The opinion of the court was delivered by: GEORGE MAROVICH, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiffs Brian Ruhnke (Mr. Ruhnke") and Colleen Ruhnke ("Mrs.
Ruhnke") filed a three-count complaint against two defendants,
Pipe Fitters' Welfare Fund, Local 597 (the "Plan") and Philip
Doran ("Doran"). Against the Plan, plaintiffs assert that Mrs.
Ruhnke was denied benefits to which she was entitled under an
ERISA plan in violation of the Employee Retirement Income
Security Act ("ERISA") § 502 (a)(1)(B), 29 U.S.C. § 1132
(a)(1)(B). Against Doran, Mrs. Ruhnke asserts a claim for legal
malpractice and a claim for breach of fiduciary duty.
Before the Court are two motions to dismiss, one filed by each
defendant. For the reasons set forth below, the Court grants the
defendant Plan's motion to dismiss. The Court dismisses without
prejudice for lack of jurisdiction the claims (counts II and III)
against defendant Doran. The Court denies as moot Doran's motion
For purposes of these motions to dismiss, the Court takes as
true the allegations in the complaint. In addition, the Court
considers the Pipe Fitters' Welfare Fund, Local 597 Summary Plan
Description and Plan Document (the "Plan"), which is attached to
plaintiffs' complaint, and the other letters that are attached to plaintiff's complaint.
Tierney v. Vahle, 304 F.3d 734, 739 (7th Cir. 2002);
Fed.R.Civ.P. 10(c). The Court also considers the amendments to
the Plan, which are attached to defendant's motion to dismiss.
The Court may consider these amendments without converting the
motion to dismiss into a motion for summary judgment because the
Plan was attached to the complaint, the amendments are part of
the Plan, the documents are relevant to plaintiffs' claims, and
they do not require discovery to authenticate or disambiguate.
Tierney v. Vahle, 304 F.3d 734, 739 (7th Cir. 2002).
Plaintiff Mrs. Ruhnke is a beneficiary of the defendant Plan.
(Mr. Ruhnke is a plan participant). Defendant Doran is an
attorney who represented Mrs. Ruhnke in connection with a lawsuit
arising out of a car accident in which Mrs. Ruhnke was severely
injured. In the complaint, plaintiffs allege that the car
accident was caused by Jeanne Habenicht ("Habenicht"). The
injuries Mrs. Ruhnke suffered in the car accident resulted in
medical bills of $225,132.99 through August 6, 2003. These bills
were paid by the Plan. In the future, Mrs. Ruhnke expects to
incur additional medical expenses as a result of the car
accident. The story of how Mrs. Ruhnke's medical expenses lead
her to file claims against her former attorney and the Plan is
The Plan contains the following subrogation language:
SUBROGATION OR REIMBURSEMENT
Subrogation or reimbursement rules apply if the Fund
pays medical bills which arise out of an incident
(accident) which may result in a claim against a
third-party. Under these circumstances, the Fund is
entitled to reimbursement of its expenditures.
Other sources may include, but are not limited:
other benefit plans; insurance company;
Workers' Compensation; or
any other third party which is obligated to make
payments which the Fund would otherwise be obligated
You and/or your dependent must immediately notify the
Fund Office whenever a claim against a third-party is
made for yourself and/or your dependent regarding any
loss for which benefits are received from the Fund.
You and/or your dependent must cooperate with the
Fund by providing, among other things, information
requested by the Fund concerning subrogation or
reimbursement. You must provide the Fund Office with:
a signed Subrogation and Reimbursement Agreement;
the names and addresses of all potential
third-parties and their insurer, adjusters and claim
accident reports; and
any other information the Fund Office requests.
The Fund Office may withhold future benefit payments
until you comply with these requirements. The Fund
Office may maintain an action against the third-party
on your behalf. You and/or your dependent agree to
give the Fund Office the right to prosecute such
claim or action.
If You Are Reimbursed By A Third Party
If you and/or your dependent receive payment from a
third party for benefits paid by the Fund, you or the
third party must reimburse the Fund Office. The
proceeds from the settlement or judgment must be
divided as follows:
First, a sum sufficient to fully reimburse the Fund
Office for all (100%) benefits advanced. No
reductions or deductions are allowed for attorneys'
any remainder will be paid to you and/or your
The proceeds of the settlement must be divided as
stated above even if you and/or your dependent are
not fully compensated for the loss. However, the Fund
is not entitled to receive reimbursement in excess of
the amount you and/or your dependent receive from all
Furthermore, if you and/or your dependent receive
payment from a third party for Plan benefits already
received and you do not reimburse the Fund as stated
above, the Fund may take any action to recover the benefits
paid. Such action includes, but is not limited to:
withholding benefits payable to you or your
dependents in the future; or
initiating court or legal action.
