154 F.3d 168 (4th Cir. 1998), 97-1046, United McGill Corp. v. Stinnett

Docket Nº:97-1046.
Citation:154 F.3d 168
Party Name:UNITED McGILL CORPORATION, Plaintiff-Appellant, v. Sharon STINNETT, Defendant-Appellee.
Case Date:August 27, 1998
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

Page 168

154 F.3d 168 (4th Cir. 1998)

UNITED McGILL CORPORATION, Plaintiff-Appellant,

v.

Sharon STINNETT, Defendant-Appellee.

No. 97-1046.

United States Court of Appeals, Fourth Circuit

August 27, 1998

Argued June 3, 1998.

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ARGUED: Matt R. Ballenger, Baltimore, Maryland, for Appellant. Robyn B. Lupo, Eric S. Slatkin & Associates, Burtonsville, Maryland, for Appellee. ON BRIEF: Eric S. Slatkin, Eric S. Slatkin & Associates, Burtonsville, Maryland, for Appellee.

Before MURNAGHAN and ERVIN, Circuit Judges, and PHILLIPS, Senior Circuit Judge.

Vacated and remanded by published opinion. Senior Judge PHILLIPS wrote the opinion, in which Judge MURNAGHAN and Judge ERVIN joined.

OPINION

PHILLIPS, Senior Circuit Judge:

This is an appeal by United McGill Corporation from a district court judgment holding that an ERISA plan participant who recovers

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from a third party is entitled to a pro rata reduction for attorney's fees when reimbursing the plan for benefits paid. Although granting summary judgment for McGill on its claim for reimbursement, the district court held that McGill, the employer and administrator of the welfare benefit plan, must share in the costs of third-party recovery and, therefore, reduced McGill's reimbursement from Sharon Stinnett, the employee, by one-third. Because the express terms of the ERISA plan provide otherwise, we vacate and remand with instructions.

I.

On May 9, 1993, Sharon Stinnett was involved in a motor vehicle accident and suffered considerable injuries. At the time, Stinnett was an employee of United McGill Corporation and participated in McGill's welfare benefit plan ("the Plan"). Following the accident, she incurred medical bills totaling $39,000 and received medical benefit expenses from the Plan in the sum of $31,418.89. Stinnett then brought suit against the driver who caused the accident and eventually settled the claim for $100,000. Pursuant to a contingency fee arrangement, Stinnett's attorney received one-third of the settlement proceeds.

McGill, as administrator of the Plan, sought to recover the full amount of medical expenses paid to Stinnett and perfected a lien on the settlement proceeds. The terms of the Plan provide:

REFUND TO U.S. FOR OVERPAYMENT OF BENEFITS

If you or your dependent recover money for medical, hospital, dental or vision expenses incurred due to an illness or injury for which a benefit has been paid under this plan, we will have the right to a refund from you or your dependent. The amount refunded to us will be the lesser of:

  1. the amount you or your dependent recover;

  2. the amount of benefits we have paid .

RIGHT OF SUBROGATION

If you or your covered dependent has a claim for damages or a right to recover damages from a third party or parties for any illness or injury for which benefits are payable under this plan, we are subrogated to such claim or right of recovery. Our right of subrogation will be to the extent of any benefits paid or payable under this plan, and shall include any compromise settlement....

(J.A. at 69 (emphasis added).) Based on these provisions, McGill filed a complaint for declaratory judgment and then moved for summary judgment.

In both her answer to the complaint and response to the summary judgment motion, Stinnett acknowledged McGill's right to reimbursement for the medical expenses but insisted that McGill must reduce the amount of the lien by one-third to account for the attorney's fees expended in order to recover from the negligent driver. The district court agreed and, although granting summary judgment in favor of McGill, reduced McGill's award because it was "the fair, appropriate, and equitable determination under the circumstances of this case." (J.A. at 112.)

McGill now appeals that portion of the district court's decision reducing its reimbursement of benefits paid by one-third to cover Stinnett's attorney's fees.

II.

We review de novo the district court's ruling on summary judgment and are therefore guided by the appropriate standard of review of McGill's decision, as administrator of the Plan, not to apportion Stinnett's attorney's fees. Bailey v. Blue Cross & Blue Shield of Va., 67 F.3d 53, 56 (4th Cir.1995).

Interpretive decisions by administrators of ERISA plans are generally subject to de novo review. Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). If, however, the plan expressly grants the plan administrator discretionary authority to construe the provisions, the administrator's decision is reviewed for abuse of discretion. Id. (indicating that courts should defer when the administrator is granted interpretive discretion). Under this deferential standard, "the administrator or fiduciary's

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decision will not be disturbed if it is reasonable, even if this court would have come to a different conclusion independently." Ellis v. Metropolitan Life Ins. Co., 126 F.3d 228, 232 (4th Cir.1997) (citations omitted). In certain circumstances, this deference is "lessened to the degree necessary to neutralize any untoward influence resulting from [ ] conflict[s] [arising from the administrator's financial interest in the outcome of the decision]." Bailey, 67 F.3d at 56 (citations omitted); Ellis, 126 F.3d at 233 ("The more incentive for the administrator or fiduciary to benefit itself by a certain interpretation of benefit eligibility or other plan terms, the more objectively reasonable the ... decision must be and the more substantial the evidence must be to support it.").

In this case, the Plan grants McGill discretionary authority to "construe the terms of the Plan and resolve any disputes which may arise with regard to the rights of any persons under the terms of the Plan." (J.A. at 80.) Thus, McGill's interpretation of the Plan's reimbursement provision is entitled to some deference. However, because McGill serves as both employer and administrator and apparently retains a financial interest in reducing payments under the Plan, its decision is judicially reviewed under a less deferential abuse of discretion standard. Jenkins v. Montgomery Indus. Inc., 77 F.3d 740, 742 (4th Cir.1996).

McGill argues that the Plan clearly, concisely, and unambiguously requires Plan beneficiaries to refund the Plan from any third-party recovery to the extent of any benefits paid. Here, Stinnett recovered $100,000 and, after paying her negotiated attorney's fees, retained approximately $67,000--more than enough to reimburse the Plan $31,418.89 for medical benefits payments received from the Plan. Accordingly, McGill contends that the district court erroneously disregarded the plain language of the Plan and crafted a solution outside the contractual arrangement between the parties.

In response, Stinnett maintains that the "obvious inequities" of allowing McGill to benefit without contributing to the recovery should control our decision. Even conceding that the language of the Plan is clear, Stinnett reasons that but for her retention of an attorney to pursue the claim, the Plan...

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