GALLAGHER v. MAKOWSKI et al
OPINION. Signed by Judge Joseph E. Irenas on 3/28/2014. (tf, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
JENNIFER A. GALLAGHER,
JOHN M. MAKOWSKI, et al.,
Civil No. 13-1103 (JEI/AMD)
POLINO AND PINTO, P.C.
By: Joseph M. Pinto, Esq.
Moorestown Times Square
720 East Main Street, Suite 1C
Moorestown, New Jersey 08057
Counsel for Plaintiff
JOHN M. MAKOWSKI, ESQ., pro se
Greentree Executive Campus
4003 Lincoln Drive West, Suite C
Marlton, New Jersey 08053
Counsel for Defendant Makowski
JACOBY DONNER, PC
By: Liam Y. Braber, Esq.
1700 Market Street, Suite 3100
Philadelphia, Pennsylvania 19103
Counsel for the Fund Defendants
IRENAS, Senior United States District Judge:
This suit arises out of Plaintiff Gallagher’s divorce in 2011.
Shortly after the divorce, Gallagher’s ex-husband, Gary Brooks,
withdrew money from his union’s Supplemental Retirement Plan (“SRP”)
account which Gallagher asserts was legally hers pursuant to the
terms of their divorce decree.
Gallagher asserts a malpractice claim against her divorce
attorney, Defendant Makowski, for allegedly failing to adequately
protect her interest in the money.
Gallagher also asserts ERISA claims against the Fund Defendants- Plumbers Local Union 690 Supplemental Retirement Plan; the plan’s
Administrator, Thomas J. McNulty; and Trustees John I. Kane, Thomas
J. Crowther, Timothy J. Brink, Howard Weinstein, and John J. Bee-asserting that they breached the Plan provisions and their fiduciary
duties when they erroneously allowed Brooks to withdraw the money.
Presently before the Court are: (1) Makowski’s Motion for
Summary Judgment; (2) the Fund Defendants’ Motion for Summary
Judgment; and (3) Gallagher’s Cross-Motion for Summary Judgment
against the Fund Defendants.
For the reasons stated herein, Makowski’s motion will be denied
in part and denied without prejudice in part; the Fund Defendants’
motion will be granted in part and denied in part; and Gallagher’s
cross-motion will be granted in part and denied in part.
In August, 2010, Gallagher retained Makowski to represent her in
her divorce suit against her husband, Gary Brooks. (SUF ¶ 2)
four days in June, 2011, the case was tried before the Honorable
Charles M. Rand, P.J.F.P. (SUF ¶ 3).
On the last day of trial, Judge
Rand rendered an oral decision on the record.
That same day
the judge signed a Judgment for Divorce, which was drafted by
(Makowski Ex. A; SUF ¶ 6)
According to Makowski, the court “required that a Judgment of
Divorce limited to dissolution and name change be signed the day the
divorce is made final[,] with an Amended Judgment of Divorce on all
remaining issues prepared and entered on a later date.”
Moving Brief, p. 1)
A month later, on July 26, 2011, Judge Rand
signed the Amended Judgment of Divorce, which was also drafted by
(Makowski Ex. B; SUF ¶ 6)
The relevant portion of the
Amended Judgment provides,
13. The date of complaint balance and all
accrued interest in the Defendant’s Local 640
Supplemental [Retirement] Plan [“SRP”] with his
union will be divided equally between the parties
utilizing a Qualified Domestic Relations Order.
The cost of the QDRO will be divided equally
between the parties.
The Defendant’s one half
interest in this plan will be frozen by the Plan
Administrator pursuant to the provisions of this
Order until further order of the Court.
(Makowski Ex. B)
Unfortunately, in the interim between the entry of the Judgment
of Divorce and the Amended Judgment of Divorce, Gary Brooks withdrew
his half of the SRP funds, which the parties do not dispute, was
supposed to be frozen.
When Brooks made his request to withdraw, Defendant Thomas
McNulty, the Plan Administrator, responded by letter dated July 6,
Dear Mr. Brooks:
Thank you for furnishing us with your Divorce
Decree . . . effective June 27, 2011.
understand that you are seeking to make a
withdrawal from the Plumbers Local Union No. 690
Supplemental Retirement Plan (SRP).
