Bauhaus Usa, Inc. v. Copeland, 01-60343.

• Decision Date: 21 May 2002
• Docket Number: No. 01-60343.,01-60343.
• Citation: 292 F.3d 439
• Parties: BAUHAUS USA, INC., Plaintiff-Appellant, v. Lillie Regina Holmes COPELAND, etc.; et al., Defendants, Lillie Regina Holmes Copeland, as natural guardian and next friend of Reshan Holmes; and Reshan Holmes, a minor, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

292 F.3d 439

BAUHAUS USA, INC., Plaintiff-Appellant, v. Lillie Regina Holmes COPELAND, etc.; et al., Defendants, Lillie Regina Holmes Copeland, as natural guardian and next friend of Reshan Holmes; and Reshan Holmes, a minor, Defendants-Appellees.

No. 01-60343.

United States Court of Appeals, Fifth Circuit.

May 21, 2002.

Rehearing and Rehearing En Banc Denied June 21, 2002.^*

Thomas H. Lawrence (argued), John Morris Russell, Lawrence & Russell, Memphis, TN, Glover Alcorn Russell, Jr., Watkins, Ludlam, Winter & Stennis, Jackson, MS, for Plaintiff-Appellant.

Roy O. Parker (argued), Roy O. Parker & Associates, Tupelo, MS, for Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Mississippi.

Before DAVIS, WIENER, and BARKSDALE, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Plaintiff Bauhaus USA, Inc. ("Bauhaus"), appeals from the district court's dismissal of its declaratory judgment action to enforce the terms of an employee benefit plan against defendants Lillie Regina Holmes Copeland and her daughter Reshan Holmes. Bauhaus sought a declaratory judgment in the district court that it was entitled, under the terms of the plan, to funds resulting from a settlement between defendants and third-party tortfeasors. The defendants moved to dismiss the case, arguing that the Employee Retirement Income Security Act of 1974 ("ERISA")¹ does not preempt Mississippi's anti-assignment rule. The district court granted the defendants' motion. Because we conclude that ERISA does not authorize Bauhaus' declaratory judgment action, we do not reach the preemption question.

I.

On June 1, 1996, James Davis crashed the vehicle he was driving into a car carrying seven year-old defendant Reshan Holmes, who suffered injuries. Holmes is the daughter of defendant Lillie Regina Holmes Copeland. Copeland was an employee of Bauhaus, the sponsor and administrator of an employee benefit plan (the "Plan") that covered Copeland as a participant and Holmes as a beneficiary. Although the Plan did not cover injuries resulting from the acts of another, the Plan honored Copeland's request for benefits and elected to advance payments for Holmes' medical expenses in the amount of $46,229.45.

According to the Plan's provisions, one condition of any advance payment of benefits is that the Covered Person reimburse the Plan out of any recovery against a third party. In relevant part, the Plan provides:

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, omission or alleged negligence of another person....

However, the Plan may elect to advance payment for Medical Care expenses incurred for an injury or illness in which a third party may be liable if the Covered Person agrees to the following:

The Covered Person will reimburse the Plan out of the Covered Person's recovery for all benefits paid by the Plan. The Plan will be reimbursed prior to the Covered Person receiving any monies recovered from a Third Party or their insurer as a result of judgment, settlement or otherwise....

....

The Covered Person further agrees that he will not release any third party or their insured without prior written approval from the Plan, and will take no action which prejudices the Plan's subrogation right.

The Plan defines "Covered Person" to include both employees and their minor children. The Plan is self-funded — that is, it does not purchase an insurance policy but is funded only by the sponsoring employer — here Bauhaus. The parties agree that the Plan is an employee welfare benefit plan governed by ERISA.

Davis, the driver of the other vehicle, was an employee of James M. Newman, who did business as Newman Trucking and was insured by Canal Insurance Company. Copeland, on behalf of the minor, sued these parties (collectively, the "Tortfeasors") in Mississippi state court, and they eventually negotiated a settlement of the claims, including medical expenses, in return for $750,000.

For legal standing to represent Holmes in litigation, Copeland sought and was granted appointment as Holmes' legal guardian. In the context of that guardianship case, Copeland petitioned the Mississippi Chancery Court for authority to settle Holmes' claim against the Tortfeasors according to the proposed settlement agreement. The settlement agreement required the Tortfeasors to pay into the Registry of the Lee County Chancery Court $78,161.47 of the settlement proceeds, an amount sufficient to cover all liens against the proceeds. The agreement further stated that all parties with claims against that money would then be "served with process in the interpleader action."

