United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT April 1, 2005
Charles R. Fulbruge III
Clerk
No. 04-20349
CHARLES ATTEBERRY SR, ET AL
Plaintiffs
v.
MEMORIAL-HERMANN HEALTHCARE SYSTEMS, On Behalf and for the
Benefit of The Estates, Heirs, Devisees, Legatees, Spouses,
Children and/or Parents of Charles Atteberry Jr.
Plaintiffs - Appellees
v.
MEMORIAL-HERMANN HEALTHCARE SYSTEM; MEMORIAL-HERMANN HOSPITAL
SYSTEM
Plaintiffs - Appellants - Appellees
v.
BEN ETHRIDGE
Intervenor - Plaintiff - Appellee
v.
DALINDA SHELTON; CAROL ANN PITTMAN, also known as Carol Ann
Peterson, Independent Executrix of the Estate of John Linwood
Pittman, Jr., Deceased and Individually as Beneficiary of John
Linwood Pittman, Jr.
Intervenor - Plaintiffs - Appellants
v.
EUROCOPTER DEUTSCHLAND, GMBH, ET AL
Defendants
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Appeals from the United States District Court
for the Southern District of Texas
--------------------
Before GARWOOD, BENAVIDES, and STEWART, Circuit Judges.
BENAVIDES, Circuit Judge:
I. INTRODUCTION
This action arises from the crash of a Life Flight
helicopter owned and operated by Memorial-Hermann Healthcare
System and Memorial-Hermann Hospital System (collectively
“MHHS”). All three MHHS employees aboard the helicopter –
Charles Atteberry, Jr., John Pittman, Jr., and Silvia Lynn
Ethridge – perished in the crash. At the time of their deaths,
the employees were covered by MHHS’ ERISA Occupational Benefits
Plan (the “Occupational Benefits Plan”) which essentially
provided death benefits of $1,000,000 to the estate of the
deceased employee or, in the absence of a will, to the employee’s
heirs at law.
This appeal involves the claims of three separate
appellants, Dalinda Shelton (“Shelton”), MHHS, and Carol Pittman
(“Pittman”). Each of the disputes centers on the scope and
extent of MHHS’ claimed subrogation rights following the payment
of death benefits pursuant to MHHS’ Occupational Benefits Plan.
More specifically, Shelton appeals the district court’s grant of
summary judgment against her and its conclusion that MHHS’
subrogation right gives MHHS the right to control the prosecution
and settlement of the claims of the Estate of Silvia Lynn
Ethridge (the “Ethridge Estate”). MHHS appeals the district
court’s denial of its motion for summary judgment with respect to
Ben Ethridge and its conclusion that MHHS is not subrogated to
Ben Ethridge’s wrongful death claim arising from the death of his
daughter Silvia Ethridge. Pittman appeals the district court’s
grant of partial summary judgment against her – as well as its
subsequent denial of her motion for partial summary judgment
against MHHS – and its conclusion that MHHS is subrogated to her
claims, both as an individual and as the independent executrix of
the Estate of John Linwood Pittman, Jr. (the “Pittman Estate”).
Having reviewed the record and considered the briefs and
arguments on appeal, we uphold the district court’s grant of
summary judgment against Shelton and its denial of MHHS’ motion
for summary judgment with respect to Ben Ethridge. However, we
reverse the district court’s grant of summary judgment against
Pittman in her individual capacity.
II. STANDARD OF REVIEW
The parties agree that MHHS’ ERISA Occupational Benefits
Plan Administrative Committee (the “Administrative Committee”)
had discretionary and final authority to interpret MHHS’
Occupational Benefits Plan and make all necessary factual
findings. When a plan administrator has such discretionary
authority, this Court applies an abuse of discretion standard.
Pickrom v. Belger Cartage Serv., Inc., 57 F.3d 468, 471 (5th Cir.
1995). This Court reviews de novo the district court’s holdings
regarding whether a plan administrator has abused its discretion.
Threadgill v. Prudential Sec. Group, Inc., 145 F.3d 286, 292
(5th Cir. 1998).
