Cagle v. Ford
| Decision Date | 22 April 1999 |
| Docket Number | No. 7:98-CV-70-F(1).,7:98-CV-70-F(1). |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | Doug CAGLE, Adrian A. deVogel, Stuart Appelbaum, Don Hopkins, Henry Jenkins, and Lenore Miller, as Trustees and Fiduciaries of the Retail, Wholesale and Department Store International Union and Industry Health and Benefit Fund, Plaintiffs, v. Lannie D. FORD, William W. Phipps and Soles, Phipps, Ray, Prince & Williford, Attorneys at Law, Defendants. |
Martha A. Geer, Patterson, Harkavy & Lawrence, Raleigh, NC, Lisa Grafstein, Raleigh, NC, for plaintiffs.
Clay A. Collier, Crossley, McIntosh, Prior & Collier, Wilmington, NC, for defendants.
This matter is before the court on the cross-motions for summary judgment filed by the Plaintiffs and the Defendants in this matter. The Plaintiffs have responded to the Defendants's motion for summary judgment. The Defendants did not respond to the Plaintiffs' motion. Both motions are ripe for disposition.
The Plaintiffs, Trustees of the Retail, Wholesale and Department Store International Union and Industry Health and Benefit Fund (hereinafter the "Trustees" and the "Fund," respectively) filed this action on April 27, 1998, seeking a declaratory judgment requiring the Defendants, a Fund participant and his attorneys, to pay money to the Fund pursuant to a subrogation policy in the Fund's Rules and Regulations (hereinafter "the Plan"). The Fund is an employee welfare benefit plan as defined in 29 U.S.C. § 1002(1) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461. The Fund, which is self-funded, provides health and welfare benefits to covered employees, retirees, and their dependents through contributions made by employers pursuant to a collective bargaining agreement. The Fund is operated pursuant to an Agreement and Declaration of Trust ("the Trust Agreement"). Three of the Trustees of the Fund are appointed by the participating Employers and three are appointed by the Union. The Fund is self-administered by an Administrator, Mr. Michael Tamucci, appointed by the Trustees. The Defendant, Lannie D. Ford, is an employee and "participant" in the Fund as defined by subsection 3(7) of 29 U.S.C. § 1002. The Defendants William W. Phipps and the law firm of Soles, Phipps, Ray, Prince & Williford, are Ford's attorneys.
As an initial matter, the court notes the settled standard and shifting burdens governing the disposition of a motion for summary judgment. See Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.), cert. denied, 513 U.S. 813, 115 S.Ct. 67, 130 L.Ed.2d 24 (1994). Summary judgment is appropriate when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The party seeking summary judgment bears the burden initially of coming forward and demonstrating the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met its burden, the non-moving party then must come forward and demonstrate that such a fact issue does indeed exist. See Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Summary judgment is appropriate against a party who fails to make a showing sufficient to establish any one of the essential elements of the party's claim on which he will bear the burden of proof at trial. See Celotex, 477 U.S. at 322-23, 106 S.Ct. 2548. In this case, because the court perceives that no genuine issues of material fact exist that remain to be tried, the court will enter judgment as a matter of law.
In reviewing a decision by the trustees or administrators of an ERISA plan, a court first must determine what standard of review is appropriate. The ERISA statute is silent on the subject. In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), the Supreme Court held that decisions of plan administrators and trustees are "to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Id. at 115, 109 S.Ct. 948. If the plan gives the administrator or trustee such discretionary authority, then a district court must review a decision only for abuse of discretion. See Sheppard & Enoch Pratt Hosp. v. Travelers Ins. Co., 32 F.3d 120, 123-24 (4th Cir.1994) (quoting de Nobel v. Vitro Corp., 885 F.2d 1180, 1186 (4th Cir.1989)). Under the abuse of discretion standard, a decision must be upheld if it is "reasonable." Brogan v. Holland, 105 F.3d 158, 161 (4th Cir.1997). The decision is reasonable if it is the "result of a deliberate, principled reasoning process and if it is supported by substantial evidence." Id.
