2011 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

9-16-2011

Board of Trustees Plumbers v. Richard Drew

Precedential or Non-Precedential: Non-Precedential

Docket No. 10-4367

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2011

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 2011 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

Recommended Citation

"Board of Trustees Plumbers v. Richard Drew" (2011). 2011 Decisions. Paper 523.

http://digitalcommons.law.villanova.edu/thirdcircuit_2011/523
NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 10-4367

_____________

BOARD OF TRUSTEES OF PLUMBERS & PIPEFITTERS LOCAL 

UNION NO. 9 WELFARE FUND,

 

v.

RICHARD DREW,

 Appellant

_______________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 09-cv-05069)

District Judge: Hon. Garrett E. Brown, Jr.

_______________

Submitted Under Third Circuit L.A.R. 34.1(a)

September 15, 2011

Before: RENDELL, JORDAN and BARRY, Circuit Judges.

(Filed: September 16, 2011 )

_______________

OPINION OF THE COURT

_______________
2

JORDAN, Circuit Judge.

Richard Drew appeals the October 22, 2010 order of the United States District 

Court for the District of New Jersey granting summary judgment for the Board of 

Trustees of Plumbers & Pipefitters Local Union No. 9 Welfare Fund (the “Board”), the 

sponsor and fiduciary of the Plumbers & Pipefitters Local Union No. 9 Welfare Fund (the 

“Fund”), on its equitable claim for reimbursement pursuant to § 502(a)(3) of the

Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, 29 U.S.C. 

§ 1132(a)(3) (“§ 502(a)(3)”). The reimbursement claim1arose from medical expenses

that the Fund paid for Drew‟s treatment for injuries he suffered in a traffic accident. For 

the reasons that follow, we will vacate the grant of summary judgment and remand the 

case for further consideration consistent with this opinion.

I. Background2

A. The ERISA Plan

At all times relevant to this appeal, Drew was a participant in the Fund,3 which is a 

Federal, tax-exempt, “multiemployer plan,” as defined in 29 U.S.C. § 1002(37)(A), and a 

 

1

Though the initial claim for equitable reimbursement was made by the plan 

administrator of the Fund on behalf of the Board, it is now being advanced by the Board. 

As do the parties, we will refer to the claim as being made by and in the name of the 

Fund.

2 Because we are reviewing a grant of summary judgment, we recount the facts in 

the light most favorable to the non-movant, Drew. 

3

To be a participant is to be “any employee or former employee of an employer 

... who is or may become eligible to receive a benefit of any type from an employee 

benefit plan which covers employees of such employer....” 29 U.S.C. § 1002(7). 
3

self-funded, “employee welfare benefit plan,” as defined in 29 U.S.C. § 1002(1). The 

terms and conditions governing the Fund are described in a booklet known as the Plan 

and Summary Plan Description (the “SPD”). Generally, the SPD provides Fund 

participants with information pertaining to the Fund benefits, as well as certain rules and 

regulations that apply to the Fund. Among other things, the SPD provides that the Fund 

has a right to reimbursement and subrogation against a Fund participant when the 

participant receives money from a third party to compensate for personal injury or illness 

for which the Fund has already paid some compensation to the participant. The pertinent

clause in the SPD (the “Reimbursement Clause”) states that:

If the Fund pays benefits to or on behalf of a Participant ... arising out of 

any event for which the Participant files, or has the right to file, a claim for 

medical benefits payable under any Workers‟ Compensation or similar 

statute or a legal action to recover damages for personal injury or illness, 

the Participant shall notify the Fund of such claim or action and the Fund 

shall be entitled to reimbursement from any payment made as a result of 

such claim or action to the full extent of the benefits paid out by the Fund.

At the time of filing a claim for benefits under the Plan, the Participant ... 

shall execute a Repayment Agreement which fully implements the intent of 

[the paragraph] above. 

(App. at 42.)

