F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
FEB 8 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
EDWARD G. TRUJILLO,
Plaintiff-Appellant,
v. No. 99-1008
CYPRUS AMAX MINERALS
COMPANY RETIREMENT PLAN
COMMITTEE and CYPRUS AMAX
MINERALS COMPANY
RETIREMENT PLAN,
Defendants-Appellees.
APPEAL FROM UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 96-S-2130)
Ralph Ogden of Wilcox & Ogden, P.C., Denver, Colorado, for the appellant.
David R. Hammond (Janet A. Savage, with him on the brief) of Davis, Graham &
Stubbs LLP, Denver, Colorado, for the appellees.
Before BRISCOE and PORFILIO, Circuit Judges, and ROGERS, Senior
District Judge. 1
1
The Honorable Richard D. Rogers, Senior United States District Judge
for the District of Kansas, sitting by designation.
BRISCOE, Circuit Judge.
Plaintiff Edward Trujillo, a former employee of Cyprus Amax Minerals
Company (Amax), filed suit under the Employee Retirement Income Security Act
of 1974 (ERISA), 29 U.S.C. §§ 1001-1461, challenging a decision by defendant
Cyprus Amax Minerals Company Retirement Plan Committee (the Committee) to
reduce Trujillo’s disability retirement benefits by the total amount of a workers’
compensation settlement without paying a pro rata share of attorney fees incurred
in obtaining the settlement. The district court granted summary judgment in favor
of the Committee and Trujillo appeals. We exercise jurisdiction pursuant to 28
U.S.C. § 1291 and affirm.
I.
Trujillo began working for Amax in 1976 as a hard rock miner. He
suffered work-related injuries to his arms in March 1985, and a work-related
injury to his lower back on November 21, 1985. Although Trujillo continued
working on and off until 1991, the injuries ultimately rendered him totally and
permanently disabled. On July 31, 1991, he was discharged from his employment
and instructed by Amax to apply for retirement-disability benefits under Amax’s
Henderson Mine Non-Contributory Retirement Income Plan (the Plan).
Trujillo sought, and eventually received, workers’ compensation benefits
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as a result of his 1985 injuries. On December 13, 1993, he settled all of his
outstanding workers’ compensation claims for a lump sum payment of $45,000
and monthly payments of $372.45 for the remainder of his life. Out of the
$45,000 lump sum payment, Trujillo paid his attorneys $7,000 in fees and
reimbursed them $2,826.99 for costs advanced on his behalf.
Trujillo also sought benefits under the Plan. On January 31, 1995, the
coordinator of the Plan sent Trujillo a letter outlining the specific benefits he
would receive. The letter indicated that his benefits would be reduced, in part, by
the total amount of his workers’ compensation benefits. On July 17, 1995,
Trujillo appealed the determination of his benefits, arguing the Plan, as a
beneficiary of the settlement of Trujillo’s workers’ compensation claims, should
pay a proportionate share of the attorney fees incurred in obtaining the settlement,
thus reducing the amount of the reduction. On November 14, 1995, the Director
of the Committee rejected Trujillo’s argument that the Plan was responsible for
any portion of his attorney fees:
You assert that the Plan must assume a portion of the responsibility
for attorneys’ fees, which were incurred in obtaining the settlement
of [your] workers’ compensation benefits. The Plan document does
not authorize the payment of the attorneys’ fees you seek.
You cite two Colorado state court cases in support of your
claim for attorneys’ fees. As you have acknowledged, the Plan is
governed by the federal Employee Retirement Income Security Act of
1974, as amended (“ERISA”). ERISA is a comprehensive statute and
contains provisions that make it clear that ERISA preempts any state
regulation which relates to an employee benefit plan. ERISA
3
§ 514(a). We believe that the Colorado state case law you rely upon
as authority for your position does not govern the operation of the
Plan because it is preempted by ERISA. Under ERISA, the Plan
administrator is required to discharge its duties with regard to the
Plan in accordance with the terms of the Plan document. Thus, this
portion of [your] claim is denied.
App. at 126.
