Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ared-4_02-cv-00661/USCOURTS-ared-4_02-cv-00661-2/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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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

WESTERN DIVISION

KARLA L. COSSEY and WILLIAM ) 4:02CV661 WKU

COSSEY, )

)

Plaintiffs, )

) MEMORANDUM AND ORDER ON

vs. ) RECONSIDERATION OF THE 

) DEFENDANTS’ MOTION TO 

ASSOCIATES’ HEALTH AND WELFARE) AFFIRM THE DETERMINATION 

PLAN; and ADMINISTRATIVE ) OF THE ADMINISTRATIVE

COMMITTEE, ASSOCIATES’ HEALTH ) COMMITTEE OR, ALTERNATIVELY,

AND WELFARE PLAN, ) MOTION FOR SUMMARY JUDGMENT

)

Defendants. )

Now before me is the defendants’ supplemental brief in support of their motion to affirm

the determination of the administrative committee or, alternately, for summary judgment. 

(Filing 220.) For the following reasons, I find that the defendants’ motion for summary

judgment must be granted in part.

I. BACKGROUND

On April 26, 2004, the plaintiffs, Karla and William Cossey, filed their sixth amended

complaint against Defendants Associates’ Health and Welfare Plan (“the Plan”) and

Administrative Committee, Associates’ Health and Welfare Plan (“the Committee”), alleging

violations of the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (ERISA). 

(See generally Sixth Am. Compl., filing 121.) The parties filed cross-motions for summary

judgment, and I resolved those motions in a memorandum and order dated March 15, 2005. (See

generally Mem. and Order on Mots. for Summ. J., filing 141.) More specifically, I granted the

defendants’ motion for summary judgment on the plaintiffs’ claim for “statutory penalties,” and

I granted the plaintiffs’ motion for summary judgment in part. (See id.) The basic facts of this

case and the reasoning underlying my decision to grant the plaintiffs’ motion in part have been

set forth in earlier filings (see, e.g., filings 141, 193), but they will be summarized here in the

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1Copies of these documents appear in the Administrative Record, filing 32, at pages 167

203 and 167 217. 

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interest of convenience. 

Wal-Mart Stores, Inc., created the Plan “to provide medical benefits to its employees.” 

(Mem. and Order on Mots. for Summ. J., filing 141, at 1 (quoting filing 19 at 2).) The plaintiffs

were eligible to receive benefits under the Plan. In October 2001, Karla Cossey sustained

injuries in a car accident, and she retained counsel to file a personal injury lawsuit on her behalf.

After medical bills for the treatment of Ms. Cossey’s accident-related injuries began to issue, the

Plan informed the plaintiffs’ counsel that Ms. Cossey’s claims for benefits would not be

processed until the plaintiffs signed “reimbursement/subrogation forms” and their counsel

completed a “disbursement agreement.” (Id. at 2 (quoting Administrative Record (“A.R.”),

filing 32, at 167 202).)1 Counsel objected to the Plan’s refusal to pay benefits and asked the Plan

to provide authority for its position that the payment of benefits could be conditioned on the

execution of the aforementioned documents. (Id. at 3.) The defendants responded via letter

dated June 11, 2002. In relevant part, this letter states,

The Plan language includes a Right to Reduction, Reimbursement and

Subrogation provision, which clearly states 100% reimbursement is required with

no reduction for attorneys’ fees. This provision further states 100%

reimbursement is required regardless of whether the participant was made whole

or not as well as that the Plan has first priority from any judgment, payment or

settlement. . . . 

Please refer to page 43 of the enclosed Summary Plan Description. There

it states, “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 direction: Take any action; give information; and execute

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.” 

(Id. at 3-4 (quoting A.R., filing 32, at 167 206).) 

The plaintiffs and their attorney refused to execute the documents. As a result, the

defendants refused to pay Ms. Cossey’s accident-related claims. (See Mem. and Order on Mots.

for Summ. J., filing 141, at 4-6.) Also, after the Plan learned that a settlement had been reached

in Ms. Cossey’s personal injury action, the Plan informed the plaintiffs that “Ms. Cossey’s

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medical benefits are now subject to reduction since she has obtained a settlement from the third

parties responsible for her injuries.” (Id. at 5 (quoting filing 107, Ex. A-2 at 3).)

