Mcintosh v. Pacific Holding Co.
| Citation | 928 F. Supp. 1464 |
| Decision Date | 18 June 1996 |
| Docket Number | No. 4:CV95-3123.,4:CV95-3123. |
| Parties | Jean A. McINTOSH, etc., et al., Plaintiffs, v. PACIFIC HOLDING COMPANY, et al., Defendants. |
| Court | U.S. District Court — District of Nebraska |
Tim Engler, Gregory D. Barton, Harding, Schultz & Downs, Lincoln, NE, for Plaintiffs.
Shawn D. Renner, Cline, Williams, Wright, Johnson & Oldfather, Lincoln, NE, for Defendants.
Based upon stipulated facts, the parties have filed cross-motions for summary judgment. This case requires me to determine the applicability of the so-called "common fund" attorney fee doctrine to a health benefits plan governed by the Employee Retirement Income Security Act (ERISA). See 29 U.S.C. § 1001, et seq.
Specifically, Plaintiffs (a plan participant and her lawyers) ask me to determine whether a health benefits plan governed by ERISA and the employer which created the plan are liable for an attorney fee allegedly earned when the plan participant and her lawyers successfully prosecuted a claim against third-parties but also vigorously, albeit unsuccessfully, opposed the plan's claim that it was entitled to the proceeds.
All parties agree that ERISA provides no rule of decision on the questions presented by this case.
I find and conclude that the motion for summary judgment should be granted in favor of the defendants because a "party may not recover and try to monopolize a fund, but then, failing in the attempt, declare it a `common fund' and obtain his expenses from those whose rightful share of the fund he sought to appropriate." United States v. Tobias, 935 F.2d 666, 668 (4th Cir.1991).
From the stipulation of the parties (filing 26, Ex. 8)1 the undisputed facts which are material to resolution of the motions for summary judgment are these:
1. Jean A. McIntosh is a resident of Lincoln, Lancaster County, Nebraska. Jean A. McIntosh was at all times relevant to this suit the duly appointed conservator of her daughter Kristin K. McIntosh, who at all times relevant to this suit was a protected minor person.
2. Harding and Ogborn (H & O) is a law firm with its principal place of business in Lincoln, Lancaster County, Nebraska, and is successor in interest to the law firm of Nelson & Harding, P.C.
3. Pacific Holding Company (PHC) is the Plan Administrator of the Pacific Holding Company Employee Welfare Benefit Plan (the Plan). PHC is a sole proprietorship with its principal place of business in Los Angeles, California. The Plan is a qualified plan under ERISA. The Plan is self-funded; it is not insured with respect to health benefits. Attached to the stipulation as Exhibit "A" is a full, complete, and accurate copy of the Plan.
4. Jean A. McIntosh is and was at all times relevant to this suit an employee of The Cornhusker Hotel, located in Lincoln, Lancaster County, Nebraska. The Cornhusker Hotel is owned by PHC. As an employee of The Cornhusker Hotel, Jean A. McIntosh was and is a beneficiary and "covered person" of the Plan.
5. Kristin K. McIntosh is a beneficiary and a "covered person" of the Plan because she is and was a "dependent" within the meaning of the Plan's definition of that term, and she has satisfied the "dependent eligibility" requirements of the Plan.
6. On approximately July 31, 1988, Kristin K. McIntosh was a passenger in a vehicle driven by Andrea C. Stephens, and owned by Robert L. Stephens. At the intersection of 11th and D Streets, Lincoln, Nebraska, the vehicle was involved in a two-car accident with a vehicle owned and driven by Leonard Hawkins. As a direct result of the accident, Kristin K. McIntosh suffered severe and permanent physical injuries. Kristin K. McIntosh suffered pain from the injury and suffered loss of enjoyment of life. She has continued to incur pain and suffering and substantial loss of income and related damages, and such losses will likely continue for the remainder of her natural life as a result of her permanent injuries.
7. As a result of the serious, permanent injuries to Kristin K. McIntosh, Jean A. McIntosh incurred medical and related expenses in excess of $500,000. The vast majority of such medical expenses were paid by the Plan pursuant to its terms, and to date the Plan has paid in excess of $500,000 for medical and related expenses incurred by or on behalf of Kristin K. McIntosh.
8. Following the above-described collision, Jean A. McIntosh retained Nelson & Harding, P.C., to represent her, individually, and on behalf of her daughter Kristin in an action against Leonard Hawkins. Nelson & Harding agreed to represent Jean A. McIntosh on a contingent-fee basis. Attached to the stipulation as Exhibit "B" is a full, complete, and accurate copy of the contingent-fee agreement between Jean A. McIntosh and Nelson & Harding.
