Blue Cross v. Sanders ( 1998 )

PUBLISH
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 97-6178
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D. C. Docket No. 96-L-925-NE
BLUE CROSS & BLUE SHIELD
OF ALABAMA,
Plaintiff-Appellee,
versus
DOYLE G. SANDERS and
TINA M. SANDERS,
Defendants-Appellants.
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Appeal from the United States District Court
for the Northern District of Alabama
-------------------------
(April 13, 1998)
Before TJOFLAT and HULL, Circuit Judges, and KRAVITCH, Senior
Circuit Judge.
KRAVITCH, Senior Circuit Judge:
This case, brought under the Employee Retirement Income
Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1461, presents
questions of subject matter jurisdiction, federal preemption, and
statute of limitations.
Blue Cross and Blue Shield of Alabama (“Blue Cross”) sued
Doyle G. Sanders and Tina M. Sanders (“the Sanderses”) under ERISA,
29 U.S.C. § 1132(a)(3)(B). The district court denied summary
judgment to the Sanderses and granted summary judgment to Blue
Cross. See Blue Cross & Blue Shield of Ala. v. Sanders, 974
F. Supp. 1416 (N.D. Ala. 1997). We affirm.
I.
From June 1990 to May 1992, the Sanderses were participants in
a health benefits plan (“the Plan”) offered through Mr. Sanders’s
employer, the Nichols Research Corporation (“NRC”). The Plan, an
“employee welfare benefit fund” under 29 U.S.C. § 1002(1), was
self-funded by NRC, which paid the cost of all claims approved by
Blue Cross, the “Claims Administrator” under the terms of the Plan.
See Plan at 1, § I, ¶ 2.
The version of the Plan at issue here was executed on August
23, 1991, with a retroactive effective date of January 1, 1991.
The “Subrogation” provision of the Plan stated in part:
If the Claims Administrator pays or provides any benefits
for a Member under this Plan, it is subrogated to all
rights of recovery which that Member has in contract,
tort or otherwise against any person or organization for
the amount of benefits paid or provided. That means that
1
the Claims Administrator may use the Member’s right to
recover money from that other person or organization.
Separate from and in addition to the Claims
Administrator’s right of subrogation, if an Employee or
a member of his family recovers money from the other
person or organization for any injury or condition for
which benefits were provided by the Claims Administrator,
the Member agrees to reimburse the Claims Administrator
from the recovered money that amount of benefits the
Claims Administrator has paid or provided . . . . The
right to reimbursement of the Claims Administrator comes
first even if the Member is not paid for all of his claim
for damages . . . or if the payment he receives is for,
or is described as for, his damages (such as personal
injuries) for other than health care expenses . . . .
Plan at 38, § XI - Subrogation, ¶¶ 1-2 (emphasis in original).
In March 1991, Mrs. Sanders was injured in an automobile
accident, which resulted in various medical expenses. Blue Cross
authorized the Plan to pay medical providers a total of $12,678.69
for these expenses. In November 1991, the Sanderses filed suit in
Alabama state court against both the owner and the driver of the
vehicle. The suit did not include any claim for medical expenses.
The Sanderses won a default judgment, which was satisfied by a
payment of $200,000 in October 1992. They did not notify Blue
Cross about the judgment, but Blue Cross, upon learning of the
judgment, requested that they reimburse the Plan in the amount of
$12,678.89. They refused.
In April 1996, Blue Cross, on behalf of the Plan, sued the
Sanderses in federal district court under 29 U.S.C.
§ 1132(a)(3)(B). Section 1132(a)(3) states in part:
A civil action may be brought . . . by a participant,
beneficiary, or fiduciary (A) to enjoin any act or
practice which violates any provision of this subchapter
2
or the terms of the plan, or (B) to obtain other
appropriate equitable relief (i) to redress such
violations or (ii) to enforce any provisions of this
subchapter or the terms of the plan.
In its complaint, Blue Cross requested that the court: (1)
pursuant to 29 U.S.C. § 1132(a)(3)(B)(i), issue a declaratory
judgment interpreting Section XI of the Plan to require, inter
alia, that the Sanderses reimburse the Plan the amount of
$12,678.89; and (2) pursuant to 29 U.S.C. § 1132(a)(3)(B)(ii),
enforce Section XI of the Plan and obtain reimbursement from the
Sanderses in the amount of $12,678.89.
In their answer, the Sanderses admitted that Blue Cross was a
fiduciary seeking equitable relief under 29 U.S.C. § 1132(a)(3).
