United States District Court, D. New Jersey
September 9, 2005.
UNUM LIFE INSURANCE COMPANY OF AMERICA, Plaintiff,
MARIA LASZOK, Defendant.
The opinion of the court was delivered by: KATHARINE HAYDEN, District Judge
Plaintiff Unum Life Insurance Company of America ("Unum") is
seeking recoupment of an overpayment of disability benefits paid
out to defendant Maria Laszok ("Laszok") under an "employee
welfare benefit plan," as defined by the Employee Retirement
Income Security Act of 1974 ("ERISA"). By way of present motion,
Unum requests summary judgment be entered against Laszok for the
overpayment balance of $25,420.65 and moves for attorneys' fees
and costs under 29 U.S.C. § 1132(g)(1). Laszok has filed a
cross-motion for summary judgment asserting that Unum's complaint
must be dismissed because it fails to state a cause of action
under Fed.R.Civ.P. 12(b)(6) and has also submitted an
application for an award of attorneys' fees and cost pursuant to
29 U.S.C. § 1132(g)(1). These cross-motions are appropriately
filed because there are no material facts in dispute: Unum did
overpay and Laszok has not returned the full amount she received.
For the reasons set forth below, the Court denies Unum's motion
for summary judgment and grants Laszok's cross-motion for summary
judgment. Both parties' applications for attorneys' fees and cost
The parties have stipulated to the following in a Stipulation
of Facts dated January 28, 2005. Laszok was an employee of St.
Michael's Hospital/Cathedral Health Care Systems Inc. ("Cathedral
Healthcare") and as such was covered under Cathedral Healthcare's
"employee welfare benefit plan" (the "Plan"), as defined by the
Employee Retirement Income Security Act of 1974, amended
("ERISA"), 29 U.S.C. § 1001 et seq.. The Plan provided
eligible employees, including Laszok, with long-term disability
("LTD") benefits. Unum issued a policy of group LTD insurance
that funded, in whole or in part, these benefits. Unum assumed
the authority to determine eligibility under the policy.
Due to a disability commencing on November 1, 1996, Laszok
submitted a claim under the Plan's LTD insurance and was approved
for a monthly benefit in the amount of $2,453.75 for a 24-month
period, following a 180-day elimination period. She began
receiving monthly LTD benefits in the full amount on April 30,
1997 and continued to receive full monthly payments from Unum up
to the scheduled termination date, April 30, 1999.
The Plan's LTD insurance policy required "other income
benefits" to be deducted from an insured's monthly LTD benefit
payments, including the estimated amount of social security
disability benefits the insured would be entitled to. Monthly
payments would not be reduced if the insured signed the
"Company's Agreement Concerning Benefits," promising to repay
Unum for any overpayment created by an award of social security
disability benefits. Laszok signed this agreement.
On April 29, 1999, Unum learned during the period that Laszok
was receiving LTD benefits, she was retroactively awarded monthly
social security disability benefits of $1,267.00. Under the terms
of the Plan and the Company's Agreement Concerning Benefits, this
retroactive award of social security benefits created an
overpayment of LTD benefits in the amount of $29,183.23. Unum
immediately sought recovery from Laszok. On June 9, 1999, Unum
received a check in the amount of $3,569.25 from Laszok's sister
towards the overpayment. And on January 27, 2000 Unum recouped an
additional $193.33, leaving an overpayment balance of $25,420.65.
To date, even after Unum made repeated demands, Laszok has not
paid the remaining balance of the overpayments.
Unum argues that it is entitled to reimbursement of the
overpaid LTD benefits as an ERISA fiduciary pursuant to
29 U.S.C. § 1132(a)(3), and alternatively, under federal common law. The
Court will address each of Unum's proposed causes of action in
A. "Equitable Remedy" under 29 U.S.C. § 1132(a)(3)
Under the statutory scheme of ERISA, a fiduciary may commence a
civil action to obtain appropriate equitable relief to redress
any violation of the terms of the plan or to enforce any
provision of the terms of the plan. See 29 U.S.C. § 1132(a)(3).
Unum, which qualifies as a fiduciary because it had the
discretion to grant or deny LTD benefits to the Plan's
participants, asserts this provision authorizes an action for
restitution to recover overpayments made to Laszok. The Supreme Court has determined that § 1132(a)(3) does not
authorize all relief falling under the "rubric of restitution;"
rather it only authorizes that which is equitable in nature.
