Administrative Committee of Wal-Mart v. Willard
| Decision Date | 13 February 2004 |
| Docket Number | No. CIV.A.02-2571-KHV.,CIV.A.02-2571-KHV. |
| Citation | 302 F.Supp.2d 1267 |
| Court | U.S. District Court — District of Kansas |
| Parties | ADMINISTRATIVE COMMITTEE OF THE WAL-MART ASSOCIATES HEALTH AND WELFARE PLAN, Plaintiff, v. Melvin WILLARD, Defendant. |
Christopher R. Hedican, Baird Holm Law Firm, Omaha, NE, for Plaintiff.
Fred Spigarelli, Thomas E. Hayes, Lori A. Bolton Fleming, Spigarelli, McLane & Short, Pittsburg, KS, for Defendant.
Melvin Willard suffered injuries when a pharmacy employee for Wal-Mart Stores, Inc. erroneously filled his prescription in June of 2001. The Wal-Mart Associates Health and Welfare Plan, an employer-sponsored health plan, provided coverage for Willard's medical expenses. Wal-Mart Stores agreed to settle plaintiff's claim against it and having done so, the health plan filed suit to establish an enforceable lien on the settlement proceeds. On a trial to the Court, the Court makes the following findings of fact and conclusions of law, as required by Rule 52(a) of the Federal Rules of Civil Procedure.1
Melvin Willard is a resident of Bourbon County, Kansas. On June 11, 2001, the Wal-Mart pharmacy in Fort Scott, Kansas erroneously filled a prescription for him. As a result, he suffered injuries and incurred medical treatment and bills totaling $534,919.68. Because Willard was a covered beneficiary under the Wal-Mart Associates Health and Welfare Plan ("the Plan"), it paid all of his medical bills.
On August 27, 2002, Wal-Mart Stores, Inc. ("Wal-Mart") and Willard reached a confidential agreement for a settlement in excess of plaintiff's medical bills. It stipulated that Wal-Mart would hold back $534,919.68 (the amount of the medical bills), and file a declaratory judgment action against Willard and the Plan, to determine whether the Plan had an enforceable lien on that amount.2 The parties also stipulated that Wal-Mart's duty to pay the $534,919.68 balance to Willard was contingent on the Court's finding that the Plan did not have an enforceable lien.
The 1997 Associates Health and Welfare Trust (the "Trust") receives contributions from Wal-Mart, and from current and former employees and their dependents. It uses those contributions to pay participant claims and operating expenses for the Plan.3 The Trust holds the Plan assets and once they are placed in the Trust, it must maintain those assets separate from Wal-Mart. A Board of Trustees, which consists of two members appointed by the Wal-Mart Board of Directors, administers the Trust. The current trustees are executive officers of Wal-Mart. Plan Trustees have exclusive power regarding investment of the funds into the Plan.
Wal-Mart appointed the initial members of the Plan's Administrative Committee. The Administrative Committee is the Plan administrator unless and until Wal-Mart appoints a replacement. Wal-Mart may terminate the Plan without the consent of the Plan's Administrative Committee. Wal-Mart may also remove any member of the Administrative Committee and fill any vacancies, as follows:
In the event an Administrative Committee member resigns, dies or is removed, the remaining Administrative Committee members shall appoint a successor member and provide reasonable notice of such appointment to the Compensation Committee of [Wal-Mart's] Board of Directors; provided, however, such Compensation Committee shall have reserve powers to fill any Committee vacancy or to add additional members to the Committee with written notice to the other members of the Committee.
Plan Wrap Document ¶ 4.1, Exhibit 10 to Defendant's Index Of Exhibits (Doc. # 73).
Wal-Mart has the ability to control the Administrative Committee, and it therefore has indirect control over the Plan, even though the Administrative Committee administers it. Wal-Mart is responsible for oversight of the Administrative Committee and the Trustees. The Administrative Committee includes employees of both Wal-Mart and the Plan. The Plan guarantees each member of the Administrative Committee full indemnity by Wal-Mart for any claims or liability.4 Members of the Administrative Committee serve without bond and receive no compensation for their services.
The agent for service of legal process for the Plan is Robert K. Rhoads, Senior Vice-President of Wal-Mart. During 2002, Rhoads was an executive officer of Wal-Mart.
