Lexington Insurance Company, As Assignee of Ann M. Wells v. S.H.R.M. Catering Services, Inc. a/k/a Eurest Support Services

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 08-40322
Lexington Insurance Company,
As Assignee of Ann M. Wells
Plaintiff-Appellant
v.
S.H.R.M. Catering Services, Inc.
a/k/a Eurest Support Services
Defendant-Appellee
Appeal from the United States District Court
for the Southern District of Texas
Before GARWOOD, GARZA, and OWEN, Circuit Judges.
GARWOOD, Circuit Judge:
Plaintiff-appellant, Lexington Insurance Company (Lexington), as
assignee of Ann Wells (Wells), sued Defendant-appellee, S.H.R.M. Catering
Services, Inc., a/k/a Eurest Support Services (Eurest), based upon injuries Wells
sustained while employed by Eurest. Eurest filed a Rule 12(b)(6) motion to
dismiss the suit, arguing that the assignment was invalid. The district court
granted the motion and dismissed Lexington’s claim. Lexington now appeals the
district court’s grant of Eurest’s motion to dismiss. For the following reasons,
we affirm.
United States Court of Appeals
Fifth Circuit
F I L E D
May 4, 2009
Charles R. Fulbruge III
Clerk

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Specifically, Wells stated early on that a Eurest co-worker was partly responsible1
for her slip and fall by applying excess wax to the floor and failing to place a warning sign.
She also stated that Eurest employees had improperly stacked the boxes which fell and
injured her. This information was also available in the accident reports.
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FACTS AND PROCEEDINGS BELOW
Eurest provides catering and janitorial services for offshore rigs. Wells,
a Eurest employee, was assigned to work as a cook on the M/V OCEAN
LEXINGTON, a semisubmersible drilling rig owned and operated by Diamond
Offshore Drilling Services, Inc. (Diamond). Wells was injured on two separate
occasions while working aboard the OCEAN LEXINGTON, once after she
slipped and fell in wet wax in a hallway and a second time after boxes fell on her
in the vessel’s storage area. On June 30, 2005, Wells sued Diamond in federal
district court to recover for her injuries. As Wells’s employer, Eurest had a
Master Service Agreement with Diamond that required Eurest’s Commercial
General Liability carrier, Lexington, to defend and indemnify Diamond against
Wells’s claims.
From the beginning, both parties had access to information suggesting
Eurest shared liability for Wells’s injuries. However, Wells did not name Eurest1
in her suit, and Diamond did not move to join Eurest as a third-party defendant
until April 18, 2006, more than nine months after Eurest brought suit and less
than two months prior to the parties’ set trial date. Wells opposed the motion
as untimely, and the district court dismissed the motion as being without merit.
Diamond did not attempt to appeal or otherwise seek review of the ruling, but
instead reached a settlement agreement with Wells. As part of the settlement,
Wells agreed to assign to Lexington all of her claims against Eurest. Diamond
notified the district court that a settlement had been reached, and the district
court dismissed Wells’s claims against Diamond with prejudice. The release

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agreement did not name Eurest among the released parties. Later, Lexington,
as Wells’s assignee, brought the present suit against Eurest. Eurest filed a
motion to dismiss Lexington’s claims, and the district court ruled that the
assignment of unliquidated personal injury claims was invalid under federal
maritime law and dismissed Lexington’s suit pursuant to Rule 12(b)(6).
Lexington timely filed this appeal.
DISCUSSION
Lexington argues that the district court erred in concluding that the
assignment of Wells’s unliquidated personal injury claim was invalid under
federal maritime law and, thus, the court improperly dismissed Lexington’s
claims under Rule 12(b)(6). Dismissals under Rule 12(b)(6) are reviewed de
novo. In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007).
To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead “enough
facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 127 S.Ct. 1955, 1974 (2007). “Factual allegations must be enough to
raise a right to relief above the speculative level on the assumption that all the
allegations in the complaint are true (even if doubtful in fact).” Id. at 1965
(quotation marks, citations, and footnote omitted). Because Lexington's
complaint is premised on the permissibility of an assignment of unliquidated
personal injury claims, this court must affirm the district court’s dismissal if
such assignments are invalid.
This court has not yet addressed the issue of whether such assignments
of unliquidated tort personal injury claims are generally permissible under
federal maritime law. In the absence of any direct authority, admiralty courts
may look to the common law for guidance. Casino Cruises Inv. Co., L.C. v.
Ravens Mfg. Co., 60 F. Supp. 2d 1285, 1287 (M.D. Fla. 1999). Under the common
law and the law of most states, “personal injury claims are not assignable absent

