analysis begins with the recognition of ERISA's preemption provision, which provides for the preemption of "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). The analysis then proceeds to examine ERISA's "saving clause," which excludes state laws regulating insurance from ERISA's preemption provision, see 29 U.S.C. § 1144(b)(2)(A), and ERISA's "deemer clause," which provides that an employee benefit plan cannot be "deemed" to be an insurance company for purposes of any state law purporting to regulate insurance. See 29 U.S.C. § 1144(b)(2)(B). Based on the Supreme Court's interpretation of these provisions, which reads the deemer clause to exempt self-funded ERISA plans from state laws that regulate insurance within the meaning of the saving clause, see FMC Corp., 498 U.S. at 409, courts in this district have concluded that ERISA preempts Illinois' anti-subrogation common law rule.
Apart from a public policy argument which the court summarily rejects, plaintiff's only challenge to the soundness of these decisions and this analysis is that the Illinois common law rule does not "relate to" the Plan so as to trigger ERISA's preemption provision. Plaintiff contends that the Illinois law is one of general applicability such that it makes "no reference to ERISA."
As the Supreme Court has explained, a law "'relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 131 L. Ed. 2d 695, 115 S. Ct. 1671, 1677 (1995). Thus, the fact that a law makes no "reference to" an ERISA plan is only half the analysis, for the law may still have a "connection with" such a plan. Id. Plaintiff has pointed to only one decision in this district in which a court has found that Illinois' anti-subrogation common law rule has no connection with an ERISA plan-- Prudential Ins. Co. of Am. v. Rodriguez, 1991 U.S. Dist. LEXIS 19640, No. 90 C 2514, 1991 WL 288127, at *3 (N.D. Ill. Dec. 23, 1991) (Leinenweber, J.). In finding that the Illinois rule has no connection with an ERISA plan, the court in Rodriguez stated: "Illinois common law only affects the ability of minors to make claim for reimbursement for medical bills and the right of a medical provider to recover from a minor. The law does not deny subrogation rights to insurance companies. It denies rights to a minor for which an insurance company that could be subrogated." Id. at *3. For these reasons, the court in Rodriguez found that the Illinois common law rule does not "relate to" an ERISA plan.
At least one court in this district has expressly declined to follow Rodriguez in this respect, see Rogers, 909 F. Supp. at 543, and two others have found that Illinois' anti-subrogation common law rule "relates to" an ERISA plan after considering similar arguments. See, e.g., In re Estate of O'Leary, 1995 U.S. Dist. LEXIS 14733, 1995 WL 599074, at *4; Pople, 1993 U.S. Dist. LEXIS 16105, 1993 WL 469915, at *4. Several other courts have merely assumed in their treatment of the preemption issue that the Illinois rule "relates to" an ERISA plan. See, e.g., Bode, 1994 U.S. Dist. LEXIS 1756, 1994 WL 53783, at *3; Preze v. Board of Trustees, Pipefitters Welfare Fund Local 597, 1992 U.S. Dist. LEXIS 2118, No. 91 C 6124, 1992 WL 38398, at *3-4 (N.D. Ill. Feb. 24, 1992) (Kocoras, J.), aff'd, 5 F.3d 272 (1993); General Business Forms, Inc. v. Employee Health and Dental Care Plan, 1989 U.S. Dist. LEXIS 10192, No. 88 C 8549, 1989 WL 103382, at *4-6 (N.D. Ill. Aug. 29, 1989) (Holderman, J.).
This court agrees with the persuasive weight of authority in this district and concludes that Illinois' anti-subrogation common law rule "relates to" the Plan. In so doing, the court declines to follow Rodriguez. Illinois' rule, as delineated in Hammond and Woodring, prohibits the Plan from having a right of subrogation and reimbursement against a "covered person" when the covered person is a minor. Thus, just like the anti-subrogation law at issue in FMC Corp., Illinois' anti-subrogation common law rule has a sufficient connection with an employee benefit plan such that it "relates to" an ERISA plan. Cf. FMC Corp., 489 U.S. at 59-60 (finding that the Pennsylvania statute "relates to" employee benefit plans where the law prohibited plans from being structured in a manner requiring reimbursement in the event of recovery from a third party); see also Rogers, 909 F. Supp. at 543-44.
