Appendix — Cooper Tire & Rubber Co. v. St. Paul Fire & Marine Insurance
Supreme Court brief1995
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FILED
BS 139 Ju 241%
CASE NO.
IN THE SUPREME COURT OF THE UNITED STATES
October Term, 1995
COOPER TIRE & RUBBER COMPANY,
Petitioner
ST. PAUL FIRE AND MARINE INSURANCE
COMPANY, RICHARD C. PILLSBURY, M.D.,
and ROBERT MAZA
Respondents
Petition for Writ of Certiorari to the
United States Court of Appeals for the Eighth Circuit
MICHAEL T. McMENAMIN, Counsel of Record for
Petitioner Cooper Tire & Rubber Company,
and NANCY A. NOALL
Walter & Haverfield, 1300 Terminal Tower,
Cleveland, Ohio 44113 (216) 781-1212
—
E. BEN FRANKS
DAVID G. PAUL
Franks & Grimes, L.L.P., 8 Woodmont Crossing
Texarkana, Texas 75503 (903) 792-3117
July 21, 1995
TABLE OF CONTENTS
Page
OPINIONS AND ORDERS
1. Opinion of the Court of Appeals for
the Eighth Circuit (February 27, 1995) ...... 1-20
2. Order of the Court of Appeals Denying
Petition for Rehearing (April 25, 1995) ....... 21
3. Order of the Court of Appeals for
Technical Correction (May 2, 1995) ......... 22
4. Memorandum Opinion of the District Court
for the Western District of Arkansas
after Trial (October 1, 1993) ........... 23-49
5. Judgment entered by District Court
I ed sw kaw be 50
6. Order of the District Court on Post-Trial
Pitins CADE £2, TIPS) oc cee cw ees 51-63
7. Amended Judgment entered by District
Cee Se Ee Ee ie 8 hs a bk ER ees 64
STATUTE
Ae Ce ONE Ce eee Ee eR Ch eee 65-66
OTHER RELEVANT EXHIBITS
1. Cooper Tire & Rubber Company’s Salaried
Employees Welfare Benefits Plan with Relevant
Excerpts From the Health Care Plan For
SRIMIOG TMOVOES . wc ccc cece een 67-86A
2. Summary Plan Description of Health
Care Plan [excerpted from Benefits Handbook] 87-99
3. Receipt and Subrogation Agreement
signed by Robert Maza .............. 100-101
UNPUBLISHED CASES
1. Harris Trust & Savings Bank v. Provident
Life & Accident Ins. Co., 1995 U.S.
App. LEXIS 15096 (7th Cir. 1995) ...... 102-122
2. Health Cost Controls v. Manetas, Case
No. 94-C-00419, 1995 U.S. District
LEXIS 1800 GN.D. Hl. 1995) ..... ccc 123-139
3. Health Cost Controls v. Skinner, Case
No. 94-C-307, 1995 U.S. District LEXIS
i og: ae OM | ee ene 140-149
4. Hedberg v. Zaldivar, Case No. 94-C117
1994 U.S. District LEXIS 2505 (N.D.
ere er 150-157
5. Marianjoy Rehabilitation Ctr. v. Mirtl,
1994 U.S. Dist. LEXIS 6320 (N.D.
Se: TD a8 sae 4 eh ee ae 158-173
6. Pople v. Cox, Case No. 93-C6274
1993 U.S. District LEXIS 16105
ee 174-183
7. Providence Life and Ac. Ins. Co. v. Waller,
906 F.2d 985, 993 (4th Cir. 1990), cert.
denied, 498 U.S. 982 (1990) .......... 184-206
G: \WPDOC\039\P\CONTENTS .APP
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
No. 94-2183
Cooper Tire & Rubber .
Company, .
oh
Plaintiff-Appellee, .
”
Vv. .
*
St. Paul Fire and ° Appeals from the United
Marine Insurance ° States District Court for
Company, * the Western District of
. Arkansas.
Defendant-Appellant, .
m
Robert Maza, °
7~
Defendant °
*
Richard C. "
Pillsbury, M.D., °
a
Defendant-Appellant. .
s
<
1 a
re
No.
94-2209
Cooper Tire & Rubber
Company,
Plaintiff-Appellee,
St. Paul Fire and
Marine Insurance
Company,
Defendant
Robert Maza,
Defendant- Appellant,
Richard C.
Pillsbury, M.D.,
Defendant.
No. 94-2240
Cooper Tire & Rubber °
Company, °
—
Plaintiff-Appellee, °
Vv. .
St. Paul Fire and a
Marine Insurance °
Company; Robert °
Maza; Richard C. .
Pillsbury, M.D., .
a
Defendants-Appellees. °
Submitted: December 12, 1994
Filed: February 27, 1995
4
Before MAGILL and BEAM, Circuit Judges, and PIERSOL,
District Judge.
BEAM, Circuit Judge.
St. Paul Fire and Marine Insurance Company (St.
Paul), Richard C. Pillsbury, M.D., and Robert Maza appeal
an adverse judgment of the district court. After a bench
trial, the district court found that Maza breached his
contractual obligations to the ERISA plan of Cooper Tire &
Rubber Company (Cooper Tire) by settling his medical
malpractice claims against Dr. Pillsbury. The district court
further found that Dr. Pillsbury and St. Paul (Pillsbury’s
malpractice insurer) tortiously interfered with the contract
between Maza and Cooper Tire by settling with Maza.
Because we find that Maza took no actions contrary to the
terms of the ERISA plan, we reverse.
THE HONORABLE LAWRENCE L. PIERSOL,
United States District Judge for the District of South
Dakota, sitting by designation.
I. BACKGROUND
Cooper Tire maintains a_ self-funded and
self-administered employee welfare benefit plan (the Plan)
which is subject to the Employee Retirement Income Security
Act (ERISA), 29 U.S.C. §§ 1001-1461. As an employee of
Cooper Tire, Robert Maza received health insurance
coverage through the Plan for himself and his wife. In 1988,
Maza’s wife became seriously ill and died. As a result of
her illness, the Mazas incurred covered medical expenses
totaling $298,118.07. Cooper Tire reimbursed the Mazas for
these expenses as they were incurred. On receipt of each
payment, Cooper Tire required that Maza sign a "Receipt
and Subrogation Agreement” releasing Cooper Tire from all
claims for the reimbursed expenses and acknowledging
Cooper Tire’s subrogation rights.’
In August 1989, Maza filed a medical malpractice
action against Dr. Pillsbury, his wife’s physician, in
Arkansas state court. Maza sued Dr. Pillsbury individually
> Both Maza and the Director of Labor Relations at
Cooper Tire testified that Maza signed a Receipt and
Subrogation Agreement each time medical bills were paid on
his wife’s behalf. App. at 195, 279. Only two of the
agreements (representing $57,770.09 in payments) are in the
record before us. Id. at 419-420. Based on the undisputed
testimony of the Director that the agreements in the record
are "exemplars" of the agreements signed for each and every
| payment, we will assume that the relevant language in all the
agreements is identical. The two agreements in the record
are identical, except for the insertion of relevant dates and
| amounts. One of these agreements is reproduced in the
‘ appendix to this opinion.
6
and on behalf of his wife’s estate, alleging that his wife’s
death was the result of Dr. Pillsbury’s negligence. On his
own behalf, Maza sought recovery for medical expenses
incurred and for loss of "consortium, society, and
companionship." On behalf of the estate, Maza sought
recovery of damages for medical expenses, loss of earnings,
pain and suffering, mental anguish, and wrongful death. As
Dr. Piilsbury’s malpractice insurer, St. Paul provided for
Pillsbury’s legal defense.
In February 1990, Cooper Tire intervened in the state
court action based on its payment of the Mazas’ medical
expenses. As discovery in the case progressed, both Maza
and Cooper Tire discussed separate settlements with Dr.
Pillsbury. By October 1990, Maza had reached a settlement
with Dr. Pillsbury as to all the claims asserted by Maza and
the estate except Cooper Tire’s claim for medical expenses.
Rather than wait for a settlement to be reached on the
medical expenses claim, Maza and Dr. Pillsbury entered into
a settlement agreement covering all the malpractice claims
except Cooper Tire’s alleged subrogation claim.
In exchange for $350,000, Maza and the estate
released Dr. Pillsbury from all claims, but expressly reserved
the "subrogation and other rights of Cooper."’ Though there
~~.
> The "Addendum to Release and Settlement Agreement"
executed by Maza provides in relevant part: "It is expressly
understood that the subrogation and other rights of Cooper as
provided by the Plan and the Receipt and Subrogation
Agreement is [sic] reserved and this settlement and release is
not intended by the parties to in any way effect such
subrogation and other rights of Cooper." App. at 430.
Similarly, the order of dismissal entered in the state court
7
kau
is evidence that Cooper Tire was aware that a separate
settlement between Maza and Dr. Pillsbury was "imminent,"
Cooper Tire was not involved in the proceedings whereby
both the probate court and the state trial court approved the
separate settlement. On October 22, 1990, the state court
dismissed Maza’s complaint with prejudice.
After the settlement, Cooper Tire continued to pursue
its claim in state court. Soon thereafter, however, it adopted
a new strategy.“ On May 8, 1991, Cooper Tire filed the
present act federal district court against Maza, Dr. Pillsbury,
and St. Paul, seeking to recover its claim for medical
expenses out of the $350,000 settlement received by Maza
and the estate. Cooper Tire contends that Maza breached the
terms of the Plan and the Receipt and Subrogation
Agreements by settling around its subrogation claim. As to
Dr. Pillsbury and St. Paul, Cooper Tire alleges that they
1 tortiously interfered with the contractual relationship between
i Maza and Cooper Tire by settling Maza’s claims.
After a bench trial, the district court determined that
Maza breached its contractual obligations to Cooper Tire.
Though the court recognized that Cooper Tire still had the
| right to pursue a claim against Dr. Pillsbury, it found that the
separate settlement impaired Cooper Tire’s rights. The court
action provides: “The intervention of Cooper Tire and
Rubber Company is reserved and this dismissal is not
intended to in any way effect the claims alleged in the
intervention.” Id. at 594.
* On Cooper Tire’s motion, the Arkansas state court
action was dismissed without prejudice on November 16,
1992.
8
focused primarily on Maza’s failure to obtain Cooper Tire’s
written consent prior to any settlement, as required,
according to Cooper, by the Receipt and Subrogation
Agreements.* In the district court’s view, Maza thereby
stripped Cooper Tire of its right to block a separate
settlement. The court also noted that Maza’s conduct
deprived the Plan of "the considerable benefit of having the
injured employee act as the party plaintiff in a trial against
the tortfeasor.”
C Tire & Rubber Co. v. St. Paul Fi beaten 3
Co., No. 91-1156, mem. op. at 14 (W.D. Ark. Oct. 1,
1993).
As to Dr. Pillsbury and St. Paul, the court found that
they had intentionally interfered with the Maza-Cooper Tire
contract. Applying Arkansas law, the court found that: 1)
a valid contract existed between Maza and Cooper Tire; 2)
Dr. Pillsbury and St. Paul knew of the contract; 3) Dr.
* The relevant portion of the Receipt and Subrogation
Agreement provides:
Warranted no settlement has been
~— made by the undersigned (Maza) with any
person or corporation against whom a claim
may lie, and no release has been given to
anyone responsible for the loss, and that no
such settlement will be made nor release given
by the undersigned without the written consent
of the said Cooper Tire & Rubber Company .
App. at 420.
i ee eee
9
Pillsbury and St. Paul knew that a settlement with Maza
would harm the rights of Cooper Tire; and 4) Cooper Tire
suffered damage as a result.
Based on these findings, the court imposed joint and
several liability on Maza, Dr. Pillsbury, and St. Paul for the
amount of the medical expenses paid by Cooper Tire
($298,118.07) plus prejudgment interest ($53,661.25). The
court denied Cooper Tire’s request for attorneys’ fees.
Maza, Dr. Pillsbury, and St. Paul (collectively "Defendants")
appeal from the judgment. Cooper Tire cross-appeals from
the district court’s denial of attorneys’ fees.
Il. DISCUSSION
In this appeal from a civil bench triai, we review the
trial court’s findings of fact for clear error. Its conclusions
of law are subject to de novo review. Mixed questions of
law and fact that require the consideration of legal concepts
and the exercise of judgment about the values underlying
legal principles are also reviewed de novo. See Ellis v.
Great-West Life Assurance Co., No. 93-1973, 1994 WL
710466, at *4 (8th Cir. Dec. 23, 1994).
Defendants contend on appeal that the district court
erred in failing to apply federal common law estoppel
principles. They argue that Cooper Tire is estopped from
bringing this action as a result of its willing participation in
separate settlement negotiations and its initial acquiescence in
the Maza-Pillsbury settlement. We need not address this
argument. Both the parties and the district court have
underestimated the impact of ERISA on Cooper Tire’s
10
claims. Viewed in the context of the ERISA civil
enforcement scheme, Cooper Tire’s claims fail.
Our analysis focuses on Cooper Tire’s claim against
Maza. Cooper Tire styles the claim as an action for breach
of the Plan and the Receipt and Subrogation Agreements.
This claim must be based on a specific ERISA provision.°
The broad preemptive sweep of ERISA limits Cooper Tire to
the civil remedies contained in 29 U.S.C. § 1132(a). Pilot
Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54-57 (1987); Kuhl
v. Lincoln Nat’l Health Plan, 999 F.2d 298, 302-04 (8th Cir.
1993), cert. denied, 114 S.Ct. 694 (1994). Otherwise, "the
policy choices reflected in the inclusion of certain remedies
and the exclusion of others under the federal scheme would
be completely undermined. . . ." Pilot Life, 481 U.S. at 54.
Section 1132 (a) of ERISA provides that certain civil
actions may be brought by a “participant,” “beneficiary,” or
"fiduciary." As the administrator of its own plan, Cooper
Tire qualities as a fiduciary, see 29 U.S.C. §1002(21)(A),
but not as a participant or beneficiary, see id. § 1002(7)-(8).
The remedies available to a fiduciary are set forth in section
1132(a)(3), which provides that a civil action may be
brought:
* Based on Cooper Tire’s complaint and the district
court’s memorandum opinion, neither Cooper Tire nor the
district court directly linked the claim to a specific ERISA
provision. However, in a separate opinion denying Cooper
Tire attorneys’ fees, the district court noted that such fees are
allowable "since this is a civil action brought by a fiduciary
to enforce the terms of the plan. See 29 U.S.C. § 1132(a)(3)
and 29 U.S.C. § 1132(g)(1).". App. at 133.
a
LIN it I ROE, nee
ee Se eee wah LS
Ry Aceh Maar A Nae Ws Aa Tht ee, a andeds
ee a
11
(A) to enjoin any act or practice which
violates any provision of this subchapter or
the terms of the plan, or (B) to obtain other
appropriate equitable relief (i) to redress such
violations or (ii) to enforce any provisions of
this subchapter or the terms of the plan.
In order to obtain relief’ under this provision, Cooper Tire
must establish that Maza has failed to comply with the terms
of the statute or the Plan. As noted above, the district court
imposed liability based on Maza’s failure to comply with the
terms of the Receipt and Subrogation Agreements. Failure
to comply with these agreements does not result in liability
under section 1132(a)(3).
Section 1132(a)(3) requires a showing that the terms
of the applicable ERISA plan have been violated. The
Receipt and Subrogation Agreements are not part of Cooper
Tire’s Plan. They were executed after the covered medical
expenses had been incurred and at a time when Maza already
had a right to the benefits. See Sturges v. Hy-Vee Employee
Benefit Plan and Trust, 991 F.2d 479, 481 (8th Cir. 1993)
(per curiam) (finding plan revisions made after the
occurrence of a covered event to be inapplicable to the
participant). Cooper Tire is bound by the terms of the Plan
in effect at the time the Mazas incurred the covered medical
expenses. After a covered event has occurred, a plan
” Cooper Tire does not seek an injunction pursuant to
section 1132(a)(3)(A). Under 1132(a)(3)(B), Cooper Tire is
entitled only to “appropriate equitable relief.". Based on our
resolution of this case, we do not reach the issue of whether
the relief awarded by the district court was "equitable relief."
12
administrator cannot create new rights in a separate document
and enforce those rights under ERISA.*
Thus, to determine the validity of Cooper Tire’s claim
against Maza, we must look to the terms of the Plan itself.
The relevant language is contained in Article 12(e) of the
Plan and can be broken down into three parts. First, it
provides that Cooper Tire "will upon making payment [for a
covered service or prescription drug] under this Plan succeed
to any rights of recovery the Employee or dependent may
have or acquire (with respect to such service or prescription
drug) against any person or organization. . . .” Second, an
employee who accepts payments under the Plan is required
"to furnish such information and assistance, and execute such
assignment[s] and other instruments as [Cooper Tire] may
reasonably request to facilitate enforcement of the successor
rights of [Cooper Tire]." Finally, the employees and their
dependents are directed to “take no action prejudicing”
Cooper Tire’s subrogation rights.’
* Indeed, the Receipt and Subrogation Agreements
recognize this limitation. Each Agreement provides: "This
Receipt and Subrogation Agreement is subject to the
provisions of Article 12, Section E of Cooper Salaried
Employees Medical Benefits... ." App. at 420. Article
12(e) contains the Plan’s subrogation provisions.
® Article 12(e) of the Plan provides as follows:
In the event an Employee or a dependent of an
Employee, including the surviving spouse or
a surviving dependent of a deceased
Employee, is legally entitled to recover,
including recovery under uninsured motorist
coverage, all or a portion of the cost of a
ic hee bn ae onl
13
The Plan gives Cooper Tire the power to "construe
and interpret" the provisions of the Plan. Cooper Tire’s
interpretation of Article 12(e) is evident from its arguments
in this appeal and from the Receipt and Subrogation
Agreements. Essentially, Cooper Tire contends that the Plan
language gives it: 1) subrogation rights as to all claims (not
just medical expense claims) against any party liable for
medical expenses; 2) the right to demand written consent
prior to settlement of any claim against any party liable for
service or prescription drug covered by this
Plan from a third party, the Company will
upon making payment under this Plan succeed
to any rights of recovery the Employee or
dependent may have or acquire (with respect
to such service or prescription drug) against
any person or organization except insurors
[sic] of individual hospital, surgical, or
medical policies issued to the Employee or
dependent.