B. The Accident and Settled Claims

On September 18, 2001, Drew sustained various injuries in an automobile 

accident. Between September 21, 2001, and January 21, 2009, the Fund paid 

$181,579.61 to Drew for medical expenses related to those injuries. Since the at-fault 

driver in the accident carried minimal insurance coverage, Drew only received $10,000 

from that driver‟s liability policy. Consequently, Drew filed a claim for uninsured
4

motorist (“UIM”) benefits.4 He later settled his UIM claim for $900,000.

5

 From the 

UIM settlement proceeds, Drew‟s attorney deposited the total of the amounts that the 

Fund had previously paid to Drew, the $181,579.61, into a trust account, where it 

remains. 

C. The Repayment Agreements and Addendum

Prior to the UIM settlement, the Fund asked Drew to execute a form Repayment 

Agreement (the “Agreement”) in connection with the medical expenses paid to Drew by 

the Fund. The Agreement, which is referenced in the Reimbursement Clause, provides 

that the Fund participant:

Agree[s] that with respect to any payments received by [the participant] or 

on [the participant‟s] behalf of any kind, which shall include payment for 

“pain and suffering” by way of either judgement [sic] or settlement arising 

out of said claim, [the participant] shall repay the Fund for all payments 

made to [the participant] or on [the participant‟s] behalf, arising out of or 

relating to the aforesaid claim. 

 

4 Drew notified both his employer‟s insurer and his own auto insurer that he would 

pursue claims for UIM benefits under their respective policies. Each insurer denied 

primary liability on the claim and litigated the issue by way of a declaratory judgment 

action, which was ultimately settled by the parties and dismissed on May 24, 2004. 

5

The claims director who settled Drew‟s UIM claim wrote a letter dated February 

19, 2009, regarding the basis of the settlement amount. That letter reads: 

The claim for reimbursement was brought to my attention and taken into 

consideration as a part of the overall assement [sic] of Mr. Drews [sic] total 

injury and disability. The overall settlement was based upon the years of 

pain and suffering Mr. Drew has and will in the future continue to endure 

as well as the vast physical limitations he has and will continue to have on a 

permanent basis.

(App at 570.)
5

(App. at 43.) Rather than sign the Agreement, however, Drew, through his 

counsel, modified it to state that his repayment obligation was limited to payments

he received by judgment or settlement for medical bills. As modified, the

Agreement provided that the Fund participant:

Agree[s] that with respect to any payments received by [the participant] for 

medical bills which shall include UIM claims made by way of either 

judgement [sic] or settlement arising out of said claim, [the participant] 

shall repay the Fund for all payments made to [the participant] or on [the 

participant‟s] behalf, arising out of or relating to the aforesaid claim. 

(App. at 46.) Thus, the modified Agreement replaced the phrase “or on [the 

participant‟s] behalf of any kind, which shall include payment for „pain and suffering‟” 

with “for medical bills which shall include UIM claims made.” (App. at 43.) The 

modified Agreement bore the typewritten date of July 15, 2002. When Drew signed the 

modified Agreement, he dated it July 18, 2002. The record does not reflect that the 

modifications to the Agreement were ever adopted or otherwise acknowledged by the 

Fund, although Drew claims in his briefing before us, as well as in the Rule 56.1 

Statement of Material Facts Not in Dispute that he submitted to the District Court, that 

they were negotiated with the Fund. (App. at 518 ¶ 14.) The Fund contends on appeal, 

as well as in its Rule 56.1 Statement of Material Facts Not in Dispute, that it would not 

accept the modified Agreement. (App. at 102 ¶ 21.) 

The Fund also required Drew and his attorney to sign a document titled 

Addendum to Repayment Agreement (the “Addendum”), which he did on July 18, 2002. 

The portion he signed reads:
6

I, RICHARD DREW, participant, hereby agree to have a lien placed on my 

file for all actions taken as a result of my September 18, 2001, accident and 

I acknowledge my responsibility to give full force and effect to the 

Subrogation Rights as per the attached pertinent section of the Fund‟s Rules 

and Regulations. 