See Answer at 2, ¶ 4 (“The Defendants admit the allegations of
paragraphs 1 through 7 except this action is not prosecuted by
Nichols Research Corporation’s Employee’s Health Benefit Plan, the
real party in interest, as required by Rule 17, Federal Rules of
Civil Procedure.”); Complaint at 2, ¶ 5 (stating that the court had
subject matter jurisdiction under 29 U.S.C. § 1132(a)(3) because
the action was brought by a fiduciary under an employee welfare
benefit plan to enforce provisions of the plan); id. at ¶ 3(stating that Blue Cross was a Plan fiduciary with standing to
bring an action under 29 U.S.C. § 1132(a)(3)); Answer at 2-3, ¶¶
3(c), 6, 12 (stating that Blue Cross was seeking “equitable”
relief1).
1
See Answer at 2, ¶¶ 3(c)(“Since subrogation is an equitable
remedy, the Plaintiff is now barred by waiver, estoppel, latches
3
The parties filed cross-motions for summary judgment. The
district court denied summary judgment to the Sanderses and granted
summary judgment to Blue Cross. See Blue Cross & Blue Shield of
Ala. v. Sanders, 974 F. Supp. 1416 (N.D. Ala. 1997). In its order,
the court determined that the Plan conflicted with Alabama’s common
law of subrogation, but it ruled that ERISA preempted this state
law. Id. at 1419-22. The court concluded: “Under the plan’s
provisions on subrogation, the plan is entitled to recover the
$12,678.69 that it has paid for Tina M. Sanders’ injuries.” Id. at
1422.2
On appeal, the Sanderses argue that:
(1) the district court lacked subject matter
jurisdiction over this case brought under 29 U.S.C.
§ 1132(a)(3)(B) because:
(a) Blue Cross was not a “fiduciary” under 29
U.S.C. § 1132(a)(3); and
(b) the relief sought was not “equitable”
under 29 U.S.C. § 1132(a)(3)(B);
(2) Alabama law prohibited Blue Cross, on behalf of the
Plan, from recovering money from the Sanderses’
tort action;
(3) the instant action was barred by the statute
[sic] or unclean hands to maintain this action against your
Defendants . . . .”); id. at 2, ¶ 6 (“The Defendants deny that the
reimbursement provisions of the plan are binding upon the
Defendants in this equitable proceeding.”); id. at 3, ¶ 12 (“[T]he
Plaintiff is seeking to come into this court of equity with unclean
hands; all of its claims are barred by equitable principles,
equitable estoppel and waiver.”).
2
In granting relief based on the “plan’s provisions on
subrogation,” the district court apparently is referring to the
second paragraph of “Section XI - Subrogation,” which requires
reimbursement, not the first paragraph, which addresses
subrogation. See Plan at 38, § XI - Subrogation, ¶¶ 1-2.
4
of limitations; and
(4) the reimbursement provision of the Plan should not apply
retroactively to medical benefits that were paid on Mrs.
Sanders’s behalf before the Plan was executed.3
We analyze the Sanderses’ arguments de novo, applying the same
legal standards that bound the district court and viewing all facts
and any reasonable inferences therefrom in the light most favorable
to the non-moving party. See Hale v. Tallapoosa County, 50 F.3d
1579, 1581 (11th Cir. 1995). Summary judgment is appropriate only
when “there is no genuine issue of material fact and . . . the
moving party is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(c).
II.
The Sanderses contend that the district court lacked subject
matter jurisdiction over the instant suit brought under 29 U.S.C.
§ 1132(a)(3)(B) because: (a) Blue Cross was not a “fiduciary” under
29 U.S.C. § 1132(a)(3); and (b) the relief sought was not
“equitable” under 29 U.S.C. § 1132(a)(3)(B).
The Sanderses did not make this argument before the district
court. Indeed, in their answer, they explicitly admitted that Blue
Cross was a fiduciary seeking equitable relief. See Answer at 2-3,
¶¶ 3(c), 4, 6, 12. Notwithstanding the Sanderses’ failure to raise
the issue in the district court, this court may review subject
3
Without explanation, the Sanderses also refer to a variety of
other equitable defenses: laches, waiver, estoppel, and unclean
hands. See Sanderses’ Br. at 27. We summarily reject these
arguments as meritless.
5
matter jurisdiction sua sponte. See Baltin v. Alaron Trading
Corp., 128 F.3d 1466, 1468 (11th Cir. 1997) (stating that this
court may conduct plenary review of subject matter jurisdiction and
that this court has the obligation to inquire into subject matter
jurisdiction whenever it may be lacking) (citations omitted); see
also Fed. R. Civ. P. 12(h)(3) (“Whenever it appears by suggestion
of the parties or otherwise that the court lacks jurisdiction of
the subject matter, the court shall dismiss the action.”).
In determining whether the district court had subject matter
jurisdiction, we respect the important distinction between the lack
of subject matter jurisdiction and the failure to state a claim
upon which relief can be granted. In Bell v. Hood, 327 U.S. 678,
66 S. Ct. 773 (1946), the Court ruled that a claim alleged to arise
under federal law should not be dismissed for lack of subject
matter jurisdiction if “the right of the petitioners to recover
under their complaint will be sustained if the Constitution and
laws of the United States are given one construction and will be
defeated if they are given another.” Id. at 685, 66 S. Ct. at 777.
