1. Ethics & Fiduciary Obligations in ERISA Litigation Presented by: Matthew R. Falk, Esq. Daran Kiefer, Esq. Falk Metz LLC Kreiner & Peters Co. L.P.A. www.falkmetz.comwww.falkmetz.com www.subrogation-recovery.comwww.subrogation-recovery.com (414) 226-2139 (216) 771-6650 The Subro Grapevine

2. Matthew R. Falk, Esq. Daran Kiefer, Esq. Falk Metz LLC Kreiner & Peters Co. L.P.A.

3.  Typical players/documents in health recovery cases  Who Is Your Client- Breakout/Group Discussion  Who Speaks on behalf of the client - Breakout/Group Discussion?  Who is an ERISA fiduciary duties - Breakout/Group Discussion  Conflicts - Breakout/Group Discussion  Recap/Question and Answer

4.  Administrator  Attorney  Client  Fiduciary  Plan  Plan Beneficiary  Plan Administrator  Plan Participant  Plan Sponsor  Recovery Agent  Human Resources Director  Risk Manager  Benefits Coordinator

5.  Form 5500  Plan  Reimbursement Agreement  Stop Loss Insurance  Summary Plan Description  Others

6. The ABA Model Rules of Professional Conduct provides a good legal backdrop; however, the definition of “client” is omitted! What “player” is your client?

7. Let’s look at example cases.

8. Case No. 1 You are contacted by the head of human resources for Big Bottle Inc. who has a self- funded ERISA plan. One of their employees was in a car accident and they want you to represent the plan’s subrogation interest. The SPD provides that subrogation rights to “the plan” which is defined as “Big Bottle Health Plan Trust” and the plan sponsor is “Big Bottle Inc.”. Who is your client in this case?

9. Case No. 2 You get a new litigation case referred to you where Colossal Life was named in a case seeking declaratory judgment that it has no right to reimbursement from the settlement of an injury claim by a covered insured. Colossal Life is the health insurer for the “Wonder Widgets LLC” providing health insurance to its employees. The SPD provides for “reimbursement” to “us/we” in the subrogation and reimbursement provision. “Us/We” is defined as referring to “Colossal Life Ins. Co., its subsidiaries, parent companies or other corporate affiliates”. Who is your client?

10. Case No. 3 You get a case referred to you by Subro Aficionado who regularly sends you files where their main client Stingy Health Insurance Company has a subrogation case. In this particular case, Stingy Health and Subro Aficionado were named in a lawsuit as defendants to assert their subrogation interest by the covered employee arising from an auto accident. The plan subrogation provision provides “Stingy Health Insurance Company is subrogated to all rights of recovery”. Who is you client?

11. Case No. 4 You receive a call to handle a new file from a vendor Subro Aficionado. The case involves a self-funded ERISA plan for Mega Motors. Subro Aficionado send you the subrogation claim as subrogation vendor who has a contract with Mega Life Insurance Company to handle, investigate and settle their subrogation claims. Mega Life serves as a “TPA” and “claims administrator” for this self-funded ERISA plan. The subrogation provision grants to “the plan” all subrogation rights and defines “the plan” as “Mega Motors Health and Welfare Benefit Trust”. Which entity or organization is your client?

12. Case No. 5 The same facts as Example #4 except the case is being referred to you by Subro Aficionado to respond to a lawsuit filed by the injured party. In this case, the injured party sues Mega Life Insurance Company asking them to assert their subrogation claim or be forever barred. Who is your client?

13. See ABA Model Rule 1.13:  Rule 1.13(a) provides that representation of the organization can be conducted through “duly authorized constituents”.  Rule 1.13(b) provides guidance to an attorney regarding what to do when the “other person associated with the organization” acts in a manner inconsistent with their legal obligations.

14. Let’s look at example cases.

15.  Example #1  Your law firm has been contacted by the human resources director for Acme Inc. as they have been sued in a case asking them to assert their subrogation claim or be barred. The HR director found your name on line and would like you to represent the Acme Inc. Employee Benefit Plan in this case. Does the HR director have this authority? What questions would you ask her to verify the authority to refer this matter to you?

16.  Example #2  You have been contacted by National Health Insurance Co. who has been named in a suit seeking to have their contract rights of subrogation and reimbursement construed through a declaratory judgment action. Their subrogation analyst saw you give a speech at a conference and wondered if you would handle the case for them. This analyst has faxed over the lawsuit papers showing that “Boo Boo Costumes Health Plan” was named in the suit and not National Health Insurance Co. Is the analyst a “constituent” to engage you? What documents or evidence would you need to take the case? What does the plan say and does it matter?

17.  Example #3  You get a call from your buddy Derrick with SubroGator LLC. They handle subrogation services for Mega Health Insurance Company nationally. They want to refer you a case under their standard agreement with your firm. You get the lawsuit in the mail. The actual litigation names “Wrascally Wrabbit LLC” as a party defendant to assert their subrogation claim. Is SubrogGator representative Derrick a “constituent” such that he can hire you to represent the company? What types of documents do you want to see that authorize Derrick to engage your firm? Does the plan language or funding matter?

18.  Example #4  You have been handling a file for the “Cheese Factory U.S.A.” self-funded health plan sent you by SubroGator LLC. You just got a call from Andrew Hoffman IV who is the associate general counsel for “Cheese Factory U.S.A” overseeing all litigation for the company. His first question to you is “Who the hell hired you?” You advise it was “SubroGator” who he says has never heard of. What documents do you have to show him how “SubroGator” is involved. Does the funding of the plan matter to you?

19. See 29 U.S.C. §1002 (21)(A) for ERISA’s definition of “fiduciary”: An entity providing administrative-related services to an ERISA plan may be considered a fiduciary of the plan to the extent that the person exercises authority, control, or responsibility with respect to the Pan or its assets.

