Essex v. Randall

Full title: ROY ESSEX, et al. v. DOUGLAS A. RANDALL, et al

Court: United States District Court, D. Maryland

Date published: Mar 15, 2005

Civil Action No. DKC 2003-3276 (D. Md. Mar. 15, 2005)

Opinion

Civil Action No. DKC 2003-3276.

March 15, 2005

MEMORANDUM OPINION

DEBORAH CHASANOW, District Judge

Presently pending and ready for resolution in this Employment Retirement Income Security Act of 1974 ("ERISA") case are (1) the motion of Plaintiffs Roy Essex, Eric Weiss, Frank Stegman, Ritchie Brooks, William Johnson, and John Woodall, as Trustees of the Warehouse Employees Union Local No. 730 Health Welfare Trust Fund ("the Fund"), for default judgment against Defendant Douglas Randall on the original complaint, pursuant to Fed.R.Civ.P. 55(b)(2) (paper no. 19); and (2) the motion of Plaintiffs for summary judgment against Defendants Randall and James F. Farmer on the original and amended complaints, pursuant to Fed.R.Civ.P. 56 (paper no. 20). The issues are fully briefed and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that follow, the court grants in part and denies in part the motion for default judgment against Randall, denies without prejudice as moot the motion for summary judgment against Randall, and grants in part and denies in part the motion for summary judgment against Farmer.

I. Background

The following facts are undisputed. The Fund is an employee benefits plan that provides health and welfare benefits to its participants and their eligible dependents, subject to the terms of a Plan of Benefits ("the Plan"). The Plan provides benefits to a participant for an injury for which a third party may be liable, but only if the participant agrees to subrogate or assign his right of recovery from the third party to the Fund.

On May 24, 2000, Defendant Randall, a participant in the Fund, was injured in an automobile accident. He required medical treatment and was unable to work for approximately five months.

On August 7, 2000, Randall executed the Fund's Assignment and Subrogation Agreement ("Agreement"). See paper no. 20, Exh. D. Paragraph 4 of the Agreement provides:

The Claimant, in consideration for the payment by the Fund of . . . benefits arising from his or her injury, which constituted good, valuable and sufficient consideration, does hereby assign, transfer and subrogate to the Fund any and all sums of money received, now due and owing to him or later received from a Third Party. . . . Any sums recovered by the Claimant from the Third Party . . . either by judgment or settlement and regardless of whether such sums are designated as reimbursement for medical expenses incurred or anticipated or past or future wage losses as pain and suffering or as any other form of damages shall be applied first to reimburse the Fund.

Paragraph 7 provides notice to the Fund of payments received by Claimant:

The Claimant agrees to notify the Fund promptly in writing if suit is filed by the Claimant or on Claimant's behalf against any Third Party. . . . The Claimant also agrees to notify the Fund promptly if the Claimant receives any award as a result of litigation or if the Claimant receives payment from any source whatsoever for claims arising from or related to the injury. . . .

Other pertinent provisions of the Agreement include paragraph 8, which requires that no settlement between the claimant and third party be given "without prior notice to and written consent from the Fund," and paragraph 10, which states that if the claimant "fails to comply with any provision of this Agreement[,] the Claimant shall be responsible for any costs or attorneys' fees incurred by the Fund to enforce this Agreement and further agrees to pay interest on any amounts owed to the Fund. . . ."

Randall's attorney, Defendant Farmer, signed a separate provision that stated: "I acknowledge the terms of the Agreement . . . and agree to be bound by its terms in representing the Claimant in connection with any claim related to or arising out of the injury which is the subject of this Agreement."

After Defendants executed the Agreement, the Fund paid $2,532.16 in medical benefits to various medical providers on Randall's behalf and $7,114.34 in accident and sickness benefits to Randall for the time he was unable to work as a result of the injuries received from the accident, for a total of $9,646.50. See paper no. 27, Exh. B.

On or about September 11, 2001, Randall recovered $20,000 in a settlement with the third party liability insurer of John Anderson, the other driver involved in the May 24, 2000 accident. Some of that settlement was paid to Farmer as attorney's fees.

