AC Houston Lumber Co. Employee Health Plan v. Berg

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT DEC 29 2010
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
AC HOUSTON LUMBER COMPANY No. 10-15170
EMPLOYEE HEALTH PLAN,
D.C. No. 2:08-cv-02374-JAM-
Plaintiff - Appellee, GGH
v.
MEMORANDUM*
WILLIAM L. BERG; BERG INJURY
LAWYERS,
Defendants - Appellants.
Appeal from the United States District Court
for the Eastern District of California
John A. Mendez, District Judge, Presiding
Argued and Submitted December 8, 2010
San Francisco, California
Before: THOMPSON, COWEN** and SILVERMAN, Circuit Judges.
Defendants William Berg and Berg Injury Lawyers appeal the district
court’s grant of summary judgment in favor of plaintiff AC Houston Lumber
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The Honorable Robert E. Cowen, Senior United States Circuit Judge
for the Third Circuit, sitting by designation.
Company Employee Health Plan. AC Houston, an ERISA1 plan, sued the
defendants pursuant to 29 U.S.C. § 1132(a)(3) to enforce a plan lien for medical
benefits paid on behalf of plan beneficiary Mark Freed. The defendants
represented Freed in his personal injury action and disbursed the settlement money
without paying the plan lien. The district court held that the plan’s lien had
priority over attorneys’ fees and ordered the law firm and attorney defendants to
pay $16,522.05 of the law firm’s fees and costs to the plan. We have jurisdiction
pursuant to 28 U.S.C. § 1291 and reverse.
Hotel Employees & Rest. Employees Int’l Union Welfare Fund v. Gentner,
50 F.3d 719 (9th Cir. 1995), controls. Gentner held that an ERISA plan’s lien
cannot be enforced against an attorney who did not sign the reimbursement
agreement or expressly agree to honor the plan’s lien. Id. at 721-22.
The plaintiff here argues that Sereboff v. Mid Atlantic Med. Serv., Inc., 547
U.S. 356 (2006), overrules Gentner. We disagree. Sereboff concerned claims
against plan beneficiaries, parties who were bound by the plan terms. Id. at 359-
1
Employee Retirement Income Security Act, 29 U.S.C. §§ 1001-1461.
2
60. Sereboff did not undermine the logic of Gentner, which dealt with lawyers
who are not parties to the plan.2
REVERSED.
2
Because we reverse on this ground, we do not consider the alternative
arguments asserted by the defendants.
3
FILED
AC Houston Lumber Company v William Berg 10-15170 DEC 29 2010
MOLLY C. DWYER, CLERK
THOMPSON, Senior Circuit Judge, dissenting: U.S. COURT OF APPEALS
I respectfully dissent. To the extent our decision in Hotel Employees &
Restaurant Employees Int’l Union Welfare Fund v. Gentner, 50 F.3d 719 (9th Cir.
1995), prevents an ERISA plan from recovering against an attorney who possesses
a portion of the settlement funds with knowledge of the subrogation agreement
between his client and the ERISA plan, it has been overruled by Sereboff v. Mid
Atlantic Medical Services, Inc., 547 U.S. 356 (2006).
Any difference between this case and Sereboff is illusory, because as the
Sereboff Court explained, the claim for equitable restitution attached “‘as soon as
the settlement fund was identified.’” See 547 U.S. at 364 (citation omitted). At that
point, in the present case, the funds were in Freed’s “constructive possession,” and
the Berg law firm was acting as Freed’s agent when it disbursed the funds to itself
as attorneys’ fees. See Bombardier Aerospace Emp. Welfare Benefits Plan v.
Ferrer, Poirot & Wansbrough, 354 F.3d 348, 356 (5th Cir. 2003). No further
tracing or maintenance of a fund is necessary for equity to allow repayment.
As two of our sister circuits recently concluded, once an ERISA § 502(a)(3)
claim attaches, there is no practical difference if the money is then disbursed to the
beneficiary, as was the case in Sereboff, or to a third party with knowledge of the
subrogation agreement. See Longaberger Co. v. Kolt, 586 F.3d 459, 469 (6th Cir.
2009) (allowing recovery against the beneficiary’s attorney where the attorney
already disbursed a portion of the funds to himself as attorney’s fees); Admin.
Comm. for the Wal-Mart Stores, Inc. Assocs.’ Health & Welfare Plan v. Horton,
513 F.3d 1223, 1227-29 (11th Cir. 2008) (allowing recovery against the
conservator of a special needs trust where the settlement funds were deposited).
Here, because the funds to which AC Houston was “entitled” under the
subrogation agreement were “specifically identifiable” and in the Berg law firm’s
“possession and control,” the district court properly imposed an equitable lien over
them pursuant to § 502(a)(3). See Sereboff, 547 U.S. at 362-64. The fact that the
law firm never signed the subrogation agreement is irrelevant, because the firm
knew of the agreement when it decided to represent Freed and before it disbursed a
portion of the funds to itself as attorneys’ fees. Accordingly, I would affirm.
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