On December 8, 1995, Trujillo appealed the Director’s decision to the
entire Committee. The Committee, on February 6, 1996, issued a letter addressed
to Trujillo’s counsel affirming the Director’s decision. In pertinent part, that
letter provided:
With respect to the aspect of the appeal relating to any
apportionment of attorneys’ fees incurred by Claimant in obtaining
the workers’ compensation settlement, you stated that common law
equitable principles of unjust enrichment support the claim. Again,
we are constrained by the plain terms of the Plan, which do not
provide for reimbursement of attorneys’ fees under these
circumstances. See Plan Section 9.4(b). Accordingly, we . . . uphold
the [Director’s] decision . . . and deny the instant appeal.
It is well settled that common law claims premised on
equitable theories of recovery are preempted by the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), 29
U.S.C. § 1144(a) (ERISA “shall supersede any and all State laws
insofar as they may now or hereafter relate to any employee benefit
plan . . .”). This provision has been construed by the courts broadly
to preempt any and all state law claims for benefits, particularly
where, as here, the claim would in some way modify the written
terms of an employee benefit plan. See, for example, Straub v.
Western Union Telegraph Co., 851 F.2d 1262 (10th Cir. 1988)
(ERISA preempts state law claims premised on common law
doctrines of estoppel).
As stated above, the Claimant’s assertion that he is entitled to
an apportionment of attorneys’ fees with the Plan is contrary to the
terms of the Plan. The Committee, therefore, respectfully disagrees
4
with your assertion that cases applying state common law equitable
theories of recovery . . . are applicable to an ERISA employee benefit
plan. Any such alleged legal bases for recovery are preempted by
ERISA.
In your December 8, 1995 letter, you also offer the
representation that the amount of attorneys’ fees is not properly
offset because it was not actually received by the Claimant . . . , but
rather was deposited in a trust account maintained by your law firm
on behalf of the Claimant. You correctly note that the Plan provides
for offset only for amounts actually paid to a participant. Plan
Section 9.4(b)(2).
The fact that you or your law firm may have elected to deposit
the settlement check in a trust account and to withdraw some portion
of the settlement prior to releasing the funds to Claimant does not
change the fact that the full settlement was payable to and actually
paid to Claimant. The Stipulation for Full and Final Settlement and
Release of All Claims executed by the Claimant specifically states
that the insurer agreed to “pay to Claimant” the total amount of the
settlement. Moreover, it is reasonable for the Committee to assume
(and Claimant has presented no evidence to the contrary) that any
subsequent release of the settlement proceeds paid to Claimant, for
example to his legal counsel, was with the full knowledge and
consent of Claimant. The Committee believes that, to interpret the
Plan provisions as urged by Claimant, such that any subsequent
division of settlement proceeds between a participant and other
parties reduces the actual amount of proceeds paid to the participant,
is neither an accurate statement of the events that transpired nor
consistent with the plain language of Plan Section 9.4(b)(2).
Accordingly, this aspect of the appeal also is denied.
Id. at 133-34.
After receiving the Committee’s letter, Trujillo filed this action in the
District Court for the City and County of Denver. Defendants removed the case
to federal district court. The parties filed cross-motions for summary judgment.
The district court granted summary judgment in favor of defendants, concluding
5
they did not act arbitrarily or capriciously in refusing to reduce the amount of the
benefit reduction to account for a proportionate share of the attorneys’ fees
expended by Trujillo in obtaining his workers’ compensation settlement.
II.
Although the district court granted summary judgment in favor of
defendants, the underlying facts were uncontroverted and the district court’s
decision hinged solely on its determination that defendants’ decision to deny
relief to Trujillo was neither arbitrary nor capricious. Because this determination
involved a legal conclusion, our “review of the district court’s decision, although
not the underlying administrator’s decision, is plenary.” Sandoval v. Aetna Life
and Cas. Ins. Co., 967 F.2d 377, 380 (10th Cir. 1992).