Between September 2001 and July 2002, representatives of the Fund repeatedly contacted Farmer and Randall by telephone and in writing to ascertain the status of any lawsuit by Randall in connection with the accident, but received no response to phone messages or written requests for information. In August 2002, the Fund was told by an unrelated party that Randall had received a third party recovery relating to the accident. Between October 2002 and February 2003, representatives of the Fund continued to attempt to contact Farmer and Randall, but, again, received no response.

Farmer finally contacted the Fund by telephone on September 3, 2003, and stated that (1) Randall had received a third-party recovery approximately eighteen months prior; (2) at the time of the recovery, Farmer had "overlooked" the fact that Randall had subrogated his right to recovery to the Fund; and (3) Farmer had not responded to the Fund's requests for information because he hoped that the Fund would "simply forget about its lien." See paper no. 20, Exhs. J, K. Despite these admissions, to the court's knowledge neither Farmer nor Randall has paid any money to the Fund.

On November 14, 2003, Plaintiffs filed a complaint with this court. Their complaint, as later amended, asserts an equitable lien pursuant to § 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3), against both defendants; claims of unjust enrichment against each defendant separately; and claims of conversion, breach of contract, negligence, and fraud against Farmer. Plaintiffs seek (1) imposition of a constructive trust on the escrow account maintained by Farmer containing proceeds from the recovery; (2) a declaratory judgment that the Fund has an equitable lien on any settlement proceeds held by either Randall or Farmer, not to exceed $9,646.50; (3) equitable restitution of $9,646.50, plus interest from the date of the third party recovery; (4) a temporary restraining order and preliminary injunction enjoining Defendants from disbursing the Fund's interest in the settlement funds; (5) attorney's fees and costs; and (6) punitive damages of $10,000.

Farmer answered Plaintiffs' complaint, but Randall did not. On July 21, 2004, Plaintiffs moved for default judgment against Randall, and for summary judgment against both Defendants.

II. Standard of Review

A. Default Judgment

Entry of default is left to the discretion of the court. Dow v. Jones, 232 F.Supp.2d 491, 494 (D.Md. 2002). The Fourth Circuit has a "strong policy" that "cases be decided on their merits," Dow, 232 F.Supp. at 494-95 (citing United States v. Shaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993)), but default judgment may be appropriate when the adversary process has been halted because of an essentially unresponsive party. See Jackson v. Beech, 636 F.2d 831, 836 (D.C. Cir. 1980) (quoting H.F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689, 691 (D.C. Cir. 1970)).

B. Summary Judgment

It is well established that a motion for summary judgment will be granted only if there exists no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In other words, if there clearly exist factual issues "that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party," then summary judgment is inappropriate. Anderson, 477 U.S. at 250; see also Pulliam Inv. Co. v. Cameo Properties, 810 F.2d 1282, 1286 (4th Cir. 1987); Morrison v. Nissan Motor Co., 601 F.2d 139, 141 (4th Cir. 1987). The moving party bears the burden of showing that there is no genuine issue as to any material fact and that he is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Catawba Indian Tribe of South Carolina v. State of S.C., 978 F.2d 1334, 1339 (4th Cir. 1992), cert. denied, 507 U.S. 972 (1993).

When ruling on a motion for summary judgment, the court must construe the facts alleged in the light most favorable to the party opposing the motion. See U.S. v. Diebold, 369 U.S. 654, 655 (1962); Gill v. Rollins Protective Servs. Co., 773 F.2d 592, 595 (4th Cir. 1985). A party who bears the burden of proof on a particular claim must factually support each element of his or her claim. "[A] complete failure of proof concerning an essential element . . . necessarily renders all other facts immaterial." Celotex Corp., 477 U.S. at 323. Thus, on those issues on which the nonmoving party will have the burden of proof, it is his or her responsibility to confront the motion for summary judgment with an affidavit or other similar evidence in order to show the existence of a genuine issue for trial. See Anderson, 477 U.S. at 256; Celotex Corp., 477 U.S. at 324. However, "[a] mere scintilla of evidence in support of the nonmovant's position will not defeat a motion for summary judgment." Detrick v. Panalpina, Inc., 108 F.3d 529, 536 (4th Cir.), cert. denied, 522 U.S. 810 (1997). There must be "sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (citations omitted).

