How To Determine Whether Third-Party Beneficiary Exists in Louisiana Workers Compensation Claims

working-1229720-1024x783Workers’ compensation disputes often boil down to the terms of a written contract where each party asserts their own interpretation of the agreement and lets the court decide. The case below is no different as it pertains to a “third-party beneficiary,” which essentially is a party not expressly contained in the agreement, but is no less a party to the contract.

Mr. Scarberry was an employee of the Oklahoma Gas and Electric Company (OGE) and was helping Entergy Gulf States Louisiana, LLC (Entergy) restore power to residences and business in the midwest after hurricane Gustav caused damage to the area.

OGE and Entergy were members of a larger nonprofit trade association, Southeastern Electrical Exchange (SEE), and the relationship between members of SEE was governed by an Agreement, which is the backdrop of the dispute here between Mr. Scarberry, OGE, and Entergy.

Mr. Scarberry was injured while assisting Entergy and later sued Entergy for damages. Meanwhile, Mr. Scarberry had already received workers’ compensation benefits from OGE, as its employee, in the amount of approximately $150,000. Furthermore, Entergy reimbursed OGE for those benefit payments pursuant to the Agreement governing members of SEE.

OGE intervened in the lawsuit between Mr. Scarberry and Entergy to assert its rights. Specifically, OGE wanted the District Court to establish OGE’s right to a credit toward any “potential future exposure” that it would be subjected to under workers’ compensation laws, in addition to the roughly $150,000 of reimbursements OGE already received from Entergy. The District Court denied OGE’s request on the basis that Mr. Scarberry was a third party beneficiary to the Agreement. The District Court essentially held that OGE was not entitled to any future credit since Mr. Scarberry was the intended beneficiary of the Agreement, not OGE.

OGE argued that Mr. Scarberry was not a third-party beneficiary and that Mr. Scarberry did not show the required intent to receive any benefit pursuant to the Agreement. OGE’s position was that the Agreement only governed the relationship between Entergy and OGE.

Pursuant to La. C.C. art. 1978 a contracting party may agree that a third party not expressly listed in the agreement can nonetheless be a third-party beneficiary to the agreement. Further, once that third party has shown his intent to receive the benefit, the parties to the original contract can not dissolve the contract without the consent of the third party beneficiary.

There are three requirements before a third-party beneficiary to a contract is established: 1) there must be a “manifestly clear” stipulation as to a third party; 2) the benefit provided must be certain; and 3) the benefit must not be “a mere incident of the contract” between the original parties. Joseph v. Hosp. Serv. Dis. No. 2, 939 So. 2d 1206 (La. 2006).

A footnote within the Agreement made clear that the contract pertained to both the companies, i.e., OGE and Entergy, and its employees, i.e., Mr. Scarberry. Therefore, any mention of OGE in the Agreement implicitly included Mr. Scarberry and as such, Mr. Scarberry was a third party beneficiary. Thus, the Agreement was “manifestly clear” as to a third party, the benefit was certain, and it was not a “mere incident” of the agreement, rather the contract specifically mentioned employees.

As to the issue of Mr. Scarberry’s intent, the Court of Appeal found that Mr. Scarberry’s lawsuit against Entergy, the basis of which was the Agreement, evinced his intent to avail himself of the benefits of the Agreement. There was no requirement that Mr. Scarberry’s intent is express. It was enough to satisfy the requirement through an implied intention.

It is important to note that the issue here wasn’t whether Mr. Scarberry was entitled to workers’ compensation. He was indeed and those benefits are covered by other statutes. Even though at first the lawsuit was between Mr. Scarberry and Entergy, as OGE intervened itself the issue evolved into a contract dispute between two member-companies of a trade association, of which Mr. Scarberry found himself caught in the middle. This case illustrates the unexpected complexities that can arise in any lawsuit and serves as a reminder that it is always wise to protect yourself by retaining a good attorney with experience to represent your interests.

Written by Berniard Law Firm Blog Writer: Nicholas Ciani

Additional Sources: BUDDY SCARBERRY VERSUS ENTERGY CORPORATION, ENTERGY SERVICES, INC., ENTERGY GULF STATES LOUISIANA, L.L.C., AND ENTERGY LOUISIANA, L.L.C.

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