Harris v. Harvard Pilgrim Health Care Inc., 208 F.3d 274 (1st Cir. 2000)-This appeal concerned a subrogation agreement. Under the agreement, plan members Michael and Wendy Harris had to reimburse the plan money recovered in a tort action against a third party. One issue was whether a plan could seek full reimbursement for amounts recovered, or only the amount minus the plan members' attorneys' fees in pursuing the tort action. This court noted "among the courts of appeals which have considered it, the majority view is that an ERISA plan need not contribute to attorney fees where its plain language gives it an unqualified right to reimbursement." This court followed these precedents, and vacated the district court's order directing HPHC to defray a pro rata share of the Harrises' attorney fees.
A
second issue was whether the Harrises could refuse to pay reimbursement at all
(or at least lessen the amount) under the reasoning that settlement did not
result in their being "made whole."
The Harrises argued that since the tort settlement compensated them for
only two-thirds of their actual losses in the motorcycle accident, they either
owe HPHC nothing or at most $ 68,582.86. (Their
attorney had settled for two-thirds on the basis of a trial risk-calculation
that factored in Mr. Harris' intoxication at the time of the accident.)
This
court declined to adopt the "make whole" doctrine as federal common
law. It held that where the terms
of an ERISA plan confer upon it an unqualified entitlement to reimbursement, the
ERISA plan administrator need not demonstrate that the settlement fund, from
which it seeks reimbursement, fully compensated the plan member.
In addition to its reluctance to superimpose substantive provisions on
ERISA plans, this court was unwilling to adopt the "make whole"
doctrine as the ERISA default rule because of the threat of raising premiums and
the danger of inappropriate incentives for further litigation to determine
whether settlement made the plaintiff whole.
Lastly, this court affirmed that ERISA preempts the Harris' state law claims of deceptive and unfair trade practices. "ERISA will be found to preempt state-law claims if the trier of fact necessarily would be required to consult the ERISA plan to resolve the plaintiff's claims." Here, the plan stated that HPHC could seek full reimbursement.