Plan v. Vial
| Decision Date | 17 March 2011 |
| Docket Number | Case No. 2:09-CV-169 |
| Court | U.S. District Court — Western District of Michigan |
| Parties | REINHART COMPANIES EMPLOYEE BENEFIT PLAN and REYES HOLDINGS WELFARE BENEFIT PLAN, Plaintiffs, v. CORY VIAL and PAULA VIAL, individually and as co-conservators of CHANDLER VIAL, Defendants. |
HON. GORDON J. QUIST
Plaintiffs, Reinhart Companies Employee Benefit Plan and Reyes Holdings Welfare Benefit Plan (the "Plans"), have sued Defendants, Cory Vial and Paula Vial (the "Vials"), individually and as co-conservators of Chandler Vial, pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. 1001, et seq. The Plans seek reimbursement of benefits they paid for the medical care and treatment of the Vials' minor son, Chandler, through the imposition of a constructive trust and enforcement of equitable liens on funds from a settlement in a medical malpractice case the Vials filed for injuries Chandler allegedly sustained during his birth.
On December 2, 2009, the Court entered an Opinion and Order denying the Vials' motion to dismiss and for judgment on the pleadings. The Plans and the Vials have now filed cross motions for summary judgment. For the reasons set forth below, the Court will deny the Plans' motion and grant the Vials' motion in part and deny it in part.
Cory Vial was a participant and enrolled member of the Reinhart Plan through December 31, 2005, and a participant and enrolled member of the Reyes Plan after January 1, 2006. Chandler was born on January 1, 2004, and was a covered dependent under the Plans during these periods.1Complications arose during Chandler's birth, requiring extensive medical care and treatment. During the period of January 1, 2004, through December 5, 2005, the Reinhart Plan paid claims totaling $55,403.47 for Chandler's medical care and treatment. Between January 1, 2006 and July 1, 2007, the Reyes Plan paid claims totaling $31,947.89 for Chandler's medical care and treatment.
On or about September 5, 2006, the Vials, individually and as next friends for Chandler, sued the medical providers in the Marquette County Circuit Court alleging that they committed malpractice that resulted in serious injuries to Chandler during his birth. In particular, the Vials alleged that as a result of the providers' malpractice, Chandler "suffered serious injuries including, but not limited to, a massive subarachnoid hemorrhage and subdural hematoma, resulting in a seizure disorder and cerebral palsy." The providers disputed the allegations, alleging that Chandler's injuries occurred in utero as a result of a disorder from which Paula Vial suffered known as a "thrombophilia." In addition to other damages, the Vials sought to recover past medical expenses.
As a result of a mediation, the Vials and the providers reached a settlement pursuant to which the providers were to pay $400,000, allocated as follows: (1) $190,000 to the Vials' attorneys for fees and costs; (2) $60,000 to the Vials, as co-conservators for Chandler; and (3) $150,000 for thepurchase of an annuity for Chandler. Although the Vials were aware of the Plans' claims for reimbursement of the medical expenses they had paid, those expenses were not included in the settlement agreement. However, the agreement provided that the providers and their insurer would remain responsible for all medical liens asserted in the case. On May 18, 2009, the state court entered an order approving the settlement agreement and distribution of the settlement proceeds. Although defense counsel in the underlying case notified the Plans that the claim for past medical bills had not been resolved, the Plans declined to pursue their claims for medical expenses in the state court proceeding.
The Plans are self-funded, ERISA-qualified employee welfare benefit plans.2 (Farr Decl. ¶ 2; Clark Decl. ¶ 2.) Both Plans contain reimbursement provisions that give the Plans the right to reimbursement from enrollees or beneficiaries in certain circumstances for benefits paid by the Plans.3
The Plans filed the instant case on August 8, 2009, seeking equitable relief pursuant to their reimbursement provisions and § 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3), through the imposition of a constructive trust and enforcement of their equitable liens against the settlement proceeds. On December 2, 2009, the Court entered an Opinion and Order denying the Vials' motion to dismiss and for judgment on the pleadings. In particular, the Court held that: (1) it has subject matter jurisdiction over the Plans' claims for equitable relief under ERISA; (2) the Plans' claims are ripe; (3) the Plans' claims are not moot; (4) the Plans stated a claim for equitable relief under ERISA; (5)the Plans have standing under ERISA to assert their claims; and (6) Bell Memorial Hospital was not a required party under Rule 19(a)(1).
