LEONIE M. BRINKEMA, District Judge.
This action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., arises from defendant Sun Life Assurance Company of Canada's ("Sun Life" or "defendant") termination of plaintiff Jeffrey P. Fine's ("Fine" or "plaintiff") long-term disability ("LTD") benefits. The parties disagree as to whether Fine ceased being eligible to receive LTD benefits under the terms of an employee benefit plan administered and insured by Sun Life. Specifically, Fine argues that he never ceased being eligible for LTD benefits and has filed suit to recover the benefits that have accrued since Sun Life terminated his benefits (the "ERISA claim"). In contrast, Sun Life argues that Fine has been ineligible for LTD benefits since January 1, 2012, and has counterclaimed against Fine to recover payments made after that date. The parties' filed cross-motions for summary judgment on both the ERISA claim and the counterclaim, on which the Court heard oral argument. For the reasons discussed in open court and those that follow, the Court finds that Sun Life did not abuse its discretion in terminating Fine's benefits but that equitable considerations now prevent Sun Life from recouping most of the amount previously paid in error.
Fine is the former president and CEO of CIBT Inc. ("CIBT" or "the company"), a McLean, Virginia, multinational travel document expediting company with hundreds of employees in the United States and abroad. S654, S1594-95, S1682-83.
Fine began seeing an attending physician for chronic pain in his back and lower extremities in 2004. S93, S434, S1641-42. Since that time, he has been diagnosed with failed back syndrome and nerve dysfunction, has sought treatment from many specialists, and has undergone a number of different procedures, all of which have failed to relieve his pain. S434-41, S444, S1641-42. Fine now takes prescription pain medications, including narcotics. S674, S1108-12, S1642. Due to his chronic pain and the effects of his medications, the conclusion was reached, in consultation with Fine's primary attending physician, that Fine could no longer perform his duties as CEO (part of which required him to travel extensively domestically and abroad). S94-95, S676-77, S1409, S1595, S1641-42. John Donoghue ("Donoghue"), who had served under Fine, took over the position of president and CEO on September 1, 2010. S1397.
Fine, who was 47 years old at the time of his resignation, remained with CIBT as Non-Executive Chairman, a position created exclusively for him, which he presently still holds. S654, S1389, S1398. In this capacity, Fine primarily functions as an advisor and mentor to Donoghue on a part-time basis and attends regular meetings of the CIBT board of directors. S55, S1152, S1619. Fine's first Non-Executive Chairman Agreement with CIBT, dated August 20, (the "2010 NEC Agreement"), provided in a section titled "Compensation" that he was "entitled to" receive "$50,000 per year paid in ratable installments in accordance with the Company's payroll practices" and "an annual bonus for calendar years beginning after December 31, 2010 in an amount determined by the Board in its sole discretion." S1152-53.
Following a stock purchase involving CIBT's parent company, Fine executed a new Non-Executive Chairman Agreement, effective December 15, 2011 (the "2011 NEC Agreement"), in which his role as Non-Executive Chairman remained unchanged. Compare S55 (describing Fine's responsibilities under the 2011 NEC Agreement), with S1152 (describing Fine's responsibilities under the 2010 NEC Agreement). Fine's compensation also remained largely unchanged except for minor alterations to the language of the "Compensation" section of the 2011 NEC Agreement, which provided that he was "entitled to" receive "an annual fee of $50,000 per year . . . paid in ratable installments in accordance with the Company's payroll practices" and he was "eligible to receive . . . a profit sharing bonus in such amount, if any, as may be determined by the . . . Board, in its sole and absolute discretion, if the Company's performance is sufficient." S56.
Initially following his resignation as CEO, Fine also entered into a Consulting Agreement through Everest Financial Corp. ("Everest"), his consulting company, to provide acquisitions consultation to CIBT. S1119-25. CIBT paid Everest a $12,500 monthly retainer for these services until May 31, 2011, at which time the Consulting Agreement terminated because of Fine's inability to perform the required services due to his disability. S21, S1120. In addition, Fine agreed in January 2012 to serve on the board of directors of Relectric Holdings, LLC ("Relectric"), a company unrelated to CIBT. S84-88. For this position, he is paid $50,000 per year through Everest. S84, S88.
