Synergy Blog

ERISA Subrogation Claim Barred by One Year Statute of Limitations

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. The United States District Court for the District of Arizona issued an order in Blood Systems, Inc. v. Roesler, et. al. which both time barred the subrogation/reimbursement claim and awarded attorney’s fees against the ERISA plan. This case revolves around the approximately $50,000 in medical benefits paid by the plaintiff’s self-funded ERISA qualified health plan arising from a serious motorcycle accident.

The plaintiff hired counsel and was eventually able to recover a policy limit settlement in the amount of $100,000. The self-funded ERISA plan filed suit against the plan participant and her attorneys seeking to recover the full amount of the medical benefits provided by the plan. The attorneys sought summary judgment and the court agreed finding that the self-funded ERISA plan can only look to the plan participant for repayment. Following that, the attorneys petitioned the Court to award attorney’s fees and costs associated with defending the claim asserted against them by the self-funded ERISA plan.

Along with the motion for attorney’s fees raised by plaintiff’s counsel, a statute of limitations defense was raised by the plaintiff himself against the subrogation/reimbursement claim being asserted by the ERISA plan. It is important to this argument that:

“ERISA itself does not contain a statute of limitations applicable to Plaintiffs’ claims. Therefore, the Court must borrow ‘the most analogous state statute of imitations.’  Wetzel v. Lou Ehlers Cadillac Group Long Term Disability Insurance, 222 F.3d 643, 646 (9th Cir. 2000). When borrowing a state statute of limitations, the task is to apply ‘the local time limitation most analogous to the case at hand.’ Lampf v. Gilberston, 501 U.S. 350, 355 (1991) (emphasis added).” Blood Systems, Inc. v. Roesler, et. al.

As ERISA is a federal law dealing with employer sponsored group welfare benefit plans, there is no perfectly analogous state level statute of limitations. However, the Court in this case well expresses the rule that is applied and the inability of the federal court to interpret a state statute of limitations.

“In other words, the issue is not which state statute of limitations is a “perfect” fit for the federal claim, but which statute of limitations is the 29 U.S.C. § 1002(1) (providing definition for ERISA-governed plans) closest fit. DelCostello v. Int’l Brotherhood of Teamsters, 462 U.S. 151, 171 (1983). And when picking the closest fit, a federal court must ‘accept[ ] the state’s interpretation of its own statutes of limitations.’  Barajas v. Bermudez, 43 F.3d 1251, 1258 (9th Cir. 1994) (quotation and citation omitted).”  Blood Systems, Inc. v. Roesler, et. al.

Typically courts have found that the most analogous state statute of limitations is one that controls written contacts.  (Barajas v. Bermudez, 43 F.3d 1251, 1258 (9th Cir. 1994); Blue Cross & Blue Shield of Alabama v. Sanders, 138 F.3d 1347, 1357 (11th Cir. 1998) ).  In this Arizona case there was choice of which limitations statute to use – either the six year statute that governs general written contracts, or the one year statute that controls certain employment disputes. (See, A.R.S. § 12-548, A.R.S. § 12-541).

For the Court the question was “whether an ERISA plan should be viewed as an ‘employment contract’”.  (Blood Systems, Inc. v. Roesler, et. al.).  Here the Court found that:

“Under the parties’ contract, Blood Systems agreed to provide Pauline Roesler additional compensation in the form of paying for medical care in return for Pauline Roesler’s  continued  employment.  Accordingly, … claims regarding benefits under an ERISA plan qualifies as claims under an “employment contract.”  Blood Systems, Inc. v. Roesler, et. al

In deciding to apply the one  year statute of limitations contained in A.R.S. § 12-541 the Court looked to the rationale of the Eight Circuit in Adamson v. Armco, Inc., 44 F.3d 650 (8th Cir. 1995).  In that case, the Eight Circuit “applied the two-year period to ‘all damages arising out of the employment relationship[]’”.  This court also looked to the Third Circuit who decided in Syed v. Hercules Inc., 214 F.3d 155 (3d Cir. 2000) that the appropriate statute of limitations was the one year statute.  In that case the Delaware one year statute of limitations controlled “claim[s] of wages, salary, or overtime for work, labor or personal services performed, . . . or for any other benefits arising from such work, labor or personal services performed.” (Blood Systems, Inc. v. Roesler, et. al.).

Though this is certainly very good news for the plaintiff it should be noted, as with other aspects of ERISA subrogation, plan language controls.  The District Court for Arizona expresses this principle clearly, and relies on previous Ninth Circuit holdings which state “[I]f [the self-funded ERISA plan] believe a one-year limitations period is too short, they likely can contract around it.” Wang Laboratories, Inc. v. Kagan, 990 F.2d 1126 (9th Cir. 1993) (enforcing choice of law provision in ERISA plan resulting in longer statute of limitations).

Having found that the self-funded ERISA plan’s claim for subrogation/reimbursement was time barred, the court moved onto an analysis of whether or not plaintiff’s counsel was entitled to an award of attorney’s fees. 

“ERISA authorizes an award of attorney’s fees to a party who achieves ‘some degree of success on the merits.’  Hardt v. Reliance Standard Life Ins. Co., 130 S. Ct. 2149, 2158 (2010). Once a party achieves some success, the court should not ‘favor one side or the other’ when deciding whether to award attorneys’ fees. Estate of Shockley v. Alyeska Pipeline Service Co., 130 F.3d 403, 408 (9th Cir. 1997).” Blood Systems, Inc. v. Roesler, et. al.

The Court employed a five part test to determine whether an award of fees is appropriate:

“1. [T]he degree of Plaintiffs’ culpability or bad faith,

  2. Plaintiffs’ ability to satisfy an award of fees,

  3. [W]hether an award of fees would deter others from acting in similar           

      circumstances,

  4. [W]hether [the attorneys] sought to benefit all participants and beneficiaries of an   

      ERISA plan or to resolve a significant legal question regarding ERISA, and

  5. [T]he relative merits of the parties’ positions.”

Cline v. Industrial Maintenance Engineering & Contracting Co., 200 F.3d 1223, 1235 (9th Cir. 2000) (quoting Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980)); Blood Systems, Inc. v. Roesler, et. al.)

In performing this analysis the court is cognizant that “no single . . . factor is necessarily decisive.”  Simonia v.Glendale Nissan/Infiniti Disability Plan, 608 F.3d 1118, 1122 (9th Cir. 2010). 

In this case the District Court for Arizona found that the subrogation/reimbursement claim of the self-funded ERISA plan could have been completely satisfied from the settlement proceeds disbursed to the plaintiff, yet despite this, the ERISA plan included counsel in the repayment demand which indicated a level of culpable conduct.  This along with the fact that awarding attorney’s fees would discourage this kind of behavior in the future, and the lack of merit to the ERISA plan’s claim against plaintiff’s counsel convinced the Court to award $30,700 in fees and $600.42 in costs.

This case, as well as the cases cited by this court, provides a sound basis for the wise plaintiff’s attorney to argue for a shortened statute of limitations period. Additionally, there are a myriad of cases which stand for the proposition that plaintiff’s counsel is not personally liable for repayment to the self-funded ERISA plan. If the ERISA plan or their recovery agent takes an aggressive and meritless approach as was employed here, remind them that they may become subject to a significant claim for attorney’s fees and costs.

Contact Synergy today to learn more about our lien resolution services.

Ready to schedule a consultation?

The Synergy Settlements team will work diligently to ensure your case gets the attention it deserves. Contact one of our legal experts and get a professional review of your case today.

Request Consultation
WordPress Image Lightbox