Opinion
Case No. 4:99-CV-78
April 9, 2001
OPINION
This matter is before the Court on Defendants' Motion for Summary Judgment pursuant to Rule 56(c) of the Federal Rules of Civil Procedure. Plaintiff has also filed a Motion for Summary Judgment pursuant to Rule 56(c). Having considered both Motions, the Court grants in part and denies in part each Motion.
FACTUAL BACKGROUND
Eaton Corporation ("Eaton") employed Plaintiff in Battle Creek, Michigan, in 1951. In 1969, Plaintiff injured his hand in a press at work. As a result, on July 7, 1981, the Bureau of Workers' Compensation awarded Plaintiff compensation disability of $74 per week.
Effective August 1, 1983, Plaintiff took early retirement and began to receive a monthly pension benefit of $319.87. Plaintiff continued to receive his monthly pension benefit and his weekly workers' compensation benefit until September 30, 1992. On September 16, 1992, Eaton sent
Plaintiff a letter notifying him that his pension benefits would be offset entirely because his workers' compensation benefits exceeded his pension benefits.
On May 31, 1995, Plaintiff filed an action against Eaton in a Michigan state court alleging that Eaton was liable for failure to pay his pension since October 1, 1992. Eaton filed a counterclaim in this action seeking a return of all pension monies Eaton erroneously paid to Plaintiff while he received his workers' compensation benefits. Eaton then moved for summary disposition on Plaintiff's complaint and its counterclaim. Plaintiff cross-filed a motion for summary disposition. After hearing arguments, the state court ruled that the plan was clear that "Plaintiff should not have been receiving the pension benefit and workers' compensation benefit." The state court memorialized this holding in a September 30, 1996 order. The state court then held oral argument on Eaton's counterclaim. In a December 20, 1996 order, the state court granted Eaton's counterclaim and awarded Eaton $57,108.20.
On March 1, 1999, Plaintiff filed a motion to set aside judgment in state court. While this motion was pending, Plaintiff filed his Complaint in this Court on June 17, 1999. On October 11, 1999, Plaintiff filed his First Amended Complaint. In response, Defendants filed a Motion to Dismiss, or in the Alternative, Motion for Summary Judgment on Plaintiff's First Amended Complaint. On October 25, 1999, the state court vacated its judgment on Eaton's counterclaim because it held that it lacked jurisdiction over Defendants' counterclaim.
On June 27, 2000, this Court ruled on Defendants' dispositive motion. The Court interpreted Plaintiff's First Amended Complaint to assert two separate claims for pension benefits: (1) Plaintiff's pension benefits were improperly offset by the amount of workers' compensation benefits he received, and (2) even if the offset was proper, Plaintiff's benefits were improperly withheld once the workers' compensation benefits stopped in 1997. Plaintiff also claimed a breach of fiduciary duty. This Court held that under the doctrine of res judicata, Plaintiff was "precluded from relitigating the issue of whether he is entitled to recover pension benefits offset by any workers' compensation benefits. . . ." Smith v. Eaton Corp., 102 F. Supp.2d 439, 442 (W.D.Mich. 2000). The Court also dismissed Plaintiff's claim for breach of fiduciary duty because it was time-barred. Id. at 441. Thus, the only claim before the Court was whether Plaintiff was entitled to pension benefits commencing in May 1997 for the period of time Plaintiff no longer received both workers' compensation benefits and pension benefits.
Defendants claim they have since sent Plaintiff a check for $14,974.53, which represents payment of Plaintiff's back workers' compensation benefits.
Plaintiff filed a Second Amended Complaint, seeking the difference between the amount of workers' compensation benefits received and the amount of pension benefits due on a monthly basis. Plaintiff claims that as of July 7, 1981, he received $74 in weekly workers' compensation, plus a supplementary workers' compensation amount of $59, for a total of $133 per week. Plaintiff also claims that as of April 1997, his weekly workers' compensation rate was reduced according to a time table. Plaintiff further asserts that the total amount of workers' compensation does not offset his pension. In response, Defendants filed an Answer and a Counterclaim seeking restitution of the amounts overpaid to Plaintiff between August 1, 1983, and September 1, 1992.
