Amicus Curiae Brief — Great-West Life & Annuity Ins. Co. v. Knudson

MOTION FELED | (\p)

0. 99-1786 MAY 2 2001

In the

ourt of the Gnited States

GREAT-WEST LIFE & ANNUITY INSURANCE

COMPANY, EARTH SYSTEMS, INC., AND THE

HEALTH AND WELFARE PLAN FOR EMPLOYEES AND

DEPENDENTS OF EARTH SYSTEMS, INC.,

- Petitioners,

JANETTE KNUDSON AND ERIC KNUDSON,

Respondents.

On Writ of Certiorari to the United

States Court of Appeals for the Ninth Circuit

MOTION FOR LEAVE TO FILE A BRIEF AS

AMICUS CURIAE AND BRIEF OF THE

CENTRAL STATES, SOUTHEAST AND SOUTHWEST

AREAS HEALTH AND WELFARE FUND AS AN

AMICUS CURIAE IN SUPPORT OF PETITIONERS

WILLIAM J. NELLIS JOHN A. KUKANKOS

Secretary to the Board Counsel of Record

of Trustees JAMES L. COGHLAN

Central States, Southeast FRANCIS E. STEPNOWSKI

and Southwest Areas DEBRA M. CYRANOSKI

Health and Welfare Fund COGHLAN KUKANKOS COOK

9377 W. Higgins Road One N. Franklin Street

Rosemont, IL 60018 Suite 900

(847) 518-9800 Chicago, IL 60606

(312) 357-9200

Attorneys for Amicus Curiae

Midwest Law Printing Company/Photex — Chicago — (312) 321-0220

Ty,

ein

at * a. x of :

Sv, OG Vinge

ae , e*

44 by’ oka we

* . - . ’

> : Sok

5 Ae PEE EG..

re 77, > »

dy ~e ¥

. ya * >

—< % 3

Shed elceg?

1

MOTION FOR LEAVE TO

FILE A BRIEF AS AMICUS CURIAE

Central States, Southeast and Southwest Areas Health

and Welfare Fund (“Welfare Fund”), pursuant to Su-

preme Court Rule 37, respectfully moves this Honorable

Supreme Court of the United States of America to grant

it leave to file a brief amicus curiae in support of the

position of Great-West Life & Annuity Insurance Com-

pany, Earth Systems, Inc., and Health and Welfare Plan

for Employees and Dependents of Earth Systems, Inc.

(collectively, “Petitioners” or “Great-West”) to reverse

the decision of the Ninth Circuit Court of Appeals. The

Welfare Fund submits its brief amicus curiae together

with this motion. In support, the Welfare Fund states:

1. On January 22, 2001, this Court granted the

Welfare Fund’s motion for leave to file a brief as amicus

curiae in support of the Petition for a Writ of Certiorari

in this case. The Welfare Fund now moves the Court for

permission to file its brief amicus curiae in this case

which is now before the Court for oral argument.

2. Petitioners have consented to the filing of the

Welfare Fund’s brief amicus curiae. The Welfare Fund

has been unable to obtain the consent of Respondents

Janette Knudson and Eric Knudson to the filing of the

Welfare Fund’s brief amicus curiae. Petitioners’ letter of

consent accompanies this motion for filing with the

Clerk of this Court.

3. The Welfare Fund is a Taft-Hartley trust and an

employee benefit plan under Section 3(1) of the Employ-

ee Retirement Income Security Act of 1974 (“ERISA”), 29

U.S.C. § 1002(1). See Central States, Southeast & South-

2

west Areas Pension Fund v. Central Transport, Inc., 472

U.S. 559, 561-62 (1985), reh’g denied, 473 U.S. 926

(1985). Welfare Fund beneficiaries are teamsters and

dependents of teamsters (collectively, “Beneficiaries”)

from local unions throughout the country. Under the

terms of collective bargaining agreements negotiated

between local unions and employers, employers pay

contributions to the Welfare Fund to fund benefits for

Beneficiaries.

4. The Welfare Fund provides medical, hospital, den-

tal, disability, vision and life benefits to more than three

hundred thousand Beneficiaries who reside in thirty-six

states. The Welfare Fund is self-funded and not-for-

profit. Like Petitioners, the Welfare Fund has imple-

mented a subrogation program which it actively enforces

in all jurisdictions where its Beneficiaries reside.

5. The issue in this case is whether an employee

benefit plan regulated by ERISA can sue in federal court

to obtain reimbursement of paid medical benefits from

the proceeds of its beneficiary's personal injury settle-

ment. The resolution of this issue depends upon whether

such an action seeks equitable relief under Section

502(aX3) of ERISA, 29 U.S.C. § 1132(aX3).

6. The Welfare Fund seeks leave to file its brief

amicus curiae to bring to the attention of the Court the

effect which the Ninth Circuit’s decision will have on

large employee benefit plans, such as the Welfare Fund,

which operate in many states. For these employee bene-

fit plans, the decision of the Ninth Circuit, if allowed to

stand, will cause the exact harm which Congress sought

to prevent in enacting ERISA.

7. In enacting ERISA, Congress recognized the im-

portance of employee benefit plans and the problems of

administration which conflicting state and local regula-

tion would cause for such plans. Congress further rec-

ognized the need for exclusive federal regulation of such

plans to ensure uniformity in enforcement of plan terms.

This Honorable Court has, on many occasions, noted

these laudable goals of ERISA. See Shaw v. Delta Air

Lines, Inc., 463 U.S. 85, 99 (1983) (quoting 120 Cong.

ne 29933 (1974)); FMC Corp. v. Holliday, 498 U.S. 52,

(1990).

8. The Ninth Circuit’s decision, which is in conflict

with decisions in other Circuits, directs plans to state

court as the exclusive forum for enforcing the terms of

the plan and redressing violations of the terms of the

plan related to subrogation and reimbursement.

9. As discussed in the brief amicus curiae, the deci-

sion of the Ninth Circuit will have far-reaching deleteri-

ous effects on the Welfare Fund. Directing fiduciaries to

state court to enforce plan terms and to seek redress for

violations of plan terms will cause the exact patchwork

administration of multistate plans which Congress

sought to prevent in enacting ERISA. In addition, be-

cause ERISA provides for exclusive jurisdiction over

such actions, certain state courts may refuse jurisdic-

tion. Because ERISA preempts state laws, and because

many states have a wide range of varying state laws

which diminish or eliminate subrogation rights, state

courts which do entertain jurisdiction may not provide

appropriate relief. Contrary to the mandate of ERISA,

plan fiduciaries will be unable to administer the plan

and enforce plan terms.

