:: ERISA Group Health Plan Subrogation Update

The United States Supreme Court decision in Sereboff v. Mid Atlantic Med. Serv., Inc., 126 S.Ct. 1869 (2006) contributed to a flourishing of plan subrogation efforts and, as a consequence, a refinement of remaining issues in the health plan context. In the cases below, all decided in 2008, the health plans have by and large prevailed. Difficulties have been encountered, however, including instances involving decedents and their estates, and in the perennial disputes over the adequacy of plan language. . . .

Chicago Graphic Arts Health & Welfare Plan v. Castaneda, Slip Copy, 2008 WL 345615 (N.D.Ill.) (February 07, 2008) Attorneys fees awarded to plan following successful litigation seeking reimbursement from plan participant after tort settlement. Pursuant to 29 U.S.C. § 1132(g)(1), the court awarded attorneys’ fees and nontaxable expenses totaling $12,424.93 claimed to have been incurred in the prosecution of this suit.In reaching its decision, the district court observed:

Prior to the filing of the complaint in this case, [the personal injury plaintiffs] took the position that Illinois law precluded recovery because of the anti-subrogation provisions of the Family Expense Act. However, the law upon which they based this assertion applies to insured plans, not self-funded plans such as the one in this case, which are exempt from state regulation under 29 U.S.C. § 1144(b)(2)(B). See, e.g., Estate of Lake v. Marten, 946 F.Supp. 605, 608-10 (N.D.Ill.1996); Health Cost Controls v. Rogers, 909 F.Supp. 537, 542-44 (N.D.Ill.1994). The legal underpinning of their resistance to this suit has been consistently rejected in this district for over a decade, and there is no argument within their submissions that they sought, in good faith, to change the law with respect to this kind of case. Despite having been informed of this line of case law before the action commenced, the Castanedas persisted in their course of action up to and including final judgment pursuant to a motion that they did not see fit to answer.

. . . the deterrent effect presented by an award of fees in this case is slight; we are not persuaded that the facts of this case will be oft-repeated, particularly the Castanedas’ resistance to paying the lien amount when faced with the case law the Plan supplied. However, there is some chance that an award would cause second thoughts in those contemplating a recalcitrant approach.

Trustees of Local 734 Bakery Drives Health and Welfare Plan v. Wolff, Slip Copy, 2008 WL 320394 (N.D.Ill.) (January 31, 2008) State court lacked jurisdiction to adjudicate lien based upon terms of case dismissal. The district court held that:

The subsequent adjudication of the lien related to the settlement; it did not seek to enforce the judgment of dismissal itself. An Indiana court also has the inherent authority to enforce the settlement of litigation that was before that court. E & S Hems, L.L.C. v. Eagen, 795 N.E.2d 508, 510 (Ind.Ct.App.2003) (quoting Germania v. Thermasol, Ltd., 569 N.E.2d 730, 732 (Ind.Ct.App.1991)). However, unless the dismissal provides that the court is retaining jurisdiction to enforce the settlement, the court loses such authority upon the entry of a judgment of dismissal. E & S, 795 N.E.2d at 510-11. Here, the Superior Court lacked jurisdiction to rule on the motion to adjudicate the lien because the case had already been dismissed without retaining jurisdiction to enforce the settlement or for some other purpose.

On the other hand, the case holds an important cautionary point as to the scant need for personal jurisdiction in lien adjudication proceedings. (In this case, the plan argued it had not been served with notice of the hearing.) The court observed:

The Fund’s contentions regarding personal jurisdiction are without merit. The Wolffs moved to resolve a lien on settlement proceeds they possessed; they did not seek to impose any liability on ACS or the Fund nor to attach any property already held by ACS or the Fund. Thus, their motion to adjudicate the lien was an in rem proceeding and it concerned a res (the settlement proceeds) that was held by the Wolffs. Since the Wolffs were Indiana residents both at the time of the settlement and when the lien was being adjudicated, the res they held is considered to be located in Indiana, making it proper for the adjudication to take place at a court in Indiana. . . . Because the lien adjudication was an in rem proceeding, personal jurisdiction over ACS was not required.

Cossey v. Associates’ Health and Welfare Plan, Slip Copy, 2008 WL 276282 (E.D.Ark.) (January 30, 2008) In proceedings following the Eighth Circuit’s reversal of a decision for the plan participant, Administrative Committee of the Wal-Mart Stores, Inc. v. Gamboa, 479 F.3d 538 (8th Cir.2007), the district court considered remaining issues in a substantially similar case. (Gamboa essentially held that the entire SPD was a part of the Plan and that the Administrative Committee reasonably concluded that the reimbursement provision appearing in the SPD obliged the defendants to reimburse the Plan.) In this subsequent district court opinion, the court held that the SPD provisions allowed the plan to withhold benefits if participants or beneficiaries failed to execute a “Reimbursement-Subrogation Agreement” or if counsel failed to execute a “Disbursement Agreement”.

Board of Trustees for Laborers Health and Welfare Trust Fund for Northern California v. Board of Trustees for Laborers Health and Welfare Trust Fund for Northern California v. Hill, Slip Copy, 2008 WL 239184 (N.D.Cal.) (January 28, 2008). The district court declined to adopt a rule that would require a plan to use specific “magic words” in order to displace the make-whole doctrine. The plan language unambiguously gave the plan priority to and an automatic lien on the settlement funds recovered by participants or beneficiaries. In so ruling, however, the district court in dicta notes a possible conflict in the views of the Ninth and, on the other hand, the views of the Sixth and Eleventh Circuits, as to required disclaimer language.

Diamond Crystal Brands, Inc. v. Wallace, — F.Supp.2d —-, 2008 WL 223248 (N.D.Ga.) (January 22, 2008) In this action by a plan to enforce reimbursement rights, the district court issued a preliminary injunction as to portion of settlement allocated to estate under Georgia’s survival statute (held not preempted), but not to portion of settlement allocated to wrongful death claim by decedent’s adult daughter.

Administrative Committee for Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan v. Horton, 513 F.3d 1223 (C.A.11 (Ga.)) (January 15, 2008) (see my coverage in :: Eleventh Circuit Holds Conservator Proper Defendant In ERISA Health Plan Subrogation Litigation)

Metal Technologies, Inc. v. Ramirez, Slip Copy, 2008 WL 153534 (E.D.Wis.) (January 11, 2008) District court grants plan’s motion for summary judgement, imposing a constructive trust and equitable lien in favor of the plan upon the remaining settlement funds.