Aetna Life Insurance Company v. Kohler et al

Filing 28

ORDER by Judge Claudia Wilken DENYING DEFENDANTS 12 MOTION TO DISMISS AND DENYING AS MOOT PLAINTIFFS 17 MOTION TO STRIKE PORTIONS OF DEFENDANTS MOTION TO DISMISS. (ndr, COURT STAFF) (Filed on 5/23/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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No. C 11-0439 CW
AETNA LIFE INSURANCE COMPANY, on
behalf of LEHMAN BROTHERS HOLDINGS,
INC.,

ORDER DENYING
DEFENDANTS’ MOTION
TO DISMISS AND
DENYING AS MOOT
PLAINTIFF’S MOTION
TO STRIKE PORTIONS
OF DEFENDANTS’
MOTION TO DISMISS
(Docket Nos. 12 and
17)

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Plaintiff,
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v.
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THOMAS KOHLER and DIANE KIMSEU
KOHLER,

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United States District Court
For the Northern District of California

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Defendants.
/

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Plaintiff Aetna Life Insurance Company, on behalf of Lehman

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Brothers Holdings, Inc., brings a claim under section 502(a)(3) of

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the Employment Retirement Insurance Security Act (ERISA), 29 U.S.C.

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§ 1132(a)(3), to recover funds from Defendants Thomas Kohler and

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Diane Kimeseu Kohler.

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complaint.

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of Defendants’ motion to dismiss.

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to strike.

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considered the papers submitted by the parties, the Court DENIES

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Defendants’ motion and DENIES as moot Aetna’s motion to strike.

Aetna opposes the motion and moves to strike portions
Defendants oppose Aetna’s motion

The motions will be decided on the papers.

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Defendants move to dismiss Aetna’s

Having

BACKGROUND
Aetna is the administrator and fiduciary of the Lehman

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Brothers Holdings, Inc. Benefits Plan, which is a self-funded plan

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governed by ERISA.

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Kohler was employed by Lehman Brothers and was a participant under

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the Plan.

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Aetna’s claim to recover funds from Defendants, the Summary Plan

Defendants are husband and wife.

Mr. Kohler was a covered dependent.

Ms. Kimseu

As relevant to

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Description (SPD) for the Plan provided,
Subrogation
Immediately upon paying or providing any benefits under this
plan, the plan shall be subrogated to (stand in the place of)
all rights of recovery a Covered Person has against any
Responsible Party with respect to any payment made by the
Responsible Party to a Covered Person due to a Covered
Person’s injury, illness, or condition to the full extent of
benefits provided or to be provided by the plan.

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United States District Court
For the Northern District of California

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Reimbursement
In addition, if a Covered Person receives any payment from any
Responsible Party or Insurance Coverage as a result of an
injury, illness, or condition, the plan has a right to receive
from, and be reimbursed by, the Covered Person for all amounts
this plan has paid and will pay as a result of that injury,
illness, or condition, up to and including the full amount the
Covered Person receives from any Responsible Party.
Constructive Trust
By accepting benefits (whether the payment of such benefits is
made to the Covered Person or made on behalf of the Covered
Person to any provider) from the plan, the Covered Person
agrees that if he or she receives any payment from any
Responsible Party as a result of an injury, illness, or
condition, he or she will serve as a constructive trustee over
the funds that constitutes such payment. Failure to hold such
funds in trust will be deemed a breach of the Covered Person’s
fiduciary duty to the plan.

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Lien Rights
Further, the plan will automatically have a lien to the extent
of benefits paid by the plan for the treatment of the illness,
injury, or condition for which the Responsible Party is
liable. The lien shall be imposed upon any recovery whether
by settlement, judgment, or otherwise related to the treatment
for any illness, injury, or condition for which the plan paid
benefits. The lien may be enforced against any party who
possesses the funds or proceeds representing the amount of
benefits paid by the plan including, but not limited to, the
Covered Person, the Covered Person’s representative or agent;
Responsible Party; Responsible Party’s insurer,
representative, or agent; and/or any other source possessing
funds representing the amount of the benefits paid by the
plan.

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First-Priority Claim
By accepting benefits (whether the payment of such benefits is
made to the Covered Person or made on behalf of the Covered
Person to any provider) from the plan, the Covered Person
acknowledges that this plan’s recovery rights are a first
priority claim against all Responsible Parties and are to be
paid to the plan before any other claim for the Covered
Person’s damages. This plan shall be entitled to full
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reimbursement on a first-dollar basis from any Responsible
Party’s payments, even if such payment to the plan will result
in a recovery to the Covered Person which is insufficient to
make the Covered Person whole or to compensate the Covered
Person in part or in whole for the damages sustained. The
plan is not required to participate in or pay court costs or
attorneys fees to any attorney hired by the Covered Person to
pursue the Covered Person’s damage claim.

