RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 2 QualChoice, Inc. v. Rowland No. 02-3614 ELECTRONIC CITATION: 2004 FED App. 0134P (6th Cir.) File Name: 04a0134p.06 _________________ COUNSEL UNITED STATES COURT OF APPEALS ARGUED: Daran P. Kiefer, KREINER & PETERS CO., FOR THE SIXTH CIRCUIT Cleveland, Ohio, for Appellant. Donald Cybulski, LOWE, _________________ EKLUND, WAKEFIELD & MULVIHILL, Cleveland, Ohio, for Appellee. ON BRIEF: Daran P. Kiefer, Ted M. Traut, QUALCHOICE, INC., X KREINER & PETERS CO., Cleveland, Ohio, for Appellant. Plaintiff-Appellant, - Donald Cybulski, LOWE, EKLUND, WAKEFIELD & - MULVIHILL, Cleveland, Ohio, for Appellee. - No. 02-3614 v. - _________________ > , OPINION ROBIN ROWLAND, - _________________ Defendant-Appellee. - N KAREN NELSON MOORE, Circuit Judge. Plaintiff- Appeal from the United States District Court Appellant QualChoice, Inc. (“QualChoice”), a fiduciary and for the Northern District of Ohio at Cleveland. administrator of an employee benefits plan governed by the No. 01-02605—Kathleen McDonald O’Malley, District Employee Retirement Income Security Act of 1974 Judge. (“ERISA”), appeals from the district court’s dismissal, for lack of subject matter jurisdiction, of its action to obtain Argued: December 3, 2003 reimbursement under the terms of that plan from Defendant- Appellee Robin Rowland (“Rowland”), a plan participant. Decided and Filed: May 11, 2004 QualChoice raises three claims of error on appeal. First, QualChoice argues that the district court had jurisdiction Before: MARTIN and MOORE, Circuit Judges; pursuant to 28 U.S.C. § 1331, as federal common law McKEAGUE, District Judge.* provides federal question jurisdiction for ERISA reimbursement actions. Second, QualChoice argues that the district court had jurisdiction pursuant to 29 U.S.C. § 1132(e)(1), as QualChoice prayed for equitable relief within the meaning of 29 U.S.C. § 1132(a)(3). Third, QualChoice argues that the district court erred in granting Rowland’s motion to dismiss for lack of subject matter jurisdiction before allowing QualChoice sufficient time to gather evidence. * The Ho norable D avid W . McKeague, United States District Judge for the Western District of Michigan, sitting by designation.
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For the following reasons, we AFFIRM the district court’s reimbursement . . .[and] any other equitable relief.” Joint dismissal for lack of subject matter jurisdiction. Appendix (“J.A.”) at 11-12 (First Am. Compl. ¶¶ 10, 13, 14). The amended complaint claimed that federal jurisdiction was I. BACKGROUND proper under 29 U.S.C. § 1132(e) and 28 U.S.C. § 1331. On April 29, 2002, the district court entered an order explaining On November 16, 2001, QualChoice filed a complaint its obligation to ascertain whether federal question subject against Rowland alleging that QualChoice was a plan matter jurisdiction existed and its power to conduct an administrator and fiduciary for an employee benefit plan evidentiary investigation in furtherance of that goal, and governed by ERISA, and that Rowland was a participant in requesting that the parties supply the following “information that plan. QualChoice further alleged that it had advanced to the Court as soon as possible.” J.A. at 65-67 (District Ct. $80,763.58 to Rowland under the plan to cover medical Order, 4/29/02) (emphasis added). expenses arising from an accident, that Rowland had settled a claim with the third-party tortfeasor, and that under the • The time and nature of defendant Rowland’s accident, terms of the plan Rowland was obligated to reimburse as referred to in ¶ 8 of the amended complaint. QualChoice from the money she received in that settlement. • The details of how Rowland received a “fund in QualChoice prayed for specific performance of the settlement of her claims from the above accident,” id. reimbursement provision of the plan and restitution of the at ¶ 11 (e.g., whom she sued, what the settlement money it had advanced under the plan. On January 11, 2002, amount was, and when and to whom settlement Rowland filed a Rule 12(b)(1) motion to dismiss amounts were or will be paid). QualChoice’s complaint for lack of subject matter jurisdiction • Where the monies making up the “fund in settlement” because QualChoice sought only legal remedies for which are now. ERISA does not provide federal question subject matter jurisdiction. On January 21, 2001, QualChoice filed a motion J.A. at 66-67. (District Ct. Order). One day later, on for leave to file an amended complaint that requested April 30, 2002, Rowland filed an affidavit sworn by Attorney equitable relief in order to avoid dismissal for lack of federal Claudia R. Eklund (“Attorney Eklund”) in response to the question subject matter jurisdiction. district court’s order. On February 27, 2002, the district court held a case Attorney Eklund’s affidavit provided the following management conference during which it granted information. On the evening of November 23, 1994, when a QualChoice’s motion for leave to file an