9. Nelson & Harding conducted an investigation of the facts preparatory to legal action against Leonard Hawkins and other potentially liable parties. Such investigation resulted in the development of facts supporting the imposition of liability upon Leonard Hawkins because the above-described accident was caused by the negligence of Leonard Hawkins, and of facts establishing Jean A. McIntosh and Kristin K. McIntosh had sustained special damages in excess of $430,000.
10. At the time of the accident of July 31, 1988, the vehicle Hawkins was driving was insured to a maximum of $100,000 under a liability insurance policy issued by the Nebraska Division of the State Farm Automobile Insurance Company of Bloomington, Illinois, policy # 2113 456-27A, which policy was in full force and effect on July 31, 1988.
11. Robert Stephens, the owner of the vehicle in which Kristin K. McIntosh was a passenger at the time of the accident, was insured under an insurance policy issued by Allied Mutual Insurance Company of Des Moines, Iowa, policy # AAP XXXXXXXXXX-X, which policy was in full force and effect on July 31, 1988. The Allied policy provided underinsured motorist coverage in a maximum amount of $250,500, of which only $150,500 was available due to the subrogation provision contained in the Allied policy.
12. Following the accident of July 31, 1988, Jean A. McIntosh filed claims with the Plan for medical and related expenses incurred for the treatment of Kristin K. McIntosh's personal injuries. The Plan initially made payments for these medical and related expenses. On September 7, 1988, Penn General Services, acting as a third-party claims supervisor on behalf of the Plan, sent to Jean McIntosh a standard form letter which required McIntosh to acknowledge by her signature the Plan's right of subrogation and reimbursement from payments she may receive from responsible third parties (referred to hereafter as "subrogation letter"). Jean McIntosh altered the language of the subrogation letter by deleting parts thereof and adding additional language, signed the altered subrogation letter, and returned it to Penn General Services. A true and correct copy of the subrogation letter, including Jean McIntosh's alterations, is attached to the stipulation as Exhibit "C". A true and correct copy of the standard form subrogation letter, without the handwriting addressing the letter to Jean McIntosh and without McIntosh's alterations, is attached to the stipulation as Exhibit "D".
13. On October 17, 1988, Penn General Services wrote to Jean McIntosh to advise her that the alterations she made to the subrogation letter were unacceptable to PHC. The October 17, 1988 letter enclosed another form subrogation letter and asked Jean McIntosh to sign and date the form without altering it. The October 17, 1988 letter from Penn General Services to Jean McIntosh informed McIntosh that charges incurred for Kristin were being held pending receipt of the signed, unaltered subrogation letter. A true and correct copy of the October 17, 1988 letter from Penn General Services to McIntosh is attached hereto as Exhibit "E".
14. Attorney Tim Engler responded to Exhibit "E" by a letter to Penn General Services dated November 3, 1988. A true and correct copy of Engler's November 3, 1988 letter to Penn General Services is attached to the stipulation as Exhibit "F". Donald Spuehler, a Los Angeles attorney representing PHC and the Plan, responded to Engler's November 3, 1988 letter in a letter to Engler dated November 9, 1988. A true and correct copy of Spuehler's November 9, 1988 letter to Engler is attached to the stipulation as Exhibit "G".
15. On November 14, 1988 Engler wrote to Penn General Services. Engler's November 14, 1988 letter described the third-party insurance available to compensate for Kristin McIntosh's injuries and to satisfy the Plan's subrogation and reimbursement interest. The letter requested that the Plan consider "waiving" its subrogation interest. A true and correct copy of Engler's November 14, 1988 letter to Penn General Services is attached to the stipulation as Exhibit "H".
16. On December 13, 1988, Engler wrote a ten-page letter to Spuehler which set out in detail McIntosh's position regarding the Plan's subrogation and reimbursement provision. A true and correct copy of Engler's December 13, 1988 letter to Spuehler is attached to the stipulation as Exhibit "I".
17. Following receipt of Engler's December 13, 1988 letter to him, Spuehler advised PHC that it appeared likely that litigation would result from the different views of the Plan's subrogation and reimbursement rights held by PHC and McIntosh, and suggested that PHC retain Nebraska counsel experienced in ERISA litigation. On December 20, 1988, PHC retained the firm of Cline, Williams, Wright, Johnson & Oldfather ("CWWJ & O") to represent its interest in connection with McIntosh's medical claims against the Plan and the Plan's subrogation or reimbursement rights relating to any recovery McIntosh might make against third parties.
18. On December 22, 1988, Engler wrote to Kathleen Jaudzemis, then an attorney affiliated with CWWJ & O, to further...
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