Opinion
No. 1:03-cv-409
December 12, 2003
PRELIMINARY INJUNCTION
In accordance with the accompanying memorandum opinion filed herewith, the plaintiff's motion for preliminary injunction [Court File No. 2] is GRANTED IN PART as follows.
Defendant Robert T. Hyde is hereby ENJOINED from disbursing, spending, using, and/or dissipating any of the settlement proceeds and monies currently in his possession in his checking account which are derived from the settlement in the suit styled Robert T. Hyde v. Ricky V., Hardaway, Circuit Court of Hamilton County, Tennessee, Civil Action No. 03-C-1294, up to the maximum limit of $23,488.50. Robert T. Hyde SHALL IMMEDIATELY withdraw and remove said settlement proceeds from his joint checking account and deposit said funds into a new, separate interest-bearing savings account or money market account solely in his name at a federally insured bank of his choice located in Hamilton County, Tennessee. Furthermore, Robert T. Hyde SHALL KEEP, MAINTAIN, AND PRESERVE said settlement proceeds and funds in the separate bank account subject to the further orders of the Court. Robert T. Hyde SHALL NOT withdraw, transfer, or disburse said settlement proceeds and funds without the prior written permission of this Court. On or before December 19, 2003, Robert T. Hyde SHALL FILE with the Clerk of this Court his sworn affidavit showing that he has fully complied with this preliminary injunction and submit copies of the bank records demonstrating that he has opened the new, separate bank account and deposited said settlement proceeds and funds therein.
SO ORDERED.
MEMORANDUM
This case came before the Court on December 12, 2003, for a hearing on the plaintiff's motion for preliminary injunction under FED. R. CIV. P. 65. After reviewing the record and hearing oral argument from counsel, the Court concludes that the motion for preliminary injunction [Court File No. 2] will be GRANTED IN PART.A preliminary injunction will enter enjoining defendant Robert T. Hyde ("Hyde") from disbursing or using that portion of the settlement proceeds currently in Hyde's possession in his checking account until the Court can finally adjudicate the plaintiff's claim for equitable relief under the Employee Retirement Income Security Act ("ERISA") and federal common law. Hyde will be ordered to deposit said funds into an interest-bearing, separate savings account or money market account at a federally insured bank or savings and loan institution of his choice located in Hamilton County, Tennessee. Hyde will further be required to keep, maintain, and preserve said funds in the separate account subject to the further orders of this Court. I. Facts
On or about August 5, 2002, defendant Hyde was involved in a motor vehicle accident and he suffered injuries. Hyde filed a tort action in the Circuit Court for Hamilton County, Tennessee, to recover monetary damages styled Robert T. Hyde v. Ricky V. Hardaway, Civil Action No. 03-C-0194. Hyde recently agreed to settle the underlying tort case.
Hyde and his attorney, defendant Morgan G. Adams ("Adams"), received a settlement check in the amount of $25,000. Adams has deducted his attorney's fees and disbursed the remainder of the settlement proceeds to Hyde. The precise amount of the settlement proceeds received by Hyde has not been revealed to the Court. Hyde has deposited his portion of the settlement proceeds into a joint checking account. Thus, the settlement proceeds flowing to Hyde are clearly traceable to particular funds currently in Hyde's possession in his checking account.
Plaintiff Shaw Industries, Inc. ("Shaw") maintains a Welfare Benefit Plan for its employees pursuant to ERISA. Pursuant to this ERISA Plan, Shaw has paid $23,488.50 in medical benefits on behalf of Hyde for the treatment of injuries arising out of the automobile accident. Hyde is employed by Shaw. Under Shaw's employee benefit plan, Shaw is entitled to be fully reimbursed out of any settlement proceeds paid to Hyde.
II. Standard of Review
In deciding the plaintiff's motion, the Court considers four factors:
(1) whether the plaintiff has a strong likelihood of success on the merits;
(2) whether the plaintiff will suffer irreparable injury without the preliminary injunction;
(3) whether issuance of the preliminary injunction would cause substantial harm to other; and
(4) whether the public interest would be served by issuance of the preliminary injunction.
These are factors to be balanced, not prerequisites that must be met. Jones v. City of Monroe, Michigan, 341 F.3d 474, 476 (6th Cir. 2003); National Hockey League v. Plymouth Whalers Hockey, 325 F.3d 712, 717 (6th Cir. 2003); In re DeLorean Motor Co., 755 F.2d 1223, 1228 (6th Cir. 1985).
III. Analysis
The Court concludes that all four of the factors weigh in favor of granting the plaintiff's motion for preliminary injunction. Plaintiff has met its burden of showing a strong likelihood of success on the merits. Great-West Life Annuity v. Knudson, 534 U.S. 204 (2002), does not preclude plaintiff Shaw from bringing this claim in equity to obtain the equitable remedy of restitution available under ERISA, 29 U.S.C. § 1132(a)(3). The settlement proceeds in question can be clearly traced to particular funds in Hyde's possession in his checking account. As the Supreme Court explains in Great-West Life, 534 U.S. at 213-14, a plaintiff may bring a claim in equity seeking restitution in the form of a constructive trust or equitable lien, where the money or property identified as belonging in good conscience to the plaintiff can be clearly traced to particular funds or property in the defendant's possession. For restitution to lie in equity, the action generally must seek to restore to the plaintiff particular funds or property in the defendant's possession.
Hyde argues that he must be allowed to keep the settlement proceeds and defeat plaintiff Shaw's right to restitution and subrogation on the theory that he has not been "made whole" by the settlement. This argument fails. The make-whole doctrine is an equitable insurance doctrine that establishes a ranking of priority between the ERISA Plan and beneficiary. Under this doctrine, the beneficiary keeps everything recoverable from third-parties until he is made whole. Copeland Oaks v. Haupt, 209 F.3d 811, 813 (6th Cir. 2000); Sealy, Inc. v. Nationwide Mut. Ins. Co. — F. Supp.2d —, 2003 WL 22328851, *7 (M.D.N.C. Sept. 29, 2003). The make-whole doctrine has been incorporated into federal common law.
The make-whole doctrine does not override the ERISA Plan in the instant case because the Plan's terms here are clear and unambiguous. In re Paris v. Iron Workers Trust Fund, 2000 WL 384036 (4th Cir. April 17, 2000); Sealy, 2003 WL 22328851, at *7. According to plaintiff Shaw, the ERISA Plan applicable to this case provides that the right to reimbursement and subrogation "regardless whether the individual has been made whole." The Plan expressly provides that any recovery by Hyde "shall be applied first to reimburse the Plan; only when the Plan has been fully reimbursed shall the individual collect the portion of the recovery that exceeds the payments made or to be made by the Plan to the individual." In the face of this unambiguous language in the ERISA Plan, Hyde cannot utilize the made-whole doctrine to avoid making restitution to plaintiff Shaw.
The Court finds that the plaintiff will suffer irreparable injury without a preliminary injunction. Issuance of a preliminary injunction to maintain the status quo will not cause substantial harm to Hyde or others. The public interest will be served by the preliminary injunction because it will help to preserve and protect the rights of the ERISA Plan that provides benefits to numerous Shaw employees.
Accordingly, the Court will issue a preliminary injunction.