amended complaint, Wheeling & Lake Erie Railroad (“W & LE”) “train was but specified that Rowland’s motion to dismiss for lack of crossing an unguarded, unlit track,” Rowland drove her car subject matter jurisdiction would apply to the amended into one of the railcars. J.A. at 68 (Eklund Aff. ¶¶ 2, 3). complaint. On February 28, 2002, QualChoice filed an Rowland was severely injured in the accident and required amended complaint that made many of the same factual several hospitalizations, surgical procedures, and eventually allegations as its original complaint but newly alleged that it a below-the-knee amputation. Rowland incurred medical had advanced $101,440.54 to Rowland and prayed for bills totaling $203,000 as a result of the accident. equitable restitution, imposition of a constructive trust or equitable lien, an order declaring that QualChoice “has a right Attorney Eklund represented Robin and Robert Rowland in to the equitable remedy of subrogation to obtain their lawsuit against W & LE for personal injuries and No. 02-3614 QualChoice, Inc. v. Rowland 5 6 QualChoice, Inc. v. Rowland No. 02-3614
damages arising out of the collision. W & LE “was an affidavit, the district court entered an order granting uninsured entity and verified by counsel to be an entity Rowland’s motion to dismiss for lack of subject matter functioning on the verge of bankruptcy.” J.A. at 69 (Aff. ¶ 5). jurisdiction. QualChoice timely appealed the district court’s “[A] settlement was proposed under which [W & LE] agreed order dismissing this action for lack of subject matter to pay a total of $147,668.00 over the course of forty-four jurisdiction. (44) months.” J.A. at 69 (Aff. ¶ 6). W & LE agreed to pay an additional $37,500 over the same forty-four months, II. ANALYSIS contingent upon W & LE “obtaining certain concessions from the Surface Transportation Board at a hearing to be held in A. Standard of Review June, 1998.” J.A. at 69 (Aff. ¶ 7). According to Attorney Eklund, QualChoice agreed to waive any subrogated interest We review de novo “a district court’s decision to grant a it may have had in the proposed settlement agreement. On motion to dismiss for lack of subject matter jurisdiction.” December 3, 1997, W & LE and Rowland consummated the Nichols v. Muskingum College, 318 F.3d 674, 677 (6th Cir. settlement agreement. The Surface Transportation Board, 2003). Although Rowland makes both facial and factual however, did not grant the concessions upon which the challenges to QualChoice’s assertion of federal question contingent payment of $37,500 was based; therefore, that subject matter jurisdiction, we only reach the facial challenge, amount did not become payable. and thus we must view the facts in the light most favorable to QualChoice, the non-moving party. See Ohio Nat’l Life Ins. On December 3, 1997, upon signing the agreement, Co. v. United States, 922 F.2d 320, 325-26 (6th Cir. 1990). W & LE paid a lump sum of $25,000 to Rowland. On May 1, 1998, W & LE paid an additional lump sum of $8,000 to B. 28 U.S.C. § 1331 Rowland. “[C]ommencing with June 1, 1998, monthly payments of $2,322.00 for the next 44 months were paid by QualChoice argues that the district court had federal [W & LE], the last of which was received on January 1, question subject matter jurisdiction pursuant to 28 U.S.C. 2002.” J.A. at 69-70 (Aff. ¶ 12). “From the initial payments, § 1331 because QualChoice sought reimbursement under the the sum of $13,168 was” used to pay litigation expenses. J.A. terms of an ERISA plan, which we have held may be obtained at 69 (Aff. ¶ 11). From each monthly check, an amount was under federal common law. To support this argument, deducted to pay the $27,308 attorney fee balance. “Robin and QualChoice relies upon Walbro Corp. v. Amerisure Cos., 133 Robert Rowland received a net recovery of $107,192.” J.A. F.3d 961, 965-66 (6th Cir. 1998), in which we held that a plan at 69 (Aff. ¶ 11). fiduciary’s action for reimbursement is cognizable under federal common law doctrines building on the enforcement According to Attorney Eklund, “at this time [April 30, provisions of ERISA, and thus falls within the district court’s 2002], no ‘settlement fund’ exists, as the money has been federal question jurisdiction. disbursed over the last 44 months on a monthly basis.” J.A. at 70 (Aff. ¶ 13). Subsequent to our decision in Walbro, however, the Supreme Court decided Great-West Life & Annuity Insurance On April 30, 2002, which was the day after the district Co. v. Knudson, 534 U.S. 204, 209 (2002), in which the Court court requested that the parties supply additional information reemphasized its view “that ERISA is a ‘comprehensive and and the same day that Rowland filed Attorney Eklund’s reticulated statute,’ the product of a decade of congressional No. 02-3614 QualChoice, Inc. v. Rowland 7 8 QualChoice, Inc. v. Rowland No. 02-3614
