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

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Supretac Court, U.S

JUN 24 200| LY | FILED

No. 99-1786 , JUN 29 2001

| OFFICS OF THE CLERK

= r

IN THE

Supreme Court of the Gnited States

GREAT-WEST LIFE & ANNUITY INSURANCE CO., 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

BRIEF OF AMICUS CURIAE

IN SUPPORT OF THE JUDGMENT BELOW

BY INVITATION OF THE COURT

RICHARD G. TARANTO

Counsel of Record

FARR & TARANTO

1220 19th Street, NW

Washington, DC 20036

(202) 775-0184

June 29, 2001

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 -— WASHINGTON, D.C. 20001

BEST AVAILABLE COPY}

QUESTION PRESENTED

Whether petitioners’ suit for money allegedly due under an

ERISA plan reimbursement provision is an action for

“appropriate equitable relief’ under Section 502(a)(3) of

ERISA.

TABLE OF CONTENTS

QUESTION PRESENTED .........cccecccocsecseccsoossesseossecseees

TABLE OF AUTHORITIES cccccccccscccccsccsccscccscsscsscsscesees

A. Petitioners and the Plam..............ccsesseeseeeeseeeeees

B. The Accident And Its Aftermath ..............:00000000

C. The State Court Tort Action..........cccccccceeeeseerseenees

Be eT ecrenccncccsnsenassnesssssscsssessccsscnescssscsecee

E. Court of Appeals Decision ............:cecsseeessereneees

SUMMARY OF ARGUMENT .............:ccsccsssessssesseeeeees

I. PETITIONERS’ MONEY CLAIM DOES NOT

SEEK EQUITABLE RELIEF UNDER

Be EEISS SEMIN P covecceresessseccsssssecseessovssceosseceee

A. Section 502(a)(3) Covers Only Claims

Cc.

Typically Remediable In Equity..................

A Claim For Money To Fulfill An

Obligation To Pay, Not For Return Of

Specific Property (Or Its Product), Was

Not Typically Remediable In Equity...........

TET

The Arguments Presented To Support

Section 502(a)(3) Coverage Are Flawed.....

(iii)

TABLE OF CONTENTS—Continued

I nicictniciniereitinnenniesiientiien

Il. IF PETITIONERS’ CLAIM IS_ FOR

EQUITABLE RELIEF, IT IS NEVER-

THELESS NOT FOR’ APPROPRIATE

eID GUE cncescscnssnceneensernenenmeenmecnens

A. Section 502(a)(3) Requires That Any

Equitable Relief Be Appropriate,

Considering More Than Just Its

Responsiveness To The Asserted Wrong....

B. Recognizing Reimbursement Claims

Under Section 502(a)(3) Would Authorize

Harmful Duplicative State And Federal

C. Petitioners Have Not Shown The

Duplicative Litigation To Be Necessary

To Protect Plan Interests ............:.:ccsss0ss0e0-

IIE crsesnsensnnsstunmnemmansnctnsennenietammennumecniinetiens

— eS

TABLE OF AUTHORITIES

CASES Page

Administrative Committee v. Gauf, 188 F.3d 767

of: 9 a 35

Alessi v. Raybestos-Manhattan, Inc., 451 U.S.

FO Ca ei cantesecsinmmemnenienes 47

American & Foreign Ins. Co. v. Bolt, 106 F.3d

Un 43

Austin v. Shalala, 994 F.2d 1170 (Sth Cir. 1993).. 25

Barnes v. Indep. Auto Dealers, 64 F.3d 1389 (9th

ee Ge cncencsvenssememmmmenenmmngmmenen 16

Bast v. Prudential Ins. Co., 150 F.3d 1003 (9th

Ge, Fei emerescasnennenensinennseseesasmesenmsenngmensnens 38

Blue Cross & Blue Shield of Alabama v. Sarders,

138 F.3d 1347 (11th Cir. 1998) .00.........cccceeeees 35

Boggs v. Boggs, 520 U.S. 833 (1997) .......c0ceseeeees 46

Bowen v. Massachusetts, 487 U.S. 879 (1988)...... 29, 30,

31, 33, 34

Brighton Village Associates v. United States, 52

F.3d 1056 (Fed. Cir. 1995)...........cccescccessessesseees 30

Buzard v. Houston, 119 U.S. 347 (1886)............++. 37

California v. Deep Sea Research, Inc., 523 U.S.

GS Ca ccccetanssseastntersemmecimenmmnenne 49

California Div. of Labor Standards Enforcement

v. Dillingham, Constr., N.A., Inc., 519 U.S.

SL , 46, 47

Cannon v. Group Health Service of Oklahoma,

Inc., 77 F.3d 1270 (10th Cir. 1996) ..........c00000000 38

Cement Masons Health and Welfare Trust Fund

for Northern California v. Stone, 197 F.3d

Le 17

Cigna Ins. Co. v. Oy Saunatec, Ltd., 241 F.3d 1

(Bad Cale, FIRS) cancasscscecsesssncsscnscsncssnccsscnsssnesnensssses 44

Corcoran v. United Healthcare, Inc., 965 F.2d

0 f .. > i a 38

TABLE OF AUTHORITIES—Continued

Page

Counihan v. United States, 194 F.3d 357 (2d Cir.

UE cccniennmsnsntnecennnnasemmnsinnsusmeenpsenebianteemnemneiens 29, 45

Damsky v. Zavatt, 289 F.2d 46 (2d Cir. 1961)....... 25

De Buono v. NYSA-ILA Medical and Clinical

Serv. Fund, 520 U.S. 806 (1997) .................ee00e 46

Department of the Army v. Blue Fox, Inc., 525

Re 29, 30, 31

Donohue v. Highlands Underwriters Ins. Co.,

198 Cal. App. 3d 1176, 1181 (1st Dist. 1988)... 45

Egelhoff v. Egelhoff, 121 S. Ct. 1322 (2001)......... 46, 47

Feder v. Paul Revere Life Ins. Co., 228 F.3d 518

ls ee cercccererensncnemenentanamensemmnnenes 16

Firestone Tire & Rubber Co. v. Bruch, 489 U.S.

Be Ce enscnnntncnmnsreserescinnemmmmnnenemnamenen 16, 39

FMC Corp. v. Holliday, 498 U.S. 52 (1990) ......... 46

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

eet Fie rcecenmnncsrenssnnssemenenmmmensnnennnemeneeemnns 17

Fort Halifax Packing Co. v. Coyne, 482 U.S. |

Gi evsesennenstetmennntemenermeneens 47

Gaines v. Miller, 111 U.S. 395 (1884)..............00+ 24

Ghazarian v. Wheeler, 177 F.R.D. 482 (C.D. Cal.

Ee eT 45

Granfinanciera, S.A. v. Nordberg, 492 U.S. 33

Ge cctenccntsensnnsseennemmmnenmenuntnnteemenennin 24, 37

Granite State Ins. Co. v. Smart Modular

Technclogies, Inc., 76 F.3d 1023 (9th Cir.

FD cevascssernennnmesneenmaninmmmenmne 44

Harris Trust and Savings Bank v. Salomon Smith

Barney Inc., 120 S. Ct. 2180 (2000) ........ 18, 22, 27, 29

Health Cost Controls of Illinois, Inc. v.

Washington, 187 F.3d 703 (7th Cir. 1999) ........ 28, 34

Healy v. Commissioner, 345 U.S. 278 (1953) ....... 35

Herzberger v. Standard Ins. Co., 205 F.3d 327

Co: Se 16, 23

Vii

TABLE OF AUTHORITIES—Continued

Page

Hudson View Il Associates v. Gooden 222

A.D.2d 163, 644 N.Y.S.2d 512 (list Dept.

SED cocssesemsrensesnemnmemensnmenenenmmmmeen 25

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133

CEE nancssncneunsscentneieecmnsntennnmeinenensenenmtmnentie 47

Ingram v. Martin Marietta Plan, 244 F.3d 1109

ee 16

Jefferson-Pilot Life Ins. Co. v. Krafka, 50 Cal.

App. 4th 190 (2d Dist. 1996) ............ccccceseeeeeees 45

Johnson v. Home State Bank, 501 U.S. 78

|: ene 49

Kuhl v. Lincoln National Health Plan, 999 F.2d

ee 38

Langenkamp v. Culp, 498 U.S. 42 (1990).............. 24, 37

Mackey v. Lanier Collection Agency & Service,

0B ng GD Be GRD Ce cccnescennesssscccnsennsseenscsnse 48, 49

Martin v. Wilks, 490 U.S. 755 (1989) .........cccseeeees 43

Massachusetts Mut. Life Ins. Co. v. Russell, 473

RR, GO Ci renenensesenensesennensnessesesemenennnee 22, 40

Mercy Hosp. & Medical Ctr. v. Farmers Ins.

Group, 15 Cal. 4th 213 (1997) ........cccccccseseeseeeees 49

Mertens v. Hewitt Associates, 508 U.S. 248

eee ere ae eee passim

Metropolitan Life Ins. Co. v. Massachusetts, 471

Fee Ce cthenseensnnessnenssnnscimesssemmemssnessunets 6, 46

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58

COP cennsssneninaltcnementmnennmeneemmaen 47

Middlesex County Sewerage Authority v.

National Sea Clammers Ass'n, 453 U.S. |

Ge ccnsansnsnpnesenenpsenennnsentenmamnsssnnmnenninnes 39

Milwaukee v. Illinois, 451 U.S. 304 (1981)........... 39

New York State Conference of Blue Cross & Blue

Shield Plans v. Travelers Ins. Co., 514 US.

Pe ccnemncemmmenimnnmemnied 46, 47, 49

Vill

TABLE OF AUTHORITIES—Continued

Page

Olszewski v. ScrippsHealth, 107 Cal. Rptr. 2d

OU ee 45

Peacock v. Thomas, 516 U.S. 349 (1996).............. 49

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41

(RIE Peensceensemmmnnneenenemmnes 39, 47, 48

Plut v. Fireman's Fund Ins. Co., 102 Cal. Rptr.

2d 36 (Ct. App. 2d Dist. 2000)............cccceeeeeeees 45

Postma v. Paul Revere Life Ins. Co., 223 F.3d

Se Coen Ga meme

Quackenbush v. Allstate Ins. Co., 517 U.S. 706 ... 41

Raton Waterworks Co. v. Raton, 174 U.S. 360

Gee pninenemssememesmmemee 24

Reliance “Nat. Indemn. Co. v. General Star

Indem. Co., 72 Cal. App. 4th 1063 (2d Dist.

EE Cen 43

Reich v. Continental Cas. Co., 33 F.3d 754 (7th

GR, GEN cnsnepensnnsennsssemmnnnsnpmenmninmnee 34, 38

Reynolds Metals Co. v. Ellis, 202 F.3d 1246 (9th

SFA, SEIU crccessnespsnensetnentotesnmemnensmemnaenameemane 17

Richards v. Jefferson County, 517 U.S. 793

aN 43

Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574

NE 41

Settles v. Golden Rule Ins. Co., 927 F.2d 505

CRE Ga SO rcerenmessesneneemeneenensemsenen 39

Shaw v. Delta Air Lines, Inc., 463 U.S. 85

Gee cecenenssesennmnnrenenenessmmmemenmennimanen 46

Spain v. Aetna Life Ins. Co., 11 F.3d 129 (9th

Ga Fe cnetencsnsessssnnsteensememeemanen 38

St. Louis & S.F.R. Co. v. Spiller, 274 U.S. 304

en 27

Tester v. Reliance Standard Life Ins. Co., 228

Fee Pees Gen GE, SUED coneensssmemmenmennn 24

TABLE OF AUTHORITIES—Continued

STATUTES

Page

Tolton v. American Biodyne, Inc., 48 F.3d 937

ee 38

United States v. Aetna Cas. & Sur. Co., 338 U.S.

EO 45

United States v. Anderson, 584 F.2d 369 (10th

GS, Bi eecnnnsecunsensuntsnieninammnementeneieinenenee 25

United States v. Bank of Metropolis, 40 U.S. (15

PRD Bee Gee ences 24

United States v. California, 507 U.S. 746 (1993).. 24, 43

United States v. Rodgers, 461 U.S. 677 (1983) ..... 49

U.S. Healthcare, Inc. v. O’Brien, 868 F. Supp.

