Employee Benefit Plan of Compass Group USA, Inc. v. Marino et al

Filing 128

ORDER denying 110 Motion for Summary Judgment; granting 111 Motion for Summary Judgment. Please see attached ruling and order for details. Signed by Judge Robert N. Chatigny on 9/30/19. (Morgan, Luke)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT

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

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

RULING AND ORDER
Plaintiff Employee Benefit Plan of Compass Group USA, Inc.,
is the fiduciary of an employee welfare benefit plan (“the
Plan”) administered pursuant to the Employee Retirement Income
Security Act of 1974 (“ERISA”).

William Marino, a participant

in the Plan, suffered injuries caused by a third party and
Plaintiff paid for his medical treatment.

Defendant Miller,

Rosnick, D’Amico, August & Butler, P.C. (“Miller Rosnick”)
brought suit against the third party on behalf of Marino,
obtained a lump sum settlement, took its attorney’s fees and
costs from the settlement proceeds, and disbursed the remainder
to Marino.

A consent judgment has been entered in favor of

Plaintiff against Marino in the amount of the medical expenses
Plaintiff paid on his behalf, but Plaintiff seeks to recover
this amount from Miller Rosnick.

The question addressed here is

whether the relief Plaintiff seeks against the law firm falls
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within the scope of § 502(a)(3)(B) of ERISA, which authorizes a
fiduciary to bring an action “to obtain appropriate equitable
relief” for conduct that violates ERISA or the terms of a plan.
Plaintiff contends the answer is yes; Defendant responds the
answer is no.

I conclude that Defendant is correct and

therefore grant Defendant’s motion for summary judgment and
deny Plaintiff’s cross-motion.
I. Factual Background
The Plan contains a provision entitled “Subrogation and
Reimbursement,” which provides as follows:
[I]f a Participant incurs charges or expenses for any
illness, injury or other condition as a result of the
act of a third party or parties . . . and such
Participant has or may have a legal right to seek
restitution from such third party, his insurance
company or other responsible party for such act, then
any payment of benefits made under this Plan based on
such illness, injury or other condition automatically
shall be subject to the provisions of this Section.
The Participant shall advise the Plan of any claim or
potential claim he might have against any [such] third
party or his insurance company as of the date the
person becomes a Participant under this Plan, or, if
later, within sixty (60) days of the act which gives
rise to such claim if such act also results in payment
of benefits being made under the Plan. . . .
If a Participant receives any judgment, settlement or
other payment from any person or persons considered
responsible for the condition which gives rise to the
expenses which the Plan pays, . . . the Participant
shall reimburse the Plan from the first of such
payments received to the extent of the expenses paid
under the Plan regardless of whether the judgment,
settlement or other payment allocates any specified
amount to medical expenses paid under the Plan. The
Plan’s right to recovery shall be enforceable, even if
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the Participant has not been made whole. If the
Participant fails to timely and fully reimburse the
Plan for such expenses, any future claims the
Participant makes under the Plan shall be offset by
any amounts owed by the Participant to the Plan.
The Plan reserves Plaintiff’s right to “request a court to
establish a constructive trust or equitable lien” on assets
“held by a third party” and to “sue the Participant or a third
party in state court for reimbursement of funds held by such
party.”
Beginning in early 2011, Kerris Brown, an employee of
Rawlings Company, LLC, Plaintiff’s subrogation agent,
communicated with Attorney James Butler at Miller Rosnick
regarding Plaintiff’s payment of Marino’s medical expenses. In a
series of communications, Brown provided documentation of
medical expenses paid on Marino’s behalf, requested information
about Marino’s lawsuit, and asserted a lien on funds recovered
from the lawsuit.
With regard to these communications, the record shows the
following. Brown first contacted Butler on February 22.

Her

letter provided notice of plaintiff’s payment of medical
expenses on behalf of Marino and requested information regarding
his lawsuit against the responsible party.

On March 2, Brown

sent Butler the first of several summaries of medical expenses
paid on behalf of Marino.

On April 5, she followed up with

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Butler regarding her first communication.

This letter again

requested information about the lawsuit and noted that “to date,
[Butler] ha[d] not provided that information nor acknowledged
representation of [Marino].”

On May 17, Brown followed up

again, seeking the same information.

She noted that “[f]ailure

to provide such information may result in a finding of noncooperation.

The member may be held accountable for any

prejudice to [Plaintiff’s] right of recovery as a result of the
failure to comply.”