Employees (including dependents, surviving
spouses or surviving dependents of deceased
Employees) by acceptance of such benefit
payments agree to furnish such information
and assistance, and execute such assignment
and other instruments as the Company may
reasonably request to facilitate enforcement of
the successor rights of the Company.
Employees and their dependents shall take no
action prejudicing such rights of the
Company.
App. at 498.
14
medical expenses; and 3) the right to first-dollar recovery out
of any settlement if written consent is not obtained."
We review an administrator’s interpretation of the
Plan language under an “abuse of discretion” standard.
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115
(1989); Kenn Vv rgia-Pacifi , 31 F. 3d 606,
609 (8th Cir. 1994). In so doing, we examine: 1) whether
‘© The portions of the Receipt and Subrogation
Agreements that reflect this interpretation provide in relevant
part:
[T]he undersigned [Maza] hereby subrogates
said Cooper Tire & Rubber Company, to all
of the rights, claims and interest which the
undersigned may have against any person or
corporation liable for the loss mentioned
above...
Warranted no settlement has been
made by the undersigned with any person or
corporation against whom a claim may lie,
and no release has been given to anyone
responsible for the loss, and that no such
settlement will be made nor release given by
the undersigned without the written consent of
the said Cooper Tire & Rubber Company
App. at 420. Though we believe these provisions can be
reasonably read to apply only to claims involving medical
expenses, Cooper Tire’s arguments on appeal make clear that
it interprets this language broadly to apply to all claims
against a party liable for medical expenses.
ee
oes aaa
ray (Saudia
Can ene ages
15
the interpretation is consistent with the goals of the Plan; 2)
whether it renders any language in the Plan meaningless or
internally inconsistent; 3) whether it conflicts with the
substantive or procedural requirements of the ERISA Statute;
4) whether Cooper Tire has interpreted the provision at issue
consistently; and 5) whether the interpretation is contrary to
the clear language of the Plan. Finley _v. Special Agents
Mut. Benefit Ass’n, 957 F.2d 617, 621 (8th Cir. 1992).
Based on the limited record before us, we are not
prepared to find that Cooper Tire’s interpretation of the Plan
is inconsistent with the Plan’s goals. Likewise, Cooper
Tire’s interpretation does not render any of the Plan language
itself internally inconsistent. Nonetheless, the remaining
factors persuade us that Cooper Tire has abused its discretion
by so broadly interpreting the scope of Article 12(e).
First, the Plan conflicts with the ERISA requirement
that the summary plan description (SPD) be “sufficiently
accurate and comprehensive to reasonably apprise [the]
participants and beneficiaries of their rights and obligations
under the plan." 29 U.S.C. § 1022(a)(1). Cooper Tire’s
SPD fails to inform participants that Cooper Tire will claim
a right to written consent or first-dollar recovery on all the
participant’s claims against a liable third party. Indeed, the
SPD does not even mention subrogation rights. Thus, it does
not support Cooper Tire’s interpretation. See Lutheran
Medi v. Contract r mster Eng’r
Health and Welfare Plan, 25 F.3d 616, 621 (8th Cir. 1994).
In addition, there is evidence that Cooper Tire has
interpreted the subrogation provision inconsistently. In a
16
1980 letter to Maza explaining the subrogation provisions in
the Plan, Cooper Tire wrote:
The Subrogation Section permits Cooper to be
reimbursed from any liable third party for
medical expenses incurred, as the result of an
accident, by an employee or eligible spouse or
dependent. A liable third party may be the
party at fault, his/her Insurance Company or,
when appropriate, your Uninsured Motorist
Coverage. Under this paragraph you will be
asked to sign an Agreement that allows
Cooper to collect from the liable third party,
then Cooper’s Medical Plan will pay all
medical costs that are covered by the plan.
App. at 422. This letter does not state, or even imply, that
the subrogation provisions give Cooper Tire rights in claims
other than those for medical expenses.
Most importantly, we find Cooper Tire’s
interpretation to be contrary to the plain language of the
Plan. Cooper Tire’s subrogation rights are expressly limited
to Maza’s right to recovery of medical expenses. Per the
language of the Plan, Cooper Tire “succeeds” only to rights
of recovery an employee or dependent may have "with
respect to” services or drugs covered by the Plan. Thus,
Cooper Tire’s subrogation rights do not extend beyond its
claim for medical expenses. Given this limitation, Cooper
Tire may not demand written consent prior to settlement of
non-medical expense claims and characterize it as a means to
"facilitate enforcement” of its subrogation rights.
Sn ont ie eh ee eee
17
In sum, we find Cooper Tire’s interpretation of the
Plan’s subrogation provisions to be an abuse of discretion.
Reasonably interpreted, the Plan gives Cooper Tire
subrogation rights only with respect to the medical expenses
it paid on Maza’s behalf. This being the case, there is no
evidence that Maza took any actions which impaired Cooper
Tire’s subrogation rights. Cooper Tire still has the right to
pursue its claim for medical expenses against Dr. Pillsbury.
This right was expressly reserved by the Maza-Pillsbury
settlement agreement and by the dismissal order of the
Arkansas state court. In addition, Cooper Tire still has the
right to pursue its claim in Maza’s name."
Thus, there is no evidence that Maza’s conduct
violated the terms of the Plan and he cannot be held liable
under section 1132(a)(3). In the absence of any violation of
Cooper Tire’s rights, the state law tortious interference claim
against Dr. Pillsbury and St. Paul fails and we need not
consider whether it is preempted by ERISA. Cooper Tire’s
motion to assess attorneys’ fees is moot and the district
court’s denial of the motion must be affirmed.
fll. | CONCLUSION
For the foregoing reasons, the order of the district
court is reversed and this action is remanded with directions
to dismiss Cooper Tire’s claims against St. Paul Fire and
" “Article 12(e) of the Plan requires Maza to furnish
assistance which Cooper Tire may “reasonably request to
facilitate enforcement" of its rights. It is reasonable to
interpret this language to allow Cooper Tire to sue in Maza’s
name to recover the medical expenses it has paid.
18
Marine Insurance Company, Richard C. Pillsbury, M.D.,
and Robert Maza. The district court’s denial of Cooper
Tire’s motion for attorneys’ fees is affirmed.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS
EIGHTH CIRCUIT.
PAE on Cree cme eee ey
PAOD TE NOC ages om NF clan Hr MEI, MeN
19
Appendix
RECEIPT AND SUBROGATION AGREEMENT ...
The undersigned hereby acknowledges RECEIPT
from the Cooper Tire & Rubber Company of the sum of One
thousand six hundred and 00/100 Dollars ($1600.00) in full
settlement of all claims and demands of the undersigned and
any spouse or dependents of the undersigned for any medical
costs, expenses or any other items whatsoever payable under
the Cooper Tire Medical Payment Plan with regard to any
accident, illness, or injury commencing on or about the 23rd
day of June, 1988, or any medical treatment or services
rendered during the period commending on or about the 3rd
day of October, 1988, and ending on or about the 30th day
of November, 1988.
In consideration of and to the extent of Said payment
the undersigned hereby subrogates said Cooper Tire &
Rubber Company, to all of the rights, claims and interest
which the undersigned may have against any person or
corporation liable for the loss mentioned above, and
authorizes the said Cooper Tire & Rubber Company to sue,
compromise or settle in the undersigned’s name or otherwise
all such claims and to execute and sign releases and
acquittances and endorse checks or drafts given in settlement
of such claims in the name of the undersigned, with the same
force and effect as if the undersigned executed or endorsed
them.
Warranted no settlement has been made by the
undersigned with any person or corporation against whom a
claim may lie, and no release has been given to anyone
20
responsible for the loss, and that no such settlement will be
made nor release given by the undersigned without the
written consent of said Cooper Tire & Rubber Company and
the undersigned covenants and agrees to cooperate fully (and
to exert his best efforts to cause any affected spouse or
dependent to cooperate fully) with said Cooper Tire &
Rubber Company in the prosecution of such claims, and to
procure and furnish all papers and documents necessary in
such proceedings and to attend court and testify (and to exert
his best efforts to cause any affected spouse or dependent to
attend court and testify) if Cooper Tire & Rubber Company
deems such to be necessary, but it is understood the
undersigned is to be saved harmless from costs in such
proceedings.
This RECEIPT AND SUBROGATION
AGREEMENT is subject to the provisions of Article 12,
Section E of Cooper Salaried Employees Medical Benefits,
effective 1/1/86.
21
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH DISTRICT
No. 94-2183WAED
No. 94-2209WAED
No. 94-2240WAED
Company, et al.,
Cooper Tire & Rubber ™
Company, .
*
Appellee, ws
—
vs. ¥ Order Denying Petition
° for Rehearing and
St. Paul Fire and . Suggestion for Rehearing
Marine Insurance . En Banc
a
7
-
Appellants.
The suggestion for rehearing en banc is denied.
Judge McMillian would grant the suggestion for rehearing en
banc. The petition for rehearing by the panel is also denied.
April 25, 1995
Order Entered at the Direction of the Court:
Clerk, U.S. Court of Appeals, Eighth Circuit
22
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH DISTRICT
No. 94-2183WAED
No. 94-2209WAED
No. 94-2240WAED
Cooper Tire & Rubber *
Company, °
—
Appellee, .
x
vs. * Appeal from the United
* States District Court for
St. Paul Fire and . the Western District of
Marine Insurance . Arkansas
Company; Richard C. .
Pillsbury, M.D.; .
Richard Maza, .
—
Appellants. .
On its own motion, the court orders a technical
correction to its opinion of February 27, 1995. In the second
full paragraph on page eleven, the opinion states, "Indeed,
the SPD does not even mention subrogation rights." This
portion of the opinion is hereby deleted.
May 2, 1995
Order Entered at the Direction of the Court:
Clerk, U.S. Court of Appeals, Eighth Circuit.
23
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
EL DORADO DIVISION
COOPER TIRE & RUBBER COMPANY PLAINTIFF
¥. NO. 91-1156
ST. PAUL FIRE AND MARINE
INSURANCE COMPANY et al. DEFENDANTS
MEMORANDUM OPINION
Trial to the Court on this matter was hold on
September 14, 1993. At the conclusion of the trial, the
Court advised the parties that it would take the matter under
advisement. The Court hereby renders its opinion, based
upon the pleadings now before it and the testimony and
evidence received during the course of the trial.
PROCEDURAL BACKGROUND
In its complaint, plaintiff, Cooper Tire it Rubber
Company ("Cooper Tire”) brings suit in its capacity as a
provider of medical benefits under an Employee Welfare
Benefit Plan ("Plan") under 29 U.S.C. Section 1002.
Jurisdiction is based upon diversity of citizenship and 29
U.S.C. Section 1001-1461 ("ERISA"). Plaintiff contends
that it was entitled to recover from Robert Maza ("Maza") all
sums received by him from St. Paul Fire & Marine Insurance
24
Companies ("St. Paul") and/or Richard C. Pillsbury, M.D.
("Pillsbury"), and the failure of Maza to pay over said funds
to plaintiff constitutes breach of the contract. Plaintiff
further alleges that St. Paul and/or Pillsbury, intentionally
interfered with the existing contractual relations between
Cooper Tire and Maza. Plaintiff seeks to recover from
defendants, jointly and severally, the amount paid by it on
behalf of the Mazas. Plaintiff also seeks reasonable
attorney’s fees, punitive damages, pre-judgment interest,
post-judgment interest, and costs.
It is not disputed that as an employee of Cooper Tire,
defendant Maza applied for and received medical benefits as
a result of the illness of his deceased wife, Sandra Maza
which commenced on or about June 23, 1988, and continued
until she expired on December 4, 1988. It is likewise not
disputed that under its employee health care plan, Cooper
Tire paid, on behalf of Robert Maza and Sandra Maza,
medical expenses in the sum of Two Hundred Ninety-Eight
Thousand One Hundred Eighteen and 07/100 Dollars
($298,118.07).
Paragraph 12(e) of the Plan provides:
In the event an Employee or dependent of an
Employee, including the surviving spouse or
a surviving dependent of a deceased
Employee, is legally entitled to recover,
including recovery under uninsured motorist
coverage, all or a portion of the cost of a
service or proscription drug covered by this
Plan from a third party, the Company will
upon making payment under this Plan succeed
25
to any rights of recovery the Employee or
dependent may have or acquire (with respect
to such service or prescription drug) against
any person or organization except insurers of
individual hospital, surgical, or medical
policies issued to the Employee or dependent.
Employees (including dependents, surviving
spouses or surviving dependents of deceased
Employees) by acceptance of such benefit
payments agree to furnish such information
and assistance, and execute such assignment
and other instruments as the Company may
reasonably request to facilitate enforcement of
the successor rights of the Company.
n
Company. (Emphasis added)
Two different Receipt and Subrogation Agreements
were signed by defendant Maza - one on October 13, 1988
and one on January 19, 1990 - prior to the payment of the
medical bills which were presented to Cooper Tire. In both
documents, Maza agrees as follows:
In consideration of any to the extent of
said payment the undersigned hereby
Subrogates said Cooper Tire & Rubber
Company, to all of the rights, claims and
interest which the undersigned may have
against any person or corporation liable for
the loss mentioned above, and authorizes the
said Cooper Tire & Rubber Company to sue,
26
; in te lerioned*
Name or otherwise all such claims and to
execute and sign releases and acquittances and
endorse checks or drafts given in settlement of
such claims in the name of the undersigned,
with the same force and effect as if the
undersigned executed or endorsed them.
Warranted no settlement has been
made by the undersigned with any person or
corporation against whom a claim may lie,
and no release has been given to anyone
responsible for the loss, and that no such
settlement will be made nor release given by
entontel wil ; ; ;
the said Cooper Tire & Rubber Company and
the undersigned covenants and agrees to
cooperate fully (and to exert his best efforts to
cause any affected spouse or dependent to
cooperaie fully) with said Cooper Tire &
Rubber Company in the prosecution of such
claims, and to procure and furnish all papers
and documents necessary in such proceedings
and to attend court and testify (and to exert
his best efforts to cause any affected spouse or
dependent to attend court and testify) if
Cooper Tire & Rubber Company deems such
to be necessary but it is understood the
undersigned is to be saved harmless from
costs in such proceedings. (Emphasis added)
On August 30, 1989, Maza, individually and as
administrator of the estate of Sandra Maza, deceased, filed
27
suit in the Circuit Court of Union County, Arkansas, against
defendant Pillsbury, for medical negligence resulting in the
wrongful death of his wife, Sandra Maza. Pillsbury was
insured by St. Paul, and pursuant to its policy with Pillsbury,
St. Paul provided legal defense to Pillsbury.
Cooper Tire intervened in the state court action in a
timely and proper fashion.
In its Motion to Intervene filed in the state court
action, Cooper Tire stated that under the laws of the state of
Arkansas, it is entitled to subrogate to the rights of the
plaintiff, Robert Maza individually and as administrator of
the estate of Sandra Maza, deceased,
against any recovery he might have against the
defendant herein to the extent of the amount
paid by this petitioner; petitioner should be
allowed to intervene in this cause so as to
protect its subrogation rights and should be
declared to have a first and paramount lien on
the proceeds of any settlement, judgment or
recovery made or rendered by, for or on
behalf of said plaintiff or plaintiffs to the
extent of the benefits paid or to be paid in the
future.
In the Intervention Complaint, Cooper Tire made the
same request, adding that the benefits paid or to be paid in
the future thus far total $298,118.07.
On October 15, 1990, Maza filed in the state court
action a Petition for Authority to Settle Wrongful Death
28
Claim. In the petition, Maza states that there has been
offered "a reasonable sum in full and complete settlement of
the wrongful death claim, and all claims, demands, and
causes of action which have arisen or may arise from the
accidental death of the decadent.” The petition further states:
By making such offer neither the Medical
Center of South Arkansas nor Dr. Richard C.
Pillsbury admit or acknowledge any fault or
negligence on their part and, to the contrary,
they specifically deny same.
4. As a condition of the offer there is an
agreement of confidentiality and nondisclosure
of the terms thereof.
Paragraph 6 of the petition states:
Petitioner should be authorized to accept such
offer and to execute and deliver any and all
documents, instruments, or releases necessary
to fully accept said offer and dismiss with
prejudice the wrongful death action now
pending in the Union County Circuit Court,
second division, provided, however, that the
ae Ti 1 Rubi
C ; 1 and {i
tiemnieen? 3 ; led to i ff
[sic] the clai out ie thei “on
(Emphasis added)
On October 17, 1990, the Release and Settlement
agreement was signed by Maza. Therein, Maza released
29
Pillsbury and St. Paul from liability for all damages as
follows:
FOR THE SOLE CONSIDERATION
of the payment of the sum of $350,000.00
(Three Hundred Fifty Thousand and no/100
Dollars) ... do hereby release, acquit, and
forever discharge Dr. Richard C. Pillsbury...
and St. Paul Fire and Marine Insurance
Company ... from any and all actions, causes
of action, actions for medical injury under
Acts of Arkansas No. 709, 1979, as amended,
claims, and demands, damages, costs, loss of
Services, expenses, and compensation, on
account of or in any way growing out of any
and all known and unknown personal injuries
or death for or because of any matter or thing
done, omitted or suffered to be done by the
Said parties herein released, prior to and
including the date hereof, and particularly on
account of the care, treatment or services of
any kind rendered to Sandra Maza.