A Se 5

Varity Corp. v. Howe, 516 U.S. 489 (1996) ......19, 22, 40

Wal-Mart Stores, Inc. Associates’ Health and

Welfare Plan v. Wells, 213 F.3d 398 (7th Cir.),

cert. denied, 121 S. Ct. 441 (2000)......6, 24, 25, 33, 35

Weinberger v. Romero-Barcelo, 456 U.S. 305

SETI ccuctresenssenenienmenunenmusamenmntnneeneneunnien 41

Wilton v. Seven Falls Co., 515 U.S. 277 (1995)... 41

Employee Retirement Income Security Act of

FO) Gccesesescesesesesetnenssvensnseeseevenvsnscsesseuseeccnvasssesvecse passim

Po §} 8 oe 3

§ 406(a), 29 U.S.C. § 1106(a)..............cceeeeeeeeees 27

§ 502(a)(1)(B) 29 U.S.C. § 1132(a)(1)(B)......... 15

§ 502(a)(3), 29 U.S.C. § 1132(a)(3)...............000 passim

§ 502(e)(1), 29 U.S.C. § 1132(e)(1)..............000 15

tS eee 9, 30, 31

en 43

be), 14

eee 45

TABLE OF AUTHORITIES—Continued

Page

Cal. Probate Code

is srsiniiaeaesnnitaduntuistiusinnetdileaisinistiemsentonaiesiiiaitis 10

iP I Uiinensisanpatteiscnicaeaadamatigepsueeainsieieinnemanetieeeines 9

OTHER MATERIALS

Dam, Tea, SHAPED CNG 7a ccccrccsscncsscccepsssesencscsseedinenes 27

G. Bogert & G. Bogert, Law of Trusts ond

Trustees § 471 (rev. 2d ed. 1978) ..........cccceeeeeees 28

D. Dobbs, Remedies (2d ed. 1993)

IT iinet ahi atalinaainiia ia iniaanaliaaimnatil 41

I cea ciaaineae iia testi eae nid iicicialiats 37

IT Tass cnsasitintaaiiaremandtiariaiediatdepmmntnnnnniaianimtminaiaie 34

D. Dobbs, Remedies (1973)

TTT sicsisceeeienntestecndepannnnnaianaanisisianeniesiedieieepetiatings 26

TET eneeidasiarndaienigsltanaaiiasaraaetiteemanilataiaeimeadmmamineaitaie 34

A ctoarshasarhiniceanieeepanseeniditeeitaieabbebbiainieaiieiiniaistiniates 27, 34

Ti cnartenaceaealarcenseadaieneeaiaiaea illic iiabiealadateidiaiiatts 27

Laycock, The Scope and Significance of Resti-

tution, 67 Tex. L. Rev. 1277 (1989) ..............000 34

Restatement of Restitution (1937) ...........:cccceeeeeeees passim

1 ccneasiessipteninbemeiatisbitnetaianbeseninesiiuaienninbeenstiodee 25

A wsisiccnidieaeniesntpeannniitaaiaiiianapdeitiammecinineenidnaienuneie 25

Ib Hii licsicsiamtncineiadiiensennmnasenninninieinbinasssiiiiieasbiiaaiamiiaiiaabiaiadiaaidaiad passim

i ‘Til nutesesnecnnnsnsssennsesenienmennienistgmenieenensmenennnnagetn 26, 32

i hicscaridainnsennensedeaeciateeintasinactinensmaibinniantaiupdanendennenteiued 26

Restatement (Second) of Contracts (1981)

SIIEGIIED i thiredetnnesipedconmmmmtennntubiantebedetienennaeienasneiate 24

i 2 snientenineegneninusiinnnedansenegeanbiansepeemnpimepbedtnenieiiues 24

i a aiatintasidehnecienpeanebeiaebintaianiiaiieedsiasiicnasebaiiaiedidintitit 24

Restatement (Second) of Trusts (1959)

i i hsocnsatnsnmecnteppenienndnniaiasiaineneniteannbepatiateptnenenennes 26

ir i tsadeteonshdeacinannmnieienepteneadaiapeneibastetienieuneiumengies 36, 37

iP 2 inscnnndinencnuiatdeseateasinbiiadimmnseniensdaneniounientanusinants 36

—

TABLE OF AUTHORITIES—Continued

Page

(} [ith cesanseeseecceseessssnnssssmnesatacnenannsnsenesenessemenssneasste 37

FF Si coensacesenccsensessemesnensssensassnnqnensensnemmemeansenssns 29

3A A. Scott & W. Fratcher, Law of Trusts (4th

ed. 1988)

Gp Bien SE ecnseqeessvenssnsemninseminniememennnn 36

5 A. Scott & W. Fratcher, Law of Trusts (4th ed.

1989)

TEI isitaiiacainaeindntcinaiaiaiiaeeieladcmnatdbaeamearaiaemasaiaaas 35

A inissicinsteiaietcnncasiineiiaiiniaaiiniatteniaaiuanimaiaiaiiel 28, 32, 35

6A C. Wright, A. Miller, & M. Kane, Federal

Practice & Procedure § 1546 (1990)...............+ 45

7C C. Wright, A. Miller, & M. Kane, Federal

Practice & Procedure § 1908 (1986)...............+ 45

39 Cal. Jur. 3d (Rev.) Insurance Contracts § 653... 45

58 Cal. Jur. 3d Subrogation § 31...........ccscsseeeeeees 43

ee ae

IN THE

Supreme Court of the United States

No. 99-1786

GREAT-WEST LIFE & ANNUITY INSURANCE CO., EARTH

SYSTEMS, INC., AND THE HEALTH AND WELFARE PLAN FOR

EMPLOYEES AND DEPENDENTS OF EARTH SYSTEMS, INC.,

Petitioners,

Vv.

JANETTE KNUDSON AND ERIC KNUDSON,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF OF AMICUS CURIAE

IN SUPPORT OF THE JUDGMENT BELOW

BY INVITATION OF THE COURT

Pursuant to this Court’s order dated March 19, 2001, this

brief is submitted in support of the judgment of the Ninth

Circuit in this case.

STATEMENT

In this case, as in many others, a beneficiary of an

employer-sponsored medical plan, covered by the Employee

Retirement Income Security Act of 1974 (ERISA), was

injured in an accident, and the ERISA Plan paid for her

medical expenses. The beneficiary filed and pressed a state-

court tort action against alleged tortfeasors to recover

damages, including for many items, such as future medical

expenses and lost earnings (from what here was a life-altering

injury), not paid for by the Plan. Neither the ERISA Plan nor

its representatives assisted or participated in the state-court

action, even after receiving notice of a settlement proceeding

in which liens on the recovery would be paid. Instead,

alleged fiduciaries of the ERISA Plan initiated a second

action, in federal court, under ERISA § 502(a)(3), 29 U.S.C.

§ 1132(a)(3), invoking a reimbursement provision of the

ERISA plan to demand payment from the injured beneficiary

of the amount the Plan had expended for her medical care.

The district court in this case, agreeing with the injured

beneficiary, held that the particular plan provision at issue

allowed reimbursement only out of the third party’s

settlement payments made for past medical expenses, not out

of the payments made for (a small portion) of other (amply

documented) losses. The court of appeals did not decide the

proper interpretation and application of the plan

reimbursement provision at issue. It held instead that this

action for money was not within ERISA § 502(a)(3)’s

authorization for a fiduciary to sue for “appropriate equitable

relief.”

A. Petitioners and the Plan

In 1981, petitioner Earth Systems, Inc., an employer,

established an employee benefit plan to provide medical

benefits for its employees and their dependents, subject to

ERISA and California law. JA 189-90, 204. Earth Systems

established a formal Trust to carry out the plan, and trustee

Jerol Brown identified the Trust as the legal entity

constituting the Plan, a petitioner here. JA 177, 187. The

“only plan documents” were the 1981 Trust Agreement and a

Summary Plan Description. JA 207.

The Trust Agreement obliges Earth Systems to pay to the

Trust the amounts needed for the Trust to pay claims (JA

190), while also allowing the Trust to purchase insurance

directly for the beneficiaries (JA 198). The Agreement states

that Earth Systems’ board of directors had “appointed a

Board of Trustees (the “Trustees’) to administer the Plan” (JA

189) and that “[t}]he Trustees . . . shall be the Plan

Administrator as defined in Section 3(16)(A) of ERISA [29

U.S.C. § 1102(16)(A)] and the fiduciary with the rights,

powers, duties, responsibilities, discretion and immunities set

forth in the Plan” (JA 192). The trustees had “the authority to

direct the investment, management and control of Trust

assets” (JA 192), to appoint agents as needed to carry out

their duties (JA 193), and to exercise a broad range of general

powers to operate the Trust (JA 195-200).

The second relevant plan document is the Summary Plan

Description (the “Booklet’”), which is excerpted at JA 54-66.

The Booklet identifies Earth Systems, Inc. as_ the

“Policyholder/Employer,” names “Denise Shelton, Human

Resources Manager, Earth Systems, Inc.” as the “Plan

Administrator,” and defines the terms of the benefits plan at

the relevant time. JA 61-62. Immediately after a provision

for “co-ordination of benefits’—‘to correct overcoverage

which occurs when a person has health coverage for the same

expenses under two or more” plans providing benefits (JA

54)—the Booklet sets forth a “Provision for Right of

Recovery,” which is the basis for the present lawsuit.

JA 58-59.

The provision first states that “[a] third party may be liable

or legally responsible for expenses incurred by a Covered

Person for[] an illness; or a sickness; or a bodily injury.” JA

58 (boldface omitted throughout this paragraph). In that case,

the Plan will “pay any benefits which are payable for the

expenses incurred by the Covered Person for the treatment of

such illness, sickness or bodily injury (the Loss).” JA 58.

The Plan, however, at its option has

the right to recover from the Covered Person any

payment for benefits paid for treatment of such Loss

under this Booklet which the Covered Person is entitled

to receive from the third party.

JA 58. The Plan has “a first lien upon any recovery, whether

by settlement, judgment or otherwise, that the Covered

Person receives” from the responsible third party (or its

insurer or guarantor or from uninsured motorist insurance).

JA 58. That “lien will not exceed: the amount of benefits

paid under [the] Booklet for the treatment of the Loss; or the

amount received by the Covered Person for such medical

treatment from the third party.” JA 59. The Covered Person

must “cooperate fully” with the Plan, and if a recovery is

obtained from a third party and the Plan is not reimbursed

“fully for any benefits paid under this provision,” then the

Covered Person “will be personally liable . . . to the extent of

such recovery up to the amount of the first lien.” JA 59.'

The essential dispute on the merits is over the scope of the

reimbursement right under the plan. See JA 244. The

position urged by respondent Janette Knudson—and adopted

by both the state and federal trial courts considering it, but not

discussed by the court of appeals—is that this recovery

provision (like the coordination of benefits provision) targets

only duplication of payments to the injured person and thus

reaches only money paid by the third party (alleged

tortfeasor) for the medical expenses covered by the plan, not

money paid by the third party for other losses such as future

' The provisions quoted in the paragraph in text use “we” and “us” to

describe both the payments made and the recovery rights, and the

Summary Plan Description (at V-10) says: “‘We’, ‘our’ and ‘us’ will be

used in reference to:—for Health Benefits, the Employer... .” Ex. 25 to

Def. Cross-Motion for Summary Judgment. Consistent with the limited

class of permitted plaintiffs under ERISA § 502(a)(3), 29 U.S.C.

§ 1132(a)(3) (“participant, beneficiary, or fiduciary”), petitioners,

throughout their brief and elsewhere, treat “the Plan” as having made the

payments and being entitled to the claimed recovery. See, e.g., Pet. Br. 4,

6, 11, 12, 13, 15, 18, 23, 24, 28, 29, 34, 35; JA 77-78 (Right of Recovery

Agreement); JA 85 (complaint); JA 90, 92 (amended complaint); JA 180

(Brown declaration). This brief accordingly refers to the Plan’s asserted

right to recover.

medical expenses or lost income or loss of enjoyment of life

from a long-term disability. The provision begins by

introducing its subject in terms of past expenditures, i.e.,

“expenses incurred,” for which a third party may be liable but

that the Plan pays. It states that the Plan has “the right to

recover from the Covered Person any payment for benefits

paid for treatment of such Loss under this Booklet which the

Covered Person is entitled to receive from the third party.”

It states that the lien “will not exceed . . . the amount received

by the Covered Person for such medical treatment from the

third party,” and it restricts the liability of the Covered Person

to “the amount of [that] lien.” JA 58-59 (emphases added).’

See U.S. Healthcare, Inc. v. O’ Brien, 868 F. Supp. 607, 610-

11 (S.D.N.Y. 1994). Petitioners, in contrast, have urged that

the provision reaches (up to the amount of benefits paid by

the Plan) any payments made to the injured person by a third

party on account of the injury, whether for Plan-paid medical

expenses or otherwise, and without any Plan sharing of the

costs of obtaining the settlement.’

? The possible confusion from the phrase “payment for benefits paid”

may be alleviated by re-arranging the sentence: the Plan has “the right to

recover from the Covered Person any payment” “which the Covered

Person is entitled to receive from the third party” “for benefits paid for

treatment of such Loss under this Booklet.”

* The Right of Recovery Agreement signed by Eric Knudson, on which

petitioners rely, introduces its topic as the possibility that a third party

“may be liable for like benefits,” i.e., the Plan-paid benefits. The sentence

in the Agreement about recovery seems to focus on payments for Plan-

paid expenses: “the Plan may recover from me any payment for benefits

paid under this Plan . . . which I or my dependents may be entitled to

receive from a third party” (“for” omitted at ellipsis). JA 77-78.

* Chief Judge Posner, speaking for the Seventh Circuit, recently

explained, in terms applicable to the present case, some of the

consequences of such a demand: it “would allow the plan to free ride on

the efforts of the plan participant's attorney”; it would “gratuitously deter

the exercise of the tort rights of plan participants” who can easily (as here)

“lose part of [their] plan benefits simply by virtue of having exercised

The third petitioner in this case (besides Earth Systems and

the Plan) is Great-West Life & Annuity Insurance Company

(Great-West), whose relation to the other two petitioners was

defined by two agreements, entered into simultaneously in

1990. In a Services Agreement—separately signed by a

“Plan Administrator” and Contractholder Earth Systems’

Treasurer (JA 31)}—Great-West undertook to provide “non-

discretionary” benefit-payment services to the Plan (JA 25).

The Agreement states that “under no circumstances shall

Great-West be designated as plan administrator or a fiduciary

of the Plan” and that it does not “confer upon Great-West any

authority or control respecting management of the Plan{ or]

authority or responsibility in connection with administration

of the Plan.” JA 28; see JA 178 (“non-discretionary claims

service administrator’’).