On June 7, and again on June 13, Brown sent

Butler updated lists of medical expenses.
On June 20, Butler sent a letter to Brown, his first
communication to her contained in the record.

In the letter, he

commented on the medical expenses claimed by plaintiff but wrote
that his “letter [was], in no way, meant to convey that {he]
accept[ed] the legitimacy and validity of [Plaintiff’s] claimed
lien.”

On November 11, he wrote to Brown stating that he had

requested “documentation” related to plaintiff’s claim “[o]n
numerous occasions” and been provided no “documentation
whatsoever.”

Butler threatened legal action if the information

was not provided.
On December 5, Ben White, associate general counsel
at Rawlings, wrote to Butler.

White’s letter suggests that

Brown had inquired about the employment status of Marino
(salaried or hourly) to ensure she provided Miller Rosnick with
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the right documentation supporting Plaintiff’s claim but Miller
Rosnick had failed to provide the requested information.
Enclosed with the letter were pertinent pages from both the
salaried and hourly plans.
On May 3, 2012, Brown sent a letter to Butler
notifying him that Rawlings was aware that Marino had reached a
settlement in the civil case.

In fact, the case been settled

for a lump sum payment of $160,000.

The letter requested that

Butler contact Brown to arrange for satisfaction of Plaintiff’s
claim.
On May 8, 2012, Butler responded to Brown.

He

acknowledged the settlement but argued that Rawlings was
attempting to collect on a claimed lien without providing proof
of the lien’s legitimacy.

Butler added that he was “awaiting

the Schedule A’s that you must file along with the Form 5500 to
be in compliance with the reporting requirements under the
applicable ERISA statutes.”

Butler offered to advise Marino to

pay $5,000 to settle the matter but stated that “this offer, in
no way, acknowledges the validity or legality of [plaintiff’s]
claim.”
About two months later, Butler disbursed the settlement
proceeds.

Of the total amount of $160,000, Butler disbursed

$55,872.68 to his law firm to cover costs, plus another $50,000

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for attorney’s fees.

The remaining $54,127,32 was disbursed to

Marino and several of his creditors.
Subsequently, on September 6, 2012, White responded to
Butler’s letter of May 8. White wrote that IRS Form 5500 is
not an appropriate tool to determine a plan’s funding status.
He also enclosed a Summary Plan Description (“SPD”). 1
II. Procedural History
In 2014, Plaintiff brought this suit against Miller Rosnick
and Marino claiming that neither had reimbursed it for covering
Marino’s medical costs, and seeking “equitable relief in the
form of a constructive trust and equitable lien on the amounts
held by defendants that rightfully belong[] to plaintiff.”
After the suit was filed, and while cross-motions for summary
judgment were pending, the Supreme Court decided Montanile v.
Board of Trustees of the National Elevator Industry Health
Benefit Plan, -- U.S. --, 136 S. Ct. 651 (2016).

Montanile held

that when a participant in an ERISA plan settles with a third
party responsible for his or her injuries, and then “dissipates

1

The record includes the full Plan document, which contains the
provision entitled “Reimbursement and Subrogation” set forth
above. ECF No. 41 ¶ 6; ECF No. 41-1 at 99-100; see generally
id. at 87-190. White’s letter of September 6 states that the
Plan’s subrogation section is attached. But the subrogation
section in the attachment to the letter does not appear in the
Plan document itself. ECF No. 41-3 at 42-48.
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the whole settlement on nontraceable items, the fiduciary cannot
bring a suit to attach the participant’s general assets under
§ 502(a)(3) because the suit is not one for ‘appropriate
equitable relief.’”

Id. at 655.

The parties submitted

supplemental briefing with regard to Montanile.

After reviewing

the supplemental briefing, I concluded that further discovery
was necessary to determine whether the settlement funds at issue
here had been dissipated.

The motions for summary judgment were

denied pending completion of that discovery.
Discovery disputes arose.

To resolve an impasse with

regard to discovery, Defendant stipulated that it “waives and
will not assert any defense to [Plaintiff’s] claim(s) that may
be available pursuant to [Montanile] and which is based on
[Defendant’s] purported dissipation, commingling or otherwise
disbursing its fee and costs incurred in connection with the
legal representation provided” to Marino.

That same month, a

consent judgment entered against Marino in the amount of
$33,267.92, terminating his status as a party.

