Moore, William v. CapitalCare Inc

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 1, 2005 Decided August 29, 2006

No. 04-7121

WILLIAM MOORE,

INDIVIDUALLY AND AS PARENTS AND GUARDIANS

OF ALISTAIRE MOORE;

JUDITH MOORE,

INDIVIDUALLY AND AS PARENTS AND GUARDIANS

OF ALISTAIRE MOORE,

APPELLANTS

v.

CAPITALCARE, INC. ET AL.,

APPELLEES

No. 04-7122

WILLIAM MOORE,

INDIVIDUALLY AND AS PARENTS AND GUARDIANS

OF ALISTAIRE MOORE;

JUDITH MOORE,

INDIVIDUALLY AND AS PARENTS AND GUARDIANS

OF ALISTAIRE MOORE, ET AL.

APPELLEES

v.

CAPITALCARE, INC. ET AL.,

APPELLANTS

2

Appeals from the United States District Court

for the District of Columbia

(No. 94cv01326)

Martin H. Freeman argued the cause for the

appellants/cross-appellees.

Jacqueline Marie Saue argued the cause for the

appellees/cross-appellants. Charles J. Steele entered an

appearance.

Before: HENDERSON, Circuit Judge, and Edwards* and

WILLIAMS, Senior Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: Alistaire

Moore, the daughter of William and Judith Moore (collectively,

Moores), was severely injured in an automobile accident and as

a result required extensive medical care. She is the beneficiary

of a health insurance plan administered by CapitalCare, Inc. and

Blue Cross & Blue Shield of the National Capital Area (BCBS)

(collectively, CC/BCBS). CC/BCBS paid over $200,000 in

accident-related benefits on Alistaire’s behalf. Alistaire also

recovered a $1.3 million settlement for her injuries from a

personal injury lawsuit. In 1994, the Moores instituted this

action under the Employee Retirement Income Security Act of

1974 (ERISA), 29 U.S.C. §§ 1001 et seq., alleging that

*

Senior Circuit Judge Edwards was in regular active service at the

time of oral argument.

3

CC/BCBS failed to pay benefits due under the plan. CC/BCBS

countersued under ERISA, claiming that, pursuant to a

subrogation clause in the plan, it was entitled to reimbursement

because Alistaire received compensation from a third party for

her injuries. The district court awarded the Moores $72,083.52

in unpaid benefits, awarded CC/BCBS an equitable lien of

$194,274.72 against the settlement funds and denied both

parties’ motions for prejudgment interest and attorney’s fees.

The Moores appeal the grant of the equitable lien against the

settlement proceeds claiming that, because Alistaire was not

“made whole” for her injuries, CC/BCBS are not entitled to

reimbursement. We disagree, concluding that Alistaire’s health

insurance plan expressly provides for reimbursement in the

event of partial recovery from a third party. Both the Moores

and CC/BCBS appeal the denial of prejudgment interest and

attorney’s fees, which we reverse and remand as to all parties.

I.

In 1991, the Moores purchased a group benefit plan (ERISA

plan) from BCBS and its wholly-owned subsidiary, CapitalCare.

The ERISA plan included various contracts that together

provided “dual option coverage.” The ERISA plan’s dual option

coverage allowed an insured to seek medical attention at his

option either from the HMO side through CapitalCare or from

the indemnity side through BCBS. The ERISA plan also

included a subrogation clause, by which an injured beneficiary

agreed to reimburse CC/BCBS for medical expenses the ERISA

plan paid if he recovered compensation from a third party for his

injuries.1

1

The subrogation clause provides as follows:

12. Subrogation . . . .

a. To the extent that benefits for covered services

are provided or paid under this Contract, the

4

On September 10, 1992, Alistaire Moore sustained life-

threatening injuries when the chauffeured car in which she was

a passenger crashed. Her resulting medical care was lengthy

and expensive. She is a beneficiary under the ERISA plan.

After several years of wrangling with CC/BCBS over Alistaire’s

healthcare expenses, the Moores initiated this lawsuit against

CC/BCBS in 1994.2 The suit, brought under section

Corporation shall be subrogated and succeed to

any rights of recovery of a Participant for

expenses incurred against any persons or

organizations except insurers on policies of

health insurance issued to and in the name of the

Participant.

b. The Participant shall pay the Corporation all

amounts recovered by suit, settlement, or

otherwise from any third party or his insurer to

the extent of the benefits provided by this

Contract.

c. Attorneys’s [sic] fees, court costs, and any

other costs expended in the course of securing

recovery by suit, settlement, or otherwise, shall

be subtracted from the amount to be paid to the

Corporation; the amount to be subtracted shall

be as follows:

(1) If the case is settled out of court--one-quarter

of the amount of benefits paid or to be paid for

covered services; or

(2) If the case is settled as a result of litigation--

one third of the amount of benefits paid or to be

paid for the covered services.

Moore v. CapitalCare, Inc., 70 F. Supp. 2d 9, 38 (D.D.C. 1999).

