United States Court of Appeals
Fifth Circuit
F I L E D
REVISED APRIL 29, 2004
IN THE UNITED STATES COURT OF APPEALS April 15, 2004
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
_____________________
No. 03-30518
_____________________
COOPERATIVE BENEFIT ADMINISTRATORS, INC.,
In Its Capacity as a Named Fiduciary of
the National Rural Electric Cooperative
Association Long-Term Disability Plan,
Plaintiff - Counter Defendant - Appellee,
versus
DALE R. OGDEN,
Defendant - Counter Claimant - Appellant.
---------------------
Appeal from the United States District Court for the Middle
District of Louisiana
---------------------
Before HIGGINBOTHAM, SMITH, and WIENER, Circuit Judges.
WIENER, Circuit Judge:
Defendant-Appellant Dale Ogden appeals the district court’s
grant of the summary judgment motion of Plaintiff-Appellee
Cooperative Benefit Administrators, Inc. (“CBA”), enforcing terms
of an ERISA-governed long-term disability plan against her and
dismissing her counterclaim for benefits. Ogden also appeals the
district court’s denial of her motion to dismiss for lack of
subject matter jurisdiction and for failure to join her daughters
as indispensable parties, as well as the court’s denial of her
motion for partial summary judgment. For the following reasons, we
reverse the district court’s denial of Ogden’s motion to dismiss,
albeit not on jurisdictional grounds; we render a judgment of
dismissal, but for failure to state a claim in federal common law;
and we affirm the district court’s dismissal of Ogden’s
counterclaim for benefits.
I. FACTS AND PROCEEDINGS
The National Rural Electric Cooperative Association (“NRECA”)
is a trade association for more than 1,000 rural electric
cooperatives throughout the United States. CBA is the claims
adjudicator for NRECA’s Group Benefits Program, a multiple-employer
benefits plan sponsored by NRECA for its member cooperatives. This
Program consists of five welfare benefits plans, including a self-
insured Long-Term Disability Benefits Plan (“the Plan”) governed by
the Employee Retirement Income Security Act of 1974 (“ERISA”).1 As
claims adjudicator for the Program, CBA is also an ERISA fiduciary
as defined by § 1102(a).2 Ogden is a former employee of Cajun
Electric Power Cooperative, Inc., one of NRECA’s member
cooperatives, and was a participant in the Plan at all relevant
times. After sustaining non-work related injuries that rendered
her totally disabled, Ogden filed a claim in April 1995 seeking
long-term disability benefits under the Plan. Within three weeks,
1
See 29 U.S.C. §§ 1002(1), et seq.
2
See 29 U.S.C. § 1102(a).
2
CBA approved her request and began paying Ogden the full amount of
her benefits under the Plan.
The Plan documents contain a “Benefit Offset” provision that
allows CBA, as plan fiduciary, to estimate the amount of benefits
a participant is eligible to receive from sources outside the Plan3
and to deduct —— or “offset” —— the combined amount of these
outside benefits from the amount that the participant is entitled
to receive under the Plan. Benefits from outside sources that were
subject to offset included “any payments [from other sources]. . .
whether the payment is made to, or on behalf of, the Participant,
the Participant’s spouse or any dependent of the Participant.” As
there is often a substantial delay between the time that a
participant becomes eligible for outside benefits and the time that
such benefits are actually paid to the participant, the Plan also
gives CBA the option of advancing to a participant the full amount
of his Plan benefits, without offset, conditioned on the
participant’s agreeing to reimburse the Plan the amount of the
advances attributable to eventual receipts of outside benefits. To
reinforce a participant’s reimbursement obligation, the Plan
requires him to sign a Reimbursement Agreement (“Agreement”), the
3
The following outside sources are subject to offset under
the Plan: (1) workers’ compensation benefits, (2) welfare benefits
to which the participant may be entitled to receive under the terms
of an employee benefit plan other than one sponsored by the NRECA
Group Benefits Program, (3) benefits under state or federal law,
(4) wage payments, (5) pension payments, (6) life insurance
disability payments, (6) Social Security Retirement benefits, and
(7) Social Security Disability benefits.
3
terms of which are stated in the plan documents, obligating the
participant both to cooperate with CBA in pursuing benefits from
outside sources and to reimburse the Plan the amount of the
advances within 30 days following receipt of any benefits from
outside sources. The Agreement specifies that, if the participant
fails to repay the Plan within thirty days for amounts previously
advanced, the participant is liable to the Plan for the full amount
of the advances, plus interest and any costs or attorney’s fees
incurred by CBA in enforcing the Agreement. If a participant
refuses to reimburse the Plan in accordance with the provisions of
the Agreement, CBA is authorized by the Plan to reduce —— “setoff”
—— reimbursements owed to it by the participant against future
monthly benefits as they become due.
In June 1995, CBA learned that Ogden and her two dependent
daughters had become eligible to receive Social Security disability
benefits, which, as we have noted, are among the types of outside
benefits that are subject to the Plan’s offset provisions.4
Consequently, CBA informed Ogden that it would begin offsetting the
estimated amount of her and her daughters’ anticipated Social
Security disability benefits against her monthly benefits under the
Plan, unless she agreed to provide CBA with a copy of her Social
Security application and sign a Reimbursement Agreement as required
4
The Plan defines Social Security disability benefits to
include “benefits paid to the Participant’s spouse or children on
account of the Participant’s employment and earnings record.”
