Title: REEDS v. WALKER
Citation: 157 P.3d 100, 2006 OK 43
Docket Number: 
State: Oklahoma
Issuer: Oklahoma Supreme Court
Date: June 20, 2006

REEDS v. WALKER Annotate this Case REEDS v. WALKER 2006 OK 43 157 P.3d 100 Case Number: 101994; Consol. w/101678 Decided: 06/20/2006 THE SUPREME COURT OF THE STATE OF OKLAHOMA WILLIAM S. REEDS, Co-Guardian of the Estate of PHILLIP M. REEDS, and ELLEN O. REEDS, Co-Guardian of the Estate of PHILLIP M. REEDS, and PHILLIP M. REEDS, Petitioners, v. THE HONORABLE THOMAS S. WALKER, JUDGE OF THE DISTRICT COURT, CARTER COUNTY, OKLAHOMA, Respondent. NATIONAL AMERICAN INSURANCE COMPANY, Plaintiff/Appellee, v. WILLIAM S. REEDS, Co-Guardian of the Estate of PHILLIP M. REEDS, and ELLEN O. REEDS, Co-Guardian of the Estate of PHILLIP M. REEDS, and PHILLIP M. REEDS, Defendants/Appellants. APPLICATION TO ASSUME ORIGINAL JURISDICTION FOR ISSUANCE OF A WRIT OF MANDAMUS TOGETHER WITH APPEAL FROM THE DISTRICT COURT, CARTER COUNTY, HONORABLE THOMAS S. WALKER, TRIAL JUDGE ¶0 Plaintiff brought this action in the District Court, Carter County, Honorable Thomas S. Walker, trial judge, for reimbursement of medical benefits paid on behalf of defendant, Phillip M. Reeds. On counter motions for summary judgment, the trial judge gave judgment to plaintiff. Plaintiff moved for and was granted an award of prejudgment interest and costs. Defendants' motions for postjudgment relief were denied. Defendants filed an appeal, designated as Cause No. 101,678, in which they challenged the adverse judgment and ancillary award as well as the denial of their postjudgment motions. While the appeal was pending, defendants asked this court to assume original jurisdiction to issue a writ of mandamus to the trial judge to direct that he refrain from implementing or enforcing the judgment and dismiss the action for lack of subject matter jurisdiction. We assumed original jurisdiction in Cause No. 101,994 and after withdrawing Cause No. 101,678 from assignment to the Court of Civil Appeals, we consolidated the two proceedings under surviving Cause No. 101,994 for disposition by a single opinion. ORIGINAL JURISDICTION IS ASSUMED; WRIT OF MANDAMUS IS DENIED; THE TRIAL COURT'S SUMMARY JUDGMENT IS REVERSED AND THE CAUSE IS REMANDED FOR FURTHER PROCEEDINGS TO BE CONSISTENT WITH THIS OPINION. Dino E. Viera, Nicholas V. Merkley, and Kevin R. Donelson, FELLERS, SNIDER, BLANKENSHIP, BAILEY & TIPPENS, Oklahoma City, Oklahoma; Stephen J. Adams, FELLERS, SNIDER, BLANKENSHIP, BAILEY & TIPPENS, Tulsa, Oklahoma; and Stephen Q. Peters, HARRIS, McMAHAN, PETERS, THOMPSON & STALL, PC, Tulsa, Oklahoma, Attorneys for Petitioners/Appellants. Michael G. McAtee, McATEE & WOODS, P.C., Oklahoma City, Oklahoma, Attorney for Respondent and for Appellee. OPALA, J. ¶1 The dispositive issues presented in these consolidated proceedings are: (1) Do Oklahoma courts have subject matter jurisdiction over an ERISA fiduciary's claim for damages for breach of the subrogation/reimbursement provision of an ERISA-regulated employee benefit plan? and if so, (2) Was plaintiff entitled to summary relief? We answer the first question in the affirmative and the second in the negative. I ANATOMY OF LITIGATION ¶2 Phillip M. Reeds (Phillip) was injured in August 1999 in an automobile accident that was caused by a third party's negligence. At the time of the accident, Phillip was insured under a health insurance contract (the Plan) sold to his father's company by plaintiff, National American Insurance Company (NAICO). Phillip suffered extensive injuries in the accident and received medical benefits pursuant to the Plan in the amount of $454,407.94. ¶3 Phillip and his parents/guardians, William S. Reeds and Ellen O. Reeds (collectively "defendants" or "the Reeds"), sued the tortfeasor and their own automobile insurer. They settled with their own insurer for $2,250,000.00. ¶4 NAICO brought this action against defendants in the district court, Carter County, alleging breach of contract. Both sides moved for summary judgment. After consideration of the submitted materials, the trial court granted judgment to NAICO, ordering defendants to pay damages in the amount of $454,407.94. Plaintiff's motion for prejudgment interest and costs was granted and defendants were ordered to pay the additional sum of $146,607.81. Defendants' postjudgment motion for a new trial3 or for judgment notwithstanding the verdict and their postjudgment motion for dismissal4 on the grounds that the trial court lacked subject matter jurisdiction were all denied. ¶5 Defendants appealed. The appeal, designated as Cause No. 101,678, was assigned to the Court of Civil Appeals in Oklahoma City. While the appeal was pending, defendants filed an application in this court, designated as Cause No. 101,994, invoking the court's original cognizance to direct the trial court not to implement or enforce the