II.) Federal Common Law
There is no doubt about the authority of the federal courts to create common law for use in ERISA cases. Cutting v. Jerome Foods, Inc., 993 F.2d 1293, 1296-97 (7th Cir. 1993). Because ERISA sets forth none of its own principles of interpretation, courts have to adopt "some" interpretive principles in order to construe ERISA plans. Id. at 1297. These principles, because they are judge-made, constitute common law. Id. Such interpretive rules, however, can be overridden by clear language in the plan. Id. at 1298-99.
Petitioners in this case have pointed to a line of district court cases, none of which this court need follow, see Old Republic Ins. Co. v. Chuhak & Tecson, P.C., 84 F.3d 998, 1003 (7th Cir. 1996) (district court decisions are nonprecedential), which fashioned a federal common law rule allowing for a one-third reduction in the amount reimbursed to a plan under a subrogation provision. See Cutting v. Jerome Foods, Inc., 820 F. Supp. 1146, 1155 (W.D. Wis. 1991), aff'd on other grounds, 993 F.2d 1293 (7th Cir. 1993); Serembus v. Mathwig, 817 F. Supp. 1414, 1423 (E.D. Wis. 1992); Dugan v. Nickla, 763 F. Supp. 981, 984-85 (N.D. Ill. 1991). The court is unpersuaded by these cases for several reasons. First, it is entirely inconsistent for this court to rule that ERISA preempts the Illinois common fund doctrine from permitting a reduction in the subrogation amount for attorney fees only to turn around and fashion a federal common law rule that does exactly the same thing. While the court is aware of the significant difference between a state law affecting ERISA and a federal law doing so, the practical inconsistency is difficult to ignore.
Second, and perhaps more importantly, a straightforward provision requiring reimbursement for medical expenses by an employee who recovers from a third-party, such as the one at issue here, calls for no interpretive rules to be crafted by the federal court. There is nothing about such a provision that is ambiguous or in need of interpretation. It calls for reimbursement. See Ryan v. Federal Express Corp., 78 F.3d 123, 127 (3d Cir. 1996) (unambiguous subrogation provision calling for employee to pay back all money received in settlement from third party does not require common law application absent showing common law is necessary to effectuate ERISA policy). Petitioners point to nothing in the language to support that such reimbursement should be anything less than full.
Third, and most importantly, the provisions of the plan, including the subrogation one at issue here, were bargained for by the parties. While there is some appeal to the reasoning of the district court in Dugan, and embraced by the district courts that later visited the issue, that had the employee not engaged an attorney and pursued the case the fund would not have recovered any of the benefits paid the employee, see Dugan, 763 F. Supp. at 984, such a circumstance is insufficient to warrant an otherwise unambiguous and bargained-for-provision being modified. It should surprise no one, the employee or the employer, that the employee will seek compensation for his injuries beyond that provided for in the plan. Nor should it surprise anyone, especially in this day and age, that he will utilize a lawyer to do so.
Even more unsurprising is that the employee will fork over one-third of his recovery to the attorney. Given those common understandings, there is no reason to fiddle with an unambiguous plan provision which the parties freely entered into. See Ryan, 78 F.3d at 127-28, (it is inequitable to permit employee to partake of plan benefits then, after receiving substantial settlement, invoke common law as justification for refusal to satisfy his end of the bargain). The court respectfully disagrees with the contrary conclusion of the district courts in Dugan, Serembus and Cutting. Accordingly, the court finds that petitioners are required to reimburse the plan in the full amount of the medical expenses, $ 26,830.92.
PHILIP G. REINHARD, JUDGE
UNITED STATES DISTRICT COURT
DATED: July 29, 1996