(App. at 48.) 

A few days later, on July 22, 2002, Drew‟s attorney signed the Addendum. The 

portion of the Addendum signed by Drew‟s attorney reads:

I ... am the legal representative for the participant and do hereby 

acknowledge that I have placed a lien on Mr. Drew‟s file and acknowledge 

that we shall have an affirmative duty to assert the Fund‟s medical lien and 

we shall be required to show proof to the Fund that said medical lien was 

fully protected. 

(App. at 48.) 

To date, Drew has not reimbursed the Fund for what it paid for his medical 

expenses. 

D. Proceedings in the District Court

Ultimately, the Board filed suit to recover that $181,579.61. The Board and Drew 

filed cross motions for summary judgment,

6

and the District Court granted summary 

judgment to the Fund. The Court held that it had subject matter jurisdiction under 

Sereboff v. Mid Atlantic Medical Services, 547 U.S. 356 (2006), that the Fund‟s claim 

was equitable and enforceable under Sereboff, that certain aspects of New Jersey‟s auto 

insurance and collateral source statutes were preempted by ERISA, and that the

provisions of the SPD, of the Agreement, and of the Addendum were unambiguous and 

supported the Fund‟s reimbursement claim. Regarding the modifications to the

 

6 Drew filed a motion to dismiss, or in the alternative, for summary judgment. 
7

Agreement, the District Court held that they were nullified by Drew‟s execution of the 

Addendum. The District Court rejected Drew‟s argument that the SPD did not establish a 

right to reimbursement. Based on the Court‟s conclusion that the relevant Fund language 

was unambiguous, it also rejected Drew‟s argument that the “make whole” rule7should 

apply and prevent the Fund from receiving any recovery.

Drew timely appealed. 

II. Discussion8

“Summary judgment is proper if there is no genuine issue of material fact and if, 

viewing the facts in the light most favorable to the non-moving party, the moving party is 

entitled to judgment as a matter of law.” Smathers v. Multi-Tool, Inc./Multi-Plastics, Inc. 

Emp. Health & Welfare Plan, 298 F.3d 191, 194 (3d Cir. 2002). Applying that standard, 

we exercise plenary review of the District Court‟s grant of summary judgment. Id.

On appeal, Drew contends that the District Court erred in (i) determining that the 

Fund had a claim for “appropriate equitable relief” under ERISA against the settlement 

funds held in the escrow account; (ii) determining that certain aspects of New Jersey‟s 

auto insurance and collateral source statute were preempted by ERISA; and (iii) failing to 

give effect to the modifications made to the Agreement in resolving whether an 

ambiguity existed among the operative documents governing reimbursement. While we 

 

7

The “make whole” rule is an equitable principle which provides that “a plan 

participant has no duty to reimburse a plan until that person has been „made whole,‟ i.e. 

been fully compensated for all injuries sustained.” Bill Gray Enters. v. Gourley, 248 F.3d 

206, 220 n.13 (3d Cir. 2001).

8

The District Court had jurisdiction pursuant to 28 U.S.C. § 1331 and 29 U.S.C. 

§ 1132(e)(1). We have jurisdiction pursuant to 28 U.S.C. § 1291.
8

disagree with Drew on the first two contentions, we agree that there is a genuine issue of 

material fact as to the last contention.

A. Right to Reimbursement Under ERISA

Drew argues that the District Court erred in its analysis of the factors necessary to 

support a claim for “appropriate equitable relief” under ERISA. Under § 502(a)(3), a 

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). However, a fiduciary may 

only seek relief under § 502(a)(3) if the relief sought falls within “those categories of 

relief that were typically available in equity,” Sereboff, 547 U.S. at 361 (internal

quotation marks omitted) (emphasis original), and “the basis for its claim is equitable.” 