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United States District Court
For the Northern District of California

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Cooperation
The Covered Person shall fully cooperate with the plan’s
efforts to recover its benefits paid. It is the duty of the
Covered Person to notify the plan within 30 days of the date
when any notice is given to any party, including an insurance
company or attorney, of the Covered Person’s intention to
pursue or investigate a claim to recover damages or obtain
compensation due to injury, illness, or condition sustained by
the Covered Person. The Covered Person and his or her agents
shall provide all information requested by the plan, the
Claims Administrator or its representative including, but not
limited to, completing and submitting any applications or
other forms or statements as the plan may reasonably request.
Failure to provide this information may result in the
termination of health benefits for the Covered Person or the
institution of court proceedings against the Covered Person.
The Covered Person shall do nothing to prejudice the plan’s
subrogation or recovery interest or to prejudice the plan’s
ability to enforce the terms of this plan provision. This
includes, but is not limited to, refraining from making any
settlement or recovery that attempts to reduce or exclude the
full cost of all benefits provided by the plan.

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Compl., Ex. A, at 40-41.
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The following allegations are contained in Aetna’s complaint,
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unless otherwise stated.
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On July 4, 2008, Mr. Kohler was injured in a traffic accident
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involving Lise Warren.

The Plan paid out $147,986.76 to cover Mr.

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Kohler’s medical expenses.
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In November 2008, The Rawlings Company, LLC, on behalf of
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Aetna, notified Mr. Kohler of his duty to inform Aetna of any claim
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he intended to bring based on the July 2008 accident.

Rawlings

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also informed Mr. Kohler of Aetna’s “right to reimbursement from
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any settlement or other payment received as a result of the
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accident.”

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letter.

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Compl. ¶ 15.

Defendants did not respond to this

In June 2009, Rawlings again contacted Mr. Kohler, seeking

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information about whether he had brought any claim regarding the

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July 2008 accident and whether he had retained an attorney.

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Defendants did not respond, notwithstanding that they apparently

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had filed a complaint against Ms. Warren in San Francisco County

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Superior Court on June 24, 2009.1

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Case No. CGC-09-489784 (S.F. Super. Ct.).

See generally Kohler v. Warren,
On September 24, 2009,

United States District Court
For the Northern District of California

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Mercury Insurance Company, Ms. Warren’s insurer, informed Rawlings

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that The Dolan Law Firm was representing Mr. Kohler.

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Firm serves as Defendants’ counsel in this case.

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The Dolan Law

On or about September 30, 2009, Rawlings informed Defendants

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that Aetna had a lien for medical benefits paid on behalf of Mr.

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Dolan on funds that may be obtained through a settlement with Ms.

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Warren and her insurer.

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asking that Aetna withdraw its lien because Ms. Warren had

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insufficient policy coverage and personal assets to make Mr. Kohler

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whole.

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right to know of any settlement, Defendants responded by

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reiterating their belief that the Plan could not recover any amount

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from Mr. Kohler.

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On December 9, 2009, Defendants responded,

After receiving a letter from Rawlings asserting Aetna’s

On June 28, 2010, Defendants informed Rawlings that they had

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reached a settlement with Ms. Warren and her insurer.

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had sought $2 million from Ms. Warren.

Mr. Kohler

Under the parties’

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This was not alleged in Aetna’s complaint, but rather
represented to be true by Defendants. It is offered here only to
provide further background. The Court’s ruling does not rely on
it.
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settlement agreement, Mr. Kohler would receive $7,250.00 and Ms.

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Kimseu Kohler would receive $137,750.00, for a total of

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$145,000.00.

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Aetna filed this action on January 28, 2011, asserting a claim

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for equitable relief under section 502(a)(3) of ERISA.

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particular, Aetna asks the Court to impose a “constructive trust or

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equitable lien agreement in favor of the Plan upon settlement

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proceeds in possession of Defendants.”

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In

Compl. ¶ 38a.

Defendants have submitted a copy of the docket sheet in the

United States District Court
For the Northern District of California

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state court action.

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Defendants’ counsel, on behalf of Defendants and Ms. Warren, filed

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in the state court action an ex parte motion to interplead funds

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related to the settlement, to discharge the liability of Ms. Warren

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and her insurer, and to dismiss Defendants’ claims against Ms.

