Verizon Sickness & Accident Disability Benefit Plan for New Eng. Assocs. v. Rogers

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VERIZON SICKNESS AND ACCIDENT DISABILITY BENEFIT PLAN FOR NEW ENGLAND ASSOC., Plaintiff, v. JACQUELINE ROGERS, and AFFILIATED LAW OFFICES OF RICHARD M. SANDS, Defendants and Third-Party Plaintiffs, v. VERIZON COMMUNICATIONS, INC. And EQUIAN, LLC., Third-Party Defendants.

No. 1:21-CV-00110-MSM-PAS

United States District Court, D. Rhode Island

March 15, 2023

MEMORANDUM AND ORDER

Mary S. McElroy, United States District Judge

Jacqueline Rogers (“Rogers”) was an employee of Verizon Inc., and a participant in her employer's disability benefits plan (“Plan”)^[1], when, in late October 2016 her vehicle was struck from behind and she was too injured to work. Pursuant to the Plan, Rogers went out on disability leave and was paid disability benefits of $44,962.50; her medical costs were also covered by the Plan. After her collection of benefits, and without filing a lawsuit, Rogers settled with the insurer of the car that had hit her vehicle for a lump sum of $100,000. She was represented by the Affiliated Law Offices of Richard M. Sands (“Sands” or “firm”). The $100,000 was disbursed, as is customary, to Rogers' attorney, the Sands firm. The ultimate disposition of that $100,000 is relevant to the outcome in this case, as discussed below.

Verizon,^[2]filing this lawsuit approximately 18 months after Rogers settled her accident case, lays claim to $44,962.50 of that settlement, seeking reimbursement of the disability benefits it paid. Sands vehemently disputes Verizon's entitlement to any part of the settlement. Rogers is apparently playing no part in these post-settlement activities; the plaintiff, while naming her as a defendant in Count I, has not served her, and she has therefore not been active in this case.

Verizon's cause of action arises under Section 502(a)(3) of the Employment Retirement Securities Act (“ERISA”) 29 U.S.C. § 1132(a)(3)(B)(ii), which provides that a fiduciary may seek equitable relief to enforce the terms of a Plan. Verizon maintains that the Plan, in its subrogation clause, required Rogers to reimburse it for the benefits it paid her, and that the obligation created an equitable lien on the proceeds of the settlement. It argues that this action against Sands, to whom the settlement proceeds were given, is an equitable one to enforce the reimbursement requirement of the Plan, and thus falls within §1132(a)(3)(B)(ii). Sands disagrees that Verizon has an equitable, rather than a legal, action^[3] and this issue is central to their dispute.

Sands has counterclaimed against the Plan for a violation of 29 U.S.C. §1024(b)(4), a provision of ERISA that requires the administrator of a Plan to furnish certain documents to any participant or beneficiary. (ECF No. 7.) Verizon contests that claim because, it maintains, Sands is neither a beneficiary of nor a participant in the Plan and therefore lacks standing, that the documents he accuses the Plan of withholding are not documents required to be furnished, and that Sands' request for documents was not made to the Plan administrator.

Sands then filed a third-party Complaint against both Verizon Communications and Equian. That Complaint repeats the allegation of a violation of § 1024(b)(4) against Equian (Count 3). In addition, Count 1 accuses Verizon Communications and Count 2 accuses Equian of violating 29 U.S.C. § 1029(c).^[4]Finally, Counts 4 and 5 allege that Verizon Communications and Equian, respectively, intentionally and tortiously interfered with Sands' contract to zealously represent Rogers “in her pursuit for damages arising out of the injuries she sustained in the motor vehicle accident.” All the claims in the third-party Complaint are based on the Plan's allegedly unlawful failure to turn over to Sands specific records related to Rogers' employment that he had requested in connection with his representation of her in the car accident case.

I. SUMMARY JUDGMENT

The parties have filed cross-motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Summary judgment's role in civil litigation is “to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.” Garside v. Osco Drug Inc., 895 F.2d 46, 50 (1st Cir. 1990) (quoting Fed.R.Civ.P. 56(e) Advisory Committee Notes). Summary judgment can be granted only when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56. “A dispute is genuine if the evidence about the fact is such that a reasonable jury could resolve the point in the favor of the non-moving party. A fact is material if it carries with it the potential to affect the outcome of the suit under the applicable law.” Santiago-Ramos v. Centennial P.R. Wireless Corp., 217 F.3d 46, 52 (1st Cir. 2000) (quoting Sanchez v. Alvarado, 101 F.3d 223, 227 (1st Cir. 1996)).