* * *
For the same consideration and as a
part of this payment, the undersigned, Robert
Maza.... further agree to indemnify and
forever save harmless Dr. Richard C.
Pillsbury.... and St. Paul Fire and marine
Insurance Company... from any further claims
or causes of action of any nature, demands,
costs, attorneys’ fees, expenses or judgments
which might be incurred by or against them or
any of them related to the care, treatment or
30
services of any kind rendered to Sandra Maza,
except, however, as to the subrogation and
other rights of Cooper Tire and Rubber
Company as expressly reserved in the
Addendum to Release and _ Settlement
Agreement. (Emphasis added)
Maza also agreed, inter alia:,
to indemnify and forever save harmless Dr.
Richard C. Pillsbury, Medical Center of South
Arkansas, and St. Paul fire and Marine
Insurance Company (as insurer of Dr. Richard
C. Pillsbury, and Medical Center of south
Arkansas) and any other physician, nurse, and
medical care provider practicing at El Dorado,
Arkansas, or in the Medical center of South
Arkansas during 1988 and thereafter and their
agents, servants and employee, and all other
persons, firms and corporations of and from
any further claims or causes of action of any
nature, demands, costs, attorneys’ fees,
expenses or judgments which might be
incurred by or against them or any of them
related to the care, treatment or services of
any kind rendered to Sandra Maza, except,
however, as to the subrogation and other
rights of Cooper Tire and Rubber Company as
expressly reserved in the Addendum To
Release and Settlement Agreement.
(Emphasis added)
31
On October 17, 1990, an Addendum to Release and
Settlement Agreement was signed by Maza, which states,
inter alia:
* * *In accordance with the Plan, and upon
making payment, Cooper succeeds to any
right of recovery the employee or dependent
may have (with respect to cost of a service or
prescription) against any person or
organization. At the time of the payment
Robert Maza executed a receipt and
subrogation agreement by which Cooper was
subrogated to all claims for medical costs,
expenses or other items payable under the
plan. It is expressly understood that the
subrogation and other rights of Cooper as
provided by the Plan and the receipt and
Subrogation Agreement is reserved and this
settlement and release is not intended by the
parties to in any way effect such subrogation
and other rights of Cooper. (Emphasis added)
On October 22, 1990, an order was entered by the
State court judge dismissing with prejudice Maza’s complaint
against Pillsbury and St. Paul. The order specifically stated
that the intervention of Cooper Tire “is reserved and this
dismissal is not intended to in any way effect the claims
alleged in the intervention."
On May 9, 1991, Cooper Tire brought the suit now
before this Court against Maza, Pillsbury, and St. Paul.
32
On November 20, 1992, upon Cooper Tire’s motion, the
State court judge dismissed the intervention compliant without
prejudice.
FINDINGS OF FACTS
AND CONCLUSIONS OF LAW
1. It does not appear to be disputed that plaintiff's
claims are governed by the Employee Retirement Income
Security Act ("ERISA"), 29 U.S.C. §1001, et. seq. It has
also been held that ERISA applies to self-funded benefit
plans and preempts application of state anti-subrogation laws.
FM Vv iday,
498 U.S. 52 (1990). See Provident-Life & Acc. Ins. Co. v.
Linthicum, 930 F.2d 14 (8th Cir. 1991); Baxter v. Lynn,
886 F.2d 182 (8th Cir. 1989).
a3 Where federal case law does not deal with a
dispute arising under a given issue, the Court must develop
federal common law,, and will look to the plan contract
itself, the statutory policies of ERISA and state law.
Provident Life and Acc. Ins. Co, v. Waller, 906 P.2d 985,
993 (4th Cir. 1990), cert. denied, 498 U.S. 982 (1990).
a The claims asserted by plaintiff in this case
exist by virtue of the subrogation provision set forth in the
Plan and Receipt and Subrogation Agreements referred to
above. The Court recognizes it is not alleged that plaintiff
Is right to proceed in a separate lawsuit against the tortfeasor
has been defeated by the settlement agreement. The issues
for the Court to determine are whether Maza breached the
terms of the Subrogation Agreement by settling with
Pillsbury without Cooper Tire’s written consent and whether
33
St. Paul and Pillsbury interfered with the contractual
relationship between Maza and Cooper Tire.
4. Jim Geers, Corporate Director of Labor
Relations for Cooper Tire since 1989 testified that the normal
procedure his office follows when a claim is submitted is to
review the claim and determine if there is a potential
subrogation claim. If so, their legal department is notified.
If the legal department determines a subrogation claim exists,
Cooper Tire asks the employee to sign a Receipt and
Subrogation Agreement so that Cooper Tire can safely pay
the employee’s medical bills and save the employee from
creditors’ harassment. He stated that the subrogation clause
is in the plan to protect the company and its employees.
a Mike Landers, the attorney who represented
Cooper Tire during the state court proceedings, testified that
prior to May 7, 1990, he had discussions with counsel for
Maza regarding settlement and in February of 1990, he had
discussions with counsel for Pillsbury and St. Paul about
possible settlement. He also stated that he talked with
counsel for Maza about whether Cooper Tire would share in
litigation expenses in late February 1990. He testified that
his perception was that Maza and Cooper Tire might try to
settle separately. He stated that it would have been proper
for Cooper Tire to settle without Maza’s consent, but it
would not have been proper for Maza to settle without
Cooper’s consent. He asked counsel for defendants about the
legal ethics of settling around Cooper Tire and told counsel
for Pillsbury he did not think it was proper. He stated that
he had no notice of the settlement hearing and would have
attended had he received notice.
a
34
6. Counsel for defendants Maza and Pillsbury and
St. Paul testified at length regarding the ongoing negotiations
between them and Cooper Tire which took place during the
state court action. It is not disputed by either defendant that
when the state court held a hearing on the approval of the
settlement between Maza, Pillsbury, and St. Paul, no notice
of said hearing was given to counsel for Cooper Tire, and it
was not until after the settlement between Maza, Pillsbury,
and St. Paul became final that counsel for Cooper Tire knew
of said settlement. Defendants argue that counsel for Cooper
Tire was aware of the negotiations between counsel for Maza
and Pillsbury, and never voiced any objection to the
settlement, raising the defense of estoppel. Further,
defendants argue that they preserved Cooper Tire’s
subrogation rights in the Release and Settlement and
Addendum to Release and Settlement. Defendants do not
dispute the facts that no written consent was given by Cooper
Tire to the settlement between Maza, Pillsbury, and St. Paul,
as required by the Subrogation Agreement and that counsel
for Cooper Tire was not given notice of the settlement
hearing.
7. It is the Court’s opinion that, by entering into
the Settlement Agreement without the written consent of
Cooper Tire, defendant Maza breached the terms of the
Receipt and Subrogation Agreement. The Agreemes# stated
that written consent was required by Cooper Tire before
Maza could settle his case or give any release. The
undisputed facts show that Cooper Tire’s written consent was
never requested nor given with respect to the said settlement.
Defendants take the position that the silence of
counsel for Cooper Tire and his failure to voice any
EEE
|
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4
q
ARE Ate SB aes BOREL IR BIR SROREA
Silt RNa We LAB Ue Bi soins silks spol ag
35
objection to the settlement now estops Cooper Tire from
making such objection. The Court is not persuaded by this
argument. State law claims of estoppel have been held to be
preempted under the terms of ERISA. See Rodrigue v.
Western and Southern Life Ins. Co., 948 F.2d 969 (Sth Cir.
1991); Agee v. Armour Foods Co., 672 F.Supp. 1210 (D.
Mo. 1986), aff'd 834 F. 2d 144 (8th Cir. 1987) ;: accord
Barkdall v, H&W Motor Express Co., 820 F.Supp. 410 (D.
Iowa 1993). Although in Fitch v. Arkansas Blue Cross and
Blue Shield, 795 F.Supp. 904 (W.D. Ark. 1992), the court
applied estoppel principles on a federal common law basis to
an ERISA case, that case involved the situation where oral
representations were made concerning ambiguities in the
plan. The court held:
Despite this language in Phillips, we
do not believe the Court of Appeals for the
Eighth Circuit bar [sic] the application of
estoppel principles in all ERISA actions.
Whatever the applicability of equitable
estoppel claims in general under ERISA, the
court believes equitable relief is proper under
ERISA where the challenged actions do not
involve alleged modifications of the plan.
Id. at 908.
See also, Kane v, Aetna Life Ins., 893 F.2d 1283 (11th Cir.
1990), cert. denied, 498 U.S. 890 (1990). In this case, the
plan is clear as to both the recovery of the proceeds in the
event of the recovery from a third party tortfeasor and the
subrogation rights of Cooper Tire. The Court finds credible
Mr. Landers’ testimony that he was concerned and expressed
36
such concern to counsel for Maza and Pillsbury as to whether
they could settle around Cooper Tire. Furthermore, there
was no evidence presented which indicate that Landers, on
behalf of Cooper Tire, in any way led defendants counsel to
believe that written consent to a settlement would no be
required. The Court believes that to allow applicability of
the estoppel argument in this case would not comport with
the underlying policy of ERISA, since it would violate the
terms of the Plan and create further delay in potential
recovery of the payment made under the Plan.
8. Defendants contend they preserved Cooper
Tire’s subrogation rights in the Settlement Agreement and,
therefore, the settlement between Maza, Pillsbury, and St.
Paul did not constitute a breach of the agreement which gave
rise to those rights. However, a close reading of the
documents in question indicates otherwise. In the Settlement
Agreement, defendants expressly reserved Cooper Tire’s
subrogation rights and other rights. One of those “other
rights" contained in the Subrogation Agreement was the right
to effectively block a settlement by Maza by withholding
written consent of same. Maza’s act of settling without first
obtaining the written consent of Cooper Tire concerning the
settlement adversely affected Cooper Tire’s “other rights”.
One of the purposes in obtaining subrogation rights is
to insure that when an individual Plaintiff who has been
injured receives his money from the alleged tortfeasor, the
insurer - in this case Cooper Tire - which has paid out its
money quickly, will also be reimbursed quickly and will not
have to spend large quantities of money and time pursuing
litigation in its own behalf at a later time. In Keeton and
a!
6s RRO TRY AN IE:
4 sige
AHMAR Sees at Mai Bas CA ik
Ree ch Meh lt HARUN SRN RT iain sais 2, te.
37
Widiss, Insurance Law, §3.10(c)(1988), this concern is
addressed:
When an Insurer asserting a right of
subrogation, wants to initiate an action against
a third party, the insurer usually prefers the
controversy - especially when a jury may be
involved - as one between the insured and
third party. One justification for presenting
such an action as the insured’s claim is that
this approach avoids the possible effect of
prejudice an the part of jury members against
insurers.
The justification for permitting an
insurer’s subrogation action against a third
party to be brought in the name of an insured
is most persuasive when the insurer has paid
only part of the loss, so that the insured
continues to retain a beneficial interest in the
Claim.
Id. at 240-41, 244-45 (footnotes omitted). '
In the same treatise, the author addresses one of the
remedies available:
'The Arkansas case of Sentry Insurance Co. v. Stuart,
246 Ark. 680, 439 S.W.2d 797 (1969) was cited in the
footnote. (medical payments coverage; trial court’s action in
Sustaining demurrer reversed).
38
The majority rule allows a subrogated
insurer to proceed against a tortfeasor who
settled with an insured in violation of the
insurer’s subrogation rights. Thus, a payment
to an insured (or another) by a third party
who knew of an insurer’s subrogation interest
does not discharge the third party’s liability to
the extent of the insurer’s subrogation interest.
me Ok
When insurance benefits have been paid to the
insured, a subrogated insurer may be entitled
to enforce one or another among several
possible remedies in a separate action against
the insured. Causes of action, subject to some
qualifications, have been recognized on each
of the following theories:
(i) Breach of Contract. A settlement
with a third party tortfeasor,
responsible for the insured loss,
constitutes a breath of an express
subrogation provision included either
in the insurance policy or in a
collateral agreement (such as an
assignment, “loan receipt,” or
subrogation agreement executed at the
time of payment of the policy claim),
and either damages are recovered for
the breach or the insurer is entitled to
predicate a denial of a claim for
insurance benefits on the insured’s
breach.
Id. at 244-45 (footnotes omitted).
.
‘
4
Naat
EE Oa PE ES ae SAL ND TS aoe eS Bs PMG,
39
'9. "Other rights” also held by Cooper Tire
included the right to require Maza to cooperate by furnishing
information, assistance, assignments or any other instruments
needed to facilitate the enforcement as well as the right of
Cooper Tire to settle on his behalf, including the power to
e:idorse settlement checks or drafts and Sign releases and
acquittances in his own name. Defendants Clearly recognized
Cooper Tire’s "other rights” since this language appears in
the Settlement Agreement and Addendum.
10. _— Clearly, these other rights were not preserved
by the settlement between Maza and Pillsbury. obviously the
settlement agreement itself - reached and implemented
without Cooper Tire’s knowledge or written consent -
violated rather than preserved Cooper Tire’s right not to have
that very thing happen. Moreover, it does not appear that
there was ever any discussion among the settling parties as
to what Cooper Tire’s other rights were. It seems it was just
assumed that all Cooper Tire had, by way of subrogation
rights, was the right to sue the tortfeasor directly for
reimbursement of medical expenses.
If the Court were to approve and sanction the type of
settlement reached which disregards these other valuable
rights, the resulting precedent would permit an injured
employee to disregard his obligations under the ERISA plan
and under the Receipt and Subrogation agreements and
recover for his own benefit, subjecting the ERISA plan
administrator to the whim of attorneys for the insured and
tortfeasor to determine whether the Plan’s rights are
adequately protected. It would also require a Plan
administrator to seek recovery by separate suit against the
tortfeasor. Such a ruling only not only would condone a
40
breach of contract, but would also have the potential of
adversely affecting the efficient and proper administration of
the ERISA plan. As indicated in the insurance treatise
quoted from above, such a precedent would place the plan"
administrator in a position of paying for the medical bills
quickly but not being able to be reimbursed quickly, and
would further deprive the administrator of the considerable
benefit of having the injured employee act as the party
plaintiff in a trial against the tortfeasor. Additionally, as was
found in Curtis v. Sears, Roebuck & Co., 754 F.2d 781 (8th
Cir. 1985), Cooper Tire was in a position where its interest
was impaired by disposition of the main claim without
Cooper Tire’s participation.* In Curtis, the Eighth Circuit
Stated:
The Japse of time required to institute a now
action and get service on Sears and Curtis
could give Curtis time to leave the state,
spend the money, or take other steps to
impede State Farm’s collection effort. Neither
of the existing parties represents State Farm’s
interest. Curtis does not because he stands to
lose what could be a potential double recovery
if State Farm is allowed to remain in the
action. Sears wants the action to end as soon
as possible for fear of being expected to make
a double payment. State Farm was therefore
properly allowed to intervene as of right.
*The Court recognizes distinctions that can be made
between the present case and the Curtis case. However, the
Court believes many of the principles announced in Curtis
are applicable here.
"amin tc a ai ccc
ws ances 5
is EME Uiid 2 wait Slag SG SRB ii BAe ABLE Miaka ncieeses Se
A RRS IIS Np RRMA SES 0 I 8 adn. 4k
Id. at 784.
11.
a
Although the facts in this case are not as
egregious as those in Daves v. Hartford Acc, and Indemn,
Co., 302 Ark. 242, 788 S.W.2d 733 (1990), the Court finds
certain language in that case to be pertinent:
Prior to the settlement between Sentry
and Daves, Hartford repeatedly notified Sentry
of its subrogation claim. Thereafter, Sentry,
with full knowledge of Hartford’s interest,
paid Daves pursuant to the settlement, without
notifying Hartford of the settlement or Daves’
Suit, and then excluded Hartford’s name from
the settlement, prepared by Sentry, to
indemnify Sentry for all claims "Hartford may
make against Sentry by virtue of the medical
PIP and subrogation lien that Hartford is
making in this case."
Obviously, from the wording in its
agreement, Sentry’s maneuvers were simply a
well designed and calculated attempt to escape
its acknowledged duty to Hartford. Under the
circumstances, we hold that Sentry cannot
legally or equitably ignore its responsibility to
pay Hartford’s lien even though it may have
parted with the settlement proceeds through
improvident payment to Daves.
Id., 302 Ark. at 249-50.
42
12. | The Court does not suggest that counsel for
Pillsbury and Maza schemed or manipulated so as to deny
Cooper Tire the benefit of recovering its payments made on
Maza’s behalf. To the contrary, the testimony presented
indicates that counsel for defendants in good faith thought the
language contained in the settlement agreement and
addendum preserved Cooper Tire’s rights. However, as
already stated, the Court believes Cooper Tire’s rights
consisted of more than the right to sue for and receive
payment for medical expenses, and that defendants viewed
Cooper Tire’s rights too narrowly. These “other rights"
were not, in the Court’s opinion, preserved by the language
in the Settlement Agreement and Addendum, and were
violated when settlement occurred without Cooper Tire’s
written consent. Obviously, defendants Pillsbury, St. Paul,
and Maza could not properly or legally just agree among
themselves that Cooper Tire’s written consent to the
settlement was not required and expect Cooper Tire to be
bound by that agreement or this Court to uphold it. Further,
the fact that Cooper Tire tried to negotiate a settlement could
not reasonably have been construed as an amendment to the
agreement which would eliminate the right of “written
consent". The subrogation agreement did not say written
consent was required from Cooper Tire “unless its rights
were preserved in the settlement agreement." The fact that
defendants thought they were preserving Cooper Tire’s rights
becomes irrelevant when considering the express language of
the documents in question. Therefore, the Court believes
that Maza breached his agreement with Cooper Tire when he
settled the claim without Cooper Tire’s written consent and
failed to reimburse plaintiff out of the funds.