We are prepared to allow you to make this
withdrawal, consistent with the terms of the SRP,
provided that you confirm that there is no
property settlement agreement in effect, or other
understanding, by which your former spouse,
Jennifer A. Brooks [Gallagher], is entitled to
receive some or all of your account balance in
the SRP and which might limit the amount you can
withdraw from the SRP at this time.
On the line indicated below, please confirm that
your former spouse is not entitled to an
assignment of any portion of your SRP as a result
of your divorce proceeding.
After you confirm
this by signing and dating below, we will
initiate the withdrawal process. Thank you.
(Fund Defs’ Ex. B)
Brooks signed the letter and dated it July 8,
He also completed the Plan’s “Supplemental Retirement Special
Hardship Withdrawal Additional Information Form.” (Fund Defs’ Ex. B)
The form specifies, “hardship withdrawals may be given only for the
following reasons (must check one).”
Brooks checked the box
corresponding to “medical expenses . . . incurred by . . . any
dependents of the participant.”
The form further directed,
“PLEASE EXPLAIN IN THE SPACE BELOW THE FINANCIAL CONDITION WHICH
REQUIRES YOU TO RECEIVE AN IMMEDIATE HARDSHIP WITHDRAWAL FROM THE
The undisputed record demonstrates that the SRP knew that Brooks
had three “eligible dependents”-- “his unmarried children under 19
years of age”-- at the time of his request. (Pl’s App’x 490)
(Id.; caps in original)
for explanation was left blank.
Brooks did not explain; the space
The form is stamped
“received” by the Fund on July 11, 2011.
On July 13, 2011, the Funds issued a check payable to Gary
Brooks in the amount of $19,884.80, which represented half of his
account balance less 20% federal income tax withholding and the
applicable early withdrawal fee.
(Fund Defs’ Ex. B)
Sometime prior to August 16, 2011, Makowski learned of Brooks’
(Makowski Ex. C)
In response to Makowski’s inquiry to
the Funds, the Funds’ attorney, William Denmark, wrote to Makowski on
August 24, 2011, explaining the circumstances under which Brooks’
withdrawal occurred and stating that the remaining one-half balance
was available for distribution to Gallagher upon submission of the
appropriate documentation, including an appropriate QDRO.
On October 3, 2011, Judge Rand signed the QDRO “resolv[ing] and
specif[ing] the extent of [Gallagher’s] interest in [the SRP].”
(Makowski Ex. F)
The QDRO directs the Funds to “segregate and pay a
portion of [Brooks’] account under the [SRP] to [Gallagher] equal to
one half or fifty (50%) percent [sic] of the account balance as of
[the date of the divorce complaint].”
Makowski’s earlier draft of the QDRO included a provision,
consistent with paragraph 13 of the Amended Judgment of divorce, that
Brooks’ half of the account balance be frozen. However, that
provision was later deleted after correspondence with the Funds’
attorney, Mr. Denmark. (Pl’s App’x p. 92)
On October 21, 2011, Judge Rand signed another order, which
states, in relevant part,
The Defendant, Gary P. Brooks, willfully and
purposely removed the amount of $23,000.00 from
his Plumbers Local Union No. 690 Supplemental
Retirement Plan account. In accordance with ¶ 13
of the Amended Judgment for Divorce dated July
26, 2011, said funds representing his share of
retirement funds to be divided by a Qualified
Domestic Relations Order were to be frozen for
use to pay child support owed and to be owed by
Therefore, a Judgment is hereby
entered against the Defendant, Gary P. Brooks in
favor of the Plaintiff, Jennifer A. Brooks, a/k/a
Said Judgment represents child
support and is not dischargable in bankruptcy.
The Defendant, Gary P. Brooks, is in contempt of
court and a warrant for his arrest is hereby
issued with a purge amount of $23,000.00.
(Makowski Ex. G) (emphasis added).
On November 9, 2011, the Funds paid Gallagher the remaining
balance in Brooks’ account. 3
On June 14, 2012, Gallagher filed a Chapter 7 Voluntary
Bankruptcy Petition in U.S. Bankruptcy Court.