“A court reviewing a challenge to a denial of employee benefits under 29
U.S.C. § 1132(a)(1)(B) applies an ‘arbitrary and capricious’ standard to a plan
administrator’s actions if the plan grants the administrator discretionary authority
to determine eligibility for benefits or to construe the plan’s terms.” Charter
Canyon Treatment Ctr. v. Pool Co., 153 F.3d 1132, 1135 (10th Cir. 1998) (citing
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)); see also
Millensifer v. Retirement Plan for Salaried Employees of Cotter Corp., 968 F.2d
1005, 1009 (10th Cir. 1992) (“[I]f the Plan gives the retirement committee
discretion to construe doubtful provisions of the plan itself, the committee’s
6
decision must be upheld unless it was arbitrary and capricious, not supported by
substantial evidence or erroneous on a question of law.”) (internal quotations
omitted). Here, the parties agree that the Plan gives the Committee such
discretionary authority, see App. at 56-57 (indicating the Committee “shall have
sole discretion in carrying out its responsibilities,” and “has full discretion to
deny or grant a claim in whole or in part”), and that the standard of review is
whether the Committee’s determination was arbitrary and capricious. Under this
standard of review, we will not set aside a benefit committee’s decision if it was
based on a reasonable interpretation of the plan’s terms and was made in good
faith. See Jones v. Kodak Med. Assistance Plan, 169 F.3d 1287, 1292 (10th Cir.
1999); Averhart v. U.S. West Management Pension Plan, 46 F.3d 1480, 1485
(10th Cir. 1994).
The Committee’s decision, and hence this appeal, center around Section 9.4
of the Plan, entitled “Disability Retirement Benefits,” which provides:
The Disability Retirement Benefits payable to any Member shall be
reduced by the amount of any worker’s compensation benefits
(except fixed statutory payment for the loss of any bodily member)
payable to him with respect to his disability; provided that deduction
for all such benefits shall be made only with respect to the period in
which such benefits (A) are actually paid to such Member, and (B)
have not been deducted from a disability insurance benefit payable to
him under the Federal Insurance Contributions Act, as now in effect
or hereafter amended. In the case of lump sum settlements under
worker’s compensation, the lump sum shall be divided by the weekly
payment to which he was entitled under worker’s compensation in
order to determine the period with respect to which worker’s
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compensation benefits are payable for the purpose of this Section
9.4.
App. at 74 (Section 9.4(b)(2) of the Plan). 2
Trujillo contends the Committee’s interpretation of Section 9.4 was
arbitrary and capricious because it reduced his benefits by amounts which he did
not receive and which were not payable to him. More specifically, Trujillo argues
that “[a]ttorneys fees and expenses incurred in obtaining workers’ compensation
disability benefits . . . are amounts due and payable by the injured worker to his
attorney and must be paid from the worker’s lump sum settlement before the
worker is paid anything.” Aplt.’s Opening Br. at 19. Thus, Trujillo argues, “only
the net settlement, i.e., the settlement amount minus fees and expenses, is
‘payable’ to the worker.” Id.
Although Trujillo’s argument is not without appeal, we are unable to
conclude the Committee acted arbitrarily and capriciously when it adopted an
interpretation different from the one espoused by Trujillo. The Plan does not
define the word “payable.” According to Black’s Law Dictionary, “payable”
means “[c]apable of being paid; suitable to be paid; admitting or demanding
2
The summary plan description, which Amax distributed to its employees,
likewise provided: “Your Plan benefit is reduced by amounts you may receive
from:
Workers’ Compensation (except payments for loss of any bodily member).” App.
at 140.
8
payment; justly due; legally enforceable.” Black’s Law Dictionary 1128 (6th ed.
1990). 3 Analyzing the language of the Plan in light of these definitions, we
believe the phrase “worker’s compensation benefits . . . payable to him with
respect to his disability” can reasonably be interpreted to encompass any amounts
“capable of being paid,” “justly due,” or “legally enforceable” that arise out of a
worker’s disability. In turn, the workers’ compensation settlement agreement
negotiated by Trujillo provided, in part, that “[a]ll sums set forth herein constitute
damages on account of personal injuries and sickness, within the meaning of
Section 104(a)(1) of the Internal Revenue Code of 1986, as amended.” App. at
167. Because the statute cited in the settlement agreement, 26 U.S.C. § 104(a)(1)
of the Internal Revenue Code, excludes from gross income “amounts received
from workmen’s compensation acts as compensation for personal injuries or
sickness,” the settlement agreement effectively indicated that all of the amounts
set forth therein, i.e., the $45,000 lump sum payment and the $372.45 monthly
payments, constituted “compensatory damages” for Trujillo’s injuries. See
3
In his appellate brief, Trujillo suggests that because his workers’
compensation benefits were paid pursuant to Colorado law, “the question of
whether the attorneys fees and expenses were either ‘payable to’ or ‘received’ by
him must be decided under state law.” Trujillo’s Opening Br. at 18. He provides
no authority in support of this proposition. For the reasons discussed above, the
controlling question is whether the Committee’s interpretation of the Plan was
arbitrary or capricious; thus, the two Colorado cases cited by Trujillo in his brief,
neither of which are ERISA cases, are of little value.