Sara a Bal
eR AAS VE
ER Se Sek 6 ee
RRP LOLA 2 BAS, ERAT Ay
MERRIE ye ES Oe
We) HER
43
13. The findings and conclusions mentioned above
require the Court to further conclude that Pillsbury and St.
Paul tortiously interfered with Maza’s contract with Cooper
Tire. In Arkansas, the elements of a prima facie case of
tortious interference with contract are:
(1) The existence of valid contractual
relationship or business expectancy;
(2) The knowledge of the relationship or
expectancy on the part of the interferer;
(3) Intentional interference inducing or causing a
breach or termination of the relationship or
expectancy; and
(4) Resulting damage to the party whose
relationship or expectancy has been disrupted.
Robertson Oil Co., Inc. v. Phillips Petroleum Co., 871 F.2d
1368, 1372 (8th Cir. 1989).
14. it is undisputed that a valid contractual
relationship existed between Maza and Cooper Tire.
Furthermore, by virtue of Cooper Tire’s intervention in the
State court action, defendants were aware of the Receipt and
Subrogation Agreements between Maza and Cooper Tire.
Although Maza testified he did not recall anyone from
Cooper Tire explaining the Receipt and Subrogation
Agreements to him, he nevertheless signed the documents
and there was no evidence presented that he was coerced into
doing so. He was merely told that he had to sign the
agreement in order to have the plan pay his medical bills.
Defendants were aware of Cooper Tire’s expectancy to be
paid, and were aware the Receipt and Subrogation
Agreements existed between Cooper Tire and Maza.
a3
Reference to the language contained in the Plan and
Subrogation Agreement was made in the Second Amended
complaint in Intervention, and defendants therefore had
knowledge of the obligations set forth therein.
15. To be liable for tortious interference with a
contract, one must either desire to bring about the harm to
the plaintiff or have known that this result was substantially
certain to be produced by his conduct. City National Bank
of Fort Worth v. Unique Structures, Inc., 929 F.2d 1308,
1316 (8th Cir. 1991). The Court is of the opinion that
Pillsbury and St. Paul knew at all times that, if they could
settle their claim with Maza, they could reduce the settlement
value of the claim with Cooper Tire. St. Paul obviously
acted to protect its own economic interest by settling Maza’s
claim on the most favorable terms possible since by doing so,
it could limit its remaining exposure and that of it insured tc
the amount of the medical expenses which had been paid by
Cooper Tire. By entering into the settlement, St. Paul could
eliminate the prospect of Pillsbury being exposed to any
further personal liability.
16. Having found that plaintiff met its burden of
proving the first three (3) elements of a prima facie case of
tortious interference with contract, the Court will now
address the resulting damage Cooper Tire has suffered. As
a result of the interference with the contract between Cooper
Tire and Maza, Cooper Tire has been stripped of its right to
be associated with Maza in connection with a settlement and
of its right to expect that when Maza gets his money, Cooper
Tire will get its money. It should be obvious that of the two
(2) claims - that of Maza as a bereaved widower, who lost
his wife allegedly as a result of alleged medical malpractice
AEA eed eae nade e
45
of one of the defendants, as opposed to the claim of Cooper
Tire, a large business entity who is simply seeking
reimbursement for dollars paid out - the former is by far
more attractive to a jury and more potentially dangerous to
defendants than is tho latter. It would logically follow,
therefore, that if not Settling the latter claim would prohibit
the favorable settlement of the former claim, defendants
would be more likely to settle the latter claim than they
would if it were the only claim the defendants would have to
consider. As conceded by plaintiff, such a strategic right is
a loss which is difficult to place a value on, but the Court
agrees that it is at least worth the value of the settlement with
Robert Maza up to the amount Cooper Tire paid out for him
and his wife on medical expenses occasioned by that same
loss and the expense of enforcing its subrogation right,
namely its attorney’s fees and costs. As noted in the treatise
cited above:
If the objective of an insurer’s cause of
action is damages for breach of contract by
the insured, troublesome questions may arise
concerning the measure of damages. The
insurer’s rights depend to a large extent on
views regarding the respective interests of the
insured and the subrogated insurer in the third
party claim.
A conflicting line of precedents, which
includes several variants, limits an insurer’s
relief to an amount that is consistent with the
harm done by the breach. For example, in
one leading case, the court stated that in order
to prove the harm done by violation of its
46
subrogation rights an insurer "must show that
in fact it might have recovered against* * *"
the third party "as a wrongdoer." The insurer
had issued collision coverage for a car and
had a subrogation interest in the claim for
damage to the car, but no interest in the
insured’s very substantial claim for personal
injury. The use of the word "might" in this
opinion is ambiguous. Was it intended to
mean that in order to recover the insurer must
show both that it would have litigated the tort
claim and that it would have recovered
judgment against the alleged tortfeasor if the
settlement had not been made? Alternatively,
is it sufficient for an insurer to show that the
prospect of a suit would have been sufficient
to have effected some recovery by way of
compromise of the disputed liability? The
second interpretation of what the insurer
should be required to prove seems the fairest,
because it is essentially comparable to the
position the insurer would have occupied had
the subrogation rights not been violated.
If the passage quoted in the preceding
paragraph means that the insurer must prove
that it would have recovered in the event the
claim had been litigated rather than being
settled, then the compromise settlement figure
is not treated as the true value of the third
party claim. If the passage means that the
insurer must show only that there is such a
possibility of a recovery because the claim had
47
settlement value, then it would be open to the
insurer to show damages in an amount equal
to the compromise settlement figure allocable
to the portion of the claim to which it was
subrogated (the property damage claim, but
not the personal injury claim). Although an
insurer would be free to urge that the
reasonable compromise settlement value
exceeded the amount the insured accepted in
settlement, the insured would have little cause
for complaint if the insurer were satisfied to
treat the actual settlement figure as the true
value.
Keeton and Widiss, Insurance law §3.10 (1988) at p. 247.
17. As the Court stated from the bench,
Fed.R.Evid. 408 provides that evidence of (1) furnishing or
offering or promising to furnish, or (2) accepting or offering
or promising to accept, a valuable consideration in
compromising or attempting to compromise a claim which
was disputed as to either validity or amount, is not
admissible to prove liability for or invalidity of the claim or
its amount. The Court further notes that under said rule,
"Evidence of conduct or statements made in compromise
negotiations is likewise not admissible. The rule also states
that exclusion is not required when the evidence is offered
for another purpose, such as proving bias or prejudice of a
witness, negativing a contention of undue delay, or proving
an effort to obstruct a criminal investigation or prosecution.
The comments to the rule state that the rule excludes such
evidence only when the purpose is proving the validity or
48
invalidity of the claim or its amount, and an offer for another
purpose is not within the rule.
There is no question that the majority of the testimony
at the trial in this case consisted of statements made during
the settlement negotiations relative to the state court trial.
However, the statements introduced in this trial were offered
for the purpose of trying to prove defendant’s estoppel theory
- that plaintiff was aware that defendants were trying to settle
separately with Maza and that it raised no objection thereto.
In this case, both sides chose to offer the evidence of
settlement negotiations, which, arguably was offered for a
permissible purpose. Therefore, although the Court finds
discussion of Rule 408 to be of limited relevance, the
purpose behind the rule - to encourage freedom to
communication with respect to compromise - has application
in this case. To hold, solely, or at least in large part, on the
basis of evidence of settlement negotiations, that defendants’
conduct in this case did not constitute a breach or tortious
interference would create a chilling effect on settlement
negotiations.
Based upon the foregoing, the Court finds in favor of
plaintiff and against defendants on both claims. In so
holding, the Court finds that plaintiff should recover from
defendants, jointly and severally, the amount of medical
expenses paid $298,118.07. The Court also finds that
plaintiff is entitled to recover attorney’s fees and costs in this
matter. If the parties are unable to reach an agreement as to
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49
the amount of attorney’s fees and costs, plaintiff should
present its petition for such by October 15, 1993.
ENTERED this day of
, 1993.
JIMM LARRY HENDREN
UNITED STATES DISTRICT
JUDGE
50
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
EL DORADO DIVISION
COOPER TIRE & RUBBER COMPANY PLAINTIFF
V. NO. 91-1156
ST. PAUL FIRE AND MARINE
INSURANCE COMPANY ET AL. DEFENDANTS
JUDGMENT
In accordance with the Memorandum Opinion filed
this same date, the Court hereby enters judgment in favor of
plaintiff and against defendants in the amount of
$298,118.07, plus reasonable attorney’s fees and costs, the
amount which will be determined upon proper petition.
ENTERED this VA st day of October, 1993
JIMM LARRY HENDREN
UNITED STATES DISTRICT
JUDGE
51
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
EL DORADO DIVISION
COOPER TIRE & RUBBER COMPANY PLAINTIFF
V. NO. 91-1156
ST. PAUL FIRE & MARINE DEFENDANTS
INSURANCE COMPANIES, ROBERT
MAZA AND RICHARD C. PILLSBURY,
M.D.
ORDER
NOW on this tex ; | day of April, 1994, comes on
for consideration several post-trial motions: 1) Motion for
New Trial and Amendment of Judgment filed by defendant
Robert Maza ("Maza"); 2) Motion for New Trial filed by St.
Paul Fire & Marine Insurance Companies and Richard C.
Pillsbury, M.S. ("St. Paul and "Pillsbury"); 3) Motion for
Assessment of Attorneys I Fees and Costs; and 4) Motion for
Prejudgment interest. Responses and replies have been filed
and the matters are now ripe for determination.
Motions for New Trial and Amendment of Judgment
In the "Argument" in support of his motion, defendant
Maza states that the Court’s Opinion suggests that when the
settlement was made by Maza, a $298,118.07 check should
52
have been written to Cooper Tire & Rubber Company, who
had done very little to recover this money. Defendant
complains that should the judgment stand, plaintiff will
recover, without costs to them, the entire amount of their
claim.
In the "Memorandum in Support of Motion for New
Trial" filed by defendant St. Paul and Pillsbury, it is argued,
in part, that "the ’chilling affect’ of this Court’s decision is
that an employer under the guise of an ERISA right can
completely dominate and dictate the course of a personal
injury or wrongful death claim because of the employer’s
subrogation right for money expended under an employee
benefit plan.”
The Court believes that a reading of the opinion
clearly suggests that prior to the settlement, Maza should
have obtained Cooper Tire’s written consent. Further,
defendants fail to mention or recognize the fact that the Court
based its decision on the very clear language contained in the
Subrogation Agreements, both of which were signed by
defendant Maza, who reaped the benefits by the Plan’s
payment of medical expenses. Defendants, St. Paul and
Pillsbury, had knowledge of these documents, since they
were part of the record in the state court decision. It is these
documents which required Maza to obtain the written consent
of plaintiff prior to finalizing any settlement agreement,
which was not done in this case. Since defendants chose to
ignore the clear language of the Subrogation Agreements
with respect to the requirement of prior written consent by
plaintiff before any settlement, one might reasonably expect
that defendants would likewise fail to note or ignore the fact
that the Subrogation Agreements say nothing whatever about
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53
the deduction of costs and attorneys’ fees from any recovery
due plaintiff under the subrogation right. Finally, it is
perhaps a bit brazen for defendant Maza to now argue that
the Court should deduct an attorneys’ fee from plaintiff's
recovery when it appears that the settlement made was in
knowing violation of plaintiff's contractual rights and that
plaintiff has been required to bring this suit to enforce those
rights.
As to defendants’ argument that the opinion by this
Court creates a "chilling effect.". The Court believes that a
"chilling effect" would result only if the Court had reached
a contrary result, as indicated in the following language of
the Court opinion.
If the Court were to approve and
sanction the type of settlement reached which
disregards these other valuable rights, the
resulting precedent would permit an injured
employee to disregard his obligations under
the ERISA plan and under the Receipt and
Subrogation agreements and recover for his
own benefit, subjecting the ERISA plan
administrator to the whim of attorneys for the
insured and tortfeasor to determine whether
the Plan I s rights are adequately protected.
It would also require a Plan administrator to
seek recovery by separate suit against the
tortfeasor. Such a ruling not only would
condone a breach of contract, but would also
have the-potential of adversely affecting the
efficient and proper administration of the
ERISA plan. As indicated in the insurance
54
treatise quoted from above, such a precedent
would place the plan administrator in a
position of paying for the medical bills quickly
but not being able to be reimbursed quickly,
and would further deprive the administrator of
the considerable benefit of having the injured
employee act as the party plaintiff in a trial
The standard which has been applied by the Eighth
Circuit in determining a motion for new trial is stated in
White v. Pence, 961 F.2d 776 (8th Cir. 1992):
With respect to motions for new trial
on the question of whether the verdict is
against the weight of the evidence, we have
Stated: "In determining whether a verdict is
against the weight of the evidence, the trial
court can rely on its own reading of the
evidence-it can ’weigh the evidence,
disbelieve witnesses, and grant a new trial
even where there is substantial evidence to
sustain the verdict. I" (citation omitted)... .
These cases establish the fundamental
procedures or methodology to be applied by
the district court in considering new trial
motions and are in contrast to those
procedures governing motions for j.n.o.v.
* x *
It is apparent that this language in
Fireman’s Fund was discussing’s verbal
formulation of the quantum of weight to
support the grant of a new trial, and while
ite see ih Oe Ne
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55
reciting the terms clear weight,’
‘overwhelming weight,’ or great weight,’ we
made plain that the ultimate test was whether
there had been a miscarriage of justice. We
believe there is nothing inconsistent with the
discussion of quantum in Fireman’s Fund and
the discussion of methodology in Brown
Bates, and Slaton, described above, and in
Cole _v, Williams, we essentially stated as
much.
The district court’s discretion is not
boundless, however. We stated in Fireman’s
Fund and reiterated in Blake that the district
court is not "’free to reweigh the evidence and
Set aside the jury verdict merely because the
jury could have drawn different inferences or
conclusions or because judges feel that other
results are more reasonable.’" (citation
omitted). We similarly observed in McGee v.
South Pemiscot School Dist., 712 P.2d 339
(8th Cir. 1983), that the ’trial judge may not
usurp the functions of a jury . . . [which]
weighs the evidence and credibility of
witnesses.’ Id. at 344.
Fireman’s_ Fund contains further
discussion limiting the grant of a new trial.
We there stated: ’Where the subject matter of
the litigation is simple; where there exists no
complicated evidence or where the legal
principles presented are such that they would
not confuse the jury, the court should be
reluctant to grant a new trial.’ 466 F.2d at
187. In this vein, and looking at the
56
particular evidence before the court, we
concluded: °’The evidence is such that
reasonable men may differ as to the result,
therefore, the determination should properly
be left for the jury.’ Id. We concluded that
there was no significant weight factor favoring
the defendant in that case, and reversed the
grant of the new trial. The cases articulating
this theme but underscore this distinction
between such rulings and the judicial weighing
and balancing required by the cases we have
discussed above.
Id. at 780-781.
In their motion and briefs, defendants have presented
substantially the same arguments that were presented to the
Court prior to its ruling, and have failed to convince the
Court that a miscarriage of justice has occurred by the
Court’s findings in this matter.
Defendant Maza spends little time in argument
relating to the liability determination made by the Court, and
then argues that the Court erred in the determination of
damages. Defendant Maza argues that the plaintiff has not
demonstrated a figure allocable to the medical claim because
there was no recovery for the medical claim, which claim
was allegedly preserved. He further argues that to award a
judgment for the full amount of medical expenses without
deducting any costs of collection and separating the medical
expenses claim and personal injury claim is not compatible
with the treatise cited.
57
Defendants St. Paul and Pillsbury argue that
protecting their economic interests or the interest of Pillsbury
is not sufficient evidence of tortious conduct to support a
finding of intentional interference. Defendants also argue
that plaintiff did not sustain its burden of proving there was
resulting damage, and that the evidence of medical expenses
paid fails to provide a basis upon which the Court could
determine the amount of damages resulting from or
proximately caused by the tortious interference.
The Court, in its opinion, set forth the elements
required to be proven in a case involving a tortious
interference with contract claim, and examined the evidence
produced at the trial in light of those elements. As argued
by plaintiff, defendants chose not to introduce any evidence
on the issue of allocation of damages, relying entirely on the
estoppel argument. Defendants failed to introduce any
evidence relating to the value of Maza’s entire claim.
Finally, the Court is not persuaded by defendant's “privilege”
argument. Defendant has failed to convince the Court that
its conclusions were unfounded and the court hereby denies
the Motions for Now Trial or Amendment of Judgment on
the basis of the argument that the evidence does not support
the opinion.
Motion for Assessment of Attorneys’ Fees
In its opinion, the Court found that plaintiff "is
entitled to recover attorney’s fees and costs in this matter."
Op. at p. 21. The Court also found that plaintiff's claims
were governed by ERISA. Op. at p. 7. Plaintiff’s counsel
seeks $46,147.50 in attorneys’ fees. Affidavits of the
attorneys of record were submitted in support of the motion.
58
Defendants argue that there are no provisions for
attorneys’ fees, statutory or otherwise in this case.
Alternatively, defendants ask that attorneys’ fees be denied
since plaintiff has not made the itemization of fees available
to them.
First, the Court will address whether it may now give
defendant relief from that portion of the judgment awarding
attorneys’ fees. Plaintiff argues that such a request is
untimely and unwarranted under Fed. R. Civ. P. 59.
However, under Rule 60(b), a party may obtain relief from
a judgment or order in certain circumstances, including
mistake or inadvertence. Mistake or inadvertence by the
Court is included in said rule. mer _v. Secr f_ Air
Force, 944 F.2d 804, 807 (11th Cir. 1991). In this case, the
Court is of the opinion that after conducting more thorough
research with respect to the attorneys’ fee issue, it was
mistaken in awarding attorney’s fees, and hereby relieves
defendant from said part of the judgment for the following
reasons:
An award of attorneys’ fees would be allowable in
this case since this is a civil action brought by a fiduciary to
enforce the terms of the plan. See 29 U.S.C. §1132(a)(3)
and 29 U.S.C. §1132(g)(1). However 29 U.S.C.
