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March 9, 1992

JAMES A. GERMANY, Plaintiff,


The opinion of the court was delivered by: GEORGE H. REVERCOMB


This is an action to recover benefits allegedly due and to clarify rights to future benefits from a health plan, pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(1)(B). Before the Court are the cross-motions for summary judgment of plaintiff James A. Germany, and defendant Operating Engineers Trust Fund of Washington, D.C. ("the Fund"), a self-insured employee benefit plan established under 29 U.S.C. 1102 of ERISA. Counsel for the parties have been heard in oral argument. For the reasons set forth below, the Court will grant plaintiff's Motion for Summary Judgment and deny defendant's Motion for Summary Judgment.


 Mr. Germany is a participant in the Operating Engineers Trust Fund of Washington, D.C., also known as the Operating Engineers Local No. 77 Trust Fund. The Fund is a self-insured employee health benefit plan. Plaintiff's counsel stated at oral argument, and defendant's counsel did not dispute, that the maximum benefits payable by the Fund to a participant in the plan is $ 60,000 per calendar year. Mr. Germany may also recover, in a third-party liability claim, as much as $ 50,000 from the driver and owner of the car that struck him, based on the latter's insurance coverage. See Pl.'s Ex. 8, at 4. His contention, which defendant does not seriously dispute, is that a third-party recovery of $ 50,000 will be inadequate to compensate him for his medical expenses, pain and suffering, and lost wages, *fn1" as a result of his accident.

 Pursuant to 29 U.S.C. § 1021 of ERISA, the Fund has published and distributed to participants a Summary Plan Description ("SPD"), which it has also filed with the Secretary of Labor. See Pl.'s Ex. 8. The SPD contains a provision giving the Fund subrogation rights with regard to a participant's third-party recovery for injuries and/or death for which a benefit is payable under the plan. See Pl.'s Ex. 1, at 11. According to this provision, "each participant to whom the subrogation provision may apply will be asked to sign an agreement with respect to the subrogation provision." Id. It is the policy of the Fund not to make payments for medical expenses until such a participant executes the subrogation agreement to which the clause quoted above refers. See Dep. of Simone L. Ornold, Pl.'s Ex. A, at 12; Pl.'s Ex. 11.

 Mr. Germany declines to execute the subrogation agreement presented to him by the Fund. He contends -- and this is the central dispute of this lawsuit -- that the subrogation agreement expands the rights of the Fund to a participant's third-party recovery beyond what is claimed in the subrogation provision contained in the SPD. The latter document, according to Mr. Germany, limits the Fund's subrogation rights only to those circumstances in which a participant might enjoy a double recovery, which would not apply to Mr. Germany because of the catastrophic extent of his damages. Mr. Germany further argues that the subrogation agreement is not itself a part of the plan, as summarized in the SPD, so that the Fund's conditioning of payment of benefits on his execution of this agreement violates ERISA's disclosure and reporting requirements. See 29 U.S.C. §§ 1021, 1022.

 In his lawsuit, Mr. Germany alleges that the trustees have failed to process his claims for benefits and to provide him with benefits to which he is entitled, in violation of ERISA § 404(a), 29 U.S.C. § 1104(a). He seeks a declaration from the Court that he has the right not to be bound by the subrogation agreement, and that he has the right to receive future benefits for which he is eligible under the terms of the plan as a result of his injury, which are not subject to defendant's subrogated claim for any part of his anticipated $ 50,000 recovery. He also seeks an accounting from the Fund, and an injunction to prevent the Fund from enforcing a subrogation document that differs from the terms included in the SPD. *fn2"

 Because Mr. Germany has refused to execute the subrogation agreement, the Fund, for its part, has declined to make any payments for medical expenses he incurred as a result of the accident. See Pl.'s Ex. 7. The Fund has also declined to waive its subrogation rights, see id., *fn3" or consider an alternative subrogation agreement proposed by Mr. Germany. The Fund insists that the subrogation agreement is part of the plan as set forth in the SPD, and that the agreement in no way broadens the Fund's subrogation rights as disclosed to Mr. Germany in the SPD.


