ROBERT L. TAYLOR, District Judge.
This case involves the question of whether the United States can maintain an action against an Armed Forces veteran's employer or workmen's compensation carrier for the value of hospital and medical services furnished free of charge to the veteran for injuries sustained in the course of his employment. All parties have moved for summary judgment on the issue of the Government's right to maintain this action. The facts, to the extent necessary to rule on the motions for summary judgment, have been established by the complaint, the answers, admissions, and the pre-trial order.
Daniel Stewart is a veteran who was injured on November 28, 1973, in the course of his employment with defendant Walter H. Kirkland, d/b/a Kirkland Brothers Distributors [hereinafter "Kirkland"]. Defendant Casualty Reciprocal Exchange [hereinafter CRE] is Kirkland's workmen's compensation carrier under the Tennessee Workmen's Compensation Act, T.C.A. § 50-901 et seq. Stewart was hospitalized at University of Tennessee Memorial Hospital until January 22, 1974, when he was transferred to the Veterans Administration [hereinafter "VA"] Hospital in Memphis.
CRE paid the cost of Stewart's hospitalization at the University of Tennessee Memorial Hospital. The VA sent four bills to CRE for services rendered, the last of which was dated June 21, 1974 and stated an amount due of $10,073.64. CRE denied payment and the Government instituted the present action.
The present case represents one facet of a continuing controversy over the Government's right to be reimbursed by third persons for the cost of such hospital and medical services. The issues presently before the Court can be placed in proper perspective by reviewing four previous cases in which courts have addressed similar or closely related issues. The first such case is United States v. Standard Oil Co., 332 U.S. 301, 67 S.Ct. 1604, 91 L.Ed. 2067 (1947).
In Standard Oil, a soldier was hit by a truck under circumstances creating tort liability in both the owner and driver of the truck. The Government bore the soldier's hospitalization expenses and continued to pay him his military salary during the disability period. The Government filed an action in District Court against the owner and driver of the truck to recover the money expended for hospitalization and military salary during the disability period. The District Court rendered judgment on the Government's behalf, 60 F.Supp. 807 (S.D.Cal.1945), and the Court of Appeals reversed, 153 F.2d 958 (9th Cir. 1946). Although the Government's claim amounted only to $192.76, the Supreme Court granted certiorari "because of the novelty and importance of the principal question," 332 U.S. 301, 302, 67 S.Ct. 1604, 1605.
The Supreme Court considered the Government's claim as something more than the claim of a subrogee to the soldier's rights against the third party tortfeasors. Significantly, the Court found that the claim was predicated upon an independent liability owed directly to the Government for tortious interference with the Government-soldier relationship. Id. at 304, n. 5, 67 S.Ct. 1604. The Government's right in this situation, the Court reasoned, "comes down in final consequence to a
Congressional response to Standard Oil was slow in coming. Fifteen years later Congress enacted the Medical Care Recovery Act, 42 U.S.C. § 2651-53, which conferred an independent federal right of recovery on the Government.
Whether the Medical Care Recovery Act created an independent federal right against workmen's compensation carriers was squarely addressed in Pennsylvania National Ins. Co. v. Barnett, 445 F.2d 573 (5th Cir. 1971). In Pennsylvania National, the Fifth Circuit held that the Medical Care Recovery Act applies only "in tort situations and does not apply where the source of the claim is workmen's compensation." 445 F.2d at 575. Relying on Standard Oil, supra, the Court declined to fashion a rule creating a federal right of recovery against a workmen's compensation carrier and held that legislative rather than judicial action was appropriate.
The Pennsylvania National Court, however, left open the question of whether the Government could obtain an assignment of a veteran's workmen's compensation claim and successfully maintain an action on that basis. Id. at 576. The Veterans Administration has promulgated a regulation, 38 C.F.R. § 17.48(d)
Two district courts subsequently addressed the question of whether the Government could maintain an action against an employer or his workmen's compensation carrier on the basis of an assignment procured pursuant to 38 C. F.R. § 17.48(d). Both courts reached opposite conclusions, largely because of their disagreement on whether the VA had the authority to promulgate § 17.48(d).
