Administrative Committee of the Wal-Mart Stores, Inc. v. Varco

338 F.3d 680
CourtCourt of Appeals for the Seventh Circuit
DecidedJuly 29, 2008
DocketNos. 02-3879, 02-1124 and 02-1143
StatusPublished
Cited by1 cases

This text of 338 F.3d 680 (Administrative Committee of the Wal-Mart Stores, Inc. v. Varco) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Administrative Committee of the Wal-Mart Stores, Inc. v. Varco, 338 F.3d 680 (7th Cir. 2008).

Opinion

MANION, Circuit Judge.

I.

Clara Vareo, a Wal-Mart employee, incurred medical expenses due to a car accident, which were paid by Wal-Mart’s health and welfare benefit plan. After Vareo recovered damages for her injuries in a state court action, the Wal-Mart Plan Committee sought restitution for the medical expenses it had paid from Vareo and her attorney, Laurence Dunford. The district court granted a preliminary injunction in favor of the Committee, preventing Vareo and her attorney from disbursing those funds or further adjudicating the matter in state court. Vareo and Dunford appealed the preliminary injunction. The district court then granted summary judgment in favor of the Committee, ordering that the medical expenses be remitted to the Committee, less its proportional share of Dunford’s attorney’s fees pursuant to Illinois’ common fund doctrine. The Committee appealed the order diminishing its reimbursement due to the application of the common fund doctrine. The cases were consolidated. We affirm in part and reverse in part.

II.

On September 24, 2000, Clara Vareo sustained injuries in an automobile collision in Orland Park, Illinois. At that time she was employed by Wal-Mart Stores, Inc. (‘Wal-Mart”), which provides its employees benefits through the Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan (the “Plan”). The Plan is a self-funded employee welfare benefit plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1461 and administrated by the Administrative Committee of the Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan (the “Committee”). Pursuant to the terms of the Plan, $18,865.72 in medical benefits was immediately paid on behalf of Vareo following the accident.

Significantly, for the purposes of appeal, the Plan includes a provision stating that the Committee has a right to “recover or subrogate 100 percent of the benefits paid or to be paid by the Plan on your behalf and/or your dependents to the extent of ... [a]ny judgment, settlement or any payment made or to be made, relating to the accident, including but not limited to other insurance.” The Plan further provides that it “does not pay for nor is responsible for the participant’s attorney’s fees. Attorney’s fees are to be paid solely by the participant.”

The procedural intricacies of this case began when Vareo retained Laurence J. Dunford to represent her against Kristopher Lapsis, the other driver responsible for her injuries, and to make a claim [684]*684against All-State Insurance Company, her insurer. She contracted with Dunford to pay him a contingency fee of one-third of any recovery. Vareo then filed a tort action in Illinois state court against Lapsis. In October 2001, in contemplation of settlement, Vareo sought adjudication of various liens on the lawsuit, including that of the Plan. In response, the Committee asked the state court to postpone adjudication of its lien and filed a notice for removal in federal court. The district court promptly remanded the case back to state court finding no subject matter jurisdiction. Varco v. Lapsis, 172 F.Supp.2d 985, 988-92 (N.D.Ill.2001).1 Not content with this course of events, the Committee filed a second action in federal court on October 29, 2001, asserting claims under § 502(a)(3)(B), 29 U.S.C. § 1132(a)(3), for “appropriate equitable relief’ including an injunction, declaration of rights, specific performance, imposition of a constructive trust and restitution against Vareo and Dunford. The Committee also moved to have related matters in state court stayed and Vareo and Dunford enjoined from proceeding with further state court litigation.

While these suits were proceeding, Var-eo, through her attorney, received settlement proceeds of $100,000. The settlement proceeds were disbursed by Dunford to Vareo, himself, and other lienholders. In anticipation of litigation, Vareo established a reserve bank account in her name in the amount of $34,034.55 (the initial amount the parties believed to have been spent in medical bills under the Plan) to pay the Committee when the courts resolved the question of what amount was due and owing. Dunford, meanwhile, took his full portion of attorney’s fees from the settlement fund ($22,000) when he disbursed the monies, thereby leaving all of the disputed monies in Varco’s possession. Administrative Committee of Wal-Mart Stores, Inc. v. Varco, No. 01 C 8277, 2002 WL 31189717 *2, n. 5 (N.D.Ill., Oct.02, 2002) (“Vareo III”). At the end of December 2001, Dunford and Vareo returned to state court and filed a motion to adjudicate Wal-Mart’s lien. In response, the Committee filed yet another motion in federal court pursuant to the Anti-Injunction Act, 28 U.S.C. § 2283, the All Writs Act, 28 U.S.C. § 1651, and “the Princess Lida doctrine” to enjoin the state court from adjudicating the hens.

The Committee was successful in both of its motions before the district court. On December 24, 2001, it obtained a temporary restraining order from the district court and a preliminary injunction preventing Vareo and Dunford from disbursing the $34,035.55 until “the rights of [the Committee] have been determined by [the district court].” Administrative Committee of Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan v. Varco, No. 1:01-CV-8277, 2001 WL 1772318, *3 (N.D. Ill., Dec 21, 2001) (“Vareo I”).2 On January 14, 2001, the court entered an injunction barring Vareo from proceeding with further adjudication of the Committee’s lien in state court. Administrative Committee v. Varec & Dunford, No. 01 C 8277, 2002 WL 47159, *3-4 (N.D.Ill. Jan.14, [685]*6852002) (“Vareo IP). The court also dismissed all of the Committee’s claims for equitable relief with the exception of its “claim for the imposition of constructive trust on particular property in the hands of the defendants and for the pendent state law claims.” Id. at *4. After the district court stayed the state court proceedings and enjoined Dunford and Vareo from proceeding in state court, the Committee removed for the second time Var-co’s personal injury action, as all of the hens on the settlement, except for the Committee’s, had been paid. The district court found that it properly had jurisdiction to adjudicate the Committee’s claim this time, for reimbursement as “equitable relief’ under § 502(a)(3)(B), because the Committee was seeking a constructive trust over Varco’s reserve account. Vareo and Dunford then filed a timely interlocutory appeal of the injunctions arguing, in relevant part, that the district court lacked jurisdiction over the claims because the Committee was seeking legal relief based on the language of the Plan.

While the injunction was pending on appeal, the district court proceeded to address the merits of the case. On October 2. 2002 the district court granted the Committee’s motion for summary judgment, holding that the Plan was due reimbursement of the paid medical expenses. Vareo III at *4-6. The court also held that, pursuant to Illinois’ common fund doctrine, the Committee must bear its proportional share of Dunford’s attorney fee.

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