Court Opinion

ID: 9931609
Source: CourtListenerOpinion
Date Created: 2024-02-09 16:01:33.926855+00
Date Added: 2024-06-11T12:24:29.835060
License: Public Domain

Appellate Case: 22-1356     Document: 010110997609        Date Filed: 02/09/2024     Page: 1
                                                                                     FILED
                                                                         United States Court of Appeals
                       UNITED STATES COURT OF APPEALS                            Tenth Circuit

                              FOR THE TENTH CIRCUIT                           February 9, 2024
                          _________________________________
                                                                            Christopher M. Wolpert
                                                                                Clerk of Court
  MARIE WATSON,

        Plaintiff - Appellant,

  v.                                                            No. 22-1356
                                                   (D.C. No. 1:19-CV-02667-RMR-STV)
  EMC CORP.,                                                     (D. Colo.)

        Defendant - Appellee.
                       _________________________________

                              ORDER AND JUDGMENT *
                          _________________________________

 Before MATHESON, KELLY, and EID, Circuit Judges.
                   _________________________________

        After Metropolitan Life Insurance Company (“MetLife”) refused to pay life

 insurance benefits to Marie Watson following her husband’s death, she sued EMC

 Corporation (“EMC”), her husband’s former employer, for breach of fiduciary duty under

 29 U.S.C. § 1132(a)(3)(B), a provision of the Employee Retirement Income Security Act

 (“ERISA”). The district court denied relief. Exercising jurisdiction under 28 U.S.C.

 § 1291, we reverse and remand.

        *
          This order and judgment is not binding precedent, except under the doctrines of
 law of the case, res judicata, and collateral estoppel. It may be cited, however, for its
 persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Appellate Case: 22-1356     Document: 010110997609         Date Filed: 02/09/2024    Page: 2

                                      I. BACKGROUND

                                      A. Factual History

        In 2000, Thayne Watson started working at EMC. He participated in EMC’s

 benefits plan, which included a MetLife group basic life insurance policy. In 2015, when

 Dell, Inc. purchased EMC, he accepted a voluntary separation plan (“VSP”). Under the

 VSP, Mr. Watson would stop working for EMC, but EMC would continue to pay him

 and he would retain employment benefits through November 24, 2016, when his

 employment would end. At that point, Mr. Watson could “convert” his life insurance

 from a group to an individual policy, App. at 77, and he was eligible for “continued”

 group health coverage, id. at 110.

        On November 29, 2016, five days after Mr. Watson’s employment ended, he

 emailed EMC, stating, “I took VSP on 12-31-2016 [sic]. My pay ended on 11-24-2016.

 How do I start paying for my benefits at the employee rate for the next year?”

 Id. at 118. 1 On November 30, 2016, an EMC benefits representative responded, “You

 will be receiving a bill form [sic] [APD, LLC (“ADP”),] pay flex to continue paying for

 your benefits. Benefits remain active during the transition.” Id.

        Mr. Watson never converted his MetLife life insurance from a group to an

 individual policy. He paid each bill he received from ADP.

        1
         Mr. Watson mistakenly wrote that his VSP began on December 31, 2016.
 Aplt. Br. at 5 n2. His VSP began on December 31, 2015. Id.; Aplee. Br. at 2; App. at
 108.

                                              2
Appellate Case: 22-1356        Document: 010110997609           Date Filed: 02/09/2024   Page: 3

        Mr. Watson died on September 18, 2017. His wife, Marie Watson, filed a life

 insurance claim. MetLife denied her claim because Mr. Watson never converted his life

 insurance from a group to an individual policy or paid premiums, so his coverage ended

 on November 24, 2016.

                                      B. Procedural History

        Ms. Watson sued EMC under 29 U.S.C. § 1132(a)(3)(B) 2 for breach of fiduciary

 duty, seeking surcharge 3 as an equitable remedy. She alleged EMC breached its fiduciary

 duty because its November 30 email was misleading and caused Mr. Watson to believe

 he still had basic life insurance coverage. Mr. Watson and EMC filed a joint stipulation

 and motion for determination, agreeing that no evidentiary hearing was needed.

