Humana Health Plan, Inc. v. Nguyen

785 F.3d 1023

HUMANA HEALTH PLAN, INCORPORATED, Plaintiff–Appellee

v.Patrick NGUYEN, Defendant–Appellant.

No. 14–20358.

United States Court of Appeals, Fifth Circuit.

May 11, 2015.

Thomas H. Lawrence, III (argued), John Gordon Howard, Esq. (argued), Lawrence & Russell, P.L.C., Memphis, TN, for Plaintiff–Appellee.

Peter K. Stris, Esq. (argued), Dana Erin Berkowitz, Victor Artun O'Connell, Stris & Maher, L.L.P., Los Angeles, CA, David Hall Abney, II, Law Office of David H. Abney, II, Frankfort, KY, Amar B. Raval, Plummer Law Group, Houston, TX, for Defendant–Appellant.

Appeal from the United States District Court for the Southern District of Texas.

Before JOLLY, WIENER, and CLEMENT, Circuit Judges.

Opinion

EDITH BROWN CLEMENT, Circuit Judge:

Defendant-appellant Patrick Nguyen (“Nguyen”) appeals from the district court's order granting summary judgment in favor of plaintiff-appellee Humana Health Plan, Inc. (“Humana”). For the reasons explained below, we REVERSE the judgment of the district court and REMAND for further proceedings consistent with this opinion.

Facts and Proceedings

Nguyen is a participant in the API Enterprises Employee Benefits Plan (the “Plan”), an ERISA-governed employee welfare plan established by API Enterprises, Inc. (“API”). API entered into a Plan Management Agreement (“PMA”) with Humana, through which Humana agreed to serve as “Plan Manager” and to provide various administrative services to the Plan. Two features of the PMA are particularly relevant here.

First, the PMA made clear that API or the Plan's administrator would make all discretionary decisions about the Plan's administration and management, and that Humana “act[ed] as an agent of [API] authorized to perform specific actions or conduct specified transactions only as provided in this Agreement.” API agreed to give Humana written notice of “the Plan's management policies and practices,” and Humana agreed that it “operat[ed] within a framework of the Plan's management policies and practices authorized or established by the Plan Administrator, in accordance with the provisions of the Plan.” While the PMA authorized Humana to conduct its affairs according to its normal operating procedures, it stated that Humana must abandon its normal procedures if “they are inconsistent with the Plan's management policies or practices.”¹ The PMA authorized Humana to hire “subcontractors and/or counsel” of its choosing to perform certain services. But the parties agreed that API would reimburse Humana for fees paid to outside counsel only if the “legal fees incurred by [Humana] [were] attributable to a request, direction, or demand by [API], the Plan Administrator, or the Employer.”

Second, the PMA stated that Humana would provide “ ‘Subrogation/Recovery’ services ... [for] identifying and obtaining recovery of claims payments from all appropriate parties through operation of the subrogation or recovery provisions of the Plan.” The PMA defined subrogation and recovery services to include: “(1) Investigation of claims and obtaining additional information to determine if a person or entity may be the appropriate party for payment”; “(2) Presentation of appropriate claims and demands for payment to parties determined to be liable”; “(3) Notification to Participants that recovery or subrogation rights will be exercised with respect to a claim”; and “(4) Filing and prosecution of legal proceedings against any appropriate party for determination of liability and collection of any payments for which such appropriate party may be liable.” API agreed to pay Humana “30% of all amounts recovered” under the subrogation and recovery services provision.

According to the district court's opinion, Nguyen was injured in an automobile accident in April 2012. Between April 2012 and April 2013, the Plan paid $274,607.84 to cover Nguyen's resulting medical expenses. Nguyen “recovered from a third party settlement funds of $255,000 for damages sustained in the accident.” Nguyen argued, the district court accepted, and Humana does not contest that the third party settlement funds were paid by Nguyen's own insurance provider.

The Plan notified Humana that it did not intend to seek reimbursement from Nguyen, because the Plan's governing documents did not allow recovery from a beneficiary's uninsured motorist policy payout. Humana determined that it was free to disregard the Plan's instruction. It sued Nguyen in district court, seeking, inter alia, an injunction prohibiting Nguyen from disposing of the insurance payout and an “equitable lien to enforce ERISA and the terms of the Plan.” Nguyen deposited the disputed funds into the court registry and filed a counterclaim against Humana.² The parties then filed cross-motions for summary judgment. The district court granted Humana's motion, denied Nguyen's motion, and entered judgment in favor of Humana. Nguyen appeals the district court's order and judgment.

