ERISA – Repayment Clause – Covered Dependent

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7^th Circuit Court of Appeals

Case Name: Central States, Southeast and Southwest Areas Health and Welfare Fund, et al., v. Shelby L. Haynes, et al.,

Case No.: 19-2589

Officials: BAUER, EASTERBROOK, and WOOD, Circuit Judges.

Focus: ERISA – Repayment Clause – Covered Dependent

Doctors removed Shelby Haynes’s gallbladder in 2013. She was injured in the process and required additional surgery that led to more than $300,000 in medical expenses. Her father’s medical-benefits plan (the Fund) paid these because Haynes was a “covered dependent”. The plan includes typical subrogation and re payment clauses: on recovering anything from third parties, a covered person must reimburse the Fund. In 2017 Haynes settled a tort suit against the hospital, and others, for $1.5 million. But she and her lawyers refused to repay the Fund, which brought this action to enforce the plan’s terms under §502(a)(3) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §1132(a)(3).

Haynes concedes that the Fund paid her medical bills but insists that she never agreed to reimburse it. She did not sign a promise to follow the plan’s rules and was not a participant (as opposed to a beneficiary). The district judge disagreed with her and granted summary judgment to the Fund for the full amount of its outlay. 397 F. Supp. 3d 1149 (N.D. Ill. 2019). Along the way, the district court enjoined Haynes, Haynes’s malpractice lawyer, and the lawyer’s firm from dissipating the proceeds of the settlement. The Fund named each of them as a defendant to avoid ambiguity about who possessed the money. See Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204, 214 (2002). Haynes contends that counsel should be able to keep a share of the settlement under equitable principles. But §11.14(j) of the plan expressly forbids this approach, and “if a contract abrogates the common-fund doctrine, the insurer is not unjustly enriched by claiming the benefit of its bargain.” McCutchen, 569 U.S. at 100.

Haynes also maintains that she shouldn’t be bound by this provision because a summary plan description does not explain that the plan displaces the common-fund doctrine. Yet the Fund makes the plan available online, mails printed copies on request, and sent the relevant provisions to her lawyer before the malpractice settlement. The point of a summary plan description is to summarize; some terms necessarily are omitted. At all events, if the plan and the summary plan description conflict, the plan controls. CIGNA Corp. v. Amara, 563 U.S. 421, 438 (2011).

Finally, Haynes’s complaint about the district court’s decision to exclude an expert’s report, 2018 U.S. Dist. LEXIS 234265 (N.D. Ill. Oct. 24, 2018), is beside the point; this case has been resolved on legal grounds that are unaffected by any expert’s conclusions, admissible or not.

Neither the plan, the Act, nor the common law excuses Haynes from her obligation to reimburse the Fund. Her status as a beneficiary—whether minor or adult—doesn’t deprive a fiduciary of the ability to obtain appropriate equitable relief under §502(a)(3) of the Act.

Affirmed

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Derek A Hawkins is trademark corporate counsel for Harley-Davidson. Hawkins oversees the prosecution and maintenance of the Harley-Davidson’s international trademark portfolio in emerging markets.