4

10. Moreover, the decision of the Ninth Circuit at issue

in this appeal is simply incorrect. Respondents hold set-

tlement funds sufficient to satisfy Great-West’s subro-

gation and reimbursement rights. They hold such funds

for Great-West’s use and benefit and plan terms require

that Respondents return such funds to the plan. Tradi-

tional equitable remedies of specific performance, resti-

tution and a constructive trust are all appropriate rem-

edies to prevent Respondents’ unjust enrichment.

11. Finally, subrogation realizes significant cost-sav-

ings for ERISA plans. Since its inception in 1984, the

Welfare Fund’s subrogation program has achieved direct

reimbursements and savings of approximately $67.5

million. The decision of the Ninth Circuit, if allowed to

stand, will result in the diminishment of subrogation

recoveries and savings and, ultimately, in the reduction

of benefits for Beneficiaries—a result further detracting

from ERISA’s goals as described in Shaw, 463 U.S. at

99, and FMC, 498 U.S. at 60.

For each of the above reasons, the Central States,

Southeast and Southwest Areas Health and Welfare

Fund requests this Honorable Court to grant it leave to

file the Welfare Fund’s brief amicus curiae.

Respectfully submitted,

JOHN A. KUKANKOS

One of the Attorneys for

Central States, Southeast

and Southwest Areas Health

and Welfare Fund

JOHN A. KUKANKOS

JAMES L. COGHLAN

FRANCIS E. STEPNOWSKI

DEBRA M. CYRANOSKI

COGHLAN KUKANKOS COOK

One North Franklin Street

Suite 900

Chicago, Illinois 60606

(312) 357-9200

WILLIAM J. NELLIS

Secretary to the Board of Trustees

Central States, Southeast

and Southwest Areas Health

and Welfare Fund

9377 West Higgins Road

Rosemont, Illinois 60018

(847) 518-9800

TABLE OF CONTENTS

PAGE

I. THE INTEREST OF THE

AMICUS CURIAE .......cccccccecsceccees 1

Il. SUMMARY OF THE ARGUMENT........... 3

Be. GETS cc cc cccccccccccesccescesoeees 4

A. The Decision of the Court of Appeals

for the Ninth Circuit, If Allowed To

Stand, Will Create the Exact Adminis-

trative Morass which ERISA was De-

EPS oebcecédesedesecesoees 4

1. In Promulgating ERISA, Congress

Recognized the Importance of Em-

ployee Benefit Plans and the Need

for Exclusive Federal Regulation of

Such Plans to Ensure Uniformity in

Enforcement of the Terms of the

PEs béccedeéeensbocsbevesessesocs 4

2. The Decision of the Ninth Circuit

Fosters the Very Harm Which Con-

gress Sought to Prevent in Enact-

DUES ccccosecececeseeccococecs 7

B. If Not Overturned, the Ninth Circuit's

Decision Will Diminish a Valuable and

Equitable Cost-Saving Mechanism for

ne” . oc csccaseds ous ceeees 4

ii

C. The Decision of the Ninth Circuit Lim-

its the Ability of Plan Trustees to Ad-

minister the Plan in Accordance with

ERISA’s Mandate. ......ccccccccccsees 11

D. The Decision of the Ninth Circuit is

Incorrect. Various Forms of Appropri-

ate Equitable Relief Are Available to

Plans Which Seek to Enforce Subro-

gation and Reimbursement Rights ....... 14

1. The Instant Case in Which Plan

Trustees Seek to Enforce Plan

Terms Against a Plan Beneficiary

is Distinguishable from Mertens v.

PED <cccenneeecseseoes 14

2. A Fiduciary Suing to Enforce

Subrogation and Reimbursement

Rights Set Forth in the Plan

Seeks Specific Performance of Plan

WE coccccecedececesescntecseses 15

3. Restitution and a Constructive

Trust are Additional Equitable

Remedies Available to Plans Seek-

ing to Enforce Subrogation and Re-

imbursement Rights. ............... 20

TV. CONCLUGION 2... ccccccccccccvcvccccsess 22

iii

TABLE OF AUTHORITIES

Cases PAGE(S)

Administrative Comm. v. Gauf,

188 F.3d 767 (7 Cir. 1999) ........ccceeeees 16

Blue Cross & Blue Shield of Ala. v. Sanders,

138 F.3d 1347 (11 Cir. 1998) ..........0000. 16

Bollman Hat Co. v. Root,

112 F.3d 113 (3™ Cir. 1997),

cert, denied, 522 U.S. 952 (1997) .............. 8

Bowen v. Massachusetts,

487 U.S. 879 (1988) ........... 16, 17, 18, 19, 20

Cagle v. Bruner,

112 F.3d 1510 (11 Cir. 1997),

reh’g denied, 124 F.3d 223 (11 Cir. 1997) ..... 13

Central States, Southeast & Southwest Areas

Pension Fund v. Central Transport, Inc.,

472 U.S. 559 (1985), reh’g denied, 473 U.S.

DT, Kceccdescdondewenewenséececutenes 1

Community Ins. Co. v. Richardson,

172 F.3d 872 (6" Cir. 1999) ......... cee eens 8

Copeland Oaks v. Haupt,

ee ee OAR GB” Cle. BOGB) onc cccccccccccces 13

Curtis v. Loether,

ES re 21

iv

Cutting v. Jerome Foods, Inc.,

993 F.2d 1293 (7* Cir. 1993),

cert. denied, 510 U.S. 916 (1993) .........

Davis v. Line Constr. Benefit Fund,

589 F. Supp. 146 (W.D. Mo. 1984) ........

Department of Army v. Blue Fox, Inc.,

Pe EEE ocececncascodsceanss

Descant v. Administrators of the Tulane Educ.

Fund, 706 So. 2d 618 (La. Ct. App. 1998) ..

Egelhoff v. Egelhoff,

BSA &. Ce. BABB CBSE) 2. ccc vccccccccsccs

Electro-Mechanical Corp. v. Ogan,

9 F.3d 445 (6" Cir. 1993) ...............

Fields v. Farmers Ins. Co., Inc.,

18 F.3d 831 (10 Cir. 1994) .............

Firestone Tire & Rubber Co. v. Bruch,

Se, ED cg ccccceunsenctéevenes

FMC Corp. v. Holliday,

Se GR GED ccceccnsccccececceses

FMC Medical Plan v. Owens,

122 F.3d 1258 (9™ Cir. 1997) ............

Fort Halifax Packing Co., Inc. v. Coyne,

GEE, BORED vo cccsvvsdcccedccceses

'

i

RR I

v

Hampton Indus., Inc. v. Sparrow,

608 P.08 TE 4G" Cie. BED... cc ccccncccnuunes 8

Harris v. Harvard Pilgrim Health Care, Inc.,

208 F.3d 274 (1" Cir. 2000) .............200- 13

Harris Trust & Sav. Bank v. Salomon

Smith Barney, Inc., 530 U.S. 238 (2000) ....... 22

Health Cost Controls v. Isbell,

139 F.3d 1070 (6" Cir. 1997) ................. 8

Health Cost Controls v. Washington,

187 F.3d 703 (7 Cir. 1999),

cert. denied, 120 S. Ct. 979 (2000) ............ 12

Hiney Printing Co. v. Brantner, 243

|. | 4 6 eee 13

Ingersoll-Rand Co. v. McClendon,

I i i ee an eee e 7

Jefferson-Pilot Life Ins. Co. v. Krafka,

57 Cal. Rptr.2d 723 (Cal. Ct. App. 1996) ........ 7

Larson v. Domestic & Foreign Commerce

Corp., 337 U.S. 682 (1949),

reh’g denied, 338 U.S. 840 (1949) .............. 17

Maryland Dept. of Human Resources v.

