Summary
holding that res judicata does not bar the health plan's reimbursement claim under ERISA because the ERISA issue could not have been decided in the state court proceedings based on the federal district courts' exclusive jurisdiction over ERISA claims
Summary of this case from Administrative Com. of the Wal-Mart Stores v. SantillanesOpinion
No. 99 C 3021.
March 7, 2000.
MEMORANDUM AND ORDER
In 1991, defendant Cherry Maxwell was in an automobile accident. The plaintiff, Administrative Committee of the Associates' Health and Welfare Plan, reimbursed Maxwell $11,338.58 for her ensuing medical treatment. Maxwell ultimately recovered over $221,000 from the Village of Lindenhurst in connection with the accident, but her attorney absconded with the funds. In this action filed pursuant to § 503(a)(3) of the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(3), the Plan seeks $11,338.58 plus attorneys' fees and costs from Maxwell. Maxwell's motion to dismiss for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1) and failure to state a claim under Fed.R.Civ.P. 12(b)(6) is before the court. For the following reasons, the motion to dismiss is denied.
I. Standard of Review
A. Standard for a 12(b)(1) Motion to Dismiss
The standard of review for a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction depends upon the purpose of the motion. See Freiburger v. Emery Air Charter, Inc., 795 F. Supp. 253, 256 (N.D.Ill. 1992). if the defendant challenges the sufficiency of the allegations regarding subject matter jurisdiction, the court must accept all well-pleaded factual allegations as true and draw all reasonable inferences in favor of the plaintiff United Transp. Union v. Gateway Western Ry. Co., 78 F.3d 1208 (7th Cir. 1996). if, however, the defendant denies or controverts the truth of the jurisdictional allegations, the court may properly "look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists." Capitol Leasing Co. v. F.D.I.C., 999 F.2d 188, 191 (7th Cir. 1993) (citations omitted).
Dismissal is proper if it appears beyond doubt that the plaintiff cannot prove any set of facts consistent with the pleadings that would entitle him to the relief requested. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). The court also notes that, where the court's jurisdiction has been controverted, "the party invoking jurisdiction has the burden of supporting the allegations of jurisdictional facts by competent proof," Grafon Corp. v. Hausermann, 602 F.2d 781, 783 (7th Cir. 1979), and by a preponderance of the evidence that there is a reasonable probability that jurisdiction exists, NLFC, Inc., v. Devcom Mid-America, Inc., 45 3d 231, [ 45 F.3d 231], 237 (7th Cir. 1995).
B. Standard for a 12(b)(6) Motion to Dismiss
In ruling on a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), the court must assume the truth of all facts alleged in the complaint, construing the allegations liberally and viewing them in the light most favorable to the plaintiff. See, e.g., McMath v. City of Gary, 976 F.2d 1026, 1031 (7th Cir. 1992); Gillman v. Burlington N.R.R. Co., 878 F.2d 1020, 1022 (7th Cir. 1989). Dismissal is properly granted only if it is clear that no set of facts which the plaintiff could prove consistent with the pleadings would entitle the plaintiff to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 2 L.Ed.2d 80, 78 S.Ct. 99 (1957); Kunik v. Racine County, Wis., 946 F.2d 1574, 1579 (7th Cir. 1991), citing Hishon v. King Spalding, 467 U.S. 69, 73 81 L.Ed.2d 59, 104 S.Ct. 2229 (1984).
The court will accept all well-pled factual allegations in the complaint as true. Miree v. DeKalb County, 433 U.S. 25, 27, 53 L.Ed.2d 557, 97 S.Ct. 2490 (1977). In addition, the court will construe the complaint liberally and will view the allegations in the light most favorable to the non-moving party. Craigs, Inc. v. General Electric Capital Corp., 12 F.3d 686, 688 (7th Cir. 1993). However, the court is neither bound by the plaintiffs legal characterization of the facts, nor required to ignore facts set forth in the complaint that undermine the plaintiffs claims. Scott v. O'Grady, 975 F.2d 366, 368 (7th Cir. 1992).
II. Background
A. Facts
The Associates' Health and Welfare Plan is an "employee welfare plan" under ERISA, 29 U.S.C. § 1001, et seq., and is available to employees of Wal-Mart Stores, Inc. Defendant Cherry Maxwell was employed by Wal-Mart and was a participant in the Plan. On Christmas Eve in 1991, Maxwell was injured in an automobile accident in Lindenhurst, Illinois. The Plan paid Maxwell $11,339.58 for her medical expenses. Maxwell subsequently retained attorney Brian Hubka to file suit against the Village of Lindenhurst in connection with the accident. During the course of that lawsuit, the law firm of Munday Nathan filed an additional appearance on Maxwell's behalf. In 1994, attorney Thomas Nathan of Munday Nathan achieved a settlement from the Village of Lindenhurst in the amount of $225,000.00.
