United States District Court, D. Kansas
IT'S GREEK TO ME, INC. d/b/a GTM SPORTSWEAR and HANESBRAND, INC. as plan administrator of the GTM EMPLOYEE HEALTH CARE PLAN, Plaintiffs,
Jeffrey S. FISHER and BRETZ & YOUNG, LLC, Defendants.
MEMORANDUM & ORDER
KATHRYN H. VRATIL, UNITED STATES DISTRICT JUDGE.
September 18, 2017, plaintiffs filed suit under Sections
502(a)(2) and 502(a)(3) of the Employee Retirement Income
Security Act of 1974 (“ERISA”), 29 U.S.C. §
1001 et seq. Complaint (Doc. #1).
Plaintiffs seek damages and equitable relief, claiming that
defendants failed to remit to the GTM Employee Health Care
Plan (“the Plan”) funds recovered in a personal
injury lawsuit. This matter comes before the Court on
Defendant Bretz And Young, LLC's Motion To
Dismiss (Doc. #28) filed December 20, 2017. For reasons
stated below, the Court sustains defendant's motion in
ruling on a motion to dismiss under Rule 12(b)(6), Fed. R.
Civ. P., the Court assumes as true all well-pleaded factual
allegations and determines whether they plausibly give rise
to an entitlement of relief. Ashcroft v. Iqbal, 556
U.S. 662, 679 (2009). To survive a motion to dismiss, a
complaint must contain sufficient factual matter to state a
claim which is plausible - not merely conceivable - on its
face. Id. at 679-80; Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). In determining
whether a complaint states a plausible claim for relief, the
Court draws on its judicial experience and common sense.
Iqbal, 556 U.S. at 679. The Court need not accept as
true those allegations which state only legal conclusions.
bear the burden of framing their claim with enough factual
matter to suggest that they are entitled to relief; it is not
enough to make threadbare recitals of a cause of action
accompanied by conclusory statements. See Twombly,
550 U.S. at 556. Plaintiffs make a facially plausible claim
by pleading factual content from which the Court can
reasonably infer that defendant is liable for the misconduct
alleged. Iqbal, 556 U.S. at 678. Plaintiffs must
show more than a sheer possibility that defendant has acted
unlawfully - it is not enough to plead facts that are
“merely consistent with” defendant's
liability. Id. (quoting Twombly, 550 U.S.
at 557). A pleading which offers labels and conclusions, a
formulaic recitation of the elements of a cause of action or
naked assertions devoid of further factual enhancement will
not stand. Iqbal, 556 U.S. at 678. Similarly, where
the well-pleaded facts do not permit the Court to infer more
than the mere possibility of misconduct, the pleading has
alleged - but has not “shown” - that the pleader
is entitled to relief. See id. at 679.
ruling on a Rule 12(b)(6) motion, the Court does not analyze
potential evidence that the parties might produce or resolve
factual disputes. Jacobsen v. Deseret Book Co., 287
F.3d 936, 941 (10th Cir. 2002). The Court accepts
well-pleaded allegations as true and views them in the light
most favorable to the non-moving party. Sutton v. Utah
State Sch. for the Deaf and Blind, 173 F.3d 1226, 1236
(10th Cir. 1999).
And Procedural History
summarized, plaintiffs allege as follows. Plaintiffs are the
former and current administrators of the GTM Employee Health
Care Plan - a self-funded employee welfare benefit plan.
Amended Complaint (Doc. #15) filed December 6, 2017,
¶¶ 7-8. On October 5, 2014, defendant Jeffrey
Fisher - a Plan beneficiary - sustained injuries in an
automobile accident. Id., ¶ 16. Upon his
request, the Plan advanced Fisher $146, 726.61 for medical
expenses. Id., ¶ 18. To receive the advance,
Fisher's wife agreed that Fisher would reimburse the Plan
from any “payment, award or settlement which may be
paid by a third party” as a result of the accident.
Id., ¶ 19 (quoting Accident Questionnaire). The
Plan requires that all participants and beneficiaries who
receive medical advances subrogate claims against
third-parties and/or reimburse the Plan with any recovery
from a third-party. Id., ¶ 20. The Plan terms
also state that regardless of who possesses the eventual
recovery, the Plan will have an equitable lien on recovered
receiving his advance from the Plan, Fisher instituted a
personal injury lawsuit concerning his automobile accident
and ultimately received a settlement payment. Id.,
¶ 29. The settlement agreement required Fisher and the
law firm that represented him - Bretz & Young, LLC - to
satisfy any liens on the settlement funds. Id.,
¶ 30. Before entering into this settlement agreement,
plaintiffs placed Bretz & Young on notice of their lien.
