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Sometimes The Facts Are Just Not On Your Side

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  • Posted on: Feb 24 2021

As the title of this article suggests, there are times in litigation where the facts simply do not support a claim or defense advanced by one or more of the parties. That was the case in Alston v. Golfo, 2021 N.Y. Slip Op. 30471(U) (Sup. Ct., N.Y. County Feb. 17, 2021) (here).

Alston was commenced by a labor union welfare fund (the “Fund”) in July 2018 against one of its enrollees, Salvatore Golfo (“Salvatore”), and his former wife, defendant Denise Golfo (“Denise”), for restitution of health benefits wrongly paid by the Fund on account of Denise during the period April 2011 through January 2018. The action was predicated on the fact that Denise was not an eligible dependent of Salvatore (i.e., his spouse) during that time period. According to the Court, Salvatore submitted a health plan enrollment form in which Salvatore represented that Denise was his spouse. Slip Op. at *1. In truth, Denise and Salvatore had been divorced pursuant to a judgment of divorce since 2007 (“Judgment of Divorce”). Id. at *2.

The Fund asserted three causes of action, all focused on Salvatore’s enrollment form: fraud, conversion, and breach of contract.

After the Fund commenced the action, Salvatore filed a third-party action against Denise and her father, Joseph Mattesi (“Mattesi”), one of the Fund’s trustees, sounding in fraud and in “contribution and/or indemnification,” alleging that Mattesi acquiesced in Salvatore’s submission of the false enrollment form and that Denise had caused Salvatore to innocently believe that she was still his spouse, despite the 2007 Judgment of Divorce.

The Fund moved for summary judgment against Salvatore. In March 2019, the Court granted a default judgment against Denise. 

In addition, Mattesi cross-moved to dismiss the third-party claims asserted against him by Salvatore.

The Court granted the motion for summary judgment because there was “absolutely no issue of fact or law which could possibly impede the conclusion that neither Salvatore [n]or Denise were entitled to health insurance benefits benefitting Denise” because they were not married at the time Salvatore enrolled in the health plan. Slip Op. at *4.

The Court explained that the governing documents expressly provided that the “[b]enefits under th[e] Plan [were] for the sole use of [members] and [their] eligible dependents. No one (including an employer, Union representative, supervisor or shop steward) other than the Board of Trustees [of the Fund] ha[d] any authority to interpret [the] SPD [Summary Plan Description] or other Plan documents ….” 

The plan defined “eligible dependents” as “[t]he spouse to whom you are legally married” or certain categories of unmarried children, and instructed members to “notify the Fund Office promptly if: you marry[,] a child is born[,] [or] you get divorced”. The document further informed members that coverage terminated any time a member’s “dependents” “no longer [met] the definition of ‘dependent’”. Id. at *3.

The Court found that Salvatore never informed the Fund Office of his 2007 Judgment of Divorce, which severed his spousal relationship with Denise four years prior to the submission of his enrollment form. Notwithstanding, said the Court, Salvatore relied on Denise’s belief that they were still married – despite the 2007 Judgment of Divorce – and on Mattesi’s acquiescence to Salvatore’s submission of the inaccurate enrollment form. That belief, no matter its credibility, reasoned the Court, did not fall within the definition of an eligible participant:

Under any reasonable reading of the Summary Plan Description, which explicitly refers to its interdependence on the union’s “collective bargaining agreements” and “official Plan documents”, a binding contract existed between Salvatore and the Fund involving Salvatore’s continued employment and his providing accurate “Eligible Dependent” information to the Fund in exchange for health insurance benefits.

Nothing in that document conditions coverage on any good faith belief (however credible or incredible) regarding the spousal status of a named beneficiary. Simply put, an eligible spouse is, and only is, “[t]he spouse to whom you are legally married”. In this case, regardless of Salvatore’s state of belief, Denise was undoubtedly and irrefutably not Salvatore’s “spouse to whom [he was] legally married”. Therefore, there is absolutely no issue of fact or law which could possibly impede the conclusion that neither Salvatore or Denise were entitled to health insurance benefits benefitting Denise. Consequently, there is no issue of fact or law which could possibly impede the conclusion that plaintiff is entitled to restitution of its health benefit payouts on account of Denise.

