Thurber v. Aetna Life Ins. Co., No. 12-370 (2d Cir. 2013)
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Plaintiff appealed from the district court's grant of Aetna's motion for summary judgment on the issue of whether the insurer improperly denied plaintiff long-term disability benefits under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq. Because Aetna's reservation of discretion was sufficient to compel use of the arbitrary and capricious standard of review, the court affirmed summary judgment to Aetna on its denial of benefits. The court also held that Aetna's action seeking return of overpaid benefits was properly brought under 29 U.S.C. 1132(a)(3) as an equitable counterclaim. Accordingly, the court reversed the district court's denial of summary judgment on the counterclaim.
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12-370-cv(L) Thurber v. Aetna Life Ins. Co. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2012 (Argued: December 14, 2012 Decided: March 13, 2013) Docket Nos. 12-370-cv (Lead), 12-521-cv (XAP) SHARON THURBER, Plaintiff-Counter-Defendant-Appellant-Cross-Appellee, -v.AETNA LIFE INSURANCE COMPANY, Defendant-Counter-Claimant-Appellee-Cross-Appellant, QUEST DIAGNOSTICS, INCORPORATED WELFARE PLAN, AKA THE QUEST DIAGNOSTICS' AETNA LONGTERM DISABILITY BENEFIT PLAN, AKA THE QUEST DIAGNOSTICS' MANAGED DISABILITY BENEFITS PLAN, THE QUEST EMPLOYEE BENEFITS ADMINISTRATION COMMITTEE, AS PLAN ADMINISTRATOR, Defendants-Appellees-Cross-Appellants. Before: WESLEY, HALL, LYNCH, Circuit Judges. Plaintiff-Counter-Defendant-Appellant-Cross-Appellee Sharon Thurber appeals from a January 6, 2012 Decision and Order by the United States District Court for the Western District of New York (Skretny, J.) granting DefendantCounter-Claimant-Appellee-Cross-Appellant Aetna Life 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Insurance Company s motion for summary judgment on the issue of whether the insurer improperly denied Thurber long-term disability benefits under ERISA. Thurber argues that the district court used the wrong standard of review and further erred by upholding Aetna s decision denying her long-term disability benefits. Because Aetna s reservation of discretion was sufficient to compel use of the arbitrary and capricious standard of review, we AFFIRM the district court s grant of summary judgment to Aetna on its denial of benefits. Aetna cross-appeals the portion of the district court s Decision and Order denying Aetna s motion for summary judgment on its counterclaim for equitable restitution of overpaid short-term disability benefits. Aetna argues that the plan language gave it the right to seek reimbursement of overpaid benefits pursuant to 29 U.S.C. § 1132(a)(3). What qualifies as appropriate equitable relief under ERISA is an open question in this Circuit. We now hold that Aetna s action seeking return of overpaid benefits was properly brought under 29 U.S.C. § 1132(a)(3) as an equitable counterclaim. We REVERSE the district court s denial of summary judgment on the counterclaim. 23 AFFIRMED IN PART AND REVERSED IN PART. 24 25 26 27 28 29 30 31 32 33 34 35 36 LISA BALL (Christen Archer Pierrot, Andrew P. Fleming, on the brief) Chiacchia & Fleming, Hamburg, NY, for Plaintiff-Counter-DefendantAppellant-Cross-Appellee. MICHAEL H. BERNSTEIN (John T. Seyberg, on the brief), Sedgwick LLP, New York, NY, for Defendant-Counter-Claimant-Appellee-CrossAppellant and Defendants-Appellees-CrossAppellants. 37 38 39 2 1 WESLEY, Circuit Judge: 2 3 Background Sharon Thurber worked at Quest Diagnostics ( Quest ) as 4 a client services representative from 1993 through August 5 15, 2007. 6 enrolled in Quest s Employee Retirement Income Security Act 7 (ERISA) disability benefits plan, administered by Aetna Life 8 Insurance Company ( Aetna ). 9 entitled to long-term disability benefits if a disabling 10 condition rendered her unable to perform the material and 11 substantial duties of her occupation. 12 Thurber s supervisor, her position as a client services 13 representative consisted of sitting for approximately 80% of 14 her shift and alternately standing and walking a short 15 distance for the remaining 20% of the time. As a full-time Quest employee, Thurber was Under the plan, Thurber was According to 16 In 1983, Thurber broke both of her legs in a car 17 accident; her right leg is shorter than her left leg as a 18 result. 19 in another car accident, in which she hit a cement barrier 20 twice while driving on the New York State Thruway. 21 not worked since that accident. 22 initial claim for short-term disability benefits for On or about August 17, 2007, Thurber was involved 3 She has Aetna approved Thurber s 1 traumatic arthritis in both knees. 2 term disability benefits for six months, ending on February 3 20, 2008. 4 She received short- Thurber then submitted a claim for long-term disability 5 benefits. At this time, she informed Aetna that she had 6 received other income in the form of no-fault insurance 7 payments of $1,202.32 per month while receiving short-term 8 disability benefits from Aetna. 