judgment and to dismiss the action for lack of subject matter jurisdiction. We agreed to assume original cognizance, withdrew the appeal's earlier assignment to the Court of Civil Appeals, and consolidated the two proceedings for disposition by a single opinion under surviving Cause No. 101,994. ¶6 Defendants argue in this consolidated proceeding that Oklahoma courts do not have subject matter jurisdiction over this action because federal law requires us to treat plaintiff's lawsuit as a federal ERISA claim over which the federal courts assert exclusive subject matter jurisdiction. They argue in the alternative that should we determine that the Oklahoma courts have jurisdiction, we must reverse the judgment because (1) the trial court wrongly construed the words "third party" in the Plan's subrogation/reimbursement provision to include defendants' own "first party" UM carrier; and/or (2) the trial court erred in finding that the subrogation/reimbursement clause contains a "priority of payments" provision, thereby overriding the Oklahoma make-whole rule. ¶7 For the reasons to be explained below, we hold that Oklahoma courts have jurisdiction over this action, but that summary judgment was not plaintiff's due. We hence reverse the judgment and remand the cause with instructions to proceed in a manner consistent with this opinion. II STANDARD OF REVIEW ¶8 Summary process -- a special pretrial procedural track pursued with the aid of acceptable probative substitutes5 -- is a search for undisputed material facts which, sans forensic combat, may be utilized in the judicial decision-making process.6 Summary relief is permissible where neither the material facts nor any inferences that may be drawn from uncontested facts are in dispute, and the law favors the movant's claim or liability-defeating defense.7 Only those evidentiary materials which eliminate from trial some or all fact issues on the merits of the claim or defense afford legitimate support for nisi prius resort to summary process for a claim's adjudication.8 ¶9 Summary relief issues stand before us for de novo review. III OKLAHOMA COURTS HAVE JURISDICTION OVER AN ERISA FIDUCIARY'S CLAIM FOR DAMAGES FOR BREACH OF AN ERISA-REGULATED HEALTH INSURANCE CONTRACT ¶10 Our initial task today calls for an inquiry into whether Oklahoma courts stand ousted by federal law of jurisdiction over a state-law contract action brought by an ERISA fiduciary against an ERISA beneficiary over the interpretation and application of an ERISA plan provision. When there are no contested jurisdictional facts, ¶11 The state judiciary's subject matter jurisdiction is derived from the State Constitution which gives Oklahoma courts unlimited original jurisdiction over all justiciable matters unless otherwise provided by law. ¶12 Because they are courts of limited jurisdiction, federal courts presume jurisdiction is lacking absent an adequate showing by the party invoking it. ¶13 The United States Supreme Court has recognized a narrow exception to the well-pleaded complaint rule. That exception, known as the complete preemption doctrine, provides that a strictly state-law claim presents a federal question if Congress intended for a specific federal statute to provide the exclusive cause of action, procedures, and remedies for that claim. ¶14 Complete preemption is a rule of federal jurisdiction. ¶15 Defendants did not attempt to remove NAICO's claim to federal court based on the complete preemption doctrine. Rather, they argue that the state-court judgment is a nullity because complete preemption ousts the state court of subject matter jurisdiction over NAICO's state-law claim. ¶16 The causes of action available under ERISA are set out in nine civil enforcement provisions found at §502(a), 29 U.S.C. §1132(a). These provisions specify who may bring an action under ERISA and what relief is available to enforce, or obtain redress for violations of, ERISA or of benefit plans covered by ERISA. A plan fiduciary is authorized by ERISA to bring a civil action only under the provisions of §502(a)(3), which state: "A civil action may be brought . . . by a . . . 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; . . ." Under the terms of §502(e)(1), any claim brought under the provisions of §502(a)(3) comes within the exclusive jurisdiction of the federal courts. ¶17 In Metropolitan Life Insurance Company v. Taylor, ¶18 These cases provide little in the way of evidence to support this conclusion beyond Metropolitan Life's expansive language. Complete preemption alters the well-established division of jurisdiction between the state and federal courts. Hence, only when Congress has shown an intent, not merely to preempt state law, but to transfer jurisdiction over a state-law claim to the federal courts does complete preemption apply. In Metropolitan Life, the Court found evidence of the