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Warren.

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the sum of the following amounts: $6,878.56 held by Mr. Kohler,

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$37,750.00 held by Ms. Kimseu Kohler and $100,000.00 held by

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Mercury Insurance.

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deposited with the state court.

The parties sought to interplead $144,628.56, which was

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The docket shows that, on February 3, 2011,

The motion was granted, and $144,628.56 is now

LEGAL STANDARD
A complaint must contain a “short and plain statement of the

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claim showing that the pleader is entitled to relief.”

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Civ. P. 8(a).

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12(b)(6) for failure to state a claim, dismissal is appropriate

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only when the complaint does not give the defendant fair notice of

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a legally cognizable claim and the grounds on which it rests.

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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

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considering whether the complaint is sufficient to state a claim,

Fed. R.

When considering a motion to dismiss under Rule

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In

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the court will take all material allegations as true and construe

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them in the light most favorable to the plaintiff.

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v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986).

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principle is inapplicable to legal conclusions; “threadbare

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recitals of the elements of a cause of action, supported by mere

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conclusory statements,” are not taken as true.

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___ U.S. ___, 129 S. Ct. 1937, 1949-50 (2009) (citing Twombly, 550

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U.S. at 555).

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However, this

Ashcroft v. Iqbal,

DISCUSSION

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United States District Court
For the Northern District of California

NL Indus., Inc.

Defendants argue that Aetna’s claim must be dismissed because

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it is not for “appropriate equitable relief.”

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Defendants assert that this case should be dismissed pursuant to

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Colorado River Water Conservation District v. United States, 424

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U.S. 800 (1976).

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I.

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Alternatively,

Appropriate Equitable Relief
Section 502(a)(3) of ERISA permits a plan fiduciary to bring a

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civil action “(A) to enjoin any act or practice which violates any

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provision of this subchapter or the terms of the plan, or (B) to

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obtain other appropriate equitable relief (i) to redress such

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violations or (ii) to enforce any provisions of this subchapter or

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the terms of the plan.”

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for equitable relief, a plan must “(1) specifically identify a

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fund, distinct from the beneficiary's general assets, from which

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reimbursement will be taken, and (2) specify a particular share to

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which the plan is entitled.”

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Stores, Inc. Assocs.’ Welfare Plan v. Salazar, 525 F. Supp. 2d

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1103, 1111 (D. Ariz. 2007) (citing Sereboff v. Mid-Atl. Med.

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Servs., 547 U.S. 356, 362-63 (2006)); see also Cigna Corp. v.

29 U.S.C. § 1132(a)(3).

To state a claim

Administrative Comm. for Wal-Mart

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Amara, ___ U.S. ___, 2011 WL 1832824, at *10.
As noted above, Aetna seeks to impose a constructive trust or

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equitable lien on any settlement proceeds obtained by Defendants.

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Defendants advance various arguments, which appear to fall into two

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categories: (1) “Aetna is not ‘doing equity,’” Mot. at 4:2, and

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therefore equitable relief is not appropriate; and (2) Aetna seeks

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an amount that exceeds the amount to which it is entitled under the

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Plan.2

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United States District Court
For the Northern District of California

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None of these arguments is availing.

A.

“Doing Equity”

Defendants point to the “the time-honored maxim that ‘[h]e who

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seeks equity must do equity.’”

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1152 n.11 (9th Cir. 2000) (quoting McQuiddy v. Ware, 87 U.S. 14, 19

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(1873)).

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Aetna evident from the face of the pleadings that precludes it from

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obtaining equitable relief.

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In re Gardenhire, 209 F.3d 1145,

However, they do not identify any inequitable act by

First, Defendants contend that the Plan effected a “forced

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waiver” of their “equitable defenses, including the make whole

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doctrine.”

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an equitable defense.

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provides that “absent an agreement to the contrary, an insurance

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company may not enforce a right to subrogation until the insured

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has been fully compensated for her injuries, that is, has been made

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whole.”

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Welfare Benefit Plan, 64 F.3d 1389, 1394 (9th Cir. 1995).

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make-whole doctrine is a federal common-law rule of contract

Mot. at 3:15-16, 4:1.

The make-whole doctrine is not

It is a federal common law rule that

Barnes v. Indep. Auto. Dealers Ass’n of Cal. Health &
The

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Defendants also contend that public policy justifies
dismissing Aetna’s claim because it has a chilling effect on “the
ability of personal injury claimants to obtain representation.”
Mot. at 7:10-11. This argument does not warrant dismissal.
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interpretation.

