3–99–0766

IN THE 

APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

_________________________________________________________________

CATHERINE R. BISHOP,           ) Appeal from circuit court of the

                               ) 10th Judicial Circuit, Tazewell

	Plaintiff-Appellee,       ) County, Illinois

                               )

	     v.                   )

                               )

KELLY BURGARD,                 )

                               )

	Defendant                 ) No. 98 L 87

                               )

                               )

(Administrative Committee,     )

as Adm. of the                 )

Associates Health and Welfare  )  

Plan,                          ) 

                               ) Honorable John A. Barra,

	 Defendant-Appellant.)     ) Presiding Judge

_________________________________________________________________

	JUSTICE KOEHLER delivered the opinion of the court:

_________________________________________________________________

	The defendant-appellant, Administrative Committee (Committee),

administers the Employment Retirement Income Security Act (ERISA)

plan (plan) in which the plaintiff-appellee, Catherine Bishop,

participates.  The Committee appeals the Tazewell County circuit

court's entry of summary judgment in favor of the plaintiff-

appellee, Catherine Bishop, in her action on a petition to

adjudicate lien.  In granting summary judgment, the circuit court

reduced the amount of money Bishop is required to pay the plan as reimbursement of medical benefits the plan paid to Bishop for injuries she received in an automobile accident.  On review, this

court must decide whether the circuit court erred (1) in not

dismissing the action for lack of subject matter jurisdiction over the petition because the federal Employment Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq. (1994)) (ERISA) preempted state court action, and (2) in applying the common fund

doctrine to reduce the amount Bishop must pay to the plan as

reimbursement of medical benefits it paid to Bishop for injuries

she received in an automobile accident.  We conclude that the

circuit court erred in applying the common fund doctrine rather

than the terms of the plan contract.  Accordingly, we reverse the

circuit court's grant of summary judgment.

FACTS

	The plaintiff, Bishop, incurred medical expenses in the amount

of $8,576.30 for injuries she received in an automobile accident on

September 3, 1997.  Bishop, an employee of Wal-Mart and a

participant in the company's ERISA plan, received that amount from

the plan for her injuries.  The plan's benefit book for 1996 and

1998 included the following provisions: 

		"Right to Reduction and Reimbursement (Subrogation)

The Plan has the right to reduce or deny benefits

otherwise payable by the Plan *** and *** recover

(subrogate) 100% of the benefits previously paid by the

Plan to the extent of any and all of the following:  

Any judgment, settlement, or any payment, made or

to be made by a person for the condition giving

rise to the expense or by their insurers. 

	*** 

Attorney's fees.

	Cooperation Required

	The Plan requires that you or your covered dependent

cooperate to guarantee reimbursements to the Plan from

third party benefits.  Failure to comply with this

request will entitle the Plan to withhold benefits due

you under the Plan Document.  You or your covered

dependents may not do anything to hinder reimbursement of

overpayment to the Plan after you have received benefits.

Note: All attorney's fees and court costs are the

responsibility of the participant, not the Plan.

***

	Participant's Responsibility Regarding Right of

Recovery

	***

	Subrogation is when Wal-Mart pays your medical

charges relating to your accident while waiting for the

responsible party to settle.  Repayment to the Plan of

100% will be made at the time the settlement is received

by the associate, dependent, or their attorney."

Under the plan, the plan administrator has discretionary authority

to resolve all questions regarding plan administration,

interpretation and application.	

	Bishop retained counsel and, on June 9, 1998, filed a personal

injury action against Kelly Burgard, the driver of the other

automobile involved in the accident, seeking damages in excess of

$50,000.  Bishop signed an agreement under which she would pay her attorneys a percentage of her recovery as attorney fees and costs. 

Bishop accepted a $21,500 settlement.  On February 19, 1999, Bishop

filed a petition for adjudication of lien in the circuit court in

which she alleged that (1) Blue Cross/Blue Shield (Blue Cross) had

claimed a lien in the amount of $8,576.30 on any proceeds Bishop

received as settlement; (2) asserting that Illinois' common fund

doctrine did not apply, Blue Cross refused her request to reduce

the lien by one-third to reflect attorney fees; (3) in Scholtens v. Schneider, 173 Ill. 2d 375, 671 N.E.2d 657 (1996), the Illinois Supreme Court held that ERISA's conflict preemption doctrine does

not preempt Illinois' common fund doctrine; and (4) Illinois law is

that the common fund doctrine requires that she, as creator of the

fund, be reimbursed for the reasonable value of the legal service

rendered in protecting Blue Cross's subrogation lien.  On March 10,

1999, Bishop amended her petition, substituting the Associates

Health and Welfare Plan as the owner of the reimbursement right

against the proceeds. 