Id. at 363. When a plan governed by ERISA seeks “to impose a constructive trust or 

equitable lien on „particular funds or property in the defendant‟s possession,‟” id. at 362 

(citing Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 213 (2002)), it 

seeks relief of a type based in equity and that has typically been available in equity. Id. 

at 363-64.

The District Court correctly determined that the Fund is seeking equitable relief in 

the form of a constructive trust or equitable lien on the settlement funds held in the

escrow account maintained by Drew‟s attorney. Thus, the Fund is seeking “its recovery 

through a constructive trust or equitable lien on a specifically identified fund, not from 

the [participant‟s] assets generally....” Sereboff, 547 U.S. at 363. Because the Fund
9

seeks such equitable relief, and not personal liability against Drew, the relief qualifies as

restitution under § 502(a)(3). Cf. Funk v. CIGNA Grp. Ins., No. 10-3936, 2011 WL 

3332669 (3d Cir. Aug. 4, 2011) (holding that plan was entitled to equitable relief under § 

502(a)(3) to recover a plan participant‟s Social Security benefits that were deemed 

overpayments under the plan‟s reimbursement provisions and two reimbursement 

agreements executed by the plan participant).

B. Preemption

Drew also contends that the District Court erred when it held that New Jersey‟s 

auto insurance statute, N.J. STAT. ANN. § 39:6A-1 et seq., and collateral source statute, 

N.J. STAT. ANN. § 2A:15-97, are in certain circumstances preempted by ERISA. Drew

argues that those state statutes limit his recovery in his own personal injury claim by 

precluding tort liability for medical expense claims and expressly prohibiting his 

recovery for any loss otherwise compensated by way of a collateral source of benefits. 

As Drew sees it, the Fund has already paid for his medical expenses and, therefore, no 

portion of his settlement can – under state law – be characterized as compensation for 

medical expenses. He goes on to conclude that the Fund cannot satisfy its equitable 

claim for reimbursement of medical expenses by seeking money from settlement funds

that, by state law definition, are meant to make him whole for losses besides medical 

expense. 

We agree with the District Court that those contentions cannot withstand close 

scrutiny. ERISA contains an express preemption clause, 29 U.S.C. § 1144(a), which we 

interpret broadly. Gourley, 248 F.3d at 212. That clause provides that, “[e]xcept as 
10

provided in ... [ERISA‟s savings clause], the provisions of this subchapter [] shall 

supersede any and all State laws insofar as they may now or hereafter relate to any 

employee benefit plan... .” 29 U.S.C. § 1144(a). The “savings clause” referenced in 

that preemption clause is found at 29 U.S.C. § 1144(b)(2)(A) and says that, in general, a 

state law will not be preempted if it “regulates insurance.”

9

In yet another ERISA clause, 

however, one known as the “deemer clause,” there is an important caveat to the savings 

clause. It says, in essence, that states cannot regulate self-funded ERISA plans under the 

guise of regulating insurance.10 

In short, ERISA‟s deemer clause “exempt[s] certain employee benefit plans from 

the reach of state laws otherwise saved from preemption under the savings clause.” 

Levine, 402 F.3d at 164 n.11. The Supreme Court has “read the deemer clause to exempt

self-funded ERISA plans from state laws that „regulate insurance‟ within the meaning of 

the savings clause.” Gourley, 248 F.3d at 213 (quoting FMC Corp. v. Holliday, 498 U.S. 

52, 61 (1990)). The Fund is a self-funded ERISA plan, and it is, accordingly, beyond the 

reach of the state laws Drew cites. More specifically, New Jersey‟s collateral source 

statute is preempted by ERISA‟s explicit preemption clause because it “relates to” an 

 

9

“[F]or a „state law to be deemed a law ... which regulates insurance,‟” it must (1) 

“be „specifically directed towards entities engaged in insurance‟” and (2) “„substantially 

affect the risk pooling arrangement between the insurer and the insured.‟” Levine v. 