20. Examples of cases where entity assigned to obtain reimbursement and/or subrogation is a fiduciary:  Health Cost Controls of Illinois, Inc. v. Washington  Health Cost Controls v. Skinner  Health Cost Controls v. Manetas  Health Cost Controls v. Bichanich

21. Examples of cases where entity assigned to obtain reimbursement and/or subrogation is not a fiduciary:  Ince v. Aetna Health Management, Inc.  Singleton v. Board of Trustees, of IBEW Local 613 and Contributing Employers Health and Welfare Fund

22. What about the attorneys? An attorney who renders legal and consulting advice to an ERISA plan is generally not considered to be a fiduciary absent a showing of his or her control of the management of the plan or its assets, investment advice for a fee, or discretionary responsibility in administering the plan. However, case law exists where the attorney was held to be a Plan fiduciary.

23. Let’s look at example cases.

24.  Example #1  A Plan sponsor retains ERISA Administrators R Us, Inc. to process claims, investigate claims and perform certain record keeping claims on behalf of the Plan. Is ERISA Administrators R Us a fiduciary?

25.  Example #2  A Plan hires ERISA Administrators R Us, Inc. to act a Third Party administrator. The administrative services agreement between the Plan and T.P.A. includes a provision that requires the T.P.A. to investigate and prosecute reimbursement and subrogation claims on the Plan’s behalf. The T.P.A. enters into a contract with SubroGator R Us to investigate and prosecute reimbursement and subrogation claims. Is SubroGator R. Us a fiduciary?

26.  Example # 3   Same facts as Example # 2, but T.P.A.’s agreement with the Plan assigns all rights to seek reimbursement and subrogation to the T.P.A. T.P.A.’s agreement with SubroGator retains settlement authority with the Plan to resolve the reimbursement and subrogation claims. Is SubroGator R. Us a fiduciary?

27.  Example # 4   Same facts as Example #3, but SubroGator has full discretion and authority to investigate, prosecute and resolve reimbursement and subrogation claims. Is SubroGator R. Us a fiduciary?

28. I owe a fiduciary duty… so what? Fiduciaries have a duty to:  Not to mislead plan participants or misrepresent the terms or administration of a plan  Administer the plan according to its terms

29. Conflict of Interests: Who do I listen to? An attorney then must understand the scope of her or his engagement by the “client”. Let’s look at examples.

30.  Example No.1  The Plaintiff, as the CFO for the plan sponsor, files suit seeking damages for his 14 year old son who was severely injured in a car accident. The Plaintiff’s suit names the Plan as a party to the litigation. The Plan forwards the lawsuit to their T.P.A. who engages you as outside counsel to protect the Plan’s reimbursement and subrogation rights. At a private mediation, the Plaintiff and the Defendant agree to resolve the minor’s claim but specifically refuse to reimburse the Plan. On Monday, you get an email from the CFO of the Plan Sponsor instructing you to drop the subrogation and reimbursement case. What do you do? What is your obligation to the plan?

31. Example No. 2 Plaintiff, a plan beneficiary, initiates a personal injury action and includes his employer sponsored self-funded health plan as a party to the litigation. The Plan forwards the lawsuit to the T.P.A. No. 1 who retains you to protect the rights of the plan. You enter an appearance on behalf of the plan. During the course of litigation, the Plan fires T.P.A. No 1 and retains T.P.A. No 2 to handle its plan. T.P.A. No. 2 administers additional payments on the Plaintiff’s behalf arising from this accident. The Plaintiff makes the plan an offer to settle for 100% of the paid claim by T.P.A. No. 1. Your contact at T.P.A. #1 says take it. What do you do? How to you handle to release? What do you do if you represent T.P.A. #2 later?

32. Example No. 3 Plaintiff/participant sues employer health plan sponsor. Mega Health Insurance Company is the T.P.A. paying claims for this self- funded plan. Mega does not have any offices in the state where the lawsuit is filed. Mega’s subrogation analyst refers the case to SubroGator and Derrick hires you. The plan provides for full recovery rights. In the course of litigation, the responsible party’s attorney admits liability for the accident and will not dispute relatedness of the medical bills. However, neither party will stipulate to the plan’s payments and demand that plan present someone at trial to testify to the bills. The Plaintiff’s attorney offers you 50% of the plan’s subrogation right to avoid the need for a witness at trial. Derrick tells you to take it as SubroGator and Mega don’t want to send anyone to trail. What do you do?

33.  Example No 4  Plaintiff is a covered participant in the Suzie’s Sweets LLC health plan. At the time of the accident, the Sweet’s health plan was a self-funded plan handled by ABC as their T.P.A. One year after the accident, Sweet’s plan became an insured health plan through Universal Health Carrier. Plaintiff’s attorney sued the plan for all the bills. Universal’s subrogation agent refers the case to you to handle for the plan. During discovery you learn of ABC’s bills paid for the plan. How do you handle further representation of Sweet’s plan? Who is the client? Plaintiff’s attorney makes an offer for 100% of the bills paid by ABC as he claims he cannot relate the treatment paid by Universal. Universal wants you to take the settlement and pay them back. What do you do?

34.  Typical players/documents in health recovery cases  Who Is Your Client  Who Speaks on behalf of the client  Who is an ERISA fiduciary duties  Conflicts  Question(s)

35. Matthew R. Falk, Esq. Daran Kiefer, Esq. Falk Metz LLC Kreiner & Peters Co. L.P.A. www.falkmetz.comwww.falkmetz.com www.subrogation-recovery.comwww.subrogation-recovery.com (414) 226-2139 (216) 771-6650

36. Thank you!