No. 02 C 6489 Page 4

Mertens v. Hewitt Associates, 508 U.S. 248, 256 (1993)).

In Knudson, the Supreme Court determined that ERISA does not authorize a suit by
a plan to impose a lien on funds received by a beneficiary in a lawsuit against third parties.
534 U.S, at 221. Writing for the majority, Justice Scalia stated that the petitioners (the plan)
did not seek “particular funds that, in good conscience, belong to petitioners, but that
petitioners are contractually entitled to some funds for benefits that they conferred.” Id. at
214. Therefore, “[t]he kind of restitution that petitioners seck, therefore, is not equitable — the
imposition of a constructive trust or equitable lien on particular property — but legal — the
imposition of personal liability for the benefits that they conferred upon respondents.” Id.
Because the funds in question had already been “dissipated” so that they were not easily
identifiable, it was impossible for plaintiff to identify a res that could be the subject of the
trust, 7d. at 213-14,

The only factual difference between this case and Knudson is that here plaintiffs seek
to impose a trust on funds which have not yet been received (and may never be) by defendant.
Plaintiff argues that because they seek prospective relief rather than retrospective restitution,
their claim is different. The circuit courts have not yet addressed whether this matters in light
of Knudson, and the district courts are split on the issue. Two district courts, both in cases

involving the plaintiff in this matter, reached differing conclusions.

In Primax Recoveries Inc. y. Duffy, 204 F.Supp. 2d 1111, 1113 (N.D.ID. 2002), Judge
Bucklo determined that Knudson does not “bar a lien on specific funds not yet received.”
There, Judge Bucklo indicated that Knudson was raised only in a supplemental brief, to which

plaintiff did not reply. In Primax Recoveries Inc. vy. Carey, 2002 WL 1968339, *3, n, 5



No. 02 € 6489 Paye3

301 F.3d 492, 496 (7" Cir. 2002). To determine if we have jurisdiction, we look beyond the face
of the complaint to any evidence submitted regarding jurisdiction. Id.

Plaintiff now seeks to reinstate the lien and defendant moves to dismiss the claim,
arguing that this court lacks subject matter jurisdiction. The health care benefits plan is
governed by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq.
Section 502(a)(3) of ERISA authorizes civil action

by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice

which violates any provision of this subchapter or the terms of the plan, or (B)

to obtain other appropriate equitable relief (i) to redress such violation or (ii)

to enforce any provision of this subchapter or the terms of the plan. 29 U.S.C.

§ 1132(a)(3).

By its terms, this statute authorizes suits for equitable relief only, not legal relief.
Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 221 (2002). To determine
whether we have jurisdiction over plaintiff’s suit, we must determine whether the claim is for
equitable relief and, if not, dismiss the action.

Plaintiff seeks the following relief: a declaratory judgment declaring that plaintiff is
entitled to recover the funds (if any) from the defendant; an injunction barring the defendant
from disposing of the fands in any way to prevent plaintiff from collecting; restitutionary relief
in the amount that plaintiff paid tu defendant; a constructive trust imposed upon any proceeds
ofthe third party lawsuit; and an injunction requiring defendant to tender restitutionary relief
to plaintiff upon receipt, While on its face plaintiff appears to be secking equitable relicf, we

must look at the substance of plaintiff's complaint and determine whether it seeks “those

categories of relief that were typically available in equity.” Knudson, 534 U.S, at 210 (quoting

we offer no thoughts on whether plaintiff may be able to recover from defendant in an appropriate state
action,



No, 02 C 6489 Page 5

(S.D.N.Y. 2002), Judge Lynch held, following a lengthy discussion of Knudson, that a suit of
this type was barred by Knudson, stating that “[s]urely the same conclusion follows 4 fortiori
when the ‘settlement proceeds’ are in nobody’s possession, because they are the entirely
hypothetical fruit of a potential future settlement that does not yet exist and may never come
into being at all.”