The plaintiffs argued that summary judgment ought to be granted in their favor because

the defendants’ decision to deny benefits was based on terms set forth only in a Summary Plan

Description, or SPD, and not in the Plan itself. (See Mem. and Order on Mots. for Summ. J., 

filing 141, at 18 (citing filing 91 at 43-44, filing 113, ¶¶ 6, 20-21; filing 117 at 43-48; filing

134).) I agreed with the plaintiff’s argument, and I concluded that “the defendants’ decision to

treat the SPD as a formal Plan document was ‘contrary to the plan’s clear language’ and

rendered ‘the plan’s language meaningless or internally inconsistent.’” (Id. at 28 (quoting Wald

v. Southwestern Bell Customcare Medical Plan, 83 F.3d 1002, 1007 (8th Cir. 1996)).) I also

found that “[t]here is no evidence that the denials of the plaintiffs’ claims were . . . in accordance

with the Plan’s terms or were based upon a reasonable interpretation of the Plan’s terms.” (Id. at

29.) I therefore granted the plaintiffs’ motion for summary judgment in part, stating, “the

defendants’ decision to deny the plaintiffs’ claims for benefits was not reasonable.” (Id. at 39;

see also id. at 15 (quoting Wald, 83 F.3d at 1007).) The defendants moved for reconsideration of

my determination that the SPD “does not contain the terms of the Plan,” (filing 144 at 1), but I

denied this motion in a memorandum and order dated November 21, 2005, (see filing 193). 

The reasoning I applied in partially granting the plaintiffs’ motion for summary judgment

was soon adopted by another district court. See Administrative Committee of the Wal-Mart

Stores, Inc. Associates’ Health and Welfare Plan v. Gamboa, No 05-5007, 2006 WL 374764, at

*4 n.3 (W.D. Ark. Feb. 7, 2006). The Administrative Committee appealed that court’s

judgment, and one of the parties in the case before me proposed that further proceedings be

stayed until the Eighth Circuit resolved that appeal. After discussing the matter with the parties

in a telephone conference on or about March 29, 2006, I agreed that a stay would be appropriate.

On March 7, 2007, the Eighth Circuit reversed the district court’s judgment in Gamboa

and remanded the case for further proceedings. See Administrative Committee of the Wal-Mart

Stores, Inc. v. Gamboa, 479 F.3d 538 (8th Cir. 2007). The Eighth Circuit held that the entire

SPD was a part of the Plan and that the Administrative Committee reasonably concluded that the

reimbursement provision appearing in the SPD obliged the defendants “to reimburse the Plan for

judgments or settlements obtained because of an accident.” Id. at 541; see also id. at 546 (“Our

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consideration of the Finley factors convinces us that the Administrative Committee’s

interpretation was reasonable and not an abuse of discretion.”).

The parties then requested a hearing to determine how this case ought to proceed. (See

filings 210-211.) This hearing was held, telephonically, on or about June 6, 2007. Following

that hearing, I entered an order that, inter alia, granted the parties an opportunity to file briefs

addressing the issues that, in their view, ought to be resolved in the wake of Gamboa. (See

Order on Progression of Case, filing 215.) Those briefs are now before me, (see filings 220, 221,

224), and my analysis of the issues raised by the parties is set forth below.

II. ANALYSIS

The threshold issue in this case is whether the defendants’ decision to deny Karla

Cossey’s accident-related claims for benefits amounted to an abuse of discretion. (See Mem.

and Order on Mots. for Summ. J., filing 141, at 7-15 (describing standard of review for suits

brought pursuant to 29 U.S.C. § 1132(a)(1)(B)).) “In applying an abuse of discretion standard, [I

must affirm the Committee’s decision] if a reasonable person could have reached a similar

decision, given the evidence before him, not that a reasonable person would have reached that

decision.” Administrative Committee of the Wal-Mart Stores, Inc. v. Gamboa, 479 F.3d 538,

542 (8th Cir. 2007) (quoting Groves v. Metro. Life Ins. Co., 438 F.3d 872, 875 (8th Cir. 2006)). 

In other words, “[w]here the plan administrator offers a reasonable interpretation of a plan, the

district court should not substitute a different, though also reasonable, interpretation that could

have been made.” Id. at 541-42 (citations omitted). 

My analysis “begin[s] with the language of the Plan.” Gamboa, 479 F.3d at 542. As

noted above, I determined previously that the defendants’ decision to deny Karla Cossey’s

claims for benefits was not based on a reasonable interpretation of the Plan because their

decision depended upon terms that were not a part of the Plan. Clearly, however, that

determination cannot stand in light of the Eighth Circuit’s decision in Gamboa. For the reasons

explained by the Eighth Circuit, the terms of the SPD that were cited by the defendants in

support of their decision to deny the claims are indeed part of the Plan, and it was reasonable for

the defendants to treat them as such. As a result, I must vacate the portion of the memorandum

and order of March 15, 2005, in which I concluded that the plaintiffs’ motion for summary

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2As I noted in my memorandum of March 15, 2005, it is not clear whether the terms of

the 2001 Associate Benefits Book or the 2002 Associate Benefits Book are controlling in this

case. (See filing 141 at 15 n.10.) Although the defendants quoted the terms of the 2001

Associate Benefits Book in their motion for summary judgment, (see filing 19 at 5-8 (quoting

Loftus Aff., filing 32, Ex. B-2)), only the 2002 Associate Benefits Book has been included in the

Administrative Record, (see generally filing 32). I have chosen to treat the 2002 Associate

Benefits Book as the controlling document, but I note that the relevant portions of each Book are

nearly identical.