9 reduce short- or long-term disability benefits if a Under the plan, Aetna may 10 beneficiary receives Other Income Benefits, including no- 11 fault insurance payments. 12 [i]ncome earned from a part-time return to work at Quest . 13 . . will result in a reduction of benefits. 14 plan also authorizes Aetna to: (1) require the return of 15 overpayments; (2) cease paying benefits until overpayments 16 are recovered; (3) pursue legal action to recover 17 overpayments; or (4) [p]lace a lien . . . in the amount of 18 the overpayment on the proceeds of any other income. 19 at 201.) 20 (AR 198.) In addition, any (Id.) The (Id. In support of Thurber s claim for long-term disability 21 benefits based on her intermittent, unpredictable pain, 22 Thurber s orthopedist, Dr. Michael T. Grant, completed a 4 1 Capabilities and Limitations Worksheet ( CLW ) in November 2 2007. 3 occasional sitting and occasional walking, but not in 4 standing, stooping, climbing, crawling, kneeling or 5 twisting, among other limitations. 6 Grant opined that Thurber remains totally disabled due to 7 being persistently symptomatic in regards to severe post- 8 traumatic arthritis of her knees bilaterally. 9 878.) Dr. Grant indicated that Thurber could engage in In January 2008, Dr. (Id. at Two months later, another of Thurber s physicians, 10 Dr. Anthony J. Bianchi, completed a second CLW and found 11 that Thurber could frequently (34%-66% of an eight-hour day) 12 sit, stand and walk. 13 still very symptomatic at times, but recommended that she 14 slowly work up to an 8 hour work day. 15 Dr. Bianchi noted that Thurber was (Id. at 916.) Based on this information, Aetna denied Thurber s claim 16 for long-term disability benefits on March 31, 2008. 17 Aetna s denial letter summarized the medical reports 18 provided by Thurber s doctors before concluding that the 19 information did not demonstrate that Thurber was unable to 20 perform the functions of her position as a client services 21 representative. 22 submit any additional information she desired and gave a Aetna informed Thurber that she could 5 1 list of the types of tests and records that might prove 2 helpful. 3 2008. 4 Thurber appealed the denial of benefits in April On April 28, 2008, Thurber underwent arthroscopic knee 5 surgery, as suggested by Dr. Grant. 6 Thurber s claim file for an independent medical review by 7 Dr. Lawrence Blumberg, a Board Certified orthopedic surgeon. 8 Dr. Blumberg summarized the medical information provided by 9 Thurber s physicians, but his report wrongly attributed the 10 March 3, 2008 CLW to Dr. Grant, rather than to Dr. Bianchi. 11 Dr. Blumberg determined that [i]n spite of claimant s 12 subjective complaints, she has an adequate range of motion 13 to perform sedentary activities, as required by her job, 14 because [t]here is no evidence that she cannot stand, sit, 15 or ambulate. 16 Thurber s claim on appeal and upheld its original decision. 17 (Id. at 951.) Aetna then forwarded In late May, Aetna denied Although the internal appeals process offers only one 18 level of review, Thurber requested reconsideration of her 19 appeal. 20 regarding spinal problems in October 2008, specifically, the 21 results of a static EMG scan. 22 claim file for two additional independent medical reviews, She subsequently submitted medical information Aetna forwarded Thurber s 6 1 both conducted by Board Certified orthopedic surgeons. The 2 second independent review physician, Dr. James Wallquist, 3 reviewed Thurber s medical reports and correctly attributed 4 the March 3, 2008 CLW to Dr. Bianchi. 5 and Dr. Leela Rangaswamy, Aetna s third independent review 6 physician, concluded that Thurber was functionally impaired 7 from the date of her arthroscopic surgery and for six weeks 8 of recovery thereafter, but not during the periods prior or 9 subsequent. Both Dr. Wallquist On December 6, 2008, Aetna completed the re- 10 review of its denial of Thurber s claim for benefits and re- 11 affirmed its initial denial. 12 Thurber filed a complaint in the United States District 13 Court for the Western District of New York (Skretny, J.) 14 challenging Aetna s denial of benefits under ERISA, 29 15 U.S.C. § 1132(a)(1)(B). 16 restitution of $7,213.92 in overpaid plan benefits under 29 17 U.S.C. § 1132(a)(3). 18 Thurber s claim and its counterclaim. 19 the district court granted Aetna s motion for summary 20 judgment with respect to Thurber s claims but denied and 21 dismissed Aetna s counterclaim for lack of subject matter 22 jurisdiction under ERISA because it was legal, rather than 23 equitable, in nature. Aetna counterclaimed for equitable Aetna moved for summary judgment on 7 On January 6, 2012, 1 Thurber appeals from the district court s grant of 2 summary judgment to Aetna on Thurber s claim for disability 3 benefits; Aetna cross-appeals from the district court s 4 denial of its counterclaim. 5 6 7 8 9 Discussion I. Standard of Review Thurber argues that the district court should have reviewed her claim de novo because she allegedly never 10 received the plan documents that clearly reserved Aetna s 11 discretion to assess her eligibility for long-term 12 disability benefits. We disagree. 