Date: 06-26-2015

Case Style: John A. Kasel v. Union Pacific Railroad Company

Case Number: S-14-563

Judge: Connolly

Court: Supreme Court of Nebraska on appeal from the District Court, Scotts Bluff County

Plaintiff's Attorney: Andrew W. Snyder

Defendant's Attorney: Walt Downing

Description: John A. Kasel sustained injuries at a motel while he was
an employee of Union Pacific Railroad Company (Union
Pacific). Kasel sued Union Pacific and the motel. After the
parties settled, Union Pacific asserted a contractual right
of subrogation to the extent of medical payments made on
Kasel’s behalf by a third-party administrator. The contract in
question created a lien or right of reimbursement if a third
party is liable, but not if Union Pacific is liable. The court
held that Union Pacific did not have a lien or right of reimbursement
because it was party to the settlement. We also
conclude that Union Pacific is a liable party under the settlement.
We therefore affirm.
BACKGROUND
Parties
Kasel, an engineer, stayed at an Oak Tree Inn in Wyoming,
while on duty for Union Pacific in October 2009. Union
Pacific contracted with Oak Tree Inn to provide overnight
lodging for its employees. Kasel sustained injuries when the
bottom of the bathtub in his room gave way.
In January 2010, Kasel sued Union Pacific and Oak Tree Inn.
Count I of the complaint alleged that Union Pacific was negligent
and liable for his injuries under the Federal Employers’
Liability Act (FELA). Count II alleged that Oak Tree Inn negligently
failed to provide a reasonably safe premises, warn of
hidden dangers, and inspect for defects.
Liberty Mutual Insurance Company (Liberty Mutual)
accepted tenders of defense from both Union Pacific and Oak
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291 Nebraska Reports
KASEL v. UNION PACIFIC RR. CO.
Cite as 291 Neb. 226
Tree Inn. Liberty Mutual issued insurance policies to Oak
Tree Inn, and Oak Tree Inn had executed an indemnity agreement
with Union Pacific. Counsel hired by Liberty Mutual
represented both defendants.
The Union Pacific Railroad Employes Health Systems
(UPREHS) paid some medical expenses on behalf of Kasel.
UPREHS was the third-party administrator for on-duty injuries
to active Union Pacific employees. UPREHS is not a subsidiary
of Union Pacific.
During the period relevant to this case, UPREHS’ “Challenger
Health Plan” applied to Kasel. Article XI of the Plan—titled
“SUBROGATION”—provides:
a) In consideration of treatment or payment for treatment
of a Member by UPREHS, said Member assigns,
transfers and subrogates to UPREHS, to the extent of all
expenditures made in behalf of said Member by UPREHS,
all rights, claims, interest and rights of action that the
Member may have against any party, person, firm or corporation
that may be liable for the loss except . . . Union
Pacific . . . and its affiliated and subsidiary companies.
Said UPREHS Member authorizes UPREHS to sue, compromise
or settle in the Member’s name and UPREHS is
fully substituted for the Member and subrogated to all
of the Member’s rights to the extent of all expenditures
made in behalf of said Member. . . .
b) In the event a Member elects to pursue a suit, claim
or right of action against any party, person, firm, or corporation
that may be liable for loss, except . . . Union
Pacific . . . , with respect to on-duty injuries, UPREHS
is entitled to full reimbursement to the extent of all benefits
it pays out of any proceeds, settlement, or verdict
recovered by the Member. In all such cases, UPREHS
shall have a lien against any recovery and expects and
is entitled to be reimbursed in full in the amount of all
benefits it pays, without any reduction for costs or attorney’s
fees. This subparagraph shall not in any way limit
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KASEL v. UNION PACIFIC RR. CO.
Cite as 291 Neb. 226
or impair UPREHS’ right to independently recover such
expenditure as set forth in subparagraph (a) above.
In March 2012, 2 days before the start of trial, Kasel’s attorney
and an attorney representing Union Pacific and Oak Tree
Inn reached a tentative agreement to settle Kasel’s claims.
In May 2012, Kasel and his wife signed a “Release of All
Claims” (Release), early drafts of which “originated” from
Union Pacific. The Release provided: “For the sole gross consideration
of Four Million Dollars . . . to be paid on behalf
of DEFENDANTS to CLAIMANTS, CLAIMANTS releases
[sic] any and all CLAIMS against RELEASEES arising out
of . . . KASEL’S employment with UNION PACIFIC . . . .”
The Release defined “DEFENDANTS” as Union Pacific and
Oak Tree Inn; defined “RELEASEES” as Union Pacific, Oak
Tree Inn, and Liberty Mutual; and defined “CLAIMANTS”