It is undisputed that
she did not list her current malpractice claim against Makowski, nor
her claims against the Fund Defendants, on the relevant bankruptcy
On September 14, 2012, the Honorable Judith H. Wizmur,
It should be noted that in an earlier order, this Court stated that
this suit arose out of two alleged withdrawals that Gallagher’s exhusband made from his pension account. That statement was the result
of the Court’s attempt to understand a somewhat unclear and sometimes
contradictory Fourth Amended Complaint. Now, based on the documents
in the summary judgment record and the parties’ briefs, it appears
that Brooks made only one withdrawal (not two) and that withdrawal
was from his SRP account (not his pension account).
U.S.B.J., signed the order discharging Gallagher’s debts and closing
the bankruptcy case.
Gallagher filed this suit in New Jersey state court on October
Upon addition of the ERISA claims against the Fund
Defendants, the case was removed to this Court on February 25, 2013.
The Fourth Amended Complaint asserts four counts.
Count One is
Gallagher’s legal malpractice claim against Defendant Makowski.
Count Two asserts a claim against the Fund Defendants pursuant to
ERISA for recovery of benefits.
Counts Three and Four assert ERISA
claims against the Fund Defendants for breach of fiduciary duty.
Makowski asserts cross-claims for indemnification and
contribution against the Fund Defendants, and the Fund Defendants
assert the same cross-claims against Makowski.
Makowski also asserts
a counterclaim against Gallagher for unpaid legal fees.
The parties’ motions for summary judgment on the direct claims
only (i.e., not the cross-claims, nor the counterclaim) are presently
before the Court.
“The court shall grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a).
deciding a motion for summary judgment, the court must construe all
facts and inferences in the light most favorable to the nonmoving
See Boyle v. Allegheny Pennsylvania, 139 F.3d 386, 393 (3d
The moving party bears the burden of establishing that
no genuine issue of material fact remains.
Catrett, 477 U.S. 317, 322-23 (1986).
See Celotex Corp. v.
A fact is material only if it
will affect the outcome of a lawsuit under the applicable law, and a
dispute of a material fact is genuine if the evidence is such that a
reasonable fact finder could return a verdict for the nonmoving
See Anderson, 477 U.S. at 252.
“[A] party may file a motion for summary judgment at any time
until 30 days after the close of all discovery.”
Fed. R. Civ. P.
The Court addresses Makowski’s motion, then addresses the Funds’
motion and Gallagher’s attendant cross-motion.
Makowski makes two related arguments.
First, he argues that the
Court should apply the doctrine of judicial estoppel to preclude
Gallagher from pursuing her legal malpractice claim (Count 1 of the
Fourth Amended Complaint) because she failed to list her accrued
claim as an asset on her bankruptcy schedule.
Discovery has been stayed pending the outcome of the instant
Second, Makowski asserts that Gallagher cannot pursue the prepetition legal malpractice claim because it belongs to the Chapter 7
Trustee, who is the real party in interest.
The Court addresses each argument in turn.
Makowski acknowledges that the decision to apply judicial
estoppel is discretionary.
See In re Kane, 628 F.3d 631, 638 (3d
Cir. 2010) (“Judicial estoppel is a fact-specific, equitable
doctrine, applied at courts’ discretion.”); Montrose Med. Group
Participating Sav. Plan v. Bulger, 243 F.3d 773, 780 (3d Cir. 2001).
He argues that a favorable exercise of this Court’s discretion is
warranted in this case.
The Court disagrees.
Three requirements must be met before a district
court may properly apply judicial estoppel.
First, the party to be estopped must have taken
unwarranted unless the party changed his or her
position in bad faith--i.e., with intent to play
fast and loose with the court. Finally, a
district court may not employ judicial estoppel
unless it is tailored to address the harm
Bulger, 243 F.3d at 779-80 (internal citations and quotations
Judicial estoppel is an affirmative defense, see Fed. R. Civ. P.
8(c)(1); therefore, Makowski bears the burden of proof.
