Bauhaus USA, Inc. v. Copeland

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________________________

No. 01-60343
_____________________________________

BAUHAUS USA, INC.,

Plaintiff-Appellant,

v.

Lillie Regina Holmes COPELAND, ect; ET AL,

Defendants,

Lillie Regina Holmes COPELAND,
as natural guardian and next friend of Reshan Holmes; and
Reshan HOLMES, a minor,

Defendants-Appellees.

__________________________________________________

Appeal from the United States District Court
for the Northern District of Mississippi
__________________________________________________

May 21, 2002

Before DAVIS, WIENER, and BARKSDALE, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Plaintiff Bauhaus USA, Inc. (“Bauhaus”), appeals from the

district court’s dismissal of its declaratory judgment action to

enforce the terms of an employee benefit plan against defendants

Lillie Regina Holmes Copeland and her daughter Reshan Holmes.

Bauhaus sought a declaratory judgment in the district court that

it was entitled, under the terms of the plan, to funds resulting
from a settlement between defendants and third-party tortfeasors.

The defendants moved to dismiss the case, arguing that the

Employee Retirement Income Security Act of 1974 (“ERISA”)1 does

not preempt Mississippi’s anti-assignment rule. The district

court granted the defendants’ motion. Because we conclude that

ERISA does not authorize Bauhaus’ declaratory judgment action, we

do not reach the preemption question.

I.

On June 1, 1996, James Davis crashed the vehicle he was

driving into a car carrying seven year-old defendant Reshan

Holmes, who suffered injuries. Holmes is the daughter of

defendant Lillie Regina Holmes Copeland. Copeland was an

employee of Bauhaus, the sponsor and administrator of an employee

benefit plan (the “Plan”) that covered Copeland as a participant

and Holmes as a beneficiary. Although the Plan did not cover

injuries resulting from the acts of another, the Plan honored

Copeland’s request for benefits and elected to advance payments

for Holmes’ medical expenses in the amount of $46,229.45.

According to the Plan’s provisions, one condition of any

advance payment of benefits is that the Covered Person reimburse

the Plan out of any recovery against a third party. In relevant

part, the Plan provides:

Medical care benefits are not payable to or for a
person covered under this Plan when the injury or illness to

1
29 U.S.C. § 1001 et seq (2002).

-2-
 the Covered Person occurs through the act, omission or
alleged negligence of another person . . . .

However, the Plan may elect to advance payment for
Medical Care expenses incurred for an injury or illness in
which a third party may be liable if the Covered Person
agrees to the following:

The Covered Person will reimburse the Plan out of the
Covered Person’s recovery for all benefits paid by the Plan.
The Plan will be reimbursed prior to the Covered Person
receiving any monies recovered from a Third Party or their
insurer as a result of judgment, settlement or otherwise . .
. .

. . . .

The Covered Person further agrees that he will not
release any third party or their insured without prior
written approval from the Plan, and will take no action
which prejudices the Plan’s subrogation right.

The Plan defines “Covered Person” to include both employees and

their minor children. The Plan is self-funded--that is, it does

not purchase an insurance policy but is funded only by the

sponsoring employer–-here Bauhaus. The parties agree that the

Plan is an employee welfare benefit plan governed by ERISA.

Davis, the driver of the other vehicle, was an employee of

James M. Newman, who did business as Newman Trucking and was

insured by Canal Insurance Company. Copeland, on behalf of the

minor, sued these parties (collectively, the “Tortfeasors”)in

Mississippi state court, and they eventually negotiated a

settlement of the claims, including medical expenses, in return

for $750,000.

For legal standing to represent Holmes in litigation,

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Copeland sought and was granted appointment as Holmes’ legal

guardian. In the context of that guardianship case, Copeland

petitioned the Mississippi Chancery Court for authority to settle

Holmes’ claim against the Tortfeasors according to the proposed

settlement agreement. The settlement agreement required the

Tortfeasors to pay into the Registry of the Lee County Chancery

Court $78,161.47 of the settlement proceeds, an amount sufficient

to cover all liens against the proceeds. The agreement further

stated that all parties with claims against that money would then

be “served with process in the interpleader action.”

A separate interpleader action never developed. Rather, the

Chancery Court ordered that the Plan be made a party to the

guardianship case and required to show why the Tortfeasors should

not be given a release. The Plan then gave notice of removal of

the guardianship case to the Northern District of Mississippi.

Holmes moved to remand, and the Plan consented; accordingly, the

district court remanded the case to the state court in June 2000.

A week later, Bauhaus, as administrator of the Plan, sued

Copeland, Holmes, and the Tortfeasors in the Northern District of

Mississippi, seeking a declaratory judgment that “Bauhaus is

entitled to and shall receive full reimbursement of $46,229.45

from the proceeds of the settlement . . . upon approval by the

Chancery Court of the settlement.” The crux of Bauhaus’ case

was, and is, that ERISA preempts the Mississippi law that

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requires court approval of the assignment of a minor’s right to

insurance proceeds.

A week after Bauhaus filed suit in federal court, the

Chancery Court approved Copeland’s petition to settle Homes’

claims. The sum of $78,161.47 remains in the registry of that

court, and the guardianship case is still pending.2 The tort

litigation, however, is closed. The Chancery Court’s order (1)

released the Tortfeasors from all “claims, demands, liens [and]

subrogation interests” arising out of the tort litigation,

including Bauhaus’ claim; and (2) required dismissal of the tort

litigation.

The Tortfeasors, Copeland, and Holmes moved the district

court to dismiss the action. The Tortfeasors argued that the

doctrines of res judicata and release barred Bauhaus from suing

them again. Copeland and Holmes contended that dismissal was

proper on three grounds: (1) absence of a federal question,

because ERISA does not preempt Misssissippi’s anti-assignment

rule; (2) lack of federal jurisdiction over the funds in

question, because they are in the registry of the Mississippi

court; and (3) consent to state jurisdiction, because Bauhaus had

agreed to remand the guardianship case to state court.

In March 2001, the district court granted the motions to

dismiss because it found that ERISA did not preempt Mississippi’s

2
At oral argument, the parties agreed that the Chancery
Court is collegially awaiting our ruling.

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anti-assignment rule, and therefore, that it did not have

jurisdiction to hear the case. Bauhaus then filed its notice of

appeal. We granted the Tortfeasors’ unopposed motion to dismiss

them from this case prior to oral argument. Bauhaus now appeals

only the district court’s dismissal of its claims against

Copeland and Holmes.

II.

We review de novo a district court’s grant of a motion to

dismiss.3 We must therefore take the complainant’s allegations

as true, and may not dismiss a claim unless it appears certain

that the plaintiff cannot prove any set of facts in support of

its claim that would entitle it to relief.4

The parties urge this court to decide whether ERISA preempts

Mississippi’s anti-assignment rule that requires court approval

of any assignment of a minor’s interest in insurance proceeds.5

Before we may reach the merits of the parties’ preemption

arguments, however, we must make certain that jurisdiction is

3
Carney v. Resolution Trust Corp., 19 F.3d 950, 954 (5th
Cir. 1994) (citing Benton v. United States, 960 F.2d 19, 21 (5th
Cir. 1992)).
4
Id.
5
The Mississippi Supreme Court articulated this rule in
McCoy v. Preferred Risk Ins. Co., 471 So.2d 396, 397-99 (Miss.
1985) and Methodist Hospitals v. Marsh, 518 So.2d 1227, 1228 (Miss.
1988).