4
by the Plan. Ogden opted to sign the Agreement and continue to
receive the full amount of her benefits without offset. In the
Agreement, Ogden promised
[t]o repay CBA the amounts advanced to [her] in
accordance with the offset provisions of the [LTD]
plan and this Reimbursement Agreement within 30
days of [her] receipt of the proceeds of any
benefits, awards, or payments recovered from Social
Security . . . The repayment will not exceed the
amount of the benefits, awards, or payments
recovered from Social Security, except that it
shall include interests, costs, and attorney’s fees
as provided in this RA.
In October 1996, CBA informed Ogden that she had become
eligible to receive her retirement pension and that her total
monthly benefits under the Plan would be offset by $66.52, the full
amount of her monthly pension payments. Thus, her total monthly
benefits from the Plan were reduced from $996.77 to $930.25,
starting with her November 1996 payment.
Initially, the Social Security Administration (“SSA”) denied
Ogden’s claim. CBA subsequently offered to hire Allsup, Inc. to
pursue the claim on Ogden’s behalf. Ogden accepted this offer, and
CBA paid all expenses related to Allsup, Inc.’s representation.
The SSA finally approved Ogden’s claim for disability benefits in
October 1997, more than two years after she had submitted her
application. Shortly thereafter, the SSA issued Ogden a Notice of
Award, stating that she was entitled to monthly Social Security
disability benefits of $844, starting the following month, plus a
lump-sum payment of $26,808 for retroactive disability payments for
5
the period April 1995 through October 1997. The SSA also informed
Ogden that her two daughters, both of whom had attained majority
after Ogden’s application was filed and were thus no longer her
dependents, would each receive lump-sum payments totaling $27,624
for the same period.
The present controversy arose when, after receiving her lump-
sum Social Security award, Ogden refused to reimburse the Plan
$27,291.29 to cover advances that she owed under the terms of the
Plan and the Agreement. Although CBA began suspending Ogden’s
benefits in December 1998 through the exercise of its setoff
rights, it continued to seek reimbursement from Ogden from her
lump-sum award. In April 2000, after several attempts to obtain
reimbursement failed, CBA filed suit in district court for
$27,693.86 in benefit “overpayments.” Because Ogden’s daughters
had not, at that time, received their lump-sum Social Security
awards, CBA based its demand on the amount of Ogden’s lump-sum
award and the estimated amount of her daughters’ anticipated lump-
sum awards, plus pre-judgment interest at eight percent, post-
judgment interest, and attorney’s fees and costs.
In July 2000, the SSA paid Ogden’s two major daughters lump
sums of $26,994 and $630, respectively. CBA subsequently amended
its complaint to state a demand for $22,784.74, an amount that
reflected both the sums it had recouped from Ogden since December
1998 as a result of its suspension of her plan benefits under the
setoff provision and the sums her daughters had actually received.
6
CBA premised subject matter jurisdiction on two separate grounds:
(1) ERISA § 502(a)(3),5 which authorizes a plan fiduciary to bring
a civil action for equitable relief to enforce the terms of the
plan, and (2) the federal common law of unjust enrichment as
applied to ERISA.
Ogden answered the complaint and counterclaimed for back
benefits allegedly owed to her from May 2000 to date, plus
attorney’s fees and costs. She then filed a motion to dismiss
CBA’s complaint for lack of subject matter jurisdiction on the
basis that CBA had failed to state a statutory claim for equitable
relief under § 502(a)(3) and that federal common law could not be
invoked to provide CBA with a remedy. That motion also included an
alternative Rule 12(b)(7)6 motion to dismiss CBA’s complaint for
failure to join her daughters as indispensable parties under Rule
19.7
While these motions were still pending, Ogden filed a motion
for partial summary judgment on the merits of CBA’s claims,
asserting, inter alia, that she could not be held liable under the
5
See 29 U.S.C. § 1132(a)(3). ERISA § 502(a)(3) authorizes a
civil action “by a participant, beneficiary, or fiduciary (A) to
enjoin any act or practice which violates any provision of this
title or the terms of the plan, or (B) to obtain other appropriate
equitable relief (i) to redress such violations or (ii) to enforce
any provisions of this title or the terms of the plan[.]” 29 U.S.C.
§ 1132(a)(3).
6
Fed. R. Civ. P. 12(b)(7).
7
Fed. R. Civ. P. 19.
7
terms of the Agreement for the Social Security awards received by
her daughters, as they were no longer her dependents when they
received those awards. Specifically, Ogden requested that the
district court (1) dismiss CBA’s reimbursement action on the
merits, (2) declare that CBA erred in offsetting her plan benefits
by the amount of her retirement pension, and (3) declare that CBA
had accepted her alleged offer to pay the amount she owed to the
Plan through setoff of her plan benefits. CBA then filed a cross-
motion for summary judgment on the merits of its claims and on
Ogden’s counterclaim for benefits.