13 When an ERISA plan participant challenges a denial of 14 benefits, the proper standard of review is de novo unless 15 the benefit plan gives the administrator or fiduciary 16 discretionary authority to assess a participant s 17 eligibility. 18 101, 115 (1989). 19 denial is subject to arbitrary and capricious review and 20 will be overturned only if it is without reason, 21 unsupported by substantial evidence or erroneous as a matter 22 of law. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. If the plan does reserve discretion, the Kinstler v. First Reliance Standard Life Ins. 8 1 Co., 181 F.3d 243, 249 (2d Cir. 1999) (quoting Pagan v. 2 NYNEX Pension Plan, 52 F.3d 438, 442 (2d Cir. 1995)). 3 Although we do not require the plan to employ any particular 4 language to reserve discretion, the chosen words must 5 clearly convey the administrator s intent. 6 Prudential Ins. Co. of Am., 406 F.3d 98, 108 (2d Cir. 2005); 7 Kinstler, 181 F.3d at 251-52. 8 9 See Nichols v. Thurber conceded at oral argument that the plan itself and the Summary Plan Description ( SPD ) both include 10 language that is sufficient to reserve discretion to Aetna 11 to assess participants eligibility for benefits.1 12 argues, however, that there is no evidence in the record 13 showing that she actually received either of these plan 14 documents and that, therefore, she cannot be bound by 15 language contained therein. 16 plan document that she received (the Booklet ) does not 17 clearly reserve discretion to Aetna.2 Thurber According to Thurber, the only 1 The plan provides Aetna with discretionary authority to: determine whether and to what extent employees and beneficiaries are entitled to benefits. (AR 54.) Likewise, the SPD states that [Aetna] has the discretionary authority to determine eligibility for benefits, decide claim appeals, and to interpret provisions of the plan. (Id. at 305.) 2 The Booklet states that [a] period of disability will be certified by Aetna if, and for only as long as, Aetna determines that you are disabled . . . . (Doc. #40, Ex. A, 3.) Because we 9 1 Thurber relies on the Seventh Circuit s decision in 2 Herzberger v. Standard Insurance Co., 205 F.3d 327 (7th Cir. 3 2000), for her assertion that she must have received actual 4 notice of Aetna s reservation of discretion before Aetna s 5 denial of benefits is entitled to deferential review. 6 Herzberger, the Seventh Circuit reversed and remanded two 7 district court decisions granting summary judgment to plan 8 administrators after the lower courts reviewed eligibility 9 determinations under the arbitrary and capricious standard. In 10 See id. at 333. The court held that neither plan at issue 11 clearly reserved discretion to the respective plan 12 administrators. 13 the language of the plan itself, and concluded that language 14 that simply provided that the administrator had to determine 15 eligibility did not imbue the administrator with discretion. 16 See id. 17 noted that [t]he employees are entitled to know what 18 they re getting into, and so if the employer is going to Id. The court s analysis rested fully on In explicating this holding, the court further find that the plan s reservation of discretion to Aetna was sufficient regardless of whether Thurber had actual notice of the plan s language, we need not decide the controversial question of whether use of the word determines in the Booklet is clear enough to reserve discretion under Firestone. See Fay v. Oxford Health Plan, 287 F.3d 96, 104 (2d Cir. 2002); cf. Nichols, 406 F.3d at 108-09. 10 1 reserve a broad, unchanneled discretion to deny claims, the 2 employees should be told about this, and told clearly. 3 Id. Contrary to Thurber s reading, the case did not in any 4 way involve, and the court s language did not address, a 5 situation in which the plan s language did unambiguously 6 provide for discretion (as did the SPD), but the employee 7 seeking benefits had not received a copy of either document. 8 That a court will review benefits determinations de novo 9 unless the plan documents clearly specify a reservation of 10 discretion does not imply that such a reservation must be 11 specifically conveyed to all members of the plan. 12 event, to the extent that the language in Herzberger could 13 be read to require actual notice of the insurer s purported 14 reservation of discretion, we cannot detect any basis in law 15 or the statute to support this position. 16 Supreme Court s decision in Firestone merely establishes 17 that review under the arbitrary and capricious standard will 18 be inappropriate unless the benefit plan gives the 19 administrator or fiduciary discretionary authority to 20 determine eligibility. 21 Firestone says nothing about whether the SPD or other plan 22 documents must contain language clearly reserving discretion In any Indeed, the 489 U.S. at 115 (emphasis added). 11 1 - Firestone refers to the plan itself. 2 participants are entitled to receive copies of the SPD, 3 pursuant to 29 U.S.C. §§ 1021, 1022 and 1024, the 4 administrator of an ERISA plan has no obligation to ensure 5 that participants receive copies of the plan itself. 