requisite Congressional intent in large part in the legislative history of ERISA. ¶19 Fortunately, we need not decide whether state-law actions that come within the scope of §502(a)(3) are or are not completely preempted because, even if they are, it does not follow that NAICO's claim comes within that provision's scope. By its express terms, §502(a)(3) authorizes suits for equitable relief only. ¶20 It would be easy to jump directly from the words "not authorized" in Knudson to the conclusion that the Court intended to negate federal subject matter jurisdiction over claims seeking legal relief that would, but for the prayer for legal relief, fall within the scope of 502(a)(3). Indeed, a claim which seeks relief that is "not authorized" by ERISA's civil enforcement scheme may stand outside the jurisdiction of the federal courts, but that is not the only possible legal consequence of Knudson's holding. It is also possible that such a claim stands within the federal courts' jurisdiction, but fails to state a claim under federal law for which relief may be granted. Each of these interpretations of Knudson has its judicial adherents. ¶21 We are not unmindful of federal jurisprudence declaring the preeminence of federal authority in the area of employee benefit plan regulation. The United States Supreme Court has spoken of the centrality of the federal interest in ERISA, ¶22 We have also examined the Supreme Court's recent pronouncement in Aetna Health Inc. v. Davila, IV DEFENDANTS' UM CARRIER IS A THIRD PARTY UNDER THE PLAN ¶23 We are asked on appeal to construe the language of the subrogation/reimbursement provision to determine whether NAICO may be reimbursed from proceeds obtained by its insured from the insured's own UM carrier. Right to Subrogation ¶24 Defendants argue that the words "third party" in the quoted provision do not include an injured insured's UM carrier. We disagree. The plain and ordinary meaning of the term "third party" is simply someone who is not a party to the health insurance contract. A UM carrier's "first party" status vis a vis its insured does not alter its third party status vis a vis the health insurance contract. Defendants would have us limit the words "third party" to the tortfeasor or the tortfeasor's insurer. Nothing in the contract itself justifies interjection of such a restriction. Defendants' reliance on Provident Life & Accident Insurance Company v. Ridenour ¶25 The Plan provides not only that the person or entity from whom reimbursement is sought must be a "third party," but that it must be a third party who is "liable for the same expenses, . . ." We hold that the defendants' UM carrier is a "third party liable for the same expenses." UM coverage is typically described as indemnity insurance because it pays the person who pays for the policy, but the UM insurer's obligation to pay anything at all depends on the liability of the uninsured or underinsured tortfeasor. Under our UM statute, once a vehicle is determined to be uninsured, the UM carrier becomes legally responsible -- i.e. legally liable -- to pay the insured for the same expenses the tortfeasor or the tortfeasor's liability insurer would be liable to pay were the tortfeasor not uninsured or underinsured. V THE PLAN DOES NOT CONTAIN A PRIORITY OF PAYMENTS PROVISION THAT OVERRIDES THE OKLAHOMA MAKE-WHOLE RULE ¶26 Defendants argue that even if their UM benefits are subject to the Plan's subrogation/reimbursement provision, the judgment must be reversed because the trial court erred in finding that the Plan contains a priority of payments provision that overrides the Oklahoma make-whole rule. They contend that in the absence of such a provision, NAICO may only obtain reimbursement if Phillip has been fully compensated for his damages. In light of this rule, defendants assert that summary judgment was inappropriate because plaintiff's evidentiary materials did not indisputably establish that Phillip has been fully compensated. We agree. ¶27 In Equity Fire and Casualty Company v. Youngblood,62 we adopted the make-whole rule, which provides that an insurance contract that sets repayment priorities or otherwise gives the insurer the right to recoup payments before the beneficiary is paid will be enforced even if the injured person has not been fully compensated for his or her injuries. 