Great-West Life & Annuity Insurance Co. V. Knudson,
534 U.S. 204, 212 (2002). This holding establishes that regardless of how
Unum labels its claim for relief, the Court must determine
whether the relief sought is truly equitable. Id. In
Great-West, the plan beneficiary was injured in a car accident,
and the plan fiduciary advanced money to cover the cost of
medical expenses. Later, the beneficiary received money from a
settlement agreement with the tortfeasor. Based on the plan's
reimbursement provision, the fiduciary sued the beneficiary
seeking recoupment of the overpayments of benefits and prayed for
various equitable remedies. Under these facts, the Supreme Court
held that (1) the plan fiduciary was not entitled to an
injunction against "[beneficiary's] failure to reimburse the
plan," or to specific performance of the "past due monetary
obligation." The Court reasoned that the restitution being sought
should be deemed "legal," not "equitable," and therefore not an
appropriate remedy under ERISA. Id. at 210-11. Distinguishing
between legal and equitable restitution, the Supreme Court held
that "a plaintiff could seek restitution in equity, ordinarily
in the form of a constructive trust or an equitable lien, 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." 534 U.S. at 213. On the
other hand, if "the property [sought to be recovered] or its
proceeds have been dissipated so that no product remains, [the
plaintiff's] claim is only that of a general creditor, and the
plaintiff cannot enforce a constructive trust of or an equitable
lien upon other property of the [defendant]." Id. at 213-214.
Under those circumstances, the plaintiff is seeking a legal
remedy the imposition of personal liability on the defendant to
pay a sum of money which the plaintiff is owed and so his claim falls outside § 1132(a)(3). Id. at 210.
In rejecting the plan fiduciary's claim for restitution, the
majority wrote that "[plaintiff] seeks, in essence, to impose
personal liability on [defendant] for a contractual obligation to
pay money relief that was not typically available in equity."
On that basis, the Court held that § 1132(a)(3) did not authorize
the plan fiduciary's action for specific performance and
restitution under the plan's reimbursement provision.
532 U.S. at 210-11.
Laszok argues that the case at bar is indistinguishable from
Great-West and asserts that Unum's claim is "legal rather than
equitable in nature and therefore barred by Fed.R.Civ.P.
12(b)(6) and 29 U.S.C.A. § 1132(a)(3)." (Laszok Opposition, at
5.) Like the plaintiff in Great-West, Unum seeks, in essence,
to impose personal liability on Laszok for money owed under the
Plan, an action the Supreme Court has categorized in Great-West
as an action at law.
In determining whether this deprives Unum of its cause of
action, the Court notes that some courts have held that
reimbursement of overpaid benefits is recoverable under the
majority's holding in Great-West, if the fiduciary seeks "to
recover funds (1) that are identifiable, (2) that belong in good
conscience to the [fiduciary], and (3) that are within the
possession and control of the defendant beneficiary," as opposed
to dissipated. Bombadier Aerospace Employee Welfare Benefits
Plan v. Gerrer Poirot and Wansbrough, 354 F.3d 348, 356 (5th
Cir. 2003); see also Admin. Comm. of the Wal-Mart Stores, Inc.
Assocs.' Health and Welfare Plan v. Willard, 393 F.3d 1119, 1122
(10th Cir. 2004); Admin. Comm. of the Wal-Mart Stores, Inc.
Assocs.' Health and Welfare Plan v. Varco, 338 F.3d 680 (7th
Cir. 2003).*fn1 Here Unum does not contend that the particular funds are identifiable or in the control of
the defendant. Nor does Unum present any other argument to refute
Laszok's contention that Unum is seeking legal restitution.
Instead, Unum maintains it is entitled to reimbursement pursuant
to the federal common law doctrine of unjust enrichment. (Unum
Brief, at 7-16; Unum Reply, at 4-10.) Based on Great-West and a
review of the law of this Circuit, on the facts presented the
Court concludes that Unum has failed to state a permissible claim
under 29 U.S.C. § 1132(a)(3).
That Unum does not present a cause of action under ERISA does
not divest this Court of subject matter jurisdiction because Unum
has asserted as well a federal common law claim of unjust
enrichment and restitution. The Court therefore has the authority
to address the claim. See Steel Co. V. Citizens for a Better
Env't, 523 U.S. 83, 89 (1998) (holding that the broad language
of 28 U.S.C. § 1331 permits courts to exercise jurisdiction over
all claims allegedly based on federal law, despite the
possibility that the court may later determine that the asserted
right is not cognizable); Illinois v. Milwaukee, 406 U.S. 91,
100 (1972) (holding that federal question jurisdiction may exist
over claims arising under federal common law).