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a statute to the contrary.” Id. This common law bar was intended to prevent the
“evils of champerty and maintenance.” Id. (quoting Hospital Serv. Corp. v.
Pennsylvania Ins. Co., 101 R.I. 708, 712 (1967)).
Lexington argues, however, that concerns regarding champerty and
maintenance are outdated and without merit—as evidenced by state law
exceptions to the common law prohibition and this court’s approval of Mary
Carter Agreements. While Lexington’s argument may have some merit, this
court will generally follow the common law bar unless good reason instructs us
otherwise. And, in this instance, federal maritime law persuades this court to
adhere to the common law prohibition of such assignments.
The proportionate liability framework for general maritime tort law, as
established in McDermott Inc. v. AmClyde, 114 S.Ct. 1461 (1994), is instructive.
Under this framework, a tortfeasor is ultimately liable only for his proportionate
share of fault. Id. at 1465. In the event of settlement, a settling tortfeasor is
presumed to pay only for his proportionate liability, non-settling tortfeasors
receive no credit for the amount paid by a settling tortfeasor, and contribution
actions by non-settling tortfeasors against a settling tortfeasor are barred. Id.
at 1466, 1470–71.
In Ondimar Transportes Maritimos v. Betty Street, 555 F.3d 184 (5th Cir.
2009), we recently addressed the effect of McDermott on a settling tortfeasor’s
suing a non-settling tortfeasor for property damage on the basis of an
assignment of the property damage claim from the injured party in the
settlement. We noted that the assignment would be invalid “if the assignment
of property damage tort claims is either (a) generally prohibited by law or (b)
generally permitted by law but barred by application of McDermott and
Murphy[v. Florida Keys, 329 F.3d 311 (11th Cir. 2003)] principles.” Id. at 187.

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We note that in Ondimar the injured party and the co-tortfeasor was apparently at2
all relevant times subject to service of process by the settling tortfeasor. It is true that the
settling tortfeasor there was under pressure to settle within 30 days of demand or be
precluded by the relevant tariff under 46 U.S.C. § 40501(f) from use of the port facilities of
the injured party. Id. at 185-86. However, nothing in Ondimar suggests that it could not
have, for example, brought a declaratory action against the injured party and co-tortfeasor,
paying the funds demanded into the registry of the court or under protest or the like.
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We declined to decide “whether the assignment of property damage tort claims
are generally prohibited,” although we observed that it appeared “most state
courts . . . permit such assignments.” Id. We stated in this connection that “we
look to the common law as a ‘guide to interpretation of federal admiralty
principles’,” citing Casino Cruises Inv. Co., L.C.. Id. at 187 n.2. We went on to
hold, however, that even if the assignment of property damage tort claims were
generally permitted, “there are good reasons for imposing certain limitations in
the context of McDermott’s proportionate fault framework.” Id. at 188. We held
that “permitting assignment under these circumstances would not further the
primary goals of McDermott: ‘consistency with the proportionate fault approach
. . . promotion of settlement, and judicial economy,’” quoting McDermott, and
“such assignments will lead to costlier, longer, and more confusing suits, all of
which would undermine McDermott’s goal of promoting judicial economy.” Id.
at 189. We therefore held: “We adopt the rule for the general maritime law that
the assignment of tort claims from the injured party to one tortfeasor permitting
the settling defendant to proceed against a co-tortfeasor is invalid.” Id.2
Ondimar controls. Under these circumstances the assignment from Wells
to Lexington is invalid to authorize the latter’s suit against Eurest.
We recognize, as does Ondimar, see id. at 188 n.3, that where the injured
party has released not only the settling tortfeasor but also the non-settling
tortfeasor, that an action by the settling tortfeasor against the non-settling

