Petition for Writ of Certiorari — Waller v. Provident Life & Accident Insurance

Supreme Court brief1990

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IN THE A, a esc

‘

Supreme Court of the HuniteStates:

MARY 7, WALLER,

Petitioner,

Vv.

PROVIDENT LIFE & ACCIDENT

INSURANCE COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

COUNSEL OF RECORD FOR PETITIONER:

William Rosenberger, Jr., Esquire

Pr. ©. Box isae

Lynchburg, VA 24505

(804) 845-2393

ON BRIEF FOR PETITIONER:

Thomas L. Phillips, Jr., Esquire

Phillips, Phillips & Phillips

Irongate at Spring Hill

Route 4, Box 179-P

Rustburg, VA 24588

a ai ic a

QUESTIONS PRESENTED FOR REVIEW

I. Did the United States Court

of Appeals for the Fourth Circuit

err in holding that federal

Subject-matter jurisdiction eakees

in this action by a plan

administrator seeking to recover

amounts paid to a plan participant

who subsequently- recovered from a

third-party tortfeasor because the

action “arises under" the federal

common law of ERISA within the

meaning of 28 U.S.C. Section

1331(a)?

zr. Did the United States

Court of Appeals for the Fourth

Circuit err in holding that the

"federal common law of ERISA"

includes a cause of action for

unjust enrichment?

III. Did the United States

Court of -Appeals for the Fourth

Circuit err in concluding that it

need not address the question of

whether Section 38.1-342.2 of the

Code of Virginia, 1950, as amended,

re-codified July 1, 1986, as Section

38.2-3405, is preempted by ERISA on

the basis of its conclusion that the

provision of the plan in question,

which dealt with the right to

require reimbursement from a plan

participant who later recovers from

a third-party tortfeasor, is not a

"subrogation" provision and

therefore would not fall within the

ambit of the Virginia statute even

absent preemption?

PARTIES TO THE PROCEEDING

The only parties to the

proceeding in the court whose

judgment is sought to be reviewed

are those named in the caption of

the case: Mary J. Waller and

Provident Life and Accident

Insurance Company.

iii

TABLE OF CONTENTS

QUESTIONS PRESENTED. ...

PARTIES TO THE PROCEEDING.

TABLE OF CONTENTS. ....

TABLE OF AUTHORITIES. ...

PRIOR OPINIONS IN CASE. ..

GROUNDS OF JURISDICTION. .

STATUTES INVOLVED IN CASE.

STATEMENT OF THE CASE. ..

ARGUMENT FOR ALLOWING WRIT.

CONCLUSION. . . « « © © « «

APPENDIX. .« « « «© «© © «© « «

TABLE OF AUTHORITIES

CASES

Airco Industrial Gases v.

Teamsters Health & Welfare

Pension Fund, 6168 F. Supp.

- Del. 1985), aff'd

850 F.2d 1028 (3d Cir. I988) 19-20

Amato v. Western Union

Int’l, Inc., 773 F.oa

ir. 1985) 19-20

Amato v. Western Union

Int'l, Inc., 596 F. Suppl.

963 (S.D.N.Y. 1984),

aff'd in part, rev'd in

art, 773 F.2d [402 ~~

Cir. 1985) 19, 20

Cummings By Techmeier v.

Briggs & Stratton, %97 F.2d

383-T1th Cir. 1986) 18

Dime Coal Co., Inc. v.

Combs, 796 F.2d 394

(llth Cir. 1986) 18

FMC Corp. v. Hollidav,

885 Foy 7S (3d Cir. 1989),

cert. granted 110 S. Ct.

1109 (Feb. 20, 1990) 25-26

Franchise Tax Roard v.

Construction Laborers

Vacation Trust, 463 U.S. 1

(1983)

Group Hospitalization Med.

Service v. Smith, 236 Va. 228,

372 S.E.2d 159 (1988)

Morales v. Pan American

tife Ins. Co., 718 F. Supp.

-D. La. 1989)

Provident Life & Accident

Ins. co. v. Waller, 906

F.2a 985 (4th Cir. 199C)

United Food & Commercial

Workers & Fmployers

Arizona Tealeh & Welfare

Trust v. Pacygqa, 501

F.2d 1157 (Sth Cir. 1986)

Van Orman v. American

Ins. Co., 6580 F.2ag 301

(3d Cir. 1982)

Whitworth Bros. Storage

Co. v. Central States

Pension Fund, 704 F.2d

221 (6th Cir.) cert. denied

479 U.S. 1007 (1986) ,

12-16

23-24

20-21

12,

13,

17,

25-26

17-18

STATUTES

28 U.S.C. Section 1331 (fa)

(1988 ed.) 10,

12-13

29 U.S.C. Section

1132(a)d(1)(B) (1988 ed.) S. 30.

Va. Code Ann. Section

38.1-342.2 (1950 &

Repl. Vol. 1981) 7-9,

15,

22-23,

Va. Code Ann. Section

38.2-3405 (1950 &

Repl. Vol. 1986) Fe 83-6

PRIOR OPINIONS IN THE CASE

Provident Life & Accident Ins.

Co. v. Waller, 905 F.2d 985 (4th

Cir. 1990)

Provident Life & Accident Ins.

Co. v. Waller, Civ. Action No. 88-

0173-R (W.D. Va., Roanoke Division,

June “5, 1989) ‘Taek... 23

(unpublished Mem. Op.)

GROUNDS OF JURISDICTION

The judgment sought to be

reviewed was entered by the United

States Court of Appeals for the

Fourth Circuit on June 27, 1990.

Jurisdiction to conduct the

requested review is conferred upon

this Honorable Court by 28 U.S.C.

Section 1254.

STATUTES INVOLVED IN THE CASE

28 U.S.C. Section 1331 (a) (1988

ed.).

29 U.S.C. Section 1132(a) (1) (B)

(1988 ed.).

Va. Code Ann. Section 38.1-342.2

(1950 & Repl. Vol. 1981).

Va. Code Ann. Section 28.,3-3405

(1950 & Repl. Vol. 1986).

The full text of each statute

cited above is contained in the

Appendix to this Petition.

STATEMENT OF THE CASE

On February 21, 1986, Mary

Waller was injured in an automobile

collision in Virginia. As a result

of this injury, she incurred medical

expenses of $5,922.53.

At the time of her injury, Mrs. |

Waller was an emplovee of |

Burlington Industries participating

in that companv's qualified self-

funded employee benefit plan, which

was administered by Provident Life

and Accident Insurance Company.

This plan included the following

provision:

Medical and

disability benefits are.

not payable to or for a

person covered under the

Group Plan when the injury

or illness to the covered

person occurs through the

act or omission of another

person. However, payment

for medical care

expenses...for an injury

or illness in which a

third party is liable may

be advanced by Provident.

For this to happen, the

covered person must sign

an agreement to repay the

Group Plan in full any

payments advanced...from

the judgment or

settlemert he or she

received...."

Mrs. Waller submitted her

medical bills to Provident, which

paid them without requiring Mrs.

Waller to sign a reimbursement

agreement. When Mrs. Waller

subsequently recovered from the

third-party tortfeasor who caused

her injury, Provident demanded

reimbursement of all payments it had

made to her. Mrs. Waller refused,

contending the plan's reimbursement

provision was invalid under Virginia

law, specifically Va. Code Ann.

Section 38.1-342.2, Virginia's

"anti-subrogation statute," which

was recodified as Va. Code Ann.

Section 38.2-3405 on July 1, 1986.

Provident subsequently filed

Suit in the U. S. District Court for

the Western District of Virginia,

Roanoke Division, alleging that

court had subject-matter

jurisdiction over the suit pursuant

to 29 0.8.C. Section

1132(a) (1) (B) (1982). Waller

answered, denying that federal

jurisdiction existed under ERISA and

alleging by way of counter-claim

that the recovery sought by

Provident was prohibited by Section

38.1-342.2 of the Code of Virginia,

1950, as amended.

On June 5, 1989, the Honorable

James C. Turk, Chief District Judge,

handed down his opinion in the

case. After holding that federal

subject-matter jurisdiction existed

pursuant to 29 U.S.C. 1001-1461

(ERISA), Judge Turk went on to hold

that Section 38.1-342.2, the

Virginia Anti-Subrogation Statute,

has been preempted by ERISA.

Nevertheless, because Prevident had

failed to have Mrs. Waller sign a

reimbursement agreement prior to

making payments, as required by the

plan, Judge Turk held that Provident

could not recover.

Provident subsequently appealed

Judge Turk's decision to the United

States Court of Appeals for the

Fourth Circuit. On June 27, 1990,

that Court, speaking through Judge

Murnaghan, held that the District

Court had erred in concluding

federal jurisdiction over the case

existed by reason of 29 U.S.C:

Section 1132¢a) (1) (B). The Fourth

Circuit found, however, that federal

subject-matter jurisdiction existed

under 28 U.S.C. Section 1331(a),

inasmuch as the cause of action in

question arises under "the federal

common law of ERISA." Having

concluded federal jurisdiction

existed, the Court went on to

declare that the federal common law

existing amid the interstices of

ERISA includes a cause of action for

unjust enrichment and that Provident

was entitled to recover on this

theory under federal common law.