Assuming arguendo that Gallagher’s failure to list her
malpractice claim on the relevant bankruptcy schedule is
irreconcilably inconsistent with the pursuit of that same claim here,
the Court concludes that the record evidence does not support a
finding that Gallagher acted in bad faith.
The record evidence Makowski cites in support of his bad faith
argument is sparse at best, and would not necessarily lead a
reasonable factfinder to conclude that Gallagher acted with the
intent to play fast and loose with either the Bankruptcy Court or
Gallagher filed her bankruptcy petition with the relevant
schedule on June 14, 2012.
(Makowski Ex. M)
Nothing in the record
supports a conclusion that Gallagher knew, on that day, that she had
a malpractice claim against Makowski.
Indeed, viewing the record
evidence in the light most favorable to Gallagher, a reasonable juror
could conclude that Gallagher, in fact, did not know.
Gallagher’s current counsel, Joseph Pinto, states in his
concerning pursuing collection of the funds taken
by her ex-husband from the Plumbers Union Local
690 Supplemental Retirement Plan. I received her
bankruptcy petition and other documents related
to her divorce case, and believed that, besides a
possible appeal to the Pension Plan concerning
the monies that had been withdrawn . . . she
might also have a cause of action against
[Makowski] for malpractice.
(Pinto Cert. ¶ 2)
From this evidence a reasonable juror could infer that Gallagher
did not know she had a claim against Makowski until she consulted an
attorney, which did not occur until after she filed her bankruptcy
Makowski argues that Gallagher’s failure to amend her bankruptcy
schedule to include the claim once she did know about it evidences
However, Mr. Pinto’s Certification details the lengths to
which he, on behalf of his client, Gallagher, went to get Gallagher’s
bankruptcy counsel, Eric Kishbaugh to amend the petition, but to no
(Pinto Cert. ¶¶ 5-8)
Such evidence at least raises an issue
of material fact as to Gallagher’s bad faith.
Lastly, Makowski argues that several of Gallagher’s legal
arguments in opposition to the instant motion are entirely meritless
and therefore support the conclusion that Gallagher is pursuing her
legal malpractice claim in bad faith.
The Court rejects Makowski’s
Asserting an unmeritorious legal position is not
tantamount to bad faith.
The Court concludes that applying judicial estoppel is not
appropriate in this case. 5
Makowski’s Motion for Summary Judgment in
this regard will be denied. 6
In light of this holding, the Court does not reach Gallagher’s
argument that the state court decided the judicial estoppel issue in
her favor prior to removal, and therefore Makowski is bound by the
law of the case.
After Makowski filed his Motion for Summary Judgment, the Fund
Defendants informed the Court by letter that they joined in the
motion because it is undisputed that Gallagher failed to list on her
Makowski also argues that, by virtue of Gallagher’s bankruptcy
filing and her failure to schedule the instant malpractice claim, the
claim belongs to the United States Trustee, not Gallagher.
Makowski reasons, pursuant to Fed. R. Civ. P. 17(a), the claim must
be prosecuted by the Trustee, as the real party in interest.
Makowski’s Motion for Summary Judgment on this issue will be
denied without prejudice.
or he may not.
The Trustee may elect to pursue this claim
If the Trustee chooses to abandon the claim, then
Gallagher may continue to pursue the claim in her own right.
The Court will order Gallagher to give notice of the malpractice
claim against Makowski to the Trustee.
If the Trustee wishes to
prosecute this claim, he may take the appropriate steps to do so.
In any event, this issue affects neither Makowski’s potential
liability nor any damages that may be assessed against him.
Therefore, judgment in his favor is inappropriate.
Counts 2 through 4 of the Fourth Amended Complaint are the ERISA
claims against the Fund Defendants.
Counts 3 and 4 assert breach of
fiduciary duty claims for relief pursuant to 29 U.S.C. § 1109(a) (see
Fourth Amend. Compl. ¶¶ 42, 45, 66); and Count 2 asserts a claim
bankruptcy schedule her claims against the Funds. The Court’s
holding as to judicial estoppel applies equally to the Fund
Defendants; their Motion for Summary Judgment on estoppel grounds
will be denied.
pursuant to 29 U.S.C. § 1132(a)(1) to recover benefits allegedly due
Gallagher under the terms of the Plan.
