Bollman Hat Co v. Root

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit
4-18-1997
Bollman Hat Co v. Root
Precedential or Non-Precedential:
Docket 96-1191
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"Bollman Hat Co v. Root" (1997). 1997 Decisions. Paper 86.
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 96-1191
___________
BOLLMAN HAT COMPANY
v.
KEVIN T. ROOT;
DALE E. ANSTINE, P.C.
Bollman Hat Company, as sponsor
of the Bollman Hat Company Health
and Welfare Benefits Plan,
Appellant
_______________________________________________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 94-cv-07569)
___________________
Argued January 14, 1997
Before: SLOVITER, Chief Judge,
GREENBERG and SCIRICA, Circuit Judges
(Filed: April 18, l997)
J. FREEDLEY HUNSICKER, JR., ESQUIRE (ARGUED)
SUSAN M. ROCHE, ESQUIRE
Drinker, Biddle & Reath
1345 Chestnut Street
Philadelphia National Bank Building
Philadelphia, Pennsylvania 19107-3496
Attorneys for Appellant
THOMAS P. LANG, ESQUIRE (ARGUED)
Law Offices of Dale E. Anstine, P.C.
Two West Market Street
P.O. Box 952
York, Pennsylvania 17405
1
WAYNE C. PARSIL, ESQUIRE
Law Offices of Dale E. Anstine, P.C.
131 East Grant Street
Lancaster, Pennsylvania 17602
Attorneys for Appellees
Kevin T. Root and Dale E. Anstine, P.C.
JOSEPH M. MELILLO, ESQUIRE
Angino & Rovner
4503 North Front Street
Harrisburg, Pennsylvania 17110
Attorney for Amicus Curiae Appellee,
Pennsylvania Trial Lawyers Association
__________________
OPINION OF THE COURT
__________________
SCIRICA, Circuit Judge.
This appeal involves an ERISA plan's subrogation
rights, specifically whether a plan must contribute to the legal
expenses of a plan participant's recovery against a third party.
We addressed this issue in Ryan by Capria-Ryan v. Fed. Express
Corp., 78 F.3d 123 (3d Cir. 1996), decided after the district
court here rendered judgment. In this appeal we are asked to
distinguish Ryan or in the alternative to reconsider our holding
in Ryan.
I.
Bollman Hat Company sponsors a self-insured, ERISA-
regulated employee benefit plan. After a Bollman employee, Kevin
Root, was injured in a motorcycle accident, the Plan paid him
$100,197.92 for his medical expenses. Thereafter, Root sued the
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third party responsible for his personal injuries and obtained a
$215,000.00 settlement.
Bollman sought full reimbursement from Root in
accordance with § 10.8 of the Plan, which provides:
In the event of any payment under the Plan to any covered person,
the Plan shall, to the extent of such payment, be
subrogated, unless otherwise prohibited by law, to all
the rights of recovery of the covered person arising
out of any claim or cause of action which may accrue
because of alleged negligent conduct of a third party.
Any such covered person hereby agrees to reimburse the
Plan for any payments so made hereunder out of any
monies recovered from such third party as the result of
judgment, settlement, or otherwise . . . .
(emphasis added). Root complied with Bollman's request for
reimbursement in part, but withheld $30,507.13 to pay a portion
of the attorney's fees and costs incurred in obtaining the third
party settlement.
Bollman contends the terms of the Plan require full
reimbursement and do not allow Root to withhold money for
attorney's fees. Bollman also maintains Root expressly agreed to
full reimbursement when he signed a Reimbursement Agreement
before receiving the $100,197.92 from the Plan. The
Reimbursement Agreement provides:
I, Kevin T. Root, understand and acknowledge that my medical plan
has a reimbursement provision which provides that
medical benefits paid under the plan are to be
reimbursed up to the amount of such benefits paid from
any payments, awards or settlements which may be paid
by any third party.
(emphasis added).
3
As sponsor of the Plan, Bollman brought suit against
Root in district court for $30,507.13.1
Following stipulations of fact and cross-motions for summary
judgment, the district court granted summary judgment to Root.
Finding Root's personal injury litigation substantially benefited
Bollman, the district court held Bollman would be unjustly
enriched if Root bore the full burden of litigation costs.
Bollman appeals, citing our intervening decision in Ryan by
Capria-Ryan v. Fed. Express Corp., 78 F.3d 123 (3d Cir. 1996).
II.