At all relevant times, Fine was a participant in an employee benefit plan sponsored by CIBT (the "Plan") and insured by Sun Life. S654-57. Sun Life provides LTD benefits for the Plan under the terms
S704-05, S729-30.
In turn, "Disability Earnings" means "the employment income an Employee receives while Partially Disabled or income an Employee receives while participating in an approved Rehabilitation program. Disability Earnings does not include income an Employee receives from work performed prior to his Total or Partial Disability, nor income that is not derived from work performed." S702. To determine whether a claimant's Disability Earnings exceed 80% of his Indexed Total Monthly Earnings, thereby rendering him ineligible for LTD benefits, Sun Life first calculates his "Total Monthly Earnings" ("TME"), which is defined as the "basic monthly earnings as reported by the Employer immediately prior to the first date Total or Partial Disability begins" but "does not include commissions, bonuses, overtime pay or any other extra compensation," and then applies an annual indexing adjustment.
After Fine resigned as CEO, he timely filed a claim for LTD benefits under the Policy, listing September 1, 2010, as the date for the onset of his disability status. S54-56, S659-64. Sun Life initially denied Fine's claim in January 2011
On appeal from its initial denial, Sun Life rendered a favorable decision on Fine's LTD benefits claim on July 28, 2011, granting him benefits retroactively as of December 1, 2010.
Under the Policy, LTD claimants are required to provide ongoing proof of their entitlement to benefits. Accordingly, in January 2013, Sun Life requested updated information regarding Fine's earnings since December 2011, S90-91, and forwarded the updated documentation it received to Bannon for further review. Bannon reported, in April 2013, that the nature of certain amounts reflected on Fine's tax forms for 2011 and 2012 was unclear but that if those amounts constituted Disability Earnings, Fine's Disability Earnings would have exceeded his THE for both 2011 and 2012. S161-62. Specifically, Bannon needed clarification regarding $1,412,488 Fine received in 2011 and $361,854.50 Fine received in 2012. S161-62. Sun Life informed Fine that he may have received an overpayment of benefits and asked him to send additional documentation clarifying the nature of those two amounts. S332. Sun Life also informed Fine that it was providing his July 2013 benefits "under reservation of rights pending receipt of the requested documentation." S332.
Fine responded to Sun Life's request through e-mails from his counsel. S409-33. In those e-mails, Fine's counsel explained that the $1,412,488 payment resulted from the 2011 sale of Fine's shares in CIBT. S410-11. Fine's counsel also explained that the $361,854.50 Fine received in 2012 was comprised of $81,854.50, which represented the remaining amount of his annual bonus from CIBT, and $280,000, which represented his 2012 annual bonus from CIBT. S410-11. Lastly, Fine's counsel elaborated that the 2012 annual bonus was "based on the company's financial progress" rather than "on actual worked [sic] performed" by Fine; in support, he quoted an email from Donoghue informing Fine of his 2012 bonus.
Sun Life again forwarded Fine's response to Bannon, who issued a report on August 27, 2013. S454-56. In his report, Bannon acknowledged that the $1,412,488 "was paid pursuant to a `Sale Transaction Bonus' agreement," which "indicated that the amount of the bonus was dependent on the valuation of the business and whether the sale was completed on or after" a certain date. S454. Therefore, Bannon
Adopting Bannon's calculations, Sun Life ceased paying Fine benefits on August 29, 2013, informing him that he had become ineligible for benefits as of January 1, 2012, because his Disability Earnings were too large. S460-68. Of the $330,000 total that Sun Life had paid to Fine, it asked him to return $200,000 to account for the LTD benefits he had received from January 2012 through August 2013 (a total of 20 months). S463, S467. Fine timely appealed on the ground that the $280,000 bonus from CIBT was a "profit sharing bonus," as indicated in the 2011 NEC agreement, and so did not fit the definition of Disability Earnings. S514-17. On appeal, Sun Life engaged Bristol to provide an independent analysis of Fine's financial records. In his report, Bristol considered the $280,000 bonus as part of Fine's Disability Earnings and distributed the bonus across all months of 2012, just as Bannon had. S614-15. Sun Life adopted Bristol's calculations and, by a letter dated January 31, 2014, Sun Life upheld its denial of Fine's claim and increased the amount it asked him to return to $203,121.01. S608-19. The increase was due to Bristol's determination, which Sun Life adopted, that Fine should not have been paid the full $10,000 for December 2011 under the terms of the Policy due to the application of a "proportionate loss formula." S611, S614.
