Hauptman, O'Brien v. Auto-Owners Ins. Co.

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/05/2021 08:09 AM CDT
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Nebraska Supreme Court Advance Sheets
310 Nebraska Reports
HAUPTMAN, O’BRIEN v. AUTO-OWNERS INS. CO.
Cite as 310 Neb. 147Hauptman, O’Brien, Wolf & Lathrop, P.C.,
appellee and cross-appellant, v. Auto-Owners
Insurance Company, appellant
and cross-appellee.
Filed September 17, 2021. No. S-20-516.
1. Attorney Fees: Equity. The common fund doctrine provides that an
attorney who renders services in recovering or preserving a fund, in
which a number of persons are interested, may in equity be allowed
his or her compensation out of the whole fund, only where the attor-
ney’s services are rendered on behalf of, and are a benefit to, the com-
mon fund.
2. Actions: Subrogation: Attorney Fees. Where the holder of a subroga-
tion right does not come into the action, whether he or she refuses to do
so or acquiesces in the plaintiff’s action, but accepts the avails of the
litigation, he or she should be subjected to his or her proportionate share
of the expenses thereof, including attorney fees.
3. Statutes: Appeal and Error. To the extent an appeal calls for statutory
interpretation or presents questions of law, an appellate court must reach
an independent conclusion irrespective of the determination made by the
court below.
4. Statutes: Legislature: Intent. There are three types of preemption: (1)
express preemption, (2) field preemption, and (3) conflict preemption.
In all three cases, the touchstone of preemption analysis is legisla-
tive intent.
5. Political Subdivisions: Statutes: Legislature: Intent. Field preemption
and conflict preemption arise in situations where the Legislature did
not explicitly express its intent to preempt local laws, but such can be
inferred from other circumstances.
6. ____: ____: ____: ____. In field preemption, legislative intent to pre-
empt local laws is inferred from a comprehensive scheme of legislation.
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HAUPTMAN, O’BRIEN v. AUTO-OWNERS INS. CO.
Cite as 310 Neb. 1477. Statutes: Legislature. The mere fact that the Legislature has enacted a
law addressing a subject does not mean that the subject matter is com-
pletely preempted.
8. Political Subdivisions: Statutes: Legislature: Intent. In conflict pre-
emption, legislative intent to preempt local laws is inferred to the extent
that a local law actually conflicts with state law.
9. Statutes. If a statute is in derogation of common law, it is to be strictly
construed.
10. Statutes: Intent. The construction of a statute which restricts or removes
a common-law right should not be adopted unless the plain words of the
statute compel it.
11. Statutes: Legislature: Intent. In construing a statute, a court must
determine and give effect to the purpose and intent of the Legislature
as ascertained from the entire language of the statute considered in its
plain, ordinary, and popular sense.
12. Statutes. It is not within the province of the courts to read a meaning
into a statute that is not there or to read anything direct and plain out of
a statute.
13. Statutes: Legislature: Presumptions: Judicial Construction. In deter-
mining the meaning of a statute, the applicable rule is that when the
Legislature enacts a law affecting an area which is already the subject
of other statutes, it is presumed that it did so with full knowledge of the
preexisting legislation and the decisions of the Nebraska Supreme Court
construing and applying that legislation.
Petition for further review from the Court of Appeals,
Pirtle, Chief Judge, and Moore and Arterburn, Judges,
on appeal thereto from the District Court for Douglas County,
Peter C. Bataillon, Judge. Judgment of Court of Appeals
affirmed.
Michael T. Gibbons and Raymond E. Walden, of Woodke &
Gibbons, P.C., L.L.O., for appellant.
Joshua J. Yambor and Stevie Chesterman, of Hauptman,
O’Brien, Wolf & Lathrop, P.C., for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
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Nebraska Supreme Court Advance Sheets
310 Nebraska Reports
HAUPTMAN, O’BRIEN v. AUTO-OWNERS INS. CO.
Cite as 310 Neb. 147Cassel, J.
INTRODUCTION
This appeal presents a question of law: Does a statute grant-
ing an insurer the right of subrogation preempt a common-law
rule allowing an attorney to collect a pro rata share of his or
her fees from an insurer? Because the statutory language is
silent as to attorney fees and there is no indication that the
Legislature intended to restrict or preclude the common fund
doctrine, we conclude that attorney fees are not within the field
occupied by the statute. We affirm.
BACKGROUND
Law at Issue
Before summarizing the facts, we set forth the statute and
common-law rule central to this appeal. The statute, Neb. Rev.
