United States Court of Appeals,
Fifth Circuit.
No. 95-10288
Summary Calendar.
Gilbert EHLER, Plaintiff-Appellant,
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Appellee.
Oct. 17, 1995.
Appeal from the United States District Court for the Northern District of Texas.
Before HIGGINBOTHAM, DUHÉ and EMILIO M. GARZA, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
Gilbert Ehler sued in state court to set aside a compromise settlement agreement with St. Paul
Fire and Marine Insurance Company on the ground that he signed the CSA after relying on
misrepresentations by a St. Paul representative. St. Paul removed the case to federal district court,
which denied Ehler's motion to remand to state court and thereafter granted summary judgment for
St. Paul. Ehler appeals. We affirm the denial of Ehler's motion to remand and reverse the grant of
summary judgment for St. Paul.
I.
In 1990, Ehler filed a workers' compensation claim after being injured by an electric shock
while employed as a pipefitter with Trinity Contractors, Inc. Rita Trubatisky, a claims representative
at St. Paul, which at that time was Trinity's workers' compensation insurer, initially offered to settle
Ehler's claim for $20,000 plus three years of future medical care. Ehler did not accept this offer, but
negotiated a better offer of $22,000 plus four years of medical benefits. Before accepting this revised
offer, Ehler underwent a medical evaluation in February 1991; the evaluation indicated that his bodily
impairment level would likely require him to retrain for another job. Responding to this new
information, Trubatisky offered him $29,000 plus four years of future medical care. After reviewing
his doctors' evaluations and talking with Donna Standifer, an employee at the Texas Workers'
Compensation Committee, Ehler signed a CSA in March 1991 for $29,000 plus four years of medical
care.
II.
Ehler contends that the district court erred in denying his motion to remand to state court;
he argues that his cause of action "arises under" the Texas Workers' Compensation Act,1 and
therefore removal to federal court was barred by 28 U.S.C. § 1445(c), which provides that "[a] civil
action in any State court arising under the workmen's compensation laws of such State may not be
removed to any district court of the United States." Id. We disagree.
In Jones v. Roadway Express, Inc., 931 F.2d 1086 (5th Cir.1991), we defined "arising under"
in § 1445(c) in the same manner as we have done in analyzing 28 U.S.C. § 1331; hence, for §
1445(c) purposes, we held that "a suit arises under the law that creates the cause of action." 931 F.2d
at 1092. Applying this definition to Ehler's suit to set aside his CSA with St. Paul, we find that Texas
common law, not the Texas Workers' Compensation Act, creates his cause of action.
"That a workers' compensation law is a premise of the tort does not mean that the tort "arises
under' the workers' compensation laws...." Spearman v. Exxon Coal USA, Inc., 16 F.3d 722, 725
(7th Cir.1994) (holding that retaliatory discharge claim did not arise under workers' compensation
laws of Illinois).2 Rather, the focus must be on the source of the right of action. Ehler's suit to set
aside a CSA for fraud or misrepresentation is a common law action for rescission and cancellation
of contract. See, e.g., Luerson v. Transamerica Ins. Co., 550 S.W.2d 171, 173
1
Tex.Rev.Civ.Stat.Ann. arts. 8306 to 8309f, repealed and reenacted as Tex.Rev.Civ.Stat.Ann.
art. 8308-1.01 et seq., by Acts 1989, 71st Leg., 2d C.S., ch. 1, effective January 1, 1991,
repealed by Acts 1993, 73rd Leg. ch. 269, § 5(2), effective September 1, 1993 (current version at
Tex.Lab.Code.Ann. §§ 401.001 to 506.001). As Ehler was injured before January 1, 1991, the
relevant provisions of the former statute, Tex.Rev.Civ.Stat.Ann. arts. 8306 et seq., apply in this
case.
