## Facts

- Conwed Corporation, a self-insured employer, manufactured ceiling tiles using asbestos supplied by Union Carbide Corporation.
- Conwed employees developed asbestos-related diseases, and Conwed paid workers’ compensation benefits.
- The employees brought product-liability tort claims against Union Carbide and settled for damages not covered by workers’ compensation.
- After the settlements, Conwed sued Union Carbide in subrogation to recover workers’ compensation benefits “paid and payable.”
- Union Carbide asserted counterclaims seeking contribution and indemnity.
- The district court, applying Minnesota law, tried claims by disease category; asbestosis claims were tried in a consolidated, bifurcated proceeding for 11 employees.
- For six asbestosis claimants, a jury found both Conwed and Union Carbide at fault and awarded common-law damages including general disability and loss of future earning capacity.
- A special master determined the amount of workers’ compensation benefits “paid and payable,” and the district court capped Conwed’s subrogation recovery at the lesser of (1) benefits paid and payable or (2) the share of the jury’s tort damages attributable to Union Carbide’s fault.

## Issues

1. Under Minnesota law, how should comparative fault limit a self-insured employer’s subrogation recovery for workers’ compensation benefits against a third-party tortfeasor after fault is allocated at trial?
2. Whether Conwed’s subrogation action was barred by collateral estoppel based on prior proceedings and employee settlements.
3. Which elements of the jury’s tort damages may be used as the baseline for calculating the employer’s subrogation recovery.
4. Whether the third-party tortfeasor may pursue an equitable contribution counterclaim against the employer beyond the workers’ compensation/subrogation framework.

## Decision

- The Eighth Circuit affirmed the district court’s comparative-fault methodology that limited Conwed’s recovery to the lesser of benefits paid and payable or Union Carbide’s fault-percentage share of the jury’s tort damages.
- The court rejected Union Carbide’s collateral estoppel defense.
- The court largely affirmed the district court’s inclusion/exclusion of tort damage categories used to compute the cap, but found one error requiring a limited adjustment.
- The court affirmed dismissal of Union Carbide’s equitable contribution counterclaim.
- The judgment was affirmed in all but one respect and remanded for the limited recalculation.

## Legal Principles

- In Minnesota, an employer’s subrogation claim for workers’ compensation benefits is derivative and cannot exceed what the employee could recover from the third party after applying comparative fault.
- An employer’s subrogation recovery is capped at the lesser of (1) workers’ compensation benefits paid and payable or (2) the portion of the employee’s tort damages attributable to the third party’s percentage of fault.
- Collateral estoppel requires identity of issues actually litigated and necessary to a prior judgment, plus a full and fair opportunity to litigate; employee tort settlements do not, by themselves, preclude an employer’s later subrogation action.
- Minnesota’s workers’ compensation and third-party liability scheme does not permit a separate equitable contribution claim by the third-party tortfeasor against the employer beyond the fault allocation and subrogation limits set by that scheme.
- For the subrogation cap, the relevant tort-damages baseline must correspond to harms workers’ compensation benefits are designed to address; categories outside that correspondence may be excluded.

## Conclusion

Applying Minnesota law, the Eighth Circuit held that a self-insured employer’s subrogation recovery for workers’ compensation benefits is limited by comparative fault to the lesser of benefits paid and payable or the third party’s fault-based share of the employee’s tort damages, rejected estoppel and equitable contribution defenses, and remanded only for a narrow correction in the damages calculation.


Conwed Corp. v. Union Carbide Corp., 443 F.3d 1032 (8th Cir. 2006)