B. Federal Common Law
Congress has authorized federal courts to create common law in
the context of ERISA. E.g., Pilot Life Ins. Co. v. Dedeaux,
481 U.S. 41, 56 (1987); Plucinski v. I.A.M. Nat. Pension Fund, 875 F.2d 1052, 1056-1057 (3d Cir. 1989); Van Orman v.
American Insurance Co., 680 F.2d 301, 311 (3d Cir. 1982). The
Third Circuit has held that federal common law may be applied to
fill "minor gaps" in ERISA's text, as long as the federal common
law created is compatible with and in furtherance of ERISA's
policies. Luby v. Teamsters Health Welfare and Pension Trust
Funds, 944 F.2d 1176, 1186 (3d Cir. 1991); see also
Plucinski, 875 F.2d at 1056. But this holding exists in the
context of the familiar observation that in ERISA Congress has
established "an extensive regulatory network," and that "federal
courts [should] not lightly create additional [ERISA] rights
under the rubric of federal common law." Plucinski,
875 F.2d at 1056.
There is Third Circuit precedent for invoking the federal
common law doctrine of unjust enrichment and restitution to
create causes of action in the ERISA arena. For example, in
Plucinski, 875 F.2d at 1058, the Court found restitution was
available to employers to recover mistakenly paid pension fund
contributions, unless restitution would result in underfunding of
the ERISA plan. And in Luby, 944 F.2d at 1186, the Court
created an equitable remedy to permit an ERISA fund itself to
recover mistaken payments out of the corpus of the trust. It
appears, however, that the Third Circuit has not addressed
whether the federal common law right of unjust enrichment or
restitution can be used as a cause of action in a situation where
a fiduciary sues a beneficiary for reimbursement of benefits
paid. Unum argues that this Court should create such a right
because (1) it comports with ERISA's goals of ensuring that plan
funds are administered equitably and safeguarding the corpus of
funds; and (2) it is necessary to promote the prompt payment of
claims. (Unum Reply, at 7-8.)
The entitlement to a federal common law right depends on
whether a gap exists in the statutory text of ERISA regarding a
fiduciary's right to bring an action for reimbursement of overpayments of benefits pursuant to a beneficiary's contractual
reimbursement obligation. ERISA's civil enforcement provision,
29 U.S.C. § 1132(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 terms of the plan. And as previously
discussed, the United States Supreme Court has specified that
only those remedies "typically available in equity" are available
under this provision. Great-West, 534 U.S. at 215, 220.
Unum argues that Great-West has no effect on the federal
common law claim of equitable restitution, and so it is entitled
to get back its overpayments. (Unum Reply, at 4.) Unum cites
various district court cases whose outcomes appear to support
this proposition. The Court has read Unum's authority, and
concludes that the cases become unpersuasive once carefully
examined because their reasoning does not provide analytical
support for Unum's argument here.
For example, in Empire Kosher Poultry, Inc. v. United Food and
Commercial Workers Health and Welfare fund of Northeastern
Pennsylvania, 285 F. Supp. 2d 573, 579 (M.D. Pa. 2003), the
district court concluded that the holding in Great-West was
inapplicable to the federal common law claim of equitable
restitution and recognized a common law claim of restitution that
permitted the employer to sue an ERISA fund for amounts allegedly
paid by mistake to the fund under a contract between the employer
and the union. In distinguishing Great-West, the district court
relied on the reasoning of the Third Circuit in Plucinski,
875 F.2d 1052 (3d Cir. 1989), and concluded that "the analysis of a
common law restitution claim is not tied to any specific
provision of ERISA but is based on [an] application of equitable
principles." 285 F. Supp. 2d at 580. Great-West, by contrast,
according to the district court, concerned itself "entirely with
the interpretation of an express statutory provision of ERISA,
specifically § 1132(a)(3)," and was focused on giving effect to the language
enacted by Congress instead of broad notions of equity. Id. at
580-81. Finding Plucinski and Great-West arose out of
different rationales, the district court held that the "analysis
of Great-West is simply inapplicable to the federal common law
claim of restitution," because the statutory language of §
1132(a)(3) "that drove the Supreme Court's decision has no
relationship to common law restitution, which the Third Circuit
developed from broad equitable principles underlying ERISA and
the permissive language of § 1103(c)." Id. at 581.
Along with Plucinski, Unum cites Smith v. Metro. Life Ins.
Co., 344 F. Supp. 2d 696, 705-06 (D. Colo. 2004); Unum Life
Ins. Co. of Am. v. Long, 227 F. Supp. 2d 609, 613 (N.D. Tex.
