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Inc. v. Fisher

United States District Court, D. Kansas

February 20, 2018

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.



         On 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 part.

         Legal Standard

         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. See id.

         Plaintiffs 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.

         When 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).

         Factual And Procedural History

         Highly 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 funds. Id.

         After 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

         Plaintiffs 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).[1]


         On 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.

         I. ERISA Section 502(a)(3) Claim (Count 1)

         Bretz & 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)).

         Plaintiffs 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) . . .”).

         Furthermore, 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)).

         Bretz & 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 Count 1.

         II. Declaratory Judgment Claim (Count 2)

         Bretz & 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 ...

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