The Fourth Circuit never addressed

the question whether the Virginia

statute Mrs. Waller contends

invalidates the reimbursement

provision in question has. been

preempted by ERISA, as the District

Court had held, because it

characterized the Virginia statute

as prohibiting only "subrogation,"

which it defined narrowly as not

including provisions requiring

reimbursements by Plan participants.

ARGUMENT FOR ALLOWING WRIT

Petitioner respectfully submits

that compelling reasons exist for

qranting certiorari with respect to

each of the three questions

presented bv this case.

I. The Fourth Circuit erred in

holding that federal subject-matter

jurisdiction exists in this action

by a plan administrator seeking to

recover amounts paid to a plan

participant who subsequently

recovered from a_ third-party

tortfeasor because the action

"arises under" the federal common

law _of ERISA within the meaning of

28 U.S.C. Section 1331l(a).

The Fourth Circuit's opinion in

this case held "that federal

question jurisdiction exists

Pursuant to ERISA only where the

issue in dispute is of ‘central

concern' to the federal statute,"

906 F.2d at 990, Having

acknowledged the limits to federal

question jurisdiction in this

context delineated by the decision

of this Honorable Court in Franchise

Tax Board v. Construction Laborers

Vacation Trust, 463 U.S. 1, 25-26

(1983), the Fourth Circuit then

concludes that the issue presented

in this case “meets [the]

condition," 906 F.2d at 991, of

being "of ‘central concern'” to

ERISA and, therefore, the case is a

proper one for the exercise of

federal jurisdiction under 28 U.S.C.

Section 1331 (a). Petitioner

respectfully submits that the Court

of Appeals erred in reaching this

conclusion.

The Complaint filed to

institute this case sought

reimbursement from the defendant

pursuant to a contractual provision

of a group life, medical and

disability benefit policy issued by

Provident to Burlington as part of

an ERISA-qualified benefit plan.

Although the plaintiff alleged

federal jurisdiction under 29 U.S.C.

Section 1132(a)(1)(B), a position

the Fourth Circuit found untenable,

in all other respects the action, as

pled, was 4 simple collection case

seeking to recover money on 4a

contractual or quasi-contractual

theory existing completely separate

and apart from ERISA, This

collection action was of no more

"central concern" to ERISA than the

state tax levy involved in Franchise

Tax Board.

Petitioner respectfully submits

that in finding it had “arising

under" jurisdiction in this case,

the Fourth Circuit committed exactly

the same analytical error as the

Ninth Circuit in reaching the same

conclusion in Franchise Tax Board:

in each case the Circuit Court

looked beyond the Complaint to the

true issue presented, the question

of preemption, and concluded, quite

properly, that the extent to which

State law is preempted by ERISA is a

"central concern" to the federal

statute.

Petitioner agrees that the

issue of whether the Virginia anti-

subrogation statute, Va. Code Ann,

Section 38.1-342.2 (1950 & Repl.

Vol. 1981) (now recodified as Va.

Code Ann. Section 38.2-3495) has

been preempted by ERISA is of

central concern. Under the

circumstances of this case, however,

the preemption question only enters

the case by way of a defense to the

collection action, that is, it first

was raised when the defendant relied

on the Virginia statute as barring

the collection action, and the

plaintiff Per a that the

Virginia statute had been preempted.

Given this, the ruling of this

Honorable Court in Franchise Tax

Board adhering to the "well-pleaded

Complaint” rule, 463 U.S. at 10, 13-

14, 25-26, requires the conclusion

here, as in Franchise Tax Board,

that no Section 1331 "arising under”

jurisdiction exists. Id. at 25-26.

2. The Fourth Circuit erred

in holding that the federal common

law of ERISA includes an implied

cause of action for unjust

enrichment in favor of a plan

administrator.

As the Fourth Circuit noted in

its opinion in this case, 906 F.2d

at 992, the federal courts are

divided on the propriety of finding

that the federal common law of ERISA

includes an implied cause of action

for unjust enrichment or restitution

of amounts paid by mistake. Thus,

although the Sixth Circuit found

such a cause of action to exist in

favor of an emplover which

mistakenly had made certain payments

into a plan, Whitworth Bros. Storage

Co. v. Central States Pension Fund,

794 F.2d 221, 235-36 (6th Cir.),

cert. denied 479 U.S. 1007 (1986),

the Seventh Circuit has found to the

contrary, Cummings By Techmeier v.

Briggs & Stratton, 797 F.2d 383,

390-91 (7th Cir. 1986), as has the

Eleventh Circuit, Dime Coal Co.,

Inc. v. Combs, 796 F.2d 394, 396-99

(llth Cir. 1986). To further

complicate matters, although leaving

open the possibility that they might

recognize such an implied cause of

action in an appropriate case, hoth

the Second and Third Circuits have

cautioned against federal courts

moving too quickly to create

additional rights under the rubric

of federal common law “where

Congress has established an

extensive regulatory network and

expressly announced its intention to

occupy the field," Amato v. Western

Union Int'l, Inc., 773 F.2d 1402,

1419 (2d Cir. 1985), quoting Van

Orman v. American Ins. Co., 680 F.2d

301, 312 (3d Cir. 1982).

The division among the federal

courts is even more sharply defined

at the district court level. Thus,

while the District Court for the

District of Delaware has declared

flatly that the federal common law

of unjust enrichment existing amid

the interstices of ERISA allows an

employer to recover contributions

made to a plan by mistake, Airco

Industrial Gases v. Teamsters Health

& Welfare Pension Fund, 618 F. Supp.

943, 950 (D. Del. 1985), the

District Court for the Southern

District of New York has stated just

as emphatically that there is no

federal common law of uniust

enrichment, Amato v. Western Union

Int’l, Inc., 396 F. Sepp. $63, 973

(S.D.N.Y. 1984), aff'd in part,

rev'd in part on another ground, 773

F.2d 1402 (2d Cir. 1985), while the

District Court for the Eastern

District of Louisiana has gone so

far as to declare developing a

federal common law of unjust

enrichment under ERISA would be

inconsistent with ERISA's terms and

policies, Morales v. Pan American

Life Ins. Co., 718 F. Supp. 1297,

1301-1302 (E. D. La. 1989).

Petitioner respectfully submits

that the authority set forth above

not only demonstrates the need for a

ruling by this Honorable Court to

resolve a conflict among _ lower

federal courts, but also that the

great weight of authority supports

her position that no federal common

law cause of action for unjust

enrichment should be implied from

ERISA. She respectfullv submits

that the Fourth Circuit erred in

holding such an action exists, and

in entering judgment against her on

the basis of this holding.

III. The Fourth Circuit erred

in concluding that it need not

address the question of whether Va.

Code Ann. Section 38.1-342.2, re-

codified as Va. Code Ann. Section

38.2-3405 on July 1, 1986, is

preempted by ERISA,

Writing for the Fourth Circuit,

Judge Murnaghan acknowledged the

difficulty of the question raised by

Mrs. Waller whether ERISA preempts

the Virginia "“anti-subroaqation"

statute. 906 F.2d at 989 n.7.

Having acknowledged the difficulty

of the question presented, and the

Split of authority on point, id.,

Judge Murnaghan then evaded the

question of whether ERISA preempts

Virginia's "anti-subrogation

statute," Va. Code Ann. Section

38.1-342.2 (1950 & 1981 Repl. Vol.),

recodified as Va. Code Ann. Section

38.2-3405 effective Julv 1, 1986, by

simply declaring that because the

plan provision in question deals

with reimbursement by the plan

participant rather than subrogation

in a narrow legal sense the statute

is inapplicable. This conclusion is

clearly wrong in light of the

Supreme Court of Virginia's holding

in Group Hospitalization Med.

Service v. Smith, 236 Va. 228, 372

S.E.2d 159 (1988).

In Group Hospitalization, the

Virginia court, to which the federal

courts must defer on matters of

interpretation of Virginia law, held

the anti-subrogation statute, Va.

Code Ann. Section 38.1-342.2,

applicable to a situation precisely

like that presented by this case,

i.e., where a plan sued a

beneficiary to recover the amount it

had paid the beneficiary after the

beneficiary recovered from a third-

party tortfeasor, 236 Va. at 230,

232, 372 S.E.2d at 160, 161. This

decision conclusively demonstrates

that the Virginia "“anti-subrogation"

statute is not limited to true

subrogation, but also _ prohibits

reimbursement provisions of exactly

the type involved in this case. It

necessarily follows that the

question of whether ERISA preempts

the Virginia statute cannot be

avoided in the case, and the Fourth

Circuit erred in attempting to do

so.

