This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
A former employee, who was wrongfully denied long-term disability benefits under an ERISA-governed plan, obtained a default judgment against the plan. The employee sought to enforce the judgment through a writ of garnishment against the insurer, which funded the plan and was responsible for paying benefits. The insurer contested the garnishment, arguing it was not liable under state garnishment law (paras 1-2, 18-20).
Procedural History
- District Court, December 1999: Dismissed the employee’s initial complaint on the grounds of ERISA preemption, with leave to amend (para 9).
- District Court, September 2001: Dismissed the third amended complaint against the insurer with prejudice on res judicata grounds (para 11).
- District Court, February 2003: Denied the employee’s motion for default judgment against the plan and dismissed the claim against the plan with prejudice (para 15).
- Court of Appeals, 2004-NMCA-095: Reversed the dismissal of the claim against the plan, allowing the employee to proceed against the plan but affirming the dismissal of the employer (para 17).
- District Court, November 2004: Entered a default judgment against the plan, ordering reinstatement of benefits and awarding attorney’s fees and costs (para 18).
- Federal District Court, 2006: Dismissed the employee’s claims against the insurer, holding that enforcement of the state court judgment was a state law issue (para 19).
- District Court, March 2007: Granted the employee’s motion for summary judgment on the garnishment claim, ordering the insurer to pay the judgment (para 21).
- Court of Appeals, 2008-NMCA-154: Reversed the district court, holding that the insurance policy was not a garnishable asset of the plan (para 22).
Parties' Submissions
- Plaintiff: Argued that the insurer was obligated under the policy to pay the judgment against the plan and that garnishment was an appropriate mechanism to enforce the judgment (paras 20-21, 26).
- Defendant (Insurer): Contended that the policy was not a garnishable asset under state law, that it owed no debt to the plan, and that res judicata barred the garnishment claim (paras 20, 28-31, 59).
Legal Issues
- Was garnishment an appropriate mechanism to enforce a judgment against an ERISA plan by attaching the insurer’s obligations under the policy?
- Did the insurer’s res judicata defense preclude garnishment?
- Was the insurer liable for attorney’s fees and costs awarded in the default judgment?
Disposition
- The Supreme Court of New Mexico reversed the Court of Appeals, upheld the writ of garnishment against the insurer, and remanded the case to the Court of Appeals to address the issue of attorney’s fees and costs (paras 74-75).
Reasons
Per Bosson J. (Chávez CJ., Serna, Maes, and Daniels JJ. concurring):
Garnishment and the Plan’s Right of Action: The court held that the insurer’s obligation under the policy to pay benefits upon a judicial determination of eligibility constituted a valid right of action for the plan. This right of action was not contingent and could be garnished by the employee to satisfy the judgment (paras 26, 33, 39-40, 51-53).
ERISA Preemption: The court determined that ERISA did not preempt the application of state garnishment law because garnishment was a state judgment enforcement mechanism that did not alter ERISA’s remedial scheme or impose additional liability on the insurer (paras 41-50).
Res Judicata: The court rejected the insurer’s res judicata defense, finding that the garnishment action was distinct from the earlier claims dismissed with prejudice. The garnishment arose from the insurer’s refusal to pay benefits after the default judgment, constituting a new breach of the policy (paras 59-67).
Attorney’s Fees and Costs: The court remanded the issue of attorney’s fees and costs to the Court of Appeals, instructing it to determine whether the plan had a valid right of action against the insurer for these amounts under ERISA and the policy (paras 72-73).