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judgment must be granted in part, and I must reconsider whether the defendants’ decision to

deny benefits was an abuse of discretion.

The defendants submit that their decision to deny Karla’s accident-related claims was

reasonable in light of the plaintiffs’ refusal to execute a “Reimbursement-Subrogation

Agreement” and the plaintiffs’ attorney’s refusal to execute a “Disbursement Agreement.” (See

generally Mem. in Supp. of Defs.’ Mot. to Affirm Determination of the Administrative

Committee, filing 19; see also Combined Mem. in Supp. of Defs.’ Supplemental Mot. to Affirm

the Determination of the Administrative Committee, filing 106, at 2-4, 6, 8-18; Supplemental Br.

in Supp. of Defs.’ Mot. to Affirm Determination of the Administrative Committee, filing 220, at

5-19.) In support of this argument, the defendants rely primarily on the following terms, which

appear in the 2002 Associate Benefits Book:2

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

- Execute 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.

(A.R., filing 32, at 167 65. See also, e.g., filing 220 at 7.)

In order to determine whether the defendants’ decision to deny the plaintiffs’ claims was

reasonable in light of the foregoing terms, I must consider the following factors: whether the

defendants’ interpretation of the Plan “contradicts the plan’s clear language, whether the

interpretation renders any plan language internally inconsistent or meaningless, whether the

administrator has interpreted the words at issue consistently, whether the interpretation is

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consistent with the plan’s goals, and whether the interpretation conflicts with any substantive or

procedural requirements of ERISA.” Administrative Committee of the Wal-Mart Stores, Inc. v.

Gamboa, 479 F.3d 538, 542 (8th Cir. 2007) (citing Riddell v. Unum Life Ins. Co. of America,

457 F.3d 861, 864 (8th Cir. 2006)). I find that each of these factors supports the conclusion that

the defendants’ interpretation of the Plan was reasonable. 

First, the Plan’s language–now that it has been established that the SPD is indeed part of

“the plan”–clearly provides that covered persons and their representatives must execute

documents “at the Plan’s request and at its direction” in order “[t]o aid the Plan in its

enforcement of its right of reduction, recovery, reimbursement, and subrogation.” (A.R., filing

32, at 167 65.) Furthermore, the Plan states specifically that “benefits, services, payments or

credits due . . . under the Plan” may be withheld in the event that the Plan’s requests are not

satisfied. (Id.) It seems to me that it is reasonable to interpret the term “documents” to

encompass Reimbursement-Subrogation Agreements and Disbursement Agreements, and it is

reasonable to interpret the term “representatives” to encompass attorneys representing covered

persons. Thus, the defendants’ determination that the Plan allowed them to withhold benefits if

the plaintiffs failed to execute a Reimbursement-Subrogation Agreement or if counsel failed to

execute a Disbursement Agreement is consistent with the Plan’s clear language.

Second, there is no indication that the defendants’ interpretation of the relevant terms

rendered any Plan language internally inconsistent or meaningless. 

Third, there is no evidence that the defendants have interpreted the language at issue

inconsistently. On the contrary, it is undisputed that whenever a third party may be responsible

for a covered person’s injuries, the defendants will not pay medical benefits until the covered

person signs a Reimbursement-Subrogation Agreement and the covered person’s attorney signs a

Disbursement Agreement. (See Mem in Supp. of Defs.’ Mot. to Affirm Determination of the

Administrative Committee, filing 19, Statement of Undisputed Material Facts ¶¶ 7-8; Pls.’

Response to Defs.’ Statement if Undisputed Material Facts, filing 113, ¶¶ 7-8.) 

Fourth, the defendants’ interpretation is consistent with the Plan’s goals. As the

defendants argued previously,

The goal behind the Plan’s reimbursement provision is to allow the Plan to recoup

monies paid by the Plan which have been paid by the responsible third party to

the covered person or her legal representative. The Plan initially pays benefits so

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that there is no loss to the covered person. This payment of benefits is

conditioned on the covered person’s promise that, if recovery from other parties is

obtained, the Plan will be reimbursed. Through enforcement of the

subrogation/right of recovery provision, the third party pays for the injuries that

he caused. This allows the Plan to recover Plan assets for future claims thereby

discharging on [sic] of the Plan’s most fundamental fiduciary obligations,

protecting Plan assets by preventing double recovery by the covered person at the

expense of the Plan and its other participants. Requiring these Agreements is a

reasonable requirement in furtherance of the Plan’s goal of protecting the Plan’s

assets.

