Aetna Life Insurance Company v. Kohler et al

Filing 50

ORDER by Judge Claudia Wilken GRANTING PLAINTIFFS 35 MOTION FOR SUMMARY JUDGMENT AND DENYING AS MOOT PLAINTIFFS 45 MOTION TO STRIKE PORTIONS OF THE DECLARATION OF ANDREW KLIMENKO. (ndr, COURT STAFF) (Filed on 11/2/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court
For the Northern District of California

ORDER GRANTING
PLAINTIFF’S MOTION
FOR SUMMARY
JUDGMENT AND
DENYING AS MOOT
PLAINTIFF’S MOTION
TO STRIKE PORTIONS
OF THE DECLARATION
OF ANDREW KLIMENKO
(Docket Nos. 35
and 45)

Plaintiff,
v.
THOMAS KOHLER and DIANE KIMSEU
KOHLER,
Defendants.

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No. C 11-0439 CW

AETNA LIFE INSURANCE COMPANY, on
behalf of LEHMAN BROTHERS
HOLDINGS, INC.,

________________________________/

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Plaintiff Aetna Life Insurance Company, on behalf of Lehman

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Brothers Holdings, Inc., moves for summary judgment on its claim

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under section 502(a)(3) of the Employment Retirement Insurance

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Security Act (ERISA), 29 U.S.C. § 1132(a)(3), to recover funds

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from Defendants Thomas Kohler and Diane Kimeseu Kohler.

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Defendants oppose the motion.

Aetna also moves to strike portions

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of a declaration submitted by Defendants in support of their
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opposition.

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and their oral arguments, the Court GRANTS Aetna’s motion for

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summary judgment and DENIES as moot Aetna’s motion to strike.

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Having considered the papers submitted by the parties

BACKGROUND
Aetna is the administrator and fiduciary of the Lehman
Brothers Holdings, Inc. Benefit Plan, a self-funded plan governed

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by ERISA.

Ms. Kimseu Kohler was employed by Lehman Brothers and

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was a participant under the Plan.

Mr. Kohler, her husband, was a

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covered dependent under the Plan.

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Summary Plan Description (SPD) provides

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In relevant portion, the

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
[sic] such payment. Failure to hold such funds in trust
will be deemed a breach of the Covered Person’s
fiduciary duty to the plan.
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
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United States District Court
For the Northern District of California

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insurer, representative, or agent; and/or any other
source possessing funds representing the amount of the
benefits paid by the plan.
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 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.
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.

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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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Decl. of Kate Mellor in Supp. for Pl.’s Mot. for Summ. J. (Mellor
Decl.) ¶ 4, Ex. A, at 40-41.

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On July 4, 2008, Defendant Thomas Kohler suffered severe
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injuries when Lise Warren made an illegal u-turn and hit his

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motorcycle.

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for Summ. J. (Opp.) at 2; Decl. of Andrew Klimenko in Supp. of

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Defs.’ Opp. to Pl.’s Mot. for Summ. J. (Klimenko Decl.) ¶ 11, Exs.

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A-C, G.

United States District Court
For the Northern District of California

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Compl. ¶ 13; Answer ¶ 13; Defs.’ Opp. to Pl.’s Mot.

As a result of the accident, Mr. Kohler has required

extensive medical treatment; he was hospitalized for eleven days,

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continues to suffer numerous health problems, and will likely
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undergo additional surgeries in the future.

Opp. at 2; Klimenko

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Decl. ¶ 11, Exs. C, E, G.

Kohler also suffered lost wages and the

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loss of his motorcycle.

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Mr. Kohler’s medical expenses were approximately $173,910.32.

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Klimenko Decl. ¶ 11, Ex. H.

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to $147,986.76 of these costs;1 the remainder were paid by another

Klimenko Decl. ¶ 11, Ex. G.

In total,

Aetna paid approximately $146,998.90

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insurer.

Klimenko Decl. ¶ 11, Exs. H, L.

