Opinion ID: 35245
Heading Depth: 2
Heading Rank: 2

Heading: CBA's Federal Common Law Claim

Text: 17 As noted, CBA's complaint alleged two alternative bases for jurisdiction: (1) a statutory claim for equitable relief under § 502(a)(3), and (2) a federal common law claim of unjust enrichment. As CBA conceded that it could not maintain its claim for equitable relief under § 502(a)(3), we need not address it except to note that, in seeking to impose personal liability on Ogden to enforce her contractual reimbursement obligation under the LTD Plan and the Reimbursement Agreement, CBA was requesting precisely the kind of legal remedy that the Supreme Court has held to be beyond § 502(a)(3)'s jurisdictional grant. 11 18 As the district court correctly ruled, however, CBA's failure to state a statutory cause of action under ERISA does not bar federal subject matter jurisdiction over its unjust enrichment claim under federal common law. Indeed, the Supreme Court has made clear that federal question jurisdiction may exist over claims arising under federal common law. 12 Nevertheless, simply because federal courts have subject matter jurisdiction over CBA's action to determine the existence of a federal common law remedy of unjust enrichment on CBA's behalf does not mean that CBA has successfully stated a federal common law cause of action for unjust enrichment. 13 In cases such as this, for which Congress has empowered the judiciary to create federal common law pursuant to federal legislation, the ability of a plaintiff to state a federal common law cause of action depends on the existence of a gap in the text of that legislation that allows for the creation of the federal common law remedy sought by the plaintiff. 14 19 Our holding in Frank v. Bear Stearns & Co. to the effect that federal question jurisdiction did not exist because the plaintiff's complaint did not state a claim under federal common law is not to the contrary. 15 In the instant case, our power to create federal common law is premised on congressional authorization to fill interstitial gaps in the text of federal legislation, here, ERISA. Accordingly, we have jurisdiction over the action to construe that legislation to determine the existence of a federal common law cause of action on CBA's behalf. By contrast, the issue in Frank was whether the plaintiff's state law claims implicated federal common law issues because their resolution required interpretation of a federal contract. 16 Thus, in Frank we did not have congressional authorization to make substantive rules pursuant to a federal statute, and we could exercise federal question jurisdiction over the action only if we found that the action fell within the narrow class of cases where federal rules are necessary to protect uniquely federal interests. 17 As the action did not fall within that narrow class of cases, we concluded that federal common law did not exist in the case, and thus there was no basis for federal question jurisdiction. 18 20 More to the point of today's inquiry, we have held that federal common law may be applied to fill minor gaps in ERISA's text, as long as the federal common law rule created is compatible with ERISA's policies. 19 In so holding, however, we cautioned that the power of the judiciary to develop federal common law pursuant to ERISA does not give carte blanche power to rewrite the legislation to satisfy our proclivities. 20 Thus, federal courts do not have authority under ERISA to create federal common law when that statute specifically and clearly addresses the issue before th[e] Court. 21 This is so because, in such instances, the legislative scheme does not contain a gap that requires filling by application of federal common law. Thus, a court's general opinion as to what remedies might further ERISA's underlying policies will not be sufficient `to overcome the words of its text regarding the specific issue under consideration.'  22 21 Although we have not previously recognized a federal common law right of unjust enrichment or restitution in the context of an ERISA fiduciary's efforts to obtain reimbursement of funds paid to a participant, CBA argues that such a right comports with ERISA's goal of enforcement of plan terms and is necessary to provide CBA with relief in the absence of equivalent statutory or state law remedies. 23 Ogden counters that the Supreme Court, in both Mertens v. Hewitt Associates and Knudson, interpreted § 502(a)(3)'s appropriate equitable relief language to proscribe precisely the type of monetary relief — or legal remedy — that CBA requests. As such, argues Ogden, the district court did not have authority to grant CBA a federal common law right that would, in effect, allow it to circumvent the plain language of ERISA's text, i.e., to do indirectly that which under ERISA it cannot do directly. 