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contract’s subrogation clause is silent with respect to the

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insured’s right to be made whole before the insurer may obtain

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reimbursement for benefits paid.

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the make-whole rule by providing that the insurer has “the right of

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first reimbursement out of any recovery the insured [is] able to

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obtain, even if [the insured is] not made whole.”

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It is a “gap-filler” that applies only if the

Thus, the parties may abrogate

Id. at 1395.

Here, the “First-Priority Claim” provision of the SPD provides
that the Plan is entitled “to full reimbursement on a first-dollar

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United States District Court
For the Northern District of California

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basis from any Responsible Party’s payments, even if such payment

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to the plan will result in a recovery to the Covered Person which

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is insufficient to make the Covered Person whole or to compensate

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the Covered Person in part or in whole for the damages sustained.”

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Compl., Ex. A, at 41.

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the gap-filling make-whole doctrine.

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any authority that precludes Aetna from seeking equitable remedies

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simply because Aetna’s recovery may exhaust settlement proceeds.3

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District courts, including this one, have permitted insurers to

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assert equitable claims under section 502(a)(3), notwithstanding

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the inapplicability of the make-whole doctrine.

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Techs. & Solutions, Inc. v. Rose, 2011 WL 197772, at *4 (W.D.

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Wash.) (concluding that plan may assert equitable lien against

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insured, despite non-operation of make-whole doctrine); Pioneer

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Title Co. Employee Welfare Benefits Trust v. Tague, 2009 WL

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1687966, at *6 (D. Idaho); Bd. of Trustees for Laborers Health &

This language obviates the need to resort to
Defendants do not identify

See, e.g., CGI

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Although Defendants’ argument suggests they believe the
First-Priority Claim provision to be unconscionable, they cite no
authority to support this position.
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Welfare Trust Fund for N. Cal. v. Hill, 2008 WL 5047705, at *4

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(N.D. Cal.).

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require dismissal of Aetna’s claim.

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Thus, that Mr. Kohler may not be made whole does not

Defendants also argue that Aetna is not “doing equity”

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because, under the “common fund doctrine,” their counsel’s right to

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fees should take priority over Aetna’s claim.

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“‘a litigant or a lawyer who recovers a common fund for the benefit

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of persons other than himself or his client is entitled to a

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reasonable attorney’s fee from the fund as a whole.’”

Under this doctrine,

Staton v.

United States District Court
For the Northern District of California

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Boeing Co., 327 F.3d 938, 967 (9th Cir. 2003) (quoting Boeing Co.

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v. Van Gemert, 444 U.S. 472, 478 (1980)).

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Court, the “doctrine rests on the perception that persons who

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obtain the benefit of a lawsuit without contributing to its cost

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are unjustly enriched at the successful litigant’s expense.”

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Gemert, 444 U.S. at 478.

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if a party accepted benefits, that party agreed that the Plan “is

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not required to participate in or pay court costs or attorneys fees

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to any attorney hired by the Covered Person to pursue the Covered

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Person’s damage claim.”

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fund doctrine does not require dismissal of Aetna’s claim, in whole

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or in part.

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According to the Supreme

Van

However, the Plan’s terms provide that,

Compl., Ex. A, at 41.

Thus, the common

Finally, Defendants contend that Aetna is not “doing equity”

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because they and their attorneys may receive nothing from the

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settlement with Ms. Warren and her insurer if Aetna were to

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prevail.

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precludes Aetna from pursuing equitable relief.

However, Defendants offer no authority that this result

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B.

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As noted above, Aetna seeks $147,986.76 for monies it paid to

Amount of Aetna’s Entitlement

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cover Mr. Kohler’s medical expenses.

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amount exceeds Aetna’s entitlement under the Plan’s terms and that

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its claim should be dismissed in whole or in part.

Defendants contend that this

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Defendants cite a portion of the Eleventh Circuit’s decision

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in Popowski v. Parrott, in which that court concluded that, under

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Sereboff, a plan’s ERISA equitable relief claim failed because the

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plan’s terms failed to “specify that recovery come from any

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identifiable fund or to limit that recovery to any portion

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thereof.”

461 F.3d 1367, 1374 (11th Cir. 2006).

There, the plan

United States District Court
For the Northern District of California

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sought to be reimbursed “in full, and in first priority, for any

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medical expenses paid by the Plan relating to the injury or

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illness.”

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limited to “all the amounts the plan has paid and will pay as a

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result of that injury, illness, or condition, up to and including

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the full amount the Covered Person receives from any Responsible

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Party.”

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Aetna’s claim to an identifiable fund and a portion of it.