In United States v. Chicago White Metal Casting Co., Civ. No. 73 C 2424 (N.D.Ill., Jan. 16, 1974), the Government brought an action against a veteran's employer after obtaining from the veteran an assignment of his workmen's compensation claim. The Court first held that § 17.48(d) was valid, as it was based upon the authority of the Administrator of Veterans Affairs to make necessary rules and regulations, 38 U.S. C. § 210(c), and to prescribe rules, procedures, and limitations concerning hospital care, id. § 621. Pennsylvania National, supra, was also relied on by the Court as "indirect support" for this holding. The Court considered the Fifth Circuit's statement that "any right of the Veterans Administration to recover was conditioned upon the procurement of an assignment," 445 F.2d at 574, as an implicit holding that recovery would have been allowed had an assignment been procured.
The Court then concluded that the action could be maintained on the basis of an assignment alone, even though workmen's compensation claims were not assignable under state law. The Court reasoned that state law, to the extent it purported to prohibit the assignment, was invalid because of the supremacy clause.
In Texas Employers Insurance Ass'n v. United States, 390 F.Supp. 142 (N.D. Tex.1975), however, the Court held that § 17.48(d) was invalid to the extent that it created a right of recovery in the VA against a workmen's compensation insurance carrier. Id. at 148. The Court reasoned that to allow the VA to sue on the basis of an assignment would, in effect, permit an administrative agency to "create `a new substantial legal liability' affecting `the federal fiscal policy'" Id. Unlike the Court in Chicago White Metal Casting, supra, the Texas Employers Court concluded that the Fifth Circuit's statement in Pennsylvania National merely indicated that it did not consider whether § 17.48(d) gave the VA authority to prosecute a claim by virtue of an assignment. Id. at 148-49.
Finally, the Court rejected the Government's argument that the state statute prohibiting assignment of workmen's compensation claims was superseded by the supremacy clause. The Court reasoned that the anti-assignment provision was an integral part of the workmen's compensation contract, and that the "Workmen's Compensation Act is a package deal, and must be accepted as such by any litigant seeking to recover benefits under it." Id. at 150.
The first issue before the Court in the present case is whether § 17.48
Section 17.48(d) does not purport to allow VA to maintain an action against Kirkland and CRE to enforce a liability owed directly by them to VA, a liability independent of and in addition to their liability to Stewart under state law. If § 17.48(d) were intended to create an independent liability owed directly to VA, it would have been unnecessary to provide that an assignment be executed.
The second issue, then, is whether § 17.48(d) is valid to the extent that it confers a right of recovery on VA. Kirkland and CRE contend that VA is without authority to create "a new and substantive legal liability" affecting "federal fiscal policy." They rely on Standard Oil for the proposition that only Congress can create such a liability.
The Court is of the opinion that § 17.48(d) does not create what the Standard Oil Court termed "a new and substantive legal liability,"
There are other reasons why Standard Oil does not preclude VA from succeeding to Stewart's right by virtue of an assignment. In Standard Oil, the Court was asked to create a "new and substantive legal liability" that arguably would have subjected tortfeasors to double liability.
Standard Oil is distinguishable from the present case in another important respect. In Standard Oil the Court limited the power of federal courts to select state law to determine the rights of the Government in areas where Congress has not spoken. See 332 U.S. at 308-09, 67 S.Ct. 1604. There is no indication that this same limitation was intended to be placed on Federal administrative agencies whose regulations, if reasonable and authorized, have the same effect as an Act of Congress.
Since Standard Oil does not preclude VA from succeeding to Stewart's rights on the basis of an assignment, the next issue presented is whether VA is authorized by Congress to take and enforce the assignment. Congress has conferred on the Administrator of Veterans Affairs the broad statutory authority to promulgate regulations "necessary or appropriate to carry out the laws administered by the Veterans' Administration and are consistent therewith."
Congress, however, has enacted a statute limiting VA's authority to provide
The final issue before the Court is whether the provision of the Tennessee Workmen's Compensation Law, T.C. A. § 50-1016, which forbids the assignment of workmen's compensation claims, renders Stewart's assignment to VA invalid and unenforceable. No Tennessee courts have considered the application of the statute to a situation like the present. In Gregg v. New Careyville Coal Co., 161 Tenn. 350, 31 S.W.2d 693 (1930), however, the Court stated that T.C.A. § 50-1016 "was intended to prevent diversion of the compensation to objects beyond the purposes of the act." In the present case, enforcement of the assignment would not confer benefit on a non-object. Hospitals that furnish care which an employer or his workmen's compensation carrier are required by law to provide necessarily must be considered objects of the Act to the extent of their reasonable expenditures on behalf of the employee.
