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Media Alerts - ACS Recovery Services, Inc. v. Griffin - Fifth Circuit
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May 13, 2013
  ACS Recovery Services, Inc. v. Griffin - Fifth Circuit
Headline: En Banc Fifth Circuit Rules that Employer-Sponsored Health Insurance Plan May Obtain Reimbursement of Medical Expenses from Employee's Special Needs Trust.

Area of Law: ERISA

Issue Presented: Whether a fiduciary seeks permissible equitable relief under ERISA § 502(a)(3)(B) when it pursues reimbursement for previously paid medical expenses from an employee's Special Needs Trust.

Brief Summary: Two ERISA plan fiduciaries filed suit against an employee, the employee's ex-wife, the employee's Special Needs Trust, and the employee's brother in the U.S. District Court for the Eastern District of Texas. The fiduciaries sought reimbursement, pursuant to the terms of the plan, for past medical expenses paid by the plan after the employee settled a tort lawsuit against the parties responsible for his injuries. The district court ruled against the fiduciaries with respect to every party. The fiduciaries appealed, and the U.S. Court of Appeals for the Fifth Circuit affirmed. The fiduciaries then sought and obtained en banc review. The Fifth Circuit, sitting en banc, held that the fiduciaries could sue the Special Needs Trust because the terms of the plan created an equitable lien by agreement that attached to the settlement proceeds.

Extended Summary: Larry Griffin was injured in an automobile accident while he was employed by FK Industries, Inc. The company's healthcare plan paid Griffin's medical expenses. Subsequently, Griffin filed suit against the third parties responsible for his injuries. When Griffin filed suit, ACS Recovery Services, Inc., the healthcare plan administrator, informed Griffin's lawyer that the plan had a first lien upon any recovery in order to reimburse the plan for medical expenses previously paid on Griffin's behalf. Griffin's tort lawsuit then settled. Griffin's lawyer attempted to legally avoid the plan's equitable lien. He did so by arranging for the tort defendant's insurer to purchase an annuity. That annuity made monthly payments to a statutory Special Needs Trust. The trust, with Griffin's brother serving as trustee, then made monthly payments to Griffin.

FK Industries and ACS filed suit as ERISA plan fiduciaries against Griffin, his ex-wife, his brother, and the Special Needs Trust in the U.S. District Court for the Eastern District of Texas. The fiduciaries sought a constructive trust upon settlement funds sufficient to reimburse the plan. The district court, approving a magistrate judge's report and recommendation, rejected the fiduciaries' claims for relief. Specifically, the court denied the fiduciaries' motion for summary judgment and granted the trust's cross motion for summary judgment. The fiduciaries then appealed to the U.S. Court of Appeals for the Fifth Circuit. After a Fifth Circuit panel affirmed the district court, the fiduciaries obtained en banc review.

The en banc court concluded that the fiduciaries sought "appropriate equitable relief" from the trust under ERISA § 502(a)(3)(B) because the terms of the plan created an equitable lien by agreement. Griffin's healthcare plan expressly provided itself with a first lien to repay medical expenses upon any recovery from a third party. Griffin then recovered from a third party when he approved the settlement. As soon as Griffin approved the settlement, an equitable lien by agreement attached to the proceeds of the settlement. Based on Supreme Court precedent, enforcement of a lien by agreement is a form of appropriate equitable relief under ERISA § 502(a)(3)(B). Accordingly, the district court erred and the en banc court rendered judgment to that effect.

For the full opinion, please see:

Panel: En Banc

Argument Date: 09/19/2012

Date of Issued Opinion: 05/07/2013

Docket Number: No. 11-40446

Decided: Reversed in part, affirmed in part, and remanded

Case Alert Author: Louis Holzer

Counsel: David Alan Belofsky, David A. Belofsky & Associates, Ltd., for Plaintiffs-Appellants ACS Recovery Services, Inc. and FKI Industries, Inc. Leland Alan Reinhard, for Defendants-Appellees Larry Griffin, Willie Earl Griffin, and Larry Griffin Special Needs Trust. Laura D. Schmidt, Downs & Stanford, P.C., for Amicus Curiae National Association of Subrogation Professionals. David I. Schiller, Gibson, Dunn, & Crutcher, L.L.P., for Amicus Curiae IBEW-NECA Southwestern Health and Benefit Fund.

Author of Opinion: Judge Jones, joined by Chief Judge Stewart and Judges Jolly, Davis, Smith, Clement, Owen, Southwick, Graves, and Higginson (Judge Prado, concurring in part and dissenting in part; Judge Haynes, joined by Judges Reavley, Dennis, and Elrod, concurring in part and dissenting in part).

Case Alert Circuit Supervisor: Aaron-Andrew P. Bruhl

    Posted By: Aaron Bruhl @ 05/13/2013 11:39 PM     5th Circuit  

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