• Treasurer, Trustees of Drury Industries, Inc. Health Care Plan and Trust v. Sean Goding; Casey & Devoti, P.C.
  • December 26, 2012 | Authors: Justin Gundlach; Arthur N. Lerner
  • Law Firm: Crowell & Moring LLP - Washington Office
  • The Eighth Circuit upheld the District Court's denial of reimbursement by a beneficiary's law firm to an ERISA Plan administered by Treasurer, Trustees of Drury Industries, Inc. Health Care Plan and Trust ("Drury").

    The Plan beneficiary, Sean Goding, received benefits from Drury following a slip-and-fall accident.  Subsequently, Goding obtained compensation for his injuries in a civil suit.  In the suit, the law firm Casey & Devoti ("Casey") represented Goding. Drury sought reimbursement from Goding according to the subrogation provision in its Plan contract with Goding. When Goding filed for bankruptcy, Drury looked to Casey for satisfaction on three bases: (1) subrogation; (2) equitable lien; and (3) a state law conversion claim.

    During its representation of Goding, Casey twice acknowledged Drury's subrogation agreement with Goding. First, Casey wrote to Drury, "This will confirm that we do acknowledge Drury['s] lien in this matter." A few months later, Casey wrote, "We are not challenging your right to reimbursement/subrogation for payments made for the health care of Sean Goding . . . ." When Casey received the settlement money from the civil suit, it kept the amount subject to Drury's subrogation interest in trust and disbursed the remainder to Goding. After about a month, though, Casey disbursed that amount to Goding as well.  When Goding filed for bankruptcy without reimbursing Drury, Drury filed suit against Casey.

    The District Court for the Eastern District of Missouri denied Drury's motion for summary judgment and granted summary judgment to Casey on all causes of action.

    First, the District Court held that Casey was not a party to the subrogation provision. A subrogation agreement between a beneficiary and an ERISA Plan is only enforceable against the beneficiary's attorney if the attorney agrees with the beneficiary and the ERISA Plan to honor the Plan's subrogation right. The Court stated that mere acknowledgement of the provision did not constitute an implied contract between Casey and Drury. Though Casey acknowledged the validity and existence of the subrogation provision, Casey never promised to be accountable for it nor to honor it. The Court thus held that Casey was not party to the agreement, and Drury cannot enforce it against Casey.

    Second, the District Court denied Drury's equitable action against Casey under Section 502(a)(3) of ERISA. That section allows a party to bring a civil action for violation of a plan, but the party may obtain only equitable, not legal, relief. In equity, there is not cause for restitution where the trustee of property wrongfully disposes of another's property if the trustee no longer holds the property or its product. In other words, if the wrongdoer no longer has the property or its product in his possession, a person must bring a legal, not an equitable, claim against the wrongdoer. In this case, Casey no longer held the funds due to Drury. Any action by Drury to recover from Casey is thus a legal claim, not equitable, so Section 502(a)(3) does not apply.

    Finally, the District Court dismissed a state law cause of action against Casey for conversion of funds as preempted by ERISA. The Court of Appeals for the Eighth Circuit affirmed the District Court in all respects.