(See Mem in Supp. of Defs.’ Mot. to Affirm Determination of the Administrative Committee,

filing 19, at 16.) Cf. Gamboa, 479 F.3d at 545-46 (“A self-funded plan generally has limited

resources, and the right of reimbursement or subrogation in certain instances ‘is an extremely

important tool for maintaining the financial viability of such plans.’”). 

Finally, the defendants’ interpretation does not conflict with any substantive or

procedural requirements of ERISA. Indeed, courts have held in analogous cases that benefits

may be conditioned on an attorney’s execution of a “Subrogation Agreement,” see Kress v. Food

Employers Labor Relations Association, 391 F.3d 563, 568-70 (4th Cir. 2004), or on a plan

participant’s execution of a similar document, see Cagle v. Bruner, 112 F.3d 1510, 1517-18,

1519-20 (11th Cir. 1997); Alves v. Silverado Foods, Inc., 6 F. App’x 694, 704-05 (10th Cir.

2001) (quoting Cagle, 112 F.3d at 1520).

In opposition to the defendants’ motion, the plaintiffs argue that the defendants’

interpretation of the Plan is “arbitrary and capricious” because, according to the relevant terms of

the Plan, “the Cosseys were obligated to ‘execute documents’ . . . only to aid the Plan in the

enforcement of its right to reimbursement.” (Cosseys’ Response to Supplemental Br. in Supp. of

Defs.’ Mot. to Affirm, filing 221, at 3.) Because the Plan’s right to reimbursement does not arise

until after the Plan pays benefits, the plaintiffs assert that the defendants cannot, under the Plan’s

own terms, require the plaintiffs to “execute documents” until after benefits have been paid. 

(See id. at 2-3.) In support of their argument, the plaintiffs rely upon Administrative Committee

of the Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan v. Cossey, 287 F. Supp 2d 975

(E. D. Ark. 2003), a “companion case” to the instant action. (See filing 221 at 2.) In Cossey,

Judge Wilson denied the Administrative Committee’s motion “for an equitable injunction in the

form of a lien or constructive trust under 29 U.S.C. § [1132](a)(3), seeking to preserve

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$69,576.42 [of the settlement funds obtained by the Cosseys] until the Plan’s right to

reimbursement has been determined.” 287 F. Supp. 2d at 977. The sum that the defendants

sought to preserve equaled the amount of the medical claims that the Cosseys had presented to

the Plan, but the Plan had paid only $110.46 toward these claims. In support of his decision to

deny the Administrative Committee’s motion, Judge Wilson noted that the Plan specifically

states, “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.” Id. at 978 (citation and emphasis omitted).

I agree with the plaintiffs’ suggestion that the defendants have no right to reimbursement

of funds that they never paid. The question at hand, however, is not whether the defendants were

(or are) entitled to reimbursement, but whether they reasonably interpreted the Plan’s language

to allow them to condition the payment of benefits on the execution of documents “[t]o aid the

Plan in its enforcement of its right of reduction, recovery, reimbursement and subrogation.” 

(A.R., filing 32, at 167 65.) Judge Wilson’s opinion in Cossey does not speak to this question,

but the Eleventh Circuit has addressed it squarely. In Cagle v. Bruner, 112 F.3d 1510, 1517-18

(11th Cir. 1997), an ERISA-governed plan (the “Fund”) argued that the following language

allowed it to require a plan participant to sign a subrogation agreement before benefits would be

paid:

Subrogation seeks to conserve the assets of the Benefit Fund by imposing

the expense for accidental injuries suffered by members or eligible dependent’s

[sic] on those responsible for causing them. If you or one of your dependents, for

example, should receive benefits from the Fund for injuries caused by someone

else (such as an automobile accident,) the Benefit Fund through subrogation has

the right to seek repayment from the other party or his insurance company, or in

the event you or your dependent recovers the amount of medical expense paid by

the Fund by suit, settlement or otherwise from any third person or his insurer, the

Fund has the right to be reimbursed therefor through subrogation.

The Benefits Fund will provide benefits to you and your dependents at the

time of need, but you may be asked to execute documents or take such other

action as is necessary to assure the rights of the Fund. 

The court determined that the Fund’s interpretation of the plan was not arbitrary and capricious. 

See id. at 1519-20. In reaching this conclusion, the court stated, 

[T]he district court determined that the Fund unreasonably interpreted the plan to

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allow it to require a signed subrogation agreement prior to paying benefits. 

According to [the plan participant/defendant], the district court correctly found

the Fund’s position to be unreasonable, because the Fund has no right of

subrogation until benefits are paid. We believe that [the defendant] is confusing

the issues. It is true that because the Fund has no right of subrogation until the

plan pays benefits, it cannot enforce the subrogation agreement until it pays

benefits. Nevertheless, nothing in the plan forbids the Fund from requiring the

agreement to be signed before it pays any claims. The SPD states that “[the

participant or beneficiary] may be asked to execute documents or take such other

action as is necessary to assure the rights of the Fund.” That language can be read

to require execution of the subrogation agreement before payment as easily as it

can be read to require execution of the agreement after payment. Thus, the

Fund’s interpretation is not unreasonable, given the language of the plan.