In January 2002, after both sides had filed their dispositive
motions, the Supreme Court issued its decision in Great-West Life
& Annuity Insurance Co. v. Knudson, which further defined the scope
of § 502(a)(3)’s equitable relief provision.8 Subsequently, the
parties filed supplemental memoranda addressing Knudson’s impact on
CBA’s reimbursement claim.
In March 2003, the district court heard oral argument on
Ogden’s motions to dismiss and for partial summary judgment, as
well as on CBA’s cross-motion for summary judgment. During the
course of the proceedings, CBA conceded that it had failed to state
a viable claim for equitable relief under § 502(a)(3), after which
the district court dismissed that claim. The court ruled, however,
that the dismissal of CBA’s statutory claim did not preclude the
8
534 U.S. 204 (2002).
8
exercise of federal question jurisdiction under § 1331, theorizing
that CBA had a right to assert a federal common law claim grounded
in unjust enrichment.9
The district court then denied Ogden’s Rule 12(b)(7) motion,
reasoning that, unlike their mother, Ogden’s daughters were not
contractually bound by the Agreement to repay the amounts advanced
to Ogden by the Plan and thus were not indispensable parties to the
suit. Finally, the district court denied Ogden’s motion for
partial summary judgment and granted CBA’s cross-motion for summary
judgment, concluding that Ogden had failed to raise a genuine issue
of fact regarding CBA’s unjust enrichment claim and that her
counterclaim was barred for failure to exhaust administrative
remedies.
The district court entered judgment against Ogden for
$22,784.74, plus attorney’s fees, costs, and interest at the rate
of eight percent per annum, compounded annually, from the date on
which Ogden and her daughters had received their Social Security
disability benefits. It is from this judgment that Ogden timely
filed a notice of appeal.
II. ANALYSIS
A. Standard of Review
9
Frank v. Bear Stearns & Co., 128 F.3d 919, 922 (5th Cir.
1997) (“[f]ederal question jurisdiction may exist over claims
arising under federal common law”); see 28 U.S.C. § 1331.
9
We review de novo both a denial of a motion to dismiss and a
grant of a motion for summary judgment.10
B. CBA’s Federal Common Law Claim
As noted, CBA’s complaint alleged two alternative bases for
jurisdiction: (1) a statutory claim for equitable relief under §
502(a)(3), and (2) a federal common law claim of unjust enrichment.
As CBA conceded that it could not maintain its claim for equitable
relief under § 502(a)(3), we need not address it except to note
that, in seeking to impose personal liability on Ogden to enforce
her “contractual reimbursement obligation under the LTD Plan and
the Reimbursement Agreement,” CBA was requesting precisely the kind
of “legal” remedy that the Supreme Court has held to be beyond §
502(a)(3)’s jurisdictional grant.11
As the district court correctly ruled, however, CBA’s failure
to state a statutory cause of action under ERISA does not bar
federal subject matter jurisdiction over its unjust enrichment
claim under federal common law. Indeed, the Supreme Court has made
clear that federal question jurisdiction may exist over claims
10
See Benton v. United States, 960 F.2d 19, 21 (5th Cir.
1992) (per curiam).
11
See Knudson, 534 U.S. at 210, 221 (an action that seeks “to
impose personal liability on [a defendant] for a contractual
obligation to pay money” is “legal” in nature and unauthorized by
§ 502(a)(3)); see also Bombardier Aerospace Employee Welfare
Benefits Plan v. Ferrer, Poirot & Wansbrough, P.C., 354 F.3d 348,
356 (5th Cir. 2003); Bauhaus USA, Inc. v. Copeland, 292 F.3d 439,
444 (5th Cir. 2002).
10
arising under federal common law.12 Nevertheless, simply because
federal courts have subject matter jurisdiction over CBA’s action
to determine the existence of a federal common law remedy of unjust
enrichment on CBA’s behalf does not mean that CBA has successfully
stated a federal common law cause of action for unjust enrichment.13
In cases such as this, for which Congress has empowered the
judiciary to create federal common law pursuant to federal
legislation, the ability of a plaintiff to state a federal common
law cause of action depends on the existence of a “gap” in the text
of that legislation that allows for the creation of the federal
common law remedy sought by the plaintiff.14
Our holding in Frank v. Bear Stearns & Co. to the effect that
federal question jurisdiction did not exist because the plaintiff’s
12
See Illinois v. Milwaukee, 406 U.S. 91, 100 (1972) (“We see
no reason not to give ‘laws’ its natural meaning, and therefore
conclude that § 1331 jurisdiction will support claims founded upon
federal common law as well as those of a statutory origin.”
(citation omitted)); see also Frank, 128 F.3d at 922.
13
See, e.g., Airco Indus. Gases, Inc. Div. of BOC Group , Inc.
v. Teamsters Health & Welfare Pension Fund, 850 F.2d 1028, 1032 (3d
Cir. 1988) (“[t]he question of whether the district court had
subject matter jurisdiction pursuant to [28 U.S.C. § 1331] is not
whether [the plaintiff-employer] had a valid cause of action
against the [defendant-plan] under federal common law . . . [but]
[r]ather . . . whether the determination of the existence vel non
of that cause of action is a question “arising under . . . the laws
. . . of the United States.”) (citing 28 U.S.C. § 1331) (1982)).
