Afl v. Bosque

• Decision Date: 28 April 2006
• Docket Number: No. 26631.,26631.
• Citation: 132 P.3d 1229
• Parties: AFL HOTEL & RESTAURANT WORKERS HEALTH & WELFARE TRUST FUND, by its Trustees, Cherlyn Logan, Malcolm Sur, Nona Tamanaha, Eric Gill, Gilbert Farias, and Hernando Tan, Plaintiffs-Appellants, v. Elmer BOSQUE, Defendant-Appellee.
• Court: Hawaii Supreme Court

132 P.3d 1229

AFL HOTEL & RESTAURANT WORKERS HEALTH & WELFARE TRUST FUND, by its Trustees, Cherlyn Logan, Malcolm Sur, Nona Tamanaha, Eric Gill, Gilbert Farias, and Hernando Tan, Plaintiffs-Appellants, v. Elmer BOSQUE, Defendant-Appellee.

No. 26631.

Supreme Court of Hawai`i.

April 28, 2006.

Ashley K. Ikeda and Lori K. Aquino (of Weinberg, Roger & Rosenfeld), on the briefs, for plaintiffs-appellants AFL Hotel & Restaurant Workers Health & Welfare Trust Fund, by its Trustees, Cherlyn Logan, Malcolm Sur, Nona Tamanaha, Eric Gill, Gilbert Farias, and Hernando Tan.

Janice P. Kim, Honolulu, on the briefs, for defendant-appellee Elmer Bosque.

MOON, C.J., LEVINSON, NAKAYAMA, ACOBA, and DUFFY, JJ.

Opinion of the Court by DUFFY, J.

Plaintiff-appellant AFL Hotel & Restaurant Workers Health & Welfare Trust Fund, by its trustees, [hereinafter, AFL] appeals from the June 1, 2004 final judgment of the Circuit Court of the First Circuit¹ in favor of defendant-appellee Elmer Bosque dismissing AFL's complaint against Bosque for breach of a subrogation agreement. On appeal, AFL argues that the circuit court erred by: (1) granting Bosque's motion to dismiss on the basis that the Employment Retirement Income Security Act of 1974 (ERISA), as amended, 29 U.S.C. § 1001 et seq. (2002), preempts an ERISA plan's state law claim against a plan beneficiary for reimbursement, out of proceeds recovered from a third-party tortfeasor, of medical expenses paid on behalf of the beneficiary to cover injuries caused by that third party; and (2) dismissing as moot AFL's motion for summary judgment when there were no genuine issues of material fact and AFL was entitled to judgment as a matter of law. AFL thus asks this court to vacate the judgment below and remand with directions to enter an order grating summary judgment in its favor and award AFL reasonable attorney's fees and costs. Bosque responds that: (1) the circuit court properly dismissed the suit on ERISA preemption grounds; (2) AFL is judicially estopped to deny Bosque's preemption argument based on the inconsistent position taken by AFL in related cases; (3) this court may not consider AFL's motion for summary judgment because it was not granted or denied on the merits; and (4) this court should direct the circuit court to award Bosque reasonable attorney's fees and costs incurred in connection with this action.

Based on the following, we vacate the judgment below and remand for further proceedings.

I. BACKGROUND

A. Facts

The following facts are not disputed by the parties. AFL is an employee benefit plan within the meaning of ERISA, of which Bosque was a beneficiary. Bosque admitted that on October 25, 1996, he was injured in a motor vehicle accident. AFL subsequently agreed to pay Bosque's medical expenses on the condition that he sign a subrogation agreement (Agreement). The Agreement, which Bosque admitted he signed on March 2, 2000, stated that Bosque would notify AFL of any third-party recovery arising out of his motor vehicle accident and reimburse AFL out of that recovery. Specifically, the Agreement provided in relevant part as follows:

I understand that [medical] bills shall be paid [by AFL] on a "loan" basis only, subject to the recovery rights of [AFL] and I agree to promptly repay [AFL] if and when I . . . receive payment(s) from or on behalf of [a] responsible third party.

I hereby authorize and direct my attorney to notify [AFL] of any claim, action or lawsuit filed on my behalf . . . as a result of the accident. I or my attorney, will notify [AFL] immediately upon receiving any settlement or payment resulting from such a claim[.] I hereby further give an irrevocable lien on any such claim, action or lawsuit to [AFL] against the proceeds of any settlement, judgement [sic] or verdict which may be paid to me . . . as the result of injuries or illness for which I . . . have been treated by reason of the accident. . . .

I agree that I will not rescind this Agreement, and that any attempted rescission will not be honored by my attorney. I hereby instruct that, in the event another attorney is substituted in this matter, the new attorney shall honor this lien. In the event of any litigation concerning the enforcement or interpretation of this lien, the prevailing party shall be entitled to an award of its attorney's fees and cost [sic].

I acknowledge that I have carefully read and fully understand all of the provisions of this Subrogation Agreement and the effect of the lien on my entitlement to the proceeds of any payment from a third party.