United Healthcare Corp., 402 F.3d 156, 164 n.11 (3d Cir. 2005) (citing Kentucky Ass’n. 

of Health Plans Inc. v. Miller, 538 U.S. 329, 341-42 (2003)).

 

10 The deemer clause states that “[n]either an employee benefit plan ... nor any 

trust established under such a plan, shall be deemed to be an insurance company or ... to 

be engaged in the business of insurance ... for purposes of any law of any State 

purporting to regulate insurance companies....” 29 U.S.C. § 1144(b)(2)(B). 
11

ERISA plan and does not even purport to “regulate insurance” within the meaning of the 

savings clause. Levine, 402 F.3d at 166. As for New Jersey‟s automobile insurance 

statute, even assuming that it “regulate[s] insurance” in a way that would bring it within 

ERISA‟s savings clause, it is nevertheless of no effect in determining the meaning of the 

Fund‟s governing documents because, under the deemer clause, self-funded ERISA plans 

like the Fund are exempt from any state insurance regulation to the extent there is a 

conflict with ERISA. The District Court correctly understood that there would be such a 

conflict if New Jersey laws were applied as Drew urges, with state law dictating the 

recoverability of monies paid under an ERISA plan.

C. Reimbursement and Subrogation Language

After establishing that the Fund may seek restitution under § 502(a)(3), and that 

the New Jersey auto insurance and collateral source statutes do not limit the Fund‟s 

ability to seek restitution, we now turn to the question of whether summary judgment in 

favor of the Fund was proper. The answer depends upon whether there is ambiguity in 

the plan documents, specifically, ambiguity in the SPD, the modified Agreement, and the 

Addendum. 11

The standard under which a court reviews a plan administrator‟s interpretation of 

plan language has been described in various ways. Recently, the Supreme Court 

reviewed such actions under an abuse of discretion standard. See Metro. Life Ins. Co. v. 

Glenn, 554 U.S. 105, 115 (2008). Prior to Glenn, we reviewed such actions under an

 

11 The parties and the District Court assume, without discussion, that those three 

documents are part of the plan governing the Fund. We accept that assumption for 

purposes of our analysis.
12

arbitrary and capricious standard. See Estate of Schwing v. The Lilly Health Plan, 562 

F.3d 522, 526 n.2 (3d Cir. 2009). Since Glenn, in the ERISA context, we have treated the 

abuse of discretion standard and the arbitrary and capricious standard as functionally the 

same. See Estate of Schwing, 562 F.3d at 526 n.2 (noting that those two standards of 

review are “practically identical” in the ERISA context). Actions that are “reasonably 

consistent with unambiguous plan language are not arbitrary.” Funk, 2011 WL 3332669,

at *8 (quoting Gourley, 248 F.3d at 218). 

The District Court held that the reimbursement and subrogation statements in the

SPD, and in the form Agreement, and in the Addendum are all “essentially identical,” 

(App. at 15) and that, taken together, they are unambiguous. Furthermore, in granting 

summary judgment in favor of the Fund, the District Court reasoned that, “[r]egardless of 

whether [the Fund] agreed to th[e] modified language [in the Agreement] or not, this 

language was nullified by [Drew‟s] signing of the Addendum, which ... state[d] that he 

„acknowledge[d his] responsibility to give full force and effect to the Subrogation Rights 

as per the attached pertinent section of the Fund‟s Rules and Regulations.‟” (App. at 15-

16.)

Despite the District Court‟s explicit referencing of the modifications to the form 

Agreement, Drew contends that the Court simply discarded those modifications in 

analyzing whether the reimbursement language unambiguously supported the Fund‟s

claim for reimbursement. He argues that if the District Court had properly considered the 

Agreement as modified, it would have found an ambiguity between the relevant 

reimbursement provisions. The Fund responds that no ambiguity exists because it 
13

affirmatively rejected the modifications to the Agreement, and because the Addendum 

signed by Drew repeated and reinforced the Fund‟s right to reimbursement as provided in 

the SPD. 