14
Jamail, Inc. v. Carpenters Dist. Council of Houston Pension
& Welfare Trusts, 954 F.2d 299, 303 (5th Cir. 1992) (“Whenever
Congress enacts complex comprehensive legislation, such as ERISA,
minor gaps in the legislation are unavoidable . . .[,][and] [i]t is
the judiciary’s role . . . to fill in these gaps.”).
11
complaint did not state a claim under federal common law is not to
the contrary.15 In the instant case, our power to create federal
common law is premised on congressional authorization to fill
interstitial gaps in the text of federal legislation, here, ERISA.
Accordingly, we have jurisdiction over the action to construe that
legislation to determine the existence of a federal common law
cause of action on CBA’s behalf. By contrast, the issue in Frank
was whether the plaintiff’s state law claims implicated “federal
common law issues” because their resolution required interpretation
of a federal contract.16 Thus, in Frank we did not have
congressional authorization to make substantive rules pursuant to
a federal statute, and we could exercise federal question
jurisdiction over the action only if we found that the action fell
within “the narrow class of cases where federal rules are necessary
to protect uniquely federal interests.”17 As the action did not
fall within that narrow class of cases, we concluded that federal
common law did not “exist” in the case, and thus there was no basis
for federal question jurisdiction.18
More to the point of today’s inquiry, we have held that
federal common law may be applied to fill “minor gaps” in ERISA’s
15
See 128 F.3d at 924.
16
See id. at 922.
17
See id. at 923 (citations omitted).
18
Id. at 925.
12
text, as long as the federal common law rule created is “compatible
with ERISA’s policies.”19 In so holding, however, we cautioned that
the power of the judiciary “to develop federal common law pursuant
to ERISA does not give carte blanche power to rewrite the
legislation to satisfy our proclivities.”20 Thus, federal courts
do not have authority under ERISA to create federal common law when
that statute “specifically and clearly addresses the issue before
th[e] Court.”21 This is so because, in such instances, the
legislative scheme does not contain a “gap” that requires “filling”
19
Jamail, Inc., 954 F.2d at 304; Rodrigue v. Western and
Southern Life Ins. Co., 948 F.2d 969, 971 (5th Cir. 1991) (“federal
courts should create federal common law when adjudicating disputes
regarding ERISA”) (citing Degan v. Ford Motor Co., 869 F.2d 889,
892 (5th Cir. 1989)); Cefalu v. B.F. Goodrich Co., 871 F.2d 1290,
1297 (5th Cir. 1989) (“federal courts may create federal common law
governing employee benefit plans in order to supplement the
statutory scheme”) (citing Nachwalter v. Christie, 805 F.2d 956,
959 (11th Cir. 1986)); see also United States v. Little Lake Misere
Land Co., Inc., 412 U.S. 580, 593 (1973) (“[T]he inevitable
incompleteness presented by all legislation means that interstitial
federal lawmaking is a basic responsibility of the federal
courts.”); Morales v. Pan Am. Life Ins. Co., 914 F.2d 83, 87 (5th
Cir. 1990) (declining to create federal common law unjust
enrichment and third-party beneficiary claims where creation of
such claims “would be inconsistent with ERISA’s terms and
policies”).
20
Jamail, Inc., 954 F.2d at 303.
21
Cefalu, 871 F.2d at 1297 (refusing to apply federal common
law to ERISA “because ERISA specifically and clearly addresse[d]
the issue before th[e] Court”); Rodrigue, 948 F.2d at 971-72
(refusing to create federal common law rule that would allow
employee to assert an estoppel-based argument against the Plan
because ERISA “addresses estoppel claims”) (citing Degan v. Ford
Motor Co., 869 F.2d 889, 895 (5th Cir. 1989) (power to create
federal common law when adjudicating ERISA disputes exists only
where ERISA preempts but does not address the issue) (citations
omitted)).
13
by application of federal common law. Thus, a court’s general
opinion as to what remedies might further ERISA’s underlying
policies will not be sufficient “‘to overcome the words of its text
regarding the specific issue under consideration.’”22
Although we have not previously recognized a federal common
law right of unjust enrichment or restitution in the context of an
ERISA fiduciary’s efforts to obtain reimbursement of funds paid to
a participant, CBA argues that such a right comports with ERISA’s
goal of enforcement of plan terms and is necessary to provide CBA
with relief in the absence of equivalent statutory or state law
remedies.23 Ogden counters that the Supreme Court, in both Mertens
v. Hewitt Associates and Knudson, interpreted § 502(a)(3)’s
“appropriate equitable relief” language to proscribe precisely the
type of monetary relief —— or “legal” remedy —— that CBA requests.
As such, argues Ogden, the district court did not have authority to
grant CBA a federal common law right that would, in effect, allow
it to circumvent the plain language of ERISA’s text, i.e., to do
indirectly that which under ERISA it cannot do directly.
