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National Foundation For Special Needs Integrity, Inc. v. Reese

United States District Court, S.D. Indiana, Indianapolis Division

October 26, 2016

DEVON C. REESE, as the Personal Representative for THE ESTATE OF THERESA A. GIVENS, deceased, Defendant/Counterclaimant.



         Pending before the Court are three motions: a Motion for Summary Judgment filed pursuant to Federal Rule of Civil Procedure 56 by Plaintiff National Foundation for Special Needs Integrity, Inc. (“National Foundation”) (Filing No. 54), a Cross Motion for Summary Judgment filed pursuant to Federal Rule of Civil Procedure 56 by Defendant Devon Reese, as Personal Representative of the Estate of Theresa Givens (“Reese”) (Filing No. 66), and a Motion for Leave to File a Sur-Reply filed by National Foundation (Filing No. 74). For the following reasons, the Court GRANTS in part and DENIES in part National Foundation's Motion for Summary Judgment, DENIES Reese's Motion for Summary Judgment, and DENIES National Foundation's Motion for Leave to File Sur-Reply.

         I. BACKGROUND

         National Foundation is a not-for-profit corporation whose purpose is to act as trustee to pooled special needs trusts. A special needs trust is a trust created for the benefit of a beneficiary with a disability who is receiving means-tested governmental benefits, such as Supplemental Security Income or Medicaid. A special needs trust protects a disabled person's eligibility for current or future public benefits while simultaneously allowing the person with disabilities access to additional funds to pay for expenses not covered by public benefits. The trust property of numerous trust beneficiaries (called “members”) is “pooled” for the purpose of custody, management, and investment in accordance with 42 U.S.C. §1396(d)(4)(C). A separate “sub-account” is established and administered for the sole benefit of each specific trust member. At the time of a pooled trust member's death, the funds remaining in the deceased member's sub-account must be used to pay back Medicaid, and if funds still remain after repayment, the funds either: (a) remain in the pooled trust for the benefit of the other pooled trust members, or (b) can be distributed to others pursuant to the beneficiary's wishes that are clearly stated in the trust documents.

         Theresa Givens (“Givens”) was a forty-nine year old, unmarried mother of three adult children, who was severely injured in 2009 by the medical use of Gladolium dye. (Filing No. 69 at 2.) Givens filed a products liability lawsuit and was represented by Brown & Crouppen law firm. The suit resulted in Givens receiving $254, 847.76 in net settlement proceeds. Prior to receiving the settlement, Givens' attorneys at Brown & Crouppen, gave her the name of both National Foundation and Midwest Special Needs Trust to discuss distribution her settlement benefit. (Filing No. 64-4 at 2.)

         On or about June 1, 2011, Givens contacted Shane Service (“Service”), National Foundation's then-general counsel, and informed Service that she had six goals for her settlement funds. (Filing No. 64-5 at 1.) Givens advised Service that she wished to use her settlement funds to purchase: 1) a primary residence; 2) a home for her son; 3) an income-producing storefront property; 4) two cars; 5) a vacation; 6) and saving bonds of an undisclosed amount for her three children and all of her grandchildren. Id. Givens also informed Service that she wanted to purchase an annuity with the left over proceeds and to live off the interest. Id.

         After speaking with Givens, Service emailed Andee McGaughey (“McGaughey”), the paralegal at Brown & Crouppen, who was assigned to Givens' case. Id. In the email, Service reminded McGaughey that a special needs trust is subject to the sole benefit rule and cannot be used for the primary benefit of anyone other than the beneficiary. Id. at 2. Service informed Givens that, given her stated goals, a special need trust might not be the proper vehicle for her because it would not allow Givens to purchase housing for her family members, give gifts to her children and grandchildren, and would only allow her to purchase one vehicle. Id.

         On July 11, 2011, Givens met with her attorneys at Brown & Crouppen who advised that the settlement funds needed to be placed in the trust so that Givens would not lose her public health benefits. (Filing No. 64-6.) On July 20, 2011, despite the advice of counsel regarding the risk of losing her needs based government benefits, Givens instructed Brown & Crouppen to place only $184, 000.00 in a special needs trust and distribute the remaining portion by check made payable to her. (Filing No. 64-7.) Givens informed her attorneys that she intended to use the funds that were not placed in the trust to pay off her debts, open a bank account, buy a car for her daughter, and give $50, 000.00 to her son. (Filing No. 64-11 at 36; Filing No. 24-1.) Eight days later, on July 28, 2011, Givens then instructed Brown & Crouppen to place her entire settlement into a special needs trust. (Filing No. 64-8.) McGaughey testified that, on that same day, Givens informed McGaughey that she was frustrated with her children because she felt that she was being pressured by them to give them her settlement funds. (Filing No. 64-11 at 7-8.) Givens also told McGaughey that she was afraid her children would take the money, she would be left without anything and that she could have everything taken away from her. Id.