Hubka took the settlement proceeds so he could distribute them to Maxwell and various lien holders, including the Plan. However, he left everyone in the lurch by converting the proceeds, and was disbarred as a result. In 1996, Maxwell filed a malpractice action against Hubka, Nathan, and Munday Nathan in the Circuit Court of Cook County. In 1997, the Circuit Court of Cook County entered a $213,414.75 judgment against Hubka. The judgment proved to be a Pyrrhic victory, as Hubka was judgment-proof. Hubka's professional liability carrier filed a declaratory judgment action against Maxwell and successfully asserted that her claim against Hubka was barred under Hubka's policy which, among other things, contained an exclusion for conversion.
In 1998, the Circuit Court of Cook County entered a $213,414.75 judgment against Nathan and Munday Nathan. Maxwell fared better with this judgment, as several months later, Munday Nathan's professional liability carrier settled with her in the amount of $221,481.82. Shortly thereafter, Maxwell filed a petition in the Circuit Court of Cook County seeking to adjudicate the Plan's lien. The Plan moved to dismiss this petition for lack of subject matter jurisdiction.
Judge Michael Hogan of the Circuit Court of Cook County denied the Plan's motion to dismiss and granted Maxwell's petition to adjudicate the Plan's subrogation/reimbursement lien to zero, finding that Illinois law does not attach a lien to the proceeds of a legal malpractice case. The court made this final and appealable order pursuant to Illinois Supreme Court Rule 304(a). The Plan did not appeal.
Instead, the Plan filed the present federal action against Maxwell seeking to recover the $11,339.58 it paid to Maxwell, without any reduction for the fees and costs incurred by Maxwell in connection with her suit against the Village of Lindhurst. The Plan, however, does not point to any specific portion of the policy entitling it to reimbursement. The court assumes that the Plan's claim is based on portions of the Plan corresponding to the reduction/reimbursement/subrogation provisions on page D15 of the 1988 Summary Plan Description, which provides that:
The Plan has the right to 1) reduce or deny benefits otherwise payable by the Plan and 2) recover or subrogate 100% of the benefits paid or to be paid by the Plan on your behalf and/or your dependents to the extent of any and all the following payments;
• Any judgment, settlement, or any payment made or to be made relating to the accident, including but not limited to other insurance.
• Any auto or recreational vehicle insurance coverages or benefits including, but not limited to, uninsured or underinsured motorist coverage.
• Business and homeowners medical liability insurance coverage or payments.
• Attorneys' fees.
Associate Benefit Book, Summary Plan Description at D15, effective date January 1998 (attached to the complaint). The Plan also seeks attorney's fees and costs under ERISA.
Maxwell contends that the 1988 Plan is inapplicable. However, to the extent that she is contending that the Plan has, therefore, failed to state a claim, the court declines to reach this issue as it is outside the pleadings. See, e.g., Carter v. Stanton, 405 U.S. 669, 671 (1972); Fed.R.Civ.P. 12(b)(6). For the purposes of the motion to dismiss, the court will thus accept the complaint's premise — that the 1988 Plan governs the parties' rights.
B. The Parties' Positions
Maxwell contends that this court lacks subject matter jurisdiction and that the complaint fails to state a claim because the Rooker-Feldman doctrine, District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983), and Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), as well as the doctrine of res judicata, bar this action. She also asserts that the Plan's subrogation/reimbursement rights cannot attach to the proceeds from a legal malpractice action. Finally, she contends that the terms of the 1998 Wal-mart Associate Benefit Book do not govern the rights of the parties.
In response, the Plan argues that res judicata is inapplicable because the Illinois state court never adjudicated its right to reimbursement under ERISA. It also contends that its claim for reimbursement is actionable under § 1132(a)(3) of ERISA and that this court possesses exclusive jurisdiction over this matter. Finally, it claims that Maxwell's motion to dismiss under Rule 12(b)(6) should be denied because it relies on evidence outside the four corners of the complaint and fails to comply with Rule 56.
III. Discussion
A. The Rooker-Feldman Doctrine
Grounded in principles of comity, the Rooker-Feldman doctrine prevents federal courts from exercising jurisdiction in an appellate capacity over the state court judicial process. Homola v. McNamara, 59 F.3d 647, 650 (7th Cir. 1995). To determine whether the Rooker-Feldman doctrine bars a plaintiff's federal suit, this court must ask whether the injury alleged by the plaintiff resulted from the state court judgment itself or is distinct from that judgment. Garry v. Geils, 82 F.3d 1362, 1365 (7th Cir. 1996). If the injury alleged in the federal complaint was caused by the state court judgment, then the federal court lacks subject matter jurisdiction. GASH Assoc. v. Village of Rosemont, 995 F.2d 726, 728-29 (7th Cir. 1993).
