Paul Kress v. Food Employers Labor Relations Association

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
 PAUL KRESS,
Plaintiff-Appellant,
v.
FOOD EMPLOYERS LABOR RELATIONS
ASSOCIATION AND UNITED FOOD AND
COMMERCIAL WORKERS HEALTH AND No. 03-2269 
WELFARE FUND,
Defendant-Appellee,
and
GIANT FOOD STORES, INCORPORATED,
Defendant. 
Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Deborah K. Chasanow, District Judge.
(CA-02-2159-DKC)
Argued: October 26, 2004
Decided: December 10, 2004
Before WILKINSON and TRAXLER, Circuit Judges, and
HAMILTON, Senior Circuit Judge.
Affirmed by published opinion. Judge Wilkinson wrote the opinion,
in which Judge Traxler and Senior Judge Hamilton joined.
COUNSEL
ARGUED: Louis Fireison, Bethesda, Maryland, for Appellant. Terra
Elswick Castaldi, MORGAN, LEWIS & BOCKIUS, L.L.P., Wash-

-- 1 of 11 --

ington, D.C., for Appellee. ON BRIEF: Darin L. Rumer, LOUIS
FIREISON & ASSOCIATES, P.A., Bethesda, Maryland, for Appel-
lant. Harry W. Burton, Donald L. Havermann, MORGAN, LEWIS &
BOCKIUS, L.L.P., Washington, D.C. for Appellee.
OPINION
WILKINSON, Circuit Judge:
Paul Kress, a participant in his employer’s welfare benefit plan,
was injured by a third party in an automobile accident away from
work. Under such circumstances, the plan will advance participants
accident-related expenses. The Summary Plan Description empha-
sizes that such payments are in the nature of a "service" to the plan’s
members, because "[r]ecovery from a third party can take a long
time."
In order to receive the advance, participants and their attorneys
must execute a subrogation agreement to reimburse the plan "before
all others" from any third-party recovery. Kress’s attorney refused to
sign the agreement. After the 180 day time limit expired, the claim
for the advance was denied. Kress brought suit, alleging that denying
benefits because of the attorney’s refusal to sign was wrongful under
ERISA, 29 U.S.C. § 1001 et seq. The district court granted summary
judgment to the plan. Because the SPD was clear and in no way vio-
lated ERISA, we affirm.
I.
A.
The Food Employers Labor Relations Association & United Food
and Commercial Workers Health and Welfare Fund ("Fund") is a
multi-employer welfare benefit plan governed by ERISA. It resulted
from collective bargaining between unions and the employers. The
Fund is administered by its trustees, half of whom are appointed by
the unions, and half by the employers. The governing plan document,
the Summary Plan Description ("SPD"), grants the trustees "the dis-
2 KRESS v. FOOD EMPLOYERS LABOR RELATIONS

-- 2 of 11 --

cretion to interpret the terms of this document" and to "interpret and
apply its terms in situations not expressly addressed" in the SPD.
Participation in the Fund depends upon being "employed" by a par-
ticipating employer. There are six ways to maintain this status: (1)
actively working; (2) being on paid vacation; (3) being on jury duty;
(4) collecting accident and sickness benefits; (5) collecting workers’
compensation from a participating employer; and (6) being on leave
covered by the Family and Medical Leave Act. Dependents of partici-
pants are covered as well, so long as the participant maintains his or
her "employed" status.
Although "[b]enefits are not payable if the disability is due to an
injury or sickness which, as determined by the Trustees, is . . . the
responsibility of" a third party, the Fund does assist its participants in
such situations by advancing them funds to cover the extraordinary
expenses. The SPD conditions such accident and sickness benefits on
participants and their attorneys signing a Subrogation Agreement
("Agreement"). The SPD and the Agreement require that the Fund be
reimbursed "in full" if the participant recovers from a third party; they
also allow the Fund to litigate the suit if the individual does not. The
SPD provides:
Waiting for a third party to pay for these injuries may be
difficult. Recovery from a third party can take a long time
(you may have to go to court), and your creditors will not
wait patiently. Because of this, as a service to you, the Fund
will pay your (or your eligible dependent’s) expenses based
on the understanding that you are required to reimburse the
Fund in full from any recovery you or your eligible depen-
dent may receive, no matter how it is characterized. This
process is called "subrogation."
. . .
The Fund extends benefits to you and your dependents
only as a service to you. The Fund must be reimbursed if
you obtain any recovery from another person or entity’s
insurance coverage.
3 KRESS v. FOOD EMPLOYERS LABOR RELATIONS

