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In re Cole

April 23, 2009

IN RE: GEORGE W. COLE, DEBTOR
CITY OF WILKES-BARRE, APPELLANT
v.
ROBERT P. SHEILS, JR., TRUSTEE



On Appeal from the United States District Court for the Middle District of Pennsylvania District Court No. 07-cv-1238 District Judge: The Honorable James M. Munley.

The opinion of the court was delivered by: Smith, Circuit Judge.

PRECEDENTIAL

Submitted Pursuant to Third Circuit L.A.R. 34.1(a) April 14, 2009

Before: MCKEE, SMITH, Circuit Judges and STEARNS, District Judge.*fn1

OPINION

Under the Pennsylvania Heart & Lung Act (HLA), the City of Wilkes-Barre (City) was obligated to pay police officer George Cole wages and medical expenses during the period that Cole was unable to work after being severely injured in the line of duty. Cole subsequently brought a personal injury action against the third parties responsible for his injuries. The City then sought to recover its HLA payments by asserting a right of subrogation against the settlement Cole won in his personal injury action. Presently, the City appeals from a determination by the United States District Court for the Middle District of Pennsylvania that Section 1720 of the Motor Vehicle Financial Responsibility Law (MVFRL)*fn2 bars the City from asserting a right of subrogation against Cole's settlement proceeds. We will vacate the District Court's judgment and remand the case to the District Court for further consideration consistent with this opinion.

I.

Cole was severely injured in 1996 when a Luzerne County vehicle struck his police cruiser. He was unable to return to work for nine years. During those nine years, the City paid Cole HLA benefits totaling $425,945.69. Meanwhile, Cole also sued Luzerne County for the injuries he had suffered. While Cole's personal injury action was pending, he filed a voluntary petition for Chapter 7 bankruptcy. Robert Sheils, Jr., the appellee, was appointed trustee for Cole's bankruptcy estate. In 2005, the United States Bankruptcy Court for the Middle District of Pennsylvania approved a settlement of Cole's personal injury action according to which the trustee received $495,000.

In 2004, however, the City asserted a common-law right of subrogation to recover its HLA payments from Cole's personal injury settlement. The Bankruptcy Court rejected the City's claim. That Court concluded that Cole was immune from subrogation pursuant to 77 Pa. Stat. Ann. § 501 and granted the trustee's motion for summary judgment.

The City appealed the Bankruptcy Court's decision to the District Court under 28 U.S.C. § 158. The District Court noted that it did not necessarily disagree with the Bankruptcy Court's reasoning but denied the City's appeal on a separate ground: the District Court determined that the City's right of subrogation was barred by Section 1720 of the MVFRL. The City now appeals from that determination.

II.

We have jurisdiction pursuant to 28 U.S.C. § 158(d). We review the District Court's legal conclusions de novo and its findings of fact for clear error. Citicorp Venture Capital, Ltd. v. Committee of Creditors Holding Unsecured Claims, 323 F.3d 228, 232 (3d Cir. 2003). When applying substantive Pennsylvania law, we must defer to decisions of the Pennsylvania Supreme Court. Where the Pennsylvania Supreme Court has not directly addressed an issue, we must predict how that Court would rule. See Travelers Indem. Co. of Ill. v. DiBartolo, 131 F.3d 343, 348 (3d Cir. 1997).

III.

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