Slip Op. at *4.

Although not specifically stated, the Court treated the fraud claim against Salvatore as duplicative of the contract claim. In this regard, the Court held that whatever Salvatore’s state of mind, “the Fund had no contractual obligation whatsoever to pay those expenses because of the indisputable fact that Denise was not Salvatore’s legally married spouse during any part of that seven-year period.” Id. at *5. 

However, the success of the plaintiff’s claims does not rest solely with the cause of action sounding in fraud, or any asserted issues regarding its discovery, or, most pointedly, whether Salvatore intended to defraud the Fund in the first place. Rather, as noted above, irrespective of Salvatore’s state of mind, or state of belief, at the time he submitted his inaccurate enrollment form, or thereafter during the seven-year period he allowed the Fund to cover Denise’s expenses to the tune of $77,317.43, the Fund had no contractual obligation whatsoever to pay those expenses because of the indisputable fact that Denise was not Salvatore’s legally married spouse during any part of that seven-year period.

It bore no contractual obligation to do so and, thus, is entitled to restitution.

Id.

The Court also found that under the “continuous duty doctrine,” Salvatore was liable for Fund payments on account of Denise for the seven-year period, thereby negating any statute of limitations defense. The Court explained that the plan documents “explicitly placed Salvatore under a continuing obligation to keep the Fund accurately informed of spousal or other dependent status, which he did not do for all of those seven years in which the Fund made payments on account of Denise.” Id. Thus, concluded the Court, “Salvatore’s continuing breach of his contractual duty to accurately inform the Fund of Denise’s spousal status, and, at a bare minimum, to inquire about it by calling ‘the Fund Office’, render’s said breach actionable with regard to all Fund payments made during a full six-year period immediately preceding the July 19, 2018, commencement date of this action.” Id. at *5-*6 (citations omitted).

Turning to the motion to dismiss the third-party claims against Mattesi (e.g., fraud and contribution and/or indemnification), the Court held that Salvatore failed to state a claim. As to the fraud claim, the Court said that Salvatore could not satisfy the justifiable reliance element of the cause of action because Salvatore could not demonstrate “any reliance … on any alleged misrepresentation by Mattesi … concerning Salvatore’s own marital status … [due to] the Judgment of Divorce” and the contractual obligation under the Plan “to bring any questions to the attention of the ‘Fund Office’ at its designated telephone number.” Slip Op. at *6. In other words, Salvatore could not rely on a misrepresentation about a fact of which he already knew the truth (e.g., the Judgment of Divorce).   

As for indemnification, the Court held that Salvatore could not show that any judgment against him would be due solely to Mattesi’s negligence in connection with, or nonperformance of, an act solely within Mattesi’s province. Id. at *6-*7 (citations omitted). The Court explained that as “a union member participating in, and enrolling in, the Plan that paid benefits … to Denise, Salvatore was under an independent and exclusive duty to accurately identify Denise as his legally married spouse – which he could not rightly do.” Id. at *7. “Mattesi bore no independent, let alone sole, obligation in said regard,” concluded the Court.

As for contribution, the Court held that Salvatore could not show that Mattesi was “‘liable at least partially because of [Mattesi’s] own negligence.’” Id. (quoting Fox v. County of Nassau, 183 A.D.2d 746, 747 (2d Dept. 1992)). The reason explained the Court, “Salvatore was under his own independent and sole duty, per the Plan, to accurately identify his dependents or, if he could not on his own, to raise the question with the Fund Office. Any possible misunderstanding on Mattesi’s part as to Denise’s spousal connection or non-connection to Salvatore – even in the face of the Judgment of Divorce – [did] not play any role in wresting any part of Salvatore’s contractual duties as Plan participant away from Salvatore and onto Mattesi.” Id. Thus, concluded the Court, “contribution cannot lie.” Id.

[Ed. Note: this Blog discussed indemnification and contribution claims here, here, and here.] 

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