Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-arwd-5_05-cv-05007/USCOURTS-arwd-5_05-cv-05007-0/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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(Rev. 8/82)

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

FAYETTEVILLE DIVISION

ADMINISTRATIVE COMMITTEE

OF THE WAL-MART STORES, INC.

ASSOCIATES’ HEALTH AND

WELFARE PLAN PLAINTIFF

v. CASE NO. 05-5007

NANCY LYNN GAMBOA,

BAUDELIO JOSE GAMBOA,

WENDY AURORA GAMBOA, AND

LUCAS TIZOE GAMBOA DEFENDANTS

MEMORANDUM OPINION AND ORDER

There comes on for consideration the Plaintiff’s Motion to

Affirm the Decision of the Administrative Committee. (Doc. 22.)

Plaintiff’s claims are governed by the Employee Retirement Income

Security Act of 1974 (“ERISA”). Plaintiff contends the Decision of

the Administrative Committee of the Wal-Mart Stores, Inc,

Associates’ Health and Welfare Plan (“Administrative Committee”) was

neither arbitrary nor capricious and should be affirmed. Defendants

disagree and contend that the Decision of the Administrative

Committee is arbitrary and capricious as it is based on an

unreasonable finding that the Summary Plan Document (“SPD”), which

contains the Right to Reduction Reimbursement and Subrogation

provision, is part of the Plan. (Doc. 24). This matter is before

the Court on the Administrative Record (“AR”) and the briefs. For

the reasons that follow, Plaintiff’s motion is DENIED. The Court

finds that the resolution of the Motion to Affirm the Decision of

the Administrative Committee resolves all legal issues with no

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factual disputes remaining; therefore, the case can properly be

resolved. After due consideration, the preliminary injunction on

the disputed funds is hereby lifted and Plaintiff’s complaint is

DISMISSED WITH PREJUDICE. 

I. Background

Except as noted, the facts are not disputed. On February 14,

2002, Defendants were involved in an automobile accident caused by

an inebriated driver. (Doc. 23, Administrative Record (“AR”), pp.

19-23, 105.) As a result of the accident, the Defendants were

injured, with Defendant Baudelio Jose Gamboa (“Jose”) receiving

serious, permanent injuries which rendered him disabled and unable

to care for himself. Id. Defendants Nancy Gamboa and Jose are

married. AR at 105. At the time of the accident, Nancy Gamboa was

employed by Wal-Mart. See id. As Nancy Gamboa’s spouse, Jose was

a covered person pursuant to Wal-Mart Stores, Inc. Associates’

Health and Welfare Plan (“the Plan”). See AR at 1. On Jose’s

behalf, the Plan paid $177,136.07 to healthcare providers. AR at

53-54. 

In March 2003, Defendants filed a wrongful death and personal

injury claim action against the bar that served alcohol to the

person that caused the automobile accident. AR at 19-23. On

December 6, 2004, Nancy Gamboa, Wendy Gamboa and Lucas Gamboa

settled their claims against the bar for one million dollars. AR

at 16-17. That same day, Jose signed a release of liability in

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consideration of his family receiving the one-million-dollar

settlement and waived his right to any of the proceeds. AR at 14-

15. A settlement check in the amount of $982,727.47 was paid to

Nancy Gamboa, Wendy Gamboa, Lucas Gamboa, and Corley & Ganem Law

Firm. Id. at 18, 24.

After the settlement, the Administrative Committee determined

that they were entitled to reimbursement of the monies it paid on

behalf of Jose. Jose then appealed. See AR at 38-39 (letter from

Jose’s attorney stating that there is no legal obligation to

reimburse the Plan). On June 13, 2005, in response to Jose’s appeal

of the adverse medical benefit determination, the Administrative

Committee upheld its decision that Jose must reimburse the Plan for

medical benefits paid, in the amount of $177,136.07. (Doc. 23,

Administrative Committee Notification.) The Administrative

Committee relied upon “the Right to Reduction, Reimbursement and

Subrogation provision, which entitle[d] the Plan to ‘recover or

subrogate 100 percent 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. . . .’” See Id. (which appears to be

quoting the reimbursement provision contained in the SPD). The

Administrative Committee rejected Jose’s argument that they were not

entitled to reimbursement from the settlement because the settlement

paid to Jose’s family was not paid on or for his behalf, since he

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Plaintiff provided the 2004 SPD to the Court. (Doc. 23). The 2004 SPD 1

is not relevant to this case. Plaintiff has since provided the Court with the

correct 2002 SPD. (Doc. 25.) The Court did not consider the 2004 SPD in

making its determinations.