Thus, a federal court may dismiss a federal question claim for lack
of subject matter jurisdiction only if: (1) “the alleged claim
under the Constitution or federal statutes clearly appears to be
immaterial and made solely for the purpose of obtaining
jurisdiction”; or (2) “such a claim is wholly insubstantial and
frivolous.” Id. at 682-83, 66 S. Ct. at 776. Under the latter
Bell exception, subject matter jurisdiction is lacking only “if the
6
claim ‘has no plausible foundation, or if the court concludes that
a prior Supreme Court decision clearly forecloses the claim.’”
Barnett v. Bailey, 956 F.2d 1036, 1041 (11th Cir. 1992) (quoting
Olivares v. Martin, 555 F.2d 1192, 1195 (5th Cir. 1977)); see also
McGinnis v. Ingram Equipment Co., Inc., 918 F.2d 1491, 1494 (11th
Cir. 1990) (en banc) (“The test of federal jurisdiction is not
whether the cause of action is one on which the claimant can
recover. Rather the test is whether ‘the cause of action alleged
is so patently without merit as to justify . . . the court’s
dismissal for want of jurisdiction.’”) (quoting Dime Coal Co. v.
Combs, 796 F.2d 394, 396 (11th Cir. 1986)).
Under the reasoning of Bell and its progeny, federal subject
matter jurisdiction exists in this case as long as Blue Cross
plausibly is a “fiduciary,” see 29 U.S.C. § 1132(a)(3), seeking
“equitable relief,” see 29 U.S.C. § 1132(a)(3)(B). Blue Cross
plainly satisfied both the “fiduciary”4 and “equitable relief”5
4
Blue Cross has amply satisfied its burden of demonstrating that
it plausibly is a fiduciary. According to 29 U.S.C. § 1002(21)(A),
[A] person is a fiduciary with respect to a plan to the
extent (i) he exercises any discretionary authority or
discretionary control respecting management of such plan
or exercises any authority or control respecting
management or disposition of its assets, . . . or (iii)
he has any discretionary authority or discretionary
responsibility in the administration of such plan. . . .
See also 29 U.S.C. § 1002(9) (stating that the term “person”
includes corporations).
Claims administrators are fiduciaries if they have the
authority to make ultimate decisions regarding benefits
eligibility. Compare Libbey-Owens-Ford Co. v. Blue Cross & Blue
Shield Mut. of Ohio, 982 F.2d 1031, 1035 (6th Cir. 1993) (holding
that claims administrator was fiduciary because it “retained
7
authority to resolve all disputes regarding coverage”), with Baker
v. Big Star Div. of the Grand Union Co., 893 F.2d 288, 290 (11th
Cir. 1989) (“An insurance company does not become an ERISA
‘fiduciary’ simply by performing administrative functions and
claims processing within a framework of rules established by an
employer, especially if, as in this case, the claims processor has
not been granted the authority to make the ultimate decisions
regarding eligibility.”); Harris Trust and Sav. Bank v. Provident
Life and Accident Ins. Co., 57 F.3d 608, 613 (7th Cir. 1995)
(ruling that claims administrator was not a fiduciary where
employer had the right to decide all disputed and non-routine
claims); and Kyle Rys., Inc. v. Pac. Admin. Servs., Inc., 990 F.2d
513 (9th Cir. 1993) (stating that plan administrators are not
fiduciaries when they merely perform ministerial duties or process
claims).
According to this standard, Blue Cross likely is a fiduciary
under 29 U.S.C. § 1132(a)(3) because Blue Cross has full authority
to determine payment eligibility for submitted claims and to review
denied claims. See Plan at 45-48; Administrative Services
Agreement between Blue Cross and Blue Shield of Alabama and Nichols
Research Corporation, Inc. at 2, 9.
5
Blue Cross has more than satisfied its burden of demonstrating
that the relief sought is plausibly “equitable.” Blue Cross
essentially seeks specific performance of the reimbursement
provision of the Plan. Specific performance is an equitable remedy
available when legal remedies are inadequate. See Dairy Queen,
Inc. v. Wood, 369 U.S. 469, 478, 82 S. Ct. 894, 900 (1962). Legal
remedies were inadequate here because ERISA preemption would have
precluded Blue Cross from suing the Sanderses at law in state
court, cf. Landwehr v. Dupree, 72 F.3d 726, 736-37 (9th Cir. 1995)
(holding that where state law claims for damages would fall within
ERISA’s preemptive scope, plan beneficiaries had no adequate remedy
at law), and because Blue Cross’s only potential federal remedy was
equitable, see 29 U.S.C. § 1132(a)(3), not legal, see 29 U.S.C.
