Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-01592/USCOURTS-azd-2_06-cv-01592-3/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.-Employee Benefits

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Administrative Committee for the WalMart Stores, Inc. Associates' Health and

Welfare Plan,

Plaintiff, 

vs.

Alice Salazar; Frank Lesselyong; and

Kleinman, Lesselyong, Novak & Russell, 

Defendants. 

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No. CV 06-1592-PHX-SMM

ORDER

Pending before the Court are the parties' cross motions for summary judgments, filed

by Plaintiff, the Administrative Committee of the Wal-Mart Stores, Inc. Associates’ Health

and Welfare Plan (“Wal-Mart”)(Dkt. 44) and Defendants Alice Salazar; Frank Lesselyong;

and Kleinman, Lesselyong, Novak & Russell (“Defendants”), pursuant to Fed. R. Civ. P. 56.

(Dkt. 49). 

Wal-Mart moves for partial summary judgment on its claim for reimbursement of

$64,386.58 in medical expenses paid on behalf of Defendant Alice Salazar (“Defendant

Salazar”). Plaintiff asserts that Wal-Mart is entitled to reimbursement for payments it made

to certain of Defendant’s medical providers in connection with a January 22, 2005,

automobile collision in which Defendant was seriously injured. 

Case 2:06-cv-01592-SMM Document 52 Filed 08/20/07 Page 1 of 18
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Defendants assert that the Wrap Document that applies in the present case does not

contain or incorporate the reimbursement provision that Wal-Mart relies upon in its

reimbursement argument, and therefore, Wal-Mart has no claim. Consequently, Defendants

move for summary judgment on all claims. Defendants further argue that even assuming the

Plan did include a reimbursement provision, federal case law dictates that Wal-Mart is not

entitled to reimbursement as a matter of law because Wal-Mart has not sought “appropriate

equitable relief” under ERISA, 29 U.S.C. § 1132(a)(3). Moreover, in the event that the Court

determines that the Plan includes a reimbursement provision, and that the provision is

enforceable, Defendants argue that any such amount of reimbursement awarded to Wal-Mart

should be reduced from the amount sought because Wal-Mart “inequitably” seeks to fully

recover, while Defendant was “forced” to settle for less than the total value of her claim.

UNDISPUTED FACTS

A. Background

On January 22, 2005, Defendant Salazar was riding as a passenger in her sister’s car

when another car turned left in front of them, causing a collision. (Dkt. 50, ¶ 11).

The collision resulted in multiple fractures to Defendant Salazar, including her leg,

back, arm, and hand, and she endured a lengthy hospital stay, multiple surgeries, and

rehabilitation. Her leg injury resulted in the prognosis of lifetime use of a walker. (Dkt. 50,

¶ 13; report of orthopedic surgeon Naftaly Attias, MD, Exhibit D).

Defendant Salazar’s orthopedic surgeon has authored a report opining that, as a result

of the collision, she had forty percent (40%) whole body impairment. He also stated that she

would likely need two hip replacement surgeries within the next 5-10 years, each at a cost

of approximately $40,000 to $50,000. (Dkt. 50, ¶ 13; Exhibit D).

At the time of the collision, Defendant Salazar was a stocker at Wal-Mart, earning

$8.88 per hour. Due to her injuries, it is unlikely that she will ever be able to work again.

(Dkt. 50, ¶ 14).

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 1 The “Wrap Document” defines the Plan, as well as certain terms contained

within the Plan, and incorporates by reference the Plan documents. (Dkt. 46, Exhibit 1).

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Defendant Salazar incurred over $161,000 in medical expenses as a result of the

collision. (Dkt. 50, ¶ 15).

Defendant Salazar settled the claims relating to the January 22, 2005 accident for

$250,000.00. (Dkt. 50, Exhibit 1, ¶ 9 & 21; see also Defendants’ Answer, ¶ 12).

The Administrative Committee for the Wal-Mart Stores, Inc. Associates’ Health and

Welfare Plan (the “Committee”) is vested with discretion, limited by statutory and case law,

to resolve questions concerning the administration, interpretation, or application of the Plan.

(Dkt. 46, p.2). 

The Plan is covered by the Employee Retirement Income Security Act of 1974, 29

U.S.C. §§ 1001, et seq. (“ERISA”). (Dkt. 46, p.1). 

The only Plan terms that require and authorize the Plan to pay benefits are located in

the Medical section of the Associates’ Benefits Guide. (Dkt. 46, p.2). 