As our discussion indicates, CBA’s entitlement to a federal
common law remedy is dependent on our determining that a gap exists
in ERISA’s text regarding CBA’s right, as a plan fiduciary, to
22
Knudson, 534 U.S. at 220 (quoting Mertens v. Hewitt Assocs.,
508 U.S. 248, 261 (1993)).
23
CBA did not assert a state law cause of action for breach
of contract, and thus we express no opinion as to whether such a
claim would be preempted.
14
bring an action for a money judgment enforcing a participant’s
contractual reimbursement obligation. As we shall show, ERISA’s
civil enforcement provision specifically and clearly addresses this
issue, thereby eschewing any possibility that a “gap” exists in the
statutory text that would permit us to employ federal common law to
create the remedy that CBA seeks.
To reach that determination, we need only examine the text of
§ 502(a)(3) in light of the Supreme Court’s decisions in Mertens
and Knudson. Section 502(a)(3) arms plan fiduciaries with a cause
of action “to obtain . . . appropriate equitable relief” to redress
any act in violation of ERISA or the terms of the plan or to
enforce ERISA’s provisions or the terms of the plan.24 In Mertens,
the Supreme Court interpreted § 502(a)(3)’s “appropriate equitable
relief” language to include only “those categories of relief that
were typically available in equity,” reasoning that a contrary
interpretation —— namely, one that would allow a plaintiff to bring
an action for monetary damages, “the classic form of legal relief,”
—— “would limit the relief not at all” and “render the modifier
[equitable] superfluous.”25 Although the Mertens plaintiffs did
not, as CBA does here, ask the Court to recognize a federal common
law cause of action in unjust enrichment, the Court, in rejecting
their proposed construction of § 502(a)(3), did admonish the
24
29 U.S.C. § 1132(a)(3).
25
508 U.S. at 255-56, 257, 258.
15
plaintiffs that “[t]he authority of courts to develop a ‘federal
common law’ under ERISA is not the authority to revise the text of
the statute.”26
In Knudson, the Supreme Court revisited the boundaries of
“equitable relief” under § 502(a)(3) and again carefully emphasized
that Congress’s use of the word “equitable” was not inadvertent,
but rather was a deliberate act on its part to limit a § 502(a)(3)
plaintiff’s remedies to those that were traditionally considered
equitable in nature.27 For an action to lie in equity, the Court
stated, an ERISA plaintiff must “seek not to impose personal
liability on the defendant, but to restore to the plaintiff
particular funds or property in the defendant’s possession.”28 The
Knudson Court was singularly unimpressed by the ERISA plan’s
concerns that limiting § 502(a)(3) actions to include only those
remedies “typically available in equity” would deprive the plan of
any remedy and create a result contrary to a “‘primary purpose of
ERISA,’ namely, the enforcement of the terms of a plan.”29 To this
end, the Court noted that, “‘[e]ven assuming ... that petitioners
are correct about the pre-emption of previously available
26
Id. at 259 (citing Firestone Tire & Rubber Co. v. Bruch, 489
U.S. 101, 110 (1989)).
27
534 U.S. at 220-221. Like CBA, the plan in Knudson sought
reimbursement from the beneficiary out of funds that were beyond
the beneficiary’s possession and control. See id. at 214.
28
Id. at 214.
29
Id. at 215, 220.
16
state-court actions’ or the lack of other means to obtain relief,
‘vague notions of a statute’s “basic purpose” are nonetheless
inadequate to overcome the words of its text regarding the specific
issue under consideration.’”30
Looking at ERISA’s civil enforcement provision as a whole, the
Court in Knudson observed:
In the very same section of ERISA as § 502(a)(3),
Congress authorized ‘a participant or beneficiary’ to
bring a civil action to enforce his rights under the
terms of the plan,’ without reference to whether the
relief sought is legal or equitable. But Congress did
not extend the same authorization to fiduciaries.
Rather, § 502(a)(3), by its terms, only allows for
equitable relief. We will not attempt to adjust the
“carefully crafted and detailed enforcement scheme”
embodied in the text that Congress has adopted.31
As the plan clearly sought to impose personal liability on the
beneficiary to enforce her contractual reimbursement obligation
under the plan, the Court held that the plan’s action was legal in
nature and outside the scope of equitable relief permitted by §
502(a)(3).32
In the wake of Mertens and Knudson, we have twice interpreted
§ 502(a)(3) in the context of a plan’s suit for reimbursement from
a beneficiary. In Bauhaus U.S.A., Inc. v. Copeland, we reversed
the district court’s exercise of subject matter jurisdiction over
the plan’s claim, noting that the funds sought by the plan were not
30
Id. at 220 (quoting Mertens, 508 U.S. at 261).
31
Id. at 220-221 (citations omitted).
32
See Knudson, 534 U.S. at 221.