6 Although plan Thus, unless ERISA requires the SPD to contain language 7 setting the standard of review, we see no reason why a plan 8 administrator must actually notify a participant of its 9 reservation of discretion. ERISA contains no such edict. 10 See 29 U.S.C. § 1022(b); 29 C.F.R. § 2520.102 3. 11 Accordingly, to the extent that the Seventh Circuit has 12 articulated an actual notice requirement, we disagree that 13 ERISA imposes such an obligation on an insurer that 14 endeavors to reserve discretion. 15 Here, the language contained in Aetna s plan and the 16 SPD clearly reserves discretion to Aetna for determining 17 participants eligibility for disability benefits. 18 Thurber did not have actual notice of Aetna s reservation of 19 discretion is of no consequence. 20 arguments that plan provisions that affect the basic terms 21 of the plan, or ones that affect what an applicant must do 22 to become eligible for benefits, should be conveyed directly 12 That There may be strong 1 to plan beneficiaries and not buried in a lengthy and 2 technical contract. 3 to a provision that is effectively addressed not to the 4 beneficiary, but only to a reviewing court that must act 5 only after an application has been denied. 6 standard that focuses on the language of the plan raises a 7 purely legal standard of review for all participants in the 8 same plan. 9 make the standard of review different for each individual However, those arguments do not apply Moreover, a In contrast, an actual notice standard would 10 applicant, based on resolution by reviewing courts of 11 factual disputes which will frequently pit a participant s 12 fallible and self-interested memory against a plan 13 administrator s reliance on evidence of standard practice 14 about whether the particular participant received a copy of 15 the relevant documents. 16 As a result, we conclude that the district court 17 correctly utilized the arbitrary and capricious standard of 18 review. 19 judgment to Aetna de novo, see Pagan, 52 F.3d at 441, and 20 thus will review Aetna s denial of long-term disability 21 benefits under the same arbitrary and capricious standard 22 properly used by the district court. We review the district court s grant of summary 13 1 2 II. The Merits of Thurber s Claim for Benefits Thurber makes several arguments on appeal for why Aetna 3 acted arbitrarily and capriciously in denying her long-term 4 disability benefits under the plan. 5 arguments have sufficient merit to require discussion. 6 agree with the district court that Aetna s determination of 7 Thurber s eligibility for long-term benefits was supported 8 by substantial evidence. 9 district court s grant of summary judgment to Aetna. 10 Only some of these We Accordingly, we affirm the First, Thurber argues that Aetna failed to give enough 11 weight to her subjective complaints of pain. Although 12 subjective complaints if found credible . . . could [be] 13 legally sufficient evidence of disability, Krizek v. Cigna 14 Group Insurance, 345 F.3d 91, 102 (2d Cir. 2003), we agree 15 with the district court that Aetna gave sufficient attention 16 to Thurber s subjective complaints of pain before 17 determining that they were not supported by objective 18 evidence. 19 noted that [Thurber] complain[ed] of recurrent discomfort 20 about the right knee. 21 benefits on appeal, Aetna commented that Dr. Blumberg found 22 that in spite of your subjective complaints, you had In Aetna s first denial letter, the insurer (AR 925.) 14 In its May 2008 denial of 1 adequate range of motion to perform sedentary activities. 2 (Id. at 947.) 3 denial on re-review, the letter confirmed that [t]he 4 consultant noted that Ms. Thurber had had previous knee 5 pain and the consultant was aware that [s]he claimed to 6 have pain, stiffness, and fatiguability on June 10, 2008. 7 (Id. at 1118.) 8 concluding either that Thurber s subjective complaints of 9 pain standing alone did not warrant finding her eligible for Finally, in Aetna s December 2008 final Aetna did not abuse its discretion in 10 long-term disability benefits, or that objective evidence 11 did not support finding otherwise. 12 Second, Thurber argues that Dr. Blumberg s error 13 attributing the March 3, 2008 CLW to Dr. Grant, instead of 14 to Dr. Bianchi, is a critical mistake because Dr. Blumberg 15 believed that Dr. Grant found Ms. Thurber to have 16 improved. 17 erroneously believed that Dr. Grant had authored the March 18 2008 CLW, his recommendation to Aetna was based on the 19 substance of the report which was the most recent CLW 20 available at the time of his review. 21 Blumberg s review and Aetna s denial of Thurber s appeal, 22 Aetna retained two additional independent physicians to (Appellant s Br. at 65.) 15 Even if Dr. Blumberg Moreover, after Dr. 1 review Thurber s file and subsequently affirmed its prior 2 denial based on their (correct) reports. 3 Third, Thurber claims that Aetna did not give 4 sufficient consideration to the total impact of the medical 5 evidence she submitted to support her claim for disability 6 benefits. 7 facts prove otherwise. 