While we cannot agree, as Drew implies, that the District Court ignored the 

modified Agreement, we do agree that it did not adequately address whether the 

modifications to the Agreement introduced an ambiguity into the question of Drew‟s 

repayment obligation. In particular, the District Court bypassed a significant factual 

dispute by failing to address whether the Fund manifested its assent to the modified 

Agreement and whether the modified Agreement was negotiated by the parties in 

connection with the signing of the Addendum. If, as events unfolded, the Fund 

effectively rejected Drew‟s effort to modify the form Agreement, then the Fund and the 

District Court are correct that the plan unambiguously gives the Fund the right to recoup 

the medical expenses it paid for Drew‟s treatment. But if, as Drew contends, the 

modifications to the Agreement were part of a negotiated deal on the respective rights of 

the parties, then the modifications were not overridden by the Addendum and there may 

be an ambiguity.12 

 

12 Moreover, we note that the Subrogation provision, the first paragraph of which 

the District Court quotes in concluding that the repayment obligation is not limited to 

medical bills (App. at 10), contains a second paragraph that states: “At the time of filing a 

claim for benefits under the Plan, the Participant shall execute a Repayment Agreement 

which fully implements the intent of (1) above.” The third paragraph also notes the 

importance of the execution of a Repayment Agreement. We leave it to the District Court 

in the first instance to decide whether these provisions further the ambiguity, or, perhaps, 

makes it unambiguous that the Repayment Agreement controls. (We also note, with 

some concern, that this important document was not included in the Appendix filed on 

appeal.)
14

If plan language is ambiguous, a plan administrator is authorized to interpret it, 

McElroy v. SmithKline Beecham Health & Welfare Benefits Trust Plan for U.S. Emps.

340 F.3d 139, 143 (3d Cir. 2003) (holding that plan administrator was authorized to 

interpret plan language that was “equivocal”), so long as “the plan administrator‟s 

interpretation of the document is reasonable.” Funk, 2011 WL 3332669, at *8 (quoting 

Gourley, 248 F.3d at 218). On remand, the District Court will need to determine how to 

resolve the factual dispute over the adoption or rejection of the modifications to the 

Agreement, and, further, whether the modified Agreement, if assented to by the Fund, 

introduced an ambiguity into the relevant documents. If an ambiguity exists, the District 

Court should analyze whether the Fund‟s interpretation of the relevant documents was 

reasonable, that is, whether it fell within the discretion of the plan administrator. 13

 

13 Additionally, if an ambiguity does exist, the District Court may also consider 

whether the “make whole” doctrine should apply. Drew contends that the District Court 

erred by not applying the “make whole” doctrine. This Circuit has been hesitant to adopt 

that federal common law doctrine. In rejecting the application of the “make whole”

doctrine, the Gourley Court stated that “importing federal common law doctrines to 

ERISA plan interpretation is generally inappropriate, particularly when the terms of an 

ERISA plan are clear and unambiguous.” Gourley, 248 F.3d at 220 n.13 (citing Bollman 

Hat Co. v. Root, 112 F.3d 113, 117 n.3 (3d Cir. 1997) (citing authorities)). Since the plan 

provision providing for reimbursement in Gourley was unambiguous, the Court declined 

to apply the “make whole” doctrine. 

At this point, we need not reach the issue of whether the “make whole” doctrine 

should apply here. On remand, if the District Court finds that the Fund affirmatively 

rejected the modified Agreement, and that no ambiguity exists, then the “make whole”

doctrine should not apply. If, however, the District Court finds that the Fund manifested 

its assent to the modified Agreement, and that an ambiguity exists between the modified 

Agreement as compared to the SPD and the Addendum, then the District Court may 

consider the applicability of the “make whole” doctrine. 
15

III. Conclusion

For the foregoing reasons, we will vacate the District Court‟s grant of summary 

judgment for the Fund and remand the case to the District Court for further consideration 

consistent with this opinion.