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previously signed a release of all claims arising out of the

accident. Id.

On September 19, 2005, Plan’s Appeals Coordinator wrote a

letter stating the Administrative Committee’s position concerning

whether the Plan included the 2002 Associates’ Benefits Guide (which

served as the SPD). (Doc. 33, Letter, Exhibit 2 to the Affidavit

of Christy Herbaugh, Exhibit A). The letter stated that the 1

Committee’s position was that the Plan includes the Wrap Document

and the SPD, “quoting the portion of the Associates Benefits Book,

which states in pertinent part, that ‘portions of this book will

serve as part of the official plan document for the Associates’

Health and Welfare Plan.’” Id. at 1. Furthermore, the

Administrative Committee rejected the contention that the SPD is not

part of the Plan because if it were not part of the Plan,

beneficiaries would be left without medical benefits as “[t]he only

Plan terms that require and authorize the Plan to pay benefits are

found in the Medical section of the [SPD].” Id. at 2. “In short,

the document that allows the Plan to offset benefits, recover, and

subrogate, is the same and only document that requires the Plan to

pay benefits.” Id. 

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II. ERISA, 29 U.S.C. § 1132(a)(3), Standard of Review.

“The Plan is a self-funded, ERISA-covered Plan.” (Doc. 23,

Affidavit of Christy Herbaugh, p. 1.; see AR p. 26.) Plaintiff is

a fiduciary that brought the current case, contending that the

Defendants violated the Plan by not reimbursing the Plan with monies

obtained from a civil settlement. An ERISA plan fiduciary may bring

a civil action “(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 standard

of review applicable to ERISA cases is de novo, unless the plan

administrator or fiduciary has been given “discretionary authority

to determine eligibility for benefits or to construe the terms of

the plan.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115

(1989). The deferential abuse of discretion standard of review will

apply when the administrator/fiduciary has discretionary authority.

Additionally, a court may apply a less-deferential standard of

review in a case where the administrator/fiduciary has discretionary

authority, if the claimants “present material, probative evidence

demonstrating that (1) a palpable conflict of interest or a serious

procedural irregularity existed, which (2) caused a serious breach

of the plan administrator’s fiduciary duty to [the claimants].” Woo

v. Deluxe Corp., 144 F.3d 1157, 1160 (8 Cir. 1998). th

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The Plan gives the Plan administrator complete discretionary

authority to interpret the Plan provisions and to make findings of

fact. (Doc. 33, The Wrap Document, p. 5.) Therefore, absent a

showing of a “palpable conflict of interest or serious procedural

irregularity,” the standard of review will be the deferential abuse

of discretion. Defendants have provided no evidence of either a

“palpable conflict of interest or serious procedural irregularity.”

Therefore, the standard of review shall be the discretionary abuse

of discretion standard. 

The abuse of discretion standard requires an inquiry into

whether the plan administrator’s decision is reasonable, asking

“whether a reasonable person could have reached the same decision.”

Wald v. Southwestern Bell Customcare Medical Plan, 83 F.3d 1002,

1007 (8 Cir. 1996) (citing Donaho v. FMC Corp., 74 F.3d 894, 899 th

(8 Cir. 1996)). The Wald Court looked at five factors in th

determining whether a plan administrator’s interpretation is

reasonable: “(1) whether the interpretation is consistent with the

plan’s goals; (2)whether the interpretation renders any of the

plan’s language meaningless or internally inconsistent; (3) whether

the interpretation conflicts with the substantive or procedural

requirements of ERISA; (4) whether [the plan administrator] has

interpreted the words at issue consistently; and (5) whether the

interpretation is contrary to the plan’s clear language.” Id.

(citing Finley v. Special Agents Mutual Benefit Association, Inc.,

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957 F.2d 617, 621 (8 Cir. 1996)). th

A district court generally should not admit evidence outside

the administrative record before conducting deferential review “to

ensure expeditious judicial review of ERISA benefit decisions and

to keep district courts from becoming substitute plan

administrators.” Brown v. Seitz Foods, Inc. Disability Benefit Plan,

140 F.3d 1198, 1200 (8 Cir. 1998) (quoting Cash v. Wal-Mart Group th

Health Plan, 107 F.3d 637, 641-42 (8 Cir. 1997)) (internal quotes th

omitted) (additional cite omitted). 

