UNITED STATES OF AMERICA, PETITIONER V. PAUL B. LORENZETTI No. 83-838 In the Supreme Court of the United States October Term, 1983 On Petition for a Writ of Certiorari to the United States Court of Appeals for the Third Circuit Reply Memorandum for the United States 1. Respondent concedes (Br. in Opp. 4-5), as he must, that there is a direct conflict between the Third Circuit's decision in this case and the Sixth Circuit's decision in Ostrowski v. Dep't of Labor, OWCP, 653 F.2d 229 (1981). In an effort to support the decision below, however, respondent obfuscates the issue in the case and departs from the court of appeals' own reasoning. Respondent's emphasis on the state law basis of a federal employee's right to recover from a third-party tortfeasor (Br. in Opp. 5-8) simply misses the point of the question presented. That question is whether, once a federal employee has recovered damages in a tort action against a third party, he should be relieved of his obligation under the Fedearl Employees' Compensation Act (FECA), 5 U.S.C. 8132, to reimburse the federal government for compensation payments it made to him on the ground that (because of the effect of a state no-fault insurance scheme) the damages he recovered do not include payments for medical expenses and lost wages. The FECA itself creates no cause of action in tort against persons who injure federal workers; nor is the existence of such a cause of action at issue in this case. The FECA does impose an obligation on a federal employee to reimburse the government for payments he receives from the compensation fund in certain circumstances. When (i) an employee sustains an injury for which compensation is payable under the FECA, (ii) the injury is caused under circumstances creating a legal liability in a third party other than the United States to pay damages, and (iii) the employee in fact recovers damages, the employee must refund the amount of benefits paid on his behalf (after various statutory deductions). Respondent meets these conditions and therefore (under our reading of Section 8132) has incurred an obligation to reimburse the compensation fund under federal law, regardless of the operation of any state no-fault insurance scheme. The conflict created by this case concerns the proper interpretation of the federal statute, not any disputed question of state law. 2. Respondent errs in contending (Br. in Opp. 8-11) that Congress intended 5 U.S.C. 8132 to operate as an equitable subrogation provision. Section 8132 was designed in large part to minimize the cost of the compensation program by providing for replenishment of the fund (see Pet. 13-15); the duty of reimbursement it prescribes is not dependent on any subrogation principle. In any event, in amending Section 8132 in 1974, /1/ Congress responded to equitable concerns about the operation of Section 8132 by per itting an employee to retain at least one-fifth of his tort recovery after the payment of costs and attorney's fees. See Pet. 17. In view of the 1974 amendment, there is no reason to invoke inapplicable principles such as subrogation in order to do equity. 3. We note that the decision in this case has already begun to have repercussions, even beyond the no-fault context. In Green v. United States Dep't of Labor, Civ. No. 3-82-1282 (D. Minn. Dec. 16, 1983), the court cited the court of appeals' decision in this case in support of its holding that the government could not obtain reimbursement under the FECA from an employee's third-party tort recovery because the employee had been barred from pleading or proving damages covered by FECA benefits in the tort action on the ground that he was not the real party in interest. The court in Green concluded that the facts there were "indistinguishable" from the facts of this case, since the employee in Green "was affirmatively prevented from asserting his claim for past lost wages and medical expenses" (although for a reason other than operation of a no-fault scheme) (slip op. 8-9). /2/ Thus, in addition to the state-by-state litigation in no-fault jurisidctions that we anticipated in our petition (at 8-10), it appears that the government may be required as well to litigate the interpretation of the FECA in states without no-fault insurance schemes. For the foregoing reasons and the reasons stated in the petition, it is respectfully submitted that the petition for a writ of certiorari should be granted. REX E. LEE Solicitor General JANUARY 1984 /1/ Respondent errs in representing (Br. in Opp. 10) that Section 8132 was last amended in 1966. Our petition (at 16-17) discusses the 1974 amendments to Section 8132. /2/ Copies of the slip opinion in Green are being lodged with the Clerk of the Court and provided to respondent's counsel.