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proper in this case.6 “Every federal appellate court has a

special obligation to satisfy itself not only of its own

jurisdiction, but also that of the lower courts in a cause under

review, even though the parties are prepared to concede it.”7

ERISA grants the federal courts “exclusive jurisdiction of

civil actions under this title brought by . . . [a] fiduciary.”8

The parties agree that the Plan is governed by ERISA and that

Bauhaus, as administrator of the Plan, is a “fiduciary” under

6
There is no independent ground for federal question
jurisdiction under § 1331 based on plaintiff’s preemption argument
because plaintiff’s suit cannot “arise under” ERISA for purposes of
§ 1331 if ERISA does not authorize the suit. See Franchise Tax Bd.
v. Construction Laborers Vacation Trust, 463 U.S. 1 (1983);
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987). In
Franchise Tax Board and Taylor, the Supreme Court held that “ERISA
preemption, without more, does not convert a state claim into an
action arising under federal law.” Taylor, 481 U.S. at 64 (citing
Franchise Tax Board, 463 U.S. at 25-27). A claim that ERISA
preempts a state law cannot create federal question jurisdiction
where the federal issue is not part of the plaintiff’s well-pleaded
complaint but could only arise as a defense, unless Congress
created a cause of action in the allegedly preemptive statute. See
Franchise Tax Board, 463 U.S. at 25-27; Taylor, 481 U.S. 64-66; see
also Erwin Chemerinsky, Federal Jurisdiction § 5.2, at 265-67 (2d
ed. 1994). In Taylor, 481 U.S. 64-66, the Court held that federal
jurisdiction existed where ERISA preemption arose as a defense
because § 502(a)(1) expressly created a cause of action available
to the plaintiff. The Court reasoned that the federal courts had
jurisdiction in that case because “Congress has clearly manifested
an intent to make causes of action within the scope of the civil
enforcement provisions of § 502(a) removable to federal court.”
Id. at 66. Therefore, because we conclude, as discussed later in
this opinion, that § 502(a)(3) does not authorize Bauhaus’ suit,
the preemption claim cannot form the basis of federal question
jurisdiction.
7
Arizonans for Official English v. Arizona, 520 U.S. 43,
73 (1997) (internal citation omitted).
8
29 U.S.C. § 1132(e)(1) (1994).

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ERISA. The only question that this court must resolve to

determine whether jurisdiction is proper, therefore, is whether

ERISA authorizes Bauhaus’ suit.

ERISA § 502(a)(3) authorizes a civil action “by a . . .

fiduciary (A) to enjoin any act or practice which violates . . .

the terms of the plan, or (B) to obtain other appropriate

equitable relief (i) to redress such violations or (ii) to

enforce any provisions of . . . the terms of the plan.”9 ERISA

authorizes Bauhaus’ suit, and this court has jurisdiction then,

only if Bauhaus’ declaratory judgment action is an action “to

enjoin any act or practice which violates . . . the terms of the

plan” or “to obtain other appropriate equitable relief.”10

In Mertens v. Hewitt Associates,11 the Supreme Court made

clear that the term “equitable relief” in § 502(a)(3) referred

only to “those categories of relief that were typically available

in equity.”12 In its later, and quite recent, case of Great-West

Life & Annuity Insurance Co. v. Knudson,13 the Court considered a

case with facts nearly identical to the instant case.14 In

9
29 U.S.C. § 1132(a)(3).
10
§ 502(a)(3).
11
508 U.S. 248 (1993).
12
Id. at 256 (emphasis in original).
13
534 U.S. 204, 122 S.Ct. 708 (2002).
14
Id.

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Great-West, Janette Knudson, a beneficiary of an ERISA-governed

employee welfare benefit plan, was injured in a car accident.15

The employee benefit plan included a reimbursement provision

similar to the one at issue in the present case; the provision

stated that the plan had “‘the right to recover from the

[beneficiary] any payment for benefits’ paid by the Plan that the

beneficiary is entitled to recover from a third party.”16 In

particular, the Plan had “‘a first lien upon any recovery,

whether by settlement, judgment or otherwise,’ that the

beneficiary receives from the third party, not to exceed ‘the

amount of benefits paid [by the Plan] . . . [or] the amount

received by the [beneficiary] for such medical treatment . . .

.’”17 According to this provision, the plan covered $ 411,157.11

of Janette’s medical expenses, of which all except $ 75,000 was

paid by Great-West.18

Janette and her then-husband filed a state tort suit against

the Hyundai Motor Company (“Hyundai”), the manufacturer of the

car in which they were riding when they were injured, and other

tortfeasors.19 The parties negotiated a $650,000 settlement

15
Id. at 711.
16
Id. (citing the plan at App. 58).
17
Id. (citing the plan at App. 58-59).
18
Id.
19
Id.

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which allocated $256,745.30 to a Special Needs Trust to provide

for Janette’s medical care; $373,426 to attorney’s fees and

costs; and $13,828.70 to satisfy Great-West’s claim under the

plan’s reimbursement provision.20 Before the state court

approved the settlement, however, Great-West filed a notice of

removal in the federal district court, asserting ERISA claims and

that it was a defendant in the state law action.21 The district

court denied Great-West’s notice and remanded the case to state

court, where that court approved the settlement.22 Accordingly,

the tortfeasors paid the settlement money to the Special Needs

Trust and gave the remainder to the Knudsons’ attorney, who

tendered a check in the amount of $13,828.70 to Great-West.23

Instead of cashing its check, however, Great-West filed suit in

the federal district court seeking declaratory and injunctive

relief under ERISA § 502(a)(3) to enforce the reimbursement

provision of the plan and recover from the settlement proceeds

the $411,157.11 it had advanced to Janette.24

The Supreme Court held that ERISA did not authorize Great-

West’s suit, and therefore, affirmed the dismissal of the

20
Id.
21
Id.
22
Id.
23
Id.
24
Id. at 712.

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action.25 The Court found that Great West was not seeking “to

enjoin any act or practice which violate[d] . . . the terms of

the plan” or “to obtain other appropriate equitable relief” under

§ 502(a)(3).26 Declining to construe Great-West’s complaint as

seeking a remedy that was “typically available in equity” as

Mertens requires, the Court reasoned that Great-West essentially

sought “to impose personal liability on [the Knudsons] for a

contractual obligation to pay money–relief that was not typically

available in equity.”27

The Court refused to accept Great-West’s argument that the

relief it sought met the Mertens standard.28 First, the Court

rejected Great-West’s contention that Great-West sought an

injunction or specific performance to compel the Knudsons to

repay the contested funds. The Court reasoned that “an

injunction to compel the payment of money past due under a

contract, or specific performance of a past due monetary

obligation, was not typically available in equity.”29

The Court also held that the relief that Great-West sought

25
Id. at 718-19.
26
Id.
27
Id. at 712-13.
28
Id. at 712-19.
29
Id. at 713.

-11-
did not constitute restitution in equity.30 Distinguishing

restitution in equity from restitution at law, the Court defined

restitution in equity as a “form of constructive trust or

equitable lien, where money or property identified as belonging

in good conscience to the plaintiff could clearly be traced to

particular funds or property in the defendant’s possession.”31

The Court reasoned that Great-West did not seek restitution in

equity because the proceeds of the settlement to which Great-West

maintained it was entitled were not in the Knudsons’ possession,

but were in the Special Needs Trust.32 The Court explained that

“[t]he basis for petitioners’ claim is not that respondents hold

particular funds that, in good conscience, belong to petitioners,

but that petitioners are contractually entitled to some funds for

benefits that they conferred.”33

Finally, the Court rejected the contention that the common

law of trusts encompassed the relief sought by Great-West.34 The

30
Id. at 714.
31
Id. (emphasis added). In contrast, the Court defined
“restitution at law” as a remedy available to a plaintiff who
“could not assert title or right to possession of particular
property, but in which nevertheless he might be able to show just
grounds for recovering money to pay for some benefit the defendant
had received from him.” Id. (internal citation omitted) (emphasis
in original).
32
Id. at 715.
33
Id.
34
Id. at 717.

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Court found that the trust remedies were “simply inapposite” to

the relief sought by Great-West.35

We conclude that the facts of the instant case are

indistinguishable in principle from Great-West. Both cases

involve ERISA-governed employee benefit plans that include

reimbursement provisions allowing the plans to recover from any

settlement proceeds any amount the plans advanced for medical

expenses resulting from third party wrong-doing. Third-party

tortfeasors injured the plan beneficiaries in both cases, and the

plans advanced funds to the beneficiaries for medical expenses.

In both cases, the plan beneficiaries made tort settlements with

third-party tortfeasors following suit in state court. In both,

the plan administrator or assignee filed suit in the federal

district court seeking declaratory relief that it was entitled to

repayment of the benefits it had conferred. In the instant case,

the settlement proceeds are in the registry of the Mississippi

Chancery Court. In Great-West, the proceeds of the settlement

were placed in a private Special Needs Trust outside the

possession and control of the plan beneficiary. Nevertheless,

the defendants in this case, like the Knudsons in Great-West, are

not in possession of the disputed funds, a fact that Justice

Scalia found extremely important in Great-West.

