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Walker v. Liberty Mutual Insurance Co.

United States District Court, D. South Carolina, Florence Division

January 28, 2018

Gwendolyn Dianette Walker, as Personal Representative of the Estate of Robert Lee Walker, Plaintiff,
Liberty Mutual Insurance Company and K and W Cafeterias, Inc., Defendants.


          R. Bryan Harwell United States District Judge

         In this declaratory judgment action, Plaintiff asks this federal Court to determine whether Defendants can assert a lien under North Carolina workers' compensation law against settlement proceeds that Plaintiff received primarily from underinsured motorist coverage. Meanwhile, there is a related, ongoing state workers' compensation proceeding in North Carolina dealing with the same issues presented in this federal case.

         The parties have filed cross-motions for summary judgment, but for the reasons explained herein, the Court will exercise its discretion and abstain from hearing this declaratory action. Accordingly, the Court will deny the summary judgment motions as moot and dismiss this action without prejudice.[1]


         On May 16, 2012, Plaintiffs husband died in an automobile accident in Dillon, South Carolina during the course of his employment with his North Carolina employer, Defendant K & W Cafeterias, Inc. ("K & W"), and while operating a vehicle[2] owned by K & W. See Complaint & Answers [ECF Nos. 1-1, 5, & 6]. Plaintiff sought workers' compensation benefits from K & W and its insurance carrier, Defendant Liberty Mutual Insurance Company ("Liberty Mutual"), and she applied for death benefits under the North Carolina Workers' Compensation Act.[3] See ECF No. 33-3 at p. 4. On December 12, 2012, the North Carolina Industrial Commission ("Industrial Commission" or "NCIC") issued a Consent Opinion and Award granting Plaintiff $333, 763 in benefits (to be disbursed in weekly payments of $650.89). See ECF No. 35-6. Notably, this Consent Opinion and Award contained the stipulations of Plaintiff and Defendants K & W/Liberty Mutual that:

• Plaintiff s husband "died as the result of a motor vehicle accident arising out of and in the course of his employment with" K & W;
• "At all relevant times, the parties . . . were subject to and bound by the provisions of the North Carolina Workers' Compensation Act"; and
• "The North Carolina Industrial Commission has jurisdiction over the parties and the subject matter involved in this case."

Id. at pp. 1-2. Under North Carolina workers' compensation law, Defendants retained the ability to assert a subrogation lien on settlement proceeds obtained by Plaintiff from the at-fault third-party. See N.C. Gen. Stat. § 97-10.2(f).

         In 2014, Plaintiff filed a wrongful death and survival action against the at-fault driver in South Carolina state court, and in March 2016, she settled the lawsuit and received the following proceeds:

$50, 000 in liability benefits from the at-fault driver's insurer;
$12, 500 in personal underinsured motorist ("UIM") coverage (covering Plaintiff and her husband's own personal vehicle) from Plaintiffs own automobile insurance carrier; and
$900, 00 in commercial UIM coverage (covering the vehicle that Plaintiffs husband was driving when the accident occurred) from K & W's automobile insurance carrier.[4]

ECF Nos. 35-8 through 35-13. Defendants sought to enforce their $333, 763 subrogation lien against Plaintiffs $962, 500 settlement proceeds.[5] Thus, on March 21, 2016, Defendants filed a claim with the Industrial Commission seeking an order requiring Plaintiff to reimburse them for the workers' compensation benefits she had received. See ECF No. 35-14. That case is captioned "ROBERTLEE WALKER, Deceased Employee-Plaintiff and GWENDOLYN DIANETTE WALKER, as Widow, and as Personal Representative of the ESTATE OF ROBERTLEE WALKER, Plaintiffs, v. K&W CAFETERIAS, Employer, and LIBERTY MUTUAL INSURANCE COMPANY, Carrier, Defendants:' ECF No. 44-1 at p. 1; see also ECF No. 33-3 at p. 1.

         On March 30, 2016, Plaintiff filed the instant action in South Carolina state court (the Horry County Court of Common Pleas) against Defendants seeking solely declaratory relief. See ECF No. 1 -1.

         In her complaint, Plaintiff alleges S.C. Code Ann. § 38-77-160[6] precludes subrogation and assignment of the settlement proceeds paid under the UIM coverage, and she seeks a declaration as to whether Defendants are entitled to assert a claim against any and all settlement proceeds, including the UIM settlement proceeds. Id.

         On May 2, 2016, Defendants removed the action to this Court on the basis of diversity jurisdiction under 28 U.S.C. § 1332.[7] On March 16, 2017, the Court issued an order denying Plaintiffs motion for judgment on the pleadings and motion for interpleader and Defendants' three motions to stay or continue. See ECF Nos. 10, 16, 19, 20, 25, & 29. In April 2017, the parties filed cross-motions for summary judgment. See ECF Nos. 33 & 35.

         On July 10, 2017, a Deputy Commissioner of the Industrial Commission issued an Opinion and Award ruling in Defendants' favor and requiring Plaintiff to apply the $962, 500 to satisfy Defendants' $333, 763 lien. See ECF No. 44-1. On July 20, 2017, Plaintiff appealed the Deputy Commissioner's decision to the Full Commission of the Industrial Commission. See ECF No. 46-1. That appeal remains pending in North Carolina.

         On August 16, 2017, the parties filed a Joint Motion to Defer the Current Trial Deadlines wherein they agreed the Deputy Commissioner's decision "addresses all issues currently before this Court, including whether S.C. [Code] Ann. § 38-77-160 precludes Liberty Mutual from receiving the 'underinsurance' settlement proceeds that Plaintiff has received; whether the NCIC has jurisdiction over this matter; and whether this Court should defer to the NCIC's adjudication." ECF No. 47. The Court granted the joint motion to continue, see ECF No. 48, and the cross-motions for summary judgment remain pending.


         In their cross-motions for summary judgment, the parties dispute whether S.C. Code Ann. § 38-77-160 precludes Defendants from asserting their lien against Plaintiffs settlement proceeds, including those received from UIM coverage. However, Defendants separately argue the Court should decline to exercise its discretionary jurisdiction over this declaratory judgment action, [8] and the Court agrees abstention is appropriate.

         I. Legal Standard:[9] Declaratory Judgment Actions & Brillhart/Wilton Abstention

         "The Supreme Court held in Brillhart v. Excess Insurance Co.,316 U.S. 491 (1942) and reaffirmed in Wilton v. Seven Falls Co.,515 U.S. 277(1995) that when a plaintiff brings a declaratory judgment action, [10] the district court enjoys discretion in deciding whether to assert jurisdiction over the action or abstain from hearing it." Riley v. Dozier Internet Law, PC, 371 Fed.Appx. 399, 401 (4th Cir. 2010).[11] "[T]he Brillhart/Wilton standard . . . recognize[s] that courts have broad discretion to abstain from deciding declaratory judgment actions when concurrent state court proceedings are under way. This wide latitude arises out of 'federal courts['] unique and substantial discretion in deciding whether to declare the rights of litigants.'" VonRosenberg v. Lawrence, 781 F.3d 731, 734 (4th Cir. 2015) (emphasis removed) (third alteration in original) (quoting Wilton, 515 U.S. at 286). "The Supreme Court has repeatedly characterized the Declaratory Judgment Act as an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant." Penn-Am. Ins. Co. v. Coffey,368 F.3d 409, 412 (4th Cir. 2004) (internal quotation marks omitted). "In the declaratory judgment context, the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration." Wilton, 515 U.S. at 288. Thus, "district courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when ...

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