Id. at 1520. It seems to me that the plaintiffs in the instant case are also “confusing the issues.” 

Id.; see also Copeland Oaks v. Haupt, 209 F.3d 811, 815 & n.2 (6th Cir. 2000); Alves v.

Silverado Foods, Inc., 6 F. App’x 694, 704-05 (10th Cir. 2001). Even though the defendants’

right to reimbursement was not ripe, it does not follow that the defendants acted arbitrarily and

capriciously when they required the plaintiffs and their attorney to execute the ReimbursementSubrogation Agreement and Disbursement Agreement prior to the processing of the plaintiffs’

claims. As in Cagle, here the terms of the Plan do not forbid the defendants from requiring the

execution of the agreements before paying benefits. On the contrary, the Plan states specifically

that the failure to comply with requests to execute documents “may result in the Plan’s

withholding . . . benefits.” (A.R., filing 32, at 167 65.) This provision would be rendered a

nullity if the defendants were required to pay benefits before requesting documents. Thus, the

defendants’ interpretation of the Plan did not amount to an abuse of discretion.

The plaintiffs argue next that I should “reject” Kress v. Food Employers Labor Relations

Association, 391 F.3d 563 (4th Cir. 2004), because the court failed to consider that “requiring

attorneys for plan participants to sign disbursement agreements runs counter to Model Rule

1.7(b),” along with the Eighth Circuit’s opinion in Southern Council of Industrial Workers v.

Ford, 83 F.3d 966 (8th Cir. 1996), Judge Wilson’s opinion in Administrative Committee of the

Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan v. Cossey, 287 F. Supp 2d 975 (E. D.

Ark. 2003), and decisions of the Ninth and Eleventh Circuit Courts of Appeals. (Cosseys’

Response to Supplemental Br. in Supp. of Defs.’ Mot. to Affirm, filing 221, at 4 (citing, inter

alia, Hotel Employees & Restaurant Employees Int’l Union Welfare Fund v. Gentner, 50 F.3d

Case 4:02-cv-00661-WKU Document 225 Filed 01/30/08 Page 9 of 16
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719 (9th Cir. 1995); Chapman v. Klemick, 3 F.3d 1508 (11th Cir. 1993)).) More specifically,

the plaintiffs argue,

Requiring the Cosseys’ attorney to sign a Disbursement Agreement in

favor of the Plan’s claimed right of reimbursement, when the Plan and the

Cosseys espouse adverse positions on that claimed right, would invoke the

“competing allegiances” and “unacceptable conflicts of interest” that the Eighth

Circuit cautioned against in Ford, and that Judge Wilson noted in Cossey . . . . As

such, Kress is contrary to Eighth Circuit law, not to mention the law of this

district.

(Id. at 4-5.) I am not persuaded.

In Ford, Southern Council maintained an employee benefit plan that included “a

subrogation clause providing that Southern Council would be subrogated, to the extent of

payments it had made, to the rights of a beneficiary to receive or claim indemnification from a

third party.” 83 F.3d at 967-68. Ford, a beneficiary under the plan, received $39,971.35 in

benefits payments from the plan after she sustained injuries in a supermarket. Ford retained Mr.

Thompson to represent her in a personal injury action against the supermarket, and “Ford and

Thompson signed a subrogation agreement providing that they would reimburse the fund from

the proceeds of any recovery received for Ford’s injuries.” Id. at 968. Ford’s claim against the

supermarket was settled for $150,000, and after the settlement proceeds were released to Ford,

Ford paid Southern Council only $10,000 in reimbursement. Seeking to recover the balance of

the payments it made on Ford’s behalf, Southern Council filed suit, claiming, inter alia, that 1)

Thompson breached his fiduciary duty to the plan by failing to reimburse the fund, and 2) Ford

and Thompson violated the plan’s subrogation clause and the subrogation agreement. The

Eighth Circuit found that the complaint failed to state a claim against Thompson for a violation

of a fiduciary duty owed to the plan, stating,

Thompson did not become a plan fiduciary merely by representing Ford or

by related control over the settlement proceeds. Southern Council’s argument

that the result here should be different because Thomson signed the subrogation

agreement is unpersuasive. “An attorney has an ethical obligation to his or her

client that does not admit of competing allegiances.” Chapman [v. Klemick, 3

F.3d 1508, 1511 (11th Cir. 1993)]. Accordingly, to impose fiduciary liability on

Thompson would be to subject him to “unacceptable conflicts of interest.” Id.