2002); Unum Life Ins. Co. of Am. v. O'Brien, 2004 WL 2283559,
*4 (M.D. Fla. Oct. 4, 2004); Fick v. Metro. Life Ins. Co.,
347 F. Supp. 2d 1271 (S.D. Fla. 2004). Each recognizes a federal
common law right of restitution, but none resolves the predicate
issue of whether a "gap" exists that would warrant the creation
of a federal common law right of restitution. Rather these cases
appear to focus on whether Great-West changed the meaning of
"equitable restitution" in the context of traditional common law
More to the point in this Court's estimation is the Fifth
Circuit's decision in Cooperative Benefit Administrators, Inc.
v. Odgen, 367 F.3d 323, 332 (5th Cir. 2004), a case Unum does
not address, which holds that a plan fiduciary was not entitled
to seek reimbursement from a plan beneficiary under a federal
common law theory of unjust enrichment. The Fifth Circuit found
that Great-West and Mertens v. Hewitt Associates,
508 U.S. 248 (1993), demonstrate that in drafting § 1132(a)(3) to allow
only "equitable relief," 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. "As ERISA's text specifically and clearly
addresses the issue whether [a plan fiduciary] has a right to
pursue a claim for legal relief against [a plan participant],
there is no gap in ERISA on this question and thus no basis for
granting [a fiduciary] a federal common law remedy."
367 F.3d at 332. The Court believes that in shaping the issue, the Fifth
Circuit's analysis is consonant with that of the Third Circuit's
In Plucinski the Third Circuit did recognize a common law
right of restitution, but it began its analysis by determining
whether there was a "gap" in the ERISA statute that needed to be
filled. The Court also noted that although the federal common law
right of restitution has been created in the context of an
identified "gap," the right is not automatic.
875 F.2d at 1056-58. Under the specific facts before it, which involved the
employer's ability to recoup contributions mistakenly made on
behalf of its employees, the Third Circuit found that "creating
such a cause of action will fill in the interstices of ERISA and
further the purposes of ERISA" because the applicable provision,
29 U.S.C. § 1103, which simply permits funds plans to refund
mistaken contributions, does not demonstrate Congress's intent to
foreclose the courts from investing employers with a remedy when
these funds are not simply refunded. Id. But here, the text of
§ 1132(a)(3) and Supreme Court precedent indicate that Congress,
in choosing the modifier "equitable" to characterize available
remedies, has foreclosed legal remedies. As articulated by the Supreme Court:
In the very same section of ERISA as [§
1132(a)(1)(B)], 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, [§ 1132(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.
Great-West, 534 U.S. at 220-221 (citing Mertens,
508 U.S. at 254) (emphasis added). No "gap" exists indeed, there appears to
be a prohibition. At best, then, Unum can argue that its
entitlement, while not falling into a "gap," falls into the
category of restitution that is equitable. But that argument is
foreclosed by Great-West. Accordingly, the Court is constrained
to conclude that Unum has failed to state a cause of action.
While this conclusion may easily be seen as inconsistent with a
primary purpose of ERISA, i.e., enforcement of the terms of a
plan, the Supreme Court's admonition to lower courts in
Great-West remains: "[E]ven assuming . . . that petitioners are
correct about . . . 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. . . ."
3. Attorneys' fees and cost under ERISA
Both parties argue they are entitled to attorneys' fees and
cost pursuant to 29 U.S.C. § 1132(g)(1). (Unum Brief, at 16;
Laszok Opposition, at 6.) Section 1132(g) provides that "the
court, in its discretion may allow a reasonable attorneys' fee
and costs of act to either party." Courts generally are to
consider the following five factors when evaluating a fees and
(1) the offending parties' culpability or bad faith;
(2) the ability of the offending parties to satisfy
an award of attorneys' fees;
(3) the deterrent effect of an award of attorneys'
fees against the offending parties; (4) the benefit conferred on members of the pension
plan as a whole; and
(5) the relative merits of the parties position.
Fields v. Thompson Printing Co., Inc., 363 F.3d 259
, 275 (3d
Cir. 2004); Ursic v. Bethlehem Mines, 719 F.2d 670
, 673 (3d
Cir. 1993). The applications are denied. Based on the ruling, the
Court would be hard put to award fees in plaintiff's favor even
if (3) and (4) have some relevance, and the Court does not find
culpability or bad faith in the traditional meaning of the terms
apply to this defendant. Again, even if they did, plaintiff did
not prevail. Finally, (2) and (5) are not germane when the issue
is, as this one, a knotty matter of construction.
For the foregoing reasons, the Complaint is dismissed on the
basis that Unum has failed to assert a claim upon which relief
can be granted, and the parties' applications for attorney's fees
and costs are denied. An appropriate order will be entered.
© 1992-2005 VersusLaw Inc.