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Raines v. Flascher

United States District Court, D. Minnesota

July 17, 2019

JOHN G. RAINES and TIMOTHY MCGOUGH, Plaintiffs,
v.
JOHN FLASCHER and ROBINS KAPLAN, LLP, Defendants.

          AMANDA R. CEFALU AND ANDREW R. SHEDLOCK, KUTAK ROCK, LLP, FOR PLAINTIFFS.

          BRANDON THOMPSON, CIRESI CONLIN, LLP, AND RICHARD B. ALLYN AND SCOTT A. JURCHISIN, ROBINS KAPLAN, LLP, FOR DEFENDANTS.

          MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' MOTION TO DISMISS

          JOHN R. TUNHEIM UNITED STATES DISTRICT JUDGE

         John G. Raines and Timothy McGough (“Plaintiffs”) bring this action against John Flascher and Robins Kaplan, LLP (“Defendants”) seeking a constructive trust, equitable and declaratory relief, and injunction to enforce their alleged right to reimbursement. Defendants move to dismiss for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). Specifically, Defendants claim that Plaintiffs fail to sufficiently plead how or why their right to reimbursement applies. Because Plaintiffs' Complaint lacks sufficient non-conclusory facts, the Court will grant the motion to dismiss and dismiss the Complaint without prejudice.

         BACKGROUND

         Plaintiffs are trustees of the Carpenters and Joiners Welfare Fund (the “Fund”). (Am. Compl. ¶ 1, Nov. 15, 2018, Docket No. 8.) The Fund is a “fringe benefit plan” created under the Labor Management Relations Act and administered in accordance with the Employee Retirement Income Security Act of 1974. (Id. ¶ 3.) As a fringe benefit plan, the Fund provides health and welfare benefits to plan participants and their dependents. (Id. ¶ 10.)

         The Summary Plan Description and Plan Document (“SPD”) governs the Fund benefits. (Id. ¶ 12; Ex. A (the “SPD”), Oct. 25, 2018, Docket No. 1-1.) Relevant here, the SPD has several provisions setting out the Fund's subrogation and reimbursement rights when a third party may be liable for an expense paid by the Fund. For example, the SPD explicitly notes that the Fund will not cover expenses “for which a Third Party may be liable.” (SPD at 10-11.) However, should the Fund provide benefits in this situation, the SPD provides that the Fund “has a first priority subrogation and reimbursement right if it provides benefits resulting from or related to an injury, occurrence, or condition for which the Employee or Beneficiary has a right of redress against any third-party.” (Id. at 15.)

         The SPD further notes that the Fund's “subrogation and reimbursement rights grant the [Fund] an equitable lien on . . . any recovery . . . from a third-party, whether by settlement, judgment or otherwise.” (Id. at 16.) Under the SPD, the proceeds of any recovery should be held in trust on which the Fund may impose a constructive trust or equitable lien. (Id.)

         Defendant John Flascher is/was a participant in the Fund and is/was eligible for benefits in accordance with the SPD. (Am. Compl. ¶ 11.) Plaintiffs claim that on January 26, 2016, a dependent of Flascher's, Justin Flascher, “sustained injuries out of and in connection with a surgery and hospitalization” which ultimately “resulted in his death on February 14, 2016.” (Id. ¶ 14.) Plaintiffs state that the Fund “paid medical benefits in the amount of $182, 910.92 on behalf of . . . Justin Flascher, for injuries sustained in and relating to an injury, occurrence, or condition occurring between January 26, 2016 and February 14, 2016.” (Id. ¶ 18.) Finally, Plaintiffs claim that Flascher “had a right of redress against any [sic] third-party” for the expenses the Fund paid on behalf of Justin Flascher. (Id.)

         After Justin Flascher's death, Flascher allegedly retained Defendant Robins Kaplan, LLP to represent him “in connection with claims against Allina and other third-parties for injuries and damages sustained arising out of the treatment and death of Justin Flascher.” (Id. ¶ 19.) Subsequently, Plaintiffs claim, Robins Kaplan contacted the Fund and “recognized” that the Fund's subrogation and reimbursement rights were implicated by Justin Flascher's death. (Id. ¶ 20.) Accordingly, over the following few months, Robins Kaplan and the Fund negotiated but ultimately disagreed about the value and scope of the subrogation claim. (Id. ¶ 21-23.) On August 22, 2018, Flascher settled his liability claims for $1.4 million dollars. (Id. ¶ 24.) Plaintiffs claim they requested a copy of Flascher's mediation statement which resulted in the settlement, but that Defendants denied the request. (Id. ¶ 26.)

         Plaintiffs filed this action on October 25, 2018, alleging that Flascher violated the terms of the SPD by failing to reimburse the Fund for payments it made on expenses for which Flascher had a right of redress against a third-party. (Id. ¶ 29.) Accordingly, Plaintiffs seek a constructive trust and/or an equitable lien on “the portion of Defendants' settlement proceeds . . . which in good conscience belong to the Fund in accordance with” the SPD. (Id. at 9-10.) Further, Plaintiffs seek a declaratory judgment from the Court that the SPD governs the rights of the parties in this dispute. (Id. ¶ 38.)

         On November 15, 2018, Defendants brought a Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6), asserting that Plaintiffs failed to adequately state a claim upon which relief can be granted. (Mot. to Dismiss, Nov. 15, 2018, Docket No. 10.) Plaintiffs filed an Amended Complaint on the same day, which is now the operative complaint. (Am. Compl.) Subsequently, Defendants filed an Amended Motion to Dismiss, asserting the same grounds as the original. (Am. Mot. to Dismiss, Nov. 29, 2018, Docket No. 15.)

         DISCUSSION

         I. ...


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