Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_07-cv-05849/USCOURTS-cand-4_07-cv-05849-0/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

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

BOARD OF TRUSTEES for the LABORERS

HEALTH AND WELFARE TRUST FUND FOR

NORTHERN CALIFORNIA,

Plaintiff,

 v.

JEANNE L. HILL,

Defendant. /

No. C 07-05849 CW

ORDER GRANTING IN

PART AND DENYING IN

PART DEFENDANT’S

MOTION TO DISMISS

Defendant Jeanne L. Hill moves to dismiss the complaint in its

entirety. Plaintiff Board of Trustees for the Laborers Health and

Welfare Trust Fund for Northern California opposes Defendant’s

motion. The matter was taken under submission on the papers. 

Having considered all of the materials submitted by the parties,

the Court grants Defendant’s motion in part and denies it in part.

BACKGROUND

Plaintiff oversees the Laborers Health and Welfare Trust Fund

(the Fund), which finances an employee benefit plan (the Plan) in

which Defendant was a participant at all relevant times. On or

about December 10, 2002, Defendant underwent a surgical procedure. 

Just over two weeks later, Defendant underwent a second surgical

Case 4:07-cv-05849-CW Document 9 Filed 01/28/08 Page 1 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1The facts in this paragraph are not contained in the

complaint, which alleges simply that Defendant “is actively

pursuing, or has received a monetary recovery in connection with, a

lawsuit against one or more third parties for personal injuries

2

procedure due to complications arising from the first surgery. 

Pursuant to the Plan, the Fund paid “no less than” $167,767 on

Defendant’s behalf as benefits for healthcare costs incurred in

connection with the second surgery. The Plan provides that these

benefits were subject to the following conditions:

If an Eligible Individual has an illness, injury, disease

or other condition for which a third party may be liable

or legally responsible by reason of an act or omission,

or insurance coverage of such third party, the Fund will

have an automatic lien upon any recovery against the

third party for benefits paid by the Fund as a result of

such illness, injury, disease or other condition. All

Eligible Individuals, as a condition precedent to

entitlement to benefits from the Fund, must agree in

writing to reimburse the Fund for any payments made by

the Fund on account of hospital, medical or other

expenses in connection with, or arising out of, that

injury, illness, disease or other condition. The

reimbursement will be made out of any proceeds received

by way of judgment, arbitration award, settlement or

otherwise in connection with, or arising out of, any

claim for a right to damages by the Eligible Individual

against the third party, his insurance carrier, guarantor

or other indemnitor, or by reason of uninsured or

under-insured motorist coverage of the Eligible

Individual, or any other source of third party recovery. 

The agreement will require all Eligible Individuals to

prosecute the claim for damages diligently; to give

priority to the reimbursement of the Fund in the

allocation of the proceeds of any recovery, to cooperate

and assist the fund [sic] in obtaining reimbursement for

the payments, to execute any documents necessary to

secure reimbursement; and to refrain from any act or

omission that might hinder such reimbursement, and may

contain any other provision as the Fund may reasonably

require.

Compl. ¶ 11 (emphasis added).

Defendant sued the doctor who performed the first surgery for

medical malpractice.1 She settled this lawsuit for $230,000, an

Case 4:07-cv-05849-CW Document 9 Filed 01/28/08 Page 2 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

sustained as a result of the Second Surgery.” Compl. ¶ 15. 

However, the Court includes these additional facts here to provide

a fuller explanation of the underlying events. They are not

necessary to the Court’s holding.

2

Defendant claims to have incurred almost $400,000 in

healthcare costs. However, it is not clear what portion, if any,

of this sum Defendant paid out-of-pocket.

3

amount which she claims represents compensation exclusively for her

pain and suffering and lost wages.2 She has not reimbursed the

Fund for the sum it paid toward her medical expenses because,

according to her, the settlement did not include compensation for

medical costs.