	On April 13, the Committee, as administrator of the Associates

Health and Welfare Plan, filed an emergency petition to intervene

as of right in the petition for adjudication.  The Committee filed

a motion to dismiss the petition pursuant to section 2–619 of the Code of Civil Procedure (735 ILCS 5/2–619 (West 1996)) on the ground that ERISA preempted the state court action.  The circuit

court denied the motion.  On May 28, 1999, Bishop filed a motion

for summary judgment.  In it she asked the circuit court to apply

Illinois' common fund doctrine to reduce by one-third the amount she was required to pay to reimburse the plan for attorney fees and

costs she incurred in the personal injury action against Burgard. 

On July 12, 1999, the Committee filed a cross-motion for summary

judgment against Bishop seeking full reimbursement for the medical

benefits it paid Bishop as a result of the automobile accident.  On

August 2, 1999, the circuit court dismissed, pursuant to

stipulation, the action between Bishop and Burgard.  On September

9, 1999, the circuit court denied the Committee's motion and

granted Bishop's motion, reducing by $3,025.09 the amount Bishop

was required to pay the plan as reimbursement.

ANALYSIS

	Summary judgment should be granted only when the pleadings,

depositions, and admissions on file, together with any affidavits,

when construed in the light most favorable to the nonmoving party

show there is no genuine issue of material fact and the moving

party is entitled to judgment as a matter of law.  735 ILCS 5/2–1005(c) (West 1996).  On review, we determine only whether the circuit court correctly concluded that no genuine issue of material

fact had been raised and, if none was raised, whether it correctly

entered judgment as a matter of law.  Fuller v. Justice, 117 Ill. App. 3d 933, 453 N.E.2d 1133, 1136 (1983).  This court reviews a

grant of summary judgment de novo.  Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102, 607 N.E.2d 1204, 1209 (1992).  

	Does ERISA preempt the state court action and, therefore, did

the circuit court err when it did not dismiss the petition for adjudication of lien for lack of subject matter jurisdiction?  The

Committee contends that Bishop's petition to adjudicate lien states

a prima facie cause of action under ERISA section 502(a)(3) (29 U.S.C. §1132(a)(3) (1994)) in that: (1) Bishop is a plan

participant; and (2) she seeks equitable relief in the nature of a

declaratory judgment through the petition and she seeks other

appropriate relief to redress the Committee's claim or to interpret

or enforce the plan's provisions to reduce the claim under the

common fund doctrine.  Therefore, according to the Committee, ERISA

completely preempts the state court action.  The Committee

maintains that the circuit court mistakenly relied on the supreme

court's holding in Scholtens v. Schneider, 173 Ill. 2d 375, 671 N.E.2d 657 (1996) which, the plan argues, addressed only conflict

preemption and not complete preemption under ERISA.   

	The Committee alternatively argues that, under ERISA section

514 (29 U.S.C. §1144 (1994)) (section 514), any state law that

relates to or has a connection with an ERISA plan is preempted

under the conflict preemption doctrine and an action brought under

the state law must be dismissed.  The Committee maintains that

Bishop's petition for adjudication of lien is preempted under this

conflict preemption doctrine because (1) the plan's reimbursement

right arises under section 502(a)(3) and the circuit court's

adjudication of the right relates to or is connected with an ERISA

plan; (2) such a distribution would adversely affects the Plan's benefit

structure and nationwide administration in that it could result in

different benefits for participants in other states under different subrogation and reimbursement laws; and (3) the plan's benefits

book expressly provides that participants are liable for their own

attorney fees and are required to reimburse 100% of the benefits

paid if they recover money in a settlement or judgment against the

party responsible for the injuries.

	Bishop responds that the circuit court correctly decided that

it had subject matter jurisdiction.  Bishop argues that (1) ERISA's

purpose is to protect the interests of plan participants, not to

provide a loophole through which a plan can avoid its obligations;

(2) the common fund doctrine is a common law doctrine that applies

to any type of recovery, not only health plans or ERISA plans and

her petition for adjudication only asks the court to apply the

common law and is outside the scope of section 502(a)(3); and (3)

she is not seeking additional benefits from the plan.  