The Plan paid a total of $64,386.58 in medical benefits on behalf of Defendant Salazar

because of the injuries she sustained. (Dkt. 46, p.1; see also Defendants’ Answer, ¶ 10). 

 The 2001 Wrap Document1

 does not contain a “Right to Reduction, Reimbursement

and Subrogation” provision. However, the 2005 Wrap Document does contain a “Right to

Reduction, Reimbursement and Subrogation” provision. 

Defendants attempted to negotiate with Plaintiff for payment of a portion of Plaintiff's

claimed right to reimbursement. Defendants did not agree to reimburse the Plan in the

amount requested by the Plan. (Dkt. 50, ¶ 25-26; see also Affidavit of Frank M.

Lesselyong). 

Defendants are currently preserving $64,386.58 in settlement funds recovered as a

result of the January 22, 2005 accident in an IOLTA Trust Account at National Bank of

Arizona, controlled by attorney, Frank Lesselyong (Mr. Lesselyong). (Dkt. 17).

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 2 Plaintiff contends that, although the 2001 Wrap Document may have been in

effect at the time of the collision and at the time of nearly all of Defendant’s paid-for

medical services, it is not the controlling document in this case. Instead, Plaintiff

maintains that the 2005 Wrap Document, in effect at the time of Defendant Salazar’s

settlement, is controlling. (Dkt. 48, pp.4-5).

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According to Exhibit 2, attached to the affidavit of Teresa Todd, which Wal- Mart

filed with its Statement of Facts, all but $2,780.79 of Wal-Mart’s payments for medical

benefits were for medical services that Defendant received prior to June 1, 2005, which is

when the 2005 “Wrap Document” that Wal-Mart’s lawsuit relies upon came into effect. (Dkt.

46, Exhibit 2); (Dkt. 46, Exhibit 1, p.1). At the time of the collision and at the time of nearly

all of Defendant's paid-for medical services, the 2001 Wrap Document was in effect.2

 (Dkt.

49, p.4).

Defendant Salazar engaged Co-Defendant Mr. Lesselyong, a certified specialist in

personal injury and wrongful death litigation, and his law firm, Co-Defendant Kleinman,

Lesselyong, Novak & Russell to pursue her claim against the driver of the car. On behalf of

Defendant Salazar, Mr. Lesselyong asserted a bodily injury claim against the negligent

driver’s insurer, Nationwide. (Dkt. 49, p.4). The limited liability insurance of the tortfeasor

caused Defendant Salazar to settle for $250,000. No portion of that settlement was

earmarked for past or future medical expenses. Defendant Salazar received no other

recovery from third parties or any other insurer, nor does she have any prospect for doing so.

(Dkt. 46, p.4).

Ultimately, the net payment to Defendant Salazar for her injuries was $140,959.94

once attorneys’ fees and costs had been deducted. After the settlement was reached, WalMart demanded reimbursement for the medical benefits it provided, but offered to settle

for $31,000. (Dkt. 46, pp.4-5); (Dkt. 23, p.4). Defendants refused the offer, but as a

precaution withheld that amount from Plaintiff’s settlement in a trust account. (Dkt. 46,

p.5). Plaintiffs then on June 22, 2006 motioned the Court for a Temporary Restraining

Order and Preliminary Injunction seeking to enjoin Defendants from distributing the

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disputed amount of $64,386.58. (Dkt. 2). This Court granted such motion on June 29,

2006 (Dkt. 17). Pursuant to that Order, Mr. Lesselyong maintained $64,386.58 in a

National Bank of Arizona IOLTA trust account to guard against the possibility of a court

determining that Wal-Mart was entitled to reimbursement. 

B. The Wrap Documents

The 2001 Wrap Document defines “Plan” as follows:

“Plan” means the Walmart Stores, Inc. Associates Health and Welfare Plan,

as set forth herein, and each Welfare Program incorporated hereunder by

reference, as amended from time to time. (Dkt. 50, Exhibit A, section 1.3(m)).

The 2001 Wrap Document defines “Welfare Program” as follows:

“Welfare Program” means a written arrangement that is offered by one or

more Employers and incorporated into this Plan by identification in Appendix

A and which provides any employee benefit that would be treated as an

“employee welfare benefit plan” under Section 3(1) of ERISA if offered

separately. Welfare Program also means any plan established pursuant to

Section 125 of the Code if incorporated herein by identification in Appendix

A. For purposes of this Plan, only the terms of the formal plan document of

each such arrangement is incorporated herein. Where no separate formal plan

document exists, the plan document shall consist of any applicable insurance

policy or contract and the applicable description of such benefits contained in

the Associate Benefits Book, as modified from time to time, to the extent

consistent with any applicable insurance policy or contract. (Id., section

1.3(q)).

