Opinion
Case No. 1:00-CV-131
April 26, 2000
ORDER
In accordance with the opinion entered this date,
IT IS HEREBY ORDERED that the Defendant's Motion to Dismiss and Motion for Summary Judgment (Docket #3) is GRANTED.
IT IS FURTHER ORDERED that JUDGMENT is entered in FAVOR of the DEFENDANT.
OPINION
The Plaintiff, Wal-Mart Stores, Inc. Associates' Health Welfare Plan brings suit against the Defendant, Church, Kritselis Wyble, P.C., seeking $33,842.10, the balance of medical benefits payments the Plan made to its beneficiary, Sharon Ward. Before this Court is the Defendant's motion to dismiss and motion for summary judgment. The Court heard oral argument on April 25, 2000, and has carefully reviewed the Sixth Circuit's opinion in the matter ofWal-Mart Stores. Inc. Associates Health Welfare Plan, No. 98-1285, 98-1346, 194 F.3d 1315 (unpublished) (6th Cir. Sept. 30, 1999), the parties' briefs, and relevant case law. For the reasons stated herein, the Court grants the motion to dismiss.
I
In 1994, Sharon Ward was injured in an automobile accident involving a City of Lansing vehicle. Wal-Mart Stores, Inc. Associates' Health Welfare Plan, her employer's ERISA Plan ("the Plan"), paid her medical bills of $101,526.56. She and her husband then filed a third-party automobile negligence action against the City of Lansing. Church, Kritselis Wyble, P.C. ("the attorneys") represented the Wards in the personal injury action. The Wards received a settlement of $200,000. The Plan asserted a lien seeking recovery of the $101,526.56 it had paid to the Wards in medical benefits. In 1996, the Wards commenced an action against the Plan, seeking a declaratory judgment that the Plan was not entitled to recover medical benefits from the Wards' personal injury settlement.
This Court concluded that the Plan had a right to recover medical benefits paid under the Plan's reimbursement provision which provides in part:
The PLAN shall have the right to . . . recover benefits previously paid by the PLAN to the extent of any and all of the following:
A. Any payment resulting from a judgment or settlement, or other payment or payments, made or to be made by any person or persons considered responsible for the condition giving rise to the medical expense — or by their insurers, regardless of whether the payment is designated as payment for such damages including, but not limited, to pain and/or suffering, loss of income, medical benefits or any other specified damages; or any other damages made or to be made by any person. . . .
The Court next considered the issue of whether the Plan was entitled to the full amount of its lien, or whether this amount should be reduced to reflect attorney fees and costs. Ward v. Wal-Mart Stores Inc. Associates Health Welfare Plan, 7 F. Supp.2d 927 (W.D.Mich. 1998). The Court concluded that the reimbursement provision establishes the Plan's "general entitlement to be reimbursed, but fails to specify unambiguously the extent of that reimbursement." Id. at 930. The Court construed the Plan consistent with common law principles of unjust enrichment and reasoned that the equities favored requiring the Plan to absorb its pro rata share of attorney fees and costs. Id. The total settlement to the Wards was $200,000, costs were $10,353.27 and the attorney fees were based on one-third of the settlement after deduction of the costs. The Court calculated the Plan's reimbursement from the Wards' settlement from the City of Lansing as follows:
Medical benefits paid: $101,526.56
Less 1/2 costs: $5,176.64
$96,349.92
Less 1/3: $32,116.64
Total Reimbursement: $64,233.28
Id. at 931.
On appeal to the Sixth Circuit, the Plan challenged the judgment of this Court on the grounds that the terms of the plan do not provide for a deduction of attorney fees. The Sixth Circuit reversed the decision of this Court to deduct a pro rata share of attorneys' fees from the amount of reimbursement due the Plan. The Sixth Circuit determined that the Plan was entitled to full reimbursement and that the Plan administrator's determination that a deduction for attorneys' fees was not set forth by the Plan was neither arbitrary nor capricious. Having thus concluded, the Sixth Circuit then added a "caveat." The Court of Appeals determined that the amount of "payment resulting from a judgment or settlement" from which the Plan was allowed to recover benefits it had previously paid was (after costs) $189,646.73 and that this "payment" was divided, "such that the Wards received two-thirds and their attorneys received one-third of that amount." The Court of Appeals, sua sponte, allocated the reimbursement to the Plan between the wards and their attorneys, reasoning that:
if the Plan were able to recover wholly from the Wards, we would have the anomalous result that the attorneys would retain over $63,000, while the Wards themselves retain less $25,000 after reimbursing the Plan. Such a result would be unjust.
Accordingly, in keeping with the language of the Plan, we conclude that the `payment resulting from a judgment' consisted of a payment that went two-thirds to the Wards and one-third to the attorneys, such that the Plan may recover only two-thirds of $101,526.56, or approximately $67,684.37, from the Wards. The Plan may then file suit against the attorneys to recover the remaining one-third of the amount it is due.
The issue of whether the reimbursement due the Plan should be allocated between the Wards and their attorneys had not been raised before the district court and had not been briefed to the Court of Appeals.
