Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-06-03531/USCOURTS-ca8-06-03531-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 06-3531

___________

Administrative Committee of the *

Wal-Mart Stores, Inc. Associates’ *

Health and Welfare Plan, *

*

Appellee, *

* Appeal from the United States

v. * District Court for the 

* Eastern District of Missouri. 

James A. Shank, as Trustee of *

Deborah J. Shank Irrevocable Trust; *

Deborah J. Shank; Deborah J. Shank *

Irrevocable Trust, *

*

Appellants. *

___________

Submitted: April 13, 2007

Filed: August 31, 2007

___________

Before WOLLMAN, BEAM, and COLLOTON, Circuit Judges.

___________

COLLOTON, Circuit Judge.

The Administrative Committee of the Wal-Mart Associates’ Health and Welfare

Plan (“the Committee”) brought suit under section 502(a)(3) of ERISA, 29 U.S.C. §

1132(a)(3), against James A. Shank, Deborah J. Shank, and the Deborah J. Shank

Irrevocable Trust (“the Shanks”). The Committee sought reimbursement for $469,216

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The Honorable Lewis M. Blanton, United States Magistrate Judge for the

Eastern District of Missouri, to whom the case was referred for final disposition by

consent of the parties pursuant to 28 U.S.C. § 636(c).

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it had paid in medical expenses on behalf of Deborah Shank. The district court1

granted summary judgment for the Committee, and the Shanks appeal. We affirm.

I.

Deborah Shank (“Shank”) was a Wal-Mart employee and a member of the

Associates’ Health and Welfare Plan (“the Plan”), a self-funded employee benefit plan

regulated by ERISA. In May 2000, Shank was severely injured in a car accident, and

was eventually adjudicated an incompetent. Pursuant to the terms of the Plan, the

Committee paid for the full amount of Shank’s medical expenses related to the

accident, a total of $469,216. Shank eventually filed a lawsuit against the parties

responsible for her injuries, and in 2002, she obtained a settlement of $700,000. After

deducting attorney’s fees and costs, the district court placed the remaining $417,477

from the settlement into a special needs trust, with Shank as the beneficiary and her

husband, James Shank, the trustee.

The Plan contains a subrogation and reimbursement clause that grants the

Committee first priority over any judgment or settlement Shank received relating to

the accident, so the Committee may recover in full the amount it paid on Shank’s

behalf. After the Committee learned of Shank’s settlement agreement, it sought to

enforce the Plan’s reimbursement provision, bringing suit under section 502(a)(3) of

ERISA against Deborah Shank, James Shank, and the special needs trust. The district

court granted summary judgment for the Committee and imposed a constructive trust

on the funds in the special needs trust, in an amount not to exceed $469,216. The

Shanks appeal the judgment of the district court. Reviewing the district court’s

decision de novo, we affirm.

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II.

Section 502(a)(3) of ERISA authorizes a civil action by a plan “participant,

beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision

of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable

relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter

or the terms of the plan.” 29 U.S.C. § 1132(a)(3). The parties agree that the

Committee is a fiduciary and that it brought suit to enforce the terms of the Plan. The

applicable Plan provision obligates Shank to reimburse the Committee from any

judgment or settlement that she receives, up to the full amount the Committee paid on

her behalf. At issue in this appeal is whether the Committee’s claim for full

reimbursement sought “appropriate equitable relief” as authorized by

section 502(a)(3).

In their brief, the Shanks argued that the Committee sought money damages,

a form of legal rather than equitable relief. See Mertens v. Hewitt Assocs., 508 U.S.

248, 255 (1993). They contended that this court lacks subject matter jurisdiction

because the Committee’s claim does not fall under section 502(a)(3). The Shanks

appeared to abandon this assertion at oral argument, and we reject it.