The Court in Great-West characterized the suit in that case

35
Id.

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as “[a] claim for money due and owing under a contract” and that

such a suit is “quintessentially an action at law.”36 Because

the facts in today’s case are, in principle, indistinguishable

from those in Great-West, we are bound by that decision and hold

that § 502(a)(3) does not authorize Bauhaus’ suit.

III.

For reasons stated above, we affirm the district court’s

dismissal of this suit for lack of federal jurisdiction because

ERISA does not authorize this suit. Consequently, we do not

reach the parties’ preemption arguments.

AFFIRMED.

36
Id. at 713 (internal citation omitted).

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WIENER, Circuit Judge, dissenting:

Federal preemption is the keystone that gives ERISA’s arch

the ability to span the nation with a single, uniform, pension

and welfare-benefit law. When Congress manifested its intent to

create such an exclusive federal presence in that field of law,

it expressly decreed perhaps the most comprehensive and pervasive

preemption of the present era. In the absence of federal

jurisdiction, however, federal statutory preemption fails.

Therefore, unless the federal courts cautiously, deliberately,

and charily examine every asserted challenge to, or claim of

limitation on, subject-matter jurisdiction under ERISA,

Congress’s command cannot be effectuated to the extent clearly

intended.

Unfortunately, in adopting an overly expansive reading of

Great-West Life37 to conclude that the district court lacked

jurisdiction over Bauhaus’s suit, the panel majority errs.

Although I have difficulty in discerning the majority’s precise

reasoning, I am left no choice but to conclude that my learned

colleagues have misunderstood the narrowness of the rule that the

Supreme Court announced in that case. Because I am convinced

that jurisdiction of this case lies in the federal courts even

under Great-West Life, and believe that for us to affirm the

district court’s dismissal is to frustrate the unmistakable

37
Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S. Ct. 708 (2002).
congressional policy embodied in ERISA, I respectfully dissent.

I can only hope that the majority’s result will not chill the

discretionary delivery in this circuit of health care to plan

beneficiaries who are victims of tortfeasors. Today’s tort

victim is a minor; future victims will likely be adults made

legally incompetent by the very tort injuries for which they need

prompt medical care. Whoever might be the victims, however,

today’s ruling could very well harm many of those for whose

benefit Congress enacted ERISA.

I. SUBJECT-MATTER JURISDICTION

Great-West Life, asserts the majority, requires that we affirm

the district court’s dismissal. That assertion is not at all

supported by the realization (alluded to and perhaps relied on by

the majority) that Bauhaus’s complaint seeks an extremely narrow

remedy. And that assertion is utterly refuted by a deeper analysis

and thorough understanding of the Supreme Court’s opinion in Great-

West Life.

A. Declaratory Judgment

The fact that Bauhaus’s complaint specifically sought only

declaratory relief38 does not mean, as the majority seems to imply,

38
Bauhaus captioned and described its federal complaint as a “complaint for declaratory
judgment.” The demand and prayer for relief, which Bauhaus never amended, read as follows:
20. Plaintiff demands that this Court enter declaratory judgment in favor of
Plaintiff determining and declaring that Bauaus [sic] is entitled to and shall receive full
reimbursement of $46,229.45 from the proceeds of the settlement....
Wherefore, premises considered, Plaintiff prays that this Court declare that
Bauhaus USA, Inc. is entitled to $46,229.45 from the aforementioned settlement

-16-
that the district court automatically lacks jurisdiction of this

case.39 It is true that the district court could have had subject-

matter jurisdiction only if Bauhaus raised a federal question.40

But when we construe Bauhaus’s prayer for relief with the

liberality that the federal rules require of us, the federal

question becomes undeniably apparent.

1. ERISA (29 U.S.C. § 1132)

ERISA gives the federal district courts “exclusive

jurisdiction of civil actions under this subchapter brought by . .

. [a] fiduciary.”41 No one contests that Bauhaus, as the custodian

and administrator of the Plan, is a “fiduciary” within the meaning

of this section. The statute carefully delineates how a fiduciary

can enforce its rights judicially under a plan:

(a) Persons empowered to bring a civil action. A civil

proceeds and that this Court will advance this matter on its docket, order a speedy
hearing as provided in Rule 57 of the Federal Rules of Civil Procedure and for [sic]
other general relief to which Plaintiff may be entitled [emphasis added].
39
The majority accurately states that Great-West sought declaratory judgment; but it is
inaccurate to imply, as the majority appears to, that the Court in Great-West Life held that
declaratory judgment was not available to ERISA fiduciaries seeking to enforce their plan rights.
Great-West sought “injunctive and declaratory relief.” Great-West Life, 122 S. Ct. at 712 (emphasis
added). The Court therefore did not determine whether declaratory relief alone was permissible, but
went straight to the underlying claim. As I shall show, we should do the same here, regardless of the
contents of Bauhaus’s prayer for relief. See Part I.A.2–3, infra.
40
Bauhaus is a Mississippi corporation; Copeland and Holmes are domiciled in Lee County,
Mississippi; and the amount in controversy is less than $75,000. However, ERISA gives the district
courts jurisdiction over suits under 29 U.S.C. § 1132(a) “without respect to the amount in
controversy or the citizenship of the parties.” 29 U.S.C. § 1132(f).
41
29 U.S.C. § 1132(e)(1).

-17-
 action may be brought—
. . .
(3) by a . . . fiduciary (A) to
enjoin any act or practice which
violates any provision of this
subchapter or the terms of the plan,
or (B) to obtain other appropriate
equitable relief (i) to redress such
violations or (ii) to enforce any
provisions of this subchapter or the
terms of the plan[.]42

Hence the first jurisdictional issue: Is a complaint that demands

a purely declaratory judgment a “civil action . . . to obtain other

appropriate equitable relief” under § 1132(a)(3)(B)?

The leading case construing “appropriate equitable relief” is

Mertens v. Hewitt Associates.43 In it, the Supreme Court

interpreted § 1132(a)(3)(B) to enable plaintiffs to sue for only

“those categories of relief that were typically available in equity

(such as injunction, mandamus, and restitution but not compensatory

damages).”44 The panel majority cites no case, and I have found

none, that addresses the question whether declaratory judgment,

taken alone, is “appropriate equitable relief” under § 1132(a)(3).45

42
29 U.S.C. § 1132(a)(3) (emphases added). Thus a fiduciary is in a different position from
a plan beneficiary or participant, whom ERISA expressly authorizes to seek relief that clarifies a right
under a plan. See 29 U.S.C. § 1132(a)(1)(B).
43
508 U.S. 248 (1993).
44
Id. at 256 (emphasis original).
45
In FMC Corp. v. Holliday, 498 U.S. 52 (1990), the Supreme Court reached the merits of
a case in which the plaintiff had sought a declaration that it was entitled to subrogation for its
payments of the covered person’s medical expenses. But FMC was also a diversity case, and thus
did not settle the instant question. Id. at 56 (“Petitioner, proceeding in diversity, then sought a
declaratory judgment in Federal District Court.”). In Heimann v. Natl. Elevator Industry Pension

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 To answer this question in the affirmative may seem

incongruous at first. Like most courts, we generally view the

Declaratory Judgment Act46 as a procedural statute, not an

independent basis of federal jurisdiction.47 More importantly, the

Declaratory Judgment Act became law in the 1930s, just as the

Federal Rules of Civil Procedure were merging law and equity.

Thus, at least in the federal courts, declaratory judgment was not

a remedy “typically available” in equity, as Mertens requires. If

the district court’s selection of remedies were determined solely

by Bauhaus’s narrow prayer for relief, I would have to agree with

the majority that the district court lacked jurisdiction over

Bauhaus’s suit.

