Summary
noting that " federal court lacks jurisdiction over a claim under seeking legal relief."
Summary of this case from Delapaz v. Magnifique Parfumes & Cosmetics, Inc.Opinion
1:03-cv-0099-JDT-WTL.
May 20, 2003.
ENTRY ON MOTON TO DISMISS COUNT THREE
This Entry is a matter of public record and is being made available to the public on the court's web site, but it is not intended for commercial publication either electronically or in paper form. Although the ruling or rulings in this Entry will govern the case presently before this court, this court does not consider the discussion in this Entry to be sufficiently novel or instructive to justify commercial publication or the subsequent citation of it in other proceedings.
The Defendant moves the court to dismiss "Count III: ERISA Violation" of the Complaint for failure to state a claim. The motion is opposed by the Plaintiff.
Count III alleges in relevant part that the Plaintiff was employed by the Defendant and was discharged; she carried health insurance and other benefits through her employment, the use of which had the potential of increasing costs to the Defendant; her husband had a life threatening illness requiring the use of such benefits; and in terminating her employment, the Defendant was motivated by an effort to avoid the costs of providing a benefit under the Employment Retirement Income Security Act, 29 U.S.C. § 1001 et seq. ("ERISA"). The Complaint asks the court to find that the Defendant violated ERISA and seeks to recover the Plaintiff's lost income, including the value of lost benefits, compensatory damages, punitive damages, pre- and post-judgment interest, reasonable attorney's fees and costs, and all other appropriate relief.
The Defendant seeks dismissal of the Plaintiff's claim to the extent she seeks benefits under ERISA Section 502(a)(1)(B). The Plaintiff's response clarifies that her only ERISA claim is that the Defendant violation Section 510 by terminating her employment because of concerns over what her husband's illness did or would do to its employee health insurance costs. Thus, the court understands that the Plaintiff does not assert a claim to benefits under ERISA Section 502(a)(1)(B) and such a claim is not in this case. This leaves only the Section 510 discharge claim brought under Section 502(a)(3). The Defendant contends that this claim should be dismissed because the relief requested is not recoverable under Section 502(a)(3).
The first question is whether the Defendant's motion ought to be treated as a motion to dismiss for lack of subject matter jurisdiction instead of a motion to dismiss for failure to state a claim. The asserted basis for this court's jurisdiction over Count III is federal question, 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e), in that the claim allegedly falls under ERISA Section 502(a)(3). (Compl. ¶¶ 10, 11, 50.) A federal court has jurisdiction over an action authorized under Section 502(a). See 29 U.S.C. § 1132(e)(1); Admin. Comm. v. Gauf, 188 F.3d 767, 770 (7th Cir. 1999). A federal court lacks jurisdiction over a claim under Section 502(a)(3) seeking legal relief. Mertens v. Hewitt Assocs., 508 U.S. 248, 255-62 (1993). So, the Defendant's motion should be treated as a motion to dismiss for lack of subject matter jurisdiction.
Thus, the second question is whether the court has subject matter jurisdiction over the claim asserted in Count Ill. The claim is brought under ERISA Section 502(a)(3) which provides:
A civil action may be brought- . . .
(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan[.]29 U.S.C. § 1132(a)(3). Therefore, the answer to the second question hinges on whether Count III seeks equitable relief.
The Supreme Court's decision in Great-West Life Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002), guides this court to the answer. Great-West Life reaffirmed Mertens in concluding that Section 502(a)(3) authorizes suits seeking equitable relief, not legal relief. Id. at 221. In that case, the respondent Janette Knudson was covered by an ERISA plan of her then-husband's employer. The plan covered $411,157.11 of her medical expenses resulting from a car accident, all except $75,000 of which was paid by the petitioner Great-West. The plan contained a reimbursement provision, the rights to which were assigned to Great-West. Id. at 207. Great-West sued under Section 502(a)(3) to enforce the plan's reimbursement provision by requiring the Knudsons to pay the plan $411,157.11 of any proceeds recovered from third parties. Id. at 208. The issue was whether Section 502(a)(3) authorized the action. Id. at 206.
The Supreme Court answered, "no." The Court first rejected the argument that the suit was authorized because the petitioners sought an injunction to compel the respondents to reimburse the plan. Great-West Life, 534 U.S. at 210. The Court reasoned that "an injunction to compel the payment of money past due under a contract or specific performance of a past due monetary obligation, was not typically available in equity." Id. at 210-11 (footnote omitted).
