Cognetta v. Bonavita

• Decision Date: 07 June 2018
• Docket Number: 17-CV-3065 (ARR) (RML)
• Citation: 330 F.Supp.3d 797
• Parties: Frank COGNETTA, George Orlando, Matthew Matassa, and Roy Kohn, in Their Capacity as Trustees for the Wine, Liquor & Distillery Workers Union Local 1- D Major Medical Plan, Plaintiffs, v. James BONAVITA, Nicole Bonavita, Joseph P. Napoli, and Napoli Shkolnik, PLLC, Defendants.
• Court: U.S. District Court — Eastern District of New York

330 F.Supp.3d 797

Frank COGNETTA, George Orlando, Matthew Matassa, and Roy Kohn, in Their Capacity as Trustees for the Wine, Liquor & Distillery Workers Union Local 1- D Major Medical Plan, Plaintiffs,

v.James BONAVITA, Nicole Bonavita, Joseph P. Napoli, and Napoli Shkolnik, PLLC, Defendants.

17-CV-3065 (ARR) (RML)

United States District Court, E.D. New York.

Signed June 7, 2018

J. Warren Mangan, O'Connor & Mangan, P.C., New Rochelle, NY, for Plaintiffs.

Joseph P. Napoli, Napoli Shkolnik, LLP, New York, NY, for Defendants.

OPINION & ORDER

ROSS, United States District Judge:

Plaintiffs Frank Cognetta, George Orlando, Matthew Matassa, and Roy Kohn are trustees of the Wine, Liquor & Distillery Workers Union Local 1-D Major Medical Plan (the "Plan" or the "Fund"), an employee benefit plan, as defined in Section 3 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1002(3). The Plan has paid approximately $110,000 to cover medical expenses incurred by defendants James and Nicole Bonavita as a result of a car accident. Pursuant to ERISA § 503(a)(3), 29 U.S.C. § 1132(a)(3), plaintiffs seek a declaratory judgment that the Plan has an equitable lien or constructive trust in the amount of benefits paid against any award or settlement that defendants might recover in a negligence action against third parties currently pending in the Supreme Court of the State of New York, New York County. Defendants contend that New York General Obligation Law § 5-335 ("Section 5-335"), a statute that precludes insurers from exercising subrogation or reimbursement rights on a claimant's tort recovery, prohibits the Plan from obtaining reimbursement from defendants' possible recovery in their personal injury lawsuit. Defendants, to whom the state court granted summary judgment on the issue of liability, also argue that plaintiffs' action is premature because defendants do not currently possess identifiable funds from which the Plan can recover. For the following reasons, I grant plaintiffs' motion for summary judgment on their declaratory judgment action.¹

BACKGROUND

Plaintiffs are trustees of the Plan. George Orlando Aff. ¶ 1, ECF No. 19 ("Orlando Aff."); Pls.' Mem. of Law in Supp. of Their Mot. for Declaratory J. 1, ECF No. 17 ("Pls.' Mem. of Law"). The Plan provides health benefits to employees and their dependents. Orlando Aff. ¶ 3. According to evidence plaintiffs adduce, the Plan is self-funded, which means that the Plan does not purchase insurance from an insurance company to satisfy its obligations to Plan participants. Id. ¶¶ 4–5. Rather, the benefits are "derived from contributions made by employers pursuant to the terms of their collective bargaining agreements," and all costs are "paid directly from the Plan's assets." Id.

Among its provisions, the Plan's Summary Plan Description (SPD), its operative document, contains a clause entitled, "Fund's Right to Subrogation, Assignment to Rights and Reimbursement." Compl. ¶ 13, ECF No. 1; Orlando Aff. ¶ 8. Under that clause, a Plan member agrees to reimburse the Plan for benefits paid if the member recovers on a claim in a liability action against a third party. Compl. ¶ 13; Orlando Aff. ¶ 8. The SPD states:

Where the Fund has or may provide benefits to you or your dependent(s) in connection with or arising from an accident or other occurrence for which some other party or parties may be responsible ("Claims"), the Fund has the right, under the Plan, to subrogation, assignment and reimbursement to all Claims, rights, causes of action, or other interests that you or your dependent(s) has/have, or which may accrue against any party or parties ... arising out of said accident or occurrence to the extent of any benefits paid by the Fund to you and/or your dependent(s) arising from said accident or occurrence....

The Fund shall have an equitable lien on any amount received from any Claims from some other party or parties, to the extent of any benefits paid by the Fund to you and/or your dependent(s) ..., and such amount received ... shall be held in constructive trust for the sole benefit of the Fund until paid to the Fund.

Compl. ¶ 13; Orlando Aff. ¶ 8. If a Plan member or a dependent seeks a benefit payment as a result of an accident, that person must execute a Subrogation, Assignment of Rights, and Reimbursement Agreement ("Agreement") before he or she will receive any benefits. Compl. ¶ 13; Orlando Aff. ¶ 8. The Agreement, which "affirm[s] the Fund's rights of assignment, reimbursement and subrogation," states:

I hereby subrogate, assign and transfer to the Plan all claims, rights, causes of action, or other interests ... that I may have or which may accrue against any party or parties (including my own insurer) arising out of the [a]ccident to the extent of the benefits paid by the Plan on my or my dependent(s) behalf in connection with the [a]ccident.