(Plan at 52-53).
Pursuant to the terms of the Plan, Mr. and Mrs. Ruhnke and the
Plan entered into a subrogation agreement on June 24, 1999. That
agreement provides, in relevant part:
This Subrogation and Reimbursement Agreement
("Agreement") by and between the PIPE FITTERS'
WELFARE FUND, LOCAL 597 ("TRUST FUND'[sic]) and Brian
and Colleen, is hereby entered into this 24th day of
WHEREAS, the Participant sustained injuries from an
"Accident" (any loss or damage) for which a "Third
Party" is or may be responsible on the 5 [sic] day of
WHEREAS, the Participant has or will submit medical
bills associated with the Accident to the TRUST FUND
WHEREAS, this Agreement is entered in pursuant to
Article XI Section 1 of the Pipe Fitters' Welfare
Fund, Local 597 Plan Document.
NOW THEREFORE, for other good and valuable
consideration, the receipt and sufficiency of which
is hereby acknowledged, the TRUST FUND and
Participant do mutually agree as follows:
1. The TRUST FUND agrees to pay the medical bills
associated with the Accident according to the Pipe
Fitters' Welfare Fund, Local 597 Plan Document.
2. Participant does hereby assign and subrogate to
the TRUST FUND all of the rights, claims, interests,
chooses or things in action and action at law, to the
extent of the amount which has been or will be paid
by the TRUST FUND which the Participant may have
against any party, person, firm or corporation,
private or public, who may be liable or may hereafter
be adjudged liable for the loss, and the Participant
authorizes and empowers the TRUST FUND to sue,
compromise or settle in the name of the Participant,
and, said TRUST FUND is hereby fully substituted in
the place of the Participant. Participant further
agrees that he/she will execute any and all appeal bonds or other instruments in writing
pertaining to any litigation arising out of losses
herein above referred to, at the request of the TRUST
3. Should Participant or his/her representative
receive any money or other assets from a responsible
Third Party, the Participant does hereby agree to
reimburse the TRUST FUND 100% of the benefits paid on
account of the Accident by the TRUST FUND, [sic]
shall not, however, be entitled to receive
reimbursement in excess of the amount which the
Participant receives from all responsible Third
4. The recitals shall be a part of this Agreement.
(Exh. B to Plaintiffs' Complt.). The Plan proceeded to pay
$225,132.99 for Mrs. Ruhnke's medical expenses arising from the
Mrs. Ruhnke hired Doran to represent her with respect to her
rights arising from the car accident. With Doran as her counsel,
Mrs. Ruhnke filed suit against Habenicht and, in June 2003,
settled the lawsuit for $1,100,000.00.
Next, Doran sought to settle with the Plan its subrogation
right. On August 6, 2003, an attorney for the Plan sent to Doran
a letter which stated, in relevant part:
As General Counsel to the Pipe Fitters' Welfare Fund,
Local 597 and as per our telephone conversation
yesterday, I am authorized to communicate to you that
the Welfare Fund will accept $157,593.09 in full and
final satisfaction of its rights to reimbursement and
subrogation in the amount of $225,132.99.
This offer shall remain valid provided payment is
received within 120 days from the date shown above.
If payment is not received within such time, this
offer shall lapse and become void.
Additionally, your client should understand that
future medical bills not already paid by the Welfare
Fund that are related to the above captioned matter
will be her responsibility, unless and until she
incurs related medical expenses which exceed the
proceeds from the litigation.
(Exh. D to Plaintiff's Complt.). Doran sent a check to the Plan
in the amount of $157,593.09. According to the complaint allegations, Doran did not show the
Plan's August 6, 2003 letter to Mrs. Ruhnke or discuss the
subrogation settlement offer with her. Nor did Mrs. Ruhnke
authorize Doran to accept the settlement offer. Doran, however,
provided Mrs. Ruhnke with a "Settlement Breakdown Sheet" which
stated that the Plan's subrogation claim was compromised for
Later in August 2003, Mr. Ruhnke submitted to the Plan on
behalf of Mrs. Ruhnke medical bills related to the Accident. The
Plan denied the claim for benefits, stating "Denied Per
Subrogation Agreement." Mrs. Ruhnke appealed the Plan's denial of
her request for benefits. As her appeal, Mrs. Ruhnke argued:
Both [Mr. and Mrs. Ruhnke] executed a Subrogation
Agreement with the Plan. The Subrogation Agreement
was in accordance with the Plan provisions and
consistent with the Plan's summary of benefits
provided to [Mr. and Mrs. Ruhnke].