§ 1132(a)(1)-(9) (listing types of civil enforcement actions that
may be brought under ERISA). Moreover, because Blue Cross had no
other available remedy, specific performance is “appropriate
equitable relief” under 29 U.S.C. § 1132(a)(3)(B). Cf. Varity
Corp. v. Howe, 516 U.S. 489, 514, 116 S. Ct. 1065, 1079 (1996)
(“[W]here Congress elsewhere provided adequate relief for a
beneficiary’s injury, there will likely be no need for further
equitable relief, in which case such relief normally would not be
‘appropriate.’”).
In arguing that the relief sought by Blue Cross is not
equitable, the Sanderses rely on FMC Med. Plan v. Owens, 122 F.3d
1258 (9th Cir. 1997), which, like this case, involved a fiduciary
8
seeking reimbursement pursuant to a benefit plan provision
requiring reimbursement from an insured who recovered payments from
a third party. The Owens court stated that the action was
essentially “a breach of contract claim for monetary relief” that
did not fall within any of three traditional categories of
equitable relief: injunction, mandamus, or restitution. Id. at
1261. The court thus ruled that the action was legal, rather than
equitable, and not authorized under 29 U.S.C. § 1132(a)(3). Id.;
but see Harris Trust & Sav. Bank v. Provident Life & Accident Ins.
Co., 57 F.3d 608, 615-16 (7th Cir. 1995) (holding that employer’s
claim for reimbursement of benefits pursuant to plan provision
constituted action for restitution, which was equitable relief
under § 1132(a)(3)(B)).
In our view, Owens appears to be based on an unduly narrow
reading of Mertens v. Hewitt Assocs., 508 U.S. 248, 113 S. Ct. 2063(1993), which held that 29 U.S.C. § 1132(a)(3) does not allow a
suit by plan participants for money damages against nonfiduciaries
who knowingly participate in a fiduciary’s breach of fiduciary
duty. In Mertens, the Court reasoned that “equitable relief,” as
used in § 1132(a)(3)(B), means those types of relief that were
“typically available in equity (such as injunction, mandamus, and
restitution, but not compensatory damages).” 508 U.S. at 256, 113
S. Ct. at 2069 (emphasis in original); see also id. at 260, 113
S. Ct. at 2071 (stating that traditional equitable relief of
restitution includes disgorgement of ill-gotten plan assets or
profits). Relying on Mertens, the Owens court held that “equitable
relief” includes only injunction, mandamus, and restitution.
See 122 F.3d at 1261 (stating that the Ninth Circuit has
interpreted Mertens as allowing “only the traditional forms of
equitable relief under section 1132(a)(3)-injunction, mandamus, and
restitution”) (citing Watkins v. Westinghouse Hanford Co., 12 F.3d
1517 (9th Cir. 1993)).
The Court in Mertens, however, did not imply that specific
performance is unavailable under 29 U.S.C. § 1132(a)(3)(B).
Because specific performance is a traditional form of equitable
relief, see Owens-Illinois, Inc. v. Lake Shore Land Co., Inc., 610
F.2d 1185, 1189 (3d Cir. 1979) (“An action for specific performance
without a claim for damages is purely equitable and historically
has always been tried to the court.”), we believe that specific
performance may be equitable relief available under 29 U.S.C.
§ 1132(a)(3)(B). Other courts have so held. See In re Unisys
Corp. Retiree Med. Ben. ERISA Litigation, 57 F.3d 1255, 1268-69 (3d
Cir. 1995) (ruling that “equitable relief” under § 1132(a)(3)(B)
includes monetary awards typically available in equity but not
compensatory or consequential damages; granting retirees both
specific performance of fiduciary’s assurances of post-retirement
medical benefits and restitutionary reimbursement of back
9
elements of this inquiry. Accordingly, because Blue Cross’s ERISA
claims are neither “immaterial and made solely for the purpose of
obtaining jurisdiction” nor “wholly insubstantial and frivolous,”
see Bell, at 682-83, 66 S. Ct. at 776, we hold that the district
court properly exercised jurisdiction over the case, see Health
Cost Controls v. Skinner, 44 F.3d 535, 537-38 (7th Cir. 1995)
(ruling that the district court had subject matter jurisdiction
over an action brought by a fiduciary to enforce reimbursement
rights under 29 U.S.C. § 1132(a)(3); concluding that the district
court’s holding that the remedy sought was not equitable “does not
negate the existence of federal subject matter jurisdiction, but
rather indicates that [the plaintiff] may have failed to state” a
claim upon which relief can be granted); Brule v. Southworth, 611
F.2d 406, 409 (1st Cir. 1979) (holding that subject matter
jurisdiction existed because plaintiff’s claim was not frivolous or
insubstantial).
