Benefit Recovery, Inc. v. Donelon

• Decision Date: 11 March 2008
• Docket Number: No. 07-30414.,07-30414.
• Parties: BENEFIT RECOVERY, INC., Plaintiff-Appellant, v. James J. DONELON, In His Official Capacity as Commissioner of Insurance for the State of Louisiana, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

521 F.3d 326 BENEFIT RECOVERY, INC., Plaintiff-Appellant,
v.
James J. DONELON, In His Official Capacity as Commissioner of Insurance for the State of Louisiana, Defendant-Appellee. No. 07-30414. United States Court of Appeals, Fifth Circuit. March 11, 2008.

[521 F.3d 327]

Perry R. Staub, Jr., Donald J. Miester, Jr. (argued), Larry E. Demmons, Taggart,

[521 F.3d 328]

Morton, Ogden, Staub & O'Brien, New Orleans, LA, for Plaintiff-Appellant.

Thomas More Flanagan (argued), William Michael Ross, F.A. Little, Jr., Stanley, Flanagan & Reuter, New Orleans, LA, Lorraine Adrienne Dupont, Louisiana Dept. of Ins., Baton Rouge, LA, for Defendant-Appellee.

Before REAVLEY, SMITH and DENNIS, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Benefit Recovery, Inc. ("Benefit"), sued the Louisiana Commissioner of Insurance in his official capacity;¹ the district court granted summary judgment for the Commissioner, holding that the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq., does not preempt Directive 175, which the Commissioner had issued. We affirm.

I.

In early 2003, the Commissioner issued Directive 175, which provides that "any right of recovery from third parties on the part of the insurer, whether by subrogation or reimbursement, is subordinate to the insured's right to be fully compensated for his damages; and ... the insurer is obligated to share in the legal expenses incurred." According to stipulated facts, Directive 175 applies only to insurance policies, not self-funded ERISA benefit plans or entities acting as "pure administrators" of such plans.

Directive 175 therefore encapsulates the so-called "make whole" and Moody doctrines. The "make whole" doctrine is "an insurance principle which mandates that, in the absence of contrary agreement, an insurance company may not enforce its subrogation rights until the insured has been fully compensated for her injuries — 'made whole.'" Roberts v. Richard, 743 So.2d 731, 733 (La.App. 3d Cir.), writ denied, 749 So.2d 677 (La.1999). The Moody doctrine is that a benefits provider may be "charged with a proportionate share of the reasonable and necessary costs of recovery, including attorneys' fees, incurred by the injured worker in the suit against the third person." Moody v. Arable, 498 So.2d 1081, 1083 (La.1986).

Benefit provides subrogation services to Louisiana self-funded and fully insured employer health benefit plans, many of which are governed by ERISA. A proposed health insurance form from Ochsner Health Plan, with whom Benefit had contracted for subrogation services, was rejected for failing to include terms pursuant to Directive 175.

Benefit sued the Commissioner in August 2003 on the theory that ERISA preempts Directive 175. The parties proposed the case be decided on cross-motions for summary judgment and filed joint stipulations of fact. The district court granted the Commissioner's summary judgment motion on the theory that Directive 175 is saved from preemption by 29 U.S.C. 1144(b)(2)(A) ("Section 514").

Benefit moved to alter or amend the judgment pursuant to Federal Rule of Civil Procedure 59(e), asking the court to decide whether Directive 175 is invalid on state-law grounds and requesting an opportunity to submit additional evidence on the savings clause analysis. The district court refused.

521 F.3d 329

II.

Benefit first contends that ERISA's complete preemption provision, 29 U.S.C. § 1132(a) ("Section 502"), preempts Directive 175. Benefit, however, has not preserved that issue for appeal.

We will not consider arguments or evidence that was not presented to the district court. Nissho-Iwai Am. Corp. v. Kline, 845 F.2d 1300, 1307 (5th Cir.1998). Raising an argument in the district court is therefore the essential predicate for a valid appeal. FDIC v. Mijalis, 15 F.3d 1314, 1327 (5th Cir.1994). But, we require a party to do more than just raise an argument; the contention must be pressed so that the district court has an opportunity to rule on it. Id.

Benefit's motion for summary judgment makes explicit that the issue is whether Section 514 preempts Directive 175. The question whether Section 502 preempts the Directive is therefore presented for the first time on appeal, so we do not reach the merits of Benefit's claim.

Realizing this hurdle, Benefit seeks to invoke our appellate power through a back door: In its reply brief, it urges that parties do not expect cross-motions for summary judgment to end their case.² Regardless of the legal merits of such an expectation, Benefit has waived our review of the dismissal of the case, because arguments cannot be raised for the first time in a reply brief. Yohey v. Collins, 985 F.2d 222, 225 (5th Cir.1993).

III.

Benefit contends Directive 175 is invalid as a matter of federal law because it is an improperly issued state regulation purporting to supply a rule of decision for ERISA plans. We do not reach the merits of that argument, because Benefit raised it only after entry of judgment.

Benefit made the argument for' the first time in its unsuccessful rule 59(e) motion. We review for abuse of discretion. Coliseum Square Ass'n v. Jackson, 465 F.3d 215, 247 (5th Cir.2006), cert, denied, ___ U.S. ___, 128 S.Ct. 40, 169 L.Ed.2d 11 (2007). In other words, we are not deciding whether Directive 175 is in fact invalid as a matter of federal law, but whether the district court acted improperly.³

In denying Benefit's motion, the district court properly relied on Elementis Chromium L.P. v. Coastal States Petroleum Co., 450 F.3d 607 (5th Cir.2006), in which we said that "[m]otions to alter or amend judgments `cannot be used raise arguments which could, and should, have been made before judgment issued' and `cannot be used to argue a case under a new legal theory.'" Id. at 610 (quoting Simon v. United States, 891 F.2d 1154, 1159 (5th Cir.1990)).

Throughout its submissions to the district court, Benefit relied on a theory of ERISA preemption. When the district court found that argument unavailing, Benefit presented the new argument. The district court did not abuse its discretion in refusing to change its judgment in response to Benefit's motion.

521 F.3d 330

IV.

Benefit...