Bishop v. Burgard

• Decision Date: 25 January 2002
• Docket Number: No. 90742.,90742.
• Citation: 764 N.E.2d 24,261 Ill.Dec. 733,198 Ill.2d 495
• Parties: Catherine R. BISHOP, Appellant, v. Kelly BURGARD et al. (Administrative Committee, as Adm'r of the Associates Health and Welfare Plan, Appellee).
• Court: Illinois Supreme Court

764 N.E.2d 24

198 Ill.2d 495

261 Ill.Dec. 733

Catherine R. BISHOP, Appellant, v. Kelly BURGARD et al. (Administrative Committee, as Adm'r of the Associates Health and Welfare Plan, Appellee).

No. 90742.

Supreme Court of Illinois.

January 25, 2002.

J. Kevin Wolfe, of Harvey & Stuckel, Chtrd., Peoria, for appellant.

Peter R. Bulmer, of Jackson, Lewis, Schnitzler & Krupman, Chicago, for appellee.

Stanley L. Tucker, of Hartzell, Glidden, Tucker & Hartzell, Carthage, for amicus curiae Illinois Trial Lawyers Association.

Chief Justice HARRISON delivered the opinion of the court:

The issues presented in this appeal are, simply put, whether the circuit court lacked subject matter jurisdiction over a petition for adjudication of lien because the Employment Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq. (1994)) preempted state court action, and whether the circuit court properly applied the common fund doctrine to reduce the amount the administrator of plaintiff's benefit plan received from plaintiff's settlement fund as reimbursement for medical benefits paid on plaintiff's behalf.

In this case, the circuit court of Tazewell County ruled that ERISA did not preempt state court action on plaintiff's motion to adjudicate lien, and that the common fund doctrine applied to reduce the amount the administrator of plaintiff's benefit plan would receive from settlement proceeds. In the ensuing appeal, the appellate court agreed with the circuit court's ruling on the preemption issue, but held that the circuit court had erred in applying the common fund doctrine rather than the terms of the plan, as the appellate court interpreted them. Accordingly, the appellate court reversed the judgment of the circuit court. 317 Ill.App.3d 923, 251 Ill. Dec. 712, 741 N.E.2d 306. We allowed plaintiff's petition for leave to appeal (177 Ill.2d R. 315(a)) and granted leave to the Illinois Trial Lawyers Association to submit a brief as amicus curiae in support of the plaintiff. 155 Ill.2d R. 345. For the reasons expressed below, we reverse the judgment of the appellate court.

The plaintiff, Catherine Bishop, incurred medical expenses in the amount of $8,576.30 as a result of injuries she sustained in an automobile accident on September 3, 1997, when her automobile was struck by a vehicle driven by the defendant, Kelly Burgard. Bishop was an employee of Wal-Mart and a participant in the company's ERISA plan. Pursuant to plan provisions, Bishop, or her health-care providers, received payments totaling $8,576.30 from the plan for medical expenses Bishop had incurred.

Bishop retained counsel on February 17, 1998, signing an agreement under which she would pay her attorney a percentage of her recovery as attorney fees and costs. On June 9, 1998, Bishop filed a personal injury action against Burgard, seeking damages in excess of $50,000. Bishop's attorney ultimately procured a settlement offer of $21,500, which Bishop accepted. On February 19, 1999, Bishop's attorney filed a petition for adjudication of lien in the circuit court of Tazewell County, alleging (1) Blue Cross/Blue Shield (Blue Cross) had claimed a lien in the amount of $8,576.30 on any proceeds Bishop received as settlement, (2) Blue Cross had refused a request to reduce the lien by one-third to reflect attorney fees, asserting that Illinois' common fund doctrine did not apply, (3) pursuant to precedent established in Scholtens v. Schneider, 173 Ill.2d 375, 219 Ill.Dec. 490, 671 N.E.2d 657 (1996), ERISA's conflict preemption doctrine does not preempt Illinois' common fund doctrine, and (4) under Illinois law, the common fund doctrine requires that the creator of the fund be reimbursed by Blue Cross for the reasonable value of the legal service rendered in protecting Blue Cross's subrogation lien. The amount of Blue Cross's lien was not disputed, nor was its validity. On March 10, 1999, an amended petition was filed, substituting the Associates Health and Welfare Plan as the lienholder claiming a right against the proceeds of settlement. Neither the original petition, nor the amended petition, refers to plan provisions which might require interpretation in this matter or control the outcome.

