UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
In the Matter of: SHAWN R. PARIS
ROBERT B. PARIS, natural father of
Shawn R. Paris; WANDA C. PARIS,
Guardian of Shawn R. Paris and
natural mother of Shawn R. Paris, No. 99-1558
Petitioners-Appellants,
v.
IRON WORKERS TRUST FUND, Local
No. 5, Washington, D.C.,
Respondent-Appellee.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Frederic N. Smalkin, District Judge.
(CA-99-613-S)
Argued: March 1, 2000
Decided: April 17, 2000
Before MICHAEL, Circuit Judge,
G. Ross ANDERSON, Jr., United States District Judge
for the District of South Carolina, sitting by designation,
and James H. MICHAEL, Jr., Senior United States District Judge
for the Western District of Virginia, sitting by designation.
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Affirmed by unpublished per curiam opinion.
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COUNSEL
ARGUED: Nathaniel Crow Fick, Jr., FICK & PETTY, Towson,
Maryland; C. William Michaels, Baltimore, Maryland, for Appellants.
Francis Jude Martorana, O'DONOGHUE & O'DONOGHUE, Wash-
ington, D.C., for Appellee. ON BRIEF: Daniel J. McNeil,
O'DONOGHUE & O'DONOGHUE, Washington, D.C., for Appel-
lee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
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OPINION
PER CURIAM:
Appellants appeal the district court's order granting summary judg-
ment. The district court granted summary judgment on the basis that
the make-whole doctrine* did not apply to the subrogation provision
in the ERISA plan in question, thereby allowing subrogation of
Appellants' recovery against a third party in favor of Appellee. Essen-
tially, Appellants ask us either to adopt the make-whole doctrine as
a matter of federal common law under ERISA or to find that state law
governs the question of whether the make-whole doctrine applies and
certify the question to the Maryland Court of Appeals. For the reasons
stated below, we decline Appellants' request and affirm the district
court.
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*The make-whole doctrine, when applicable, limits an insurer's right
to subrogation of an insured's recovery against a third party. Generally,
under the doctrine, an insurer is entitled to subrogation of an insured's
recovery against a third party only to the extent that the combination of
the proceeds the insurer has already paid to the insured and the insured's
recovery from the third party exceed the insured's actual damages. In
other words, the insured must be made whole before the insurer can exer-
cise his right of subrogation. See Harris v. Harvard Pilgrim Health Care,
Inc., 20 F. Supp. 2d 143, 150 (D. Mass. 1998).
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I.
Shawn R. Paris is a participant in the Iron Workers Fund (Fund).
He sustained serious injuries in a motorcycle accident and submitted
a claim for medical benefits under the Fund's ERISA-qualified Plan
of Benefits (Plan). The Fund does not provide benefits to the extent
of any recovery from a third party but will advance benefits prior to
any such recovery subject to the following subrogation provision in
the Plan:
Once the Third Party's liability is resolved, you will be
required to reimburse the Fund up to the full amount of the
recovery for the full amount of loss of . . . benefits received.
In such cases, the acceptance of benefits . . . constitutes an
agreement . . . to reimburse the Fund for benefits paid up to
the full amount of the recovery. . . . By accepting benefits
from the Fund, the injured person agrees that any amounts
recovered by the injured person by judgment, settlement or
otherwise will be applied first to reimburse the Fund.
The Fund advanced over $200,000 in benefits and entered a subroga-
tion agreement with Wanda C. Paris as guardian for Shawn. The sub-
rogation agreement provides: "The Fund shall not be responsible for
any of the Claimant's attorney's fees or the costs of Claimant's litiga-
tion."
Shawn's parents sued the driver of the other vehicle involved in the
accident and settled that suit for $100,000. Although Shawn's dam-
ages clearly exceeded that amount, $100,000 was the limit of existing
insurance coverage. The Parises filed a petition in Maryland state
court seeking an apportionment of the settlement proceeds, asserting
that the make-whole doctrine prevented subrogation by the Fund. The
Fund sought the entire sum as partial reimbursement for the benefits
it advanced. Neither party disputed that the Plan was subject to
ERISA.