The Court next rejected the argument that the suit was authorized because Great-West sought restitution, which it argued was a form of equitable relief. The Court recognized that restitution can take the form of equitable or legal relief, id. at 212, 218, and explained that whether restitution was "legal or equitable depends on the basis for the plaintiff's claim and the nature of the underlying remedies sought." Id. at 213 (quotation omitted). Restitution was considered legal "[i]n cases in which the plaintiff could not assert title or right to possession of particular property, but in which nevertheless he might be able to show just grounds for recovering money to pay for some benefit the defendant had received from him[.]" Id. (quotation omitted). A plaintiff's claim for restitution was legal in such cases "because he sought to obtain a judgment imposing a merely personal liability upon the defendant to pay a sum of money." Id. (quotation omitted). The Court distinguished equitable restitution as follows:
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. . . . Thus, for restitution to lie in equity, the action generally 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.Great-West Life, 534 U.S. at 213-14 (citations omitted).
The Court concluded that Great-West sought legal restitution. This was based on the fact that Great-West claimed entitlement to funds which were not in the respondents' possession. Thus, the Court reasoned: "The basis for petitioners' claim is not that respondents hold particular funds that, in good conscience, belong to petitioners, but that petitioners are contractually entitled to some funds for benefits that they conferred." Id. at 214. Another determinative fact was that the petitioners did not seek to impose a constructive trust or equitable lien on particular property. Id. The Supreme Court therefore held that because Great-West was seeking legal relief, that is, the imposition of personal liability on respondents for the payment of money, Section 502(a)(3) did not authorize the action. Id. at 221.
Application of the legal principles from Great-West Life leads to the conclusion that the Plaintiff's claim in Count III is for legal relief and therefore is not authorized by Section 502(a)(3). The Plaintiff does not assert title to any particular property or funds in the possession of the Defendant. She does not seek a constructive trust or equitable lien on particular funds or property. The basis for her claim is not that the Defendant has any particular funds or property that belong to her, but that she is entitled to some funds or property from the Defendant. The court therefore concludes that the claim asserted in Count III seeks legal relief which is not authorized by Section 502(a)(3).
If the Plaintiff argued that she seeks equitable relief by seeking an injunction to compel payment of backpay and the value of lost benefits, the relief sought no doubt would be considered legal under Great-West Life. If she seeks compensatory or punitive damages under Count III, such damages are not considered "appropriate equitable relief" and are thus not recoverable under Section 502(a)(3). See Mertens, 508 U.S. at 256; Buckley v. Dement, Inc. v. Travelers Plan Admin. of III., Inc., 39 F.3d 784, 787 (7th Cir. 1994); Harsch v. Eisenberg, 956 F.2d 651, 660-61 (7th Cir. 1992).
The Plaintiff's attempts to distinguish Great-West Life are unavailing. She first argues that the basis for reimbursement there was a contract, whereas, here it is not. In explaining the difference between equitable restitution and legal restitution, the Court said that claims for legal restitution were viewed as breach of contract actions, whether or not the contract was actual or implied. Great-West, 534 U.S. at 213. Thus, an express contract is not required in order for a claim to seek legal relief.
The Plaintiff next argues that she seeks restitution, including reinstatement with backpay and benefits and the value of lost benefits. First, the Complaint does not seek reinstatement or benefits. Moreover, the fact that the Plaintiff seeks restitution is not enough to bring her claim within Section 502(a)(3). See Great-West, 534 U.S. at 212-18 (rejecting argument that claim was authorized under Section 502(a)(3) because petitioners sought restitution as not all claims for restitution are claims for equitable relief).
The Plaintiff also relies on footnote 4 of the Great-West Life majority opinion in claiming that backpay is an equitable remedy. This reliance is misplaced. The footnote responds to an argument by the dissent that Congress intended all restitution to be equitable relief under ERISA Section 502(a)(3). The majority indicated that the authorities relied on by the dissent to support that argument did not state that because backpay is restitutionary, it also is equitable. Id. at 218 n. 4.
The Plaintiff cites to the unpublished opinion of the district court in Carnegie v. Mutual Savings Life Insurance Co., Civil Action No. CV 99-S-3292-NE, 2002 U.S. Dist. LEXIS 21396 (N.D. Ala. Nov. 1, 2002), as support for her claim that the restitution she seeks, including payment of benefits, is equitable in nature. Carnegie does not assist the Plaintiff. First, no claim in that case was brought under ERISA Section 502(a)(3). Second, one claim was for a refund of premiums paid, which the court concluded constituted a claim to restore particular funds or property in the defendant's possession, making it an equitable claim. Carnegie, 2002 U.S. Dist. LEXIS 21396, at *52-53.
Finally, the Plaintiff cites to 29 U.S.C. § 1109, but for reasons which are not apparent to the court. She does not allege a breach of fiduciary duty by the Defendant, so it seems that this provision is inapplicable.
For the foregoing reasons, the Defendant's motion to dismiss Count III will be GRANTED.