Bollman states in its complaint that jurisdiction
arises under the Employee Retirement Income Security Act of 1974
("ERISA"), 29 U.S.C. §§ 1001-1461. A case may arise under ERISA
where the suit is filed by a plan sponsor who is also a
fiduciary. See Northeast Dep't ILGWU Health and Welfare Fund v.
Teamsters Local Union No. 229 Welfare Fund, 764 F.2d 147, 153 (3d
Cir. 1985) (we must "narrowly and literally" interpret ERISA's
civil enforcement provision, 29 U.S.C. § 1132, which allows only
a participant, a beneficiary, or a fiduciary to sue). A plan
sponsor is a fiduciary only "to the extent" it acts in a
fiduciary capacity. 29 U.S.C. § 1002(21)(A) (definition of
"fiduciary"). See also Malia v. General Elec. Co., 23 F.2d 828,
833 (3d Cir.), cert. denied, 115 S. Ct. 377 (1994).
1. The parties stipulated that $30,507.13 is the amount due if
defendants prevail. Bollman named as a defendant Dale Anstine,
P.C., who holds the disputed $30,507.13 in an escrow account
pending resolution of this matter.
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Bollman has limited the "extent" to which it is a
fiduciary by delegating some of its fiduciary duties. At least
one circuit has held a suit brought by a plan sponsor as a
fiduciary does not arise under ERISA unless the action is related
to the fiduciary duties retained by the plan sponsor. See Coyne
& Delany Co. v. Selman, 98 F.3d 1457, 1465 (4th Cir. 1996). Cf.
Northeast Dep't, 764 F.2d at 154 ("[O]ne's status as fiduciary
under ERISA is dependant upon one's relationship to a particular
plan.") It is unclear whether Bollman retained fiduciary duties
which are in any way relevant to this lawsuit. But we do not
need to resolve this issue here. Even if our jurisdiction does
not arise under the statute itself, we nonetheless have
jurisdiction arising under the federal common law developed
pursuant to ERISA. See Airco Indus. Gases, Inc. Div. of the BOC
Group, Inc. v. Teamsters Health and Welfare Pension Fund of
Philadelphia and Vicinity, 850 F.2d 1028, 1033-34 (3d Cir. 1988)
(ERISA case may arise under federal common law where it does not
arise directly under the statute).
Federal question jurisdiction will support claims
arising under federal common law as well as those of a statutory
origin. See Illinois v. City of Milwaukee, Wis., 406 U.S. 91,
100 (1972). A case arises under federal common law if the issue
presented is one "of central concern" to ERISA. Airco, 850 F.2d
at 1033 (quoting Franchise Tax Bd. of the State of Cal. v.
Constructions Laborers Vacation Trust for S. Cal., 463 U.S. 1,
26-27 (1983)). This is such a case. See, e.g., Provident Life &
Accident Ins. Co. v. Waller, 906 F.2d 985, 991 (4th Cir.)
5
(holding the issue of "whether federal courts should impart
unjust enrichment principles into the gaps left by ERISA" is one
of central concern to the statute), cert. denied, 498 U.S. 982(1990); Northeast Dep't, 764 F.2d 147 (we have federal question
jurisdiction to determine a question that implicates ERISA).
We have jurisdiction under 28 U.S.C. § 1291. Our
review of the district court's grant of summary judgment is
plenary. See Ryan by Capria-Ryan v. Fed. Express Corp., 78 F.3d
123, 125 (3d Cir. 1996).
III.
Shortly after the district court granted Root summary
judgment, we held in Ryan by Capria-Ryan v. Fed. Express Corp.,
78 F.3d 123 (3d Cir. 1996), that an ERISA plan participant whose
third party recovery is subrogated to the plan may not withhold
attorney's fees where the plan unambiguously requires full
reimbursement. See id. at 127. Bollman contends this case is
indistinguishable from Ryan.
A.
The Ryans were employees of Federal Express and
participants in its ERISA plan. After Mrs. Ryan gave birth to a
daughter with cerebral palsy and severe brain damage, the Federal
Express plan paid medical expenses. Meanwhile, the Ryans brought
suit for medical malpractice. After the suit was settled, the
Federal Express plan demanded full reimbursement. The Ryans
refused, insisting on withholding a portion of counsel fees
incurred in pursuing their medical malpractice claim.
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The Federal Express plan's subrogation provision
provided, "[I]f benefits are paid on account of an illness
resulting from the intentional actions or from the negligence of
a third party, the Plan shall have the right to recover, against
any source which makes payments or to be reimbursed by the
Covered Participant who receives such benefits, 100% of the
amount of covered benefits paid." Ryan, 78 F.3d at 124.