Standard of Review

“Standard summary judgment rules control in ERISA cases.” Green v. Life Ins. Co. of N. Am., 754 F.3d 324, 329 (5th Cir.2014) (internal quotation marks omitted). “We review a district court's grant of summary judgment de novo, applying the same standards as the district court.”Id. (internal quotation marks omitted). “Summary judgment is appropriate when ‘there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’ ” Id. (quoting Fed.R.Civ.P. 56(a) ).

The decision below turned in part on the district court's interpretation of the PMA.³ “[W]e review de novo the interpretation of a contract, including any questions about whether the contract is ambiguous.” Pioneer Exploration, L.L.C. v. Steadfast Ins. Co., 767 F.3d 503, 511–12 (5th Cir.2014).

Discussion

The district court held that Humana was an ERISA fiduciary as a matter of law. In its appeal, Nguyen argues that Humana is not an ERISA fiduciary, and thus, that Humana does not have the statutory right to seek relief under 29 U.S.C. § 1132(a)(3).

I.

Section 1132(a)(3) provides that any “participant, beneficiary, or fiduciary” has the right to seek an injunction and other “appropriate equitable relief” when necessary to stop violations of ERISA's regulatory provisions or the terms of the ERISA plan. As relevant here, a third party service provider is an ERISA fiduciary “to the extent ... [it] exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of [the plan's] assets,” or it “has any discretionary authority or discretionary responsibility in the administration of such plan.” 29 U.S.C. § 1002(21)(A)(i), (iii). In short, “[a] fiduciary within the meaning of ERISA must be someone acting in the capacity of manager [or] administrator.” Pegram, 530 U.S. at 222, 120 S.Ct. 2143.

“We give the term fiduciary a liberal construction in keeping with the remedial purpose of ERISA.” Reich v. Lancaster, 55 F.3d 1034, 1046 (5th Cir.1995) (internal quotation marks and alteration omitted). But the broad definition of fiduciary is still constrained in at least two ways. First, third-party service providers can serve as ERISA fiduciaries in one capacity and non-fiduciaries in another. See Pegram, 530 U.S. at 225–26, 120 S.Ct. 2143 (explaining that “persons who provide services to an ERISA plan” may operate with a conflict of interest, so long as they comply with fiduciary duties while acting in fiduciary capacity). Thus, when courts evaluate whether a party is an ERISA fiduciary, they must focus on the specific role the purported fiduciary played as relevant to the claim at hand. See id. at 226, 120 S.Ct. 2143 (holding that, “[i]n every case charging breach of ERISA fiduciary duty, ... the threshold question is ... whether that person was acting as a fiduciary ... when taking the action subject to complaint”).⁴

Second, not every act that could be described as “discretionary” in the general sense makes the actor a fiduciary under ERISA. For almost forty years, the Department of Labor has maintained that “a person who performs purely ministerial functions,” such as the “[p]reparation of reports concerning participants' benefits” or “[m]aking recommendations to others for decisions with respect to plan administration,” is not an ERISA fiduciary. 29 C.F.R. § 2509.75–8, at D–2.⁵ This is because

a person who performs purely ministerial functions ... for an employee benefit plan within a framework of policies, interpretations, rules, practices and procedures made by other persons ... does not have discretionary authority or discretionary control respecting management of the plan, does not exercise any authority or control respecting management or disposition of the assets of the plan, ... and has no authority or responsibility to do so.

Id. The distinction between fiduciaries and ministerial agents applies even to “an attorney, accountant, actuary or consultant who renders legal, accounting, actuarial or consulting services to an employee benefit plan,” even though these parties exercise independent, professional judgment when acting on behalf of an ERISA plan. Id. § 2509.75–5, at D–1; see also Reich, 55 F.3d at 1049 (stating that “professionals ... who provide necessary services to ERISA plans” do not become fiduciaries simply by “play[ing] influential roles by virtue of the expertise that they possess or the capacities in which they act”). “[A]ttorneys, accountants, actuaries and consultants performing their usual professional functions will ordinarily not be considered fiduciaries, [unless] the factual situation in a particular case” shows that the professional serves as a manager or administrator of the plan. 29 C.F.R. § 2509.75–5, at D–1.

The Department of Labor's interpretations of § 1002(21)(A) are even more persuasive when one considers their similarity to the common law of trusts, which is the “source” of ERISA's fiduciary duty provisions. See Pegram, 530 U.S. at 224, 120...