Appendix A to the 2001 Wrap Document states as follows:

The following Welfare Programs are incorporated in the Plan by reference and

shall be treated as comprising the Plan pursuant to Section 1.3 (q):

-Wal-Mart Associates’ Group Health Plan

-Wal-Mart Associates’ Dental Plan

-Short-Term Disability Plan

-Long-Term Disability Plan

-Business Travel Accident

-Accidental Death & Dismemberment (AD&D)

-Company Paid Life

-Optional Life

-Dependent Life

-Wal-Mart Stores, Inc. Flexible Benefit Plan

-Associates Health and Welfare Trust. (Id., Appendix A).

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The SPD explains the impact of its provisions as follows:

The Summary Plan Descriptions (SPDs) contained in this book explain the

principal provisions of Wal-Mart’s benefits in simple language. Please take the

time to review each SPD to understand your benefits. If there is a

disagreement between the SPD and the legal documents that define the

benefits of these plans, the legal documents or applicable insurance policies

will govern. (Dkt.50, Exhibit H, p. 25) (emphasis added).

The Wrap Document, Amendment provision in section 6.1, provides, in relevant part:

6.1 Amendment. The Plan is subject to amendment at any time without

consent of the Participants. The procedure for amending the Plan, including the

addition or deletion of a Welfare Program from Appendix A, shall consist of

the Administrative Committee or its delegate submitting proposed Plan

amendments to the Executive Committee of the Bard of Directors of the

Company, receiving its approval, then communicating the amendments along

with the effective date of such amendments to Participants. (See Exhibit A,

section 6.1).

Plaintiff contends that the terms of the 2005 Wrap Document and the 2006 Associates’

Benefits Guide, which contains the SPD, together govern Defendants’ obligation to

reimburse the Plan for benefits paid by the Plan as a result of Defendant’s January 22, 2005

injuries because pursuant to the terms of the 2005 Wrap Document and the 2006 Associate

Benefits Guide, “The right of reduction, reimbursement, and subrogation is based on the Plan

language in effect at the time of judgment, payment, or settlement.” (Dkt. 46, Exhibit 1, ¶

10).

The 2005 Wrap Document and the 2006 Associates’ Benefits Guide contain a “Right to

Reduction, Reimbursement and Subrogation” provision which states:

The Plan has the right to:

• Reduce or deny benefits otherwise payable by the Plan, and

• Recover or subrogate 100% of the benefits paid, or to be paid, by the Plan for

covered persons, to the extent of any and all of the following payments:

– Any judgment, settlement, or payment made or to be made because

of an accident or malpractice, including but not limited to other

insurance

– Any auto or recreational vehicle insurance coverage or benefits,

including but not limited

to uninsured/underinsured motorist coverage

– Business medical and/or liability insurance coverage or payments

– Attorney’s fees

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Note:

• The Plan has first priority with respect to its right to reduction,

reimbursement, and subrogation.

• The Plan has the right to recover interest on the amount paid by the Plan

because of the accident.

• The Plan has the right to 100% reimbursement in a lump sum.

• The Plan is not subject to any state laws, including but not limited to the

common fund doctrine, which would purport to require the Plan to reduce its

recovery by any portion of a covered person’s attorney’s fees and costs.

• The Plan is not responsible for the covered person’s attorney’s fees,

expenses, or costs.

• The right of reduction, reimbursement, and subrogation is based on the Plan

language in effect at the time of judgment, payment, or settlement.

• The Plan’s right to reduction, reimbursement, and subrogation applies to any

funds recovered from another party, by or on behalf of the estate of any

covered person.

• The Plan’s right to first priority shall not be reduced due to the participant’s

own negligence. Cooperation Required.

The Plan requires you, your dependents, and your representatives to

cooperate in order to guarantee reimbursement to the Plan from third party

benefits. Failure to comply with this request will entitle the Plan to withhold

benefits due to you or your dependents under the Plan. You, your dependents,

and/or your representatives cannot do anything to hinder reimbursement of

overpayment to the Plan after benefits have been accepted by you, your

dependents, and/or your representatives. These rights apply regardless of

whether such payments are designated as payment for, but not limited to:

• Pain and suffering, or

• Medical benefits.

This applies regardless of whether you or your dependents have

been fully compensated for injuries.