Fine has exhausted all administrative remedies regarding the denial of his claim.
The parties have filed cross-motions for summary judgment, in which they dispute the interpretation of the terms of the Policy—specifically whether the $280,000 bonus for 2012 constituted employment income that was "derived from work performed." The parties' cross-motions for summary judgment also address Sun Life's counterclaim.
Generally, summary judgment is appropriate where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "However, in actions brought under ERISA, summary judgment is merely the conduit to bring the legal question before the district court and the usual tests of summary judgment . . . do not apply." Tobey v. Keiter, Stephens Hurst, Gary & Shreaves, No. 3:13-cv-315, 2014 WL 61325, at *3 (E.D.Va. Jan. 7, 2014), aff'd 585 Fed.Appx 837 (4th Cir.2014).
"Although ERISA itself is silent on the standard for denials of benefits challenged under § 1132(a)(1)(B), Firestone [Tire & Rubber Co. v. Bruch] establishes that a de novo standard applies `unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan,' in which case the exercise of assigned discretion is reviewed for abuse of discretion." Evans v. Eaton Corp. Long Term Disability Plan, 514 F.3d 315, 321 (4th Cir.2008) (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)). Here, both parties agree that the company delegated to Sun Life such discretionary authority and that, as a result, the abuse of discretion standard applies to the Court's review of Sun Life's interpretation of the Policy and its eligibility determination. Under the abuse of discretion standard, a court should defer to a plan fiduciary's decision if it is reasonable, even if the court would have come to a different conclusion independently. Booth v. Wal-Mart Stores, Inc. Assocs. Health & Welfare Plan, 201 F.3d 335, 341-42 (4th Cir.2000). "The `deference that is the hallmark of abuse-of-discretion review,' is deference enough to appreciate reasonable disagreement." Evans, 514 F.3d at 322 (quoting Gen. Elec. Co. v. Joiner, 522 U.S. 136, 143, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997)). A plan fiduciary's "decision is reasonable if it is the result of a deliberate, principled reasoning process and if it is supported by substantial evidence." Id. (internal quotation marks omitted).
The Fourth Circuit has articulated eight non-exhaustive factors (the "Booth factors") relevant to the abuse of discretion analysis in ERISA lawsuits:
Booth, 201 F.3d at 342-43. In applying Booth, a plan administrator's conflict of interest, where the administrator evaluates the benefits claims and also pays the claims, is "only one factor among many" that must be considered. Carden v. Aetna Life Ins. Co., 559 F.3d 256, 260 (4th Cir. 2009) (quoting Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 116, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008)). "[W]henever a plan administrator employs its interpretive discretion to construe an ambiguous provision in favor of its financial interest, that fact may be considered as a factor weighing against the reasonableness of its decision. . . . The weight accorded to this factor will, of course, depend largely on the plan's language and on consideration of other relevant factors." Id. at 261.
Neither party disputes the extent of Fine's physical disability. The sole issue in this litigation is whether his employment income in 2012 exceeded the maximum earnings threshold of 80% of his Indexed Total Monthly Earnings. See S734. The $280,000 "profit sharing bonus" that Fine received in December 2012 is at the heart of this action because it caused Fine's Disability Earnings to exceed the maximum earnings threshold, which disqualified him for benefits. Accordingly, the chief question is whether Sun Life reasonably interpreted "Disability Earnings" to include the type of bonus at issue, given the Policy's terms and the other Booth factors.