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In a letter dated November 11, 2008, the Rawlings Company,

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LLC, on behalf of Aetna, notified Mr. Kohler of his duty to inform

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Aetna of any claim he intended to bring based on the July 2008

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accident.

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Decl. of Denise M. Harris in Supp. of Pl.’s Mot. for

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Defendants’ exhibits provide two different amounts for the
medical expenses paid by Aetna on Mr. Kohler’s behalf. Klimenko
Decl. ¶ 11, Exs. H, L. The amounts differ by less than one
thousand dollars and both exceed the total amount of the
settlement fund at issue in this case.
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Summ. J. (Harris Decl.) ¶ 3, Ex. A.

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Kohler that “if you receive a settlement or other payment from any

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other insurance company, person, or organization, you may be

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required to reimburse the health plan benefits provided as a

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result of the incident.”

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Rawlings also informed Mr.

Id.

In a letter dated June 11, 2009, Rawlings asked Mr. Kohler

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again whether he had brought a tort claim against the party
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responsible for the injuries he had suffered and whether he

United States District Court
For the Northern District of California

Id.

Rawlings informed Mr. Kohler again of

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retained a lawyer.

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Aetna’s right to reimbursement.

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notwithstanding that, on June 24, 2009, they had filed a complaint

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against Ms. Warren in the California Superior Court for the City

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and County of San Francisco.

Id.

Defendants did not respond,

Decl. of Clarissa A. Kang in Supp.

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of Pl.’s Mot. for Summ. J. (Kang Decl.) ¶ 3, Ex. A.

In a letter

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dated September 24, 2009, Mercury Insurance Company, Ms. Warren’s
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insurer, informed Rawlings that litigation had begun on Mr.

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Kohler’s claim and that Christopher Dolan was representing Mr.

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Kohler.

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Defendants’ counsel in this case.

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Harris Decl. ¶ 4, Ex. B.

The Dolan Law Firm serves as

In a letter dated September 30, 2009, Rawlings notified
Andrew Klimenko of The Dolan Law Firm of Aetna’s lien for medical

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benefits paid on behalf of Mr. Kohler on funds that might be
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obtained through a settlement with Ms. Warren and her insurer.

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Compl. ¶ 18; Answer ¶ 18; Harris Decl. ¶ 5, Ex. C.

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Defendants responded, asking that Aetna withdraw its lien because
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On December 9,

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Ms. Warren had insufficient policy coverage and personal assets to

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make Mr. Kohler whole.

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sent Defendants another letter on January 4, 2010 re-asserting

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Aetna’s right to reimbursement for its payment of medical

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expenses, Defendants responded on January 7, 2010, reiterating

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Compl. ¶ 19; Answer ¶ 19.

After Rawlings

their belief that Aetna could not recover any amount from Mr.

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Kohler.

Compl. ¶¶ 20-21; Answer ¶¶ 20-21; Harris Decl. ¶ 5,

Ex. C.

On January 15, 2010, Rawlings again sent Defendants a

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United States District Court
For the Northern District of California

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letter explaining the legal basis for Aetna’s claim for

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reimbursement.

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Compl. ¶ 22; Answer ¶ 22; Harris Decl. ¶ 5, Ex. C.

Defendants claim that, on May 20, 2010, their attorney spoke

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with Denise Harris of Rawlings and the parties “generally agreed

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that, given the limited insurance available, the customary three

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way split would be done in which the lien claimant would get 1/3
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of the recovery, the attorneys would receive 1/3, and the client
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would receive 1/3.”

Decl. of Shawn R. Miller (Miller Decl.) ¶ 2.2

On June 16, 2010, Rawlings sent Defendants documentation of

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the medical expenses Aetna had paid on behalf of Mr. Kohler and of

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the Plan’s subrogation and reimbursement language.

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Klimenko Decl.