        The district court granted the motion and denied relief. It assumed without

 deciding that EMC breached its fiduciary duty, App. at 203-04, 4 and held Ms. Watson

        2
            Section 1132(a)(3)(B) provides:
                 A civil action may be brought . . . by a participant,
                 beneficiary, or fiduciary . . . to obtain other appropriate
                 equitable relief (i) to redress such violations or (ii) to enforce
                 any provisions of this subchapter or the terms of the plan.
        3
          Surcharge is a “form of monetary compensation.” CIGNA Corp. v. Amara,
 563 U.S. 421, 441 (2011) (quotations omitted). Before the merger of law and equity,
 courts of equity could award surcharge “for a loss resulting from a trustee’s breach of
 duty, or to prevent the trustee’s unjust enrichment.” Id.
        4
          EMC argues it did not breach its fiduciary duty. Aplee. Br. at 18-27. Because
 the district court did not decide that issue, we decline to address it. See Singleton v.
 Wulff, 428 U.S. 106, 120 (1976) (“It is the general rule, of course, that a federal appellate
 court does not consider an issue not passed upon below.”); N. Tex. Prod. Credit Ass’n v.
 McCurtain Cnty. Nat’l Bank, 222 F.3d 800, 812 (10th Cir. 2000) (“As a general rule, we
                                                  3
Appellate Case: 22-1356     Document: 010110997609         Date Filed: 02/09/2024     Page: 4

 could seek surcharge as an equitable remedy under § 1132(a)(3)(B), App. at 205-07. 5

 But the court denied relief because it found surcharge would not be “appropriate

 equitable relief” under the circumstances. Id. at 207. The court explained:

               Although [Ms. Watson] argues that Mr. Watson and she were
               under the impression that such payments were being made
               and that Mr. Watson would have made such payments if he
               had been properly informed to convert his group life
               insurance policy to an individual policy in order to continue
               such payments, it remains that Mr. Watson was not entitled to
               coverage because he did not convert the group life policy to
               an individual policy. . . . Given that Mr. Watson did not pay
               any premiums toward a life insurance policy that
               [Ms. Watson] now seeks to recover, the Court does not find
               that the request for surcharge in the amount of the life
               insurance benefits of $663,000 constitutes “appropriate
               equitable relief” under ERISA in this case. See 29 U.S.C.
               § 1132(a)(3).

 do not consider issues not passed on below, and it is appropriate to remand the case to the
 district court to address an issue first.”).
        5
           The district court rejected EMC’s argument that a surcharge award would
 amount to “compensatory damages” that are not recoverable under § 1132(a)(3)(B).
 App. at 205-07. Following Amara, it said surcharge could qualify as “appropriate
 equitable relief” under the statute. Id. at 207. EMC contends the surcharge that Ms.
 Watson requested was inappropriate, Aplee. Br. at 27-31, but it has not adequately
 developed an argument in its response brief that a surcharge is never appropriate under
 § 1132(a)(3)(B).
         EMC later submitted a Fed. R. App. P. 28(j) letter pointing out that Rose v. PSA
 Airlines, Inc., 80 F.4th 488 (4th Cir. 2023), petition for cert. filed (U.S. Jan. 8, 2024)
 (No. 23-734), had declined to follow Amara and suggesting we should do the same.
 Doc. 11037434. But without the benefit of full briefing (here or in district court) and
 district court analysis on whether Rose, a nonbinding out-of-circuit case, should affect the
 surcharge issue here, we do not consider EMC’s suggestion. See, e.g., United States v.
 Schneider, 594 F.3d 1219, 1227-28 (10th Cir. 2010) (recognizing this court may decline
 to consider an alternative ground to affirm); Feinberg v. Comm’r, 916 F.3d 1330, 1334
 (10th Cir. 2019) (same). EMC may, however, ask the district court to consider its Rose
 argument on remand.

                                              4
Appellate Case: 22-1356      Document: 010110997609          Date Filed: 02/09/2024      Page: 5

 Id. at 207-08 (citation omitted) (emphasis added). The court entered judgment for EMC.

 Ms. Watson timely appealed.

                                      II. DISCUSSION

                                    A. Standard of Review

        We review a district court’s equitable remedy determination under 29 U.S.C.

 § 1132(a)(3)(B) for abuse of discretion. Downie v. Indep. Drivers Ass’n Pension Plan,

 934 F.2d 1168, 1170 (10th Cir. 1991). “Under the abuse of discretion standard, we defer

 to the district court’s judgment if it is rationally sustainable on the law and facts.” D.K. v.

