Yerby v. United Healthcare Ins. Co.

Decision Date18 April 2002
Docket NumberNo. 2000-CA-01378-SCT.,2000-CA-01378-SCT.
Citation846 So.2d 179
CourtMississippi Supreme Court

T. Jackson Lyons, Jackson, attorney for appellant.

Edward Arthur Scallet, William Francis Hanrahan, Jennifer E. Eller, Washington, DC, Michael D. Tapscott, Tupelo, attorneys for appellee.


SMITH, P.J., for the Court.

¶ 1. Della F. Yerby and James D. Yerby filed suit on April 22, 1998, against George Langham ("Langham") and John E. Smith & Company, Inc. ("Smith") for personal injuries suffered by Della in a motor vehicle accident which occurred when a vehicle driven by Langham struck the Yerbys' vehicle from behind. On April 29, 1998, the Yerbys filed an amended complaint adding Healthcare Recoveries, Inc. ("HR, Inc.") of Louisville, Kentucky, as a plaintiff under Rule 17(b) of the Mississippi Rules of Civil Procedure stating that HR, Inc. was the real party in interest due to an unsatisfied medical healthcare subrogation lien.

¶ 2. United Healthcare Insurance Company (United) intervened pursuant to Rule 24 of the Mississippi Rules of Civil Procedure. United claimed as its basis to intervene that under the terms of Della's insurance plan, it was contractually entitled to recover any benefits paid or payable for medical treatment of Della as a result of any recovery from another source. HR, Inc. had contracted with United to pursue subrogation claims on United's behalf.

¶ 3. The Yerbys settled their suit against Langham and Smith for $738,000.00. United moved to recover the amount it paid to Mrs. Yerby for her injuries. Yerby filed a motion to deny United's claimed lien. After a hearing, the circuit court held that United was entitled to reimbursement for all medical benefits it had paid on Yerby's behalf. Aggrieved by the trial court's ruling, Yerby appeals to this Court.

¶ 4. We hold that the trial court and this Court have subject matter jurisdiction over this case pursuant to the Employee Retirement Income Security Act of 1974 (ERISA) 29 U.S.C. § 1132(a)(1)(B). We also affirm the lower court's holding that the Wackenhut "Plan" is entitled to reimbursement from Yerby's settlement with George Langham and John E. Smith & Company, Inc. We further hold that the made-whole rule as announced by this Court in Hare v. State, 733 So.2d 277 (Miss.1999), and the common-fund doctrine do not apply in this case. Accordingly, we affirm the trial court.


¶ 5. Della Yerby suffered severe back injuries as a result of a car accident on May 1, 1995. At the time of the accident, she was an employee of Wackenhut Corporation ("Wackenhut") and was covered under an employee welfare benefit plan sponsored by Wackenhut (the "Plan"). The Plan paid $53,417.46 to cover medical expenses Yerby incurred as a result of the accident.

¶ 6. The Plan is a self-funded health plan governed by ERISA, 29 U.S.C. §§ 1001 et seq. This means that the benefits paid out under the Plan are funded through employer and employee contributions rather than through an insurance policy. United Healthcare Insurance Company ("United") provides administrative services to the Plan.

¶ 7. The reimbursement and subrogation provision of the Plan is described in the combined Plan document/summary plan description in effect at the time of the accident. It states:

If the Plan pays more Medical Care Benefits to you than you should have been paid because expenses were not paid by you or expenses were repaid to you from sources other than an individual policy, the Plan will have the right to a refund from you. The amount of the refund is the difference between what was paid for those expenses and what should have been paid.

¶ 8. Yerby filed suit against the driver and his employer. United filed a formal motion to clarify its role in the litigation as the administrator of the Plan, which was granted. Yerby later settled her case against the defendants for $738,000.00. Following this, Yerby filed a motion to deny the Plan's claimed lien. After a hearing, the circuit court held that the Plan was entitled to reimbursement for all medical benefits it had paid on Yerby's behalf. Further, the court found that because the Plan does not allow for the deduction of attorney fees from the reimbursement, Yerby was not entitled to such a deduction.