Pursuant to the Sixth Circuit opinion, this Court entered an order on December 13, 1999, amending the judgment and ordering that the Plan be reimbursed from the Wards in the amount of $67,684.37. That judgment is not at issue and accordingly, the Court does not disturb the judgment against the Wards. The Plan has now commenced a new action against a new party, the Wards' attorneys, who were not parties in the underlying action, seeking payment of the remaining one-third of its medical benefits payments to the Wards. The Wards are not a party to this action.
II
In resolving a FED. R.CIV.P. 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, the factual allegations in the complaint must be taken as true and construed in a light most favorable to the plaintiff. Bower v. Federal Express Corp., 96 F.3d 200, 203 (6th Cir. 1996). If it appears beyond doubt that the plaintiff can prove no set of facts in support of its claims that would entitle it to relief, then dismissal is proper. Performance Contracting. Inc. v. Seaboard Sur. Co., 163 F.3d 366, 369 (6th Cir. 1998). See Pinney Dock Transport Co. v. Penn Cent. Corp., 196 F.3d 617, 619 (6th Cir. 1999).
The Plan alleges that the Defendant has refused the Plan's request that the Defendant pay it $33,842.19 plus interest, costs and attorneys' fees. Count I of the First Amended Complaint alleges a claim for conversion and count II alleges "Unjust Enrichment/Restitution/Constructive Trust." The Defendant moves for dismissal on the grounds that the Plan's claims are not cognizable. Under the circumstances of this case, this Court agrees that the attorneys are not liable to the Plan for the medical benefits it paid.
Because the Court agrees, it need not reach the Defendant's alternative grounds for dismissal, namely that the claims are barred by the applicable statute of limitations.
"A conversion is any distinct act of dominion wrongfully exerted over another person's personal property." Pamar Enterprises, Inc. v. Huntington Banks of Mich., 228 Mich. App. 727, 734, 580 N.W.2d 11 (1998). "Conversion is any distinct act of dominion wrongfully exerted over another's personal property in denial of or inconsistent with his rights therein." Thoma v. Tracy Motor Sales, Inc., 360 Mich. 434, 437 104 N.W.2d 360 (1960).
A constructive trust may be imposed "where such trust is necessary to do equity or to prevent unjust enrichment. . . ." Ooley v. Collins, 344 Mich. 148, 158, 73 N.W.2d 464 (1955). Hence, such a trust may be imposed when property "has been obtained through fraud, misrepresentation, concealment, undue influence, duress, taking advantage of one's weakness, or necessities, or any other similar circumstances which render it unconscionable for the holder of the legal title to retain and enjoy the property. . . ."Potter v. Lindsay, 337 Mich. 404, 411, 60 N.W.2d 133 (1953).
Accordingly, it may not be imposed upon parties "who have in no way contributed to the reasons for imposing a constructive trust."Ooley, 344 Mich. at 158. The remedy of a constructive trust will be imposed when it is inequitable under the circumstances to allow one to retain property. A constructive trust need not arise because the property was wrongfully acquired, it may arise out of unconscionability and unjust enrichment. "A constructive trust need not arise because the property was wrongfully acquired, it may arise out of unconscionability and unjust enrichment. A constructive trust may be based upon a breach of fiduciary or confidential relationship, misrepresentation, concealment, mistake, undue influence, duress or fraud. Grasman v. Jelsema, 70 Mich. App. 745, 752, 246 N.W.2d 322 (1976). "Where one party mistakenly retains property or money which rightfully belongs to another, a constructive trust is a proper remedial device to correct the situation." Yamaha Motor Corp. U.S.A. v. Tri-City Motors and Sports, Inc., 171 Mich. App. 260, 280, 429 N.W.2d 871 (1988).
Neither of the Plan's claims are applicable because the Plan does not have a propriety interest in the fees paid to the attorneys. There is no privity between the Plan and the attorneys. The Plan does not allege that the attorneys became a fiduciary pursuant to ERISA. Neither the Plan nor this Court can articulate any duty or legal relationship the attorneys had to the Plan. The attorneys' compensation was the result of a separately executed contract between the attorneys and the Wards, to which the Plan is not a party. The attorneys were not a signatory to the Plan nor did the attorneys receive any monies from the Plan and thus the attorneys have not been unjustly enriched at the expense of the Plan. The attorneys' fees came out of the settlement the attorneys negotiated on behalf of the Wards with the City of Lansing. Because the Court is unable to discern any ownership interest by the Plan in the fees paid to the attorneys, the Plan's claims fail as a matter of law.
See Hotel Employees and Restaurant Employees International Union Welfare Fund v. Gentner, 50 F.3d 719, 722 (9th Cir. 1994) (holding that the fund could not recover against the attorney who represented the Fund beneficiary because attorney was not a signatory to the terms of a client's subrogation agreement and finding that "there is no indication Congress intended to extend ERISA liability to parties with no professional or contractual relationship with a plan.); Chapman v. Klemick, 3 F.3d 1508, 1511 (11th Cir. 1993) (holding that the lawyer for an ERISA plan beneficiary was not a fiduciary for an ERISA plan and noting that imposing fiduciary status would make "law firms extremely wary of ERISA plans as customers and clients [and] would likely render it difficult for . . . fund beneficiaries with personal injury claims to obtain counsel. That result would work to the detriment of ERISA trust funds.")
An order and judgment consistent with this opinion will be entered.