Department of Health & Human Services,

763 F.2d 1441 (D.C. Cir. 1985) ......... 17, 18, 19

Mertens v. Hewitt Assoes.,

Ee and 6 eee ech eens ieee 14, 19

vi

Pilot Life Ins. Co. v. Dedeaux,

GRE TEE, GE GRRESD cc civevcccescccvessevens 6,7

Ryan v. Federal Express Corp.,

78 F.3d 123 (3™ Cir. 1996) ..........---eeeeee 8

School Comm. of Burlington v. Department

of Educ. of Massachusetts, 471

CO SGD . cc cveestesesctccsesecessees 20

Shaw v. Delta Air Lines, Inc.,

463 U.S. OB (IGBB) 2. cc ccvcccccccccccccese 5,9

Southern Council of Indus. Workers v. Ford,

83 F.3d 966 (8™ Cir. 1996) ........--- 2c eee 16

Sunbeam-Oster Co., Inc. v. Whitehurst,

102 F.3d 1368 (5" Cir. 1996) .........--+55: 13

Tull v. United States,

481 U.S. 412 (1GB7) ..wccccccccccccccccsccce 21

United McGill Corp. v. Stinnett,

154 F.3d 168 (4% Cir. 1998) ........---ee sees 8

Walker v. Wal-Mart Stores, Inc.,

159 F.3d 938 (5" Cir. 1998) .........---e eee 8

Waller v. Hormel Foods Corp.,

120 F.3d 138 (8" Cir. 1997) .......----- eee eee 8

Wendy’s Int'l, Inc. v. Karsko,

94 F.3d 1010 (6" Cir. 1996) ........--.-- eee: 13

Statutes

SUBC. 6 TSB ..cccsccccccessscsteccccuenueuas 16

UBL. § 1GB .. ccccccvcccasscccsvsteneeuneees 1

29 U.S.C. § 1GOMae) ... cc ccccccccccccsccsecscccss 4

SD UBC. 6 BOG)... ow ccccccccessoserccssesesess 1

29 U.S.C. § 110BlaM1) ... cc ccccccscccccenccces 11

29 U.S.C. § 1104(aX1MA) .. 2... cece eee cece eens 2

29 U.S.C. § 1132(aX3) .........-.- 0 eee 6, 7,11, 15

SO UBS. © RUBBED . ccc cccccccvccccccsses 6, 7,11

BD UB. BEES 2 cc cvccccvcecceccceccosvcees 5, 10

Other Authorities

Black’s Law Dictionary 910 (6 ed. 1991) ......... 21

120 Cong. Rec. 29933 (1974) ...........0eeeee ees 5

Dan B. Dobbs, Handbook on the Law of

Remedies § 3.1, at 185 (1973) ............--- 19

H.R. Rep. No. 1785, 94 Cong., 2d Sess.,

ONE oo. 0 66 ebb eeeéebeeroseseoeeseucees 5

H.R. Rep. No. 533, 93% Cong., 1" Sess.,

at 12 (1973), reprinted in 1974

CF Tt ee = err rrr ee 6, 10

16 Lee R. Russ & Thomas F. Segalla,

Couch on Insurance 3D § 222:5(2000) ........ 20

16 Lee R. Russ & Thomas F. Segalla,

Couch on Insurance 3D § 223:89 (2000) .... 20, 21

Restatement of Restitution § 1(1937) ............ 21

Restatement of Restitution § 160 (1937) .......... 21

Restatement of Restitution § 160 cmt. d(1937) .... 21

Restatement (Second) of Trusts § 1 cmt. e (1959)... 21

Bem. Ct. BR. STBla) 2... cccccscccsccccccececccsess 1

ie OER. |... .1ckussssusasepeaeibumnnt 1

_ = <2. 2rs

1

BRIEF OF AMICUS CURIAE

I. THE INTEREST OF THE AMICUS CURIAE

Central States, Southeast and Southwest Areas Health

and Welfare Fund (“Welfare Fund”) is an employee

benefit plan under Section 3(1) of the Employee Retire-

ment Income Security Act of 1974 (“ERISA”), 29 U.S.C.

§ 1002(1). See Central States, Southeast & Southwest

Areas Pension Fund v. Central Transport, Inc., 472 U.S.

559, 561-62 (1985), reh’g denied, 473 U.S. 926 (1985)."

Welfare Fund beneficiaries are teamsters and depend-

ents of teamsters (collectively, “Beneficiaries”) from local

unions throughout the country. These teamsters and

their employers negotiate collective bargaining agree-

ments requiring the employers to pay a certain level of

contributions to the Welfare Fund in return for a set

benefit package offered by the Welfare Fund for that

particular contribution level. Each contributing em-

ployer executes a participation agreement with the Wel-

fare Fund agreeing, among other things, to pay the re-

quired contributions and to abide by all rules and regu-

lations set by the Welfare Fund Trustees who administer

the Welfare Fund. Established under the Taft-Hartley

Act, the Welfare Fund has ten trustees—five appointed

by contributing employers and five elected by the unions

whose members are Beneficiaries. See 29 U.S.C. § 186.

' As provided in Sup. Ct. R. 37.6, the Welfare Fund confirms

that no counsel for any party authored any part of this brief,

and that no person other than amicus curiae, its members, or

its counsel made any monetary contribution to the prepara-

tion or submission of this brief. As provided in Sup. Ct. R.

37.3(a), the Welfare Fund states that Petitioners have con-

sented and Respondents have not consented to the filing of

the Welfare Fund’s brief as amicus curiae.

2

The Welfare Fund provides medical, hospital, dental,

vision, life and disability benefits to more than three

hundred thousand Beneficiaries who reside in thirty-six

states. The Welfare Fund is self-funded and pays bene-

fits directly from the contributions of participating em-

ployers. The Welfare Fund is not-for-profit, and its

assets are used exclusively to provide benefits for Bene-

ficiaries and to defray the reasonable costs of adminis-

tering the benefit plan. See 29 U.S.C. § 1104(aX1)(A).