2

The Moores initially sued only CapitalCare; BCBS was later

joined as a party-defendant pursuant to Federal Rule of Civil

5

502(a)(1)(B) of ERISA, see 29 U.S.C. § 1132(a)(1)(B),3 sought

unpaid benefits allegedly due under the ERISA plan.

During discovery, CC/BCBS learned that Alistaire had

obtained a $1.3 million settlement from a personal injury suit

that was filed on her behalf against the chauffeur and his

insurers. CC/BCBS believed that the proceeds of the settlement

were held in an irrevocable trust for the benefit of Alistaire M.

Moore (Trust) with Judith Deitz as the named trustee.4

CC/BCBS then filed a counterclaim against the Moores,

asserting their subrogation claim. CC/BCBS also filed a third

party complaint against Alistaire M. Moore, the Trust and Judith

Deitz Moore as trustee, seeking reimbursement for the benefits

they had paid for Alistaire’s care. The Moores never responded

to CC/BCBS’s counterclaim. The third party defendants

admitted that the Trust had been created with and/or contained

funds from the settlement. Pls.’ Answer to Third Party Compl.

¶ 3, reprinted at Supplemental Appendix (SA) 124.

Following a bench trial, the district court concluded that

CC/BCBS had failed to pay the Moores benefits due under

ERISA but that CC/BCBS also had a subrogation right to the

settlement proceeds to the extent they had paid benefits to

Alistaire or on her behalf. See Moore v. CapitalCare, Inc., 70

F. Supp. 2d 9 (D.D.C. 1999). Thereafter, the Moores moved for

Procedure 19.

3

Section 502(a)(1)(B) authorizes a beneficiary to bring a civil

action “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.” 29 U.S.C. §

1132(a)(1)(B).

4

Deitz is apparently the maiden name of Judith Moore. She is

referred to as Judith Deitz Moore in the Third Party Complaint. See

3d Party Compl. ¶ 3.

6

reconsideration of the subrogation ruling, which motion the

court denied. See Moore v. CapitalCare, Inc., No. 94-1326

(D.D.C. June 1, 2000). The court also ordered an accounting to

determine the amount each party was due. See id. Following

the accounting, the Moores first claimed that the settlement

proceeds had dissipated and therefore could not be subject to an

equitable lien. Pls.’ Reply Mem. in Supp. of Pls.’ Mot. for

Recons. on Issue of Reimbursement/Subrogation ¶ 7, R. Doc.

No. 200. CC/BCBS moved for another accounting. Defs.’ Mot.

for Accounting & Declaratory & Equitable Remedies under

Section 502(a)(3) of ERISA & Mem. of P. & A. in Supp.

Thereof, R. Doc. No. 204. Without addressing the Moores’

dissipation claim, the court directed CC/BCBS to pay the

Moores $72,083.52 due under the ERISA plan and granted

CC/BCBS an equitable lien “in the amount of $194,274.72 upon

the proceeds of any recovery from any third party by reason of

the injury to Alistaire Moore that is the subject of this action in

aid of defendants’ subrogation rights under ERISA.” Moore v.

CapitalCare, Inc., No. 94-1326, slip op. at 1–2 (D.D.C. July 20,

2004). It also denied without prejudice CC/BCBS’s motion for

a second accounting as well as all parties’ petitions for

prejudgment interest and attorney’s fees. Id. The Moores

appeal the reimbursement award,5 arguing that CC/BCBS’s

subrogation claim is legal, not equitable, and therefore barred by

ERISA and, alternatively, that CC/BCBS are not entitled to

reimbursement because Alistaire was not “made whole” by her

settlement. The Moores also appeal the denial of their petitions

for prejudgment interest and attorney’s fees. CC/BCBS cross-

appeal, similarly arguing that they are entitled to prejudgment

5

The third party defendants, Alistaire Moore, the Trust and Judith

Deitz Moore as trustee, do not appeal and thus are the appellees here.

7

interest and attorney’s fees.6

II.

A.

We turn first to the Moores’ challenge of the district court’s

subrogation ruling. Originally, the Moores had argued that the

award was improper under ERISA section 502(a)(3), see 29

U.S.C. § 1132(a)(3), because CC/BCBS seek legal relief, not the

“other appropriate equitable relief” authorized therein. ERISA

section 502(a)(3) authorizes the ERISA plan fiduciary “(A) to

enjoin any act or practice which violates . . . 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 . . .

the terms of the plan.” Id. (emphasis added).

At the time of oral argument on November 1, 2005, the

circuits were split regarding an ERISA fiduciary’s subrogation

right under section 502(a)(3).7 Shortly after oral argument, the

6

CC/BCBS also appeal the denial of their motion for an

accounting. Appellees’ Br. 35–37. They argue that an accounting is

warranted in light of the Moores’ continued insistence that the

settlement funds were “never segregated” and have “long since been

dissipated,” Reply Mem. in Supp. of Pls.’ Mot. for Recons. on Issue

of Reimbursement/Subrogation ¶¶ 7–8, R. Doc. No. 200—claims the

Moores continue to press on appeal, see Appellants’ Br. 21–22 & n.9;

Appellants’ Reply Br. at 5–6. After oral argument, the Moores

deposited $210,000 into the district court registry and stipulated that,

if they lose on appeal, CC/BCBS may collect from the registry. Pls.’