Here, Maxwell characterizes this action as an attempt to relitigate the state court decision finding that the Plan was not entitled to any of the proceeds from her legal malpractice action. On the other hand, the Plan asserts that this court has exclusive subject matter jurisdiction over an entirely separate claim for equitable relief brought under § 502(a)(3) of ERISA, because this suit is "[a] civil action . . . brought — . . . (3) by a . . . fiduciary (A) to enjoin any act or practice which violates . . . the terms of the plan, or (B) to obtain other appropriate equitable relief . . . to enforce the terms of the plan." 29 U.S.C. § 1132(a)(3).
The Seventh Circuit has recently considered this precise issue, in a case brought by the Wal-Mart Plan against an injured Wal-Mart employee who, like Maxwell, had recovered monies after an automobile accident in a state court proceeding and had advised the state court that the Plan claimed it was entitled to subrogation. Administrative Committee, as Administrator of the Associates' Health and Welfare Plan v. Gauf, 188 F.3d 767 (7th Cir. 1999). The Seventh Circuit found that the plaintiff Plan was an ERISA fiduciary because it had discretionary authority to resolve questions concerning the administration, interpretation, and application of the Plan. 29 U.S.C. § 1002(21)(A). Because the Plan's complaint in this case contains these allegations, for the purposes of the motion to dismiss, the court finds that it is a fiduciary under § 502(a)(3) of ERISA.
29 U.S.C. § 1002(21)(A) provides that:
[A] person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan. Such term includes any person designated under section 1105(c)(1)(B) of this title.
The Seventh Circuit then held that the Plan had stated a claim for equitable relief under ERISA because the complaint clearly indicated that the Plan was seeking an equitable remedy — an order forcing the defendant to comply with the terms of the Plan. Id. at 770. It also noted that the Plan's claim was "more appropriately characterized as a reimbursement right under the Plan and therefore a matter of federal law and not a subrogation right arising under state law" as "[t]he Plan is seeking to protect its contractual right to repayment from [the defendant]." Id. at 771. It thus concluded that, as the Committee was a fiduciary and was seeking equitable relief; its claim arose under ERISA § 503(a)(3) and therefore under federal law. Id.
Here, as in Gauf, the Plan is seeking to protect its contractual right to repayment from the defendant. Accordingly, its claim arises under § 503(a)(3) and is distinct from the claims adjudicated in the state court proceedings. Its claim, therefore, is separate from the state court judgment, as it does not arise from that judgment. See Garry v. Geils, 82 F.3d at 1365. Rooker-Feldman is thus inapplicable.
B. Res Judicata
Maxwell also asserts that, under the doctrine of res judicata, the Committee is barred from relitigating not only the issues that were in fact raised and decided in the state court proceedings, but also all other issues which could have been raised in that action, citing Lee v. City of Peroria, 685 F.2d 196, 198 (7th Cir. 1982). For the following reasons, the court disagrees.
Since an Illinois court issued the prior judgment, the court must look to Illinois law to determine whether res judicata bars the Committee's claim. See Whitaker v. Ameritech Corp., 129 F.3d 952, 955 (7th Cir. 1997); 28 U.S.C. § 1738. In Illinois, res judicata applies where: (1) the issues were actually decided or could have been decided in the original suit; (2) there is a final judgment on the merits by a court of competent jurisdiction; (3) there is an identity of cause of action; and (4) there is an identity of parties or their privies Whitaker v. Ameritech Corp., 129 F.3d at 955; Rein v. David A. Noyes Co., 172 Ill.2d 325, 334-35, 665 N.E.2d 1199, 1204 (Ill. 1996).
Here, Maxwell's res judicata argument falters on the first requirement, as the ERISA issue could not have been decided in the state court proceedings. Specifically, as noted above, the Plan's ERISA claim falls within the exclusive jurisdiction of the federal courts. Hence, res judicata does not bar the Plan's ERISA claim. See Spitz v. Tepper, 171 F.3d 443, 447 (7th Cir. 1999); Board of Trustees of the Pipefitters' Welfare Find Local 597 v. Adams, No. 97 C 5592, 1999 WL 446688 *3-4 (N.D.Ill. Jun. 23, 1999).
C. The 1998 Benefit Book and Illinois Anti-Subrogation Law
Maxwell claims that the 1998 Benefit Book, attached to the Plan's Complaint, is not the correct plan document. The court declines to consider this argument, as well as the affidavit and additional summary plan description from 1996, as the court cannot look beyond the four corners of the complaint when resolving a Rule 12(b)(6) motion to dismiss. Carter v. Stanton, 405 U.S. 669, 671 (1972). The court also declines to consider Maxwell's arguments regarding subrogation and reimbursement, as they are at odds with the court's finding that the Plan has stated a claim under ERISA.
III. Conclusion
For the foregoing reasons, Maxwell's motion to dismiss [6-1] is denied.