Longaberger Co. v. Kolt
| Decision Date | 16 November 2009 |
| Docket Number | No. 08-4432.,08-4432. |
| Citation | 586 F.3d 459 |
| Parties | The LONGABERGER COMPANY, as Administrator of the Longaberger Family of Companies Group Medical Plan, Plaintiff-Appellee, v. Jeffrey A. KOLT, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
L.P.A., Cleveland, Ohio, for Appellee.
ON BRIEF:
George H. Carr, Timothy John Fitzgerald, Gallagher Sharp, Cleveland, Ohio, for Appellant. Daran Paul Kiefer, Kreiner & Peters Co. L.P.A., Cleveland, Ohio, for Appellee.
Before: BATCHELDER, Chief Judge; GRIFFIN, Circuit Judge; TARNOW, District Judge.*
Defendant Jeffrey A. Kolt appeals the district court's denial of his motion for summary judgment and its grant of summary judgment for plaintiff The Longaberger Company ("Longaberger"), an Employee Retirement Income Security Act ("ERISA") governed, self-funded employee welfare benefit plan, which sought to enforce the terms of the Plan's reimbursement provisions against attorney Kolt and his client Samuel Billiter.1 Kolt argues that Longaberger's claims for monetary relief were barred by ERISA and principles of judicial estoppel, and were premised on an invalid lien which was subordinate to Kolt's lien. We disagree and affirm. In doing so, we hold that the district court correctly granted Longaberger equitable restitution as authorized by § 502(a)(3) of ERISA.
On June 15, 2003, Samuel Billiter was involved in an automobile accident in which he was seriously injured. Longaberger's self-funded plan covered Samuel Billiter (as the dependent child of Longaberger employee Theresa Billiter), paying his medical bills in the sum of $113,668.31.
Kolt, an Ohio attorney, represented Samuel and Theresa Billiter in civil tort actions against the negligent drivers involved in the June 15, 2003, accident. In July 2004, Kolt reached settlements with the insurance companies of the two negligent drivers, receiving $35,000 from one carrier and $100,000 from the other carrier. Kolt deposited the $135,000 from the two separate settlements into his Interest on Lawyer's Trust Account ("IOLTA"). He also sent an August 4, 2004, letter to Longaberger notifying it of the settlements, and stating: "Mr. Billiter would like to try to amicabl[y] satisfy his subrogation obligation to you...."2
On December 8 and 9, 2004, Kolt disbursed the majority of the settlement funds from his IOLTA. Kolt kept $45,000 for himself as an attorney fee, disbursed $1,750 to attorney Jerry Alan Goodwin as compensation for his representation of Samuel Billiter in potential criminal proceedings, disbursed $86,082.18 to Samuel Billiter, and disbursed $1,000 to attorney Elliot Barrat in consideration for his representation of Samuel Billiter in bankruptcy proceedings. Accordingly, only $1,000 remained in the IOLTA.
The Longaberger Company Health Plan is governed by ERISA and self-funded by Longaberger employees who contribute to the Plan through payroll deductions. At the time of the June 15, 2003, automobile accident, the Plan's provisions provided Longaberger with "RIGHTS OF REIMBURSEMENT AND SUBROGATION[.]" The Plan's subrogation and reimbursement terms provided:
The Plan does not cover:
(1) Expenses for which another party may be responsible as a result of liability for causing or contributing to the injury or illness of you or your Dependent(s); or
(2) Expenses to the extent they are covered under the terms of any automobile medical, automobile no fault, uninsured or underinsured motorist, workers' compensation, government insurance, other than Medicaid, or similar type of insurance or coverage when insurance coverage provides benefits on behalf of you or your Dependent(s).
If you or your Dependent(s) incur health care expenses as described in (1) and (2) above, the Plan shall automatically have a first priority lien upon the proceeds of any recovery by you or your Dependent(s) from such party to the extent of any benefits provided to you or your Dependent(s) by the Plan. You or your Dependent(s) or their representative shall execute such documents as may be required to secure the Plan's rights. The Plan has the right to recover from you or your Dependent(s) the lesser of:
• The amount actually paid by the Plan; or
• An amount actually you or your Dependent(s) received from the third party at the time that the third party's liability is determined and satisfied; whether by full or partial settlement, judgment, arbitration or otherwise.
