Airtran Airways, Inc. v. Brenda Elem

767 F.3d 1192, 59 Employee Benefits Cas. (BNA) 1995, 2014 U.S. App. LEXIS 18187, 2014 WL 4694776
Court of Appeals for the Eleventh Circuit·Decided September 23, 2014·No. 13-11738, 13-14912·Published·Cited by 12 cases

Opinions

[1195]*1195PRYOR, Circuit Judge:

This appeal requires us to decide whether an employee welfare benefit plan may recover medical costs it spent on behalf of a beneficiary after she and her attorney conspired to hide and disburse settlement funds she received after a car accident. Brenda Elem participated, as an employee of AirTran, in a self-funded employee welfare benefit plan. After Elem suffered injuries in a car accident and the plan paid over $100,000 for her medical care, Elem sued the other driver and settled for $500,000. AirTran sought reimbursement from Elem, but Elem’s attorney, Mark Link, misrepresented that Elem had settled for only $25,000. Link’s sin then found him out, see Numbers 32:23, when he accidentally sent the plan a copy of a settlement check for $475,000. After Air-Tran sued Elem, Link, and Link & Smith, P.C., for violations of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132(a)(3), the district court granted summary judgment and awarded attorney’s fees and costs in favor of Air-Tran.

Elem, Link, and the law firm challenge three orders. They contest the summary judgment on the ground that AirTran failed to satisfy the strict tracing rales of equitable restitution, but these rales do not apply to the equitable lien by agreement that the AirTran plan created. See Sereboff v. Mid Atlantic Med. Serv., Inc., 547 U.S. 356, 364-65, 126 S.Ct. 1869, 1875, 164 L.Ed.2d 612 (2006). Elem and Link argue that the district court abused its discretion when it awarded AirTran attorney’s fees and costs, but the district court had the authority to sanction them for their bad faith. Elem and Link also complain that the district court misapplied Federal Rule of Civil Procedure 70 when the court ordered enforcement of the judgment, but that issue became moot when Link and his law firm complied with the order. We affirm the summary judgment and award of fees and costs and dismiss as moot the appeal of the order to enforce the judgment.

I. BACKGROUND

In 2007, Brenda Elem sustained injuries in a car accident. Her employer, AirTran, paid $131,704.28 for her medical care as a result of her participation in its self-funded employee welfare benefit plan. The plan designated Elem as a constructive trustee over any payments recovered from third parties and created an equitable lien for the amount of benefits paid by the plan. Under the plan, when Elem accepted her medical benefits from AirTran, she acknowledged that AirTran had a first priority claim to all payments made by a third party, even if that third party failed to pay the full amount of her damages. Months after the accident, the plan administrator advised Elem that, if she sued the driver of the other vehicle, Migel Rizo, the terms of the plan required Elem to reimburse AirTran with proceeds from that suit. And the plan administrator also advised Rizo’s insurer, AIG, of that right to reimbursement.

In September 2007, when Elem contacted AIG to settle the claim against Rizo within his liability policy limits of $25,000, she misrepresented that the plan would have no lien against any funds she would recover from AIG. [Id.] She also stated that she intended to sue Rizo for the full amount of her damages if AIG refused to pay the $25,000. AIG responded that Rizo’s policy limit was $25,000 and that it would be willing to issue a settlement check for that amount to Elem if her plan “waive[d] their subrogation lien” or to Elem and the plan if the plan did not waive the lien.

[1196]*1196Elem hired Mark Link of Link & Smith, P.C., as her attorney and sued Rizo for the injuries she sustained in the accident. AIG advised Link that it had offered $25,000 to Elem, but that AIG had notice of a lien and a duty to protect its insured. In December 2007, the plan administrator for AirTran notified Link of the lien in favor of AirTran.

Rizo and Elem later settled their lawsuit for $500,000. During the negotiation of their settlement agreement, Link asked AIG to prepare two releases: one reflecting payment of the policy limit of $25,000 and another for $475,000 in settlement of Rizo’s claim of bad faith. Link also requested two separate checks and demanded that the $25,000 release not mention Rizo’s release of his claim of bad faith. AIG responded that “it seems deceptive” to omit Rizo’s release of his claim, but Link got his way.

Elem executed a release in favor of AIG for $25,000 and another release for $475,000 signed also by Rizo. AIG issued two separate settlement checks to Elem, Link, and Link & Smith, one for $25,000 and another for $475,000. Elem later received $274,184.08; Link & Smith retained $190,000.00 for attorney’s fees and $10,815.92 for expenses; and Link & Smith kept the remaining funds of $4,500.00 in an escrow account.

When Link informed the plan administrator about the settlement, he stated that Elem had settled her claim against Rizo for the policy limit of $25,000 and “has abandoned any hope of recovering” more than that amount. Although Link intended to enclose a copy of the $25,000 check as proof of that settlement, he inadvertently enclosed a copy of the $475,000 check. The plan administrator noticed the error and demanded reimbursement from “[a]ll [settlements and ^judgments.”

When Elem refused to reimburse the plan, AirTran filed suit against Elem, Link, and Link & Smith. The parties filed cross motions for summary judgment, and the district court granted summary judgment in favor of AirTran. The court then awarded AirTran attorney’s fees in the amount of $145,723.28 and costs in the amount of $3,692.52.

When Link still refused to pay, AirTran filed a motion to enforce the judgment under Federal Rule of Civil Procedure 70. Elem and Link responded that Rule 70 was inapplicable because the judgment against them was for money damages enforceable only through a writ of execution. The district court granted the motion and ordered Elem and Link to satisfy the full amount of the judgment or post a bond. AirTran later moved to hold Elem and Link in contempt when they refused to comply with the order, but AirTran withdrew the motion when Link and Link & Smith eventually paid the full amount of the judgment and attorney’s fees and costs. At oral argument, the parties stipulated that Link and his firm conditioned this payment on the disposition of the appeal of the summary judgment and the award of attorney’s fees and costs.

II. STANDARDS OF REVIEW

Two standards of review govern us. First, we review de novo a summary judgment and draw all inferences and review all evidence in the light most favorable to the nonmoving party. Hamilton v. Southland Christian Sch., Inc., 680 F.3d 1316, 1318 (11th Cir.2012). Summary judgment should be granted only when the movant establishes that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Id. We also review the mootness of an appeal de novo. Tanner Adver. Grp., L.L.C. v. Fayette Cnty., Ga., 451 F.3d 777

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Airtran Airways, Inc. v. Brenda Elem, 767 F.3d 1192, 59 Employee Benefits Cas. (BNA) 1995, 2014 U.S. App. LEXIS 18187, 2014 WL 4694776 (11th Cir. 2014).

767 F.3d 1192 (Airtran Airways, Inc. v. Brenda Elem) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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