After removal from state court, the United States District Court for
the District of Maryland granted the Fund's motion for summary
judgment based on the clear and unequivocal language of the Plan.
The district court had informed the parties' attorneys that Maryland
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law was inapplicable and, in its order, refused to apply the make-
whole doctrine as a matter of federal common law. The court also
refused to permit a pro rata deduction of attorney's fees because of
the subrogation agreement. After a de novo review of the relevant
documents and the applicable law, we must affirm the district court.
II.
ERISA establishes a comprehensive regulatory scheme for self-
funded employee benefit plans that preempts state law. The Supreme
Court has noted that ERISA's preemption clause is conspicuously
broad. See FMC Corp. v. Holliday, 498 U.S. 52, 58 (1990). "It estab-
lishes as an area of exclusive federal concern the subject of every
state law that `relate[s] to' an employee benefit plan governed by
ERISA." Id. (alteration in original). Nonetheless, ERISA's regulatory
scheme, though comprehensive, is not exhaustive, and in United
McGill Corp. v. Stinnett, 154 F.3d 168 (4th Cir. 1998), we noted: "In
enacting ERISA, Congress intended for the judiciary to develop a
body of federal common law to supplement the statute's express pro-
visions." 154 F.3d at 171. However, we also stated that "[c]ourts
should only fashion federal common law when `necessary to effectu-
ate the purposes of ERISA'" and that "`[r]esort to federal common
law generally is inappropriate when its application would . . . threaten
to override the explicit terms of an established ERISA benefit plan.'"
Id. (quoting Singer v. Black & Decker Corp. , 964 F.2d 1449, 1452
(4th Cir. 1992)). "Rather, one of the primary functions of ERISA is
to ensure the integrity of written, bargained-for benefit plans." Id. at
172. Therefore, "the plain language of an ERISA plan must be
enforced in accordance with `its literal and natural meaning.'" Id.
(quoting Health Cost Controls v. Isbell, 139 F.3d 1070, 1072 (6th Cir.
1997)).
III.
As an initial matter, Maryland law cannot govern the question of
whether the make-whole doctrine applies in this case, for even if
Maryland law spoke to the issue, ERISA preempts state law regarding
subrogation rights. See FMC Corp., 498 U.S. at 58, 65; Hampton
Indus., Inc. v. Sparrow, 981 F.2d 726, 728-30 (4th Cir. 1992) (pre-
emption of state statute limiting subrogation); Harris v. Harvard Pil-
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grim Health Care, Inc., 20 F. Supp. 2d 143, 148-149 (D. Mass. 1998)
(preemption of subrogation statute). The district court was therefore
correct in notifying counsel that Maryland law was inapplicable and
in treating the issue as a matter of federal law. Consequently, no basis
exists for certifying a question to the Maryland Court of Appeals.
As a federal matter, our decision in United McGill, supra, prevents
us from resorting to federal common law in this case, let alone adopt-
ing the make-whole doctrine as a new federal common-law principle
for ERISA cases. As Appellants conceded at oral argument, the sub-
rogation provision in the Fund's Plan is plain and clear. It entitles the
Fund to reimbursement of the full amount of Appellants' recovery.
We must enforce this unambiguous provision in accordance with its
plain language and literal meaning, and it would therefore be inappro-
priate for us to override the provision by grafting onto it the make-
whole doctrine.
