Trustees of Local 734 Bakery Drives v. Wolff

• Decision Date: 31 January 2008
• Docket Number: No. 07 C 2070.,07 C 2070.
• Citation: 537 F.Supp.2d 951
• Parties: TRUSTEES OF the LOCAL 734 BAKERY DRIVES HEALTH AND WELFARE PLAN, Plaintiff, v. Lamont A. WOLFF and Lorraine G. Wolff, Defendants.
• Court: U.S. District Court — Northern District of Illinois

537 F.Supp.2d 951

TRUSTEES OF the LOCAL 734 BAKERY DRIVES HEALTH AND WELFARE PLAN, Plaintiff, v. Lamont A. WOLFF and Lorraine G. Wolff, Defendants.

No. 07 C 2070.

United States District Court, N.D. Illinois, Eastern Division.

January 31, 2008.

COPYRIGHT MATERIAL OMITTED

Lance Russell Minor, David Alan Belofsky, Douglas Merrill Belofsky, Belofsky & Belofsky; P.C., Chicago, IL, for Plaintiff.

Timothy F. Kelly, Kelly Law Offices, Crown Point, IN, for Defendants.

OPINION AND ORDER

WILLIAM T. HART, District Judge.

Plaintiff Trustees of the Local 734 Bakery Drivers Health and Welfare Fund (the "Fund"), pursuant to § 502(a)(3) of the Employee Retirement and Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(3), allege that defendants Lamont and Lorraine Wolff must reimburse the Fund for benefits the Fund paid for Lamont's medical care. Lamont was injured in an automobile accident and the Fund contends it is entitled to reimbursement out of a settlement resulting from a related state court lawsuit filed in Indiana. The Wolffs move to dismiss on the ground that the Fund's right to a lien was already adjudicated in the Indiana case and therefore the Fund's present claim is barred based on res judicata.

Defendants filed a motion to dismiss and subsequently supplemented that motion with a statement of fact. The statement of fact cites to state court pleadings and orders, as well as some related correspondence. Plaintiff does not dispute that accurate copies of the state court documents are provided. Although no declaration or affidavit is provided authenticating the correspondence, plaintiff also does not dispute the authenticity of those documents. In response to the motion to dismiss, plaintiff provides four declarations. Plaintiff, however, does not provide a paragraph-by-paragraph response to defendants' statement of facts as would ordinarily be required when responding to a summary judgment motion. See N.D. Ill. Loc. R. 56.1. No formal order was entered converting the motion to dismiss to one for summary judgment. Without further notice to plaintiff and an opportunity to respond, defendants' motion cannot be converted to one for summary judgment. See Edward Gray Corp. v. National Union Fire Ins., Co. of Pittsburgh, Pa., 94 F.3d 363, 366-67 (7th Cir.1996). Still, without converting the motion to one for summary judgment, judicial notice may be taken of the state court documents. See 4901 Corp. v. Town of Cicero, 220 F.3d 522, 527 n. 4 (7th Cir.2000); Mara Intern. Furniture, LLC v. Village of Hanover Park, 2006 WL 1543912 *1 (N.D.Ill. June 1, 2006); Lara-Unzueta v. Monica, 2004 WL 856570 *3 (N.D.Ill. April 20, 2004). Also, if the parties agree as to additional facts that are consistent with, but outside the complaint, those facts may be considered oil a motion to dismiss. Duferco Steel Inc. v. M/V Kalisti, 121 F.3d 321, 324 n. 3 (7th Cir.1997); Ruppel v. Ramseyer, 33 F.Supp.2d 720, 728 (C.D.Ill.1999); Jeanty v. Washington Mut. Bank F.A., 305 F.Supp.2d 962, 964 (E.D.Wis.2004). Moreover, even if the additional facts should not be considered absent formal conversion to a motion for summary judgment, any procedural error would be harmless if there is no evidence supporting a genuine factual dispute and plaintiff had an adequate opportunity to submit such additional evidence, either before judgment is entered or on a Rule 59(e) motion after judgment is entered. See Loeb Ind., Inc. v. Sumitomo Corp., 306 F.3d 469, 479-80 (7th Cir.2002). Here, judicial notice will be taken of the state court pleadings and orders and other additional facts that plaintiff does not contend are disputed will be considered. As to the res judicata defense, the state court pleadings themselves are not in dispute. The only possible material factual disputes would relate to service of process and the relationship between plaintiff and a purported agent.

The facts taken as true for purposes of ruling on the motion to dismiss are as follows. The Wolffs are and have been residents of Indiana. In December 1998, Lamont was severely injured in an automobile accident that occurred in Indiana. Through his employment, Lamont had medical insurance from the Fund. In January 1999, both Lamont and Lorraine signed an agreement promising to reimburse the Fund for related medical benefits paid by the Fund in the event monies were paid by a third party "by reason of any claim, demand, suit or settlement arising out of the pertinent injury or illness. The Fund paid approximately $120,000 in medical benefits related to Lamont's injuries.