III. DISCUSSION
A. Dalinda Shelton and Ben Ethridge
1. Factual and procedural history
On December 23, 1999, MHHS paid a death benefit under its
Occupational Benefits Plan in the amount of $1,050,816 to the
Ethridge Estate through Dalinda Shelton; Shelton is Silvia
Ethridge’s same-sex domestic partner, the personal representative
and independent executrix of the Ethridge Estate, and the
principal beneficiary under Silvia Ethridge’s will. Payment of
the death benefit to the estate representative is consistent with
Article 8.2 of MHHS’ Occupational Benefits Plan which states that
“[i]n the event of the Death of an Eligible Employee, any Death
Benefits payable hereunder shall be paid to the personal
representative of the estate of the deceased Eligible Employee
after the Administrative Committee receives appropriate
directions.”
At the time the death benefit was paid, Shelton and the
Occupational Benefits Plan Administrator for MHHS entered into an
Acknowledgment of Receipt of Benefits, Subrogation Rights and
Confidentiality Agreement (the “Agreement”). As part of the
Agreement, Shelton recognized that she received funds from MHHS’
Occupational Benefits Plan and acknowledged that MHHS was
subrogated to the Ethridge Estate’s claims and causes of action.
The Administrative Committee subsequently determined that MHHS’
subrogation rights gave it the right to pursue and settle the
Ethridge Estate’s claims without the participation of Shelton as
the Ethridge Estate representative.
Ben Ethridge, for his part, denies receiving Occupational
Benefits Plan death benefits. In his deposition testimony, Ben
Ethridge acknowledged receipt of a share of the Occupational
Benefits Plan death benefit, but stated that he received that
money not from the Occupational Benefits Plan, but as a gift from
Shelton. Although Ben Ethridge did not receive Occupational
Benefits Plan death benefits, he did receive other insurance
proceeds resulting from his daughter’s death; those proceeds were
paid to him through separate insurance policies that are
different from the Occupational Benefits Plan that is at the
heart of the instant dispute. Specifically, Ben Ethridge
received life insurance and accidental death and dismemberment
insurance proceeds pursuant to a Beneficiary Designation Form, on
which Silvia Ethridge designated both Ben Ethridge and Dalinda
Shelton as her designated beneficiaries. At oral argument, it
was conceded by MHHS that while the Beneficiary Designation Form
determined how the life insurance and accidental death and
dismemberment insurance proceeds were to be paid out in the event
of Silvia Ethridge’s death, it did not set forth how the death
benefit under MHHS’ Occupational Benefits Plan was to be
disbursed.
The Administrative Committee determined that the Beneficiary
Designation Form governed the disbursement of the death benefit
under MHHS’ Occupational Benefits Plan and that Ben Ethridge was
a designated beneficiary who received Occupational Benefits Plan
monies, albeit indirectly from Shelton. The Administrative
Committee concluded that because Ben Ethridge was a beneficiary
of Occupational Benefits Plan death benefits, his wrongful death
cause of action was subrogated to MHHS, which could then sue
third parties on Ben Ethridge’s behalf.
MHHS filed suit against the third-party helicopter
manufacturer on behalf of, inter alios, Ben Ethridge and the
Ethridge Estate. The district court subsequently permitted
Shelton and Ben Ethridge to intervene in the action. Shelton
claimed that as executrix of the Ethridge Estate, she had the
right to control the prosecution and settlement of Silvia
Ethridge’s survival action. Ben Ethridge contended that his
wrongful death cause of action was not subrogated to MHHS because
he was not a recipient of Occupational Benefits Plan death
benefits and that, therefore, MHHS could not sue the helicopter
manufacturer on his behalf.
MHHS moved for summary judgment against Shelton, as
executrix and beneficiary, and against Ben Ethridge. The
district court granted MHHS’ motion for summary judgment with
respect to Shelton and concluded that MHHS, as subrogee, has the
authority to prosecute and settle the claims of the Ethridge
Estate without the consent or participation of the Ethridge
Estate representative. The district court denied MHHS’ motion
for summary judgment with respect to Ben Ethridge and concluded
that Ben Ethridge’s claims were not subrogated to MHHS because he
had not received Occupational Benefits Plan death benefits.
Shelton and MHHS subsequently appealed the judgment of the
district court.
2. Shelton’s claims
Because it is undisputed that MHHS is subrogated to the
Ethridge Estate’s causes of action, the sole issue of contention
between Shelton and MHHS is the meaning of the term “subrogation”
as used in the Occupational Benefits Plan. Shelton contends that
the Administrative Committee’s interpretation of the meaning of
subrogation amounts to an abuse of discretion because MHHS’
subrogation rights do not allow MHHS the right to exclusively
control the Ethridge Estate’s causes of action without the
consent or participation of the Ethridge Estate representative.