Plaintiff claims that, pursuant to the Plan, the Fund has a

lien on Defendant’s settlement proceeds, and it demands

reimbursement. Plaintiff first sued Defendant in state court

alleging breach of contract. The trial court found that it had

subject matter jurisdiction over the action, and granted summary

judgment against Plaintiff on the merits of its claim. On appeal,

however, the California Court of Appeal held that Plaintiff’s

state-law contract claim was preempted by the Employee Retirement

Income Security Act (ERISA), and thus the trial court lacked

subject matter jurisdiction over the action. The appeals court

vacated the lower court’s judgment and dismissed the case. Totten

v. Hill, 154 Cal. App. 4th 40, 54 (2007).

Plaintiff subsequently brought the present lawsuit. In its

complaint, Plaintiff asserts three causes of action against

Defendant: 1) equitable restitution under § 502(a)(3) of ERISA, 29

U.S.C. § 1132(a)(3), for Defendant’s violation of the Plan’s terms;

2) imposition of a constructive trust; and 3) unjust enrichment.

Case 4:07-cv-05849-CW Document 9 Filed 01/28/08 Page 3 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 4

LEGAL STANDARD

A complaint must contain a “short and plain statement of the

claim showing that the pleader is entitled to relief.” Fed. R.

Civ. P. 8(a). When considering a motion to dismiss under Rule

12(b)(6) for failure to state a claim, dismissal is appropriate

only when the complaint does not give the defendant fair notice of

a legally cognizable claim and the grounds on which it rests. See

Bell Atl. Corp. v. Twombly, __ U.S. __, 127 S. Ct. 1955, 1964

(2007).

In considering whether the complaint is sufficient to state a

claim, the court will take all material allegations as true and

construe them in the light most favorable to the plaintiff. NL

Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). 

Although the court is generally confined to consideration of the

allegations in the pleadings, it may take judicial notice of facts

not reasonably subject to dispute, either because they are

generally known, are matters of public record or are capable of

accurate and ready determination. See Intri-Plex Techs., Inc. v.

Crest Group, Inc., 499 F.3d 1048, 1052 (9th Cir. 2007). However,

“[o]n a Rule 12(b)(6) motion to dismiss, when a court takes

judicial notice of another court’s opinion, it may do so ‘not for

the truth of the facts recited therein, but for the existence of

the opinion, which is not subject to reasonable dispute over its

authenticity.’” Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th

Cir. 2001) (quoting S. Cross Overseas Agencies, Inc. v. Wah Kwong

Shipping Group Ltd., 181 F.3d 410, 426-27 (3rd Cir. 1999)).

When granting a motion to dismiss, the court is generally

Case 4:07-cv-05849-CW Document 9 Filed 01/28/08 Page 4 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 5

required to grant the plaintiff leave to amend, even if no request

to amend the pleading was made, unless amendment would be futile. 

Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911

F.2d 242, 246-47 (9th Cir. 1990). In determining whether amendment

would be futile, the court examines whether the complaint could be

amended to cure the defect requiring dismissal “without

contradicting any of the allegations of [the] original complaint.” 

Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990). 

Leave to amend should be liberally granted, but an amended

complaint cannot allege facts inconsistent with the challenged

pleading. Id. at 296-97.

DISCUSSION

I. Plaintiff’s ERISA Claim

Defendant argues that the “make-whole” doctrine bars

Plaintiff’s ERISA claim. Pursuant to this federal common law rule,

“absent an agreement to the contrary, an insurance company may not

enforce a right to subrogation until the insured has been fully

compensated for her injuries, that is, has been made whole.” 

Barnes v. Indep. Auto. Dealers Ass’n of Cal. Health and Welfare

Benefit Plan, 64 F.3d 1389, 1394 (9th Cir. 1995). The Barnes court

defined subrogation as “the insurer’s right to be put in the

position of the insured, in order to recover from third parties who

are legally responsible to the insured for a loss paid by the

insurer.” While the make-whole rule protects the insured, it “does

not permit an insured to recover from the tort-feasor and from her

insurance company if the recovery would exceed the damages.” Id.

at 1395. Thus, “[i]f the insurer paid the insured the full amount

Case 4:07-cv-05849-CW Document 9 Filed 01/28/08 Page 5 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 6

of his claim and the insured then recovers from the third party,

the insured must reimburse the insurer any amount recovered in

excess of his own claim.” Id. at 1392.