During discovery Plaintiff stated that from August 1, 1983, to September 16, 1992, he received $319.87 in monthly pension benefits plus workers' compensation benefits. Plaintiff also stated that he received a check representing payments to Plaintiff of all past due workers' compensation payments from May 1997 to June 1999. In fact, in deposition, Defendants asked Plaintiff "Do you have any further claim regarding Workers' Compensation benefits for the period of May of 1997 to June of 1999 that you feel have not been paid?" Defendants responded "No."
On January 2, 2001, Defendants filed this Motion for Summary Judgment. Plaintiff filed his Motion for Summary Judgment on January 5, 2001.
LEGAL STANDARDS
In reviewing a motion for summary judgment, this Court will only consider the narrow question of whether there are "genuine issues as to any material fact and [whether] the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A motion for summary judgment requires that the Court view the "`inferences to be drawn from the underlying facts . . . in the light most favorable to the party opposing the motion.'" Matsushita Elec. Ind Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)). The opponent, however, has the burden of showing that a "rational trier of fact [could] find for the non-moving party [or] that there is a genuine issue for trial.'" Matsushita, 475 U.S. at 587. "The mere existence of a scintilla of evidence in support of plaintiff's position[, however,] will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Anderson v. Liberty Lobby, 477 U.S. 242, 252 (1986).
ANALYSIS
Plaintiff alleges that he is entitled to the difference between part of his workers' compensation benefits and his pension benefits because the supplementary amount he began receiving in 1981 should not be included as part of the offset calculation. Plaintiff' asserts that if this $59 supplement is not included in the offset calculation, his workers' compensation benefits do not completely offset the pension benefits.
Article IV, Section 2(b) of the Pension Plan provides the method for deducting monthly benefits. Section 2(b) allows for a deduction of workers' compensation benefits. The formula mandated by section 2(b) calls for multiplying the weekly amount of the benefit by 4.33 to obtain the monthly amount of the benefit. In any month which this amount exceeds the amount of pension benefits payable, no pension benefits should be paid. The supplement of which Plaintiff speaks is contained in Michigan Compiled Laws § 418.352 (West 1999).
An exhibit entitled "Summary of Pension Plan A-1" states that workers' compensation benefits "provided through taxes, premiums, or other payments made by or at the expense of [Eaton]" will be deducted. Defendants have produced an affidavit from Eaton's current Manager of Benefit Services, who testified that Eaton pays to the state of Michigan single business taxes, personal property taxes, and real estate taxes. Defendants argue this entitles Eaton to offset the supplement when deducting workers' compensation benefits. The Manager of Benefit Services also stated that Eaton has consistently interpreted the Plan to deduct the supplement in offset calculations, and Defendants assert this should be given deference.
It appears to the Court that Plaintiff's claim must survive a res judicata analysis. Under 28 U.S.C. § 1738, federal courts must give full faith and credit to the judicial proceedings of a state court. This means that this Court must give a Michigan state court judgment "the same preclusive effect" it would be given under Michigan law. See Smith, Hinchman Grylls, Assocs., Inc. v. Tassic, 990 F.2d 256, 257 (6th Cir. 1993) (quoting Migra v. Warren City Sch. Dist., 465 U.S. 75, 81 (1984)). In this case, we look to the doctrine of res judicata under Michigan law.
In Michigan, res judicata bars the relitigating of claims where (1) the prior action was decided on its merits; (2) the issue raised in the second case either was resolved in the first case, or through the exercise of reasonable diligence might have been raised and resolved in the first case; and (3) both actions involved the same parties or their privies. See id. at 257-58; see also Sloan v. City of Madison Heights, 425 Mich. 288, 295 (1986). Michigan's application of res judicata bars "both claims actually litigated in a prior action and those claims arising out of the same transaction which plaintiff could have brought, but did not." Schwartz v. City of Flint, 187 Mich. App. 191, 194 (1991) (citing Gose v. Monroe Auto Equip. Co., 409 Mich. 147, 160 (1980); Vutci v. Indianapolis Life Ins. Co., 157 Mich. App. 429, 436 (1987). To determine whether the two claims arise out of the same transaction, courts look to whether the same facts or evidence are essential to the maintenance of the two actions. See Schwartz, 187 Mich. App. at 194-95.