Stat. § 44-3,128.01 (Reissue 2010), provides:
A provision in an automobile liability policy or
endorsement which is effective in this state and which
grants the insurer the right of subrogation for payment of
benefits under the medical payments coverage portion of
the policy shall be valid and enforceable, except that if
the claimant receives less than actual economic loss from
all parties liable for the bodily injuries, subrogation of
medical payments shall be allowed in the same propor-
tion that the medical expenses bear to the total economic
loss. For purposes of this section, it shall be conclusively
presumed that any settlement or judgment which is less
than the policy limits of any applicable liability insur-
ance coverage constitutes complete recovery of actual
economic loss.
[1,2] The common law implicated is known as the com-
mon fund doctrine. The common fund doctrine provides that
an attorney who renders services in recovering or preserv-
ing a fund, in which a number of persons are interested,
may in equity be allowed his or her compensation out of the
whole fund, only where the attorney’s services are rendered
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HAUPTMAN, O’BRIEN v. AUTO-OWNERS INS. CO.
Cite as 310 Neb. 147on behalf of, and are a benefit to, the common fund. 1 Thus,
“where the holder of the subrogation right does not come into
the action, whether he refuses to do so or acquiesces in the
plaintiff’s action, but accepts the avails of the litigation, he
should be subjected to his proportionate share of the expenses
thereof, including attorney’s fees.” 2
We now provide context for the dispute.
Factual Background
Auto-Owners Insurance Company (the insurer) issued an
automobile insurance policy to Charlyn Imes. The policy and
an endorsement both contained a section on preserving the
insurer’s right to recover payments. The section of the endorse-
ment addressed the right to recover disbursements made pursu-
ant to medical payments coverage. This section stated in part
that if the insurer makes a payment under the endorsement and
the person for whom payment is made has a right to recover
damages from another, the insurer will be entitled to that right
and the person for whom payment is made shall transfer the
right to the insurer and do nothing to prejudice it.
After Imes suffered injuries in a motor vehicle accident,
the insurer made medical payments of $1,000 on her behalf.
Imes retained Hauptman, O’Brien, Wolf & Lathrop, P.C. (the
law firm), via a contingent fee agreement to pursue her claims
against a negligent third party. Imes ultimately sued the neg-
ligent third party. She sought special and general damages,
including medical expenses of $40,100.
Two months after the filing of the lawsuit, the insurer sent
a letter to the negligent third party’s insurance company.
The insurer requested that its right of recovery be “consid-
ered, protected and satisfied” in the event the negligent third
party’s insurance company made payment. The letter further
1
See Walentine, O’Toole v. Midwest Neurosurgery, 285 Neb. 80, 825
N.W.2d 425 (2013).
2
United Services Automobile Assn. v. Hills, 172 Neb. 128, 133, 109 N.W.2d
174, 177 (1961).
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HAUPTMAN, O’BRIEN v. AUTO-OWNERS INS. CO.
Cite as 310 Neb. 147stated: “Please be advised that [the insurer] will represent
our subrogation interest for payment made on behalf of our
insured. We will not honor any requests for attorney fees
unless we expressly request their assistance in pursuit of our
subrogation.”
Eight months after filing suit, Imes settled for $48,200. The
law firm asked the insurer to take a one-third reduction of its
$1,000 medical payment subrogation interest in exchange for
the law firm’s efforts in obtaining a settlement from which the
insurer may be reimbursed. The insurer refused to accept less
than $1,000.
Procedural Background
The law firm sued the insurer in county court. It alleged that
its work in obtaining a recovery on behalf of Imes, including
the insurer’s subrogation interest in the claim, created a com-
mon fund; that the insurer benefited from the law firm’s work;
and that a fair and customary attorney fee under Nebraska
common law was one-third of the amount recovered per the
law firm’s fee agreement with Imes. The law firm therefore
sought recovery of $333.33 against the insurer.
The insurer filed an answer and set forth various affirmative
defenses. The insurer also filed a counterclaim, seeking a decla-
ration that it was entitled to the full $1,000 under § 44-3,128.01
and the terms of the insurance policy. Upon cross-motions
for summary judgment, the county court sustained the law
firm’s motion and overruled the insurer’s motion. The insurer
appealed to the district court.
The district court affirmed the entry of summary judgment.
The court stated that the statute “in no way limits or affects the
Common Fund doctrine and the Common Fund doctrine in no
way limits or affects section 44-3,128.01.”
The insurer then appealed to the Nebraska Court of Appeals.
In considering whether the common fund doctrine survived
§ 44-3,128.01, the Court of Appeals discussed the insurer’s
preemption argument. The Court of Appeals clarified that the
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Nebraska Supreme Court Advance Sheets
310 Nebraska Reports
HAUPTMAN, O’BRIEN v. AUTO-OWNERS INS. CO.