Once the inevitability of

addressing the question of whether

ERISA preempts state anti-

subrogation statutes like Va. Code

Ann. 38.1-342.2 is acknowledged, the

split among the circuits, compare

FMC Corp. v. Hollidav, 885 F.2d 79,

89-90 (3d Cir. 1989), cert. granted,

110 S. Ct. 1109 (Feb. 20, 1990)

(ERISA does not preempt Pennsylvania

anti-subrogation provision because

law did not address a "core type of

ERISA matter"), with United Food &

Commercial Workers & Employers

Arizona Health & Welfare Trust v.

Pacyga, 801 F.2d 1157, 1160, 1162

(9th Cir. 1986) (Arizona's anti-

subrogation law "relates to" benefit

plan and so is preempted), arques

strongly that a writ should be

allowed in this case. That this

Honorable Court has_~ granted

certiorari in FMC Corp. v. Holliday,

a case presenting a very similar if

not identical issue, underscores the

importance of the issue presented,

and the need for a definitive

answer.

CONCLUSION

In light of the serious issues

raised by the case, and the splits

among the Circuits in their analysis

and handling of these issues,

Petitioner respectfully submits this

is a proper case for allowing a Writ

of Certiorari, which action she

respectfully requests.

MARY J. WALLER

ay LOY Pree

La @)

COUNSEL OF RECORD FOR BETITIONER:

William Rosenberger, Jr.

P. O. Box 1328

Lynchburg, VA 24505

(804) 845-2393

ON BRIEF FOR PETITIONER:

Thomas L. Phillips, Jr.

PHILLIPS, PHILLIPS & PHILLIPS

Irongate at Spring Hill

Route 4, Box 179-P

Rustburg, VA 24588

(804) 821-5022

APPENDIX TABLE OF CONTENTS

OPINION OF THE FOURTH CIRCUIT. .. 1

FINAL JUDGMENT AND ORDER OF

THE DISTRICT COURT. . . «© © © © « D4

MEMORANDUM OPINION OF THE

DISTRICT COURT. « © © © © © © © «© OD

TEXT OF STATUTES INVOLVED

IN CASE

A) 28 U.S.C. Section 1331 (a)

el 8 Pee ee ee a ee ee, |

B) 29 U.S.C. Section

1132(a)(1)(B) (1988 ed.). . 64

C) Va. Code Ann. Section

38.1-342.2 (1950 & Repl.

ie: lt

D) Va. Code Ann. Section

38.2-3405 ( 1950 & Repl.

Vol. 1986). . > * - . _ — 87

I. OPINION OF THE FOURTH CIRCUIT

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 89-2123

PROVIDENT LIFE & ACCIDENT INSURANCE

COMPANY,

Plaintiff - Appellant,

versus

MARY J. WALLER,

Defendant - Appellee.

No. 89-2124

PROVIDENT LIFE & ACCIDENT INSURANCE

COMPANY,

Plaintiff - Appellee,

versus

MARY J. WALLER,

Defendant - Appellant.

MURNAGHAN, Circuit Judge:

We are presented with several

difficult questions regarding the

scope of the Employee Retirement

Income Security Act of 1974

("ERISA") and the power of the

federal courts to fill in the

interstices of this comprehensive

and labyrinthine statute.

Specifically, we address whether the

Provident Life & Accident Insurance

Co. ("Provident") may recover monies

advanced to one of its plan

participants, Mary J. Waller, after

she was injured in an auto accident.

In response to Provident's action

under ERISA for recovery of the

advanced benefits, the district

court concluded that Provident was

not entitled to reimbursement

because it did not comply with one

of the provisions of the ERISA-

governed plan. On Provident's

appeal, we conclude that a failure

to repay this advance would unjustly

enrich Waller and contradict the

intent of both ERISA and the plan.

Accordingly, we reverse the order of

the district court and enter

judgment for Provident.

Waller was employed by

Burlington Industries and a

participant in its qualified self-

funded employee benefit plan, which

is administered by Provident. The

plan pays life, medical and

disability benefits to or on behalf

of its participants, such as Waller.

However, the plan _ specifically

provides in an "Acts

Parties" provision that

Medical and disabi

of Third

lity

benefits are not payable

to or for a person covered

under the Group Plan when

the injury or illness to

the covered person occurs

through the act or

omission of another

person. However, payment

for medical care

expenses...for an injury

or illness in which a

third party is liable may

be advanced by Provident.

For this to happen, the

covered person must sign

an agreement to repay the

Group Plan in full any

payments advanced...from

the judgment or settlement

he or she receives....

(Emphasis added.)

On February 21, 1986, Waller

was injured in a car accident in

which she was not at fault.

Waller's written request, Provident

advanced her $5,922.53 in medical

expenses despite never obtaining a

Signed repayment agreement .! Waller

later recovered damages from the

third party in excess of what the

plan paid out to her. After Waller

refused to reimburse the plan,

Provident brought an action under

ERISA, 29 ig de a « Section

1132(a)(1)(B), (e)(2) (1982), for

recovery of the advanced monies plus

costs and attorney's fees. Although

admitting to receiving the money

-IThe record is silent on why

the agreement was never signed by

Waller. Provident states only that

the benefits were advanced "at

[Waller's] request." Appellant's

Be. at 3.

from a third party,” Waller filed an

answer questioning the district

court's jurisdiction under Section

1132(a) (1) (B). She also filed a

counterclaim under Section

1132(a)(1) (B) requesting a

declaratory judgment that the

Virginia anti-subrogation statute,

Va. Code Ann. Section 38,2-3405,

precluded reimbursement and was not

preempted by ERISA. Finally, Waller

requested class certification on

behalf of all plan beneficiaries

who had repaid money advanced by

Provident.

2An afrtfidavit submitted by

Burlington's group benefits manager

demonstrated that Waller also knew

of the "Acts of Third Parties"

provision.

The district court denied

Waller's motion to certify the class

but denied Provident's motion for

Summary judgment and entered

judgment in favor of Waller. The

district court found that although

ERISA preempted the Virginia anti-

subrogation provision, Provident's

failure to require Waller to sign

the repayment provision constituted

noncompliance with the terms of the

plan and therefore barred its

recovery of advanced expenses.

Provident appeals that conclusion

and Waller appeals the district

court's denial of class

certification.

II.

In its complaint, Provident

alleged federal jurisdiction under

ERISA Section 502(a)(1)(B), 29

U.S.C. Section 1132(a)(1)(B) (West

1985). Waller maintains that

Section 1132(a)(1)(B) does not

provide a federal cause of action

for plan administrators. We agree,

but nonetheless conclude that the

district court had jurisdiction

under the federal question

provision,

Section 1132(a)(1)(R) provides,

in relevant part, that "“fa] civil

action may be brought...by a

participant or beneficiary...to

recover benefits due 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" (emphasis added). Here,

Provident was neither a participant

nor beneficiary but rather’ the

administrator of Burlington's self-

funded plan. Although we have not

3in the “definitions” section

of ERISA, the term "participant" is

described as "any employee...who is

or may become eligible to receive a

benefit of any type from an employee

benefit plan....”" 29 U.S.C.A.

Section 1002(7) (West Supp. 1990).

A beneficiary is described as "a

person designated by a participant,

or by the terms of an employee

benefit plan, who is or may become

entitled to a benefit thereunder."

29 U.S.C.A. Section 1002(8) (West

Supp. 1990). The term

"administrator" means "the @rson

specifically so designated yw the

terms of the instrument under which

the plan is operated; [or]...the

plan sponsor...." 29 U.S.C.A.

Section 1002(16)(A) (West Supp.

1990).

yet addressed the scope of Section

1132(a), most of our sister circuits

have limited federal jurisdiction to

the suits by the entities specified

in the statute. See, e.g., Herman

Hosp. v. MEBA Medical & Benefits

Plan, 845 F.2d 1286, 1288-89 (5th

Cir. 1988) ("Where Congress has

defined the parties who may bring a

Civil action founded on ERISA, we

are loathe to ignore the

legislature's specificity.");

Pressroom Unions Printers League

Income Security Fund v. Continental

Assurance Co., 700 F.2d 889, 892 (2d

Cizs.} ("legislature [did not]

intend[] to grant subject matter

jurisdiction over suits by

employers, funds, or other parties

Se ee

not listed in Section 1132[al...."),

cert. denied, 464 U.S. 845 (1983) .-

Such a conclusion is amply supported

by the Supreme Court's decision in

Franchise Tax Board v. Construction

Laborers Vacation Trust, 463 U.S. l,

21 (1983), which noted that "(t]he

express grant of federal

jurisdiction in ERISA is limited to

Suits brought by certain

@ The only circuit holding a

contrary view is the Ninth, which

held in Fentron Indus. v. National

Shopmen Pension Fund, ©?4 F.2d 1300,

1304 (oth Cir. 1982), that certain

"non-enumerated"” parties have

standing to sue under Section

1132(a)(1)(B). However, Fentron has

been widely criticized and narrowed

within its own circuit. See

Associated Builders & Contractors v.

Ca nters Vacation & Holida Trust

fan, 700 F.od 1200, loo (3th Cir.)