Furthermore, we need not determine whether Blue Cross failed
benefits), cert. denied, 517 U.S. 1103 (1996); Bishop v. Martin
Marietta Corp., No. CIV.A.95-5426, (E.D. Pa. March 31, 1997)
(stating that employee suing fiduciary under § 1132(a)(3)(B) may
obtain equitable relief in the form of specific performance of
fiduciary’s assurances of benefit eligibility). Because ERISA
plausibly authorized the relief sought by Blue Cross, the district
court had subject matter jurisdiction over this case.
We note that Blue Cross sued under 29 U.S.C. § 1132(a)(3)(B).
We therefore are not presented with the question of whether an
action to compel reimbursement could be considered an injunctive
action allowable under 29 U.S.C. § 1132(a)(3)(A) (authorizing suit
by a participant, beneficiary, or fiduciary “to enjoin any act or
practice which violates any provision of this subchapter or the
terms of the plan”).
10
“to state a claim upon which relief can be granted.” Fed. R. Civ.
P. 12(b)(6). As this court has held, “[T]he failure to state a
claim is not a jurisdictional question.” Gholston v. Hous. Auth.
of City of Montgomery, 818 F.2d 776, 781 (11th Cir. 1987). Thus,
although we may determine sua sponte whether subject matter
jurisdiction exists, we will not decide whether the plaintiff
failed to state a claim unless the defendant preserved that defense
in the district court pursuant to Fed. R. Civ. P. 12(h)(2). See
Brule, 611 F.2d at 409 (“Having neglected to assert the defense of
failure to state a claim below, defendants have waived their right
to assert it now.”); see also Dean Witter Reynolds, Inc. v.
Fernandez, 741 F.2d 355, 360-61 (11th Cir. 1984) (declining to
consider a defense not raised in the district court except under
extraordinary circumstances).
As noted supra, the Sanderses in the district court conceded
that Blue Cross is a fiduciary and that Blue Cross’s reimbursement
action is equitable. Although the Sanderses did include in their
answer the naked assertion that Blue Cross failed to state a claim,
see Answer at 1, ¶ 1 (“The complaint fails to state a claim against
Defendants upon which relief can be granted.”), the Sanderses
waived the particular failure to state a claim defense that is
implicit in their subject matter jurisdiction argument -- namely,
the defense that Blue Cross is not a “fiduciary,” see 29 U.S.C.
§ 1132(a)(3), seeking “equitable relief,” see 29 U.S.C. §
1132(a)(3)(B). See Miller v. Cudahy Co., 858 F.2d 1449, 1460 (10th
11
Cir. 1988) (holding that the mere recital of the defense of failure
to state a claim in defendant’s answer was insufficient to preserve
the issue for appellate review).
Because the Sanderses effectively waived the defense, this
court will not determine whether Blue Cross stated a claim upon
which relief can be granted. As the First Circuit reasoned in
Brule:
While the [defendant’s] argument is presented as
jurisdictional, it is plain that its underpinnings rest
on the contention that plaintiffs failed to state a claim
on which relief could be granted, and we think it fatal
that defendants never asserted any such ground in the
district court, either before or during trial. Having
neglected to assert the defense of failure to state a
claim below, defendants have waived their right to assert
it now. Defendants now wish to breathe new life into
their waived defense of failure to state a claim by
presenting it as a challenge to the court’s subject
matter jurisdiction -- the latter being an issue which,
of course, neither the parties nor the court could waive.
We see no merit in this approach.
611 F.2d 406, 409 (1st Cir. 1979); see also McGinnis v. Ingram
Equipment Co., Inc., 918 F.2d 1491, 1494 (11th Cir. 1990) (en banc)
(holding that defendant waived the right to assert a failure to
state a claim; stating that issue was not jurisdictional); Brown v.
Trustees of Boston Univ., 891 F.2d 337, 356-57 (1st Cir. 1989)
(same). Thus, the question of whether Blue Cross actually is a
“fiduciary,” see 29 U.S.C. § 1132(a)(3), seeking “equitable
relief,” see 29 U.S.C. § 1132(a)(3)(B), is not properly before this
court.
III.
12
The Sanderses also contend that Alabama law prohibited Blue
Cross from recovering money from the Sanderses’ state court tort
judgment. In our view, this argument is based on a misreading of
Alabama law and a misunderstanding of the wide scope of ERISA
preemption.
Under Alabama common law, an insurer’s subrogation right,
whether equitable or contractual, does not arise until the insured
has been fully compensated for his loss. See CNA Ins. Cos. v.
Johnson Galleries of Opelika, Inc., 639 So.2d 1355, 1357 (Ala.
1994); Powell v. Blue Cross & Blue Shield of Ala., 581 So.2d 772,
776 (Ala. 1990). The insurer has the burden of proving that the
insured has been fully compensated. See Complete Health, Inc. v.
White, 638 So.2d 784, 787 (Ala. 1994).