2. Rule 54(c)

Nevertheless, the remedies that a federal court may bring to

Fund, 187 F.3d 493 (5th Cir. 1999), we liberally construed a complaint brought by a plan participant
under § 1132(a)(1), not by a plan fiduciary under § 1132(a)(3), the provision that applies to this case.
46
28 U.S.C. § 2201 (permitting a federal court to render a declaratory judgment “[i]n a case
of actual controversy within its jurisdiction”).
47
See Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671–72 (1950); In re B-727
Aircraft Serial No. 21010, 272 F.3d 264, 270 (5th Cir. 2001) (“[T]he Declaratory Judgment Act does
not provide a federal court with an independent basis for exercising subject-matter jurisdiction.”)
(citation omitted); 10B CHARLES ALAN WRIGHT, ARTHUR R. MILLER, & MARY KAY KANE, FEDERAL
PRACTICE AND PROCEDURE § 2766 (West 3d ed. 1998) (citing cases):
The operation of the Declaratory Judgment Act is procedural only. By passage of the
Act, Congress enlarged the range of remedies available in the federal courts but it did
not extend their subject-matter jurisdiction. Thus, prior to deciding whether to
exercise its discretion and allow a declaratory-judgment action to be brought, the
court must determine if jurisdict ion and venue are proper. There must be an
independent basis of jurisdiction, under st atutes equally applicable to actions for
coercive relief, before a federal court may entertain a declaratory-judgment action.

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bear are not constrained by a litigant’s prayer for relief; rather,

the Federal Rules of Civil Procedure command the federal courts to

grant relief that complainants do not demand when such relief is

appropriate.48 As one leading treatise notes,

adherence to the particular legal theories of counsel
that may have been suggested by the pleadings is
subordinated to the court’s duty to grant the relief to
which the prevailing party is entitled, whether it has
been demanded or not.49

Thus “coercive relief or damages may be given in a suit seeking a

declaratory judgment.”50 The Rules’ policy of mandating liberal

construction of pleadings should place Bauhaus’s complaint in the

Mertens box, because in general, “it is not the...type of relief

requested in the demand that determines whether the court has

jurisdiction.”51 As I demonstrate below, Bauhaus is entitled to

relief that would pass the Mertens test.

In short, the panel majority implicitly assumes that in our

48
“[E]very final judgment shall grant the relief to which the party in whose favor it is rendered
is entitled, even if the party has not demanded such relief in the party’s pleadings.”
FED. R. CIV. P. 54(c) (emphasis added). See also FED. R. CIV. P. 8(e) (“No technical forms of
pleading or motions are required.”); FED. R. CIV. P. 8(f) (“All pleadings shall be so construed as to
do substantial justice.”) (emphasis added); FED. R. CIV. P. 8(a).
49
10 CHARLES ALAN WRIGHT, ARTHUR R. MILLER, AND MARY KAY KANE, FEDERAL
PRACTICE AND PROCEDURE § 2664 & n.2 (West 3d ed. 1998) (collecting eight Fifth Circuit cases).
See also United States v. Universal Management Servs., Inc., 191 F.3d 750 (6th Cir. 1999); Minyard
Enters., Inc. v. Southeastern Chem. & Solvent Co., 184 F.3d 373 (4th Cir. 1999); Valona v. United
States Parole Comm’n, 165 F.3d 508 (7th Cir. 1998).
50
Id. & n.24 (collecting cases).
51
Id. & n.9 (collecting cases).

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jurisdictional analysis, we must take Bauhaus’s prayer for relief

at face value, even though the Rules mandate that in awarding

relief, federal courts look beyond the prayer to the underlying

claim. The facial assumption that the prayer controls the relief,

which the majority makes no attempt to defend, is heavy freight

with which to lade the language of § 1132(a)(3). It is also

clearly at variance with the Supreme Court’s insistence in Great-

West Life that we should focus on the essential nature of the

relief sought, not on the label that creative —— or, in this case,

tentative —— lawyering might give the requested remedy.52 Rather

than read this policy-filled statute as irreconcilable with the

Rules, we should try to make sense of both and find them compatible

if we can in a principled manner —— and I believe that we can.

3. The Remedial Indeterminacy of Declaratory Judgment

Even if we were bound by Bauhaus’s prayer for relief (which

may or may not be the panel majority’s view), the relationship

between declaratory judgment and equity can be —— and is here ——

far tighter than the majority suggests. For openers, declaratory

judgment’s historical roots do lie in equity.53 Such a judgment,

52
Great-West Life, 122 S. Ct. at 713 n.1.
53
EDWIN BORCHARD, DECLARATORY JUDGMENTS 238–39 (Banks-Baldwin 2d ed. 1941)
(“[T]he power granted by the declaratory judgment statutes is more strictly a direction to use an
existing power than an authorization of new power. . . . [I]t is both historically and traditionally a
power exercised primarily by courts of equity, and even where exercised by law courts it is largely
equitable in nature.”); id. at 348 (stating that declaratory judgment was “born under equitable
auspices and ha[d] preponderantly equitable affiliations”).

-21-
however, is now a preliminary procedure: as the Declaratory

Judgment Act provides, a successful declaratory plaintiff may seek

“[f]urther necessary or proper relief” to enforce a declaratory

judgment.54 This suggests that the majority’s result may well be

premature. Furthermore, the modern view is that, although

declaratory judgment in and of itself is neither legal nor

equitable, it takes on the character of the underlying right or

relation that it declares.55 A judgment decreeing that Bauhaus is

entitled to a particular portion of identifiable funds sojourning

in the registry of another court could not conceivably be equated

to a declaration that Bauhaus can impose general liability on and

collect contractual damages from Copeland and Holmes, which Great-

West Life proscribes. Rather —— as I shall explain —— such a

judgment would declare only that Bauhaus is entitled to remedies

traditionally available at equity. I am convinced, then, that to

whatever extent the majority relies on the narrowness of Bauhaus’s

prayer for relief to determine that Bauhaus does not seek an

equitable remedy and therefore that federal jurisdiction is

lacking, the majority errs.

B. Interpreting Great-West Life

54
28 U.S.C. § 2202.
55
BORCHARD, supra, at 239 (“[I]n principle declaratory relief is sui generis and is as much
legal as equitable.”); DAN B. DOBBS, LAW OF REMEDIES § 2.6(3) (West 1993) (“More commonly the
declaratory action is regarded as equitable when the underlying dispute is equitable, otherwise it is
legal.”).

-22-
 The majority seems to rely chiefly, however, on Great-West

Life rather than Mertens, stating that “the facts in today’s case

are, in principle, indistinguishable from those in Great-West,” and

apparently drawing from that case the rule that if the disputed

funds are not in the possession of an ERISA beneficiary, the ERISA

plan cannot sue in federal court. This simply is not the rule that

Great-West Life laid down; and, importantly, the instant facts are

distinguishable from Great-West Life’s facts in the very ways that

the Supreme Court found to be dispositive there.

1. The Great-West Life Opinion

In Great-West Life, the Court determined that given the

posture of that case, restitution, specific performance, and

constructive trust were not equitable remedies that permitted

federal jurisdiction of a fiduciary’s suit seeking to enforce an

ERISA plan’s reimbursement provision.56 Great-West, the ERISA

fiduciary that had funded medical care, sued for declaratory and

injunctive relief, but Justice Scalia —— as we should do here ——

looked beyond the labels of the requested remedies to their

essentials, and held that Great-West actually sought “to impose

personal liability on respondents for a contractual obligation to

pay money —— relief that was not typically available in equity.”57

Creative lawyering can couch this relief as injunctive to prevent

56
Great-West Life, 122 S. Ct. at 713–19.
57
Id. at 712–13.

-23-
violation of a plan, but that does not mask the reality, said the

Court.58 The Court described the relief that Great-West actually

sought as “legal restitution” —— “the imposition of personal

liability for the benefits that [it] conferred” on the plan

participant —— not equitable restitution, in which the plaintiff

seeks “to restore to the plaintiff particular funds or property in

the defendant’s possession.”59 Similarly, the other remedies Great-

West sought —— injunctive and trust remedies —— were, in the

posture of Great-West Life, actually legal ones, no matter in what

guise they walked. Therefore, the Court held, the district court

lacked jurisdiction.

I part company with the panel majority in my understanding of

the Great-West Life Court’s basis for these distinctions between

legal and equitable remedies. The majority seizes on the phrase

“in the defendant’s possession” as a pronouncement that if the

disputed funds are not in the defendant’s possession, the remedy

sought must be legal, not equitable. This seriously misreads

Great-West Life.