Plaintiff and

Defendant then renewed their cross-motions for summary judgment.
III. Analysis
Summary judgment may be granted when there is no “genuine
issue of material fact and, based on the undisputed facts, the
moving party is entitled to judgment as a matter of law.”
D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir. 1998).
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A genuine issue of fact exists “if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

In

considering cross-motions for summary judgment, “the court must
evaluate each party’s motion on its own merits, taking care in
each instance to draw all reasonable inferences against the
party whose motion is under consideration.”

Coutard v. Mun.

Credit Union, 848 F.3d 102, 114 (2d Cir. 2017) (quoting
Schwabenbauer v. Bd. of Educ., 667 F.2d 305, 314 (2d Cir.
1981)).
The issue in this case is purely legal - whether
Plaintiff’s claim against Defendant seeks relief within the
scope of § 502(a)(3)of ERISA.

This section of ERISA provides

that a fiduciary may sue: “(A) to enjoin any act or practice
which violates any provision of this subchapter or the terms of
the plan, or (B) to obtain other appropriate equitable relief
(i) to redress such violations or (ii) to enforce any provision
of this subchapter or the terms of the plan.”

29 U.S.C.

§ 1132(a)(3).
The meaning of “appropriate equitable relief” in
§ 502(a)(3) has been addressed by the Supreme Court in a series
of cases.

“Under [the Supreme] Court’s precedents, whether the

remedy a plaintiff seeks ‘is legal or equitable depends on (1)
the basis for the plaintiff’s claim and (2) the nature of the
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underlying remedies sought.’”

Montanile, 136 S. Ct. at 657

(alterations omitted) (quoting Sereboff v. Mid Atl. Med. Serv.,
Inc., 547 U.S. 356, 363 (2006)).

A plaintiff seeks equitable

relief “where money or property identified as belonging in good
conscience to the plaintiff [can] clearly be traced to
particular funds or property in the defendant’s possession.”
Id. (quoting Great-West Life & Annuity Ins. Co. v. Knudson, 534
U.S. 204, 213 (2002)).
In Sereboff, the Court distinguished between “equitable
restitution (where a lien attaches because the defendant
misappropriated property from the plaintiff) and equitable liens
by agreement,” where a defendant constructively possesses a fund
to which the plaintiff is entitled.
660.

Montanile, 136 S. Ct. at

The Court explained that an ERISA plan, by its terms,

could create an equitable lien by agreement on damages recovered
from a tortfeasor, where a plan has covered a participant’s
medical expenses.

Sereboff, 547 U.S. at 364-65.

The Court then

clarified in Montanile that, regardless of whether a plaintiff
can show an equitable lien by agreement, when the funds sought
by the plaintiff have been completely dissipated, “that complete
dissipation eliminate[s] the lien.”
659.

Montanile, 136 S. Ct. at

In that circumstance, a plaintiff is left to seek damages,

which is not a remedy available under § 502(a)(3).

Id.; see

also Mertens v. Hewitt Assocs., 508 U.S. 248, 256 (1993)
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(rejecting ERISA claim that sought “nothing other than
compensatory damages”).
Plaintiff argues that the Plan created an equitable lien by
agreement over any funds Marino received from the responsible
third party and, accordingly, Defendant was required to hold the
settlement funds in escrow until Plaintiff settled its lien.
ECF No. 69 at 4.

However, Plaintiff does not dispute that

Defendant was entitled to attorney’s fees for the services it
rendered to Marino.

Id. at 3, 4.

The only funds to which

Plaintiff lays claim have therefore left Defendant’s hands.
Under Montanile, Defendant’s dissipation of those funds
eliminated any lien Plaintiff may have had.

136 S. Ct. at 659. 2

The Supreme Court has “‘recognized consistently’ that
someone ‘who recovers a common fund for the benefit of persons
other than himself’ is due ‘a reasonable attorney’s fee from the
fund as a whole.’”

US Airways, Inc. v. McCutchen, 569 U.S. 88,

104 (2013) (quoting Boeing Co. v. Van Gemert, 444 U.S. 472, 478
(1980)).

This rule, called the common fund doctrine, governs

any ERISA plan that does not expressly abrogate it.

