Blood Sys., Inc. v. Roesler

972 F.Supp.2d 1150

BLOOD SYSTEMS, INC. et al., Plaintiffs,

v.Joseph ROESLER, et al., Defendants.

No. CV–11–02133–PHX–ROS.

United States District Court, D. Arizona.

Sept. 24, 2013.

John C. West, Michael Freeman Tamm, Shelley Catherine Nordling, Brownstein Hyatt Farber Schreck LLP, Phoenix, AZ, for Plaintiffs.

Michael F. Magee, Levenbaum Trachtenberg PLC, Phoenix, AZ, for Defendants.

ORDER

ROSLYN O. SILVER, Senior District Judge.

Defendants Joseph and Pauline Roesler move for summary judgment and the law firm of Levenbaum & Cohen moves for an award of attorneys' fees and costs. As set forth below, the Roeslers are entitled to summary judgment and Levenbaum & Cohen is entitled to its attorneys' fees and costs.

BACKGROUND

The parties disagree on the most basic of facts, making it difficult to set forth a clear and concise statement of the factual background. For present purposes, only the following facts are important. As of May 2009, Defendant Pauline Roesler worked for Blood Systems, Inc. (“Blood Systems”). In connection with her employment, Mrs. Roesler and her spouse, Defendant Joseph Roesler, participated in the “Blood System, Inc. Group Medical Plan” (the “Plan”). On May 27, 2009, Mr. Roesler, was seriously injured in a motorcycle crash. The Plan ended up paying approximately $50,000 for Mr. Roesler's medical care.

The Roeslers later retained the law firm of Levenbaum & Cohen ¹ to pursue a personal injury claim against the other driver involved in the motorcycle crash. The Roeslers settled their claim against the other driver for $100,000. On November 10, 2009, the Roeslers received $66,573.17, reflecting their share of the $100,000 settlement after Levenbaum & Cohen retained its attorneys' fees and costs.

On October 28, 2011, Blood Systems and the Plan (collectively, “Plaintiffs”) filed this suit, seeking to recover the approximately $50,000 the Plan paid out for Mr. Roesler's medical care. Plaintiffs named as defendants the Roeslers as well as Levenbaum & Cohen. According to Plaintiffs, the Summary Plan Description (“SPD”) for the Plan provides that if the Plan pays for medical care as a result of an injury caused by a third-party, the Plan has a right to subrogation and reimbursement from the payments or settlements received by the participant from the third-party. (Doc. 100–1 at 105). In other words, and as applied here, Plaintiffs believe the SPD means they are entitled to recover $50,000 from the settlement the Roeslers received from the other driver. Plaintiffs apparently did not care whether that $50,000 came from the Roeslers or from Levenbaum & Cohen.

In September 2012, the Court granted summary judgment on Plaintiffs' claims against Levenbaum & Cohen. In doing so, the Court concluded Plaintiffs' remedy, if any, lay against the Roeslers and not against the attorneys who handled the third-party tort claim. Levenbaum & Cohen seek the attorneys fees they incurred in obtaining that result. And the Roeslers have now filed their own motion for summary judgment, presenting three arguments: 1) this suit is not timely; 2) the SPD is not an enforceable document under ERISA; ² and 3) there is no basis for imposition of an “equitable lien by agreement” on the relevant funds. The first argument is convincing, meaning the Court need not reach the latter two.

ANALYSIS

I. Summary Judgment Standard

Summary judgment is appropriate where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Only genuine disputes will prevent summary judgment. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “Factual disputes that are irrelevant or unnecessary will not” preclude entry of summary judgment. Id.

II. Plaintiffs' Claims Are Not Timely

Plaintiffs' claims against the Roeslers depend on a number of basic propositions. Those propositions include: the Plan is an ERISA-governed “employee welfare benefit plan”; ³ the Roeslers were participants in the Plan; the Plan allows for the recovery of funds paid to participants in certain circumstances; and the Roeslers have refused to repay funds otherwise owing to the Plan. The Roeslers dispute the accuracy of some of these propositions. For purposes of their statute of limitations argument, however, the Roeslers accept all the propositions and argue that Plaintiffs waited too long to file suit. To analyze the timeliness issue, the Court will also accept the underlying propositions. Therefore, the only question is whether Plaintiffs brought their claims soon enough. They did not.