In a separate agreement, Great-West issued to Earth

Systems (“the Contractholder”) a group contract for stop-loss

insurance, under which Great-West, in exchange for

premiums, bore the risk that plan benefits would exceed

certain designated amounts for which Earth Systems

was itself responsible. JA 35-38°; see Pet. Br.3

[their] right to bring a tort suit against a third party” (the reimbursement

claim, arising only if there is a recovery, can be more than the net

proceeds, leaving the participants worse off than if they never sue); that

“prospect might well deter a suit likely to result in a judgment or

settlement not much larger than the benefits available under the plan,”

producing “undercompensation for harms [other than medical expenses]

that were unrelated to the type of harm [medical expenses] to which the

benefits pertain”; and “[(t}he plan itself might well be worse off in the long

run, as it would have to incur attorneys’ fees in order to enforce its right of

subrogation.” Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan

v. Wells, 213 F.3d 398, 402 (7th Cir.) (Posner, C.J.), cert. denied, 121 S.

Ct. 441 (2000).

* As of January 1, 1994, Earth Systems changed its plan from “self-

funded” to insured—an important distinction for ERISA purposes. See

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985). Before

then, Earth Systems had responsibility for providing the needed funds for

(“stop-loss insurance coverage . . . reimbursed the employer,”

not the Plan). While the stop-loss contract states that it

created no “rights or obligations whatsoever on the part of

Great-West with respect to the persons covered under the

plan, or their beneficiaries” (JA 42), it provides that Earth

Systems “assign[ed] to Great-West all of its rights to make,

litigate, negotiate, settle, compromise, release or waive,” in

the “sole discretion” of Great-West, any claim “under the

Right of Recovery Provision contained in the Plan.” JA 45.

Subsequent adjustments to the stop-loss contract (JA 46-49,

50-53) set forth the priority of distribution of money collected

under the recovery provision (first to Great-West, then to

Earth Systems), see JA 49, 52-53, and state: “The

Contractholder hereby assigns to Great-West any and all

rights the Contractholder, as Employer, may have under

the Right of Recovery Provision contained in the Plan.”

JA 49, 53.

B. The Accident And Its Aftermath

On June 10, 1992, Janette Knudson and Eric Knudson

(then Janette’s husband), along with three passengers, were

involved in an automobile accident that left Janette a

quadriplegic from a severe injury to her spinal cord. JA 112,

145. As a result of her injuries, she incurred substantial

medical expenses. At the time, Eric Knudson was an

employee of petitioner Earth Systems, and both he and his

wife were “Covered Persons” under the Summary Plan

Description. The Plan eventually paid $411,157.11 in

medical expenses, though petitioners have not alleged or

established that any of that money was ever paid to Janette

Knudson (or Eric), rather than the providers of her medical

care. JA 238.

the Plan, and Earth Systems purchased insurance for itself, with the

insurer having no direct relationship to the beneficiaries. Beginning in

1994, the Plan purchased insurance, with the beneficiaries then having a

direct relationship, as insureds, to the insurer. JA 177 n.1, 208, 215.

In August 1992, two months after the accident, Great-West

wrote a letter to Eric Knudson stating, among other things,

that the Plan was entitled “to be a party to any legal action

you may take because of an accident or injury” (JA 71) and

“to full reimbursement for expenses” paid by the Plan (JA

71). In September 1992, Great-West wrote a letter to Janette

Knudson (at the same address as Eric Knudson’s) stating that .

Great-West “on behalf of the Plan has a first lien Right of

Recovery to any sums paid in settlement or judgment on your

behalf as a result of the accident” and asking for completion

of the “Right of Recovery Agreement” (prepared by Great-

West and included with the letter, see JA 68). JA 75-76. The

next month, Eric Knudson signed and returned the agreement,

evidently without authorization from Janette Knudson, as she

attested (JA 113). The Agreement “request[ed] that benefits

be paid by the Plan . . . with the understanding . . . that

another party or insurer may be liable for like benefits for

which they will make payments” (emphasis added) and then

addressed subrogation (in one paragraph) and reimbursement

(in another) (JA 77-78):

In consideration for the plan paying benefits and in

accordance with the terms of the Plan, I agree that the

plan may be subrogated to me or my dependent’s rights

for any benefits from the other party. I agree to transfer

to the Plan any right I or my dependents may have to

take legal action against the other party. I also agree to

cooperate fully with the Plan in asserting its right to

subrogate and supply to the Plan any and all information.

I will execute all documents reasonably necessary to

Carry Out its right to recover from the other party any

benefits paid under the Plan which are subject to this

provision.

I also understand that under the terms of the Plan, the

Plan may recover from me any payment for benefits paid

under this Plan for which I or my dependents may be

entitled to receive from a third party. The Plan shall

automatically have a first lien upon any recovery,

whether by settlement, judgment or otherwise, that I or

my dependents receives from another party, the other

party’s insurer or guarantor, or my Own insurer or

guarantor. Said first lien shall be for the amount of

medical and hospital benefits paid by the Plan, I shall be

personally liable to the Plan to the extent of such

recovery up to the amount of its first lien. I agree to

cooperate fully with the Plan in asserting its rights to

recover.

C. The State Court Tort Action

In late 1993, Janette Knudson and Eric Knudson filed a tort

suit in the California courts seeking to recover from Hyundai

Motor Company, the manufacturer of the car, and others. JA

238. Great-West had notice of the ligitation from the outset

(Pet. Br. 6-7), but it did nothing to participate or to assist

financially in the litigation. After more than three years of

discovery and vigorous disputes over the alleged defects in

the automobile and the cause of Janette Knudson’s injuries

(JA 145-46), Janette Knudson and the defendants in March

1997 negotiated a settlement of the state-court case in the

amount of $650,000, conditional on court approval. JA 161-

66 (conditional release). (Eric Knudson does not appear on

the relevant papers; in April 1997 he informed Great-West

that he and Hyundai had settled his loss—of-consortium claim.

C.A. Appellee ER at 261. See note 9, infra.)

Janette Knudson petitioned the state court for an order to

approve the settlement and, as part of that settlement, to

establish a Special Needs Trust under California Probate

Code § 3611 to provide (if only for a limited time) for some

of her special needs that will not be covered by state

Medicaid (“Medi-Cal”) or related programs. JA 145-60; see

JA 115-38 (Trust). The petition was joined by Louise

Curinga, “a long term friend” who had “agreed to be the

Trustee of the Janette Knudson’s Special Needs Trust.” JA

145. It recited, with supporting declarations, that future

medical expenses alone would be more than $2.5 million and

lost earnings more than $819,000, that Janette Knudson “will

need lifetime care and lifetime attendant assistance,” and that

she would need special wheelchairs, beds, vehicles, house

alterations, and other help. JA 148; see JA 142 (noting lost-

earnings figure from Knudson’s evidence). Pursuant to

California Probate Code § 3602, notice was given to

California authorities so that they might satisfy their liens (for

Medi-Cal payments made) and ensure that the statutory

qualifications for the Trust were met. JA 149-53.

The petition laid out the calculation of how much money

was to be put into the Special Needs Trust—$256,745.30,

representing the $650,000 settlement amount, minus the

attorney’s fees and other costs of obtaining the settlement

(totaling $373,426),° minus the amounts to be paid to the two

known lienholders, namely, Medi-Cal and Great-West.

JA 153-58. A payment of $5,000 was reserved for Medi-Cal.

JA 157. As for Great-West, the petition reported the dispute

over the proper amount, noted that Great-West had never

intervened or filed a lien notice in the state-court suit, and

explained why, under the language of the plan, Great-West’s

claim (defined by the lien created by the Plan) was limited to

““the amount received . . . for [the Plan-funded] medical

treatment from the third party.’” JA 154-55 (quoting plan)

(emphasis added). Accordingly, the proposed Great-West

° Although petitioners report the total of $373,426 (Pet. Br. 7), they

omit the breakdown: (a) recovery of costs (including expert fees) of

$161,760 advanced by counsel over the years of the litigation, and (b) an

attorney's fee of $216,666, representing a 1/3 share (reduced from the

agreed-on 40% share). JA 157. Janette Knudson attested that, upon

review (by herself and Trustee Louise Curinga) of the attorney's fee and

costs, she did not object to those charges, considering “the testing, time,

effort, and numerous experts employed . . . as consultants in order to

attempt to prove the crash worthiness theory.” JA 113.

payment was based on the allocation of the settlement amount

to various categories of loss traceable to the accident: 45% for

future medical expenses; 40% for loss of enjoyment of life,

distress, and long-term disability; 5% for lost earnings; 5%

for housing, transportation, and other needs; and 5% for past

medical expenses. JA 154. With Great-West limited to

recoveries for past medical expenses, the 5% figure was

applied to the net settlement ($650,000 minus the fees and

costs of $373,426, resulting in $276,574) to arrive at a

$13,828.70 payment to Great-West. JA 157.’

On March 26, 1997, Janette Knudson gave notice of the

proposed settlement to Great-West by mailing it the papers

seeking state-court approval of the settlement. JA 233. On

April 22, 1997, the day before the state-court hearing date,

Great-West, calling itself a “defendant” and asserting that the

state-court action involved federal claims relating to ERISA

benefits, filed notices of removal of the case. JA 167-70; see

JA 233 (date of filing). On June 30, 1997, the federal district

court remanded the case to state court, concluding that Great-

West, not being a defendant in the case, could not remove it.

JA 171-75; see JA 233.

A few days later, a new notice of a new settlement-

approval date in state court was sent to and received by

Great-West and Earth Systems, Inc., which still did not

intervene or otherwise participate in the state-court suit.

JA 217, 233-34. In late July 1997, the state court approved

the settlement, with $13,828.70 to go to Great-West,

$2,729.42 to Medi-Cal (whose actual claim was lower than

If the $411,157.11 sought here by Great-West were subtracted

directly from the $650,000 settlement amount, $238,842.89 would remain.

If Medi-Cal were then paid its $2,729.42, and the out-of-pocket expert

fees and other costs advanced by counsel ($161,760) were paid,

$74,353.47 would remain. Out of that amount would have to come (a) a

recovery to Janette Knudson and (b) a fee to counsel who worked for

years to obtain the settlement.

the reserved $5,000), $260,015.88 to the Special Needs Trust,

and the remainder to Janette Knudson’s counsel for his costs

and fees. JA 139-44. The court found that Janette Knudson

qualified for the Special Needs Trust, which would receive an

amount “substantially less than the present value of the future

medical expenses” (JA 140-141); that there was a substantial

risk of Janette Knudson’s not prevailing at all in the

“disputed, highly complex product liability” action (JA 141);

that the allocation of the settlement amount to various

categories of loss was fair (given, particularly, the estimated

$2.5 million in future medical expenses and $819,000 in lost

earnings) (JA 143); that the plan provision invoked by Great-

West is limited to the amount recovered for “past medical

expenses” (JA 143); and that the attorney’s fees and costs—in

a case requiring “considerable discovery, vehicle testing, seat

belt testing including the employment of eleven (11) expert

witnesses”—were proper (JA 143-44). Hyundai was directed

to pay the Trust amount directly to the Special Needs Trust

and the remainder to a Client Trust Account held by Janette

Knudson’s attorney. JA 144. Janette Knudson herself

received no money.

On August 1, 1997, the order approving the settlement was

mailed to Great-West and Earth Systems, Inc. JA 234-35

(stipulation of parties). On August 21, 1997, notice was

given to Great-West that a check of $13,828.70 was being

sent. JA 235. Petitioners’ attorney responded the next day

that all funds should segregated pending the outcome of the

federal-court case, but Janette Knudson’s attorney replied, the

same day, that he had already disbursed the money he had

received and the money for the Special Needs Trust had been

paid directly into that trust by third-party Hyundai. JA 235.

D. This Litigation

On May 19, 1997, before the federal court rejected the

effort to remove the state-court case, Great-West (by itself)

filed a complaint in federal district court against Janette and

Eric Knudson, asserting that it was “the assignee for

collection” of the Plan for reimbursement purposes. JA 82;

see JA 81-86. Great-West invoked ERISA § 502(a)(3)(B)(ii),

29 U.S.C. § 1132(a)(3)(B)(ii) (“appropriate equitable relief . .

. to enforce . . . the terms of the plan”). See JA 82, 85. It

asked for a declaration of rights and an injunction requiring

the Knudsons “to reimburse the Plan in the amount of

$411,157.11 out of any proceeds they recovered from third

parties.” JA 85-86.

In early July 1997, an amended complaint was filed

(JA 87-95; see JA 5, 234), now with three plaintiffs

(petitioners here)—Great-West, again asserting that it was

“assignee for collection” of the Plan for purposes of

reimbursement; the Plan itself; and Earth Systems, Inc.,

which stated that it was the Plan Administrator. JA 88-89.

The amended complaint, now also reciting the Right of

Recovery Agreement signed by Eric Knudson (JA 91-92),

again asserted that the Knudsons violated the plan “[b]y not

agreeing to reimburse the Plan [out of] the amount recovered”

in the state-court tort suit (JA 92) and invoked ERISA

§ 502(a)(3) to recover (JA 92). Petitioners asked for an

injunction requiring reimbursement of $411,157.11 to the

Plan (JA 92), a declaratory judgment declaring the Plan’s

right to reimbursement in that amount (JA 93), a temporary

restraining order and preliminary injunction against

continuation of the state-court proceedings for approval of the

settlement until the federal court determined petitioners’

reimbursement rights and against any disposition of funds

received in the settlement (JA 93-94), and a permanent

injunction against any sch disposition (JA 94). While the

concluding prayer for relief requested “an injunctive order

enjoining Defendants to reimburse the Plan . . . and for any

other relief to which it is entitled” (JA 95), no mention was

made of any remedies besides a preliminary or permanent

injunction, declaratory judgment, and TRO.

The district court denied the application for a TRO to

stop state-court completion of the settlement proceedings.