-- 3 of 11 --

. . . [Y]our acceptance of benefits from the Fund means
that you have agreed to reimburse the Fund — in full — for
any benefits it has paid from any settlement, judgement,
insurance, or other payment you, your eligible dependent, or
your attorney receive as a result of your accident. It does not
matter how these amounts are characterized, why they are
paid, or whether or not these other payments are specified
as being for your Accident and Sickness or Medical bills.
The Fund requires that you and/or your eligible dependent
(if applicable) and your or your dependent’s attorney fill
out, sign, and return to the Fund office a subrogation agree-
ment that includes a questionnaire about the accident. Your
claim will not be deemed complete and will be pended for
payment until your fully executed subrogation agreement is
received by the Fund office. If it is not completed in a
timely fashion, your claim will be denied.
(emphasis added). The SPD requires that the Subrogation Agreement
be "fully executed" within 180 days. The Agreement, though not the
SPD, explicitly states that reimbursement of the Fund has a priority
"before all others."
B.
Partly because he valued the benefits the Fund would provide him
and his dependents, Paul Kress chose to work for Giant. He was an
employee at a Giant grocery store in Silver Spring, Maryland, and he
was a Fund participant.
On November 14, 2000, Kress was injured by a third party. He
"was stopped at a traffic light when [he] was hit from behind due to
no fault of [his own]." After the accident, Kress was no longer
actively working. Therefore, of the six methods of maintaining his
connection to the Fund, Kress now only qualified on the basis of his
receipt of accident and sickness benefits.
Although it denied Kress’s claim for benefits because his injury
was caused by a third party, the Fund sent Kress the Agreement so
that he could receive his expenses subject to its terms. Kress indicated
that he wished to avail himself of the subrogation option. In anticipa-
4 KRESS v. FOOD EMPLOYERS LABOR RELATIONS

-- 4 of 11 --

tion of a properly completed Agreement, the Fund advanced Kress
over $1500. He signed the Agreement, but his attorney refused, writ-
ing to the Fund that "attorney fees and related costs must be paid
first." The Fund then contacted Kress, warning him that his claim was
in jeopardy — but that he could rectify the situation by directing his
attorney to sign the Agreement. This did not happen, and the Fund
notified Kress that he was therefore not eligible for accident and sick-
ness benefits. Because of this, his last connection to the Fund was
severed, and his and his dependents’ benefits were terminated.
In May 2002, Kress filed suit in Maryland state court. The action
was subsequently removed to the U.S. District Court for the District
of Maryland. Kress sought a declaratory judgment, recovery of plan
benefits, and damages for breach of fiduciary duty. The gravamen of
his claims was that the SPD did not — and could not legally —
require his attorney’s signature on an Agreement as a condition for
coverage. The district court, concluding that the SPD did in fact
require precisely that, and that ERISA in no way impeded such a
requirement, granted summary judgment for the Fund in September
2003. Kress v. Food Employers Labor Relations Ass’n, 285 F. Supp.
2d 678 (D. Md. 2003). This appeal, which Kress limits to the question
of whether the Fund can condition the receipt of benefits on the attor-
ney’s signature, followed.
II.
We review a grant of summary judgment de novo. Bailey v. Blue
Cross & Blue Shield, 67 F.3d 53, 56 (4th Cir. 1995). When an ERISA
plan denies benefits, that decision is reviewed under an abuse of dis-
cretion standard, if — as here — plan administrators are granted dis-
cretionary authority to interpret the plan. Firestone Tire & Rubber Co.
v. Bruch, 489 U.S. 101, 115 (1989). In the case before us, however,
the Fund’s discretionary authority is not implicated, because the terms
of the plan itself are clear.
III.
A.
Kress argues that the SPD does not authorize the Fund to condition
benefits on the attorney signature since "[t]he specific terms of that
5 KRESS v. FOOD EMPLOYERS LABOR RELATIONS

