The opinion of the court was delivered by: REINHARD
Petitioner, Ronald and Barbara Blackburn, filed a petition to adjudicate subrogation claim in the circuit court of Winnebago County naming as respondents, Sundstrand Corporation. Respondent removed the petition to adjudicate to this court.
Jurisdiction arises under the Employee Retirement and Income Security Act (ERISA), 29 U.S.C. 1444 et seq., and venue is proper as the ERISA plan at issue is administered in this district and division, see 29 U.S.C. § 502(e) (2).
The facts are taken from the allegations in the petition to adjudicate. Petitioners filed suit against Bryan Becker and, as a result of that suit, obtained a settlement consisting of $ 100,000 for Ronald Blackburn's personal injuries and $ 5,000 for the personal injuries of Barbara Blackburn. Both petitioners were covered by an ERISA plan (plan) including medical and hospitalization insurance provided by respondent. Respondent, under the plan, paid $ 26,830.92 for medical expenses incurred by petitioners.
Petitioners' attorneys, pursuant to a written contingency fee agreement, received one-third of the settlement plus $ 1,125.87 in litigation expenses. Pursuant to the plan, respondent had a right of subrogation in the amount paid out for medical expenses incurred by petitioners. In December 1995, petitioners advised respondents that they were willing to reimburse respondent for its subrogation claim minus one-third for attorney fees and a pro-rata share of the litigation expenses in accordance with the Illinois "common fund doctrine." In turn, respondent refused petitioners' request for reimbursement of their attorney fees and pro-rata litigation expenses, contending that the common fund doctrine under Illinois law is preempted by ERISA. Petitioners, in response, filed their petition to adjudicate, arguing that under Illinois law the common fund doctrine applies notwithstanding that ERISA preempts state law. Alternatively, petitioners also contend that even if ERISA preempts the Illinois common fund doctrine, several federal district courts have created a rule of federal common law that entitles the recipient of a tort judgment or settlement to reduce by one-third the amount of reimbursement owed under an ERISA subrogation clause.
I.) Illinois Common Fund Doctrine and preemption
Section 514(a) of ERISA provides that "except as provided in subsection (b) of this section [the saving clause], the provisions of this subchapter and subchapter III of this chapter shall supersede any and all state law insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). The preemption clause establishes as an area of exclusive federal concern the subject of every state law that relates to an employee benefit plan governed by ERISA. FMC Corp. v. Holliday, 498 U.S. 52, 58, 112 L. Ed. 2d 356, 111 S. Ct. 403 (1990). In giving definition to the term "relates to," the Supreme Court has recently stated that it is necessary to "go beyond the unhelpful test" of the statute and "look instead to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive." New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 131 L. Ed. 2d 695, 115 S. Ct. 1671, 1677 (1995). The Supreme Court has held that Congress, in passing section 514(a), intended that plans and plan sponsors be subjected to a uniform body of benefits law. Id. (citing Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142, 112 L. Ed. 2d 474, 111 S. Ct. 478 (1990)). Congress's goal was to minimize the administrative and financial burden of complying with conflicting directives among states or between states and the federal government and to prevent the potential for conflict in substantive law and requiring the tailoring of plans and employer conduct to the peculiarities of the law of each jurisdiction. Id. In other words, the basic thrust of the preemption clause was to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans. 115 S. Ct. at 1677-78.
The issue here is whether the Illinois common fund doctrine relates to the plan to the extent its application to reduce the subrogation claim of the plan would interfere with the nationally uniform administration of such plans. It is clear that a state's antisubrogation law, that is, a law that prohibits subrogation by a plan, is preempted by ERISA. FMC Corp., 498 U.S. at 58-61. The Illinois common fund doctrine, however, is not an antisubrogation law. While it has a potential impact on a plan's right to subrogation, it does not act to prohibit such a claim. Thus, FMC Corp. does not entirely resolve the preemption issue.
The parties here dispute the import of Land v. Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent) Health and Welfare Fund, 25 F.3d 509 (7th Cir. 1994). In that case, the Seventh Circuit stated in unequivocal terms that "because ERISA supersedes any and all state laws relating to covered plans, however, (see 29 U.S.C. § 1444(a)), [the Illinois common fund doctrine] is not available to [the plaintiff], and the terms of the plan require reimbursement of the entire amount without the deduction of any attorney's fees." Land, 25 F.3d at 511. Petitioners characterize this statement as dictum because the issue of whether ERISA preempts the Illinois common fund doctrine was not raised by the plaintiff on appeal, because the statement is found in the "background" section near the front of the opinion and because the statement is unsupported by any analysis or citation of authority. Respondent, on the other hand, describes the statement as a holding which preclusively governs the issue in this case.
Certainly, if the statement is not dictum, it drives a stake through the heart of petitioners' non-preemption argument. Dictum has been defined by the Seventh Circuit as a statement in a judicial opinion that could have been deleted without seriously impairing the analytical foundations of the holding. United States v. Crawley, 837 F.2d 291, 292 (7th Cir. 1988). Because it is peripheral, it may not have received the full and careful consideration of the court that uttered it. Id. Put another way, dictum is a remark or an aside concerning some rule of law or legal proposition that is not necessarily essential to the decision and lacks the authority of adjudication. Id. Alternatively, the Seventh Circuit has looked to what is at stake in distinguishing dictum from a holding. Id. In that regard, the court of appeals explained that a court should ask what reasons there are against giving weight to a passage found in a previous opinion such as whether the passage was unnecessary to the outcome, whether it was an integral part of the earlier opinion, whether it was grounded in the facts of the case and whether the issue addressed in the passage was not presented as an issue. Id. at 292-93.
Applying the Seventh Circuit's prior definition of dictum to the statement in Land, the court concludes that it is dictum. While a seemingly clear statement of law, it does not appear the statement pertains to an issue actually raised on appeal. Nor was the statement necessary to the disposition of the issues that were raised. Further, the lack of analysis and citation of authority, while not dispositive on the question, lends further support for the conclusion that the statement is dictum and, hence, not binding on this court.
Nevertheless, because the statement is nonbinding dictum does not render it impotent. Such a clear and direct statement of law by the Seventh Circuit is, at the very least, persuasive on the issue. Admittedly, its persuasive weight is somewhat diluted by the fact it was made prior to the Supreme Court's most recent discussion of the "relates to" language in the preemption clause. See Travelers, 115 S. Ct. at 1677-78. It nonetheless remains persuasive as the proposition is consistent with the Supreme Court's discussion of preemption in Travelers.
Looking to Travelers, this court finds the Illinois common fund doctrine to be preempted by ERISA to the extent an employee seeks to have his or her obligation to repay medical expenses pursuant to a plan provision such as the one at issue here reduced by one-third based on the employee's payment of attorney fees. If the Illinois common fund doctrine could be applied as asserted by petitioners here, an ERISA plan would be subjected to a multiplicity of such state laws which would result in a nonuniform administration of such plans. Application of the common fund doctrine would require plans that contain such subrogation clauses and related employer conduct to be tailored to the peculiarities of the law of each jurisdiction. See Sims v. Ewing, No. 3-91-0264, at p. 12 (M.D. Tenn. Aug. 20, 1993) (unpublished ...