study of the Nation’s private employee benefit system.” reimbursement,” or any other equitable relief that the district (citations omitted). The Court further stated that, because of court deemed proper. J.A. at 12. QualChoice argues that the the comprehensive nature of the statute, it has “been settlement money that Rowland recovered from W & LE especially ‘reluctant to tamper with [the] enforcement rightfully belongs to QualChoice; therefore, equity requires scheme’ embodied in the statute by extending remedies not imposition of a constructive trust or an equitable lien to specifically authorized by its text.” Id. (quoting prevent unjust enrichment. QualChoice acknowledges that in Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, Knudson, the Supreme Court held that if a plan fiduciary 147 (1985)). Obeying the Court’s direction in Knudson, we seeks restitution from a plan beneficiary, who recovered from explicitly held in Community Health Plan of Ohio v. Mosser, another, and the plan beneficiary does not possess the 347 F.3d 619, 624 (6th Cir. 2003), that federal question recovered funds, then the action is merely a legal action under jurisdiction does not exist under 28 U.S.C. § 1331 in an the terms of the contract. QualChoice argues, however, that action by a plan fiduciary seeking civil enforcement of the the instant action is distinguishable from Knudson because the terms of an ERISA plan that does not implicate any ERISA evidence demonstrates that Rowland possesses the recovered provision. In Mosser, we held that 29 U.S.C. § 1132(e)(1) did funds.1 QualChoice further argues that the Supreme Court not provide federal question subject matter jurisdiction over expressly limited its holding in Knudson to situations where the plan fiduciary’s action because the relief sought was not the plan participant or beneficiary did not possess the equitable within the meaning of 29 U.S.C. § 1132(a)(3). Id. recovered funds, thereby indicating that the result would have at 623-24. We further held that no other ERISA provision been different if the plan participant or beneficiary did permitted the action; therefore, “federal question jurisdiction possess the recovered funds. The district court rejected this does not exist under 28 U.S.C. § 1331 [because] ERISA does argument, noting that regardless of Rowland’s possession of not authorize the suit.” Id. at 624. Thus in Mosser, we an identifiable fund, QualChoice is still seeking damages for abandoned our position in Walbro and held explicitly that breach of contract, and concluding in any case that the there is no federal question subject matter jurisdiction in an beneficiary in Knudson did actually possess the fund, as the action by a plan fiduciary seeking civil enforcement of the beneficiary’s settlement recovery there was placed in a terms of an ERISA plan, unless ERISA specifically Special Needs Trust and a client trust account. authorizes the suit. Therefore, QualChoice’s action to enforce the reimbursement provision is not cognizable under federal ERISA contains a section specifying the proper procedures common law, and QualChoice cannot rely upon federal for civil enforcement of the statute. Section 1132(e)(1) common law to supply jurisdiction over its claim pursuant to provides, “Except for actions under subsection (a)(1)(B) of 28 U.S.C. § 1331. this section, the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter C. 29 U.S.C. § 1132 brought by the Secretary or by a participant, beneficiary, fiduciary, or any person referred to in section 1021(f)(1) of QualChoice alternatively argues that the district court had this title.” Thus, except for actions by a participant or subject matter jurisdiction pursuant to 29 U.S.C. § 1132(e)(1) because QualChoice sought equitable remedies within the meaning of 29 U.S.C. § 1132(a)(3). In its amended 1 complaint, QualChoice prayed for restitution, imposition of QualChoice argues that Attorney Eklund’s affidavit confirms that Rowland “took possession of [a] settlement ‘fund’ in the amount of a constructive trust or equitable lien, “subrogation to obtain $107,192.00.” Appellant’s Br. at 24. No. 02-3614 QualChoice, Inc. v. Rowland 9 10 QualChoice, Inc. v. Rowland No. 02-3614
beneficiary to recover benefits under the terms of a plan, and tortfeasor. Id. The plan fiduciary brought an action against another exception not relevant here, § 1132(e)(1) supplies the plan beneficiary seeking reimbursement under the terms exclusive federal subject matter jurisdiction for the civil of the plan and prayed for various equitable remedies. Id. at enforcement procedures authorized by § 1132. 