A Cautionary Tale: Cabezas v. Penske Truck Leasing Co.
by B. Smith
When it comes to disputes regarding the resolution of conditional liens as part of settlement, the courts will usually defer to settlement terms as their guide. This was certainly true in Cabezas v. Penske Truck Leasing Co., L.P.[1] where the Court enforced settlement against the defendants, causing them to pay twice for the same lien.
The Facts of the Case
In Cabezas, the parties entered into a full and final settlement whereby the plaintiff would release all claims in exchange for a payment of $500,000. The release further provided that the plaintiff would be responsible for satisfying all liens as follows:
The plaintiff agrees to fully satisfy, indemnify, and hold defendant harmless from any and all penalties, liens, conditional payments, fines, demands, and actions in law or equity, or other payments that may be required if any of the plaintiffs’ representations as to their entitlement (or lack thereof) to Medicare or Social Security benefits is in any way misrepresented.
On May 22, 2024, the plaintiff sent the executed release to the defendants and on June 3, 2024, the Centers for Medicare & Medicaid Services (CMS) issued a final demand letter noting a lien in the amount of $39,365.09. The plaintiff provided the letter to the defendants and again noted the plaintiff’s responsibility to resolve the lien. The defendants thereafter notified the plaintiff they had issued a check in the amount of $460,634.91 and their third-party administrator paid the Medicare lien directly for the remaining amount. The plaintiff objected however and filed a motion to enforce settlement seeking the full payment of $500,000 along with interest and attorneys’ fees.
The defendants argued that the plaintiff had incurred no damages by payment of the lien. But the lower court disagreed, finding that the terms of the settlement agreement, which is a binding contract, clearly state that the plaintiff would resolve the lien. Further, the defendants took away the ability of the plaintiff to potentially negotiate the lien. The defendants moved for reconsideration, arguing double recovery and noting that the inability to negotiate the lien was speculative. Nonetheless, the lower court denied the request noting that the case was not about damages but contract terms. The court further stated that if the defendants chose to pay something outside of the terms of the contract, that was their decision but it did not impact plaintiff’s right to the full $500,000. On appeal, the New Jersey Superior Court agreed with the lower court.
Final Thoughts
The Court relied on the terms of the settlement and not whether the plaintiff would be unjustly enriched when it determined that the defendants must pay an additional $39,365.09 plus interest and attorney fees. This case illustrates not only the importance of abiding by settlement terms but also of negotiating terms that you are comfortable with when resolving lien issues. If you want to ensure that Medicare liens are satisfied through payment directly to CMS, you can stipulate it as a term of settlement. If, however, you put that responsibility on the plaintiff, or the plaintiff has negotiated the same, intervening in this process can lead to litigation and additional exposure. Every case is unique and requires an analysis of whether the party satisfying the lien has the knowledge and experience to do so in a timely manner.
For questions about Cabezas, or if you would like more information about IMPAXX’s Lien Solutions services, please contact the Settlement Consultant Team at [email protected].
[1] 2025 N.J. Super. Unpub. LEXIS 2034 (App. Div. Oct. 28, 2025)