The inquiry involved on a summary judgment motion "necessarily implicates the substantive evidentiary standard of proof that would apply at the trial on the merits." Anderson, 477 U.S. at 252. Where the movant also bears the burden of proof on the claims at trial, as Plaintiff here, he "must do more than put the issue into genuine doubt; indeed, [he] must remove genuine doubt from the issue altogether." Hoover Color Corp. v. Bayer Corp., 199 F.3d 160, 164 (4^th Cir. 1999) (internal quotation omitted), cert. denied, 530 U.S. 1204 (2000); see also Proctor v. Prince George's Hosp. Ctr., 32 F.Supp.2d 820, 822 (D.Md. 1998) (evidentiary showing by movant "must be sufficient for the court to hold that no reasonable trier of fact could find other than for the moving party") (internal quotation and italics omitted). Summary judgment will not be appropriate unless the movant's evidence supporting the motion "demonstrate[s] an absence of a genuine dispute as to every fact material to each element of the movant's claim and the nonmovant's response fails to raise a genuine issue of material fact as to any one element." McIntyre v. Robinson, 126 F.Supp.2d 394, 400 (D.Md. 2000) (internal citations omitted).

III. Analysis

1. Default

A. Default Judgment Against Defendant Randall

Randall has been utterly unresponsive in this action. He did not answer Plaintiffs' complaint, failed to respond when a default was entered against him by the clerk on April 6, 2004, and in fact has not filed any briefs whatsoever in this action. He has had ample notice of impending default judgment, but has taken no action whatsoever. Judgment by default is therefore clearly appropriate. See Jackson, 636 F.2d at 836.

2. Liability

Upon default, the well-pled allegations in a complaint as to liability are taken as true, although the allegations as to damages are not. See Dundee Cement Co. v. Howard Pipe Concrete Products, Inc., 722 F.2d 1319, 1323 (7th Cir. 1983). Plaintiffs assert two claims against Randall: violation of ERISA and unjust enrichment.

a. ERISA Violation

Plaintiffs' pleadings, taken as true, establish Randall's liability as to Plaintiffs' ERISA claim against him. That claim is made pursuant to § 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3), which states that Plaintiffs, as undisputed fiduciaries of the Fund, are entitled to bring a civil action "(A) to enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan." Id. Courts addressing the question of whether a fund may maintain such an action to enforce a reimbursement provision after a plan beneficiary has received compensation from a third party have applied a three-part test, asking whether the plan seeks to recover funds (1) that are specifically identifiable, (2) that belong in good conscience to the plan, and (3) that are within the possession and control of the defendant beneficiary. Admin. Comm. of the Wal-Mart Assocs. Health Welfare Plan v. Willard, 393 F.3d 1119, 1122 (10^th Cir. 2004); Bombardier Aerospace Employee Welfare Benefits Plan v. Ferrer, Poirot Wansbrough, 354 F.3d 348, 356 (5^th Cir. 2003); see also Admin. Comm. of Wal-Mart Stores, Inc. Assocs. Health Welfare Plan v. Varco, 338 F.3d 680, 687 (7^th Cir. 2003); Mid Atlantic Med. Svcs., Inc. v. Sereboff, 303 F.Supp.2d 691, 695 (D.Md. 2004) (citing cases) ("where funds in the actual or constructive possession of a plan beneficiary are traceable to money or property identified as belonging in good conscience to [the ERISA plan], the ERISA fiduciary may bring its claim for reimbursement in federal court under § 502(a)(3). . . .") (brackets in original) (internal quotation marks omitted). Here, the funds are specifically identifiable, namely, $9,646.50 of the $20,000 paid to Defendants by the insurer of the third party who caused Randall's injuries, in accordance with the settlement that ended Randall's lawsuit seeking recovery for his injuries; the $9,646.50 in good conscience belongs to the Plan, by the plain terms of the Plan requiring subrogation, see Agreement at ¶ 4; and the funds are within Defendants' possession and control insofar as the funds were paid directly to them. Plaintiffs are therefore entitled to injunctive relief under § 502(a)(3)(A), and to "appropriate equitable relief" under § 502(a)(3)(B)(ii). Furthermore, in addition to violating the reimbursement provision of the Plan, Randall was obligated but failed (1) to notify Plaintiffs when commencing his lawsuit against the third party insurance carrier, and (2) to obtain Plaintiffs' consent before settling his case with the third party insurance carrier. These additional violations entitle Plaintiffs to "appropriate equitable relief" under § 502(a)(3)(B)(i).

