Case Remanded to Determine Setoff Amounts from Settlements with Asbestos Trusts

MISSISSIPPI — On February 13, 2009, Clara Hagan filed a complaint, as the representative of Bennie Oakes, against Illinois Central Railroad in the Warren County Circuit Court. The complaint, brought under the provisions of the Federal Employers Liability Act, sought to recover damages for personal injuries and/or death sustained by decedent Bennie Oakes while decedent was employed by Illinois Central and while engaging in interstate commerce. The decedent was employed by Illinois Central from 1952 through 1994 and alleged he was exposed to asbestos “on a daily basis.”

The first trial occurred in 2011 but resulted in a hung jury. The jury in the second trial found in favor of Hagan and awarded $250,000; however, the jury also apportioned fault, with Illinois Central being twenty percent at fault and Oakes being 80 percent. Therefore, the circuit court adjusted the damages accordingly, and the total award was $50,000. Illinois Central filed a Motion of Entry of Judgment and Setoff to have the damages reduced further based on the fact that Hagan had received more than $65,000 in payments from asbestos trusts for Oakes’s injuries and death. The circuit court denied the motion and entered judgment of $50,000 plus eight percent interest.

Illinois Central appealed, and the Court of Appeals framed the issue on appeal as “whether setoff against a jury verdict is required in Federal Employers’ Liability Act cases where the claimant has already settled with separate tortfeasors.” The Appeals Court held that “an allowance of setoff for recoveries from nonparty tortfeasors is inconsistent with the Act’s intent, the statutory language, and Mississippi and U.S. Supreme Court precedent.”

Illinois Central petitioned the Supreme Court of Missouri, arguing that the Court of Appeals decision was in “irreconcilable conflict with previous opinions…and disregards the controlling federal law on the issue.” Illinois Central further argued that the Court of Appeals’ decision erred in holding that the collateral source rule applied to asbestos trusts set up by the now-bankrupt manufacturers as a condition of their bankruptcy proceedings. Finally, Illinois Central contended that the Court of Appeals’ decision effectively “obliterates” the one-recovery rule by allowing Hagan to collect from the asbestos trust for the asbestos-related injury and also from Illinois Central for the same asbestos-related injury.

The Supreme Court agreed with Illinois Central’s reasoning, and held that Illinois Central was entitled to a setoff of the jury verdict based on Oakes’s or Hagan’s receipt of settlement funds from an asbestos bankruptcy trust if the funds compensated for the same injuries alleged in the instant lawsuit.

The Supreme Court further held that the record was “less than clear” that the settlements were to compensate for the same injuries as alleged in the instant lawsuit and remanded the case back to the Court of Appeals and circuit court for a hearing, if necessary, to determine whether the settlement indeed compensated the plaintiffs for the same injuries and the same type of damages as alleged in the lawsuit.

Read the full decision here.