Justia Legal Ethics Opinion SummariesArticles Posted in ERISA
Sheet Metal Workers’ Health & Welfare Fund of North Carolina v. Law Office of Michael A. DeMayo, LLP
Simpson's insurer, the Fund, paid Simpson’s medical costs ($16,225) arising from a car accident. Simpson hired the Firm to represent her in a personal injury suit. The Fund maintained a right of subrogation and reimbursement. Simpson settled her suit for $30,000. After depositing the settlement funds in a trust account, the Firm paid $9,817.33 to Simpson, $1,000.82 to other lienholders, and $10,152.67 to its own operating account for fees and expenses, offering the Fund $9,029.18. The Fund sued under the Employee Retirement Income Security Act (ERISA) section 502(a)(3), claiming an equitable lien of $16,225. The Firm issued a $9,029.18 check to the Fund, exhausting the settlement funds.The district court issued a TRO requiring the Firm to maintain $7,497.99 in its operating account. The Firm argued that the Fund sought a legal remedy because the Firm no longer possessed the settlement funds; ERISA 502(a)(3) only authorizes equitable remedies. The Fund argued that it sought an equitable remedy because the settlement funds were in the Firm’s possession pursuant to the TRO and cited the lowest intermediate balance test: a defendant fully dissipates a plaintiff’s claimed funds (by spending money from the commingled account to purchase untraceable items) only if the balance in the commingled account dipped to $0 between the date the defendant commingled the funds and the date the plaintiff asserted its right to the funds. The district court granted the Firm summary judgment, reasoning that the Firm dissipated the settlement funds before the TRO issued; the Fund could not point to specific recoverable funds held by the Firm and sought a legal remedy. The Sixth Circuit affirmed, concluding that no issues had been preserved for review. View "Sheet Metal Workers' Health & Welfare Fund of North Carolina v. Law Office of Michael A. DeMayo, LLP" on Justia Law
Katherine P. v. Humana Health Plan, Inc.
The Fifth Circuit denied plaintiff's motion for attorneys' fees under the Employee Retirement Income Security Act. The court held that 29 U.S.C. 1132(g)(1) does not provide unfettered discretion to courts to award fees. The court explained that a fees claimant whose only victory was an interlocutory ruling by the Court of Appeals that his complaint should not have been dismissed for failure to state a claim has not received any relief on the merits. In this case, plaintiff persuaded the court to reverse the district court's summary judgment ruling in favor of Humana. If plaintiff achieves some success on the merits on remand, she may then ask for fees. View "Katherine P. v. Humana Health Plan, Inc." on Justia Law
Secretary United States Department of Labor v. Kwasny
While Kwasny was managing partner at a now-dissolved law firm, the firm established a 401(k) profit-sharing plan for its employees. Kwasny was named as a trustee and fiduciary of the plan. Between September 2007 and November 2009, the plan sustained losses of $40,416.302 because plan contributions withdrawn from employees’ paychecks were commingled with the firm’s assets and were not deposited into the plan. In 2011, the Secretary of Labor received a substantiated complaint from a plan member; investigated; and filed suit to recover the lost funds, remove Kwasny as trustee and fiduciary of the plan, and enjoin Kwasny from acting as a plan fiduciary in the future. The Third Circuit affirmed summary judgment in favor of the Secretary, remanding for determination of whether the judgment should be offset by a previous Pennsylvania state court default judgment entered against Kwasny for the same misdirected employee contributions. The court rejected arguments based on res judicata and on the statute of limitations. There is no genuine issue of disputed fact regarding Kwasny’s violation of the Employee Retirement and Income Security Act. View "Secretary United States Department of Labor v. Kwasny" on Justia Law
Prather v. Sun Life Financial Insurance Co.
Prather, age 31, tore his Achilles tendon. His surgery to repair the injury was uneventful. He returned to work. Four days later he collapsed, went into cardiopulmonary arrest, and died as a result of a blood clot in the injured leg that had traveled to a lung. Prather’s widow applied for benefits under his Sun Life group insurance policy (29 U.S.C. 1132(a)(1)), which limited coverage to “bodily injuries ... that result directly from an accident and independently of all other causes.” Sun Life refused to pay. The Seventh Circuit ruled in favor of Prather’s widow, noting that deep vein thrombosis and pulmonary embolism are risks of surgery, but that even with conservative treatment, such as immobilization of the affected limb, the insured had an enhanced risk of a blood clot. The forensic pathologist who conducted a post-mortem examination of Prather did not attribute his death to the surgery. Prather’s widow then sought attorneys’ fees of $37,170 under ERISA, 29 U.S.C. 1132(g)(1). The Seventh Circuit awarded $30,380, stating that there is no doubt of Sun Life’s culpability or of its ability to pay without jeopardizing its existence; the award of attorneys’ fees is likely to give other insurance companies in comparable cases pause; and a comparison of the relative merits of the contending parties clearly favors the plaintiff. View "Prather v. Sun Life Financial Insurance Co." on Justia Law
Templin v. Independence Blue Cross
Insurance companies allegedly refused to honor claims for payment of blood-clotting-factor products. After they paid the claims in full, the district court dismissed a complaint under the Employees Retirement Income Security Act (ERISA) and state law. Following dismissal, both the plaintiffs and defendants sought attorney’s fees and costs. The Third Circuit affirmed denial, but remanded one issue: whether the plaintiffs were entitled to interest on the delayed payment of benefits. On remand, they sought interest of $1.5 to $1.8 million, primarily under the Maryland Code, with $68,000 based on the federal Treasury bill rate. The companies agreed to pay $68,000.00 in interest and the district court dismissed the case. Plaintiffs then sought attorney’s fees and costs of $349,385.15. The district court denied the motion, finding that plaintiffs had failed to achieve “some degree of success on the merits” as required for an award of fees under ERISA. The Third Circuit reversed, holding that the court used an incorrect legal standard to evaluate eligibility for attorney’s fees and misapplied the “Ursic” factors. The “catalyst theory” of recovery is available to the plaintiffs and judicial action is not required under that theory in order to establish some degree of success. View "Templin v. Independence Blue Cross" on Justia Law
AirTran Airways, Inc. v. Elem, et al.