§1132(g)(1) clearly gives the Court discretion ("The court in
its discretion may allow a reasonable attorney’s fee and costs
of action to either party"). Said statute does not establish
criteria directing the Court’s determination of fee awards.
However, as set forth in Andrews v, Employees’ Retirement
Plan of First Alabama Bancshares, 938 F.2d 1245, 1248
(11th Cir. 1991), the Court in Iron Workers Local No. 272
v. Bowen, 624 P.2d 1255, 1266 (Sth Cir. 1980), adopted
aa ah T Wilke oe
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59
five factors governing the district court’s determination
whether to award fees in an ERISA action:
(1) the degree of the opposing parties’
culpability or bad faith; (2) the ability of the
Opposing parties to satisfy an award of
attorneys’ fees; (3) whether an award of
attorneys’ fees against the opposing parties
would deter other persons acting under similar
circumstances; (4) whether the parties
requesting attorneys’ fees sought to benefit all
participants and beneficiaries of an ERISA
pian or to resolve a significant legal question
regarding ERISA itself; and (5) the relative
merits of the parties’ positions.
Id. at 1248 (footnotes omitted).
The Court will address each of the above factors.
l. Although the Court has clearly hold that
defendants were incorrect in their assumption that the
preservation of Cooper Tire’s rights in the settlement
agreement adequately protected Cooper Tire, the Court
cannot say that defendants acted in bad faith.
2 Although defendants St. Paul and Pillsbury
may have the ability to pay an award, it is doubtful that
defendant Maza has such ability. Further, the Court can not
Say that an award would dater other persons acting under
similar circumstances. Defendants relied upon the advice of
their counsel in agreeing to the terms of the settlement
agreement, and it is therefore doubtful that an award in this
60
case would have any deterrent effect other than upon
attorneys.
3. Although the outcome of the case benefits all
participants and beneficiaries of the ERISA plan, the Court
does not believe plaintiff's intent was to benefit all
participants and beneficiaries or to resolve a legal question
regarding ERISA itself.
4. This case was hotly contested and although the
Court disagreed with defendants’ positions, the Court does
not believe their position was totally without merit.
After considering the above factors in light of the
facts and circumstances in this case, the Court, in the
exercise of its discretion, declines to award attorneys’ fees
and costs, and an Amended Judgment will be entered
accordingly.
Prejudgment Interest
This Court has had occasion to recently address the
issue of prejudgment interest in Missouri Pacific Railroad
Company v, R.N. Reynolds Construction Co., Inc., no. 90-
1004, in an Order entered on March 10, 1994, a copy of
which is attached hereto. In that Order, the Court discussed
at length the law relating to the. award of prejudgment
interest as decided by the Arkansas courts and Eighth Circuit
Court of Appeals. A review of that Order leads the Court to
conclude that the case most on point with the facts presented
herein is Bank of Mulberry v. Fireman’s Fund Insurance
Co., 720 F.2d 501 (8th Cir. 1983), where the bank brought
action against an insurance company providing coverage
61
against losses resulting from employee fraud on claims which
the insurer had denied. In reversing the district court’s
denial of prejudgment interest, the Eighth Circuit stated:
Prejudgment interest is to be awarded in cases
where there is a method of determination of
the value of the property at the time of the
loss. Lovell v. Marianna Federal Savings &
7 Loan Ass’n, 267 Ark. 164, 589 S.W.2d 577
(1979). In Lovell, the court held that
prejudgment interest should have been
awarded when the property involved was a
certificate of deposit. Prejudgment interest
has also been awarded in cases involving a
real estate broker’s fee, Toney v, Haskins, 7
| Ark. App. 98, 644 S.W.2d 622, 627 (1983);
damage to an automobile, Wooten v.
McClendon, 272 Ark. 61, 612 S.W.2d 105
I (1981) and the cost of a construction job,
United States _v. United States Fidelity &
Guaranty Co., 644 F.2d 747 (8th Cir. 1991)
(applying Arkansas Law). Prejudgment
interest has been denied in cases involving
persona injuries, Wooten v. McClendon, 612
S.W.2d at 106; see Lovell v Marianna Federal
Savings and Loan Ass’n, 589 S.W.2d at 578;
and lost profits, Red Lobster Inns. Inc. v.
Lawyers Title Ins. Co., 656 F.2d 381, 386
(8th Cir. 1981) (applying Arkansas law).
a a Ke Tah taka gl
It is not obvious from looking at these cases
into which category payment of insurance
proceeds should fall. However the premier
62
prejudgment interest case in Arkansas, Lovell,
provides some guidance. In that case the
court noted that "[iJn the present case the
certificates of deposit had an exact value on
the date appellee refused to pay them over to
appellant. He has been wrongfully deprived
of the use of these funds since November 13,
1973." We note that in this case the unpaid
loans and the theft had an exact value on the
date Fireman’s refused to pay under the
Bank’s policy, and that Fireman’s has had the
use of what is essentially the Bank’ s money
since that time. Nor does the fact that the
Bank may have alternative sources of recovery
-- i.e., the assets of C.A.T.V.’s shareholders -
- mean that the amount was not capable of
determination. As the court expressly noted
in Lovell, it does not matter that the claim is
not "liquidated"; in other words, it is
irrelevant to the recovery of prejudgment
interest that tho amount is disputed. We
consider that the proof of loss statement and
the Bank’s books and records provide a
method of determining the damages.
Therefore, prejudgment interest should have
been awarded.
Id. at 503-504.
In the present case, both the time of the accrual and
amount are capable of exact determination. The amount
awarded $298,118.07 - could be exactly calculated by
adding the amount of the medical bills paid - by Cooper
63
Tire, an amount undisputed by defendants. The time of
accrual is the date of the execution of the written settlement
agreement, or when the breach occurred October 17, 1990.
The amount of interest is calculated on a six percent interest
rate. Ark. Constitution, Art. 19 §13; Killam v, Texas Oil
& Gas Corp., 303 Ark. 547, 798 S.W.2d 419 (1990).
Therefore, the Court finds that prejudgment interest
should be awarded from October 17, 1990, through October
1, 1993, the date of entry of final judgment herein, or
$53,661.25.
Based upon the foregoing, the Court hereby denies the
Motion for New Trial, denies the request for attorneys’ fees,
and grant the Motion for Prejudgment Interest. An Amended
Judgment will be entered accordingly.
IT IS SO ORDERED.
JIMM LARRY HENDREN
UNITED STATES DISTRICT
JUDGE
64
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
EL DORADO DIVISION
COOPER TIRE & RUBBER COMPANY PLAINTIFF
V. NO. 91-1156
ST. PAUL FIRE & MARINE DEFENDANTS
INSURANCE COMPANIES, ROBERT
MAZA AND RICHARD C. PILLSBURY,
M.D.
AMENDED JUDGMENT
In accordance with the Order entered this same date,
the Court hereby vacates that part of the judgment entered on
October 1, 1993 awarding attorneys’ fees. The Court
amends the Judgment so as to award plaintiff prejudgment
interest in the amount of $53,661.25, in addition to that
awarded in the Judgment.
ENTERED this 47 _ day of April, 1994.
JIMM LARRY HENDREN
UNITED STATES DISTRICT
JUDGE
EAD Oe ht Cl atte
65
29 USCS § 1132 (1994)
printed in FULL format.
UNITED STATES CODE SERVICE
Copyright (c) 1994
Lawyers Cooperative Publishing
*** THIS SECTION IS CURRENT THROUGH P.L.
103-465, APPROVED 12/8/94 ***
TITLE 29. LABOR
CHAPTER 18. EMPLOYEE RETIREMENT INCOME
SECURITY PROGRAM PROTECTION OF EMPLOYEE
BENEFIT RIGHTS REGULATORY PROVISIONS
Administration and Enforcement
29 USCS § 1132 (1994)
§ 1132. Civil enforcement
(a) Persons empowered to bring a civil action. A civil
action may be brought--
(1) by a participant or beneficiary--
(A) for the relief provided for in subsection (c) of this
section, or
(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;
66
(2) by the Secretary, or by a participant, beneficiary or
fiduciary for appropriate relief under section 409 [29 USCS
§ 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;
* * *
12/20/90
COOPER TIRE & RUBBER COMPANY
WELFARE BENEFITS PLAN
68
COOPER TIRE & RUBBER COMPANY
WELFARE BENEFITS PLAN
TABLE OF CONTENTS
ARTICLE I1_ ESTABLISHMENT
Section 1.1 Welfare Benefits l
Section 1.2 Purpose l
Section 1.3 Effective Date l
ARTICLE II_DEFINITIONS
Section 2.1 Definitions 2
Section 2.2 Construction 3
ARTICLE II] PARTICIPATION
Section 3.1 Initial Participation 4
Section 3.2 Cessation of Participation 4
Section 3.3 Reinstatement of Former
Participant +
ARTICLE IV_ BENEFITS AND BENEFICIARIES
Section 4.1 Plan Benefits
Section 4.2 Permissible Benefits
Section 4.3 Prohibited Benefits
Section 4.4 Beneficiaries
Section 4.5 Form of Benefit
AAA nN
EE I Sat! OP OO BEI ean a a
69
ARTICLE V_ADMINISTRATION OF THE PLAN
Section 5.1 The Committee
Section 5.2 Power and Duties of the Committee
Section 5.3 Procedures
Section 5.4 Allocation and Delegation
of Fiduciary Authority and Duties
Section 5.5 Claims Procedure
Section 5.6 Records and Reports
Section 5.7 Remuneration
Section 5.8 Liability and Indemnification
Section 5.9 Reliance on Statements
Section 5.10 Wire Transfers
ARTICLE VI_AMENDMENT OR TERMINATION
Section 6.1 Amendment
Section 6.2 Termination
ARTICLE VII_MISCELLANEOUS PROVISIONS
Section 7.1 Information to be Furnished
Section 7.2 Limitation of Rights
Section 7.3 Nondiscrimination
10
10
70
Article I
Establishment
Section 1.1 Welfare Benefits. Cooper Tire & Rubber
Company (the "Company") is concerned for the security and
welfare of its employees, retired employees, and their
dependents. The Company has maintained certain employee
benefit programs which provide for life, sickness, medical,
accident, disability, and other similar benefits (the "Benefit
Programs"). The Company hereby establishes the Cooper
Tire & Rubber Company Welfare Benefits Plan (the "Plan”).
Section 1.2 Purpose. The purpose of this Plan is to
facilitate administration of the Benefit Programs designated
by the Company from time to time for inclusion in the Plan.
The Benefit Programs, administered through the Plan are
intended to constitute a single plan for purposes of ERISA.
Section 1.3 Effective Date. The provisions of the
Plan as contained herein shall be effective as of December
31, 1990. The Plan is intended to constitute a welfare
benefit plan under ERISA.
71
Article II
Definitions
Section 2.1 Definitions. The following words and
phrases shall have the meaning and application set forth
below:
“Benefit Programs", means any schedule of benefits
providing life, sickness, accident, medical, disability or other
similar benefits that the Company from time to time shall
designate for inclusion under the Plan. Such schedules are
corporated by reference herein.
“Code” means the Internal Revenue Code of 1986 as
amended from time to time.
"Committee" means the committee appointed in
accordance with Article V herein to administer the Plan. If
the Company fails to appoint a Committee, the Board of
Directors of Cooper Tire & Rubber Company shall be
deemed to constitute to the Committee.
“Company” means Cooper Tire & Rubber Company
and any Subsidiary which adopts this Plan.
"Effective Date" means December 31, 1990.
“Employee” means any employee of the Company.
"ERISA" means the Employee Retirement Income
Security Act of 1974 and the rules and regulations
thereunder, as amended from time to time.
72
"Participant" means a person who qualifies for
benefits under a Benefit Program, and participates under
Article III.
"Plan" means the Cooper Tire & Rubber Company
Welfare Benefits Plan, and any other Benefit Programs that
the Company may specify for inclusion under the Plan.
"Plan Year" means the Plan’s accounting year ending
on December 31 of each year.
"Subsidiary" means any corporation in which the
Company owns 50 percent or more of the combined voting
power of all classes of stock entitled to vote or at least 50
percent of the total value of all classes of stock of such
corporation.
"Trust" means the Cooper Tire & Rubber Company
Voluntary Employees’ Beneficiary Trust.
"Trustee" means the person or entity named as trustee
under the Trust including any successor Trustee.
Section 2.2 Construction.
(a) This Plan shall be interpreted, construed,
enforced, and administered in accordance with
the laws of the United states and the State of
Ohio to the extent not preempted by ERISA or
other Federal laws,
(b) The titles and headings of the Plan are for
convenience and reference only, shall not be
(c)
(d)
(e)
73
considered part of the Plan, and shall not be
employed in construction of the Plan,
Whenever words are used in the Plan in
Singular form they shall, where appropriate,
be construed to include the plural.
Masculine gender shall include the feminine
and neuter unless the context indicates
otherwise.
If a provision of the Plan shall be held illegal
or invalid, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the
Plan shall be construed or enforced as if the
illegal or invalid provisions had never been
included in the Plan.
74
Article III
Participation
Section 3.1 Initial Participation
Each person who is a participant or eligible dependent
in a Benefit Program designated for inclusion in the Plan
shall become Participants of the Plan upon the date specified
in the Schedule of Benefit Programs made a part of this Plan.
Section 3,2 Cessation of Participation. A Participant
will cease to be a Participant as of the earlier of (a) the date
on which the Plan terminates or (b) the date on which he
ceases to be eligible to participate under Section 3.1, or (c)
the date on which the applicable Benefit Program(s)
terminate.
Section 3.3 Reinstatement of Former Participant. A
former Participant will become a Participant again at the time
he meets the eligibility requirements of Section 3.1.
DUOMO BAIA A i a at See WSS al Sth LSE lh a ih dn hein sibs
75
Article IV
Benefits and Beneficiaries
Section 4.1 Plan Benefits. The Company shall
designate, from time to time, the Benefit Programs which are
to be included under the Plan. Except as provided in Section
4.3, the benefits provided under such Benefit Programs shall
constitute benefits under the Plan.
Section 4.2 Permissible Benefits. The benefits
designated for inclusion in the Plan may include life,
sickness, accident, medical, disability, vacation, recreational
or other benefits which safeguard or improve the health of an
individual or protect against an interruption of a Participant’s
earning power.
Section 4.3 Prohibited Benefits. The Company shall
not designate as benefits under the Plan workers’
compensation benefits required by statute, death benefits
under an insurance contract providing a cash surrender value
to the Participant, pension, savings, profit sharing or stock
bonus benefits, or any deferred compensation that becomes
payable by passage of time, rather than as the result of an
unanticipated event.
Section 4.4 Beneficiaries. In addition to providing
benefits for a Participant, the Benefit Programs administered
under the Plan may also provide belief its to the Participant’s
spouse, any child of the Participant or the Participant’s
spouse who is a minor or a student (within the meaning of
Code Section 151(c)(4)), any other minor child residing with
the Participant, and any other individual who is a person
described in Code Section 152(a). Death benefits may be
76
provided to any beneficiary designated by a Participant under
the terms of a death Benefit Program or an insurance contract
forming part of the Plan.
Section 4.5 Form of Benefit. The Benefit Programs
administered under the Plan may provide benefits by cash °
payment, a distribution of property, or the provision of
services. The Benefit Programs administered under the Plan
may reimburse a Participant for premiums or other payments
he expends for benefits or insurance provided in the Benefit
Program.
3
a
a
~
v
'
77
Article V
Admini ion of P]
Section 5.1 The Committee. The Board of Directors
of the Company shall appoint the Committee to administer
the Plan. The Committee shali consist of officers or other
Employees or any other persons who shall serve at the
request of the Board of Directors. Any member of the
Committee may resign by delivering a written resignation to
the Board of Directors and to the Committee. Vacancies on
the Committee, which result from resignation, death,
removal, or otherwise, shall be filled by the Board of
Directors.
Section 5.2 Powers and Duties of the Committee.
Except as otherwise provided in a Benefit Program
designated for inclusion in the Plan and in the absence of a
different allocation of power and duties pursuant to Section
5.4 below, the Committee shall have the following powers
and duties;
(a) to construe and interpret the provisions of the
Plan;
(b) to prescribe procedures to be followed by
Participants and beneficiaries when applying
for benefits;
(c) to decide all questions of eligibility for Plan
participation;
(d) to conform to the requirements of ERISA:
(e)
(f)
(g)
(h)
(i)
()
(k)
(I)
78
to obtain from the Company, Participants,
insurance company,, and any other persons,
information necessary for the proper
administration of the Plan;
to establish procedures pursuant to Section 5.4
for allocating and delegating fiduciary powers
and duties (other than Trustee responsibilities
as defined in Section 405(c)(3) of ERISA);
to determine the amount, manner, and time of
payment of benefits;
to appoint, retain, remove, or consult with
counsel, actuaries, accountants, or other
persons concerning the operation of the plan;
to provide the Trustee with guidelines for
investment of Trust assets;
to review appeals of denied claims for benefits
pursuant to Section 5.5 below;
to do other acts reasonably necessary to
administer the Plan in accordance with its
terms or as may be provided for or required
by law; and
to adopt those rules and regulations it deems
necessary or desirable for the conduct of its
affairs;
j
P|
(a)
(b)
(m)
79
to notify the insurance company in writing of
the termination of the Plan.
Section 5.3 Procedures.
Voting. A majority of the members of the
Committee shall constitute a quorum for the
transaction of business. All actions taken by
the Committee shall be by majority vote of the
members present at the meeting, except for
those matiers which have been allocated or
delegated pursuant to Section 5.4 below to a
particular person.
Plan Administrator, Chairman and Secretary.
