Rader v. American Association

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

JAMES LELAND RADER; KAREN SUE
RADER,
Plaintiffs-Appellees,

v.
No. 97-1134
AMERICAN ASSOCIATION OF CHRISTIAN
SCHOOLS, a corporation; GALLAGHER
BASSETT SERVICES, INCORPORATED, a
corporation,
Defendants-Appellants.

JAMES LELAND RADER; KAREN SUE
RADER,
Plaintiffs-Appellants,

v.
No. 97-1174
AMERICAN ASSOCIATION OF CHRISTIAN
SCHOOLS, a corporation; GALLAGHER
BASSETT SERVICES, INCORPORATED, a
corporation,
Defendants-Appellees.

Appeals from the United States District Court
for the Southern District of West Virginia, at Charleston.
Jerry D. Hogg, Magistrate Judge.
(CA-96-710-2)

Argued: October 29, 1997

Decided: August 4, 1998

Before WILKINS and MOTZ, Circuit Judges, and CAMPBELL,
Senior Circuit Judge of the United States Court of Appeals for the
First Circuit, sitting by designation.
Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Steve L. Cummings, Decatur, Georgia, for Appellants.
William H. Scharf, Charleston, West Virginia, for Appellees.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

The American Association of Christian Schools (AACS) and Gal-
lagher Bassett Services, Incorporated appeal a magistrate judge's order1
granting summary judgment to James Leland Rader and Karen Sue
Rader on their claim for coverage under a health benefits plan. The
Raders cross appeal the denial of their request for attorneys' fees. We
affirm.

I.

The essential facts are undisputed. Karen Rader is employed as a
teacher at Elk Valley Christian School in Elkview, West Virginia. Elk
Valley Christian School is a member of AACS, which provides a
health benefits plan (the Plan) to the employees of its members. The
Plan is administered by Gallagher Bassett Services, Incorporated.2
_________________________________________________________________
1 The proceedings in this action were conducted by a magistrate judge
pursuant to the consent of the parties. See 28 U.S.C.A. § 636(c) (West
1993 & Supp. 1998).
2 For ease of reference, we refer to AACS and Gallagher Bassett Ser-
vices, Incorporated collectively as "Gallagher."

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Karen Rader elected coverage under the Plan and listed her husband,
James Rader, as a dependent.

In 1988, James and a friend, Terry Bradshaw, formed a partnership,
T&J Painting. All of the work of T&J Painting has been performed
solely by the two partners. The parties agree that when the partnership
was formed, it was not required to furnish contributions to the work-
ers' compensation fund of West Virginia (the Fund) on behalf of the
partners, and that the partnership was not required to notify the Fund
of a decision not to participate. T&J Painting has never contributed to
the Fund.

In September 1994, James was injured during the course of his
employment with T&J Painting. He subsequently filed a claim for
benefits under the Plan. Gallagher denied the claim on the basis of a
provision in the Plan that precludes coverage for, inter alia,

[a]ny accidental bodily injury which arises out of or in the
course of any employment with any Employer and/or for
which the individual is entitled to benefits under any work-
ers' compensation law or ... receives any settlement from a
workers' compensation carrier.

J.A. 111. Gallagher asserted that James was entitled to receive work-
ers' compensation benefits notwithstanding the failure of
T&J Painting to make contributions to the Fund, and thus that James
was excluded from coverage under the Plan.3

The Raders thereafter brought this action in state court, claiming
entitlement to benefits under the Plan. Gallagher then removed the
action to federal court on the basis of diversity of citizenship. After
discovery, the magistrate judge granted summary judgment to the
_________________________________________________________________
3 We note that the language of the Plan appears to prohibit coverage for
injuries that either "arise[ ] out of or in the course of any employment
with any Employer" or for which the injured person is entitled to work-
ers' compensation benefits. J.A. 111. To our knowledge, however, Gal-
lagher has never maintained that James is excluded from coverage on the
basis that his injury was sustained during the course of his employment,
regardless of his eligibility for workers' compensation benefits.

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Raders on their claim that Gallagher had improperly denied benefits
under the Plan.

II.

The parties agree that the dispositive question is whether James
was entitled to workers' compensation benefits under West Virginia
law in September 1994. At that time, West Virginia required partici-
pation in the Fund by, inter alia, "all persons, firms, associations and
corporations regularly employing another person or persons for the
purpose of carrying on any form of industry, service or business in"
West Virginia. W. Va. Code § 23-2-1(a) (1994). 4 An employer
required to subscribe to the Fund paid premiums calculated as a per-
centage of its payroll. See W. Va. Code§ 23-2-5(a) (1994). However,
nonpayment of premiums by an employer did not prohibit an
employee from collecting benefits from the Fund. See W. Va. Code
§ 23-2-5(g) (1994) ("No employee of an employer required ... to sub-
scribe to the [Fund] shall be denied benefits ... because the employer
failed to subscribe or because the employer's account is either delin-
quent or in default.").

After determining that whether James was eligible for workers'
compensation benefits raised unsettled issues of West Virginia law,
we certified the following questions to the Supreme Court of Appeals
of West Virginia:

(1) Under the law of West Virginia as it existed in 1994,
was a partnership that did not employ anyone other than the
members of the partnership an employer within the meaning
of W. Va. Code § 23-2-1(a) (1994), such that the partnership
was required by West Virginia law to furnish contributions
to the workers' compensation fund on behalf of the mem-
bers of the partnership?

(2) If a partnership that did not employ anyone other than
the members of the partnership was an employer within the
meaning of § 23-2-1(a), but did not furnish the required con-
_________________________________________________________________
4 This requirement was subject to certain exceptions not applicable
here.

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 tributions to the workers' compensation fund and did not
elect not to include the members of the partnership as
employees pursuant to W. Va. Code § 23-2-1(g)(2), (h)
(1994), was a member of the partnership entitled to receive
workers' compensation benefits pursuant to W. Va. Code
§ 23-2-5(g) (1994)?

The Supreme Court of Appeals of West Virginia answered the first
question in the negative and consequently found it unnecessary to
address the second question. See Rader v. American Ass'n of Chris-
tian Sch., ___ S.E.2d ___ (W. Va. 1998). Accordingly, we affirm the
judgment in the Raders' favor.5

AFFIRMED
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5 The Raders cross appeal the denial of their request for attorneys' fees
pursuant to 29 U.S.C.A. § 1132(g) (West 1985). After reviewing the par-
ties' briefs and the applicable law, and having had the benefit of oral
argument, we conclude that the magistrate judge did not abuse his discre-
tion in denying the request for attorneys' fees. See Quesinberry v. Life
Ins. Co. of N. Am., 987 F.2d 1017, 1028-30 (4th Cir. 1993) (en banc).

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