Fiduciary Duty in ERISA Under § 1132(a)(3)
Plaintiffs can bring a breach of fiduciary duty under 29 U.S.C. § 1132(a)(3) " for appropriate equitable relief," but that relief does not apply to a disability claim denial, because a remedy under § 1132(a)(3) flows to the plan, and not to the individual claimant. Amalgamated Clothing & Textile Workers Union, AFL-CIO v. Murdock, 861 F.2d 1406, 1414 (9th Cir. 1988).
"Appropriate equitable relief" has been interpreted to mean that the relief must be "equitable," not "legal," and the relief sought must be predicated on either a violation of ERISA or the enforcement of a plan provision or an ERISA provision." Green v. Holland, 480 F.3d 1216, 1224 (11th Cir. 2007).
A claimant cannot challenge the denial of disability benefits under § 1132(a)(3). To recover disability benefits due under the plan, the proper claim is under 29 U.S.C. § 1132(a)(1)(B), which provides that a civil action may be brought by a participant or beneficiary of an ERISA plan "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan."
Insurers and plans make use of § 1132(a)(3) to recover "overpayments." For example, an ERISA health plan may require a beneficiary to repay some or all of a recovery obtained from a third party in a successful personal injury claim. Or, when an insurer seeks to offset the benefits that it is paying out of an award of Social Security (SSDI) disability benefits.
There is no specific provision in ERISA that directly provides for a recovery of "overpayments." Therefore, when plans and insurers have used the "appropriate equitable relief" provision of § 1132(a)(3) to obtain "overpayments" relief, courts have been required to develop federal case law accordingly.
In Mertens v. Hewitt Associates, 508 U.S. 248, 255 (1993), the Court declined to construe § 502(a)(3)'s reference to "appropriate equitable relief" to encompass what was equity's routine remedy for such breaches—a compensatory monetary award calculated to make the victims whole, a remedy that was available against both fiduciaries and participating non-fiduciaries, even if construing the statute in this manner afforded participants in ERISA-governed plans and their beneficiaries as having less protection than they enjoyed before ERISA was enacted.
The Supreme Court held that recovery of "overpayments" was not within the scope of § 1132(a)(3), because the relief that was being sought was "legal" rather than "equitable." Great-W Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002).
However, the Supreme Court in Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356 (2006), allowed a plan to recover overpaid medical benefits from a beneficiary, because the beneficiary, by contractual agreement, created a "lien by agreement" that allowed recovery by the plan. [See also: U.S. Airway, Inc. v. McCutchen, 133 S. Ct. 1537 (2013).]
In Blankenship v. Liberty Life Assurance Company of Boston, 486 F.3d 620, 624-25 (9th Cir. 2007), the court held that an insurer was entitled to offset its LTD obligation by any amount of long-term disability payments from the Social Security Administration (SSDI) that the claimant had received or would receive.
In CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), the Court held that while the district court did not have authority under § 502(a)(1)(B) to reform CIGNA's pension plan, it did have authority to do so under § 502(a)(3) and that equitable estoppel and surcharge (meaning a monetary remedy against a trustee) could be suitable remedies under § 502(a)(3)'s "appropriate equitable relief"provision. [See also: Gabriel v. Alaska Elec. Pension Fund, 773 F.3d 945 (9th Cir. 2014).]
In Bilyeu v. Morgan Stanley Long Term Disability Plan, 683 F.3d 1083 (9th Cir. 2012), the court held that in an action for equitable relief under § 502(a)(3) for plan "overpayments," the insurer was required to identify a particular fund apart from the benefit overpayment amount from which recovery was sought, and trace that particular fund to the beneficiary's possession and control, and to not attempt to secure repayment from the beneficiary's general assets.
In Day v. AT&T Disability Income Plan, No. 10-16479 (9th Cir. 2012), an ERISA beneficiary elected to roll over his pension benefits into an IRA account, which the plan administrator construed as equivalent to the beneficiary having "received" his pension benefits, and reduced the beneficiary's long-term disability benefits by the amount of the roll over. The Court concluded that "when a beneficiary rolls a pension into an IRA, he may not take possession of it, but he has control over the assets. For instance, he can choose the IRA and change it; and he can withdraw funds from it, albeit perhaps having to pay penalties for early withdrawal. It is therefore not unreasonable to say that he has received these benefits."
In Montanile v. Bd. of Trustees of Nat. Elevator Indus. Health Benefit Plan, 136 S. Ct. 651 (2016), the Supreme Court limited the recovery of overpayments to an identifiable res, in accordance with "equitable relief" principles, and refused to allow recovery from the beneficiary's general assets, even if the res had been spent and was no longer in existence.
Because case law continues to evolve in this area of ERISA law, stay tuned.