Additionally, the Plan has the right to file suit on your behalf for the

condition related to the medical expenses in order to recover benefits paid or

to be paid by the Plan.

Participant’s Responsibility Regarding Right of Reduction and/or Recovery to

aid the Plan in its enforcement of its right of reduction, recovery,

reimbursement, and subrogation, you and your representative must, at the

Plan’s request and at its discretion:

• Take any action,

• Give information, and

• Sign documents so required by the Plan.

Failure to aid the Plan and to comply with such requests may result in

the Plan’s withholding or recovering benefits, services, payments, or credits

due or paid under the Plan. The Plan’s right to reimbursement applies when the

Plan pays medical benefits, and a judgment, payment, or settlement is made on

behalf of the covered person for whom the medical benefits were paid.

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Reimbursement to the Plan of 100% of these charges shall be made at the time

the payment is received by you, your dependent(s), or your representative.

(Dkt. 46, pp.3-5)..

STANDARD OF REVIEW

 A court must grant summary judgment if the pleadings and supporting documents,

viewed in the light most favorable to the nonmoving party, “show that there is no genuine

issue as to any material fact and that the moving party is entitled to judgment as a matter of

law.” Fed. R. Civ. P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986);

Jesinger v. Nevada Federal Credit Union, 24 F.3d 1127, 1130 (9th Cir. 1994). Substantive

law determines which facts are material. See Anderson v. Liberty Lobby, 477 U.S. 242, 248

(1986); see also Jesinger, 24 F.3d at 1130. “Only disputes over facts that might affect the

outcome of the suit under the governing law will properly preclude the entry of summary

judgment.” Anderson, 477 U.S. at 248. The dispute must also be genuine, that is, the

evidence must be “such that a reasonable jury could return a verdict for the nonmoving

party.” Id.; see Jesinger, 24 F.3d at 1130.

A principal purpose of summary judgment is “to isolate and dispose of factually

unsupported claims.” Celotex, 477 U.S. at 323-24. Summary judgment is appropriate

against a party who “fails to make a showing sufficient to establish the existence of an

element essential to that party's case, and on which that party will bear the burden of proof

at trial.” Id. at 322; see also Citadel Holding Corp. v. Roven, 26 F.3d 960, 964 (9th Cir.

1994). The moving party need not disprove matters on which the opponent has the burden

of proof at trial. See Celotex, 477 U.S. at 323-24. The party opposing summary judgment

need not produce evidence "in a form that would be admissible at trial in order to avoid

summary judgment." Id. at 324. However, the nonmovant “may not rest upon the mere

allegations or denials of [the party's] pleadings, but . . . must set forth specific facts showing

that there is a genuine issue for trial.” Fed. R. Civ. P. 56(e); see Matsushita Elec. Indus. Co.,

Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585-88 (1986); Brinson v. Linda Rose Joint

Venture, 53 F.3d 1044, 1049 (9th Cir. 1995).

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Where the decision to grant or deny ERISA benefits is reviewed for abuse of

discretion, a motion for summary judgment is merely the conduit to bring the legal question

before the district court and the usual tests of summary judgment, such as whether a genuine

dispute of material fact exists, do not apply. Bendixen v. Standard Ins. Co., 185 F.3d 939

(9th Cir. 1999) citing 29 U.S.C.A. § 1132(a)(1)(B); Fed. Rules Civ. Pro. Rule 56(c), 28

U.S.C.A Where an ERISA plan vests an administrator with discretionary authority to

determine eligibility for benefits, a district court may review administrator’s determinations

only for abuse of discretion. Taft v. Equitable Life Assur. Soc., 9 F.3d 1469 (th 1993), citing,

29 U.S.C.A. §§ 1001-1461. A plan administrator exercises an abuse of discretion if he or she

relies on clearly erroneous findings of fact in making benefit determinations. Taft, 9 F.3d at

1473.

DISCUSSION

I. The Wrap Documents

Wal-Mart’s claim for reimbursement relies on the premise that the Wrap Documents,

whichever is in effect, and Associates Benefits Guide, containing the SPD, together set forth

the rights and obligations of the Plan and its beneficiaries, including reimbursement rights

and obligations. (Dkt. 48, pp.2,6). Where the plan administrator offers a reasonable

interpretation of the plan and that decision was made in good faith, it should be upheld.

Estate of Shockley v. Alyeska Pipeline Service Co., 130 F.3d 403, 405 (9th Cir. 1997) quoting

MacDonald v. Pan American World Airways, Inc., 859 F.2d 742, 744 (9th Cir. 1988). Based

on applicable case law, the administrator’s decision to consider the Wrap Document along

with the Associates’ Benefits Guide, containing the SPD, as constituting the Plan is

reasonable. 