b. Unjust Enrichment

Plaintiffs' second claim against Randall is for unjust enrichment. Unjust enrichment claims, like other state common law tort and contract claims, are generally preempted by ERISA. See 29 U.S.C. 1144(a) ("the provisions of [ERISA] shall supercede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan."); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47-48 (1987) (state common law contract and tort claims preempted by ERISA when claims "relate to" an employee benefit plan) ("a state law `relate[s] to' a benefit plan in the normal sense of the phrase, if it has a connection with or reference to such a plan.") (citations and internal quotation marks omitted); Provident Life Accident Ins. Co. v. Waller, 906 F.2d 985, 989-90 (4^th Cir. 1990) (citing Pilot Life). Plaintiffs argue that an unjust enrichment claim is authorized by Provident, but the facts of Provident differ materially from the instant case. In Provident, the defendant received benefits from an ERISA-governed plan, but, for unknown reasons, never actually signed the plan's reimbursement agreement, so no contract existed with regard to the issue of reimbursement. Id. at 986. The court therefore fashioned a federal common law of unjust enrichment under those limited circumstances to avert the patently unjust result of a beneficiary receiving payment from an ERISA-governed plan without being liable to reimburse that plan merely for lack of a signature. Id. at 993. Here, Randall's signature on the Agreement subjects him to the terms of the Plan, and thus obviates the need for a quasi-contractual theory of liability. "[W]e are constrained to fashion only those remedies that are appropriate and necessary to effectuate the purposes of ERISA." Provident, 906 F.2d at 992 (quoting U.S. Steel Mining Co. v. Dist. 17, United Mine Workers of Am., 897 F.2d 149, 153 (4th Cir. 1990)). Accordingly, judgment on this claim will be denied, and it will be dismissed.

B. Summary Judgment Against Defendant Randall

Because the court will enter default judgment against Randall, see supra at III.A.1, Plaintiffs' motion for summary judgment against him is denied without prejudice as moot.

C. Summary Judgment Against Defendant Farmer

Plaintiffs allege that Farmer violated section 502(a)(3) of ERISA, and further asserts state law claims of unjust enrichment, conversion, breach of contract, negligence, and fraud.

The court notes initially that, by signing the Agreement, Farmer agreed "to be bound by its terms." Paper no. 20, Exh. D. At least two circuits agree that in ERISA cases, "a subrogation agreement is enforceable against an attorney who agrees with a client and a plan to honor the plan's subrogation right." So. Council of Indus. Workers v. Ford, 83 F.3d 966, 969 (8^th Cir. 1996) (citing Hotel Empls. Restaurant Empls. Int'l Union Welfare Fund v. Gentner, 50 F.3d 719, 721-22 (9^th Cir. 1995) ("[A] beneficiary's attorney is not bound to the terms of a client's subrogation agreement to which he is not a signatory. . . . A subrogation agreement or lien can be enforced against the attorney only if the attorney agrees with the client and creditor to protect the lien.").

The court also notes that Farmer concedes much of Plaintiffs' argument: that the Fund paid medical bills and lost wages to Randall; that he and Randall were obligated but failed to notify Plaintiffs when Randall's lawsuit commenced against the third party insurance carrier; that they were obligated but failed to obtain Plaintiffs' consent before settling with the third party insurance carrier; that he and Randall received $20,000 in settlement proceeds from the third party insurance carrier; that the monies paid by the Fund for medical expenses and lost wages were and are due to be repaid to the Fund from those settlement proceeds by the terms of the Agreement; that nevertheless, he "overlook[ed] the lien" and has not repaid any monies to the Fund; and that for almost two years he ignored Plaintiffs' repeated attempts to contact him because he hoped Plaintiffs would forget about their lien. See generally paper no. 26; paper no. 20, Exh. J, K.

