Brian:
Thanks for supplying the explanation of equitable relief.
It seems that equitable relief is difficult to prove, for it seems to be a more abstract concept than legal relief.
In addition, wouldn't equitable relief extend to the plan, as well as the Shanks?
The reason I say that is we are dealing with a stop-loss insurer with a self-funded plan, in contrast to a fully insured plan. If the stop-loss insurer is not reimbursed, I assume the plan's stop-loss premium the following year will be increased by the amount which would not have been subrogated.
In essence, the make whole doctrine seems to be applicable to the plan as well as the beneficiary.
To what degree will each be made whole?

I read an article about subrogation in the Houston Chronicle this week.
It stated that subrogation cannot be brought up in court, to adjust the amount in consideration of the "windfall" to the insurer.
Is that accurate?
Don Levit

"Appropriate equitable relief" requires a court to consider the whether the application of law results in undue hardship and allows the court to mitigate that harshness. As used in ERISA, this phrase clearly means that a court has power to consider all the facts and circumstances that relate to the grievance a party brings to the court and they may go beyond "legal" relief.

The difference between "equitable" and "legal" relief is an old one that goes back centuries to England. It's not a well-defined distinction. In merry olde England, equitable powers were exercised by the Lord Chancellor. An aggrieved party petitioned this Lord as the "keeper of the King's conscience." It is similar to the difference between principles of justice and principles of mercy.

In this context it calls on the court to exercise its power to consider more than the boilerplate provisions of the "contract" that the parties entered into. It calls on the court to prohibit or limit Wal-Mart's enforcement of the reimbursement language in the plan to more fairly allocate the losses between the parties. It asks the court to look at the loss Deborah Shank has incurred and compare it to the loss Wal-Mart incurred and split the money at issue proportionately. If you do that, it's not hard to see that Wal-Mart would walk away with little, if anything, out of the personal injury proceeds.

It's easy to understand what the Shanks want here: they ask the court to relief them of the burden the plan language imposes in light of the facts and circumstances surrounding Deborah's injuries. It is harder for Wal-Mart to present facts that favor them in equity. They simply want strict enforcement of the contract and to recover money from the Shanks. That is the quintessential "legal" remedy. And that is what the court gave Wal-Mart.

That's my objection. The only remedy ERISA gives Wal-Mart is "appropriate equitable relief." But under equitable principles, it has very little to justify its position. So it basically argues that legal relief (enforcement of the contract without regard to the effect on the Shanks of that enforcement) = "appropriate equitable relief." The court buys off on it. In the process it guts any meaning that "appropriate equitable relief" has.

Brian:
Can you explain what appropriate equitable relef would have been, from the plan's viewpoint, and from the beneficiary's viewpoint?
Or, are you saying that appropriate equitable relief extends only to the beneficiary, and not to the plan as well?
Don Levit

Don, the problem with Shank is that the Eighth Circuit strips ERISA's "appropriate equitable relief" language of any meaning. If ERISA said that plan participants are entitled to the benefits the plan gives them, nothing more and nothing less, the decision would be defensible, perhaps even be the only reasonable decision the court could make given the express language of the plan.

But ERISA doesn't say that. The remedy section of the statute that Wal-Mart was relying on specifies that the *only* relief it was entitled to was "appropriate equitable relief." Where the Eighth Circuit gets off interpreting that phrase to mean "enforce the terms of the plan without any regard to the individual facts and circumstances surrounding the claim," I'll never know.

Shank is simply an abomination. It not only is it completely lacking in justice, equity and fairness, but it contains no reasonable legal analysis. What part of "appropriate equitable relief" can the Eighth Circuit not understand?

Brian:
Thanks for alerting us to this important case.
It is indeed tragic what has happened to the Shanks.
Certainly, those dollars mean so much more to them, than they do to Wal-Mart.
Reading through the decision, though, can you see how the court was "justified" in applying the law in Wal Mart's favor?

While state law may forbid subrogation, that has no impact, in my opinion, how an ERISA plan document can be written. It is written according to federal law, not state law.
If subrogation violated ERISA or federal law, then the Shanks would have had a winning case.

I am wondering about contracts of adhesion?
Wal-Mart and the Shanks came to no bargain. The bargain was totally drawn up by Wal-Mart.
Is this concept applicable at all here?

Brian, I can understand a little bit your frustration in pursuing justice in the present legal and regulatory environment. For example, I have encountered much frustration in trying to deal with state regulators concerning state laws that, in my opinion, conflict with ERISA. Just citing the savings clause, without understanding federal law, or how it may conflict, is not sufficient.
In the long run the type of justice meted out to the Shanks will not be sustainable.
Don Levit