208. The Supreme Court held that the plan fiduciary was not entitled to an injunction against “respondents’ failure to Title 29 U.S.C. § 1132(a)(3) is the civil enforcement reimburse the Plan” or specific performance of the “past due mechanism available to plan fiduciaries. Section 1132(a) monetary obligation” because such remedies are not typically provides: available in equity. Id. at 210-11. In rejecting the plan fiduciary’s claim for restitution, the Supreme Court A civil action may be brought — distinguished between legal and equitable restitution. Id. at 212-13. The Supreme Court stated: ... In cases in which the plaintiff “could not assert title or (3) by a participant, beneficiary, or fiduciary (A) to right to possession of particular property but in which enjoin any act or practice which violates any provision of nevertheless he might be able to show just grounds for this subchapter or the terms of the plan, or (B) to obtain recovering money to pay for some benefit the defendant other appropriate equitable relief (i) to redress such had received from him,” the plaintiff had a right to violations or (ii) to enforce any provisions of this restitution at law through an action derived from the subchapter or the terms of the plan. common-law writ of assumpsit. In such cases, the plaintiff’s claim was considered legal because he sought The Supreme Court has emphasized that § 1132(a)(3) does “to obtain a judgment imposing a merely personal not authorize all relief that a court of equity might award; liability upon the defendant to pay a sum of money.” rather it only authorizes those remedies traditionally awarded Such claims were viewed essentially as actions at law for by courts of equity. The Court has also made clear that breach of contract (whether the contract was actual or regardless of how plaintiffs label their claims to relief, courts implied). must determine whether the relief sought is truly equitable. See Knudson, 534 U.S. at 209-10; Mertens v. Hewitt Assocs., In contrast, a plaintiff could seek restitution in equity, 508 U.S. 248, 256-57 (1993). ordinarily in the form of a constructive trust or an equitable lien, where money or property identified as The district court predicated its dismissal for lack of subject belonging in good conscience to the plaintiff could matter jurisdiction upon its conclusion that the instant case is clearly be traced to particular funds or property in the indistinguishable from Knudson. In Knudson, the Supreme defendant’s possession. A court of equity could then Court held that a plan fiduciary’s action for specific order a defendant to transfer title (in the case of the performance and restitution under the plan’s reimbursement constructive trust) or to give a security interest (in the provision was not authorized by § 1132(a)(3). Knudson, 534 case of the equitable lien) to a plaintiff who was, in the U.S. at 210-11. After the plan beneficiary in Knudson was eyes of equity, the true owner. But where “the property injured in a car accident, the plan fiduciary advanced money [sought to be recovered] or its proceeds have been to cover the cost of medical expenses. Id. at 207. The plan dissipated so that no product remains, [the plaintiff’s] beneficiary then received money from a settlement with the claim is only that of a general creditor,” and the plaintiff No. 02-3614 QualChoice, Inc. v. Rowland 11 12 QualChoice, Inc. v. Rowland No. 02-3614
“cannot enforce a constructive trust of or an equitable participant or beneficiary recovered money from another lien upon the property of the [defendant].” entity, and possesses that recovery in an identifiable fund. Id. at 213-14 (citations omitted) (alterations in original). In Of the circuits that have been faced with this same issue, holding that the plan fiduciary in Knudson was not entitled to two have concluded that a reimbursement action by an ERISA equitable restitution, the majority wrote that “petitioners seek, fiduciary is equitable if the participant or beneficiary has in essence, to impose personal liability on respondents for a recovered from another entity and possesses that recovery in contractual obligation to pay money — relief that was not an identifiable fund, but legal if the participant or beneficiary typically available in equity. ‘A claim for money due and does not possess that recovery in an identifiable fund. See, owing under a contract is quintessentially an action at law.’” e.g., Bombardier Aerospace Employee Welfare Benefits Plan Id. at 210 (quotation omitted). Yet, the majority opinion also v. Ferrer, Poirot and Wansbrough, 354 F.3d 348 (5th Cir. emphasized that the plan fiduciary in Knudson was not 2003); Admin. Comm. of the Wal-Mart Stores, Inc. Assocs.’ entitled to equitable restitution because Health and Welfare Plan v. Varco, 338 F.3d 680 (7th Cir. 2003), petition for cert. filed, 72 U.S.L.W. 3452 (Dec. 23, the proceeds from the settlement of respondents’ tort 2003) (No. 03-959). action — are not in respondents’ possession [; rather] . . . the disbursements from the settlement were paid by two Several of these circuit cases focus largely upon the checks, one made payable to the Special Needs Trust and language throughout Knudson emphasizing that the plan the other to respondents’ attorney. . . . The basis for beneficiary did not possess the settlement money, and the petitioners’ claim is not that respondents hold particular admonishment near the end of Knudson stating that the funds that, in good conscience, belong to petitioners, but majority was not foreclosing the possibility that a plan that petitioners are contractually entitled to some funds fiduciary might