’

{limiting Fentron to confer standing

only where “specific and personal"

injuries alleged), cert. denied,

464 U.S. 825 (1983).

parties...as to whom Congress

presumably determined that a right

to enter federal court was necessary

to further the statute's purposes.”

Finally, at least two courts

specifically have concluded that

plan administrators may not bring

Suit under Section 1132(a) (1) (BY of

ERISA. See Great Lakes Steel v.

Deggendorf, 716 F.2d 1101, 1104 (6th

Cir. 1983); In Re Sheppard, 658 F.

Supp. 729, 734 (C.D. I11. 1987). We

find ourselves in agreement with

this view, and so conclude that

Provident cannot bring suit under

Section 1132(a) (1) (B).

3 It is probable, however, that

Provident could have sued under

Section 1132(a)(3), which provides

that

"{a] civil action may be

brought...by a

Ordinarily, the failure to

state the federal statutory or

constitutional provision under which

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

Salta? (1) to redress such

violations or (ii) to

enforce any provisions of

this subchapter or the

terms of the plan.

29 U.S.C.A. Section 1132(a) (3) (West

1985) (emphasis added). Recently,

we concluded in an analogous ERISA

Situation that a plan administrator

"is clearly a fiduciary." u. 8s.

Steel Mining Co. v. District 17,

United Mine Workers of America,

F.2q 149, 152 (4th Cir. 1590). That

conclusion is bolstered by a recent

Department of Labor regulation,

which states that "a plan

administrator...must, by the very

nature of his position, have

'discretionary authority [and

fiduciary status].” 29 =. C.F Rs

Section 2509.75-8 (1989).

a claim arises warrants dismissal

for lack of subject matter

jurisdiction. However, it is well

settled that courts may excuse

pleading defects if the facts

alleged in the complaint and the

relief requested demonstrate the

existence of a substantial federal

question. See Schlesinger v.

Councilman, 420 U.S. 738, 744 n.9

(1975) (Section 1331 “nowhere

mentioned” in complaint but facts

"demonstrate the existence of a

federal question”); Blue v. Craig,

505 F.2d 830, 844 (4th Cir. 1974)

("(I]f facts giving the court

jurisdiction -are set forth in the

complaint, the provision conferring

jurisdiction need not be

AS nly oO ae ph

RN et i ii

specifically pleaded.") (quoting

Williams v. United States, 405 F.2d

951, 954 (9th Cir. 1969)); 5c.

Wright & A. Miller, Federal Practice

& Procedure: Civil Section 1209, at

92 (1969 & Supp. 1989) ("failure to

name the particular statute...under

which the action arises is not fatal

if the remainder of the complaint

shows that a federal question

actually is involved or relied upon

by the pleader"). We believe that

the balance of Provident's complaint

demonstrates that a federal question

is involved, see 28 U.S.C. Section

1331(a) (1982).°

6 Although the ERISA provision

not referred to in Provident's

complaint, 29 UVU.8.C. Section

1132(a) (3), may also provide a route

to federal jurisdiction, there is

seemingly little or no authority

Section 1331l(a) provides that

district courts "shall have original

jurisdiction of all civil actions

arising under the Constitution, laws

or treaties of the United States."

A suit "arises under” federal law if

federal law creates the cause of

action. American Well Works Co. v.

Layne & Bowler Co., 241 U.S. 257,

260 (1916); Cook v. Georgetown Steel

Corp., 770 F.2d 1272, 1274 n.2 (4th

Cir. 1985). Although the issue was

at one point in doubt, see T.B.

Harms Co. v. Eliscu, 339 F.2d 823,

827-828 (2d Cir. 1964) (Friendly,

J.), cert. denied, 381 U.S. 915

(1965), there is no longer any

with regard to that question.

Accordingly, in this case, we prefer

to ground federal jurisdiction under

the federal question provision.

ee < he ae ae

question that the word "laws" in

Section 1331(a) embraces claims

founded upon federal common law. In

Illinois v. City of Milwaukee, 406

U.S. 91, 100 (1972), the Supreme

Court concluded that "Section 1331

jurisdiction will support claims

founded upon federal common law as

well as those of a statutory

origin." City of Milwaukee involved

a public nuisance suit brought by

the State of Illinois against four

Wisconsin cities and a city sewage

commission for dumping raw sewage

into Lake Michigan. The Court,

asked to exercise its original

jurisdiction because a state was a

party, declined but instead found

federal question jurisdiction. The

Court held that because Congress had

federalized the area of water

pollution with the Water Pollution

Control Act of 1972, federal courts

could impose remedies that fell

within the interstices of this act

using a federal common law of

nuisance. The Court concluded that

such a suit arose under the "laws"

of the United States. 406 U.S. at

100-04,

Citing City of Milwaukee,

several courts have held that ERISA

actions governed by federal common

law "arise under" federal law for

purposes of Section 1331. See Airco

Industrial Gases v. Teamsters Health

& Welfare Pension Fund, 850 F.2d

1028, 1033 (3d Cir. 1988); Whitworth

Ua, Bago aban Ce

atta te

Bros. Storage Co. v. Central States

Pension Fund, 794 F.2d 221, 236 (6th

Cir.), cert. denied, 479 U.S. 1007

(1986); Northeast Dep't ILGWU v.

Teamsters Local Union No. 229, 764

F.2d 147, 154-159 (3d Cir. 1985)

(opinion of Becker, J.). Cf. Award

Service, Inc. v. Northern Calif.

Retail Clerks Unions, 763 F.2d 1066,

1068 (9th Cir. 1985) (district court

had Section 1331 jurisdiction for

purposes of determining whether

employer had implied cause of action

under ERISA), cert. denied, 474 U.S.

1081 (1986). One commentator has

cited City of Milwaukee for the

proposition that "federal common law

supports federal question

jurisdiction in the district courts

in exactly the same way as other

federal law does." Field, Sources

of Law: The Scope of Federal Conmon

Law, 99 Harv. L. Rev. 881, 897

(1986); see also Merrill, The Common

Law Powers of Federal Courts, 52 U.

Chi. L. Rev. 1, 40-46 (1985).

As to the situation presented

sub judice, both Airco Industrial

Gases and Whitworth are particularly

instructive. In Airco, an employer

sued an employee benefit plan

seeking to recover, under. the

equitable doctrine of unjust

enrichment, overpayments made by

mistake. After the district court

found federal question jurisdiction

and granted relief for the

plaintiff, the Third Circuit

rod

aes Sy ak:

SRA LER A MOND Ae eed

affirmed on the jurisdictional

point. Writing for a unanimous

panel, Judge Higginbotham stated

that ERISA's broad preemption

provision, 29 U.S.C. Section

1144(a), "requirel[s|] the

applicaticn of federal legal

principles for its disposition in

this case, that is, federal common

law principles." 850 F.2d at 1033.

Thus, the court concluded that "we

agree with [the district court's]

conclusion- that section 1331

conferred upon it subject matter

jurisdiction to determine the

existence of a federal common law

cause of action based on unjust

enrichment." Id. at 1034 (emphasis

added).

Similarly, in Whitworth, an

employer sued under the contract

doctrine of restitution to recover

payments mistakenly made to a

retirement plan. Because the

employer was neither a plan

participant, beneficiary, or

fiduciary, the Sixth Circuit

concluded that the plaintiff could

not premise jurisdiction on the face

of the ERISA statute. 794 F.2d at

22ats However, because the

restitution claim could only be

decided under federal common law

given ERISA's preemption clause, the

court held that plaintiff's claims

"arise under federal law pursuant to

28 U.S.C. Section 1331." Id. at

233.

RN kT 2 tt At RS Ne IONE WEIL Cae EE Na bY

As in Airco and Whitworth, this

appeal presents an application of

federal common law. There is little

question that Provident's claim of

unjust enrichment may not be

predicated on state law given

ERISA's broad preemption provision.’

TA question does exist,

however, as to whether ERISA

preempts the Virginia anti-

subrogation provision, Va. Code Ann.

Section 38.2-3405 (Michie 1986

Repl.). Provident argues, and the

district court agreed, that

preemption is appropriate;

conversely, Waller contends that the

Virginia provision is controlling

and requires a judgment in her

favor. Despite the district court's

finding that the anti-subrogation

statute "without reservation" meets

the test for preemption outlined in

Shaw v. Delta Air Lines, 463 U.S.

85, 97-995 (1983), we note that the

issue of whether state anti-

subrogation provisions are

preempted by ERISA has divided the

courts, Compare FMC ork: Vv.

Hollida ’ 8 F. ’ -

Cir. 7389) (ERISA did not preempt

Pennsylvania anti-subrogation

See 29 U.S.C.A. 1144(a) (West 1985)

provision because law did not

address a "“core type of ERISA

matter"), cert. ranted, 58

U.S.L.W. 3513 (0.S. Feb. 20, 1990)

(No. 89-1048), with United Food &

Commercial Workers & Employers

Arizona Health & Welfare Trust v.

