Last Thursday, Public Justice won a federal appeals court ruling limiting ERISA plan’s ability to collect from personal injury lawsuits. This is Public Justice’s second ERISA lien victory in less than a year. Their tireless work has provided plaintiffs with a ray of light for us to fight the ERISA liens that so greatly limit personal injury recoveries. In its “E-lert” from Thursday, Public Justice Executive Director Arthur Bryant wrote,
For the second time in the last year, Public Justice has won a federal appeals court ruling that an employer-based insurance plan is not entitled to full reimbursement of medical claims from an injured beneficiary who recovered only a fraction of damages from the person who caused the injury. Last November, in the first Public Justice victory, the Third Circuit similarly blocked a plan’s attempt to obtain 100 percent reimbursement.
In its heavily anticipated ruling in CGI v. Rose yesterday [Wednesday, June 20, 2012], the Ninth Circuit agreed with the Third Circuit, holding that “parties may not by contract deprive [a court] of its power to act as a court in equity,” and made clear that notwithstanding the express terms of a Plan, it is within a district court’s broad equitable powers under ERISA to apply principles of equity in fashioning appropriate relief.
In a concurring opinion, Circuit Judge Schroeder observed that it would be “manifestly unfair” to allow the plan to recoup 100 percent of its medical expenses. Such a result, Judge Schroeder wrote, would “leav[e] the beneficiary vastly undercompensated for her actual damages” and “unjustly enrich” the ERISA plan, which had been paid premiums for the expenses it was now seeking to recoup.
The court also flatly rejected the insurer’s attempt to sue the attorney who represented an injured woman in her case against a third party. That holding is the first in the country to deny insurers the ability to intimidate by threat of lawsuit the lawyers who represent injury victims.
Mr. Bryant also noted that more than 170 million Americans are covered by an ERISA health insurance plan. That means nearly 55 percent of Americans could benefit from this decision. Equally important is to review the cross-section of America that follows this new equity rule. Because of Public Justice’s success in the 3rd Circuit and 9th Circuit, more than 85 million Americans live in jurisdictions that follow this rule. Back to percentages – that is 27.4% of Americans. Keep in mind only one circuit has ruled unfavorable on the same question – the 11th Circuit (FL, AL, GA). The other circuits have not yet been provided the opportunity to rule on this issue.
What does CGI v. Rose mean for ERISA liens?
This case seems to create a silent maximum lien for ERISA liens in personal injury. Your best reduction tools are our usual favorites: the common fund doctrine reduction for attorney fees/costs and the made whole doctrine. We suggest you don’t get greedy as ERISA lien holder’s greed is what forced these cases in the first place. The most likely scenarios are 50/50 splits of net settlements where the ERISA lien exceeds the client take-home. Many state Medicaids follow such a rule.
We also have some concern that the Supreme Court will review either this case or McCutchen v. US Airways. After all, the court composition hasn’t really changed since Sereboff came down in 2006 (it remains 5-4 conservative).
Please click here for a copy of CGI v. Rose.
Ryan J. Weiner
Managing Partner
Lien Resolution Services
https://lienblog.wordpress.com
Lien Resolution Services - Healthcare Lien Resolution Blog 
Rose is no longer an argument that can be asserted in defense of a plan’s reimbursement claim.