be able to bring an equitable action against for benefits that they conferred. the Special Needs Trust or the client trust account. See, e.g., Varco, 338 F.3d at 687-88 (concluding that the action sought Id. at 214. equitable relief because the plan participant possessed an identifiable fund); Primax Recoveries, Inc. v. Sevilla, 324 Subsequent to Knudson, we held that a claim seeking F.3d 544, 547-48 (7th Cir. 2003) (concluding that the action restitution, or imposition of a constructive trust or equitable sought legal relief because the plan participant possessed only lien, is a legal claim if the plan participant or beneficiary does an uncashed check from an insurer and the money remained not possess an identifiable fund, regardless of whether the with the insurer; therefore, the participant did not possess an plan participant or beneficiary possesses money recovered identifiable fund); Bauhaus USA, Inc. v. Copeland, 292 F.3d from another entity. Mosser, 347 F.3d at 624. QualChoice 439, 445 (5th Cir. 2002) (concluding that the action sought attempts to distinguish this case from both Knudson and legal relief because the settlement money had been paid into Mosser by claiming that it has alleged that Rowland possesses the registry of the Mississippi Chancery Court; therefore, the an identifiable fund, and further that Attorney Eklund’s beneficiary did not possess an identifiable fund). affidavit proves that Rowland possesses the settlement Additionally, in a malpractice suit by ERISA trustees against money. Therefore, we must decide whether district courts an actuary hired to evaluate a plan, the Second Circuit took a have jurisdiction over claims seeking restitution, or similar position regarding the distinction between equitable imposition of a constructive trust or an equitable lien, if the and legal relief. Gerosa v. Savasta & Co., 329 F.3d 317, 321- No. 02-3614 QualChoice, Inc. v. Rowland 13 14 QualChoice, Inc. v. Rowland No. 02-3614
22 (2d Cir. 2003), cert. denied, 124 S. Ct. 435 (Oct. 20, Fifth Circuit, the plan beneficiary in Knudson did not have 2003), and cert. denied, 124 S. Ct. 929 (Dec. 8, 2003).2 The actual or constructive possession over the funds because the Gerosa court concluded that the trustees sought legal relief settlement money “had been placed in a Special Needs Trust, because they sued for damages for the actuary’s misconduct, as mandated by California law,” but the plan participant in rather than to recover a specific fund from the actuary. Id. Bombardier did have possession because the funds were We find the analysis in these opinions to be unavailing on this “held in a bank account in the name of the participant’s issue because the majority in Knudson left open the question attorneys,” which gave him constructive control, as the of whether the plan participant’s or beneficiary’s possession attorneys were his agents. Id. Finding that the plan fiduciary of an identifiable fund would have allowed the fiduciary to in Bombardier met all of the requirements of the three-part seek equitable relief, and because this analysis ignores the test, the Fifth Circuit concluded that the fiduciary sought to Knudson majority’s repeated emphasis that a breach of recoup the amount it had paid to the participant in benefits, contract claim seeking money damages is a legal action. rather than to impose personal liability on the participant, and therefore, that the fiduciary sought equitable relief. Id. at 358. Recently, however, the Fifth Circuit issued an opinion providing a more thorough analysis supporting its view of the The Ninth Circuit has taken the opposite view and held that distinction between legal and equitable relief. Bombardier, an action by an ERISA fiduciary to enforce a plan 354 F.3d 348. Extrapolating from Knudson, Bombardier reimbursement provision is legal, regardless of whether the creates the following three-part test for determining whether plan participant possesses an identifiable fund. Westaff (USA) an action by a plan fiduciary seeks equitable relief: “Does the Inc. v. Arce, 298 F.3d 1164, 1167 (9th Cir. 2002), cert. Plan seek to recover funds (1) that are specifically denied, 537 U.S. 1111 (2003).3 In Westaff, the plan fiduciary identifiable, (2) that belong in good conscience to the Plan, brought an action “seeking a declaratory judgment that the and (3) that are within the possession and control of the funds in escrow belonged to it and seeking specific defendant beneficiary?” Id. at 356. The first prong of this performance of [the participant’s] obligation to reimburse test asks whether the plan fiduciary “sought to recover funds [it].” Id. at 1166. Noting that the Supreme Court has [that they had paid out previously as benefits] from a instructed courts to look at “the ‘substance of the remedy specifically identifiable corpus of money.” Id. The second sought . . . rather than the label placed on that remedy,’” the prong of the test asks whether “the plan’s terms contained an Ninth Circuit concluded that the plan fiduciary in Westaff express, unambiguous