The Court’s analysis did indeed turn on the fact that the

personal-injury proceeds had already been paid out: some to a

special needs trust for Knudson, the tort victim, under a provision

of California’s probate code; some to Knudson’s attorney; some to

58
Id. at 713 n.1.
59
Id. at 715 (emphasis added).

-24-
California Medicaid; and only $14,000 to the ERISA plan that had

spent over $410,000 on the victim’s care.60 But the significance

of this fact was not simply that the funds were not in the

beneficiary’s possession; and, conversely, to read the Court’s

opinion as requiring that the disputed funds be in the defendant’s

possession is to mistake the relevant analysis.

A closer examination reveals the Court’s doctrinal point:

After the distribution of the funds, the tort victim herself was

left without specific, identifiable funds to which the ERISA plan

could assert title.61 This fact made the remedy that Great-West

sought to impose essentially personal and general contractual

damages —— classically, a legal remedy, which the statute does not

permit.62 In other words, the Court’s test was not whether the

money was in the defendant’s possession vel non, but whether the

remedy that the plan sought to impose was legal or equitable; and

this distinction turned on where the money to pay the judgment

would come from: if from the defendant’s personal, fungible, and

untraceable resources, the remedy sought was legal and proscribed.

That was the case in Great-West Life; that is not the case with

60
Id. at 711 (describing the facts), 714–15 (distinguishing between restitution of personal
property in a defendant’s possession and imposing personal liability on a defendant). Compare id.
at 721 (Ginsburg, J., dissenting) (noting that “whether relief is ‘equitable’ would turn entirely on the
designation of the defendant”) with id. at 718 (majority) (expressing no opinion as to whether federal
jurisdiction would exist over a suit brought against the trust, rather than its beneficiary).
61
Great-West Life, 122 S. Ct. at 714–15.
62
Id. at 712–15.

-25-
Bauhaus.

2. Disputed Funds Are in State Court Registry

In deciding today’s case, the majority glides past the most

salient factual distinction between this case and Great-West Life

for purposes of the analysis that the Court performed in that case.

There was no parallel guardianship proceeding and thus no money in

a state-court registry, as there are here. The posture of the

instant case thus differs markedly from the posture that ultimately

determined the outcome in Great-West Life.

Funds in the registry of a court are deposited in the court’s

bank, which is otherwise uninvolved in the case. Such funds are

truly in legal limbo vis-à-vis parties in interest. Asserting a

claim against funds in the registry of the Chancery Court, then,

does not require the imposition of general, in personam

responsibility on Copeland, Holmes, or anyone else —— the

quintessentially legal remedy that the Great-West Life Court held

was unavailable under § 1132(a)(3)(B). Instead, Bauhaus is

contesting title to a specific and identifiable quantum of funds in

custodia legis that it claims as its own under the Plan. The court

(or its bank) possesses for no one in particular until the rightful

owner is determined. Here, the disputed funds have not yet been

distributed in the sense seized upon by the Court in Great-West

Life, and the parties agree that the funds are more than sufficient

to satisfy Bauhaus’s claim. There is thus no conceivable danger,

in this case’s current posture, of the district court’s imposing

-26-
general, personal, contractual liability on anyone. The relief

sought by Bauhaus is not in personam against Copeland or Holmes,

but is in rem against funds possessed by a neutral stakeholder.

This proposition —— that the location of the instant funds in

the Chancery Court’s possession, and not in the defendant’s

possession, should actually defeat a rote application of Great-West

Life —— is borne out by this case’s resemblance to situations that

Justice Scalia specifically and explicitly said Great-West Life did

not reach. He cautioned that the Court did not “decide whether

petitioners could have obtained equitable relief against

respondents’ attorney and the trustee of the Special Needs Trust.”63

Leaving these questions undecided necessarily meant that the

Court’s test hinged not on who possessed the disputed funds, but

rather on what kind of remedy would enable the plaintiff to recover

those funds. The attorney and the trustee, both technically third

parties in Great-West Life, are closely analogous to the Chancery

Court here; and that state court is far more neutral among and

attenuated from the several claimants here than were the attorney

and the trustee in Great-West Life, who were closely aligned with

the defendant. It follows obviously and indisputably that by

seeking funds held in the registry of a court —— particularly a

63
122 S.Ct. at 718.

-27-
state court of equity64 —— Bauhaus does not seek to impose (1) a

legal remedy (2) of general liability on Copeland or Holmes. That

was the Court’s basic concern in Great-West Life, and we could have

easily allayed it here.

3. Subrogation, Not Reimbursement

Another important distinction between Great-West Life and the

instant case is the nature of the obligation that Bauhaus here

seeks to enforce. The right that Bauhaus asserts is to

subrogation, not reimbursement or restitution.

The plan provision at issue is less than pellucid, but when

read fairly it requires that the Plan recover funds before the

beneficiary does. The Plan may elect to pay the expenses of a

beneficiary injured by a third party if the beneficiary (or

“Covered Person”) agrees that

The Covered Person will reimburse the Plan out of
the Covered Person’s recovery for all benefits paid by
the Plan. The Plan will be reimbursed prior to the
Covered Person receiving any monies recovered from a
Third Party or their [sic] insurer as a result of
judgment, settlement, or otherwise . . . .
. . .
The Covered Person further agrees that he will not
release any third party or their insured without prior
written approval from the Plan, and will take no action
which [sic] prejudices the Plan’s subrogation right
[emphasis added].

64
See MISS. CONST. art 6, § 159:
The chancery court shall have full jurisdiction in the following matters and cases, viz.:
(a) All matters in equity;
(b) Divorce and alimony;
(c) Matters testamentary and of administration; [and]
(d) Minor’s business[.]

-28-
Needless to say, Copeland and Holmes have violated every clause of

these paragraphs: They have failed to turn over funds to Bauhaus;

they have themselves recovered before turning over anything; they

have released the tortfeasors; and they have taken other actions to

the prejudice of Bauhaus’s subrogation right. But the prohibitions

on release and prejudicial action, and the requirement that Bauhaus

recover its advances before the Covered Person is paid, remove any

doubt that this provision is a subrogation provision, not a

reimbursement provision, regardless of any loose or contradictory

language in the document. The duty that this provision imposes on

Copeland and Holmes becomes even clearer on close inspection of the

form that Copeland signed after the accident so that Holmes might

receive medical treatment. In signing that form, Copeland

promised, on Holmes’s behalf,65 that:

I hereby agree that such plan is subrogated and succeeds
to the right, which right is hereby assigned to such
plan, of such covered individual to recover therefore
[sic] against any person who . . . is liable . . . . I
further agree to take all such further action and to
execute and deliver . . . such further instruments as may
be required to secure the foregoing rights for the plan.

This is in obvious contrast to the contractual provision

implicated in Great-West Life. To quote the Court’s description of

that provision:

The Plan includes a reimbursement provision that is the

65
Neither party contends on appeal that Copeland’s signature was invalid because she
technically was not yet Holmes’s legal guardian. Copeland’s signature at least implied the contrary,
and Bauhaus certainly relied detrimentally on her signature.

-29-
 basis for the present lawsuit. This provides that the
Plan shall have “the right to recover from the
[beneficiary] any payment for benefits” paid by the Plan
that the beneficiary is entitled to recover from a third
party. Specifically, the Plan has “a first lien upon any
recovery . . .” that the beneficiary receives from the
third party . . . . If the beneficiary recovers from a
third party and fails to reimburse the Plan, “then he
will be personally liable to [the Plan] . . . up to the
amount of the first lien.”66

This passage explains the Court’s reluctance to enforce the Great-

West plan provision, which itself provided for personal liability

of the beneficiary; Bauhaus’s does not. And, again, Great-West

Life involved a reimbursement provision, not a subrogation

provision.

The subrogation remedy contained in the instant provisions is

doctrinally distinguishable from the varieties of restitution

discussed in Great-West Life. Subrogation stands on its own as a

typically equitable remedy.67 Unlike garden-variety restitution or

reimbursement, subrogation does not require that the contested

funds be in the possession of the principal obligor; indeed, they

usually are not. This, I submit, is a controlling distinction for

the purposes of Great-West Life.