JA 96-99. It relied first on the Anti-Injunction Act’s broad

prohibition against federal courts enjoining state court

proceedings (28 U.S.C. § 2283), concluding that none of the

exceptions to the broad bar applied to justify “disrupt[ing] the

delicate balance of federalism.” JA 98. The court also found

petitioners unlikely to succeed, noted that (at the time) “their

rights of subrogation remain{ed] intact,” and observed

(relatedly) that “Great-West has filed this Application after

failing for three years to intervene in the state court action.”

JA 99.

After the state court approved the settlement and the

money was disbursed (as described above), and after Janette

Knudson answered (JA 100-11), this litigation proceeded in

discovery. Petitioners filed a motion for summary judgment

in December 1997. Petitioners’ position, stated by trustee

Jerol Brown, was that the Plan’s right of recovery provision,

and the Right of Recovery Agreement signed by Eric

Knudson, entitled the Plan to recover its $411,157 out of the

full $650,000, without deduction for the costs of securing the

settlement and without regard to whether Janette Knudson

was being made whole for her losses. JA 180-82; see

JA 185-86 (re-affirming interpretation after considering

additional language). Janette Knudson filed a motion for

* Petitioners, citing their own Ninth Circuit brief, report that Great-

West offered (presumably to Janette Knudson, the alleged obligor) to

accept only $200,000 if Janette Knudsons counsel would accept

$200,000 as well, leaving $250,000 for the Special Needs Trust. Pet. Br.

7. The $200,000 amount for counsel would, after subtracting the more

than $161,000 in out-of-pocket expert fees and other costs incurred by

counsel, have left a fee of roughly $39,000. Petitioners do not suggest

that such a fee would be reasonable or that they ever offered to pay Janette

Knudson’s counsel for his years of effort, bearing a substantial risk of no

payment at all, that resulted in the settlement from which they sought to

benefit.

summary judgment in mid-February 1998 contending that

petitioners’ recovery was limited to the $13,828.70 they had

been offered all along. JA 8-15.’

In May 1998, the district court granted summary judgment

against petitioners. The court wrote a brief opinion (JA 237-

49) and adopted an edited version of Janette Knudson’s

statement of uncontroverted facts and conclusions of law (JA

210-35). First, the court concluded that the state court

hearing the tort case had jurisdiction to “determine the status

of liens on Janette Knudson’s recovery” under ERISA

§ 502(a)(1)(B), which authorizes a beneficiary “to enforce

his rights under the terms of the plan,” 29 U.S.C.

§ 1132(a)(1)(B). See ERISA § 502(e)(1), 29 U.S.C.

§ 1132(e)(1) (concurrent jurisdiction over § 502(a)(1)(B)

claims). JA 242-43; see also JA 228 (“failure after notice to

subrogate or to enforce their alleged rights” in state court

“preclude[s] them from re-litigating the same issues in this

case”). Second, the court explained that petitioners’ right of

recovery must be governed only by the plan provision on the

right of recovery, not by the Right of Recovery Agreement

signed by Eric Knudson—which could not permissibly alter

* The petition for certiorari describes the judgments below as only in

favor of respondent Janette Knudson, referring throughout to

“respondent” and “Knudson” in the singular. Pet. i, 1-9. Eric Knudson

did not appear in the court of appeals, was not served by petitioners in the

court of appeals (according to the certificates of service attached to their

notice of appeal and their briefs), and was not served and has not appeared

in this Court. The relevant papers in the district court, including the

“stipulation of facts between the parties” (JA 232), were filed only on

behalf of Janette Knudson as defendant, not Eric Knudson (see JA 100

(answer); JA 210 (statement supporting summary judgment motion)), who

seems to have filed only an opposition to the initial application for a

temporary restraining order and an opposition to reconsideration of the

summary judgment against petitioners (see JA 5-21). See also JA 139-60

(state-court settlement and accompanying release and court approval only

on behalf of Janette Knudson). This brief hereafter refers simply to

Janette Knudson as respondent.

the plan document without amendment. JA 245-46. Third,

the court held that the plan terms are “abundantly clear” in

limiting recovery to amounts “received from a third party for

medical treatment” (JA 246-47 (emphasis added)); the court

therefore rejected the interpretation of trustee Jerol Brown

(who it said “was vested with the authority to interpret the

Plan”) as simply “clash[ing] with the terms of the Plan”

(JA 246).'° See also JA 228 (citing the Make Whole Rule

presuming no reimbursement until injured person made

whole, see Barnes v. Indep. Automobile Dealers Ass'n of Cal.

Health & Welf. Benefit Plan, 64 F.3d 1389 (9th Cir. 1995)).

Finally, the court held that the amount of the recovery for

medical treatment expenses was resolved by the state court

(JA 247), while separately declaring that the damages

apportionment was fair (JA 228). See also JA 229 (adopting

conclusion that stop-loss agreement unlawful). Accordingly,

the court granted summary judgment against petitioners (and

awarded attorney’s fees, see Pet. App. D1-D6)."'

Jerol Brown pointed (JA 185) to the Trust Agreement as vesting him

with interpretive authority, but the Trust Agreement nowhere states a

discretion to “interpret” or “construe” (JA 189-202), and Brown did not

identify the particular language he was relying on. It is unclear, therefore,

how the pertinent language fares under the standards for overcoming the

presumption of de novo review. See, e.g., Firestone Tire & Rubber Co. v.

Bruch, 489 U.S. 101 (1989); Ingram v. Martin Marietta Plan, 244 F.3d

1109 (9th Cir. 2001); Feder v. Paul Revere Life Ins. Co., 228 F.3d 518

(4th Cir. 2000); Postma v. Paul Revere Life Ins. Co., 223 F.3d 533 (7th

Cir. 2000); Herzberger v. Standard Ins. Co., 205 F.3d 327 (7th Cir. 2000)

(Posner, J.).

'' Among the motions the district court denied was petitioners’ motion

(filed in December 1997, see JA 8) to amend the complaint to add as

defendants both Janette Knudson’s counsel and Louise Curinga, trustee of

the Special Needs Trust. See JA 249; Pet. Br. 8. Neither on appeal, nor in

their petition for certiorari, did petitioners make any argument that, even if

summary judgment was proper as to Janette (and Eric) Knudson, it was

error to deny leave to amend. See JA 252 n.4 (court of appeals noting

lack of challenge); C.A. Brief of Appellants 6-7 (statement of issues),

E. Court of Appeals Decision

On appeal, the Ninth Circuit affirmed the judgment against

petitioners, but on a threshold ground (whether or not deemed

jurisdictional). JA 250-53. The Ninth Circuit had held in

FMC Medical Plan v. Owens, 122 F.3d 1258 (9th Cir. 1997),

and reaffirmed in Cement Masons Health and Welfare Trust

Fund for Northern California v. Stone, 197 F.3d 1003 (9th

Cir. 1999), and Reynolds Metals Co. v. Ellis, 202 F.3d 1246

(9th Cir. 2000), that “actions by ERISA fiduciaries seeking to

enforce an ERISA plan’s_ contractual reimbursement

provisions,” where the initial benefits (or, for that matter, the

recovery from the third-party alleged tortfeasor) were not

wrongfully obtained in the first place, do not come within

ERISA § 502(a)(3)’s authorization for “equitable relief.”

Reynolds Metals, 202 F.3d at 1248-49; see FMC Medical,

122 F.3d at 1262 (“substance of the remedy sought by FMC

is money damages for Owens’s alleged breach of the Plans’’);

Cement Masons, 197 F.3d at 1007-08. The Ninth Circuit in

the present case concluded that those decisions controlled and

thus affirmed the judgment against petitioners—for either

lack of a cause of action (as Cement Masons said) or for lack

of jurisdiction (JA 253 n.5).

SUMMARY OF ARGUMENT

The Ninth Circuit’s judgment affirming the dismissal of

petitioners’ suit is correct for two reasons. The suit does not

seek “equitable relief’ under the standard set by this Court in

Mertens v. Hewitt Associates, 508 U.S. 248 (1993). And

even if it does, the suit does not seek “appropriate” equitable

relief.

16-31 (availability of § 502(a)(3)), 31-41 (no preclusion by state-court

judgment), 41-53 (interpretation of plan terms), 53-58 (enforceability

against Janette Knudson of separate agreement signed by Eric Knudson),

58 (remand to determine amount of medical expense recovery), 58-59

(attorney's fees).

To state a cause of action for “equitable relief’ under

Section 502(a)(3), a claim must, under Mertens, seek relief

that was traditionally available in equity, for litigants

generally, for the type of claim made. A reimbursement

claim like petitioners’ claim, however, seeks nothing but

money due under an obligation to pay. It does not involve

specific plan property or its product: the recovery amount

claimed is not money that was actually obtained from the plan

or the proceeds or profits of such money, let alone money

obtained by anyone’s wrong or error. Such a money claim

was not typically remediable in equity, but had to be pursued

at law, even when the substantive basis alleged was unjust

enrichment. It is immaterial whether restitution in equity

might be available when non-monetary property is involved

or when, as in Harris Trust and Savings Bank v. Salomon

Smith Barney Inc., 120 S. Ct. 2180 (2000), a claim is for

money transferred out of a trust by the trustee’s wrongful

conduct (though without wrong by the recipient). Nothing

shown by petitioners or the United States establishes, that

equity typically provided a remedy for a money claim like

petitioners’, which does not seek return of specific Plan assets

(or their profits or proceeds), let alone Plan assets improperly

transferred. Indeed, petitioners’ claim is deficient for an

additional reason: the recovery amount was never received by

respondent, making the claim against her one for purely

personal monetary liability, and thus outside the equitable

restitution remedies of constructive trust and equitable lien.

This conclusion is not overcome by the pleading device of

requesting an “injunction” to pay the money claimed.

Likewise, blanket invocation of “restitution” (or its “unjust

enrichment” basis), which was available in different circum-

stances in the equity and law courts, fails to distinguish

whether the equitable restitution remedies were traditionally

available for the type of claim presented. The law of trusts

does not help petitioners either: Mertens pointedly rejected a

trust-specific application of Section 502(a)(3); and in any

event, a trustee’s suit against a beneficiary for money was an

action at law if such claims, aside from trust law, were

actions at law. Finally, the claim cannot become equitabic

simply because damages might be unavailable: allowing an

injunction to pay money to substitute for damages would

simply reverse the congressional rejection of such remedies,

as established by Mertens’ definitive construction of Section

502(a)(3). The potential lack of remedy for plans cannot

support a different result: Mertens made clear the standard,

despite the obvious potential that some wrongs and harms

would go unredressed without damages remedies; and, given

the breadth of ERISA preemption, leaving wrongs

unredressed is far from alien to ERISA. Accordingly, Section

502(a)(3)—which petitioners cannot properly supplement

with newly created nonstatutory remedies—does not embrace

petitioners’ claim.

If this Court nevertheless were to conclude that petitioners’

claim seeks “equitable relief,” the claim still should be held

outside Section 502(a)(3) on the ground that it does not seek

“appropriate” relief. The Court's decision in Varity Corp. v.

Howe, 516 U.S. 489, 515 (1996), makes clear that the

appropriateness of the relief is an additional requirement for

coverage by Section 502(a)(3). A claim should be held not

appropriate under the provision if it would harm ERISA

interests—e.g., by increasing litigation expenses and

interfering with tort suits for recovery—and generate

substantial difficulties of coordination and comity between

state and federal courts, and if there are alternative avenues

for protecting legitimate ERISA interests that avoid those

harms. Reimbursement claims like petitioners’ are not

appropriate for those reasons.

Such reimbursement claims _ intrinsically generate

duplicative litigation, as they add to the (typically) state-court

tort suit a new federal proceeding with interrelated issues.

The costs and delays of such duplicative litigation must be

borne by beneficiaries and participants and by plans, too, and

can impede the completion of the state-court proceedings that

produce the very recovery sought by the plans. The plan

itself (or its representatives) may even be party to the state-

court tort suit under a subrogation provision, which leaves the

tort claim to which the plan would be subrogated as a state-

law claim in state court. Permitting such fractured and

multiple litigation makes no sense, in terms of ERISA

interests or the interests of the state and federal judiciaries,

where it is not shown to be unavoidable.

Petitioners have not shown that plans cannot protect their

interests in enforcing recovery rights through participation in

the underlying state-court suit, as by intervening to assert a

lien on the recovery amount or to assert rights as subrogee.

The sole suggested impediment is that of preemption, but

petitioners have not shown that these state-court mechanisms

should be preempted. In fact, such mechanisms do not add

any obligations to override plan choices about benefits

payments or administration, and they do not add any

liabilities to those authorized by ERISA: they provide

procedural mechanisms for a plan to obtain, under federal-

law principles governing application of plan terms, exactly

what it claims an entitlement to receive under its own chosen

recovery provisions. The sensible course of participation in

the underlying state-court case thus has not been shown to be

preempted. The duplicative federal-court suits petitioners

propose should accordingly be held to be not “appropriate,”

and thus outside the scope of Section 502(a)(3).

ARGUMENT

I. PETITIONERS’ MONEY CLAIM DOES NOT

SEEK EQUITABLE RELIEF UNDER SECTION

$02(a)(3)

Section 502(a)(3) requires that the relief sought be

“equitable relief.” Petitioners’ suit, however, seeks nothing

more than money to fulfill an obligation to pay. In particular,

it does not seek the return of specific property (or even

money) once properly conveyed to respondent or the

proceeds from any such specific property; indeed, it does not

claim money actually ever acquired by respondent. Such a

claim traditionally was not typically remediable in equity and

is thus outside Section 502(a)(3).

