Ibew-Neca Southwestern Health and Bene. v. Gurule, Civ.A.3:03-CV-0092-L.

• Citation: 337 F.Supp.2d 845
• Decision Date: 18 August 2004
• Docket Number: No. Civ.A.3:03-CV-0092-L.,Civ.A.3:03-CV-0092-L.
• Parties: IBEW-NECA SOUTHWESTERN HEALTH AND BENEFIT FUND and its Board of Trustees, Plaintiffs, v. Joseph GURULE and Sandra Gurule, both in their individual capacities, and as next friends for Alicia Cordova, a minor, Defendants.
• Court: U.S. District Court — Northern District of Texas

Page 845

337 F.Supp.2d 845

IBEW-NECA SOUTHWESTERN HEALTH AND BENEFIT FUND and its Board of Trustees, Plaintiffs, v. Joseph GURULE and Sandra Gurule, both in their individual capacities, and as next friends for Alicia Cordova, a minor, Defendants.

No. Civ.A.3:03-CV-0092-L.

United States District Court, N.D. Texas, Dallas Division.

August 18, 2004.

COPYRIGHT MATERIAL OMITTED

Mark S. Whitburn, David I. Schiller, Matthew Daniel Rinaldi, Todd A. Schroeder, Gibson, Dunn & Crutcher, Dallas, TX, for Plaintiffs.

Steven C. Henry, Law Office of Steven C. Henry, Corrales, NM, for Defendants.

ORDER

LINDSAY, District Judge.

Before the court are the Findings, Conclusions and Recommendation of the United States Magistrate Judge ("Report"), filed March 23, 2004; Plaintiffs' Motion to Find Steven C. Henry and Defendants in Contempt of Court, filed April 19, 2004; and Defendants' Motion to Dismiss for Lack of Jurisdiction, filed May 11, 2004. After careful consideration of the motions, responses, replies, the evidence, the Report, and the applicable law, the court denies Defendants' Motion to Dismiss for Lack of Jurisdiction; denies Plaintiffs' Motion to Find Steven C. Henry and Defendants in Contempt of Court; accepts the findings and conclusions of the magistrate judge; and grants in part and denies in part Plaintiffs' Motion for Summary Judgment, filed November 19, 2003.

I. Background

Plaintiffs IBEW-NECA Southwestern Health and Benefit Fund (the "Plan") and its Board of Trustees (the "Trustees") (collectively, "Plaintiffs") filed this action against Defendants Joseph Gurule and Sandra Gurule, both in their individual capacities, and as next friends for Alicia Cordova ("Alicia"), a minor, pursuant to § 502(a)(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. § 1132(a)(3). The Plan is a multi-employer welfare benefit plan within the meaning of ERISA, and was established to provide health and welfare benefits to eligible employees and their dependents. The Plan is governed exclusively by ERISA, the written trust fund documents, and plan documents and their amendments. The Trustees serve as plan administrator for the Plan and a plan fiduciary. Defendant Joseph Gerule is a participant of the Plan; Defendants Sandra Gurule and Alicia are his eligible dependents.

On or about November 30, 2001,¹ Alicia was injured in an automobile accident and incurred medical bills as a result of her subsequent treatment. The Plan conditionally advanced $31,751.69 to Defendants to cover Alicia's medical expenses, subject to the terms of the Plan and a Reimbursement Agreement. The Reimbursement Agreement, which was executed by Defendants, provided that the Plan would receive full reimbursement of the advanced funds from any recovery by Defendants from a third person or insurance company.

Defendants subsequently recovered $46,500 in damages from a settlement with the responsible driver's insurance company, and the settlement was approved by the First Judicial District Court in the County of Santa Fe, New Mexico. Pursuant to the terms of the Plan and Reimbursement Agreement, Plaintiffs demanded reimbursement from the settlement in the full amount advanced to Defendants for Alicia's medical expenses. Thereafter, Defendants requested that Plaintiffs consider an equitable reduction of the full reimbursement amount in accordance with New Mexico law. Plaintiffs declined to do so, and demanded full reimbursement of the approximately $31,751.69 allegedly owed by Defendants under the Reimbursement Agreement. Defendants have refused to reimburse the Plan for the funds advanced to them for Alicia's medical expenses.

Plaintiffs filed this action against Defendants on January 15, 2003, seeking (1) a declaration that the Trustees' interpretation of the Plan terms is reasonable and, therefore, the Plan is entitled to full reimbursement from the settlement for the amount advanced to Defendants; (2) equitable restitution, reimbursement and/or recovery of the money advanced to Defendants; (3) specific performance to enforce the Fund terms and Reimbursement Agreement to turn over that portion of the settlement equal to $31,751.49 held in trust by Defendants; (4) imposition of a constructive trust over the $31,751.49 for the benefit of Plaintiffs; (5) a preliminary injunction enjoining Defendants from disposing, transferring, or otherwise encumbering the funds held in trust representing insurance proceeds received from the settlement;² (6) prejudgment and postjudgment interest; (7) attorney's fees; and (8) all costs of enforcement and collection. Defendants do not dispute that Plaintiffs have a right to some reimbursement from the settlement; rather, they contend that the Trustees abused their discretion in interpreting the Plan and Reimbursement Agreement by not granting an equitable reduction of the amount of reimbursement pursuant to New Mexico law.

