Source: https://www.insurancedevelopments.com/erisa/
Timestamp: 2019-03-19 07:46:21
Document Index: 692068632

Matched Legal Cases: ['§ 1132', '§ 1132', '§ 1002', '§ 1054', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 502', '§ 502', '§ 502', '§ 502', '§ 1132', '§ 502', '§ 502', '§ 1132', '§ 1132', '§ 1132', '§ 407', '§ 407', '§ 407', '§ 407', '§ 1132', '§ 1132', '§ 1132']

Insurance Developments: ERISA
Court Illuminates Criteria for an Employee Welfare Benefit Plan
The United States District Court for the Western District of Kentucky, in Brown v. Metropolitan Life Ins. Co., No. 3:11-CV-451-H, 2011 WL 68266638 (W.D.Ky. Dec. 28, 2011), recently held that ERISA did not preempt a plaintiff's state law claims against her long-term disability benefits plan provider, the National Conference of Bankruptcy Clerks ("NCBC"), because, the court determined, the NCBC was not an "employee organization" within the meaning of ERISA.
In doing so, the Court looked to the Eleventh and Ninth Circuits for guidance on whether an organization will be considered an "employee organization" under ERISA, citing Slamen v. Paul Revere Life Ins. Co., 166 F.3d 1102, 1104 (11th Circ. 1999) (holding that plan falls within ERISA only where it covers "participants because of their employee status in an employment relationship, and an employer or employee organization is the person that establishes or maintains the plan. . . .") and Saffaf v. Standard Ins. Co., 102 F.3d 991, 992-93 (9th Cir. 1996) (finding that an organization qualifies as an "employee organization" if it limits its membership to employees and excludes employers or independent contractors from joining.").
The court in Brown v. Metropolitan Life Ins. Co. found that the NCBC "opens it membership to virtually anyone. . . [and that] [e]ven though NCBC does limit its membership to a category of employees, it also undeniably offers membership of some type to any and all individuals, irregardless of their employee status." Id. The court further noted that non-employees were able to participate in NCBC's welfare benefit plan. Id.
Based on these facts, the court held that NCBC did not qualify as an "employee organization" within the ambit of ERISA:
To qualify as an 'employee organization', NCBC must directly base membership upon employee status. Thus, to the extent NCBC allows membership beyond a specified category of employees, it would fall beyond the definition of an 'employee organization' as ERISA defines it.
The court also rejected HCBC's reliance on its filing of ERISA Form 5500 and its compliance with ERISA's procedural protections, which, the court found "laudatory" but could not confer ERISA preemption.
Posted by Seiger Gfeller Laurie LLP in ERISA | Permalink | TrackBack (0)
Tags: "Brown v. Metropolitan Life", "employee organization", "ERISA Form 5500", "ERISA preemption", "Saffaf v. Standard", "Slamen v. Paul Revere"
Obligation to Reimburse Medicare Defined by the Scope of Plaintiff's Claim Against Third Party, Sixth Circuit Says
The United States Court of Appeals for the Sixth Circuit recently decided Hadden v. U.S., No. 09–60722011, WL 5828931 (6th Cir., Nov. 21, 2011), a case in which the plaintiff made several compelling arguments to avoid reimbursing Medicare 100% where the plaintiff contended he only recovered 10% of his damages.
In this case, Medicare paid plaintiff’s medical bills which totaled $82,036.17, and plaintiff Hadden thereafter recovered $125,000 in a personal injury claim. Medicare subtracted a portion of the attorneys’ fees Hadden paid to his lawyer relating to the settlement and demanded approximately $62,000. Hadden escrowed $62,000, paid it to Medicare under protest, and took an appeal.
Hadden’s essential argument was that the tortfeasor from whom he recovered was only 10% responsible for his damages, and thus, the $125,000 settlement represented only 10% of Hadden’s damages. Further, Hadden argued that the settlement compensated him for only 10% of his medical expenses, or $8,000. Therefore, Hadden claimed that the remaining $117,000 “compensated him for damages other than medical expenses . . . and was therefore off-limits to Medicare.” Id. at *1.