In May 1999, in the Superior Court of Lake County, Indiana, the Wolffs brought suit against Terry Thackston, the driver of the vehicle that collided with Lamont's vehicle (the "Liability Case").¹ The lawsuit sought compensatory and punitive damages, and included Lorraine's claim for loss of consortium.

In July 1999, Primax Recoveries, Incorporated (n/k/a ACS Recovery) sent the Wolffs' attorney a, document entitled "Notice of Lien to Attorney" in which it represented that the Fund was its "client." The letter is addressed to the attorney at his office in Indiana. Presently, the Wolffs provide a "To Whom It May Concern" letter from the Administrator of the Fund stating that Primax "has authority to negotiate and resolve subrogative/reimbursement claims on our behalf." Although the letter is undated, it uses the name Primax so it predates the July 2006 name change to ACS (see Romano Decl. ¶ 2) and the November 2006 adjudication of lien motion. In the lien notice, ACS asserts a lien based on the Fund's right to subrogation. The lien notice does not expressly refer to the then-pending Indiana litigation, but does mention that ACS had been notified that the attorney represented Lamont Wolff. In August 2000, the Wolffs' insurer paid the Wolffs the $75,000 limit under their underinsured motorist clause, less a setoff for medical expenses previously paid. A few days later, the Wolffs paid Primax $12,500 which they described in a cover letter as "partial satisfaction" of the Fund's medical benefits lien.

In July 2003, following a jury trial in the Liability Case, a verdict was returned in the Wolffs' favor awarding Lamont $981,873 in compensatory damages, Lorraine $500,000 in compensatory damages, and the two of them were jointly awarded $20,000 in punitive damages. Following the verdict, an insurer of Thackston (Integon Insurance Company) deposited $25,000 with the Lake County Superior Court, which represented the limits of its policy.

Thackston subsequently assigned to the Wolffs his rights under the Integon policy. Based on the assignment of rights, the Wolffs brought suit in the Circuit Court of Lake County, Indiana (the "Insurance Case") alleging that Integon and the other defendants improperly delayed paying the limits of the policy thereby forcing Thackston to defend himself in the Liability Case. Named as defendants in the Insurance Case were Integon, two related insurance companies, and Integon's insurance adjuster. The insurance defendants allegedly breached their duties of good faith and fair dealing. In accordance with Indiana court rules, the Insurance Case was transferred to the Superior Court where the Liability Case had been tried. The Insurance Case was assigned a different case number than the Liability Case. In October 2006; the Insurance Case was settled for $625,000, which the Wolffs contend represents one-third of the amount claimed.²

In November 2006, the Wolffs filed a "motion to adjudicate lien" in the Insurance Case. The motion states that the Fund paid some of Lamont's medical bills and then refers to a lien of ACS. There is no express allegation regarding the relationship between ACS and the Fund. The accompanying memorandum also fails to explain the relationship between ACS and the Fund, but makes clear that any lien claimed by ACS is based on the Fund's claim for reimbursement of medical benefits it paid on Lamont's behalf. The requested relief, however, expressly refers only to a lien of ACS. In the state court memorandum, the Wolffs argue that ACS would not be entitled to any portion of the $625,000 recovery because, other than the $25,000 limit of the policy, that recovery was based on bad faith conduct on the part of the insurer, not indemnity for the Wolffs' successful claim against Thackston. Alternatively, the Wolffs argued that the lien should be limited to one-third of the medical benefits less a proportionate share of attorney fees and expenses in accordance with Ind.Code § 34-51-2-19 or based on the common law of ERISA as set forth in Wal-Mart Stores, Inc. Assocs.' Health & Welfare Plan v. Wells, 213 F.3d 398 (7th Cir.2000).

On November 1, 2006, by certified mail, the Wolffs sent ACS a notice of the motion along with the accompanying memorandum. The notice also informed ACS that there would be a hearing on the motion on January 12, 2007. The notice was addressed to an in-house counsel of ACS at ACS's offices. The certified mail receipt shows that ACS received the notice on November 6, 2006. The Fund does not dispute that ACS received notice of the motion. The Wolffs do not dispute that (a) no separate notice was sent to the Fund; (b) no motion was filed to make ACS or the Fund a party to the Insurance Case; and (c) no summons was served on ACS or the Fund.

Under the terms of the settlement, a stipulation of dismissal was to be filed following the payment of the settlement amount. The settlement agreement did not have a provision that the parties would request that the court retain jurisdiction to enforce the settlement agreement. On November 8, 2006, a stipulation of dismissal was submitted to the court.³ On November 17, 2006, a docket entry was made in the Insurance Case stating: "Final Order entered. Order dated 11-15-06. Court grants Order of Dismissal with prejudice. RJo."⁴ However, a later entry the same day states in its entirety: "Dismissed without Prejudice."

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