as Kasel and his wife. The “CLAIMS” subject to the Release
include not only those arising from Kasel’s October 2009
injuries, but all claims arising out of Kasel’s employment with
Union Pacific. For example, Kasel expressly waived any wage
claims under collective bargaining agreements and claims for
unlawful discrimination under federal law. In addition to dismissing
his lawsuit, Kasel agreed to resign from active service
with Union Pacific and to never again seek employment with
the railroad.
Procedural Background
After Kasel and his wife signed the Release, a disagreement
arose about Union Pacific’s subrogation rights. The court
sustained Liberty Mutual’s motion to interplead $300,000 to
the clerk of court. The court later released $129,736.70 of
the interpleader fund to Kasel after the parties stipulated that
Union Pacific sought only $170,263.30.
Union Pacific and UPREHS jointly filed a notice of claims
to the interpleader fund. In their “Claim for Subrogation,”
they alleged that the “moment UPREHS began paying medical
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KASEL v. UNION PACIFIC RR. CO.
Cite as 291 Neb. 226
bills on behalf of [Kasel], [Kasel] assigned the right of subrogation
to UPREHS to pursue any claims against any third
party,” and that “UPREHS assigned to Union Pacific the right
of subrogation that [Kasel] assigned to UPREHS.” In their
second and third claims, Union Pacific and UPREHS alternatively
asserted that UPREHS had a lien against the settlement
that it did or did not assign to Union Pacific.
In May 2014, the court released the remaining $170,263.30
to Kasel. The court reasoned that the settlement was just as
much on Union Pacific’s behalf as it was on behalf of Oak Tree
Inn: “Liberty Mutual did not pay four million dollars to settle
only Kasel’s claims against Oak Tree Inn. It was paid to settle
all Kasel’s claims against both [Union Pacific] and Oak Tree
Inn.” The court emphasized the unity of Union Pacific’s and
Oak Tree Inn’s fortunes:
[D]uring the course of this lawsuit [Union Pacific] and
Oak Tree Inn were represented by the same attorney
or attorneys . . . . From the time that Kasel filed his
Complaint until the time the case was settled Kasel’s
claim was against both Oak Tree Inn and [Union Pacific].
The parties’ eventual “Release of All Claims” was a
global release wherein Kasel and his wife released all
claims against [Union Pacific] and Oak Tree Inn (and its
insurer) “arising out of [Kasel’s] employment with Union
Pacific . . . .”
Union Pacific appealed. The Court of Appeals sustained
Oak Tree Inn’s motion to be excused from the appeal.
ASSIGNMENT OF ERROR
Union Pacific assigns that the court erred by “holding that
UPREHS did not have a valid subrogation interest in Kasel’s
settlement with Union Pacific and Oak Tree Inn and in holding
that as a result neither Union Pacific nor UPREHS had
a valid lien, right of subrogation or right of reimbursement
against the interpleaded funds.”
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291 Nebraska Reports
KASEL v. UNION PACIFIC RR. CO.
Cite as 291 Neb. 226
STANDARD OF REVIEW
[1] The meaning of an unambiguous contract is a question
of law, in connection with which an appellate court has an
obligation to reach a conclusion independently of the determination
made by the court below.1
ANALYSIS
Union Pacific argues that “[b]ecause Kasel sued a responsible
third party . . . ,” it has a lien against the settlement
funds.2
Union Pacific’s in-house counsel conceded that Kasel
could have sued only Union Pacific and that, if Kasel had
done so, “there’s no UPREHS lien.” But, according to Union
Pacific, once Kasel sued a third party, the railroad was entitled
to recover medical expenses paid by UPREHS whether or not
Union Pacific was also liable.
[2,3] We note that Union Pacific is not asserting a subrogation
interest arising from a relationship between itself and
Kasel. Instead, Union Pacific argues that UPREHS assigned
to it certain contractual subrogation rights. As an assignee,
Union Pacific stands in the shoes of its assignor and is bound
by the terms of the contract to the same extent as UPREHS.3
An assignment does not affect or change any of the provisions
of the contract.4
If the assignor could not have maintained an
action based on the contract, neither can the assignee.5
The contractual provision in question is article XI of the
Challenger Health Plan. There, Kasel generally transferred to
UPREHS his remedies against third parties in the amount that
UPREHS paid medical expenses on his behalf. In paragraph (a),
1 Weber v. North Loup River Pub. Power, 288 Neb. 959, 854 N.W.2d 263
(2014).
2 Brief for appellant at 11.
