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Smith v. Accenture United States Group Long-Term Disability Insurance Plan

September 13, 2006


The opinion of the court was delivered by: Hon. Blanche M. Manning


I. Background

Plaintiff Janet Smith has brought suit under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§1132(e)(1) and (f), to recover benefits allegedly due under a long-term disability policy underwritten and insured by Aetna for the benefit of employees of Accenture LLP. The defendants, Aetna Life Insurance Company and Accenture United States Group Long-Term Disability Plan ("Aetna"), then filed a first amended counterclaim ("FAC") seeking the return of certain benefits they had paid to Smith. According to Aetna, the Plan provides that any benefits paid under the Plan are to be reduced by other income benefits, including social security disability benefits obtained during the same time period. Count I of the FAC seeks a constructive trust under 29 U.S.C. §1132(a)(3), ERISA §502(a)(3), on the long-term disability benefits Aetna allegedly overpaid to the plaintiff. Count II alleges a federal common law claim for unjust enrichment. Smith seeks to dismiss both counts. For the reasons stated below, the motion is denied.

II. Analysis

A. Count I--Constructive Trust under §502(a)(3)

Smith moves to dismiss Count I on the ground that the constructive trust claim as alleged by Smith may not be brought under §502(a)(3). Specifically, Smith asserts that §502(a)(3) of ERISA does not provide a basis for recovery of legal (as opposed to equitable) claims. 29 U.S.C. § 1132(a)(3) ("a civil action . . . may be brought . . . by a fiduciary . . . to obtain other appropriate equitable relief.") (emphasis added). Relying on Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002), Smith contends that Aetna's claim for restitution pursuant to a constructive trust is a claim for legal and not equitable relief and thus is not viable under §502(a)(3).

In Great-West Life, the plaintiff, a plan, sought the return of funds from the defendant pursuant to a reimbursement provision in a health benefits policy. The Supreme Court considered whether the relief the plaintiff-plan was seeking was legal or equitable, and stated as follows:

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 (C.A.7 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, 108 S.Ct. 2722, 101 L.Ed.2d 749 (1988) (SCALIA, J., dissenting). And "[m]oney damages are, of course, the classic form of legal relief." Mertens [v. Hewitt Assoc., 508 U.S. 248 (1993)], supra, at 255, 113 S.Ct. 2063.

Great-West Life, 534 U.S. at 210. See also Leipzig v. AIG Life Ins. Co., 362 F.3d 406, 410 (7th Cir. 2004) (a "plan's demand to be reimbursed for benefits wrongly paid out is not [equitable]; it is instead a quest for money damages and thus is legal rather than equitable.").

However, the United States Supreme Court's opinion in Sereboff v. Mid Atlantic Med. Servs. Inc., 126 S.Ct. 1869 (2006), has altered the analysis as to these types of claims. This court fully addressed the implications of the Sereboff decision in its recent memorandum and order in Gutta v. Standard Select Trust Ins., No. 04 C 5988, slip op. on motion for summary judgment, at 39-48 (N.D. Ill. September 13, 2006). Accordingly, the court adopts and incorporates its discussion in Gutta into this memorandum and order. Briefly though, this court reads Sereboff as standing for the proposition that tracing of funds is unnecessary when a plan contract contains language creating an equitable lien by agreement. In such an instance, a plan may seek reimbursement pursuant to § 502(a)(3) when such an "other income" or "acts of third parties" provision (i.e., an equitable lien by agreement) exists.

Here, Aetna alleges in its counterclaim (allegations which the court accepts as true for purposes of this motion to dismiss), that "[t]he Plan provides that the Long Term Disability Benefit amount is to be reduced by other income benefits including, but not limited to, Social Security Benefits." FAC at ¶8. The FAC further alleges that "[t]he Plan also provides that Aetna may recover any overpayment of long-term disability benefits from Plaintiff by taking any necessary legal action." Id. at ¶10. Given these allegations, the court cannot conclude that Aetna has failed to allege a claim under §503(a)(3) pursuant to the Supreme Court's recent ruling in Sereboff. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957) ("a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief"). Therefore, the motion to dismiss this count of the FAC is denied.

B. Count II--Federal Common Law Claim for Unjust Enrichment

Aetna's second count of its counterclaim is one for unjust enrichment under the federal common law of ERISA*fn1 pursuant to 28 U.S.C. § 1331. While Smith frames her argument for dismissal using two different bases (i.e., first, for lack of subject matter jurisdiction under 12(b)(1) and second, for failure to state a claim under Rule 12(b)(6)), it appears Smith is actually making one argument -- that no federal common law cause of action for restitution exists.

This court recognizes that there is a circuit split on the issue of whether a federal common law cause of action for unjust enrichment exists under the circumstances in the instant case. For its part, the Seventh Circuit appears to have acknowledged that such a cause of action exists. In Harris Trust and Savings v. Provident Life and Accident, the plan filed a counterclaim seeking to recover overpayments by alleging counts under both ยง 502(a)(3) as well as a federal common law of unjust enrichment. Harris Trust, 57 F.3d 608, 615 (7th Cir. 1995) ("The district court appears to have proceeded under the second theory, holding that 'although ERISA did not provide a cause of action for an insurer to recover advances, reimbursement was necessary to prevent unjust enrichment.'") (citation omitted). In affirming the ...

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