We conclude that the Administrative Committee’s
interpretation of the meaning of subrogation is legally correct
under both an ordinary meaning analysis and the three-part test
this Court employs to determine the legal correctness of an ERISA
plan administrative committee’s determination.
a. Ordinary meaning analysis
Subrogation is not defined in the Occupational Benefits Plan
and its meaning cannot be unambiguously discerned from the
Occupational Benefits Plan language. However, as it is
ordinarily understood, “subrogation simply means substitution of
one person for another; that is, one person is allowed to stand
in the shoes of another and assert that person’s rights.”
Black’s Law Dictionary 1468 (8th ed. 2004). Put differently,
“[i]n a subrogation action, it is well established that there is
only one cause of action for the insured’s injuries . . . . [and
t]he insurer can assert its subrogation claim independently of
the insured.” Prudential Prop. and Cas. Co. v. Dow
Chevrolet-Olds, Inc., 10 S.W. 3d 97, 100 (Tex. App. Texarkana
1999). Moreover, under Texas state law, “[t]he subrogees stand
in the shoes of the one whose rights they claim.” Interstate
Fire Ins. Co. v. First Tape, Inc., 817 S.W. 2d 142, 145 (Tex.
App. Houston 1991). Therefore, if there is only one cause of
action for an insured’s injuries, and in a subrogated action that
cause of action belongs to the insurance company subrogee, it
follows that the insurance company subrogee has the right to
control the subrogated cause of action.
As applied to the instant case, the Ethridge Estate has a
cause of action on behalf of Silvia Ethridge. However, under the
clear terms of the Occupational Benefits Plan, by accepting
Occupational Benefits Plan death benefits, the Ethridge Estate
has subrogated its cause of action to MHHS, which then stands in
the shoes of the Ethridge Estate. Because there is only one
cause of action, and MHHS received from the Ethridge Estate the
right to control that cause of action, as the party in control
MHHS is entitled to prosecute and settle the Ethridge Estate’s
claims without seeking approval from the Ethridge Estate
representative.
b. Legally correct interpretation
Moreover, the Administrative Committee gave the meaning of
subrogation in the Occupational Benefits Plan a legally correct
interpretation under the three-part test employed by this Court
to determine the legal correctness of an ERISA administrative
committee’s determination. Pickrom v. Belger Cartage Serv.,
Inc., 57 F.3d 468, 471 (5th Cir. 1995). Under the three-part
test, this Court considers: (1) whether the administrative
committee has given the plan a uniform construction; (2) whether
the administrative committee’s interpretation is consistent with
a fair reading of the plan; and (3) whether different
interpretations of the plan will result in unanticipated costs.
Id.
Regarding the first factor, when there is no evidence in the
record as to whether an administrative committee has given the
plan a uniform construction, this Court should proceed to the
other two factors. See id. Because there is no evidence in the
record that the Administrative Committee previously had to
construe the scope of the Occupational Benefits Plan’s
subrogation rights, our analysis necessarily turns to the
remaining two factors.
Regarding the second factor, the Administrative Committee’s
interpretation of the term “subrogation” is consistent with a
fair reading of the Occupational Benefits Plan. The Occupational
Benefits Plan language limits MHHS’ recovery to the extent of
“any Benefit payments made under the Plan,” but does not limit
MHHS’ right of subrogation. The Occupational Benefits Plan
language, in fact, grants MHHS a broad subrogation right since it
states that MHHS “has the right to pursue any action to enforce
its subrogation rights against a third party.” Therefore, a
plain reading of the Occupational Benefits Plan language gives
MHHS the right of subrogation to all of the Ethridge Estate’s
claims, with MHHS’ right of recovery in any action against a
third party limited to the amount of the death benefit paid to
the Ethridge Estate.
