United States District Court, E.D. New York
KOHL'S DEPARTMENT STORES, IN ITS CAPACITY AS PLAN ADMINISTRATOR OF THE KOHL'S GROUP HEALTH PLAN, Plaintiff,
FRED CASTELLI and LITE & RUSSELL Defendants,
For the Plaintiff: James N. Tracy, Esq., Thomas Vincent Convery, Esq., Of Counsel, Tansey, Tracy & Convery, Staten Island, NY.
For the Defendants: Justin N. Lite, Esq., Of Counsel, Lite & Russell, West Islip, NY.
MEMORANDUM OF DECISION AND ORDER
ARTHUR D. SPATT, United States District Judge.
On June 14, 2012, the Plaintiff Kohl's Department Stores (" Kohl's" or the " Plaintiff" ), the Plan Administrator for the Kohl's Group Health Plan (the " Plan" ), commenced this action against the Defendants Fred Castelli (" Castelli" ) and Lite & Russell (collectively, the " Defendants" ). The Plaintiff commenced this action to enforce the terms of the " Plan" and for equitable relief under the provisions of 29 U.S.C. § 1132(a)(3).
Specifically, the Plaintiff brings causes of action demanding that (1) Lite & Russell reimburse the Plan for the portion of legal service fees that were rendered in connection with a personal injury action filed by Castelli against a third-party in the Supreme Court of the State of New York (" the Underlying Action" ) and (2) the Defendants reimburse the Plan for the portion of the settlement proceeds recovered in the Underlying Action as reimbursement for the paid benefits over which
the Plan has an equitable lien or a constructive trust.
Presently before the Court is the Defendants' motion to dismiss the Complaint in its entirety pursuant to Federal Rule of Civil Procedure (" Fed. R. Civ. P." ) 12(b)(6). First, the Defendants seek to dismiss the action on the ground that the Plaintiff's subrogation causes of action are time-barred. Second, the Defendants seek to dismiss the action on the ground that New York General Obligation Law § 5-335 (" N.Y. GOL § 5-335" ) prohibits health benefit providers from enforcing any non-statutory contractual right of reimbursement and/or subrogation claims against an insured's recovery in a personal injury lawsuit. In this respect, the Defendants contend that the Employee Retirement Income Security Act (" ERISA" ) does not pre-empt N.Y. GOL § 5-335.
In addition, the Defendants seek to dismiss the first and second causes of action on the ground that the Plaintiff does not enjoy a statutory lien. Finally, the Defendants seek to dismiss the Plaintiff's second cause of action on the ground that the Plaintiff has no legal authority to assert an equitable lien over the legal fees earned by Lite & Russell.
On March 29, 2013, Kohl's filed an opposition to this motion. The Defendants have not filed a reply. For the reasons that follow, the Defendants' motion is denied.
A. Factual Background
Unless otherwise stated, the following facts are drawn from the Complaint and are construed in a light most favorable to the Plaintiff.
On or about November 13, 2007, Castelli sustained personal injuries as a result of a motor vehicle accident (the " Accident" ). At the time of the Accident, Castelli was a " Covered Person" under the Plan.
At all relevant times, the Plan was a self-funded employee welfare benefits plan governed by the Employee Retirement Income Security Act of 1974 (" ERISA" ), 29 U.S.C. § 1001, et seq .
The terms and conditions of coverage under the Plan included the following:
If you receive a Benefit payment from the Plan for an injury caused by a third party, and you later receive any payment for that same condition or injury from another person, organization or insurance company, we have the right to recover any payments made by the Plan to you.
You agree as follows:
You will reimburse the Plan immediately upon recovery. Once we make or are obligated to make payments on your behalf, we are granted and you are required and consented to, an equitable lien by agreement or constructive trust on the proceeds of any payment, reimbursement, settlement or judgment received by you from Third Parties or any other source.
(Comp., at ¶ ¶ 3, 4.) (internal quotation marks omitted).
Between October 2009 and February 2010, the Plan paid medical benefits on behalf of Castelli in the amount of $63,732.80 (" the Paid Benefits" ). The Paid Benefits covered medical expenses related to injuries Castelli sustained as a result of the Accident.
On or about May 30, 2008, Castelli filed a personal injury action in the Supreme Court of the State of New York, County of Suffolk, alleging that the negligence of third parties caused the Accident. Lite & Russell represented Castelli in that action, entitled " Freddy Castelli, et al v. Town of
Brookhaven, et al," Index No. 20992-08, (" the Underlying Action" ). As part of that litigation, Castelli and Lite & Russell entered into a retainer agreement providing for a one-third contingency attorneys' fee. In or about 2010, the Underlying Action settled for a sum certain (" the Settlement Proceeds" ).
As a result, the Plaintiff alleges that the Plan has an equitable lien or constructive trust over that portion of the Settlement Proceeds owed to the Plan as reimbursement for the Paid Benefits. The Plaintiffs further allege that the Defendants have ...