Federal court lets suit against contractor proceed with no cap on damages

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A federal court of appeals will let a negligence suit against two contractors proceed without a cap on damages.

The 7th U.S. Circuit Court of Appeals ruled Monday that the bankruptcy trustee of a man injured on a construction site may proceed in a negligence suit against two contractors alleged to have contributed to his injury and that any excess money from that suit may be collected by the injured man.

David Matichak was injured when he was hit by a beam in August 2009 at a construction site for Silver Cross Hospital in New Lenox, Ill., according to court documents. At the time, Matichak was employed by Area Erectors Inc., Rockford, Ill., a subcontractor on the job. M.A. Mortenson Co., Minneapolis, was the construction manager on the site, according to court filings. Schuff Steel Co., Overland Park, Kan., was a steel contractor also working on the site.

A Mortenson representative said she could not comment on ongoing litigation.

Matichak filed a workers’ compensation claim against Area Erectors. He and his wife filed for Chapter 7 bankruptcy in Sept. 2010, in which he disclosed the compensation claim. Two months later, the bankruptcy court discharged Matichak and his wife’s debts and the proceedings were closed. A year after that, Matichack filed a federal suit against Mortenson and Schuff, claiming that they had contributed to his injuries.

Schuff and Mortenson, upon finding out that Matichak had previously filed for bankruptcy, made motions for summary judgment, claiming Matichak could not sue in federal court because he had not disclosed his negligence claim in the bankruptcy proceedings, which were now closed. Even so, the trustee of the bankruptcy estate could sue, so the bankruptcy proceeding was reopened and the trustee replaced Matichak as the plaintiff.

The U.S. district court ruled that the trustee could not recover more than the value of the debts that had not been paid in 2010, essentially ruling that Matichak’s creditors could benefit from the suit, but not Matichak.

The court of appeals decision reverses that ruling and remands the case back to the district court.

“On the assumption [which we must indulge] that the tort claim is valid,” 7th Circuit Judge Frank Easterbrook wrote, “cutting the maximum recover to the amount of Matichak’s unpaid debts in 2010 would injure the creditors even though the district judge’s target was Matichak himself.”

Moreover, the court went on to point out that Matichak did not hide the negligence claim from his creditors during the bankruptcy proceeding. Rather, he claimed he thought the workers’ comp claim he listed was his only source of compensation and that it was only after the bankruptcy ended that his lawyers told him he could recover money from someone other than his employer.

“When as in Cannon-Stokes a debtor stubbornly tries to cut out the creditors, the claim is gone forever,” wrote Easterbrook. “But a debtor who errs in good faith, and tried to set things right by surrendering the asset to the trustee, remains entitled to any surplus after creditors have been paid just as would have occurred had the claim been disclosed on the bankruptcy schedules.” Follow @erikastrebel