66
Id. at 711 (emphasis added).
67
See 1 GEORGE E. PALMER, THE LAW OF RESTITUTION (Little Brown 1978) § 1.5(b)
(“Subrogation is an equitable remedy that was used as early as the seventeenth century.”); DAN B.
DOBBS, LAW OF REMEDIES § 4.3(1) (West 1993) (listing subrogation as a “major restitutionary
remedy in equity”), § 4.3(4) (“Subrogation is another equitable remedy in which tracing is used to
prevent unjust enrichment and to give effective relief to the plaintiff.”).
There is no doubt that we have here a classic case of subrogation. See DOBBS, supra note 3,
§ 4.3(4) (“The most familiar case of subrogation is that of the collision insurer.”).

-30-
 4. Other Equitable Remedies

The term “subrogation” does not occur anywhere in the majority

opinion in Great-West Life, which discusses the remedies that the

parties in that case contested: injunction, restitution, and

common-law trust remedies.68 The panel majority may therefore be

holding that subrogation is per se not an equitable remedy under

the statute. To whatever extent the majority views Great-West Life

as describing the only remedies available under § 1132(a)(3), the

majority fails to recognize that at least two of these three

permissible remedies remain available to Bauhaus.69 To reiterate,

the Great-West Life Court held that restitution and trust remedies

were unavailable to the ERISA plan in that case because the plan

essentially sought to impose personal and general contractual

liability on the beneficiary, which was a legal remedy, and not an

equitable one. That objection does not lie against Bauhaus.

The Supreme Court’s discussion of trust remedies is

particularly illuminating on this point. The Court noted that if

68
Great-West Life, 122 S. Ct. at 713–18.
69
Injunctions may be problematic here. Neither of the parties has brought to our attention the
implications for this case of the Anti-Injunction Act, 28 U.S.C. § 2283 (“A court of the United States
may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act
of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.”).
This Circuit has previously upheld a district court’s dismissal, for failure to state a claim, of a
fiduciary’s ERISA-preemption action that sought both an injunction against state-court proceedings
and a declaratory judgment. Total Plan Services, Inc. v. Texas Retailers Ass’n, 925 F.2d 142, 144
(5th Cir. 1991). Furthermore, in a non-ERISA preemption case, this Circuit also stated that
declaratory judgment would not be available in cases where the Anti-Injunction Act forbids an
injunction. Texas Employers’ Insurance Ass’n v. Jackson, 862 F.2d 491, 506 (5th Cir. 1988).

-31-
a trustee advances funds to a trust beneficiary, that beneficiary’s

interest in the trust may be subject to a charge for repayment of

the money lent; but the Court distinguished the situation under

scrutiny in Great-West Life by noting that “[t]hese setoff remedies

do not give the trustee a separate equitable cause of action for

payment from other moneys.”70 In contrast, the funds in the

Chancery Court truly are analogous to the corpus of a trust,71 so

Bauhaus has —— or should have —— a setoff remedy in federal court.72

Those funds are not “other moneys,” but are instead precisely the

identifiable and traceable funds to which Bauhaus is entitled under

the Plan. No judgment for Bauhaus would create a general money

obligation. Rather, such a judgment would equitably dispose of a

particular quantum of funds in judicial custody, and would

therefore be equitable under the Great-West Life test.

5. No Remedy in State Court

The fourth and final distinction between today’s case and

Great-West Life is that here it is uncontroverted that Bauhaus

70
Great-West Life, 122 S. Ct. at 718.
71
The more direct analogy would of course be to regard the assets of the Plan as held in trust
for beneficiaries, but Congress likely did not intend that Bauhaus recover against a beneficiary’s
interest in the Plan —— in other words, a beneficiary’s right to further health benefits.
72
Neither party, nor the majority, makes an argument from Princess Lida of Thurn and Taxis
v. Thompson, 305 U.S. 456 (1939), and its sequelae regarding concurrent jurisdiction quasi in rem.
That doctrine might have been a better basis on which to decide this case than the result reached by
the majority, which apparently will protect not only funds held by state courts, but also funds held by
tort victims’ lawyers and trustees, from federal ERISA jurisdiction, since such funds are also not in
the victims’ possession.

-32-
lacks an adequate remedy in state court. This difference, while

perhaps insufficient on its own to justify viewing the relief

Bauhaus seeks as equitable, certainly adds strong support to that

conclusion.

In Great-West Life, the justices raised this issue in debating

what the Court’s holding would mean for cases in which a state-law

action is preempted by ERISA. The majority stated that its opinion

did not resolve the question:

We note . . . that there may have been other means for
petitioners to obtain the essentially legal relief that
they seek . . . . We express no opinion as to whether
petitioners could have intervened in the state-court tort
action brought by respondents or whether a direct action
by petitioners against respondents asserting state-law
claims such as breach of contract would have been pre-
empted by ERISA.73

This passage reflects the Great-West Life Court’s determination

that the ERISA plan in that case may have had other remedies

available to it. At the very least, the justices did not view that

possibility as foreclosed.

In today’s case, though, that possibility is foreclosed.

Bauhaus has no adequate legal remedy in either federal or state

court. In federal court, by ERISA’s express terms, legal remedies

are totally unavailable. In state court, Bauhaus is already party

to the action in Chancery Court; but that action obviously will

avail it naught, because, as I describe below, Mississippi’s anti-

assignment rule holds sway there. This very problem was foreseen

73
Great-West Life, 122 S. Ct. at 718.

-33-
by Justice Ginsburg, dissenting in Great-West Life:

After today, ERISA plans and fiduciaries unable to fit
their suits within the confines the Court’s opinion
constructs are barred from a federal forum; they may seek
enforcement of reimbursement provisions like the one here
at issue only in state court. Many such suits may be
precluded by antisubrogation laws, others may be
preempted by ERISA itself, and those that survive may
produce diverse and potentially contradictory
interpretations of the disputed plan terms.74

The panel majority’s result will henceforth require insurers that

advance funds to pay for medical treatment of minor or incompetent

Mississippi tort victims to seek recovery of those funds in state

court, where the insurers are now fated to fall victim to the state

rule. What plan administrator would risk fiduciary liability by

advancing funds of a plan under these conditions? None. And who

will be the victims of this result? Plan beneficiaries injured by

third parties.

The total absence of legal remedies in today’s case is

important because such absence was key to the distinction between

equity and law. Although Justice Scalia stated for the majority in

Great-West Life that “an injunction to compel the payment of money

past due under a contract, or specific performance of a past due

monetary obligation, was not typically available in equity,”75 he

went on to discuss several exceptions to this rule, without

purporting to exhaust the list of exceptions or identifying the

74
Id. at 722 (Ginsburg, J., dissenting) (citation omitted).
75
Id. at 713 (majority).

-34-
general principle from which those exceptions flow. Yet that

principle is widely recognized: When the remedy of damages is not

adequate at law, equitable remedies may be sought.76 This doctrine

is so well established that it must be credited as one kind of

relief that was “typically available in equity” —— the

quintessential alternate equitable remedy that becomes available

when legal remedies are inadequate or nonexistent. Here, this

conclusion does not run afoul of Justice Scalia’s caution that the

statutory phrase “equitable relief” cannot mean any remedy, for the

simple reason that —— in contrast to Great-West Life —— injunction,

subrogation, restitution, and trust remedies are all, in the

circumstances of this case, eminently equitable.

Because the Great-West Life Court expressed “no opinion” on

questions central to this aspect of the distinction between law and

equity, that case simply cannot be read to control the

jurisdictional outcome in today’s case as mechanically as the panel

majority would suggest. I am satisfied that we have the customary

latitude here to apply the doctrine of adequacy of legal remedies

as requiring resort to an equitable remedy and thus as supporting

federal jurisdiction. I am even more satisfied that we have erred

by failing to do so.

76
See id. at 725 (Ginsburg, J., dissenting); DAN B. DOBBS, LAW OF REMEDIES (West 1993)
§ 2.5(1) (discussing irreparable harm test); § 2.5(2) (stating that an equitable remedy is “usually
granted” in cases —— such as the insolvency of the defendant —— where “a legal remedy [is]
available but not collectible”).