The make-whole doctrine is a federal common-law rule of

contract interpretation. It is a “gap-filler” that applies only if

the contract’s subrogation clause is silent with respect to the

insured’s right to be made whole before the insurer may obtain

reimbursement for benefits paid. Thus, the parties may abrogate

the make-whole rule by providing that the insurer has “the right of

first reimbursement out of any recovery the insured [is] able to

obtain, even if [the insured is] not made whole.” Id. at 1395.

Here, the Plan provides that, if a third party is liable for

the participant’s injury, the Fund “will have an automatic lien

upon any recovery against the third party for benefits paid,” and

that reimbursement for benefits paid “will be made out of any

proceeds received by way of . . . settlement.” Compl. ¶ 11

(emphasis added). It also provides that Plan participants must

“give priority to the reimbursement of the Fund in the allocation

of the proceeds of any recovery.” Id. (emphasis added). While the

Plan does not expressly refer to the make-whole doctrine, its plain

language, particularly the provision requiring participants to give

priority to the Fund’s reimbursement out of any settlement

proceeds, indicates that participants have waived their right to be

made whole. Cf. Moore v. CapitalCare, Inc., 461 F.3d 1, 10 (D.C.

Cir. 2006) (make-whole doctrine was abrogated where plan provided,

“Participant shall pay the Corporation all amounts recovered by

suit, settlement, or otherwise from any third party or his insurer

Case 4:07-cv-05849-CW Document 9 Filed 01/28/08 Page 6 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3Defendant correctly notes that the Plan refers to an

apparently separate agreement, to which participants “must agree in

writing” as “a condition precedent to entitlement to benefits from

the Fund.” The Plan appears to ground the Fund’s priority rights

in that separate agreement, not in the Plan itself. Whether

Defendant signed such an agreement is not clear from the complaint. 

If a fuller record demonstrates that no such agreement exists,

Defendant may be able to move for summary judgment on this basis.

7

to the extent of the benefits provided by this Contract”).3

None of the cases Defendant cites in support of her motion

persuade the Court to reach a different conclusion. In Barnes, the

only case cited by the parties that is binding precedent, the Ninth

Circuit considered a subrogation clause that provided:

This plan may withhold payment of benefits when a party

other than the employee or dependent may be liable for

expenses until liability is legally determined. However,

if this plan makes payment which the employee, dependent

or any other party is or may be entitled to recover

against any person or organization responsible for an

accident or illness, this Plan is subrogated to all

rights of recovery to the extent of its payment. The

employee, dependent, or other person or organization

receiving payment from this Plan shall execute and

deliver instruments and papers and do whatever else is

necessary to secure such rights to the Plan, and shall do

nothing either before or after payment by the Plan to

prejudice such rights.

64 F.3d at 1393 (emphasis in Barnes). Crucially, the insurer had

neither assisted the participant in obtaining recovery from the

third party nor paid the participant any benefits under the plan --

the lawsuit was brought by the participant to obtain these

benefits. Because the Barnes plan’s clear language indicated that

the insurer’s right to subrogation arose only after it made payment

to the insured, the insurer in Barnes had no right to subrogation

at all, regardless of whether the make-whole doctrine would have

applied if it had made such a payment. Id. Here, in contrast, the

Case 4:07-cv-05849-CW Document 9 Filed 01/28/08 Page 7 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 8

Plan contains no conditional language comparable to that in Barnes

and, in any event, the Fund paid benefits to Defendant.