It seems clear that the fundamental goal of plaintiff's suit is to impose a constructive
trust in order to get the money it believes is due under the terms of the benefits plan. Judge
Cardozo stated that a “constructive trust is the formula through which the conscience of equity

finds expression.” Beatty v. Guggenheim Exploration Co., 225 N.Y. 380, 386 (N.Y, 1919).

Generally, parties seek to impose a constructive trust to prevent unjust enrichment. See 1G.
Palmer, Law of Restitution § 1.4, p. 16-17 (1978). Where a unique chattel is wrongfully held
by one party, another party has an action in equity to gain title to the property. Restatement
of Restitution § 160, comment e, at 644 (1937).

However, “where money is paid by one person to another as a result of a mistake of
such character that the payor is entitled to restitution, he is ordinarily not entitled to maintain
a suit in equity for the specific recovery of the money, even though the payee stiJ] holds the
money so that specific restitution would be possible, since a quasi-contractual action at law
would give an adequate remedy.” Restatement of Restitution § 160, comment e, at 645, Courts
of equity did not traditionally allow suits for money damages, even if the plaintiff attempted
to characterize the suit as a trust or lien over specific money damages, The Court requires that
we recognize this law/equity distinction in determining whether ERISA allows a particular

lawsuit. Knudson, 534 U.S, at 217.



* United States District Court, Northern District of Illinois )

Ni f Assigned Jud; Sitting Judy
ror Magitrate Judge James B. Moran than Assigned Tage
CASE NUMBER 02 C 6489 DATE 12/12/2002
CASE Primax Recoveries Inc. Vs. Neal Goss etc.
TITLE

Lin the following box (a) indicate the party filing the motion, ¢.g.. plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
‘of the motion being presented, |

MOTION:
Memorandum Opinion and Order
DOCKET ENTRY:
(1) Oo Filed motion of | use listing in “Motion” box above. |
(2) Qo Brief in support of motion duc
(3) o Answer brief to motion due____. Reply to answerbricfdue_.
(4) oO Ruling/Hearing on set for saat .
(5) oO Status hearing[held/continued to] [set for/re-set for]on__—setfor__ at
(6) ia] Pretrial conference[held/continued to] [set for/re-sct for]on ss __setfor_ ss at__
(7) Oo Trial[set for/re-set for]on__——at_
(8) o [Bench/Jury trial] [Hearing] held/continued toa
(9) oO This case is dismissed [with/without] prejudice and without costs[by/agrecment/pursuant to]
OFRCP4(m) Local Rule 41.1 ClFRCP41(a)(1) [1 FRCP41(a)(2).
a0) =o [Other docket entry] Enter Memorandum Opinion and Order. For the foregoing reasons,

defendant’s motion to dismiss is granted and plaintiff's claim is dismissed.

(il) of [For further detail sec order attached to the original minute order.]

No notices required, advised in open court, [Dogue
‘Nutiber
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No notices required.

umber of notices

Notices muiled by judge's sta.

Notified counsel by telephone. DEC 1.3 2002

datw'dogketed

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courtroom ee itd 21 930 e0 due mae st
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No. 02 C 6489 Page 6

This is exactly the situation here. Plaintiff feels that, should defendant be awarded
damages or a settlement arising from a third party lawsuit, defendant will be unjustly
enriched. As a result, it seeks to recover the money that it advanced under the terms of the
plan. It does not matter to plaintiff which money it recovers, so long as it gets the money. As
such, the substance of its claim is a breach of contract action for damages — a traditional legal
claim.

We read the Court’s opinion in Knudson to stand for the proposition that, regardless
of their motivation, Congress drew a clear line between snits-at- law and suits-at-cquity, only
the latter of which are authorized by ERISA. “‘Equitable’ relief must mean something less
than ail relief.”, Knudson, 534 U.S, at 209 (quoting Mertens, 508 U.S. at 258, n. 8). Allowing
suits of this nature would allow parties to circumyent the statute based simply on when they
file the lawsuit, rather than the relief they desire. We believe that suits like this are basically
suits for money damages “since they seek no more than compensation for loss resulting from

the defendant’s breach of legal duty.” Jd, at 210 (quoting Bowen v. Massachusetts, 487 U.S.

