related to Jama Lynn's third-party litigation. Defendants argue that had Jama Lynn not engaged an attorney and litigated the third party claims, there would be no monies from whence the Fund could seek reimbursement. Accordingly, Defendants believe that the Fund should bear a pro rata share of the cost of that third party litigation.
Plaintiff argues that Defendants are not entitled to the setoff for attorney's fees and costs. First, Plaintiff contends that the Serembus/Dugan approach is problematic because it "discourage[s] . . . ERISA benefit plans from advancing benefits to those similarly situated to Defendants." (Pl. Reply Brief at 7.) Next, Plaintiff contends that the agreement signed by Mr. Kurtz expressly prohibits the very type of offset that Defendants request. Third, Plaintiff attempts to distinguish Serembus and Dugan on the ground that the subrogation clause in the instant case, unlike those in Serembus and Dugan, provides that the participant "shall do nothing after the loss to prejudice [the Fund's subrogation] . . . rights." (Summary plan at 8.) Plaintiff equates the request for setoff with an attempt to prejudice the Fund's subrogation rights. Finally, Plaintiff contends that allowing an offset in the instant case would be contrary to this court's ruling in Travitz.
In the Serembus and Dugan decisions, the respective courts found that it was appropriate to reduce by reasonable attorney's fees the amount the beneficiaries were responsible for reimbursing the fund.
See also Metro Health Systems v. Glepko, 980 F.2d 730, 1992 WL 348967 (6th Cir. 1992) (unreported opinion) (table in reporter, text on Westlaw) ("Under the judgment, the fund would be entitled to collect up to the full amount of benefits paid or to be paid on Mr. Glepko's behalf, from the net of any litigation recovery less Mr. Glepko's attorney fees and costs expended in order to obtain the recovery.") Both the Serembus and Dugan courts maintained that without litigation of the third party claims, the fund would not have been reimbursed. In essence, the courts concluded that it was reasonable to withhold attorney's fees and costs because through the beneficiaries' litigation the fund was better off than it would be otherwise.
The court finds no reason to depart from the existing legal precedent. There is merit in Plaintiff's contention that allowing a setoff may discourage ERISA plans from advancing funds to persons similarly situated to Defendants. The court, however, must balance this policy concern against the inequity that would result in allowing the Fund to reap the benefits of Defendants' third party litigation without sharing in the costs of that litigation. On the instant facts, the balance weighs in favor of the equitable considerations. Without Defendant Jama Lynn Kurtz's litigation, the Fund would be entitled to recover nothing. Because of her litigation, the Fund is recouping a substantial portion of the monies it advanced. Further, the court finds Plaintiff's argument regarding Travitz to be inapposite, as a potential setoff was not at issue in that case. Finally, because the court has already found the existence of a signed assignment of claim form to be irrelevant to the issues at hand, the court will not base any ruling on language contained in that document.
In ordering Defendants to reimburse the Fund, the court is respecting the desire of Congress "to ensure that plan funds are administered equitably, and that no one party, not even plan beneficiaries, should unjustly profit." Travitz, 818 F. Supp. at 771 (quoting Provident, 906 F.2d at 993). In allowing the sum to be reimbursed to be setoff by Defendants' attorney's fees and costs in the third party litigation, the court is ensuring that the Fund will not be unjustly enriched. The court will grant Defendants' motion for summary judgment and allow Defendants' to withhold $ 5,830.71 of the monies recovered for attorney's fees and costs.
D. Attorney's Fees
Finally, Plaintiff requests an award of attorney's fees and costs with respect to litigation of the captioned action. Section 502(g)(1) of ERISA, 29 U.S.C. § 1132(g)(1), provides that the court, in its discretion, may award reasonable attorney's fees and costs to either party. There are five policy factors that the court must consider when determining whether or not to award attorney's fees under 502(g)(1). Those considerations are as follows:
(1) the offending party's bad faith or culpability, (2) the ability of the offending party to pay the fee award, (3) the deterrent effect of an attorney's fee award against others acting under similar circumstances, (4) whether or not the party requesting attorney's fees seeks to benefit all participants or members of the ERISA plan, and (5) the relative merits of the parties' positions.