In accord with ERISA’s “prudent man” investment

standards, Welfare Fund Trustees have implemented

cost-containment measures including the promulgation

of subrogation and reimbursement provisions. Since its

inception in 1984, the Welfare Fund’s subrogation pro-

gram has achieved recoveries and savings totaling ap-

proximately $67.5 million.

Since benefit levels are based on actuarial assumptions

which assume a certain level of subrogation and reim-

bursement recoveries, such recoveries are necessary to

provide assets sufficient to fund the benefit levels stated

in the various benefit plans offered by the Welfare Fund.

Like other large multiemployer plans where contribution

rates are set pursuant to collective bargaining and

participation agreements, the Welfare Fund cannot un-

ilaterally increase contribution rates. Thus, if subroga-

tion recoveries are reduced, benefits provided to Benefi-

ciaries will be correspondingly reduced.

The impact of the Ninth Circuit’s decision on the

Welfare Fund and other large multistate plans will be

substantial. That decision denies ERISA plans access to

federal courts to enforce subrogation and reimbursement

rights and to redress violations of those rights. As dis-

cussed within, the Ninth Circuit’s decision will result in

3

the nonuniform enforcement of plans, an increase in

administrative costs for plans, and reduced subrogation

recoveries—all to the detriment of plan beneficiaries.

Il. SUMMARY OF THE ARGUMENT

Because ERISA provides that federal district courts

have exclusive jurisdiction over actions to enforce plan

terms regarding subrogation, state courts may not en-

tertain such actions. State courts which do accept jur-

isdiction may not afford sufficient or uniform relief due

to ERISA’s preemption provision and the varying state

antisubrogation laws. Given all of the above, the Ninth

Circuit’s action will not only result in the exact piece-

meal enforcement of plan terms which ERISA was de-

signed to prevent, but will also greatly limit the ability

of plan fiduciaries to enforce plan terms as required by

ERISA and the common law of trusts. The end result

will be higher administrative costs, lower subrogation

recoveries, and the loss of benefits for plan beneficiaries.

4

Finally, the decision of the Ninth Circuit is simply

incorrect. As discussed within, Great-West seeks equita-

ble relief in this case. The fact that Great-West is sub-

rogated to Janette Knudson’s rights of recovery means

that her rights belong to Great-West. Once Janette

Knudson asserts those rights and receives money in

return, that money properly belongs to Great-West.

Great-West is entitled to specific performance of the

terms of its plan which require the payment of those

funds to the plan. Moreover, when Janette Knudson

refuses to surrender those funds to Great-West, she is

unjustly enriched. Great-West is also entitled to the

additional equitable remedies of restitution of these

funds and the imposition of a constructive trust over

these funds.

Ill. ARGUMENT

A. The Decision of the Court of Appeals for the

Ninth Circuit, If Allowed To Stand, Will Create

the Exact Administrative Morass which ERISA

was Designed to Prevent.

1. In Promulgating ERISA, Congress Recog-

nized the Importance of Employee Benefit

Plans and the Need for Exclusive Federal

Regulation of Such Plans to Ensure Unifor-

mity in Enforcement of the Terms of the Plan.

In enacting ERISA, Congress recognized that employee

benefit plans involve the national public interest and

stressed the importance of uniform federal regulation of

such plans. 29 U.S.C. § 1001(a). Both ERISA’s legislative

sponsors and this Court have emphasized the necessity

for uniform federal regulation of not only the substantive

provisions, but also the enforcement provisions applica-

28 ee Ee ~~ ——_——— er eee

ble to ERISA plans. Shaw v. Delta Air Lines, Inc., 463

U.S. 85, 99 (1983) (quoting 120 Cong. Rec. 29933

(1974));? see also FMC Corp. v. Holliday, 498 U.S. 52, 60

(1990).

To enable plan Trustees to structure uniform plan

provisions for all participants and to seek redress for

violations of those provisions, Congress enacted ERISA’s

preemption provision which preempts state laws which

relate to ERISA plans. See 29 U.S.C. §1144.* To further

? Congress rejected amendments to ERISA which would have

required ERISA plans to comply with multiple and potentially

conflicting state laws which would raise the possibility of

“endless litigation” on issues of whether state regulation

impinged upon federal regulation. Shaw, 463 US. at 99 n.20.

Thus, after a period of monitoring by the Congressional Pen-

sion Task Force and hearings by a House Subcommittee, a

report evaluating ERISA’s preemption provisions was issued,

stating that “‘the Federal interest and the need for national

uniformity are so great that enforcement of state regulation

should be precluded.’” Jd. (quoting H.R. Rep. No. 1785, 94"

Cong., 2d Sess., at 47 (1977)).

* This Court has also recognized the disruptive effect that

state regulation would have on ERISA plans. In Shaw, the

Court, noting that the obligation of the plans to comply with

“the varied and perhaps conflicting” requirements of particu-

lar state fair employment laws would make nationwide ad-

ministration of plans more difficult, found that ERISA pre-

empted New York's Disability Benefits Law. 463 U.S. at 105

n.25. In Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1

(1987), this Court recognized that requiring an employer to

adopt different payment formulae for employees inside and

outside the State would subject the employer to precisely the

burden that ERISA preemption was intended to eliminate.

Id. at 10. Similarly, in Egelhoff v. Egelhoff, 121 S. Ct. 1322

(continued...)

this same uniformity, Congress enacted Section 502(aX3)

of ERISA, 29 U.S.C. § 1132(aX3), ERISA’s enforcement

provision. Section 502(a\3) allows plans to sue to obtain

equitable relief to enforce plan terms and redress vio-

lations of plan terms. To ensure uniform enforcement of

plan terms, Congress stated that federal district courts

shall have exclusive jurisdiction over such actions. See

29 U.S.C. § 1132(e).

ERISA’s uniform enforcement mechanism comple-

ments ERISA’s administrative scheme. In Pilot Life Ins.

Co. v. Dedeaux, 481 U.S. 41 (1987), this Court again

confirmed that ERISA was designed to achieve unifor-

mity of decision to assist fiduciaries “‘to predict the

legality of proposed actions without the necessity of

reference to varying state laws.’” Jd. at 56 (quoting H.R.

Rep. No. 533, 93" Cong., 1" Sess., at 12 (1973), reprinted

in 1974 U.S.C.C.A.N. 4639, 4650). This Court noted

ERISA’s expectation that federal courts would develop

federal common law.

The expectations that a federal common law of

rights and obligations under ERISA-regulated

plans would develop, indeed, the entire compari-

son of ERISA’s § 502(a) to § 301 of the LMRA,

would make little sense if the remedies available

to ERISA participants and beneficiaries under

* (...continued)

(2001), this Court held that ERISA preempted a Washington

statute providing for automatic revocation, upon divorce, of

any designation of spouse as beneficiary of a non-probate as-

set. Id. at 1326-29. The Court found the statute to be in direct

conflict with ERISA’s requirement that the plans be adminis-

tered in accordance with the plan document. /d. at 1329.