Aetna has submitted a declaration from Denise M. Harris,
who attests that “I have never agreed, generally or otherwise,
. . . to any settlement offer to resolve Aetna’s lien for amount
paid in benefits for Ms. Kohler,” including “through a three-way
split of the settlement amount in which the lien claimant, the
attorneys and the Kohlers would each receive one-third of the
settlement amount.” Suppl. Decl. of Denise M. Harris in Supp. of
Pl.’s Mot. for Summ. J. (Suppl. Harris Decl.) ¶ 3. For the
purposes of considering Aetna’s motion for summary judgment, the
Court resolves this factual dispute in favor of Defendants as the
non-moving parties.
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¶¶ 5, 6, Ex. L.

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claim reductions were considered on a case-by-case basis and that

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it would consider a reduction at a future time.

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In this correspondence, Rawlings stated that

Id.

On June 28, 2010, Defendants informed Rawlings that they had
reached a settlement with Ms. Warren and her insurer.
¶ 23; Answer ¶ 23; Harris Decl. ¶ 6, Ex. D.

Compl.

Mr. Kohler had sought

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$2 million from Ms. Warren.

Compl. ¶ 21; Answer ¶ 21.

Defendants

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told Rawlings that, under the parties’ settlement agreement, Mr.

United States District Court
For the Northern District of California

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Kohler would receive $7,250 from Ms. Warren.

Compl. ¶¶ 23, 26,

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Ex. C; Answer ¶¶ 23, 26; Harris Decl. ¶ 6, Ex. D.

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letter did not state this, Ms. Kimseu Kohler would receive

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$137,750 from Ms. Warren.

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26; Klimenko Decl. ¶ 4, Ex. I.

Although the

Compl. ¶¶ 23, 26, Ex. C; Answer ¶¶ 23,
The total to be recovered by

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Defendants was $145,000.

Defendants have not presented any

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evidence that they consulted Aetna regarding the settlement with
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Ms. Warren prior to entering into it.

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Subsequently, Defendants and Aetna participated in a

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mandatory settlement conference in the underlying state court

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action to try to resolve the outstanding medical liens.

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Klimenko

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Decl. ¶ 7; Kang Decl. ¶¶ 5-6.3

A settlement to resolve the lien

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was not reached at that time.

Klimenko Decl. ¶ 7; Kang Decl. ¶¶

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5-6.

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Aetna filed this action on January 28, 2011, asserting a
claim for equitable relief under section 502(a)(3) of ERISA.

In

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particular, Aetna asks the Court to impose a “constructive trust
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or equitable lien agreement in favor of the Plan upon settlement
proceeds in possession of Defendants.”

Compl. ¶ 38a. Defendants

United States District Court
For the Northern District of California

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filed a motion to dismiss the complaint, which this Court denied

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on May 23, 2011.

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Moot Pl.’s Mot. to Strike Portions of Defs.’ Mot. to Dismiss.

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Order Den. Defs.’ Mot. to Dismiss and Den. as

On September 2, 2011, settlement funds totaling $144,628.56,
plus accumulated interest, held by the San Francisco Superior

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Court in the underlying state court civil action, were deposited
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into the client trust account for The Dolan Law Firm.4

The

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parties previously stipulated that these funds would be held in

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trust in The Dolan Law Firm’s client trust account pending final

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Aetna has asked this Court to strike Paragraph 7 of the
Declaration of Andrew Klimenko, on the grounds that this paragraph
impermissibly sets forth evidence of conduct or statements made
during negotiations to compromise and that it impermissibly
provides an expert opinion of the typical amount for which an
ERISA lien is settled. Pl.’s Reply to Defs.’ Opp. to Mot. for
Summ. J. 11-12 (citing Fed. R. Civ. Pro. 408, 702). Because this
Court grants Aetna’s motion for summary judgment notwithstanding
this declaration, Aetna’s motion to strike is DENIED as moot.
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With Plaintiff’s consent, Defendants used $371.44 from the
settlement funds to satisfy another provider’s lien on a portion
of the funds. Klimenko Decl. ¶ 8, Ex. M; Pl.’s Mot. for Summ.
J. 3.
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disposition of this proceeding.