Bosque admitted that AFL then paid $60,948.83 in medical expenses on his behalf. Bosque also admitted that on June 6, 2002, he obtained a $106,000.00 judgment, after a jury trial, against a third party for his injuries in the accident. Following entry of judgment, Bosque entered into a confidential, "general damages only" settlement with the third party. While the amount of the settlement is not revealed in the record before us, Bosque admitted that the amount exceeded the amount paid by AFL on his behalf in medical expenses. Bosque denied actually receiving any settlement proceeds himself, however, claiming that the proceeds were applied to attorney's fees and costs incurred in pursuing the third-party tort case. Ultimately, Bosque refused to reimburse AFL for any of the money paid on his behalf by AFL.

B. Procedural History

On February 5, 2003, AFL filed a three-count complaint in the first circuit court against Bosque alleging breach of contract, unjust enrichment, and unlawful rescission, and seeking $60,948.83 in damages plus attorney's fees and costs. Specifically, AFL alleged that "Bosque's repeated and unequivocal refusal to comply with the terms of the Subrogation Agreement and reimburse [AFL] the full amount of $60,948.83 is a breach of the Subrogation Agreement." On April 22, 2003, Bosque filed a motion to dismiss, arguing that ERISA preempted AFL's state-law claims for reimbursement.

On June 19, 2003, AFL filed a motion for summary judgment, arguing that there were no genuine issues of material fact because Bosque admitted to both signing the Agreement and obtaining a third-party recovery. In addition to arguing ERISA preemption, Bosque opposed the summary judgment motion on the grounds that: (1) AFL was collaterally and judicially estopped to deny preemption on the basis of adverse circuit court rulings and inconsistent positions taken in other cases; and (2) even if AFL's claim were not preempted, Hawai`i Revised Statutes (HRS) § 663-10 (Supp.2002) limits lienholder and subrogee recovery of tort proceeds to a share of special damages, allows a deduction for reasonable fees and costs, and requires that the lienholder timely intervene in the tort action.

On July 9, 2003, both Bosque's motion to dismiss and AFL's motion for summary judgment came on for hearing. On August 6, 2003, the circuit court entered a written order granting Bosque's motion to dismiss, which stated in relevant part as follows:

Assuming the allegations of [AFL's] complaint to be true, Au v. Au, 63 Haw. 210, 214, 626 P.2d 173, 177 (1981), the Court finds that: [AFL] is an employee benefit plan organized under federal laws as an employee welfare benefit plan within the meaning of ERISA, 29 U.S.C. §§ 1002(1); Defendant Bosque is a beneficiary of the plan who was provided medical benefits under the [AFL] plan to pay for injuries suffered in an automobile accident on or about October 25, 1996; [AFL] in this action seeks reimbursement of those benefits paid to [Bosque].

The United States Supreme Court has held that actions by ERISA plan trustees seeking reimbursement from plan beneficiaries for benefits received are barred by the ERISA statute. Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002); Westaff(USA) Inc. v. Arce, 298 F.3d 1164 (9th Cir.2002).[AFL] in this action has thus failed to state a claim upon which relief can be granted, Blair v. Ing, 95 Hawai`i 247[,] 21 P.3d 452 (2001); [Hawai`i Rules of Civil Procedure (HRCP) Rule] 12(b)(6).

On September 15, 2003, the circuit court entered an order declaring AFL's motion for summary judgment moot inasmuch as Bosque's motion to dismiss had already been granted.

On February 4, 2004, AFL filed a motion for reconsideration of the circuit court's August 6, 2003 and September 15, 2003 orders based on: (1) subsequently entered state circuit court rulings in other cases on the same ERISA-preemption issue; and (2) a new Ninth Circuit Court of Appeals opinion directly addressing the issue, Providence Health Plan v. McDowell [hereinafter, Providence], 361 F.3d 1243, reh'g en banc denied, 385 F.3d 1168 (9th Cir.2004), cert. denied, 544 U.S. 961, 125 S.Ct. 1726 (2005) and 544 U.S. 961, 125 S.Ct. 1735 (2005). After a March 31, 2004 hearing, the motion was denied pursuant to a written order entered on May 6, 2004.

On June 1, 2004, the circuit court entered final judgment in favor of Bosque dismissing the complaint. On June 18, 2004, AFL filed a timely notice of appeal in this court.

II. STANDARD OF REVIEW

A trial court's ruling on a motion to dismiss is reviewed de novo. Bremner v. City & County of Honolulu, 96 Hawai`i 134, 138, 28 P.3d 350, 354 (App.2001). The court must accept plaintiff's allegations as true and view them in the light most favorable to the plaintiff; dismissal is proper only if it appears beyond doubt that the plaintiff "can prove no set of facts in support of his or her claim that would entitle him or her to relief." Dunlea v. Dappen, 83 Hawai`i 28, 32, 924 P.2d 196, 200 (1996), overruled on other grounds by Hac v. Univ. of Hawai`i, 102 Hawai`i 92, 105-06, 73 P.3d 46, 59-60 (2003) (citations omitted).

III. DISCUSSION

The principal issue in the instant suit — i.e., the ability of an ERISA plan to enforce reimbursement agreements such as the Agreement here — has been the focus of frequent litigation in federal and state courts in...