22 As our discussion indicates, CBA's entitlement to a federal common law remedy is dependent on our determining that a gap exists in ERISA's text regarding CBA's right, as a plan fiduciary, to bring an action for a money judgment enforcing a participant's contractual reimbursement obligation. As we shall show, ERISA's civil enforcement provision specifically and clearly addresses this issue, thereby eschewing any possibility that a gap exists in the statutory text that would permit us to employ federal common law to create the remedy that CBA seeks. 23 To reach that determination, we need only examine the text of § 502(a)(3) in light of the Supreme Court's decisions in Mertens and Knudson. Section 502(a)(3) arms plan fiduciaries with a cause of action to obtain ... appropriate equitable relief to redress any act in violation of ERISA or the terms of the plan or to enforce ERISA's provisions or the terms of the plan. 24 In Mertens, the Supreme Court interpreted § 502(a)(3)'s appropriate equitable relief language to include only those categories of relief that were typically available in equity, reasoning that a contrary interpretation, — namely, one that would allow a plaintiff to bring an action for monetary damages, the classic form of legal relief, — would limit the relief not at all and render the modifier [equitable] superfluous. 25 Although the Mertens plaintiffs did not, as CBA does here, ask the Court to recognize a federal common law cause of action in unjust enrichment, the Court, in rejecting their proposed construction of § 502(a)(3), did admonish the plaintiffs that [t]he authority of courts to develop a `federal common law' under ERISA is not the authority to revise the text of the statute. 26 24 In Knudson, the Supreme Court revisited the boundaries of equitable relief under § 502(a)(3) and again carefully emphasized that Congress's use of the word equitable was not inadvertent, but rather was a deliberate act on its part to limit a § 502(a)(3) plaintiff's remedies to those that were traditionally considered equitable in nature. 27 For an action to lie in equity, the Court stated, an ERISA plaintiff must seek not to impose personal liability on the defendant, but to restore to the plaintiff particular funds or property in the defendant's possession. 28 The Knudson Court was singularly unimpressed by the ERISA plan's concerns that limiting § 502(a)(3) actions to include only those remedies typically available in equity would deprive the plan of any remedy and create a result contrary to a `primary purpose of ERISA,' namely, the enforcement of the terms of a plan. 29 To this end, the Court noted that, `[e]ven assuming that petitioners are correct about the pre-emption of previously available state-court actions' or the lack of other means to obtain relief, `vague notions of a statute's basic purpose are nonetheless inadequate to overcome the words of its text regarding the specific issue under consideration.' 30 25 Looking at ERISA's civil enforcement provision as a whole, the Court in Knudson observed: 26 In the very same section of ERISA as § 502(a)(3), Congress authorized `a participant or beneficiary' to bring a civil action to enforce his rights under the terms of the plan, without reference to whether the relief sought is legal or equitable. But Congress did not extend the same authorization to fiduciaries. Rather, § 502(a)(3), by its terms, only allows for equitable relief. We will not attempt to adjust the carefully crafted and detailed enforcement scheme embodied in the text that Congress has adopted. 31 27 As the plan clearly sought to impose personal liability on the beneficiary to enforce her contractual reimbursement obligation under the plan, the Court held that the plan's action was legal in nature and outside the scope of equitable relief permitted by § 502(a)(3). 32 28 In the wake of Mertens and Knudson, we have twice interpreted § 502(a)(3) in the context of a plan's suit for reimbursement from a beneficiary. In Bauhaus U.S.A., Inc. v. Copeland, we reversed the district court's exercise of subject matter jurisdiction over the plan's claim, noting that the funds sought by the plan were not within the participant's possession and control. 33 More recently, in Bombardier Aerospace Employee Welfare Benefits Plan v. Ferrer, Poirot and Wansbrough, we affirmed the district court's exercise of subject matter jurisdiction on the basis that the participant had constructive possession over the funds sought by the plan. 34 In each case, we stressed that, for a plan fiduciary's action to fall within § 502(a)(3)'s jurisdictional grant, it must seek recovery of (1) specifically identifiable funds, (2) that belong in good conscience to the Plan, and (3) that are within the possession and control of the defendant-beneficiary. 35 29 As Mertens and Knudson demonstrate, Congress, in drafting § 502(a)(3)(B) to allow only equitable relief, 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. As ERISA's text specifically and clearly addresses the issue whether CBA, as a plan fiduciary, has a right to pursue a claim for legal relief against Ogden, there is no gap in ERISA on this question and thus no basis for granting CBA a federal common law remedy. We therefore cannot sanction the district court's decision to grant CBA a federal common law right to pursue its claim for money damages against Ogden. 