ERISA Plan Precluded From Pursuing Recovery From Third Party Settlement Due to Delay

In the case of Carpenter Technology Corp. v. Weida, 2018 W.L. 398297 (E.D. Pa. Jan. 11, 2018 Stengel, C.J.) (Mem. Op.), the court granted a Defendant’s Motion to Dismiss the Plaintiff’s action for equitable relief to enforce the terms and preserve the assets of an Employee Welfare Benefit Plan under the terms of the Employee Retirement Income Security Act (ERISA).  

The court explained that the Plaintiff, Carpenter Technology Corporation Health & Welfare Plan was a self-funded Employee Welfare Benefit Plan.   The plan contained a provision to fulfill ERISA’s requirement that such a plan be established and maintained by a written plan document.  That document contained an expressed provision indicating that Plan participants must fully reimburse the Plan from payments received from a settlement of personal injury claims against third parties.  

By way of further background, the Defendant in this matter was injured in a car accident. The Plan paid medical benefits on the injured party’s behalf.   The injured party filed suit against the tortfeasor and settled that action.  

The Plan then filed this suit asserting that the injured party was in possession of funds that belonged to the Plan and, through this lawsuit, the Plan was attempting to compel the injured party to reimburse the plan from the settlement proceeds.  

The Plan was seeking (1) an Order imposing a constructive trust and/or equitable lien in favor of the Plan against any settlement funds or any property into which the settlement funds had been converted by the injured party; (2) an Order enjoining the injured party from dissipating any of these settlement funds until the Plan’s rights could be adjudicated; (3) an Order enjoining the injured party from transferring or disposing of the settlement funds; and/or reasonable attorney’s fees and costs.  

In response, the injured party Defendant/Plan beneficiary filed the subject motion to dismiss which was granted by the court.  

In granting the Motion to Dismiss, the court noted that the ERISA Plan waited approximately nine (9) months after receiving notice from the injured party’s personal injury attorney of the pending third party settlement distribution before the Plan ever filed this Complaint for equitable relief.  

The Court also noted that, although the language of the Plan entitled the Plaintiff to relief, by the time the Plaintiff had filed this Complaint, the settlement proceeds, which had been deposited into a joint marital account, had already been dissipated.   The court additionally noted that, generally speaking, a joint property is protected from creditors for an individual spouse’s debt.  

Anyone wishing to review a copy of this decision may click this LINK.  The accompanying Order may be viewed HERE.

I send thanks to Attorney Scott Cooper of the Harrisburg law firm of Schmidt Kramer for bringing this case to my attention.