In reviewing the Plan, we have kept in mind that contracts subject
to the provisions of ERISA are very different from ordinary insurance
contracts and are not subject to the same rules of construction. ERISA
requires that drafters of plans use clear, ordinary language that is
readily understandable by laypersons, whereas ordinary insurance
contracts contain more particular and precise language, as well as
confusing legalese and boilerplate. Applying the same doctrines and
rules of construction to ERISA contracts that generally apply to insur-
ance contracts, such as the make-whole doctrine or the rule requiring
courts to construe insurance contracts strictly against their drafters,
would frustrate the purposes of ERISA. As the Fifth Circuit stated in
Sunbeam-Oster Co. v. Whitehurst, 102 F.3d 1368 (5th Cir. 1996):
"[W]e should not (and will not) penalize[ERISA plans] for lack of
technical precision or verbosity by labeling the Plan `silent' or
`ambiguous' when it uses the kind of direct, jargon-free language that
is mandated by ERISA for all summary plan descriptions . . . ." 102
F.3d at 1375. As to the plan in question, we find it equally as clear
as the plan in Sunbeam-Oster, and we reach the same conclusion the
Fifth Circuit reached there.
When [the Plan's] language is read in context and viewed
in light of all the circumstances, it can only mean that the
Plan is entitled to be paid back by the beneficiary all
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amounts that the Plan has paid to the beneficiary, or on his
behalf, to the full extent . . . that the beneficiary recovers
from another source . . . .
Id. at 1375-76.
We note also that self-funded ERISA plans generally have very
limited resources that they must use for the benefit of all their partici-
pants. Subrogation is an extremely important tool for maintaining the
financial viability of such plans.
Our decision not to adopt the make-whole doctrine as a matter of
federal common law in ERISA cases comports with the weight of
authority addressing the issue. See, e.g., Waller v. Hormel Foods
Corp., 120 F.3d 138 (8th Cir. 1997); Sunbeam-Oster, supra; Cutting
v. Jerome Foods, Inc., 993 F.2d 1293 (7th Cir. 1993); Great-West Life
& Annuity Ins. Co. v. Barnhart, 19 F. Supp. 2d 584 (N.D. W. Va.
1998). In addition, this case is distinguishable from Barnes v. Inde-
pendent Automobile Dealers Ass'n of California Health & Welfare
Benefit Plan, 64 F.3d 1389 (9th Cir. 1995), wherein the Ninth Circuit
adopted, as a matter of federal common law, a rule that "in the
absence of a clear contract provision to the contrary, an insured must
be made whole before an insurer can enforce its right to subrogation."
64 F.3d at 1395. As the plan in this case contains a clear provision
contrary to the make-whole doctrine, we need not consider adopting
a rule similar to the Ninth Circuit's at this time. Furthermore, we
reject Appellants' suggestion to follow Eleventh Circuit precedent
holding that the make-whole doctrine is a default rule in ERISA cases
limiting a plan's subrogation rights absent explicit preclusion of the
doctrine by the plan. See Cagle v. Bruner, 112 F.3d 1510, 1521 (11th
Cir. 1997). Such a rule would frustrate the purposes of ERISA by
requiring plan drafters to inject legalese into plans rather than use
clear, ordinary language explaining the plan's provisions. Laypersons
generally would not understand a reference to the make-whole doc-
trine.
As a final matter, although it is questionable whether Appellants
have properly appealed the district court's ruling as to attorney's fees,
we note that the district court correctly decided that Appellants were
not entitled to a pro rata deduction of attorney's fees. The subrogation
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agreement in this case clearly addressed the issue of attorney's fees
and was not inconsistent with any language in the Plan.
IV.
At oral argument, Appellants contended that ERISA unfairly grants
drafters of plans broad power to override equitable doctrines such as
the make-whole doctrine. Appellants urged us to restrict that power.
However, while Congress has granted courts some authority under
ERISA, that authority is limited. We must enforce the plain language
of an ERISA plan that does not conflict with any of ERISA's provi-
sions. Therefore, while we are aware of the possible hardships when
an accident victim must reimburse a plan even when not made whole,
Appellants' proper recourse is to Congress, not the courts.
For the reasons stated above, we affirm the district court.
AFFIRMED
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