Applying de novo review, the Sixth Circuit affirmed the district court's judgment, and held that the government was entitled to recover 100% of the recovery, and that the beneficiary's own obligation to reimburse Medicare was defined by scope of beneficiary's own claim against third-party:
Consequently, the scope of the plan's “responsibility” for the beneficiary's medical expenses—and thus of his own obligation to reimburse Medicare-is ultimately defined by the scope of his own claim against the third party. That is true even if the beneficiary later “compromise[s]” as to the amount owed on the claim, and even if the third party never admits liability. And thus a beneficiary cannot tell a third party that it is responsible for all of his medical expenses, on the one hand, and later tell Medicare that the same party was responsible for only 10% of them, on the other.
Hadden v. U.S., 2011 WL 5828931, *3 (emphasis in original). The court also rejected Hadden's reliance on “equity and good conscience”, which the court determined did not favor returning money that beneficiary had paid under protest.
Posted by Seiger Gfeller Laurie LLP in ERISA, Life Insurance, Medicare | Permalink | TrackBack (0)
Tags: "Hadden v. U.S.", "medicare reimbursement", "medicare subrogration", "Section 1395y", medicare
Existence Of ERISA Plan Not Jurisdictional Requirement, But Element Of Plaintiff's Claim, Says Sixth Circuit
A circuit split is now resolved on a key ERISA question, thanks to a decision last week from the Sixth Circuit Court of Appeals.
In Daft v. Advest, Inc., Nos. 08-3212 and 10-3151 (5th Cir. Sept. 23, 2011), the Sixth Circuit reversed itself on the question of whether the existence of an ERISA plan is a prerequisite for federal jurisdiction (its prior position) or only an element of the plaintiff's benefit claim (which is now the court's view).
With the reversal, the Sixth Circuit joins other circuit courts of appeals, and resolves the split of authority - and brings its position in line with recent Supreme Court authority.
The Sixth Circuit reversed, although it did send the matter back to the district court for further proceedings.
The Sixth Circuit considered that, if the plan's existence is jurisdictional, then the issue could not be waived and may be raised at any time. Alternatively, if the plan's existence is merely an element of the plaintiff's claim, then the defendant can waive the issue.
One of the issues in Daftwas that the defendants said that the plan did not come within the scope of an ERISA pension benefit plan. Even if it did, the defendants claimed, the plan was not a "top hat" plan and therefore the plaintiffs' claims failed.
The court considered the jurisdictional question "head-on" for the first time since recent Supreme Court authority on the subject:
Now that the time has come to confront the question head-on, we find that recent Supreme Court precedent has abrogated the conclusion, assumed in our previous cases and explicitly adopted in the majority of our sister circuits, that the existence of an ERISA plan is a prerequisite to federal subject-matter jurisdiction. In the last several years, the Court has repeatedly warned that jurisdiction “ ‘is a word of many, too many, meanings' “ that have sometimes led courts to “profligate ... use of the term.” Arbaugh, 546 U.S. at 510 (quoting Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 90, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998)). “Because the consequences that attach to the jurisdictional label may be so drastic, [the Court] ha[s] tried in recent cases to bring some discipline to the use of this term.” Henderson ex rel. Henderson v. Shinseki, ––– U.S. ––––, ––––, 131 S.Ct. 1197, 1202, 179 L.Ed.2d 159 (2011); see also Reed Elsevier, Inc. v. Muchnick, ––– U.S. ––––, –––– – ––––, 130 S.Ct. 1237, 1243–44, 176 L.Ed.2d 18 (2010); Union Pacific R.R. Co. v. Bhd. of Locomotive Eng'rs & Trainmen Gen. Comm. of Adjustment, Cent. Region, ––– U.S. ––––, ––––, 130 S.Ct. 584, 596, 175 L.Ed.2d 428 (2009); Arbaugh, 546 U.S. at 510–11; Eberhart v. United States,546 U.S. 12, 18–19, 126 S.Ct. 403, 163 L.Ed.2d 14 (2005) (per curiam); Scarborough v. Principi, 541 U.S. 401, 413–14, 124 S.Ct. 1856, 158 L.Ed.2d 674 (2004); Kontrick v. Ryan, 540 U.S. 443, 454–455, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004). Of particular relevance is Arbaugh,which counsels that “[s]ubject matter jurisdiction in federal-question cases is sometimes erroneously conflated with a plaintiff's need and ability to prove the defendant bound by the federal law asserted as the predicate for relief—a merits-related determination.” 546 U.S. at 511 (internal quotation marks omitted).
