On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil Action No. 94-cv-07569)
Before: SLOVITER, Chief Judge, GREENBERG and SCIRICA, Circuit Judges
This appeal involves an ERISA plan's subrogation rights, specifically whether a plan must contribute to the legal expenses of a plan participant's recovery against a third party. We addressed this issue in Ryan by Capria-Ryan v. Fed. Express Corp., 78 F.3d 123 (3d Cir. 1996), decided after the district court here rendered judgment. In this appeal we are asked to distinguish Ryan or in the alternative to reconsider our holding in Ryan.
Bollman Hat Company sponsors a self-insured, ERISA-regulated employee benefit plan. After a Bollman employee, Kevin Root, was injured in a motorcycle accident, the Plan paid him $100,197.92 for his medical expenses. Thereafter, Root sued the third party responsible for his personal injuries and obtained a $215,000.00 settlement.
Bollman sought full reimbursement from Root in accordance with Section(s) 10.8 of the Plan, which provides:
In the event of any payment under the Plan to any covered person, the Plan shall, to the extent of such payment, be subrogated, unless otherwise prohibited by law, to all the rights of recovery of the covered person arising out of any claim or cause of action which may accrue because of alleged negligent conduct of a third party. Any such covered person hereby agrees to reimburse the Plan for any payments so made hereunder out of any monies recovered from such third party as the result of judgment, settlement, or otherwise . . . .
(emphasis added). Root complied with Bollman's request for reimbursement in part, but withheld $30,507.13 to pay a portion of the attorney's fees and costs incurred in obtaining the third party settlement.
Bollman contends the terms of the Plan require full reimbursement and do not allow Root to withhold money for attorney's fees. Bollman also maintains Root expressly agreed to full reimbursement when he signed a Reimbursement Agreement before receiving the $100,197.92 from the Plan. The Reimbursement Agreement provides:
I, Kevin T. Root, understand and acknowledge that my medical plan has a reimbursement provision which provides that medical benefits paid under the plan are to be reimbursed up to the amount of such benefits paid from any payments, ...