Recent Fourth Circuit opinions have articulated a third, "heightened" abuse of discretion standard applicable if a plan administrator or fiduciary acts under a conflict of interest when making a plan decision. Generally, a conflict of interest arises when "an administrator['s] decision ... impacts its own financial interests." Bernstein v. CapitalCare, Inc., 70 F.3d 783, 787 (4th Cir.1995). If a plan administrator with discretionary powers acts under a conflict of interest, "that conflict must be weighed as a `facto[r] in determining whether there is an abuse of discretion.'" Bruch, 489 U.S. at 115, 109 S.Ct. 948 (citation omitted). The Fourth Circuit has explained that the standard of review in a conflict case is a "less deferential" one than the abuse of discretion standard, Jenkins v. Montgomery Industries, Inc., 77 F.3d 740, 742 (4th Cir.1996). That is, "the fiduciary decision will be entitled to some deference, but this deference will be lessened to the degree necessary to neutralize any untoward influence resulting from the conflict." Doe v. Group Hospitalization & Medical Services, 3 F.3d 80, 87 (4th Cir. 1993); see also Ellis v. Metropolitan Life Ins. Co., 126 F.3d 228, 233 (4th Cir.1997) ().
In this case, the Trust Agreement grants the Trustees discretionary authority "`to determine eligibility requirements and to adopt Rules and Regulations setting forth same which shall be binding on the Employees, their families and dependents.'" Plaintiff's Memorandum, at 3 (). Thus, the Trustees's interpretation of the Plan's subrogation provision is entitled to some deference. However, because certain of the Trustees serve as both employers and fiduciaries retaining a financial interest in reducing payments under the Plan, the Trustees's decisions are judicially reviewed under a "heightened" or less deferential abuse of discretion standard. See Jenkins, 77 F.3d at 742.
On May 6, 1995, the Defendant Ford sustained serious injuries when the motorcycle he was driving was hit by a car driven by Johnny Mack Strickland. Ford subsequently received medical treatment for his injuries. On May 12, 1995, Ford contracted with the Defendant Phipps and his law firm to represent him for the purposes of making a claim against Strickland for his personal injuries and medical expenses. Ford, as a beneficiary of the Fund, made application for benefits, specifically the payment of his medical bills and sick pay benefits.
Article VII of the Plan, labeled "Subrogation," effective at the time of Ford's accident, states in relevant part:
If an Employee or one of his Dependents ... should receive benefits from the Plan for Injuries caused by someone else (such as an automobile accident), the Plan, through subrogation, has the right to seek repayment from the other party or his insurance company, or in the event an Employee or his Dependent recovers the amount of medical expense paid by the Plan by suit, settlement or otherwise from any third person or his insurer, the Plan has the right to be reimbursed through Subrogation.
Plaintiff's Memorandum, at Exhibit B to Tamucci Affidavit, at 44.
On August 22, 1995, Ford received correspondence from the Fund stating the following:
... the Board of Trustees has adopted a policy requiring a third person who has caused you to incur medical expense to reimburse the Benefit Fun for the medical costs which it paid on your behalf.
The Benefit Fund is not interested in depriving you of any rights you may have against such a third party and it is prepared to cooperate with you and any attorney you may retain in enforcing your claim.
However, it is necessary to carry out the rules of your Plan of Benefits, and we request that you execute and return the enclosed Subrogation Agreement and Accident Report in the envelope provided for your convenience. Upon receipt of the executed Subrogation Agreement and Accident Report, the Fund will process your claim for payment.
Obviously, if it should develop that you have no claim against a third person, or that the claim cannot be enforced against the third party, for any reason, no effort will be made to seek reimbursement from you.
Plaintiff's Memorandum, at Exhibit C to Tamucci Affidavit. This letter from the Fund was accompanied by a questionnaire that requested information concerning, among other things, whether Ford had retained an attorney. The letter also was accompanied by a "Subrogation Agreement" (hereinafter "the Agreement"). The Agreement stated:
I(we) understand that if payments are made under the Plan for any treatment or services...
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