The Court addresses Counts 3 and 4 before turning to Count 2.
Section 1109(a) provides in relevant part,
Any person who is a fiduciary with respect to a
plan who breaches any of the responsibilities,
obligations, or duties imposed on fiduciaries by
this title shall be personally liable to make
good to such plan any losses to the plan
resulting from each such breach, and to restore
to such plan any profits of such fiduciary which
have been made through use of assets of the plan
by the fiduciary, and shall be subject to other
equitable or remedial relief as the court may
deem appropriate, including removal of such
(emphasis added). 7
Counts 3 and 4 fail to state a claim because Gallagher does not
allege that the SRP suffered any loss.
Gallagher merely asserts that
the Fund Defendants paid the wrong person.
When a plan participant or beneficiary seeks damages under ERISA
for losses that she, as an individual-- rather than the plan-allegedly suffered, she has failed to state a claim for relief under
Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1162
n.7 (3d Cir. 1990) (“Because plaintiffs here seek to recover benefits
allegedly owed to them in their individual capacities, their action
29 U.S.C. § 1132(a)(2) provides, “a civil action may be brought . .
. by a beneficiary . . . for appropriate relief under [29 U.S.C. §
is plainly not authorized by [§ 1109].”); Fox v. Herzog Heine Geduld,
Inc., 232 F. App’x 104, 105 (3d Cir. 2007) (“The District Court . . .
correctly held that plaintiffs could not state a claim for monetary
damages for breach of fiduciary duty under ERISA, absent a ‘loss to
the plan’ as opposed to a loss suffered by individual beneficiaries
or a subclass of beneficiaries.”); see generally Mass. Mut. Life Ins.
Co. v. Russell, 473 U.S. 134, 140 (1985) (stating that an ERISA suit
for breach of fiduciary duty “inures to the benefit of the plan as a
whole,” and observing that Congress was concerned with fiduciaries’
“misuse and mismanagement of plan assets.”). 8
As to the breach of fiduciary duty claims, the Fund Defendants’
Motion for Summary Judgment will be granted and Gallagher’s crossmotion will be denied.
Section 1132(a)(1)(B) provides, in relevant part, “a civil
action may be brought by a participant or beneficiary to recover
benefits due to him under the terms of his plan, to enforce rights
under the terms of the plan, or to clarify his rights to future
See also Walker v. Federal Express Corp., 492 F. App’x 559, 563
(6th Cir. 2012); Smith v. Medical Benefit Administrators Group, Inc.,
639 F.3d 277, 282 (7th Cir. 2011); Wise v. Verizon Communications,
Inc., 600 F.3d 1180, 1189 (9th Cir. 2010); Clark v. Bd. of Trs. S.S.
Trade Ass'n, 1990 U.S. App. LEXIS 27020 at *8 (4th Cir. 1990);
Placzek v. Strong, 868 F.2d 1013, 1014 (8th Cir. 1989); Goldenberg v.
Indel, Inc., 741 F. Supp. 2d 618, 638-39 (D.N.J. 2010) (Simandle,
D.J.) (“This claim, as presented, is not cognizable under ERISA
because . . . the statute does not permit recovery for damage to an
individual that does not harm plan assets.”).
benefits under the terms of the plan.”
Gallagher asserts that under
the terms of the SRP, “Brooks’ application for a [financial] hardship
distribution should not have been approved.”
Moving Brief, p. 7)
(Opposition / Cross-
She reasons that if the Fund Defendants had
properly denied Brooks’ request, his half of the money would have
remained in the account, because it is undisputed that any other
withdrawal Brooks could have made would have had to await approval by
the Fund Trustees at the next quarterly meeting, which was to be held
in September, 2011. (Fund Defs’ Ex. B) 9
The issue is whether the Fund Defendants properly concluded that
Brooks had a “financial hardship” under paragraph 7.5 of the SRP.
The SRP gives the Fund Defendants “sole and absolute discretion
to determine eligibility for benefits under this Plan, and to
construe and interpret the provisions of the Plan . . . and to make
factual determinations with respect thereto.”
(SRP ¶ 8.7)
Therefore, the Court applies a deferential abuse of discretion
standard of review.
