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Great-West Life & Annuity Insurance Co. v. Knudson

January 08, 2002

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY, ET AL., PETITIONERS
v.
JANETTE KNUDSON AND ERIC KNUDSON



Court Below: 208 F. 3d 221

SYLLABUS BY THE COURT

When respondent Janette Knudson was injured in a car accident, the health plan (Plan) of petitioner Earth Systems, Inc., the employer of Janette's then-husband, respondent Eric Knudson, covered $411,157.11 of her medical expenses, most of which was paid by petitioner Great-West Life & Annuity Insurance Co. The Plan's reimbursement provision gives it the right to recover from a beneficiary any payment for benefits paid by the Plan that the beneficiary is entitled to recover from a third party. A separate agreement assigns Great-West the Plan's rights to any reimbursement provision claim. After the Knudsons filed a state-court tort action to recover from the manufacturer of their car and others, they negotiated a settlement which allocated the bulk of the recovery to attorney's fees and to a trust for Janette's medical care, and earmarked $13,828.70 (the portion of the settlement attributable to past medical expenses) to satisfy Great-West's reimbursement claim. Approving the settlement, the state court ordered the defendants to pay the trust amount directly and the remainder to respondents' attorney, who, in turn, would tender checks to Great-West and other creditors. Instead of cashing its check, Great-West filed this federal action under §502(a)(3) of the Employee Retirement Income Security Act of 1974 (ERISA) 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. The District Court granted the Knudsons summary judgment, holding that the terms of the Plan limited its right of reimbursement to the $13,828.70 determined by the state court. The Ninth Circuit affirmed on different grounds, holding that judicially decreed reimbursement for payments made to a beneficiary of an insurance plan by a third party is not "equitable relief" authorized by §502(a)(3).

Held: Because petitioners are seeking legal relief -- the imposition of personal liability on respondents for a contractual obligation to pay money -- §502(a)(3) does not authorize this action. Pp. 4-17.

(a) Under §502(a)(3) -- which authorizes a civil action "to enjoin any act or practice which violates ... the terms of the plan, or ... to obtain other appropriate equitable relief" -- the term "equitable relief" refers to those categories of relief that were typically available in equity. Mertens v. Hewitt Associates, The opinion of the court was delivered by: Justice Scalia.

534 U. S. ____ (2002)

On Writ Of Certiorari To The United States Court Of Appeals For The Ninth Circuit

The question presented is whether §502(a)(3) of the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 891, 29 U. S. C. §1132(a)(3) (1994 ed.), authorizes this action by petitioners to enforce a reimbursement provision of an ERISA plan.

I.

Respondent Janette Knudson was rendered quadriplegic by a car accident in June 1992. Because her then-husband, respondent Eric Knudson, was employed by petitioner Earth Systems, Inc., Janette was covered by the Health and Welfare Plan for Employees and Dependents of Earth Systems, Inc. (Plan). The Plan covered $411,157.11 of Janette's medical expenses, of which all except $75,000 was paid by petitioner Great-West Life & Annuity Insurance Co. pursuant to a "stop-loss" insurance agreement with the Plan.

The Plan includes a reimbursement provision that is the basis for the present lawsuit. This provides that the Plan shall have "the right to recover from the [beneficiary] any payment for benefits" paid by the Plan that the beneficiary is entitled to recover from a third party. App. 58. Specifically, the Plan has "a first lien upon any recovery, whether by settlement, judgment or otherwise," that the beneficiary receives from the third party, not to exceed "the amount of benefits paid [by the Plan] ... [or] the amount received by the [beneficiary] for such medical treatment ... ." Id., at 58-59. If the beneficiary recovers from a third party and fails to reimburse the Plan, "then he will be personally liable to [the Plan] ... up to the amount of the first lien." Id., at 59. Pursuant to an agreement between the Plan and Great-West, the Plan "assign[ed] to Great-West all of its rights to make, litigate, negotiate, settle, compromise, release or waive" any claim under the reimbursement provision. Id., at 45.

In late 1993, the Knudsons filed a tort action in California state court seeking to recover from Hyundai Motor Company, the manufacturer of the car they were riding in at the time of the accident, and other alleged tortfeasors. The parties to that action negotiated a $650,000 settlement, a notice of which was mailed to Great-West. This allocated $256,745.30 to a Special Needs Trust under Cal. Prob. Code Ann. §3611 (West 1991 and Supp. 1993) to provide for Janette's medical care; $373,426 to attorney's fees and costs; $5,000 to reimburse the California Medicaid program (Medi-Cal); and $13,828.70 (the portion of the settlement attributable to past medical expenses) to satisfy Great-West's claim under the reimbursement provision of the Plan.