8 letters, along with the reports from three independent Board 9 Certified physicians, explained why Aetna found Thurber s As the district court correctly determined, the Each of Aetna s three denial 10 submissions to be insufficient. In addition, Thurber s 11 claim that Aetna failed to credit the objective medical 12 evidence she submitted regarding her neck and spinal 13 problems also fails. 14 all of the supporting documentation from her care providers 15 up until the fall of 2008 focused on injuries to her knees 16 caused by her August 2007 car accident in conjunction with 17 her 1983 car accident. 18 extended beyond disabling knee pain, the third independent 19 physician s review and Aetna s subsequent final denial 20 letter both discuss the tests performed on Thurber s spine, 21 demonstrating that Aetna did not arbitrarily ignore this 22 evidence for purposes of assessing her eligibility for 23 benefits. Thurber s initial disability claim and But, even if Thurber s claim 16 1 We have considered Thurber s additional arguments that 2 the rejection of her claim was arbitrary and capricious and 3 find them without merit. 4 conclusion that Aetna s eligibility determination was 5 supported by substantial evidence. We affirm the district court s 6 7 III. Aetna s Counterclaim 8 Aetna brought a counterclaim seeking the return of 9 overpaid short-term benefits pursuant to ERISA, 29 U.S.C. § 10 1132(a)(3), which authorizes civil actions brought by a 11 participant, beneficiary, or fiduciary . . . to obtain . . . 12 appropriate equitable relief . . . to enforce any provisions 13 of this subchapter or the terms of the plan. 14 1132(a)(3). 15 relief is an issue that continues to perplex courts despite 16 efforts by the Supreme Court during the past decade to shed 17 some light on the matter. 18 Servs., Inc., 547 U.S. 356 (2006); Great-West Life & Annuity 19 Ins. Co. v. Knudson, 534 U.S. 204 (2002). 20 district court determined that it did not have subject 21 matter jurisdiction over Aetna s counterclaim because Aetna 22 sought legal, rather than equitable, relief. 23 convinced that Aetna s counterclaim seeking the return of 29 U.S.C. § What qualifies as appropriate equitable See Sereboff v. Mid Atl. Med. 17 Here, the Because we are 1 overpaid benefits constituted an action for appropriate 2 equitable relief, we reverse. 3 The Supreme Court first tackled the question of whether 4 29 U.S.C. § 1132(a)(3) authorizes subrogation-like actions 5 by insurers under an ERISA plan in Great-West Life & Annuity 6 Insurance Company v. Knudson. 7 approximately $350,000 for the participant s medical 8 expenses under her husband s ERISA plan after a car 9 accident. There, the insurer paid See Knudson, 534 U.S. at 207. The Knudsons 10 subsequently settled their state court tort suit against the 11 car manufacturer and other tortfeasors. 12 court approved the settlement and directed the distribution 13 of approximately $250,000 into a Special Needs Trust that, 14 under California law, would provide for medical care. 15 addition, the state court allotted nearly $375,000 for 16 attorney s fees and costs; $5,000 to reimburse the 17 California Medicaid program; and approximately $14,000 to 18 satisfy Great-West s claim. 19 received notice of the proposed settlement and, calling 20 itself a defendant, unsuccessfully attempted to remove the 21 state action to federal court on the grounds that the state 22 action involved federal claims related to ERISA. 23 208. Id. Id. at 207-08. 18 The state In Great-West Id. at 1 Great-West simultaneously sought to block the state 2 court settlement in federal court under 29 U.S.C. § 3 1132(a)(3), claiming that the plan s subrogation provision 4 required the Knudsons to reimburse Great-West from any 5 third-party payments for plan-covered expenses and precluded 6 the state court from limiting Great-West s recovery to the 7 past medical expenses portion of the settlement. 8 district court denied Great-West s request for a temporary 9 restraining order and Great-West did not appeal. The Id. The 10 district court ultimately dismissed Great-West s action 11 after the state court approved the settlement. 12 See id. The Ninth Circuit affirmed the dismissal of Great- 13 West s claim, holding that judicially decreed reimbursement 14 for payments made to a beneficiary of an insurance plan by a 15 third party is not equitable relief and is therefore not 16 authorized by the statute. 17 Supreme Court explained that it had previously determined 18 that the statute provided only equitable and not legal 19 remedies to plan administrators to redress violations of the 20 plan or to seek enforcement of plan provisions. 21 Knudsons had not retained any moneys recovered in the state 22 action as those funds were sequestered in the Special Needs 23 Trust pursuant to the state court order. Id. at 209. 19 On appeal, the Id. The Consequently, 1 Great-West was really trying to enforce its plan provision 2 authorizing the imposition of personal liability if a 3 beneficiary failed to reimburse the insurer after receiving 4 a third-party settlement. 