Emp. Benefit Plan of Compass Grp. USA v. Miller, Rosnick, D'Amico, August & Butler, P.C.

EMPLOYEE BENEFIT PLAN of COMPASS GROUP USA, INC., Plaintiff, v. MILLER, ROSNICK, D'AMICO, AUGUST & BUTLER, P.C., Defendant.

Case No. 3:14-cv-00389 (RNC)

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

September 30, 2019

RULING AND ORDER

Plaintiff Employee Benefit Plan of Compass Group USA, Inc., is the fiduciary of an employee welfare benefit plan ("the Plan") administered pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"). William Marino, a participant in the Plan, suffered injuries caused by a third party and Plaintiff paid for his medical treatment. Defendant Miller, Rosnick, D'Amico, August & Butler, P.C. ("Miller Rosnick") brought suit against the third party on behalf of Marino, obtained a lump sum settlement, took its attorney's fees and costs from the settlement proceeds, and disbursed the remainder to Marino. A consent judgment has been entered in favor of Plaintiff against Marino in the amount of the medical expenses Plaintiff paid on his behalf, but Plaintiff seeks to recover this amount from Miller Rosnick. The question addressed here is whether the relief Plaintiff seeks against the law firm falls within the scope of § 502(a)(3)(B) of ERISA, which authorizes a fiduciary to bring an action "to obtain appropriate equitable relief" for conduct that violates ERISA or the terms of a plan. Plaintiff contends the answer is yes; Defendant responds the answer is no. I conclude that Defendant is correct and therefore grant Defendant's motion for summary judgment and deny Plaintiff's cross-motion.

I. Factual Background

The Plan contains a provision entitled "Subrogation and Reimbursement," which provides as follows:

[I]f a Participant incurs charges or expenses for any illness, injury or other condition as a result of the act of a third party or parties . . . and such Participant has or may have a legal right to seek restitution from such third party, his insurance company or other responsible party for such act, then any payment of benefits made under this Plan based on such illness, injury or other condition automatically shall be subject to the provisions of this Section. The Participant shall advise the Plan of any claim or potential claim he might have against any [such] third party or his insurance company as of the date the person becomes a Participant under this Plan, or, if later, within sixty (60) days of the act which gives rise to such claim if such act also results in payment of benefits being made under the Plan. . . .

If a Participant receives any judgment, settlement or other payment from any person or persons considered responsible for the condition which gives rise to the expenses which the Plan pays, . . . the Participant shall reimburse the Plan from the first of such payments received to the extent of the expenses paid under the Plan regardless of whether the judgment, settlement or other payment allocates any specified amount to medical expenses paid under the Plan. The Plan's right to recovery shall be enforceable, even ifthe Participant has not been made whole. If the Participant fails to timely and fully reimburse the Plan for such expenses, any future claims the Participant makes under the Plan shall be offset by any amounts owed by the Participant to the Plan.

The Plan reserves Plaintiff's right to "request a court to establish a constructive trust or equitable lien" on assets "held by a third party" and to "sue the Participant or a third party in state court for reimbursement of funds held by such party."

Beginning in early 2011, Kerris Brown, an employee of Rawlings Company, LLC, Plaintiff's subrogation agent, communicated with Attorney James Butler at Miller Rosnick regarding Plaintiff's payment of Marino's medical expenses. In a series of communications, Brown provided documentation of medical expenses paid on Marino's behalf, requested information about Marino's lawsuit, and asserted a lien on funds recovered from the lawsuit.

With regard to these communications, the record shows the following. Brown first contacted Butler on February 22. Her letter provided notice of plaintiff's payment of medical expenses on behalf of Marino and requested information regarding his lawsuit against the responsible party. On March 2, Brown sent Butler the first of several summaries of medical expenses paid on behalf of Marino. On April 5, she followed up withButler regarding her first communication. This letter again requested information about the lawsuit and noted that "to date, [Butler] ha[d] not provided that information nor acknowledged representation of [Marino]." On May 17, Brown followed up again, seeking the same information. She noted that "[f]ailure to provide such information may result in a finding of non-cooperation. The member may be held accountable for any prejudice to [Plaintiff's] right of recovery as a result of the failure to comply." On June 7, and again on June 13, Brown sent Butler updated lists of medical expenses.