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 3 “Defendants” hereafter refers to Defendants collectively (Ms. Salazar, Mr.

Lesselyong, and Kleinman, Lesselyong, Novak & Russell, P.C.). “Defendant Salazar”

refers to Ms. Salazar individually.

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Defendants3

 counter that the Wrap Document is controlling where it is more favorable

to the employee than the SPD because the drafters should bear the burden of poor drafting.

(Dkt. 51, p.3); Bergt. v. Retirement Plan for Pilots Employed by Markair, Inc., 293 F.3d

1139, 1145 (9th Cir. 2002). However, in Bergt, the Court held that the SPD should indeed

be considered part of the plan. The Court stated:

“[T]he SPD is a plan document and should be considered when interpreting an

ERISA plan...Employers are required to provide participants with a copy of an

SPD (not the plan master document). 29 U.S.C. § 1022(a)-(b)... Furthermore,

the SPD is the ‘statutorily established means of informing participants of the

terms of the plan and its benefits’ and the employee's primary source of

information regarding employment benefits. Pisciotta v. Teledyne Indus., 91

F.3d 1326, 1329 (9th Cir.1996), citing, Alday v. Container Corp. of America, 906 F.2d 660, 665 (11th Cir.1990). For these reasons, we follow the other

courts that have held that the SPD is part of the ERISA plan. Chiles v.

Ceridian, 95 F.3d 1505, 1511 (10th Cir.1996) (holding that “SPDs are

considered part of the ERISA plan documents” and when “interpreting the

terms of an ERISA plan we examine the plan documents as a whole”); Alday

v. Container Corp. of America, 906 F.2d 660, 665-666 (11th Cir.1990).” Id.

at 1143.

Additionally, in Bergt, the plan master document and the SPD were in direct conflict, one

making the employee a part of the retirement plan and the other excluding him. Id. at 1141.

Here the Wrap Document and SPD do not directly contradict each other, simply because the

former may fail to incorporate the later. Where there is ambiguity between the Plan and the

SPD, the SPD is held to be controlling since it is this document that ERISA requires be

provided to the employee. 29 U.S.C. § 1022 (a)(1). Thus, even if the Court were to find

ambiguity between the two documents, the SPD would still be controlling. Therefore, the

Court finds the Wrap Document, either the 2001 or 2005 version, as well as the SPD, shall

be considered the Plan governing Plaintiff’s ERISA claim. As this Court has concluded that

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 4 As stated above, the Ninth Circuit has explicitly held that, “the SPD is a plan

document and should be considered when interpreting an ERISA plan.” Bergt, 293 F.3

1143. Therefore, whether the Wrap Document explicitly incorporates the SPD is

irrelevant. 

 5

 The Court also finds persuasive Plaintiff’s argument that as Defendant was

paid out of the SPD, the only document authorizing the Plan to pay benefits, she should

also be bound by the rest of the terms of the SPD which require reimbursement. (Exhibit

1, ¶ 7); (Dkt. 48, p.3). The Eighth Circuit in Gamboa has noted the same, stating,

“[h]aving received medical benefits in accordance with the Associates’ Benefits Book,

we will not permit a participant to deny the corresponding responsibilities and obligations

that are clearly imposed on the participant in the same document - what is good for the

goose is good for the gander.” Admin. Comm. of the Wal-Mart Stores, Inc. Health and

Welfare Plan v. Gamboa, 479 F.3d 538, 545 (8th Cir. 2007). 

 6

 “The Plan’s right to reduction, reimbursement, and subrogation applies to any

funds recovered from another party, by or on behalf of the estate of any covered person.”

(Dkt. 46, p.4); 2005 Wrap Document, 2006 Associates’ Benefits Guide. 

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the SPD is an integral part of the Plan,4

 addressing the arguments regarding which Wrap

Document applies is no longer necessary.5

II. Appropriate, Equitable Relief 

A. Equitable

Defendants argue that even assuming the SPD applies, Wal-Mart has not sought

“appropriate equitable relief.” Defendants cite Sereboff in support of its proposition that for

relief to be considered equitable, there must be specific language in the governing plan

documents creating an “equitable lien established by agreement.” (Dkt. 51, p.6); Sereboff

v. Mid Atlantic Medical Services, Inc., 126 S.Ct. 1869, 1877 (2006). This Court agrees that

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. Id. at 1875. The SPD language here specifies

both the fund (recovery from the third party or insurer)6

 and the portion due the Plan (the

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 7 “The Plan has the right to: ...Recover or subrogate 100% of the benefits paid,

or to be paid, by the Plan for covered persons.”(Dkt. 46, p.3); 2005 Wrap Document,

2006 Associates’ Benefits Guide. 

 8

 See supra footnote seven. 