Pacyga, 601 F.od 1157, 1160 (Sth

st 1986) (Arizona's anti-

subrogation law “relates to" benefit

plans and so is preempted).

We are saved from weighing in

on the issue because we conclude

that no subrogation situation is

presented here. Typically,

subrogation in the tortfeasor

context involves the insurer

stepping into the shoes of the

insured and attempting to recover

from the third party who caused the

injury. See 16 Couch on Insurance

2a Section 61:172 (Rev. ed. I9583).

The instant case, however, concerns

a dispute over the terms of the

insurance contract itself, and this

contract does not provide for

subrogation against a third party.

All Provident seeks here is the

money it paid out to the insured; it

does not seek to step into Waller's

shoes and proceed against the third

party tortfeasor. Consequently, the

Virginia anti-subrogation provision

is inapplicable, and so we do not

reach the preemption issue.

("the provisions of [ERISA] shall

Supersede any and all State laws

insofar as they may now or hereafter

relate to any employee benefit

PLGR. 2 ee). The Supreme Court has

interpreted this provision to

preempt state common law contract

and tort claims because they

"relate to" an employee benefit

plan, see Pilot Life Ins. Co. v.

Dedeaux, 481 U.S. 41, 47 (1987);

Metropolitan Life Ins. Co. v.

Taylor, 481 U.S. 58, 62 (1987), and

we cannot see how a different result

could ensue from a claim for unjust

In light of that consideration,

if preemption through ERISA had not

occurred and we were thrown back on

the Virginia law, the situation, as

later explanation in the opinionn

indicates, is one calling for

application under Virginia law of

unjust enrichment principles.

enrichment. See Airco Industrial

Gases v. Teamsters Health & Welfare

Pension Fund, 618 F. Supp. 943, 950

n.6 (D. Del. 1985) ("existence of a

federal common law action for unjust

enrichment action preempts

plaintiff's claimed state law

action"). Having established

ERISA's applicability, we must then

focus on common law remedies because

ERISA does not provide an explicit

remedy for Provident. Although it

has been well recognized for years,

both the Supreme Court and this

circuit recently gave express

authorization for federal courts to

"develop a ‘federal common law of

rights and obligations under ERISA-

regulated plans.'" Firestone Tire &

Rubber Co. v. Bruch, U.S.

, 109 S. Ct. 948, 954 (1989)

(quoting Pilot Life, 481 U.S. at

56); see also U.S. Steel Mining Co.

v. District 17, United Mine Workers

of America, 897 F.2d 149, 152 (4th

Cir. 1990) ("the drafters of ERISA

authorized courts to develop federal

common law"). Here, we must

undertake precisely the task

outlined in Firestone and already

performed in a different context in

Steel Mining, i.e., develop and add

to the growing federal common law of

ERISA rights and obligations.

Our holding today that the

creation of ERISA federal common law

establishes "arising under"

jurisdiction is not without

boundaries, however. The mere

invocation by a plaintiff of Section

1331 and federal common law is not

enough, by itself, to confer federal

question jurisdiction. For example,

a more specific statutory provision

conferring exclusive jurisdiction

elsewhere would supersede the

application of Section 1331. E.g.,

Connors v. Amax Coal Co., 858 F.2d

1226, 1230 (7th Cir. 1988)

(Longshore and Harbor Workers’

Compensation Act supplants

application of Section 1331 and

ERISA in disputes concerning

specific medical expenses). Rather,

we hold, as did the Third Circuit in

Airco, 850 F.2d at 1033, that

federal question jurisdiction exists

pursuant to ERISA only where the

issue in dispute is of "central

concern" to the federal statute.

Such a conclusion is supported both

by Franchise Tax Board vy.

Construction Laborers Vacation

Trust, 463 U.S. 1 (1983), and Shaw

v. Delta Air Lines, 463 U.S. 85

(1983), two cases decided the same

day that address the existence of

federal jurisdiction over claims

that relate to ERISA.

In Franchise Tax Board, a state

taxing authority brought suit

against an ERISA-qualified benefit

trust fund seeking damages and a

declaration that its authority to

levy was not preempted by ERISA.

Despite the- fact that the state did

not fall within the parties allowed

to sue under Section 1132(a), the

state argued that any action that

required an interpretation or

application of ERISA "arose under"

the laws of the United States and

created Section 1331 jurisdiction.

Writing for a unanimous Court,

Justice Brennan did not agree, and

held that despite the statute's

broad scope, the Congress did not

intend for ERISA to preempt every

cause of action relating to benefit

-plans. Thus, the Court concluded,

™~- suit by state tax

authorities...does not ‘arise

under' ERISA...[because] the State's

right to enforce its tax levies is

not of central concern to the

hd ona Ml

Nitin nek

federal statute." 463 U.S. at 25-

26.

Despite the Court's refusal to

invoke federal question jurisdiction

in Franchise Tax Board, its decision

should not be read as a rejection of

the application of Section 1331 to

other claims governed by ERISA,

especially those that require

application of federal common law. °

8 In Northeast Department ILGWU

v. Teamsters Local Union No. 229,

. - mi T3a Cir.

1985), all three panel members

reached different conclusions

regarding the effect of Franchise

Tax Board and the jurisdictional

basis of a claim brought by one

employee benefit plan against

another. Judges Becker and Sloviter

agreed that Section 1331 provided

the basis for jurisdiction over a

question implicating ERISA, but

District Judge Fullam, sitting by

designation, held that the express

jurisdictional grant of Section

1132(a)(1)(B) provided the

appropriate basis. However, Judges

The situation presented in Franchise

Becker and Sloviter disagreed as to

the reasons for Section 1331

jurisdiction. Interpreting City of

Milwaukee, Franchise Tax Board and

Delta Air Lines, Judge Becker held,

as we do here, that a claim

requiring the application of federal

common law arises under the laws of

the United States. Disagreeing,

Judge Sloviter argued that Franchise

Tax Board “expressly rejected” the

view that “arising under”

jurisdiction may be created when

federal common law supplies the

rule of decision. 764 F.2d at 165-

66 (Sloviter, J., concurring).

Rather, Judge Sloviter found that

Section 1331 jurisdiction was

proper because, like the plaintiffs

in Delta Air Lines, the Northeast

Department plaintiffs brought suit

to Clarity their obligations under

an ERISA-governed plan. Id.

This disagreement was clarified

partially by the Third Circuit in

Airco. There, Judge Higginbotham

"agree(d]" with Judge Becker's view

that Franchise Tax Board did not

foreclose Section 1331 jurisdiction

over claims that could arise under

the federal common law of ERISA, so

long as the claims were of "central

concern" to ERISA. 850 F.2d at

1033-34 n.5. We find that view of

Franchise Tax Board persuasive and

SO adopt it today.

Tax Board was unusual (as it

involved the state taxing power and

an entity not subject to ERISA

regulation), and so the Court was

not faced with and did not decide

whether federal question

jurisdiction could be predicated on

the basis of federal common law in

accordance with City of Milwaukee.

In contrast, Delta Air Lines

represented a more typical ERISA

action as there several companies

subject to ERISA regulation brought

declaratory judgment actions

alleging that ERISA preempted

several state benefit laws. Noting

the difference from Franchise Tax

Board, which the Court said "d[id]

not call into question the lower

courts' jurisdiction to decide these

cases," the Court held that the

plaintiffs "present{ed] a federal

question over which the federal

courts have jurisdiction under 28

U.S.C. Section 1331 to resolve."

463 U.S. at 96 n.14. See also

Metropolitan Life Ins. Co. v.

Taylor, 481 U.S. 58, 64-67 (1987)

(claim of ERISA preemption that is

also within scope of Section 1132 (a)

arises under laws of United States

for purposes of Section 1331).

We read Franchise Tax Board and

Delta Air Lines to provide, "at a

minimum," Airco, 850 F.2d at 1033

n.5, for federal question

jurisdiction under ERISA where the

issue rrcesented, whether it be the

creation of federal common law or

the interpretation of a specific

ERISA provision, is of “central

concern" to the statute. We believe

the instant case meets this

condition. As will be shown below,

the issue of whether federal courts

should impart unjust enrichment

principles into the gaps left by

ERISA is one that has divided the

courts. Similarly, the issue of

whether employers and plan

administrators should receive the

benefit of these common law

principles requires an examination

of several collateral ERISA

provisions as well as the concerns

behind the formulation of the

statute. Consequently, we conclude

that "the absence of an express

statutory grant of jurisdiction in

Section 1132 of FRISA is, under the

rationale of [City of Milwaukee],

irrelevant, and this claim may be

adjudicated in federal court

pursuant to 28 U.S.C. Section

1331(a)." Northeast Department, 764

F.2d at 155.

eee

Having established that federal

question jurisdiction exists and

that the dispute is governed by the

federal common law of ERISA, we must

now consider whether such common law

should include the unjust enrichment

remedy sought by Provident. Like

many issues that involve ERISA, the

federal courts are divided over the

creation of a federal common law of

unjust enrichment. Compare Cummings

By Techmeier v. Briggs & Stratton,

797 F.2d 383, 390 (7th Cir. 1986)

(courts should only invoke federal

common law of unjust enrichment in

"limited circumstances"), and Van

Orman v. American Ins. Co., 680 F.2d

301, 312 (3d Cir. 1982) (no federal

common law cause of action under

doctrine of unjust enrichment when

"such a right would override a

contractual provision"), and Amato

v. Western Union Int'l, 773 F.2d

1402 (2d Cir. 1985) (no ERISA common

law of unjust enrichment in

"circumstances of this case"), with

Airco Industrial Gases v. Teamsters

Health & Welfare Pension Fund, 618

F. Supp. 943, 950 (D. Del. 1985)

(included within grant of authority

to create federal common law "is the

power, in appropriate circumstances,

to order restitution to prevent

unjust enrichment"), with Morales v.

