Ibp, Inc. v. Foust
| Decision Date | 01 December 1997 |
| Docket Number | No. C 97-4005.,C 97-4005. |
| Citation | 987 F.Supp. 714 |
| Parties | IBP, INC., Plaintiff, v. Michael L. FOUST, et al., Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
Theodore F. Sporer, W. Des Moines, IA, for plaintiff.
Willis J. Hamilton, Storm Lake, IA, for defendants.
This dispute concerns whether an employee benefit plan with a "full reimbursement" subrogation provision must contribute to the legal expenses incurred by a plan participant to recover from a third party tort-feasor.
On June 24, 1997, the parties consented to have this matter decided by the undersigned United State Magistrate Judge under 28 U.S.C. § 636(c) (Docket No. 10). Plaintiff IBP, Inc. filed a Motion for Summary Judgment on August 29, 1997 (Docket No. 12). On September 15, 1997, the defendants resisted the motion (Docket No. 16), and filed a Motion to Dismiss (Docket No. 18). The Motion to Dismiss has not been resisted. These motions are now deemed fully submitted.
The plaintiff IBP, Inc. ("IBP") operates a fully-qualified, self-funded ERISA1 Employee Benefit Plan (the "Plan"). IBP is the employer and administrator of the Plan. Defendant Michael Foust was an employee of IBP and a beneficiary of the Plan. The other two defendants, Michelle Foust and Cory Foust, are his daughter and son.
On April 16, 1992, Michelle and Cory were in an automobile accident in which they suffered personal injuries requiring medical treatment. The Plan paid out medical benefits totaling $7,351.72 - $6,417.34 on behalf of Cory and $934.38 on behalf of Michelle. In addition, the Fousts recovered $485,000 from a third-party tort-feasor. IBP claims a subrogation right against the Fousts' recovery based on the following Plan language:
As a condition to receiving benefits under this Medical Plan, Participants and Covered Family Members receiving medical benefits agree to transfer in full to the Medical plan their rights to recover damages for these benefits when the injury or illness occurs through the act or omission of another person. If benefits paid under the Medical Plan are recovered by Participant or Covered Family Member from another person or business entity, the Medical Plan will be reimbursed in full. No repayment agreement is required to be signed. Subrogation or reimbursement rights require only that the injury occur through the act of a third party. The Medical Plan's rights of full recovery may be from the Participant, or covered Family Member, the third party, any liability or other insurance covering the third party, the insured's own uninsured motor insurance, underinsured motorist insurance, any medical payments, no fault or school insurance coverages which are paid or payable. The Medical Plan may enforce its right of subrogation by requiring the employee to assert a claim to any of the foregoing coverages to which he/she may be entitled. The Medical Plan will not pay fees or costs associated with a claim/lawsuit without express written authorization.
Although the Fousts have paid nothing to the Plan, they admit their obligation to reimburse the Plan for the medical benefits, but only after they have deducted a pro rata share of the attorneys' fees paid to obtain the recovery. (Def.'s Resistance to Pl.'s Mot. for Summ.J., at 2.)
There are no disputed material facts.
The standards for summary judgment have been described in detail in several recent decisions in this district. For example, the court in Lockhart v. Cedar Rapids Community Sch. Dist., 963 F.Supp. 805 (N.D.Iowa 1997), outlined these standards as follows:
The Eighth Circuit Court of Appeals recognizes "that summary judgment is a drastic remedy and must be exercised with extreme care to prevent taking genuine issues of fact away from juries." Wabun-Inini v. Sessions, 900 F.2d 1234, 1238 (8th Cir.1990). On the other hand, the Federal Rules of Civil Procedure have authorized for nearly 60 years "motions for summary judgment upon proper showings of the lack of a genuine, triable issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986). Thus, "summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Wabun-Inini, 900 F.2d at 1238 (quoting Celotex, 477 U.S. at 327 106 S.Ct. at 2554-55); Hartnagel v. Norman, 953 F.2d 394, 396 (8th Cir.1992).
Lockhart, 963 F.Supp. at 813-15.