	Further, Bishop argues ERISA does not preempt the action under

the conflict preemption doctrine because (1) her petition does not

fall under any of the four categories of state laws ERISA preempts,

i.e., (a) laws regulating the type of benefit or forms of ERISA plans; (b) laws creating reporting, disclosure, funding, or vesting

requirements for a plan; (c) laws providing for the calculation of

amounts paid under the plan; and (d) laws providing remedies for

misconduct growing out of plan administration; and (2) ERISA's

purpose is to protect plan participants, not the plan itself, and

the fact that, in this case, the plan has a national scope does not

change ERISA's purpose.

	Section 502 provides:

	(a) "A civil action may be brought 

	(1) by a participant or beneficiary 

	    ***	   

	(B) to recover benefits due to him under

the terms of his plan, to enforce his rights

under the terms of the plan, or to clarify his

rights to future benefits under the terms of

the plan;

***

	(3) 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

violation or (ii) to enforce any provision of this

subchapter or the terms of the plan."  29 U.S.C.

§1132(a) (1994).

It further provides:

	"(e) Except for actions under subsection (a)(1)(B)

of this section, the district court of the United States

shall have exclusive jurisdiction of civil actions under

any subchapter brought by *** a participant, beneficiary,

fiduciary, or any other person ***.  State courts of

competent jurisdiction and district courts of the United

States shall have concurrent jurisdiction of actions

under paragraphs (1)(B) *** of subsection (a) of this section."  29 U.S.C. §1132(e) (1994). 

Section 514 provides:

	"Except as provided in subsection (b) of this

section, the provisions of this subchapter and subchapter

III of this chapter shall supercede any and all State

laws insofar as they may now or hereafter relate to any

employee benefit plan in section 1003(a) of this title

and not exempt under section 1003(b) of this title."  29

U.S.C. §1144 (1994).

	Illinois' common fund doctrine "permits a party who creates,

preserves, or increases the value of a fund in which others have an

ownership interest to be reimbursed from that fund for litigation

expenses incurred, including counsel fees."  Scholtens, 173 Ill. 2d at 385, 671 N.E.2d at 662 (1996), citing Brundidge v. Glendale Federal Bank, F.S.B., 168 Ill. 2d 235, 659 N.E.2d 909 (1995).  The doctrine is a common law rule of general application that does not

expressly refer to or depend upon ERISA plans, but applies

generally to all funds created, preserved or increased by a party

in which others have an ownership interest.  Scholtens, 173 Ill. 2d at 385-86, 671 N.E.2d at 662. 

	In determining whether a claim comes within the scope of

section 502(a), the court examines whether (1) the plaintiff is

eligible to bring a claim under the section; (2) the cause of

action falls within the scope of an ERISA provision that can be

enforced through section 502(a); and (3) the state law claim cannot

be resolved without interpretation of a contract governed by federal law.  Speciale v. Seybold, 147 F.3d 612, 615 (1998).  In Blackburn v. Sundstrand Corp., 115 F.3d 493, 494 (7th Cir. 1997), the United States Court of Appeals for the Seventh Circuit

determined that the district court did not have jurisdiction over

a petition to apportion a settlement fund.  The court stated,

"[n]ot even the most expansive reading of ERISA covers motor

vehicle collisions, just because part of the recovery may inure to

the benefit of a plan.  The petition to apportion the fund invoked

the ancillary jurisdiction of the state court and was part of that

original, non-removal action."  Blackburn, 115 F.3d at 494.  Further, "it has been understood for a very long time that a

federal defense to a claim arising under state law does not create

federal jurisdiction ***.  This is true of defenses under ERISA no

less than of defenses under other federal statutes."  Blackburn, 115 F.3d at 495.  Such is the case before this court.  Accordingly, we conclude that section 502(a) does not preempt Bishop's petition

to adjudicate the lien. 

	In Scholtens, which the circuit court found controlling in this case, our supreme court concluded that a quasi-contractual

obligation existed between the plan and Scholtens' attorney.  Accordingly

Therefore, the circuit court concluded that the common fund

doctrine applied and required the plan to pay the attorney fees.  Scholtens, 173 Ill. 2d at 390, 671 N.E.2d at 665.  However, where a specific contract governs the parties' responsibilities, quasi-

contract doctrines do not apply.  F.H. Prince & Co., Inc. v. Towers Financial Corp., 275 Ill. App. 3d 792, 804, 656 N.E.2d 142, 151.  	