 9

 Whether or not couched in terms of an “equitable lien,” the Plan contains a

reimbursement right, as the SPD explicitly states that the Plan has this right (see supra

footnote eight) and this Court has found the SPD to be included in the Plan. See Section

I of this Order.

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amount the Plan paid out in medical benefits)7

. Thus, the Plan is equitable and complies with

Sereboff. 

Although not binding authority, the Plan also complies with Popowski, the case cited

by Defendants for the proposition that the Plan language does not create an equitable lien,

but only a “trigger.” (Dkt. 51, p.6); Popowski v. Parrott, 461 F.3d 1367, 1374 (11th Cir.

2006). The Court disagrees. The Popowski Court found the Blue Cross Blue Shield

Mohawk Plan subrogation and reimbursement provision was a trigger because it “[did] not

specify that [the] reimbursement be made out of any particular fund, as distinct from the

beneficiary’s general assets.” Id. at 1374. As previously stated, the Plan at issue here did

specify a particular fund, distinct from the beneficiary’s general assets.8

 Thus, the language

of the SPD is sufficient to create an equitable lien under both Sereboff and Popowski.

9

 

B. Appropriate

Defendants argue that reimbursement is not appropriate for the following reasons: (1)

it is unfair for Wal-Mart to be made whole while Defendant was not, (2) Wal-Mart has

“unclean hands,” and (3) reimbursement would constitute an improper forfeiture under Ore.

& Cal. Railroad Co. v. U.S. 35 S.Ct. 908, 919 (1915). (Dkt. 51, pp.7-8). The Court will now

address each of these arguments in turn.

1. Basic Fairness

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 10 Under the made-whole doctrine, if an employee has not been fully

compensated for his or her injuries through his or her claim against the liable third party,

the Plan may not seek reimbursement. See Barnes v. Independent Auto. Dealers Ass’n

of California Health and Welfare Benefit Plan, 64 F.3d 1389, 1394 (9th Cir. 1995) (“It

is a general equitable principle in insurance law that, absent agreement to contrary,

insurer may not enforce right to subrogation until insured has been fully compensated for

her injuries, that is, has been made whole”).

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Defendants argue that reimbursement is unfair because (a) Wal-Mart will be made

whole while Defendant is not, (b) reimbursement is not mentioned in the ERISA statutory

scheme, and (c) awarding reimbursement would be putting the interests of the Plan “far

above the interests of a catastrophically injured victim.” (Dkt. 51, p.8). 

a) Made-Whole Doctrine

The Court finds that reimbursement is fair because Defendant has chosen to accept

money from a plan that disclaims the make-whole doctrine10. In the Ninth Circuit, an

employee may sign away his or her make-whole right. See Barnes v. Independent

Automobile Dealers, 64 F.3d 1389, 1395 (9th Cir. 1995) citing Cutting v. Jerome Foods, Inc.,

993 F.2d 1293, 1297 (7th Cir.), cert. denied, 510 U.S. 916 (1993). Here, Defendants have

done just that as the Plan explicitly states they must reimburse the Plan “whether [they] or

[their] dependants have been fully compensated for [their] injuries.” (Dkt. 46, p.4); 2005

Wrap Document, 2006 Associates’ Benefits Guide. Thus, Defendants are not entitled to be

made whole.

b) Reimbursement contemplated by ERISA

Defendants further argue that requiring them to repay the Plan would not be fair

because reimbursement is not contemplated by ERISA. (Dkt. 49, p.24). It is true that ERISA

does not address reimbursement of medical expenses paid out by a plan; however, “there is

no bar to plan provisions requiring reimbursement or to demands for reimbursement.” Meek

v. Standard Ins. Co., 41 Fed.Appx. 37, 38 (9th Cir. 2002). If the employer and employee

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 11 The Plan, consisting of the Wrap Document and the SPD, contains a

reimbursement provision. As discussed supra, the receipt of funds from the Plan created

an equitable lien whereby Defendant agreed to repay the Plan. 

