Opinion
A3n-00-161, A3-02-27
April 22, 2002
MEMORANDUM AND ORDER
I. Introduction
Before the Court are a several motions in each of the above captioned cases. First, in both cases there is a motion by plaintiffs for a temporary injunction and a preliminary injunction, as well as for hearings on both (doc. # 3 in A3-02-27; # 18 in A3-00-161). As explained below, these motions are DENIED. Second, plaintiffs seek to consolidate the two cases (doc. # 3 in A3-02-27; #18 in A3-00-161). This motion is GRANTED. Finally, plaintiffs seek to amend the complaint in A3-00-161 (doc. # 18). This motion is also GRANTED. In addition to ruling on these motions, the Court essentially REAFFIRMS its earlier grant of summary judgment.
II. Background
The procedural history here is somewhat complicated, so the Court will briefly review it before proceeding. Defendant Delvin Gylten was covered by the ERISA plan of which plaintiff's are administrators; he was in an accident, and the plan paid for his medical bills. He then sought and recovered money from the third party tortfeasor who had caused the accident. Plaintiffs then initiated this action to recover ERISA benefits from Gylten pursuant to a subrogation agreement and various plan provisions. On cross motions for summary judgment, the Court on December 12, 2001, held that the plan could recover amounts paid dollar-for-dollar except to the extent the recovery was attributable to Gylten's wife. The Court did not attempt to perform such an apportionment, however, and so did not enter any final judgment.
Then, on January 8, 2002, the United States Supreme Court decided Great-West Life Annuity Insurance Company v. Knudson, 534 U.S. 204 (2002). In short, Great-West held that ERISA plans could not sue in law to recover plan benefits; such efforts at collection were limited to suits in equity. This Court considered that Great-West might have an effect on the ultimate outcome of the instant case, and so on January 28, 2002, it ordered the parties to provide additional briefing.
Before the time for briefing had run, plaintiffs commenced the action numbered A3-02-27, seeking injunctive relief requiring defense counsel to maintain the funds at issue and enjoin their distribution. They also sought to amend the complaint in A3-00-161 to add explicitly equitable remedies. The parties arranged a stipulation — approved by the Court — by which defense counsel agreed to maintain the funds, essentially giving plaintiffs what they sought as injunctive relief. This stipulation also extended the time for filing supplemental briefs; this period has now run and the Court has received and considered these briefs. The Court now enters several rulings on the motions before it.
III. Analysis
A. Temporary restraining order preliminary injunction
As mentioned, the parties have essentially stipulated to the injunctive relief sought (doc. # 20 in A3-00-161). Therefore, the Court considers these motions moot, and they are DENIED. The Court thanks the parties for working to achieve this result.
B. Motion to consolidate
In light of the above motion, there is little left in A3-02-27. However, to the extent any issues remain, it makes sense to resolve them together with the primary case. Therefore, the motion to consolidate cases A3-00-161 and A3-02-27 is GRANTED.
C. Motion to amend
Plaintiffs seek to amend the complaint in A3-00-161 to request the creation of a constructive trust, consisting of the monies which they claim under the plan and which defense counsel is currently holding, and transfer of that trust to them. This amendment would essentially bring their complaint in line with Great-West, as it seeks the kind of equitable relief the Supreme Court held ERISA authorizes plans to seek. The first question is thus whether to allow the amendment; assuming the Court does so, the substantive issues could then be addressed.
Rule 15(a) of the Federal Rules of Civil Procedure provides that a party at this stage of a case "may amend [its] pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." This decision lies in the discretion of the trial court. See generally Grandson v. Univ. of Minnesota, 272 F.3d 568, 575 (8th Cir. 2001). A number of courts confronting the situation facing the Court here have concluded that amendments intended to reflect a recent change in decisional law are generally permissible. See, e.g, Gregory v. Harris-Teeter Supermarkets, Inc., 728 F. Supp. 1259, 1260 (W.D.N.C. 1990); Vanguard Savings Loan Ass'n v. Banks, 1995 WL 379999 (E.D.Pa. June 27, 1995).
The Court agrees with this general proposition, and finds its application appropriate here for several reasons. First, this case does not involve discovery; the parties submitted it for summary judgment on stipulated facts. There is therefore no real trial schedule which will be affected by amendment. Second, it is only proper that the decision here reflect the current state of the law, and this amendment is necessary to achieve that result. Therefore, the motion to amend is GRANTED, and the proposed amended complaint is ORDERED FILED.
