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Central States, Southeast and Southwest Areas Health and Welfare v. Beverly Lewis and David T.

May 15, 2012


The opinion of the court was delivered by: Judge Joan H. Lefkow

Illinois Northern District Federal District Court 1_11_cv_04845_43.pdf


Central States, Southeast and Southwest Areas Health and Welfare Fund ("Central States"), through one of its trustees in his representative capacity, filed a two count complaint under § 502(a)(3) of the Employment Retirement Income Security Act of 1974 ("ERISA"),

29 U.S.C. § 1132(a)(3), seeking an equitable lien and constructive trust (Count I) and a subrogation lien and constructive trust (Count II) on funds held by Beverly Lewis and her lawyer David T. Lashgari ("defendants"). Central States alleges that Lewis received a settlement payment from an automobile accident and that she failed to reimburse Central States for medical payments that it made on her behalf. Lashgari represented Lewis in the lawsuit related to her accident. Before the court is Central States's motion for a preliminary injunction under Federal Rule of Civil Procedure 65 enjoining Lewis and Lashgari from disposing of a portion the settlement fund, specifically $180,033.46, until the claims in this case have been fully litigated. For the reasons set forth herein, Central States's motion [#27] will be granted.


From the documents submitted,*fn1 the court ascertains the following facts, disputed where indicated. Central States is an ERISA regulated employee welfare benefit plan under 29 U.S.C. § 1002(1). Lewis was a "covered participant" of Central States's through her husband Michael's participation in Central States's welfare benefit plan under a collective bargaining agreement. As a covered participant, Lewis was subject to the terms, conditions and limitations upon payment of benefits, including Central States's right to full reimbursement, immediate subrogation, and first lien rights as to any recovery against a third party related to an incident giving rise to payment under the plan.

Lewis was injured in an automobile accident on October 8, 2008*fn2 while riding in a vehicle driven by Joseph Hanson, her son-in-law. The vehicle was owned by Hanson's employer, L.E. Schwartz & Son, Inc. ("Schwartz & Son"), and the accident allegedly occurred while Hanson was within the scope of his employment. Central States's plan covered medical expenses for Lewis as Michael's dependent, resulting in payment of $108,003.46 from October 8, 2008 through April 5, 2011 on Lewis's behalf. A year after the accident, Lewis and her husband, by their lawyer, David T. Lashgari, filed a lawsuit in Bibb County, Georgia, Civil Action No. 73321, against Hanson and his employer, Schwartz & Son, to recover damages related to the accident. (Defs.' Resp. Ex. A.)

The complaint alleged several counts of negligence against Hanson and Schwartz & Son,*fn3 and loss of consortium as to Lewis's husband. Two additional counts alleged other claims against Hanson and Schwartz & Son. Count II claimed intentional infliction of emotional distress based on allegations that Hanson, after the accident, deliberately and maliciously prevented Lewis's grandchildren from visiting their severely injured grandmother, caused his wife and children to cut off all contact with Lewis, failed to apologize to her, and began to ridicule her to others. Count III claimed invasion of privacy alleging that Schwartz & Son, through Hanson, wrongly obtained and disseminated private medical information belonging to Lewis. (Defs.' Resp. Ex. A.) On May 4, 2011, after a motion for summary judgment was filed, the Lewises voluntarily dismissed their complaint without prejudice. (Id. Ex. B & C.) Shortly thereafter, a settlement occurred. Lewis settled her claims for $500,000, but, according to Lewis, the settlement related only to Hanson's post-accident conduct. (Answer ¶ 9, Lewis Aff. ¶ 6.) Lashgari states that he disbursed to Lewis an unspecified amount from the settlement fund on June 15, 2011. (Presumably, he paid himself an attorney's fee first). Central States filed the present lawsuit on July 19, 2011.


A party seeking a preliminary injunction must demonstrate that (1) its claim has some likelihood of success on the merits; (2) traditional legal remedies would be inadequate; and (3) absent injunctive relief, it will suffer irreparable harm in the period prior to final resolution of its claim. Girl Scouts of Manitou Council v. Girl Scouts of the U.S. of Am., Inc., 549 F.3d 1079, 1086 (7th Cir. 2008). If the moving party satisfies these threshold requirements, the court must balance the threatened injury to the moving party with the threatened harm the injunction may inflict on the non-movant. Id. The court also must consider the public interest in either the grant or denial of the injunctive relief. Id. In applying these criteria, the court uses a "sliding scale" approach: if a claim is very likely to succeed on the merits, less harm to the plaintiff will be required to justify injunctive relief and vice versa. Abbott Labs. v. Mead Johnson & Co., 971 F.2d 6, 12 (7th Cir. 1992).


I. Whether Central States is Seeking "Equitable Relief" under § 502(a)(3) ERISA § 502(a)(3) authorizes a civil action "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." 29 U.S.C. § 1132(a)(3). The parties do not dispute that Central States, through one of its trustees, is authorized to bring the present action. Section 502(a)(3)(B) of ERISA, however, allows only equitable relief, and to succeed on the merits of its claims Central States must show that the relief it seeks is equitable. If it is not, the case does not arise under federal law and the court lacks subject matter jurisdiction to consider Central States's claims. See Varco v. Admin. Comm. of the Wal-Mart Stores, Inc. Assocs.' Health & Welfare Plan, 338 F.3d 680, 686--688 (7th Cir. 2003).

In Great-West Life Annuity Insurance Company v. Knudson, the United States Supreme Court held that § 502(a)(3) does not authorize a legal claim against a plan beneficiary where the settlement fund had already been distributed to a Special Needs Trust and were not in the possession of the beneficiary. 534 U.S. 204, 214, 122 S. Ct. 708, 151 L. Ed. 2d 635 (2002). The Court distinguished between restitution at law and restitution at equity and concluded that equitable relief under ยง 502(a)(3) was unavailable because Great-West was not claiming "particular funds that, in good conscience, belong to petitioners, but that petitioners are ...

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