Equitable Relief
In Cheryl Street v. Ingalls Memorial Hospital, (2007 U.S. Dist. Lexis 18643), the Northern District Court of Illinois held on March 15, 2007 that just as a Plan must identify funds prior to seeking equitable relief in Federal Court, so too must relief sought by participants be specifically identifiable. In one case, decided by the Third Circuit Court of Appeals, a group of employee Plan Participants brought their Plan Administrator to court for handling their assets in an irresponsible manner. In Eichorn, et al. v. AT&T Corp., et al., 484 F.3d 644, (May 2, 2007), the Court held that while ERISA makes it illegal for a Plan Administrator to prevent the attainment of rights provided by the Plan, actions that lessen the value of the rights are not so prohibited. As such, in a case like this one, the only relief available was in the form of monetary awards and back pay, which is not “equitable relief” for purposes of Federal jurisdiction.
In another case, decided by the Sixth Circuit Court of Appeals, an employee Plan Participant was wrongfully removed from a list of employees eligible to receive benefits. The Participant sought, in Nancy Alexander, et al. v. Bosch Automotive Systems, Inc., et al., 2007 U.S. App. Lexis 11694, (May 14, 2007), to receive the benefits he was wrongfully denied. The Court determined that they did not have jurisdiction. “A plaintiff could seek restitution in equity, ordinarily in the form of a constructive trust or an equitable lien, where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant’s possession. But where the property sought to be recovered or its proceeds have been dissipated so that no product remains, the plaintiff’s claim is only that of a general creditor…” In a fascinating case, the Northern District Court of Illinois held in Lynn Fregeau v. Life Insurance Company of North America, 2007 U.S. Dist. Lexis 38617, (May 25, 2007), that a Plan’s lien actually attaches to the money it advanced to the Participant, and not the funds the Participant recovers later on from responsible parties. The Participant received disability benefits from the Plan. The Participant then also recovered payments from Social Security. Federal Law prohibits subrogation actions to be taken for the recovery of Social Security funds. In this case, when the Plan attempted to obtain reimbursement from the Participant, the Participant claimed this was a wrongful attempt to take Social Security funds and that a lien could not be attached to such funds. The Court held, however, that the lien was not on Social Security funds and that the lien was in fact on the funds paid by the Plan. It was this money, the Court reasoned, for which the Plan was seeking reimbursement.
The District Court for the Southern District of Mississippi, in the March 19, 2007 Kim B. Schultz v. The Progressive Health, Life, and Disability Benefits Plan, et al., 481 F. Supp. 2d 594, held likewise when the Plan in that case was attempting to recover overpayments made after the same claims were paid by Social Security. In this case as in the Fregeau case, the Court determined the recovery was targeting the Plan funds paid, not the Social Security benefits obtained by the Participant.