A. Section 502(a)(3) Covers Only Claims Typic-

ally Remediable In Equity

In Mertens v. Hewitt Associates, 508 U.S. 248 (1993), this

Court established the meaning of “equitable relief’ under

ERISA § 502(a)(3). The case involved a claim under Section

502(a)(3) by beneficiaries of an ERISA-covered plan against

a nonfiduciary who knowingly participated in a breach of

fiduciary duty, causing underfunding of a pension plan that

consequently was terminated. 508 U.S. at 250-51. The Court

held that the suit was not within Section 502(a)(3) because

the beneficiaries sought compensatory damages, not “a

remedy traditionally viewed as ‘equitable.’” 508 U.S. at 255.

The Court rejected the position that “equitable relief” under

Section 502(a)(3) embraced “‘whatever relief a court of

equity is empowered to provide in the particular case at

issue,"” even while acknowledging that “equitable relief” in

isolation could bear that meaning. 508 U.S. at 256. Rather,

the Court squarely construed “equitable relief” to refer only

to “those categories of relief that were typically available in

equity (such as injunction, mandamus, and restitution, but not

compensatory damages).” /d. (emphasis in original). The

Court made clear, moreover, that the standard is not what was

ever available from equity courts, not even what was usually

or always available under an entire branch of equity

jurisprudence (trust law), but what types of relief were

“typically” available in equity generally. Over a dissent on

this precise point, the Court held that it was not enough that

the relief sought was available from equity courts in a whole

category of cases that included the case before it, i.e., suits

against trustees or those who knowingly participate with

trustees in breaches of trust. /d. at 255-56; id. at 258

(““‘equitable relief’ does not mean ““‘all relief available for

breach of trust at common law’”).

In its subsequent decisions under Section 502(a)(3), this

Court has not altered the Mertens standard for “equitable

relief.” In particular, the Court did not alter the standard in

Varity Corp. v. Howe, 516 U.S. 489 (1996), which held that

beneficiaries could sue under Section 502(a)(3) to obtain

individual relief (there, simple reinstatement in a benefits

plan), not just relief on behalf of the plan.'? Nor did the

Court alter the Mertens standard in Harris Trust and Savings

Bank v. Salomon Smith Barney Inc., 120 S. Ct. 2180 (2000),

which held that a nonfiduciary who received plan money

from a trustee’s prohibited transaction could be sued for its

return, as restitution, under Section 502(a)(3). As petitioners

thus acknowledge, Section 502(a)(3), under the controlling

Mertens interpretation, is limited to “those remedies

traditionally thought of as equitable relief and typically

available in equity.” Pet. Br. 11; id. at 17.

B. A Claim For Money To Fulfill An Obligation

To Pay, Not For Return Of Specific Property

(Or Its Product), Was Not Typically Remedi-

able In Equity

1. Petitioners’ Claim.

It is important, at the outset, to recognize that petitioners’

claim is not a claim for return of particular money that the

Plan paid to respondent and that respondent still retains.

First, petitioners have not established that Plan money was

'? The Court had earlier rejected a claim for individual relief under

Section 503(a)(2). Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S.

134 (1985).

ever paid to respondent, rather than to providers of her

medical services. Compare JA 75 (Great-West letter stating

that money “has been paid to hospital and medical providers

on your behalf’) (emphasis added). Second, the money the

Plan paid for medical expenses was spent. What petitioners

are seeking, therefore, is not that money (or profits from its

use or proceeds from its exchange); it is new money paid out

by a third party, the alleged tortfeasor—money that

petitioners might have sought directly had they sued as

subrogees. This fact is common to reimbursement claims

generally. Third, and more particular to this case, respondent

did not in fact ever receive any money in the tort suit: the

money went to the Special Needs Trust, to Medi-Cal, and to

respondent’s counsel (and thereafter to his creditors).

Given those facts, the basis for the claim here is simply the

“obligation to pay money to a plan under a reimbursement

provision of the plan” (Pet. Br. 12); petitioners seek “to

enforce [the plan’s] terms” by “compelling the performance

of a monetary obligation” (id. at 10). See id. at 14-15.'° This

obligation is in sum and substance a contract obligation. /d. at

10 (“a contractual promise”), 14-15 (“specific performance”);

US Br. 18 (“agreement”). Although the United States says

that an ERISA Plan, like other trusts, is not “merely one type

of contract,” not “a garden-variety, arm’s-length contract”

(US Br. 16 (emphasis added)), it remains true that “[aJn

ERISA plan is a contract.” Herzberger v. Standard Ins.

'* Although the United States briefly invokes “double recovery” (US

Br. 14), it does not explain what it means. Respondent has always

tendered to petitioners the part of the settlement paid for the medical

expenses that the Plan had previously paid on her behalf; and given the

small recovery compared to the magnitude of respondent's lifetime losses

wholly apart from the Plan-paid past medical expenses, the remaining

settlement amount in no reasonable sense represents a “double recovery”

for Plan-paid medical expenses. Accordingly, if there is “unjust

enrichment” here, it is solely because of a plan-defined obligation to pay,

not for any other reason.

Co., 205 F.3d 327, 330 (7th Cir. 2000) (Posner, C.J.); see

Tester v. Reliance Standard Life Ins. Co., 228 F.3d 372, 375

(4th Cir. 2000); Wal-Mart Stores, Inc. Associates’ Health and

Welfare Plan v. Wells, 213 F.3d 398, 402 (7th Cir.) (Posner,

C.J.) (citing Langbein, The Contractarian Basis of the Law of

Trusts, 105 Yale L.J. 625 (1995), cert. denied, 121 S. Ct. 441

(2000). By the act of accepting the benefits, a beneficiary

generally becomes contractually bound to the clear terms on

which they were offered. See Restatement (Second) of

Contracts §§ 56, 59 (1981). It is that obligation which forms

the entire basis for the claim to money here.

2. Reimbursement Claims Generally.

a. Equity did not generally provide relief for claims for

money owed, where plaintiffs were not seeking funds

identified as property conveyed in breach of a fiduciary duty

(by someone) or its proceeds. Thus, as the United States

acknowledges—based on Raton Waterworks Co. v. Raton,

174 U.S. 360 (1899), and the Restatement (Second) of

Contracts § 359 (no specific performance if “damages would

be adequate to protect the expectation interest of the injured

party”)—specific performance of a contract to pay money

was not typically available in equity. US Br. 26; see

Restatement (Second) of Contracts § 373(2) (restitution, even

as damages relief, is not available to enforce a contractual

obligation to pay a definite sum of money). In other contexts,

too, it is well established that claims for money owed

traditionally must be pursued at law, not in equity. See, e.g.,

United States v. Bank of Metropolis, 40 U.S. (15 Pet.) 377,

379 (1841); Gaines v. Miller, 111 U.S. 395, 397 (1884)

(equitable relief denied, explaining: “Whenever one person

has in his hands money equitably belonging to another, that

other person may recover it by assumpsit for money had and

received.) (cited in United States v. California, 507 U.S.

746, 755 (1993)); Langenkamp v. Culp, 498 U.S. 42 (1990)

(following Granfinanciera, SA. v. Nordberg, 492 U.S. 33,

58-59 (1989); bankruptcy trustee challenging transfer of

money made pre-bankruptcy, when the transfer may well

have been lawful, must bring a legal action against

nonclaimant); Austin v. Shalala, 994 F.2d 1170, 1175-77 (Sth

Cir. 1993) (claims by the United States to recoup mistaken

overpayments of benefits are legal claims, i.e., claims in

quasi-contract traditionally falling “under the common law

writ of general assumpsit’’); United States v. Anderson, 584

F.2d 369 (10th Cir. 1978) (government suits for taxes due are

legal, relying on Damsky v. Zavatt, 289 F.2d 46 (2d Cir.

1961) (Friendly, J.)).

That traditional limitation did not evaporate when a

plaintiff claimed that failure to pay money would result in

“unjust enrichment”: such claims for money, where not

seeking the return of specific property (or its proceeds or

profits), were also generally not remediable in equity, as the

Restatement of Restitution (1937) makes clear. See Hudson

View Il Associates vy. Gooden 222 A.D.2d 163, 168, 644

N.Y.S.2d 512, 516 (1™ Dept. 1996) (claim for value of

services performed and expenditures made for defendant,

unlike claim for return of specific property, even when

brought under “quasi-contractual theory of quantum meruit,”

had to be brought as action at law, citing Restatement of

Restitution), relied on in Wal-Mart, 213 F.3d at 401;

Restatement of Restitution, General Scope Note at | (“the

subject of quasi contracts is limited to actions at law to secure

the payment of money”). Thus, after defining restitution as

the prevention of unjust enrichment (Restatement § 1, at 12),

the Restatement (§ 4, at 17-18) identifies the different legal

and equitable remedies available to prevent unjust enrichment

in different circumstances and observes that “ordinarily [a]

money judgment [against the recipient of the benefit] is

obtained by an action at law,” though “a decree for money

will sometimes be rendered by a court of equity,” referring to

Sections 160-162 (on constructive trusts, equitable liens, and

subrogation) for the specifics. § 4, Comment e at 21

(emphasis added). Section 160, Comment a (at 642), explains

that a request for a constructive trust “seeks to recover

specific property” whereas a quasi-contract action at law

“impos[es] a merely personal liability.” Comment e (at 645)

then explains: “where money is paid by one person to another

as a result of a mistake of such a character that the payor is

entitled to restitution, he is ordinarily not entitled to maintain

a suit in equity for the specific recovery of the money, even

though the payee still holds the money so that specific

restitution would be possible .. . .” (emphasis added). Only

certain circumstances involving specific money still held by

the defendant—if the defendant was insolvent or obtained the

money “by an abuse of a fiduciary or confidential relation” —

entitled the plaintiff to relief in equity for non-unique money.

Id.; see also Restatement of Restitution § 161, at 650-53

(equitable lien).

The general unavailability of equitable remedies for

restitution of money reflects the limitation of those remedies

to obtaining particular property claimed by (and taken from)

the plaintiff, in contrast to establishing personal liability.

D. Dobbs, Remedies § 4.1 at 223 (1973) (“kinds of claims

enforced in equity under the name of constructive trust”

involve awards that are “restitutionary or restorative in the

sense that the money gained by the defendant is identified

with the property taken from the plaintiff’ (footnote

omitted)); Restatement of Restitution § 160, Comment e at

645 (“specific recovery”; “specific restitution”). Thus,

Section 215 of the Restatement of Restitution (at 866) points

to the “necessity of tracing property” in order to assert the

equitable remedies, rather than have “merely a personal

claim.” See id. Comment a at 867 (“if it is shown that the

property or its proceeds have been dissipated so that no

product remains, [plaintiff's] claim is only that of a general

creditor”); see also Restatement (Second) of Trusts § 202

(vol. 1 at 444) (1959) (“Following Trust Property into Its

Product”) (where trustee acquires property by wrongful

disposition of trust assets, the acquired property may be

subjected to a constructive trust or equitable lien only if it is

“the product of the trust property” and “can be traced”);

Dobbs (1973), § 4.3 at 242 (stating tracing requirement); id.

§ 5.16 at 423-30 (application to money). Money not

specifically traceable to wrongly received funds was

generally outside the reach of the constructive trust remedy.

See St. Louis & S.F.R. Co. v. Spiller, 274 U.S. 304, 310

(1927) (money nowhere segregated is not the traced product

within constructive-trust law).

This focus on claims to specific assets (or their product) is

reflected in the two references to “restitution” in Mertens that

are something other than an abstract mention of the term. See

508 U.S. at 252 (“‘profits of such fiduciary which have been

made through use of assets of the plan by the fiduciary’’’); id.

at 260 (“restitution of ill-gotten plan assets or profits”).'*

Similarly, the Court’s decision in Harris Trust, relied on by

petitioners (Pet. Br. 10-11, 20, 25-27) and the Government

(US Br. 11-12, 29), not only said nothing to alter the Mertens

standard but involved a claim within the property-specific

equitable remedies traditionally available in equity for

restitution. It involved an acquisition of trust money that was

wrongful—because the trustee paid plan money to the

defendant in violation of ERISA § 406(a), 29 U.S.C.

§ 1106(a)}—and the suit sought return of just those “ill-gotten

trust assets.” 120 S. Ct. at 2190. See Restatement of

Restitution § 160, Comment ¢ at 645 (money obtained “by an

abuse of a fiduciary or confidential relation”’).

By contrast, a reimbursement claim on behalf of an ERISA

plan does not involve unique currency or money obtained as a

The reference to “constructive trust” in the legislative history has the

same focus. Sen. Rep. 93-383 at 105 (1973) (“a constructive trust may be

imposed on the plan assets, if needed to protect participants and

beneficiaries”).

result of a breach of duty by a plan fiduciary or someone

acting in concert with a plan fiduciary. A plan beneficiary “is

not a fiduciary.” Health Cost Controls of Illinois, Inc. v.

Washington, 187 F.3d 704, 710 (7th Cir. 1999). And the

money sought (/.e., money coming from a third party) is not

money obtained from the plan, or profits from it, or proceeds

from exchanging it, let alone money obtained by anyone's

breach of duty. The claim is not to specific property within

the limited class of traditional equitable remedies for

restitution.