A state procedural rule supplements Alabama’s substantive law
of subrogation. According to Ala. R. Civ. P. 17(a),
Every action shall be prosecuted in the name of the real
party in interest. . . . In subrogation cases,
regardless of whether subrogation has occurred by
operation of law, assignment, loan receipt, or otherwise,
if the subrogor no longer has a pecuniary interest in the
claim, the action shall be brought in the name of the
subrogee. If the subrogor still has a pecuniary interest
in the claim, the action shall be brought in the names of
the subrogor and the subrogee.
Although the Sanderses concede that ERISA preempts Alabama’s
common law of subrogation, see Sanderses’ Br. at 27, they
nonetheless contend that Alabama’s procedural subrogation rule,
Ala. R. Civ. P. 17(a), precludes the instant suit. They assert:
The Plan was subrogated immediately upon payment of the
13
medical benefits to the medical providers. Therefore,
the Plan in the present case, or Blue Cross on its
behalf, was the real party in interest with the sole
right to maintain its subrogation case against the tort
feasor pursuant to Rule 17(a) of the Alabama Rules of
Civil Procedure.
Sanderses’ Br. at 27.
The Sanderses thus interpret Ala. R. Civ. P. 17(a) to mean
that because Blue Cross had subrogation rights, it could sue only
the third-party tortfeasor. The Plan, however, expressly provided
that Blue Cross, as Claims Administrator, had the right to
reimbursement “[s]eparate from and in addition to the Claims
Administrator’s right of subrogation.” Plan at 38, § XI -
Subrogation, ¶ 2. In order for the Sanderses to prevail,
therefore, this court would have to hold that Ala. R. Civ. P. 17(a)
precludes a party with contractual subrogation rights from pursuing
its contractual reimbursement rights.
We reject the Sanderses’ argument for two reasons. First,
their interpretation of Ala. R. Civ. P. 17(a) is unpersuasive. We
have identified no authority holding that under Rule 17(a) a party
with both subrogation and reimbursement rights may only pursue its
subrogation rights. The plain language of the rule addresses only
the proper form of a subrogation action, not whether a subrogee may
pursue an independent action based on its right to reimbursement.
Second, even if we were to accept the Sanderses’
interpretation of Ala. R. Civ. P. 17(a), we would hold that ERISA
preempts this state law. As interpreted by the Sanderses, Rule
14
17(a) would preclude Blue Cross from obtaining reimbursement under
the Plan. See Plan, Section XI, ¶ 2. Rule 17(a) thus would fall
within the scope of ERISA preemption. See 29 U.S.C. § 1144(a)
(stating that, except as provided in the saving clause, ERISA
supersedes all state laws that “relate to any employee benefit
plan”); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47, 107 S. Ct.
1549, 1549 (1987) (stating that ERISA preemption has an “expansive
sweep” and is not limited to state laws designed specifically to
affect employee benefit plans); cf. FMC Corp. v. Holliday, 498 U.S.
52, 111 S. Ct. 403 (1990) (holding that state subrogation law
related to employee benefit plans because it prohibited plans from
being structured in a manner requiring reimbursement in the event
of recovery from a third party).
Moreover, ERISA’s saving clause, 29 U.S.C. § 1144(b)(2)(A),
does not protect Ala. R. Civ. P. 17(a) from preemption. The saving
clause states that, except as provided in the deemer clause,
“nothing in this subchapter shall be construed to exempt or relieve
any person from any law of any State which regulates insurance,
banking, or securities.” 29 U.S.C. § 1144(b)(2)(A). In Smith v.
Jefferson Pilot Life Ins. Co., 14 F.3d 562, 569 (11th Cir. 1994),
this court explained that the saving clause only applies if the
state law meets both prongs of the following two-part test: (1)
“the state law must regulate insurance within a common-sense view
of the word ‘regulate,’” id., and thus the law “must not just have
an impact on the insurance industry, but must be specifically
15
directed toward that industry,” Pilot Life, 481 U.S. at 50, 107 S.
Ct. at 1554; and (2) the state law must regulate the “business of
insurance,” as that term is defined by cases interpreting the scope
of the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015, see Jefferson
Pilot Life, 14 F.3d at 569 (citing Metropolitan Life Ins. Co. v.
Travelers Ins. Co., 471 U.S. 724, 743, 105 S. Ct. 2380, 2391
(1985)). As this court has held, a state law satisfies the second
part of this test if the law: (a) “has the effect of transferring
or spreading a policyholder’s risk”; (b) “impacts an integral part
of the policy relationship between the insurer and the insured”;
and (c) “is directed only at entities within the insurance
industry.” See Jefferson Pilot Life, 14 F.3d at 569 (citing
Metropolitan Life, 471 U.S. at 743, 105 S. Ct. at 2391).
Ala. R. Civ. P. 17(a) fails both prongs of this two-part test.