III. REASONABLENESS OF ADMINISTRATIVE COMMITTEE’S DECISION

Defendants contend that the Plan’s administrator’s

interpretation of the Plan was contrary to the Plan’s clear language

and renders the Plan’s language meaningless or internally

inconsistent. (Doc. 25, Defendants’ Response, p. 3.) The

Administrative Committee relies on the SPD Reimbursement provision

for its position that the Defendants must reimburse the Plan for

medical benefits paid on Jose’s behalf. The SPD contains the

following paragraph, titled “Right to Reduction, Reimbursement and

Subrogation”: 

The plan has the right to 1) reduce or deny benefits

otherwise payable by the Plan and 2) recover or subrogate

100 percent 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

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Plaintiff initially provided the Court the 1997 Wrap Document. (Doc. 2

23.) The Wrap Document at issue in the case sub judice is the amended 2001

Wrap Document, which Plaintiff later provided the Court. (Doc. 33.) The 

Court did not consider the 1997 Wrap Document in its determinations.

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insurance.... 

• Attorney’s fees. 

(Doc. 25, SPD, dated January 2002, p. 42.) 

To support their contention that the SPD reimbursement

provision is not part of the Plan, Defendants cite the Court to the

Associates’ Health and Welfare Plan Wrap Document (“Wrap

Document”). (Doc. 33.) The Wrap Document defines the term “Plan” 2

as: “‘Plan’ means the Wal-Mart 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.”

Id. at 2. The Wrap Document defines the term “Welfare Program” as:

(q) “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 I Appendix A.

For purposes of this Plan, only the terms of the formal

plan document of 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 contact. 

Id. at 2-3 (emphasis added).

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For resolution of the legal issues in the present case, we adopt and 3

apply the reasoning and logic set forth by Judge Urbom in the Cossey

decision.

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The plain language of the paragraph “Welfare Program” clearly

states that the SPD (as “the applicable description of such benefits

contained in the associate benefits book”) will be considered part

of the Plan if: “(1) there is ‘no separate formal plan document’

that provides the relevant benefits; 2) the relevant portions of the

SPD describe the benefits set forth in ‘any applicable insurance

policy or contract”; and 3) the relevant portions of the SPD are

‘consistent with’ that policy or contract.” Cossey v. Associates’

Health and Welfare Plan, 363 F. Supp. 2d 1115, 1130 (E.D. Ark. 2005)

(analyzing the identical provisions at issue in the case sub

judice).3

Appendix A does not list the SPD as one of the Welfare Programs

under the Plan. Regardless of whether we find a separate formal

plan, there has been no evidence submitted to this Court regarding

a reimbursement provision contained in any insurance policy or

contract. Since the SPD is not listed in Appendix A and the Plan’s

own language states that the SPD’s reimbursement provision cannot be

considered to be part of the Plan, the reimbursement provision

cannot be part of the Plan. See Id. at 1131 (where that court

considered the identical reimbursement paragraph and SPD, resulting

in the same finding). 

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Even if this Court could determine that the SPD reimbursement

provision was part of the Plan, the result would be the same - that

the provision is unenforceable against Defendants. 

[W]hen the plan master document is more favorable to the

employee than the SPD, . . . it controls, despite contrary

unambiguous provisions in the SPD. The plan master

document is the main document that specifies the terms of

the plan, and employees should be entitled to rely on its

unambiguous provisions. The SPD, on the other hand,

should simply summarize the relevant portions of the plan

master document.

Bergt v. Ret. Plan for Pilots Employed by Mark Air, Inc., 293 F.3d

1139, 1145 (9 Cir. 2002). th

Any burden of uncertainty created by careless or

inaccurate drafting of the summary must be placed on those

who do the drafting, and who are most able to bear that

burden, and not on the individual employee, who is

powerless to affect the drafting of the summary or the

policy and ill equipped to bear the financial hardship

that may result from a misleading or confusing document.

Accuracy is not a lot to ask.

Id. (quoting Hansen v. Continental Ins. Co., 940 F.2d 971, 982 (5th

Cir. 1991)). “[T]he law should provide as strong an incentive as

possible for employers to write the SPDs so that they are consistent

with the ERISA plan master document, a relatively simple task.”

Hansen, 940 F.2d at 1145 (citation omitted). SPDs are created as a

“summary” of ERISA plans, not as a separate document in which new

benefits/requirements can be created. Therefore, the SPD

reimbursement provision in the case sub judice was improperly

written into the SPD since no Plan provision exists that creates

such a right. 

