Great-West Life & Annuity Insurance Co. et al. v. Knudson et al.
534 U.S. 204 (2002)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
ERISA § 502(a)(3) authorizes only traditional "equitable relief," such as injunction or restitution of specific, identifiable funds in the defendant's possession. It does not authorize suits seeking to impose personal liability on a defendant for a contractual obligation to pay money from their general assets, which is considered a legal remedy.
Facts:
- Janette Knudson was rendered quadriplegic in a car accident in 1992.
- Her husband's ERISA-governed health plan (the Plan), administered by Great-West Life & Annuity Insurance Co., paid $411,157.11 for her medical care.
- The Plan contained a provision granting it the right to recover benefits paid if a beneficiary received a recovery from a third party.
- The Knudsons filed a tort action against Hyundai Motor Company, the car's manufacturer, and others.
- The parties negotiated a $650,000 settlement.
- The settlement allocated the majority of funds to a Special Needs Trust for Janette's future care and to attorney's fees, designating only $13,828.70 to satisfy the Plan's reimbursement claim.
- The settlement funds were not paid directly to the Knudsons but were disbursed to the trust and their attorney.
Procedural Posture:
- The Knudsons filed a tort action in California state court against Hyundai Motor Company and other alleged tortfeasors.
- Great-West filed a separate action in the U.S. District Court for the Central District of California, seeking injunctive relief under ERISA § 502(a)(3) to enforce the Plan's reimbursement provision.
- The state court approved the settlement, and the funds were disbursed to a Special Needs Trust and the Knudsons' attorney.
- The U.S. District Court granted summary judgment to the Knudsons, finding the Plan's reimbursement was limited to the amount allocated for past medical expenses.
- Petitioner Great-West appealed to the U.S. Court of Appeals for the Ninth Circuit.
- The Ninth Circuit affirmed the judgment for the Knudsons, but on the grounds that the relief sought was not 'equitable relief' authorized by § 502(a)(3).
- The U.S. Supreme Court granted certiorari.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a plan fiduciary's lawsuit to enforce a contractual reimbursement provision by seeking to impose personal monetary liability on a beneficiary constitute a claim for "equitable relief" authorized under ERISA § 502(a)(3)?
Opinions:
Majority - Justice Scalia
No. A lawsuit to impose personal monetary liability for breach of a contractual reimbursement provision is a claim for legal relief, not the "equitable relief" authorized by ERISA § 502(a)(3). The term "equitable relief" in the statute is limited to those categories of relief traditionally available in a court of equity, such as an injunction or restitution. While restitution can be an equitable remedy, the specific relief sought here is legal in nature. Equitable restitution requires tracing specific funds or property in the defendant's possession, for instance through a constructive trust or equitable lien. In this case, the settlement funds are not in the Knudsons' possession, and Great-West is seeking to enforce a contractual obligation for payment from their general assets, which is a classic claim at law for money damages. To interpret "equitable relief" more broadly would render the term superfluous, as any claim for money could be framed as an injunction to pay.
Dissenting - Justice Stevens
Yes. ERISA should be interpreted to provide a federal remedy for this clear violation of the plan's terms. The statute's provision allowing a fiduciary "to enjoin any act or practice which violates... the terms of [a] plan" should be read to authorize a court order terminating the violation—in this case, the failure to reimburse. The majority's reliance on obsolete historical distinctions from English Chancery courts is unnecessary and thwarts the congressional purpose of providing remedies for violations of federal rights. There is no persuasive reason why Congress would have intended to deny a federal remedy in this situation.
Dissenting - Justice Ginsburg
Yes. The relief sought by Great-West is restitution, which is a category of relief typically available in equity and therefore should be permitted under ERISA § 502(a)(3). The majority's rigid adherence to the anachronistic distinctions between law and equity from the "days of the divided bench" is contrary to congressional intent in 1974. The proper inquiry should focus on the substance of the relief requested. Restitution was a well-established equitable remedy, and the Court's precedent in Mertens required only that relief be "typically" available in equity, not exclusively so. The majority's holding creates an absurd result where a plan's ability to recover depends on the technicality of who possesses the funds, undermining ERISA's goal of a uniform federal enforcement scheme.
Analysis:
This decision significantly narrowed the scope of remedies available to ERISA plan fiduciaries under § 502(a)(3). By strictly adhering to the historical distinction between legal and equitable relief, the Court established that fiduciaries cannot sue beneficiaries for personal monetary liability to enforce reimbursement provisions. This ruling forced plans to seek recovery by other means, such as intervening in the beneficiary's state tort action or pursuing an equitable lien over specifically identified funds, creating practical difficulties for plan administration. The decision underscored that the text of ERISA's remedies section would be interpreted strictly, even if it leads to outcomes seemingly at odds with the statute's broader purpose of protecting plan integrity.
Unlock the full brief for Great-West Life & Annuity Insurance Co. et al. v. Knudson et al.