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Central States, Southeast and Southwest Areas Health and Welfare Fund v. Lewis

United States District Court, N.D. Illinois, Eastern Division

September 30, 2014

CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS HEALTH AND WELFARE FUND and ARTHUR H. BUNTE, JR., as Trustee, Plaintiffs,
v.
BEVERLY LEWIS and DAVID T. LASHGARI, Defendants.

OPINION AND ORDER

JOAN H. LEFKOW, District Judge.

In 2008, defendant Beverly Lewis was injured in a car accident and the resulting medical expenses were covered by plaintiff Central States, Southeast and Southwest Areas Health and Welfare Fund ("Central States"). In 2011, Lewis settled a state court tort action related to the accident and the settlement proceeds were paid to her attorney, defendant David Lashgari, who kept $298, 149 and disbursed the remaining $201, 851 to Lewis and her husband. Central States then brought this suit against Lewis and Lashgari for reimbursement of Lewis's medical expenses from the settlement proceeds.[1]

After a trip to the Seventh Circuit for the interlocutory appeal of a contempt order, the case is now before the court on cross-motions for summary judgment.[2] For the reasons stated below, the motion of Lewis and Lashgari (dkt. 161) is denied. Central States' motion (dkt. 148) is granted as to defendants' liability as discussed herein but is denied with respect to the amount of Central States' recovery.[3]

LEGAL STANDARD

Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). To determine whether any genuine fact issue exists, the court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed.R.Civ.P. 56(c). In doing so, the court must view the facts in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Scott v. Harris, 550 U.S. 372, 378 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). When considering cross-motions for summary judgment, the court must be careful to draw reasonable inferences in the correct direction. See, e.g., Int'l Bhd. of Elec. Workers, Local 176 v. Balmoral Racing Club, Inc., 293 F.3d 402, 404 (7th Cir. 2002). The court may not weigh conflicting evidence or make credibility determinations. Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 704 (7th Cir. 2011).

The party seeking summary judgment bears the initial burden of proving there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In response, the non-moving party cannot rest on bare pleadings alone but must designate specific material facts showing that there is a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). If a claim or defense is factually unsupported, it should be disposed of on summary judgment. Celotex, 477 U.S. at 323-24.

BACKGROUND FACTS

I. Central States Plan and Covered Medical Expenses

As a teamster, Lewis's husband and his dependents were covered by the Central States' health and welfare plan regulated by the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1002(1) ("the Plan"). The Plan provides that if Central States pays a beneficiary's medical expenses for an accident-related injury, Central States is immediately subrogated to the beneficiary's rights of recovery from third parties arising out of the accident. ( See dkt. 166-2, ex. D-2 ("Plan") § 11.14.)[4] The Plan further provides that Central States' payment of accident-related medical expenses shall "result in an immediate assignment to [Central States] of all right, title and interest of the Covered Individual to and in any and all of his [recovery rights] to the extent of such payments" and clarifies that Central States is "entitled to receive payment and reimbursement in the full amount of the Fund's Subrogation Rights before the Covered Individual receives any settlement proceeds[.]" ( Id. §§ 11.14(c)-(d).) The Plan allows Central States to assert a lien on the beneficiary's recoveries from third parties. ( See id. § 11.14(f).)

Lewis was injured in an automobile accident on October 8, 2008 and Central States paid her resulting medical expenses. Beginning in December 2008, Central States advised Lewis and her attorney, Lashgari, that it had a lien in the amount of Lewis's covered medical expenses on any accident-related recoveries from third parties. Central States submits that, from the date of the accident through April 5, 2011, it paid $180, 003.46 in accident-related medical expenses for Lewis. Lewis disputes that all of the expenses related to the accident.

II. State Court Tort Action and Settlement Proceeds

In October 2009, Lewis, through her attorney Lashgari, filed a tort suit in Georgia state court against the driver of the car at the time of the accident and his employer. In 2011, Lewis settled the suit for $500, 000 and the defendants' insurer wrote a check for that amount to the order of Beverly Lewis, Michael Lewis, and Lashgari's firm, Lashgari & Associates, Attorneys at Law, P.C. (Dkt. 84 at 2.) On June 8, 2011, Lashgari deposited the settlement funds in a trust account in the name of Lashgari & Associates. A week later Lashgari dispersed $201, 851 to Lewis and her husband. He transferred the remaining $298, 149 to Lashgari & Associates' operating account. Neither Lewis nor Lashgari paid any amount to Central States to satisfy its lien.

Lewis states that she dissipated the settlement proceeds by purchasing a vehicle and a house and paying for other living expenses. ( See dkt. 113, ex. 2 ¶¶ 4-6.) Lashgari states that the funds deposited into his law firm's operating account were used to pay accounts payable, operating expenses, and for renovation and replacement of corporate equipment. ( See dkt. 66 ¶¶ 30, 32.) The amounts personally ...


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