17
within the participant’s possession and control.33 More recently,
in Bombardier Aerospace Employee Welfare Benefits Plan v. Ferrer,
Poirot and Wansbrough, we affirmed the district court’s exercise of
subject matter jurisdiction on the basis that the participant had
constructive possession over the funds sought by the plan.34 In
each case, we stressed that, for a plan fiduciary’s action to fall
within § 502(a)(3)’s jurisdictional grant, it must seek recovery of
(1) specifically identifiable funds, (2) that belong in good
conscience to the Plan, and (3) that are within the possession and
control of the defendant-beneficiary.35
As Mertens and Knudson demonstrate, Congress, in drafting §
502(a)(3)(B) to allow only “equitable relief,” specifically
contemplated the possibility of extending to plan fiduciaries a
right to sue a participant for money damages and chose instead to
limit fiduciaries’ remedies to those typically available in equity.
As ERISA’s text “specifically and clearly addresses” the issue
33
292 F.3d at 445.
34
See 354 F.3d at 356.
35
See id.; Bauhaus, 292 F.3d at 444-45. During oral argument
before the district court, CBA conceded that it had failed to state
a claim for equitable relief under § 502(a)(3) because it had moved
to re-open discovery so that it could “trace the location and
amount of social security disability benefits in the possession,
custody or control of Ogden.” Cooperative Benefit Adm’rs, Inc., 265
F. Supp. 2d 662, 670 (M.D. La. 2003). We read the district court’s
decision to dismiss CBA’s § 502(a)(3) claim based on this
concession as an implicit finding on its part that the funds CBA
sought to recover from Ogden were either not specifically
identifiable or beyond her possession and control.
18
whether CBA, as a plan fiduciary, has a right to pursue a claim for
legal relief against Ogden, there is no “gap” in ERISA on this
question and thus no basis for granting CBA a federal common law
remedy. We therefore cannot sanction the district court’s decision
to grant CBA a federal common law right to pursue its claim for
money damages against Ogden.
CBA nevertheless argues that Knudson’s statement that “there
may have been other means for petitioners to obtain the essentially
legal relief that they seek” can be construed as either an
endorsement of a federal common law remedy or at least an
intimation that its holding did not foreclose the possibility that
a federal common law remedy might exist.36 We are unpersuaded.
Aside from obviously being dicta, this statement was made only to
highlight the Court’s point, discussed above, that the availability
vel non of other remedies to the plan was irrelevant to the Court’s
decision to deny the plan’s claim for legal relief because that
type of relief was expressly proscribed by ERISA’s text.37 Thus,
we do not read this statement as an invitation to the lower courts
36
Knudson, 534 U.S. at 220.
37
The Court went on to state that it “express[ed] no opinion
as to whether [the plan] could have intervened in the state-court
tort action brought by respondents or whether a direct action by
petitioners against respondents asserting state-law claims such as
breach of contract would have been pre-empted by ERISA . . . . [or]
whether [the plan] could have obtained equitable relief against
respondents’ attorney and the trustee of the Special Needs Trust.”
Id.
19
to grant plan fiduciaries a federal common law right to pursue
claims for legal remedies against participants.
We are equally unconvinced by CBA’s suggestion that Mertens
and Knudson are somehow inapposite because the plaintiffs in those
cases did not seek a federal common law remedy. To reach the
decision we make today, we need only determine that ERISA’s text
specifically and clearly addresses the question whether CBA, as a
plan fiduciary, has a right to pursue a claim for legal relief
against Ogden. Mertens and Knudson explain in great detail that
Congress not only considered this precise question in enacting §
502(a)(3), but answered it in the negative. Far from being
inapposite, then, these opinions are directly controlling of our
decision not to extend to CBA a federal common law right to pursue
its reimbursement claim against Ogden.
We also reject CBA’s attempt to analogize its case to our
precedent in Jamail v. Carpenters District Council of Houston
Pension & Welfare Trusts.38 Decided prior to Mertens and Knudson,
Jamail recognized the existence of an employer’s federal common law
right to recover contribution “overpayments” mistakenly made to its
ERISA plan.39 Noting that ERISA § 1132 provides a private right of
action for fiduciaries, participants, and beneficiaries, but not
for employers, we reasoned in Jamail that a “gap” existed in
38
954 F.2d 299 (5th Cir. 1992).
39
See id. at 305.
20
ERISA’s text regarding an employer’s rights to recover overpayment
of contributions from the plan to which such overpayments had been
made.40 Thus, we held that recognition of a federal common law
right of restitution for an employer vis-à-vis a plan was
appropriate, as ERISA’s text did not address the issue, and such a
right would further ERISA’s underlying purposes by encouraging
small employers to sponsor benefit plans for their employees.41
Although CBA styles its reimbursement action as one for
“overpayment of benefits,” Jamail is clearly distinguishable, based
on the obvious difference between an employer qua employer and a
traditional ERISA party, i.e., plans, fiduciaries, participants,
and beneficiaries. In Jamail, we were faced with an actual gap in
ERISA’s text which makes no mention of employers. We could not,
therefore, point to precise language in ERISA’s text demonstrating
that, either expressly or implicitly, Congress had proscribed the
kind of relief that the employer plaintiff sought. As ERISA’s text
did not specifically and clearly address whether an employer had a
right to recoup mistakenly paid contributions from the plan, and as
creation of such a remedy was compatible with the policies of
ERISA, the Jamail panel did not have to “rewrite” ERISA to grant
the employer a federal common law right of restitution against the
plan. Jamail thus has no bearing on our refusal today to create a
40
See id. at 303-04.