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of Disputed Funds.

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Stipulation and Order Re Deposit

Defendants’ attorneys expended $2,396.38 in costs in the

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state court action in investigating, filing suit, conducting

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written discovery and depositions, and generally litigating the

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matter until it was resolved through the settlement agreement.

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Klimenko Decl. ¶ 3, Ex. K.

Their fee agreement with Defendants

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United States District Court
For the Northern District of California

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was to have allowed them a contingency fee of one-third of the
recovery.

Klimenko Decl. ¶ 3, Ex. J.

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LEGAL STANDARD

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Summary judgment is properly granted when no genuine and

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disputed issues of material fact remain, and when, viewing the

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evidence most favorably to the non-moving party, the movant is

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clearly entitled to prevail as a matter of law.

Fed. R. Civ. P.

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56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986);
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Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir.

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1987).

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The moving party bears the burden of showing that there is no

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material factual dispute.

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true the opposing party's evidence, if supported by affidavits or

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Therefore, the court must regard as

other evidentiary material.

Celotex, 477 U.S. at 324; Eisenberg,

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815 F.2d at 1289.

The court must draw all reasonable inferences

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in favor of the party against whom summary judgment is sought.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

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587 (1986); Intel Corp. v. Hartford Accident & Indem. Co., 952

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F.2d 1551, 1558 (9th Cir. 1991).

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DISCUSSION
Section 502(a)(3) of ERISA permits a plan fiduciary to bring
a civil action “(A) to enjoin any act or practice which violates
any provision of this subchapter or the terms of the plan, or (B)

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to obtain other appropriate equitable relief (i) to redress such
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United States District Court
For the Northern District of California

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violations or (ii) to enforce any provisions of this subchapter or
the terms of the plan.”

29 U.S.C. § 1132(a)(3).

There is no genuine dispute that Defendants violated the

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terms of the Plan.

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SDP, if Defendants “receive[] any payment from any Responsible

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Party . . . as a result of an injury,” Defendants were required to

Under the terms of the Plan set forth in the

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reimburse the Plan “for all amounts this plan has paid and will
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pay as a result of that injury, . . . up to and including the full
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amount [they] receive[d] from any Responsible Party.”

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Decl. ¶ 4, Ex. A, at 40.

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“fully cooperate with the plan’s efforts to recover its benefits

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paid” and “to notify the plan of [their] intention to pursue or

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investigate a claim to recover damages or obtain compensation”

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Mellor

Further, Defendants were required to

based on Mr. Kohler’s injuries within thirty days thereof.

Id. at

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40-41.

Defendants do not dispute that they received $145,000 as

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settlement of their claims related to Mr. Kohler’s accident with

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Ms. Warren, that Aetna paid more than this amount toward treatment

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of Mr. Kohler’s injuries, or that they failed to notify Aetna of
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their lawsuit against Ms. Warren.

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their settlement agreement with Ms. Warren to allocate the bulk of

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the money to Ms. Kimseu Kohler and a small amount to Mr. Kohler in

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a transparent attempt to circumvent Aetna’s right to recover

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treatment costs, in violation of their duty to cooperate with

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Further, Defendants structured

Aetna.

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Aetna meets the requirements set forth by the Supreme Court’s
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holding in Sereboff v. Mid-Atl. Med. Servs., 547 U.S. 356 (2006),

United States District Court
For the Northern District of California

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to demonstrate that equitable relief is appropriate to redress

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these violations.

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

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a 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

In Sereboff, the Court held that to support a

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which the plan is entitled.”

Administrative Comm. for Wal-Mart

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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, 547 U.S. at 362-63).

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The Plan at issue here clearly identifies the fund that is

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distinct from the beneficiary’s assets.