On April 13, 1999, the Administrative Committee, as administrator of the Associates Health and Welfare Plan, filed an emergency petition to intervene as of right. The Committee then filed a motion to dismiss the petition for adjudication pursuant to section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 1996)) on the ground that ERISA preempted the state court action. The circuit court denied the Committee's motion to dismiss. On May 28, 1999, Bishop filed a motion for summary judgment, asking that the circuit court apply Illinois' common fund doctrine to reduce the amount claimed by the plan, reflecting a proportionate reduction of one-third for attorney fees and an additional reduction for costs attributable to the plan's share of the recovery. On July 12, 1999, the Administrative Committee filed a response to Bishop's motion and a cross-motion for summary judgment against Bishop, seeking full reimbursement, pursuant to plan provisions, for the medical benefits it had paid as a result of the automobile accident. The Committee attached to its pleading the 1996 and 1998 versions of the benefit plan.

The plan's pertinent provisions for 1996 and 1998 differ slightly, but are consistent in most respects. Both versions contain a section entitled, "Right to Reduction and Reimbursement (Subrogation)," which gives the plan the right-under the terms of the 1996 provision:

"[to] recover (subrogate) [under the 1998 provision, "recover or subrogate" (emphasis added)] 100% of the benefits previously paid by the plan to the extent of any and all of the following:

* Any judgment, settlement, or any payment, made or to be made by a person considered responsible for the condition giving rise to the expense or by their insurers.

* Any auto or recreational vehicle insurance coverages or benefits including, but not limited to, uninsured motorist coverage.

* Business and homeowners medical liability insurance coverage or payments.

* Attorney's fees."

Under a subsection entitled "Cooperation Required," plan participants are obliged to "cooperate to guarantee reimbursement to the Plan from third party benefits." Participants are prohibited from taking any action that would "hinder reimbursement of overpayment to the Plan after [the participant has] accepted benefits." Immediately following those indiscriminate admonishments, a "Note," without specific contextual reference, states, "All attorney's fees and court costs are the responsibility of the participant, not the Plan." Plan provisions do not expressly repudiate the common fund doctrine, nor do they specifically state that the participant will be obligated to pay the plan's attorney fees. Participants are advised:

"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

* Whether the participant has been made whole (i.e., fully compensated for his/her injuries):

Additionally, the Plan has the right to file suit on your behalf against any person or entity considered responsible for the condition giving rise to the medical expenses to recover benefits paid or to be paid by the Plan."

Another subsection, entitled "Participant's Responsibility Regarding Right of Recovery," provides,

"To aid the Plan in its enforcement of its right of recovery, reimbursement, and subrogation, the participant must, at the Plan's request and at its discretion:

* Take any action

* Give information

* Execute documents so required by the Plan."

This subsection concludes with an explanation of the term "subrogation": "Subrogation is when Wal-Mart pays your medical charges relating to your accident while waiting for the responsible party to settle. Repayment to the Plan of 100% will be made at the time the settlement is received by the associate, dependent, or their attorney."

The 1998 version of the plan contains several paragraphs under the subsection "Cooperation Required" that do not appear in the 1996 version, among them, two stating as follows:

"* The Plan does not pay for nor is responsible for the participant's attorney's fees. Attorney's fees are to be paid solely by the participant.

* Modification to this section regarding the right to reduction and reimbursement (subrogation) are [sic] made to clarify previous Plan wording."

On September 9, 1999, the circuit court, in an order that mentioned neither plan provisions nor the common fund doctrine, denied the Committee's motion and granted Bishop's motion, reducing by $3,025.09 the amount the plan was entitled to receive from the settlement proceeds.

As we have previously noted, the appellate court held that ERISA did not preempt state court action on plaintiff's motion to adjudicate lien; however, the appellate court concluded that the circuit court had erred in applying the common fund doctrine rather than the terms of the plan, as the appellate court interpreted them. In this appeal, we are asked to determine whether ERISA preempts application of the common fund doctrine in this context, and if not, whether, on these facts, the provisions of the benefit plan preclude application of the doctrine, and if so, whether those provisions are unenforceable because they violate public policy. The standard of review in cases involving review of summary judgment is de novo. Ragan v. Columbia Mutual Insurance Co., 183 Ill.2d 342, 349, 233 Ill.Dec. 643, 701 N.E.2d 493 (1998)

.

We find the disposition of this case controlled by analytical principles espoused in Scholtens. In Scholtens, this court held that ERISA does not preempt application of Illinois' common fund doctrine (Scholtens, 173 Ill.2d at 396, 219 Ill.Dec. 490, 671 N.E.2d 657), stating in the course of analysis...