The parties agree that ERISA itself does not contain a statute of limitations applicable to Plaintiffs' claims. Therefore, the Court must borrow “the most analogous state statute of limitations.” Wetzel v. Lou Ehlers Cadillac Group Long Term Disability Insurance, 222 F.3d 643, 646 (9th Cir.2000). When borrowing a state statute of limitations, the task is to apply “the local time limitation most analogous to the case at hand.” Lampf v. Gilbertson, 501 U.S. 350, 355, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991) (emphasis added). In other words, the issue is not which state statute of limitations is a “perfect” fit for the federal claim, but which statute of limitations is the closest fit. DelCostello v. Int'l Brotherhood of Teamsters, 462 U.S. 151, 171, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983). And when picking the closest fit, a federal court must “accept[ ] the state's interpretation of its own statutes of limitations.” Barajas v. Bermudez, 43 F.3d 1251, 1258 (9th Cir.1994) (quotation and citation omitted).

Plaintiffs' claims against the Roeslers are, in effect, claims for benefits. The Ninth Circuit has already ruled that the “most analogous state statute of limitations” on claims for benefits is the state statute of limitations for actions on a written contract.⁴Id. at 647–48. In Arizona, that means there are two options. First, there is Arizona's general six-year statute of limitations for written contracts. A.R.S. § 12–548. Second, there is Arizona's one-year statute of limitations for certain employment disputes. A.R.S. § 12–541. Choosing between these two statutes appears to be a matter of first impression.⁵

Arizona's six-year limitations period applies to “[a] contract in writing that is executed in this state.” A.R.S. § 12–548(A)(1). The one-year limitations period is more specific and applies only to actions “[f]or breach of an oral or written employment contract including contract actions based on employee handbooks or policy manuals that do not specify a time period in which to bring an action.” A.R.S. § 12–541(3). The Arizona Supreme Court has not interpreted this latter statute. The Arizona Court of Appeals, however, has interpreted it as applying to almost all disputes between an employer and employee.

In Redhair v. Kinerk, Beal, Schmidt, Dyer & Sethi, P.C., the court concluded the term “employment contract” in A.R.S. § 12–541(3) should be given its “ordinary meaning.” 218 Ariz. 293, 183 P.3d 544, 546 (Ariz.Ct.App.2008). That meaning is: “a contract between an employer and employee in which the terms and conditions of employment are stated.” Id. (quotation omitted). This definition is not limited to “agreements affecting a term of employment or altering or limiting the at-will presumption.” Id. at 547 (quotation omitted). Instead, it includes “all contracts defining specific responsibilities of the employer to the employee.” Id. at 548. That is, any agreement related to “the nature, conditions, or duration” of employment is subject to A.R.S. § 12–541(3). Id. at 549. Using this broad construction, the Redhair court concluded a contract between an employee and employer for payment of a bonus was an “employment contract” subject to the one-year limitations period. Id.

For purposes of the present case, the question is whether an ERISA plan should be viewed as an “employment contract” as that term was defined by the Redhair court. To begin, there can be no dispute that the agreement between Blood Systems and the Roeslers regarding healthcare benefits was a contract. Harlick v. Blue Shield of Cal., 686 F.3d 699, 708 (9th Cir.2012) (“An ERISA plan is a contract....”). It is also indisputable that the parties' contract defined “specific responsibilities of [Blood Systems] to [the Roeslers].” Redhair, 183 P.3d at 548. Under the parties' contract, Blood Systems agreed to provide Pauline Roesler additional compensation in the form of paying for medical care in return for Pauline Roesler's continued employment. Accordingly, using the interpretation of “employment contract” adopted in Redhair, claims regarding benefits under an ERISA plan qualifies as claims under an “employment contract.”

Equating ERISA disputes as subject to special limitations periods applicable to employment disputes is in line with decisions from two courts of appeals. In Adamson v. Armco, Inc., 44 F.3d 650 (8th Cir.1995), the Eighth Circuit addressed which Minnesota statute of limitations should apply to a claim for ERISA benefits. The choice was between Minnesota's general six-year limitations period for written contracts or its “two-year statute of limitations for wage claims.” Id. at 652. Looking to Minnesota's interpretation of its own statutes, the Eighth Circuit found that Minnesota courts applied the two-year period to “all damages arising out of the employment relationship,” including “a claim for salary increases and adjustment of all fringe benefits.” Id. (quotations and citations omitted). Based on that reading of the Minnesota statute, the Eighth Circuit concluded the two-year limitations period was “the most analogous Minnesota statute of limitations” for the plaintiffs' ERISA claim. Id.

The Third Circuit reached a similar conclusion in Syed v. Hercules Inc., 214 F.3d 155 (3d Cir.2000). As in Adamson, the question was the applicable limitations period for an ERISA claim for benefits....