         On August 9, 2011, Givens executed a Joinder agreement, thereby joining the pooled trust operated by National Foundation. (Filing No. 55; Filing No. 69 at 3.) McGaughey signed the document as a witness. Although Brown & Crouppen was her legal counsel, at the time she completed the Joinder agreement an attorney was not present. Givens listed herself as the only “contingent/remainder/residual” beneficiary. Id. The pertinent provisions in the Joinder Agreement state as follow:

Amounts remaining in the trust upon the death of the Beneficiary shall be distributed in accordance with §13611(b) of the Omnibus Budget Reconciliation Act of 1993 (OBRA), Public Law 103-66, codified at 42 U.S.C. §1396p(d)(4)(C). Accordingly, to the extent that amounts remaining in the beneficiary's account upon the death of the Beneficiary are not retained by the trust, the trust shall pay to the state of Missouri such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the Beneficiary under the State of Missouri's Medicaid plan.
Except in the event that this Article Fourteen may be in the future amended to effectuate the letter, spirit and purpose of 42 U.S.C. §1396p(d)(4)(C)(iv), the National Foundation for Special Needs Integrity, Inc. shall not retain any portion of the Beneficiary's trust Sub-Account upon his or her death. Rather, all such amounts shall be reimbursed to the state of Missouri, by and through the Missouri Department of Health and Family Services, up to the full amount that it has expended on the Beneficiary, both before and after the creation of this trust. If any money remains after the state of Missouri has been reimbursed in full, said money shall be distributed in accordance with Section V, below.
If no secondary Contingent/Residual/Remainder Beneficiaries survive or if none are named in Section V below, then and only then shall said money remain with the trust. * * * If any amounts remain after the state of Missouri (and any other state that may receive proportionate reimbursement pursuant to Section 14.2 of the accompanying Declaration of Trust) has been reimbursed in full, as described above, the remaining amounts shall be distributed in accordance with the Joinder Agreement under which the Beneficiary has enrolled in the pooled trust.

(Filing No. 1-2 at 13).


         Please tell us below to whom you would like us to pay out the Remainder of your Sub-Account should there be any money left after the state of Missouri has been reimbursed for the Medicaid services it has rendered to you during your lifetime. This person can be an individual person, such as a family member; or an organization, such as a favorite church or charity. YOU MUST NAME AN ACTUAL PERSON OR ENTITY. DO NOT WRITE VAGUE DESCRIPTIONS OF CLASSES OF PESONS, SUCH AS “MY HEIRS AT LAW, ” OR “MY ISSUE” OR “A YET TO BE IDENTIFIED CHARTIABLE ORGANIZATION.”

         Contingent/Remainder/Residual Beneficiary #1:

Name: Theresa Givens
Address: 1723 Cochran Place St. Louis, MO 63106
Telephone Number (Include Area Code): 314-484-2558
Percentage: 100%
If you name more than one Contingent/Remainder/Residual Beneficiary, please check to make sure the percentages add up to 100%.
Any Remainder shares for a Contingent/Remainder/Residual Beneficiary named in this section who does not survive the Beneficiary will lapse and be distributed in equal shares to all other named Contingent/Remainder/Residual Beneficiaries.

Id. at 14. On October 10, 2011, Givens deposited approximately $250, 000.00 into her trust sub-account. (Filing No. 69 at 2.) Sadly, on November 19, 2011, just a few weeks after funding the trust, Givens died intestate. Id. at 1. As a result, at the time of her death, approximately $235, 000.00 was left in her trust sub-account, with no repayment being due to Medicaid. Id. at 4, 6.

         On or about November 23, 2011, Givens' personal injury attorneys at Brown & Crouppen spoke with Service regarding distribution of the remaining trust funds to Givens' adult children. (Id. at 4-5; Filing No. 69-10.) At that time, National Foundation informed Givens' attorneys that Givens had designated herself as the remainder beneficiary. Id. As a result, National Foundation stated that it would not distribute the funds to Givens' adult children but would, instead, retain the funds in ...

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