	The plan at issue in Scholtens provided that the participant was to reimburse benefits to the extent they were paid by the third

party.  After his accident, Scholtens signed a subrogation

agreement providing that, in consideration of money paid to him

under the plan, the plan would be subrogated "to the extent of such

payment, to any and all recovery."  173 Ill.2d at 377, 671 N.E.2d

at 659.  Scholtens recovered in the circuit court, and the plan

demanded complete reimbursement.  Sholtens filed a petition to

adjudicate the subrogation lien, and the circuit court applied the

common fund doctrine to reduce the reimbursement.  	

	Our supreme court stated:  "The issue in this appeal is

whether section 514 of ERISA (29 U.S.C. §1144 (1982)) preempts

application of the common fund doctrine to self-funded employee

benefit plans."  Scholtens, 173 Ill. 2d at 379, 671 N.E.2d at 660.  Our supreme court reviewed the evolution of the United States

Supreme Court's interpretation of section 514 and concluded:  

	"In sum, we have before us a generally applicable

common law doctrine which (1) is not intended to

regulate the affairs of ERISA plans, (2) neither singles

out such plans for special treatment nor predicates

rights or obligations on the existence of an ERISA plan,

and (3) does not have either the effect of dictating or

restricting the manner in which ERISA plans structure or

conduct their affairs or the effect of impairing their

ability to operate simultaneously in more than one

state.  The purpose of ERISA is to protect employees, not to provide loopholes through which ERISA plans can

avoid paying their debts.  We therefore decline to hold

that the common fund doctrine is preempted by section

514(a)."  Scholtens, 173 Ill. 2d at 396, 671 N.E.2d at 668. 

Accordingly, following the supreme court's explicit ruling in

Scholtens, the existence of an ERISA plan does not, of itself, preempt the application of the common fund doctrine under section

514.  However, we do not believe that Scholtens requires that, in every case where attorney fees are at issue, the courts are

required to apply the common fund doctrine without regard to the

plan's language.  

	In Engle v. Wal-Mart Associates Health & Welfare Plan, 48 F. Supp. 2d 1114 (N.D. Ind., 1999), the plaintiff brought an action

for declaratory judgment in the state courts to require the ERISA

plan under which he had received benefits to reduce its

reimbursement claim by one-third, the amount of the attorney fees. 

The district court determined that, in light of the fact that the

plan required 100% reimbursement and explicitly stated that the

participants were responsible for their attorney fees and costs,

the Committee's decision not to reduce the reimbursement was

reasonable. The district court further concluded that federal

common law did not apply to reduce the reimbursement in light of

the plan's explicit language.  In so concluding, the district court

stated, "[c]reation of or resort to federal common law is

inappropriate where its effect is to override the explicit terms of an established ERISA plan. [Citations.] *** [C]ourts should not

torture the language of an ERISA plan in an attempt to force a

particular result – straightforward plan language should be given its natural meaning."  Engle, 48 F. Supp. 2d at 1120.

	As in Engle, in this case the ERISA plan explicitly provides that attorney fees and court costs are the participant's

responsibility.  However, we have no indication from the circuit

court's order that it actually considered or acknowledged this

provision.  Under the facts presented in this case, we can conclude

that the common fund doctrine is applicable and reduces the plan's reimbursement only if we ignore the plan's language.  Accordingly,

we conclude that the circuit court erred in applying the common

fund doctrine to reduce the plan's reimbursement. 

CONCLUSION

	In sum, we conclude that Burgard's petition to adjudicate a

lien arising out of her state court personal injury action is not

a claim arising under ERISA and is not preempted under section

502's complete preemption provision.  Further, we conclude that

where the provisions of the plan explicitly describe the parties'

responsibilities, the common fund doctrine is inapplicable. 

Accordingly, we reverse the circuit court's grant of summary

judgment.

	Reversed.

Although federal preemption is a defense and, therefore, does not

appear on the face of a well-pleaded complaint, as required for

removal of an action to federal court, the complete preemption

doctrine recognizes that federal law may so completely occupy a

particular area that any action raising a claim in the area is

necessarily federal.  Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58, 63-64, 95 L.Ed.2d 55, 63, 107 S.Ct. 1542, 1546 (1987).

"The common thread running through these cases is that complete preemption is required where a state law claim cannot be resolved

without an interpretation of the contract governed by federal law."

Rice v. Panchal, 65 F.3d 637, 644 (7th Cir. 1995).

As the supreme court noted, the question raised in Scholtens was "whether the common fund doctrine 'relates to' and is therefore

preempted by section 514(a) of ERISA."  Scholtens, 173 Ill.2d at 397, 671 N.E.2d at 660.

	SLATER, P.M.J., and HOLDRIDGE, J., concur.