Pan American Life Ins. Co., 718 F.

Supp. 1297, 1301 (ED. La. 1989)

("{c]reation of a federal common law

of unjust enrichment...would be

inconsistent with ERISA's terms and

policies."). Cf. Whitworth, 794

F.2d at 235-36 (finding federal

common law cause of action by

employer to recover mistakenly paid

pension contributions); Dime Coal

Co. v. Combs, 796 F.2d 394, 397-99

-(llth Cir. 1986) (reaching contrary

conclusion to Whitworth).

When entering the fray, we must

keep in mind two points. The first

involves general concerns about

ERISA and federal common law.

Despite the power of the federal

courts to fill in the interstices of

ERISA, we must respect the fact that

congress in creating ERISA has

"established an extensive regulatory

network and has expressly announced

its intention to occupy the field."

Van Orman, 680 F.2d at 312.

Accordingly, we must proceed

cautiously in creating additional

rights under the rubric of federal

common law, and remember that we do

not possess carte blanche authority

to “use State common law to re-write

a federal statute.” Nachwalter v.

Christie, 805 F.2d 956, 960 (11th

Cir. 1986).

It was such concerns that

prompted Judge Butzner to announce

recently that "we are constrained to

fashion only those remedies that are

appropriate and necessary to

effectuate the purposes of ERISA."

U.S. Steel Mining Co. v. District

17, United Mine Workers of America,

897 F.2d 149, 153 (4th Cir. 1990).

In Steel Mining, an employer and a

pension fund, relying on Section

1132(a) of ERISA, sought to recover

extracontractual restitution and

attorney's fees from a union. The

employer and fund had paid these

costs pursuant to a West Virginia

statute that was subsequently

declared to be preempted by ERISA.

Declining to engraft a remedy for

extracontractual restitution under

the guise of federal common law, the

court noted that "Congress did not

intend that federal courts should

develop common law to

decide...issues that bear at best a

most attenuated relation to the

purposes of ERISA." 897 F.2d at

153.

In addition, we also recognize

the concerns that have prompted

several courts to decline to impose

a federal common law of unjust

enrichment. In Cummings By

Techmeier v. Briggs & Stratton, 797

F.2d 383, 390 (7th Cir. 1986), the

Seventh Circuit held that fashioning

a federal common law unjust

enrichment doctrine, although

permissible in other circumstances,

was inappropriate when it would

override a contractual provision in

a pension plan, Since the

"enrichment”™ in Cummings by

Techmeier was authorized by the

express terms of the plan, the court

concluded that it would not

vindicate any “important statutory

policy” to supplement the defined

remedies in ERISA. 797 F.2d at 390-

91. Similarly, in Van Orman v.

American Ins. Company, 680 F.2d 301,

312 (3d Cir. 1982), the Third

Circuit held that plan participants

were not entitled, under the

doctrine of unjust enrichment, to

portions of an actuarial plan

surplus. Writing for the court,

Chief Judge Seitz stated that

because the plan document did not

afford the plaintiffs any right to

the surplus, contravening the

provision would "“require[] a

particularly strong affirmative

indication that such a [common law]

right would effectuate a statutory

policy.” oe -f.268 &¢° 323.

Finally, we note the decision in

Morales v. Pan American Life Ins.

Co., 718 F. Supp. 1297, 1301 (E.D.

La. 1989), which held that "[q]uasi-

contractual remedies [such as unjust

enrichment] have no place where

there is a contract between the

parties.” 718 F. Supp. at 1301.

Recognizing these caveats, we

nonetheless conclude that fashioning

a federal common law rule of unjust

enrichment is appropriate in the

circumstances of this case. In

developing this rule, we look to the

plan contract itself, the statutory

policies of ERISA, and state law.

See Fox Valley & Vicinity

Construction Workers Pension Fund v.

Brown, 897 F.2d 275, 281 (7th Cir.

1990) (en banc). Unlike the plan

documents in Cummings by Techmeier,

which explicitly authorized the

enrichment, and the one in Van

Orman, which was silent as to the

plan surplus, the plan contract in

the present case provided for

repayment of the advanced monies.

Thus, the creation of a common law

remedy here would further the

contract between the parties and

effectuate the clear intent of

Provident's "Acts of Third Parties”

clause. Second, the remedy is in

accord with the statutory provision

in ERISA that allows for the return

of mistakenly paid contributions

made by employers to multiemployer

plan funds. See ERISA Section

403(c)(2) (A), 29 U.S.C. Section

1103(c) (2) (A). Recently, several

courts have cited to Section

1103(c) (2) (A) in creating a common

law remedy for employers in their

suits to recover erroneous payments

to pension funds. See, €.g.,

Plucinski v. I.A.M. Nat'l Pension

Fund, 875 F.2d 1052, 1058 (3d Cir.

1989) ("if we did not recognize this

cause of action it could lead to

severely inequitable results that we

do not believe were intended by

Congress"). Although the payment

made by Provident was probably not

mistakenly advanced, Section

1103(c) (2) (A) indicates a desire to

ensure that plan funds are

administered equitably and that no

one party, not even plan

beneficiaries, should unjustly

profit. Cf. Carl Colteryahn Dairy,

Inc. v. West Pennsylvania Teamsters

& Employers Pension Fund, 847 F.2d

113, 122 (3d Cir. 1988) (the rule

that "a party should not be allowed

to profit from its own wrongs" is

"particularly apposite when dealing

with [ERISA]" because Congress has

emphasized the"equitable character"

of these plans). As in the

Plucinski case, reaching a contrary

result would "discourage some

employers from operating ERISA

qualifying plans. It thus furthers

the purposes of ERISA to recognize

this cause of action." 875 F.2d at

1058.

Finally, the facts of the

instant case fit the archetypal

unjust enrichment scenario. As

Provident repeatedly reminds us, the

result in this case is an

inequitable one; the _ record -

indicates that Waller received a

double recovery despite knowing

about the plan's reimbursement

provision, and despite the absence

of a requirement that Providernt's

payment be made in the first place.

Consequently, Provident argues, it

is entitled to recover under a

quasi-contractual theory. In

Virginia, the "law will imply a

promise to pay for goods received,"

Kern v. Freed Co., 224 Va. 678, 680,

299 S.E.2d 363, 365 (1983), and

several cases recognize the related

theory of quantum meruit, which

holds that when one party performs

services at the request of the other

party to a contract, “the law

creates an obligation, which is an

implied-at-law contract, to pay a

reasonable compensation...."

Humphreys Railways v. F/V Nils S,

603 F. Supp. 95, 98 (E.D. Va. 1984).

As summarized by a national

commentator, three elements

encompass the equitable remedy of

unjust enrichment and quasi-

contract: the plaintiff must show

that (1) he had a reasonable

expectation of payment, (2) the

defendant should reasonably have

expected to pay, or (3) society's

reasonable expectations of person

and property would be defeated by

nonpayment. C. Kaufman, Corbin on

Contracts, Section 19A, at 50 (Supp.

1989).

In the instant case, all three

elements are apparent. Provident

reasonably expected to be reimbursed

for its rather liberal advancements;

Waller clearly was aware of the

plan's "Acts of Third Parties"

provision when she requested and

then accepted the benefits; and the

interests of society, as reflected

by the goals of ERISA and efficient

plan administration, would be served

by allowance of an equitable remedy.

Accordingly, we hold, in the

circumstances of the case, that it

is appropriate for a federal court

to weave into the statutory fabric

of ERISA the federal common law

remedy of unjust enrichment.”

REVERSED

JGiven this disposition, we

leave undisturbed the district

court's finding on class

certification.

II. FINAL JUDGMENT AND ORDER

OF THE DISTRICT COURT

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF VIRGINIA

ROANOKE DIVISION

PROVIDENT LIFE

)

AND ACCIDENT ) Civil

INSURANCE COMPANY, ) Action No.