Wal-Mart, as Plan sponsor, contracted with Blue Cross Blue Shield of Kansas ("BCBS") to allow plan participants to use the BCBS Provider Network. See BCBS of Kansas, Inc. Competitive Allowance Program Provider Network Utilization Agreement ("Utilization Agreement"), attached as Exhibit 16 to Defendant's Index Of Exhibits (Doc. # 73). Wal-Mart entered this agreement for the exclusive benefit of the Plan, to assist in controlling the cost of services to participants. In addition to allowing access, BCBS agreed to calculate the charges for services to plan participants, to assure that providers did not charge more than BCBS negotiated rates and to forward a statement of charges to Wal-Mart for payment. The Utilization Agreement also provides:
Non-Assumption of Risk by BCBSK. It is understood and agreed by the parties hereto that BCBSK is providing certain administrative services only and is not assuming any financial risk or obligation with respect to payment of claims by virtue of its execution and performance of this Agreement.
Wal-Mart has a Claims Administration division. The Administrative Committee has delegated to the Wal-Mart Claims Administration division the power to administer the Plan. The Plan is required to file an Exempt Organization Business Income Tax Return, and all books related to that return are in the care of "Wal-Mart Stores c/o Group Benefits." The Plan's Customer Service Department is "Wal-Mart Claims Administration." Any appeal of a denial of medical benefits under the Plan must be made to the "Appeals Department Wal-Mart Stores, Inc." The Plan advises participants that
On November 13, 2002, the Administrative Committee filed this suit against Willard, seeking a declaration that the Plan is entitled to recover $534,919.68 under its reimbursement and subrogation provision. On December 23, 2002, Wal-Mart filed a motion to intervene, which the Court sustained. The Court later granted Wal-Mart's motion to deposit $534,919.68 into the Court registry and dismissed Wal-Mart as a party.5 See Order (Doc. # 27) filed April 1, 2003.
Wal-Mart had possession of the settlement proceeds until April 7, 2003, when it deposited them into the Court registry. In July of 2003, by agreement of the parties, the Court dispersed the proceeds to plaintiff pending resolution of this case.6 On December 18, 2003, the Court vacated its order to disperse the proceeds and ordered plaintiff to return the disputed proceeds to the Court registry.
Willard has never had possession of the funds in question. If they are awarded to the Administrative Committee, it will return them to the Trust for payment of medical claims of other participants. Accordingly, future contributions of Wal-Mart and Plan participants will be reduced by $534,919.68.
The 2002 Summary Plan Description ("SPD")7 and the 2001 Plan Wrap Document are the controlling plan documents in this case.8 See Pretrial Order (Doc. # 95), Stipulation No. 7.
The SPD includes a reimbursement and subrogation provision, as follows:
Right to Reduction, Reimbursement and Subrogation
The plan has the right to 1) reduce or deny benefits otherwise payable by the Plan and 2) recover or subrogate 100 percent of the benefits paid or to be paid by the Plan for covered persons to the extent of any and all of the following payments:
• Any judgment, settlement or payment made or to be made because of an accident or malpractice, including but not limited to other insurance.
* * * * * *
The Plan requires covered persons or their representatives to cooperate in order to guarantee reimbursement to the Plan from third party benefits. Failure to comply with this request will entitle the Plan to withhold benefits due to covered persons under the Plan Document. Covered persons or their representatives may not do anything to hinder reimbursement of overpayment to the Plan after you have accepted benefits.
These rights apply regardless of whether such payments are designated as payment for, but not limited to:
• Pain and suffering
• Medical Benefits
• Other specified damages; or
• Whether the participant has been made whole (i.e. fully compensated for his/her injuries) *The Plan's right to reduction, reimbursement, and subrogation applies to any funds recovered from another party or on behalf of the estate of any covered person.
2002 SPD at 42-43 (emphasis added), attached as Exhibit 2 to Defendant's Index Of Exhibits (Doc. # 73) filed August 30, 2003. The SPD and the Plan Wrap Document do not define the terms "third party" and "another party." Christy Herbaugh, a Reimbursement Specialist for the Plan, is responsible for administering the Plan.9 Herbaugh and her assistants interpret the reimbursement terms of the Plan as written. They do not use extrinsic written definitions or other documents to help interpret the reimbursement terms of the Plan.
According to the Administrative Committee, a plan participant is a "party" to the Plan, and not a "third party" or "another party," because the Plan Wrap Document includes plan participants as part of the Plan and they partially fund the Plan. The Administrative Committee denies that Wal-Mart is a party to the Plan even though Wal-Mart — like Plan participants — also partially funds the Plan.
Both parties seek declaratory relief under 29 U.S.C. § 1132(a)(3). The Administrative...
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