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Abstract

The Supreme Court’s recent decision in Sereboff v. Mid Atlantic Medical Services, Inc. will likely encourage ERISA-governed plans to assert claims for reimbursement more aggressively. Prior to Sereboff, plans were often unsuccessful in recovering reimbursement, in large part because § 502(a)(3) of ERISA limits the relief available to a plan seeking reimbursement to “appropriate equitable relief” necessary to redress a violation of plan provisions requiring reimbursement or subrogation. In Sereboff, however, the Court held that the claim for reimbursement at issue was a claim for “equitable relief” under § 502(a)(3) because both the nature of the relief sought and the basis for the claim were equitable. Even though the Sereboff opinion supplies some clarity as to what constitutes a claim for “equitable relief” pursuant to § 502(a)(3), the assertion of subrogation and reimbursement claims continues to raise issues that have not been uniformly resolved. For example, in Great-West Life & Annuity Insurance Co. v. Knudson, the Supreme Court acknowledged, but did not resolve, the issue of whether ERISA preempts state-law actions for reimbursement or subrogation. Lower courts have failed to resolve this issue in a consistent manner. A similar issue is whether ERISA preempts state common fund doctrines. Further complicating the question is the possibility that some state laws requiring insurers to pay a pro rata share of attorneys’ fees are contained in anti-subrogation statutes that fall within the scope of ERISA’s express preemption clause but may nevertheless be saved from preemption because they regulate insurance. Yet another issue is whether appropriate equitable relief under § 502(a)(3) should be interpreted as relief consistent with equitable principles such as the common fund doctrine. The Court recognized this issue in Sereboff, but did not resolve it. Because the Sereboffs had not properly raised the issue below, the Court refused to address their argument that equitable relief is not “appropriate” unless consistent with other equitable principles such as the made-whole rule and the common fund doctrine.

This Article attempts to resolve many of these issues, not only to clarify the law and facilitate its just interpretation, but also to provide plan participants and their counsel with some certainty so they can evaluate the value of the plan participant’s tort claim against third parties. Part II of 28 this Article explains subrogation and reimbursement. Part III of this Article explores the historical origins of the common fund doctrine and examines its modern application by the states. Part IV argues that ERISA preempts state-law claims for subrogation and reimbursement, making § 502(a)(3) claims for “appropriate equitable relief” the only mechanism by which plan fiduciaries may enforce subrogation or reimbursement provisions. Part V analyzes whether state common fund doctrines or statutes codifying the doctrine apply to § 502(a)(3) claims and concludes that many state common fund doctrines and statutes are not preempted, either because they do not fall within the scope of the express preemption clause or because they are laws regulating insurance and are therefore saved from preemption. Part VI concludes by urging courts to interpret “appropriate equitable relief” as relief consistent with the common fund doctrine.

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