An examination of the relevant sections of ERISA does not reveal a clear statement from Congress that the existence of an ERISA plan constitutes a jurisdictional requirement. . . . Section 502(e)(1) of ERISA grants federal courts “jurisdiction of actions under” section 502(a)(1)(B), 29 U.S.C. § 1132(e)(1), and does not “specif[y] any threshold ingredient” on which that jurisdiction depends, Arbaugh, 546 U.S. at 515. Section 502(a)(1)(B) gives “a participant or beneficiary” a cause of action “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan,” 29 U.S.C. § 1132(a)(1)(B), and does not “speak in jurisdictional terms or refer in any way to the jurisdiction of the district courts,” Zipes, 455 U.S. at 394, quoted in Arbaugh,546 U.S. at 515; neither do the definitions of “plan” or “employee pension benefit plan” in ERISA Section 3, see 29 U.S.C. § 1002(2), (3).
Therefore, in light of Arbaughand its progeny, the existence of an ERISA plan must be considered an element of a plaintiff's claim under Section 502(a)(1)(B), not a prerequisite for federal jurisdiction. . . .
The relevant sections of ERISA do not evidence a Congressional intent, let alone a clear one, that the existence of an ERISA plan is a jurisdictional question. Therefore, it is best considered an element of Plaintiffs' claim.
Because the existence of an ERISA plan is not a jurisdictional prerequisite, federal subject-matter jurisdiction lies over Plaintiffs' suit as long as they raise a colorable claim under ERISA. That is, federal jurisdiction exists over Plaintiffs' ERISA claim unless “the claim ‘clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or ... is wholly insubstantial and frivolous.’ “ Steel Co., 523 U.S. at 89 (quoting Bell v. Hood,327 U.S. 678, 682–83, 66 S.Ct. 773, 90 L.Ed. 939 (1946)). Plaintiffs have clearly met this burden, as evidenced by the fact that the district court, after considering the question on the merits, determined that the AE Plan did qualify as an ERISA plan. Defendants forfeited any objection to this element of the Plaintiffs' claim by failing to raise the issue before the district court granted summary judgment to Plaintiffs. SeeFed.R.Civ.P. 12(h)(2) (specifying that “[f]ailure to state a claim upon which relief can be granted” may be raised “in any pleading allowed or ordered under Rule 7(a),” “by a motion under Rule 12(c),” or “at trial”); Winnett, 553 F.3d at 1006–07 (stating that this Court “usually require[s] timely and reasoned presentation of non-jurisdictional issues to avoid forfeiture” in order to “ensure fair and evenhanded litigation by requiring parties to disclose legal theories early enough in the case to give an opposing party time not only to respond but also to develop an adequate factual record supporting their side of the dispute”); cf. Barner v. Pilkington N. Am., Inc., 399 F.3d 745, 749 (6th Cir.2005) (“Our function is to review the case presented to the district court, rather than a better case fashioned after a district court's unfavorable order.” (internal quotation marks omitted)).
Daft v. Advest, Inc., Nos. 08-3212 and 10-3151.
Thus, the Sixth Circuit, upholding the district court's decision, determined that the existence of the plan was an element of the benefit claim and not a jurisdiction issue. Although holding that the defendants waived the right to raise the existence of the plan as an issue in the case, the court found that there were fact issues precluding a determination as to whether the ERISA plan was a top hat plan, and thus, the court reversed the district court and remanded for further proceedings.
Posted by Peter Vodola in ERISA | Permalink | TrackBack (0)
Summary Judgment For Defendant On Some Grounds, Not Others, Federal Court Rules In Latest Decision In ERISA Case
An ERISA claimant's lawsuit survived summary judgment by a defendant law firm on some grounds but not others, in a recent decision of a federal district court.
In Clark v. Feder, Semo & Bard, P.C., Civil Action No. 07-0470 (D.D.C. 2011), the federal district court for the District of Columbia addressed the summary judgment motion by the defendant law firm, Federa, Semo & Bard.