I agree to immediately reimburse the Plan, before all others, for the full amount of all benefits paid on my or my dependent(s) behalf by the Plan if there is a recovery of any amount in connection with the [a]ccident from any party or parties (including any insurance company), whether such recovery is full or partial and no matter how such recovery is characterized, why or by whom it is paid, or the type of expense for which it is paid.... I agree that, if less than the full amount paid by the Plan is received from any party or parties, the Plan shall be paid the full amount received. I understand that the Plan shall have a lien on any amount received, as a result of the [a]ccident, by me or my representatives (including my attorney), that is due to the Plan under this Agreement and any such amount shall be deemed to be held in trust either by me or by them, for the sole benefit of the Plan until paid either by me, or them, to the Plan.

Compl. ¶¶ 13, 21.

Defendant Nicole Bonavita is an active participant in the Plan. Orlando Aff. ¶ 6. Her husband, James Bonavita, was a "Covered Person" under the terms of the Plan when he was seriously injured in an automobile accident on September 12, 2013. Id. ¶ 7; Defs.' Mem. of Law in Opp'n to Pls.' Mot. for Declaratory J. 1, ECF No. 20 ("Defs.' Mem. of Law"). On December 8, 2015, the Bonavitas signed the Agreement. Orlando Aff. ¶ 10; Orlando Aff. Ex. 1, at 2–3. To date, the Plan has paid at least $110,000 in medical benefits on behalf of James Bonavita related to the injuries he sustained in the accident. Defs.' Mem. of Law 2; see Orlando Aff. ¶ 7.

On or about March 28, 2014, the Bonavitas filed an action in the Supreme Court of the State of New York, County of New York, alleging that the negligence of third parties caused the accident that resulted in James's injuries, his related medical expenses, and Nicole's loss of services. Defs.' Mem. of Law at 1; Orlando Aff. ¶ 9. On September 6, 2016, the Supreme Court of the State of New York granted the Bonavitas summary judgment on the issue of liability, leaving the issue of damages to be determined at trial. Orlando Aff. Ex. 2, at 1. Two of the three parties found liable, Quibble Cab Corp. and Mahmamoudou Siby, are insured by Fiduciary Insurance Company of America. Defs.' Mem. of Law 2. Fiduciary was placed into liquidation on July 25, 2017. Id. ; Joseph P. Napoli Decl. Ex. A, ECF No. 21 ("Napoli Decl."). The third, Gregory Andrews, is insured by GEICO. Defs.' Mem. of Law 2. As of the filing of this opinion, defendants have received no settlement offers in the state action and there has been no judgment regarding damages. Id. ; see Pls.' Mem. of Law 2.

On May 22, 2017, plaintiffs filed their complaint, requesting that the court "establish an equitable lien/constructive trust against the Defendants, joint and several, over that portion of the [state] Action Proceeds sufficient to reimburse the Plan for its Paid Benefits" in addition to interest, attorneys' fees, and costs.² Compl. ¶ 29. In their answer, defendants contend that plaintiffs' claim is barred by Section 5-335, which states that "no person entering into [a personal injury] settlement shall be subject to a subrogation claim or claim for reimbursement by an insurer and an insurer shall have no lien or right of subrogation or reimbursement against any such settling person ..., with respect to those ... expenses that have been ... paid or reimbursed by said insurer." Napoli Decl. Ex. B. ¶ 3; N.Y. Gen. Oblig. Law 5-335(a). On January 17, 2018, plaintiffs served on defendants their motion for a declaratory judgment and on February 13, 2018, the parties filed the fully briefed motion. See ECF Nos. 18–21.

LEGAL STANDARD

Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A "genuine dispute" exists for the purposes of summary judgment "where the evidence is such that a reasonable jury could decide in the non-movant's favor." Beyer v. Cty. of Nassau , 524 F.3d 160, 163 (2d Cir. 2008). In assessing whether summary judgment is proper, the court considers "the pleadings, depositions, answers to interrogatories and admissions on file, together with any other firsthand information including but not limited to affidavits." Nnebe v. Daus , 644 F.3d 147, 156 (2d Cir. 2011) (quoting In re Bennett Funding Grp., Inc. , 336 F.3d 94, 99 (2d Cir. 2003) ). To defeat the motion, the nonmoving party "must come forward with specific facts showing that there is a genuine issue for trial." LaBounty v. Coughlin , 137 F.3d 68, 73 (2d Cir. 1998). In reviewing the record before it, "the court is required to resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought." McLee v. Chrysler Corp. , 109 F.3d 130, 134 (2d Cir. 1997).

DISCUSSION

In light of what plaintiffs characterize as a "proximate expectation of a settlement or judgment" favorable to the Bonavitas in their state action, plaintiffs seek a declaratory judgment that the Plan...