Regarding the third factor, a different interpretation of
the Occupational Benefits Plan than the one adopted by the
Administrative Committee would result in unanticipated costs to
MHHS. If, as Shelton argues, MHHS should not be permitted to
prosecute or settle any subrogated claims without the consent of
an employee’s estate as subrogor, MHHS would be at the mercy of
the estate. Pursuant to Article 11.3 of the Occupational
Benefits Plan, MHHS has priority over an employee’s estate with
respect to all funds recovered from third parties, up to the
amount of benefits MHHS has paid plus the costs of recovery. If
MHHS is not permitted to independently prosecute and settle the
claims of an employee’s estate, MHHS runs the risk that the
estate – having already received funds from MHHS – will hold up
settlement negotiations in the hopes of obtaining a larger
recovery. An estate that has received funds from MHHS has no
incentive to settle its claims for any amount that does not
exceed that already paid to it by MHHS, irrespective of how
reasonable the settlement offer may be. Adopting an alternate
reading of the term “subrogation” would result in unanticipated
costs to MHHS, namely the increased costs of recovering from
third parties. Accordingly, we conclude that the Administrative
Committee has given a legally correct interpretation to the term
“subrogation” as it appears in the Occupational Benefits Plan.
Therefore, for the foregoing reasons, we affirm the judgment
of the district court upholding the Administrative Committee’s
interpretation of MHHS’ subrogation rights with respect to any
claims of the Ethridge Estate, and rejecting Shelton’s argument
that she should control or share in the control of the
prosecution of any actions brought on behalf of the Ethridge
Estate.
3. MHHS’ claims
MHHS appeals the district court’s denial of MHHS’ motion for
summary judgment and its holding that Ben Ethridge retained his
wrongful death cause of action against third parties because he
was not a beneficiary of MHHS’ Occupational Benefits Plan death
benefits. MHHS contends that the Administrative Committee’s
determination was not an abuse of discretion for the following
reasons: (1) because Silvia Ethridge designated Ben Ethridge as
a beneficiary of her Life Insurance and Accidental Death &
Dismemberment Insurance Plans, Ben Ethridge also should be
considered a designated beneficiary of Occupational Benefits Plan
death benefits; (2) under Article 8.2 of the Occupational
Benefits Plan, MHHS must pay the Occupational Benefits Plan death
benefit as the designated Occupational Benefits Plan
beneficiaries request; (3) at the request of Ben Ethridge and
Shelton, MHHS made the death benefit check payable to Shelton as
the personal representative of the Ethridge Estate; and (4) Ben
Ethridge did receive money from Shelton.
We conclude that the Administrative Committee’s
determination that Ben Ethridge received Occupational Benefits
Plan death benefits and was therefore required to comply with the
Occupational Benefits Plan’s subrogation and assignment
provisions is legally incorrect under the first prong of the
abuse of discretion standard articulated supra.
MHHS has not demonstrated that Ben Ethridge was a recipient
of Occupational Benefits Plan death benefits. Although Ben
Ethridge did receive life insurance and accidental death and
dismemberment insurance proceeds, which are not at issue in the
instant case, he did not receive from MHHS any portion of the
Occupational Benefits Plan death benefit, nor was he a designated
beneficiary of Occupational Benefits Plan benefits. The entire
amount of the death benefit was made payable to Dalinda Shelton
as the personal representative of the Ethridge Estate; Ben
Ethridge did not receive any money directly from MHHS’
Occupational Benefits Plan. Moreover, the money Ben Ethridge did
receive from Shelton was a gift to Ben Ethridge and was drawn
from Shelton’s own funds.
Therefore, because the Administrative Committee’s
determination that Ben Ethridge received Occupational Benefits
Plan death benefits is inconsistent with a fair reading of the
Occupational Benefits Plan, we conclude that the Administrative
Committee’s determination is legally incorrect. See Gosselink v.
Am. Tel. & Tel., Inc., 272 F.3d 722, 727 (5th Cir. 2001) (holding
that it is an abuse of discretion if an administrative committee
interprets a plan in a way that directly contradicts the plain
meaning of the plan language). Accordingly, we agree with the
decision of the district court denying MHHS’ motion for summary
judgment as it relates to Ben Ethridge.