In Sereboff v. Mid Atlantic Medical Servs., Inc., 126 S.Ct. 1869 (2006), the

Supreme Court concluded that “equitable relief” under section 502(a)(3) includes a

claim for restitution, in the form of a constructive trust or equitable lien, where the

plaintiff seeks to recover “specifically identifiable” funds, that are due the plaintiff

under the terms of the plan, and that are within the defendant’s “possession and

control.” Id. at 1874; see also Great-West Life & Annuity Ins. Co. v. Knudson, 534

U.S. 204, 213 (2002). In Sereboff, the plan administrator, much like the Committee

in this case, sought reimbursement of medical expenses from an investment account

that contained funds the Sereboffs had obtained in a tort settlement. The Court held

that the reimbursement provision of the plan “specifically identified a particular fund,

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In their brief, the Shanks also argued that the Summary Plan Description

(SPD), which contains the subrogation and reimbursement clauses at issue in this case,

was not part of the 2001 Plan Wrap Document that governed the dispute. The Shanks

abandoned this claim at oral argument, and it is foreclosed by our decision in Admin.

Comm. of the Wal-Mart Stores, Inc. v. Gamboa, 479 F.3d 538 (8th Cir. 2007), which

held that the SPD is part of the 2001 Plan Wrap Document. Id. at 540, 544-545. 

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distinct from the Sereboff’s general assets . . . and a particular share of that fund to

which Mid Atlantic was entitled.” Sereboff, 126 S.Ct. at 1875. Therefore, the Court

concluded, “Mid Atlantic could rely on a ‘familiar rul[e] of equity’ to collect for the

medical bills it had paid on the Sereboff’s behalf.” Id. (quoting Barnes v. Alexander,

232 U.S. 117, 121 (1914)). 

The Committee’s claim meets Sereboff’s requirements for equitable restitution:

it seeks (1) the specific funds it is owed under the terms of the plan – i.e., the money

it paid to cover Shank’s medical expenses; (2) from a specifically identifiable fund

that is distinct from the Shank’s general assets – i.e., the special needs trust; and (3)

that is controlled by defendant James Shank, the trustee. See Admin. Comm. of WalMart Assocs. Health and Welfare Plan v. Willard, 393 F.3d 1119, 1122-1125 (10th

Cir. 2004); Admin. Comm. of Wal-Mart Stores, Inc. v. Varco, 338 F.3d 680, 687-688

(7th Cir. 2003); Bombardier Aerospace Employee Welfare Benefits Plan v. Ferrer,

Poirot, & Wansborough, 354 F.3d 348, 356-358 (5th Cir. 2003). Therefore, we

conclude that the Committee’s suit seeks equitable relief under section 502(a)(3).2

The remaining issue is whether the relief the Committee sought was

“appropriate.” The Supreme Court in Sereboff declined to expound on the meaning

of this term, because Sereboff’s argument on that point had not been raised in the

court below. 126 S. Ct. at 1877 n.2. The Shanks contends that full reimbursement to

the Committee is not “appropriate” under section 502(a)(3), and asks us to apply

either the “make-whole” doctrine or a pro rata share requirement as a rule of federal

common law in order to reach this conclusion. According to the make-whole doctrine,

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the Committee would not be permitted to enforce its contractual right to

reimbursement unless Shank were first made whole, that is, fully compensated for her

injuries. See 16 Lee R. Russ et. al., Couch on Insurance § 223:134 (3d ed. 2000).

Under a pro rata share model, the Committee would receive only partial

reimbursement equal to the share of Shank’s settlement that compensates her for

medical expenses. See Sunbeam-Oster Co., Inc. v. Whitehurst, 102 F.3d 1368, 1373-

1374 (5th Cir. 1996). 

We are not persuaded that the Committee’s full recovery according to the terms

of the plan is not “appropriate” relief within the meaning of ERISA. The Supreme

Court has recognized that Congress intended for the federal courts “to develop a

federal common law of rights and obligations under ERISA-regulated plans.”

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989) (internal quotation

omitted). But the Court nonetheless has proven “reluctant to tamper with an

enforcement scheme crafted with such evident care as the one in ERISA,” and has

declined to create remedies beyond those Congress expressly authorized. Mass. Mut.