30 CBA nevertheless argues that Knudson 's statement that there may have been other means for petitioners to obtain the essentially legal relief that they seek can be construed as either an endorsement of a federal common law remedy or at least an intimation that its holding did not foreclose the possibility that a federal common law remedy might exist. 36 We are unpersuaded. Aside from obviously being dicta, this statement was made only to highlight the Court's point, discussed above, that the availability vel non of other remedies to the plan was irrelevant to the Court's decision to deny the plan's claim for legal relief because that type of relief was expressly proscribed by ERISA's text. 37 Thus, we do not read this statement as an invitation to the lower courts to grant plan fiduciaries a federal common law right to pursue claims for legal remedies against participants. 31 We are equally unconvinced by CBA's suggestion that Mertens and Knudson are somehow inapposite because the plaintiffs in those cases did not seek a federal common law remedy. To reach the decision we make today, we need only determine that ERISA's text specifically and clearly addresses the question whether CBA, as a plan fiduciary, has a right to pursue a claim for legal relief against Ogden. Mertens and Knudson explain in great detail that Congress not only considered this precise question in enacting § 502(a)(3), but answered it in the negative. Far from being inapposite, then, these opinions are directly controlling of our decision not to extend to CBA a federal common law right to pursue its reimbursement claim against Ogden. 32 We also reject CBA's attempt to analogize its case to our precedent in Jamail v. Carpenters District Council of Houston Pension & Welfare Trusts. 38 Decided prior to Mertens and Knudson, Jamail recognized the existence of an employer's federal common law right to recover contribution overpayments mistakenly made to its ERISA plan. 39 Noting that ERISA § 1132 provides a private right of action for fiduciaries, participants, and beneficiaries, but not for employers, we reasoned in Jamail that a gap existed in ERISA's text regarding an employer's rights to recover overpayment of contributions from the plan to which such overpayments had been made. 40 Thus, we held that recognition of a federal common law right of restitution for an employer vis-a-vis a plan was appropriate, as ERISA's text did not address the issue, and such a right would further ERISA's underlying purposes by encouraging small employers to sponsor benefit plans for their employees. 41 33 Although CBA styles its reimbursement action as one for overpayment of benefits, Jamail is clearly distinguishable, based on the obvious difference between an employer qua employer and a traditional ERISA party, i.e., plans, fiduciaries, participants, and beneficiaries. In Jamail, we were faced with an actual gap in ERISA's text which makes no mention of employers. We could not, therefore, point to precise language in ERISA's text demonstrating that, either expressly or implicitly, Congress had proscribed the kind of relief that the employer plaintiff sought. As ERISA's text did not specifically and clearly address whether an employer had a right to recoup mistakenly paid contributions from the plan, and as creation of such a remedy was compatible with the policies of ERISA, the Jamail panel did not have to rewrite ERISA to grant the employer a federal common law right of restitution against the plan. Jamail thus has no bearing on our refusal today to create a federal common law right of unjust enrichment that would allow a plan fiduciary to assert an action for legal relief against a participant, both parties being members of categories expressly identified in § 502. 34 We acknowledge that, in holding as we do, we may appear to be at variance with the Fourth Circuit's pre- Mertens decision in Provident Life & Accident Insurance Company v. Waller. 42 In Waller, the Fourth Circuit recognized the existence of a federal common law right of restitution on the part of a plan fiduciary to recover benefits from a beneficiary. 43 The facts of that case are as follows: The Plan administrator sought reimbursement of benefits paid to the beneficiary after settlement funds from a third party tortfeasor were received on behalf of the beneficiary. 44 The Plan administrator did not, however, allege jurisdiction under § 502(a)(3), but rather under § 502(a)(2)(B), which provides a civil action only to participants and beneficiaries to recover benefits owed from a plan. 45 Noting that § 502(a)(2)(B) does not authorize the converse, i.e., suits by plan administrators to recover from participants or beneficiaries, the Fourth Circuit held that the provision in question did not provide a basis for jurisdiction and went on to create a federal common law right of restitution for the plan administrator. 