The court said that the plaintiff's anti-cutback claim - alleging that Feder Semo violated ERISA's anti-cutback rule, 29 U .S.C. § 1054(g), when it proportionately reduced the aggregate amount distributed to Plan participants to match the Plan's assets - failed as a matter of law. The defendants also were granted summary judgment on the plaintiff's claim that the plan's fiduciaries failed to comply with the distribution restrictions in Treas. Reg. 1 .401(a)(4)–5 with the effect of reducing the benefits received by most plan participants - a failure that the court said was not an ERISA violation.
Because the defendants did not demonstrate that the plaintiff "was provided information 'clearly identifying circumstances which may result in . . . loss' of benefits, and she did not receive the complte value of her accrued benefit, the court denied summary judgment on the plaintiff's claim that defendants violated ERISA's disclosure requirements by failing to disclose the consequences of a plan termination and the Plan's lack of insurance. The court also permitted the plaintiff to proceed with her claim that the plan's "fiduciaries failed to use a reasonable actuarial assumption for interest that caused the Plan to be underfunded."
The court rejected summary judgment for the defendants on the plaintiff's improper grouping claim, which involved a contention by the plaintiff that Feder Semo improperly grouped her for purposes of her account credit, thereby understating her benefits substantially.
There, the court said that the plaintiff may proceed only under 29 U.S.C. § 1132(a)(1)(B) or § 1132(a)(3). On that issue, the court also explained that examples of "appropriate equitable relief" that a beneficiary might obtain against a plan fiduciary under § 1132(a)(3) - and as indicated in Sereboff v. Mid Atlantic Med. Srvs., 547 U.S. 356 (2006), and Great–West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002), as well as a 2011 U.S. Supreme Court decision - may include monetary relief:
Plaintiff contends that '[i]f a monetary recovery for the [§ 1132(a)(1)(B) ] violation is unavailable because the Plan's assets have been distributed, the fiduciaries who decided not to correct her benefit calculation before distributing the Plan's assets can be held responsible under [§ 1132(a)(3) ] for breach of fiduciary duty.' . . . . First, this Court has already ruled that a plaintiff may not proceed with claims under both § 1132(a)(1)(B) and § 1132(a)(3). . . . This Court relied on Variety Corp. v. Howe,516 U.S. 489 (1996), in which the Supreme Court concluded that § 1132(a)(3) is a 'catchall' provision that acts 'as a safety net, offering appropriate equitable relief for injuries caused by violations that [§ 1132(a) ] does not elsewhere adequately remedy,' 516 U.S. at 512. The plaintiffs in Variety Corp.could not proceed under § 1132(a)(1) because they were no longer plan beneficiaries, nor under § 1132(a)(2), which does not provide relief for individual beneficiaries, so they 'must rely on the third subsection, [§ 1132(a)(3) ], or they ha[d] no remedy at all.' Id.at 515. The Court in Variety Corp. explained that 'where Congress elsewhere provided adequate relief for a beneficiary's injury, there will likely be no need for further equitable relief.' Id.
Following Variety Corp., the majority of circuits that have decided this issue have held that a breach of fiduciary duty claim cannot stand where a plaintiff has an adequate remedy through a claim for benefits under § 1132(a)(1)(B). . . .
Hence, this Court ruled that 'b]ecause the gravamen of plaintiff's complaint is that she was improperly denied benefits, the remedies under [§ 1132(a)(1)(B) ] would make plaintiff whole if she were to prevail on her claim. Plaintiff therefore has an adequate remedy under [§ 1132(a)(1)(B) ], and accordingly her [§ 1132(a)(3) ] claim must be dismissed.' . . . . Concerned that the Plan lacked assets, and would therefore leave Clark without an 'adequate remedy' under § 1132(a)(1)(B), Clark maintained that 'she should [also] be allowed to proceed under section 1132(a)(3).' . . . . Plaintiff now again urges that to the extent 'monetary recovery for that violation is unavailable because the Plan's assets have been distributed,' she may also proceed under § 1132(a)(3) against plan fiduciaries for breach of duty. . . . Not so. Plaintiff must choose. If, because the Plan is terminated and lacks assets (which plaintiff currently maintains is a material fact in dispute), plaintiff does not have an adequate remedy under § 1132(a)(1)(B), then plaintiff may pursue a claim under § 1132(a)(3) instead of her inadequate claim under § 1132(a)(1)(B). Hence, the Court will permit Clark to proceed on a claim under either § 1132(a)(1)(B) or § 1132(a)(3), but not both.