Life Ins. Co. v. Russell, 473 U.S. 134, 147 (1985). In view of this cautious approach,

we generally adopt new rules of federal common law only if they are necessary to fill

gaps left by the express provisions of ERISA and to effectuate the purposes of the

statute. See, e.g., Varco, 338 F.3d at 691; Waller v. Hormel Foods Corp., 120 F.3d

138, 141 (8th Cir. 1997); see also Bollman Hat Co. v. Root, 112 F.3d 113, 118 (3d

Cir. 1997) (federal courts may adopt a common law principle under ERISA “only if

necessary to fill in interstitially or otherwise effectuate the statutory pattern enacted

in the large by Congress”) (internal quotation omitted).

In Waller, for example, we held that make-whole is not a rule of federal

common law that governs our interpretation of the written provisions of ERISAregulated benefit plans. 120 F.3d at 139-40. We concluded that the terms of the

written plan in that case entitled the administrator to full subrogation, regardless of

whether the employee had been fully compensated for his injuries. Waller recognized

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that the make-whole doctrine originated in the law of insurance, where the overriding

purpose of an insurance policy is to fully compensate the insured in case of loss, but

that many ERISA-regulated benefit plans do not share that purpose. We thus

concluded that the make-whole doctrine does not carry over from the insurance

context to ERISA. Waller did not involve an interpretation of section 502(a)(3)’s

reference to “appropriate equitable relief,” but nothing in that provision counsels a

different result.

The Supreme Court has directed that when courts consider the meaning of

“appropriate” equitable relief, they should “keep in mind the special nature and

purpose of employee benefit plans.” Varity Corp. v. Howe, 516 U.S. 489, 515 (1996)

(internal quotation omitted). Among the primary purposes of ERISA is to ensure the

integrity of written plans and to protect the expectations of participants and

beneficiaries. See, e.g., United McGill Corp. v. Stinnett, 154 F.3d 168, 172 (4th Cir.

1998); Duggan v. Hobbs, 99 F.3d 307, 309-310 (9th Cir. 1996). Ordinarily, courts are

to enforce the plain language of an ERISA plan “in accordance with ‘its literal and

natural meaning.’” United McGill, 154 F.3d at 172 (quoting Health Cost Controls v.

Isbell, 139 F.3d 1070, 1072 (6th Cir. 1997)). We therefore do not apply common law

theories to alter the express terms of a written plan. See Varco, 338 F.3d at 692;

Health Cost Controls, 139 F.3d at 1072; Singer v. Black & Decker Corp., 964 F.2d

1449, 1452 (4th Cir. 1992); Van Orman v. Am. Ins. Co., 680 F.2d 301, 312 (3d Cir.

1982). This is especially true in the context of section 502(a)(3), which “does not,

after all, authorize ‘appropriate equitable relief’ at large, but only ‘appropriate

equitable relief’ for the purpose of . . . ‘enforc[ing] any provisions’ of ERISA or an

ERISA plan.” Mertens, 508 U.S. at 253.

In this case, the Plan is clear about the rule of recovery. It states:

The Plan has the right to . . . recover or subrogate 100 percent of

the benefits paid by the Plan on your behalf . . . to the extent of .

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. . [a]ny judgment, settlement, or any payment made or to be

made, relating to the accident . . . . These rights apply regardless

of whether such payments are designated as payment for . . .

[m]edical benefits [or] [w]hether the participant has been made

whole (i.e., fully compensated for his/her injuries). . . . The Plan

has first priority with respect to its right to reduction,

reimbursement and subrogation. 

(App. 117-118).

To avoid this straightforward plan language, the Shanks argue that the makewhole rule is necessary to achieve what the Supreme Court has called the “principal

object” of ERISA: to protect plan participants and beneficiaries. Boggs v. Boggs, 520

U.S. 833, 845 (1997). If the Committee is permitted full reimbursement, the Shanks

contend, beneficiaries whose tort settlements cover only a small fraction of their

injuries will be left without protection, and will be no better off than if they had not

joined the Plan.

We acknowledge the difficulty of Shank’s personal situation, but we believe the

purposes of ERISA are best served by enforcing the Plan as written. Shank would

benefit if we denied the Committee its right to full reimbursement, but all other plan

members would bear the cost in the form of higher premiums. See Harris v. Harvard

Pilgrim Health Care, Inc., 208 F.3d 274, 280-81 (1st Cir. 2000). Reimbursement and

subrogation provisions are crucial to the financial viability of self-funded ERISA

plans, and, as a fiduciary, the Committee must “preserve assets to satisfy future, as

well as present, claims, and must “take impartial account of the interests of all

beneficiaries.” Varity Corp., 516 U.S. at 514.