Opp’ns to Defs.’ Mot. for Recons., Mot. for Prelim. Inj., & Mot. for

Hr’g ¶ 1–2, R. Doc. No. 255.

7

The United States Supreme Court has thrice interpreted the

meaning of “appropriate equitable relief” as used in section 502(a)(3):

first, in Mertens v. Hewitt Associates, 508 U.S. 248 (1993), then, in

Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204

8

(2002), and, most recently, in Sereboff v. Mid Atlantic Medical

Services, LLC, 126 S. Ct. 1869 (2006). In Mertens, the Court

determined that “ ‘[e]quitable’ relief ” as used in section 502(a)(3)

“must mean something less than all relief” and thereby rejected a

reading of the language that included all relief a court of equity was

authorized to award in a given case. 508 U.S. at 258 n.8 (emphasis in

original). Instead, the Court determined that “ ‘equitable relief’ ”

embraced only “those categories of relief that were typically available

in equity,” id. at 256 (emphasis in original), such as “injunction or

restitution,” id. at 255.

In Knudson, the Court distinguished equitable claims for

restitution—embraced by section 502(a)(3)—and legal claims for

restitution—not embraced by section 502(a)(3). In a claim for

equitable restitution, the plaintiff may obtain “a constructive trust or

an equitable lien, where money or property identified as belonging in

good conscience to the plaintiff [can] clearly be traced to particular

funds or property in the defendant’s possession.” Id. at 213. The

defendant in Knudson had received a settlement from a tort suit and,

as required by California law, placed the settlement funds in a trust

with an independent trustee. The plaintiff insurer then brought suit

under section 502(a)(3). Because the funds were no longer in the

defendant’s possession, “the plaintiff ‘[could not] enforce a

constructive trust of or an equitable lien upon other property of the

[defendant].’ ” Id. at 213–14. The plaintiff thus sought a legal

remedy—the defendant’s obligation to pay a sum of money to which

the plaintiff was owed—and could not maintain suit under section

502(a)(3). See id. at 210.

After Knudson, the circuits split over whether a fiduciary could

enforce a subrogation provision under section 502(a)(3). The Fourth,

Fifth, Seventh, Eighth and Tenth Circuits decided that if a plaintiff’s

request for reimbursement under ERISA section 502(a)(3) did not seek

to impose personal liability but instead sought relief (such as a

constructive trust or equitable lien) against identifiable funds in the

actual or constructive possession of the insured, the relief was

equitable in nature and therefore permitted under section 502(a)(3).

See Mid Atlantic Med. Servs., Inc. v. Sereboff, 407 F.3d 212, 217–21

9

United States Supreme Court granted certiorari in Mid Atlantic

Medical Services, LLC v. Sereboff, 407 F.3d 212 (4th Cir.). In

that case, the Sereboffs, beneficiaries of a health insurance plan

administered by Mid Atlantic Medical Services obtained a

settlement from a third party for injuries they sustained in an

accident. Mid Atlantic brought suit under section 502(a)(3)

seeking reimbursement pursuant to the “Acts of Third Party”

provision of the Sereboffs’ ERISA plan, under which the

Sereboffs agreed to reimburse Mid Atlantic for medical

expenses the latter paid if they recovered from a third party for

their injuries. The district court found in favor of Mid Atlantic.

The Sereboffs appealed and the Fourth Circuit affirmed,

(4th Cir. 2005) (“We agree with the district court that, in this dispute,

MAMSI’s action seeks equitable restitution, as that term is used in

Knudson, because MAMSI seeks to recover funds that are specifically

identifiable, belong in good conscience to MAMSI, and are within the

possession and control of the Sereboffs.”), aff’d, 126 S. Ct. 1869

(2006); N. Am. Coal Corp. v. Roth, 395 F.3d 916, 917 (8th Cir. 2005)

(plaintiff stated claim under 29 U.S.C. § 1132(a)(3) and district court

properly imposed constructive trust on overpaid benefits, permanently

enjoined defendants from disposing of or transferring funds in their

possession and required tracing of funds no longer in defendants’

possession); Admin. Comm. of Wal-Mart Assocs.’Health & Welfare

Plan v. Willard, 393 F.3d 1119, 1120, 1125 (10th Cir. 2004) (action

seeking injunction, declaration of rights, constructive trust and

equitable restitution was equitable in nature as in Great-West, even

though defendant never had disputed funds in his possession);

Bombardier Aerospace Employee Welfare Benefits Plan, 354 F.3d

348, 358 (5th Cir. 2003); Admin. Comm. of the Wal-Mart Stores, Inc.

Assocs.’ Health & Welfare Plan v. Varco, 338 F.3d 680, 687–88 (7th

Cir. 2003); Bauhaus USA, Inc. v. Copeland, 292 F.3d 439, 445 (5th

Cir. 2002). The Sixth and Ninth Circuits, by contrast, found that any

attempt by an insurer to enforce a subrogation clause was a request for

reimbursement which constituted legal relief. See Qualchoice, Inc. v.

