The case involves the Administrative Committee of the Wal-Mart Associates’ Health and Welfare Plan bringing a suit against James A. Shank, Deborah J. Shank, and the Deborah J. Shank Irrevocable Trust under ERISA section 502(a)(3) for reimbursement of $469,216 in medical expenses paid on behalf of Deborah Shank. After a car accident in 2000, which rendered her incompetent, the Committee covered Shank's medical costs. Following a subsequent lawsuit, Shank secured a $700,000 settlement, from which $417,477 was placed into a special needs trust. The Plan includes a subrogation and reimbursement clause, granting the Committee first priority to recover expenses paid on Shank's behalf from any settlement or judgment she receives. The district court ruled in favor of the Committee, imposing a constructive trust on the special needs trust funds to ensure reimbursement. The Shanks appealed, arguing that the Committee's claim constitutes money damages rather than equitable relief, thus challenging the court's jurisdiction under section 502(a)(3). The appellate court affirmed the district court's summary judgment, confirming that the Committee's claim qualifies as appropriate equitable relief under ERISA.
The Shanks abandoned their assertion during oral arguments, which is rejected. In *Sereboff v. Mid Atlantic Medical Servs., Inc.*, the Supreme Court determined that 'equitable relief' under section 502(a)(3) includes restitution claims for specifically identifiable funds within the defendant's control. The case involved a plan administrator seeking reimbursement from a fund obtained through a tort settlement, which the Court affirmed as a valid claim for equitable restitution. The Committee's claim aligns with *Sereboff* requirements, targeting specific funds for medical expenses from a distinct fund—the special needs trust—controlled by James Shank, the trustee. The remaining issue pertains to whether the relief sought by the Committee is 'appropriate.' The Shanks argue against full reimbursement, suggesting the application of the 'make-whole' doctrine or a pro rata share requirement. However, the argument that full recovery under the plan terms is inappropriate is unpersuasive. The Supreme Court has indicated that while federal courts can develop common law under ERISA, they are hesitant to alter ERISA's carefully constructed enforcement scheme or create new remedies beyond what Congress authorized.
New federal common law rules under ERISA are adopted cautiously, primarily to address gaps left by the statute and to align with its purposes. Federal courts may only incorporate common law principles if necessary to support the statutory framework established by Congress. In the case of Waller, the court determined that the make-whole doctrine from insurance law, which aims to fully compensate the insured, does not apply to ERISA-regulated benefit plans, as these plans often do not share that goal. The court upheld the written plan's entitlement to full subrogation, independent of the employee's compensation status, and clarified that section 502(a)(3) does not broaden the scope of equitable relief beyond enforcing ERISA provisions.
ERISA's primary goals include maintaining the integrity of written plans and safeguarding participant expectations, which courts interpret according to the plain language of the plans. Thus, common law theories cannot modify explicit plan terms. In this instance, the Plan explicitly states its right to recover all benefits paid, regardless of the participant's compensation status from any settlement or judgment. The Shanks argue against this straightforward language, suggesting that the make-whole rule is essential to protect beneficiaries who may receive inadequate tort settlements. They contend that allowing full reimbursement would leave such beneficiaries without adequate protection, contradicting ERISA's intended purpose.
The enforcement of the written Plan under ERISA is deemed essential, despite the challenges faced by Shank. Denying the Committee full reimbursement would unfairly increase costs for other plan members through higher premiums. Reimbursement and subrogation are vital for the sustainability of self-funded ERISA plans, requiring the Committee, as a fiduciary, to protect assets for all beneficiaries. While ERISA aims to safeguard the interests of plan participants, these interests are strictly defined by the written plan. Courts have recognized that the make-whole doctrine, which some have adopted as a common law default, does not apply when the plan language is explicit to the contrary.
Shank's contributions included premium payments and an agreement to reimburse the Committee for medical expenses stemming from third-party settlements, in return for immediate payment of her medical bills. The statute does not suggest that ERISA’s provision for “appropriate equitable relief” alters these contractual arrangements. Shank's argument for a pro rata reimbursement based on a Supreme Court case regarding Medicaid is rejected; ERISA does not impose similar limitations. The agreement between the Shanks and the Committee specified full reimbursement, granting the Committee priority over any settlement. Thus, both the make-whole and pro rata arguments fail, as federal courts cannot create conflicting rules against the written plan. Upholding the Committee's right to reimbursement aligns with ERISA's goals of maintaining the integrity of written plans and protecting all participants' interests, leading to the affirmation of the district court's judgment.