The Barnes court also addressed the significance of the plan’s

reference to “all rights of recovery.” The court noted, “It is

true that courts have upheld findings that a reference in a

subrogation clause to ‘any’ or ‘all’ rights of recovery overrides

the [make-whole] rule.” Id. at 1396 (citing Fields v. Farmers

Ins., Co. Inc., 18 F.3d 831, 835-36 (10th Cir. 1994); Cutting v.

Jerome Foods, Inc., 993 F.2d 1293, 1299 (7th Cir. 1993)). However,

the court distinguished these cases, as well as other state court

cases, on the basis that the insurer in those cases had already

paid benefits and, in some instances, had helped the insured pursue

his or her claims against the third party. Barnes, 64 F.3d at

1396. The court concluded that “when the insurance company makes

no payment to the injured insured for covered expenses, and places

all the cost and risk of seeking recovery from a third party on the

injured insured, the make-whole rule remains in place despite the

‘all rights’ language in the contract.” Id.

Here, unlike in Barnes, the Fund paid Defendant benefits due

under the Plan. In addition, the Plan language is significantly

more specific than the “all rights” language in Barnes. The Plan

gives the Fund an “automatic lien” on “any proceeds,” requiring

participants to give “a priority to the Fund’s reimbursement” from

the proceeds.

Defendant cites Cagle v. Bruner, 112 F.3d 1510 (11th Cir.

1997), in support of her position. In that case, the court

addressed a subrogation clause that gave the insurer:

Case 4:07-cv-05849-CW Document 9 Filed 01/28/08 Page 8 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

Likewise, the Plan language is more specific than that at

issue in a district court case cited by Defendant, Providence

Health System-Washington v. Bush, 461 F. Supp. 2d 1226 (W.D. Wash.

2006). There, the court held that the make-whole doctrine was not

displaced by plan language stating, “If someone else is legally

responsible or agrees to compensate you for injuries suffered,

. . . you will need to reimburse the plan for up to 100% of any

benefits the plan paid in connection with those injuries.” Id. at

1234.

9

the right to seek repayment from [a responsible third]

party or his insurance company, or in the event [the plan

participant] or [his] dependent recovers the amount of

medical expense paid by the Fund by suit, settlement or

otherwise from any third person or his insurer, . . . the

right to be reimbursed therefor through subrogation.

Id. at 1521 (ellipsis in Cagle). The court held that the clause

contains “standard subrogation language, which we think does not

demonstrate a specific rejection of the make whole doctrine.” Id.

Here, in contrast, the Plan does not simply give the Fund a general

“right to be reimbursed” from funds recovered by the participant. 

As discussed above, it is more specific in detailing the rights of

the Fund: the Fund has an “automatic lien upon any recovery”

obtained by the participant, as well as a priority in the

allocation of the proceeds.4

It is true that the Cagle court stated, “An ERISA plan

overrides the make whole doctrine only if it includes language

specifically allowing the Plan the right of first reimbursement out

of any recovery the participant was able to obtain even if the

participant were not made whole.” Id. at 1522. However, this

Court does not interpret this statement to require that, in order

to displace the make-whole doctrine, a plan must use the specific

phrase, “even if the participant were not made whole.” In any

event, Barnes does not suggest that courts should take such a

Case 4:07-cv-05849-CW Document 9 Filed 01/28/08 Page 9 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 10

restrictive approach to contract interpretation. The language in

the Plan is sufficiently clear to demonstrate that participants are

required to reimburse the Fund from settlement proceeds, even if

the proceeds did not make them whole.

In Copeland Oaks v. Haupt, 209 F.3d 811 (6th Cir. 2000), the

court addressed a plan provision that read:

The Covered Person agrees to recognize the Plan’s right

to subrogation and reimbursement. These rights provide

the Plan with a priority over any funds paid by a third

party to a Covered Person relative to the Injury or

Sickness, including a priority over any claim for

non-medical or dental charges, attorney fees, or other

costs and expenses.