7

§ 502(a) could be supplemented or supplanted by

varying state laws.

Pilot Life, 481 U.S. at 56.

2. The Decision of the Ninth Circuit Fosters the

Very Harm Which Congress Sought to Pre-

vent in Enacting ERISA.

The Ninth Circuit’s decision will create the exact

patchwork scheme of regulation and enforcement which

Congress sought to avoid in enacting ERISA. Ingersoll-

Rand Co. v. McClendon, 498 U.S. 133, 142 (1990). First,

denying ERISA plans the right to enforce subrogation

rights in federal court under Section 502(aX3) of ERISA,

29 U.S.C. § 1132(aX3), will result in the complete abro-

gation of such rights in certain states. The Ninth Cir-

cuit’s decision in this case provides just such an exam-

ple. The relevant state jurisdiction here, California, has

already held that because ERISA makes federal district

courts the exclusive forum for actions to enforce plan

terms, 29 U.S.C. § 1132(e), California state courts can-

not entertain jurisdiction in such matters. Jefferson-Pilot

Life Ins. Co. v. Krafka, 57 Cal. Rptr.2d 723 (Cal. Ct. App.

1996). See also Descant v. Administrators of the Tulane

Educ. Fund, 706 So. 2d 618 (La. Ct. App. 1998).

Other state courts, which do entertain jurisdiction,

may find no remedy due to ERISA’s preemption of state

causes of action. Moreover, those state courts which do

entertain jurisdiction and overcome ERISA preemption,

are invited to apply a panoply of differing state anti-

subrogation laws. These laws, in violation of plan terms,

diminish subrogation rights and further prevent the

uniform enforcement of plan terms. See Ingersoll-Rand,

498 U.S. at 142. For example, the laws of some states

8

prohibit the enforcement of subrogation rights against

uninsured motorist recoveries, recoveries by minors, or

recoveries which do not make a plan participant whole.

Other states reduce the amount of the plan’s recovery by

an award of pro rata attorney's fees under the common

fund doctrine.‘

* Federal courts are often forced to decide whether to apply

state laws that would forbid or limit an ERISA plan’s sub-

rogation rights. When confronted with this issue, most federal

courts have held that ERISA preempts such laws and that the

written language of the plan should be followed. See, e.g.,

FMC, 498 U.S. 52 (1990) (ERISA preempts state automobile

insurance anti-subrogation law); Community Ins. Co. v. Rich-

ardson, 172 F.3d 872 (6 Cir. 1999) (ERISA preempts Ohio

statute prohibiting reimbursement of medical claims from

municipalities); Electro-Mechanical Corp. v. Ogan, 9 F.3d 445

(6” Cir. 1993) (ERISA preempts Tennessee statute prohib-

iting subrogation of health care costs in malpractice cases);

Hampton Indus., Inc. v. Sparrow, 981 F.2d 726 (4 Cir. 1992)

(ERISA preempts North Carolina subrogation statute limiting

a self-funded ERISA plan’s recovery from third party settle-

ment funds); Davis v. Line Constr. Benefit Fund, 589 F. Supp.

146 (W.D. Mo. 1984) (ERISA preempts state law preventing

subrogation of an otherwise unassignable personal claim).

Courts have also considered application of the common fund

doctrine to ERISA plans. See, e.g., Walker v. Wal-Mart Stores,

Inc., 159 F.3d 938, 940 (5" Cir. 1998); United McGill Corp. v.

Stinnett, 154 F.3d 168, 173 (4" Cir. 1998); Bollman Hat Co.

v. Root, 112 F.3d 113, 118 (3" Cir. 1997), cert. denied, 522

U.S. 952 (1997); Health Cost Controls v. Isbell, 139 F.3d 1070,

1072 (6” Cir. 1997); Ryan v. Federal Express Corp., 78 F.3d

123 (3™ Cir. 1996). In Waller v. Hormel Foods Corp., 120 F.3d

138, 141 (8 Cir. 1997), the court ruled that whether ERISA

preempts the common fund doctrine depends on the language

(continued...)

The decision of the Ninth Circuit, if permitted to

stand, will create huge administrative burdens for multi-

state plans such as the Welfare Fund. These plans will

have to tailor their subrogation program to conform with

the varying laws from state to state regarding sub-

rogation and reimbursement. The patchwork scheme of

federal and state regulation of employee benefit plans

which Congress rejected when it passed ERISA will

become a reality. See Fort Halifax Packing Co., Inc. v.

Coyne, 482 U.S. 1, 9-11 (1987); Shaw v. Delta Air Lines,

Inc., 463 U.S. 85, 107-08 (1983).

B. If Not Overturned, the Ninth Circuit’s Decision

Will Diminish a Valuable and Equitable Cost-

Saving Mechanism for Self-Funded Plans.

As this Court has recognized, uniformity and equal

enforcement of Plan provisions ultimately inures to the

benefit of plan participants:

A patchwork scheme of regulation would intro-

duce considerable inefficiencies in benefit pro-

gram operation, which might lead those employ-

ers with existing plans to reduce benefits, and

those without such plans to refrain from adopt-

ing them. Pre-emption ensures that the adminis-

trative practices of a benefit plan will be gov-

erned by only a single set of regulations.

* (continued)

of the benefit plan. In Cutting v. Jerome Foods, Inc., 993 F.2d

1293, 1296 (7 Cir. 1993), cert. denied, 510 U.S. 916 (1993),

and Fields v. Farmers Ins. Co., Inc., 18 F.3d 831, 835-36 (10"

Cir. 1994), courts held that the terms of the plan override

contrary state laws related to subrogation in Wisconsin and

Oklahoma, respectively. See also footnote 7, infra, pp. 12, 13.

10

Fort Halifax, 482 U.S. at 11 (1987) (citing H.R. Rep. No.

533, 93 Cong., 1" Sess., at 12 (1973), reprinted in 1974

U.S.C.C.A.N. 4639, 4650).

Since the laws and regulations applicable to health

care benefits vary widely from state to state, the disrup-

tive effect of state regulation is compounded for em-

ployee benefit plans, such as the Welfare Fund, which

have employees in more than one state. Benefit plans

which operate in many states often choose to self-fund

benefit payments rather than purchase insurance to

cover such benefits. Because state laws vary dramati- |

cally, purchasing insurance for plans which operate in

many states is inefficient, inequitable and increasingly

expensive.° It was for this reason that Congress passed

the preemption clause of ERISA, 29 U.S.C. § 1144. See

Fort Halifax, 482 U.S. at 10; see also FMC Corp. uv.

Holliday, 498 U.S. 52 (1990).

