Post-Sereboff
Subrogation in the Post Sereboff Era
On May 15th 2006, the United States Supreme Court handed down their decision in Sereboff v. Mid Atlantic Medical Systems, Inc. In this decision, the Court ruled that a self-insured employee health benefit plan could enforce its subrogation/reimbursement provision under the “other equitable relief” portions of ERISA. Sereboff settled a dispute between the Federal Circuit Courts of Appeals as to whether plans had the right under ERISA to enforce the terms and conditions of their subrogation or reimbursement clauses. Since the Court’s decision, there have been seventy reported decisions handed down in the lower courts interpreting and applying the Sereboff decision in the context of subrogation or reimbursement.
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Circuit Cases
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Vacca v. Trinitas Hosp., 2006 U.S. Dist. LEXIS 82888, (E.D.N.Y. Nov. 14, 2006)
Suit to recover an overpayment against providers may only be brought to federal court pursuant to ERISA if there is a lien on the funds or they are specifically identified.
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Eric Rubin-Schneiderman v. Merit Behavioral Care Corporation, 2006 U.S. App. LEXIS 21192 (2d. Cir. 2006)
Monetary relief under section 502(a)(3) may be more broadly available in suits against ERISA fiduciaries than against non-fiduciaries but the mere fact that a defendant is a fiduciary of the plaintiff does not necessarily make the relief equitable in nature, nor does it change the requirement that relief sought be equitable.
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Karen B. Coan v. Alan H. Kaufman, 2006 U.S. App. LEXIS 18444, (2d. Cir. 2006)
ERISA requires both the basis of the claim and the recovery sought be equitable. Relief sought is equitable when recovering a specific, identified fund.
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Melvin Pell and Ellen Pell v. E.I. Dupont De Nemours & Co., Inc., et al., 2006 U.S. Dist. LEXIS 73053, (D. Del. Oct. 6, 2006)
If funds have been dissipated, claim is only that of a creditor and may not enforce a trust on the property. Action under ERISA must seek to restore to plaintiff particular traceable funds, set aside, preserved and in the defendant’s control and possession.
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Dastgheib v. Genentech, Inc., 457 F.Supp. 2d 536, (E.D. Pa. Oct. 27, 2006)
To determine whether a claim is equitable examine (1) basis of the claim & (2) nature of the relief. Equitable relief specifically identifies a fund distinct from general assets and imposes a trust or equitable lien over funds in the possession or control of the beneficiary.
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Adair v. Unisys Corp., 2006 U.S. Dist. LEXIS 72026, (E.D. Pa. Sept. 29, 2006)
Request for equitable relief implies constructive trust and is appropriate when specific property sought is in hands of defendant.
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Roy W. Early v. the United States Life Insurance Company in the City of New York, 2007 U.S. App. LEXIS 6870, 3d Cir. March 22, 2007
The insured asserted breach of contract, bad-faith denial of benefits, and the insurer removed the suit to the district court based on preemption under 29 U.S.C.S. § 1144 of the Employee Retirement Income Security Act (ERISA). The Employee Retirement Income Security Act (ERISA), 29 U.S.C.S. § 1001 et seq., is designed to provide a uniform regulatory regime over employee benefit plans. To this end, ERISA includes expansive preemption provisions, 29 U.S.C.S. § 1144, which are intended to ensure that employee benefit plan regulation will be exclusively a federal concern.
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James Larue v. DeWolff, Boberg & Associates, Inc., 450 F.3d 570, (4th. Cir. 2006)
One may recover specific, identified funds in the possession of and controlled by another. A claim against a defendant for funds that “never materialized” does not satisfy this requirement, even if the funds are otherwise identifiable.
ERISA preempts state law insofar as they may now or hereafter relate to any employee benefit plan, meaning where the law has reference to or connection with such a plan.
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Retail Industry Leaders Ass’n v. Fielder, 435 F.Supp. 2d 481, (Dist of MD 2006)
In Sereboff the Court allowed recovery in a state-law contract claim in Federal Court when the insurer sought subrogation from the insured through an action akin to a claim for an equitable lien. Manuel v. Hartford Life Group Ins. Co., 2006 U.S. Dist. LEXIS 76866 (S.D. Tex. Oct. 5, 2006)
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Abilene Regional Medical Center v. United Industrial Workers Health and Benefits Plan, 2007 U.S. App. LEXIS 5231, (5th Cir. March 6, 2007)
Section 514(a) of Employee Retirement Income and Security Act of 1974 (ERISA), 29 U.S.C.S. §§ 1001-1462, provides that ERISA preempts any and all tate laws insofar as they now or hereafter relate to any employee benefit plan. 29 U.S.C.S. § 1144(a). The United States Supreme Court has interpreted ERISA preemption liberally, stating that a law relates to an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan. ERISA preempts a state law when: (1) the state law claims address areas of exclusive federal concern, such as the right to receive benefits under the terms of an ERISA plan; and (2) the claims directly affect the relationship among the traditional ERISA entities–the employer, the plan and its fiduciaries, and the participants and beneficiaries. An assignee is considered as an Employee Retirement Income and Security Act of 1974 (ERISA), 29 U.S.C.S. §§ 1001-1462, entity because the assignee stands in the same shoes as an ERISA beneficiary.