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agree to a reimbursement provision, as has been done here,11 the Court will not interfere with

that agreement simply because ERISA is silent on the issue. Additionally, the U.S. Supreme

Court has upheld reimbursement and subrogation provisions in ERISA-governed employee

benefit plans. See FMC Corp. v. Holliday, 498 U.S. 52 (1990) (holding that state laws may

not abridge an employer’s right to enforce an ERISA-governed plan’s subrogation

provision). Furthermore, ERISA does not mandate any minimum substantive content for

benefit plans; “[e]mployers have large leeway to design disability and other welfare plans

as they see fit.” Black & Decker Disability Plan v. Nord, 538 U.S. 822, 833 (2003).

Therefore, the fact that ERISA does not discuss reimbursement provisions does not make

reimbursement provisions “unfair.” 

c) Plan Interests

The Court finds Defendants’ third fairness argument, that awarding reimbursement

puts the interests of the Plan above those of Defendants, is not a bar to reimbursement.

“Nothing in ERISA requires employers to establish employee benefits plans. Nor does

ERISA mandate what kind of benefits employers must provide if they choose to have such

a plan.” Lockheed Corp. v. Spink, 517 U.S. 882, 887 (1996). As stated in Shaw supra,

ERISA’s purpose is to promote the interests of employees in employee benefit plans;

however, the employer is free to confer as many or as few benefits upon its employees

through a benefit plan as it sees fit, as long as it complies with the statute. Shaw, 463 U.S.

at 90. The creation and maintenance of a benefit plan at all is in the interest of Defendant

and other employees alike. It is in the interest of both Defendant and the Plan that the Plan

be reimbursed and remain soluble for future usage. Thus, reimbursement is not unfair.

2. Unclean Hands

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 12 See also discussion on the maxim “equity abhors a forfeiture” in Section II,

B, 3 of this Order.

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The Court finds the “unclean hands” doctrine12 to be inapplicable to the case at bar.

Defendants argue that Wal-Mart is “tainted with inequitableness” because it seeks to divest

Defendant of her inadequate recovery, based on SPD language that is not addressed in the

Wrap Document and unilaterally forced on beneficiaries. (Dkt. 51, p.9); Precision

Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806, 814 (1945).

It is true that “[he] who comes into equity must come with clean hands.” However, none of

the activities alleged by Defendants would dirty Wal-Mart’s hands regarding this matter.

The “unclean hands” doctrine does contemplate bad intent or bad faith, neither of which has

been exhibited here. See Keystone Driller Co. v. General Excavator Co., 290 U.S. 240, 244-

246 (1933). The Plan Administrator’s compliance with her duties under the Plan and the

governing law does not indicate bad faith. Defendant was provided a SPD, as required by

law, so it is not inequitable that she should be bound by the SPD language. 29 U.S.C. §

1021(a). Furthermore, as previously noted, the creation of employee benefit plans is not

mandated by law and SPD construction is left up to the employer, as long as that construction

comports with ERISA. Lockheed, 517 U.S. at 887. As stated in both the 2001 and 2005

Wrap Documents, “the Plan is subject to amendment at any time without consent of the

Participants.” (Exhibit A, section 6.1). The employee is not required to be a member of the

Plan nor receive Plan payouts if she disagrees with its provisions. 

Defendants go on to argue that because Wal-Mart has violated the doctrine of judicial

estoppel by taking opposite positions on which is the appropriate date for determination of

the applicable Wrap Document, it has “unclean hands.” (Dkt. 51, p.9). In Wal-Mart v. Shank,

Wal-Mart, in its answering brief, made the same argument that Defendants make in the

present case, i.e., that the Wrap Document in effect at the time of the accident should apply.

Administrative Committee of the Wal-Mart Stores, Inc. v. Shank, 2006 WL 2546797

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 13 Several factors typically inform the decision of whether to apply the doctrine

of judicial estoppel in a particular case: whether the party's later position is clearly

inconsistent with its earlier position, whether the party has succeeded in persuading a

court to accept that party's earlier position, so that judicial acceptance of an inconsistent

position in a later proceeding would create the perception that either the first or second

court was misled, and whether the party seeking to assert an inconsistent position would

derive an unfair advantage or impose an unfair detriment on the opposing party if not

estopped. Abercrombie & Fitch Co. v. Moose Creek, Inc., 486 F.3d 629, 633 (9th Cir.

2007). 