reimbursement provision which made the disputed funds ‘belong in good conscience to the plan.’” 3 Id. The third prong of the test asks whether the plan Recently in Ho nolu lu Joint Apprenticeship and Training Committee participant or beneficiary had actual or constructive of United Ass’n Local Union No. 675 v. Foster, 332 F.3d 123 4, 12 37 (9th possession or control over the funds. Id. According to the Cir. 2003), the Ninth Circu it characterized Knudson as holding that the distinction betwe en legal and equitab le restitution turns upon the existence of an identifiable fund. Foster, however, involved a very different scenario than that involved in Westaff (USA) Inc. v. Arce, 298 F.3d 1164 2 (9th Cir. 2002 ), cert. denied, 537 U.S. 111 1 (2003 ), and in this case, in No tably, in both Prima x Reco veries and Bauhaus, the plan that the ER ISA adm inistrator sough t to recoup money that it had spent participant or beneficiary never possessed the settlement money, much training the defendant apprentice after the appre ntice broke the parties’ less maintained it in an identifiable fund. See Primax Recoveries, Inc. v. contract by working for a non-union employer without repaying the cost Sevilla, 324 F .3d 5 44, 5 48 (7th Cir. 200 3); Bauhaus US A, Inc. v. of training. Id. at 123 6. W e do not view Foster as an indication that the Copeland, 292 F.3d 43 9, 445 (5th Cir. 2002). Ninth Circuit has retreated from its holding in Westaff. No. 02-3614 QualChoice, Inc. v. Rowland 15 16 QualChoice, Inc. v. Rowland No. 02-3614
sought “to enforce a contractual obligation for the payment of made by the plan. Id. at 622. When dismissing the plan money, a classic action at law and not an equitable claim.” fiduciary’s action, we noted that the plan fiduciary Id. In Westaff, the Ninth Circuit expressly took the position that the participant’s possession of an identifiable fund did did not, in its complaint, allege that it had given certain not alter the nature of the action. Id. funds to [the participant], trace those funds to the settlement funds from [the tortfeasor], allege that [the The Third and Fourth Circuits have also applied Knudson participant] was unjustly enriched by retaining the to determine whether the relief the plaintiff sought was legal settlement funds, and seek the return of the settlement or equitable, but have done so only in unpublished opinions funds in [the participant’s possession]. Rather, [the involving obscure factual scenarios. See Sackman v. Teaneck fiduciary] sought “restitution from [the participant] for Nursing Ctr., No. 02-1083, 2003 WL 23173649 (3d Cir. all covered services.” Dec. 4, 2003); Local 109 Ret. Fund v. First Union Nat’l Bank, No. 02-1216, 2003 WL 152851 (4th Cir. Jan 23, 2003). Id. at 624. Although we did not emphasize it our opinion, While these cases do not answer the exact question we face, there was a significant factual difference between Mosser and they do reflect an adherence to Knudson’s admonition to look Knudson. In Knudson, the plan beneficiary never possessed beyond the label the plaintiff puts on the relief sought. the money she recovered in her settlement with the tortfeasor, as it had been paid directly into a Special Needs Trust and a Since Knudson was decided, we have dismissed for lack of client trust account. Knudson, 534 U.S. at 234. In Mosser, subject matter jurisdiction several actions brought by plan however, the plan participant apparently possessed the money fiduciaries seeking reimbursement. See, e.g., Mosser, 347 she recovered from the city. Mosser, 347 F.3d at 622-23. F.3d 619; Caffey v. Unum Life Ins. Co., 302 F.3d 576 (6th Cir. 2002); Cmty. Ins. Co. v. Morgan, Nos. 99-6669, 00-5002, In Saiter, a case very similar to Mosser, the plan paid 2002 WL 31870325 (6th Cir. Dec. 20, 2002); Unicare Life & $164,000 in medical expenses after the participant was Health Ins. Co. v. Saiter, No. 00-3856, 2002 WL 1301574 injured in a car accident by a negligent driver. Saiter, 2002 (June 10, 2002); Sheet Metal Local # 24 v. Newman, No. 01- WL 1301574, at *1. The participant then recovered $100,000 3085, 2002 WL 1033739 (May 21, 2002). In each of these from the tortfeasor. The plan fiduciary sued the participant, cases, we simply held that the plan fiduciary sought legal the tortfeasor, and the tortfeasor’s insurance carrier, seeking relief for breach of contract. None of them, however, reimbursement from the participant and asserting subrogation forecloses jurisdiction over the ostensibly equitable relief rights against the tortfeasor and the tortfeasor’s insurance QualChoice seeks. carrier. When dismissing the fiduciary’s action, we stated that such actions “are not authorized claims under ERISA In Mosser, the plan had paid for the participant’s medical because they seek to enforce plan provisions through legal expenses arising out of an accident with a negligent police remedies.” Id. at *2. officer. Mosser, 347 F.3d at 621. After the participant recovered from the city through a settlement, he did not In Morgan, a factually complex case, the plan paid reimburse the plan for the money it had paid out pursuant to $116,000 in medical expenses after the participant was the terms of the plan. The plan fiduciary then sued the injured in a car accident by a negligent driver. Morgan, 2002 participant, bringing a breach of contract claim “requesting WL 31870325, at *1. The participant had a $50,000 specific performance and restitution” for medical payments underinsured motorist policy with Liberty Mutual and the No. 02-3614 QualChoice, Inc. v. Rowland 17 18 QualChoice, Inc. v. Rowland No. 02-3614