The Committee, by a majority vote of its
members, shall appoint a Plan Administrator,
Chairman and Secretary. The Plan
Administrator, as appointed by the
Committee, shall be the "Named Fiduciary" of
the Plan with respect to administrative
matters.
Section 5.4 Allocation and Delectation of Fiduciary
Authority and Duties. The Committee may agree in writing
to allocate among the members of the Committee the various
i powers and duties stated in Section 5.2 other than the
: responsibility to decide appeals of benefit claims.
Section 5.5 Claims Procedure. With respect to each
benefit claim, the Committee shall follow the claims
procedure set forth in the Benefit Program for which such
claim was submitted.
80
Section 5.6 Records and Reports.
(a) The Committee shall be entitled to rely upon
certificates, reports and opinions provided by
any accountant or legal counsel employed by
the Company or the Committee. The
Committee shall keep a record of all of its
proceedings and acts, and shall keep all such
books of account, records, and other data as
may be_ necessary for the _ proper
administration of the Plan.
(b) Each Participant and each Participant’s
designated beneficiary must file with the
Committee, from time to time, in writing, his
post office address and each change of post
office address of such Participant or
beneficiary. Any communication, statement
or notice addressed to a Participant or
beneficiary at the last post office address filed
with the Committee, or if no address is filed
with the Committee, the last post office
address as shown on the Company’s records,
will be binding on the Participant and his
beneficiary for all purposes of the Plan.
Neither the Committee nor the Trustee shall
be required to search for or locate a
Participant or a beneficiary.
Section 5.7 Remuneration. Unless otherwise
determined by the Company, the members of the Committee
shall serve without compensation for services to the Plan;
however, all expenses of the Committee shall be paid by the
81
Company. Such expenses shall include any expenses
incidental to the functioning of the committee, including but
not limited to fees of accountants, legal counsel and other
specialists, or any other costs of administration of the Plan.
Section 5.8 Liability and Indemnification.
(a) A member of the committee shall not be liable
for any act, or failure to act, of any other
member of the Committee, except to the
extent that such member:
(1) knowingly participates in, or
undertakes to conceal, an act or
omission of another Committee
member, knowing that such act or
omission is a breach of fiduciary duty
to the Plan;
(2) fails to comply with the specific
responsibilities given a person as a
member of the Committee, and such
failure enabled another member of the
Committee to commit a breach of
fiduciary duty to the Plan; or
(3) has knowledge of a breach of a
fiduciary duty to the Plan by another
member of the Committee, unless such
member makes reasonable effort under
the circumstances to remedy such
breach.
82
(b) Each member of the Committee shall be liable
with respect to his own act of willful
misconduct.or gross negligence concerning the
Plan. The Company shall indemnify the
Committee and/or each of its members for
part or all of any expenses, costs, or liabilities
arising out of the performance of duties
required by the terms of the Plan or Trust,
except for those expenses, costs, or liabilities
arising out of a member’s willful misconduct
or gross negligence.
Section 5.9 Reliance on Statements. The Committee,
in any of its dealings with Participants hereunder, may
conclusively rely on any written statement, representation, or
documents made or provided by such Participants.
Section 5.10 Wire Transfers. As directed by the
Company or the Committee, the Trustee shall wire transfer
funds (to the extent the Trust is adequately funded) to any
person or entity for the payment of claims and charges for’
SeTVICes.
83
Article VI
Amendment or Termination
Section 6,1 Amendment. The Company expressly
reserves the right at any time to amend the Plan, by
resolution of the Board.of Directors, to the extent permiited
under the Code and ERISA.
Section 6.2 Termination. The Company intends to
continue the Plan indefinitely. However, the Company
reserves the right to terminate the Plan at any time.
84
Article VII
Miscellaneous Provisions
Section 7.1 Information to be Furnished.
Participants shall provide the Company and the Committee
with such information and evidence, and shall sign such
documents, as may reasonably be requested from time to
time for the purpose of administration of the Plan.
Section 7.2 Limitation Rights. Neither the
establishment of the Plan nor any amendments hereof, nor
the payment of any benefits, will be construed as giving to
any Participant or other person any legal or equitable right
against the Company or the Committee, except as provided
herein.
Section 7.3. Nondiscrimination. The Plan shall
satisfy the nondiscrimination requirements contained in
Article IX of the Trust.
IN WITNESS WHEREOF, the Company has
executed the Plan on this day of December, 1990.
COOPER TIRE & RUBBER
COMPANY, ("The Company”)
By
Its
ence Spine lhale, bat DNB ska RC leas
85
COOPER TIRE & RUBBER COMPANY
WELFARE BENEFITS PLAN
SCHEDULE OF BENEFIT PROGRAMS
as of December 31. 1990
’
Pursuant to the provisions under Section 4.1 of the
Cooper Tire & Rubber Company Welfare Benefits Plan (the
Plan), the following Benefit Programs are hereby included
under the Plan:
Program
Number Name of Program
519 Cooper Tire & Rubber Company Salaried
Employees Health Care Plan
520 Cooper Tire & Rubber Company Hourly
Employees Health Care Plan-Findlay
521 Cooper Tire & Rubber Company Hourly
Employees Health Care Plan-Texarkana
522 Cooper Tire & Rubber Company Hourly
Employees Health Care Plan-Clarksdale
523 Cooper Tire & Rubber Company Hourly
Employees Health Care Plan-Auburn
524 Cooper Tire & Rubber Company Hourly
Employees Health Care Plan-El Dorado
533 Cooper Tire & Rubber Company Hourly
Employees Health Care Plan-Bowling Green
86
IN WITNESS WHEREOF, the Company has
executed this Schedule on this day of December,
1990.
COOPER TIRE & RUBBER
COMPANY, ("The Company")
Date
86A
COOPER TIRE & RUBBER COMPANY
FINDLAY, OHIO
SALARIED EMPLOYEES HEALTH CARE PLAN
Effective January 1, 1983, for full time salaried employees,
the Company Group Hospitalization and Surgical Benefits,
except in cases covered by a Worker’s Compensation Act,
will be as hereinafter stated:
(e) r ion
In the event an Employee or dependent of an
Employee, including the Surviving spouse or a
surviving dependent of a deceased Employee, is
legally entitled to recover, including recovery under
uninsured motorist coverage, all or a portion of the
cost of a service or prescription drug covered by this
Plan from a third party, the Company will upon
making payment under this Plan succeed to any
rights of recovery the Employee or dependent may
have or acquire (with respect to such service or
prescription drug) against any person or organization
except insurers of individual hospital, surgical, or
medical policies issued to the Employee or
dependent.
Employees (including dependents, Surviving spouses
or surviving dependents of deceased Employees) by
acceptance of such benefit payments agree to furnish
such information and assistance, and execute such
assignment and other instruments as the Company
may reasonably request to facilitate enforcement of
the successor rights of the Company. Employees
and their dependents shall take no action prejudicing
such rights of the Company.
87
TO: All Salaried Employees
FROM: C. F. Stumpp
SUBJECT: Salaried Employee Benefits Handbook
Attached is a complete set of new pages for your
Benefits Handbook. Please remove ali of the old pages and
insert these new pages behind the appropriate tabs.
There have been many changes in law requiring
different language in many sections, so we want to be sure
you have received your new set of pages. Please sign the
acknowledgment below and return this page to your local
personnel office, or if you work in the Findlay office, to
Employee Services.
Please take the time to read this material. If you have
any questions contact your local personnel office or
Employee Services in Findlay.
I hereby acknowledge receipt of the Handbook pages
dated 1-89.
Signature Date
CONTENTS
Section Tab
I Sao Cae Site aye Sed lo Page i
i a ]
Thrift and Profit Sharing Plan. ............... 2
Life Insurance, A.D. and D., Voluntary
Term Life Insurance and Survivor
cisineiniut sours. tet: Loe TP eee a
ecusipmisilessmibcia... Lee rr eta TOC eee 4
7
Accident and Sickness Benefit Plan............. 5
Voluntary Accidental Death and Dismemberment
vsipinrnictyssmcinauch tr Cor Te eee 6
2
3
89
Rights and Protections
As a Participant in the various Cooper Tire & Rubber
Company Benefit Plans, you are entitled to certain rights and
protections under the Employees’ Retirement Income Security
Act of 1974 (ERISA). ERISA provides that all Plan
Participants shall be entitled to:
(1) examine, without charge, at your local
personnel office or Employee Services (in
Findlay) all Plan documents, including
insurance contracts and copies o/ all
documents filed by the Plan with the U.S.
Department of Labor, such as detailed annual
reports and Plan descriptions.
(2) obtain copies of all Plan documents and other
Plan information upon written request to the
Plan Administrator. The Administrator may
make a reasonable charge for the copies.
(3) receive a summary of the Plan’s annual
financial report. The Plan Administrator is
required by law to furnish each Participant
with a copy of this annual report.
(4) if appropriate, obtain, once a year, a
statement of the total benefits accrued and the
nonforfeitable (vested) benefits (if any) or the
earliest date on which benefits will become
nonforfeitable (vested).
90
In addition to creating rights for Plan Participants,
ERISA imposes duties upon the people who are responsible
for the operation of these Plans. The people who operate
your Plans, called "fiduciaries", have a duty to do so
prudently and in the interest of you and the other Plan
Participants and beneficiaries.
No one, including your employer or any other person,
may fire you or otherwise discriminate against you in any
way to prevent you from obtaining a benefit or exercising
your rights under ERISA.
If your claim for a benefit is denied in whole or in
part, you must receive a written explanation of the reason for
the denial. You have the right to have the Plan
Administrator review and reconsider your claim.
Under ERISA, there are steps you can take to enforce
the above rights. For instance, if you request materials from
the Plan Administrator and do not receive them within 30
days, you may file suit in a federal court. In such a case,
the court may require the Plan Administrator to provide the
materials and pay you up to $100 a day until you receive the
materials, unless the materials were not sent because of
reasons beyond the control of the Administrator. If you have
a claim for benefits which is denied or ignored, in whole or
in part, you may file suit in a state or federal court. If it
should happen that Plan fiduciaries misuse the Plan’s money,
or if you are discriminated against for asserting your rights,
you may seek assistance from the U.S. Department of Labor,
or you may file suit in a federal court.
91
The court will decide who should pay court costs and
legal fees. If you are successful, the court may order the
person you have sued to pay these costs and fees. If you
lose, the court may order you to pay these costs and fees, for
example, if it finds your claim is frivolous.
If you have any questions about your plan, you should
contact the Plan Administrator. If you have any questions
about this statement or about your rights under ERISA, you
should contact the nearest Area Office of the U.S. Labor
Management Services Administration, Department of Labor.
x* * *
Claims Procedure
To receive benefits under this Plan, your survivor must file
a claim for benefits with the Company. The claim must
include a certified copy of the death certificate.
Should a claim for benefits be partially or totally
denied, a written notice will be provided to your survivor
Stating:
(1) the specific reason for denial with reference to
the pertinent policy provisions,
(2) a description of any material needed to
complete the claim and an explanation of why
such material is needed, and
92
(3) a notice of the survivor’s right to have the
denial reviewed, and an explanation of the
appeal procedure.
If your survivor wishes to appeal the denial of a claim
he/she should be a written request of appeal within 60 days
of receipt of the original denial. Asa part of the appeal the
survivor Or appointed representative has the right to:
(1) review all pertinent documents,
(2) submit comments in writing, and
(3) receive a written decision no sooner than 60
days but no later than 120 days after receipt
of the original denial.
The written appeal decision shall contain specific
reasons for denial and make specific references to the
pertinent policy or plan provisions on which the decision is
based.
Administration Of The Plan
The Cooper Tire & Rubber Company Salaried
Employees Survivor Income Benefit Plarr is sponsored and
administered by Cooper Tire & Rubber Company, Lima and
Western Avenues, Findlay, Ohio 45840. The Company’s
| Employer Identification Number is 34-4297750. This plan
is a welfare plan and designated as Plan No. 501 for
| reporting purposes. The Company, as Plan Administrator,
has designated as its agent for service of legal process J. A.
93
Reinhardt, Lima and Western Avenues, Findlay, Ohio 45840
(tel. (419) 423-1321).
The Plan year ends on December 31 of each year.
Benefits are provided through a combination of Company
purchase of an insurance contract from Union Central Life
Insurance Company and the general assets of the Company.
Miscellaneous
The description of the benefits given in this summary
only ,highlights your benefits. For complete details
regarding these benefits consult a complete copy of the Plan.
In no way can this summary change, add to, or take away
from provisions as set forth in the documents governing this
Plan.
The Company expects this Plan to be permanent, but
reserves the right to amend, modify, enlarge, or terminate it
at any time.
Health Care Plan
Cooper provides an excellent Health Care Plan for all
full-time salaried employees who have completed thirty (30)
days of Continuous Credited Service and who are actively at
work on that date. Qualified dependents also become
covered at the same time. Coverage for you and your
dependents will stop when you cease employment with the
Company except under certain conditions as outlined in the
Plan.
94
As of 1989, this plan is provided at no cost to the
employee. However, if the cost per employee to provide this
plan continues to rise, it is possible that employees will be
asked to share in the cost increase. Should rising costs so
require, you will be advised of any cost-sharing revision to
the plan.
Health Care Benefits
There are three major parts to the Plan: Basic, Major
Medical, and Prescription Drug.
Basic Plan
e Up to 730 days of hospital room and board
(semiprivate rate)
° Miscellaneous in-hospital expenses
° Outpatient diagnostic lab and X-Rays ($550
yearly maximum)
. Past-hospital confinement
. Surgical fees (reasonable and customary)
e Limited dental surgery
. Limited chiropractic service
Major Medical
This portion of the Plan is designed to help
compensate you for certain health care costs not paid for by
the Basic Plan, such as visits to a doctor’s office for illness
or injury.
After a $100 deductible per family member per
calendar year (no more than two deductibles per family), any
95
further covered expenses would be shared. The Company
will pay 80%, and you will pay 20%. There is a $100,000
per year maximum for each family member, and a $400,000
lifetime maximum per family member.
Prescription Drug Program
Employees and their eligible dependents are provided
prescription drug coverage under two plans. The Prescrip-
tion Delivery System (PDS) provides for all of your
covered, mon-emergency prescription needs through a
mail-order system which does not require any employee
co-payment. The Prescription Card System (PCS) provides
a method for you to secure your emergency prescription
needs by presenting your prescription, along with your PCS
Card and a $3.00 co-payment fee, to any member pharmacy.
Circumstances Which May Result In The
Disqualification, Ineligibility Or Denial Of
Benefits Under This Plan
(1) The employee does not correctly complete and
submit for payment a claim for benefits,
(2) The employee’s claim for benefits is not
payable under the terms and conditions of the
current Plan,
(3) Benefits for dependents will not be payable if
the dependent is employed and as a condition
of that employment the dependent’s employer
pays any part of the cost of Health Care
coverage.
a
Te eT A gh ey
(4)
(3)
96
Certain benefit payments for employees and/or
dependents may have to be repaid if they are
covered under the Subrogation section of this
Plan, and/or
The Plan is terminated (which the Company
has the right to do).
Claims Procedure
How to File a Claim
(1)
(2)
(3)
Fill in completely and sign your portion of the
Application for Medical Benefits form,
available in Employee Services or the local
Personnel Office.
For hospital or clinical outpatient diagnostic
X-Rays, laboratory tests or emergency room
treatment procedures, only the employee
portion of the claim form need be completed
as long as the hospital or clinical document is
received and indicates the diagnosis, type of
medical procedure performed, and _ the
charges.
If your claim involves confinement in the
hospital, have the hospital submit its itemized
bill to Cooper. Ask your doctor to complete
his/her portion of the claim form and return it
to us if you have been confined or have had
surgery.
97
(4) Turn in all bills. Any that do not qualify will
be returned to you. Your claim cannot be
finalized until all bills have been received.
(5) | Payment will be made directly to the provider
of services unless we have evidence of
payment having been made by you.
(6) Each employee will receive, either at the time
the claim is paid or upon receipt of the check,
a statement listing all claims that have been
paid, all claims not payable and the reasons
why they were not paid.
Review Of Claim Denial
If you, your dependent(s) or your authorized
represented, wish to appeal the denial of a claim or portion
of a claim, your appeal should be submitted, in writing, to:
Manager, Benefits Administration Department
Cooper Tire & Rubber Company
Lima and Western Avenue
Findlay, Ohio 45840
within sixty (60) days of receipt of the original denial. Asa
part of the Claim Review procedure you will have the
opportunity to:
(1) review all pertinent documents,
(2) submit any additional comments or maternal
necessary to perfect the claim, and
98
(3) receive a written decision no sooner than sixty
(60) days but not later than one hundred
twenty (120) days after receipt of the original
denial.
The written appeal decision shall contain specific
reasons for denial and make specific reference to the
pertinent Plan provisions on which the decision is based.
Administration Of The Plan
The Cooper Tire & Rubber Company Salaried
Employees Health Care Plan is sponsored and administered
by Cooper Tire & Rubber Company, Lima and Western
Avenues, Findlay, Ohio 45840. The Company’s Employer
Identification Number is 34-4297750. This Plan is a welfare
plan and is designated as Plan No. 519 for reponing
purposes. The Company, as Plan Administrator, has
designated as its agent for service of legal process J. A.
Reinhardt, Lima and Western Avenues, Findlay, Ohio 45840
(tel. (419) 423-1321). The benefits from this Plan are paid
from the general funds of the sponsor. The Plan year ends
on December 31 of each year.
Miscellaneous
The description of the benefits given in this summary
only highlights your benefits. For complete details regarding
these benefits consult a complete copy of the Plan. In no
way can this summary change, add to, or take away from
provisions as set forth in the documents governing this Plan.
99
The Company expects this Plan to be permanent, but
reserves the right to amend, modify, enlarge, or terminate it
at any time.
