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Dakotas and Western Minnesota Electrical Industry Health and Welfare Fund v. First Agency, Inc.

United States Court of Appeals, Eighth Circuit

August 3, 2017

Dakotas and Western Minnesota Electrical Industry Health and Welfare Fund, by Randy Stainbrook and Edward Christian as Trustees Plaintiff- Appellee/Cross Appellant
v.
First Agency, Inc.; Guarantee Trust Life Insurance Company Defendants - Appellants/Cross Appellees

          Submitted: February 8, 2017

         Appeals from United States District Court for the District of North Dakota - Fargo

          Before LOKEN, COLLOTON, and KELLY, Circuit Judges.

          LOKEN, Circuit Judge.

         Jacob Plassmeyer incurred medical expenses after injuring his knee during a collegiate baseball practice in February 2014. Jacob's college provided its student athletes insurance covering accidental injuries under a blanket policy issued by First Agency, Inc., as appointee of Guarantee Trust Life Insurance Company (collectively referred to as "FA"). Jacob's father is also an insured participant in the Dakotas and Western Minnesota Electrical Industry Health and Welfare Fund ("Dakotas"), an employee welfare benefit plan. Jacob is covered under this ERISA plan as a dependent of his father. Jacob timely filed claims with both insurers. Though it is undisputed his baseball injuries are covered by both policies, both insurers refused to pay. FA claimed that Dakotas must pay first because FA's policy is "excess only." Dakotas claimed that, under the plan's coordination of benefits ("COB") provision, FA's coverage is primary. Jacob's claim remains unpaid.

         The trustees of Dakotas brought this declaratory judgment action against FA under § 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3), seeking an order enforcing the COB provisions in the Dakotas plan by declaring that FA's policy provides primary coverage of Jacob's claim for medical expenses already incurred. The district court[1]denied FA's motion to dismiss and granted Dakotas' motion for summary judgment, concluding that (i) § 502(a)(3) "allows ERISA plan trustees to bring a declaratory judgment action to determine the extent of the plan's liability, " and (ii) under the plan's COB provision FA has primary responsibility for Jacob's covered medical expenses. Dakotas & Western Minn. Elect. Indus. Health & Welfare Fund v. First Agency, Inc., 2016 WL 1736619, at *4 (D.N.D. Mar. 11, 2016). FA appeals those rulings. Reviewing de novo, we affirm. In a separate Order, the district court granted Dakotas a reduced award of attorneys' fees and non-taxable costs. FA appeals the award; Dakotas cross appeals the reduced award. Reviewing for abuse of discretion, we reverse the award of attorneys' fees and non-taxable costs.

         I. The ERISA Remedy Issue.

         ERISA is a "comprehensive legislative scheme" that includes "an integrated system of procedures for enforcement" that are "essential to accomplish Congress' purpose of creating a comprehensive statute for the regulation of employee benefit plans." Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004) (quotation omitted). "The six carefully integrated civil enforcement provisions found in § 502(a) of [ERISA] provide strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly." Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146 (1985) (emphasis in original). "[A]ny state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy . . . is therefore preempted. . . . [C]auses of action within the scope of the civil enforcement provisions of § 502(a) are removable to federal court." Davila, 542 U.S. at 209 (quotation omitted). This appeal concerns one provision, § 502(a)(3):

A civil action may be brought --
(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.

         Dakotas' trustees, who are ERISA fiduciaries, are authorized to bring an action under § 502(a)(3) to obtain "other appropriate equitable relief . . . to enforce . . . the terms of the plan."[2] The action may be brought against FA, a private insurer, because § 502(a)(3) does not limit "the universe of possible defendants." Lyons v. Philip Morris Inc., 225 F.3d 909, 913 (8th Cir. 2000) (quotation omitted). The action presents a ripe controversy to determine which insurer has primary coverage for Jacob's claims for reimbursement of medical expenses he has already incurred. See Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941).[3] However, FA argues on appeal, as it did in the district court, that Dakotas did not assert a claim seeking "appropriate equitable relief, " the only relief available under § 502(a)(3)(B).

         The comprehensive nature of § 502(a)'s remedies has made the Supreme Court "reluctant to tamper with an enforcement scheme crafted with such evident care." Russell, 473 U.S. at 147; see Admin. Comm. of Wal-Mart Stores, Inc. Assocs.' Health & Welfare Plan v. Shank, 500 F.3d 834, 837 (8th Cir. 2007). Thus, in Mertens v. Hewitt Assocs., 508 U.S. 248, 256 (1993), the Court held that "equitable relief" in § 502(a)(3) is limited to "those categories of relief that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages)." In Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204, 210 (2002), an ERISA plan gave the plan a right to recover benefits paid if the beneficiary recovered from a third party. The plan brought a § 502(a)(3) action to enforce this provision by ordering a beneficiary to pay settlement proceeds from her general assets. The Court denied relief, rejecting the contention that this was a claim for equitable restitution within the purview of § 502(a)(3) because "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, ' . . . since they seek no more than compensation for loss resulting from the defendant's breach of legal duty." Id. (quotation omitted).

         By contrast, in Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356, 362-63 (2006), the Court held that a § 502(a)(3) claim to recover restitution from a specifically identifiable fund was a claim for "appropriate equitable relief" because recovery of a specific asset is appropriately characterized as equitable restitution. Most recently, in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, 136 S.Ct. 651, 658 (2016), where the plan allowed a settlement fund to be dissipated before suing to recover benefits it had paid, the Court followed Knudson and denied § 502(a)(3) relief because "a personal claim against the defendant's general assets . . . is a legal remedy, not an equitable one." The Court explained that, "[t]o determine how to characterize the basis of a plaintiff's claim and the nature of the remedies sought, we turn to standard treatises on equity, which establish the basic contours of what equitable relief was typically available in premerger equity courts." Id. at 657 (quotation omitted).

         A number of recent circuit court decisions involved cases in which injured student athletes had overlapping coverages from an ERISA plan and a private insurer. In each case, the ERISA plan paid the insured's claim, then sued the non-ERISA insurer to recover plan benefits paid by enforcing the plan's COB provisions. Though the plans asserted § 502(a)(3) equitable-sounding claims for restitution, an equitable lien, a constructive trust, or a declaratory judgment seeking reimbursement of ERISA benefits already paid, the courts uniformly applied the Knudson-Montanile analysis and ...


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