Cite as 310 Neb. 147issue was the law firm’s entitlement to recover a reasonable
attorney fee for its efforts in securing the insurer’s subrogated
medical payment and stated: “This is not a ‘field’ addressed
by the statute, which states that an insurer is entitled to full
recovery of its medical payments when policy limits have not
been received (as opposed to a pro rata share when they have
and not all economic losses have been recovered).” 3 The court
recognized that the statute was silent as to attorney fees and
stated that there was nothing in case law to indicate that the
statute preempted the common fund doctrine. Thus, the Court
of Appeals affirmed the district court’s order.
The insurer filed a petition for further review, which we
granted.
ASSIGNMENTS OF ERROR
The insurer assigns three errors in its petition for further
review, which can be distilled to one: The Court of Appeals
erred in failing to determine that the common fund doctrine
was preempted by § 44-3,128.01.
STANDARD OF REVIEW
[3] To the extent an appeal calls for statutory interpretation
or presents questions of law, an appellate court must reach an
independent conclusion irrespective of the determination made
by the court below. 4
ANALYSIS
The insurer has relied on preemption throughout the pro-
ceedings. Preemption typically arises in connection with fed-
eral law. Federal preemption arises from the Supremacy Clause
of the U.S. Constitution and is the concept that state laws
that conflict with federal law are invalid. 5 We have also
3
Hauptman, O’Brien v. Auto-Owners Ins. Co., 29 Neb. App. 662, 676, 958
N.W.2d 428, 439 (2021).
4
Peterson v. Jacobitz, 309 Neb. 486, 961 N.W.2d 258 (2021).
5
Eyl v. Ciba-Geigy Corp., 264 Neb. 582, 650 N.W.2d 744 (2002).
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HAUPTMAN, O’BRIEN v. AUTO-OWNERS INS. CO.
Cite as 310 Neb. 147e­ ncountered preemption claims with respect to whether munic-
ipal ordinances 6 or township laws 7 were preempted by state
law. And the concept of preemption can arise in the interac-
tion of common law and statutory law. 8 That is the situation
before us.
The common fund doctrine is a part of the common law.
In 1866, Nebraska adopted the common law of England. 9 An
equity court’s authority over fees, including “the usual case . . .
where through the complainant’s efforts a fund is recovered in
which others share,” can be traced back to the English Court
of Chancery. 10 But the common law is not immutable. No one
has a vested interest in any rule of the common law, and the
Nebraska Legislature has the power to abolish rights so long as
no vested right is disturbed. 11
The insurer argues that within the statutorily defined field of
automobile liability insurance, § 44-3,128.01 preempts applica-
tion of the common fund doctrine. Whether the common fund
doctrine should apply under the specific circumstances of this
case is not at issue 12; instead, the limited issue before us is
whether the doctrine is preempted by § 44-3,128.01.
[4-8] There are three types of preemption: (1) express pre-
emption, (2) field preemption, and (3) conflict preemption. In
6
See, e.g., State ex rel. City of Alma v. Furnas Cty. Farms, 266 Neb. 558,
667 N.W.2d 512 (2003).
7
See Butler County Dairy v. Butler County, 285 Neb. 408, 827 N.W.2d 267(2013).
8
See Spear T Ranch v. Knaub, 269 Neb. 177, 691 N.W.2d 116 (2005). See,
also, Beren v. Beren, 349 P.3d 233 (Colo. 2015); WSC/2005 LLC v. Trio
Ventures, 460 Md. 244, 190 A.3d 255 (2018); In re Estate of Hannifin, 311
P.3d 1016 (Utah 2013).
9
See Rev. Stat. ch. 7, § 1, p. 31 (1866), now codified at Neb. Rev. Stat.
§ 49-101 (Reissue 2010).
10
See Sprague v. Ticonic Bank, 307 U.S. 161, 166, 59 S. Ct. 777, 83 L. Ed.
1184 (1939).
11
See Peterson v. Cisper, 231 Neb. 450, 436 N.W.2d 533 (1989).
12
See, generally, 1 Robert L. Rossi, Attorneys’ Fees § 7:21 (3d ed. 2021).
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HAUPTMAN, O’BRIEN v. AUTO-OWNERS INS. CO.
Cite as 310 Neb. 147all three cases, the touchstone of preemption analysis is legisla-
tive intent. 13 Express preemption occurs when the Legislature
has expressly declared in explicit statutory language its intent
to preempt local laws. 14 That is clearly not the situation here.
