UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
In Re: TINA L. CARPENTER,
Debtor.
WAL-MART STORES, INCORPORATED,
Plaintiff-Appellee, No. 00-2348
v.
TINA L. CARPENTER,
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of Virginia, at Norfolk.
Rebecca B. Smith, District Judge.
(CA-00-143, BK-98-26470-SCS, AP-98-01290)
Argued: May 8, 2001
Decided: June 3, 2002
Before MICHAEL and GREGORY, Circuit Judges, and
Arthur L. ALARCON, Senior Circuit Judge of the United States
Court of Appeals for the Ninth Circuit, sitting by designation.
Affirmed by unpublished per curiam opinion. Judge Michael wrote a
dissenting opinion.
COUNSEL
ARGUED: Carolyn Louise Camardo, MARCUS, SANTORO,
KOZAK & MELVIN, P.C., Portsmouth, Virginia, for Appellant.
2 IN RE: CARPENTER
Michael Stephen Cessna, Corporate Appellate Counsel, WAL-MART
IN-HOUSE LITIGATION TEAM, Bentonville, Arkansas, for Appel-
lee. ON BRIEF: Kyle L. Holifield, Corporate Appellate Counsel,
WAL-MART IN-HOUSE LITIGATION TEAM, Bentonville, Arkan-
sas, for Appellee.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
The bankruptcy and district courts held that Wal-Mart Stores, Inc.,
the sponsor and administrator of a health benefits plan with a reim-
bursement provision, had an equitable lien on personal injury settle-
ment proceeds received by a Wal-Mart employee, Tina L. Carpenter,
after she filed for bankruptcy. We affirm.
The facts are not in dispute. On November 13, 1994, Carpenter was
seriously injured in an automobile wreck caused by a third party. At
the time of the accident, Carpenter worked for Wal-Mart and partici-
pated in the Wal-Mart Group Health Plan (the Plan). Wal-Mart spon-
sors and administers the Plan, which is a self-funded, self-insured
health benefits plan. The Plan is governed by the Employee Retire-
ment Income Security Act of 1974, 29 U.S.C. § 1001, et seq.
(ERISA). Although a copy of the Plan was not introduced into evi-
dence, the parties stipulated as follows: "Pursuant to the terms of the
plan, in the event of the payment of benefits to a participant due to
an injury to such participant caused by acts of a third-party, the plan
retains the right of subrogation to claims of the participant against
such third-party, and the right to reimbursements for recoveries of the
participant from such third-party." On July 6, 1995, after the accident,
Carpenter signed a "Subrogation Rights Notification Acknowledg-
ment," acknowledging that she was aware of the Plan’s subrogation
and reimbursement provision.
IN RE: CARPENTER 3
Carpenter’s medical expenses stemming from the accident totaled
nearly $300,000, and the Plan paid her $106,935.11 in benefits. Car-
penter was overwhelmed by her medical bills, and she filed an invol-
untary Chapter 7 bankruptcy petition on September 1, 1998. On
October 13, 1998, within a few weeks of her bankruptcy filing, Car-
penter received $125,000 in settlement from the third party who had
caused her injuries. Shortly thereafter, Carpenter amended her bank-
ruptcy schedules to reflect the settlement and to claim the proceeds
as exempt under 11 U.S.C. § 522(b)(2) and Va. Code Ann. § 34-28.1.
(Va. Code Ann. § 34-28.1 exempts the proceeds of personal injury
settlements.) On November 25, 1998, Wal-Mart filed an adversary
proceeding against Carpenter, seeking (1) a declaratory judgment that
it has an equitable lien on the settlement proceeds under the terms of
the Plan and (2) an order requiring Carpenter to pay the settlement
proceeds to Wal-Mart.
The bankruptcy court held a short bench trial on Wal-Mart’s com-
plaint. The court found as follows: "In contracting for the right to
reimbursement, Carpenter evidenced an intent to charge particular
property, namely the proceeds of any subsequent recovery she would
receive, with a particular obligation, namely the obligation to repay
amounts paid out by Wal-Mart under the Plan. Carpenter further evi-
denced her assent to that provision by subsequently signing the
Acknowledgment." In re Carpenter, 245 B.R. 39, 47 (Bankr. E.D. Va.
2000). Based on this, the bankruptcy court found that Wal-Mart has
an equitable lien on the proceeds of Carpenter’s recovery. The court,
in other words, "recognized Wal-Mart’s security interest in [Carpen-
ter’s] settlement proceeds and . . . determined that nothing prevents
Wal-Mart from foreclosing on that interest." Id. at 53. Finally, the
bankruptcy court ordered Carpenter to pay over the settlement pro-
ceeds (less attorneys fees and costs) to Wal-Mart. Id. The district
court affirmed, see In re Carpenter, 252 B.R. 905 (E.D. Va. 2000),
and Carpenter appeals to us.
After oral argument we placed this appeal in abeyance pending the
Supreme Court’s decision in Great-West Life & Annuity Ins. Co. v.
Knudson, ___ U.S. ___, 122 S. Ct. 708 (2002), a case that deals with
the extent to which ERISA authorizes a plan administrator to enforce
a plan’s reimbursement provision. In Knudson the personal injury
proceeds had been paid directly into a trust, and the money therefore
4 IN RE: CARPENTER
was not in the hands of the ERISA plan beneficiaries. Id. at 715. The
plan brought a contract action against the beneficiaries, seeking legal
relief under the plan’s reimbursement provision. The Supreme Court
held that ERISA § 502(a)(3) did not authorize the action because the
plan was seeking legal relief. Id. at 719. The Court indicated that if
the plan administrator had been seeking an equitable lien on particular
property in the hands of the plan beneficiaries, such a suit would
sound in equity and would be authorized by § 502(a)(3). Id. at 714-
15. Knudson therefore does not affect the conclusion of the bank-
ruptcy and district courts that Wal-Mart has an enforceable equitable
lien on Carpenter’s settlement proceeds. We agree with the conclu-
sion of the bankruptcy and district courts, and we affirm on their rea-
soning. See In re Carpenter, 245 B.R. 39 (Bankr. E.D. Va. 2000); In
re Carpenter, 252 B.R. 905 (E.D. Va. 2000).
AFFIRMED
MICHAEL, Circuit Judge, dissenting:
I respectfully dissent because I do not believe that Wal-Mart
presented sufficient evidence to allow an equitable lien to be imposed
on Carpenter’s personal injury settlement proceeds. The Plan was not
placed in evidence, and the bankruptcy court acknowledged that "it
cannot be ascertained from the record whether the terms of the Plan
specifically call for the imposition of an equitable lien." In re Carpen-
ter, 245 B.R. 39, 47 (Bankr. E.D. Va. 2000). Nevertheless, the bank-
ruptcy court found (and the district court agreed) that the existence of
the reimbursement provision, and Carpenter’s signed acknowledg-
ment of that provision, evidence her intent to subject the settlement
proceeds to a lien. This evidence falls short of the strict proof of intent
necessary to create a security interest giving rise to an equitable lien.
See, e.g., In re O.P.M. Leasing Services, Inc., 23 B.R. 104, 119
(Bankr. S.D.N.Y. 1982).