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A, at 40-41 (“any recovery whether by settlement, judgment, or

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otherwise related to treatment for any illness, injury, or

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See Mellor Decl. ¶ 4, Ex.

condition for which the plan paid benefits,” including “any and

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all settlements or judgments, even those designated as pain and
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suffering, non-economic damages, and/or general damages only”).

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Aetna seeks money obtained in a settlement between Defendants and

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Ms. Warren, which is currently held in a client trust account
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maintained by Defendants’ attorneys and is distinct from

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Defendants’ assets.

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to which the Plan is entitled.

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(“all amounts this plan has paid and will pay as a result of [the]

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injury, illness, or condition”).

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The Plan also identifies the particular share
See Mellor Decl. ¶ 4, Ex. A, at 40

Aetna seeks here to recover the

entire settlement fund, an amount slightly less than the total

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that it expended on Mr. Kohler’s medical expenses.

The Supreme

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Court has found similar language to fulfill these requirement.

United States District Court
For the Northern District of California

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See Sereboff, 547 U.S. at 364 (finding equitable relief

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appropriate where the plan specified it was entitled to “[a]ll

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recoveries from a third party (whether by lawsuit, settlement, or

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otherwise)” in the amount of “that portion of the total recovery

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which is due [Mid Atlantic] for benefits paid”).

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The Eleventh Circuit’s decision in Popowski v. Parrott, upon
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which Defendants rely to argue that Aetna cannot seek to recover
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the entire fund, is not to the contrary.

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2006). In that decision, the court concluded that, under Sereboff,

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

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terms failed to “limit recovery to a specific portion of a

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particular fund.”

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Id. at 1374.

461 F.3d 1367 (11th Cir.

Here, the Plan does limit Aetna’s

claim to a specific portion of an identifiable fund.

Thus,

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Popowski does not support the existence of an issue of material
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fact.
Defendants cite several Ninth Circuit cases to argue that the
imposition of a constructive trust is available under section
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502(a)(3) only if Aetna establishes fraud or wrong-doing by

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Defendants.

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Carpenters H & W Trust v. Vonderharr, 384 F. 3d 667, 672-73 (9th

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Cir. 2004); Reynolds Metals v. Ellis, 202 F. 3d 1246, 1249 (9th

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Cir. 2000); Cement Masons v. Stone, 197 F. 3d 1003, 1007 (9th Cir.

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Defs.’ Opp. to Pl.’s Mot. for Summ. J. at 7-9 (citing

1999); FMC Medical Plan v. Owens, 122 F. 3d 1258, 1261 (9th Cir.

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1997)).

However, each of these cases predates the Supreme Court’s

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holding in Sereboff, wherein the Court imposed an equitable lien

United States District Court
For the Northern District of California

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in circumstances almost identical to those here and did not

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require a showing of fraud or wrongdoing.

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Enterprise Rent-A-Car Hosp. Ins. Plan, 2010 WL 3931098, at *8

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(N.D. Cal.) (stating that the Court in Sereboff “did not indicate

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that a plan fiduciary may only be entitled to this remedy if it is

See Mairena v.

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able to show fraud or wrong-doing by the beneficiary”); see also
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Hitachi High Techs. Am., Inc. v. Bowler, 455 Mass. 261, 269-70
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(2009) (holding that, after the cases which had required a showing

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of fraud or wrongdoing were decided, the law has shifted, because

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the Court in Sereboff did not require this showing).

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Aetna has demonstrated that Defendants engaged in fraud or

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wrongdoing by concealing their state court claim against Ms.

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Further,

Warren from Aetna and by structuring their settlement agreement

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with Ms. Warren to try to avoid their obligations to reimburse
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Aetna.
Defendants re-assert nearly verbatim several legal arguments
that they raised in their motion to dismiss and that the Court
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rejected at that time.

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issues of material fact relevant to these arguments, which fail

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for the same reasons that the Court previously explained in its

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Order Denying Defendants’ Motion to Dismiss.

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Defendants have not raised any genuine

First, Defendants contend Aetna is “not doing equity,”
because the Plan effected a “forced waiver” of their “equitable

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defenses, including the make whole doctrine.”