9
generally Reese v. United States, 24 F.3d 228, 231 (Fed. Cir. 1994) (indicating
that 26 U.S.C. § 104 encompasses only compensatory damages, i.e., damages for
“the replacement of losses resulting from injury or sickness”). There was no
mention of the amount of Trujillo’s attorneys’ fees in the settlement agreement.
Thus, as in most attorney fee arrangements, it appears that Trujillo agreed to pay
fees out of the total damage award he received from defendants. The fact that he
agreed to do so, however, did not prevent the Committee, in determining the
benefits due under the Plan, from deducting the total amount payable to him under
the settlement agreement.
Trujillo offers two policy-based arguments presumably aimed at persuading
us to overturn the Committee’s decision and effectively rewrite the language of
the Plan. First, he points out that the Committee’s decision in effect required him
to pay the cost of reducing his own benefits under the Plan. Second, he argues
the Committee’s decision will create irreconcilable conflicts between workers’
compensation attorneys and their clients and “make it impossible for injured
workers to obtain adequate, conflict-free representation.” Aplt.’s Opening Br. at
21. Notably, however, Trujillo has not cited any cases, and our independent
research has not produced any, that would allow such policy arguments to trump
10
the Committee’s reasonable interpretation of the Plan language. 4 See Pitcher v.
Principal Mut. Life Ins. Co., 93 F.3d 407, 411 (7th Cir. 1996) (noting that
interpretation of ERISA health insurance contract requires court to look to the
plain language of the contract, rather than public policy); Hardester v. Lincoln
Nat’l Life Ins. Co., 33 F.3d 330, 336 (4th Cir. 1994) (same).
Finally, Trujillo suggests we should invoke the doctrine of unjust
enrichment to preclude the Committee from offsetting the entire amount of the
workers’ compensation settlement without paying a pro rata share of his
attorneys’ fees. In Member Services Life Insurance Co. v. American National
Bank and Trust Co., 130 F.3d 950, 957 (10th Cir. 1997), cert. denied, 523 U.S.
1139 (1998), we placed strict limits on the use of the doctrine of unjust
enrichment in ERISA cases. Specifically, we held that the doctrine can be
utilized only when it does not “override a contractual plan provision,” and where
its application “‘would be consistent with ERISA’s scheme and further its
purposes.’” Id. (quoting Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d
270, 280 (2d Cir. 1992)).
Given our holding in Member Services, application of the doctrine of unjust
4
Because the appendix does not include the parties’ summary judgment
motions, it is unclear if Trujillo presented all of these arguments to the district
court. See Farmers Ins. Co. v. Hubbard , 869 F.2d 565, 570 (10th Cir. 1989)
(“This court will generally not address issues that were not considered and ruled
upon by the district court.”).
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enrichment would clearly be improper in this case. Aside from the fact that
ERISA says nothing about the issue raised by Trujillo, application of the doctrine
of unjust enrichment would effectively rewrite the Plan and thereby violate “a
primary purpose of ERISA,” which “is to ensure the integrity and primacy of the
written plans.” Health Cost Controls v. Isbell, 139 F.3d 1070, 1072 (6th Cir.
1997) (holding that ERISA plan’s right to reimbursement for medical benefits was
not subject to equitable reduction for proportional share of participant’s legal
costs in obtaining third-party recovery); see also Ward v. Wal-Mart Stores, Inc.,
1999 WL 801532 at *3-4 (6th Cir. Sept. 30, 1999) (table) (holding that
application of unjust enrichment doctrine, relied upon by district court to prevent
ERISA plan from obtaining reimbursement for settlement agreement without
paying a pro rata share of plaintiffs’ attorneys’ fees, was improper where plan
administrator’s interpretation of plan language regarding extent of reimbursement
was neither arbitrary nor capricious).
III.
The judgment of the district court is AFFIRMED.
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