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Gilcrest v. UNUM Life Insurance Co., 2006 U.S Dist. LEXIS 36741, (S.D. Ohio, June 6, 2006)
Life insurer seeking a particular share of a specifically identified fund, namely, the amount it overpaid the member, is equitable relief.
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Reliance Std. Life Ins. Co. v. Smith, 2006 U.S. Dist. LEXIS 79292 (E.D. Tenn. Oct. 18, 2006)
A Plan seeking relief to restore to itself particular funds or property in a beneficiary’s possession, not dissipated but invested, is entitled to a constructive trust / equitable lien.
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Amanda Crosby, Administratrix for the Estate of Billy K. Allred v. ROHM & HASS Company, 480 F.3d 423, (6th Cir. March 16, 2007)
Statements in a summary plan document are binding, and if such statements conflict with those in the plan itself, the summary shall govern.
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Fleetwood Enterprises, Inc v. Jackie Taylor, 2007 U.S. Dist. LEXIS 74802 (United States District Court for the Western District of Kentucky, September 27, 2007)
Plan Document must specify the portion due the plan, and assert an equitable lien on specific funds to be able to seek reimbursement.
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Louella Moberly v. Metlife, 2007 U.S. Dist. LEXIS 42294 (United States District Court for the Eastern District of Kentucky, June 8, 2007)
The Plan can enforce the terms of the Plan Document, as long as the interpretation isn’t arbitrary or capricious.
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Reliance Standard v. Smith, 2006 U.S. Dist. LEXIS 79292, (United States District Court for the Eastern District of Kentucky, October 18, 2006)
Enforcement of Plan Terms when Plan interpretation isn’t arbitrary or capricious.
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Louella Moberly v. MetLife, 2007 U.S. Dist. LEXIS 48007, (United States District Court for the Eastern District of Kentucky, Southern Division, July 2, 2007)
Enforcement of Plan Terms when Plan interpretation isn’t arbitrary or capricious.
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James L. Northcutt and Lewis Smith v. General Motors Hourly- Rate Employees Pension Plan, General Motors Corporation and General Motors Life and Disability Benefit Program, 467 F.3d 1031 (7th Cir. November 2, 2006)
Collective bargaining agreements and additional agreements signed by the beneficiaries required the beneficiaries to reimburse the plans in the event that a retroactive award of Social Security disability benefits resulted in an overpayment of plan benefits. Plan was able to offset future pension benefits and subrogate social security benefits.
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Wal-Mart Stores v. Warren, 2006 U.S. Dist. LEXIS 86588, (C.D. Ill. Nov. 29, 2006)
When a Plan is seeking specifically identifiable funds, particularly a portion of a settlement, they are seeking equitable relief and ERISA preempts state law.
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Dillard’s Inc. v. Liberty Life Assurance Company of Boston, et. al., 2006 U.S. App. LEXIS 18062, (8th Cir. 2006)
A Self-Funded ERISA plan has discretion to deny benefits based upon opinions of reviewing physicians over conflicting opinions of treating physicians.
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Finch v. UNUM Life Ins. Co., 2006 U.S. Dist. LEXIS 91374, (D. Minn. Dec 18, 2006)
An action to clarify rights under an ERISA Plan may be brought to Federal Court by the Plan or Beneficiary. Reimbursement schemes (such as lump sum recovery) do not violate ERISA unless prohibited by the Plan Document.
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Administrative Committee of the Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan v. Nancy Lynn Gamboa; Baudelio Jose Gamboa; Wendy Aurora Gamboa; Lucas Tizoe Gamboa, 479 F.3d 538, (8th Cir. March 7, 2007)
The summary plan description is the formal plan document, regardless of its label. Summary plan descriptions are considered part of the Employee Retirement Income Security Act (ERISA) plan document.
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Administrative Committee of the Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan v. James A. Shank, as Trustee of Deborah J. Shank Irrevocable Trust; Deborah J. Shank; Deborah J. Shank Irrevocable Trust, 500 F.3d 834, (8th Cir August 31, 2007)
The court finds that plaintiff’s request for a constructive trust is appropriate equitable relief, and enforces terms of the Plan as written.