When the Plan pays benefits to or on behalf of you or your Dependent(s), the Plan shall be subrogated, unless otherwise prohibited by law, to your and your Dependents' claims, causes of action or rights to recovery or rights against any person who might be liable or found legally liable by a court of competent jurisdiction for the injury that necessitated the hospitalization, medical or the surgical treatment for which Plan benefits were paid. Such subrogation rights shall extend only to the recovery by the Employer of the benefits it has paid for such hospitalization, treatment or other medical care.
The Plan shall have a first priority claim against any proceeds paid by or on behalf of a liable third party and shall be entitled to reimbursement or subrogation regardless of whether you or your Dependent(s) have been made whole. The Plan's rights shall not be subject to reduction under any common fund or similar claims or theories. However, the Employer or its authorized representative may agree to a reduction from amounts recovered to pay reasonable and necessary expenditures, including attorney's fees, incurred in obtaining the recovery of Plan benefits. This may occur when, in the judgment of Plan Administrator, it would be in the best interests of the Plan to agree to such terms. These rights of reimbursement and subrogation are reserved whether the liability of a third party arises in tort, contract or otherwise. Regardless of how proceeds are designated, the Plan's rights shall attach to any full or partial judgment, settlement or other recovery.
In the event that benefits are to be paid by the Plan for expenses resulting from an injury for which a third party is liable, you or your Dependent(s), as appropriate, shall execute a Subrogation/Right of Reimbursement Agreement in a form prescribed by the Plan. In addition, you and your Dependent(s) shall cooperate fully in the enforcement of the Plan's rights, and shall take all actions necessary to enable the Plan to secure such rights and in no way prejudice or diminish such rights without the Plan's written consent. You or your Dependent(s) shall inform the Plan of any settlement offers, and shall take no action in settlement or otherwise that would diminish the Plan's subrogation rights against the third party or diminish the Plan's reimbursement rights.
(Alterations in line spacing added.)
On February 4, 2005, Longaberger filed a complaint commencing suit against Kolt and Samuel Billiter alleging causes of action for constructive trust, equitable lien, and unjust enrichment.3 Longaberger also sought a temporary restraining order and preliminary injunction to prevent Kolt from disbursing, commingling, or transferring settlement funds that were in Kolt's IOLTA. The district court granted a "limited temporary restraining order" preventing Kolt and Samuel Billiter from disbursing any further funds and requiring the preservation of "the identifiable settlement funds paid on claims arising out of the June 15, 2003 automobile accident involving Samuel Billiter." Following a February 9, 2005, evidentiary hearing on Longaberger's motion for preliminary injunction, the district court also enjoined Kolt from dissipating the $1,000 he was still holding in his IOLTA.
On February 21, 2005, Longaberger amended its complaint to name Kolt as a defendant in his capacities as an individual and as a Trustee, and Theresa Billiter as a defendant. The amended complaint alleged claims against all named defendants for constructive trust, equitable lien, unjust enrichment, an accounting, equitable estoppel, and conversion, and against Kolt only for tortious interference with contract and breach of constructive trust. Thereafter, Kolt filed an April 4, 2005, motion to dismiss the amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that "an attorney retained by an ERISA plan beneficiary who receives settlement funds from a third party does not have any duty under ERISA to account to the ERISA plan for the proceeds received and cannot be held liable." The district court issued a June 29, 2006, decision in which it dismissed a number of Longaberger's claims, but allowed the ERISA claims for constructive trust, equitable lien, and unjust enrichment to proceed.
On November 6, 2006, Longaberger filed its second amended complaint, adding The Longaberger Family of Companies Group Health Plan as an additional plaintiff and dropping Theresa Billiter as a named defendant. In addition, Longaberger "clarified its position seeking `equitable lien by agreement' in light of the" Supreme Court's 2006 holding in Sereboff v. Mid Atl. Med. Servs., 547 U.S. 356, 126 S.Ct. 1869, 164 L.Ed.2d 612 (2006), which altered the controlling law in the present case.
In June 2007, the parties filed cross motions for summary judgment. On September 3, 2008, the district court granted Longaberger's motion for summary judgment and denied Kolt's summary judgment motion. Specifically, the district held that:
Longaberger automatically acquired a valid lien on the tort recovery fund when the funds became identifiable. In addition, Longaberger seeks equitable rather than legal restitution because the Plan specifies a particular amount and a particular fund from which restitution should be paid.
Accordingly, the district court ruled in favor of Longaberger...
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