Great-West Life and Annuity Insurance Company v. Knudson

PETITIONER: Great-West Life and Annuity Insurance Company
RESPONDENT: Knudson
LOCATION: United States District Court Eastern District of Michigan

DOCKET NO.: 99-1786
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 534 US 204 (2002)
ARGUED: Oct 01, 2001
DECIDED: Jan 08, 2002

ADVOCATES:
James F. Jorden - On behalf of the petitioners
Paul R. Q. Wolfson - Argued the cause for the United States, as amicus curiae, by special leave of court, supporting the petitioners
Richard G. Taranto - Argued the cause for the respondents

Facts of the case

In 1992, a car accident rendered Janette Knudson a quadriplegic. At that time, Knudson was covered by the Health and Welfare Plan for Employees and Dependents of Earth Systems, Inc. (the Plan), which covered $411,157.11 of her medical expenses, most of which were paid by Great-West Life & Annuity Insurance Co. The Plan contains a reimbursement provision, which gives it the right to recover from a beneficiary any payment for benefits paid by the Plan that the beneficiary is entitled to recover from a third party. After Knudson filed a state-court tort action to recover from the manufacturer of her car and others, she negotiated a settlement that earmarked $13,828.70 to satisfy Great-West's reimbursement claim. Great-West then filed an action under the Employee Retirement Income Security Act of 1974 (ERISA) to enforce the Plan's reimbursement provision by requiring Knudson to pay the Plan $411,157.11 of any proceeds recovered from third parties. The District Court granted Knudson summary judgment. In affirming, the Court of Appeals held that that judicially decreed reimbursement for payments made to a beneficiary of an insurance plan by a third party is not equitable relief authorized by ERISA.

Question

Does the Employee Retirement Income Security Act of 1974 authorize a suit to enforce a reimbursement provision by a health plan to recover from a beneficiary any proceeds paid by a third party?

Media for Great-West Life and Annuity Insurance Company v. Knudson

Audio Transcription for Oral Argument - October 01, 2001 in Great-West Life and Annuity Insurance Company v. Knudson

Audio Transcription for Opinion Announcement - January 08, 2002 in Great-West Life and Annuity Insurance Company v. Knudson

William H. Rehnquist:

The opinion of the Court in No. 99-1786 Great-West Life and Annuity Insurance Company, against Knudson will be announced by Justice Scalia.

Antonin Scalia:

This case is here on writ of certiorari to the United States Court of Appeals for the Ninth Circuit.

The respondent, Janette Knudson, was rendered quadriplegic by a car accident.

The employee health plan of her employer, petitioner Earth Systems, Inc. covered about $411,000 of her medical expenses.

The plan includes a reimbursement provision that is the basis of this action.

This provides the plan with the right to recover from a beneficiary any payment for benefits paid by the plan that the beneficiary is entitled to recover from a third party.

Janette and her then-husband, respondent Eric Knudson, brought a state law tort action against the manufacturer of the car involved in the accident and other alleged tortfeasors.

The parties to that action negotiated a $650,000 settlement which allocated about $14,000, the portion of the settlement attributable to past and medical expenses to satisfy the plan’s claim of $411,000.

Instead of cashing the check for that amount however, the petitioner Great-West Life and Annuity Insurance Company, the insurer for the plan which had paid Janette’s medical expenses and thereby assignee of the plan’s rights under the reimbursement provision, filed this action in the United States District Court for the Central District of California seeking injunctive and declaratory relief under Section 502(a)(3) of ERISA to enforce the reimbursement provision by requiring the Knudsons to pay $411,000 of any proceeds recovered from third parties.

The District Court granted summary judgment to the Knudsons and was affirmed by the United States Court of Appeals for the Ninth Circuit on the ground that judicially decreed reimbursement for payments made to a beneficiary of an insurance plan by a third party is not equitable relief, and is therefore not authorized by 502(a)(3).

We granted certiorari and now affirm.

Section 502(a)(3) authorizes, among other things, a civil action by a fiduciary “(A) to enjoin any act or practice which violates the terms of the plan or (B) to obtain other appropriate equitable relief to redress such violations or to enforce the terms of the plan.”

We held in a case called Mertens versus Hewitt Associates that the term equitable relief in Section 502(a)(3) must refer to “those categories of relief that were typically available in equity.”

Here, petitioners seek in essence to impose personal liability on respondents, the Knudsons, for a contractual obligation to pay money, relief that was not typically available in equity.

Indeed, a claim for money due and owing under a contract is quintessentially an action at law.

We are not persuaded by petitioners’ attempts to characterize the relief they seek as equitable.

First, petitioners argue that they are entitled to relief because they seek to enjoin respondents from failing to reimburse them in violation of the plan.

However, an injunction to compel the payment of the money passed due under a contract or specific performance of a past due monetary obligation was not typically available in equity.

Those rare cases in which a court of equity would decree specific performance of a contract to transfer funds or suits which unlike the present case, sought to prevent future losses were either incalculable or would be greater than the sum awarded.

Second, petitioners argued that their suit is authorized by 502(a)(3)(B) because they seek restitution which they characterized as a form of equitable relief.

However, not all relief falling under the rubric of restitution is available in equity.

Plaintiff who asserted no title or right to possession of particular property but merely sought money to pay for some benefit the defendant had receive from him had a right to restitution at law through an action derived from the common-law writ of assumpsit.

In contrast, the plaintiff could seek restitution in equity ordinarily in the form of a constructive trust or an equitable lean only where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant’s possession.

Here, the funds to which petitioner's claim an entitlement under the plan’s reimbursement provision, namely the proceeds from the settlement are not and have never been in the Knudsons’ possession.

The disbursements from the settlement were paid by two checks, one made payable to a special needs trust created under California law for Janette’s care, and the other to respondent’s attorney who, after deducting his own fees and costs, paid the remaining funds to respondent’s other creditors.

The kind of restitution that petitioners seek therefore, is not equitable, but legal.

We note in the opinion that there may have been other means for petitioners to obtain the legal relief that they seek but respecting Congress’ choice to limit the relief available under 502(a)(3) to equitable relief requires us to recognize the sometimes recondite differences between law and equity to which the statute refers.

Because petitioners are seeking relief that is essentially legal 502(a)(3)does not authorize this action and we affirm the judgment of the Court of Appeals.

Justice Stevens has filed a dissenting opinion; Justice Ginsburg has filed a dissenting opinion in which Justices Stevens, Souter and Breyer have joined.