Milgram v. ORTHOPEDIC ASSOC. DEFINED CONTRIBUTION
666 F.3d 68
| 2d Cir. | 2011Background
- Milgram seeks ~$1.5 million from the Plan for funds improperly transferred to Breen during a 1996 divorce settlement.
- Breen received an overpayment due to a clerical error by Bay Ridge Group; Milgram later discovered the error in 1999.
- Milgram sued Orthopedic and the Plan for contract and fiduciary relief under ERISA § 502(a)(1)-(3); a bench trial occurred in 2006.
- District court granted Milgram summary judgment against the Plan for the principal amount and later issued a final judgment totaling $1,571,723.73 including earnings and interest.
- The Plan argued enforcement violated ERISA’s anti-alienation provision and sought relief under CPLR/RF rules; Milgram opposed enforcement.
- On appeal, the Second Circuit upheld enforcement against the Plan assets, rejected anti-alienation and related defenses, and addressed accumulated earnings and prejudgment interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ERISA anti-alienation bars enforcement against plan assets | Milgram argues plan assets may be used to satisfy a judgment against the Plan. | Plan contends anti-alienation prevents using Plan funds to satisfy the judgment before Breen is fully recouped. | Enforcement against the Plan assets is permissible; anti-alienation does not bar recovery. |
| Whether undistributed Plan funds can be treated as 'benefits' under ERISA | Undistributed assets are not 'benefits' and thus not protected from creditors. | Plan treats funds in accounts as benefits to participants, potentially shielded from creditor claims. | Undistributed assets are not benefits in the alienation sense; enforcement against the Plan is allowed. |
| Whether other ERISA/plan provisions bar enforcement | Plan fiduciary duties and prohibited transactions defenses preclude enforcement until Breen returns funds. | Defendant asserts violations of plan provisions/fiduciary duties prevent enforcement. | No remaining ERISA/plan provisions bar enforcement; payments are proper expenses to restore misused funds. |
| Whether Milgram is entitled to accumulated earnings and prejudgment interest | Contract principles allow recovery of time value of money. | Dobson boundaries and plan terms may limit recovery. | Milgram entitled to accumulated earnings and prejudgment interest; plan terms support compensation for lost use. |
Key Cases Cited
- Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825 (U.S. Supreme Court, 1988) (money judgments may be enforced against ERISA plans)
- LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248 (U.S. Supreme Court, 2008) (fiduciary breach claims permissible against plan administrator)
- Guidry v. Sheet Metal Workers Nat’l Pension Fund, 493 U.S. 365 (U.S. Supreme Court, 1990) (anti-alienation limits do not bar garnishment of current benefits)
- Kickham Hanley P.C. v. Kodak Retirement Income Plan, 558 F.3d 204 (2d Cir., 2009) (current benefit payments cannot be offset to pay attorney’s fees)
- Dobson v. Hartford Financial Services Group, Inc., 389 F.3d 386 (2d Cir., 2004) (time value of money in contract-like recovery recognized)
- Harris Trust and Sav. Bank v. John Hancock Mut. Life Ins. Co., 302 F.3d 18 (2d Cir., 2002) (fiduciary duties; delineation of plan administrator's ministerial actions)
- O'Toole v. Arlington Trust Co., 681 F.2d 94 (1st Cir., 1982) (distinction between plan trust corpus and benefits; creditors can reach trust assets)
- Spalding v. Mason, 161 U.S. 375 (U.S. Supreme Court, 1896) (natural justice; compensation for time value of money)