Montrose Med. Group Sav. Plan v. Bulger
Decision Date | 30 November 2000 |
Docket Number | THIRD-PARTY,No. 00-3430,00-3430 |
Citation | 243 F.3d 773 |
Parties | (3rd Cir. 2001) MONTROSE MEDICAL GROUP PARTICIPATING SAVINGS PLAN; MONTROSE GENERAL HOSPITAL, INC., APPELLANTS v. RICHARD A. BULGER; WALTER GARVEY; MUTUAL LIFE INSURANCE COMPANY OF NEW YORK v. MUTUAL LIFE INSURANCE COMPANY OF NEW YORK; RICHARD A. BULGER,PLAINTIFFS v. EUDORA BENNETT; MONTROSE MEDICAL ARTS PHARMACY, INC.; MEDICAL ARTS NURSING CENTER, INC.; MEDICAL ARTS CLINIC,DEFENDANTS Argued: |
Court | U.S. Court of Appeals — Third Circuit |
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v.
RICHARD A. BULGER; WALTER GARVEY; MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
v.
MUTUAL LIFE INSURANCE COMPANY OF NEW YORK; RICHARD A. BULGER, THIRD-PARTY PLAINTIFFS
v.
EUDORA BENNETT; MONTROSE MEDICAL ARTS PHARMACY, INC.; MEDICAL ARTS NURSING CENTER, INC.; MEDICAL ARTS CLINIC, THIRD-PARTY DEFENDANTS
Filed March 22, 2001
As amended May 16, 2001.
On Appeal From the United States District Court For the Middle District of Pennsylvania District Judge: Honorable Thomas I. Vanaskie, Chief Judge (D.C. Civ. No. 94-cv-02141)
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William W. Warren, Jr., Esquire (argued) Saul, Ewing, Remick & Saul, Llp Penn National Insurance Tower 2 North Second Street, 7th Floor Harrisburg, PA 17101, Cathleen M. Devlin, Esquire Saul, Ewing, Remick & Saul, Llp Centre Square West 1500 Market Street, 38th Floor Philadelphia, PA 19102, Counsel for Appellants
E. Thomas Henefer, Esquire (argued) Stevens & Lee 111 North Sixth Street P.O. Box 679 Reading, PA 19603, Charles J. Bloom, Esquire Stevens & Lee 1275 Drummers Lane P.O. Box 236, Suite 202 Wayne, PA 19087, Counsel for Appellee/Third-Party Plaintiff Mutual Life Insurance Co. of New York
Daniel Morgan, Esquire O'Malley & Harris 345 Wyoming Avenue Scranton, PA 18503, Counsel for Appellee/Third Party Plaintiff Richard A. Bulger
Daniel T. Brier, Esquire Myers, Brier & Kelly 425 Spruce Street, Suite 200 Scranton, PA 18503, Counsel for Appellees/Third Party Defendants Eudora Bennett; Montrose Medical Arts Pharmacy, Inc.; Medical Arts Nursing Center, Inc.; and Medical Arts Clinic
Before: Becker, Chief Judge, and MAGILL,* Circuit Judge.
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Becker, Chief Judge.
This appeal, set in the context of an ERISA breach of fiduciary duty action, largely concerns the doctrine of judicial estoppel. The District Court applied the doctrine to bar Plaintiffs Montrose General Hospital, Inc. (Hospital) and Montrose Medical Group Participating Savings Plan (Plan) from asserting that the Plan is covered by ERISA on account of representations they had made in a related prior litigation. Because this suit is based on the premise that ERISA governs the Plan, the District Court's ruling rendered the Hospital and the Plan unable to state a prima facie case. The court therefore entered summary judgment in favor of Defendants Mutual Life Insurance Company of New York (MONY), whose insurance policies funded the Plan, and Richard Bulger, an outside consultant affiliated with MONY who had brought the parties together.
Judicial estoppel may be imposed only if: (1) the party to be estopped is asserting a position that is irreconcilably inconsistent with one he or she asserted in a prior proceeding; (2) the party changed his or her position in bad faith, i.e., in a culpable manner threatening to the court's authority
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or integrity; and (3) the use of judicial estoppel is tailored to address the affront to the court's authority or integrity. Though we agree that the inconsistency prong is satisfied in this case, the other two are not. Guided by Cleveland v. Policy Management Systems Corp., 526 U.S. 795 (1999), we hold that a party has not displayed bad faith for judicial estoppel purposes if the initial claim was never accepted or adopted by a court or agency. Because the earlier statements in this case were never accepted or adopted, judicial estoppel was inappropriate.
We hold in the alternative that application of judicial estoppel was not tailored to address any harm occasioned by the change of positions. First, the only "harm" identified by the District Court was inflicted upon third parties--fourteen plan participants who had sued the Hospital, the Plan, MONY, and Bulger in the prior litigation. Judicial estoppel's sole valid use, however, is to remedy an affront to the court's integrity. Second, judicial estoppel is an inappropriate sanction here because its effects would be borne not by any wrongdoers, but by innocent third parties.