Farmer asserts, incorrectly, that before he is required to fulfill his subrogation obligation, "the Fund has to show that the actual amounts that it paid out were related to this accident." Paper no. 26, at 10. Neither the Agreement nor the Plan state any such requirement. The crux of Farmer's argument, however, seems to be not that Plaintiffs failed to comply with some imagined requirement, but that he "doubts very seriously as to what portion, if any, of the [$9,646.50] in medical and accidental sickness benefits were related to Mr. Randall's accident." Id. at 9-10. This allegation is disingenuous at best, as it flies in the face of not only the documentation of payments submitted by Plaintiffs with their reply brief, see paper no. 27, Exh. B, but by the very nature of the Plan: All claims are submitted to the Fund by the participant (or a proxy thereof) as requests for payment of expenses or lost wages relating to an injury suffered. See Paper no. 27, Exh. A ("Claims for Medical, Weekly Accident Sickness, or Supplement to Workers' Compensation benefits are made by completing a form."). Farmer's bald assertion that the Fund paid Randall for something other than medical expenses and lost wages is neither supported, either by evidence or affidavit, nor colorable.

1. Equitable Lien Under ERISA

Applying the three-prong test for § 502(a)(3) violations enunciated in Willard and Bombardier, see supra at III.A.2.a, the court finds that Farmer's admissions establish his liability as to Plaintiffs' ERISA claim against him. The funds Plaintiffs seek to recover from Farmer are specifically identifiable (satisfying the first prong of the test) and within his possession and control (satisfying the third prong), as Farmer admits (1) to having received the settlement proceeds, including the $9,646.50 owed to the Fund; and (2) to maintaining an escrow account containing at least some of his attorney's fees from Randall's third party recovery. Farmer also admits that the funds are owed to the Plan, thus satisfying the second prong of the test. Plaintiffs are therefore entitled to injunctive relief against Farmer under § 502(a)(3)(A), and to "appropriate equitable relief" under § 502(a)(3)(B)(ii). Farmer was also obligated but failed (1) to notify Plaintiffs when Randall's lawsuit commenced against the third party insurance carrier, and (2) to obtain Plaintiffs' consent before the case settled. These additional violations entitle Plaintiffs to "appropriate equitable relief" against Farmer under § 502(a)(3)(B)(i). The court therefore grants summary judgment on this claim against Farmer.

2. State Law Claims

Plaintiff contends that Farmer's actions amount to unjust enrichment, conversion, breach of contract, negligence, and fraud under Maryland common law. As explained supra at III.A.2.b, all of these claims are preempted by ERISA. See, e.g., Elmore v. Cone Mills Corp., 6 F.3d 1028, 1038-39 (4^th Cir. 1993) (dismissing breach of contract, fraud, unjust enrichment, and negligence claims on basis of ERISA preemption) ; Ferry v. Mutual Life Ins. Co., 868 F.Supp. 764, 777 (W.D.Pa. 1994) (dismissing conversion and declining to fashion federal common law conversion claim). Summary judgment is therefore denied on these claims, and they will be dismissed.

D. Relief

Having established liability under ERISA, Plaintiffs are entitled to injunctive relief and "appropriate equitable relief." § 502(a)(3). Plaintiffs request equitable relief in the form of (1) imposition of a constructive trust on Farmer's escrow account containing proceeds from Randall's third party recovery; (2) declaratory judgment that they have an equitable lien on any settlement proceeds held by either Randall or Farmer, not to exceed $9,646.50; and (3) equitable restitution of $9,646.50, plus interest from the date of the third party recovery. Plaintiffs also seek injunctive relief in the form of a temporary restraining order and preliminary injunction enjoining Defendants from disbursing the Fund's interest in the settlement funds, attorney's fees and costs, and punitive damages of $10,000.