The Ryans sued Federal Express. The district court
granted the Ryans summary judgment based on the common law
doctrine of unjust enrichment. On appeal, we reviewed the reach
of federal courts to apply common law doctrines in ERISA actions
and reversed, holding that common law may not "override a
subrogation provision in an ERISA-regulated plan on the ground
that the plan would be unjustly enriched if it were to be
enforced as written." Id. We stated:
The language of the subrogation provision at issue here
unambiguously requires the Ryans to pay back all the
money they received from the Plan. Since the Ryans
have failed to establish that the Plan `conflict[s]
with the statutory policies of ERISA' and have
similarly failed to show that the common law right at
issue `is necessary to . . . effectuate a statutory
policy,' we must reject the Ryans' attempt to establish
the common law right they would have us recognize.
Id. at 127 (citations omitted). We also held that "[e]nrichment
is not `unjust' where it is allowed by the express terms of the .
. . plan." Id. (quoting Cummings by Techmeier v. Briggs &
Stratton Retirement Plan, 797 F.2d 383, 390 (7th Cir.), cert.
denied, 479 U.S. 1008 (1986)).
B.
7
Root argues Ryan is distinguishable because the
subrogation provision in the Bollman plan is ambiguous and does
not require full reimbursement. Whether an ERISA plan is
ambiguous is a question of law. See In re Unisys Corp. Long-Term
Disability Plan ERISA Litig., 97 F.3d 710, 715 (3d Cir. 1996).
We will look to the words of the Plan to make this
determination. See id. ("[T]he parties remain bound by the
appropriate objective definition of the words they use to express
their intent.") (quoting Mellon Bank, N.A. v. Aetna Business
Credit, Inc., 619 F.2d 1001, 1013 (3d Cir. 1980)); Ryan, 78 F.3d
at 126. The Bollman plan requires reimbursement of "any
payments" made by the Plan to a participant, and provides for
subrogation to "all [of Root's] rights of recovery." As used in
the plan, the words "any" and "all" both mean "the whole of" or
"every." Black's Law Dictionary 74, 94 (6th ed. 1990).
Notwithstanding the universal scope of "any" and "all," Root
attempts to distinguish the Bollman plan, which called for "100%"
reimbursement. We see no distinction. On this point, we find
the Ryan plan and the Bollman plan to be materially identical and
the Bollman plan to be unambiguous.
Root also contends the Plan is ambiguous on Bollman's
duty to pay Root's attorney's fees because it provides, "The
Company shall pay fees and costs associated with the enforcement
of the Plan rights." But the application of this provision is
expressly limited to "enforcement of the Plan rights," i.e.
actions in which the Plan enforces its own rights. It does not
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require the Plan to fund actions to enforce the independent
rights of a plan beneficiary against a third party.
C.
Root maintains the Reimbursement Agreement he signed is
ambiguous because it does not specifically address attorney's
fees. But the Reimbursement Agreement requires reimbursement "up
to the amount of such benefits paid." A plan or agreement need
not specifically address attorney's fees in order to
unambiguously require full reimbursement.2
IV.
The major thrust of Root's argument is that Ryan was
incorrectly decided and should be overruled. Amicus, the
Pennsylvania Trial Lawyers Association, also urges us to
reconsider our holding in Ryan. Of course, a panel of our court
cannot overrule a prior published decision.3 Only the court en
banc may do this. See Third Circuit I.O.P. 9.1.
2. Root also argues the Reimbursement Agreement is an
unconscionable adhesion contract. But the parties' stipulations
of fact, which were the sole factual basis for the district
court's decision on summary judgment, do not contain facts
necessary to support this argument. Generally we do not consider
facts raised for the first time on appeal. See Harris v. City of
Philadelphia, 35 F.3d 840, 845 (3d Cir. 1994).
3. We note the holding in Ryan has support in the case law.
See Cutting v. Jerome Foods, Inc., 993 F.2d 1293, 1298-99 (7th
Cir.) (declining to adopt federal common law rule preventing full
reimbursement where the clear language of an ERISA plan requires
full reimbursement), cert. denied, 510 U.S. 916 (1993); Blackburn
v. Becker, 933 F. Supp. 724, 729 (N.D. Ill. 1996) (employee may
not withhold attorney's fees because "there is no reason to
fiddle with an unambiguous plan provision which the parties
freely entered into."); Trident Reg'l Health Sys. v. Polin, 948
F. Supp. 509, 514 (D.S.C. 1996) ("[F]ederal courts do not rewrite
the unambiguous terms of an ERISA plan . . . ."); Provident Life
& Accident Ins. Co. v. Williams, 858 F. Supp. 907, 912 (W.D. Ark.
