ERISA Liens: Mull v. Motion Picture Industry Health Plan, Case No. 15-56246 (9th Cir., 8-1-2017):
Facts: Lenai Mull was injured in a motor vehicle accident in 2010. She then received health benefits of $147,948.38 for treatment of her injuries from the Motion Picture Industry Health Plan as a dependent of her father, Norman Mull. In 2011, Lenai received a $100,000 recovery from the third party involved in the accident. The Plan sought reimbursement, but Lenai declined. The Plan then instituted its overpayment procedures to recoup $100,000 from future benefits payable to Norman and other beneficiaries under his health benefits policy. Lenai and Norman, joined by other family member beneficiaries under their father’s policy, then sued the Plan and its Board of Directors for declaratory relief, injunctive relief, and recovery of benefits. The Board then filed a counterclaim against Lenai and Norman for equitable relief under ERISA § 1132(a)(3) seeking an equitable lien or a constructive trust to recover the $100,000 received by Lenai from the third party; with the counterclaim against Lenai dismissed by the bankruptcy court, and with the counterclaim against Normal dismissed on grounds not challenged on appeal.
Plan Documents: The Plan is a self-funded multi-employer health and welfare benefit plan established under a Motion Picture Industry Plan Agreement and Declaration of Trust (the “Trust Agreement”). The Board of Directors adopted the Motion Picture Industry Health Plan Summary Plan Description, which specified eligibility requirements, conditions for the receipt of benefits, the types of benefits, and the amount and duration of benefits provided to participants and their eligible dependents. The SPD includes a reimbursement/recoupment provision and a further provision that if reimbursement is requested but not received by the plan, the amount of benefits paid will be deducted from all future benefits payable to the participant and his or her dependents. ERISA at 2 U.S.C. § 1102(b) requires that every employee benefit plan include the following, all of which are expressly stated in the Trust Agreement, originally written in 1977 (and periodically amended or restated thereafter}: (1) a procedure for establishing and carrying out a funding policy, (2) the procedure for the allocation of responsibilities for operation and administration of the plan, and (3) a procedure for amending the plan and the identity of persons with the authority to do so.
ERISA at 2 U.S.C. § 1102(b) also requires that every employee benefit plan include the basis on which payments are made to and from the plan. The Trust Agreement Article VI, Section 3, titled “Written Plan of Benefits”, states: “After determination of the detailed basis upon which payments of Benefits is to be made pursuant to this agreement, the same shall be specified in writing by appropriate resolution of the [Board of] Directors . . . .” The SPD states: (1) “If you have selected the self-funded medical and hospital benefits provided by the [Motion Picture Industry] Helath Plan, benefit details are included in this Summary Plan Description”; (2) The Plan is operated under the provisions of an Agreement and Declaration of Trust, and all benefits provided are subject to the terms of the Trust, this Plan of Benefits and the Group Maser Contracts issued by: [various bealth benefit providers]”; and (3) “[t]his book constitutes both the Plan Document and the Summary Plan Description for the Motion Picture Industry Health Plan.”
The District Court: The district court ruled that the reimbursement/recoupment provisions were not enforceable under ERISA because they were found only in the Summary Plan Description (SPD) and not in any document that constituted the Plan Document (the ERISA plan). Mull v. Motion Picture Industry Health Plan, 51 F. Supp. 3d 910 (Dist. Court, CD California, 2014).
The Ninth Circuit Holding: The Ninth Circuit vacated the district court’s grant of summary judgment and remanded for further proceedings on remaining issues (including whether the reimbursement provision is enforceable against Lenai’s other family members receiving plan benefits), holding that a Motion Picture Industry Plan Agreement and Declaration of Trust, along with the SPD, together comprised the ERISA plan document in this case, thus the reimbursement/recoupment provision in the SPD was part of the official governing Plan Document and enforceable. “The Board carried out the Trust Agreement’s directive by approving the SPD, which supplies, in great detail, the basis for payments. - - -The natural conclusion is that “the plan” is comprised of two documents: the Trust Agreement and the SPD. - - - But by clear design reflected in the provisions of both documents, the two documents together constitute a plan. Accordingly, we conclude that the ERISA Plan is the Trust Agreement plus the SPD.”
Distinguishing Amara: The Ninth Circuit states that the U.S. Supreme Court’s decision in CIGNA Corp. v. Amara, 563 U.S. 421 (2011) not to the contrary. “Here, the SPD is part of the plan itself, and there is no conflict between the SPD and the Trust Agreement. Amara does not prohibit this type of arrangement.”
“Amara addressed only the circumstances where both a governing plan document and an SPD existed, and the plan administrator sought to enforce the SPD’s terms over those of the plan document. It did not address the situation . . . that a plan administrator seeks to enforce the SPD as the one and only formal plan document. - - - an SPD may constitute a formal plan document, consistent with Amara, so long as the SPD neither adds to nor contracdicts the terms of the existing Plan documents.” Pritchard v. Metro Life Ins. Col., 783 F.3d 1166, 1170 (9th Cir. 2015). “We interpret Amara as presenting either of two fairly simple propositions, given the factual context of that case: (1) the terms of the SPD are not enforceable when they conflict with governing plan documents, or (2) the SPD cannot create terms that are not also authorized by, or reflected in, governing plan documents.” Eugene S., 663 F.3d at 1131.
Is the Ninth Circuit Mull Decision Really All That Bad? Distinguishing Mull: Now is a good time for you to reread my previous “Liens Corner” articles, July/August and September/October 2015 “ERISA Liens: The Ninth Circuit Pritichard Case”. I believe that Pritchard v. Metro Life Ins. Col., 783 F.3d 1166 (9th Cir. 2015) remains good law and that Mull can easily be reconciled with Pritchard.
In that article, I stated my opinion that Pritchard essentially holds that: (1) The ERISA Plan may in writing incorporate by reference other documents, such as the long-term disability insurance certificate in the Pritchard case, as part of the official governing Plan Document. If this is done, then such documents are part of the official governing Plan Document which is a binding contract between the ERISA Plan and its Plan participants. (2) If the ERISA Plan has not in writing incorporated by reference the SPD as part of the official governing Plan Document, then the SPD is merely an informational summary with no contractual effect. Although the Ninth Circuit in Mull does not use the term “incorporation by reference”. this is exactly what they have done here. Again, the Trust Agreement Article VI, Section 3, titled “Written Plan of Benefits”, states: “After determination of the detailed basis upon which payments of Benefits is to be made pursuant to this agreement, the same shall be specified in writing by appropriate resolution of the [Board of] Directors . . . .”. This is clearly is an incorporation by reference provision.
In the Pritchard article, I stated my opinion that Pritchard left open the argument that SPD(s) cannot be incorporated by reference as part of the official governing Plan document, because ERISA expressly defines the SPD(s) and “written instrument”/official governing Plan Document as separate documents. I never thought this argument would prevail in the Ninth Circuit, and I was right. Mull clearly holds that SPD(s) can be incorporated by reference as part of the official governing Plan Document regardless of Mull’s not using the express term “incorporation by reference.
In the Pritchard article, I stated my opinion that the Plan Administrator’s or other Plan official’s statement that the SPD is part of or functions as the official governing Plan Document is of no legal effect when there is language in the SPD to the contrary, such as the SPD stating that “official plan documents . . . remain the final authority” and “shall govern” in the event the SPD’s terms conflict with those of official Plan Documents.
However, in Mull, there is no such distinguishing language. In fact, the SPD states the opposite, that “[t]his book constitutes both the Plan Document and the Summary Plan Description for the Motion Picture Industry Health Plan.”