100
RECEIPT AND SUBROGATION AGREEMENT
The undersigned hereby acknowledges RECEIPT
from the Cooper Tire & Rubber Company of the sum of One
thousand six hundred and 00/100 Dollars ($1600.00) in full
settlement of all claims and demands of the undersigned and
any spouse or dependents of the undersigned for any medical
costs, expenses or any other items whatsoever payable under
the Cooper Tire Medical Payment Plan with regard to any
accident, illness, or injury commencing on or about the 23rd
day of June, 1988, or any medical treatment or services
rendered during the period commencing on or about the 3rd
day of October, 1988, and ending an or about the 30th day
of November, 1988.
In consideration of and to the extent of said payment
the undersigned hereby subrogates said Cooper Tire &
Rubber Company, to all of the rights, claims and interest
which the undersigned may have against any person or
corporation liable for the loss mentioned above, and
authorizes the said Cooper Tire & Rubber Company to sue,
compromise or settle in the under-signed’s name or otherwise
all such claims and to execute and Sign releases and
acquittances and endorse checks or drafts given in settlement
of such claims in the name of the undersigned, with the same
force and effect as if the undersigned executed or endorsed
them.
Warranted no settlement has been made by the
undersigned with any person or corporation against whom a
claim may lie, and no release has been given to anyone
responsible for the loss, and that no such settlement will be
made nor release given by the undersigned without the
written consent of the said Cooper Tire & Rubber Company
and the undersigned covenants and agrees to cooperate fully
101
(and to exert him best efforts to cause any affected spouse or
dependent to cooperate fully) with said Cooper Tire &
Rubber Company in the prosecution of such claims, and to
procure and furnish all papers and documents necessary in
such proceedings and to attend court and testify (and to exert
his best efforts to cause any affected spouse or dependent to
attend court and testify) if Cooper Tire & Rubber Company
deems such to be necessary but it is understood the
undersigned is to be saved harmless from costs in such
proceedings.
This RECEIPT AND SUBROGATION
AGREEMENT is subject to the provisions of Article 12,
Section E of Cooper Salaried Employees Medical Benefits,
effective 1/1/86.
In Witness Whereof I have hereto set my hand and
my seal this day of January, 1990.
(SEAL)
STATE OF ARKANSAS _)
‘ee -
COUNTY OF UNION )
On the day of January, 1990 before me came
Robert A. Maza, to me known to be the individual described
in, and who executed, the foregoing instrument, and
acknowledged that he executed the same.
My Commission Expires
Notary Public
EN SN GY, Sa SP & 4 Nae OOM Se Se ee ee a Bo se ee a ee ee
102
1995 U.S. App. LEXIS 15096 printed in FULL format.
HARRIS TRUST AND SAVINGS BANK and MARTIN
D. HARTOG, as co-guardians of the Estate of SANDRA
DEN HARTOG, a disabled person, and MARTIN DEN
HARTOG, individually, Plaintiffs-Appellants,
Cross-Appellees, v. PROVIDENT LIFE AND
ACCIDENT INSURANCE COMPANY, a Delaware
corporation, Defendant-Appellee, Cross-Appellant, and
CAMPBELL SOUP COMPANY, a New Jersey domestic
corporation, Defendant-Appellee.
HARRIS TRUST & SAV. BANK v. PROVIDENT LIFE
& ACCIDENT INS. CO.
Nos. 94-2021, 94-2296
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
1995 U.S. App. LEXIS 15096
January 6, 1995, Argued
June 19, 1995, Decided
PRIOR HISTORY: [*1] Appeal from the United States
District Court for the Northern District of Illinois, Eastern
Division. No. 93 C 5083. Suzanne B. Conlon, Judge.
DISPOSITION: AFFIRMED.
103
COUNSEL: For HARRIS TRUST AND SAVINGS BANK,
MARTIN D. HARTOG, as co-guardians of the Estate of
SANDRA DEN HARTOG, a disabled person, and MARTIN
DEN HARTDOG, individually, Plaintiffs - Appellants
(94-2021, 94-2296): William J. Harte, Vickie Voukidis
Blum, Chicago, IL. Herbert Stride, STRIDE &
ASSOCIATES, Chicago, IL. Joan M. Mannix, HARTE &
ASSOCIATES, Chicago, IL.
For PROVIDENT LIFE AND ACCIDENT INSURANCE
COMPANY, a Delaware corporation, Defendant - Appellee
(94-2021, 94-2296): J. Robert Geiman, William A.
Chittenden, III, Douglas J. Varga, PETERSON & ROSS,
Chicago, IL.
For CAMPBELL SOUP COMPANY, a New Jersey
Domestic Corporation, Defendant - Appellee (94-2021): Scott
B. Greene, Jeffrey C. Clark, PHELAN, POPE, CAHILL &
DEVINE, Chicago, IL.
JUDGES: Before CUMMINGS and KANNE, Circuit Judges,
and GRANT, District Judge. nl
nl The Honorable Robert A. Grant of the United States
District Court for the Northern District of Indiana is sitting
by designation.
OPINIONBY: ROBERT A. GRANT
OPINION: GRANT, District Judge. This action involves a
dispute over insurance coverage provided under an employee
welfare benefits plan governed by the Employee Retirement
Securities Act ("ERISA"). Harris Trust and Savings Bank
104
and Martin Den Hartog, co-guardians of the estate of Mr.
Den Hartog’s disabled daughter Sandra, brought suit against
Campbell Soup Company and Provident Life and Accident,
the administrator of Campbell’s Group Benefits Plan, seeking
a declaration of Sandra’s rights under the Plan, specifically
her right to continued coverage. Campbell filed a
counterclaim under 29 U.S.C. § 1132(a)(3) seeking
restitution of benefits it had advanced on Sandra’s behalf
under the Plan’s third party exclusion provision.
Cross-motions for summary judgment were filed; the
defendants ultimately prevailed; [*2] and plaintiffs were
ordered to pay $ 290,241.53 in restitution. See Harris Trust
& Savings v. Provident Life and Acc. Ins. Co., 854 F. Supp.
524 (N.D. Ill. 1994). The district court, however, denied
Provident’s motion for attorneys’ fees and costs under 29
U.S.C. § 1132(g)(1). This appeal and cross-appeal followed.
For the following reasons, we now AFFIRM.
I. BACKGROUND
Sandra Den Hartog was rendered a quadriplegic when an
automobile in which she was riding was struck by a train in
September 1985. At the time of the accident, Sandra’s
medical insurance coverage was provided by her father’s
employer, Specialty Brands, Incorporated. Pursuant to the
Specialty Brands’ Employee Benefits Plan, all medical
expenses relating to the accident were paid by the plan’s
administrator, Lincoln National Life Insurance Company,
subject to a "Third Party Limitation" provision, which
provided as follows:
If an individual insured under the policy has . . . medical
or dental charges . . . as a result of the negligence or
105
intentional act of a third party, and makes a claim to Lincoln
National for benefits under the policy for such charges, the
insured individual (or legal representative of a minor [*3]
or incompetent) must agree in writing to repay Lincoln
National from any amount of money received by the insured
individual from the third party, or its insurer. The repayment
will be to the extent of the benefits paid by Lincoln National,
but will not exceed the amount of the payment received by
the individual from the third party, or its insurer. .. .
On March 4, 1986, Martin Den Hartog filed a personal
injury lawsuit on his daughter’s behalf against Conrail, the
owner and operator of the train, and Peter Beck, the
engineer. Consistent with the third party limitation provision,
Mr. Den Hartog executed written agreements to repay
Lincoln National the money it had advanced for Sandra’s
medical expenses under the Specialty Brands’ Plan. The
lawsuit was settled on January 26, 1989 for $ 7 million. n2
As part of the settlement, Sandra’s estate reimbursed Lincoln
National for the benefits it had advanced on Sandra’s behalf,
in an amount exceeding $ 400,000.00.
n2 The settlement generates sufficient annual
income to cover Sandra’s medical expenses.
[*4]
On March 31, 1988, while the lawsuit was still pending,
Specialty Brands sold its Thornton Illinois plant to Campbell
Soup Company. Mr. Den Hartog consequently became a
Campbell employee and a participant in Campbell’s Soup
Company Group Benefit Plan ("the Plan” or "the Campbell
Plan”) which was fully funded by Campbell and administered
106
by Provident Life and Accident Insurance Company.
Although employees were not furnished with a written
summary of the Campbell Plan’s provisions until June 1989,
they were assured at the time the transition occurred that
their insurance benefits would remain the same and were
instructed to rely on the terms of the Specialty Brands Plan
in determining the extent of their coverage under the new
Campbell Plan.
Although Sandra became eligible for coverage under the
Campbell Plan on March 31, 1988, her eligibility was subject
to a pre-existing condition clause, which provided:
In the event you or an eligible dependent is totally disabled
on the date your benefits with respect to your eligible
dependent becomes effective, no benefits will be payable
under this Plan for expenses incurred for treatment of the
condition causing the total disability [*5] until. . . the date
a person has been covered under this Plan for a period of 12
consecutive months.
The Specialty Brands’ Plan, however, contained an
"Extension of Benefits” provision, which provided:
If an individual’s insurance terminates because of termination
of the policy and while the individual is totally disabled, the
Medical Insurance hereunder will be extended with respect
to the illness causing the individual to be totally disabled as
of the date of termination of the policy. Such benefits will be
extended while the insured remains so disabled until the
earlier of: (a) twelve consecutive months beyond the date the
individual’s insurance terminates, or (b) the date the
individual becomes eligible for coverage under another plan
107
of group insurance provided such plan does not contain a
pre-existing conditions limitation applicable to such
individual.
Consistent with that provision, Lincoln National continued to
pay Sandra’s medical expenses from March 31, 1988 to
March 31, 1989. When Sandra’s coverage under the
Specialty Brands’ Plan lapsed, Provident began paying her
accident-related medical expenses, and continued to do so
from April 1, 1989 to June [*6] 15, 1991.
In June 1989, Campbell published a new Summary Plan
Description which described the conditions, limitations,
exclusions, and eligibility requirements for receipt of medical
benefits under its employee benefits plan. The provisions
were virtually identical to those of the Specialty Brands’ Plan
and, like its predecessor, included a limitation of liability for
injuries or illnesses caused by third parties. The Plan
specifically provided that:
ACTS OF THIRD PARTIES
Medical care benefits are not payable to or for a person
covered under this Plan when the Injury or Illness to the
covered person occurs through the act or omission of another
person. However, the Provident may elect to advance
payment for medical care expenses incurred for an Injury or
Illness in which a third party may be liable. For this to
happen, the covered person must sign an agreement with the
Provident to pay the Provident in full any sums advanced to
cover such medical expenses from the judgment or settlement
he or she receives.
108
In July 1989, Provident sent Mr. Ben Hartog two
repayment acknowledgement forms seeking information about
the personal injury lawsuit and asserting a right to
subrogation. [*7] Mr. Ben Hartog never signed or
returned the forms.
After its initial inquiries were ignored, Provident began to
investigate the status of Sandra’s lawsuit against Conrail. In
October or November 1990, it learned that the case had been
settled. When Provident’s repeated efforts to obtain
reimbursement for benefits it had paid on Sandra’s behalf
were unsuccessful, Campbell exercised its discretion under
the third party exclusion and directed Provident to cease
payment of all accident-related claims effective June 15,
1991. The present litigation ensued.
The parties filed cross-motions for summary judgment in
the district court, each contending that there were no genuine
issues of material fact which would preclude the entry of
judgment in their favor. While the plaintiffs and Campbell
argued over whether coverage was excluded under the Acts
of Third Parties provision and whether the provision required
reimbursement, Provident contended that it should not have
been a party to the litigation in the first place, because it was
not a fiduciary within the meaning of ERISA. The district
court agreed with Provident and granted its motion for
summary judgment. It also agreed with Campbell’s [*8]
interpretation of the Acts of Third Parties provision, holding
that the provision not only precluded coverage for Sandra’s
pre-existing condition, but required repayment of all benefits
which Campbell and Provident had advanced on Sandra’s
behalf. The court accordingly granted Campbell’s motion for
summary judgment and denied the plaintiffs’ motion.
109
Provident thereafter sought to recover attorneys’ fees and
costs as a prevailing party under 29 U.S.C. § 1132(g)(1). Its :
motion was denied. »
II. DISCUSSION
The issues presented on appeal are fairly straight forward:
(1) is Provident a fiduciary within the meaning of ERISA; (2)
does the third party exclusion provision apply and preclude
coverage as a matter of law; (3) is Campbell entitled to
restitution; and (4) is Provident entitled to attorneys’ fees and
costs under 29 U.S.C. § 1132(g)(1)? We address each in
turn.
A. Provident’s Relationship to the Plan
ERISA defines a plan fiduciary as follows:
[A] person is a fiduciary with respect to a plan to the
extent (i) he exercises any discretionary authority or
discretionary control respecting management of such plan or
exercises any authority or control respecting management or
[*9] disposition of its assets, (ii) he renders investment
advice for a fee or other compensation, direct or indirect,
with respect to any moneys or other property of such plan,
or has any authority or responsibility to do so, or (iii) he has
any discretionary authority or discretionary responsibility in
the administration of such plan.
29 U.S.C. § 1002(21)(A).
Plaintiffs contend that Provident has the type of
discretionary authority and responsibility necessary to qualify
110
as a plan fiduciary, and is therefore liable for any breach of
its contractual and fiduciary duties. They cite as examples,
plan provisions which give Provident the right: to elect to
advance benefits under the Acts of Third Parties provision;
to decline payment of benefits if the medical procedures, fees
and/or time involved are not itemized; to make the final
determination with regard to payment for charges or services
or procedures that are not clinically proven safe and
effective; and to determine what constituted "satisfactory
evidence" of a dependent’s good health in determining
eligibility.
The district court found, however, that Provident was not
a "fiduciary" within the meaning of § 1002, because [*10]
its duties with respect to the Campbell Plan were "ministerial
and non-discretionary," Pohl v. National Benefits
Consultants, Inc., 956 F.2d 126, 129 (7th Cir. 1992);
Geraldi v. Pertec Computer Corp., 761 F.2d 1323, 1325 (9h
Cir. 1985); Harris v. Provident Life and Accident Ins. Co.,
776 F. Supp. 1450, 1453 (D. Or. 1991), and accordingly
granted Provident’s motion for summary judgment. We have
reviewed that decision de novo, Hedberg v. Indiana Bell
Telephone Company, Inc., 47 F.3d 928, 931 (7th Cir. 1995);
Anderson v. Baxter Healthcare Corp., 13 F.3d 1120, 1122
(7th Cir. 1994), and find that Provident was, indeed, entitled
to judgment as a matter of law.
The undisputed evidence shows that the Campbell Plan was
created and fully funded by Campbell. Provident was simply
hired to administer the claims process under Campbell’s
direction and control in accordance with an Administrative
Services Agreement. Pursuant to that agreement, Campbell,
not Provident, dictates the claims administration procedures
111
and practices which are to be followed, and all benefits
eligibility determinations must be made in accordance with
those procedures and practices. Campbell also retains the
right under [*11] the agreement to decide all disputed and
non-routine claims. Provident reports all problems in
administering the program directly to Campbell, and must
account to Campbell on a monthly basis for all payments that
it processes.
While the plan does provide that "Provident may elect to
advance benefits"under the Acts of Third Parties provision,
the undisputed evidence clearlydemonstrated that Campbell,
not Provident, approved the payment of Sandra’sclaims in
1989, and that Carnpbell ordered the discontinuation of
benefitpayments in 1991. It is thus clear from the record as
a whole that Provident hadno discretion in the administration
of the Campbell Plan, and is not a fiduciarywithin the
meaning of ERISA. See Kyle Railways, Inc. v. Pacific
Admin. Services, Inc., 990 F.2d 513, 516 (Mh Cir. 1993)
(third party administrators not fiduciaries when they merely
perform ministerial duties or process claims); Pohl, 956 F.2d
at 129 (plan administrator not a fiduciary where its function
was Clerical, mechanical, ministerial, and not discretionary);
Baker v. Big Star Division, 893 F.2d 288, 290 and n.2 (11th
Cir. 1990) ("An insurance company does not become an
ERISA ’fiduciary’ simply by performing [*12]
administrative functions and claims processing within
framework of rules established by employer."); Blatt v.
Marshall & Lassman, 812 F.2d 810, 812 (2d Cir. 1987);
Howard v. Parisian, Inc., 807 F.2d 1560, 1564-65 (11th Cir.
1987); Geraldi, 761 F.2d at 1325 (insurance company hired
by employer to administer ERISA plan not a fiduciary when
it "performs only administrative functions, processing claims
112
within a framework of policies, rules and procedures
established by others"); Harris v. Provident Life and Accident
Ins. Co., 776 F. Supp. at 1453 (Provident not a fiduciary of
plan regulated by administrative services agreement).
B. Coverage Under the Campbell Plan
In their amended complaint, plaintiffs allege that Sandra is
entitled to continued coverage under the Campbell Plan’s
pre-existing conditions provision, and that Campbell and
Provident breached their contractual and fiduciary duties
under the Plan by refusing to pay Sandra’s medical expenses.
To the extent the defendants assert the "Acts of Third
Parties" provision as a basis for denying coverage, plaintiffs
contend that the provision does not apply because it was not
part of the Plan in April 1989 when Sandra became covered.
[*13] They argue alternatively, that even if the provision
may have been a part of the Plan in 1989, it only applies
when the injury in question occurred to a "covered person",
and therefore does not apply to Sandra because she was not
“covered” under the Campbell Plan in 1985 when the injury
occurred. Assuming that neither of those arguments prevails,
the plaintiffs contend that the defendants should be estopped
from denying coverage based on their prior conduct.