41
See id.
21
federal common law right of unjust enrichment that would allow a
plan fiduciary to assert an action for legal relief against a
participant, both parties being members of categories expressly
identified in § 502.
We acknowledge that, in holding as we do, we may appear to be
at variance with the Fourth Circuit’s pre-Mertens decision in
Provident Life & Accident Insurance Company v. Waller.42 In Waller,
the Fourth Circuit recognized the existence of a federal common law
right of restitution on the part of a plan fiduciary to recover
benefits from a beneficiary.43 The facts of that case are as
follows: The Plan administrator sought reimbursement of benefits
paid to the beneficiary after settlement funds from a third party
tortfeasor were received on behalf of the beneficiary.44 The Plan
administrator did not, however, allege jurisdiction under §
502(a)(3), but rather under § 502(a)(2)(B), which provides a civil
action only to participants and beneficiaries to recover benefits
owed from a plan.45 Noting that § 502(a)(2)(B) does not authorize
the converse, i.e., suits by plan administrators to recover from
participants or beneficiaries, the Fourth Circuit held that the
provision in question did not provide a basis for jurisdiction and
42
906 F.2d 985 (4th Cir. 1990).
43
See id. at 993.
44
See id. at 986-87.
45
See id.; 29 U.S.C. § 1132(a)(1).
22
went on to create a federal common law right of restitution for the
plan administrator.46
A close reading of Waller’s analysis, however, reveals that
the reasoning and facts of that case constitute an inadequate basis
for our recognition of a federal common law right of unjust
enrichment in the instant case. Although the Fourth Circuit noted
that “it [was] probable” that the plan administrator had stated a
cause of action for equitable relief under § 502(a)(3), it declined
to decide the issue, as the plan administrator had not advanced §
502(a)(3) as the basis for jurisdiction and “as there [was]
seemingly little or no authority” on what was required to state an
action for equitable relief under § 502(a)(3).47 Thus, the Waller
court recognized a federal common law right of restitution on the
part of a plan administrator against a beneficiary without ever
considering the applicability of § 502(a)(3) to the administrator’s
requested relief.
Even so, CBA urges us to follow Waller in granting it a
federal common law right of restitution against Ogden, pointing out
that the Fourth Circuit recently upheld Waller’s holding in a post-
Knudson decision, Rego v. Westvaco Corporation.48 In Rego, the
Fourth Circuit declined to grant a beneficiary a federal common law
46
See Waller, 906 F.2d at 987, 991.
47
See id. at 988 n.6
48
319 F.3d 140, 149 (4th Cir. 2003).
23
right to sue the plan for breach of fiduciary duty and negligent
misrepresentation.49 In reaching its decision, the court reasoned
that, because “Congress clearly contemplated plaintiffs like [the
beneficiary] and explicitly created remedies for them within the
text of the statute itself,”50 the court could not “disregard
Congress’ decision to limit the scope of those remedies.”51 The
Fourth Circuit went on, however, to distinguish its holding in Rego
from its decision to create a federal common law remedy in Waller
on the basis that, in Waller, “‘ERISA [did] not provide an explicit
remedy’” for the administrator.52
We find questionable the Rego court’s efforts to distinguish
Waller, in that the reasoning in the later case fails to account
for the fact that Waller had not considered the applicability of §
502(a)(3) to the plan administrator’s claim prior to granting the
administrator a federal common law remedy. We therefore decline to
adopt the Fourth Circuit’s reasoning in Waller, as approved by
Rego, because in neither case was the Court in a position to decide
whether a “gap” existed in ERISA’s text that would allow for the
application of federal common law. Accordingly, CBA’s reliance on
49
See id.
50
Id.
51
Id.
52
Id. (quoting Waller, 906 F.2d at 990).
24
Waller, although somewhat understandable in light of Rego, is
nevertheless misplaced.
Our decision not to follow Waller’s holding is equally
unaffected by Jamail’s suggestion that Waller was correctly
decided.53 A close look at Jamail’s discussion of Waller reveals
that its approval was based on a pre-Mertens understanding of what
constitutes “equitable” relief under § 502(a)(3).54 Specifically,
we noted in Jamail that “restitution is a cause of action with its
origins in equity” and cited Waller as an example of a case in
which equity had been achieved in aid of the plan by the court’s
recognition of a federal common law right of restitution on the
part of the plan.55 With the hindsight benefit of Mertens and
Knudson, however, we now know that “not all relief falling under
the rubric of restitution is available in equity,” and that
restitution can be either a legal or equitable remedy, depending on
the “‘basis for [the plaintiff’s] claim’ and the nature of the
underlying remedies sought.”56 In Jamail, we could not have known
whether the reimbursement action brought by the plan in Waller was
legal or equitable in nature, or whether the Waller court was
53
See Jamail, Inc., 954 F.2d at 305.
54
See id. (describing Waller as “a case in which equitable
principles were applied to the pension plan’s benefit”) (citing
Waller, 906 F.2d at 990).
55
Id.