1. Equitable Relief

In Great-West Life Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002), the Supreme Court explained that, by authorizing only injunctive and "appropriate equitable relief," § 502(a)(3), ERISA countenances remedies in equity but not at law. Referring to "the days of the divided bench," the court explained that "[i]n cases in which the plaintiff could not assert title or right to possession of particular property, but in which nevertheless he might be able to show just grounds for recovering money to pay for some benefit the defendant had received from him, the plaintiff had a right to restitution at law. . . ." Id. at 213 (internal quotation marks and emphasis omitted). By contrast, "a plaintiff could seek restitution in equity, ordinarily in the form of a constructive trust or an equitable lien, where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant's possession." Id.

Here, Plaintiffs request a constructive trust on clearly traceable funds belonging in good conscience to them, namely, the funds in Farmer's escrow account, which by his own admission contains $1,100 in proceeds from the settlement. A constructive trust is therefore appropriate, and will be granted.

Plaintiffs' request for declaratory judgment that they have an equitable lien on settlement proceeds held by either Defendant, not to exceed $9,646.50 is likewise appropriate, because that money belongs in good conscience to them, and can clearly be traced to particular funds, namely, the settlement proceeds. On similar facts, a bankruptcy court's decision to impose an equitable lien, which it characterized as "fully consistent with the express written terms of the plan" was affirmed by the Fourth Circuit. Wal-Mart Stores, Inc. v. Carpenter (In re Carpenter), 245 B.R. 39, 47 (Bankr. E.D.Va. 2000), aff'd, 36 Fed.Appx. 80 (4th Cir. 2002).

Plaintiffs' request for equitable restitution in the form of $9,646.50, plus interest from the date of the third party recovery, however, will be denied. Plaintiffs' restitution request does not specify recovery of money that "could clearly be traced to particular funds or property in the defendant's possession," id. at 213; rather, Plaintiffs request that the court "[o]rder Defendants to pay . . . $9,646.50, plus interest. . . ." "[F]or restitution to lie in equity, the action generally must seek not to impose personal liability on the defendant, but to restore to the plaintiff particular funds or property in the defendant's possession." Knudson, 534 U.S. at 214. Plaintiffs' request for "equitable" restitution in fact amounts to a request for personal liability, not restoration of "particular funds." It is not, therefore, "equitable relief," and is thus not authorized by § 502(a)(3).

2. Preliminary Injunctive Relief

Because the court today enters judgment in favor of Plaintiffs, their request for a temporary restraining order and preliminary injunction enjoining Defendants from disbursing the Fund's interest in the settlement funds is denied as moot.

3. Attorney's Fees and Costs

In a surreply that was filed without permission, Farmer asserts that only Randall is liable for attorney's fees. Farmer, however, agreed to be bound by all the terms in the Agreement, including the provision for Plaintiffs' attorney's fees. See paper no. 20, Exh. D. Paragraph 10 of the Agreement states that if the claimant "fails to comply with any provision of this Agreement[,] the Claimant shall be responsible for any costs or attorneys' fees incurred by the Fund to enforce this Agreement and further agrees to pay interest on any amounts owed to the Fund. . . ." As established supra at III.A.1 and III.C.1, both Defendants failed to comply with multiple provisions of the Agreement. Both Defendants are therefore liable for attorney's fees under the Agreement.

Moreover, even absent the attorney's fees provision of the Agreement, the court would still award attorney's fees to Plaintiffs pursuant to section 502(g)(1) of ERISA, which states that "the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." 29 U.S.C. § 1132(g)(1). A party who prevails does not, by prevailing alone, establish a presumption of entitlement to an award of fees. Custer v. Pan Am. Life Ins. Co., 12 F.3d 410, 422 (4th Cir. 1993) (citing Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1028-29 (4th Cir. 1993) ( en banc). In the Fourth Circuit, a court must consider five factors in determining whether to award attorney's fees in an ERISA case: (1) the degree of opposing parties' culpability or bad faith; (2) the ability of opposing parties to satisfy an award of attorneys' fees; (3) whether an award of attorneys' fees against the opposing parties would deter other persons acting under similar circumstances; (4) whether the parties requesting attorneys' fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself; and (5) the relative merits of the parties' positions. Reinking v. Philadelphia Am. Life Ins. Co., 910 F.2d 1210, 1217-18 (4th Cir. 1990), overruled in part by Quesinberry, 987 F.2d at 1028-30; Wheeler v. Dynamic Engineering, Inc., 62 F.3d 634 (4th Cir. 1995). The factors are guidelines, not a rigid test, Wheeler, 62 F.3d at 641, and no single factor may be decisive, Quesinberry, 987 F.2d at 1029.