-35-
 Federal courts are certainly courts of limited jurisdiction,

but when that jurisdiction is mapped out by a statute like ERISA

which textually incorporates equity’s long traditions of fairness

and flexibility, those traditions must be imported into the

jurisdictional cartographic exercise. That this importation might

make the exercise less than crisp does not mean that the exercise

is illegitimate; on the contrary, it implements Congress’s command

and therefore is our assigned task. I would hold the remedy

Bauhaus seeks in federal court to be equitable under the Mertens

test. Indeed, equity arose for the very purpose of correcting such

anomalies in a coordinate court system as the one we should correct

today.

6. Summary

In sum, I would heed the warning of the dissenters in Great-

West Life that if the district courts are held to lack jurisdiction

of cases such as this, ERISA plaintiffs like Bauhaus would have to

sue in state court, overcome ERISA preemption, and then contend

with a welter of disparate state laws —— such as Mississippi’s

anti-reimbursement doctrine at issue here —— that could and likely

would defeat the congressional purpose of achieving a nationally

uniform set of rules to govern ERISA plans.77 This case presents

77
See Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 9 (1987) (noting that Congress sought
through ERISA “to establish a uniform administration scheme” and to ensure that plan provisions
would be enforced in federal court, free of “the threat of conflicting or inconsistent State and local
regulation”) (internal quotation marks omitted).

-36-
a stereotypical example of what the Great-West Life dissenters

feared; more importantly, its postural facts are readily

distinguishable from those of Great-West Life and thus cry out for

a recognition of these differences and thus a different outcome.

In my view, the remedy that Bauhaus seeks is undeniably equitable;

ergo Bauhaus’s complaint arises under ERISA; ergo the district

court had subject-matter jurisdiction of this case.

Copeland nevertheless advances three defenses to Bauhaus’s

suit that she describes as jurisdictional: lack of a federal

question, lack of federal jurisdiction over the “interpled” funds,

and consent to state jurisdiction. To whatever extent my

discussion of remedies has not already shown how these three

jurisdictional issues should be resolved, they collapse into the

preemption question: If ERISA preempts, there is a federal

question; federal jurisdiction is exclusive78; the Chancery Court

lacks jurisdiction to decide this case; and Bauhaus’s consent to

remand to that court cannot have conferred jurisdiction on it. To

preemption, therefore, I now turn —— both to round out the

jurisdictional argument and to demonstrate what is really at stake

in this case.

II. PREEMPTION

78
29 U.S.C. § 1132(e):
Except for actions [by participants or beneficiaries] under subsection (a)(1)(B) of this
section, the district courts of the United States shall have exclusive jurisdiction of civil
actions under this subchapter brought by the Secretary or by a participant, beneficiary,
[or] fiduciary.

-37-
 The district court granted the motions to dismiss solely on

preemption grounds. The court tersely stated that it

could engage in a lengthy analysis on the preemption
question presented here, but, after careful
consideration, the court finds that Clardy v. ATS, Inc.
Employee Welfare Benefit Plan, 921 F. Supp. 394 (N.D.
Miss. 1996) (Davidson, J.), ably resolves this
matter. . . .
. . . This court is in accord with Judge Davidson’s
conclusion that
the state law under consideration...does not
prevent subrogation of claims, nor does it
even directly address the matter of
subrogation. The administration of a minor’s
estate is entirely a matter of state law, and
is law of general application which affects a
broad range of matters entirely unrelated to
ERISA plans.... The [plan] in this case would
have this court preempt not a state law which
impinges upon contractual subrogation rights
under ERISA, but a state law of general
application which has only an incidental
effect upon an ERISA plan. The state law in
question...relates to ERISA in “too tenuous,
remote, or peripheral a manner” to be
preempted in this case.79

Clardy, on which the district court relied entirely, is but one of

several cases in which state and federal courts in Mississippi have

held that ERISA does not preempt the state’s jurisprudential rule

requiring Chancery-Court approval of any assignment of a minor’s

interest in insurance proceeds.

1. Mississippi’s Anti-Assignment Rule

Mississippi’s anti-assignment rule was announced in McCoy v.

79
Bauhaus, USA, Inc. v. Copeland, 2001 WL 1524373 at *1 (N.D. Miss. 2001) (citing Clardy
v. ATS, Inc. Employee Welfare Benefit Plan, 921 F. Supp. 394, 399 (N.D. Miss. 1996)).

-38-
Preferred Risk Ins. Co.,80 in which the Mississippi Supreme Court

derived, from that state’s uninsured-motorists law, the principle

that a parent, acting individually, cannot transfer a child’s right

to insurance proceeds, even in exchange for medical treatment

following the accident that gives rise to the right.81 That court

later extended its McCoy holding by requiring that parents seek

chancery-court approval to assign insurance proceeds.82

From the purely common-law rule of McCoy, state and federal

courts in Mississippi have taken the giant step needed to reach the

view that this rule somehow withstands ERISA preemption, oblivious

to the universal recognition that ERISA’s is one of the most

pervasive of all federal preemptions. In Cooper Tire & Rubber Co.

v. Striplin,83 the Mississippi Supreme Court dismissed as “without

merit” an employer’s argument that ERISA permitted the employer to

enforce a subrogation agreement and recover the medical expenses of

a covered minor to whom an insurer had paid benefits.84 The court

proceeded from the premise that “Congress did not pre-empt areas

80
McCoy v. Preferred Risk Ins. Co., 471 So.2d 396 (Miss. 1985).
81
Id. at 398–99; id. at 397–98 (“These [uninsured motorist] benefits were due the son, David,
who was the person injured, and his parents as individuals had no authority to assign such benefits.”).
82
Methodist Hospitals of Memphis v. Marsh, 518 So.2d 1227, 1228 (Miss. 1988) (“Mrs. Tina
Marsh, the mother, had no legal authority, in the absence of prior chancery court approval, to execute
any document binding Stephen’s estate insofar as the insurance proceeds to which he was entitled.”).
83
Cooper Tire & Rubber Co. v. Striplin, 652 So.2d 1102 (Miss. 1995).
84
Id. at 1104.

-39-
traditionally regulated by the states” —— areas such as domestic

relations and minors’ business.85 This rallying cry has met with

great favor in the Northern District of Mississippi: The instant

case is at least the third in which that court has held that ERISA

does not preempt the Mississippi anti-assignment rule.86 The

district court certainly abided by its own jurisprudence, if

nothing more precedential, in finding no preemption here. But that

jurisprudence, examined in the light of Supreme Court precedent, is

simply incorrect; for the Mississippi Supreme Court’s premise that

ERISA does not preempt areas traditionally regulated by the states

simply does not hold water.

2. Preemption under ERISA

ERISA states that “the provisions of this subchapter . . .

shall supersede any and all State laws insofar as they may now or

hereafter relate to any employee benefit plan.”87 ERISA’s

provisions preempt state jurisprudential rules as well as state

statutes.88 It matters not that an ERISA savings clause states that

85
Id. at 1103–04.
86
See Ashmore v. Healthcare Recoveries, Inc. (In re Ashmore), 1998 WL 211778 at *2 (N.D.
Miss. 1998) (“Even if the parties’ ERISA plan contained an express subrogation clause, Mississippi
law requiring prior chancery court approval of assignment of a minor’s right to insurance proceeds
would not be preempted by ERISA.”); Clardy, 921 F. Supp. 394, 397–401 (N.D. Miss. 1996).
87
29 U.S.C. § 1144(a).
88
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 48 n.1 (1987) (“Decisional law that ‘regulates
insurance’ may fall under the savings clause.”); 29 U.S.C. § 1144(c) (“For purposes of this section:
(1) The term ‘State law’ includes all laws, decisions, rules, regulations, or other State action having
the effect of law, of any State.”).