Defendants contend that in any event Clark may not proceed under § 1132(a)(3) because that section only provides for 'appropriate equitable relief,' and Clark 'seeks to impose personal liability for money damages on Semo and Bard.' . . . . The Supreme Court's recent decision, CIGNA Corp. v. Amara, 131 S.Ct. 1866 (2011), is instructive here. In CIGNA,the district court ruled that CIGNA failed to properly notify its employees-and defined-benefit retirement plan beneficiaries-of changes to their benefits. See131 S.Ct. at 1872. For relief, the court reformed the new plan, providing benefits according to the terms of the old plan when it was favorable to the plaintiffs, and ordered CIGNA to pay benefits accordingly. Id. at 1871. The district court ruled that § 1132(a)(1)(B) provided authority to reform the plan and noted that Supreme Court precedent indicated that such relief would not be available under § 1132(a)(3). Id.at 1876. The Supreme Court reversed, holding that § 1132(a)(1)(B) did not authorize the district court's reformation of CIGNA's pension plan, but the Court then explained that § 1132(a)(3) could permit the district court to fashion similar equitable relief. Id. at 1878–80.
[S]imply because a plaintiff is seeking monetary relief for a breach of fiduciary duty 'does not remove it from the category of traditionally equitable relief.' . . . Indeed, '[e]quity courts possessed the power to provide relief in the form of monetary "compensation" for a loss resulting from a trustee's breach of duty, or to prevent the trustee's unjust enrichment.' . . . . Here, [the plaintiff] Clark has demonstrated that defendants Semo and Bard were aware of her grouping in a less advantageous category and failed to provide a reasonable explanation for why she was so classified and why her benefits were not adjusted prior to the disbursement of Plan assets upon its termination. . . . These facts support Clark's claim for breach of fiduciary duty under § 1132(a)(3), which is not precluded by the statutory limitation to 'appropriate equitable relief.' Hence, summary judgment for defendants on the improper grouping claim is denied. However . . . Clark may proceed only under § 1132(a)(1)(B) or § 1132(a)(3), not under both provisions.
The full opinion is available beginning here.
Court Prevents Pro Se Litigant From Seeking Jury Trial On ERISA Claim, Since Move Would Undermine Claims
The pro se litigant sought a jury trial.
And, as the federal district court pointed out, a jury trial is a constitutionally guaranteed right – “In Suits at common law . . .” (as per the Seventh Amendment of the U.S. Constitution).
But the pro se litigant’s claim was based on ERISA Section 502(a)(3), which – as the U.S. Supreme Court has pointed out – only allows for equitable remedies.
Accordingly, the federal district court – admitting that its decision “presses the limits of the pro se leniency standard – denied the motion for jury trial, thereby – preventing the pro se litigant from proceeding to “sabotage his entire claim with one ill-advised move made on the eve of trial.”
That sums up the July 8, 2011 decision in Lockhart v. Southern Health Plan, Inc., Plan Administrator, No. 4:04-CV-6 (WLS), 2011 WL 2680430 (M.D. Ga. Jul. 8, 2011).
A few other points made by the court include the following:
The Seventh Amendment of the United States Constitution provides: “In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved.” U.S. Const. amend. VII. The Supreme Court has “consistently interpreted the phrase ‘Suits at common law’ to refer to suits in which legal rights were to be ascertained and determined, in contradistinction to those where equitable rights alone were recognized, and equitable remedies were administered.” Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 41, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989) (emphasis in original). The Supreme Court has also “carefully preserved the right to trial by jury where legal rights are at stake.” Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558, 565, 110 S.Ct. 1339, 108 L.Ed.2d 519 (1990). The Supreme Court has long instructed that “any seeming curtailment of the right to a jury trial should be scrutinized with the utmost care.” Dimick v. Schiedt, 293 U.S. 474, 486, 55 S.Ct. 296, 79 L.Ed. 603 (1935).