2
In Humphrey v. Sequentia, Inc., 58 F.3d 1238 (8th Cir.1995), the Eighth Circuit concluded
that a retaliatory discharge claim did arise under Missouri's workers' compensation laws,
distinguishing Spearman on the ground that the Missouri Workers' Compensation Act, unlike
Illinois' workers' compensation laws, specifically included a right of action for retaliatory
discharge.
(Tex.Civ.App.—Austin 1977, writ ref'd n.r.e.).3 While such an action may require interpretation of
rights or benefits under the Texas Workers' Compensation Act, the Act itself does not provide for
the specific right of action asserted by Ehler. Cf. Patin v. Allied Signal, Inc., 865 F.Supp. 370, 373
(E.D.Tex.1994) ("[T]he most that can be said about Plaintiff's breach of good faith and fair dealing
claim is that it is related to his claim for workers' compensation.") (emphasis in original). We
conclude that Ehler's action to set aside his CSA with St. Paul arises under the Texas common law,
not the Texas Workers' Compensation Act, and therefore was removable under § 1445(c).
III.
Ehler contends that the district court erred in concluding that he had not raised a genuine issue
of material fact as to his reliance on alleged misrepresentations by Trubatisky. Reviewing the
summary judgment evidence in the same manner as the district court and drawing all inferences most
favorable to Ehler, see Jurgens v. E.E.O.C., 903 F.2d 386, 388 (5th Cir.1986), we agree.
A.
To prevail in a suit to set aside a CSA, "a worker must show that misrepresentations
concerning his or her injuries were made by the employer or compensation carrier; that the worker
relied on those misrepresentations in making the settlement; and that there was a meritorious claim
for more compensat ion than had been paid." Rodriguez v. American Home Assurance Co., 735
S.W.2d 241, 242 (Tex.1987). Ehler alleges that Trubatisky made misrepresentations by stating
throughout their settlement discussions that his injuries were "just general injuries" and by saying that
her offer of $29,000 plus four years of medical benefits "was all [he] could ever get under any
circumstances." He claims that she failed to explain that his injuries, even though classified as
"general" under the Texas Workers' Compensation Act, could have entitled him to lifetime benefits,4
and that the manner in which she referred to his injuries as "just general" misled him into believeing
3
While construction of § 1445(c) is an issue of federal law, see Grubbs v. General Elec. Credit
Corp., 405 U.S. 699, 705, 92 S.Ct. 1344, 1349, 31 L.Ed.2d 612 (1972), we may refer to state
court decisions as persuasive authority in determining the source of a cause of action.
4
Ehler claims that he should have received greater benefits because he suffered the loss of both
hands and thus would have been conclusively held to be totally and permanently disabled. See
Tex.Rev.Civ.Stat.Ann. art. 8306 § 10(b), 11a(3) (repealed).
that his injuries were "insignificant and unspecified."
The district court found that, because Trubatisky's remarks were statements of opinion about
Ehler's potential recovery rather than statements of fact about his physical condition, they were not
actionable misrepresentations. While it is true that expressions of opinion or misrepresentations
involving a point of law generally will not support an action to set aside a CSA, we agree with Ehler
that "a party having superior knowledge, who takes advantage of another's ignorance of the law to
deceive the person by studied concealment or misrepresentation, can be held responsible for the
statement." Fidelity & Guaranty Insurance Underwriters v. Saenz, 865 S.W.2d 103, 111
(Tex.App.—Corpus Christi 1993). The district court found this exception inapplicable in an action
to set aside a CSA on the ground that Fidelity & Guaranty involved a different substantive legal
theory than Ehler's. We find, to the contrary, that the Fidelity & Guaranty test is directly applicable
to this suit. The Texas Court of Appeals in Fidelity & Guaranty relied on FINA Supply, Inc. v.
Abilene National Bank, 726 S.W.2d 537, 540 (Tex.1987), which in turn cited Safety Casualty Co.
v. McGee, 133 Tex. 233, 127 S.W.2d 176, 178-79 (Tex.Comm'n App.1939, opinion adopted). The
court in Safety Casualty expressly stated that the superior-knowledge exception could be applied in
a suit to set aside a CSA.
