Sheet Metal Workers’ Health & Welfare Fund of N.C. v. Law Office of Michael A. Demayo, LLP, 21-5011

• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)
• Writing for the Court: CHAD A. READLER, Circuit Judge.
• Citation: 21 F.4th 350
• Parties: SHEET METAL WORKERS’ HEALTH AND WELFARE FUND OF NORTH CAROLINA, Plaintiff-Appellant, v. LAW OFFICE OF MICHAEL A. DEMAYO, LLP, Defendant-Appellee.
• Docket Number: No. 21-5011,21-5011
• Decision Date: 17 December 2021

21 F.4th 350

SHEET METAL WORKERS’ HEALTH AND WELFARE FUND OF NORTH CAROLINA, Plaintiff-Appellant,
v.
LAW OFFICE OF MICHAEL A. DEMAYO, LLP, Defendant-Appellee.

No. 21-5011

United States Court of Appeals, Sixth Circuit.

Argued: October 20, 2021
Decided and Filed: December 17, 2021

ARGUED: Michael J. Wall, BRANSTETTER, STRANCH & JENNINGS, PLLC, Nashville, Tennessee, for Appellant. Erik C. Lybeck, NEAL & HARWELL, PLC, Nashville, Tennessee, for Appellee. Blair L. Byrum, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Amicus Curiae. ON BRIEF: Michael J. Wall, Karla M. Campbell, BRANSTETTER, STRANCH & JENNINGS, PLLC, Nashville, Tennessee, for Appellant. Erik C. Lybeck, NEAL & HARWELL, PLC, Nashville, Tennessee, for Appellee. Blair L. Byrum, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Amicus Curiae.

Before: BATCHELDER, LARSEN, and READLER, Circuit Judges.

CHAD A. READLER, Circuit Judge.

For those who enjoy unsettled legal questions, who would not welcome the opportunity to navigate a labyrinth of ancient equitable doctrines nested within a federal statute, with little precedent to inform that review? All of that is presented in this appeal. Add to that the amici participation of a federal agency, and the table seemingly is set for a jurisprudential feast. But resolution of those issues must remain on ice, so to speak, because they were not preserved for appellate review. On that basis, we affirm the judgment of the district court.

BACKGROUND

Courtney Simpson was injured in a car accident. Her insurer, the Sheet Metal Workers’ Health and Welfare Fund of North Carolina (the Fund), paid Simpson's $16,225 in medical costs incurred as a result of the accident. Simpson hired the Law Office of Michael A. DeMayo, LLP (the Firm) to represent her in a personal injury suit arising from the accident. The Fund maintained a right of subrogation and reimbursement, meaning that if Simpson received a settlement, the Fund was entitled to be reimbursed for the medical costs it covered. Simpson eventually settled her suit for $30,000. After depositing the settlement funds in a trust account, the Firm made various payments from those funds: $9,817.33 to Simpson, $1,000.82 to other lienholders, and $10,152.67 to the Firm's own operating account for fees and expenses related to

21 F.4th 354

the suit. Aware of the Fund's right to reimbursement for $16,225, the Firm nonetheless offered the Fund $9,029.18 "in full and final satisfaction of the Fund's lien," but did not disburse any money to the Fund.

Rather than accepting the Firm's offer, the Fund filed suit against the Firm under § 502(a)(3) of the Employee Retirement Income Security Act, claiming an equitable lien to the entire $16,225. The Fund sought a temporary restraining order to enjoin the Firm "from disposing of any or all Fund assets in its possession." The same day, the Firm issued a $9,029.18 check to the Fund from the trust account. That payment, which exhausted the settlement funds remaining in the trust account, left $7,195.82 of the Fund's reimbursement claim outstanding. The Fund claimed an equitable lien as to that amount. In a March 27, 2019 order, the district court issued a TRO requiring the Firm to "maintain at least $7,497.99 in its operating account until further orders of the Court or the resolution of Plaintiff's claim." (The correct amount subject to the TRO was $7,195.82 but due to a scrivener's error the TRO incorrectly stated the amount as $7,497.99.)

Eventually, the parties filed cross motions for summary judgment on the Fund's ERISA claim. Some threshold legal points deserve mention here. Section 502(a)(3) of ERISA empowers an employee welfare benefit plan to bring a civil suit to enforce the terms of a plan, but only if the suit seeks an equitable (rather than a legal) remedy. 29 U.S.C. § 1132(a)(3) ; see also Montanile v. Bd. of Trs. of Nat'l Elevator Indus. Health Benefit Plan , 577 U.S. 136, 143, 136 S.Ct. 651, 193 L.Ed.2d 556 (2016) ; Great-West Life & Annuity Ins. Co. v. Knudson , 534 U.S. 204, 213, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002). Where a plaintiff asserts a right to possess specific, identifiable property that is in the defendant's possession (including a specific sum of money), the plaintiff seeks an equitable remedy. Knudson , 534 U.S. at 213, 122 S.Ct. 708. Where, on the other hand, a plaintiff seeks to recover money from the defendant's general assets, it pursues a legal remedy. Id. ; Zirbel v. Ford Motor Co. , 980 F.3d 520, 524 (6th Cir. 2020). Relevant here are the concepts of "dissipation" and "commingling." If a defendant spends the plaintiff's claimed funds on nontraceable items (like food, services, or travel), the defendant dissipates the funds, in that the defendant no longer possesses the specific claimed funds or their proceeds, making the plaintiff's remedy a legal one. Montanile , 577 U.S. at 139, 145, 136 S.Ct. 651. Alternatively, if a defendant only commingles the plaintiff's claimed funds with its other assets, the defendant still possesses the claimed funds, making the plaintiff's remedy an equitable one. Zirbel , 980 F.3d at 524 (citing Montanile , 577 U.S. at 149, 136 S.Ct. 651 ). In other words, dissipating all of the plaintiff's claimed funds bars recovery under ERISA § 502(a)(3), but commingling those funds does not. Id. ; see also Knudson , 534 U.S. at 213–14, 122 S.Ct. 708.

Back to the parties’ cross-motions for summary judgment. There, the parties disputed whether the Fund sought an equitable remedy. In its motion,...