Moreover, many cost-containment measures imple-

mented by employee benefit plans transfer actual costs

to beneficiaries or restrict the type, length or choice of

° The Ninth Circuit's decision will lead plans to reconsider

their policy of advancing payment for medical bills related to

injuries sustained in accidents. If benefit plans cannot enforce

subrogation rights in certain states, and in order to avoid

having one employer subsidize the benefits of another em-

ployer’s employees, multiemployer plans could add plan pro-

visions to exclude from coverage claims related to accidents

in those states where the plan’s subrogation provision could

not be enforced. Although compensating for lost subrogation

recoveries, this added layer of administration would delay

payment of a beneficiary’s benefits, increase the cost of ad-

ministering the plan, and lead to the hodge-podge administra-

tion of plans which ERISA condemned.

11

medical care. Unlike such cost-containment measures,

subrogation and reimbursement provisions merely pre-

vent the duplication of benefits by the plan where other

coverage exists for a particular injury or illness. In other

words, the participant does not recover twice for ac-

cident-related medical damages. The responsibility for

the medical care is shifted to the party vausing the

injury or to the specific-risk insurer which has specifi-

cally assumed the kind of risk leading to the injury. Sub-

rogation not only shifts the costs of medical care to the

responsible party, but also constitutes a valuable cost-

savings device. Since the inception of the Welfare Fund’s

subrogation program, the Welfare Fund has achieved re-

coveries and subrogation savings totaling approximately

$67.5 million.

C. The Decision of the Ninth Circuit Limits the

Ability of Plan Trustees to Administer the Plan

in Accordance with ERISA’s Mandate.

ERISA requires that every employee benefit plan be

established pursuant to a written instrument and that

named fiduciaries control and manage the operation and

administration of the Plan. 29 U.S.C. § 1102(a)(1). Con-

gress bestowed upon fiduciaries the power and author-

ity to accomplish these objectives by enacting ERISA’s

enforcement mechanism, Section 502(a\3) of ERISA, 29

U.S.C. § 1132(aX3). Section 502(e) of ERISA, 29 U.S.C.

§ 1132(e), makes federal district courts the exclusive jur-

isdiction for actions by fiduciaries to enforce plan terms

and redress violations of plan terms. The relief which

Section 502(a\3) allows is “appropriate equitable relief.”

29 U.S.C. § 1132(aX3).

In finding equitable relief unavailable in the instant

action by a plan to enforce plan terms against a plan

12

beneficiary, the Ninth Circuit left plan fiduciaries with-

out a forum in which to bring such actions. As already

noted, the relevant state forum in this case, California,

has taken the position that it is without jurisdiction to

entertain such an action by a plan to enforce subrogation

rights. Moreover, as stated previously, in light of

ERISA’s preemptio™ of state laws and the panoply of

state antisubrogation laws, state courts which do enter-

tain jurisdiction may not afford adequate relief.®

Subrogation is not a simple contractual matter be-

tween an insured and its insurer where state issues

predominate. Subrogation involves a core ERISA issue,

viz., the recoupment of plan benefits paid to beneficiaries

through the enforcement of plan terms by plan fiducia-

ries. In hardship cases, trustees of the trust must

balance the interests of all beneficiaries against the

interests of the beneficiary oeing asked to reimburse the

plan. Moreover, in many instances, the enforcement of

subrogation rights by a self-funded employee benefit

plan involves the interpretation of a plan’s precise

subrogation provision. All of these are functions best left

to the discretion of plan Trustees.’

® The impact of the Ninth Circuit’s decision has broad im-

plications for ERISA plans beyond subrogation and reim-

bursement rights. That decision may, for example, prevent

plans from obtaining recoveries of overpayments from pro-

viders and beneficiaries or from properly coordinating bene-

fits with other plans and insurers.

’ Plan fiduciaries must decide whether the written terms of

the plan include recoveries from tortfeasors as well as their

insurers or recoveries from uninsured motorist coverage. See

Health Cost Controls v. Washington, 187 F.3d 703, 711-12 (7"

(continued...)

13

Because ERISA considerations permeate the enforce-

ment of Plan terms such as subrogation, Congress leg-

islated that federal district courts have exclusive juris-

diction to enforce Plan terms and redress violations of

7 (...continued)

Cir. 1999), cert. denied, 120 S. Ct. 979 (2000); Wendy's Int'l,

Inc. v. Karsko, 94 F.3d 1010, 1013 (6" Cir. 1996); Sunbeam-

Oster Co., Inc. v. Whitehurst, 102 F.3d 1368, 1378 (5™ Cir.

1996). Another question of interpretation arises when the

written terms of the plan set the priority of allocations be-

tween the subrogee and subrogor. See Hiney Printing Co. v.

Brantner, 243 F.3d 956, 960 (6 Cir. 2001) (applying federal

common law make whole rule where plan language was am-

biguous as to whether plan’s reimbursement rights applied to

a partial recovery); Harris v. Harvard Pilgrim Health Care,

Inc., 208 F.3d 274, 280-81 (1* Cir. 2000) (holding that ap-

plication of the make whole rule is precluded where an ERISA

plan unambiguously requires its members to reimburse plan

for all benefits paid); Copeland Oaks v. Haupt, 209 F.3d 811,

813-14 (6" Cir. 2000) (applying make whole rule where plan

language failed to establish plan’s priority right over any par-

tial recovery); Cagle v. Bruner, 112 F.3d 1510, 1520-22 (11"

Cir. 1997) (applying make whole doctrine where plan lan-

guage did not specifically reject doctrine), reh’g denied, 124

F.3d 223 (11 Cir. 1997); Sunbeam-Oster Co., 102 F.3d at

1373-76 (refusing to apply make whole doctrine where plan

language was clear and unequivocal in providing plan with

right to reimbursement for full amount of benefits paid);

Cutting v. Jerome Foods, Inc., 993 F.2d 1293, 1298-99 (7™

Cir. 1993) (holding that ERISA plan administrator was not

unreasonable in interpreting plan provision as effectively

disclaiming make whole doctrine), cert. denied, 510 U.S. 916

(1993). See also Firestone Tire & Rubber Co. v. Bruch, 489

U.S. 101, 114-15 (1989) (arbitrary and capricious standard

applied when plan gives fiduciary discretionary authority to

construe terms of plan).

14

those terms. These are core ERISA issues best left, as

Congress intended, to the federal courts which can

ensure the uniformity of enforcement of plan terms

which ERISA intends. Contrary to the Ninth Circuit’s

position, the equitable relief which Congress set forth in

ERISA is sufficient to accomplish these objectives.

D. The Decision of the Ninth Circuit is Incorrect.

Various Forms of Appropriate Equitable Relief

Are Avnilable to Plans Which Seek to Enforce

Subrogation and Reimbursement Rights.

1. The Instant Case in Which Plan Trustees

Seek to Enforce Plan Terms Against a Plan

Beneficiary is Distinguishable from Mertens

v. Hewitt Associates.