Although the statute expressly provides that "no claim for compensation under this law shall be assignable", it must be construed in light of T.C.A. § 50-918, which provides as follows:
The Court is of the opinion that the only equitable construction that can be placed on T.C.A. § 50-1016 is that it does not forbid assignment under the unique facts of the present case.
For the foregoing reasons, it is ORDERED that the Government's motion for summary judgment on the issue of liability be, and the same hereby is, granted, and the defendants' motion for summary judgment be, and the same hereby is, denied. This case will be set for trial to determine the extent to which treatment provided Stewart at the VA hospital is covered by the Tennessee Workmen's Compensation Law, unless the parties stipulate the coverage.
"In any case in which the United States is authorized or required by law to furnish hospital, medical, surgical, or dental care and treatment . . . to a person who is injured or suffers a disease, after the effective dates of this Act, under circumstances creating a tort liability upon some third person . . . to pay damages therefor, the United States shall have a right to recover from said third person the reasonable value of the care and treatment so furnished or to be furnished and shall, as to this right be subrogated to any right or claim that the injured or diseased person, his guardian, personal representative, estate, dependents, or survivors has against such third person to the extent of the reasonable value of the care and treatment so furnished or to be furnished. The head of the department or agency of the United States furnishing such care or treatment may also require the injured or diseased person, his guardian, personal representative, estate, dependents, or survivors, as appropriate, to assign his claim or cause of action against the third person to the extent of that right or claim. (Emphasis added)
"§ 17.48. Considerations applicable in determining eligibility for hospital or domiciliary care.
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"(d) Persons hospitalized . . . who it is believed may be entitled to hospital care or medical or surgical treatment or to reimbursement for all or part of the cost thereof by reason of any one or more of the following:
"(1) (i) Membership in a union, fraternal or other organization;
"(ii) rights under a group hospitalization plan, or under any of the prepay medical care or insurance contracts or plans which provide for payment or reimbursement in whole or in part, for the cost of medical or hospital care, and conditions the obligation of the insurer to pay upon payment or incurrence of liability by the person covered;
"(iii) `Workmen's Compensation' or `employer's liability' statutes, State or Federal;
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will not be furnished hospital care, medical or surgical treatment, without charge therefor to the extent of the amount for which such parties, referred to in paragraph (d) (1) or (2) of this section, are, or will become liable. Such patients will be requested to execute an appropriate assignment as prescribed in this paragraph. Patients who, it is believed, may be entitled to care under any one of the plans in paragraph (d) (1) of this section will be requested to execute VA Form 10-2381, Power of Attorney and Agreement. Those patients who, it is believed, may be entitled to hospital care under the circumstances prescribed in paragraph (2) of this paragraph will be requested to complete VA Form 2-4763, Power of Attorney and Assignment. Notice of this assignment will be mailed promptly to the party or parties believed to be liable. When the amount of charges is ascertained, bill therefor will be mailed such party or parties.
"For not exceeding three (3) years after notice of injury, the employer or his agent shall furnish free of charge to the employee such medical and surgical treatment . . . made reasonably necessary by accident as herein defined, as may be reasonably required . . . ."
"Furthermore, the liability sought is not essential or even relevant to protection of the state's citizens against tortious harms, nor indeed for the soldier's personal indemnity or security, except in the remotest sense,
Appointment and general authority of Administrator; Deputy Administrator
(a) The Administrator of Veterans' Affairs is the head of the Veterans' Administration. He is appointed by the President, by and with the advice and consent of the Senate.
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(c) (1) The Administrator has authority to make all rules and regulations which are necessary or appropriate to carry out the laws administered by the Veterans' Administration and are consistent therewith, including regulations with respect to the nature and extent of proofs and evidence and the method of taking and furnishing them in order to establish the right to benefits under such laws, the forms of application by claimants under such laws, the methods of making investigations and medical examinations, and the manner and form of adjudications and awards.
Power to make rules and regulations. The Administrator shall prescribe —
(1) such rules and procedure governing the furnishing of hospital and domiciliary care as he may deem proper and necessary;
(2) limitations in connection with the furnishing of hospital and domiciliary care . . ..
Eligibility for hospital and domiciliary care.
(a) The Administrator, within the limits of Veterans' Administration facilities, may furnish hospital care which he determines is needed to —
(1) (A) any veteran for a service-connected disability; or
(B) a veteran of any war for a non-service-connected disability if he is unable to defray the expenses of necessary hospital care; . . .