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tortfeasor for contribution is less inconsistent with McDermott’s goals than the
situation presented in the present case, and in Ondimar, where the injured
party never released the non-settling tortfeasor. On the other hand, the
McDermott advantages of judicial economy and clearer presentation argue in
favor of having proportionate fault and the extent of damages determined in one
proceeding with all relevant parties present, at least where that is reasonably
possible.
Lexington also argues that federal maritime law authorizing the use of
Mary Carter Agreements supports the enforcement of the Wells-Lexington
assignment. Lexington argues that, while its assignment is not itself a Mary
Carter agreement, there is no material distinction between the assignment at
issue and those contained in Mary Carter agreements, which have frequently
been approved by the court. This argument, however, is unpersuasive.
While Mary Carter Agreements bear some resemblance to an assignment
of unliquidated personal injury claims, the two are quite distinct. This court has
defined Mary Carter Agreements generally as “a secret contract between the
plaintiff and one of several defendants whereby the contracting defendant will
settle with the plaintiff before trial, but must remain in the suit, and will be
reimbursed to some specific degree from the plaintiff’s recovery from the other
defendants.” McDaniel v. Anheuser-Busch, Inc., 987 F.2d 298, 309 n. 49 (5th Cir.
1993); see, e.g., Bass v. Phoenix Seadrill/78, Ltd., 749 F.2d 1154, 1156 (5th Cir.
1985); Wilkins v. P.M.B. Sys. Eng’g, Inc., 741 F.2d 795, 796–97 (5th Cir. 1984).
Lexington finds fault with this court’s characterization of such Agreements as
reimbursements, and correctly points out that this court has frequently referred
to such Agreements as “assignments.” See, e.g., Bass, 749 F.2d at 1158; Wilkins,
741 F.2d at 798. But Lexington fails to recognize that Mary Carter Agreements,
rather than involving the assignment of an entire claim, embody only the

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This court does not speak to circumstances which would leave a party without a3
remedy to litigate the matter as a single case, e.g. circumstances in which a third party
was not subject to process during the initial suit.
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assignment of a partial interest in a plaintiff’s recovery. Fundamentally, they
are best characterized as a reimbursement, requiring a settling defendant to pay
the plaintiff a certain sum (often to help finance the suit), both parties remaining
in the action, and if the plaintiff is successful, the settling defendant is entitled
to a portion of any recovery (or any over a stated amount) that the plaintiff
receives from the non-settling defendant.
In the case at hand, the Wells-Lexington assignment, unlike a Mary
Carter Agreement, involves the assignment of an entire claim, not simply a
partial interest in Wells’s ultimate recovery from Eurest. It requires a second
lawsuit, in which Lexington must act as a surrogate plaintiff and litigate the
claims of an individual who is entirely absent from the suit. This absence of the
injured party is a fundamental distinction between this assignment and those
involved in Mary Carter Agreements, where the plaintiff remains to prosecute
his own claims. See Bass, 749 F. 2d at 1156; Wilkins, 741 F.2d at 798. Allowing
this form of separate action for contribution or indemnity, even when supported
by an assignment, not only undermines the proportionate liability rule as
established in McDermott, but it also ignores the value of having all parties
before the court simultaneously in a single case.
Lexington claims, however, that there was no opportunity to handle
Wells’s claims in a single case with all responsible parties simultaneously before
the court. This argument is incorrect. Under the present facts, a remedy was
available to Lexington in the form of a Rule 14(c) joinder motion. Wells’s3
complaint was filed against Diamond on June 30, 2005. Early on, Lexington was
aware that Eurest might share responsibility for Wells’s injuries and had the

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Lexington also argues that this court should consider making an exception to the4
common law prohibition on assignments of personal injury claims. In particular,
Lexington points to DeSenne v. Jamestown Boat Yard, Inc., 781 F. Supp. 866 (D.R.I. 1991),
where the Rhode Island district court upheld the assignment of a maritime personal injury
claim. We find this case unpersuasive because the assignment was upheld under
extraordinary circumstances. In DeSenne, the assignor was attempting to renege on the
assignment she made after a settlement agreement had already been reached between the
assignee and the remaining tortfeasor. Undoubtedly, applying the common law bar in that
instance would have resulted in extreme injustice by allowing a joint tortfeasor to remain
liable to a tort victim after believing itself to have been released from all liability through a
settlement agreement made with another party.
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opportunity to file a timely Rule 14(c) motion to join Eurest as a co-defendant.
Unfortunately, Lexington did not file its Rule 14(c) motion until April, 18, 2006,
less than two months prior to the parties’ set trial date. Wells opposed the
motion, objecting to its untimeliness, among other things, and the district court
dismissed the motion as being without merit. Had Lexington timely filed a Rule
14(c) motion, Eurest could have been joined as a co-defendant, thereby placing
all joint tortfeasors before the court simultaneously.4
CONCLUSION
For the foregoing reasons, we hold that the Wells-Lexington assignment
is invalid and, thus, the district court’s February 28, 2008 order dismissing the
suit is
AFFIRMED.

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