5 Supreme Court saw this as an action at law, for breach of 6 contract, rather than an action at equity, to enjoin the 7 Knudsons from violating the terms of the plan by failing to 8 reimburse Great-West. 9 the action generally must seek not to impose personal See id. at 207, 210-12. The [F]or restitution to lie in equity, 10 liability on the defendant, but to restore to the plaintiff 11 particular funds or property in the defendant s possession. 12 Id. at 214. 13 By contrast, in Sereboff v. Mid Atlantic Medical 14 Services, Inc., the insurer sought specifically 15 identifiable funds that were within the possession and 16 control of the Sereboffs. 17 quotation marks omitted). 18 participants in Sereboff were injured in a car accident and 19 the insurer paid a sum of money, approximately $75,000, to 20 cover medical expenses under their ERISA plan. 21 Subsequently, the Sereboffs settled a tort suit arising out 22 of their accident. 23 under ERISA to enforce a plan provision requiring the Id. 547 U.S. at 362-63 (internal Like in Knudson, the plan Id. at 360. Mid Atlantic brought an action 20 1 beneficiary to reimburse the insurer from third-party 2 recoveries. 3 money from their settlement and put it into an investment 4 account until the case had been decided. 5 Id. The Sereboffs agreed to set aside a sum of Id. First, the Court determined that the nature of the 6 relief desired in Sereboff was equitable because Mid 7 Atlantic sought a specific portion (approximately $75,000) 8 of specifically identified funds (the third-party recovery). 9 See id. at 362-63. Second, the Court concluded that Mid 10 Atlantic established that the basis for its claim was 11 equitable. 12 case (from the time of the divided bench) of Barnes v. 13 Alexander, 232 U.S. 117 (1914), in which Justice Holmes 14 described See id. at 363. The Court discussed the 1914 15 16 17 18 19 20 21 Sereboff, 547 U.S. at 363-64 (quoting Barnes, 232 U.S. at 22 121). 23 the familiar rul[e] of equity that a contract to convey a specific object even before it is acquired will make the contractor a trustee as soon as he gets a title to the thing. Because the Sereboffs ERISA plan specifically 24 identified a particular share of particular funds subject to 25 return, Mid Atlantic could rely on [this] familiar rul[e] 26 of equity to collect for the medical bills it had paid. 21 1 Id. at 364 (internal quotation marks omitted). This rule 2 allowed them to follow a portion of the recovery into the 3 [Sereboffs ] hands as soon as [the settlement fund] was 4 identified, and impose on that portion a constructive trust 5 or equitable lien. 6 (alterations in original). 7 rebuffed the Sereboffs contention that Mid Atlantic needed 8 to satisfy strict tracing rules before equitable relief 9 was appropriate. Id. (quoting Barnes, 232 U.S. at 123) Moreover, the Supreme Court Id. at 364-65. Instead, the Court 10 confirmed that tracing rules have no import in the context 11 of an equitable lien by agreement. 12 Id. at 365. The Court reached different results in Knudson and 13 Sereboff because Great-West could not assert an equitable 14 lien on settlement funds contained in a separate entity 15 the restrictive trust while Mid Atlantic did not face a 16 similar obstacle. 17 over the specific funds sought by their insurer. 18 result, the Court found that the Sereboffs held these funds 19 in constructive trust for Mid Atlantic. 20 The Sereboffs had possession and control As a Here, the nature of Aetna s claim is equitable: the 21 insurer seeks specific funds (overpayments resulting from 22 Thurber s simultaneous receipt of no-fault insurance 23 benefits and short-term disability benefits) in a specific 22 1 amount (the total overpayment, $7,213.92) as authorized by 2 the plan. 3 These funds were entrusted to Thurber. However, this case differs from Sereboff in two ways. 4 First, the particular fund (from which Aetna seeks a 5 specific portion of money) is not the actual third-party 6 income Thurber received; instead, it is the benefits 7 rendered overpayments as a result of Thurber s receipt of 8 no-fault insurance benefits. 9 have since dissipated. Second, these overpayments We do not believe either of these 10 distinctions requires labeling Aetna s claim as one in law, 11 though we recognize the existence of a Circuit split on the 12 issue. 13 95 (3d Cir. 2011) (finding that dissipation of the funds 14 [is] immaterial if an equitable lien by agreement is in 15 place), and Cusson v. Liberty Life Assurance Co. of Boston, 16 592 F.3d 215, 231 (1st Cir. 2010) (determining that an 17 insurer need not identify a specific account in which the 18 funds are kept or prove[] that they are still in [the 19 beneficiary s] possession ), with Bilyeu v. Morgan Stanley 20 Long Term Disability Plan, 683 F.3d 1083, 1093-95 (9th Cir. 21 2012) (holding that fiduciar[ies] must recover from 22 specifically identified funds in the beneficiary s 23 possession (emphasis in original)). Compare Funk v. CIGNA Grp. Ins., 648 F.3d 182, 194- 23 1 With respect to the first distinction, Aetna seeks a 2 specific portion (all) of a particular fund (the subset of 3 disability benefits that became overpayments when Thurber 4 received no-fault insurance benefits). 