 The dispute in this case thus turns on the interpretation of the subrogation rights set forth in the provision contained in the SPD and in the separate subrogation agreement. In the Court's view, there are no "genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 91 L. Ed. 2d 202 , 106 S. Ct. 2505 (1986). Accordingly, summary judgment is proper.

 The parties agree that it is the trustees' interpretation of the scope of the Fund's subrogation rights under the plan that is at issue here. The SPD contains an express and broad grant of discretion to the trustees to interpret the plan's terms: "In the application and interpretation of this Plan, the decision of the Board of Trustees shall be binding on all parties, including, employees, employers, Union, claimants, and beneficiaries." Pl.'s Ex. 1, at 4. When trustees exercise discretionary powers to deny benefits or construe the terms of a plan, a deferential standard of review must be applied. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111, 115, 103 L. Ed. 2d 80 , 109 S. Ct. 948 (1989). The court of appeals for this circuit has analogized this deferential standard to the "arbitrary and capricious" test usually applied in the context of public administrative law. See Block v. Pitney Bowes, Inc., No. 89-7039, slip op. at 7-8 (D.C. Cir. Jan. 21, 1992). *fn4" When applied to the fiduciary responsibilities of ERISA trustees, this standard requires a choice between reasonable alternatives, or a reasonable interpretation of the plan. See Retirement and Sec. Program for Employees of Nat'l Rural Elec. Coop. Ass'n v. Oglethorpe Power Corp. Retirement Income Plan, 712 F. Supp. 223, 226-27 (D.D.C. 1989). However, "it is for the trustees, not the courts, to choose between two reasonable alternatives." Id. at 227 (quoting Edwards v. Wilkes-Barre Publishing Co. Pension Trust, 757 F.2d 52, 57 (3d Cir.), cert. denied, 474 U.S. 843, 88 L. Ed. 2d 107 , 106 S. Ct. 130 (1985)). This Court believes, however, that Bruch did not alter the rule in this circuit, that the trustee's interpretation of the controlling law -- the ERISA statute -- is entitled to no deference, and may be reviewed de novo by this Court. See Holt v. Winpisinger, 811 F.2d 1532, 1535-36 (D.C. Cir. 1987); see also, Penn v. Howe-Baker Engineers, Inc., 898 F.2d 1096, 1099-1100, 1101-03 (5th Cir. 1990) (analyzing the scope of Bruch, finding that Holt remains good law, and reviewing de novo whether appellant was an "employee" under the ERISA statute).

 The following guidelines have evolved within this circuit to assist courts in applying the arbitrary and capricious standard in an ERISA context.

 In determining whether a fiduciary's interpretation of the terms of a plan document is arbitrary or capricious, four factors should be considered: (1) whether the interpretation is contrary to the language of the plan; (2) whether it is consistent with the purposes of the plan; (3) whether it is consistent with the purposes of the particular provision itself; and (4) whether it is consistent with prior interpretations and whether beneficiaries were on notice of the interpretation.

 Foltz v. U.S. News & World Report, Inc., 663 F. Supp. 1494, 1514 (D.D.C. 1987) (citing Donovan v. Carlough, 576 F. Supp. 245, 249 (D.D.C. 1983), aff'd mem., 753 F.2d 166 (D.C. Cir. 1985)), aff'd, 865 F.2d 364 (D.C. Cir.), cert. denied, 490 U.S. 1108 (1989); see also, Oglethorpe Power, 712 F. Supp. 226 at 226-27 (finding these factors consistent with the holding in Firestone Tire & Rubber Co. v. Bruch). The application of these factors is not formulaic, however, and the weight given to each will vary according to the context of the case. See Carlough, 576 F. Supp. at 249. Thus, under this standard of review, the Court must grant plaintiff's summary judgment motion, and deny defendant's, if, in light of the four factors set forth above, it finds the trustees' interpretation of the Fund's subrogation rights to be unreasonable.


 A. Whether the Trustees' Interpretation of the Subrogation Agreement is Contrary to the Language of the Plan.

 The full text of the subrogation provision contained in the ...

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