Central States, Southeast & Southwest Areas Health & Welfare Fund v. Lewis
745 F.3d 283
7th Cir.2014Background
- Beverly Lewis was injured in a 2008 automobile accident; her ERISA-covered health plan paid about $180,000 for medical treatment and held a subrogation lien on recovery from Lewis’s tort suit.
- Lewis (represented by Georgia lawyer David T. Lashgari) settled her state-court claim for $500,000 in June 2011. The settlement and related documents expressly covered all claims arising from the accident.
- Lashgari retained roughly $298,000 of the settlement and paid Lewis a portion; he refused to pay the plan its $180,000 lien share.
- The plan filed an ERISA suit (29 U.S.C. § 1132(a)(3)) to enforce its equitable lien and obtained a preliminary injunction and an order to place at least $180,000 in Lashgari’s client trust account; defendants ignored both orders.
- The district court held the defendants in civil contempt, ordered production of financial records, and referred potential disciplinary matters; defendants appealed the contempt finding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of plan’s subrogation lien / remedy available | Plan: equitable lien creates constructive trust over settlement proceeds; equitable relief under ERISA § 1132(a)(3) to recover $180k | Defendants: settlement funds dissipated; this is effectively a money judgment (legal relief), so § 1132(a)(3) doesn’t authorize relief | Court: equitable lien gave rise to constructive trust; tracing not required; equitable relief available to enforce lien (ERISA suit proper) |
| Appealability of contempt order | Plan: contempt enforces preliminary injunction; underlying injunction is appealable | Defendants: challenged contempt as interlocutory | Court: contempt order is appealable because it enforces an appealable preliminary injunction under 28 U.S.C. § 1292(a)(1) |
| Sufficiency of defendants’ evidence of inability to pay | Plan: defendants produced inadequate/implausible affidavits and bank records; willful refusal to honor lien | Defendants: affidavits state they do not possess funds to restore $180k | Court: bare sworn statements insufficient; contemnor must produce credible proof of inability to pay; evidence showed willful dissipation and contempt |
| Sanctions for frivolous appeal | Plan: asks for Rule 38 sanctions (attorney-fee award) | Defendants: appeal lacks merit | Court: appeal deemed frivolous; issued order to show cause why Rule 38 sanctions should not be imposed; affirmed dismissal of appeal |
Key Cases Cited
- Sereboff v. Mid Atl. Medical Servs., Inc., 547 U.S. 356 (2006) (equitable lien/constructive trust doctrine supports ERISA plan recovery)
- Gutta v. Standard Select Trust Ins. Plans, 530 F.3d 614 (7th Cir. 2008) (affirming equitable lien principles in ERISA context)
- Longaberger Co. v. Kolt, 586 F.3d 459 (6th Cir. 2009) (equitable relief and tracing not required where lien creates constructive trust)
- In re Resource Technology Corp., 624 F.3d 376 (7th Cir. 2010) (ability-to-pay as potential defense to contempt)
- Halderman v. Pennhurst State School & Hospital, 673 F.2d 628 (3d Cir. 1982) (appealability principle for contempt tied to appealability of underlying order)
- Mohawk Industries, Inc. v. Carpenter, 558 U.S. 100 (2010) (distinction between discovery orders and appealable injunctions)
- Cleveland Hair Clinic, Inc. v. Puig, 106 F.3d 165 (7th Cir. 1997) (limits on interlocutory appeals by defiance)
- United States v. Rylander, 460 U.S. 752 (1983) (oath/affidavit of inability to pay does not per se preclude contempt)
- In re Grand Jury Proceedings, 280 F.3d 1103 (7th Cir. 2002) (jail as remedy for civil contempt)
- Central States, Southeast & Southwest Areas Pension Fund v. Central Cartage Co., 76 F.3d 114 (7th Cir. 1996) (market-rate valuation of in-house counsel services for fee awards)