¶ 9. "In Firestone Tire and Rubber Co. v. Bruch, the United States Supreme Court established the rule that courts must apply a de novo standard of review in actions brought by ERISA plan participants to challenge the denial of benefits unless the plan vests the plan administrator with discretionary authority to make eligibility determinations or construe the plan's terms." Sunbeam-Oster Co. Group Benefits Plan v. Whitehurst, 102 F.3d 1368, 1373 (5th Cir.1996) (citing Firestone, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)). "It is only in those cases involving plans that have not vested their administrators with such authority that the court must follow traditional principles of trust law and construe a participant's claim `as it would have any other contract claim-by looking to the terms of the plan and other manifestations of the parties' intent." Id. "If the plan vests the plan administrator with discretionary authority to make eligibility determinations or construe the plan's terms, the appropriate standard of review is for abuse of discretion." Walker v. Wal-Mart Stores, Inc., 159 F.3d 938, 939 (5th Cir.1998) (citing Firestone, 489 U.S. at 115, 109 S.Ct. 948).

¶ 10. The Summary Plan Description at issue expressly provides that Plan fiduciaries:

shall have discretionary authority to interpret the terms of the Plan and to determine eligibility for and entitlement to Plan benefits in accordance with the terms of the Plan. Any interpretation or determination made pursuant to such discretionary authority shall be given full force and effect, unless it can be shown that the interpretation or determination was arbitrary and capricious.

It clearly invests discretion in the Plan administrators, and therefore, the Plan's interpretation should be reviewed by this Court under the deferential abuse of discretion standard. Under this standard "[courts] pull back and defer broadly although not totally to the administration's determination, upending it only if persuaded that the administrator acted unreasonably." Cutting v. Jerome Foods, Inc., 993 F.2d 1293, 1296 (7th Cir.1993) (citing Firestone, 489 U.S. at 115, 109 S.Ct. 948). As a general rule, this Court applies a de novo standard when reviewing a trial court's ruling on a question of law, which is presented in the trial court's ruling regarding interpretation of the ERISA plan. See Zeman v. Stanford, 789 So.2d 798, 802 (Miss.2001).


¶ 11. There are three issues in this case. First, there is a jurisdictional issue. Second, Yerby asserts that the court below was incorrect in holding that her benefits under the Plan must be reduced by the amount she recovered from the third party defendants. Third, Yerby contends that the made whole rule or common fund doctrine should apply under employee benefit plans subject to ERISA.


¶ 12. ERISA is codified at 29 U.S.C. §§ 1001 et seq. Section 1132(a)(1)(B) provides that "A civil action may be brought by a participant or beneficiary ... to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." Yerby and United both agree that this describes the situation sub judice. Further, § 1132(e)(1) states that:

Except for actions under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought by the Secretary or by a participant, beneficiary, fiduciary, or any person referred to in section 1021(f)(1) of this title. State courts of competent jurisdiction and district courts of the United States shall have concurrent jurisdiction of actions under paragraph (1)(B) and (7) of subsection (a) of this section.

Thus, since both sides concede that Yerby's claim falls under § 1132(a)(1)(B), state courts have jurisdiction to hear the claim. Further, neither party contested jurisdiction below.

¶ 13. This would appear to close the door on the jurisdictional issue. However, United contends that Yerby's argument regarding the reimbursement issue raises the question of jurisdiction. United protests that Yerby's argument is essentially that if this Court finds in her favor that this Court has jurisdiction; however, if this Court finds in favor of United then it should not have jurisdiction. Yerby claims that this is a mischaracterization of her argument. Her argument is that United is not entitled to the relief it is seeking because 29 U.S.C. § 1132(a)(3) only authorizes ERISA fiduciaries to receive equitable relief. Section 1132(a)(3) states:

A civil action may be brought by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or 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 this subchapter or the terms of the plan.

29 U.S.C. § 1132(a)(3) (emphasis added).

¶ 14. The Ninth Circuit held in FMC Med. Plan v. Owens, 122 F.3d 1258 (9th Cir.1997), that federal courts did not have subject matter jurisdiction over a case where a plaintiff plan was seeking non-equitable relief under the ERISA statute; however, it altered this viewpoint in Cement Masons Health & Welfare Trust Fund v. Stone, 197 F.3d 1003, 1007 (9th Cir.1999). In Cement Masons, the court found that any non-frivolous assertion of a federal claim suffices to establish subject matter jurisdiction,...

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