There is . . . a “statutory limitation of remedies available under ERISA § 502(a)(3) to those of an equitable nature,” and this statutory limitation “precludes extra-contractual remedies, which are legal in nature.” . . . . The Supreme Court has “construed [ERISA § 502(a)(3)(B) ] to authorize only ‘those categories of relief that were typically available in equity,’ and thus rejected a claim that ... sought ‘nothing other than compensatory damages.’ ” Sereboff v. Mid Atl. Med. Servs., Inc., 547 U.S. 356, 361, 126 S.Ct. 1869, 164 L.Ed.2d 612 (2006) (quoting Mertens v. Hewitt Assocs., 508 U.S. 248, 256, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993)) (emphasis in original). To put it succinctly: “compensatory damages ... do[ ] not qualify as ‘equitable relief’ under § 502(a)(3)(B).” Flint v. ABB, Inc., 337 F.3d 1326, 1330 (11th Cir.2003) (citing Great–West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 210, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002)).
Plaintiff pro se,apparently believing that it would bolster his chances of securing a civil jury trial, now asserts that his “claim is for compensatory damages.” . . . . Compensatory damages, however, are not an available remedy to his ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3) claim — his sole remaining claim. . . . Accordingly, were the Court to accept Plaintiff pro se' s assertion regarding compensatory damages, the case would be subject to dismissal prior to trial for failure to state a claim that is entitled to relief.
Although the Court does not find it necessary to do so, given the Supreme Court's repeated and unambiguous holdings that only equitable remedies are available under ERISA § 502(a)(3), the Court quickly addresses Plaintiff pro se' s argument that the law-versus-equity analysis must consider where the action would have been brought in the courts of 18th Century England and the nature of the remedy sought. . . . Plaintiff pro se's Count II seeks relief for “Defendants' breach of fiduciary duties.” . . . . The Supreme Court holds that “an action by a trust beneficiary against a trustee for breach of fiduciary duty ... [was] within the exclusive jurisdiction of courts of equity.” Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry,494 U.S. 558, 567, 110 S.Ct. 1339, 108 L.Ed.2d 519 (1990). Thus, in addition to the fact that the relief granted by Congress in ERISA § 502(a)(3) is solely equitable in nature, the type of action that Plaintiff pro sebrings is solely equitable. He has no constitutional right to a civil jury trial, because his is not a “Suit[ ] at common law.” U.S. Const. amend. VII.
ERISA Allows For Recovering Of Overpayments - But Only When The Plan Provides For Such Recovery, Says Court
ERISA allows for recovery of overpayments - but only when the ERISA plan says that such recovery may be recovered.
In Kaufman, Dr. Joseph A. Kaufman in 1998 suffered injuries that prevented him from continuing to work as a cardiologist. He continued in an administrative position. He was insured under a long-term disability benefits plan issued by Unum Life Insurance Company of America. The plan was an employee welfare benefit plan governed by ERISA. Dr. Kaufman submitted a claim to Unum for long-term disability benefits, and Unum determined that Dr. Kaufman was eligible for benefits. Unum terminated all benefit payments when Dr. Kaufman's income reached 80% of his pre-disability income. Unum also concluded that there had been an overpayment of benefits due to errors in Dr. Kaufman's reported income. Kaufman disputed whether there had been an overpayment, and claimed that his benefits should never have been reduced under the terms of the plan.
The court concluded that Unum correctly determined that Dr. Kaufman's benefits should be reduced by his post-disability earnings. The court also concluded that Unum did not abuse its discretion in deciding that Dr. Kaufman's benefits should be reduced by all of his monthly earnings.
But on the issue of the overpayment, the court ruled for Dr. Kaufman, saying that Unum's claim was not for the kind of overpayment reimbursement provided for under the plan or within the scope of ERISA:
Unum's counterclaim alleges that Unum overpaid Kaufman, and that Unum is entitled to reimbursement of the overpayment. Kaufman asserts that Unum has no right to repayment. Under 29 U.S.C. § 1132(a)(3), ERISA authorizes civil actions “to obtain other appropriate equitable relief” to enforce ERISA or to redress any violation of ERISA.
