Milgram v. ORTHOPEDIC ASSOC. DEFINED CONTRIBUTION
666 F.3d 68
| 2d Cir. | 2011Background
- Milgram, a retired orthopedic surgeon, had two ERISA plans with Orthopedic Associates: a defined contribution plan (the Plan) and a PSP.
- A 1996 divorce caused half of Milgram’s PSP and a portion of his MPP to be ordered to Breen, but Bay Ridge Group transferred half of both accounts to Breen due to clerical error.
- Breen withdrew her portion in 1998; Milgram discovered the error in 1999 and Orthopedic pursued Breen in 1999–2001 to recover the overpayment.
- Milgram sued in 2001–2006 under ERISA § 502(a)(1)-(3) for the misallocation; the district court granted partial summary judgment against the Plan in the principal amount and later held a bench trial on remaining issues.
- In 2006 the court granted Milgram a judgment for $763,847.93, later vacated the 2006 order as non-final, and in 2010 entered a final judgment against the Plan for $1,571,723.73 including accumulated earnings and interest.
- The Plan sought to prevent enforcement arguing ERISA’s anti-alienation provision and related issues; the district court enforced the judgment, and the Plan appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ERISA allows enforcement of a judgment against plan assets before recovery from Breen. | Milgram argues the Plan may be sued and a judgment enforced against plan assets under ERISA § 502(a)(1). | Plan contends anti-alienation prohibits using plan funds to satisfy a judgment until recoupment from Breen. | Affirmed: plan assets may be used to enforce a judgment against the Plan; anti-alienation does not bar this. |
| Whether undistributed plan assets constitute 'benefits' under ERISA for anti-alienation purposes. | Milgram contends undistributed funds are not benefits protected from alienation. | Plan argues undistributed funds are benefits allocated to participants and thus inalienable. | Affirmed: undistributed funds are not 'benefits' in the alienation sense; they are plan assets held in trust. |
| Whether the district court erred in concluding the Plan could be charged for Milgram’s losses and whether fiduciary duties bar payment. | Milgram asserts fiduciary duties require restitution and the payment is a proper plan expense. | Plan asserts payment would breach fiduciary duties and be a prohibited transaction. | Affirmed: payment is permitted as a reasonable plan expense and not a prohibited transaction. |
| Whether Milgram was entitled to accumulated earnings and prejudgment interest on the principal. | Milgram seeks interest/time-value of funds as contract-based recovery under Dobson. | Plan disputes interest as improper or not contract-based. | Affirmed: accumulated earnings and prejudgment interest awarded under contract interpretation. |
Key Cases Cited
- Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825 (Supreme Court, 1988) (money judgments may be enforced against ERISA plan assets)
- Guidry v. Sheet Metal Workers Nat’l Pension Fund, 493 U.S. 365 (Supreme Court, 1990) (anti-alienation not applicable to current pension income in creditor execution)
- Kickham Hanley P.C. v. Kodak Retirement Income Plan, 558 F.3d 204 (2d Cir., 2009) (withholding attorney's fees from plan benefits not allowed when benefits currently due)
- LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248 (Supreme Court, 2008) (fiduciary duties and remedies under ERISA § 502(a)(2) and (3))
- Graden v. Conexant Systems Inc., 496 F.3d 291 (3d Cir., 2007) (standing and fiduciary duty implications for plan participants and breaches)
- Evans v. Akers, 534 F.3d 65 (1st Cir., 2008) (implications of ET fiduciary duties on plan assets; anti-alienation context)
- Harris v. Amgen, 573 F.3d 728 (9th Cir., 2009) (anti-alienation and plan asset enforcement discussions in circuit context)
- Dobson v. Hartford Financial Services Group, Inc., 389 F.3d 386 (2d Cir., 2004) (contract-based recovery of funds and interest in ERISA context)