An examination of the evidence in this case indicates that Plaintiff's claim for pension benefits is barred by res judicata. In the state court, the record contained the same evidence of the pension plan's language, the amount of workers' compensation benefits and pension benefits Plaintiff received, the amount of deduction Eaton took, and the amount of benefits Plaintiff received after the deduction. After examining this evidence and hearing oral arguments, the state court stated unequivocally, "it's clear, . . . there's no question under the terms of this plan that Plaintiff should not have been receiving the pension benefits and workers' compensation benefits." Furthermore, this Court found that the state court had jurisdiction over Plaintiff s claim for pension benefits. Smith v. Eaton Corp., 102 F. Supp.2d 439, 442 (W.D.Mich. 2000). This Court has looked at the same evidence and has also stated unequivocally, "[u]nder the doctrine of res judicata, [Plaintiff] is precluded from litigating the issue of whether he is entitled to recover pension benefits offset by workers' compensation benefits. . . ." Id.
The Court notes that the state court's subsequent vacation of its judgment on Defendants' counterclaim based on lack of subject matter jurisdiction does not affect the validity of its judgment on Plaintiff's claim for pension benefits.
Therefore, Plaintiff's current claim is barred by res judicata. It appears that the state court contemplated the $59 supplement when determining that Plaintiff had no right to pension benefits. Moreover, even if the state court did not contemplate the $59 supplement, Plaintiff could have raised this issue and had it resolved in state court had he exercised due diligence. The facts have not changed between the state court's decision and this case. Plaintiff has been receiving that supplement since 1981; surely he could have raised this issue in his state court proceeding. Indeed, he should have raised it in state court as it arises from the same transaction. As such, Plaintiff' cannot raise it now, and Defendants are entitled to summary judgment.
Defendants' Counterclaim
The Court initially notes that Defendants' Counterclaim is not barred by res judicata because the Calhoun County Circuit Court vacated its judgment after admitting it lacked jurisdiction over the Counterclaim. Thus, any decision rendered by Calhoun County Circuit Court regarding Defendants' Counterclaim was not rendered by a court of competent jurisdiction, and res judicata does not bar Defendants' from raising it now. See Rivers v. Barberton Bd. of Educ., 143 F.3d 1029 (6th Cir. 1998).
Defendants claim they are entitled to summary judgment on their Counterclaim because Plaintiff received both workers' compensation benefits and pension benefits although this contravened the Plan. Plaintiff argues that Defendants' Counterclaim is barred by a statute of limitations, and it is otherwise inequitable to allow Eaton to recover the benefits it mistakenly paid to Plaintiff.
Section 1113(a) of Title 29 of the United States Code provides a three year limitation for commencement of an action "with respect to a fiduciary's breach of any responsibility, duty, or obligation. . . ." In addition, reimbursement of funds is generally considered a form of equitable relief. See generally In re Unisys Corp, 57 F.3d 1255(3rd Cir. 1995); Central States, Southeast Southwest Areas Health and Welfare Fund v. Neurobehavioral Assoc., 53 F.3d 172 (7th Cir. 1995). Under ERISA, equitable relief includes all categories of relief, including restitution. See Mertens v. Hewitt Assocs., 508 U.S. 248, 248 (1988). Defendants filed their Counterclaim in this Court in August 2000, when it responded to Plaintiff's Second Amended Complaint. Defendants filed their state counterclaim in 1995. Defendants are suing as a fiduciary to recover benefits it should not have paid under the terms of the Plan. Thus, it appears that Defendants' Counterclaim is barred by the statute of limitations.
Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq.
Defendants claim their Counterclaim is not barred by the statute of limitations because of the doctrine of equitable tolling, but they fail to address Plaintiff's argument that ERISA provides its own statute of limitations. The Sixth Circuit Court of Appeals has allowed for equitable tolling where a plaintiff first filed ERISA claims in state court but only as to ERISA claims over which state court had concurrent jurisdiction. Farrell v. Auto. Club of Michigan, 870 F.2d 1129, 1133 (6th Cir. 1989). If a state court lacks jurisdiction, tolling does not apply. See id. In the instant case, the state court admitted it did not have jurisdiction over Defendants' counterclaim.