Plaintiff ) 88-0173-R

)

Vv. ) FINAL

) JUDGMENT

MARY J. WALLER, ) AND

Defendant ) ORDER

In accordance with the

memorandum opinion filed this day,

it is hereby

ADJUDGED AND ORDERED

as follows:

(1) Defendant's motion to

certify this case as a class action

shall be and hereby is DENIED;

(2) Plaintiff's motion for a

protective order shall be and hereby

is GRANTED;

(3) Section 38.1-342.2 of the

Virginia Code is preempted by

federal law as it applies to the

employee benefit plan at issue, and

the terms of that plan are

enforceable;

(4) Because Plaintiff failed

to comply with the terms of the plan

by failing to have Defendant sign a

repayment agreement, Plaintiff's

motion for summary judgment shall be

and hereby is DENIED; and

(5) Judgment shall be entered

in favor of the Defendant.

The Clerk of Court is directed

to strike this case from the Court's

active docket and to send certified

copies of this order and the

accompanying memorandum opinion to

onde of record.

ENTER: This 5th day of June,

1989.

James C. Turk

Chief U. S. District Judge

III. MEMORANDUM OPINION OF

DISTRICT COURT

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF VIRGINIA

ROANOKE DIVISION

PROVIDENT LIFE ) Civil

AND ACCIDENT ) Action No.

INSURANCE COMPANY, ) 88-0173-R

Plaintiff )

) MEMORANDUM

Vv. ) OPINION

) By:

MARY J. WALLER, ) Honorable

Defendant ) James C.

Turk, Chief

wo Be

District

Judge

This is an action to recover

payments advanced by Provident Life

and Accident Insurance Company

("Provident") to Mary J. Waller,

defendant herein, under the

qualified, self-funded employee

benefit plan of Burlington

Industries, Inc. ("Burlington").

Jurisdiction is alleged under the

Employee Retirement Income Security

Act of 1974 ("ERISA"), 29 U.S.C.

Sections 1001-1461, and the case is

governed by federal law. The case

is now before the Court on the

defendant's motion to certify a

class action and the plaintiff's

motion for summary judgment. The

Court has heard oral argument on

these motions, and the matter is |

ripe for a decision.

The material facts in this case

are not in dispute. Defendant is an

employee of Burlington and is a

participant in an employee benefits

plan funded by Burlington and

administered by Provident. The plan

booklet provides that medical

benefits are not payable under the

plan when the injury is caused by

the act or omission of a third

party. The plan goes on to provide,

however, that payment of medical

expenses in such cases may be

advanced when the plan participant

Signs an agreement to repay any such

advanced expenses when the

participant has received payments

from the responsible third party

pursuant to any judgment or

settlement. It is undisputed that

defendant was involved in an

accident which resulted in medical

expenses in the amount of five

thousand nine hundred twenty-two

dollars and fifty-three cents

($5,922.53). It is also undisputed

that Provident, on behalf of

aaa is

Burlington, paid these medical

expenses without having first

obtained a repayment agreement from

defendant. Notwithstanding the

absence of any agreement to repay,

Provident now seeks reimbursement,

on behalf of Burlington, for the

advanced medical expenses.

Defendant argues initially that

Section 38.1-342.2 of the Code of

Virginia prohibits any reimbursement

agreements such as the one involved

in this case. Burlington's plan is

a self-funded, qualified plan under

ERISA. 29 U.S.C. Section 1002(1).

Consequently, the reimbursement

provision, Section 38.1-342.2, and

ERISA are all involved in this case,

and the Court must determine whether

the Virginia antisubrogation

provision is preempted by the broad

lanquage of 29 U.S.C. Section

1144(a).

The United States Supreme Court

has established a two-part test to

govern questions of preemption under

Section 1144(a). Shaw v. Delta Air

the state law in question has a

connection with the employee benefit

plan and none of the narrow

exceptions to Section 1144(a) apply,

then the "conflicting and

inconsistent State and local

regulation" is displaced by ERISA.

Id., at 97, 99. The Court finds

without reservation that Section

38.1-342.2 meets both prongs of the

Shaw test and is preempted by

federal law. The provision clearly

relates to Burlington's benefit

plan, see Davis v. Line Construction

Benefit Fund, 589 F. Supp. 146 (W.D.

Mo. 1984), and none of the limited

exceptions apply.

The Court's inquiry, however,

cannot end with its finding that the

repayment provisions of the plan are

applicable in this case. The terms

of the repayment provision are

equally binding on Burlington,

Provident, and the plan

participants. In this case, medical

expenses were advanced to defendant

without an agreement to repay those

expenses from any settlement or

judgment against the responsible

third party. Having failed to

require defendant to sign such an

agreement to repav, Provident and

Burlington have not complied with

the terms of the plan and cannot now

recover the advanced expenses.

Therefore, Provident's motion for

summary judqment must be denied and

judqment entered in favor of

defendant.

The Court nas also considered

the defendant's motion for

certification of a class action

under Rule 23 of the Federal Rules

At the hearing on the motions

in this case, the parties advised

the Court that medical expenses were

also advanced under the plan to Ms.

Waller's daughter, Nicole. In

Nicole's case, however, an executed

repayment agreement was obtained by

Burlinaton and Provident and would

be enforceable,

of Civil Procedure. While the Court

has found that the repayment

provisions of the plan are

applicable and binding on Burlington

and all plan participants, the Court

also finds that Ms. Waller's defense

in this action that she was not

required to execute a repayment

agreement is not necessarily similar

to defenses available to other plan

participants and that class

certification would not be proper.

The motion for certification should

be denied.

Based upon the foregoing the

Court holds that Virginia Code

Section 38.1-342.2 is preempted by

federal law, that the plan's

repayment provisions are applicable

and binding, and that Burlington and

Provident failed to comply with the

terms of the repayment section in

Ms. Waller's case and cannot recover

the medical expenses advanced to

defendant. The Court also holds

that certification of this matter as

a class action would not be proper.

An appropriate order consistent with

this memorandum opinion shall be

entered this day.

DATED: This 5th day of June,

1989.

James C. Turk

Chief U. S. District Judge

IV. TEXT OF STATUTES INVOLVED

IN CASE

Be 28 U.S.C. Section 1331. Federal

question

The district courts shall have

original jurisdiction of all civil

actions arising under the

Constitution, laws, or treaties of

the United States.

RB. 29 U.S.C. Section 1132. Civil

enforcement

(a) Persons empowered to bring a

Civil action. A civil action may be

brought--

(1) by a participant or

bene ficiarv--

(A) for the relief provided for

in subsection (c) of this section,

(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;

(2) by the Secretary, or by a

participant, beneficiary or

fiduciary for appropriate relief

under section 409 [29 USCS Section

1109];

(3) by a participant, beneficiary,

or fiduciary (A) to enjoin any act

or practice which violates any

provision of this title 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 title

or the terms of the plan;

(4) by the Secretary, or bv a

participant, or beneficiary for

appropriate relief in the case of a

violation of 105(c) [29 USCS Section

1025(c)1;

(5) except as otherwise provided

in subsection (b), by the Secretary

(A) to enjoin any act or practice

which violates any provision of this

title, or (B) to obtain other

appropriate equitable relief (i) to

redress such violation or (ii) to

enforce any provision of this title;

(6) by the Secretary to collect

any civil penalty under subsection

(b) Plans qualified under Internal

Revenue Code; maintenance of actions

involving delinquent contributions.

(1) In the case of a plan which is

qualified under section 40l(a),

403(a), or 405(a) of the Internal

Revenue Code of 1986 for with

respect to which an application to

so qualify has been filed and has

not been finally determined) the

Secretary may exercise his authority

under subsection (a) (5) with respect

to a violation of, or the

enforcement of, parts 2 and 3 of

this subtitle [29 USCS Sections 1051

et seq., Sections i081 et seq.]

(relating to participation, vesting,

and funding), only if--

(A) requested by the Secretary of

the Treasury, or

(B) one or more participants,

beneficiaries, or fiduciaries, of

Such plan request in writing (in

such manner as the Secretary shall

prescribe bv regulation) that he

exercise such authoritv on their

behalf. In the case of such a

request under this paragraph he may

exercise such authority only if he

determines that such violation

affects, or such enforcement is

necessary to _ protect, claims of

participants or beneficiaries to

benefits under the plan.

(2) The Secretary shall not initiate

an action to enforce section 515 [29

USCS Section 1145].

supply requested information;

penalty for failure to _ provide

annual report in complete form. (1)

Any administrator (A) who fails to

meet the requirements of paragraph

(1) or (4) of section 606 [29 USCS

Section 1166(a) or (4)] with

respect to a participant or

beneficiary, or (B) who fails or

refuses to comply with a request for

anv information which such

administrator is required by this

title to furnish to a participant or

beneficiarv (unless such failure or

refusal results from matters

reasonably beyond the control of the

administrator) by mailing the

material requested to the last known

address of the requesting

participant or beneficiarv within 30

days after such request may in the

court's discretion be personally

liable to such participant or

beneficiary in the amount of up to

$100 a day from the date of such

failure or refusal, and the court

may in its discretion order such

other relief as it deems proper.