Rowland, 367 F.3d 638, 650 (6th Cir. 2004); Westaff (USA) Inc. v.

Arce, 298 F.3d 1164 (9th Cir. 2002).

10

concluding that Mid Atlantic sought equitable restitution.

The High Court affirmed the Fourth Circuit. It first

considered whether the type of relief Mid Atlantic sought was

equitable or legal. See Sereboff v. Mid Atlantic Med. Servs.,

LLC, 126 S. Ct. 1869, 1873–74 (2006). The Court determined

that Mid Atlantic sought an “equitable lien,” properly

characterized as equitable because the funds were specifically

identifiable and remained in the possession and control of the

Sereboffs. Id. at 1874. The Court next analyzed whether the

basis for Mid Atlantic’s claim was equitable, applying “ ‘the

familiar rul[e] of equity that a contract to convey a specific

object even before it is acquired will make the contractor a

trustee as soon as he gets a title to the thing.’ ” Id. at 1875

(quoting Barnes v. Alexander, 232 U.S. 117, 121 (1914))

(alteration in Sereboff). The Court found that the “ ‘Acts of

Third Parties’ provision in the Sereboffs’ plan specifically

identified a particular fund, distinct from the Sereboffs’ general

assets—‘[a]ll recoveries from a third party (whether by lawsuit,

settlement, or otherwise)’—and a particular share of that fund to

which Mid Atlantic was entitled—‘that portion of the total

recovery which is due [Mid Atlantic] for benefits paid.’ ” Id.

(alteration in original) (citation omitted). Mid Atlantic therefore

“could rely on a ‘familiar rul[e] of equity’ to collect for the

medical bills it had paid on the Sereboffs’ behalf.” Id. (citing

Barnes, 232 U.S. at 121) (alteration in original). We then

sua sponte ordered the parties to address the implications of

Sereboff.8 See Moore v. CapitalCare, Inc., No. 04-7121 (D.C.

8

The order reads:

It is ORDERED, on the court’s own motion, that the parties

submit supplemental briefs addressing the following

questions.

1. The District Court awarded CapitalCare and

BCBSNCA “an equitable lien in the amount of $194,274.72

11

Cir. June 22, 2006). In their supplemental brief submitted in

response, the Moores dropped their section 502(a)(3) challenge

to CC/BCBS’s subrogation claim because “the Sereboff Court

has made the decision that, where the fund is identifiable, the

remedy is equitable.” Appellants’ Supplemental Br. 3.

We therefore turn to the Moores’ only remaining challenge

to the subrogation ruling: that CC/BCBS are not entitled to

reimbursement because Alistaire has not been made whole by

the settlement. The Moores urge us to adopt, as a matter of

federal common law, the make whole doctrine as a default rule

upon the proceeds of any recovery from any third party by

reason of the injury to Alistaire Moore that is the subject of

this action in aid of [CapitalCare and BCBSNCA’s] equitable

subrogation rights under ERISA.” Appellants’ Appx. at 69.

This decision has been appealed by William Moore and Judith

Moore, individually and in their capacities as parents and

guardians of Alistaire Moore, but not by the Irrevocable Trust

between Alistaire M. Moore, Grantor, and Judith Deitz,

Trustee, nor by Judith Deitz in her capacity as trustee of that

trust. What are the implications of the identities of the

appellants for CapitalCare and BCBSNCA’s subrogation

claim under ERISA § 502(a)(3), particularly in light of the

Supreme Court’s decision in Sereboff v. Mid Atlantic Medical

Services, LLC, 126 S. Ct. 1869 (2006)?

2. Apart from the question above, does Sereboff have any

other implications for CapitalCare and BCBCNCA’s

subrogation claim under ERISA § 502(a)(3)?

3.What evidence is there in the record of the disposition

of the proceeds of the settlement of the tort action in the

Circuit Court for Baltimore County?

Moore v. CapitalCare, Inc., No. 04-7121 (D.C. Cir. June 22, 2006)

(emphases in original).

12

of construction.9 Appellants’ Suppl. Br. at 4. The make whole

doctrine is an equitable insurance law principle and can be

summarized as follows:

[I]n the absence of contrary statutory law or

valid contractual obligations to the contrary, the

9

In Sereboff, the defendants asserted the make whole doctrine as an

equitable defense but the Supreme Court rejected it, finding the

defense inapplicable and noting:

Mid Atlantic’s action to enforce the “Acts of Third Parties”

provision qualifies as an equitable remedy because it is

indistinguishable from an action to enforce an equitable lien

established by agreement, of the sort epitomized by our

decision in Barnes. Mid Atlantic need not characterize its

claim as a freestanding action for equitable subrogation.

Accordingly, the parcel of equitable defenses the Sereboffs

claim accompany any such action are beside the point.

Sereboff, 126 S. Ct. at 1877 (internal citations omitted). The Sereboffs

also argued that the relief Mid Atlantic sought was not “appropriate”

within the meaning of section 502(a)(3)’s because it contravened the

make whole doctrine. The Court declined to address the latter

argument because the Sereboffs had not raised it earlier in the suit.