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“nothing in this subchapter shall be construed to exempt or relieve

any person from any law of any State which regulates insurance”89:

ERISA’s “deemer clause” declares that an employee benefit plan ——

which, as all parties concede, the Plan unquestionably is —— shall

not be “deemed to be an insurance company . . . or to be engaged in

the business of insurance . . . for purposes of any law of any

State purporting to regulate insurance companies.”90 Neither does

it matter here that ERISA shall not preempt “any generally

applicable criminal law of a State,”91 a qualified domestic

relations order, or a medical child support order.92

The Supreme Court has clarified that the “relate[s] to”

standard shows that Congress intended ERISA “to establish pension

plan regulation as exclusively a federal concern.”93 For example,

in FMC Corp. v. Holliday,94 the Court held that ERISA preempted a

Pennsylvania statute that forbade reimbursement or subrogation from

a claimant’s tort recovery in a motor-vehicle action.95 There, the

89
29 U.S.C. § 1144(b)(2)(A).
90
29 U.S.C. § 1144(b)(2)(B).
91
29 U.S.C. § 1144(b)(4).
92
29 U.S.C. § 1144(b)(7).
93
Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981).
94
FMC Corp. v. Holliday, 498 U.S. 52 (1990).
95
Id. at 54 (describing the statute); id. at 58 (“Pennsylvania’s antisubrogation law ‘relate[s]
to’ an employee benefit plan.”).

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state law “relate[d] to” an ERISA plan because it “risk[ed]

subjecting plan administrators to conflicting state regulations.”96

The Court stated that its construction of ERISA was “respectful of

the presumption that Congress does not intend to preempt areas of

traditional state regulation” because that construction

distinguished between plans —— like the one now before us —— that

are self-funded and those that are insured, permitting the states

to regulate the latter more closely, in accordance with the states’

longstanding role in regulating the insurance industry.97

Despite its abstract concern for areas of traditional state

regulation, however, when push has come to shove, the Supreme Court

has held that ERISA preempts any number of such areas. For

example, the Court held that ERISA trumps the effect of Louisiana’s

community property system and succession laws, prototypical areas

of traditional state regulation. In Boggs v. Boggs,98 the sons of

a decedent’s first wife (herself also deceased) contended that her

assignment to them of her interests in the decedent’s annuity was

valid under Louisiana law; the second spouse claimed that the

annuity was all hers under ERISA.99 After we, acting as a sharply

96
Id. at 59.
97
Id. at 62.
98
Boggs v. Boggs, 520 U.S. 833 (1997).
99
Id. at 836–38.

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divided en banc court, held for the sons,100 the Supreme Court

reversed. Despite the fact that community property laws “implement

policies and values lying within the traditional domain of the

States,”101 the Court held that ERISA’s survivor annuity provisions

preempted and controlled.102

Just last year, and more directly relevant to this appeal, the

Supreme Court, in Egelhoff v. Egelhoff,103 confirmed that ERISA

preempts a state statutory scheme closely tied to the traditional

state concerns of probate and family law. At issue in Egelhoff was

the effect of a Washington state statute that automatically

revoked, upon a couple’s divorce, any designation of a spouse as

the beneficiary of a nonprobate asset.104 Justice Thomas, writing

for a majority of seven justices, held that this beneficiary-

revocation law had an “impermissible connection with ERISA plans”

because it ran counter to ERISA’s commands that the plan shall

specify those to whom benefits shall be paid and that the fiduciary

shall administer the plan in accordance with plan documents.105 The

100
Boggs v. Boggs, 82 F.3d 90 (5th Cir. 1996), rehearing en banc denied, Boggs v. Boggs,
89 F.3d 1169 (5th Cir. 1996).
101
Boggs, 520 U.S. at 840.
102
Id. at 841–44.
103
Egelhoff v. Egelhoff, 121 S.Ct. 1332 (2001).
104
Id. at 1325–26.
105
Id. at 1327–28.

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Washington statute, the Court determined, “govern[ed] the payment

of benefits, a central matter of plan administration.”106

Furthermore, enforcement of the Washington statute would

impermissibly “interfere with nationally uniform plan

administration” and raise the possibility that administrators would

shift the costs of that interference onto plans’ beneficiaries:

If they instead decide to await the results of litigation
before paying benefits, they will simply transfer to the
beneficiaries the costs of delay and uncertainty.
Requiring ERISA administrators to master the relevant
laws of 50 States and to contend with litigation would
undermine the congressional goal of minimizing the
administrative and financial burdens on plan
administrators —— burdens ultimately borne by the
beneficiaries.107

The Court acknowledged that family law is an area of traditional

state regulation, but concluded that the presumption against

preemption in such an area “can be overcome where, as here,

Congress has made clear its desire for preemption. Accordingly, we

have not hesitated to find state family law pre-empted when it

conflicts with ERISA or relates to ERISA plans.”108

Egelhoff is not meaningfully distinguishable from this case.

Each dispute involves payment of benefits under the plan; each

state’s law would prevent the plan administrator from relying on

the plan’s documents alone; and each state’s law implicates a

106
Id. at 1328.
107
Egelhoff, 121 S.Ct. at 1329 (quotation marks, brackets, and citation omitted).
108
Id. at 1330 (citing Boggs).

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traditional area of state regulation. Albeit prior to Great-West

Life, district courts in several circuits have squarely held that,

to the extent there is any conflict, ERISA preempts state statutes

that protect minors against parental assignment of their insurance

proceeds or other parental contracts on their behalf.109

Copeland does not address these precedents, virtually ignores

Boggs and Egelhoff, and in attempting to distinguish FMC,

mischaracterizes what the district court did in the instant case.110

Copeland has begged the question by relying exclusively on the

state and federal precedents from Mississippi, which heretofore

have not been tested in the crucible of federal appeals. Copeland

also argues that the ERISA provision exempting “qualified domestic

relations orders”111 from preemption applies; but no qualified

109
See Great West Life and Annuity Ins. Co. v. Moore, 133 F. Supp. 2d 677, 680 (N.D. Ill.
2001) (“The Illinois rule which prohibits insurers from having a right of subrogation and
reimbursement against a covered person when the covered person is a minor is preempted under
ERISA.”); Estate of Lake v. Marten, 946 F. Supp. 605, 610 (N.D. Ill. 1996) (“Subjecting self-funded
ERISA plans to various state anti-subrogation laws . . . would be contrary to the purpose of ERISA’s
preemption clause, which was to avoid a multiplicity of regulation in order to permit the nationally
uniform administration of employee benefit plans.”); Blue Cross and Blue Shield of Alabama v.
Cooke, 3 F. Supp. 2d 668, 672 (E.D.N.C. 1997) (finding that ERISA preempted North Carolina’s
doctrine limiting authority of parents to contract on behalf of their children for anything other than
“necessaries”); Rhodes, Inc. v. Morrow, 937 F. Supp. 1202, 1211–12 (M.D.N.C. 1996) (same).
110
Copeland’s appellate brief states that “the district court did not reach a preemption
determination because it did not have jurisdiction over the guardianship funds.” This misstates the
district court’s express holding that ERISA did not preempt Mississippi’s anti-assignment rule. The
court summed up thus: “[B]ecause plaintiff is not entitled to a declaration . . . that its entire
subrogation claim is valid and enforceable, that matter not having been completely preempted by
ERISA, the motions of defendants to dismiss are granted.” Bauhaus, 2001 WL 1524373 at *2
(emphasis added).
111
29 U.S.C. § 1144(b)(7).

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domestic relations order is at issue here, nor could one be.112

To summarize, the Supreme Court has made abundantly clear that

by enacting ERISA, Congress spoke loudly and lucidly enough to

preempt both Louisiana’s marital-property system and Washington’s

family and probate law. Given these precedents, Mississippi’s

anti-assignment rule cannot withstand preemption. A minor’s

financial business is traditionally an area of state regulation,

but no more so than family-property, inheritance, or probate law.

III. CONCLUSION

I regret that my colleagues’s parsimoniousness with federal

jurisdiction pretermits our addressing this issue and reaching this

indubitable result. Plaintiffs who put forward claims that are

completely controlled, and indeed vindicated, by the most panoramic

and potent federal statutory preemption presently on the books

should have their days in federal court.

For the foregoing reasons, I view the district court’s

dismissal for either lack of jurisdiction or failure to state a

claim as reversible error. Despite the majority’s reliance on

Great-West Life to affirm the district court, I am convinced that

the district court did have jurisdiction of this case.

I respectfully dissent.

112
Such an order, to qualify for the exception from ERISA preemption, must “create[ ] or
recognize[ ] the existence of an alternate payee’s right to, or assigns to an alternate payee the right
to, receive all or a portion of the benefits payable with respect to a participant under a plan.” 29
U.S.C. § 1056(d)(3)(B)(i)(I).

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