In Sereboff v. Mid Atlantic Medical Services,the Supreme Court held that the plan has a right to reimbursement under 29 U.S.C. § 1132(a)(3) when the plan contains a provision requiring repayment. 547 U.S. 356, 360 (2006). In our case, however, the Plan only refers to repayment of overpayment caused by awards received under the United States Social Security Act, the Canada Pension Plan, or the Quebec Pension Plan, or similar plans or acts. . . . The Plan has no express provision providing for repayment in the case that Unum miscalculates the benefits due to an insured. Other courts have refused to extend Sereboff to cases in which there is no express agreement to repay; rather, the courts hold that the strict tracing rules found in Great–West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 215 (2002), prohibit plans from recovering overpayment unless the overpayment could be traced to particular funds or property in the defendant's possession. See, e.g., Sivalingam v. Unum Life Ins. Co. of America, 2011 WL 1584055 *11 (E.D. Pa. April 26, 2011); Fier v. Unum Life Ins. Co. of America,2009 WL 3644187 *14 (D.Nev. November 3, 2009). Because Unum cannot impose an equitable lien under a theory of restitution without providing evidence of “particular funds or property” in Kaufman's possession, we hold that Unum is not entitled to repayment of any overpayment that Kaufman may have received under Unum's calculation of damages.
Unum further argues that it may recover its overpayment under state law, if ERISA does not provide a remedy. In Cooperative Ben Administrators Inc. v. Ogden,the Court of Appeals for the Fifth Circuit held that “ERISA plan fiduciaries do not have a federal common law right to sue a beneficiary for legal (as distinct from equitable) relief on a theory of unjust enrichment or restitution” because Congress “specifically contemplated the possibility of extending to plan fiduciaries a right to sue a participant for money damages and chose instead to limit fiduciaries' remedies to those typically available in equity.” 367 F.3d 323, 332, 336 (5th Cir.2004).
Jones alleged that he is disabled, and so is entitled under this ERISA plan to disability benefits, and that LINA, by denying his claim for benefits, breached a fiduciary duty owed to him.
LINA argued that his claims was baseless,and asserted a counterclaim for restitution based on his receipt of Social Security Disability benefits, for which LINA alleged that it was entitled to an offset under the Plan.
On competing motions for summary judgment, the court rejected the claim for breach of fiduciary duty, and then turned to the offset counterclaim.
In particular, Jones said that the court did not have subject matter jurisdiction pursuant to the Supreme Court's decision in Great–West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002), where the Supreme Court held that claims under 20 U.S.C. § 1132(a)(3) are cognizable only to the extent that the claimant seeks equitable relief. Jones maintained that the LINA reimbursement claim was one for money damages, and thus was a “classic form of legal relief”.
The court in the Jonescase agreed with LINA, concluding that the claim was valid under the Sereboff reasoning, and that LINA's claim should prevail:
In Sereboff,that Supreme Court held that a claim for reimbursement based on an ERISA benefit plan provision, which provided that the insurer would be reimbursed for funds received from a third party, was equitable in nature because "it sought to impose a constructive trust or equitable lien on ‘particular funds or property in the defendant's possession.’ ” 547 U.S. at 362 . . . . The Sereboff Court distinguished Great–West [v. Knudson] because the funds received by the Plaintiff in Great–West [v. Knudson] were not actually in her possession, but in a trust created under California law. Id. at 363. Such facts are not present here or relevant to this case. Further, contrary to Plaintiff's argument, the SereboffCourt also rejected a requirement that the funds sought to be recovered be directly traceable to particular funds in the defendants' possession, rather than from the defendant's general assets. 547 U.S. at 364–5.
District Courts in this Circuit have followed Sereboff in cases with factual circumstances similar to the instant action (i.e.an insurance company seeking restitution for overpayment of benefits due to the receipt of social security disability benefits) and have found that such claims are cognizable under ERISA. See Aitkins ex rel Casillas v. Park Place Entertainment Corp.,2008 WL 820040 (E.D.N.Y. March 25, 2008) (citing cases). This Court finds that LINA's claim for reimbursement of funds pursuant to the Plan and the reimbursement agreement is equitable in nature, that this Court has jurisdiction to decide the claim, and that, LINA has stated a claim upon which relief may be granted.