B. Carol Pittman
1. Factual and procedural history
Both Carol Pittman, common law wife of the deceased John
Pittman, Jr., and John Pittman III and Jennifer Pittman
(collectively, the “Pittman children”), the surviving children of
the deceased, asserted to MHHS that the $1,000,000 death benefit
under the Occupational Benefits Plan be paid to them. Unsure who
it should pay, on December 21, 2000, MHHS filed a Petition in
Interpleader against Pittman and the Pittman children asking that
the probate court administering the Pittman Estate determine who,
as between Pittman and the Pittman children, was the appropriate
payee. MHHS then deposited the $1,000,000 death benefit into the
court registry. The probate court subsequently issued an Agreed
Final Judgment ordering that the funds be released to the
“personal representative of the Estate of John Linwood Pittman,
Jr.” The probate court further determined that Pittman was the
duly authorized personal representative of the Pittman Estate.
After Pittman accepted the death benefit provided under the
Occupational Benefits Plan, she filed a declaratory judgment
action in probate court in which Pittman sought to avoid the
subrogation provisions of the Occupational Benefits Plan. MHHS
removed Pittman’s claim to federal court and Pittman filed a
motion to remand. The district court denied Pittman’s motion to
remand and consolidated the removed action with MHHS’ action
against the third-party helicopter manufacturer on behalf of,
inter alios, Carol Pittman and the Pittman Estate.
On July 30, 2003, MHHS filed with the district court a
motion for partial summary judgment against Pittman in her
capacity as executrix and beneficiary of the Pittman Estate.
MHHS contended that summary judgment was appropriate because the
Administrative Committee concluded that Pittman had accepted
death benefits under the Occupational Benefits Plan and that MHHS
had a right of subrogation to the amounts paid by it plus the
costs of prosecuting the claim. Pittman also filed with the
district court a motion for partial summary judgment against
MHHS.
The district court granted MHHS’ motion for partial summary
judgment and denied Pittman’s motion for partial summary
judgment. Pittman appeals those adverse judgments against her.
2. Pittman’s claims
Pittman concedes that the claims of the Pittman Estate are
subject to subrogation because the Pittman Estate received
Occupational Benefits Plan death benefits from MHHS. Moreover,
as the Pittman Estate’s personal representative, Carol Pittman
admits she accepted Occupational Benefits Plan death benefits,
but did so only on behalf of her deceased husband and not on her
own behalf as his wife. As such, Pittman contends that her
claims as an individual are not subject to subrogation because
she as an individual did not receive Occupational Benefits Plan
death benefits, nor did she as an individual contractually assign
her claims to MHHS by executing an Acknowledgment of Receipt of
Benefits, Subrogation Rights and Confidentiality Agreement.
The Administrative Committee read the Occupational Benefits
Plan language to mean that Pittman, upon receipt of Occupational
Benefits Plan death benefits, subrogated all of her rights, in
whatever capacity, to MHHS. We conclude that this interpretation
amounts to an abuse of discretion because the Administrative
Committee, in reaching its conclusion, ignored the plain language
of the Occupational Benefits Plan.
Article 11.1 of the Occupational Benefits Plan states that
“[i]n the event of any Benefit payments made under the Plan to or
on behalf of any Employee, the Plan shall, to the extent of such
payments, be subrogated to all the rights of recovery . . . of
the Employee.” Article 11.1 further states that by participating
in the Occupational Benefits Plan, an employee also obligates the
legal representative of his estate and that “the Plan shall be
fully subrogated to any recovery or right of recovery that the
estate may have against any third party.” The quoted language
plainly means that when an employee or his estate accepts
Occupational Benefits Plan benefits, the employee or his estate
must surrender to MHHS all of its rights against third parties.
As applied to the instant case, the Occupational Benefits
Plan language means only that the Pittman Estate, via Pittman as
the estate representative, must surrender its claims to MHHS.
The language does not mean that Pittman must surrender the
wrongful death claims she independently possesses as John
Pittman, Jr.’s wife merely because she also served as the
representative of the Pittman Estate. Because Pittman took
Occupational Benefits Plan death benefits as the Pittman Estate
representative - and not in her individual capacity - she cannot
be made to subrogate to MHHS the wrongful death claims she
independently possesses in her individual capacity as the
decedent’s wife. In other words, MHHS acquired no subrogation
rights nor control of any of Pittman’s individual claims.
Accordingly, we reverse the judgment of the district court
insofar as it granted MHHS’ motion for summary judgment with
respect to Pittman in her individual capacity, and remand the
case to the district court for proceedings not inconsistent with
this opinion.
IV. CONCLUSION
For the foregoing reasons, the judgment of the district
court is AFFIRMED in part and REVERSED and REMANDED in part.