Class action says municipal league improperly seized settlements to recoup expenses

By Michelle Keahey, East Texas Bureau | Oct 15, 2012


MARSHALL - A state-wide class action has been filed that challenges the right of the Texas Municipal League Intergovernmental Risk Pool to seize portions of injured workers’ third party settlements as recoupment for its case management expenses. 

Jose Montalvo, individually and on behalf of all others similarly situated, filed suit against Texas Municipal League Intergovernmental Risk Pool (TMLIRP), on Oct. 12 in the Eastern District of Texas, Marshall Division.

The lawsuit challenges the right of the TMLIRP to seize portions of injured workers’ third party settlements as recoupment of case management expenses it incurred under Texas workers’ compensation law.

Specifically, Montalvo alleges that TMLIRP included in its subrogation liens certain claims administration expenses that are not subject to recoupment through subrogation.

Montalvo objected to the demanded for the reimbursement of these expenses and TMLIRP seized the proceeds from the responsible third part without any form of due process or compensation, according to the suit.

Montalvo claims he was deprived of his property rights in violation of the 5th Amendment and his rights under the due process clause of the 14th Amendment.

According to the lawsuit, in the last four years TMLIRP has paid more than $13 million to case management companies for administrative services and has recouped more than $8 million in subrogation recoveries taken from class members’ third party settlement.

The defendant is accused of deprivation of property without due process and breach of contract.

The plaintiff is seeking an award of damages that include all case management expenses collected by the defendant from injured employees’ third party recoveries, plus interest, attorney’s fees and court costs.

Montalvo is represented by James A. Holmes of the Law Office of James Holmes P.C. in Henderson.

U.S. District Judge Rodney Gilstrap is assigned to the case.

Case No. 2:12-cv-00655

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