See id. at 1877 n.2.

In their supplemental brief, the Moores claim that their make

whole doctrine argument is similar to the Sereboffs’ second

argument—that is, CC/BCBS’s claim is not “appropriate” because

Alistaire was not made whole—and thus Sereboff is not dispositive.

Appellants’ Suppl. Br. at 4. CC/BCBS respond that, in the district

court, the Moores argued only the make whole doctrine as an equitable

defense and thus Sereboff forecloses that argument. Appellees’ Suppl.

Br. at 5–6. They also contend that, as in Sereboff, the Moores waived

the assertion that the equitable lien was not appropriate equitable

relief. We need not decide the waiver issue because even assuming

the Moores preserved the issue on appeal CC/BCBS are nonetheless

entitled to reimbursement.

13

general rule under the doctrine of equitable

subrogation is that where an insured is entitled to

receive recovery for the same loss from more

than one source, e.g., the insurer and the

tortfeasor, it is only after the insured has been

fully compensated for all of the loss that the

insurer acquires a right to subrogation, or is

entitled to enforce its subrogation rights. The

rule applies as well to instances in which the

insured has recovered from the third party and

the insurer attempts to exercise its subrogation

right by way of reimbursement against the

insured’s recovery.

16 Lee R. Russ et. al, Couch on Insurance § 223:134 (3d ed.

2000) (footnotes omitted) (emphasis added). At least three

circuits have adopted the make whole doctrine into federal

common law as a default rule. See, e.g., Copeland Oaks v.

Haupt, 209 F.3d 811, 813 (6th Cir. 2000) (“In Marshall, we

adopted the so-called ‘make whole’ rule of federal common law,

which requires that an insured be made whole before an insurer

can enforce its right to subrogation under ERISA, unless there

is a clear contractual provision to the contrary. . . . Also, the

make-whole rule is merely a default rule. If a plan sets out the

extent of the subrogation right or states that the participant’s

right to be made whole is superseded by the plan’s subrogation

right[,] no silence or ambiguity exists.” (alterations in original)

(citation omitted)); Cagle v. Bruner, 112 F.3d 1510, 1521–22

(11th Cir. 1997) (“We hold today that the make whole doctrine

is a default rule in ERISA cases.”); Barnes v. Indep. Auto.

Dealers Ass’n of Cal. Health & Welfare Benefit Plan, 64 F.3d

1389, 1394–95 (9th Cir. 1995) (“We would not apply the

interpretive ‘make-whole rule’ as a ‘gap-filler’ if the

subrogation clause in the Plan document specifically allowed the

Plan the right of first reimbursement out of any recovery Barnes

was able to obtain even if Barnes were not made whole. The

14

clause, however, contains no such language.”); see also Hiney

Printing Co. v. Brantner, 243 F.3d 956, 960 (6th Cir. 2001)

(“We therefore find the reimbursement provision ambiguous

because it is silent as to whether the right of reimbursement

applies to partial recovery, and accordingly, the make-whole

rule applies.”). Other circuits have declined to do so. See, e.g.,

Harris v. Harvard Pilgrim Health Care, Inc., 208 F.3d 274,

280–81 (1st Cir. 2000) (declining to adopt make whole doctrine

because it conflicts with policy objectives of ERISA); In re

Paris v. Iron Workers Trust Fund, No. 99-1558, 2000 WL

384036 (4th Cir. 2000) (same); Waller v. Hormel Foods Corp.,

120 F.3d 138, 140 (8th Cir. 1997) (declining to adopt make

whole doctrine because it does not comport with employee

benefit plans); see also Sunbeam-Oster Co. Group Benefits Plan

for Salaried & Non-Bargaining Hourly Employees v.

Whitehurst, 102 F.3d 1368, 1377 (5th Cir. 1996) (“[W]e shall

supply a default rule only when the necessary rule has not been

supplied by the plan, the law, or the parties through their

agreements.”).

It is undisputed that the $1.3 million settlement did not fully

compensate Alistaire for her injuries. Nevertheless we need not

decide whether to adopt the make whole doctrine as a default

rule because the ERISA plan unambiguously establishes a plan

priority to any third party recovery the beneficiary obtains

regardless whether the beneficiary has been made whole by the

recovery.10 Subsection “a” of the subrogation provision

10

The Moores do not argue that the subrogation provision is

ambiguous nor do they challenge the district court ruling that “[t]he

Plan provisions, when read in context, can only mean that the Plan is

entitled to be reimbursed by the beneficiary all amounts that the Plan

has paid to the beneficiary, or on her behalf, to the full extent that the

beneficiary recovers from another source.” Moore, 70 F. Supp. 2d at

39. They argue instead that we should adopt the make whole doctrine

as a matter of substantive federal common law, apparently without

15

provides the ERISA plan “shall . . . succeed to any rights of

recovery of a Participant” and subsection “b” provides that the

“Participant shall pay the Corporation all amounts recovered by

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

to the extent of the benefits provided by this Contract.” See

Moore, 70 F. Supp. 2d at 38 (emphases added). We believe that

this language plainly entitles CC/BCBS to recover from the

Moores all amounts the ERISA plan has paid to Alistaire or on

her behalf to the extent that she has recovered from a third party.