In McPeek v. Beatrice Co., 936 F.Supp. 618 (N.D.Iowa 1996), an ERISA case, the court stated the following:
"Summary judgment is particularly appropriate in cases involving the interpretation of contracts." Murphy v. Keystone Steel & Wire Co., 61 F.3d 560, 564-65 (7th Cir. 1995); Ryan v. Chromalloy American Corp., 877 F.2d 598, 602 (7th Cir.1989). Where the contract is unambiguous, a court must determine the meaning of the contract as a matter of law. Murphy, 61 F.3d at 565; Ryan [v. Chromalloy], 877 F.2d at 602.
Since there are no material factual issues in this case, it is especially well suited for summary judgment.
There is no question that the subrogation language in the Plan, if enforced, would require the Fousts to fully reimburse IBP for the medical benefits paid by the Plan as a result of the accident. The Plan's language could hardly be clearer:
The Fousts do not dispute that this language, if enforced, would require them to make full reimbursement to the Plan. (Def.'s Resistance to Pl.'s Mot. for Summ.J., at 2.) Instead, they contend that their obligation to reimburse IBP is controlled by Iowa law rather than by the language of the Plan. Iowa Code Section 668.5(3) provides:
[C]ontractual or statutory subrogated persons shall be responsible for a pro rata share of the legal and administrative expenses incurred in obtaining the judgment or verdict.
IOWA CODE § 668.5(3). This language, which is as unambiguous as the Plan's subrogation language, would require IBP to pay its pro rata share of the legal fees incurred by the Fousts to obtain the recovery. IBP contends that the Iowa Code has no bearing on this case because Iowa law has been preempted by federal law. The Fousts argue in the alternative that if IBP's contention is correct, then federal common law should be applied to permit them, under equitable principles, to deduct a pro rata share of their legal expenses before making any payment to the Plan. IBP responds that where, as here, there is specific, controlling Plan language, equitable principles should not be applied.
In FMC Corp. v. Holliday, 498 U.S. 52, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990), the United States Supreme Court considered the scope of 29 U.S.C. § 1144(a),2 the ERISA preemption provision, in relation to a state anti-subrogation statute. FMC operated an ERISA employee welfare benefit plan that provided health benefits to FMC employees and their dependents. FMC Corp., 498 U.S. at 54, 111 S.Ct. at 405. The plan contained a provision requiring members who recovered in a liability action against a third party to reimburse the plan for benefits paid by the plan. Id. at 54, 111 S.Ct. at 405-06. This provision conflicted with a Pennsylvania statute precluding subrogation or reimbursement in actions arising out of motor vehicle accidents. Id. at 55 nn. 1 & 2, 111 S.Ct. at 406 nn. 1 & 2. Cynthia Holliday, the dependent of an FMC employee, was injured in an automobile accident and the plan paid part of her medical expenses. Relying on the state anti-subrogation statute, she refused to honor FMC's demand for reimbursement. Id. at 55, 111 S.Ct. at 406.
The issue addressed by the Supreme Court was whether the Pennsylvania anti-subrogation statute "related to" an ERISA employee benefit plan for purposes of 29 U.S.C. § 1144(a). FMC Corp., 498 U.S. at 58, 111 S.Ct. at 407. Under the test announced in Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), a state law "relates to" an employee benefit plan if it has "a connection with or reference to such a plan." Id. at 96-97, 103 S.Ct. at 2899-2900. Commenting that "[t]he preemption clause is conspicuous for its breadth," the Court in FMC Corp. decided that the Pennsylvania anti-subrogation statute had a "reference to" ERISA benefit plans because, by statute, it applied to "[a]ny program, group contract or other arrangement for payment of benefits." FMC Corp., 498 U.S. at 58-59, 111 S.Ct. at 407-08. The Court also decided that, because of the differing effects such laws could have in different states, the anti-subrogation statute had a "connection with" ERISA benefit plans.
To require plan providers to design their programs in an environment of differing state regulations would complicate the administration of nationwide plans, producing inefficiencies that employers might offset with decreased benefits. Thus, where a patchwork scheme of regulation would introduce considerable inefficiencies in benefit program operation, we have applied the pre-emption clause to ensure that benefit plans will be governed by only a single set of regulations.
Id. at 60, 111 S.Ct. at 408 (citations and quotations omitted).
In the present case, the Iowa statute makes no "reference to" ERISA employee benefit plans, or for that matter, to any plan,...
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