The Ninth Circuit Court of Appeals erred in holding

that equitable relief is unavailable to Great-West in the |

enforcement of its subrogation and reimbursement

rights against its beneficiary. In finding no equitable

remedy, the Ninth Circuit relied on its prior decision in

FMC Medical Plan v. Owens, 122 F.3d 1258, 1262 (9”

Cir. 1997), which incorrectly interpreted this Court’s

decision in Mertens v. Hewitt Assocs., 508 U.S. 248

(1993). In Mertens, a class of former employees of an

ERISA pension plan sued the plan’s actuary for an

alleged knowing participation in plan fiduciaries’ breach

of fiduciary duties. Jd. at 250-51. The plaintiffs in

Mertens sought only a legal remedy and money damages

and not “appropriate equitable relief” under ERISA. Jd.

at 255-56. This court found that requiring a nonfiduciary

to make the plan whole for losses it sustained as a result

of the alleged breach of fiduciary duties would not

constitute “appropriate equitable relief.” Jd. at 255-59.

e

4

’

15

Unlike the claim in Mertens which sought monetary

recovery for injury to property, the claim brought by

Great-West is an action against a beneficiary by a

fiduciary to enforce the specific term of the trust as re-

quired by ERISA.’ Great-West does not seek mere

compensatory damages. Instead, Great-West seeks an

order requiring its beneficiary to comply with plan

terms.

2. A Fiduciary Suing to Enforce Subrogation

and Reimbursement Rights Set Forth in the

— Seeks Specific Performance of Plan

erms.

Plan fiduciaries disburse plan benefits, and beneficia-

ries receive plan benefits, subject to the terms of the

plan including subrogation and reimbursement. When a

beneficiary such as Janette Knudson refuses to reim-

burse the plan as required by plan terms, plan fidu-

ciaries may sue under Section 502(aX(3) of ERISA, 29

® The specific plan terms at issue here provide that when a

third party may be liable or legally responsible for expenses

incurred by a covered person for a bodily injury, Great-West

will pay covered expenses related to treating that injury.

Under these circumstances, Great-West will, at its option,

have the right to recover from its covered person any payment

for benefits paid for treatment of such loss which the covered

person is entitled to receive from a third party. The Plan

creates a first lien upon any recovery the covered person re-

ceives from the third party, the third party’s insurer, or from

uninsured motorists insurance. If Great-West’s covered per-

son makes any recovery therein set forth and fails to reim-

burse the plan, then the covered person is personally liable to

Great-West to the extent of its lien. (Joint App. at 58-59.)

16

U.S.C. § 1132(aX3), to specifically enforce the subro-

gation and reimbursement rights set forth in the plan

document. The fact that such specific enforcement

requires the plan beneficiary to turn over to the plan

sums of money does not change the character of the

relief from specific performance of plan terms to money

damages. See, e.g., Administrative Comm. v. Gauf, 188

F.3d 767 (7 Cir. 1999); Blue Cross & Blue Shield of Ala.

v. Sanders, 138 F.3d 1347 (11 Cir. 1998); Southern

Council of Indus. Workers v. Ford, 83 F.3d 966 (8™ Cir.

1996).

This Court has also recognized the distinction between

an action for specific relief (even when the specific relief

is money) and an action for compensatory damages. In

Bowen v. Massachusetts, 487 U.S. 879 (1988), the state

of Massachusetts brought suit in federal district court to

overturn a decision rendered by the Secretary of Health

and Human Services which disallowed reimbursement

under the Medicaid Act. The Secretary, asserting that

Massachusetts’ claim was for money damages only,

argued that Section 702 of the Administrative Procedure

Act (“APA”), 5 U.S.C. § 702, mandated dismissal. That

section provides, in part:

An action in a court of the United States seeking

relief other than money damages . . . shall not

be dismissed nor relief therein be denied on

the ground that it is against the United States

or that the United States is an indispensable

party.

5 U.S.C. § 702 (emphasis added).

In addressing the Secretary's argument, this Court

first recognized the distinction between a legal action for

17

money damages and an action for specific relief includ-

ing money. This Court stated:

Our cases have long recognized the distinction

between an action at law for damages—which

are intended to provide a victim with monetary

compensation for an injury to his person, prop-

erty, or reputation—and an equitable action for

specific relief—which may include an order

providing for . . . “the recovery of specific prop-

erty or monies. . . .” The fact that a judicial

remedy may require one party to pay money to

another is not a sufficient reason to characterize

the relief as “money damages.”

Bowen, 487 U.S. at 893 (quoting Larson v. Domestic &

Foreign Commerce Corp., 337 U.S. 682, 688 (1949), reh’g

denied, 338 U.S. 840 (1949)).

The Court concluded that Massachusetts’ suit was “not

a suit seeking money in compensation for the damage

sustained by the failure of the Federal Government to

pay as mandated,” but rather a suit “seeking to enforce

the statutory mandate itself, which happens to be one

for the payment of money.” Jd. at 900. This Court found

that Massachusetts’ suit was one for specific relief

properly brought in federal district court.° Jd.

* In Bowen, this Court quoted extensively and approvingly

from the D.C. Circuit’s decision in Maryland Dept. of Human

Resources v. Department of Health & Human Services, 763

F.2d 1441 (D.C. Cir. 1985). In Maryland, the Court consid-

ered, inter alia, whether it had federal question jurisdiction

over an action against Maryland alleging misspent federal

grant moneys received pursuant to Title XX of the Social

(continued...)

18

Although this Court’s decision in Bowen did not turn

on the distinction between equitable actions and other

actions, Department of Army v. Blue Fox, Inc., 525 U.S.

255 (1999), the Court in Bowen did note that the specific

equitable remedy of specific performance is, in many

instances, in the form of money. The Bowen Court states

as follows:

Thus, while in many instances an award of

money is an award of damages, [o]ccasionally a

money award is also a specie remedy. Jd. Courts

frequently describe equitable actions for mone-

tary relief under a contract in exactly those

terms. See, e.g., First National State Bank v.

Commonwealth Federal Savings & Loan Associa-

tion, 610 F.2d 164, 171 (3d Cir. 1979) (specific

performance of contract to borrow money);

Crouch v. Crouch, 566 F.2d 486, 488 (5 Cir.

1978) (contrasting lump-sum damages for breach

* (...continued)

Security Act. Id. at 1443. The resolution of this question

depended upon whether Maryland was seeking relief other

than money damages. In finding the relief sought by Mary-

land specific equitable relief, the D.C. Circuit distinguished

such relief from money damages:

The term “money damages,” 5 U.S.C. Sec. 702, we

think, normally refers to a sum of money used as

compensatory relief. Damages are given to the plain-

tiff to substitute for a suffered loss, whereas specific

remedies “are not substitute remedies at all, but

attempt to give the plaintiff the very thing to which

he was entitled.” D. Dobbs, Handbook on the Law of

Remedies 135 (1973).