Some circuits have interpreted similar language sufficiently

unambiguous to override the default make whole doctrine. For

example, in Sunbeam-Oster Co., the Fifth Circuit found

unambiguous a provision stating “ ‘[s]ubrogation allows the

Plan to recover duplicate benefit amounts . . . .,’ and added by

way of explanation that, ‘[i]f the plan has already paid benefits,

it has the right to recover payment from you.’ ” 102 F.3d at

1375 (alteration in original). Because the Sunbeam-Oster Co.

provision was unambiguous, the Fifth Circuit declined to

expressly accept or reject the make whole doctrine, noting: “we

have serious doubts whether we would ever approve or adopt the

Make Whole rule as this circuit's default rule for the priority of

recovery in reimbursement or subrogation between an ERISA

plan and its participant or beneficiary under circumstances such

as the ones we consider today.” Id. at 1378. In Fields v.

Farmers Insurance Co., the Tenth Circuit reviewed a provision

which provided, inter alia: “ ‘If you or your dependent sustain

an injury caused by a third party, the Plan will pay for the injury,

subject to[ ] the Plan being subrogated to any recovery or any

right of recovery you or your dependent has against that third

reference to its having been applied as a default rule only. See

Appellants’ Supplemental Br. 5 (“Under these undisputed facts [that

Alistaire was not fully compensated for her injuries], the case law

appears clearly to support the application of the Make-Whole

Doctrine.”).

16

party, including the right to bring suit in your name.’ ” 18 F.3d

831, 835 (10th Cir. 1994).11 The court noted, “Here, the clear

language of the insurance contract provides that [the insurance

company] shall be subrogated to any recovery that plaintiff

receives from the negligent third party or its insurer” and

accordingly held that the contract contained a “clear and

unambiguous” “modif[ication] [of] general common law

principles [that is, the make whole doctine] that would apply

absent express contractual provisions.” Id. at 836 (emphasis in

original).12

Moreover, even if we found the subrogation language

11

Fields involved an Oklahoma state insurance law claim and was

in federal court under diversity jurisdiction. The Tenth Circuit applied

Oklahoma state law, which adopted the make whole doctrine as a

default rule of construction.

12

There is some conflict among the circuits regarding how clear a

subrogation provision must be to supersede the default make whole

doctrine. At least two courts have found similar provisions ambiguous

because they did not contain an express disavowal of the make whole

doctrine. See, e.g., Copeland Oaks, 209 F.3d at 813 ([I]n 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.” (emphases in original));

Cagle, 112 F.3d 1521–22 (“An ERISA plan overrides the make whole

doctrine only if it includes language ‘specifically allow[ing] 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.’ ”

(citation omitted)). We do not agree that the “absence of separate,

specifically articulated rules for situations of partial recovery and total

recovery with variations depending on the nature of the source of

recovery” is always ambiguous. See Sunbeam-Oster Co., 102 F.3d at

1376. Rather, as with the provisions here, the silence may “signif[y]

nothing more than that, regardless of source, the rule is the same for

total and partial recoveries.” Id.

17

ambiguous, that would not end the matter. In Firestone Tire &

Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989), the Supreme

Court held that “a denial of benefits challenged under [29

U.S.C.] § 1132(a)(1)(B) is to be reviewed under a de novo

standard unless the benefit plan gives the administrator or

fiduciary discretionary authority to determine eligibility for

benefits or to construe the terms of the plan.” If the

administrator/fiduciary has discretion, the Firestone Court has

described the standard of review as “abuse of discretion” and

“arbitrary and capricious.” See id. at 111–15. We have

described the standard as one of “ ‘reasonableness,’ ” Wagener

v. SBC Pension Benefit Plan-Non Bargained Program, 407 F.3d

395, 402 (D.C. Cir. 2005) (quoting Block v. Pitney Bowes, Inc.,

952 F.2d 1450, 1454 (D.C. Cir. 1992)). Other courts apply a

similar standard of review in an ERISA suit brought by a

fiduciary to enforce a subrogation provision. See Sunbeam-

Oster Co., 102 F.3d at 1373 (“Federal courts have consistently

applied Firestone’s deference principles to actions concerning

benefit determinations brought not only by participants but also

by ERISA plans and, in particular, claims involving ERISA

plans’ assertions of purported reimbursement and subrogation

rights.”); see also Harris, 208 F.3d at 277 n.3; Cagle, 112 F.3d

at 1516–17; Barnes, 64 F.3d at 1392; Cutting v. Jerome Foods,

Inc., 993 F.2d 1293, 1295–96 (7th Cir.), cert. denied, 510 U.S.

916 (1993); Baxter ex. rel. Baxter v. Lynn, 886 F.2d 182, 187

(8th Cir. 1989). Here, the ERISA plan vests the administrator

with the authority to make eligibility determinations and to

construe the ERISA plan’s terms. Compare Moore, 70 F. Supp.