Moreover, the subrogation agreement did not by its terms purport to make

Thompson a fiduciary of the plan.

Ford, 83 F.3d at 968 (citations omitted). The court also found, however, that “[b]ecause

Case 4:02-cv-00661-WKU Document 225 Filed 01/30/08 Page 10 of 16
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Thompson himself signed the subrogation agreement, we conclude that the complaint . . . stated

an ERISA claim against him for violation of the subrogation clause.” Id. at 969. Seizing upon

the statements, “An attorney has an ethical obligation to his or her client that does not admit of

competing allegiances,” and, “[T]o impose fiduciary liability on [the attorney] would be to

subject him to ‘unacceptable conflicts of interest,’” the plaintiffs assert that “[t]he same would

hold true for contractual liability imposed on an attorney under a Disbursement Agreement.” 

(Cosseys’ Response to Supplemental Br. in Supp. of Defs.’ Mot. to Affirm, filing 221, at 4.) I

take the plaintiffs’ argument to be that requiring counsel to sign a Disbursement Agreement

would create the same “competing allegiances” and “unacceptable conflicts of interest” that

would arise if fiduciary liability were imposed on counsel. But the Eighth Circuit clearly held in

Ford that counsel’s execution of the subrogation agreement gave rise to an ERISA claim against

him, and the court made no findings suggesting that counsel’s execution of the agreement would

interfere with his obligations to his client or subject him to “unacceptable conflicts of interest.” 

On the contrary, the court made clear that the imposition of fiduciary liability would give rise to

“unacceptable conflicts of interest,” and it held specifically that Thompson’s signing of the

subrogation agreement did not make him a fiduciary of the plan. Ford, 83 F.3d at 968. 

The Disbursement Agreement at issue in this case provides, 

I, the attorney representing the above named Plan participant/my client for

injuries incurred due to the aforementioned accident, understand that Associates’

Health and Welfare Plan (the Plan) claims a right to reimbursement as an ERISA

governed plan. I agree not to disburse any funds from the settlement until such

right to reimbursement with the Plan has been resolved. Signature herewith is not

an admission to the Plan’s 100% reimbursement requirement. In consideration of

execution of his agreement, the Plan agrees to continue to provide future medical

benefits to the Plan participant/my client in accordance to the terms of the Plan

and not to withhold benefits otherwise allowed by the terms of the Plan.

(A.R., filing 32, at 167 203.) It seems to me that this agreement does not purport to make the

Cosseys’ counsel a fiduciary of the Plan, and I am not persuaded that Ford stands for the

proposition that the signing of such an agreement would cause counsel to face unacceptable

conflicts of interest. Indeed, Ford seems to support the opposite conclusion. Therefore, I reject

the plaintiffs’ argument that Kress v. Food Employers Labor Relations Association, 391 F.3d

563 (4th Cir. 2004), is contrary to Ford. 

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As noted above, the plaintiffs also cite Judge Wilson’s decision in Administrative

Committee of the Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan v. Cossey, 287 F.

Supp 2d 975, 979 (E. D. Ark. 2003); Model Rule 1.7(b); Chapman v. Klemick, 3 F.3d 1508

(11th Cir. 1993); and Hotel Employees & Restaurant Employees Int’l Union Welfare Fund v.

Gentner, 50 F.3d 719 (9th Cir. 1995), for the proposition that attorneys would be made to serve

“two adverse masters” if the defendants are allowed to require attorneys to execute

Disbursement Agreements as a condition to paying benefits. (Cosseys’ Response to

Supplemental Br. in Supp. of Defs.’ Mot. to Affirm, filing 221, at 4.) However, because the

signing of the Disbursement Agreement at issue in this case would not make counsel a fiduciary

of the Plan, see Ford, 83 F.3d at 968, the execution of the agreement would not create the sort of

conflict of interest noted in the authorities cited by the plaintiffs, see Gentner, 50 F.3d at 723;

Chapman, 3 F.3d at 1511-12; Cossey, 287 F. Supp. 2d at 979.

Finally, the plaintiffs argue that Kress is distinguishable from the instant case on its facts,

and is therefore “non-persuasive.” (Cosseys’ Response to Supplemental Br. in Supp. of Defs.’

Mot. to Affirm, filing 221, at 4-5.) In Kress, a “welfare benefit plan governed by ERISA” (the

Fund) included a term stating that “‘[b]enefits are not payable if the disability is due to an injury

or sickness which . . . is . . . the responsibility of’ a third party.” 391 F.3d at 566. The Fund’s

SPD also contained the following language, however:

Waiting for a third party to pay for these injuries may be difficult. 

Recovery from a third party can take a long time (you may have to go to court),

and your creditors will not wait patiently. Because of this, as a service to you, the

Fund will pay your (or your eligible dependent’s) expenses based on the

understanding that you are required to reimburse the Fund in full from any

recovery you or your eligible dependent may receive, no matter how it is

characterized. This process is called “subrogation.”