Summary judgment is proper where "the movant shows that 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). Material facts are facts which are defined by substantive law and are necessary to apply the law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510 (1986). A dispute is genuine if a reasonable jury could return judgment for the non-moving party. Id.
The court must draw all inferences in a light most favorable to the non-moving party, but may grant summary judgment when "the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Agristor Fin. Corp. v. Van Sickle, 967 F.2d 233, 236 (6th Cir. 1992) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356 (1986)).
Initially, the Court addresses the parties' dispute regarding the scope and effect of the December 2, 2009, Opinion and Order. The Plans assert that the prior Opinion and Order rejected the Vials' defenses in avoidance of the Plans' claims, such that they are entitled to summary judgment on their claims for equitable relief. The Vials respond that while the Court did decide the jurisdictional and procedural issues they raised and concluded that the Plans' complaint was not subject to dismissal under Rule 12(b)(6), the Court did not address their substantive arguments regarding the merits of the Plans' claims, which remain for decision. Both parties are correct, to a certain extent. Because the prior motion was based, in large part, on the pleadings, the Court'srulings were confined to the sufficiency of the allegations of the complaint and to jurisdictional and procedural issues based upon those allegations. Thus, the Court did not consider matters beyond the pleadings in determining the Plans' rights to relief.
The prior Opinion does foreclose some aspects of the Vials' arguments. First, the Court held that the Plans' reimbursement provisions do not limit the right of reimbursement solely to any recovery of medical expenses by the enrollee or beneficiary. (12/2/09 Op. at 6.) Thus, to the extent the Vials argue that the Reyes Plan does not provide for a lien on settlement proceeds not covering past medical expenses, that argument is again rejected. Second, the Court held that the Plans were not required to assert their claims in state court because the state court lacked jurisdiction over those claims.4 The Court further noted that the Vials failed to develop their res judicata (referred to by the federal courts as claim preclusion) argument or explain how it could apply in these circumstances. (Id. at 8 n.2.) Therefore, the Vials' assertions in their present filings that the Plans' claims are subject to res judicata or that the Plans should have sought relief in the state court are rejected.
The Plans seek relief pursuant to ERISA § 502(a)(3), which authorizes a fiduciary to file a civil action "(A) to enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan." 29 U.S.C. § 1132 (a)(3). In particular, the Plans seek "appropriate equitable relief" to enforce their reimbursement provisions. Section 502(a)(3) does not authorize all available forms of equitable relief, but rather is limited to "thosecategories of relief that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages)." Mertens v. Hewitt Assocs., 508 U.S. 248, 256, 113 S. Ct. 2063, 2069 (1993). Equitable relief is therefore "something less than all" forms of relief a court of equity would have been authorized to provide, which would have included legal remedies. Id. at 258 n.8, 113 S. Ct. at 2070 n.8.
The Supreme Court first considered the scope of equitable relief available under § 503(a)(3) to an ERISA plan seeking to enforce a reimbursement provision against a plan beneficiary in Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204, 122 S. Ct. 708 (2002). The beneficiary in Knudson was seriously injured in a car accident and the plan covered all of her medical expenses. The beneficiary sued several third parties, whom she alleged were responsible for her injuries, and obtained a settlement. The plan sought to enforce its reimbursement provisions providing for repayment of plan benefits out of any third party recovery. Addressing the plan's assertion that it was entitled to relief under § 502(a)(3)(B) because it sought restitution, which it characterized as an equitable remedy, the Court observed that "not all relief falling under the rubric of restitution is available...
To continue reading
Request your trial