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Id. at 100. 3

As discussed, Defendant waived any defense available pursuant
to Montanile based on the dissipation of its fees or costs. But
it did not waive any defense under Montanile based on
dissipation of the rest of the settlement proceeds.
3 The parties do not discuss the $55,872.68 Defendant took from
the settlement proceeds to cover litigation costs. See ECF No.
42. Because McCutchen indicates that the common fund doctrine
applies to costs as well as fees, I do not distinguish between
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Here, the Plan does not mention the common fund doctrine.
Compare with Longaberger Co. v. Kolt, 586 F.3d 459, 463 (6th
Cir. 2009) (construing ERISA plan under which “[t]he Plan’s
rights shall not be subject to reduction under any common fund
or similar claims or theories”). 4
The “true recovery” in Marino’s civil action was the
amount remaining “after the costs of obtaining it [were]
deducted.”

McCutchen, 569 U.S. at 103.

When, as here, the

common fund doctrine applies, “the recovery to which [Plaintiff]
has first claim is [not] every cent the third party paid [but],
instead, the money the beneficiary took away.”

Id.; see also

Quest Diagnostics v. Bomani, No. 11-CV-951 (MPS), 2013 WL
3148651, at *1 (D. Conn. June 19, 2013) (noting that, under
McCutchen, the common fund doctrine limits ERISA fiduciary’s

the two. See McCutchen, 569 U.S. at 105 (“Third-party
recoveries do not often come free: To get one, an insured must
incur lawyer’s fees and expenses.”) (emphasis added).
4 As noted previously, White’s letter to Butler of September 6,
2012, attaches a subrogation section. ECF No. 41-3 at 42. This
subrogation section purports to abrogate the common fund
doctrine. Id. at 48. However, such a provision does not appear
anywhere in the Plan, which states that “[t]his document and the
attached Exhibits set forth the entire Plan.” ECF No. 41-1 at
158. Accordingly, I cannot conclude that the common fund
doctrine was abrogated here. See CIGNA Corp. v. Amara, 563 U.S.
421, 437 (2011) (“[W]e have no reason to believe that [ERISA]
intends . . . to giv[e] the administrator the power to set terms
indirectly by including them in the summary plan description.”).
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claim “to the beneficiary’s net recovery, after subtracting
attorney’s fees”). 5
The gist of Plaintiff’s position is that Defendant should
have reduced its disbursement to Marino by the amount of the
claimed lien.

As a result of that disbursement, however,

Plaintiff cannot show that any “money or property identified as
belonging in good conscience to the plaintiff [can] clearly be
traced to particular funds or property in the defendant’s
possession.”

Great-West Life, 534 U.S. at 213.

“[W]here the

wrongdoer no longer has the property at issue in its possession,
the claim against that party is legal, not equitable.”
Treasurer, Trs. of Drury Indus., Inc. Health Care Plan v.
Goding, 692 F.3d 888, 896 (8th Cir. 2012).
Plaintiff explains that its claim is based on Longaberger,
in which an ERISA plan paid for a participant’s medical expenses
and the participant then received a settlement from the
tortfeasor.

Longaberger, 586 F.3d at 461-62.

The Sixth Circuit

determined that the ERISA fiduciary could hold the participant’s
attorney liable under § 503(a)(3).

Id. at 469.

Longaberger

read Sereboff as holding “that funds no longer had to be
traceable or maintained in order for relief to qualify as

5

To the extent plaintiff claims that defendant’s taking a fee
prejudiced its ability to be made whole, the $54,127.32 that
defendant disbursed to Marino was more than sufficient to
reimburse the Plan for his medical costs. See ECF No. 42.
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equitable under ERISA.”

586 F.3d at 469.

Longaberger thus

determined that because the ERISA plan created an equitable lien
by agreement on any settlement proceeds, the fiduciary “was free
to follow a portion of the settlement funds” into the hands of
the beneficiary’s attorney regardless of whether those funds had
been disbursed. Id.

Since then, the Supreme Court has clarified

that even when an equitable lien by agreement exists, if the
funds in question have been disbursed, the relief sought is
legal rather than equitable.

Montanile, 136 S. Ct. at 655.

In addition, the Longaberger court determined that the
attorney had no right to fees because the plan’s lien, by its
terms, preempted this right and abrogated the common fund
doctrine.

Id. at 471-72.

Here, in contrast, the Plan language

merely requires the participant to reimburse Plaintiff.
not mention the common fund doctrine.

It does

Because ERISA only

permits Plaintiff to enforce the Plan terms, the holding of
Longaberger does not help plaintiff here.

See 29 U.S.C.