tortfeasor had a $100,000 liability policy with State Farm. provide compensation for that loss.” Id. at 555. Under this Because the participant incurred more than $100,000 in analysis, QualChoice’s action could be characterized medical expenses, Liberty Mutual paid the participant appropriately as one seeking damages for Rowland’s breach $50,000 on his underinsured motorist claim and in order to of contract, in that QualChoice seeks to recoup the money it protect its subrogation rights, advanced him $100,000 on the lost because Rowland breached the plan’s reimbursement State Farm policy. Id. at *2. The participant then entered provision. QualChoice’s action could also be characterized into a settlement agreement with State Farm, Liberty, and the appropriately as one seeking restitution for Rowland’s breach tortfeasor in which the participant was to recover $7,500 in of contract, in that QualChoice seeks to disgorge the unjust cash and a $30,000 note with 6% secured interest. Before the enrichment that Rowland received via her double recovery. participant received any settlement money, the plan fiduciary sued the participant, seeking to enforce the plan’s As Knudson points out, however, determining that reimbursement provision. When dismissing the fiduciary’s QualChoice can bring an action for restitution is only half of action, we broadly stated, “The claim of [the plan fiduciary] the analysis. To fall within the district court’s original federal against . . . the plan participant, for reimbursement under the question jurisdiction under § 1132(e)(1), QualChoice’s action terms of the plan is squarely precluded by Knudson.” Id. We must seek equitable rather than legal restitution. Knudson, did not specify whether our holding was limited to situations 534 U.S. at 214. According to Professor Dobbs, “Restitution such as that present in Morgan, where the settlement had not claims for money are usually claims ‘at law.’ . . . On the other yet been paid to the participant. Id. hand, restitution claims that may require coercive intervention or some judicial action that is historically ‘equitable[]’ may After thorough review, we believe that no clear or binding be regarded as equitable claims.” Dobbs at 556 (emphasis answer emerges to the question before us: whether a claim added). “The most notable equitable procedures to enforce maintained by a fiduciary against a participant or beneficiary, restitution are the constructive trust, the equitable lien, and who has recovered money from another and possesses that subrogation. These procedures give the plaintiff restitution recovery in an identifiable fund, is an equitable claim under by giving the plaintiff title to, or a security interest in 29 U.S.C. § 1132(a)(3). We therefore must determine particular property.” Id. at 565. Therefore, the procedural ourselves how to answer that question, left open by Knudson. posture of this case gives rise to a conundrum — QualChoice To do so, we look to Dobbs on Remedies, relied upon by the seeks restitution of money, which is typically a claim at law; Court in Knudson. Professor Dobbs defines restitution as “a however, QualChoice also seeks to obtain restitution by return or restoration of what the defendant has gained in a asking the court to impose a constructive trust or an equitable transaction.” 1 Dan B. Dobbs, Law of Remedies 551 (2d lien upon the identifiable fund of settlement recovery that ed.1993) [hereinafter Dobbs]. The purpose of restitution “is Rowland allegedly possesses, which is typically an equitable to prevent the defendant’s unjust enrichment by recapturing claim. The Fifth and Seventh Circuits hold that Knudson the gains the defendant secured in a transaction.” Id. at 552. indicates that district courts have federal question jurisdiction Both restitution and damages may be appropriate remedies for to impose a constructive trust or an equitable lien in cases breach of contract; however, they each measure the remedy such as this — where the plan participant or beneficiary has differently. Id. “Restitution measures the remedy by the recovered from another entity and possesses that recovery in defendant’s gain and seeks to force disgorgement of that gain. an identifiable fund. Bombardier, 354 F.3d 348; Varco, 338 It differs in its goal or principle from damages, which F.3d 680. measures the remedy by the plaintiff’s loss and seeks to No. 02-3614 QualChoice, Inc. v. Rowland 19 20 QualChoice, Inc. v. Rowland No. 02-3614
