:: Fifth Circuit Case Reflects Continuity On ERISA Reimbursement Claims

The Bombardier court set out a three-part test to determine whether a claim qualified as relief pursuant to § 1132(a)(3), asking: does the Plan seek to recover funds (1) that are specifically identifiable, (2) that belong in good conscience to the Plan, and (3) that are within the possession and control of the defendant beneficiary? Id. at 356. Here, as in Bombardier,  the funds are specifically identifiable, due to the settlement; belong in good conscience to the Plan (due to the unambiguous subrogation provision); and are within the possession and control of the defendant beneficiary, as they are being held in trust by Flores’s attorneys. Thus, the constructive trust remedy was an appropriate one for the district court to grant to Allstate.

At&T, Inc. v. Flores, 2009 U.S. App. LEXIS 8538 (5th Cir. Apr. 22, 2009)  (unpublished)

This recent unpublished Fifth Circuit opinion reflects a continuity with the pre-Sereboff case law on the prerequisites for equitable relief under 29 U.S.C. § 1132(a)(3).   In Bombardier Aerospace Employee Welfare Benefits Plan v. Ferrer, Poirot and Wansbrough, 354 F.3d 348 (5th Cir. 2003), the Fifth Circuit established that a constructive trust was “appropriate equitable relief” properly sought under 29 U.S.C. § 1132(a)(3). 

The Court in Flores noted the similarity of the facts before it so those before the Supreme Court in Sereboff v. Mid-Atlantic Medical Services, 547 U.S. 356 (2006).

Under circumstances very similar to the instant case, the Supreme Court held that an equitable lien placed on “specifically identifiable” funds that were “in the possession of [the plaintiffs]” was an “appropriate equitable remedy” under § 1132(a)(3).  Sereboff, 547 U.S. at 362. As previously discussed, the funds in this case are specifically identifiable and in possession of the Plaintiff-Appellants; the district court thus did not err in granting an equitable lien to the Plan.

The Court thus continues its emphasis on the requirement of possession or control over the funds and its requirement that the funds be “specifically identifiable”.

The Court also continues its rejection of the “make whole” rule as a default rule in the absence of  a specific rejection of the common law doctrine.

The subrogation provision of the plan at issue clearly provides that the Plan is entitled to reimbursement out of payments made by an injuring party, and similar provisions have been enforced by the this Court. In Sunbeam-Oster Company, Inc. v. Whitehurst, 102 F.3d 1368, 1376 (5th Cir. 1996), which was relied on by the district court, we rejected  the “made whole” doctrine where it was not expressly included in the language of the plan, and held that a clear and unambiguous subrogation/reimbursement provision entitled the Plan to the full amount of medical benefits paid on the insured’s behalf. We follow Sunbeam-Oster and find that the subrogation/reimbursement provision in this case is equitable and not subject to the “made whole” doctrine