This conclusion is not overcome by the argument that

equitable remedies might allow for recovery of some property

when there was nothing improper (on anyone's part) about

the initial transfer of the assets to the defendant. Pet. Br. 25;

id. at 25-28. Neither petitioners nor the United States have

shown, contrary to the Restatement of Restitution, that such

remedies were typically available when money was sought in

such circumstances.'* By the same token, it simply sidesteps

the question to argue, as the United States does (US Br. 11,

27-29) that the defendant need not have engaged in

wrongdoing to be subject to equitable remedies for

'* Even some of the general relied-on statements about “property”

seem to involve erroneous transfers. Thus, the statement at 5 A. Scott &

W. Fratcher, Law of Trusts § 462.2 (4th ed. 1989), quoted at Pet. Br. 26, is

cited by the United States for situations “where the assets were transferred

by mistake” (US Br. 28); indeed, the next sentence says, “Thus a

constructive trust arises where the title to property is acquired through a

mistake, or where property is transferred by a trustee or other fiduciary, in

violation of his duty as fiduciary, to a person who has no notice of the

violation of duty but who pays no value.” 5 Scott Treatise § 462.2 at

314-17. Another treatise quoted by the Government (at 27)—G. Bogert &

G. Bogert, Law of Trusts and Trustees § 471 (rev. 2d ed. 1978), which in

fact stresses the need for “specific property as the res of the trust” (id. at

9)—states that the following sections lay out “the principal types of

wrongful retention of property which have moved chancery to decree the

constructive trust” (id. at 29), but neither the United States nor petitioners

have identified the present situation among those types.

restitution, even where money was at issue, a point

established in Harris Trust and not in dispute. What has not

been shown is the typical availability of equitable remedies to

claim money when the claimed money had not been

transferred from the plaintiff (or was the proceeds or profits

of such money), let alone transferred by a wrong of someone,

such as the transferor." Indeed, in what the United States

treats as supplying the most pertinent analogy, the

Restatement (Second) of Trusts § 283 by its terms states that

trust property, if transferred without breach of fiduciary duty,

becomes the recipient's “free of the trust.”

b. That petitioners’ money claim fails under the Mertens

standard is further supported by the (several) opinions in

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

Department of the Army v. Blue Fox, Inc., 525 U.S. 255

(1999). See Pet. Br. 11, 19-20 (discussing Bowen); US Br.

19-20 (discussing Bowen and Blue Fox). Bowen allowed a

suit under 5 U.S.C. § 702 to reverse an administrative

determination denying money claimed by a State under the

Medicaid statutes.'’ As Blue Fox explained, however, Bowen

The United States notes that Harris Trust involved an unlawful

transfer. US Br. 29 (“property transferred to [the defendant] in breach of

a trustee's fiduciary duty”). The quotation in Harris of a 19th Century

case and treatise by its terms refers generically to “property” and how it

was “obtained,” “‘acquired."” See Pet. Br. 27. Petitioners themselves

characterize Counihan v. United States, 194 F.3d 357, 361-62 (2d Cir.

1999), as stating a principle for situations where “the transfer was in

violation of the trust’s terms” (Pet. Br. 26 (emphasis added)), and the case

was one involving proceeds of an asset that had wrongfully (by arson)

been transferred out of the claimant's possession. The Government (US

Br. 29) relies on a statement in the Restatment of Restitution § 160

Comment d, at 643, that addresses “the result” of imposing a constructive

trust, not the standards for imposing one.

'’ The Court stressed that the Medicaid statute was “a complex scheme

. . . that governs a set of intricate, ongoing relationships between the

States and the Federal Government,” in contrast to “statutes that provide

compensation for specific instances of past injuries or labors” (487 U.S. at

“did not turn on distinctions between ‘equitable’ actions and

other actions,” but, rather, on “what Congress meant by ‘other

than money damages’” in 5 U.S.C. § 702. 525 U.S. at 261:

see id. at 262 (Bowen did not hinge on distinction “between

equitable and nonequitable categories of remedies”). As a

result, the majority in Bowen did not have to rule, and did not

rule, that monetary relief was typically or traditionally

available in equity. Supporting its reading of 5 U.S.C. § 702,

the Court noted only that such relief “‘occasionally’” was

available in equity as something other than monetary

damages (the classic form of legal relief). 487 U.S. at 895

(quoted at Pet. Br. 19); see US Br. 19-20 (Bowen and Blue

Fox recognize that “some actions for monetary relief” are

suits for equitable relief) (emphasis added).

The majority in Bowen thus did not disagree with the

analysis in Justice Scalia’s dissent (joined by the Chief

Justice and Justice Kennedy) unmistakably showing that

claims to monetary relief, by whatever form, were typically

not equitable. Justice Scalia explained that the Court of

Claims, though unable to give “equitable relief” (as the

majority acknowledged, 487 U.S. at 905), has long heard

claims against the United States for money past due (id. at

914, 919-21). He explained that it was only “rare suits for a

sum of money” that could be brought in equity, those

involving not payment for “a past loss” but orders “to prevent

future losses” in certain cases. /d. at 918. He further

explained that invoking “restitution” did not provide for relief

900 n.31; see id. at 905), and, perhaps critically, that the Medicaid statute

“directs the Secretary to pay money to the State, not as compensation for

a past wrong, but to subsidize future state expenditures,” again

distinguishing laws that “compensate a particular class of persons for past

injuries or losses” (id. at 90S n.42 (emphasis added); see id. at 883-84

(payments “actually a series of huge quarterly advance payments that are

based on the State’s estimate of its anticipated future expenditures”

(footnote omitted)). See Brighton Village Associates v. United States, 52

F.3d 1056, 1059 n.3 (Fed. Cir. 1995).

in equity, for “‘restitution’ in the judicial context commonly

consists of money damages,” as indicated by the fact that the

Court of Claims, broadly lacking equitable power, hears such

claims. /d. at 917 n.2 (emphasis added). And he explained

that merely using the form of “injunction” did not allow a suit

in equity: “Almost invariably, . . . suits seeking (whether by

judgment, injunction, or declaration) to compel the defendant

to pay a sum of money [other than specific currency or coins!

to the plaintiff are suits for ‘money damages,’ as that phrase

has traditionally been applied” to distinguish general legal

relief from general equitable relief. /d. at 918-19 (emphasis

added; footnote omitted); see id. at 915-16 (quoted below).

This analysis—not disputed by the Bowen majority, but

found insufficient to answer the different question presented

under 5 U.S.C. § 702—<confirms that monetary claims like

petitioners’ were not typically and traditionally remediable in

equity, as required by the Mertens standard.

Blue Fox \ends further support to this conclusion. The

Court there held, in agreement with the United States, that the

determination whether a claim is for “substitute” or “specific”

relief, the standard under 5 U.S.C. § 702, is (as Justice Scalia

explained with respect to “restitution” and “injunction” in

Bowen) not controlled by the form of relief claimed. 525

U.S. at 262-63. Thus, although the plaintiff sought an

equitable lien, the Court looked through the label placed on

the remedy to the substance of the claim itself, explaining that

such an equitable lien is merely a device “to satisfy a money

claim, usually a claim for unjust enrichment,” and therefore

“constitutes a claim for ‘money damages.’” /d. (internal

quotation marks omitted).

3. This Case.

Even if (contrary to the foregoing) some plan claims for

reimbursement out of recoveries obtained by beneficiaries

would be within the available “equitable relief’ for

restitution, petitioners’ claim would not be. The constructive

trust and equitable lien remedies require that the property in

which the plaintiff seeks a property interest (in whole or in

part) be property to which the defendant can, if relief is

granted, transfer title (or in which she can convey a partial

ownership interest through a lien). Restatement of

Restitution § 160, at 640 (defendant must be “person holding

title to property”); id. Comment j at 649 (“Where a person

does not acquire title to property but merely obtains

possession of the subject matter, he is not chargeable as

constructive trustee.”); id. § 161 (equitable lien fastens on

“property of” the defendant); 5 A. Scott & W. Fratcher, Law

of Trusts § 462, at 304 (4th ed. 1989).'* Respondent,

however, did not receive any of the money paid out in the tort

suit. Petitioners bypassed the state-court proceeding that

distributed the money, and their complaints do not seek a

“constructive trust” or an “equitable lien” (the Plan already

has an express lien, see Pet. Br. 24 n.10; US Br. 25) for

identified property of respondent.

C. The Arguments Presented To Support Section

502(a)(3) Coverage Are Flawed

1. Injunction.

Petitioners’ primary argument is that it is sufficient that

they have requested an injunction (“specific performance,”

Pet. Br. 20; US Br. 15) in order to make their claim one for

“equitable relief” under Section § 502(a)(3). Pet. Br. 12-15."

Mertens, of course, mentions injunctions (“injunction,

mandamus, and restitution’’) as a common form of equitable

'* The United States notes that constructive trust and equitable lien are

similar remedies, ‘the difference being that the equitable lien provides a

security interest in, rather than complete title to, the property to whici: it

attaches.” US Br. 24-25 (citing authorities).

'’ Neither in this Court nor in the court of appeals have petitioners

relied on the declaratory judgment request in the amended complaint. Pet.

Br. 13-14. Nor does the United States.

relief. But the form of relief cannot possibly control. If

merely seeking an “injunction” were enough to come within

Section 502(a)(3), then the plaintiffs in Mertens could have

re-framed their demand as one for an injunction requiring the

respondent there to pay the money claimed, thus emptying of

all meaning the important limitation on the reach of Section

502(a)(3) adopted by the Court. See Bowen, 487 U.S. at 919

(Scalia, J., dissenting) (quoted above); id. at 915-16 (“the line

between damages and specific relief must surely be drawn on

the basis of the substance of the claim, and not its mere

form”; “[i]t does not take much lawyerly inventiveness to

convert a claim for payment of a past due sum (Gamages) into

a prayer for an injunction against refusing to pay the sum’);

Wal-Mart, 213 F.3d at 401 (Posner, C.J.) (“[A] plaintiff

cannot convert a claim of damages for breach of contract into

an equitable claim by the facile trick of asking that the

defendant be enjoined from refusing to honor its obligation to

pay the plaintiff what the plaintiff is owed under the contract

and appending to that request a request for payment of the

amount owed. A claim for money due and owing under a

contract is ‘quintessentially an action at law.’”). What must

be critical is whether an injunction was typically available for

the kind of claim asserted, as it was not for petitioners’

money claim.

2. Restitution.

The United States makes a general argument that any

action seeking money due under a reimbursement provision is

equitable “because it seeks to prevent unjust enrichment.”

US Br. 14; id. at 14-19. This argument suffers from a flaw

similar to that infecting petitioners’ “injunction” argument.

There is no more reason to think that Mertens used

“restitution” to authorize all restitution, regardless of whether

it was typically available in equity for a type of claim, than

that it used “injunction” (parallel in the phrase “injunction,

mandamus, and restitution”) to bring any request for an

injunction under Section 502(a)(3), even one that simply

re-pleads a damages claim to request an order for a monetary

payment.

The Government's argument incorrectly assumes that all

actions alleging unjust enrichment, and for that reason

demanding restitution, are equitable. The law is clearly to the

contrary. As Chief Judge Posner noted in one of the

decisions on which petitioners rely, Health Cost Controls v.

Washington, 187 F.3d at 710 (relied on at Pet. Br. 24), it is

simply “not true” that “restitution is an equitable remedy”;

“(t}here really isn’t any question about” the fact that

“restitution is a legal remedy when sought in a case at law

and an equitable remedy when sought in a case in equity.”

See also Reich v. Continental Cas. Co., 33 F.3d 754, 755-56

(7th Cir. 1994) (Posner, C.J.), cited in US Br. 22 n.15; 1 D.

Dobbs, Remedies § 4.1(3), at 564 (2d ed. 1993); Bowen, 487

U.S. at 917 n.2 (Scalia, J., dissenting) (“‘restitution’ in the

judicial context commonly consists of money damages”).

The broad allegation of “restitution,” based on “unjust

enrichment,” is accordingly no help whatever in deciding

whether a particular case is legal or equitable.

The fact is that a// claims for restitution, whether legal or

equitable, rest on the notion of restoring the status quo by

removing the defendant’s gain to correct “unjust enrichment.”

This concept was the common thread by which the

Restatement of Restitution attempted to create a unified field

out of its two major subheadings: quasi-contract, a legal

action (originally assumpsit); and constructive trust, an

equitable remedy. See Restatement of Restitution, General

Scope Note at 1; Dobbs (1973), § 4.2 at 234-35; id. § 4.3 at

241-48; Dobbs (1993), § 4.1(1) at 552 (“unifying thread” of

restitution is “to prevent the defendant's unjust enrichment by

recapturing the gains the defendant secured in a transaction”);

Laycock, The Scope and Significance of Restitution, 67 Tex.

L. Rev. 1277 (1989). As a result, reliance on “restitution,” or

“unjust enrichment” (its basis), cannot demonstrate that this

case is within the limited class of restitution claims

remediable in equity. What must be critical is whether the

particular kind of claim for restitution was one ypically”

remediable in equity, as petitioners’ claim was not.”

3. Trust Law.

The United States, recognizing that equitable relief was not

typically available to enforce an obligation to pay money

under a contract (US Br. 26), attempts to escape the force of

the general unavailability of the monetary relief sought here

by focusing on the special part of equity that governed trusts

(genuine trusts, rather than constructive trusts). US Br.

15-19.7' The Government properly does not assert that

respondent is an actual trustee with fiduciary responsibilities.

Instead, the Government says that respondent is a beneficiary

of a trust and that this suit is analogous to two permissible

® Petitioners rely (Pet. Br. 21-23) on Blue Cross & Blue Shield of

Alabama v. Sanders, 138 F.3d 1347, 1352-54 (11th Cir. 1998), and

Administrative Committee v. Gauf, 188 F.3d 767, 770-71 (7th Cir. 1999).

But Sanders declined to rule whether Section 502(a)(3) actually applied,

concluding only that it “plausibly” applied (thus supporting federal

jurisdiction), and neither Sanders nor Gauf examined whether, though

restitution and injunction remedies sometimes are available in equity, such

remedies were typically available for money claims of the sort at issue

here. The Seventh Circuit subsequently questioned Gauf and Sanders for

just this reason. See Wal-Mart, 213 F.3d at 401 (questioning apparent

view of Gauf, and of Sanders, that “all claims of reimbursement by an

ERISA plan [are] equitable”).