Because the rule applies to all subrogation actions, it is neither
“specifically directed toward [the insurance] industry,” Pilot
Life, 481 U.S. at 50, 107 S. Ct. at 1554, nor “directed only at
entities within the insurance industry,” Jefferson Pilot Life, 14
F.3d at 569. Accordingly, the saving clause does not apply.6
6
This case differs from FMC Corp. v. Holliday, 498 U.S. 52, 111
S. Ct. 403 (1990), which applied ERISA’s saving clause because the
state subrogation law was directly related to insurance. In that
case, the state law prohibited subrogation or reimbursement of
benefits paid or payable for tort recoveries in actions arising out
of the maintenance or use of a motor vehicle, where the benefits
were provided through “[a]ny program, group contract or other
arrangement for payment of benefits.” See FMC Corp., 498 U.S. at
59, 111 S. Ct. at 408 (citing 75 Pa. Cons. Stat. § 1719-20).
Reasoning that the state law “does not merely have an impact on the
16
Moreover, even if the saving clause were applicable, the
deemer clause, 29 U.S.C. § 1144(b)(2)(B),7 would exempt the instant
self-funded plan from Ala. R. Civ. P. 17(a). As the Court ruled in
FMC Corp., “State laws that directly regulate insurance are ‘saved’
but do not reach self-funded employee benefit plans because the
plans may not be deemed to be insurance companies, other insurers,
or engaged in the business of insurance for purpose of such state
laws.” 498 U.S. at 61, 111 S. Ct. at 409; see id., at 65, 111
insurance industry; it is aimed at it,” see FMC Corp., 498 U.S. at
61, 111 S. Ct. at 409, the Court ruled that the saving clause
applied. By contrast, the subrogation law at issue in this case
covers all subrogation actions, including those arising outside of
the insurance context. FMC Corp., therefore, does not govern this
case.
Because Ala. R. Civ. P. 17(a) is not directly related to the
insurance industry, the instant case is analogous to Baxter by and
through Baxter v. Lynn, 886 F.2d 182, 186 (8th Cir. 1989), in which
the court ruled that ERISA preempted the state common law of
subrogation. As the court explained,
[T]he law of subrogation, while generally applicable to
insurance contracts, is not specifically directed toward
the insurance industry. While laws regulating
subrogation rights apply in part to holders of insurance,
they do not regulate the insurance industry
directly. . . . Thus, a common sense reading of the
insurance saving clause indicates that common law rules
on subrogation are not the type of state insurance
regulations intended to survive the broad scope of ERISA
preemption.
Id. at 186. Similarly, we hold that Ala. R. Civ. P. 17(a) is not
the type of state law that is intended to survive the broad scope
of ERISA preemption.
7
According to the deemer clause, no employee benefit plan “shall
be deemed to be an insurance company or other insurer, bank, trust
company, or investment company or to be engaged in the business of
insurance or banking for purposes of any law of any State
purporting to regulate insurance companies, insurance contracts,
banks, trust companies, or investment companies.” 29 U.S.C.
§ 1144(b)(2)(B).
17
S. Ct. at 411 (holding that ERISA preempted the application of a
state anti-subrogation law to an employer’s self-funded health care
plan). The Sanderses’ reliance on Ala. R. Civ. P. 17(a) therefore
is misplaced.
IV.
The Sanderses also contend that this case is governed by a
two-year statute of limitations. Because Blue Cross’s cause of
action for reimbursement presumably arose when the Sanderses
received payment on the default judgment in October 1992, a two-
year limitations period would bar the instant suit, which Blue
Cross brought in April 1996.
ERISA does not specify a limitations period for a fiduciary’s
suit against a participant under 29 U.S.C. § 1132(a)(3) to enforce
a reimbursement provision of a plan.8 In an ERISA action with no
congressionally mandated limitations period, the district court
“must define the essential nature of the ERISA action and apply the
forum state’s statute of limitations for the most closely analogous
8
No relevant limitations period is found in 29 U.S.C. § 1132, see
Blue Cross & Blue Shield of Ala. v. Weitz, 913 F.2d 1544, 1551 n.12
(11th Cir. 1990) (stating that 29 U.S.C. § 1132 does not specify a
limitations period), or in any other ERISA provision, cf. 29
U.S.C. § 1113 (providing limitations periods for suits brought
“under this subchapter with respect to a fiduciary’s breach of any
responsibility, duty, or obligation under this part, or with
respect to a violation of this part”); Trustees of Wyo. Laborers
Health and Welfare Plan v. Morgen & Oswood Constr. Co., Inc. of
Wyo., 850 F.2d 613, 618 n.8 (10th Cir. 1988) (“The statute of
limitations contained in 29 U.S.C. § 1113 applies only to actions
brought to redress a fiduciary's breach of its obligations to
enforce the provisions of ERISA.”).