879, 918-19 (1988) (Scalia, J., dissenting)), As suits for money damages seek “the classic form
of Jegal relief,” they are not authorized by section 502(a)(3). fd. (quoting Mertens, 508 U.S, at
255).

CONCLUSION

For the foregoing reasons, defendant's motion to dismiss is granted.

Q JAMES B. MORAN
nior Judge, U. 8. District Court

Dee. JA 2002.



“

TN THE UNITED STATES DISTRICT COURT DOCKET ED
FOR THE NORTHERN DISTRICT OF ILLINOIS Aet. 13 2nny
EASTERN DIVISION BE Rhee
PRIMAX RECOVERIES INCORPORATED,
Plaintiff,
No. 02 C 6489

vs.

NEAL GOSS, a minor, by and through

)
)
)
)
)
)
)
ROBERT M. GOSS, his father and next friend, )
)
)

Defendant.

MEMORANDUM OPINION AND ORDER

Plaintiff Primax Recoveries Incorporated (Primax) brings this suit seeking injunctive
and declaratory relief to reinstate the lien on proceeds of a lawsuit between the defendant, Neal
Goss, and third party tortfeasurs. Defendant moves to dismiss the suit pursuant to Federal
Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, For the following
reasons, defendant’s motion is granted and plaintiff's claim is dismissed,

BACKGROUND

The facts are taken from plaintiff's complaint. Robert Goss was an employee of AON
Corporation and a participant in AON’s heath care benefits program. As his son, defendant
Neal Goss was a beneficiary under the terms of the plan, The plan contains a reimbursement
provision that provides:

COORDINATION WITH THIRD PARTY CLAIMS

No payment will be made for expenses incurred for injuries received in or as a

result of an accident to the extent a third party is responsible for paying these

expenses. These injuries include expenses arising out of, or in the course of, any

employment for wage or profit, where it is determined that the individual is not
covered by Workers’ Compensation or similar law.



No, 02 C 6489 Page 2

If you or a covered dependent incurs expenses for injuries received in an
accident, for which CIGNA’s Claims Administrator determines a third party
may be liable, CIGNA’s plan will provide its normal benefits. However, you
first must agree, in writing, to refund at the time the amount of the third party’s
responsibility is determined and satisfied, the lessor of:

. the amount actually paid by the plan for those expenses; or

. an amount equal to the payment actually received from the third party
for those expenses.

In the event you or a covered dependent subsequently files a Workers’

Compensation claim, CIGNA’s Claims Administrator shall haye a lien on any

amount or settlement to the extent you have already been reimbursed under the

medical option.

On November 3, 1999, Neal was seriously injured in a sports accident, The health care
plan advanced benefits on behalf of Neal in the amount of $491,641.78. Neal and his family
filed personal injury lawsuits against third party tortfeasors allegedly responsible for Neal’s
injuries.

Primax, on behalf of the plan, asserted a lien against any potential recovery to the
extent of the benefits advanced, pursuant to the above reimbursement provision. Defendant
filed a petition in the Circuit Court of Cook County to extinguish the lien, which was granted
on September 2, 2002, after plaintiff failed to appear, respond or otherwise contest the petition.

DISCUSSION

In deciding a Rule 12(b)(1) motion to dismiss we treat all well-pleaded factual

I

allegations as true, drawing aJl reasonable inferences in favor of the plaintiff... Iddiry. LN.S.,

'We note that there is some disagreement following Knudson, over whether this is best characterized
as a question of jurisdiction or whether plaintiff fails to state a claim, Sec Primax Recoveries Ine. v. Carey,
2002 WL 1968339,*3, n.6 (S.D.N,Y. 2002). While the motion could be based on cither ground, the Seyenth
Circuit has dealt with the issue in the past as a question of jurisdiction, See, e.g., Administrative Committce
y. Gauf, 188 F.3d 767, 770-71 (7 Cir, 1999). Nothing in Knudson acts to overrule this and we deal with this
as a notion to dismiss pursuant to 12(b)(1). Inusmuch as this is 1 motion to dismiss for lack of jurisdiction,