After defendant Elem suffered injuries in a car accident, she and her attorney conspired to hide and disburse settlement funds from an employee welfare benefit plan she received after the accident. The parties filed cross motions for summary judgment and the district court granted summary judgment for the employer, as well as awarded attorney's fees and costs to the employer. The court affirmed, concluding that the district court had the authority to sanction defendants for their bad faith. The court also concluded that defendant's claim that the district court misapplied Federal Rule of Civil Procedure 70 was moot and dismissed the appeal. View "AirTran Airways, Inc. v. Elem, et al." on Justia Law
Cent. States, SE & SW Areas Health & Welfare Fund v. Lewis
Lewis was injured in an automobile accident and her health plan paid $180,000 for her medical treatment Lewis filed a tort suit against the driver (her son-in-law), represented by Georgia lawyer Lashgari, and obtained a $500,000 settlement. Lashgari knew the plan had a subrogation lien, but split the proceeds between himself and Lewis. He claimed that the plan was owed nothing. The plan filed suit under ERISA to enforce the lien, 29 U.S.C. 1132(a)(3). The defendants argued that because the settlement funds have been dissipated, the suit was actually for damages, not authorized by ERISA. The district judge ordered the defendants to place $180,000 in Lashgari’s trust account pending judgment. The defendants did not comply. A year later, the defendants having neither placed any money in a trust account nor produced any evidence of their inability to pay, the judge held them in civil contempt, ordered them to produce records that would establish their financial situations, and ordered Lashgari to documents relating to the contempt to the General Counsel of the State Bar for possible disciplinary proceedings against him. The defendants appealed the contempt order. The Seventh Circuit dismissed, characterizing the appeal as frivolous and the defendants’ conduct as outrageous. View "Cent. States, SE & SW Areas Health & Welfare Fund v. Lewis" on Justia Law
Donachie v. Liberty Mutual Ins. Co., et al.
In 2004, plaintiff appealed the denial of his long term disability (LTD) benefits under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq. Liberty moved for summary judgment. In a 2009 Report and Recommendation (R&R), the magistrate judge recommended denying Liberty's motion and granting summary judgment sua sponte to plaintiff. In 2012, the district court adopted the R&R and entered summary judgment for plaintiff, but denied his request for attorneys' fees. The court concluded that the district court did not err in granting summary judgment on plaintiff's claim for LTD benefits because Liberty's denial of LTD benefits was arbitrary and capricious where Liberty ignored substantial evidence from plaintiff's treating physician that he was incapable of performing his current occupation, while failing to offer any reliable evidence to the contrary; the court retained discretion to consider the Chambless v. Masters, Mates & Pilots Pension Plan factors, in determining whether to grant an eligible plaintiff's request for attorneys' fees, but must do so in a manner consistent with the court's case law, and could not selectively consider some factors while ignoring others; the district court misapplied the Chambliss framework, and therefore erred, in denying fees to a prevailing plaintiff primarily on the conclusion that Liberty had not acted in bad faith; and the record revealed no particular justification for denying plaintiff's attorneys' fees, and awarding fees in the circumstances presented here furthered the policy interest in vindicating the rights secured by ERISA. Accordingly, the court affirmed in part, vacated in part, and remanded for further proceedings. View "Donachie v. Liberty Mutual Ins. Co., et al." on Justia Law
Trs. of the Carptenters’ Health & Welfare Trust v. Darr
Miller, a Fund beneficiary, fell from a ladder and was injured. He hired attorney Darr on a contingent fee basis to sue the person who was supposed to hold the ladder. The Fund advanced $86,709.73 in medical and disability benefits on the condition that Miller repay from any recovery, without deducting attorneys’ fees. Miller and Darr, signed a subrogation agreement. The lawsuit settled for $500,000. Calculating his fee based on $413,290.27, Darr submitted $57,806.48 to the Fund, stating that he was withholding $28,903.25 as a fee. To avoid jeopardizing Miller’s benefits Darr later submitted the $28,903.25. The Fund indicated that if Darr pursued his claim, it would consider Darr and Miller in breach of Plan terms and in repudiation of the subrogation agreement and would consider terminating coverage and seeking relief under ERISA. Darr sued the Fund in Illinois state court under the common fund doctrine, which permits a party who creates a fund in which others have an interest to obtain reimbursement for litigation expenses incurred in creating that fund. The district court enjoined Darr’s lawsuit. The Seventh Circuit vacated. A federal court may not enjoin “proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments,” 28 U.S.C. 2283.View "Trs. of the Carptenters' Health & Welfare Trust v. Darr" on Justia Law