We conclude, however, that the source of the claim asserted QualChoice paid for Rowland’s medical expenses, but it did by QualChoice is a contract to pay money, and that the not give QualChoice a property right in any particular fund.4 procedural mechanisms of constructive trust and equitable lien are not proper mechanisms for enforcing this right, as This court has explicitly held that subrogation is not such relief would not have traditionally been awarded by a available in a situation such as this, when the plan participant court of equity in a breach of contract action. Historically, or beneficiary has already recovered, because subrogation legal restitution was limited by the concept of formal title. allows a plan fiduciary only to step into the shoes of a plan Dobbs at 586. Equitable restitution developed to fill the void participant or beneficiary and assert the rights of the left by that limitation and allowed plaintiffs, who lacked participant or beneficiary against another; subrogation does formal title, to bring actions for restitution. The problem of not allow a plan fiduciary to obtain a judgment of personal formal title was irrelevant in cases where the plaintiff sought liability against a plan beneficiary or particpant. Mosser, 347 intangibles, such as money; therefore, all plaintiffs could F.3d at 623-24; see also Dobbs at 588, 604. Therefore, bring such actions in the courts of law. Historically, when a QualChoice may have been able to use subrogation to step plaintiff sought restitution of money for breach of contract, he into the shoes of Rowland during the settlement negotiations brought an action for assumpsit, which is a legal remedy. Id. with W & LE, but QualChoice may not now use the doctrine at 571, 578-79 (“Assumpsit was the common law form of of subrogation to impose personal liability on Rowland. action by which contract claims were redressed.”). We are aware of significant scholarly criticism of Knudson Contrary to Rowland’s assertions, a plaintiff is not for defining the scope of relief available under ERISA by necessarily required to prove wrongdoing by the defendant in looking to historical practice of the courts of England. See, order to obtain relief through imposition of a constructive e.g., John H. Langbein, What ERISA Means by “Equitable”: trust or an equitable lien. Id. at 597-98. “The constructive The Supreme Court’s Trail of Error in Russell, Mertens, and trust is based on property, not wrongs.” Id. at 597 (emphasis Great-West, 103 Colum. L. Rev. 1317, 1318-20 (2003) added). “In the constructive trust case the defendant has legal (arguing that in drafting ERISA, Congress intended to rights in something that in good conscience belongs to the incorporate substantive trust law, including “make-whole plaintiff. . . . The defendant is thus made to transfer title to the relief,” such as money damages). The Supreme Court, plaintiff who is, in the eyes of equity, the true ‘owner.’” Id. however, has twice defined the scope of relief available under at 587. “The equitable lien uses similar ideas to give the § 1132(a)(3) of ERISA in terms of the relief “typically plaintiff a security interest in the property or to give the available in equity.” Mertens, 508 U.S. at 256-57 (listing plaintiff only part of the property rather than all of it.” Id. at “injunction, mandamus, and restitution” as examples of 588. It is true that an equitable lien or a constructive trust equitable relief); see Knudson, 534 U.S. at 213-16 (limiting may be imposed on a particular bank account. See id. at 591. restitution available under § 1132(a)(3) to equitable The fact that a plan participant or beneficiary places the restitution). Applying the Supreme Court’s cases, we hold money he recovered from another in a bank account does not, however, change the nature of the action. The plan may have obligated Rowland to reimburse QualChoice in the event that 4 The plan states, “If you re ceive paym ent, however designated, from a third party, you are obligated to reimburse QualChoice Health Plan, less a pro rata share of the reasonable attorneys’ fees and costs you sustained in obtaining such recovery.” J.A. at 28 (emphasis added). No. 02-3614 QualChoice, Inc. v. Rowland 21
that a plan fiduciary’s action to enforce a plan-reimbursement provision is a legal action, regardless of whether the plan participant or beneficiary recovered from another entity and possesses that recovery in an identifiable fund. D. Additional Discovery Because we hold that QualChoice’s action is a legal one seeking to recover money for Rowland’s breach of the plan’s reimbursement provision, regardless of whether Rowland possess an identifiable fund, we need not reach QualChoice’s argument that the district court abused its discretion by dismissing this action without allowing sufficient discovery and within twenty-four hours of requesting that the parties submit additional information. III. CONCLUSION Based on the foregoing, we AFFIRM the district court’s order dismissing this action for lack of subject matter jurisdiction.