*! See Healy v. Commissioner, 345 U.S. 278, 282-83 (1953) (“A

constructive trust is a fiction imposed as an equitable device for achieving

justice. It lacks the attributes of a true trust, and is not based on any

intention of the parties.”) (footmote omitted); Restatement of Restitution

§ 160, Comment a at 641 (a constructive trust “is in fact something quite

different from an express trust”; they “are not divisions of the same

fundamental concept,” but “distinct concepts”); 5 Scott Treatise § 461 at

301; id. § 462.1 at 310-13.

equitable actions against beneficiaries: (i) “to enforce an

agreement by a beneficiary to pay money into a trust” (US Br.

18, citing 3A A. Scott & W. Fratcher, Law of Trusts § 252 at

366 (4th ed. 1988); Restatement (Second) of Trusts § 252 at

635-36); and (ii) “for repayment of an advance made by the

trust” (US Br. 18, citing Restatement (Second) of Trusts

§ 255 at 640-42; 3A Scott Treatise §§ 251, 252 at 363, 366).~

There are two fundamental flaws with this argument. First,

the argument that the special equity-court powers applicable

to trusts define the reach of Section 502(a)(3) is just what the

Court rejected in Mertens, which held, instead, that Congress

was referring in that provision to the remedies generally

available from equity courts for claims of a particular type.

Second, and in any event, the United States has not

established that a trustee could bring in equity either of the

two types of claims against a beneficiary urged as analogous.

The cited Sections 252 and 255 of the Restatement

(Second) of Trusts (which are specific examples of a general

principle stated in Section 251), as well as the cited sections

from the Scott treatise, are by their terms about the right of a

trustee to charge the beneficiary's interest in the trust in order

to capture money owed the trust—which is simply not at

issue here. They do not even address the mechanisms by

which the trustee may press a separate claim against the

beneficiary. Indeed, the commentary to Section 251 makes

clear that this special self-help, setoff-type remedy (the

trustee deducts the amounts from the beneficiary's interest in

the trust) is different from the usual remedies the trustee may

pursue against persons generally who should be liable in

* The United States notes also that equity entertained suits “against a

beneficiary for instigating a breach of trust and to restore payments

improperly made to the beneficiary from the trust.” US Br. 18. Because

the preconditions of that standard (breach of trust, improper payment from

the trust) are absent in cases like the present, the United States does not

invoke that analogy here. /d.

some way to the trust, cross-referencing Section 280

particularly. § 251, Comment a (vol. | at 633). Strikingly,

Section 280 (vol. 2 at 38-42) denies that all suits become

equitable just because the trustee is pursuing a trust claim: it

provides that claims retain their usual legal or equitable

Status, without regard to the fact that it is a trustee bringing

them. The Restatement, in short, defeats the attempt to rely

on the trust character of the claimant as sufficient to make

otherwise-legal claims against beneficiaries equitable.

This Court, in fact, has recognized in a related context that

suits by a trustee for set-off are very different from suits by a

trustee for money owed generally. The Court has thus held

that a bankruptcy trustee may bring an equitable claim when

it seeks money from a creditor who has submitted a claim

against the estate but must bring a legal claim when it seeks

money from a creditor who has not. Langenkamp, 498 U.S.

at 44-45; Granfinanciera, 492 U.S. at 58-59; see id. at 43

(“*Whether a trustee’s suit should be at law or in equity is to

be judged by the same standards that are applied to any other

owner of property that is wrongfully withheld.’”), quoting

Buzard v. Houston, 119 U.S. 347, 352-53 (1886). So, too,

here: that a trustee might assert an equitable charge against

the continuing trust interest of a beneficiary does not mean

that the trustee has an equitable, rather than a legal, claim for

payment from other funds.

4. Alternative Remedies.

The general unavailability of equitable relief for claims like

petitioners’ cannot be circumvented by saying that equitable

relief was available where legal remedies were not. US Br.

26. To bring within Section 502(a)(3) any remedy that equity

could provide, even if it did so only “sometimes” (Pet. Br. 21,

citing Dobbs (1993), § 3.1 at 279-80), is to adopt the very test

Mertens rejected over a vigorous dissent. More particularly,

it would simply reverse the congressional rejection of a

damages remedy under Section 502(a)(3), as established by

Mertens, it the unavailability of damages elsewhere formed

the basis for bringing the same relief within Section

502(a)(3).

In a similar vein, petitioners suggest that, unless their suit

is deemed one for “equitable relief,” ERISA plans would lack

a remedy to enforce rights of recovery. Pet. Br. 29; see id. at

36. As explained in Argument Il, Part C, infra, the premise

of this argument has not remotely been established. Beyond

that, however, this argument runs squarely into Mertens. This

Court there established the standard circumscribing the reach

of “equitable relief,” despite the evident consequence that

some harms would go unredressed by restricting remedies to

only a subset of the full range of remedies that the legal

system, through its various courts, has traditionally found

needed. See Reich, 33 F.3d at 757 (Mertens “strips the

pension funds, or . . . their surrogate the Department of Labor,

of their principal remedy—a suit for damages”). In fact,

given the scope of preemption under ERISA and the carefully

limited remedies provided by ERISA itself, it is well accepted

that those injured in the normal course of plan

administration—including injured in non-monetary ways—

will sometimes lack corrective remedies. E.g., Bast v.

Prudential Ins. Co., 150 F.3d 1003 (9th Cir. 1998) (wrongful

death from delayed authorization for treatment); Cannon vy.

Group Health Service of Oklahoma, Inc., 77 F.3d 1270 (10th

Cir. 1996) (wrongful death from delayed authorization for

treatment); Tolton v. American Biodyne, Inc., 48 F.3d 937

(6th Cir. 1995) (suicide resulting from refusal to authorize

psychiatric benefits under the plan); Spain v. Aetna Life Ins.

Co., 11 F.3d 129 (9th Cir. 1993) (wrongful death from

withdrawn authorization for surgery); Kuhl v. Lincoln

National Health Plan, 999 F.2d 298 (8th Cir. 1993) (wrongful

death from delayed authorization for surgery); Corcoran v.

United Healthcare, Inc., 965 F.2d 1321 (Sth Cir. 1992)

(wrongful death of unborn child from denial of authorization

for hospitalization); Settles v. Golden Rule Ins. Co., 927 F.2d

505 (10th Cir. 1991) (wrongful death).

D. Petitioners Cannot Rely On Federal Common

Law

Petitioners argue that federal common law can supplement

Section 502(a)(3) if that section does not afford them the

relief they seek. Pet. Br. 32-37. This argument must be

rejected for multiple reasons. First, petitioners did not

present any such question in their petition for certiorari,

which was entirely about the scope of Section 502(a)(3).

Pet. i, 10. Second, petitioners made no such contention in the

court of appeals, in which, as in their certiorari petition, they

argued only for coverage by Section 502(a)(3). C.A. Brief

for Appellants 16-31. Third, this Court has made clear that

carefully crafted statutory regimes are not to be supplemented

by judicial creation of additional federal common law

remedies. See Middlesex County Sewerage Authority v.

National Sea Clammers Ass'n, 453 U.S. 1 (1981); Milwaukee

v. Illinois, 451 U.S. 304 (1981). Such supplementing of

statutory remedies is quite different from judicially

developing legal principles under statutory directives, as

when “developiing) a ‘federal common law of rights and

obligations under ERISA-regulated plans’” in the course of

adjudicating the ERISA cases actually authorized by Section

502. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,

110 (1989), quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S.

41, 56 (1987).

Il. IF PETITIONERS’ CLAIM IS FOR EQUITABLE

RELIEF, IT IS NEVERTHELESS NOT FOR

APPROPRIATE EQUITABLE RELIEF

Even if the Court concludes that petitioners’ suit seeks

“equitable relief,” the suit should nevertheless fail under

Section 502(a)(3)’s additional requirement that the suit be for

“appropriate” equitable relief. Petitioners’ suit does not seek

“appropriate” relief. Rather, it pursues its remedy through

a duplicative proceeding harmful to ERISA and other

recognized interests without a demonstrated need to bear such

harms.

A. Section 502(a)(3) Requires That Any Equitable

Relief Be Appropriate, Considering More

Than Just Its Responsiveness To The Asserted

Wrong

The language of Section 502(a)(3) requires not only that a

plaintiff's claim be for “equitable relief,” but also that the

relief sought be “appropriate.” 29 U.S.C. § 1132(a)(3). This

Court confirmed in Varity Corp. that appropriateness, as the

Statutory language indicates, is a second requirement for

inclusion within Section 502(a)(3): in a case where the relief

before the Court (an order of reinstatement in a benefit plan)

was unquestionably equitable (see 516 U.S. at 495), the Court

separately stressed that “the statute authorizes ‘appropriate’

equitable relief” (id. at 515) (emphasis in original). If (as

hereafter assumed) petitioners’ claim for relief is deemed to

be “equitable,” it nevertheless should be held not appropriate,

hence outside Section 502(a)(3) for that distinct reason.

In determining whether a claim for relief, even if

“equitable,” is “appropriate,” it is relevant to consider more

than simply whether the relief would redress the asserted

wrong. The Court has made clear that one such consideration

is whether other avenues are available to protect the

legitimate interests of the plan participants. Varity Corp., 516

U.S. at 515 (citing Russell, 473 U.S. at 144). The Court has

also made clear that it is relevant, too, whether allowing

pursuit of the claim would conflict with ERISA policy, as

would needlessly increasing litigation expenses, to the

detriment of beneficiaries as well as plans. See id. at 497

(avoiding high “litigation expenses” is a congressional

purpose). It should also be relevant whether allowing the suit

presents the sort of substantial potential for friction between

federal and state courts that, in various other contexts, has

weighed against federal courts exercising authority they

might otherwise have.” Those principles, while often

articulated in “abstention” settings, have a natural place in

determining what relief is “appropriate.”

B. Recognizing Reimbursement Claims Under

Section 502(a)(3) Would Authorize Harmful

Duplicative State And Federal Court Litigation

The interpretation of Section 502(a)(3) urged by petitioners

would inherently lead to the very difficulties that, at least

unless shown to be unavoidable, should render the suits

authorized by that interpretation not “appropriate.” In

particular, the proposed interpretation automatically

authorizes duplicative litigation, with a federal court ERISA

action intrinsically related to and overlapping with the

underlying state-court tort suit (which cannot be made to

disappear). It makes no sense to generate the—resulting

See, e.g., Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 717-

18 (1996), quoting Railroad Comm'n of Tex. v. Pullman Co., 312 U.S.

496, 500-01 (1941) (“history of equity jurisdiction is the history of regard

for public consequences,” including prominently “‘the avoidance of

needless friction with state policies’” or state courts); Wilton v. Seven

Falls Co., 515 U.S. 277 (1995) (abstention in light of state proceeding

considers factors, such as “the assumption by either court of jurisdiction

over a res, the relative convenience of the fora, avoidance of piecemeal

litigation, the order in which jurisdiction was obtained by the concurrent

fora, whether and to what extent federal law provides the rules of decision

on the merits, and the adequacy of state proceedings”); see also Dobbs

(1993), § 2.5 at 123 (“equitable relief may be denied . . . for reasons of

convenience or policy, as where enforcement of an injunction . . . might

interfere with resolution of the case by other courts, agencies or

departments”); Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 586

(1999) (“Cooperation and comity, not competition and conflict, are

essential to the federal design.”); Weinberger v. Romero-Barcelo, 456

U.S. 305, 312 (1982) (“courts of equity should pay particular regard for

the public consequences in employing the extraordinary remedy of

injunction” (internal quotation marks omitted)).

increase of litigation costs and of occasions for federal-court-

caused disruption of state-court proceedings where, as shown

in the next point, petititioners have not demonstrated that

ERISA plans are unable to protect their interests by

participating in the state-court suit.

Except for claims by injured persons settled without even

filing a tort suit (which is not the case here), the suit

petitioners would have this Court authorize will always be a

second suit associated with the underlying tort suit. The tort

suit will typically be in state court, and nothing about the

federal court proceeding will terminate the state court case.

Petitioners’ view of Section 502(a)(3) is thus a prescription

for regular duplicative litigation, one case in federal court and

the other closely related case in state court.

Such duplicative litigation adds expense, as the parties

must appear in a new forum, familiarize a new judge with the

issues, and ensure coordination of the proceedings. The

added costs must be borne by the beneficiary or participant

and by the plan itself. Furthermore, the federal court

proceedings may delay or even prevent the completion of the

State court proceedings that generate the recovery sought by

the plan in the first place. Again, not only may the injured

beneficiary suffer, but the plan itself may lose as well.

Separating matters that are interrelated, as petitioners

propose, creates obvious difficulties of coordination and

potential for state-federal conflict. The federal court may be

asked, as it was here, to issue an injunction against the state

court proceedings. JA 95. Those state proceedings, in turn,

may involve various determinations based on the state court’s

distinctive familiarity with the relevant evidence, e.g., about

the reasonableness of the allocation to various types of

damages of amounts recovered either in settlement or by

judgment. There may be multiple claimants to the same pool

of money, perhaps multiple liens (such as those of Medi-Cal

or the attorneys), perhaps priority contests. The creation of a

new legal entity like a Special Needs Trust through a probate

proceeding may be involved. ' A decedent’s estate in probate

may be involved. It makes little sense, in terms of judicial

efficiency and comity, to strip out the reimbursement issue

from the state-court proceeding and create two proceedings

where the same res, the recovery amount, is in play.”*

The ERISA plan may even be a party to the state court

cases. Commonly, such plans have a subrogation right along

with the reimbursement right, as petitioners asserted they had

here. See JA 71, 77; US Br. 25 n.17; cf. 5 U.S.C. §$§ 8131,

8132 (subrogation and reimburse-ment right of United States

when injured employee recovers for medical expenses paid

by United States). The two are naturally related, in that the

subrogation right gives the plan the ability to step in and try

to maximize the recovery by suing the alleged tortfeasor

itself, if it believes that the injured beneficiary is not doing so.