5 these overpayments were not segregated from the total 6 disability payments. 7 an action for the return of overpaid long-term disability 8 benefits does not seek a particular fund, but a specific 9 amount of money encompassed within a particular fund the Not surprisingly, The Ninth Circuit recently held that 10 long-term disability benefits [the insurer] paid to [the 11 beneficiary]. 12 original). 13 funds is irrelevant when the terms of the ERISA plan put 14 [the beneficiary] on notice that she would be required to 15 reimburse [the insurer] for an amount equal to what she 16 might get from third-party sources. 17 231. Bilyeu, 683 F.3d at 1093 (emphases in But the beneficiary s literal segregation of Cusson, 592 F.3d at 18 We do not see a basis for distinguishing between 19 certain funds identified by ERISA plans i.e., between 20 third-party recoveries and benefits that become 21 overpayments as a result of third-party recoveries. 22 constitute particular, identifiable sums over which an 23 insurer may assert an equitable lien authorized by its plan. 24 Both 1 For this reason, we take issue with the Ninth Circuit s view 2 that the particular fund (overpayments) sought lacks 3 sufficient specificity by virtue of being an 4 undifferentiated component of a larger fund (total 5 benefits). 6 Bilyeu, 683 F.3d at 1093. Regarding the second distinction, Thurber argues that 7 Aetna may not seek return of the overpayments under 29 8 U.S.C. § 1132(a)(3) because Thurber has spent the no-fault 9 monies she was required under the plan to deliver to Aetna. 10 This, Thurber argues, makes Aetna akin to a general creditor 11 seeking a sum of money. 12 position that if there was an equitable lien by agreement 13 that attached to the [third-party benefits] as soon as [the 14 beneficiary] received it, dissipation of the funds [is] 15 immaterial. 16 strikes the right balance, and we therefore reject the Ninth 17 Circuit s contrary view that insurers may not reach 18 specifically identified assets that have dissipated. 19 Bilyeu, 683 F.3d at 1094-96. 20 claim is equitable is because it is seeking return of 21 property over which it asserts a lien (the overpayments), 22 whether or not the beneficiary remains in possession of 23 those particular dollars is not relevant as long as she was The Third Circuit takes the Funk, 648 F.3d at 194. We believe that this See If the reason the insurer s 25 1 on notice that the funds under her control belonged to the 2 insurer; she held the money in a constructive trust. 3 When an ERISA plan creates an equitable lien by 4 agreement between the insurer and the beneficiary, the 5 insurer s ownership of the overpaid funds is established 6 regardless of whether the insurer can satisfy strict tracing 7 rules. 8 at 1102 (Rawlinson, J., dissenting). 9 equitable lien by agreement, rather than an equitable lien 10 sought as a matter of restitution, all that matters is that 11 the beneficiary did, at some point, have possession and 12 control of the specific portion of the particular fund 13 sought by the insurer. 14 This is not a case like Knudson, in which the beneficiaries 15 never had possession or control of the funds identified for 16 recovery (the settlement). 17 control of the overpaid benefits. 18 over which Aetna exerted an equitable lien is insufficient 19 to void Aetna s right to enforce the plan s subrogation 20 provision and the resulting equitable lien by agreement that 21 Aetna entered into with Thurber. 22 23 See Sereboff, 547 U.S. at 364-65; Bilyeu, 683 F.3d In the context of an See Sereboff, 547 U.S. at 364-65. Here, Thurber had possession and That she spent the funds The basis of Aetna s claim is equitable. The insurer seeks to enforce an equitable lien by agreement on its 26 1 property the overpaid funds that Thurber received. For 2 this reason, Thurber s reliance on Fehn v. Group Long Term 3 Disability Plan for Employees of JP Morgan Chase Bank, No. 4 07 Civ. 8321(WCC), 2008 WL 2754069 (S.D.N.Y. June 30, 2008), 5 is misplaced. 6 benefits that erroneously contained salary-continuation 7 payments, for which the plaintiff was not eligible, 8 resulting in a significant overpayment. 9 *1. In Fehn, the plaintiff received disability 2008 WL 2754069, at Unlike the insurer in Sereboff, because JP Morgan Chase 10 paid the excess funds in error (believing that the plaintiff 11 was entitled to salary-continuation benefits when, in fact, 12 she was not), the company was asserting a contract claim for 13 money paid by the plan in excess of its terms. 14 seeking recovery of funds held by the defendant that 15 replicated proper plan payments from third parties.3 16 *4. 17 It was not Id. at Thus, the action was legal, rather than equitable. The district court s conclusion that it lacked subject 18 matter jurisdiction over Aetna s counterclaim rested in part 19 on its belief that the language contained in Aetna s SPD 3 To the extent that the district court in Fehn rested its decision on the insurer s inability to identify segregated funds in plaintiff s possession, 2008 WL 2754069, at *4, we disagree. See supra our discussion of Cusson, 592 F.3d at 230, and Funk, 648 F.3d at 194-95. 