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Lefevre, Zeman, Oldfield & Schwarm Law Group v. Wal-Mart Stores Inc.

February 04, 1999


Appeal from the Circuit Court of Fayette County. No. 96-LM-50

The opinion of the court was delivered by: Justice Maag


Honorable Michael R. Weber, Judge, presiding.

This action was brought by the plaintiff/cross-appellee, LeFevre, Zeman, Oldfield & Schwarm Law Group, Ltd., now known as LeFevre & Oldfield Law Group, Ltd. (Law Group), to adjudicate and enforce an attorney's lien on health care benefits after defendant/cross-appellant, Wal-Mart Stores, Inc., doing business as Wal-Mart Group Health (Wal- Mart), paid benefits directly to health care providers without honoring the attorney's lien. Wal-Mart petitioned for removal to federal court, but the federal court remanded the case. Wal-Mart then filed a motion to dismiss, claiming that the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. §1001 et seq. (1994)) preempts the Illinois Attorneys' Lien Act (Illinois Act) (770 ILCS 5/1 (West 1994)). This motion was denied on April 10, 1997. The Law Group's motion for summary judgment was denied, and Wal-Mart's motion for summary judgment was granted on July 21, 1997. The Law Group appeals this order, and Wal- Mart has filed a cross-appeal from the April 10, 1997, order in the event that this court reverses the July 21, 1997, order.

Suzanne Schmid was a participant in an employee medical benefit plan administered by Wal-Mart Stores, Inc. Associates Health and Welfare Plan (the plan). The plan provides medical coverage for participants and eligible dependents. The terms of the plan are set forth in the summary plan description and in the plan that establishes the "welfare program." It is undisputed that the plan provides that the welfare program shall be controlled by the terms of the summary plan description that is specifically incorporated into the plan document that is offered by Wal-Mart. It is also undisputed that Wal-Mart's plan is a welfare benefits plan within the meaning of ERISA; therefore, it is governed and administered in accordance with ERISA.

A complaint was filed in this case on September 3, 1996, because Wal-Mart denied coverage for Schmid for certain health benefits. The complaint alleged that the Law Group entered into a written contingency- fee contract with Schmid to prosecute or settle claims relative to health insurance benefits provided by defendant, pursuant to a written contract dated April 15, 1994. Pursuant to the contract, Schmid agreed to pay the Law Group a sum equal to 40% of whatever might be recovered from said claim and 50% of whatever might be recovered if a second trial or an appeal becomes necessary. The Law Group provided legal services to Schmid in an effort to cause Wal-Mart to pay her health insurance benefits. The Law Group notified Wal-Mart of the attorney's lien by a letter sent by certified mail to Wal-Mart on February 17, 1995, pursuant to the Illinois Act (770 ILCS 5/1 (West 1994)). As a direct result of the Law Group's efforts, Schmid's medical providers were paid a total of $60,962.06. The complaint also alleged that Wal-Mart failed to honor the lien and that the Law Group is entitled to a judgment in the amount of $24,384.82.

On October 17, 1996, Wal-Mart filed a petition for removal, attempting to remove this case to the United States District Court for the Southern District of Illinois. On January 27, 1997, an order was entered by the district court stating as follows:

"[T]he Illinois law at issue [the Illinois Act] is only remotely connected to covered plans. The attorneys' fees lien enforcement statute is not intended to regulate the affairs of ERISA plans, does not restrict the manner in which ERISA plans conduct their affairs, and does not impair the ability of such plans to operate. If Wal-Mart had honored [the Law Group's] *** lien, that may have reduced the benefits payable to the plan participant, but it would have had no direct economic impact on the plan itself. In short, the Illinois law does not `relate to' an ERISA plan and, therefore, is not preempted by ERISA ***."

The federal district court then remanded this cause of action to the circuit court of Fayette County.

On February 18, 1997, Wal-Mart filed a motion to dismiss for failure to state a claim, lack of jurisdiction, and lack of standing, making the same claims that it had made in federal court, which included, inter alia, Wal-Mart's claim that ERISA preempts the Illinois Act. On April 10, 1997, defendant's motion to dismiss was denied.

Wal-Mart filed its answer and affirmative defenses on May 30, 1997. The affirmative defenses again asserted that plaintiff's claim was barred by federal preemption, that plaintiff failed to comply with conditions precedent, that the benefits had been previously assigned by Schmid, and that plaintiff failed to exhaust her administrative remedies pursuant to the plan.

Both parties filed motions for summary judgment. Attached to Wal- Mart's motion for summary judgment was a summary plan description and the welfare benefits plan. The pertinent provisions are as follows:

"ASSIGNMENT Medical Coverage benefits of this Plan may not be assigned, transferred[,] or in any way made over to another party by a participant. Nothing contained in the written description of Wal-Mart Medical Coverage shall be construed to make the Plan or Wal-Mart Stores, Inc. liable to any third party to whom a participant may be liable for medical care, treatment, or services.

However, if so authorized in writing by a participant, the Plan Administrator may pay a benefit directly to a provider of medical service instead of to the participant, as a convenience to the participant, in which event all the Company's or Plan's obligations to the eligible ...

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