Field preemption and conflict preemption arise in situations
where the Legislature did not explicitly express its intent to
preempt local laws, but such can be inferred from other cir-
cumstances. 15 In field preemption, legislative intent to pre-
empt local laws is inferred from a comprehensive scheme of
legislation. 16 The mere fact that the Legislature has enacted a
law addressing a subject does not mean that the subject matter
is completely preempted. 17 In conflict preemption, legislative
intent to preempt local laws is inferred to the extent that a local
law actually conflicts with state law. 18
[9-12] In determining whether the Legislature intended
to preempt the common fund doctrine when enacting
§ 44-3,128.01, we are mindful of four principles of statutory
interpretation and construction. First, if a statute is in deroga-
tion of common law, it is to be strictly construed. 19 Second, the
construction of a statute which restricts or removes a common-
law right should not be adopted unless the plain words of
the statute compel it. 20 Third, in construing a statute, a court
must determine and give effect to the purpose and intent of
the Legislature as ascertained from the entire language of the
statute considered in its plain, ordinary, and popular sense. 21
13
Malone v. City of Omaha, 294 Neb. 516, 883 N.W.2d 320 (2016).
14
Id.15
Id.16
Id.17
Id.18
Id.19
ML Manager v. Jensen, 287 Neb. 171, 842 N.W.2d 566 (2014).
20
In re Trust of Shire, 299 Neb. 25, 907 N.W.2d 263 (2018).
21
State ex rel. BH Media Group v. Frakes, 305 Neb. 780, 943 N.W.2d 231(2020).
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Nebraska Supreme Court Advance Sheets
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HAUPTMAN, O’BRIEN v. AUTO-OWNERS INS. CO.
Cite as 310 Neb. 147Last, it is not within the province of the courts to read a mean-
ing into a statute that is not there or to read anything direct and
plain out of a statute. 22
Application of these principles leads to the conclusion that
the Legislature did not intend to preempt or abrogate the com-
mon fund doctrine. This court specifically extended the com-
mon fund doctrine to an insurer’s subrogation interest in 1961. 23
Thus, we applied the common law rule to an insurer’s subroga-
tion interest 30 years prior to the enactment of § 44-3,128.01. 24
The plain language of § 44-3,128.01 makes enforceable an
insurer’s right of subrogation for medical payments coverage
under an automobile liability policy, but it is silent as to attor-
ney fees. In light of this silence, the statutory language does
not expressly abrogate the common law nor does the language
lead to the conclusion that § 44-3,128.01 intended to restrict or
preclude the common fund doctrine.
[13] The historical context of § 44-3,128.01 demonstrates
that it was addressed to the validity of a specific type of
subrogation clause and not to the common fund doctrine. In
determining the meaning of a statute, the applicable rule is
that when the Legislature enacts a law affecting an area which
is already the subject of other statutes, it is presumed that it
did so with full knowledge of the preexisting legislation and
the decisions of the Nebraska Supreme Court construing and
applying that legislation. 25 While statutes existed governing the
topic of insurance, no statute specifically addressed the validity
of a subrogation clause regarding medical payments coverage
under an automobile insurance policy. By a 4-to-3 decision
in Milbank Ins. Co. v. Henry, 26 this court upheld this type of
22
Id.
23
See United Services Automobile Assn. v. Hills, supra note 2.
24
1991 Neb. Laws, L.B. 224, § 1.
25
E.M. v. Nebraska Dept. of Health & Human Servs., 306 Neb. 1, 944
N.W.2d 252 (2020).
26
Milbank Ins. Co. v. Henry, 232 Neb. 418, 441 N.W.2d 143 (1989).
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HAUPTMAN, O’BRIEN v. AUTO-OWNERS INS. CO.
Cite as 310 Neb. 147clause. The dissenting justices would have held the subroga-
tion clause unenforceable as against public policy because,
they reasoned, it made medical pay coverage illusory. 27 Section
44-3,128.01 was the Legislature’s response to the validity of
that type of subrogation clause.
For the sake of completeness, we digress to note that the
legislation, as originally instituted, would have invalidated
that type of subrogation clause. L.B. 224 was introduced to
“prohibit an automobile insurance policy from containing a
right of subrogation for the insurer to recover amounts paid on
behalf of an injured person from any third party.” 28 Because
the statute, as adopted, is not ambiguous, we do not rely upon
this legislative history. The plain language of the statute, in the
context of our Milbank Ins. Co. decision, is sufficient.
CONCLUSION
We do not read § 44-3,128.01 to effect a change in the
common law with respect to the common fund doctrine and
attorney fees. Because there is no preemption or abrogation,
the county court properly entered summary judgment in favor
of the law firm. The intermediate appellate courts correctly
affirmed the judgment. We affirm the decision of the Court
of Appeals.
Affirmed.
27
See id. (Fahrnbruch, J., dissenting; White and Grant, JJ., join).
28
Committee Statement, L.B. 224, Committee on Banking, Commerce and
Insurance, 91st Leg., 1st Sess. (Feb. 4, 1991).