56
Knudson, 534 U.S. at 212-13 (quoting Reich v. Continental
Casualty Co., 33 F.3d 754, 756 (7th Cir. 1994)).
25
“achieving equity” in allowing the plan a federal common law right
of restitution. This is because the Waller court did not consider
the issue or otherwise analyze whether the plan had stated a cause
of action for equitable relief under § 502(a)(3). The Jamail
panel’s misconception of the nature of equitable relief becomes
even more apparent when we observe that, if the Waller plaintiff’s
restitution action were truly equitable in nature, as the Jamail
panel assumed, there would have been no need for the Waller court
to create a federal common law remedy to “achiev[e] equity” because
the plan’s action would have been authorized under § 502(a)(3).
Thus, Jamail’s discussion of Waller does not affect our decision
today to reject Waller’s holding.
To summarize, the district court erred in recognizing a
federal common law right of unjust enrichment on CBA’s behalf. As
the text of § 502(a)(3) and Supreme Court precedent make clear,
Congress, in choosing the modifier “equitable,” specifically
contemplated and chose to proscribe the legal remedy that CBA
proffers. As ERISA’s text specifically and clearly addresses the
issue now before us, there is no “gap” in that text that would
warrant our application of federal common law. We thus hold that
ERISA plan fiduciaries do not have a federal common law right to
sue a beneficiary for legal (as distinct from equitable) relief on
a theory of unjust enrichment or restitution. Concluding that CBA
failed to state a cause of action under the federal common law
26
applicable to ERISA, we reverse the district court’s denial of
Ogden’s motion to dismiss this claim.57
C. Ogden’s Counterclaim for Benefits58
The district court held that Ogden’s counterclaim for benefits
from May 2000 to date was barred for failure to exhaust
administrative remedies; specifically, for not complying with the
Plan’s claim-review procedures.59 We have held that “claimants
seeking benefits from an ERISA plan must first exhaust available
administrative remedies under the plan before bringing suit to
recover benefits.”60 Here, the Plan’s documents require a
participant to file an administrative appeal of the denial of a
claim for benefits within 90 days after being notified that the
57
Jurisdiction over Ogden’s counterclaim is premised on §
1132(a)(1) which allows a participant to bring a civil action “to
recover benefits due to him under the terms of his plan.” 29 U.S.C.
1132(a)(1)(B).
58
Ogden also moved for partial summary judgment in the
district court on her affirmative defense that CBA was not entitled
to offset her plan benefits by the amount of her monthly retirement
pension because, under the terms of the Plan, retirement pension
benefits could only be offset “to the extent [they were] paid to
the Participant,” and Ogden had in fact withdrawn the funds from
her pension and rolled them into an IRA. The district court
rejected this argument on the basis that Ogden had not followed the
Plan’s claim review procedure in challenging CBA’s decision to
offset her pension benefits. We do not address this issue as Ogden
has not briefed it on appeal.
59
See Cooperative Benefit Adm’rs, Inc., 265 F. Supp. 2d at
681.
60
Bourgeois v. Pension Plan for the Employees of Santa Fe
Int’l Corps., 215 F.3d 475, 479 (5th Cir. 2000) (citing Denton v.
First Nat’l Bank of Waco, 765 F.2d 1295, 1300 (5th Cir. 1985)).
27
claim has been denied. In the district court, Ogden argued that
any attempt to exhaust her administrative remedies would have been
futile, but she has not advanced this limited exception to the
exhaustion requirement on appeal.61 Neither has she challenged the
district court’s finding that she failed to comply with the Plan’s
claim review procedures. Instead, Ogden merely asserts that, in
the event we hold that she is not contractually liable under the
Reimbursement Agreement for the Social Security benefits received
by her adult daughters —— an issue that we do not reach as a result
of our finding that CBA failed to state a federal common law cause
of action —— then she is entitled to recover the amount of her plan
benefits that CBA suspended through exercise of its setoff rights.
As Ogden has not shown on appeal that she exhausted her
administrative remedies, or that her efforts to exhaust would have
been futile, we must affirm the district court’s conclusion that
her counterclaim is barred for failure to exhaust, and thus we
affirm the court’s grant of summary judgment dismissing her
counterclaim.
III. CONCLUSION
Concluding that CBA has failed to state an ERISA cause of
action under federal common law, we reverse the district court’s
denial of Ogden’s motion to dismiss CBA’s claim, grounded in
61
We have “recognized an exception to the affirmative defense
of failure to exhaust administrative remedies when such attempts
would be futile.” Id. (citing Hall v. Nat’l Gypsum Co., 105 F.3d
225, 232 (5th Cir. 1997)).
28
federal common law, but do so for failure to state a claim, not for
lack of subject matter jurisdiction, and we render a judgment
dismissing that claim; however, we affirm the district court’s
grant of summary judgment dismissing Ogden’s counterclaim for
benefits because she failed to exhaust administrative remedies.
REVERSED and RENDERED in part; AFFIRMED in part.
29
Cooperative Benefit Administrators, Inc. v. Ogden
Court: Court of Appeals for the Fifth Circuit
Date filed: 2004-04-29
Citations: 367 F.3d 323
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