3 See Spanish Oaks v. Hy-Vee, 265 Neb. 133, 655 N.W.2d 390 (2003).
4 Hansen v. E. L. Bruce Co., 162 Neb. 759, 77 N.W.2d 458 (1956).
5 Id.
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291 Nebraska Reports
KASEL v. UNION PACIFIC RR. CO.
Cite as 291 Neb. 226
Kasel “authorize[d] UPREHS to sue, compromise or settle in
[Kasel’s] name.” In paragraph (b), Kasel recognized UPREHS’
right to assert a lien or right to reimbursement against any
settlement Kasel reached with “any party, person, firm, or corporation
that may be liable for loss, except . . . Union Pacific
. . . , with respect to on-duty injuries.” This appeal involves the
interpretation of paragraph (b).
[4-7] In interpreting a contract, a court must first determine,
as a matter of law, whether the contract is ambiguous.6
A contract
is ambiguous when a word, phrase, or provision in the
contract has, or is susceptible of, at least two reasonable but
conflicting interpretations or meanings.7
If the terms of a contract
are clear, a court may not resort to rules of construction.8
The court must accord clear terms their plain and ordinary
meaning as an ordinary or reasonable person would understand
them.9
The fact that the parties suggest opposing meanings
of a disputed instrument does not compel the conclusion
that the instrument is ambiguous.10
We conclude that Union Pacific does not have a lien or
right of reimbursement under the unambiguous terms of the
Challenger Health Plan. The railroad argues that “Liberty
Mutual on behalf of Oak Tree Inn, a third party, funded the
settlement; Union Pacific did not.”11 But Kasel sued Union
Pacific in addition to Oak Tree Inn. Liberty Mutual accepted
tenders of defense from both Union Pacific and Oak Tree
Inn. The attorney hired by Liberty Mutual represented both
Union Pacific and Oak Tree Inn. And Liberty Mutual funded
the settlement on behalf of the “DEFENDANTS,” defined as
6 Gibbons Ranches v. Bailey, 289 Neb. 949, 857 N.W.2d 808 (2015).
7 Id.
8 Id.
9 Id.
10 Id.
11 Reply brief for appellant at 3.
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291 Nebraska Reports
KASEL v. UNION PACIFIC RR. CO.
Cite as 291 Neb. 226
Union Pacific and Oak Tree Inn, in order to relieve both parties
of their potential liability to Kasel. Union Pacific’s argument
that the settlement was on behalf of Oak Tree Inn only
is simply inaccurate.
In fact, the Release benefits Union Pacific in ways that it
does not benefit Oak Tree Inn. Kasel waived potential claims
against Union Pacific that are wholly unrelated to the incident
at the Wyoming motel. For example, Kasel waived employment
discrimination claims and claims for unpaid wages. The
surrender of these rights benefited only Union Pacific. The
railroad was at least an equal party to the Release.
Union Pacific argues that the trial court’s interpretation of
article XI “circumvent[ed] FELA law,”12 citing our decision in
Strasburg v. Union Pacific RR. Co.
13 There, a railroad employee
filed separate lawsuits against Union Pacific and a third-party
manufacturer. The employee settled his claims against the
manufacturer and obtained a judgment against Union Pacific.
The trial court sustained Union Pacific’s motion for a setoff
against the verdict for the amount of the employee’s medical
expenses that UPREHS paid. But the court declined to give
Union Pacific a setoff for the difference between the amount
that medical providers initially billed and what UPREHS actually
paid (the “‘writeoff amount’”).14
Union Pacific appealed in Strasburg, assigning that the
court erred by not including the writeoff amount in the
medical expense setoff. We noted that UPREHS assigned its
subrogation rights to Union Pacific, but we did not discuss
the source of UPREHS’ subrogation rights in any detail.
Furthermore, the employee did not cross-appeal and did not
dispute that Union Pacific had a lien for the amount that
12 Brief for appellant at 13.
13 Strasburg v. Union Pacific RR. Co., 286 Neb. 743, 839 N.W.2d 273
(2013).
14 Id. at 747, 839 N.W.2d at 277.
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KASEL v. UNION PACIFIC RR. CO.
Cite as 291 Neb. 226
UPREHS actually paid. And, unlike the instant case, the
employee separately sued and recovered from the railroad and
a third-party tort-feasor. For these reasons, Strasburg does not
mean that Union Pacific is entitled to a lien or right of reimbursement
in this case.

Outcome: Under the unambiguous terms of the contract, Union
Pacific does not have a lien or right of reimbursement. We
therefore affirm the order releasing the remainder of the interpleader
fund to Kasel.

Affirmed.

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Defendant's Experts:

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