In ruling on a motion for summary judgment, the court must examine the record evidence “in the light most favorable to, and drawing all reasonable inferences in favor of, the nonmoving party.” Feliciano de la Cruz v. El Conquistador Resort & Country Club, 218 F.3d 1, 5 (1st Cir. 2000) (citing Mulero-Rodriguez v. Ponte, Inc., 98 F.3d 670, 672 (1st Cir. 1996)). “[W]hen the facts support plausible but conflicting inferences on a pivotal issue in the case, the judge may not choose between those inferences at the summary judgment stage.” Coyne v. Taber Partners I, 53 F.3d 454, 460 (1st Cir. 1995). Furthermore, “[s]ummary judgment is not appropriate merely because the facts offered by the moving party seem more plausible, or because the opponent is unlikely to prevail at trial. ... If the evidence presented ‘is subject to conflicting interpretations, or reasonable [people] might differ as to its significance, summary judgment is improper.'” Gannon v. Narragansett Elec. Co., 777 F.Supp. 167, 169 (D.R.I. 1991 (citing and partially quoting 10A Charles A. Wright, Arthur R. Miller & Mary K. Kane, Federal Practice & Procedure Civil, § 2725, at 104 (1983)).

II. DISCUSSION

A claim-by-claim approach is warranted.

A. Verizon's Claim for Enforcement of an Equitable Lien (29 U.S.C. § 1132(a)(3)(B)(ii))

1. Does an Equitable Lien Exist?

Verizon argues that the terms of the Plan created a lien against the proceeds of the settlement. None of the relevant provisions are contained in the Plan itself. (ECF No. 32-1.) Instead, the plaintiff relies on the Summary Plan Description (“SPD”), a document that, with the Plan, is required to be distributed to beneficiaries and participants. 29 U.S.C. § 1024(b)(4). Sands first contests whether language in the SPD can create a lien because it is outside the Plan document. The simple answer is that the SPD is explicitly incorporated by reference in the section of the Plan that defines “Plan.”^[5](ECF No. 32-2 at 3.) Thus it is not merely a supplementary document but is part of the Plan itself. Cf Rhea v. Alan Ritchey, Inc., 85 F.Supp.3d 870, 874 75 (E.D. Tex. 2015) (where SPD was the only document and declared itself to be the Plan, its terms controlled.).^[6]

The SPD, in a section entitled “Subrogation and Third-Party Reimbursement,” makes crystal-clear that its subrogation rights become ripe if a participant who has been paid benefits recovers from a third party. (EF No. 32-2 at 21.) It is written in language as intelligible to laypersons as insurance policies get:

If you recover any charges for covered expenses from a third party (for example, as a result of a lawsuit from an automobile accident), the Plan's provision for subrogation and reimbursement takes effect. ... In this example of a car accident, should the Plan provide benefits because of your accident, the Plan has the right to recover the amount of these benefits from the negligent person or by obtaining a reimbursement from that person's insurance company - or from you if settlement amounts have been paid to you by the negligent person or his or her insurer. Id. (emphasis supplied). It goes on,

The subrogation and reimbursement provisions also mean that if you make a liability claim against a third party after you have received benefits from the Plan, you must include the amount of those benefits as part of the damages you claim. If the claim proceeds to a settlement or judgment in your favor, you must reimburse the Plan for the benefits you received.

Id.

This language creates a lien against any third-party proceeds received. Carpenter Tech. Corp. v. Weida, 300 F.Supp.3d 663, 669 (E.D. Pa. 2018). The Sands firm protests that language immediately following - “You and your dependents must grant a lien to the Plan” - means that the Plan itself does not create the lien, but simply instructs the beneficiary to take some future action to create a lien.^[7]Sands suggests that the future action must be a separate agreement executed by Rogers in which she consents to a lien. When the paragraph is read together, the defendant's interpretation fails. The Plan intends to - and by its emphatic and clear declaration that the beneficiary must reimburse, does - create an extant lien. Sands cites no authority suggesting that the language “must grant” implicitly requires some future action by the beneficiary before the lien becomes enforceable.

Sands cites cases in which the Plan language explicitly states that an “automatic lien” is created by its terms e.g., Bd. of Trustees for Laborers Health and Welfare Trust Fund for N. Cal. v. Hill, No. C 07-5849 CW, 2008 WL 5047705, at *3 (N.D. Cal. Nov. 25, 2008), or whose declaration of a “first right to reimbursement” implicitly creates an automatic lien. E.g., Quest Diagnostics v. Bomani, No....