Opposition Brief — Healthcare Recoveries, Inc. v. Hamilton

Supreeae Overt, U8.

FILED

No. 02-1602 MAY 8 2003

OFPRE GF Ear OLaRK

In The son

Supreme Court of the Anited States

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HEALTHCARE RECOVERIES, INC.,

Petitioner,

Vv.

KYLE M. HAMILTON,

Respondent.

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Fifth Circuit

BRIEF IN OPPOSITION

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GEORGE D. FAGAN

Counsel of Record

LEAKE & ANDERSSON, L.L.P.

1100 Poydras Street

1700 Energy Centre

New Orleans, Louisiana 70163

Telephone: (504) 585-7500

Fax: (504) 585-7775

Attorneys for Kyle M. Hamilton,

Respondent

COCKLE LAW BRIEF PRINTING CO (800) 225-6964

OR CALL COLLECT (402) 342-2831

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BRIEF IN OPPOSITION

Kyle M. Hamilton (“Kyle”), plaintiff and respondent,

respectfully requests that the Court deny the petition for

writ of certiorari filed by Trover Solutions, Inc. d/b/a

Healthcare Recoveries, Inc. (“HRI”), defendant and peti-

tioner, for the following reasons:

ee

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INTRODUCTION

Based on a group health policy issued to Kyle’s father,

United Healthcare of Louisiana, Inc. (“United”) paid for

Kyle’s medical treatment for severe injuries sustained in

an automobile accident. The United policy contains subro-

gation and reimbursement provisions regarding recoveries

that its policyholders may receive from third parties. Since

1998, United has contracted with HRI to enforce and

collect amounts due under those provisions. This lawsuit

claims that HRI’s enforcement of United’s subrogation

provisions against Kyle violated the Fair Debt Collection

Practices Act (“FDCPA”), 15 USC 1692, et seq.

1. There Is No Conflict in the Circuits’ Interpre-

tation of “Debt” under the FDCPA

Insurance is plainly a consumer transaction under the

FDCPA. The Fifth Circuit concluded that United’s con-

tract-based claim regarding Kyle’s third party recoveries is

a “debt” under 15 USC 1692a(5) of the FDCPA. “We cannot

avoid the inescapable conclusion that the plain meaning of

‘debt’ encompasses the funds owed in this case. There is no

question that the obligation to pay arose out of Hamilton’s

transaction of purchasing insurance. HRI is simply incor-

rect in its assertion that the obligation to pay arose out of

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a tortious act.” Hamilton v. United Healthcare of Louisi-

ana, Inc., 310 F.3d 385, 392 (5th Cir. 2002).

This is consistent with other Circuits’ interpretation of

“debt.” “(T]he plain language of the Act defines ‘debt’ quite

broadly as ‘any obligation to pay arising out of a [con-

sumer] transaction.’ In examining this definition, we first

focus on the clear and absolute language in the phrase,

‘any obligation to pay.’ Such absolute language may not be

alternatively read to reference only a limited set of obliga-

tions as appellants suggest ... As long as the transaction

creates an obligation to pay, a debt is created.” Bass uv.

Stoper, Koritzinsky, Brewster & Neider, 111 F.3d 1322,

1325 (7th Cir. 1997); See Also, Duffy vu. Landberg, 133 F.3d

1120, 1123 (8th Cir. 1998), cert. denied, 525 U.S. 821

(1998); Pollice v. National Tax Funding, L.P., 225 F.3d 379,

401 (8rd Cir. 2000); Romea v. Heiberger & Assoc., 163 F.3d

111, 115 (2nd Cir. 1998); and, Arruda v. Sears, Roebuck &

Co., 310 F.3d 3, 23 (1st Cir. 2002).

The Fifth Circuit’s decision does not conflict with

Pollice because United’s contract-based claims against

Kyle are not analogous to the legisiatively-created prop-

erty tax obligations that the Third Circuit described as

due “not from the purchase of property but from the fact of

ownership.” Jd., 225 F.3d at 402. Pcllice establishes that

United’s claim against Kyle is a “debt” because the obliga-

tion to pay money is derived from the purchase of the

United policy.

The Fifth Circuit’s decision relied on, and is consistent

with, the Seventh Circuit’s decision in Bass. Hamilton, 310

F.3d at 391-392. Further, the Seventh Circuit extends the

FDCPA’s protections beyond the obligation to pay for the

original transaction. See, Miller v. McCalla, Raymer, 214

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F.3d 872, 874-875 (7th Cir. 2000); and, Newman v. Boehm,

Pearlstein & Bright, Ltd., 119 F.3d 477, 481-482 (7th Cir.

1997); See Also, Ladick v. Van Gemert, 146 F.3d 1205,

1206-07 (10th Cir. 1998), cert. denied, 525 U.S. 1002

(1998).