. . . .

. . . [Y]our acceptance of benefits from the Fund means that you have

agreed to reimburse the Fund–in full–for any benefits it has paid from any

settlement, judgment, insurance, or other payment you, your eligible dependent,

or your attorney receive as a result of your accident. It does not matter how these

amounts are characterized, why they are paid, or whether or not these other

payments are specified as being for your Accident and Sickness or Medical bills. 

The Fund requires that you and/or your eligible dependent (if applicable) and

your or your dependent’s attorney fill out, sign, and return to the Fund office a

Case 4:02-cv-00661-WKU Document 225 Filed 01/30/08 Page 12 of 16
13

subrogation agreement that includes a questionnaire about the accident. Your

claim will not be deemed complete and will be pended for payment until your

fully executed subrogation agreement is received by the Fund office. If it is not

completed in a timely fashion, your claim will be denied.

Id. (emphasis omitted). After Kress was injured by a third party, “the Fund sent Kress the

[subrogation a]greement so that he could receive his expenses subject to its terms.” Id. at 567. 

Although Kress himself signed the agreement, his attorney refused, and the Fund determined that

Kress was not entitled to receive “Accident and Sickness” benefits. Id. The Fourth Circuit held

that the Fund could condition the payment of these benefits on the attorney’s execution of the

subrogation agreement. See id. at 568-71. 

The plaintiffs’ argument that Kress is “non-persuasive” is based on the fact that in Kress,

the Fund “was not obligated to pay the plan participant’s medical expenses”; in contrast, “it is

undisputed that the Cosseys’ medical benefits were ‘covered’ by the Plan’s terms.” (Cosseys’

Response to Supplemental Br. in Supp. of Defs.’ Mot. to Affirm, filing 221, at 5 (citing Gorman

v. Carpenters’ & Millwrights’ Health Benefit Trust Fund, 410 F.3d 1194 (10th Cir. 2005)).) 

Clearly, the distinction noted by the plaintiffs does exist. Moreover, Kress states, “Since thirdparty accident and sickness benefits are not even covered by the Fund, nor required by ERISA, it

makes little sense to argue that ERISA precludes imposing conditions on the receipt of benefits

that are in effect an interest-free loan.” 391 F.3d at 568. Thus, it is arguable not only that Kress

is distinguishable from the instant case, but also that Kress does not stand for the proposition that

ERISA permits the conditioning of benefits payments on the execution of subrogation

agreements. However, after noting that third-party accident benefits were neither covered by the

Fund nor required by ERISA, the court proceeded to analyze–in some detail–whether ERISA

precludes the Fund’s “attorney signature requirement.” Id. at 569. The court stated,

Indeed, “ERISA neither requires a welfare plan to contain a subrogation

clause nor does it bar such clauses or otherwise regulate their content.” 

Subrogation clauses requiring reimbursement are, in fact, quite common. ERISA

allows plans broad discretion to draft such clauses. Plans could forego any

reimbursement unless and until the participant is “made whole.” They could

provide for attorneys fees to be paid in full before the plan is reimbursed at all. 

They could share the expense of legal fees in a pro-rate fashion, proportionally

reducing their reimbursement to reflect the attorney fee. They could adopt a

“reasonable fee” policy, meaning that they will subtract from the amount of the

required reimbursement whatever they would have spent in legal fees to recover

Case 4:02-cv-00661-WKU Document 225 Filed 01/30/08 Page 13 of 16
3

I note in passing that here, unlike in Kress, the Disbursement Agreement did not require

the plaintiffs’ attorney to concede that the Plan was entitled to “100% reimbursement.” 

Compare Kress, 391 F.3d at 567-68 (noting that the subrogation agreement required that the

plaintiff reimburse the Fund “before all others”) with (A.R., filing 32, at 167 203 (“Signature

herewith is not an admission to the Plan’s 100% reimbursement requirement.”)). 

Relatedly, I find that the instant case is distinguishable from Gorman v. Carpenters’ &

Millwrights’ Health Benefit Trust Fund, 410 F.3d 1194 (10th Cir. 2005), which is cited in the

plaintiffs’ brief, filing 221, at page 5. In Gorman, the Carpenters’ and Millwrights’ Health

Benefit Trust Fund (the Fund) required a Fund beneficiary, his wife, and his attorney to sign a

“Subrogation Agreement Contract,” or “SAC,” as a precondition to the payment of benefits. See

410 F.3d at 1196-97. The SAC included additional conditions that did not appear in the plan,

including a requirement that the beneficiary “file a third-party action at his own expense in order

to obtain his vested medical benefits resulting from the injuries he sustained in an accident.” Id.

at 1196. The court held that “the SAC attempted to broaden the Fund’s rights by imposing a

new requirement on [the beneficiary] as a condition for receiving benefits,” and that “[b]ecause

that requirement was not contained in the 1999 SPD, it was arbitrary and capricious for the Fund

14

the advance they had paid. Or, as here, they may require that attorney fees be

paid only after the Fund is reimbursed in full.