27 1 substantively differed from language in the plans at issue 2 in Sereboff and Cusson. 3 insurer may reduce benefits if a beneficiary receives 4 other income, and may require the beneficiary to return 5 any benefits subsequently rendered overpayments. 6 district court emphasized that the SPD s use of the word 7 may implies a discretionary act, not a conclusive right 8 to the funds. 9 Aetna s right to restitution of overpaid benefits into a Aetna s SPD provides that the The According to the court, this converts 10 contractual and legal right, rather than an equitable one. 11 This strikes us as being overly formalistic. 12 In Sereboff, the plan s subrogation language specified 13 the insurer s right to recover any payments made to you or 14 your dependent by a third party. 15 Inc. v. Sereboff, 303 F. Supp. 2d 691, 698 (D. Md. 2004). 16 In Cusson, the plan gave the insurer the right to recovery 17 of such overpayments if a participant received an 18 overpayment on her claim from any source. 19 at 230. 20 requir[ing] beneficiaries to reimburse overpayments to 21 their insurers. 22 participant to reimburse an insurer or may[] [r]equire [the 23 beneficiary] to return the overpayment, as one of four Mid Atl. Med. Servs., Cusson, 592 F.3d The district court here cited to these plans as But whether the plan requires a 28 1 options the insurer may pursue, is an immaterial 2 distinction. 3 dependent on an act committed to the insurer s discretion, 4 namely, requesting or suing for the return of its property. 5 The insurer must still elect to assert its right to 6 recover. 7 Under either scenario, reimbursement remains Or, it may opt not to pursue this right. Likewise, a plan that may reduce payments if the 8 beneficiary receives income from other sources adequately 9 reserves the insurer s right to lessen the beneficiary s 10 entitlement to benefits. 11 Thurber was receiving no-fault insurance income while Aetna 12 was still paying short-term disability benefits, the insurer 13 would have had the right to reduce its payments to Thurber, 14 just as it now has the authority to seek return of those 15 overpayments. 16 Here, had Aetna been aware that We are not persuaded that a different result is 17 compelled by language in Aetna s SPD distinguishing between 18 benefits that may be reduced following receipt of Other 19 Income Benefits and benefits that will be reduced 20 following receipt of income from a part-time return to work. 21 Although we note that Aetna s decision to use two different 22 phrases could signify a meaningful difference, we believe 23 that the insurer s election here is sensible in light of the 29 1 purpose behind disability benefits: supporting individuals 2 who are unable to work by reason of their impairment. 3 Receiving income from a part-time return to work undermines 4 the very basis for receiving disability benefits; the 5 benefits should never have been paid. 6 overpaid by virtue of the beneficiary receiving additional 7 payments from a third party simply render some portion of 8 the ERISA benefits unnecessary after the fact. 9 Aetna had the right to reduce Thurber s short-term Benefits that are Because 10 disability benefits at the time she received them, Aetna now 11 retains the right under its subrogation provision to compel 12 return of the overpayments. 13 Thus, the language in Aetna s plan puts a beneficiary 14 on notice that any overpayments she receives belong to Aetna 15 by virtue of an equitable lien by agreement.4 16 participant takes immediate possession of the overpayments 17 (and perhaps even keeps possession for a certain period of 18 time) has no bearing on Aetna s right to the property nor on 19 its ability to seek return of the overpayments. 4 That the We note in Although Thurber did not raise this point in connection with Aetna s counterclaim, even if she never received the SPD, Thurber admitted to possessing the Booklet containing the following language: [o]ther income benefits . . . will reduce the benefit actually payable. (Doc. #40, Ex. A, 5.) 30 1 closing that the distinction between claims based in law and 2 those sounding in equity is often fine. 3 inclination is to favor judicial efficiency by allowing 4 ERISA insurers to bring responsive claims in ongoing federal 5 actions, rather than forcing the parties to litigate two 6 actions, one in federal court and one in state court, 7 unnecessarily. 8 established an equitable lien by agreement, we hold that 9 Aetna presented a claim for appropriate equitable relief 10 under 29 U.S.C. § 1132(a)(3) over which the district court 11 had subject matter jurisdiction. 12 district court s dismissal of Aetna s counterclaim and 13 remand to the district court with instructions to enter 14 judgment in favor of Aetna. In close cases, our Here, because we find that Aetna s plan We therefore reverse the 15 16 17 18 Conclusion For the foregoing reasons, the order of the district court is hereby AFFIRMED IN PART and REVERSED IN PART. 19 31
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