Opp. at 7.

As

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explained in this Court’s earlier Order, the make-whole doctrine

United States District Court
For the Northern District of California

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is not an equitable defense, but is instead a federal common law

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rule of contract interpretation that serves as “gap-filler” that

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applies only if the contract’s subrogation clause is silent with

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respect to the insured’s right to be made whole before the insurer

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may obtain reimbursement for benefits paid.

Here, the undisputed

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facts establish that the “First-Priority Claim” provision of the
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SPD provides that the Plan is entitled “to full reimbursement on a
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first-dollar basis from any Responsible Party’s payments, even if

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such payment to the plan will result in a recovery to the Covered

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Person which is insufficient to make the Covered Person whole or

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to compensate the Covered Person in part or in whole for the

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damages sustained.”

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Mellor Decl. ¶ 4, Ex. A, at 41.

This

language obviates the need to resort to the gap-filling make-whole

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doctrine.

Applying federal common law to override the Plan’s

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express and controlling terms would frustrate ERISA’s “repeatedly

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emphasized purpose to protect contractually defined benefits.”

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Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 148
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(1985).

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Aetna from seeking equitable remedies simply because Aetna’s

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recovery would exhaust settlement proceeds.

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may not be made whole or may not recover any settlement proceeds

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does not create a dispute of material fact.

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Defendants do not identify any authority that precludes

Thus, that Defendants

Defendants also argue that Aetna is not “doing equity”

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because, under the “common fund doctrine,” their counsel’s right
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to fees should take priority over Aetna’s claim.

Under this

United States District Court
For the Northern District of California

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doctrine, “‘a litigant or a lawyer who recovers a common fund for

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the benefit of persons other than himself or his client is

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entitled to a reasonable attorney’s fee from the fund as a

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whole.’”

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

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

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However, the Plan’s terms provide that, if a party accepted
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benefits, that party agreed that the Plan “is not required to
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18

participate in or pay court costs or attorneys fees to any

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attorney hired by the Covered Person to pursue the Covered

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Person’s damage claim.”

21

Defendants acknowledge that they hired their attorney to pursue

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their damage claim in state court.

23

Mellor Decl. ¶ 4, Ex. A, at 41.

Opp. at 6.

Thus, their

attorneys’ fees are covered by this term of the Plan and the

24
common fund doctrine does not interfere with Aetna’s right to
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recovery.
While the Court recognizes that Mr. Kohler has suffered
serious and tragic injuries, the Court cannot conclude that the
15

1

balancing of equities in this case requires application of the

2

make whole doctrine or any other equitable principle to defeat the

3

Plan’s unambiguous reimbursement provisions.

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right to reimbursement would harm other plan members and

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beneficiaries by reducing the funds available to pay their present

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Denying Aetna its

and future claims and damaging the Plan’s financial viability.

7
See Zurich Amer. Ins. Co. v. O’Hara, Ross & Pines LLC, 604 F.3d
8
9

1232, 1237-38 (11th Cir. 2010).

Moreover, the record demonstrates

United States District Court
For the Northern District of California

10

that Defendants engaged in bad faith conduct by refusing to

11

involve Aetna in the resolution of their claim with Ms. Warren and

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structuring their settlement with her in a transparent attempt to

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preclude Aetna from exercising its right to reimbursement.

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any inequity in this case would derive from allowing Defendants to

Thus,

15
take benefits from the Plan, settle with Ms. Warren in bad faith
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and then invoke common law principles to justify refusing to
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follow their contractual obligations toward Aetna.

19

Fed. Express Corp., 78 F.3d 123, 127-28 (3d Cir. 1996).

20

See Ryan v.

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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However, the Plan provides that a “lien may

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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26

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.”

Mellor Decl. ¶ 4, Ex. A, at 41.
16

Ms. Kimseu

1

Kohler received amounts under the settlement agreement, as a

2

result of the traffic accident and injuries to Mr. Kohler.