(2) The Secretary may assess a civil

penalty against any plan

administrator of up to $1,000 a day

from the date of such plan

administrator's failure or refusal

to file the annual report required

to be filed with the Secretary under

section 101(b) (4) [29 USCS Section

1021(b) (4)]. For purposes of this

paragraph, an annual report that has

been rejected under section

104(a) (4) [29 USCS Section

1024(a)(4)1] for failure to provide

material information shall not be

treated as having been filed with

the Secretarv.

(3) Any employer maintaining a plan

who fails to meet the notice

requirement of section 101(d) [29

USCS Section 1021(d)1 with respect

to any participant or beneficiary

may in the court's discretion be

liable to such participant or

beneficiary in the amount of up to

$100 a day from the date of such

failure, and the court may in its

discretion order such other relief

as it deems proper.

(da) Status of employee benefit plan

as entity. (1) An employee benefit

plan mav sue or be sued under this

title as an entity. Service of

summons, subpena, or other legal

process of a court upon a trustee or

an administrator of an employee

benefit plan in his capacity as such

shall constitute service upon the

employee benefit plan. In a case

where a plan has not designated in

the summary plan description of the

plan an individual as agent for the

service of legal process, service

upon the Secretary shall constitute

such service. The Secretary, not

later than 15 days after receipt of

service under the preceding

sentence, shall notify the

administrator or any trustee of the

plan of receipt of such service.

(2) Any money judgment under this

title against an employee benefit

plan shall be enforceable only

against the plan as an entity and

shall not be enforceable against any

other person unless’ liability

against such person is established

in his individual Po under

this title.

(e) Jurisdiction. (1) Except for

actions under subsection (a) (1) (B)

of this section, the district courts

of the United States shall have

exclusive jurisdiction of civil

actions under this title brought by

the Secretary or by a participant,

beneficiary, or fiduciary. State

courts of competent jurisdiction and

district courts of the United States

shall have concurrent jurisdiction

of actions under subsection

(a) (1) (B) of this section.

(2) Where an action under this title

is brought in a district court of

the United States, it may be brought

in the district where the plan is

administered, where the breach took

place, or where a defendant resides

or may be found, and process may be

served in any other district where a

defendant resides or may be found.

(f) Amount in controversy;

citizenship of parties. The

district courts of the United States

shall have jurisdiction, without

respect to the amount in controversy

or the citizenship of the parties,

to grant the relief provided for in

Subsection (a) of this section in

any action.

(g) Attorney's fees and _ costs;

awards in actions involving

delinquent contributions. (1) In

any action under this title (other

than an action described in

paragraph 2) by ae participant,

beneficiary, or fiduciary, the court

in its discretion may allow a

reasonable attorney's fee and costs

of action to either party.

(2) In any action under this title

by a fiduciary for or on behalf of a

plan to enforce section 515 [29 USCS

Section 1145] in which a judgment in

favor of the plan is awarded, the

court shall award the plan--

(A) the unpaid contributions,

(B) interest on the unpaid

contributions,

of--

(i) interest on the unpaid

contributions, or

(ii) liquidated damages

provided for under the plan in an

amount not in excess of 20 percent

(or such higher percentage as may be

permitted under Federal oo State

law) of the amount determined by the

court under subparagraph (A),

(D) reasonable attorney's fees and

costs of the action, to be paid by

the defendant, and

(E) such other legal or equitable

relief as the court deems

appropriate. For purposes of this

paragraph, interest on unpaid

contributions shall be determined by

using the rate provided under the

plan, or, if none, the rate

prescribed under section 6621 of the

Internal Revenue Code of 1986 [26

-uscs Section 6621)].

(h) Service upon Secretary of Labor

and Secretary of the Treasury. A

copy of the complaint in any action

under this title by a participant,

beneficiary, or fiduciary (other

than an action brought by one or

more participants or beneficiaries

under subsection (a)(1)(B) which is

solely for the purpose of recovering

benefits due such participants under

the terms of the plan) shall be

served upon the Secretary and the

Secretary of the Treasury by

certified mail. Fither Secretary

shall have the right in his

discretion to intervene in any

action, except that the dnosetary of

the Treasury may not intervene in

any action under part 4 of this

subtitle [29 USCS Sections 1101 et

seq.!. If the Secretary brings an

action under subsection f(a) on

behalf of a participant or

beneficiary, he shall notify the

Secretary of the Treasury.

(i) Administrative assessment of

civil penalty. In the case of a

transaction prohibited by section

406 [29 USCS Section 1106] by a

party in interest with respect to a

plan to which this part applies, the

Secretary may assess a civil penalty

against such party in interest. The

amount of such penalty may not

exceed 5 percent of the amount

involved in each such transaction

(as defined in section 4975(f) (4) of

the Internal Revenue Code of 1986

[26 USCS Section 4975(f)(4)]) for

each year or part thereof during

which the prohibited transaction

continues, except that, if the

transaction is not corrected (in

such manner as the Secretary shall

prescribe in regulations which shall

be consistent with section

4975(£) (5) of such Code [26 USCS

on? a

Section 4975(f)(5)]) within 99 days

after notice from the Secretary (or

such longer period as the Secretary

may permit), such penalty may be in

an amount not more than 100 percent

of the amount involved. This

subsection shall not applv to a

transaction with respect to a plan

described in section 4975(e)(1) of

such Code [26 USCS Section

4975(e)(1)].

(4) Direction and control of

litigation by Attorney General. In

all civil actions under this title,

attorneys appointed by the Secretary

may represent the Secretary (except

as provided in section 518(a) of

title 28, United States Code), but

all such litigation shall be subject

to the direction and control of the

Attorney General.

(k) Jurisdiction of actions against

the Secretary of Labor. Suits by an

administrator, fiduciary,

participant, or beneficiary of an

employee benefit plan to review a

final order of the Secretary, to

restrain the Secretary from taking

any action contrary to the

provisions of this Act, or to compel

him to take action required under

this title, may be brought in the

district court of the United States

for the district where the plan has

its principal office, or in the

United States District Court for the

District of Columbia.

(1) Civil penalties on violations by

fiduciaries. (1) in the case of--

(A) any breach of fiduciary

responsibility under (or other

violation of) part 4 [29 USCS

Sections 1101 et seq.] by a

fiduciary, or

(B) any knowing participation in

such a breach or violation by any

other person,

the Secretary shall assess a civil

penalty against such fiduciary or

other person in an amount equal to

20 percent of the applicable

recovery amount.

(2) For purposes of paragraph (1),

the term "applicable recovery

amount" means any amount which is

recovered from a fiduciary or other

person with respect to a breach or

violation described in paragraph

(1)--

(A) pursuant to any settlement

agreement with the Secretary, or

(B) ordered by a court to be paid

by such fiduciary or other person to

a plan or its participants and

beneficiaries in a judicial

proceeding instituted by the

Secretary under subsection (a) (2) or

(a) (5).

(3) The Secretary may, in the

Secretary's sole discretion, waive

or reduce the penalty under

paragraph (1) if the Secretary

determines in writing that--

(A) the fiduciary or other person

acted reasonably and in good faith,

(B) it is reasonable to expect

that the fiduciary or other person

will not be able to restore all

losses to the plan without severe

financial hardship unless’ such

waiver or reduction is granted.

(4) The penalty imposed on a

fiduciary or other person under this

Subsection with respect to any

transaction shall be reduced by the

amount of any penalty or tax imposed

on such fiduciary or other person

with respect to such transaction

under subsection (i) of this section

and section 4975 of the Internal

Revenue Code of 1986 [26 uscs

Section 4975].

Gs Va. Code Ann. Section 38.1-

a43,.23., Certain subrogation

provisions and limitations upon

recovery in hospitalization,

medical, etc., policies forbidden. -

- No contract of insurance providing

hospitalization, medical, surgical

and similar or related benefits, and

no contract or plan for prepayment

of future hospitalization, medical,

Surgical and similar and related

benefits, delivered or issued for

delivery in this State, shall

contain any provision providing for

Subrogation of a person,

corporation, or association paying

peas IMIR Ot het ht Tp

benefits under such policy,

contract, or plan to the rights

which the person receiving such

benefits may have to recover from a

third person for personal injuries

for the treatment of which such

services were rendered. Nor shall

any such contract of insurance or

contract or plan contain any

provision denying or limiting the

recovery by the person receiving

benefits under such policy or

contract or plan for’ services

rendered for the treatment of

personal injuries, for which

services, payment or reimbursement

has been or is to be received by or

for the account of any such person,

from any claim against or settlement

with a third person responsible for

such personal injuries.

D. Va. Code Ann. Section 38.2-3405.

Certain subrogation provisions and

limitations upon recovery in

hospital, medical, etc., policies

forbidden. -- A. No insurance

contract providing hospital,

medical, surgical and similar or

related benefits, and no

subscription contract or health

‘services plan delivered or issued

for delivery in this Commonwealth

shall contain any provision

providing for subrogation of any

person's right to recovery for

personal injuries from a third

person.

B. No insurance contract,

subscription contract or plan shall

contain any provision denying or

limiting the recovery from any claim

against or settlement with a third

person responsible for such personal

injures.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.