At the time of the settlement of the injury claim, in
accordance with the Plan documents and the
Subrogation Agreement, the Plan was entitled to
recover from the settlement proceeds all of the
monies it had advanced, less a reasonable attorney's
fee, in procuring the reimbursement to the Plan, all
in accordance with the laws of Illinois and the
Employee Retirement Income Security Act (ERISA).
No Plan provision, no Plan summary description, and
no Subrogation Agreement provision authorized the
Plan to recover any more or limit future benefits
available to the members.
For a reason or reasons unknown, the Plan's lawyers
demanded, and Colleen's lawyer at the time, without
her knowledge consent or permission required that
Colleen be denied future benefits under the Plan
until the full settlement amount had been expended by
Colleen for any further medical treatment for
injuries from that accident may require. Thus,
without authority, the Plan demanded that Colleen be
self-insured for any future medical figure.
Colleen has received further treatment and the Plan
has denied reimbursement for that treatment. The
Plan's denial is respectfully unlawful and without
authority in law, or in any of the Plan documents. We respectfully request an appeal from that denial,
and that the Trustees overrule the initial denial of
Plan benefits. I am available to personally appear
(Exh. E to Plaintiffs' Complt.).
On November 18, 2004, the Plan denied Mrs. Ruhnke's appeal,
The Board of Trustees reviewed the above captioned
matter on November 18, 2004, and has denied the claim
on appeal for the reasons in this letter.
The participant submitted claims in the amount of
$19,384.89 for his dependent spouse, Colleen Ruhnke.
These claims are for services related to a car
accident that occurred on May 5, 1999. The claims
were denied based on the settlement of amounts owed
by the claimant under a subrogation agreement with
the Plan. The terms of the Plan are provided in the
enclosed plan booklet, which is a combined Summary
Plan Description and Plan Document. The relevant Plan
provision entitled, Subrogation or Reimbursement,
begins on page 52 of the Plan Booklet.
The claimant requested an appeal of this adverse
benefits determination pursuant to the Plan's claim
and appeal procedures. Under the Plan's procedures,
the Board of Trustees conducts a full and fair review
of the claim and adverse benefit determination.
On November 18, 2004, the Board of Trustees reviewed
the claim on appeal including the information
provided in the letter of appeal. The Board
considered the following history of the case.
On June 24, 1999, the claimant entered into a
subrogation agreement with the Plan. The Plan agreed
to pay medical bills related to the accident. The
claimant agreed that should any money from a
responsible third party be received, the claimant
will reimburse the Plan 100% of benefits paid on
account of the accident. The claimant received from a
responsible third party a settlement related to the
accident of approximately $1.5 million.
As of August 6, 2003, the Plan paid for $225,132.99
in medical bills related to the accident.
On August 6, 2003, the Plan offered to accept
$157,593.09 in settlement of the $225,132.99 in
medical bills that were paid by the Plan as of that
date and reserved the right to offset future medical
bills related to the accident against the amount
received from the responsible third party. Under the
terms of the Plan's offer, the offset remains in place until the claimant
incurs related medical expenses which exceed the
proceeds from the litigation.
The offer of settlement is in writing and is
consistent with the Plan provisions on Subrogation or
Reimbursement. The offer of settlement was accepted
by the claimant by sending a check for the stated
The claim in question is for medical expenses related
to the accident. According to the terms of the August
6, 2003 settlement agreement the claimant is
responsible for medical expenses related to the
accident until she can show that [sic] amount of
related medical expenses exceed [sic] the amount
received from the proceeds from the litigation.
Accordingly, the Board voted unanimously to deny your
claim on appeal. The Board had discretionary decision
making authority under the Plan document and its
decision is final. No further appeals are permitted
under the terms of the Plan. However, you have the
right to bring a civil action under Section 502(a) of
the Employee Retirement Income Security Act of 1974
(ERISA). You have the right to access and copy (free
of charge) all documents, records, and other
information relevant to the claim.
I have enclosed a copy of the June 24, 1999
Subrogation Agreement, the August 6, 2003 Settlement
Agreement, the Plan booklet, and Amendment No. 2002-3
on Claim Procedures.
(Exh. F to Plaintiffs' Complt.).
Based on these facts, Mr. and Mrs. Ruhnke assert against the
Plan a claim under ERISA for denial of benefits. Mrs. Ruhnke
asserts claims against her former attorney ...