Moreover, while ERISA is designed to protect the interests of plan participants

and beneficiaries, those interests are specified by the written plan. ERISA’s

“repeatedly emphasized purpose [is] to protect contractually defined benefits.”

Russell, 473 U.S. at 148 (emphasis added). Thus, while some courts have adopted the

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make-whole doctrine as a default rule of federal common law in the absence of

contractual terms that specify a rule of recovery, these courts recognize that such a

common-law rule is inapplicable in the face of clear plan language to the contrary.

See Copeland Oaks v. Haupt, 209 F.3d 811, 813 (6th Cir. 2000); Cagle v. Bruner,

112 F.3d 1510, 1521 (11th Cir. 1997); Barnes v. Indep. Auto. Dealers Ass’n of Cal.

Health & Welfare Benefit Plan, 64 F.3d 1389, 1395 (9th Cir. 1995). 

The written Plan in this case confers benefits on both parties. Shank

contributed premium payments, plus a promise to reimburse the Committee for

medical expenses in the event she was injured and received a judgment or settlement

from third parties. In exchange, she received the certainty that the Committee would

pay her medical bills immediately if she was injured. See Varco, 338 F.3d at 692;

Cutting v. Jerome Foods, Inc., 993 F.3d 1293, 1298 (7th Cir. 1993). Nothing in the

statute suggests Congress intended that section 502(a)(3)’s limitation of the

Committee’s recovery to “appropriate equitable relief” would upset these

contractually-defined expectations. Indeed, ERISA’s mandate that “[e]very employee

benefit plan shall be established and maintained pursuant to a written instrument,” 29

U.S.C. § 1102(a)(1), establishes the primacy of the written plan. Therefore, we reject

Shank’s assertion that the make-whole doctrine limits the Committee’s contractual

right to recovery. 

The Shanks’ pro rata theory fares no better. Citing Arkansas Department of

Health & Human Services v. Ahlborn, 126 S. Ct. 1752 (2006), the Shanks argue that

the Committee’s right of reimbursement is limited to the portion of her settlement that

covers her medical expenses. The Shanks claim that Deborah Shank’s damages from

the accident were over $12 million dollars, and reason that because her settlement of

$700,000 amounted to only 5.4% of her total damages, the Committee likewise is

entitled to only 5.4% of the money it paid on her behalf, for a total of about $25,000.

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Ahlborn does not support this result. The Supreme Court there addressed a state

law that required Medicaid recipients who obtained a judgment or settlement against

a third party to reimburse the State for all payments made on their behalf. The Court

concluded that the state reimbursement statute “squarely conflicts with the . . . federal

Medicaid laws,” which entitled a State to only that portion of a judgment or settlement

that covered medical expenses. Id. at 1760, 1761-1763. Ahlborn thus turned on the

application of the federal Medicaid statute. ERISA, by contrast, does not limit the

Committee’s right to reimbursement. Some employee benefit plans explicitly provide

for pro rata reimbursement, see, e.g., Springs Valley Bank & Trust Co. v. Carpenter,

885 F.Supp. 1131, 1143 (S.D. Ind. 1993), but Shank and the Committee reached a

different bargain, agreeing that she would reimburse the Committee in full, and

granting the Committee first priority over any settlement or judgment she obtained.

The Shanks’ pro rata theory thus fails for the same reason as does her make-whole

theory: federal courts lack authority to fashion a rule of federal common law that

conflicts with the written plan and that is unnecessary to achieve the purposes of

ERISA. See Harris, 208 F.3d at 280-281; Sunbeam-Oster, 102 F.3d at 1375-1376.

ERISA’s purposes of upholding the integrity of written plans and protecting the

interest and expectations of all participants and beneficiaries are best served by

enforcing the Committee’s contractual right to reimbursement. We thus hold that such

relief is “appropriate” under section 502(a)(3).

* * *

For these reasons, the judgment of the district court is affirmed.

 ______________________________

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