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Ninth Circuit Holds Plan Sought Legal, Not Equitable Relief And Therefore Could Not Pursue ERISA Action Against Enrollee


HLD, v. 32, n. 11 (November 2004)

Ninth Circuit Holds Plan Sought Legal, Not Equitable Relief And Therefore Could Not Pursue ERISA Action Against Enrollee

The Ninth Circuit affirmed September 15 the dismissal of an employee benefits plan's action under the Employee Retirement Income Security Act (ERISA) seeking to impose a lien on a plan participant's recovery from a third-party tortfeasor. The appeals court held that the plan was seeking legal rather than equitable relief and therefore could not proceed under ERISA's civil enforcement provision.

Timothy Vonderharr and his family were involved in an automobile accident and incurred medical expenses totaling $155,224.43. Timothy is an active carpenter who receives healthcare coverage under a collective bargaining agreement from the Carpenters Health and Welfare Trust for Southern California (Trust), an employee benefit plan governed by ERISA. Before paying the medical claims, the Trust required the Vonderharrs per the summary plan description to sign a document giving the Trust a lien on any third-party recovery they might obtain.

The Vonderharrs subsequently sued the driver of the other vehicle and Ford Motor Company. The family received a $30,000 settlement from the driver and also allegedly settled with Ford. The Vonderharrs refused to acknowledge the Trust's lien, arguing the contractual reimbursement provisions were unenforceable. The Trust sued the Vonderharrs in federal district court, seeking a temporary restraining order enjoining the distribution of settlement proceeds. The district court denied the Trust's request for a temporary restraining order and granted the Vonderharrs' dismissal motion. The Trust appealed. The Vonderharrs cross-appealed the district court's refusal to award them attorneys' fees.

The Ninth Circuit affirmed the dismissal, finding that the Trust sought relief not available under ERISA's civil enforcement provision. In Great-West Life and Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002), see HLD, v. 30, n. 2, the Supreme Court held that ERISA's civil enforcement provision does not provide a cause of action for legal actions for monetary damages disguised as suits seeking "appropriate equitable relief." The critical distinction, the appeals court said, is not whether the claim is equitable in nature but rather the type of remedy sought (i.e. an injunction versus damages). "The actions asserted by the Trust are nothing more than garden-variety legal claims for contractual restitution that are not cognizable under ERISA," the appeals court held.

The appeals court reversed the district court's order denying the Vonderharrs attorneys' fees. Plan participants who prevail in a suit under ERISA to enforce their rights under the plan should ordinarily recover attorneys' fees "unless special circumstances would render such an award unjust," the appeals court said. The appeals court found no such "special circumstances" here and therefore remanded to the district court to determine reasonable fees.

Carpenters Health and Welfare Trust for Southern Cal. v. Vonderharr, No. 02-57183 (Cal. Ct. App. Sept. 15, 2004). To read the case, go to$file/0257183.pdf?openelement

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