 United Behav. Health, 67 F.4th 1224, 1235 (10th Cir. 2023) (quotations omitted). “[A]n

 error of law is per se an abuse of discretion,” United States v. Nkome, 987 F.3d 1262,

 1269 (10th Cir. 2021) (quotations omitted), and “we decide the presence or absence of

 legal error de novo,” El Encanto, Inc. v. Hatch Chile Co., Inc., 825 F.3d 1161, 1162

 (10th Cir. 2016). 6

                          B. Ms. Watson’s § 1132(a)(3)(B) Claim

    Legal Background

        “Congress enacted ERISA to ‘protect . . . the interests of participants in employee

 benefit plans and their beneficiaries’ by setting out substantive regulatory requirements

        6
          Ms. Watson argues we should review de novo because the district court
 committed legal error. Aplt. Br. at 14-15; Aplt. Reply Br. at 1-2. As explained above,
 our abuse of discretion standard includes de novo review for legal error. El Encanto, Inc.
 v. Hatch Chile Co., Inc., 825 F.3d 1161, 1162 (10th Cir. 2016). “[I]n cases like this,
 where everything turns on the interpretation of . . . statutes, it’s a bit anomalous to ask
 whether the district court abused its discretion. The real question is simply whether we
 think the district court read the law correctly.” Id.

                                               5
Appellate Case: 22-1356      Document: 010110997609           Date Filed: 02/09/2024      Page: 6

 for employee benefit plans and to ‘provid[e] for appropriate remedies, sanctions, and

 ready access to the Federal courts.’” Aetna Health Inc. v. Davila, 542 U.S. 200, 208

 (2004) (quoting 29 U.S.C. § 1001(b)).

        ERISA imposes fiduciary duties on plan providers. 29 U.S.C. § 1104. It requires

 fiduciaries to “discharge [their] duties with respect to a plan solely in the interest of the

 participants and beneficiaries and . . . for the exclusive purpose of . . . providing benefits

 to participants and their beneficiaries.” § 1104(a)(1)(A)(i).

        Plan beneficiaries may enforce their rights through civil actions. 29 U.S.C.

 § 1132. Section 1132(a)(1)(B) permits a beneficiary to bring an action “to recover

 benefits due to him under the terms of his plan” or “to enforce his rights under the terms

 of the plan.” Section 1132(a)(3)(B), by contrast, does not limit a beneficiary to the terms

 of the plan. Instead, it permits a beneficiary to bring an action “to obtain other

 appropriate equitable relief.” § 1132(a)(3)(B). It is a “‘catchall’ provision[]” that “act[s]

 as a safety net, offering appropriate equitable relief for injuries caused by violations that

 [ERISA] does not elsewhere adequately remedy,” including relief for beneficiaries

 harmed by breach of fiduciary duty. Varity Corp. v. Howe, 516 U.S. 489, 512 (1996).

    Application

        The district court committed legal error and therefore abused its discretion because

 it treated Ms. Watson’s § 1132(a)(3) claim for fiduciary breach as a § 1132(a)(1)(B)

 claim to recover under the plan. These provisions provide for distinct claims.

        Section 1132(a)(1)(B) allows recovery of “benefits due . . . under the terms of [a]

 plan.” Section 1132 (a)(3)(B) allows recovery of “equitable relief.” Plaintiffs entitled to

                                                6
Appellate Case: 22-1356     Document: 010110997609          Date Filed: 02/09/2024      Page: 7

 benefits under the terms of a plan cannot obtain § 1132(a)(3)(B) relief because they have

 another “adequate[] remedy” under § 1132(a)(1)(B). Varity Corp., 516 U.S. at 512.

        Because Mr. Watson failed to convert his insurance from a group to an individual

 policy and pay premiums, Ms. Watson was not entitled to benefits “under the terms of his

 plan.” 29 U.S.C. § 1132(a)(1)(B). So she sued instead for breach of fiduciary duty under

 § 1132(a)(3)(B), seeking equitable relief “for injuries caused by violations that [ERISA]

 does not elsewhere adequately remedy.” Varity Corp., 516 U.S. at 512.

        The district court determined Ms. Watson was not entitled to equitable relief

 because Mr. Watson failed to convert his life insurance from a group to an individual

 policy and pay premiums. By examining only whether Ms. Watson could recover under

 the terms of the plan, the court legally erred in treating her § 1132(a)(3)(B) claim for

 fiduciary breach as a § 1132(a)(1)(B) claim to recover under the plan.

                                    III. CONCLUSION

        We reverse and remand for further proceedings consistent with this opinion.

                                               Entered for the Court

                                               Scott M. Matheson, Jr.
                                               Circuit Judge

                                               7