KELLY v. RELIANCE STANDARD LIFE INSURANCE COMPANY et al

Filing 171

Opinion and ORDER denying 126 Motion to Enforce Judgment. Signed by Judge Katharine S. Hayden on 7/21/14. (rg, )

Not for Publication
THOMAS P. KELLY, JR.,
Plaintiff,
v.

Civil No.: 09-2478 (KSH)

RELIANCE STANDARD LIFE INSURANCE
COMPANY, and THE PENN MUTUAL LIFE
INSURANCE COMPANY,

OPINION AND ORDER

Defendants.

Katharine S. Hayden, U.S.D.J.
The Court is in receipt of submissions from counsel [D.E. 168, 169, and 170] related to a
motion to enforce settlement [D.E. 126] brought by plaintiff.
The parties are fully familiar with the facts of this case; procedurally, the parties are well
informed too, having engaged in many years of litigation. In the motion, plaintiff Thomas P. Kelly
(“Kelly”) seeks the money payment that one of the two defendants, Reliance Standard Life
Insurance Company (“Reliance”), agreed to as part of the settlement terms. [D.E. 121, 126.] The
full terms of the agreement remain in dispute, and the settlement is only between Kelly and
Reliance. While Kelly is frustrated with the length of time it has taken to resolve his issues with
Reliance, the Court’s review of the record reveals that the movement Kelly wants is stalled by all
parties’ confusion over what happens next with his claims against the other defendant, Penn Mutual
Life Insurance Company (“PM”).
In the earlier written opinion [D.E. 106] that granted summary judgment to Kelly on his
claims in count 1 against Reliance, the Court specified in a footnote that “because neither Kelly
nor Penn Mutual presented any arguments relating to Kelly’s ‘specific allegations’ against Penn
Mutual, the Court has not granted summary judgment as to [c]ount [2]” (the count against PM). In
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the order [D.E. 107] accompanying the written opinion, the Court originally directed “that
defendant Penn Mutual Life Ins. Co. shall immediately provide all benefits consistent with the rulings
set forth in the Court’s written opinion granting Kelly’s motion for summary judgment.” That
language was in error, as swiftly pointed out in a letter from counsel for PM. [D.E. 109.] The Court’s
amended order [D.E. 110] made clear that the Court had not resolved count 2, and so the amended
language specifies that “Kelly’s claim [for benefits against Reliance] is hereby REMANDED to
defendant Reliance for continued administration and payment of benefits, consistent with the terms of
this Order.” It was to address that requirement that Kelly and Reliance pursued negotiations and

ultimately reached agreement on certain terms, per an email from Reliance’s attorney (reproduced
in D.E. 121-1 and elsewhere in the record):
While walking to the train, my client decided to accept your final offer in order to
put the matter to rest. We will pay 400,000 to satisfy the benefit claim, Judge
Hayden will decide the fee motion and no party will appeal the court’s decisions,
re benefits, RICO, etc. including the fee ruling.
But that email only went partway toward achieving a resolution, as the motion papers
demonstrate. [See D.E. 127 (Reliance Opp’n), D.E. 128 (PM Opp’n).] When Reliance sought to factor
in Kelly’s claims against PM in a proposed release, the deal fell apart. This core disputed issue has
financial consequences—Kelly is maintaining that PM is a co-fiduciary with Reliance and as such
owes him whatever amounts Reliance has not agreed to pay [see, e.g., D.E. 105-1, 129, 142].
In letters to the Court, Kelly demands a trial date [D.E. 140] on count 2, a count he describes
as addressing “only [PM’s] co-fiduciary liability under ERISA.” In direct response, PM disagrees:
Penn Mutual has consistently held the position that payment of disability benefits is a
matter between Mr. Kelly and Reliance Standard, which issue has been resolved by
virtue of the Court’s opinion and order. Penn Mutual has also consistently
maintained that should Mr. Kelly be entitled to total disability benefits, that decision
would impact other benefits to which Mr. Kelly maybe entitled. Penn Mutual has
issued correspondence to Mr. Kelly explaining its position with regard to those
benefits and requesting that he make appropriate elections in order to permit the
payment of benefits to begin. He has failed to do so.