Ursic v. Bethlehem Mines, 719 F.2d 670, 673 (3d Cir.1983); Home for Crippled Children v. Prudential Ins. Co., 590 F. Supp. 1490, 1508 (W.D.Pa.1984). "'[A] district court considering a motion for attorney's fees under ERISA should . . . apply its discretion consistent with the purposes of ERISA, those purposes being to protect employee rights and to secure effective access to federal courts.'" Welsh v. Burlington Northern Employee Benefits Plan, 54 F.3d 1331, 1342 (8th Cir. 1995) (quoting Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 589 (9th Cir. 1994)). Further, "'A plan beneficiary who succeeds in an [ERISA] action . . . should recover attorney fees unless "special circumstances" would make such an award inequitable.'" Welsh, 54 F.3d at 1342 (quoting Lutheran Medical Center v. Contractors, Laborers, Teamsters, and Engineers Health and Welfare Plan, 25 F.3d 616, 623 (8th Cir. 1994)).
The instant case is in many ways distinguishable from the existing case law in that the plan beneficiary did not prevail. Defendants were able to secure an advance payment of medical benefits from the Fund. Those payments enabled Defendant Jama Lynn Kurtz to obtain medical care prior to and during the pendency of her third party litigation. The ERISA plan functioned exactly as Congress envisioned, providing Defendant Jama Lynn Kurtz with supplemental health benefits. Indeed, Defendants themselves, and their unwillingness to part with the monies recovered in the third-party litigation, contributed substantially to the genesis of the instant litigation. That being said, the court cannot find that Defendants withheld the monies in bad faith. The Fund, by its own admission, gambled when it advanced the benefits to Jama Lynn Kurtz. Further, to the best of the court's research, the captioned action is a case of first impression. As such, it was not in "bad faith" for Defendants to vigorously argue their position.
Based upon the foregoing, and applying the five factors mentioned above, the court finds that Plaintiff is not entitled to an award of attorney's fees and costs. An appropriate order will be issued.
The court will grant in part and deny in part each party's motion for summary judgment. The court will grant Plaintiff's motion on the issue of reimbursement. Defendants will be ordered to reimburse the Fund for monies advanced to them. The court will grant Defendants' motion on the issue of setting off the amount of reimbursement by the amount of attorney's fees and costs in the third-party litigation. Finally, the court will deny Plaintiff's motion on the issue of attorney's fees and costs for the captioned action. An appropriate order will issue.
SYLVIA H. RAMBO, Chief Judge
Middle District of Pennsylvania
Dated: August 1st, 1995.
Presently before the court are the parties' cross-motions for summary judgment. The motions have been fully briefed and are ripe for disposition. Review of the motions and supporting briefs indicates that there are no existing material factual disputes. Thus, in accordance with the accompanying memorandum of law, IT IS HEREBY ORDERED THAT:
1) Plaintiff's motion for summary judgment is GRANTED as to the issue of reimbursement;
2) Plaintiff's motion for summary judgment is DENIED as to the issues of setoff for attorney's fees in third party litigation and as to an award of attorney's fees and costs in the captioned action;
3) Defendants' motion for summary judgment is DENIED as to the issue of reimbursement;
4) Defendants' motion for summary judgment is GRANTED as to the issue of setoff for attorney's fees in the related third-party litigation;
5) Defendants' shall reimburse the fund in the amount of $ 15,254.26, plus interest; the amount currently deposited with the court;
7) The Clerk of Court shall enter judgment in favor of Plaintiff and close the file.
SYLVIA H. RAMBO, Chief Judge
Middle District of Pennsylvania
Dated: August 1st, 1995.
JUDGMENT IN A CIVIL CASE
Decision by Court. This action came to trial or hearing before the Court. The issues have been tried or heard and a decision has been rendered.
IT IS ORDERED AND ADJUDGED pursuant the the Court's memorandum and order dated August 1, 1995 judgment is entered in favor of plaintiff and against the defendants, Gerald F. and Jama Lynn Kurtz.
August 1, 1995