. . . . 

The addition of an attorney signature requirement is a difference of

degree, not of kind. . . .

Since circuit law interpreting ERISA plainly permits a plan to recoup any

advance it has made to a participant before an attorney makes a claim on a

subsequent award, we see no reason to impede a plan from requiring precommitment to this state of affairs. Congress placed no restrictions in ERISA on

reimbursement provisions. Were we to import such limits now, we would

contravene ERISA’s purpose of “promot[ing] the interests of employees and their

beneficiaries in the employee benefit plans,” because such restrictions would

surely discourage plan sponsors from providing the very sorts of accident and

sickness benefits that the Fund offered to Kress.

Id. at 569-70 (citations omitted) (emphasis added). I find the court’s analysis in Kress to be

persuasive, notwithstanding the factual differences between that case and the case now before

me. As the court explained, ERISA gives plans broad discretion to draft reimbursement clauses,

and therefore there seems to be no reason to prohibit the defendants from requiring the plaintiffs’

attorney to sign a document that acknowledges the existence of Plan’s reimbursement claim and

commits counsel to preserving the settlement funds until the reimbursement claim is resolved.3

Case 4:02-cv-00661-WKU Document 225 Filed 01/30/08 Page 14 of 16
to impose the new condition as a prerequisite to paying [the beneficiary] his benefits under the

1999 SPD.” Id. at 1200. Here, however, the defendants did not attempt to “broaden their

rights,” because neither the Reimbursement-Subrogation Agreement nor the Disbursement

Agreement added a new requirement that does not appear in the Plan. (Compare A.R., filing 32,

at 167 64-65 (setting forth the Plan’s terms with respect to reduction, recovery, reimbursement

and subrogation, including the participant’s responsibilities to aid the Plan in its enforcement of

those rights) with id. at 167 203 (the Disbursement Agreement), 167 217 (the ReimbursementSubrogation Agreement).) Instead, those agreements merely served to protect the defendants’

existing rights under the terms of the Plan. 

15

My finding that the defendants’ decision to deny Karla Cossey’s accident-related claims

did not amount to an abuse of discretion has several ramifications. First, I find that the

defendants are entitled to summary judgment on the plaintiffs’ claims under 29 U.S.C. §§

1132(a)(1), (a)(2), and (a)(3), including the plaintiffs’ claims for “plan-wide relief,” (see

Cosseys’ Response to Supplemental Br. in Supp. of Defs.’ Mot. to Affirm, filing 221, at 6-9; see

also Pls.’ Mot. for Summ. J. & Supporting Mem., filing 91, at 52-56 (summarizing the relief

requested by the plaintiffs)), to the extent that those claims are based on the defendants’ decision

to deny Ms. Cossey’s accident-related claims. Because I have also found that the defendants are

entitled to summary judgment on the plaintiffs’ claims for statutory penalties, (see Mem. and

Order on Mots. for Summ. J., filing 141, at 35-39), virtually none of the plaintiffs’ claims remain

viable. Indeed, all of the issues mentioned specifically by the parties in the current round of

briefs are now resolved. (See generally filings 220, 221, and 224.) I note, however, that the

plaintiffs appear to have raised at least two claims that do not stem directly from the defendants’

denials of Ms. Cossey’s accident-related claims. (See Sixth Am. Compl., filing 121, ¶¶ 50-59.) 

The status of these two claims is unclear, and I am not convinced that the conclusions I have

reached in this memorandum necessarily resolve them. It seems to me, therefore, that a status

conference is in order. Counsel should confer with one another, and with my chambers, to

arrange this conference as soon as it is practical to do so.

IT IS ORDERED that:

1. The portion of the memorandum and order of March 15, 2005, granting the

plaintiffs’ motion for summary judgment in part, (see filing 141), is vacated; 

2. The plaintiffs’ motion for summary judgment, filing 91, is denied; and

Case 4:02-cv-00661-WKU Document 225 Filed 01/30/08 Page 15 of 16
16

3. The “Defendants’ Motion to Affirm the Determination of the Administrative

Committee or, Alternatively, Motion for Summary Judgment,” filing 18, and the

“Defendants’ Supplemental Motion to Affirm the Determination of the

Administrative Committee or, Alternatively, Motion for Summary Judgment,”

filing 105, are granted in part, as explained in the memorandum accompanying

this order. 

Dated January 30, 2008.

BY THE COURT

s/ Warren K. Urbom

United States Senior District Judge

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