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Since there does not appear to be any dispute with regard to Mr. Kelly’s entitlement
to those benefits, and only administrative actions need be taken, we do not believe the
scheduling of a trial would be the most appropriate and effective method of disposing
of this matter. We therefore request that this Court convene a conference at which
time we can discuss the appropriate resolution of the remaining issues either by
means of settlement or motion practice.
[D.E. 141.] The foregoing exchange illustrates how the parties have been talking past one another,
something the Court sought to avoid in the amended order on summary judgment, where the parties
were directed to conduct a settlement conference before the magistrate judge in “an effort to resolve
the remaining claims against defendant Penn Mutual,” with all trial counsel and clients with full
settlement authority required to attend in person. This effort was unsuccessful, as were subsequent

efforts to employ mediation before a skilled and respected mediator. Significantly, and guiding the
Court’s decision now, the amended order aimed to resolve the case in full and to harmonize the
summary judgment decision in Kelly’s favor as against Reliance with a resolution of his claims
against PM.
All along there has been dissonance about the interrelationship between PM and Reliance
insofar as Kelly’s eligibility for benefits is concerned. Although the amended complaint [D.E. 5]
speaks, in part, of breaches of fiduciary duty, both count 1 (per Reliance) and count 2 (per PM) are
subtitled “claim for benefits under ERISA.” Count 2 claims that PM’s misconduct “contributed to
the unlawful denial of Plaintiff’s claim for disability benefits and Plaintiff was damaged as a result
of that denial.” (Am. Compl. ¶ 187.) Throughout (and as seen in the letter, D.E. 141, quoted
above), PM has indicated that, if Kelly were found to be totally disabled under the Reliance policy,
he might be entitled to additional benefits from PM, although those benefits had not been
calculated. [See, e.g., D.E. 56, 63.] In the Final Pretrial Order [D.E. 75], PM agreed that “if
[Kelly] is entitled to benefits for total disabilities, then [PM] will fulfill its obligations under its
contract.” Whatever those benefits were, it cannot be controverted that the briefing on all rounds

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of motions practice pertaining to the first and second counts of the complaint has focused primarily
on count 1, and that Kelly’s “co-fiduciary” theory regarding PM’s liability to him has never been
adjudicated.
As shown in the email earlier quoted, Reliance intended to “put the matter to rest” by
paying Kelly $400,000 to “satisfy the benefit claim” pending against it. And speaking generally as
it does about “the benefit claim,” the email is silent about whether Reliance and Kelly were
resolving in full his claims of “total disability.” PM did not enter into any settlement arrangement.
Not surprisingly, then, in opposing Kelly’s argument that the email represented the entirety of the
agreement, and looking down the road, Reliance writes in its opposition brief that the release it has
proposed “includes indemnity language as [Reliance] want[s] finality with respect to its potential
obligations under the Plan.” [D.E. 127.]
At this point, on the one hand the Court can conclude that Reliance aimed to resolve its
liability once and for all in its email to Kelly that is at the heart of his enforcement motion; indeed,
the language of its email to Kelly’s attorney indicates Reliance planned for the settlement to be not
only dispositive (“put the matter to rest . . . satisfy the benefit claim”) but that no appeal would (if
it could) be taken from this Court’s prior rulings or from an anticipated ruling on fees. On the
other hand, the Court must conclude that at this stage of the litigation, there is no reason to think
that Reliance’s payment of $400,000 would necessarily extinguish potential liability given Kelly’s
and PM’s wildly dissimilar views about the nature of those “other benefits to which [Kelly may
be] entitled.” [D.E. 141.]
There are cases arising in other contexts that hold entry of judgment is to be delayed
when it could produce absurd or incongruous results. See, e.g., Wright & Miller, Fed. Practice &
Procedure § 2690 (discussing default judgments in context of multiple defendants); Animal Sci.

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Prods., Inc. v. China Nat’l Metals & Minerals Imp. & Exp. Corp., 596 F. Supp. 2d 842, 849
(D.N.J. 2008) (Brown, J.). The time has come for Kelly to define what he wants from PM, and for
Reliance and PM to indicate what Reliance was settling by way of the email and what if anything
PM plans to offer Kelly by way of benefits. Filling in those gaps motivated the Court’s directions
that all parties, not just Kelly and PM, pursue negotiations as to PM’s obligations. Evidently
negotiations and even mediation failed as the vehicle for clarification and resolution. As a
consequence, the Court denies Kelly’s motion [D.E. 126], and in the absence of any indication the
parties can reach agreement, the Court orders motion practice.
Counsel for Kelly, Reliance, and PM shall appear in person and on the record before
Magistrate Judge Waldor and draw up a motions briefing schedule directed to the disposition of all
open issues in this case. In advance—mindful of the Final Pretrial Order—each of the parties shall
file on the docket a submission indicating the parties’ theories of what the open issues are and how
each might best be addressed by dispositive motion. These respective submissions, which are to
be simultaneously filed on Monday, July 28, 2014, may not line up precisely. However, the Court
expects that the hearing before Judge Waldor will produce coherent and efficient motion practice.
Dates for filing motions that are set forth at the hearing shall be chosen so that they are
expeditious—Kelly complains about the length of time that has ensued—and with the
understanding that no extensions of time will be granted.
SO ORDERED this 21st day of July, 2014.

/s/ Katharine S. Hayden
Katharine S. Hayden, U.S.D.J.

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