Plaintiff also argues that LINA seeks to “recover the proceeds from social security benefits, which, he argues, 42 U.S.C. § 407(a) expressly prevents.” . . . . However, Courts in this Circuit and others have also rejected this argument. See Solomon v. Metropolitan Life Ins.Co.,628 F.Supp.2d 519, 534 (S.D.N.Y.2009) (finding that § 407 was not a bar to recovery because the “counterclaim asserts a property interest in [Defendant's] own overpayment of benefits rather than [Plaintiff]'s social security benefits.”). Accordingly, this Court does not find that § 407 is a bar to recovery on LINA's Counterclaim.
Plaintiff has not disputed the substantive elements of LINA's Counterclaim for reimbursement, i.e. that it is entitled to reimbursement under the Plan, that Plaintiff received Social Security Disability benefits, and that the amount of restitution owed is $35,877.40. This Court finds that LINA's claim is equitable in nature and that neither the Supreme Court's decision in Great–West [v. Kundson] nor 29 U.S.C. § 407(a) are a bar to LINA's claim, and accordingly, this Court hereby grants LINA's Motion for Summary Judgment on its Counterclaim for offset in the amount of $35,877.40.
'Strict Tracing' Rule Applies, So No Summary Judgment For Insurer On ERISA Overpayment Claim
In Sivalingam v. Unum Life Ins. Co. of America, Civil Action No. 98-4702 (E.D. Pa. Apr. 26, 2011), plaintiff sued Unum Life Insurance Company of America under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132(a)(1)(B), and contended that Unum improperly terminated payment of long term disability benefits under an insurance policy issued to Sivalingam's employer. Unum counterclaimed against Sivalingam to recover alleged overpayments of benefits it paid him under the policy. The parties moved for summary judgment, and the court granted the plaintiff's motion in part, denied it in part, and denied Unum's motion.
Unum's motion went to its claims to recover the alleged overpayment. The court said that, on the record it had before it, Unum had not shown that it met the standard for tracing funds that is necessary to obtain equitable relief under ERISA:
The Supreme Court has limited the types of relief available under § 1132(a)(3). In actions brought under that provision, a plan fiduciary may obtain only those forms of restitution traditionally available in equity. Great–West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 210–14, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002). The traditional restitution mechanisms, such as equitable liens and constructive trusts, “restore to the plaintiff particular funds or property in the defendant's possession.” Id. at 214. The Supreme Court has found that these remedies are available only “where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant's possession.” Id. at 213 (internal citations omitted). If property “or its proceeds have [sic] been dissipated so that no product remains,” however, the plaintiff cannot obtain relief under § 1132(a)(3). Id. at 213–14 (internal citations omitted).
These interrogatory responses do not establish that the money in the identified bank accounts came exclusively from Unum. The interrogatory responses also do not suggest that Sivalingam's real estate purchases were financed using only disability benefit payments. Unum's administrative record conclusively establishes that between 1998 and 2008 Sivalingam received income from sources other than Unum. Moreover, Unum's own calculations demonstrate that between 1999 and 2004 Sivalingam received some disability benefits to which he was legitimately entitled. In sum, Unum has not identified any funds or property that can “clearly be traced” to the overpaid benefits. Id. at 213 . . . .
At oral argument, Unum suggested that strict tracing rules are not appropriate here because its claim against Sivalingam is within the compass of the Supreme Court's opinion in Sereboff v. Mid–Atl. Med. Servs. Inc., 547 U.S. 356, 364–65, 126 S.Ct. 1869, 164 L.Ed.2d 612 (2006). In Sereboff, the policy at issue included an “Acts of Third Parties” provision. Id. at 359. If the plan fiduciary was required to pay a beneficiary's medical expenses due to injuries caused by a third party, this provision compelled the beneficiary to reimburse the fiduciary the amount of those expenses from any recovery obtained from the third party. Id.at 359–60. . . . The Court held that in traditional equity practice strict tracing was not required when an equitable lien arose on property by agreement such as in the Acts of Third Parties provision. Unum has not identified any similar policy provision affording it a right to recover overpayments of plan benefits. Thus, Sereboff does not justify relaxing the tracing rules otherwise required under the Supreme Court's opinion in Knudson. See Knudson, 534 U.S. at 213–14.
According, the court, at the summary judgment stage of the proceedings, denied Unum's request to impose an equitable lien or a constructive trust on the plaintiff's bank accounts or real property.