On June 20, Butler sent a letter to Brown, his first communication to her contained in the record. In the letter, he commented on the medical expenses claimed by plaintiff but wrote that his "letter [was], in no way, meant to convey that {he] accept[ed] the legitimacy and validity of [Plaintiff's] claimed lien." On November 11, he wrote to Brown stating that he had requested "documentation" related to plaintiff's claim "[o]n numerous occasions" and been provided no "documentation whatsoever." Butler threatened legal action if the information was not provided.

On December 5, Ben White, associate general counsel at Rawlings, wrote to Butler. White's letter suggests that Brown had inquired about the employment status of Marino (salaried or hourly) to ensure she provided Miller Rosnick withthe right documentation supporting Plaintiff's claim but Miller Rosnick had failed to provide the requested information. Enclosed with the letter were pertinent pages from both the salaried and hourly plans.

On May 3, 2012, Brown sent a letter to Butler notifying him that Rawlings was aware that Marino had reached a settlement in the civil case. In fact, the case been settled for a lump sum payment of $160,000. The letter requested that Butler contact Brown to arrange for satisfaction of Plaintiff's claim.

On May 8, 2012, Butler responded to Brown. He acknowledged the settlement but argued that Rawlings was attempting to collect on a claimed lien without providing proof of the lien's legitimacy. Butler added that he was "awaiting the Schedule A's that you must file along with the Form 5500 to be in compliance with the reporting requirements under the applicable ERISA statutes." Butler offered to advise Marino to pay $5,000 to settle the matter but stated that "this offer, in no way, acknowledges the validity or legality of [plaintiff's] claim."

About two months later, Butler disbursed the settlement proceeds. Of the total amount of $160,000, Butler disbursed $55,872.68 to his law firm to cover costs, plus another $50,000for attorney's fees. The remaining $54,127,32 was disbursed to Marino and several of his creditors.

Subsequently, on September 6, 2012, White responded to Butler's letter of May 8. White wrote that IRS Form 5500 is not an appropriate tool to determine a plan's funding status. He also enclosed a Summary Plan Description ("SPD").¹

II. Procedural History

In 2014, Plaintiff brought this suit against Miller Rosnick and Marino claiming that neither had reimbursed it for covering Marino's medical costs, and seeking "equitable relief in the form of a constructive trust and equitable lien on the amounts held by defendants that rightfully belong[] to plaintiff." After the suit was filed, and while cross-motions for summary judgment were pending, the Supreme Court decided Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, -- U.S. --, 136 S. Ct. 651 (2016). Montanile held that when a participant in an ERISA plan settles with a third party responsible for his or her injuries, and then "dissipatesthe whole settlement on nontraceable items, the fiduciary cannot bring a suit to attach the participant's general assets under § 502(a)(3) because the suit is not one for 'appropriate equitable relief.'" Id. at 655. The parties submitted supplemental briefing with regard to Montanile. After reviewing the supplemental briefing, I concluded that further discovery was necessary to determine whether the settlement funds at issue here had been dissipated. The motions for summary judgment were denied pending completion of that discovery.

Discovery disputes arose. To resolve an impasse with regard to discovery, Defendant stipulated that it "waives and will not assert any defense to [Plaintiff's] claim(s) that may be available pursuant to [Montanile] and which is based on [Defendant's] purported dissipation, commingling or otherwise disbursing its fee and costs incurred in connection with the legal representation provided" to Marino. That same month, a consent judgment entered against Marino in the amount of $33,267.92, terminating his status as a party. Plaintiff and Defendant then renewed their cross-motions for summary judgment.

III. Analysis

Summary judgment may be granted when there is no "genuine issue of material fact and, based on the undisputed facts, the moving party is entitled to judgment as a matter of law." D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir. 1998).A genuine issue of fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In considering cross-motions for summary judgment, "the court must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Coutard v. Mun. Credit Union, 848 F.3d 102, 114 (2d Cir. 2017) (quoting Schwabenbauer v. Bd. of Educ., 667 F.2d 305, 314 (2d Cir. 1981)).

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