2d at 20 (Plan administrator, CapitalCare, “ ‘has full

discretionary authority to operate and administer the terms of

[the] health benefits program . . . determination(s) as to . . .

eligibility for coverage and/or benefits shall be final and

binding, subject to your right of appeal . . . .’ ” (quoting Pls.’ Ex.

2, p. 55) (alterations in original)), with Block, 952 F.2d at 1453

n.4 (“Thus, § 7.7(a) (power to ‘interpret and construe’ the plan)

18

or § 7.4 (power to make ‘final and binding’ decisions) of the

Pitney Bowes Plan, standing alone, would probably meet the

Firestone test for deferential review.” (emphasis in original)).

Accordingly, we will uphold CapitalCare’s—the

administrator’s—interpretation of the ERISA plan’s subrogation

clause unless it is an abuse of discretion. In Cutting, the Seventh

Circuit interpreted an analogous provision which “state[d] rather

flatly that the plan shall be subrogated to ‘all claims’ by the

covered individual against a third party to the extent of ‘any and

all payments’ made (or to be made) by the plan.” 993 F.2d at

1299. Although the court found the language ambiguous, it

applied the same deferential standard of review it uses if the

plan vests the administrator with discretion; it could not “say

that the company was unreasonable in interpreting this plan as

disclaiming the make-whole principle.” Id. (emphasis in

original). So too here. CC/BCBS’s interpretation of the

subrogation provision to apply to Alistaire’s partial recovery is

reasonable and we therefore affirm the district court’s award to

them of an equitable lien of $194,274.72 against the settlement

funds.13

B.

The Moores claim that the district court abused its

discretion in denying them prejudgment interest on the award of

$92,083.52 in unpaid benefits against CC/BCBS. ERISA does

13

We need not address further our sua sponte questions to the

parties, see supra note 8, especially Question No. 3, in view of the fact

that the Moores have now deposited $210,000 in the district court

registry and have stipulated that CC/BCBS may collect from that fund

if they prevail on appeal. See supra note 6. “[T]he implications of the

identities of the appellants,” as noted in Question No. 1, see supra note

8, are no longer relevant because the Moores have dropped their

section 502(a)(3) challenge to the subrogation ruling. See Appellants’

Supplemental Br. 3.

19

not expressly provide for prejudgment interest. In enacting

ERISA, however, the Congress intended the courts to develop

a body of federal law “ ‘to deal with issues involving rights and

obligations under private welfare and pension plans.’ ” Pilot

Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987) (quoting 120

Cong. Rec. 29,942 (1974) (statement of Sen. Javits)). Other

circuits have held that a beneficiary may seek prejudgment

interest in a suit to recover ERISA benefits due. See Fotta v.

Trustees of United Mine Workers of Am., Health & Ret. Fund of

1974, 165 F.3d 209, 212 (3d Cir. 1998) (“It is of considerable

moment that we have previously recognized that a beneficiary

may seek prejudgment interest in a suit to recover [ERISA]

benefits due, notwithstanding the lack of an express directive

from Congress to that effect.”); Rivera v. Benefit Trust Life Ins.

Co., 921 F.2d 692, 696 (7th Cir. 1991) (“The award of

prejudgment interest for a federal law violation is governed by

federal common law. . . . The growing recognition of the time

value of money has led this court to rule that prejudgment

interest should be presumptively available to victims of federal

law violations.” (quotation marks omitted)). We believe that a

beneficiary’s “recover[y] [of] benefits due to him under the

terms of his plan,” 29 U.S.C. § 1132(a)(1)(B), includes not only

the benefits withheld but also their time value. See, e.g.,

Skretvedt v. E.I. DuPont De Nemours, 372 F.3d 193, 207–08 (3d

Cir. 2004) (“We now make explicit that . . . an ERISA plaintiff

who prevails under § 502(a)(1)(B) in seeking an award of

benefits may request prejudgment interest under that section as

part of his or her benefits award.”); Ford v. Uniroyal Pension

Plan, 154 F.3d 613, 618 (6th Cir.1998) (“Awards of

prejudgment interest pursuant to § 1132(a)(1)(B), however, are

not punitive, but simply compensate a beneficiary for the lost

interest value of money wrongly withheld from him or her.”).

We agree with the circuits that have held that prejudgment

interest on unpaid ERISA benefits is presumptively appropriate.

See, e.g., Fritcher v. Health Care Serv. Corp., 301 F.3d 811, 820

20

(7th Cir. 2002) (presumption of prejudgment interest in ERISA

case); Holmes v. Pension Plan of Bethlehem Steel Corp., 213

F.3d 124, 131 (3d Cir. 2000) (same); U.S. Indus., Inc. v. Touche

Ross & Co., 854 F.2d 1223, 1256–58 (10th Cir. 1988) (same);

Stroh Container Co. v. Delphi Indus., Inc., 783 F.2d 743, 752

(8th Cir. 1986) (same). The presumption in favor of

prejudgment interest has three recognized bases. First, to permit

the fiduciary to retain the interest earned on wrongfully withheld

benefits would amount to unjust enrichment—a fiduciary would

benefit from failing to pay ERISA benefits. See Fotta, 165 F.3d

at 212 (“To allow the Fund to retain the interest it earned on

funds wrongfully withheld would be to approve of unjust

enrichment.” (internal quotation marks omitted)). Second,

prejudgment interest ensures that a beneficiary is fully

compensated, including for the loss of the use of money that is

his. See Holmes, 213 F.3d at 132; Short v. Cent. States, Se. &

Sw. Areas Pension Fund, 729 F.2d 567, 576 (8th Cir. 1984).