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Plaintiff contends that the reimbursement provision must be an

enforceable part of the Plan because the ability to pay any benefits

is also only found in the SPD (not the Wrap Document). (Doc. 30,

Plaintiff’s Reply.) Therefore, the reasoning behind the finding

that the SPD reimbursement provision is not part of the Plan and not

enforceable will lead to a similar result for the benefits

provisions; thus, the Plan will be unable to pay any benefits. Id.

This argument fails in light of case law on this point, for if an

employee relies on a faulty SPD and is prejudiced by that reliance,

the SPD terms will prevail. Palmisano v. Allina Health Systems,

Inc., 190 F.3d 881, 887-88 (8 Cir. 1999); Maxa v. John Alden Life th

Ins. Co., 972 F.2d 980, 984 (8 Cir. 1992), cert. denied, 506 U.S. th

1080 (1993). Specifically, if a Plan beneficiary relies on the SPD

terms for payment of benefits, the SPD terms will prevail. Unlike

the current situation, where the Plan’s terms–or rather the absence

of terms–are more favorable to the employee, the Plan terms prevail.

Additionally, we conclude the SPD does not amend the Plan. The

Wrap Document clearly states how the Plan is to be amended:

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

Board of Directors of the Company, receiving its approval,

then communicating the amendments along with the effective

date of such amendments to Participants. The purchase of

an insurance policy, by either the Company or Plan

Administrator, to provide Plan benefits, even though

constituting part of the formal plan document, may be done

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without compliance with the amendment procedure of this

Section . . . if the benefit is properly listed on

Appendix A as a Welfare Program. Similarly, an insurance

policy providing Plan benefits may be modified by the

policy (the Plan Administrator on behalf of the Plan or

the Company, as the case may be) without compliance with

the amendment procedure of this Section. . . . 

(Doc. 33, Wrap Document, pp. 9-10.) There is no evidence that the

SPD reimbursement provision was added to the Plan through the Plan’s

amendment procedures. Therefore, the reimbursement provision could

not amend the Plan. See Cossey, 363 F. Supp. 2d at 1136-37 (citing

Grosz-Salomon v. Paul Revere Life Insurance Co., 237 F.3d 1154,

1161-62 (9 Cir. 2001) (holding that SPD provision granting th

discretionary authority to the plan administrator is invalid because

the term was not part of the policy and did not amend the policy in

conformance with the policy’s amendment provisions); Shaw v.

Connecticut General Life Insurance Co., 353 F.3d 1276, 1282-84 (11th

Cir. 2003) (same); Ludlow v. ADVO-Systems, Inc. Disability Income

Plan, 2004 U.S. Dist. LEXIS 16811, No. 03-4964 MMC, 2004 WL 1844843

at *3-4 (N.D. Cal. Aug. 18, 2004) (holding that SPD provision

requiring claimant to present her administrative appeal within 60

days of the claim denial was invalid); Shultz v. Stoner, 308 F.

Supp. 2d 289, 307 (S.D.N.Y. 2004) (“To hold categorically that an

SPD which may well narrow the plans’ original participation

provisions supersedes the official plan text to the extent there is

a conflict would be to permit plan sponsors and fiduciaries to

escape obligations undertaken in duly adopted plans by the simple

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expedient of disseminating more restrictive SPDs. Such a result

would be entirely inconsistent with ERISA’s requirements that SPDs

be accurate and that plans be administered in accordance with their

terms, including compliance with amendment procedures.”)).

The Administrative Committee’s treatment of the SPD as part of

the Plan was unreasonable in that it was contrary to the Plan’s

clear language, as the Plan does not contain a reimbursement

provision and the SPD reimbursement provision failed to amend the

Plan. Therefore, the Administrative Committee’s decision that

reimbursement is required under the Plan was an abuse of discretion.

Plaintiff’s Motion to Affirm the Decision of the Administrative

Committee is DENIED.

IV. Conclusion

Based on the foregoing and upon due consideration, Plaintiff’s

Motion to Affirm the Decision of the Administrative Committee is

DENIED and Plaintiff’s Complaint is DISMISSED WITH PREJUDICE. The

preliminary injunction on the disputed funds is hereby lifted. 

WHEREFORE, before entry of a final judgment in this case,

Defendants are directed to file a motion for attorney’s fees before

February 21, 2006. The Plaintiff will have ten days to file its

response.

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IT IS SO ORDERED this 7 day of February 2006. th

 /S/ Robert T. Dawson 

Robert T. Dawson

United States District Judge

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