1994) (allowing plan participants to withhold attorney's fees but
9
Nonetheless, amicus contends Ryan will lead to
inequitable results where a plan participant's third party
recovery is less than the plan's subrogation claim plus
attorney's fees. But Root's third party settlement fully
financed his attorney's fees and the subrogation claim. We will
not address hypothetical scenarios.
Amicus also contends Ryan may hinder settlement of
claims by plan participants against third parties. This prospect
is troublesome. But Ryan holds only that we must uphold
unambiguous plan terms that do not conflict with ERISA's
statutory policies. Depending on the circumstances, parties to a
subrogation agreement may still be able to negotiate compromises
on attorneys' fees.
V.
Finally, Root raises an issue apparently not raised in
Ryan. Citing the common law on subrogation, Root maintains that
a subrogee may not recover more than the subrogor. Although his
argument is not explicit, it appears Root advocates a pro rata
(..continued)
recognizing that "if the right to reimbursement were
contractually defined, the parties could expressly agree that
reimbursement would be the first money out of the settlement
monies with no deduction for attorneys fees and costs.");
Thompson v. Fed. Express Corp., 809 F. Supp. 950, 958 (M.D. Ga.
1992) (holding plan participant may not withhold portion of
attorney's fees where plan required full reimbursement). But see
Provident Life & Accident Ins. Co. v. Waller, 906 F.2d 985, 993
(4th Cir.) (requiring reimbursement under theory of unjust
enrichment because ERISA indicates Congress's desire to ensure
that plans are administered equitably and "that no one party, not
even plan beneficiaries, should unjustly profit."), cert. denied,
498 U.S. 982 (1990); Dugan v. Nickla, 763 F. Supp. 981, 984-85
(N.D. Ill. 1991) (reducing reimbursement to reflect payment of
attorney's fees, despite plan language requiring full
reimbursement).
10
reduction of the Plan's subrogation lien, i.e. the Plan's
recovery should be limited, as Root's recovery was limited, by a
pro rata portion of the attorney's fees. See, e.g., Simmons v.
Cohen, 551 A.2d 1124, 1127 (Pa. Commw. Ct. 1988) (holding that,
where welfare recipients sued to recover SSI awards which were
subrogated to the state department of public welfare, the state
department subrogee had common law duty to contribute to their
legal expenses).
ERISA is silent on the issue of subrogation. Ryan, 78
F.3d at 127. We may adopt a common law principle only if
"necessary to fill in interstitially or otherwise effectuate the
statutory pattern enacted in the large by Congress." Plucinski
v. I.A.M. Nat'l Pension Fund, 875 F.2d 1052, 1056 (3d Cir. 1989)
(quoting Van Orman v. American Ins. Co., 680 F.2d 301, 312 (3d
Cir. 1982)). Otherwise, we may not create substantive ERISA
rights. See Hamilton v. Air Jamaica, Ltd., 945 F.2d 74, 78 (3d
Cir. 1991) (Courts have "no authority to draft the substantive
content in [ERISA] plans.") (quoting Blau v. Del Monte Corp., 748
F.2d 1348, 1353 (9th Cir. 1984), cert. denied, 474 U.S. 865(1985)), cert. denied, 503 U.S. 938 (1992); Van Orman v. American
Ins. Co., 680 F.2d 301, 312 (3d Cir. 1982).
Root has not established that full reimbursement of
subrogation claims conflicts with ERISA's policies or that
adoption of a pro rata reduction is necessary to effectuate these
policies. In fact, the policies underlying ERISA generally
counsel reliance on unambiguous plan language. Van Orman, 680
F.2d at 312 ("The Supreme Court has emphasized the primacy of
11
plan provisions . . . ."). Although circumstances may arise
necessitating a pro rata reduction in reimbursement, we find
Root's argument in this case unconvincing.
VI. Conclusion
For the reasons stated, we will reverse the grant of
summary judgment in favor of Root and remand to the district
court to enter judgment in favor of Bollman. See Ryan by Capria-
Ryan v. Fed. Express Corp., 78 F.3d 123 (3d Cir. 1996).
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