As stated in Rogers, the Supreme Court's opinion in FMC Corp. makes it clear that a "50-state survey of the law of subrogation against minors is not needed for one to understand that individual state antisubrogation laws, forever subject to change, constitute the sort of regulations that Congress intended to pre-empt insofar as they affect the rights of plans as against their beneficiaries." Rogers, 909 F. Supp. at 543-44. This conclusion is fortified by the Supreme Court's decision in Travelers, wherein the Court, in defining "relates to," stated that courts must look to "the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive." Travelers, 115 S. Ct. at 1677. Subjecting self-funded ERISA plans to various state anti-subrogation laws, like Illinois', would be contrary to the purpose of ERISA's preemption clause, which was to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans. Id. at 1677-78. Accordingly, because Illinois' anti-subrogation common law rule "relates to" the Plan, it is preempted by ERISA.
As a consequence, plaintiff's motion is denied with respect to Count I of the amended petition.
B. Illinois' common fund doctrine
Next, the court addresses plaintiff's contention that, should defendants' lien be found valid and enforceable, such lien should be reduced by one-third and a pro-rata share of costs in accordance with the Illinois common fund doctrine. The common fund doctrine permits a party who creates, preserves or increases the value of a fund in which others have an ownership interest to be reimbursed from that fund for litigation expenses incurred, including counsel fees. Brundidge v. Glendale Fed. Bank, F.S.B., 168 Ill. 2d 235, 659 N.E.2d 909, 911, 213 Ill. Dec. 563 (Ill. 1995). Defendants contend that, like Illinois' anti-subrogation common law rule, Illinois' common fund doctrine is preempted by ERISA.
A month before plaintiff filed its brief in opposition to defendants' motion and in support of its own motion for summary judgment, this court decided Blackburn v. Becker, 933 F. Supp. 724 (N.D. Ill. 1996) (Reinhard, J.). In Blackburn, this court considered an argument identical to the contention presently raised by plaintiff. Id. at 727-28. In addition, this court also considered whether such a doctrine should be recognized as a matter of federal common law, an argument not raised by plaintiff in this case. Id. at 729. Not only did this court conclude that ERISA preempts Illinois' common fund doctrine, id. at 728, this court declined to create such a doctrine as a matter of federal common law, id. at 729. Having traversed this ground so recently (and thoroughly), this court is unwilling to reconsider its position on this issue, particularly where plaintiff has not made any argument as to the soundness of that decision or the authority relied upon therein. Accordingly, the court finds that ERISA preempts the Illinois common fund doctrine.
As a consequence, plaintiff's motion is denied with respect to Count II of the amended petition, and defendants' motion is granted with respect to the counterclaim.
C. Attorney fees
Last, the court considers defendants' request for attorney fees. The decision to award attorney fees under 29 U.S.C. § 1132(g)(1) is discretionary. Although there are a variety of tests the court may employ, whichever approach is used, the "bottom-line question" is the same-- "was the losing party's position substantially justified and taken in good faith, or was that party simply out to harass its opponent?" Little v. Cox's Supermarkets, 71 F.3d 637, 644 (7th Cir. 1995). In considering whether a position is substantially justified, the court considers whether the losing party was justified to a degree that could satisfy "a reasonable person." Id.
This court finds that, although plaintiff ultimately lost this litigation, it was substantially justified in contesting defendants' lien against the settlement proceeds. As reflected in this opinion, there is a considerable split amongst the Illinois courts and the federal courts in this district on both of the issues plaintiff litigated. Had this matter not been removed to federal court, the result could have been different. In fact, on the common fund doctrine issue, the result would have been different in light of the recent Illinois Supreme Court decision in Scholtens. Accordingly, defendants' request for attorney fees is denied.
For the foregoing reasons, plaintiff's motion for summary judgment is denied. Defendants' motion for summary judgment is granted in part and denied in part. Judgment is rendered in favor of defendants on their counterclaim. The court hereby orders and declares that:
A. The terms of the Plan provide for full reimbursement from "covered persons," including the estates of minors, for sums paid by the Plan to covered persons which those persons recover from third parties;
B. The Estate of Nathan Lake is in violation of these provisions by failing to reimburse the Plan for sums paid by the Plan which the estate recovered from a third party; and