18
action.” Byrd v. MacPapers, 961 F.2d 157, 159 (11th Cir. 1992);
see also Wilson v. Garcia, 471 U.S. 261, 266-67, 105 S. Ct. 1938,
1942 (1985) (stating that when Congress has not established a time
limitation for a federal cause of action, courts should adopt a
local time limitation as federal law if it is not inconsistent with
federal law or policy to do so). The characterization of the
federal claim for statute of limitations purposes “is derived from
the elements of the cause of action, and Congress’ purpose in
providing it. These, of course, are matters of federal law.”
Byrd, 961 F.2d at 159 (citing Clark v. Coats & Clark, 865 F.2d
1237, 1241 (11th Cir. 1989)).
We therefore look to Alabama law for the relevant limitations
period. As a matter of first impression for this court, we hold
that a fiduciary’s action to enforce a reimbursement provision
pursuant to 29 U.S.C. § 1132(a)(3) is most closely analogous to a
simple contract action brought under Alabama law. Accordingly, we
apply Alabama’s six-year statute of limitations for simple contract
actions, see Ala. Code § 6-2-34(9),9 and reject the Sanders’s
9
Other circuits have used state contract law to establish
limitations periods for civil enforcement actions brought under 29
U.S.C. § 1132. See Pierce County Hotel Employees & Restaurant
Employees Health Trust v. Elks Lodge, 827 F.2d 1324, 1328 (9th Cir.
1987); Dameron v. Sinai Hosp. of Baltimore, Inc., 815 F.2d 975, 981
(4th Cir. 1987); Miles v. N.Y.S. Teamsters Conference Pension &
Retirement Fund Employee Pension Benefit Plan, 698 F.2d 593, 598
(2d Cir. 1983).
19
proposed two-year limitations period.10
V.
Finally, the Sanderses argue that the reimbursement provision
of the Plan should not apply retroactively to medical benefits paid
to Mrs. Sanders before the Plan was executed.11 The Sanderses did
not raise this argument in the district court. Under exceptional
circumstances, this court may consider an issue not raised in the
district court.12 No such circumstance exists here, however, and
10
The Sanderses cite two inapposite cases in support of their
contention that a two-year statute of limitations applies. See
Musick v. Goodyear Tire & Rubber Co., Inc., 81 F.3d 136 (11th Cir.
1996); O’Neal v. Kennamer, 958 F.2d 1044, 1047 (11th Cir. 1992).
In Musick, this court determined the appropriate Alabama
limitations period to apply to ERISA actions brought by employees
alleging that their layoffs were motivated by the employer’s desire
to avoid paying retirement benefits. 81 F.3d at 137. The court
applied Alabama’s two-year limitations period applicable to claims
for wages and claims for discharge in retaliation for seeking
worker’s compensation, rather than the six-year limitations period
applicable to actions on simple contracts. Id. at 138-39. The
cause of action in Musick is entirely dissimilar to Blue Cross’s
claim here.
In O’Neal, this court noted that under Alabama law a
subrogee’s action against a third-party tortfeasor is a tort action
for damages. 958 F.2d at 1047; see also Ala. Code 1975, Section
6-2-38(l),(n) (providing two-year limitations period for any injury
to the person or rights of another not arising from contract).
O’Neal is not relevant, however, because the instant suit is not a
subrogation action against third-party tortfeasors, but rather a
suit seeking reimbursement from the Sanderses under the terms of
the Plan.
11
The Plan had an effective date of January 1, 1991, but it was
executed on August 23, 1991, by which time the Plan had paid
medical providers much, if not all, of Mrs. Sanders’s accident-
related medical expenses.
12
In Dean Witter Reynolds, Inc. v. Fernandez, this court held:
First, an appellate court will consider an issue not
raised in the district court if it involves a pure
20
we therefore deem this issue waived.
VI.
We reject all arguments raised by the Sanderses as either
meritless or waived. Accordingly, the district court’s grant of
summary judgment to Blue Cross is
AFFIRMED.
question of law, and if refusal to consider it would
result in a miscarriage of justice. Second, the rule may
be relaxed where the appellant raises an objection to an
order which he had no opportunity to raise at the
district court level. Third, the rule does not bar
consideration by the appellate court in the first
instance where the interest of substantial justice is at
stake. Fourth, a federal appellate court is justified in
resolving an issue not passed on below where the proper
resolution is beyond any doubt. Finally, it may be
appropriate to consider an issue first raised on appeal
if that issue presents significant questions of general
impact or of great public concern.
741 F.2d 355, 360-61 (11th Cir. 1984) (internal quotations,
citations, and ellipsis omitted); see also In re Daikin Miami
Overseas, Inc., 868 F.2d 1201, 1207 (11th Cir.1989) (stating that
the third exception generally refers to the vindication of
fundamental constitutional rights).
21