Id. at 813 (emphasis in plan). The Sixth Circuit found this

language insufficient to displace the make-whole rule. It held

that, “in order for plan language to conclusively disavow the

default rule, it must be specific and clear in establishing both a

priority to the funds recovered and a right to any full or partial

recovery.” Id. (emphasis in original). Because the plan provision

did not explicitly establish its priority over funds obtained in a

partial recovery, the court found that the make-whole rule applied.

If Copeland Oaks had been decided by the Ninth Circuit, it

would likely dictate that the make-whole rule applies to the

present case, because the Plan does not specifically refer to the

possibility of partial recovery. However, Copeland Oaks is not

binding on this Court, and the Court declines to adopt a rule that

would require a plan to use specific “magic words” in order to

displace the make-whole doctrine. Barnes does not contemplate such

an approach, and the Plan here unambiguously gives the Fund

priority to and an automatic lien on the settlement funds recovered

Case 4:07-cv-05849-CW Document 9 Filed 01/28/08 Page 10 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5The Court notes that, even if the make-whole rule applied,

Defendant still would not be entitled to dismissal at this stage of

the litigation. On this motion to dismiss, the Court may not

consider matters outside the pleadings, and the complaint in this

case does not detail the nature or amount of Defendant’s recovery. 

Thus, there is a factual issue concerning whether Plaintiff was

made whole by the settlement. Nor can the Court turn to the

decision in the parties’ state-court lawsuit as a source of

supplemental facts. Even though certain of those facts may not be

in dispute, the Court may take judicial notice only of the

existence of other court decisions, not of the facts contained

therein. Lee, 250 F.3d at 690.

11

by Defendant. The Court is constrained to give the Plan’s language

its plain meaning, and Defendant’s motion to dismiss Plaintiff’s

ERISA claim is therefore denied.5

II. Plaintiff’s Other Claims

Defendant also moves to dismiss Plaintiff’s causes of action

for unjust enrichment and imposition of a constructive trust. 

Under ERISA, a civil action may be brought “by a 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). In

Pacificare Inc. v. Martin, 34 F.3d 834, 836 (9th Cir. 1994), the

Ninth Circuit held that, absent a claim brought under § 1132(a)(3),

ERSIA does not permit a plaintiff to assert an independent federal

common law cause of action, such as unjust enrichment, to enforce

the terms of an ERISA plan.

Thus, to the extent Plaintiff’s third cause of action for

unjust enrichment is brought pursuant to a federal common law

right, it must be dismissed. In addition, imposition of a

Case 4:07-cv-05849-CW Document 9 Filed 01/28/08 Page 11 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6In any event, Plaintiff is not prejudiced by this dismissal

because the substantive aspect of its third cause of action and the

relief requested in its second cause of action are incorporated

into its first cause of action.

12

constructive trust is appropriately characterized as a remedy, not

an independent cause of action. Thus, this cause of action must be

dismissed as well. However, the Court construes the complaint as

properly asserting an ERISA claim under § 1132(a)(3) based on a

theory that Defendant would be unjustly enriched if the Plan were

not enforced, and seeking either restitution or imposition of a

constructive trust as an equitable remedy for such unjust

enrichment. Plaintiff may proceed with this claim. See id. at

837-38; Chitikin v. Lincoln Nat’l Ins. Co., 879 F. Supp. 841, 851-

53 (S.D. Cal. 1995).

CONCLUSION

For the foregoing reasons, Defendant’s motion to dismiss is

GRANTED IN PART and DENIED IN PART. Plaintiff’s second and third

causes of action are dismissed. This dismissal is with prejudice

because these claims are barred by law, and thus amendment would be

futile.6 Plaintiff may proceed on its ERISA claim for equitable

relief under 29 U.S.C. § 1132(c)(3). The hearing currently

scheduled for January 31, 2008 is VACATED.

IT IS SO ORDERED.

Dated: 1/28/08 

CLAUDIA WILKEN

United States District Judge

Case 4:07-cv-05849-CW Document 9 Filed 01/28/08 Page 12 of 12