-- 5 of 11 --

agreement are not found within" the SPD. It follows, he claims, that
the SPD is ambiguous with respect to the contents of the Subrogation
Agreement — in particular, the Agreement’s requirement that the
plaintiff reimburse the Fund from any tort recovery "before all oth-
ers." Therefore, he argues, the Fund cannot "unilaterally" enforce the
Agreement, but must negotiate its contents. We think, however, that
the SPD clearly establishes the Fund’s priority status.
We first turn to the plain language of the SPD to determine whether
it in fact authorizes the Fund’s actions. "[T]he plain language of an
ERISA plan must be enforced in accordance with ‘its literal and natu-
ral meaning.’" United McGill Corp. v. Stinnett, 154 F.3d 168, 172
(4th Cir. 1998) (quoting Health Cost Controls v. Isbell, 139 F.3d
1070, 1072 (6th Cir. 1997)).
The SPD emphasizes that participants must reimburse the Fund.
The SPD employs such phrases as reimbursement "in full," from "any
recovery," "no matter how it is characterized." The SPD insists that
funds are advanced "only as a service to you," that the reimbursement
must come from "any recovery," and that "acceptance of benefits"
connotes agreement to reimburse "in full" from "any settlement, judg-
ment, insurance, or other payment" received, including payments
"your attorney receive[s]." Only someone determined to seek loop-
holes could read this refrain to mean anything other than that the Fund
refuses to subsidize any part of the litigation, including attorney fees.
The SPD does not explicitly use the phrases "attorney fees" or "be-
fore all others." But this does not render it ambiguous. "[U]nqualified
plan provisions need not explicitly rule out every possible contin-
gency in order to be deemed unambiguous." Harris v. Harvard Pil-
grim Health Care, Inc., 208 F.3d 274, 278 (1st Cir. 2000). SPDs —
Summary Plan Descriptions — are required by statute to "be written
in a manner calculated to be understood by the average plan partici-
pant, and shall be sufficiently accurate and comprehensive to reason-
ably apprise such participants and beneficiaries of their rights and
obligations under the plan." 29 U.S.C. § 1022(a) (2000). The SPD
plainly requires both the attorney and the participant to sign the
Agreement and that the Fund’s own recovery be "in full." If others
had a priority — particularly the very attorney whose signature is
required for a complete claim — the Fund often could not be reim-
6 KRESS v. FOOD EMPLOYERS LABOR RELATIONS

-- 6 of 11 --

bursed in full. The SPD’s meaning could therefore hardly be clearer.
We will not create a Catch-22, under which a plan is either hopelessly
complicated and legalistic — in violation of § 1022(a) — or "ambigu-
ous" and subject to unwarranted judicial scrutiny.
B.
Since the SPD is unambiguous, Kress must turn to ERISA. He
argues that the Fund cannot require an attorney to be bound by an
Agreement, even if the SPD clearly requires it. While the Fund may
stand in his shoes, Kress says, it cannot use subrogation to stand in
his attorney’s shoes. According to Kress, this would allow the Fund
to benefit from litigation proceeds without sharing in litigation
expenses.
We adhere to plan documents unless they contravene ERISA or
other binding authority. But ERISA "does not mandate any minimum
substantive content for [welfare benefit] plans." Stinnett, 154 F.3d at
172. "[E]mployers have large leeway to design disability and other
welfare plans as they see fit." Black & Decker Disability Plan v.
Nord, 538 U.S. 822, 833 (2003). Since third-party accident and sick-
ness benefits are not even covered by the Fund, nor required by
ERISA, it makes little sense to argue that ERISA precludes imposing
conditions on the receipt of benefits that are in effect an interest-free
loan.
Indeed, "ERISA neither requires a welfare plan to contain a subro-
gation clause nor does it bar such clauses or otherwise regulate their
content." Ryan by Capria-Ryan v. Federal Express Corp., 78 F.3d
123, 127 (3d Cir. 1996). Subrogation clauses requiring reimbursement
are, in fact, quite common. See Amber M. Anstine, Comment, ERISA
Qualified Subrogation Liens: Should They Be Reduced to Reflect a
Pro Rata Share of Attorney Fees?, 104 Dick. L. Rev. 359, 360 (2000).
ERISA allows plans broad discretion to draft such clauses. Plans
could forego any reimbursement unless and until the participant is
"made whole." They could provide for attorney fees to be paid in full
before the plan is reimbursed at all. They could share the expense of
legal fees in a pro-rata fashion, proportionally reducing their reim-
bursement to reflect the attorney fee. They could adopt a "reasonable
fee" policy, meaning that they will subtract from the amount of the
7 KRESS v. FOOD EMPLOYERS LABOR RELATIONS