The day before the hearing scheduled for judicial approval of the settlement, Great-West, calling itself a defendant and asserting that the state-court action involved federal claims related to ERISA, filed in the United States District Court for the Central District of California a notice of removal pursuant to 28 U. S. C. §1441 (1994 ed.). That court concluded that Great-West was not a defendant and could not remove the case, and therefore remanded to the state court, which approved the settlement. The state court's order provided that the defendants would pay the settlement amount allocated to the Special Needs Trust directly to the trust, and the remaining amounts to respondents' attorney, who, in turn, would tender checks to Medi-Cal and Great-West.

Great-West, however, never cashed the check it received from respondents' attorney. Instead, at the same time that Great-West sought to remove the state-law tort action, it filed this action in the same federal court (the United States District Court for the Central District of California), seeking injunctive and declaratory relief under §502(a)(3) to enforce the reimbursement provision of the Plan by requiring the Knudsons to pay the Plan $411,157.11 of any proceeds recovered from third parties. Great-West subsequently filed an amended complaint adding Earth Systems and the Plan as plaintiffs and seeking a temporary restraining order against continuation of the state-court proceedings for approval of the settlement. The District Court denied the temporary restraining order, a ruling that petitioners did not appeal. After the state court approved the settlement and the money was disbursed, the District Court granted summary judgment to the Knudsons. It held that the language of the Plan limited its right of reimbursement to the amount received by respondents from third parties for past medical treatment, an amount that the state court determined was $13,828.70. The United States Court of Appeals for the Ninth Circuit affirmed on different grounds. Judgt. order reported at 208 F. 3d 221 (2000). Citing FMC Medical Plan v. Owens, 122 F. 3d 1258 (CA9 1997), it held that judicially decreed reimbursement for payments made to a beneficiary of an insurance plan by a third party is not equitable relief and is therefore not authorized by §502(a)(3). We granted certiorari. 531 U. S. 1124 (2001).

II.

We have observed repeatedly that ERISA is a " `comprehensive and reticulated statute,' the product of a decade of congressional study of the Nation's private employee benefit system." Mertens v. Hewitt Associates, 508 U. S. 248, 251 (1993) (quoting Nachman Corp. v. Pension Benefit Guaranty Corporation, 446 U. S. 359, 361 (1980)). We have therefore been especially "reluctant to tamper with [the] enforcement scheme" embodied in the statute by extending remedies not specifically authorized by its text. Massachusetts Mut. Life Ins. Co. v. Russell, 473 U. S. 134, 147 (1985). Indeed, we have noted that ERISA's "carefully crafted and detailed enforcement scheme provides `strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly.' " Mertens, supra, at 254 (quoting Russell, supra, at 146-147).

Section 502(a)(3) authorizes a civil action:

"by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates ... 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 ... the terms of the plan." 29 U. S. C. §1132(a)(3) (1994 ed.).

As we explained in Mertens, " `[e]quitable' relief must mean something less than all relief." 508 U. S., at 258, n. 8. Thus, in Mertens we rejected a reading of the statute that would extend the relief obtainable under §502(a)(3) to whatever relief a court of equity is empowered to provide in the particular case at issue (which could include legal remedies that would otherwise be beyond the scope of the equity court's authority). Such a reading, we said, would "limit the relief not at all" and "render the modifier [`equitable'] superfluous." Id., at 257-258. Instead, we held that the term "equitable relief" in §502(a)(3) must refer to "those categories of relief that were typically available in equity ... ." Id., at 256.

Here, petitioners seek, in essence, to impose personal liability on respondents for a contractual obligation to pay money -- relief that was not typically available in equity. "A claim for money due and owing under a contract is `quintessentially an action at law.' " Wal-Mart Stores, Inc. v. Wells, 213 F. 3d 398, 401 (CA7 2000) (Posner, J.). "Almost invariably ... suits seeking (whether by judgment, injunction, or declaration) to compel the defendant to pay a sum of money to the plaintiff are suits for `money damages,' as that phrase has traditionally been applied, since they seek no more than compensation for loss resulting from the defendant's breach of legal duty." Bowen v. Massachusetts, 487 U. S. 879, 918-919 (1988) (Scalia, J., dissenting). And "[m]oney damages are, of course, the classic form of legal relief." Mertens, supra, at 255.

Nevertheless, petitioners, along with their amicus the United States, struggle to characterize the relief sought as "equitable" under the standard ...


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