Having determined that the District Court was wrong to invoke judicial estoppel, we turn to MONY's and Bulger's alternate grounds for affirmance. We ultimately decline to rule on most of them, concluding instead that it would be better to let the District Court pass on them in the first instance. We do, however, reach and reject MONY's and Bulger's assertion that they are entitled to summary judgment on statute of limitations grounds.
I.
In the late 1970s, the Hospital decided to create a retirement plan. It informed its accountant, Defendant Walter Garvey, of its intentions.1 Garvey, in turn, contacted Bulger, an outside consultant who was affiliated with MONY. Bulger proposed a plan, which the Hospital ultimately adopted. The Plan was plagued by financial troubles from the beginning, and, acting on advice from Bulger, the Hospital altered its funding mechanism on several occasions. These efforts were ultimately unsuccessful, and the Hospital ceased paying premiums in connection with the Plan in either late 1991 or early 1992.
Soon thereafter, fourteen of the sixty-seven plan participants sued the Hospital, the Plan, MONY, Bulger, and Garvey. We will refer to this suit as either the "Hickok action" or the "Hickok litigation," after its first named plaintiff, June Hickok. The Hickok plaintiffs alleged that the Plan was governed by ERISA, and charged the defendants with numerous violations of their purported fiduciary duties under that statute. In their Answer, the Hospital and the Plan raised eight defenses, two of which are pertinent here. Paragraph 7 "specifically denied that the plan [was] an employee pension benefit plan within the meaning of section 3 of ERISA," and Paragraph 11 averred that "[t]he claims of the Plaintiffs [were] barred by the statute of limitations." The Hospital and the Plan repeated these claims in their Amended Answer and Pre-Trial Memorandum.
The Hickok action settled for $600,000 in May 1994. MONY and Bulger assumed responsibility for $500,000, and the Hospital and the Plan were required to pay the remaining $100,000. The settlement was distributed among the fourteen plan participants who were plaintiffs in Hickok; nothing was paid to the fifty-three who were not.
Following closely on the heels of the Hickok settlement, the Hospital and the Plan brought this action against MONY, Bulger, and Garvey, seeking to press
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claims on behalf of the remaining fifty-three plan participants. The claims in this case are essentially the same as those against which the Hospital and the Plan were co-defendants in Hickok.2 The Complaint avers that "[t]he plaintiff Plan is an employee benefit plan within the meaning of S 3(2)(A) of ERISA," and that the Hospital is bringing this suit in its capacity as fiduciary of the Plan. The Hospital and the Plan have not countered the charge that if the claims in Hickok were time-barred, then those in this case are as well.
Discovery ensued and both MONY and Bulger eventually moved for summary judgment. In support of their motions, MONY and Bulger averred that: (1) judicial estoppel should bar the claims against them; (2) the claims were untimely; (3) they were not ERISA fiduciaries; (4) the Hospital and the Plan were not entitled to equitable relief; and (5) the Hospital's and the Plan's "prohibited transaction" claims were without merit. Ruling on the motions, the District Court invoked judicial estoppel to bar the Hospital and the Plan from repudiating their previously expressed position that ERISA did not apply to the Plan. Because the claims pressed in this suit rest on an assertion that ERISA governs the Plan, the District Court's holding rendered the Hospital and the Plan unable to state a prima facie case, and the court entered summary judgment on behalf of MONY and Bulger. With regard to the other proffered bases for summary judgment, the court remarked that "[a]n examination of the record reveals... material issues of fact that would militate against granting summary judgment. In light of the application of judicial estoppel..., these other issues, however, need not be addressed." This appeal followed.
II.
Federal courts possess inherent equitable authority to sanction malfeasance. One such sanction is judicial estoppel. See Klein v. Stahl GMBH & Co. Maschinefabrik, 185 F.3d 98, 109 (3d Cir. 1999). For reasons explained in the margin, judicial estoppel is distinct from both equitable and collateral estoppel.3 When properly invoked, judicial estoppel bars a litigant from asserting a position that is inconsistent with one he or she previously took before a court or agency. Summary judgment is appropriate when operation of judicial estoppel renders a litigant unable to state a prima facie case.
Three requirements must be met before a district court may properly apply judicial estoppel. First, the party to be estopped must have taken two positions that are irreconcilably inconsistent. See Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 361 (3d Cir. 1996). Second, judicial estoppel is unwarranted unless the party changed his or her position "in bad faith--i.e., with intent to play fast and loose with the court." Id. Finally, a district court may not employ judicial estoppel unless it is "tailored to
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address the harm identified" and no lesser sanction would adequately remedy the damage done by the litigant's misconduct. Klein, 185 F.3d at 108 (quotation marks and citation omitted).4
Though a district court's ultimate decision to invoke the doctrine is reviewed only for abuse of discretion, see Anjelino v. New York Times Co., 200 F.3d 73, 100 (3d Cir. 2000), a court "abuses its discretion when its ruling is founded on an error of law or a...
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