46 35 A close reading of Waller 's analysis, however, reveals that the reasoning and facts of that case constitute an inadequate basis for our recognition of a federal common law right of unjust enrichment in the instant case. Although the Fourth Circuit noted that it [was] probable that the plan administrator had stated a cause of action for equitable relief under § 502(a)(3), it declined to decide the issue, as the plan administrator had not advanced § 502(a)(3) as the basis for jurisdiction and as there [was] seemingly little or no authority on what was required to state an action for equitable relief under § 502(a)(3). 47 Thus, the Waller court recognized a federal common law right of restitution on the part of a plan administrator against a beneficiary without ever considering the applicability of § 502(a)(3) to the administrator's requested relief. 36 Even so, CBA urges us to follow Waller in granting it a federal common law right of restitution against Ogden, pointing out that the Fourth Circuit recently upheld Waller 's holding in a post- Knudson decision, Rego v. Westvaco Corporation. 48 In Rego, the Fourth Circuit declined to grant a beneficiary a federal common law right to sue the plan for breach of fiduciary duty and negligent misrepresentation. 49 In reaching its decision, the court reasoned that, because Congress clearly contemplated plaintiffs like [the beneficiary] and explicitly created remedies for them within the text of the statute itself, 50 the court could not disregard Congress' decision to limit the scope of those remedies. 51 The Fourth Circuit went on, however, to distinguish its holding in Rego from its decision to create a federal common law remedy in Waller on the basis that, in Waller, `ERISA [did] not provide an explicit remedy' for the administrator. 52 37 We find questionable the Rego court's efforts to distinguish Waller, in that the reasoning in the later case fails to account for the fact that Waller had not considered the applicability of § 502(a)(3) to the plan administrator's claim prior to granting the administrator a federal common law remedy. We therefore decline to adopt the Fourth Circuit's reasoning in Waller, as approved by Rego, because in neither case was the Court in a position to decide whether a gap existed in ERISA's text that would allow for the application of federal common law. Accordingly, CBA's reliance on Waller, although somewhat understandable in light of Rego, is nevertheless misplaced. 38 Our decision not to follow Waller 's holding is equally unaffected by Jamail 's suggestion that Waller was correctly decided. 53 A close look at Jamail 's discussion of Waller reveals that its approval was based on a pre- Mertens understanding of what constitutes equitable relief under § 502(a)(3). 54 Specifically, we noted in Jamail that restitution is a cause of action with its origins in equity and cited Waller as an example of a case in which equity had been achieved in aid of the plan by the court's recognition of a federal common law right of restitution on the part of the plan. 55 With the hindsight benefit of Mertens and Knudson, however, we now know that not all relief falling under the rubric of restitution is available in equity, and that restitution can be either a legal or equitable remedy, depending on the `basis for [the plaintiff's] claim' and the nature of the underlying remedies sought. 56 In Jamail, we could not have known whether the reimbursement action brought by the plan in Waller was legal or equitable in nature, or whether the Waller court was achieving equity in allowing the plan a federal common law right of restitution. This is because the Waller court did not consider the issue or otherwise analyze whether the plan had stated a cause of action for equitable relief under § 502(a)(3). The Jamail panel's misconception of the nature of equitable relief becomes even more apparent when we observe that, if the Waller plaintiff's restitution action were truly equitable in nature, as the Jamail panel assumed, there would have been no need for the Waller court to create a federal common law remedy to achiev [e] equity because the plan's action would have been authorized under § 502(a)(3). Thus, Jamail 's discussion of Waller does not affect our decision today to reject Waller 's holding. 39 To summarize, the district court erred in recognizing a federal common law right of unjust enrichment on CBA's behalf. As the text of § 502(a)(3) and Supreme Court precedent make clear, Congress, in choosing the modifier equitable, specifically contemplated and chose to proscribe the legal remedy that CBA proffers. As ERISA's text specifically and clearly addresses the issue now before us, there is no gap in that text that would warrant our application of federal common law. We thus hold 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. Concluding that CBA failed to state a cause of action under the federal common law applicable to ERISA, we reverse the district court's denial of Ogden's motion to dismiss this claim. 57