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Dillard’s Inc. v. Liberty Life Assurance Company of Boston v. Janet Bolton, 456 F.3d 894 (8th Cir. July 19, 2006)
The court of appeals affirmed the judgment on reimbursement for overpayments resulting from the receipt of social security benefits.
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South Dakota State Medical Holding Company, Inc., d/b/a DakotaCare, v. Janet Hofer, 2007 U.S. Dist. LEXIS 53963, (United States District Court for the District of South Dakota, Western Division, July 24, 2007)
A Plan may enforce the terms of the Plan if their interpretation falls within some reasonable definition of the terms.
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Providence Health System-Washington v. Bush, 2006 U.S. Dist. LEXIS 81912, (W.D. Wash. Nov. 8, 2006)
When funds recovered by a beneficiary from a responsible party are placed in any form of trust fund, Federal Courts have jurisdiction over the insurer’s equitable action to impose a constructive trust over the funds. Terms of the Plan Document will be executed stringently, and the Made Whole Doctrine must be explicitly disclaimed.
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Susanne Beveridge v. Benefit Recovery, Inc., 2006 U.S. Dist. LEXIS 50942, (United States District Court for the District of Arizona, July 21, 2006)
Plan enforcement of Plan terms when not arbitrary or capricious.
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Mutual of Omaha Insurance Company v. Estate of Anthony Arachikavitz, 2007 U.S. Dist. LEXIS 71172, (District Court for the District of Nevada, September 20, 2007)
The Court finds that funds in trustee are identifiable, plan language meets the specifications (identify, lien, trust) and the Plan is entitled to reimbursement from a Special Needs Trust and Settlement Fund.
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Administrative Committee for the Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan, Plaintiff, v. Alice Salazar, 2007 U.S. Dist. LEXIS 61273, (United States District Court for the District of Arizona, August 20, 2007)
To create a lien by agreement the plan must (1) specifically identify a fund, distinct from the beneficiary’s general assets, from which reimbursement will be taken, and (2) specify a particular share to which the plan is entitled.
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Via Christi Reg’l Med. Ctr., Inc. v. Blue Cross & Blue Shield of Kansas, Inc., 2006 U.S. Dist LEXIS 87194, (D. Kan. Nov. 29, 2006)
Federal Jurisdiction is limited to equitable requests for reclamation of funds. A participant beneficiary or Plan may bring an action for appropriate relief to Federal Court under Section 1109 (breach of fiduciary duty/obligation imposed by ERISA) and are not strictly limited to equitable restitution.
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Mark Popowski v. Deborah Parrott, 2006 U.S. App. LEXIS 21587, (11th Cir. 2006)
When a Plan claims a lien on any amount recovered, specify the fund out of which reimbursement was due, the portion due the Plan is equitable. Despite being structured as a breach of contract, it is sought through a constructive trust or equitable lien on a specifically identified fund in the participant’s possession and control, and is a form of equitable relief.
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Administrative Committee for the Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan v. Jpshua Horton, Denica Jayne Werber, TroyMillikan, ABC Bank, Regions Bank, 2008 U.S. App. LEXIS 757(11th Cir. 2008)
An employee health and welfare plan appealed a Northern District of Georgia decision in favor of defendants: a minor, a conservator of the minor, and a bank, in its action seeking to enforce reimbursement provisions of its ERISA Plan. The insured settled a personal injury suit and received funds from a liable third party. The Plan, which had previously paid the minor insured’s medical expenses, included provisions in the Plan Document identifying funds paid by the Plan as separate from the insured’s assets, and asserting a trust and equitable lien over settlement proceeds.
The Eleventh Circuit Court of Appeals found that the Plan properly sought under ERISA § 502(a)(3) equitable restitution of a specifically identifiable fund in possession of defendants, since it asserted title and right to possession of the particular property, identified as being in the hands of the conservator. The money held in trust by the conservator had been identified as belonging in good conscience to the fiduciary by virtue of the plan’s terms, and the money could be clearly traced to a particular fund in defendants’ possession. The fact that the conservator held the funds as a third party did not defeat the fiduciary’s claim because the settlement funds were intact and constituted an identifiable res that could be restored to its rightful recipient.
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Moore v. CapitalCare, Inc., 461 F.3d 1, 2006 U.S. App. LEXIS 22075, (D.C. Cir 2006)
ERISA beneficiary’s parents appeal grant of an equitable lien to the Plan, entitled to reimbursement from settlement proceeds. Parents challenge equitable lien because benficiary was not made whole. Plan unambiguously established a plan priority to any third party recovery regardless of whether the beneficiary was made whole, and Plan is entitled to recover having obtained an equitable lien.
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