The district court found that the Campbell Plan has
contained a third party limitation or exclusion since its
inception in March 1988. When Campbell acquired the
Specialty Brands plant, it assured its new employees that
their insurance benefits would remain the same and advised
them to rely upon the provisions of the Specialty Brands’
Plan until further notice when determining their benefits. The
third party limitation provision contained in the Specialty
113
Brands’ Plan was, thus, a part of the Campbell Plan from its
inception. That Mr. Den Hartog had knowledge of the
limitation provision and was aware of its implications, is
clearly demonstrated by the fact that he agreed to, and did in
fact, repay Lincoln National Life for the [*14] benefits it
had advanced on Sandra’s behalf under the Specialty Brands’
Plan. When Campbell ultimately issued a new Summary Plan
Description in June 1989, it contained the same type of third
party exclusion.
Plaintiffs’ contention that the exclusion is inapplicable in
the present case because Sandra was not a "covered person"
when the injury occurred is equally without merit. The Plan
clearly provides that: "Medical care benefits are not payable
. . . when the Injury or Illness . . . occurs through the act or
omission of another person.“ While the provision also
provides that "Provident may elect to advance payment for
medical care expenses . . . [for] which a third party may be
liable", no participant has a right to such payments, even
though he or she may be willing to agree to reimbursement.
Any and all benefits payable under the Plan, including those
which may have been payable for pre-existing conditions, are
thus clearly subject to the third party exclusion.
Plaintiffs contend in the alternative that, even if the
exclusion provision does apply, defendants should be
estopped from denying coverage. They maintain that
Campbell and Provident have consistently misrepresented
their [*15] intention to pay Sandra’s medical expenses, both
verbally and by actually paying benefits for two years; that
Mr. Den Hartog relied on those misrepresentations to his
detriment by continuing to pay insurance premiums; and that
a genuine issue of material fact, therefore, exists as to
D Bi SORTS TS
114
whether defendants should be estopped from asserting any
rights under the third party exclusion provision. As Campbell
correctly notes, however, plaintiffs’ estoppel argument was
effectively raised for the first time on appeal, and is
accordingly waived. Bank Leumi Le-Israel, B.M. v. Lee, 928
F.2d 232, 235 (7th Cir. 1991); Manor Healthcare Corp. v.
Guzzo, 894 F.2d 919, 922 (7th Cir. 1990).
C. Campbell’s Restitution Claim
Campbell sought to recover the amounts which had been
advanced on Sandra’s behalf on two theories. In Count I of
its counterclaim, Campbell sought equitable relief in the form
of restitution to enforce the third party exclusion and its
reimbursement provision under 29 U.S.C. § 1132(a)(3).
Alternatively, Count II purported to state an independent
cause of action under the federal common law of unjust
enrichment which was recognized in Provident Life &
Accident Ins. Co. v. Waller, 906 [*16] F.2d 985 (4th
Cir.), cert. denied, 498 U.S. 982, 112 L. Ed. 2d 524, 111 S.
Ct. 512 (1990). The district court appears to have proceeded
under the second theory, holding that “although ERISA did
not provide a cause of action for an insurer to recover
advances, reimbursement was necessary to prevent unjust
enrichment.” n3 Harris Trust & Savings v. Provident Life
and Acc. Ins. Co., 854 F. Supp. 524, 533 (N.D. Ill. 1994).
We need not decide which of the two theories is applicable
in the present case, however, for they are interrelated and
Campbell would prevail under either.
n3 The district court cited Waller for the
proposition that ERISA did not provide a cause of
action for an insurer to recover advances. In Waller,
115
however, Provident did not allege a right to
restitution under 29 U.S.C. § 1132(a)(3), rather its
claim was premised on § 1132(a)(1)(B), which
provides: "[a] civil action may be brought .. . by a
participant or beneficiary . . . to recover benefits due
him under the terms of the plan, or to clarify his
rights to future benefits under the terms of the plan".
Since Provident, the plan administrator, was not a
plan participant or beneficiary within the meaning of
the statute, the court held that it could not bring suit
under § 1132(a)(1)(B). It premised jurisdiction
instead upon the federal common law of unjust
enrichment. The Fourth Circuit noted, however, that:
"It is probable . . . that Provident could have sued as
a plan administrator under § 1132(a)(3)," Waller, 906
F.2d at n.5.
[*17]
29 U.S.C. § 1132(a)(3) expressly provides that: A civil
action may be brought--
(3) by a participant, beneficiary, or fiduciary (A) to enjoin
any act or practice which violates any provision of this
subchapter or the terms of the plan, or (B) to obtain other
appropriate equitable relief (i) to redress such violations or
(ii) to enforce any provisions of this subchapter or the terms
of the plan.
Campbell has clearly stated a viable claim for relief under
§ 1132(a)(3)(B). It is a fiduciary within the meaning of
ERISA; the Plan specifically provides for repayment of
benefits advanced under the third party exclusion; Campbell’s
116
action was initiated to enforce the repayment provision; and
Campbell sought "appropriate equitable relief” in the form of
restitution. See Mertens v. Hewitt Assoc. » U.S. , 1241. Ed.
2d 161, 113 S. Ct. 2063, 2069 (1993) ("appropriate equitable
relief” under § 1132(a)(3) includes "categories of relief that
were typically available in equity (such as injunction,
mandamus, and restitution, but not compensatory
damages)"); Health Cost Controls y. Skinner, 44 F.3d 535,
538 n.4, 5, and 7 (7h Cir. 1995) ("although [plan
administrator] clearly cannot recover compensatory [*18]
damages under [ § 1132(a)(3)], if it successfully makes out
a claim for restitution . . . it may be entitled to monetary
relief"); UIU Severance Pay Trust Fund v. Local Union No.
18-U, 998 F.2d 509, 512-13 (7th Cir. 1993) (ERISA permits
claim for restitution).
Restitution is available, however, "only when one party
has been enriched at another’s expense." Skinner, 44 F.3d at
538 n.7. To establish entitlement to the relief it seeks,
Campbell must, therefore, demonstrate that:
(1) [it] had a reasonable expectation of payment, (2) the
[plaintiffs] 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 § 19A, at 50 (Supp. 1989).
Waller, 906 F.2d at 933-34. It has met that burden in the
present case. The undisputed evidence Clearly demonstrates
that Campbell advanced benefits under the third party
exclusion provision with the expectation of being repaid; that
the plaintiffs knew that the Campbell Plan contained a third
party limitation when they requested and received benefits on
117
Sandra’s behalf; and that “the interests of society, as
reflected in the [*19] goals of ERISA and efficient plan
administration, would be served by allowance of an equitable
remedy." Waller, 906 F.2d at 993-94.
To the extent plaintiffs contend that Campbell waived any
right it may have had to restitution by failing to procure a
written agreement to repay, their argument is similarly
without merit.
As the district court correctly noted:
The third-party provision is a coverage limitation; it does not
purport to place duties upon Provident or Campbell . . . The
plan administrators simply may "elect" to advance payments
in appropriate situations. Campbell did not have a contractual
duty to procure a signed reimbursement agreement before
paying advances. Thus, the failure to procure Martin Den
Hartog’s signature on the reimbursement forms was not a
waiver of Campbell’s legal rights under the agreement.
Plaintiffs’ reliance on Health Cost Controls v. Wardlow,
825 F. Supp. 152 (W.D. Ky. 1993), as contrary authority, is
misplaced. The district court in Wardlow held that:
Fundamental toa decision granting restitution is a
determination that the defendant has obtained benefits by
improper means . . . Defendant Wardow engaged in no
unjust conduct. [*20] She did not obtain her medical
benefits by deceit. She simply requested payment from
{Health Cost Controls (HCC)] and received it. Quite unlike
the beneficiary in Waller, Defendant Wardlow had no
knowledge of HCC’s asserted right to reimbursement when
118
she received her medical benefits. When HCC finally
mounted its belated attempt to recover its payments,
Defendant Wardlow acted legally and reasonably by refusing
to make such reimbursement in the absence of a contractual
requirement that she do so. (Emphasis added).
Wardlow, 825 F. Supp. at 157-58. Knowledge of the
insurer’s right to reimbursement was a key factor in
determining whether restitution was appropriate in both
Wardlow and Waller. Absent that knowledge, the beneficiary
could not "reasonably have expected to pay” the insurer for
benefits he or she received, and the insurer could not
reasonably have expected payment. Unlike the beneficiary in
Wardlow, however, Mr. Den Hartog had knowledge of the
third party exclusion and Campbell’s right to reimbursement
when he requested and received benefits on Sandra’s behalf.
While Campbell’s liberal policy of advancing benefits
without first procuring a written repayment agreement [*21]
lends itself to litigation, its right to restitution in the present
case is not dependent upon the execution of a written
agreement. See Waller, 906 F.2d at 993-94.
D. Provident’s Motion for Attorneys’ Fees
In its cross-appeal, Provident challenges the district court’s
denial of its motion to recover attorneys’ fees and costs under
the fee-shifting provision of 29 U.S.C. § 1132(g)(1).
Provident contends that plaintiffs’ claims have no basis in
fact or in law; that the law recognizes a presumption in favor
of awarding fees to the prevailing party under such
circumstances; and that the district court abused its discretion
by refusing to award fees.
119
29 U.S.C. § 1132(g)(1) provides that: "In 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." We will
reverse the district court’s decision to grant or deny fees only
if there has been an abuse of discretion. Brewer v. Protexall,
Inc., 50 F.3d 453, 458 (7th Cir. 1995).
In determining whether fees are appropriate, the court may
apply one of two recognized tests. The first test, applied by
the district [*22] court in this case, requires a
~~~ determination of whether the losing party’s position was
"substantially justified". n4 Brewer, 50 F.3d at 458;
Production & Maintenance Employees’ Local 504 v.
Roadmaster Corp., 954 F.2d 1397, 1404-05 (7th Cir. 1992);
Meredith v. Navistar Int’l Transp. Corp., 935 F.2d 124, 128
~~ ~{7th Cir. 1991). nS Under that standard, a court may decline
to award fees and costs if it finds that: (1) the losing party’s
position had a reasonable or "solid" basis in law and fact; or
(2) special circumstances make an award unjust. Roadmaster,
954 F.2d at 1404; Bittner v. Sadoff & Rudoy Indus., 728
F.2d 820, 830 (7th Cir. 1984). The district court found both
in the present case. We agree with its assessment, and find
no abuse of discretion.
n4 To be “substantially justified" the losing party’s
position needs to be "more than merely not frivolous,
but less than meritorious." Bittner v. Sadoff & Rudoy
Industries, 728 F.2d 820, 830 (7th Cir. 1984).
n5 The second test requires consideration of the
following factors:
120
(1) the degree of the offending parties’ culpability or
bad faith; (2) the degree of the ability of the
offending parties to satisfy personally an award of
attorneys’ fees; (3) whether or not an award of
attorneys’ fees would deter other persons acting under
similar circumstances; (4) the amount of benefit
conferred on members of the [benefits] plan as a
whole; and (5) the relative merits of the parties’
positions.
Nichol v. Puliman Standard, Inc., 889 F.2d 115, 121
n.9 (7th Cir. 1989). See also Brewer, 50 F.3d at 458;
Anderson v. Flexel, Inc., 47 F.3d 243, 250 (7th Cir.
1995); Roadmaster, 954 F.2d at 1404.
While it is true that there is a "modest presumption . . . in
favor of awarding reasonable attorney’s fees to the winning
party", Bittner, 728 F.2d at 830; see also Roadmaster, 954
F.2d at 1405, that presumption is not irrebuttable. The
positions which plaintiffs took before the district court and on
appeal, while unsuccessful, were not indefensible.
Contrary to the picture which Provident paints, the line
separating fiduciaries from nonfiduciaries in the ERISA
context is not a bright one. 29 U.S.C. § 1002(21)(A)(iii)
provides that: "[A] person is a fiduciary with respect to a
plan to the extent . . . he has any discretionary authority or
discretionary responsibility in the administration of such
plan.” On its face, Campbell’s Summary Plan Description
appears to give Provident the minimal level of discretion
required under the statute. n6 It was not until extensive
discovery had been completed in the present case that it
121
became apparent that Campbell, not Provident, called all of
the shots.
n6 We cite as but one example the Acts of Third
Parties provision which gives Provident, not
Campbell, the right to elect to advance payments for
injuries caused by a third party tortfeasor.
[*24]
The plaintiffs’ position with respect to Provident’s status
is further bolstered by a Department of Labor regulation
which states that: "a plan administrator or a trustee of a plan
must, by the very nature of his position, have discretionary
authority or discretionary responsibility in the administration’
of the plan within the meaning of section [1002(21)(A)(iii)]
. . . [and] will therefore be [a] fiduciary." (Emphasis added).
The Fourth Circuit has held, or at least implied, under
analogous circumstances that plan administrators such as
Provident are thus fiduciaries as a matter of law. See Waller,
906 F.2d at 988 n. 5 ("It is probable . . . that Provident
could have sued [as a fiduciary] under § 1132(a)(3)"); U.S.
Steel Mining Co. v. District 17, United Mine Workers of
America, 897 F.2d 149, 152 (4th Cir. 1990) (plan
administrator “is clearly a fiduciary"). But see Kyle
Railways, Inc. v. Pacific Admin. Services, Inc., 990 F.2d
513, 516 (Mh Cir. 1993) (third party administrators not
fiduciaries when they merely perform ministerial duties or
process claims); Pohl, 956 F.2d at 129.
122
To the extent Provident contends that the plaintiffs’
interpretation of the Plan lacked [*25] a factual and legal
basis, we must once again disagree. The district court found
that the plaintiffs’ interpretation of the Plan’s provisions was
not objectionably unreasonable given the "confusing
circumstances", i.e., the fact that: (1) "the benefit plan was
instituted after Sandra’s accident, but before the $ 7 million
settlement was entered in the suit brought against the
responsible parties"; (2) "Sandra was deemed ineligible under
the new plan for a year (which could have misled Martin
Den Hartog into believing that Sandra ultimately would be
covered)"; and (3) “after the year of ineligibility had elapsed,
the plan began to pay Sandra’s expenses without (initially)
requesting reimbursement." The district court thus concluded
that there were special circumstances which made an award
of fees unjust in the present case. We quite agree, and
accordingly deny Provident’s request for fees and costs on
appeal.
III. CONCLUSION
For the foregoing reasons, the judgment of the district
court is
AFFIRMED.
123
1995 U.S. Dist. LEXIS 1800 printed in FULL format.
HEALTH COST CONTROLS, Plaintiff, v. NIKOLAOS
MANETAS and JAMES E. RILEY, Defendants.
HEALTH COST CONTROLS v. MANETAS
No. 94 C 00419
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS,
EASTERN DIVISION
1995 U.S. Dist. LEXIS 1800
February 10, 1995, Decided
February 13, 1995, DOCKETED
COUNSEL:
For HEALTH COST CONTROLS, plaintiff: David Alan
Belofsky, James John Merriman, David A. Belofsky &
Associates, Chicago, IL.
For NIKOLAOS MANETAS, defendant: Andrew Lawrence
Horberg, Horka & Horberg, P.C., Burnham, IL.
JUDGES: [*1] Ruben Castillo, United States District
Judge
OPINIONBY: Ruben Castillo
124
OPINION: MEMORANDUM OPINION AND ORDER
Plaintiff Health Cost Controls (HCC) seeks monetary relief
in the amount of $ 38,263.72 and reasonable attorney fees
and costs in prosecuting this action against defendants,
Nikolaos Manetas and James E. Riley, under "ERISA," the
Employee Retirement Income Security Act of 1974, as
amended, 29 U.S.C. § 1132(a)(3), (g)(1) (1988). Pursuant to
Fed. R. Civ. P. 12(6)(6), Manetas moves to dismiss the
count alleging breach of reimbursement obligations (Count I)
and Riley moves to dismiss the counts alleging breach of lien
(Count II) and tortious interference with a contract (Count
IV) of plaintiff's amended complaint.
BACKGROUND
Plaintiff's well pleaded allegations, which must be
accepted as true on a motion to dismiss, Dawson v. General
Motors Corp., 977 F.2d 369, 372 (7th Cir. 1992), allege the
following. HCC, an Illinois corporation, has been authorized
to prosecute all of the subrogation and reimbursement rights
of The Bakery, Cracker, Pie and Yeast Wagon Drivers
Union Local 734 Welfare Fund (Fund), which is an
"employee [*2] welfare benefit plan” under 29 U.S.C. §
1002(1). The Fund contains a reimbursement provision which
States:
If you or your dependents, while insured, are injured through
the act or omission of another, the benefits provided under
the group policy will be paid on the condition that you or
your dependent (or person legally authorized to represent
you, if you are incapable of doing so yourselves) agrees in
writing:
125
1. to pay the Insurance Company for any damages collected,
to the extent of the benefits provided, immediately upon
collection of damages with respect to you and your dependent
whether by action at law, settlement or otherwise; and
2. to provide the Insurance Company with a lien, to the
extent of the benefits provided. The lien may be filed with
the person whose act caused the injuries, his/her agent or a
court having jurisdiction in the matter.
Riley, an attorney, at all material times represented Nikolaos
Manetas, a “participant” of the Fund within the meaning of
29 U.S.C. § 1002(7).
Manetas was injured in a work-related accident on
February 17, 1989 and received benefits totalling $ [*3]
38,263.72 from the Fund for medical expenses incurred as a
result of this accident. During 1989, Manetas commenced a
Worker’s Compensation action (Cause No. 89 WC 30919)
alleging that Alpha Baking Company, Inc. was responsible
for the damages he sustained in the accident. In exchange for
payment of Manetas’s medical bills, Manetas executed an
indemnification agreement on September 19, 1990 which
obligated Manetas to reimburse the Fund out of any
settlement he received and stated in relevant part:
It is hereby understood and agreed that in consideration of
payment to me by BANKERS LIFE AND CASUALTY
COMPANY ("BANKERS") of benefits
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