§ 1132(a)(3); Cent. States, Se. & Sw. Areas Health & Welfare
Fund v. Gerber Life Ins. Co., 771 F.3d 150, 156 (2d Cir. 2014)
(“ERISA-plan provisions do not create constructive trusts and
equitable liens by the mere fact of their existence; the liens
and trusts are created by the agreement between the parties to
deliver assets.”) (quoting Cent. States, Se. & Sw. Areas Health

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& Welfare Fund v. Health Special Risk, Inc., 756 F.3d 356, 365
(5th Cir. 2014)).
Plaintiff cites two cases in which district courts
concluded that an ERISA plan fiduciary sought “appropriate
equitable relief” under § 502(a)(3) against a participant’s
legal counsel.

See Kohl’s Dep’t Stores v. Castelli, 961 F.

Supp. 2d 415, 426 (E.D.N.Y. 2013); Highmark Blue Cross Blue
Shield of W. Va. v. Johnson, No. 2:17-cv-00786, 2018 U.S. Dist.
LEXIS 118772 (W.D. Pa. July 17, 2018).

In each case, however,

as in Longaberger, the plan by its terms created an equitable
lien by agreement, and the plaintiff asserted that this lien
preempted any right to attorney’s fees.

See Kohl’s, 961 F.

Supp. 2d at 418, 425-26; Highmark, 2018 U.S. Dist. LEXIS 118772,
at *4, *20.

Here, as discussed, Plaintiff does not dispute that

Defendant had a right to take its fees and costs out of the
settlement proceeds; it argues rather that Defendant should have
retained the amount of the claimed lien in an escrow account
instead of disbursing it to Marino.

Plaintiff “is essentially

attempting to impose personal, or legal, liability on [the
attorneys] for conferring benefits on [the participant].”
Goding, 692 F.3d at 896.

Such liability is not cognizable under

§ 502(a)(3).
In addition, Kohl’s rested on the conclusion that the
attorneys had at one point “exercised sufficient control” over
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the money on which the plaintiff had a lien.
Supp. 2d at 426.

Kohl’s, 961 F.

In Montanile, the Court held that a plaintiff

cannot seek “appropriate equitable relief” for funds that are no
longer in the defendant’s possession.

136 S. Ct. at 655.

Accordingly, I decline to follow Kohl’s. 6
Plaintiff correctly notes that under Harris Trust & Savings
Bank v. Salomon Smith Barney, Inc., a nonfiduciary party in
interest may be held liable under § 502(a)(3), and “liability
under that provision does not depend on whether ERISA’s
substantive provisions impose a specific duty on the party being
sued.”

530 U.S. 238, 245 (2000).

But this holding is unhelpful

when, as here, the plaintiff does not assert a violation of an
ERISA provision, but rather seeks to enforce its rights under an

6

Plaintiff’s citation to Bd. of Trs. of the Nat’l Elevator
Indus. Health Benefit Plan v. Goodspeed, is misplaced. No. 17cv-05133, 2019 U.S. Dist. LEXIS 73314 (E.D. Pa. May 1, 2019).
In Goodspeed, the plaintiff, the administrator of an employee
benefit plan, reimbursed the defendant, a plan participant, for
medical costs. Id. at *1. The plaintiff then sought to enforce
an equitable lien on a settlement the defendant received from
the responsible tortfeasor. Id. at *1-2. The court denied the
defendant’s motion for summary judgment because he had not
completely dissipated all the settlement proceeds, and thus
“there [were] specific funds against which an equitable lien
could be attached.” Id. at *2. That the participant had
transferred the funds to a different bank account did not result
in dissipation. Id. at *14. Goodspeed is inapposite because
the plaintiff sought to enforce an equitable lien against the
plan participant, not his attorney. It does not support
Plaintiff’s claim in this case that Defendant should have
refrained from disbursing the settlement funds to Marino until
Plaintiff’s lien was satisfied.
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ERISA plan.

Plaintiff’s claim does not turn on whether an

attorney can ever be held liable under § 503(a)(3).

The

question here is whether Plaintiff seeks “appropriate equitable
relief” against Defendant for failing to keep settlement funds
in an escrow account until Plaintiff’s lien was resolved.

For

the reasons discussed above, I agree with Defendant that
Plaintiff is seeking damages, not equitable relief.
IV. Conclusion
Accordingly, Defendant’s motion for summary judgment is
granted and Plaintiff’s motion for summary judgment is denied.
The clerk may enter judgment and close the case.
So ordered this 30th day of September 2019.

/s/ RNC
Robert N. Chatigny
United States District Judge

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