-- 7 of 11 --

required reimbursement whatever they would have spent in legal fees
to recover the advance they had paid. Or, as here, they may require
that attorney fees be paid only after the Fund is reimbursed in full. See
Sunbeam-Oster Co., Inc. Group Benefits Plan v. Whitehurst, 102 F.3d
1368, 1372-74 (5th Cir. 1996) (discussing different possibilities but
recognizing that it is the language of the plan that determines which
applies).
As shown above, a plain reading of the Fund’s SPD must acknowl-
edge an unqualified right to reimbursement. We have already noted
that "[w]here . . . the language of the Plan does not qualify the right
to reimbursement by reference to the costs associated with recovery,
we are bound to enforce the contractual provisions as drafted." Stin-
nett, 154 F.3d at 173. We held in Stinnett that when plan language
unambiguously requires full reimbursement, the participant may not
withhold a portion of that reimbursement in the name of covering
attorney fees. This does not depend on any particular amount of
recovery. Absent some provision in the SPD or Agreement for fees,
the Fund’s priority is paramount — it must recover before all others.
See also Harris, 208 F.3d at 277 (listing cases agreeing with the "ma-
jority view [ ] that an ERISA plan need not contribute to attorney fees
where its plain language gives it an unqualified right to reimburse-
ment").
The addition of an attorney signature requirement is a difference of
degree, not of kind. In Walker v. Wal-Mart Stores, Inc., 159 F.3d 938
(5th Cir. 1998), the plan participant had received over $40,000 from
the plan, but settled her case for $12,500. The plan provision stated
that it had the right to "recover benefits previously paid by the PLAN
to the extent of any and all of the . . . payments resulting from a judg-
ment or settlement, or other payment or payments" by responsible
third parties. Id. at 940 (capitals in original). Although there was no
attorney-signed subrogation agreement, as the Fund requires here, the
Fifth Circuit still found that the plan unambiguously declined to pro-
vide for a "reduction of its subrogation lien for payment of attorneys’
fees or costs." Id.
Since circuit law interpreting ERISA plainly permits a plan to
recoup any advance it has made to a participant before an attorney
makes a claim on a subsequent award, we see no reason to impede
8 KRESS v. FOOD EMPLOYERS LABOR RELATIONS