D. Effect of Great-West on earlier summary judgment
In its December 12, 2001, order granting summary judgment to plaintiffs, the Court held that the plan language allowed plaintiff to collect, from defendant's third-party recovery, benefits paid on behalf of defendant except to the extent that the monies were attributable to defendant's wife's loss of consortium claim. The Court did not attempt to perform such an allocation, however, and the parties have not since put that issue before the Court. The only question at this point, therefore, is whether Great-West changes the Court's original ruling. The Court concludes that it does not.
The holding of Great-West is fairly limited. In it, the Court was required to construe ERISA § 502(a)(3), codified at 29 U.S.C. § 1132(a)(3), which provides in relevant part:
A civil action may be brought —
(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter 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 subchapter or the terms of the plan[.]
Plaintiff Great-West, an ERISA plan, had sued defendant Knudson to recover benefits it paid on her behalf after she was rendered a quadriplegic in a car accident. Great-West, 122 S.Ct. at 711. The procedural history of the case was quite complicated, and the Court will not dwell on that procedure here. Id. For purposes of this case, the key is that part of the relief Great-West sought was "judicially decreed reimbursement," which the Ninth Circuit ultimately held was not the sort of equitable relief authorized by § 502(a)(3). Id. at 712.
The Supreme Court granted certiorari and affirmed this conclusion. In so doing, it affirmed its earlier definition of "equitable relief" as "those categories of relief that were typically available in equity." Id. (citing Mertens v. Hewitt Assoc., 508 U.S. 248, 256 (1993)). After characterizing the relief Great-West sought as "personal liability . . . for a contractual obligation to pay money," the Court concluded that because this was not relief typically available in equity, Great-West could not obtain it from Knudson. Id. at 713.
Of particular relevance to the instant case is the Supreme Court's recognition that permissible equitable relief could include restitution, so long as it was "in the form of a constructive trust or 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. at 714. The court would then order transfer of the property in trust to the plaintiff. Id. According to the Court, the key is that "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." Id. at 714-15. While admitting that this was a fine distinction, the Court made clear that the language at issue necessitated that the distinction be drawn. Id. at 715, 717.
Here, the plaintiffs' original suit was for legal restitution, a kind of relief rendered unattainable by Great-West. They now seek to establish a constructive trust, however, and ultimately to compel its transfer to them, a form of relief explicitly authorized by Great-West. Id. at 714. Pursuant to a stipulation, defense counsel has agreed to hold the funds, making the money sought traceable to particular funds in the defendant's possession. Id. Thus, this seems to be the precise situation allowed in Great-West, and other courts in similar situations have also recognized as much by allowing ERISA plans to seek the relief plaintiffs here seek. See, e.g., Admin. Comm. of the Wal-Mart Stores, Inc. v. Varco, 2002 WL 47159 (N.D.Ill. Jan. 14, 2002). Therefore, the Court must conclude that Great-West has no effect on its earlier ruling other than to change the form of relief granted and the equitable basis of such relief.
Defendant's brief on the effect of Great-West does not change this conclusion. Though he urges that the result reached here is not, in fact, equitable in the sense of fairness, the Court cannot overlook the fact that the Supreme Court specifically suggested that transfer of a constructive trust is equitable relief under the rule of Great-West. Defendant also argues that a constructive trust is inappropriate because he has not been unjustly enriched or done something wrong; indeed, he will be left a debtor. The Court has previously made its sympathy for defendant's position clear, and this sympathy has not changed. However, the Court also previously rejected these arguments, and changing the form of relief pursuant to Great-West does not change the Court's underlying analysis.
In conclusion, the Court has reconsidered its earlier summary judgment in light of Great-West and has reached the following conclusions. First, the form of relief previously authorized is now clearly impermissible, but this is cured by plaintiff's amended complaint, which seeks a constructive trust. Second, the Court does not change its essential analysis and conclusion that the plan language entitles plaintiffs to recover monies paid on behalf of defendant except to the extent the recovery from which those monies come is attributable to defendant's wife. Finally, the Court will not rule on any such apportionment until the issue is fully and properly before it.
IT IS SO ORDERED.