It is not disputed that the ERISA plan itself, as subrogee,

would have to pursue the tort suit in state court, often

alongside the injured beneficiary as a co-plaintiff: the

subrogee simply “stands in the insured’s shoes against the

third-party tortfeasor” in whole or in part (US Br. 25 n.17)

and pursues the claim.” It makes little sense to permit the

For such reasons, the Court has recognized the special ability of

bankruptcy, probate, or other in rem proceedings to generate final

dispositions of property to foreclose the interests of those who may not

actually have been parties (at least if they had notice). See Richards v.

Jefferson County, 517 U.S. 793, 799 (1996); Martin v. Wilks, 490 U.S.

755, 762 n.2 (1989).

2° A subrogee steps into the place of the subrogor, with whatever rights

the subrogor had. See United States v. California, 507 U.S. at 756;

Reliance Nat. Indemn. Co. v. General Star Indem. Co., 72 Cal. App. 4th

1063, 1078 (2d Dist. 1999). It follows that what is acquired—the tort

claim itself—remains legal (under state law rules) if it was legal (and

based on state law) in the first place. See 58 Cal. Jur. 3d Subrogation § 31

at 680. ERISA does not transform the tort claim into a federal law claim

under ERISA. See, e.g., American & Foreign Ins. Co. v. Bolt, 106 F.3d

ERISA plan, after litigating the case in state court to generate

a recovery, to file a separate federal-couri suit to litigate the

distribution of the same money. And it makes little sense for

any rule under Section 502(a)(3) to treat reimbursement and

subrogation differently: the source of the money sought is the

same, and an ERISA plan can be written to include either

one.

C. Petitioners Have Not Shown The Duplicative

Litigation To Be Necessary To Protect Plan

Interests ;

The inherent costs accompanying petitioners’ view of

Section 502(a)(3)—costs to beneficiaries, to the federal and

State judiciaries, and to plans—should not be authorized in

the absence of a showing that they are unavoidable. It need

not be questioned that ERISA-covered plans have a legitimate

interest in securing recovery, out of alleged tortfeasors’

payments to an injured beneficiary, of money spent on her

medical care. Petitioners, however, have not come close to

showing that ERISA plans cannot protect their interests by

resort to state-court mechanisms, avoiding duplicative

litigation.

An ERISA plan can write its provisions to state clearly the

recovery to which it is entitled and (like this one) to give

itself a lien on recoveries. An ERISA plan also can write a

subrogation right, entitling it, upon paying a beneficiary’s

medical claims, to step into her shoes as a plaintiff (alone or

with her) in suing the alleged tortfeasor in state court.

Indeed, according to Great-West itself, in both its letter to

Eric Knudson and the Right of Recovery Agreement that it

drafted, the Plan in this case already had the right to

participate in the state-court action, as a subrogee of the claim

155 (6th Cir. 1997) (subrogee action as jury action); Cigna Ins. Co. v. Oy

Saunatec, Ltd., 241 F.3d 1 (1st Cir. 2001) (same); Granite State Ins. Co. v.

Smart Modular Technologies, Inc., 76 F.3d 1023 (9th Cir. 1996) (same).

against Hyundai or otherwise. JA 71, 77. Petitioners have

never disputed that, at a minimum, California procedural law

permitted them to intervene in respondent’s suit against

Hyundai, whether before or after the conditional settlement

was reached, to assert their interests and demand the share to

which they were entitled of the recovery amount within the

jurisdiction of the state court. See JA 238.”°

Petitioners argue, however, that state-law relief is

preempted, citing in support only one decision, that of a

California intermediate appellate court in a case not involving

a comparable proceeding. Pet. Br. 29-30, quoting Jefferson-

Pilot Life Ins. Co. v. Krafka, 50 Cal. App. 4th 190 (2d Dist.

1996) (state law contract cause of action for a money

judgment preempted; no issue of enforcement of a lien in

state court or assertion of a claim against an alleged tortfeasor

as subrogee). For its part, the United States carefully refrains

even from asserting that “a cause of action . . . under state law

to enforce a reimbursement term of a plan” would be

preempted; instead, it says only that it “presumably” or

“likely” would be, without further discussion of the ways in

which plan rights might be asserted. US Br. 20 (emphases

added).

° See Cal. Code Civ. Pro. § 387 (intervention); Olszewski v.

ScrippsHealth, 107 Cal. Rptr. 2d 187, 206 n.17 (4th Dist. 2001); Plut v.

Fireman's Fund Ins. Co., 102 Cal. Rptr. 2d 36, 40 (Ct. App. 2d Dist.

2000) (“the insurer’s safest course in order to preserve its subrogation

rights is to seek intervention in the underlying action’ brought by the

insured against the legally responsible party”); Donohue v. Highlands

Underwriters Ins. Co., 198 Cal. App. 3d 1176, 1181 (1st Dist. 1988); 39

Cal. Jur. 3d (Rev.) Insurance Contracts § 653 at 517-18 (insurer may

intervene or directly sue alleged tortfeasor). For federal court analogs,

see, e.g., 7C C. Wright, A. Miller, & M. Kane, Federal Practice &

Procedure § 1908 at 272, 274-75 (1986) (intervention); 6A id. § 1546 at

362 (1990) (intervention or joinder); United States v. Aetna Cas. & Sur.

Co., 338 U.S. 366 (1949); Counihan, 194 F.3d at 361-62; Ghezarian v.

Wheeler, 177 F.R.D. 482, 485-86 (C.D. Cal. 1997).

In fact, the decisions of this Court do not require

preemption of state-court proceedings to determine rights in a

recovery from third parties. A state law may be preempted if

it has “reference to” ERISA plans, i.e., if it “acts immediately

and exclusively upon ERISA plans” or “the existence of

ERISA plans is essential to the law’s operation.” California

Div. of Labor Standards Enforcement v. Dillingham Constr.,

NA., Inc., 519 U.S. 316, 325 (1997). But general state law

allowing intervention to assert liens on recovery amounts in

the litigation, or to adjudicate a subrogee’s state-law claim in

conjunction with the subrogor’s, plainly does not fall within

that class. The inquiry therefore is whether such state law has

“a connection with” ERISA plans, the second branch of

preemption. /d.

Under New York State Conference of Blue Cross & Blue

Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995), and

its successors, the determination of such a “connection”

begins with “the normal presumption against pre-emption”

(De Buono v. NYSA-ILA Medical and Clinical Serv. Fund,

520 U.S. 806, 813 (1997)) and focuses on any. practical

conflict with ERISA policy, based on “‘the objectives of the

ERISA statute’” and “the nature of the effect of the state law

on ERISA plans.” Dillingham, 519 U.S. at 325; see Egelhoff

v. Egelhoff, 121 S. Ct. 1322, 1327 (2001). Preemption has

been found in two circumstances (see Travelers, 514 U.S. at

658): where state law required plan choices, about benefit

payments or other plan terms, different from those which

might be voluntarily made 7’; and where state laws subjected

” See Egelhoff, 121 S. Ct. at 1327 (state law that “binds ERISA plan

administrators to a particular choice of rules for determining beneficiary

status”); Boggs v. Boggs, 520 U.S. 833 (1997) (state law permitting

transfer of pension benefits to person other than plan-designated person);

FMC Corp. v. Holliday, 498 U.S. 52 (1990) (state law barring adoption of

subrogation provision); Metropolitan Life Ins. Co. v. Massachusetts, 471

U.S. 724 (1985) (state law requiring minimum mental-health benefits);

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) (state law prohibiting

plans to remedial liabilities beyond those Congress

authorized. Preemption has thus turned on inconsistency

with plan choices or with congressional choices about the

scope of liabilities. The Court has stated that “[t}he basic

thrust of the pre-emption clause” is “to avoid a multiplicity of

regulation in order to permit the nationally uniform

administration of employee benefit plans” (Travelers, 514

U.S. at 657) and thus has focused on whether types of state

laws subject plans to “‘conflicting directives’” (id. at 662).

See Eglehoff, 121 S. Ct. at 1328; FMC Corp. v. Holliday, 498

U.S. 52, 59-60 (1990); Fort Halifax Packing Co. v. Coyne,

482 U.S. 1, 9-11 (1987); see also Egelhoff, 121 S. Ct. at 1330

(suggesting that state laws that are weil-established, with long

pre-ERISA history, and “more or less uniform nationwide,”

whose “interference with the aims of ERISA” is questionable,

might not be preempted); Dillingham, 519 U.S. at 332 n.10..

The state-court mechanisms for plans to enforce

reimbursement rights do not involve the circumstances that

have led to holdings of preemption. The state court, in such

proceedings, must follow the terms of the ERISA plan as

chosen by its sponsors, and as construed in light of relevant

federal law principles; there is no interference with plan

drafters’ or administrators’ choices. Nor is there imposition

of any additional liability on plans or, for that matter, on

beneficiaries or participants. Indeed, such state-law

certain plan benefits choices as discriminatory); Alessi v. Raybestos-

Manhattan, Inc., 451 U.S. 504 (1981) (state law barring reduction of plan

benefits by amount of workers’ compensation award).

28 See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987) (state-

law claim seeking extracontractual damages); Pilot Life, supra (same), see

also Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990) (in addition

to express preemption of state cause of action as one having “reference to”

ERISA plan, also finding conflict preemption, where in fact plaintiff was

seeking extracontractual damages, 498 U.S. at 481, subsequently held

unavailable under ERISA § 502(a)(3) in Mertens).

proceedings offer remedies for plans, giving them exactly

what they are entitled to receive. Most pointedly, if (contrary

to Argument I above) the relief the Plan seeks is “equitable,”

there is no basis for saying that Congress “rejected” the relief

that a state court would afford the Plan, namely, its share of

the state-court recovery as determined according to the terms

of the plan. Pilot Life, 481 U.S. at 54.

If petitioners cannot complain about the relief they would

get, or the rights on which the relief would be based, they

equally cannot charge that preemption would unify

proceedings in federal court or allow a more uniform

administration without need for individualized decision-

making. The underlying state-court tort case remains; it

cannot be transferred to federal court, even if the plan

participates as subrogee; and the plan must monitor the

individual case regardless of its ability to proceed in federal

court, making case-specific judgments about that case and

what the Plan may, or should, demand. Any interest in

preemption, therefore, can only come down to the abstract

concern that particular state courts might come to different

interpretations of ERISA plans than would particular federal

courts—though federal courts themselves may disagree and,

here, the state and federal courts actually agreed about the

meaning of petitioners’ plan terms. But there is no basis for

denigrating the ability or readiness of state courts to remain

faithful to the terms of ERISA plans and any federal-law

interpretive principles. And ERISA policy is affirmatively

advanced by keeping litigation costs down and not interfering

with the resolution of state court cases that produce the

recoveries that plans seek in the first place.

The absence of preemption of the state-court proceedings

at issue is reinforced by this Court’s upholding of state-court

enforcement mechanisms in Mackey v. Lanier Collection

Agency & Service, Inc., 486 U.S. 825 (1988). The Court

there held that ERISA does not preempt the application to

ERISA-governed plans of general state-law processes, in state

court, for garnishing plan benefits, ruling broadly that “state-

law methods for collecting money judgments,” including

federal court judgments, are simply outside the scope of

Section 502, yet plainly contemplated by Congress to be

available, and thus “must, as a general matter, remain

undisturbed by ERISA.” /d. at 833-34. The Court explained

particularly that the garnishment process at issue, which

involved an order of a state court (see id. at 828), was a

“*procedural’ mechanism” only, “creat[ing] no substantive

causes of action, no new bases for relief, or any grounds for

recovery”—all of which would be matters of federai law

where federal law supplied the basis for the garnishment, as

when the judgment being enforced (in state court) was a

federal-court judgment. /d. at 834 n.10. See Peacock v.

Thomas, 516 U.S. 349, 353 (1996) (citing Mackey);

Travelers, 514 U.S. at 662 (same).

The neutral state-court mechanisms for enforcing a plan

lien or subrogation right .ikewise do not depend on creation

of a new substantive cause of action or new basis for relief or

ground for recovery. Mackey, 486 U.S. at 834 n.10.” In that

context, preemption would work to undermine, not protect,

the interests of ERISA participants, beneficiaries, and plans.

Petitioners, who did not attempt to participate in the state

court proceeding to test any speculation about preemption,

have not shown that ERISA preempts the state-court

** A lien-enforcement mechanism does not involve in personam

liability at all, but is an in rem procedure. On the distinction in various

contexts, see, e.g., Johnson v. Home State Bank, 501 U.S. 78, 84 (1991)

(“a bankruptcy discharge extinguishes only one mode of enforcing a

claim—namely, an action against the debtor in personam—while leaving

intact another—namely, an action against the debtor in rem”), United

States v. Rodgers, 461 U.S. 677, 694-95 (1983) (tax lien enforcement);

California v. Deep Sea Research, Inc., 523 U.S. 491, 501 (1998)

(admiralty); Mercy Hosp. & Medical Ctr. v. Farmers Ins. Group, 15

Cal.4th 213, 217 (1997).

mechanisms that are distinctly preferable in terms of ERISA

policy and otherwise. With no basis for concluding that the

various costs of a separate federal action under Section

502(a)(3) need to be borne, that action, even if “equitable,”

should be found not “appropriate” and thus held outside the

scope of Section 502(a)(3).

CONCLUSION

The judgment of the court of appeals should be affirmed.

Respectfully submitted,

RICHARD G. TARANTO

Counsel of Record

FARR & TARANTO

1220 19th Street, NW

Washington, DC 20036

(202) 775-0184

June 29, 2001

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.