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05/30/95 RANDY SCHOLTENS v. JEFFREY SCHNEIDER AND

May 30, 1995

RANDY SCHOLTENS, PLAINTIFF,
v.
JEFFREY SCHNEIDER AND L.C. O'BANNER, DEFENDANTS. RANDY SCHOLTENS, PETITIONER-APPELLEE, V. ELECTRICAL INSURANCE TRUSTEES, RESPONDENT-APPELLANT.



APPEAL FROM THE CIRCUIT COURT. COOK COUNTY. HONORABLE HARRY R. BUOSCIO, PRESIDING.

As Modified on Denial of Rehearing August 14, 1995. Petition for Leave to Appeal Allowed December 6, 1995.

The Honorable Justice Braden delivered the opinion of the court: Campbell, P.j., and Buckley, J., concur.

The opinion of the court was delivered by: Braden

MODIFIED ON DENIAL OF REHEARING

The Honorable Justice BRADEN delivered the opinion of the court: Respondent, Electrical Insurance Trustees, appeals from an order of the circuit court of Cook County adjudicating a subrogation lien. On appeal, respondent argues that the trial court erroneously applied the Illinois common fund doctrine as opposed to the doctrine of Federal preemption.

We affirm.

Petitioner, Randy Scholtens, participated in an employee benefit plan, as defined in section 4(a) of the Employee Retirement Income Security Act of 1974 (ERISA). (29 U.S.C. ยง 1001 et seq.) The plan was administered by respondent and provided plan benefits which include the payment of hospital bills, doctor's bills and other medical expenses. The plan is a self-funded ERISA benefit plan and contained a subrogation clause regarding payments received from third parties.

On December 22, 1989, petitioner was injured in an automobile accident. On January 3, 1990, petitioner entered into a subrogation agreement with respondent. In accordance with the plan, respondent paid medical bills of $33,866.85 incurred by petitioner, and disability benefits in the amount of $9,866.85. The medical bills and disability benefits totalled $42,921.75. Petitioner filed a tort claim against two defendants which was ultimately settled for $100,000.

Scholtens then petitioned the trial court to adjudicate the subrogation lien of respondent. He argued that respondent was not entitled to the full amount of the subrogation, as it was responsible for the cost of the litigation which produced the settlement. Scholtens asserted that the amount of the subrogation lien should be reduced by one-third plus 42% of the litigation costs. The trial court found that the Illinois common fund doctrine applied and reduced the subrogation lien to $28,286.76. The trial court further held that the order did not determine the rights of respondent against Scholtens based on the terms of its plan of benefits or the subrogation agreement. Instead, the order was based solely upon the Illinois common fund doctrine.

Respondent appeals, contending that the trial court erroneously refused to adjudicate the Trustees' rights under either the benefit plan or the subrogation agreement. The trial court stated as follows:

"The Court should not and does not adjudicate any rights of the Trustees under the terms of either their subrogation agreement with plaintiff or the terms of their benefit plan."

We cannot say that the trial court erred in failing to adjudicate the subrogation rights.

Next, respondent argues that ERISA bars the use of the Illinois common fund doctrine in resolving the subrogation issue. ERISA comprehensively regulates employee pension and welfare benefits. ( Baxter ex rel. Baxter v. Lynn (8th Cir. 1989), 886 F.2d 182, 184.) Section 514(a) of ERISA preempts "any and all State laws in so far as they may now or hereafter relate to any benefit plan." ( Baxter, 886 F.2d at 184.) ERISA is broad in its preemptive scope. ( Baxter, 886 F.2d at 184.) The determination as to whether Federal law preempts a state statute requires an inquiry into congressional intent. ( FMC Corp. v. Holliday, (1990), 498 U.S. 52, 57, 112 L. Ed. 2d 356, 359, 111 S. Ct. 403, 407.) Congressional intent extends very broad preemptive powers to ERISA.

The relevant congressional phrase for purposes of this analysis is "relate to." In an employee benefit plan context, a law is deemed to "relate to" a plan if it has a connection with or reference to such plan. ( Shaw v. Delta Air Lines (1983), 463 U.S. 85, 97, 77 L. Ed. 2d 490, 501, 103 S. Ct. 2890, 2899.) Under this wide interpretation, a State law may relate to a benefit plan and consequently be preempted although the law was not crafted to affect ...


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