Id., ¶ 25. Bretz & Young and Fisher
nonetheless failed to reimburse the Plan. Id.,
¶¶ 31, 40-43. Plaintiffs allege that Bretz &
Young and Fisher each maintain possession over portions of
the settlement funds. Id., ¶ 43
filed suit against Bretz & Young and Fisher to enforce
the Plan's subrogation and reimbursement terms. Among
other things, plaintiffs seek (1) a constructive trust and
equitable lien over funds from the personal injury settlement
pursuant to ERISA Section 502(a)(3) (Count 1); (2) a
declaratory judgment stating that the Plan is entitled to
first priority reimbursement from the personal injury
settlement funds (Count 2); damages for (3) breach of
contract (Count 4), (4) breach of fiduciary duty pursuant to
ERISA Section 502(a)(2) (Count 5), (5) state and federal
common law conversion (Counts 6 and 7) and (6) tortious
interference (Count 8); and (7) attorneys' fees pursuant
to 29 U.S.C. § 1132(g) (Count 9).
December 20, 2017, Bretz & Young moved to dismiss all the
foregoing claims. Defendant Bretz And Young, LLC's
Memorandum In Support Of Its Motion To Dismiss (Doc.
#29) filed December 20, 2017 at 4. Bretz & Young asserts
that the Court should dismiss Counts 1 and 2 because
plaintiffs have not alleged that Bretz & Young agreed to
the Plan's terms; Counts 4, 6 and 8 because ERISA
preempts state law causes of action; Count 5 because Bretz
& Young did not become a fiduciary of the Plan; Count 7
because federal conversion provides a criminal, not civil,
cause of action; and Count 9 because plaintiffs have not
alleged that they are entitled to attorneys' fees.
ERISA Section 502(a)(3) Claim (Count 1)
& Young asserts that it cannot be sued on plaintiffs'
claim for an equitable lien and constructive trust on the
settlement funds under Section 502(a)(3), 29 U.S.C. §
1132(a)(3), because plaintiffs do not allege that the law
firm agreed to honor the Plan terms. Memorandum In
Support (Doc. #29) at 5. In particular, Bretz &
Young argues that a “subrogation agreement between a
client . . . and an ERISA plan is only enforceable against a
client's attorney . . . if the attorney agrees with a
client and a plan to honor the plan's subrogation
rights.” Id. at 5 (quoting Treasurer, Trs.
of Drury Indus., Inc. Health Care Plan and Trust v.
Goding, 692 F.3d 888, 894 (8th Cir. 2012)).
properly argue that Supreme Court precedent contradicts this
argument. Plaintiffs' Memorandum In Opposition To
Defendant Bretz & Young LLC's Motion To Dismiss
(Doc. #38) filed January 10, 2018 at 9. The Supreme Court has
recognized that Section 502(a)(3) limits plaintiffs to
equitable relief but “admits no limit . . . on the
universe of possible defendants.” Harris Trust and
Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238,
246 (2000). Thus, the viability of plaintiffs' Section
502(a)(3) claim against Bretz & Young does not hinge on
whether it agreed to the Plan terms. In fact, the Supreme
Court explicitly rejected the proposition that Section
502(a)(3) only extends to parties who agree to the terms of
an ERISA plan. Id. at 245-47 (“We reject,
[the] conclusion that, absent a substantive provision of
ERISA expressly imposing a duty upon a nonfiduciary party in
interest, the nonfiduciary party may not be held liable under
§ 502(a)(3) . . .”).
defendant's argument relies on non-binding, inapposite
authority. In Goding, 692 F.3d at 894, the Eighth
Circuit held that an ERISA plan could not recover from a law
firm that represented a plan beneficiary. In doing so, it
rejected two separate arguments from the ERISA plan. First,
it concluded that when the law firm acknowledged the
Plan's subrogation terms, it did not create an implied
contract between the firm and the Plan. Id. at
894-95. Second, it held that the plan could not recover under
Section 502(a)(3) because the law firm no longer possessed
any disputed funds, and therefore the plan sought legal, not
equitable relief. Id. at 896-97 (citing
Great-West Life & Annuity Ins. Co. v. Knudson,
534 U.S. 204, 213-14 (2002) (when defendant no longer
possesses disputed funds, plaintiffs seek legal relief not
permitted under Section 502(a)(3)).
& Young blurs the Eighth Circuit analysis of two separate
legal issues and also ignores an imperative factual
distinction between Goding and the allegations at
hand. In Goding, the law firm did not have
possession of any disputed funds. Here, plaintiffs allege
that Bretz & Young maintains possession of the disputed
funds. Amended Complaint (Doc. #15), ¶ 43
(“Defendants are in possession and/or constructive
possession of funds . . .”). Thus, under
Great-West, 534 U.S. at 214, and Goding,
692 F.3d at 896-97, plaintiffs can seek equitable relief
under Section 502(a)(3). Viewing the allegations in the light
most favorable to plaintiffs, the Court finds that plaintiffs
have sufficiently alleged a Section 502(a)(3) claim against
Bretz & Young. The Court overrules the motion to dismiss
Declaratory Judgment Claim (Count 2)
& Young also relies on Goding to argue that
plaintiffs cannot pursue a declaratory judgment which asserts
that the Plan is entitled to first priority over any personal
injury settlement proceeds (Count 2). Memorandum In
Support (Doc. #29) at 8-9. The law firm contends that it
cannot be a proper defendant to plaintiffs' declaratory
judgment claim because, under Goding, it does not
need to honor the Plan terms. Id. In response,
plaintiffs assert that they sufficiently allege that the Plan
terms explicitly extend to “any funds received by the
Covered Person and/or their ...