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Bishop v. Burgard

Case Date: 12/01/2000
Court: 3rd District Appellate
Docket No: 3-99-0766 Rel

December 1, 2000

3-99-0766

IN THE

APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

CATHERINE R. BISHOP,

          Plaintiff-Appellee,

                    v.

KELLY BURGARD,

          Defendant


(Administrative Committee,
as Adm. of the
Associates Health and Welfare
Plan,

          Defendant-Appellant.

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)		 Appeal from the circuit court of the
10th Judicial Circuit, Tazewell
County, Illinois





No. 98 L 87






Honorable John A. Barra,
Presiding Judge

JUSTICE KOEHLER delivered the opinion of the court:

The defendant-appellant, Administrative Committee (Committee), administers the Employment Retirement IncomeSecurity Act (ERISA) plan (plan) in which the plaintiff-appellee, Catherine Bishop, participates. The Committee appealsthe Tazewell County circuit court's entry of summary judgment in favor of the plaintiff-appellee, Catherine Bishop, in heraction on a petition to adjudicate lien. In granting summary judgment, the circuit court reduced the amount of moneyBishop is required to pay the plan as reimbursement of medical benefits the plan paid to Bishop for injuries she received inan automobile accident. On review, this court must decide whether the circuit court erred (1) in not dismissing the actionfor lack of subject matter jurisdiction over the petition because the federal Employment Retirement Income Security Act of1974 (29 U.S.C. 1001 et seq. (1994)) (ERISA) preempted state court action, and (2) in applying the common fund doctrineto reduce the amount Bishop must pay to the plan as reimbursement of medical benefits it paid to Bishop for injuries shereceived in an automobile accident. We conclude that the circuit court erred in applying the common fund doctrine ratherthan the terms of the plan contract. Accordingly, we reverse the circuit court's grant of summary judgment.

FACTS

The plaintiff, Bishop, incurred medical expenses in the amount of $8,576.30 for injuries she received in an automobileaccident on September 3, 1997. Bishop, an employee of Wal-Mart and a participant in the company's ERISA plan,received that amount from the plan for her injuries. The plan's benefit book for 1996 and 1998 included the followingprovisions:

"Right to Reduction and Reimbursement (Subrogation)

The Plan has the right to reduce or deny benefits otherwise payable by the Plan *** and *** recover (subrogate) 100% ofthe 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 for the condition giving rise to the expense orby their insurers.

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Attorney's fees.

Cooperation Required

The Plan requires that you or your covered dependent cooperate to guarantee reimbursements to the Plan from third partybenefits. Failure to comply with this request will entitle the Plan to withhold benefits due you under the Plan Document. You or your covered dependents may not do anything to hinder reimbursement of overpayment to the Plan after you havereceived benefits.

Note: All attorney's fees and court costs are the responsibility of the participant, not the Plan.

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Participant's Responsibility Regarding Right of Recovery

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Subrogation is when Wal-Mart pays your medical charges relating to your accident while waiting for the responsible partyto settle. Repayment to the Plan of 100% will be made at the time the settlement is received by the associate, dependent, ortheir attorney."

Under the plan, the plan administrator has discretionary authority to resolve all questions regarding plan administration,interpretation and application.

Bishop retained counsel and, on June 9, 1998, filed a personal injury action against Kelly Burgard, the driver of the otherautomobile involved in the accident, seeking damages in excess of $50,000. Bishop signed an agreement under which shewould pay her attorneys a percentage of her recovery as attorney fees and costs. Bishop accepted a $21,500 settlement. OnFebruary 19, 1999, Bishop filed a petition for adjudication of lien in the circuit court in which she alleged that (1) BlueCross/Blue Shield (Blue Cross) had claimed a lien in the amount of $8,576.30 on any proceeds Bishop received assettlement; (2) asserting that Illinois' common fund doctrine did not apply, Blue Cross refused her request to reduce the lienby one-third to reflect attorney fees; (3) in Scholtens v. Schneider, 173 Ill. 2d 375, 671 N.E.2d 657 (1996), the IllinoisSupreme Court held that ERISA's conflict preemption doctrine does not preempt Illinois' common fund doctrine; and (4)Illinois law is that the common fund doctrine requires that she, as creator of the fund, be reimbursed for the reasonablevalue of the legal service rendered in protecting Blue Cross's subrogation lien. On March 10, 1999, Bishop amended herpetition, substituting the Associates Health and Welfare Plan as the owner of the reimbursement right against the proceeds.

On April 13, the Committee, as administrator of the Associates Health and Welfare Plan, filed an emergency petition tointervene as of right in the petition for adjudication. The Committee filed a motion to dismiss the petition pursuant tosection 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 1996)) on the ground that ERISA preempted thestate court action. The circuit court denied the motion. On May 28, 1999, Bishop filed a motion for summary judgment. In it she asked the circuit court to apply Illinois' common fund doctrine to reduce by one-third the amount she was requiredto pay to reimburse the plan for attorney fees and costs she incurred in the personal injury action against Burgard. On July12, 1999, the Committee filed a cross-motion for summary judgment against Bishop seeking full reimbursement for themedical benefits it paid Bishop as a result of the automobile accident. On August 2, 1999, the circuit court dismissed,pursuant to stipulation, the action between Bishop and Burgard. On September 9, 1999, the circuit court denied theCommittee's motion and granted Bishop's motion, reducing by $3,025.09 the amount Bishop was required to pay the planas reimbursement.

ANALYSIS

Summary judgment should be granted only when the pleadings, depositions, and admissions on file, together with anyaffidavits, when construed in the light most favorable to the nonmoving party show there is no genuine issue of materialfact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 1996). On review, wedetermine only whether the circuit court correctly concluded that no genuine issue of material fact had been raised and, ifnone was raised, whether it correctly entered judgment as a matter of law. Fuller v. Justice, 117 Ill. App. 3d 933, 453N.E.2d 1133, 1136 (1983). This court reviews a grant of summary judgment de novo. Outboard Marine Corp. v. LibertyMutual Insurance Co., 154 Ill. 2d 90, 102, 607 N.E.2d 1204, 1209 (1992).

Does ERISA preempt the state court action and, therefore, did the circuit court err when it did not dismiss the petition foradjudication of lien for lack of subject matter jurisdiction? The Committee contends that Bishop's petition to adjudicatelien states a prima facie cause of action under ERISA section 502(a)(3) (29 U.S.C.