Finally, prejudgment interest promotes settlement and deters any

attempt to benefit unfairly from inevitable litigation delay. See

Gen. Facilities, Inc. v. Nat’l Marine Serv., Inc., 664 F.2d 672,

674 (8th Cir. 1981). Prejudgment interest, therefore, should be

denied only if exceptional circumstances—a claimant’s bad

faith, dilatoriness or frivolous claim—make the award unfair.

See Stroh Container, 783 F.2d at 752 (“Thus, prejudgment

interest should ordinarily be granted unless exceptional or

unusual circumstances exist making the award of interest

inequitable. Such circumstances may include bad faith or

dilatoriness by the claimant, or a claimant's assertion of

frivolous claims.” (internal citations omitted)).

We believe the district court abused its discretion in

denying the Moores prejudgment interest on the $72,083.52 in

unpaid benefits it awarded them. Although CC/BCBS claim that

the Moores exhibited bad faith by failing to supplement their

responses to interrogatories, discovery matters are more

appropriately dealt with under Federal Rule of Civil Procedure

21

37 and, in any event, do not make an award of prejudgment

interest inequitable.

CC/BCBS also claim that the district court erred in denying

them prejudgment interest on the value of their equitable lien.

Because a fiduciary may seek only “appropriate equitable

relief,” 29 U.S.C. § 1132(a)(3), CC/BCBS’s ability to obtain

prejudgment interest turns on whether their claim is fairly

characterized as seeking equitable relief. We believe that it is.

The Supreme Court in Knudson explicitly recognized that an

accounting for profits—whereby a party that obtains a

constructive trust may also “recover profits produced by the

defendant’s use of that property, even if he cannot identify a

particular res containing the profits sought to be recovered”—is

“a form of equitable restitution.” Knudson, 534 U.S. at 214 n.2.

An accounting for profits “is a restitutionary remedy based upon

avoiding unjust enrichment” and its purpose is to “disgorge

gains received from improper use of the plaintiff’s property or

entitlements.” 1 Dan B. Dobbs, Law of Remedies § 4.3(5) (2d

ed.1993). CC/BCBS, having obtained an equitable lien on the

settlement funds, are also entitled to prejudgment interest

thereon.

C.

We finally consider each side’s claim that it is entitled to

attorney’s fees. ERISA provides that “[i]n any action under this

subchapter . . . by a participant, beneficiary, or fiduciary, the

court in its discretion may allow a reasonable attorney’s fee and

costs of action to either party.” 29 U.S.C. § 1132(g)(1). In Eddy

v. Colonial Life Insurance Co. of America, we laid out five

factors the district court is to weigh in determining whether or

not attorney’s fees are appropriate in an ERISA case: “(1) the

losing party’s culpability or bad faith; (2) the losing party’s

ability to satisfy a fee award; (3) the deterrent effect of such an

award; (4) the value of the victory to plan participants and

beneficiaries, and the significance of the legal issue involved;

22

and (5) the relative merits of the parties’ positions.” 59 F.3d

201, 206 (D.C. Cir. 1995). We review the district court’s

determination for abuse of discretion. See id. at 203. The

district court denied each party an award of attorney’s fees

without explanation, much less discussion of the Eddy factors.

As we have recently noted, “[m]eaningful review requires us to

evaluate the district court’s rationale for its holding.” Davy v.

Central Intelligence Agency, No. 05-5151, 2006 WL 1889141,

*5 (D.C. Cir. July 11, 2006) (citing Copeland v. Marshall, 641

F.2d 880, 901 n.39 (D.C. Cir. 1980) (en banc) (“It is axiomatic

that we cannot identify an unreasonable award [of attorney’s

fees] unless it is accompanied by a statement of reasons.”)). “If

the district court fails to articulate the basis for its attorney fee

decision,” as it has here, “we believe remand for adequate

explanation of its reasoning is in order.” Id. (citing Copeland,

641 F.2d at 901 n.39 (“[A] remand may be necessary where the

District Court awards a fee without adequately articulating

underlying reasons.”)).

For the foregoing reasons, we affirm the district court’s

grant to CC/BCBS of “an equitable lien in the amount of

$194,274.72 upon the proceeds of any recovery from any third

party by reason of the injury to Alistaire Moore,” see Moore,

No. 94-1326, slip op. at 1–2 (D.D.C. July 20, 2004), reverse the

denial of prejudgment interest and attorney’s fees to both sides

and remand for further proceedings consistent with this opinion.

So ordered.