A separate interpleader action never developed. Rather, the Chancery Court ordered that the Plan be made a party to the guardianship case and required to show why the Tortfeasors should not be given a release. The Plan then gave notice of removal of the guardianship case to the Northern District of Mississippi. Holmes moved to remand, and the Plan consented; accordingly, the district court remanded the case to the state court in June 2000.

A week later, Bauhaus, as administrator of the Plan, sued Copeland, Holmes, and the Tortfeasors in the Northern District of Mississippi, seeking a declaratory judgment that "Bauhaus is entitled to and shall receive full reimbursement of $46,229.45 from the proceeds of the settlement ... upon approval by the Chancery Court of the settlement." The crux of Bauhaus' case was, and is, that ERISA preempts the Mississippi law that requires court approval of the assignment of a minor's right to insurance proceeds.

A week after Bauhaus filed suit in federal court, the Chancery Court approved Copeland's petition to settle Homes' claims. The sum of $78,161.47 remains in the registry of that court, and the guardianship case is still pending.² The tort litigation, however, is closed. The Chancery Court's order (1) released the Tortfeasors from all "claims, demands, liens [and] subrogation interests" arising out of the tort litigation, including Bauhaus' claim; and (2) required dismissal of the tort litigation.

The Tortfeasors, Copeland, and Holmes moved the district court to dismiss the action. The Tortfeasors argued that the doctrines of res judicata and release barred Bauhaus from suing them again. Copeland and Holmes contended that dismissal was proper on three grounds: (1) absence of a federal question, because ERISA does not preempt Mississippi's anti-assignment rule; (2) lack of federal jurisdiction over the funds in question, because they are in the registry of the Mississippi court; and (3) consent to state jurisdiction, because Bauhaus had agreed to remand the guardianship case to state court.

In March 2001, the district court granted the motions to dismiss because it found that ERISA did not preempt Mississippi's anti-assignment rule, and therefore, that it did not have jurisdiction to hear the case. Bauhaus then filed its notice of appeal. We granted the Tortfeasors' unopposed motion to dismiss them from this case prior to oral argument. Bauhaus now appeals only the district court's dismissal of its claims against Copeland and Holmes.

II.

We review de novo a district court's grant of a motion to dismiss.³ We must therefore take the complainant's allegations as true, and may not dismiss a claim unless it appears certain that the plaintiff cannot prove any set of facts in support of its claim that would entitle it to relief.⁴

The parties urge this court to decide whether ERISA preempts Mississippi's anti-assignment rule that requires court approval of any assignment of a minor's interest in insurance proceeds.⁵ Before we may reach the merits of the parties' preemption arguments, however, we must make certain that jurisdiction is proper in this case.⁶ "Every federal appellate court has a special obligation to satisfy itself not only of its own jurisdiction, but also that of the lower courts in a cause under review, even though the parties are prepared to concede it."⁷

ERISA grants the federal courts "exclusive jurisdiction of civil actions under this title brought by ... [a] fiduciary."⁸ The parties agree that the Plan is governed by ERISA and that Bauhaus, as administrator of the Plan, is a "fiduciary" under ERISA. The only question that this court must resolve to determine whether jurisdiction is proper, therefore, is whether ERISA authorizes Bauhaus' suit.

ERISA § 502(a)(3) authorizes a civil action "by a ... fiduciary (A) to enjoin any act or practice which violates ... 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 ... the terms of the plan."⁹ ERISA authorizes Bauhaus' suit, and this court has jurisdiction then, only if Bauhaus' declaratory judgment action is an action "to enjoin any act or practice which violates ... the terms of the plan" or "to obtain other appropriate equitable relief."¹⁰

In Mertens v. Hewitt Associates,¹¹ the Supreme Court made clear that the term "equitable relief" in § 502(a)(3) referred only to "those categories of relief that were typically available in equity."¹² In its later, and quite recent, case of Great-West Life & Annuity Insurance Co. v. Knudson,¹³ the Court considered a case with facts nearly identical to the instant case.¹⁴ In Great-West, Janette Knudson, a beneficiary of an ERISA-governed employee welfare benefit plan, was injured in a car accident.¹⁵ The employee benefit plan included a reimbursement provision similar to the one at issue in the present case; the provision stated that the plan had "`the right to recover from the [beneficiary] any payment for benefits' paid by the Plan that the beneficiary is entitled to recover from a third party."<sup>16</sup> In particular, the Plan had "`a first lien upon any recovery, whether by settlement, judgment or otherwise,' that the beneficiary receives...