3

Klimenko Decl. ¶ 11, Ex. I.

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fact as to Aetna’s right to recover from Ms. Kimseu Kohler.

5
6

Thus, there is no genuine issue of

Defendants contend that Aetna should recover no more than an
amount proportional to what Defendants received in the settlement

7
in relation to what they valued Mr. Kohler’s claim to be.

They

8
9

cite Arkansas Department of Health Services v. Ahlborn, 547 U.S.

United States District Court
For the Northern District of California

10

268 (2006), which concerned a state health agency’s lien against a

11

Medicaid recipient’s settlement proceeds.

12

identify nothing in the Ahlborn decision that creates an issue of

13

material fact or otherwise undermines Aetna’s claim.

14

However, Defendants

Defendants also contend that Aetna should be precluded from

15
recovery because Aetna seeks to recover “amounts in excess of the
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out-of-pocket maximums allowed per year pursuant to the SPD,”
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18

which Defendants argue violates the terms of the SPD.

19

However, the SPD states that the maximum amount Aetna may recover

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is the amount that the Plan paid for the covered person’s medical

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treatment, not the out-of-pocket maximum, which is the maximum

22

amount a covered person must pay for medical treatment himself

23

Opp. at 11.

before the Plan pays the full cost of medical treatment.

Mellor

24
Decl. ¶ 4, Ex. A, at 40.

This argument does not create a genuine

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26
27

issue of material fact and does not prevent Aetna’s recovery as a
matter of law.

28
17

1

Defendants further argue that the Plan’s reimbursement

2

provisions are obscure and made to appear unimportant, and that

3

this violates 29 CFR § 2520.102-2(b), which states, “Any

4

description of exception, limitations, reductions, and other

5

restrictions of plan benefits shall not be minimized, rendered

6

obscure or otherwise made to appear unimportant.”

However,

7
Defendants cite no authority that applies this subsection to
8
9

reimbursement provisions, and there is no dispute as to whether

United States District Court
For the Northern District of California

10

Aetna paid the plan benefits to which Mr. Kohler was entitled.

11

Further, the provisions at issue are printed in the same size and

12

font as other parts of the SPD and are not made to appear

13

unimportant.

14

argument does not prevent Aetna’s recovery as a matter of law.

Mellor Decl. ¶ 4, Ex. A, at 40-41.

Thus, this

15
CONCLUSION
16
For the foregoing reasons, the Court GRANTS Aetna’s Motion
17
18

for Summary Judgment (Docket No. 35) and DENIES AS MOOT Aetna’s

19

Motion to Strike Portions of the Declaration of Andrew Klimenko

20

(Docket No. 45).

21

constructive trust and equitable lien on the settlement funds

22

recovered by Defendants from Ms. Warren totaling $144,628.56, plus

23

Aetna is entitled to the imposition of a

accumulated interest, which are currently held in the client trust

24
account for The Dolan Law Firm, and of which the Plan is the
25
26
27

rightful owner.

Defendants are directed to turn over these funds

to Aetna on behalf of the Plan in compliance with the terms set

28
18

1

forth in the Stipulation and Order Regarding Deposit of Disputed

2

Funds (Docket No. 34).

3

Aetna may file a motion for attorneys’ fees and costs within

4

fourteen days of entry of judgment.

5

this action, Aetna is entitled to move to recover the reasonable

6

As the successful party in

attorneys' fees and costs it has incurred in prosecuting this

7
action, the amount of which shall be determined by post-judgment
8
9

motion.

29 U.S.C. § 1132(g)(1).

Pursuant to Civil Local Rule

United States District Court
For the Northern District of California

10

54-5, the parties are ordered to meet and confer regarding Aetna's

11

motion for attorneys' fees within fourteen days of entry of

12

judgment.

13

IT IS SO ORDERED.

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Dated: 11/2/2011

CLAUDIA WILKEN
United States District Judge

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