It is important to note that neither the Fourth Circuit nor the Supreme Court has dealt directly with a case with this fact pattern, but additional support for this conclusion can be found in Fourth Circuit dicta. The court in Cohen wrote that the plaintiff’s claim for reimbursement of overpaid disability insurance “is arguably unauthorized under § 1132(a)(3),” because the Supreme Court in Great-West “denied a fiduciary’s restitution claim against a beneficiary when the property sought could no longer be traced to a particular fund or property, because the fiduciary [was] seeking a legal remedy—the imposition of personal liability on the beneficiary to pay a sum of money owed to the plan—outside the equitable relief afforded to fiduciaries in civil actions under § 502(a)(3).”
Food Emplrs. Labor Relations Ass’n & United Food & Commer. Workers Health & Welfare Fund v. Dove, 2014 U.S. Dist. LEXIS 159773 (D. Md. Nov. 12, 2014) (Magistrate Judge Report and Recommendation)
This is a case where a multiemployer plan sued to recover medical expenses paid in error. The Defendant, originally a full time employee, had added coverage for his wife as his dependent.
Later, the Defendant became a part time covered employee, requiring that he pay an additional premium to maintain his wife’s coverage. He did not. Nonetheless, his wife incurred medical expenses which the Fund paid.
The magistrate judge began with the observation that “equitable relief” under ERISA is constrained to “the kinds of relief ‘typically available in equity’ in the days of ‘the divided bench’ before law and equity merged.” U.S. Airways, Inc v. McCutchen, 569 U.S. (slip op., at 5), 133 S. Ct. 1537, 1544, 185 L. Ed. 2d 654 (2013). Nonetheless, the Fourth Circuit created a “common law remedy of unjust enrichment” within ERISA. Provident Life & Accident Ins. Co. v. Waller, 906 F.2d 985, 994 (4th Cir. 1990).
“Contract” Supports Reimbursement Claim
Against this backdrop, the judge turned to the issue at hand. As to the contract between the parties, the matter was clear:
The claim here is for recovery of benefits paid in error, and the contract that Plaintiff and Defendant signed allows for recovery of benefits paid in error.
Scope of Permitted Equitable Relief Does Not
On the other hand, the view of equitable remedies appeared more narrow:
The Supreme Court and Fourth Circuit have also consistently held that an actionable claim for equitable relief under ERISA must involve the plaintiff bringing “a constructive trust or equitable lien on a specifically identified fund, not from [the defendant’s] assets generally.
Key Element To Holding
Taking a literal view of the cited authority, the judge ruled for the Defendant, stating that:
. . . the Supreme Court has explained that an actionable claim must involve an attempt to reclaim property within the defendant’s “control” and within “specifically identifiable funds.” See, e.g., U.S. Airways, Inc v. McCutchen, 569 U.S. , 133 S. Ct. at 1545 (2013); Sereboff, 547 U.S. at 362-63 (noting such property must also be within the defendant’s “possession”). . . .
I am persuaded that a claim for equitable relief under ERISA is only actionable in the Fourth Circuit where a defendant has control over a plaintiff’s claimed property. As Defendant here was never in control of Plaintiff’s claimed res, I recommend that the Motion be denied.
Note: The judge found support for this view in Fourth Circuit dicta here:
. . . additional support for this conclusion can be found in Fourth Circuit dicta.
The court in Cohen wrote that the plaintiff’s claim for reimbursement of overpaid disability insurance “is arguably unauthorized under § 1132(a)(3),” because the Supreme Court in Great-West “denied a fiduciary’s restitution claim against a beneficiary when the property sought could no longer be traced to a particular fund or property, because the fiduciary [was] seeking a legal remedy—the imposition of personal liability on the beneficiary to pay a sum of money owed to the plan—outside the equitable relief afforded to fiduciaries in civil actions under § 502(a)(3).” Cohen, 423 F.3d at 425 (4th Cir. 2005); see also Great-West, 534 U.S. at 214.
Here, too, Plaintiff seeks reimbursement of moneys that can “no longer be traced to a particular fund”—the money has been paid directly to third party medical care providers and is not within Defendant’s assets or control.
Additional Authorities Cited On Control Element – Regarding the “control” element as precondition to relief:
All but one circuit that has considered this question has deemed “control” of the disputed res to be a required element for an actionable claim at equity under ERISA.
The Fifth Circuit explained that “the sine qua non,” or determining factor, “of restitutionary recovery available under § 502(a)(3) is a defendant’s possession of the disputed res.” Amschwand v. Spherion Corp., 505 F.3d 342, 346 (5th Cir. 2007). “Possession is the key to awarding equitable restitution in the form of a constructive trust or equitable lien,” id. at 347.
The Second Circuit similarly held that what distinguishes a plaintiff who is able to recover reimbursements of overpaid benefits is whether the defendant “did, at some point, have possession and control of the specific portion of the particular fund sought by the insurer.” Thurber v. Aetna Life Ins. Co., 712 F.3d 654, 664 (2d Cir. 2013).
The Ninth Circuit, too, has developed a test that lists possession among the requirements for an actionable claim. It recently cited the reasoning of Justice Roberts’ unanimous opinion in Sereboff to identify “three criteria for securing an equitable lien by agreement in an ERISA action”—1) “a promise by the beneficiary to reimburse the fiduciary for benefits paid under the plan in the event of a recovery from a third party,” 2) “the reimbursement agreement must specifically identify a particular fund, distinct from the beneficiary’s general assets, from which the fiduciary will be reimbursed,” and 3) “the funds specifically identified by the fiduciary must be within the possession and control of the beneficiary.” Bilyeu v. Morgan Stanley Long Term Disability Plan, 683 F.3d 1083, 1092-93 (9th Cir. 2012) . . .
Cases Distinguished Where Funds Co-mingled Or Dissipated –
Even where circuit courts have found equitable ERISA claims to be actionable in instances where the defendant is no longer in direct possession of the monies in question (due to having spent or comingled those funds), they still require that the funds were at some point transferred directly from the plaintiff to the defendant.
See, e.g., Cusson v. Liberty Life Assur. Co. of Boston, 592 F.3d 215, 231 (1st Cir. 2010) (unlike the money to be reimbursed in Great-West, the money to be reimbursed in Cusson “was paid to Cusson rather than into a separate trust over which she has no control”);
Funk v. CIGNA Group Ins., 648 F.3d 182, 194 (3d Cir. 2011) (holding that there was an equitable claim under ERISA where “there was an equitable lien by agreement that attached to the Social Security award as soon as [the defendant] received [the money]” (emphasis added));
Longaberger Co. v. Kolt, 586 F.3d 459, 467 (6th Cir. 2009) (holding that the plaintiff’s “equitable lien attached to the settlement fund when it was identified and received” by the defendant (emphasis added); Id. at 469 (holding that the equitable claim under ERISA was actionable because defendant “properly identified a specific fund . . . that was in the possession and legal control of [the defendant], but belonged in good conscience to the Plan” (emphasis added)) . . .
Gutta v. Standard Select Trust Ins. Plans, 530 F.3d 614, 620-21 (7th Cir. 2008) does not really fit with the foregoing authorites though included for some reason in the same string cite. (See, :: Seventh Circuit Holds That Sereboff Supports Disability Carrier’s Counterclaim)