The Fifth Circuit’s decision likewise does not conflict

with Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367

(11th Cir. 1998). In that case, Liberty Mutual paid its

insured victim for the damages caused by an accident with

Hawthorne, and Mac Adjustment handled the subrogation

claim against Hawthorne, the tortfeasor. The Eleventh

Circuit held that Liberty Mutual’s subrogation claims

against the tortfeasor — who was not insured by Liberty

Mutual — did not involve a consumer transaction because

the insurer’s claim “arose purely out of an accident, [and]

involved no contract of any type between the [tortfeasor]

and the damaged party, the insurer or Mac Adjustment.”

Id., 140 F.3d at 1372, n. 2. In contrast, Kyle’s alleged obliga-

tion to pay money is solely based on the insurance contract

with United.

HRI’s argument that the payment due for the transac-

tion itself is the only obligation that arises out of a con-

sumer transaction is the “extension of credit” limitation

that has been rejected by every Circuit that has addressed

that issue. Bass, 111 F.3d at 1326; Brown v. Budget Rent-

A-Car Systems, Inc., 119 F.3d 922, 924 (11th Cir. 1997)

(“Budget’s assertion that Brown is obligated as a result of a

consumer transaction suffices to bring the obligation within

the ambit of the FDCPA.”); Snow v. Jesse L. Riddle, P-C., 143

F.3d 1350, 1353 (10th Cir. 1998); Charles v. Lundgren &

Associates, 119 F.3d 739, 742 (9th Cir. 1997), cert. denied, 522

U.S. 1028 (1997); Duffy, 133 F.3d at 1123; Pollice, 225 F.3d at

400-401); and, Romea, 163 F.3d at 115. The FDCPA defines

a

“debt” as “any obligation” to pay money “arising out of’ a

consumer transaction, which does not mean only the obliga-

tion to pay for the consumer transaction.

The Fifth Circuit determined that “arising out of” is

“ordinarily understood to mean ‘originating from,’ ‘having

its origin in,’ ‘growing out of’ or ‘flowing from,’ or in short,

‘incident to,’ or ‘having connection with.’” Hamilton, 310

F.3d at 391, quoting, Red Ball Motor Freight v. Employers

Mutual Liab. Ins. Co., 189 F.2d 374, 378 (5th Cir. 1951).

Based on Humphries v. Various Federal USINS Employ-

ees, 164 F.3d 936, 943-944 (5th Cir. 1999), the dissenting

judge in this case argued that “arising out of” requires a

causal nexus between the underlying transaction and the

obligation to pay money, but such a nexus undeniably

exists in this case.

The use of “arising out of” establishes that a series of

events may be required to trigger the obligation to pay. In

Brown, Mr. Brown ran a Budget rental truck into an over-

pass, and Budget sought reimbursement for the amounts

that Mr. Brown’s personal insurer refused to pay. Id., 119

F.3d at 923. Because Budget’s claims arose as a result of

the consumer transaction — Mr. Brown’s rental of the

truck, the Eleventh Circuit concluded that Budget’s claim

was a “debt” under the FDCPA. Id. at 924. Likewise, while

a series of events may have been necessary to trigger the

obligation, Kyle’s alleged obligation is solely based on a

consumer transaction: the United insurance contract.

2. United’s Subrogation Contract-Based Subro-

gation Claims Are Not Torts

Under Louisiana law, health insurers have no subroga-

tion rights unless the insurance contract includes provisions

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for such rights; there are no other legal, equitable or implied

rights of subrogation. Martin v. Louisiana Farm Bureau Cas.

Ins. Co., 638 So.2d 1067, 1069 (La. 1994). That subrogation

can also be based on the payment of contractual or legal

obligations owed or due by another refutes HRI’s argument

that “subrogation interests are tort claims” rather than

consumer debts. The nature of the subrogated debt does

not take away from the fact that United’s alleged subroga-

tion rights are derived from a consumer transaction — the

insurance contract issued to Kyle’s father.

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Vv

CONCLUSION

The Fifth Circuit correctly held that HRI collected and

is seeking to collect “debts” under the FDCPA because the

alleged obligation to pay money to United arises directly

out of a consumer insurance transaction. Kyle M. Hamil-

ton, plaintiff and respondent, respectfully requests that

the Court deny HRI’s petition for writs of certiorari.

Respectfully submitted:

GEORGE D. FAGAN

Counsel of Record

LEAKE & ANDERSSON, L.L.P.

1100 Poydras Street

1700 Energy Centre

New Orleans, Louisiana 70163

Telephone: (504) 585-7500

Fax: (504) 585-7775

Attorneys for Kyle M. Hamilton,

Respondent