By order of August 1, 2003, the court referred this action to the magistrate judge for pretrial management. On November 19, 2003, Plaintiffs' filed a motion for summary judgment on each and every claim asserted in Plaintiffs' Original Complaint ("Complaint"). On March 23, 2004, the Findings, Conclusions & Recommendation of the United States Magistrate Judge was filed.

On April 19, 2004, Plaintiffs file a motion to find Defendants' counsel, Steven C. Henry, and Defendants in contempt of court, contending that they are in violation of the court's Preliminary Injunction Order entered on December 19, 2003. On May 11, 2004, Defendants filed a motion to dismiss, contending that the court lacks jurisdiction to award Plaintiffs the relief sought in their Complaint. The court will first address the two most recent motions filed in this action, namely: Defendants' Motion to Dismiss and Plaintiffs' Motion to Find Steven C. Henry and Defendants in Contempt of Court. The court will then proceed to address the magistrate judge's findings, conclusions and recommendation with respect to Plaintiffs' Motion for Summary Judgment.

II. Defendants' Motion to Dismiss

Defendants contend that the court lacks subject matter jurisdiction in light of the Supreme Court's decision in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002), and the Sixth Circuit's recent decision in Qualchoice, Inc. v. Rowland, 367 F.3d 638 (6th Cir.2004). Specifically, Defendants argue that Plaintiffs' Complaint seeks only legal remedies; namely, to impose personal liability on them to enforce a contractual reimbursement obligation to the Plan for the amount they received in benefits, and to recover reimbursement, restitution and specific performance, which are damages at law. Defendants further argue that because Plaintiffs' lawsuit is in essence a legal action, rather than an equitable one, it is outside the scope of § 502(a)(3) and, therefore, this court lacks subject matter jurisdiction over the action. Plaintiffs counter that this is an action for equitable relief under § 502(a)(3), as they seek to recover, by way of a constructive trust and equitable reimbursement, specifically identifiable funds that are being held by Defendants' attorney in his client trust account that belong in good conscious to the Plan. Plaintiffs further contend that the Fifth Circuit has expressly recognized that a Plan's action for a constructive trust is equitable and, therefore, authorized under ERISA. The court agrees.

For a plan fiduciary's action to fall within § 502(a)(3)'s jurisdictional grant, it must seek recovery of (1) specifically identifiable funds, (2) that belong in good conscience to the Plan, and (3) that are within the possession and control of the defendant-beneficiary. See Bombardier Aerospace Employee Welfare Benefits Plan v. Ferrer, Poirot and Wansbrough, 354 F.3d 348, 356 (5th Cir.2003), reh'g en banc denied, cert. denied, ___ U.S. ___, 124 S.Ct. 2412, 158 L.Ed.2d 981 (2004). Plaintiffs have established these requirements.

First, the Plan seeks to recover funds from a specifically identifiable corpus of money that they had paid out previously as benefits. Second, the funds held by Defendants' attorney are clearly traceable to Defendants and in good conscience belong to Plaintiffs pursuant to the terms of the Reimbursement Agreement. Finally, the funds that Plaintiffs seek to recover are being held in the client trust account of Defendants' attorney, who is undisputably Defendants' agent. Defendants therefore have ultimate control over, and thus constructive possession of, the disputed funds. See Bombardier, 354 F.3d at 348. The court finds that Plaintiffs seek equitable relief in the form of a constructive trust and equitable reimbursement, and that this action is therefore authorized under ERISA. Accordingly, the court has subject matter jurisdiction over this action. See Bombardier, 354 F.3d at 357 (affirming district court's exercise of subject matter jurisdiction where Plan sought imposition of a constructive trust over specifically identifiable settlement funds in constructive possession of beneficiary).

Defendants' reliance on Knudson is misplaced, as that case is distinguishable.³ First, unlike in Knudson, Plaintiffs here seek to impose a constructive trust over funds currently being held by Defendants' attorney in his client trust account. Moreover, contrary to Defendants' assertion, Plaintiffs do not seek to impose personal liability on them; rather, Plaintiffs seek a constructive trust over particular funds, separate and apart from Defendants' personal resources, and only to the extent of the benefits it provided. It is clear that Plaintiffs by this action are only seeking reimbursement of particular funds, by way of constructive trust, advanced to Defendants to pay Alicia's medical expenses.

Second, unlike the settlement proceeds in Knudson, the funds held by Defendants in this case are presently within their constructive possession and control....