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e.g., Pioneer Title, 2009 WL 1687966, at *5; Admin. Cmte. for Wal-

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Mart Stores, 525 F. Supp. 2d at 1112 n.7.

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require dismissal.

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Id. at 1371.

Here, under the Plan, Aetna’s recovery is

Compl., Ex. A, at 40.

This language sufficiently limits
See,

Thus, Popowski does not

Defendants also argue that Aetna may not recover any amount

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from Ms. Kimseu Kohler because she is not a “Covered Person” as

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defined by the Plan.

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be enforced against any party who possesses the funds or proceeds

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representing the amount of benefits paid by the plan including,

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but not limited to, the Covered Person, . . . and/or any other

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source possessing funds representing the amount of the benefits

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paid by the plan.”

However, the Plan provides that a “lien may

Compl., Ex. A, at 41.
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Aetna alleges that Ms.

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Kimseu Kohler received amounts under the settlement agreement.

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Plan’s language and this allegation support Aetna’s claim against

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Ms. Kimseu Kohler.

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The

Finally, Defendants contend that Aetna should recover no more

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than an amount proportional to what Defendants received in the

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settlement in relation to what they valued Mr. Kohler’s claim to

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be.

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547 U.S. 268 (2006), which concerned a state health agency’s lien

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against a Medicaid recipient’s settlement proceeds.

They cite Arkansas Department of Health Services v. Ahlborn,

However,

United States District Court
For the Northern District of California

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Defendants identify nothing in the Ahlborn decision that supports

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dismissal of Aetna’s claim, either in whole or in part.

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Accordingly, Aetna states a cognizable claim for equitable

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relief under ERISA.

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II.

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Dismissal under the Colorado River Doctrine
In situations involving the contemporaneous exercise of

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jurisdiction by different courts over sufficiently parallel

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actions, a federal court has discretion to stay or dismiss an

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action based on considerations of wise judicial administration,

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giving regard to conservation of judicial resources and

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comprehensive disposition of litigation.

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at 817.

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implicate the Colorado River doctrine; it is enough that the two

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cases are substantially similar.

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1411, 1416 (9th Cir. 1989).

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parties or issues in one of the cases will not necessarily preclude

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a finding that they are parallel.

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Behnke Warehousing, Inc., 962 F.2d 698, 700-701 (7th Cir. 1992);

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see also Interstate Material Corp. v. City of Chicago, 847 F.2d

Colorado River, 424 U.S.

The two actions need not exactly parallel each other to

Nakash v. Marciano, 882 F.2d

The mere presence of additional

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Caminiti & Iatarola, Ltd. v.

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1285, 1288 (7th Cir. 1988) (noting that the requirement is for

2

parallel suits, not identical ones).

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The federal district courts have a “virtually unflagging

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obligation” to exercise their jurisdiction, Moses H. Cone Hosp. v.

5

Mercury Constr. Corp., 460 U.S. 1, 19 (1983), and should only

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invoke a stay or dismissal under the Colorado River doctrine in

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“exceptional circumstances,” Colorado River, 424 U.S. at 817.

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Colorado River, the Supreme Court announced a balancing test

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weighing four factors to determine whether sufficiently exceptional

In

United States District Court
For the Northern District of California

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circumstances exist: (1) whether either court has assumed

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jurisdiction over property in dispute; (2) the relative convenience

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of the forums; (3) the desirability of avoiding piecemeal

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litigation; and (4) the order in which the concurrent forums

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obtained jurisdiction.

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factor is necessarily determinative; a carefully considered

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judgment taking into account both the obligation to exercise

17

jurisdiction and the combination of factors counselling against

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that exercise is required.”

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424 U.S. at 818.

The Court stated: “No one

Id. at 818-19.

Defendants do not present exceptional circumstances that

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warrant dismissal under Colorado River or abstention.

21

funds at issue are deposited with the state court does not mandate

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dismissal.

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only after this action was filed.

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25

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Notably, Defendants sought to interplead those funds

Accordingly, Defendants’ motion to dismiss pursuant to
Colorado River is denied.

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That the

CONCLUSION
For the foregoing reasons, the Court DENIES Defendants’ motion
to dismiss.

(Docket No. 12.)

Aetna’s motion to strike portions of
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Defendants’ motion to dismiss is DENIED as moot.

(Docket No. 17.)

A case management conference will held on July 12, 2011 at
2:00 p.m.
IT IS SO ORDERED.

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Dated: 5/23/2011
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CLAUDIA WILKEN
United States District Judge

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United States District Court
For the Northern District of California

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