There is some question, however, over the equitable tolling doctrine based on the unique facts of this case. Defendants' original state counterclaim was filed within three years of the date on which Defendants sent Plaintiff a letter indicating their mistake regarding his pension benefits. The state court originally granted Defendants summary disposition on their counterclaim. Plaintiff then filed his Complaint in this Court. At the time, Defendants did not file a counterclaim because the state court's judgment was enforceable. The state court vacated its previous judgment in October 1999. At this time, a dispositive motion was pending in this Court, and Defendants' could not file a counterclaim. The Court ruled on the dispositive motion, and Plaintiff then filed his Second Amended Complaint. Defendants filed their Counterclaim approximately two weeks after this. Therefore, it appears that Defendants were unable to file the instant Counterclaim any earlier than they did.
The Court, however, questions Defendants' over-all diligence. Defendants paid Plaintiff under the Pension Plan for almost ten years before it realized its error. Nothing stopped Defendants from recognizing their error earlier and filing suit to recover improperly paid benefits. Such lack of diligence can hardly be rewarded by applying the equitable tolling doctrine and ordering Plaintiff to reimburse Defendants for ten years of improperly paid pension benefits.
Diligence is one of five factors considered by courts when applying the equitable tolling doctrine. See EEOC v. Kentucky State Police Dept., 80 F.3d 1086, 1094 (6th Cir. 1996) (citations omitted). The other four factors are: (1) lack of actual notice, (2) lack of constructive knowledge, (3) absence of prejudice, and (5) a party's reasonableness in remaining ignorant of the notice requirement. See id.
Moreover, in a related action, this Court has stated that a difference exists between Eaton's cessation of mistaken payments and its subsequent attempt to recoup 10 years' worth of these payments. Smith v. Int'l Union, United Auto. Aerospace and Agric. Implement Workers of Am., No. 1:97-CV-310 (Order at p. 12 1998). This Court noted that a decision to make a refund must take into account "principles of equity." Id. (quoting Whitworth Bros. Storage Co. v. Central States, Southeast Southwest Areas Pension Fund, 982 F.2d 1006, 1016 (6th Cir. 1993).
Plaintiff sued the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) seeking reimbursement for the amounts for which he had been held liable to Eaton.
Defendants provide the Court with little, if any, assistance on this issue. It is not equitable to allow Defendants to recover from Plaintiff for their mistake. Plaintiff received this money in lieu of income. He likely used the payments to support himself as he received them. It is unlikely that he can afford to repay 10 years' worth of payments. Furthermore, Defendants do not produce more than a mere scintilla of evidence that they are entitled to reimbursement.
The counter argument is that it is inequitable to allow Plaintiff to keep money to which he was not entitled. While this may seem inequitable, it appears to the Court that it must weigh two possible inequities against each other. Without question, one party will suffer a loss on Defendants' Counterclaim. Defendants will suffer a loss should they lose on their Counterclaim, and Plaintiff will suffer a loss should Defendants prevail on their Counterclaim. Defendants include a major corporation, while Plaintiff is simply one individual. Moreover, Plaintiff is disabled and no longer works. Plaintiff likely relies on his benefits to survive. The same cannot be said of Defendants. Surely, they will be missing money if they lose their Counterclaim, but this is money that they did not possess during the 10 years they erroneously paid Plaintiff. In considering the inequities that may result from deciding Defendants' Counterclaim, it appears that Defendants are better able to afford the loss. This, in addition to Defendants' lack of diligence and failure to produce more than a mere scintilla of evidence that they are entitled to reimbursement, entitles Plaintiff to summary judgment on Defendants' Counterclaim.
CONCLUSION
For the foregoing reasons, the Court grants in part and denies in part Defendants' Motion for Summary Judgment. The Court also grants in part and denies in part Plaintiff's Motion for Summary Judgment.
JUDGMENT
In accordance with the Opinion entered this day;IT IS HEREBY ORDERED that Defendants', Eaton Corporation, Eaton Corporation Pension Plan A-1 for Hourly Rate Employees of the UAW Masters Division, and the Pension Administration Committee of Eaton Corporation, Motion for Summary Judgment (Dkt. No. 48) is GRANTED in part and DENIED in part. Specifically, Defendants are granted summary judgment with respect to Plaintiff's claim for pension benefits, and Defendants are denied summary judgment on their Counterclaim.
IT IS FURTHER ORDERED that Plaintiff's Motion for Summary Judgment (Dkt. No. 50) is GRANTED in part and DENIED in part. Specifically, Plaintiff is granted summary judgment with respect to Defendants' Counterclaim, and Plaintiff is denied summary judgment on his claim for pension benefits.