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(E.D.Mo. 2006). Specifically, after arguing that the plan beneficiary was precluded from

arguing that the 2001 Wrap Document applied for technical reasons, Wal-Mart stated that

“even considering the argument, the plan provisions in effect at the time of the covered

event or accident are controlling.” Cooper Tire & Rubber Co. v. St. Paul Fire & Marine

Ins. Co., 48 F.3d 365 (8thCir. 1995) (citing Sturges v. Hy-Vee Employee Ben. Plan & Trust,

991 F.2d 479, 481 (8thCir. 1993)). (Emphasis added). It is within the Court’s discretion to

consider whatever facts are relevant to the inquiry. See Keystone, 290 U.S. at 246. As the

issue of which Wrap Document applies need not be addressed, the possibility that Wal-Mart

may be judicially estopped from arguing one is more applicable than the other is irrelevant.

Additionally, even if Wal-Mart were judicially estopped from arguing that the 2005 Wrap

Document applies, this does not constitute bad faith. The plan administrator is within his

or her discretion in interpreting the Plan to apply the Plan as written. Thus, it is unlikely that

Wal-Mart would meet the three factor test for judicial estoppel and Wal-Mart does not come

before this Court with unclean hands. See Abercrombie & Fitch, Co. v. Moose Creek, Inc.,

486 F.3d 629 (9th Cir. 2007).13

3. Forfeiture

Requiring Defendants to reimburse the Plan does not constitute an impermissible 

forfeiture. The maxim, “equity abhors a forfeiture” is not a rule of law, but an ethical ideal

that if a default can be compensated in other ways, the debtor’s property should be

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 14 Defendants’ previously quoted maxim, “the unclean hands doctrine, ‘closes

the doors of equity to one tainted with bad faith” is also an ethical ideal rather than a rule

of law. (Dkt. 49, p.26).

 15 See equitable lien discussion, Section II, A of this Order.

 16 See equitable lien discussion, Section II, A of this Order. 

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preserved.14 See 1 Dan B. Dobbs, The Law of Remedies, §2.3(4). Here, the default can only

properly be compensated through payment out of Defendant’s settlement because the Plan

created an equitable lien upon Defendants’ settlement proceeds.15 Thus, the $64,386.58 at

issue actually belongs to the Plan and as such can not constitute a forfeiture by Defendants.

4. Unconstitutional “Taking”

As neither Wal-Mart, nor the Plan, are government entities, they are incapable of

violating the Fifth Amendment. The Fifth Amendment provides that the government can not

take a person’s property without due process of law. U.S. Const., Amend. 5. Although

ERISA creates guidelines for employee benefit plans, it does not convey governmental status

upon these plans. 29 U.S.C. § 1003(b). Thus, the Plan does not seek to accomplish an

unconstitutional “taking”by requiring Defendants to comply with Plan provisions and

reimburse the Plan, but, as previously discussed, creates an equitable lien on Defendant’s

settlement proceeds.16 

C. Reduction on a Pro-Rata Basis

Defendants are not entitled to a reduction in the amount they are required to reimburse

the Plan as the case they rely upon, Arkansas Dept. Of Health & Human Services v. Ahlborn,

126 S.Ct. 1752 (2006), has no application to ERISA disputes. Ahlborn held that the

Arkansas statute imposing a lien on Medicaid recipient’s settlement proceeds violated federal

Medicaid law’s anti-lien provision. Id. at 1763. Here the Plan’s reimbursement provision

violates neither ERISA, the law under which the Plan was created, nor any other applicable

statute. While Medicaid may not permit liens against settlement proceeds, ERISA does

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because it does not forbid them, and as such, the Defendants’ are not entitled to a reduction

in the amount they are required to reimburse the Plan

Without a doubt the Plan creates a right of recovery from Defendant Salazar’s

settlement. Therefore, this Court finds Defendants must reimburse the Plan in the full

amount of $64.386.58 from the IOLTA trust account, managed by Mr. Lesselyong, which

has been set aside for this purpose. What is absolutely clear, however, is that Defendant

sustained catastrophically life-changing injuries for which she received limited recovery.

CONCLUSION

Accordingly,

IT IS HEREBY ORDERED that Plaintiff Administrative Committee for the WalMart Stores, Inc. Associates’ Health & Welfare Plan’s Motion for Partial Summary Judgment

is GRANTED. (Dkt. 44).

IT IS FURTHER ORDERED that Defendants Alice Salazar; Frank Lesselyong; and

Kleinman, Lesselyong, Novak & Russell’s Cross-Motion for Summary Judgment is

DENIED (Dkt. 49).

 IT IS FURTHER ORDERED that the Clerk of the Court shall enter judgment in

favor of Plaintiff and against Defendants.

DATED this 20th day of August, 2007.

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