63 Conversely, in the absence of a priority of payments provision, an insurer's right to reimbursement may only be enforced if and when the injured person has been fully compensated. ¶28 The plan language interpreted in Youngblood stated: 11.2 Reimbursement. When any Plan benefits are paid or provided for charges incurred by a Plan Member as a result of an Accidental Injury or Illness and that Plan Member makes a recovery (whether by settlement or judgment or otherwise) from any individual or organization equally or financially responsible for such Accidental Injury or Illness, then the Plan shall have a lien upon any such recovery, and the Plan Member shall reimburse the Plan to the extent that benefits were paid hereunder; provided, however, that the Committee, at its sole discretion, may permit the Plan Member to reimburse the Plan less than the full recovery amount received from such individual or organization. Nevertheless, in no event shall the Plan Member be required to make a reimbursement in an amount exceeding the recovery made by the Plan Member against such individual or organization.64 (emphasis added) We held that this provision did not establish a priority of payments or otherwise give the insurer a right to subrogation or reimbursement before the beneficiary was made whole.65 ¶29 We have found only a few cases containing "genuinely unambiguous" reimbursement provisions.66 In each such case, the contract contained an unmistakable declaration that the insurer's right to be reimbursed had priority over the insured's right to be made whole.67 In addition, we disagreed in Youngblood with the Tenth Circuit's decision in Fields v. Farmers Insurance Company, Inc.68 to enforce the following subrogation provision: SUBROGATION RIGHTS If you or your dependent sustain an injury caused by a third party, the Plan will pay for the injury, subject to (1) the Plan being subrogated to any recovery or any right of recovery you or your dependent has against that third party, including the right to bring suit in your name; (2) your not taking any action which would prejudice the Plan's subrogation right; and (3) your cooperating in doing what is reasonably necessary to assist the Plan in any recovery. The Plan will be subrogated only to the extent of Plan benefits paid because of the injury. (emphasis added)69 We viewed this language as inadequate to establish the right of the insurer to recoup its payments before the insured was made whole. ¶30 Some courts have held that the word "any" or the words "any and all" are sufficient to give the insurer payment priority. ¶31 Plaintiff argues that its policy contains an adequate expression of its reimbursement priority. Plaintiff cites the following clause in the Plan: "You must reimburse Us from any monies recovered . . . ." We do not regard this as an adequate statement to override the protection afforded an injured insured by the Oklahoma make-whole rule. Following the reasoning in Youngblood, we hold that an insurance contract stands subject to the make-whole rule unless it contains an unequivocal, express statement that the insured does not have to be made whole before the insurer is entitled to recoup its payments. ¶32 In the absence of a priority-of-payments provision in the Plan that meets the standard we have set today, plaintiff may only recover from defendants the benefits it paid on Phillip's behalf if Phillip has been fully compensated for his injuries. The burden is on the movant to establish that no genuine issue exists as to any material fact. VI AN AWARD OF PREJUDGMENT INTEREST AND COSTS RESTS UPON THE VIABILITY OF THE UNDERLYING JUDGMENT AND MUST BE VACATED UPON THE REVERSAL OF THAT JUDGMENT ¶33 Ancillary orders that are dependent upon the viability of an underlying judgment are nullified or affirmed on appeal by the disposition of the judgment on which they rest. VII SUMMARY ¶34 We decline to apply the complete preemption doctrine to recast today's claim as one arising under federal law. The law-equity dichotomy expressed in the text of §502(a)(3) of ERISA as well as inconclusive U.S. Supreme Court jurisprudence leaves us in grave doubt that plaintiff's claim, which seeks a type of relief not authorized by ERISA, comes "within the scope" of an ERISA cause of action. We will not abdicate our own cognizance over a well-pled state-law claim without a clear directive from the U.S. Supreme Court that federal jurisdiction ousts our own. We nevertheless reverse the trial court's summary judgment for plaintiff because the trial judge erred in concluding as a matter of law that the health insurance contract contained a provision that clearly and unambiguously overrides the Oklahoma make-whole rule. The cause is remanded for further proceedings consistent with this opinion. ¶35 ORIGINAL JURISDICTION IS ASSUMED; WRIT OF MANDAMUS IS DENIED; THE TRIAL COURT'S SUMMARY JUDGMENT IS REVERSED AND THE CAUSE IS REMANDED FOR FURTHER PROCEEDINGS TO BE CONSISTENT WITH THIS OPINION. ¶36 WATT, C.J. and LAVENDER, HARGRAVE, OPALA, KAUGER, EDMONDSON, and COLBERT, JJ., , concur. ¶37 WINCHESTER, V.C.J., concurs in part and dissents in part. ¶38 TAYLOR, J., dissents. ¶39 Taylor, J., dissenting. I respectfully dissent for the reason that the language, meaning and intent of the reimbursement terms of this insurance contract are clear and unambiguous. The trial court was correct in its decision. FOOT