Maryland, 763 F.2d at 1446.

to future installments); Joyce v. Davis, 589 F.2d

1262, 1265 (10 Cir. 1976) (specific performance

of a promise to pay money bonus under a sepaliy

contract).

Bowen, 487 U.S. at 895 (quoting Maryland, 763 F.2d at

cuted sonal of nn ee

u money damages. See Dan B. Dobbs,

Handbook on the Law of Remedies § 3.1, at 135 (1973).

The specific equitable remedy of specific performance

attempts to give the plaintiff the very thing to which he

is entitled. Jd. Plan trustees who seek to enforce plan

terms against a plan beneficiary are seeking the equi-

table remedy of specific performance even when that

remedy results in monetary relief. The payment of

money is the specific performance required and is not a

substituted remedy.”

The instant claims, unlike the claims in Mertens, are

not for the substitute relief of money damages. Like the

claims in Bowen, where the Secretary sought to enforce

a specific provision of a statute, the instant claims are

for specific relief. Moreover, the specific relief requested

here is equitable relief, viz., the specific performance of

the obligations of plan participants set forth in the plan.

As this Court recognizes, the fact that the relief happens

= There is also no adequate remedy at law here. As noted

previously in Section III A2 of this brief, pp. 7-8, California

state courts would afford no relief here. State courts which do

entertain jurisdiction may apply ERISA preemption or a

Neeety eiistate entieaiuagetten lawn to Caster Rants cutiet tn

court.

20

to be the payment of money to the plan does not change

the character of this specific relief to money damages.

See Bowen, 487 U.S. at 893; School Comm. of Burlington

v. Department of Educ. of Massachusetts, 471 U.S. at

370-71.

3. Restitution and a Constructive Trust are

Additional Equitable Remedies Available to

Plans Seeking to Enforce Subrogation and

Reimbursement Rights.

Subrogation is “the substitution of another person in

place of the creditor to whose rights he or she succeeds

in relation to the debt, and gives to the substitute all the

rights, priorities, remedies, liens, and securities of the

person for whom he or she is substituted.” 16 Lee R.

Russ & Thomas F. Segalla, Couch on Insurance 3D §

222:5 (2000). Thus, the rights of the plan to its partici-

pant’s claims arise the moment the Plan pays injury-

related benefits. The rights of the Plan to settlement

moneys sufficient to satisfy its subrogation interest

attach the moment such funds come into existence. As

stated by Couch:

The right of a subrogated insurer extends to any

fund against which the insured had a right to

proceed in order to satisfy his or her claim had

he or she not been paid by the insurer, and an

insurer entitled to subrogation is entitled to have

any money received by the insured or his or her

attorney which represents payment on the claim

to which the insurer has been subrogated held

for the use and benefit of the insurer.

If not, the insurer has the right to trace the

fund and recover it from whomever holds it . . . .

21

Id. § 223:89 (footnotes omitted). In the instant case,

Janette Knudson holds settlement funds received in

satisfaction of claims to which Great-West is subrogated.

These funds properly belong to Great-West and are held

by Janette Knudson for the use and benefit of Great-

West. In retaining these funds, Janette Knudson is un-

- justly enriched.

Both restitution and the imposition of a constructive

trust are available to plans to prevent unjust enrichment

and to protect subrogation and reimbursement rights.

Although both of these equitable remedies would result

in the payment of money to Great-West, these remedies

are still equitable remedies. See Tull v. United States,

481 U.S. 412 (1987) (disgorgement of improper profits is

equitable remedy); Curtis v. Loether, 415 U.S. 189 (1974)

(back pay is a form of equitable restitution).

Restitution is an equitable remedy which restores

something of value to the rightful owner and prevents a

person from being unjustly enriched. See Black’s Law

Dictionary 910 (6" ed. 1991); Restatement of Restitution

§ 1 (1937). In the instant case; the remedy of restitution

requires that Janette Knudson return to Great-West

those funds to which Great-West is entitled. Absent

restitution, Janette Knudson remains unjustly enriched.

The imposition of a constructive trust is also an

appropriate equitable remedy here. A constructive trust

imposes upon a person the equitable duty to convey

property to another on the ground that retention of the

property would be wrongful and would unjustly enrich

such person. Restatement (Second) of Trusts § 1 cmt. e

(1959); Restatement of Restitution § 160 (1937). The ©

effect of a constructive trust prevents a loss to the plan

and a corresponding unjust gain to the plan beneficiary.

Restatement of Restitution § 160 cmt. d (1937).

22

Contrary to the rule in the Ninth Circuit, a construc-

tive trust is not based on actual wrongdoing but on

equity and fairness. See Harris Trust & Sav. Bank v.

Salomon Smith Barney, Inc., 530 U.S. 238, 251 (2000).

Moreover, even if such wrongdoing is a prerequisite for

the imposition of a constructive trust, such wrongdoing

is present here. Janette Knudson’s retention of that

portion of settlement funds sufficient to satisfy Great-

West’s subrogation and reimbursement rights is wrong-

ful, in violation of plan terms and ERISA, and unjustly

enriches her. Janette Knudson has asserted control over

funds which properly belong to Great-West under plan

terms. The imposition of a constructive trust over these

funds constitutes “appropriate equitable relief” under

ERISA.

Iv. CONCLUSION

The decision of the Ninth Circuit Court of Appeals in

this case is directly at odds with the goals of Congress in

enacting ERISA. If permitted to stand, that decision will

subject employee benefit plans to non-uniform regulation

and enforcement. The consequent increased administra-

tive expense and decreased subrogation recoveries will

result in a loss of benefits for plan beneficiaries. Plan

fiduciaries will be denied the uniform enforcement

mechanism needed to enforce plan terms and redress

violations of plan terms. Moreover, that decision con-

flicts with decisions of this Court and is clearly incorrect.

Equitable relief in the form of specific performance,

restitution, and constructive trust is available to plan

fiduciaries suing plan beneficiaries in order to enforce

plan terms and redress violations of plan terms. For the

reasons stated above, Central States, Southeast and

- eR er eee

Southwest Areas Health and Welfare Fund respectively

requests this Honorable Court to overturn the decision

of the Court of Appeals for the Ninth Circuit in this case.

May 3, 2001

Respectfully submitted,

WILLIAM J. NELLIS JOHN A. KUKANKOS

Secretary to the Board Counsel of Record

of Trustees JAMES L. COGHLAN

Central States, Southeast FRANCIS E. STEPNOWSKI

and Southwest Areas DEBRA M. CYRANOSKI

Health and Welfare Fund COGHLAN KUKANKOS COOK

9377 W. Higgins Road One N. Franklin Street

Rosemont, Illinois 60018 Suite 900

(847) 518-9800 Chicago, Illinois 60606

(312) 357-9200

Attorneys for Amicus Curiae