Under Texas law, to show that Trubatisky deceived him by "studied concealment or
misrepresentation," Ehler must show that Trubatisky intentionally made misrepresentations for the
purpose of deceiving him. See Safety Casualty, 127 S.W.2d at 179. Viewing the evidence in the light
most favorable to Ehler, we are persuaded that he has raised a genuine issue of material fact
precluding summary judgment for St. Paul. In his affidavit and deposition testimony, Ehler indicated
that Trubatisky's failure to apprise him of the legal significance of a "general injury," coupled with the
manner in which she repeatedly indicated that his injuries were of a "general" nature, misled him into
believing that his injuries were insignificant and thus settling his claim without full knowledge of his
potential recovery. Ehler also stated in his affidavit and deposition testimony that Trubatisky told him
that the CSA offer was "all [he] could ever get under any circumstances."5 We recognize that Ehler's
version of Trubatisky's comments is in tension with that of Trubatisky, whose affidavit indicates that
what she said was that her offer "was the full extent of her authority." But even though a jury
ultimately may resolve this question against Ehler, we are satisfied that a reasonable jury could find
in his favor. We conclude that Ehler has offered enough evidence to raise fact issues as to whether
Trubatisky intended to misrepresent the legal significance and severity of Ehler's injuries and his
potential recovery for the purpose of inducing him to sign the CSA.
B.
St. Paul further argues that, regardless of whether Trubatisky made misrepresentations to
Ehler, Ehler's review of his doctors' evaluations together with his conversations with Standifer
amounted to an independent investigation precluding a finding of reliance. St. Paul also contends,
alternatively, that Standifer's advice was an expert opinion precluding a finding of reliance. The
district court agreed that Ehler did not rely on Trubatisky's alleged misrepresentations because his
consultation of Standifer was an independent investigation of the settlement offer.
In Texas, "where a person makes his own investigation of the facts, or relies on expert
opinions he has himself obtained, he cannot sustain a cause of action based upon misrepresentations
by others." Kolb v. Texas Employers' Insurance Association, 585 S.W.2d 870, 872
(Tex.Civ.App.—Texarkana 1979, writ ref'd n.r.e.). In particular, he must have "conduct[ed] an
independent investigation into the matters covered by the representations, which [was] sufficient to
inform him of the truth." Whitsel v. Hoover, 120 S.W.2d 930, 934 (Tex.Civ.App.—Amarillo 1938,
writ dism'd). Hence, Ehler can survive St. Paul's summary judgment motion if he has raised a fact
issue as to whether his review of his doctors' evaluation and his conversation was insufficient to
inform him of the truth about the severity of his injuries and his potential for recovery. We find that
he has.
In his affidavit and deposition testimony, Ehler indicates that he obtained only general advice
5
St. Paul intimates that Ehler's statement in his affidavit on what Trubatisky told him conflicts
his deposition testimony. Our review of the record indicates no such conflict.
from Standifer about the fairness of his settlement offer; he denies talking with her about the details
of his injuries or potential recovery. As Standifer does not remember talking with Ehler, his
testimony regarding the content of their discussions is not obviously contradicted by the summary
judgment evidence. Viewing this evidence in the light most favorable to Ehler, we are satisfied that
Ehler has raised fact issues as to whether his conversations with Standifer sufficiently informed him
of the truth about the severity of his injuries and his potential recovery. Cf. Kolb, 585 S.W.2d at 872
(plaintiff's testimony that he settled because his doctor said he was "okay" did not support summary
judgment finding of independent investigation). Although a jury ultimately may be convinced that
Ehler did acquire enough information to negate a finding that he relied on Trubatisky's
misrepresentations, we find his testimony sufficient to defeat a judgment for St. Paul as a matter of
law.
IV.
For the foregoing reasons, we AFFIRM the district court's denial of Ehler's motion to remand
to state court, REVERSE its grant of summary judgment for St. Paul, and remand for further
proceedings consistent with this opinion.