Here, based on these five factors, an award of attorney's fees is appropriate. Defendants are admittedly culpable, and there is significant evidence of bad faith: Randall has not appeared at all in this case, nor has he made any effort to repay Plaintiffs; and while Farmer protests that he acted in good faith, that assertion is belied by his own admission that he and Randall not only did not repay the Fund as clearly required under the Agreement, but for nearly two years declined to respond to Plaintiffs' repeated attempts to communicate because they "hoped the Fund would simply forget about its lien." Paper no. 20, Exhs. J, K. There is no evidence before the court as to whether Defendants can pay the attorney's fees. An award of attorney's fees in this case would certainly carry deterrent value against other parties considering similar violations, as these violations constituted a bad faith attempt to evade payment, not good faith error. Compare with, e.g., American Med. Sec., Inc. v. Larsen, 31 F.Supp.2d 502, 506-07 (attorney's fees carry no deterrent value against insurance commissioner because commissioner did not "set out to deliberately circumvent ERISA"). Plaintiffs seek "to benefit all participants and beneficiaries of" their Fund, in that the money is owed to the Fund, even though no novel overriding legal issue is involved. Finally, the relative merit of the parties' positions favors an award of attorney's fees, as the court finds today that Defendants' position has no merit at all. Finding four of the five Reinking factors to favor Plaintiffs, the court will award a reasonable attorney's fee upon submission by Plaintiffs of a billing declaration.

4. Punitive Damages

Section 502(a)(3) of ERISA, the only law under which the court today finds Defendants liable, provides only for injunctive and equitable relief. The Supreme Court in Mertens v. Hewitt Assocs., 508 U.S. 248 (1993) stated in dicta:

Money damages are, of course, the classic form of legal relief. Curtis v. Loether, 415 U.S. 189, 196, 39 L.Ed.2d 260, 94 S.Ct. 1005 (1974); Teamsters v. Terry, 494 U.S. 558, 570-571, 108 L.Ed.2d 519, 110 S.Ct. 1339 (1990); D. Dobbs, Remedies § 1.1, p. 3 (1973). And though we have never interpreted the precise phrase "other appropriate equitable relief," we have construed the similar language of Title VII of the Civil Rights Act of 1964 (before its 1991 amendments) — "any other equitable relief as the court deems appropriate," 42 U.S.C. § 2000e-5 (g) — to preclude "awards for compensatory or punitive damages." United States v. Burke, 504 U.S. 229, 238, 119 L.Ed.2d 34, 112 S.Ct. 1867 (1992).

Id. at 255. Based on Mertens and on traditional notions of equity and law, courts in this district have consistently concluded that ERISA does not permit recovery of punitive damages. Estate of Mattern v. Honeywell Int'l, Inc., 241 F.Supp.2d 540, 544 (D.Md. 2003) (punitive damages based on ERISA violations "are beyond the scope of `appropriate equitable relief'"); Hemelt v. United States, 951 F.Supp. 562, 567 (D.Md. 1996) (section 502(a) "does not permit recovery of compensatory or punitive damages"), aff'd, 122 F.3d 204 (4th Cir. 1997) (citing Mertens); Vogel v. Independence Federal Sav. Bank, 692 F.Supp. 587, 596 (D.Md. 1988) (declining to apply punitive damages) ; Trogner v. New York Life Ins. Co., 633 F.Supp. 503, 510 (D.Md. 1986) ("punitive damages are not recoverable under ERISA"). Plaintiff's request for punitive damages is therefore denied.

IV. Conclusion

For the foregoing reasons, the court will grant in part and deny in part the motion for default judgment against Randall, deny without prejudice as moot the motion for summary judgment against Randall, and grant in part and deny in part the motion for summary judgment against Farmer. A separate Order will follow.