Estate of Schwing v. Lilly Health Plan, 562 F.3d
522, 525 (3d Cir. 2009).
The Court will only overturn the benefits
decision if it is arbitrary and capricious-- that is, if the Court
The Fund Defendants’ Motion for Summary Judgment assumes that
Gallagher’s theory of her case is that the decision to allow Brooks’
withdrawal was erroneous because she had a legal right to Brooks’
half of the account balance at the time of the withdrawal. However,
Gallagher’s opposition / cross-moving brief makes clear that her
theory is different. (Opposition / Moving Brief, p. 4) She argues
the decision was erroneous simply because Brooks had not sufficiently
demonstrated a qualifying financial hardship, irrespective of her
legal entitlement to the money at the time of the withdrawal.
concludes that the decision was not “within reason” or “[un]supported
by substantial evidence.”
113, 118 (3d Cir. 2002).
Romero v. SmithKline Beecham, 309 F.3d
If “there is sufficient evidence for a
reasonable person to agree with the administrator’s decision,” the
decision must stand.
Gallagher argues that the decision to allow Brooks’ hardship
withdrawal was not supported by substantial evidence “because it was
not based upon anything in the record, other than a checkmark box on
the [withdrawal] application stating that the withdrawal was for
(Opposition / Cross-Moving Brief, p. 15)
notably, the Plan’s own form specifically asked for an explanation of
the participant’s hardship, but in Brook’s case, that section of the
form was left blank.
Gallagher argues the Administrator abused his
discretion when he failed to, at the very least, require Brooks to
fully complete the Plan’s own forms before allowing the withdrawal.
The Court agrees.
At oral argument, the Fund Defendants argued
that the Administrator has no duty to independently verify the
information Brooks provided to the SRP.
not ruling that such a duty exists.
onerous and costly.
To be clear, the Court is
Indeed, such a duty would be
The Court merely holds that, under the factual
circumstances of this case, it was an abuse of discretion to allow
the hardship withdrawal without first requiring Brooks to provide all
of the information that the Plan itself requires in order to make a
The issue is not whether Brooks’ representations should have
been believed or verified, but rather-- assuming arguendo the truth
of those representations-- whether they were sufficient.
standard is whether the decision to allow the hardship withdrawal was
supported by substantial evidence.
The Fund Defendants do point to
some evidence-- namely, the undisputed evidence that the Fund
Defendants knew Brooks had not worked since 2009, that he had three
dependent children, and that he was recently divorced.
evidence, however, does not rise to a “substantial” level because
none of it serves to distinguish a general financial hardship, which
is not grounds for immediate withdrawal under the Plan, from a
dependent medical expense hardship, which is.
The lone piece of evidence in the record supporting the
conclusion that Brooks’ asserted hardship was a medical expense for
one or more of his children is the box that he checked on the form.
This evidence alone cannot reasonably support a conclusion that the
evidence was substantial (i.e., that the Administrator’s decision was
not arbitrary and capricious) when the form itself requires an
explanation of the “financial condition which requires [the
participant] to receive an immediate hardship withdrawal.”
Defs’ Ex. B)
Accordingly, as to Count 2, the Fund Defendants’ Motion for
Summary Judgment will be denied and Gallagher’s cross-motion will be
granted as to liability. 10
In light of the foregoing, Makowski’s motion will be denied in
part and denied without prejudice in part; the Fund Defendants’
motion will be granted in part and denied in part; and Gallagher’s
cross-motion will be granted in part and denied in part.
appropriate Order accompanies this Opinion.
March 28, 2014
__s/ Joseph E. Irenas_______
JOSEPH E. IRENAS, S.U.S.D.J.
On the present record, factual issues exist as to how much of
Brooks’ half of the SRP account Gallagher is entitled to. The
parties do not dispute that Brooks’ half was to be frozen, and
apparently do not dispute that the money was to be used to satisfy
Brooks’ child support obligations. However, there is no evidence in
the current record concerning the extent of Brooks’ child support
arrearages, if any, and his future support obligations. Therefore,
at this time, the Court cannot enter a judgment in Gallagher’s favor.
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