-- 8 of 11 --

a plan from requiring pre-commitment to this state of affairs. Con-
gress placed no restrictions in ERISA on reimbursement provisions.
Were we to import such limits now, we would contravene ERISA’s
purpose of "promot[ing] the interests of employees and their benefi-
ciaries in employee benefit plans," Shaw v. Delta Air Lines, Inc., 463
U.S. 85, 90 (1983), because such restrictions would surely discourage
plan sponsors from providing the very sorts of accident and sickness
benefits that the Fund offered to Kress.
C.
Kress insists finally that the Fund’s policy is "unconscionable" and
will discourage litigation. He believes that attorneys will not take
cases when their fees are subordinated to plan reimbursement,
because this forces attorneys to bear the costs of litigation while the
Fund need not share the burden.
But this purported unfairness is nothing more than commonplace
economic calculus. Attorneys considering taking a case on contin-
gency commonly factor the likelihood of success and the magnitude
of recovery into their decision. "[M]any tort claims involve consider-
able risk and insufficient reward. Attorneys, however, carefully
screen these claims and reject a large portion, includ[ing] most
denominated as high risk." Lester Brickman, The Market for Contin-
gent Fee-Financed Tort Litigation: Is It Price Competitive?, 25 Car-
dozo L. Rev. 65, 98 (2003). A given plan’s subrogation rules
obviously make the payment of fees more or less likely, and prudent
attorneys would factor those rules into their calculus as well. If the
participant and his attorney conclude that private litigation will not
produce a sufficient recovery to make the litigation worthwhile, they
need not bring the case. Often, however, an attorney might estimate
that a jury award or settlement — with possible pain and suffering
damages — will far exceed the amount to be reimbursed to a plan.
This is the same calculation commonly made in non-ERISA contexts,
but with one further factor to add to the equation.
In the final analysis, policy arguments such as these all go to the
economic judgment of the Fund, and should be directed to its trustees,
or to Congress, rather than to the federal courts. After all, ERISA gen-
erally leaves it to plan sponsors — not courts — "to adopt, modify,
9 KRESS v. FOOD EMPLOYERS LABOR RELATIONS

-- 9 of 11 --

or terminate welfare plans." Curtiss-Wright Corp. v. Schoonejongen,
514 U.S. 73, 78 (1995). If the Fund concludes that its subrogation
rules are too severe and that they harm, rather than help, its bottom
line, it may choose to alter them. In all events, ERISA does not make
that choice for it.
IV.
Throughout this litigation, Kress’s arguments have proceeded on
the premise that the Fund’s provisions are somehow inimical to par-
ticipants’ interests.1 But that is hardly the only interpretation that one
could give them. The Fund has no obligation to provide advance
expenses to someone injured outside the workplace by a third party,
yet it does so to tide participants over difficult times. The provisions
here broadened rather than narrowed the options for Fund partici-
pants. Nothing required Kress to accept the subrogation option; he
was free to reject it and commence litigation at once, with no obliga-
tions whatever to the Fund.2 But if he did accept the Fund’s offer, and
then recovered in tort, it was not wrongful for the Fund to seek to
recoup this expenditure to provide for future participants who may
find themselves in similarly straitened circumstances. The Fund "must
serve the best interests of all Plan beneficiaries, not just the best inter-
est of one potential beneficiary." Ellis v. Metropolitan Life Ins. Co.,
126 F.3d 228, 234 (4th Cir. 1997).
Moreover, the Fund was clear and direct about its policies. The
1The termination of his dependents’ benefits has been called "retalia-
tory," for instance. The Fund, however, was created through the collec-
tive bargaining process and its trustees are equally divided between
union and employer representatives. And the SPD plainly notes that the
Fund covers dependents only if the participant remains "employed."
Since the last connection of Kress to the Fund was severed when his
accident and sickness benefits claim was denied due to counsel’s refusal
to sign the Subrogation Agreement, termination of his dependents’
remaining benefits followed as a matter of course under the plan’s terms.
2Even if he did accept the advance, he was under no obligation to sue.
If he took the money and did not file suit, he would never have to reim-
burse the Fund. In such situations, the SPD allows the Fund to file suit
at its discretion — again, with no cost to the participant.
10 KRESS v. FOOD EMPLOYERS LABOR RELATIONS

-- 10 of 11 --

SPD conditions accident and sickness benefits on the Fund’s right to
unqualified reimbursement. Because the plan is clear, and because
nothing in ERISA or any other statute precludes it, the judgment of
the district court is
AFFIRMED.
11 KRESS v. FOOD EMPLOYERS LABOR RELATIONS

-- 11 of 11 --