Opinion ID: 619740
Heading Depth: 2
Heading Rank: 3

Heading: Milgram's Entitlement to Accumulated Earnings and Prejudgment Interest

Text: In addition to contesting the enforceability of the judgment as a whole, the Plan argues that the district court erred in awarding Milgram accumulated earnings and prejudgment interest on the $763,847.93 principal amount. The parties agree that under our decision in Dobson v. Hartford Financial Services Group, Inc., 389 F.3d 386 (2d Cir.2004), Milgram's right to be compensated for the time value of the misdirected funds is a question of contract interpretation to be decided under federal common law. In concluding that accumulated earnings and prejudgment interest were available in this case, the district court noted that the plan document specifically recognizes the right of a beneficiary to recover accumulated earnings where a portion of his account has been segregated for some time pursuant to a Qualified Domestic Relations Order (QDRO) that is ultimately declared invalid. The existence of this provision, along with general fairness considerations, led the court to conclude that implicit in the Plan's terms is the commonly held notion that there is a time value to the extended period that Milgram has been without money the Plan owed him. We agree. The Plan argues that the district court's interpretation is unsustainable in light of the fact that, unlike the plan in Dobson, it has not had control over the missing funds during the period of delay and therefore has not able to profit from them. Yet the decision in Dobson did not turn on equitable considerations but rather on the express and implied terms of the plan document itself. In that regard, we noted that [i]mplied agreements to pay interest on delayed disbursements of owed money fit squarely within [the] tradition of common law contract interpretation, 389 F.3d at 399, and quoted at length from a Supreme Court opinion suggesting that compensation for the time value of money in breach of contract actions is dictated by natural justice, and the law of every civilized country, id., quoting Spalding v. Mason, 161 U.S. 375, 396, 16 S.Ct. 592, 40 L.Ed. 738 (1896). The Plan also maintains that in awarding accumulated earnings and interest under a contract theory, the district court ignored the fact that Milgram contributed to the delay by failing to examine his plan statements until several years after the erroneous distribution. Although this consideration might have supported discounting Milgram's recovery if he had been forced to bring his claim as one for other equitable relief under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), it is not relevant to his ability to recover in contract, which turns entirely on the express and implied terms of the plan document. As a matter of contract interpretation, the QDRO procedure relied upon by the district court evinces a clear orientation in the plan document towards compensating beneficiaries for the lost use of their fundseven when the loss may be partly of their own making. The Plan's other arguments, which largely rehash those it made regarding its liability on the principal sum, are similarly unavailing. The interest and accumulated earnings that Plan must pay to Milgram are expenses, like the principal sum, that the Plan incurred due to its mismanagement of the trust fund. Plan members agreed to share such expenses as a condition of their participation in the fund. In any event, the fact that the Plan has a judgment against Breen, enforceable through a constructive trust, for the full amount that it must restore to Milgram gives us some confidence that no innocent party will suffer in the long run.