Fine raises numerous arguments in support of his ERISA claim, foremost of which is that the language and structure of the Policy unambiguously exclude the profit sharing bonus from Fine's 2012 Disability Earnings for three reasons: (1) the bonus was not derived from work performed because the 2011 NEC Agreement states the bonus was tied to the company's performance rather than to Fine's own work performance and because Fine was not actually performing much work for the company by 2012 due to his disability; (2) the common definitions of "earnings" and "bonuses" are distinct, with the former defined as "something (as wages) earned" but the latter defined as "something in addition to what is . . . strictly due;" and (3) the inclusion of the bonus in Disability Earnings renders the Policy internally inconsistent because bonuses are expressly excluded when determining Total Monthly Earnings. In addition to his textual arguments, Fine argues that Sun Life did not engage in a deliberate, principled decision-making process in reaching its decision to terminate his LTD benefits, that Sun Life's retroactive allocation of the bonus to all months in 2012 was inappropriate, and that Sun Life's determination reflects a conflict of interest.
None of these arguments is sufficiently persuasive to overturn Sun Life's reasonable interpretation of the Policy under abuse of discretion review. As a general matter, both parties raise several arguments in support of their contention that the Policy unambiguously favors their opposing interpretations. These conflicting interpretations alone support the Court's conclusion that the Policy is ambiguous regarding whether bonuses like the one at
The parties' main dispute concerns the nature of the $280,000 bonus and whether it should be considered employment income "derived from work performed," which would make the $280,000 bonus includable in Fine's 2012 Disability Earnings. See S702 ("Disability Earnings does not include . . . income that is not derived from work performed."). Fine argues that the bonus was not derived specifically from work he performed; rather, it was based solely on the company's performance as a whole. Sun Life counters that Fine received the bonus as payment for work he performed for the company. In supporting their positions, both parties emphasize the same e-mail from Donoghue informing Fine of his bonus for 2012. This e-mail stated:
S411. Fine points to the first sentence, which links the bonus to "the company's financial progress" rather than to work performed by Fine. Sun Life emphasizes the last two sentences, arguing that they demonstrate that the bonus was for valuable services Fine provided to the company. Although this e-mail indicates that the bonus was in recognition of the company's performance, it also ties the bonus to the "good advice" Fine provided to the company in 2012. Therefore, this e-mail does not greatly enhance either side's position.
In addition to Donoghue's e-mail, both parties rely on the language and structure of the 2011 NEC Agreement to support their divergent characterizations of the bonus. Fine argues that the 2011 NEC Agreement describes the annual bonus as something separate from his mandatory flat-rate salary of $50,000 and as left to the discretion of the board of directors. Fine also argues that this agreement makes clear that the bonus is related only to the company's performance and not to his own performance. Sun Life counters that both the annual salary and the bonus are contained in the section of the 2011 NEC Agreement labeled "Compensation," which supports its conclusion that both types of payment are contemplated as compensation to Fine for the services he would provide to the company under this agreement. In addition, Sun Life cites the definition of "derived," meaning "to flow, spring, issue, emanate, come, arise, originate, have its derivation from, rather than out of a source." Sun Life contends that under the language of the 2011 NEC Agreement, the bonus arose, flowed, emanated, and was "derived" from the work Fine agreed to perform under the agreement. Essentially, Sun Life argues that but for Fine's employment with CIBT, he would not have received the bonus and therefore the bonus was derived from work performed in that it was derived from Fine's employment.
The structure of the 2011 NEC Agreement supports Sun Life's position. Despite the 2011 NEC Agreement's re-characterization of the annual bonus as a "profit sharing bonus," which Sun Life argues was an attempt to bring the bonus outside of the Policy's definition of Disability Earnings, the bonus remained housed in the section labeled "Compensation," just as it had been in the 2010 NEC Agreement. This section describes "Compensation"
S56.
Next Fine argues that Sun Life's inclusion of the bonus within his Disability Earnings was unreasonable given that the same type of bonus is excluded from the computation of Total Monthly Earnings. Specifically, Fine contends that it would be inconsistent and unfair to claimants for the bonus to be included in Disability Earnings but excluded from Total Monthly Earnings because this construction "illogically inflates the former and deflates the latter, arbitrarily increasing the likelihood that the thresholds for eligibility will be triggered." Mem. Supp. Fine's Mot. Summ. J. ("Mem. Supp. Fine's MSJ") 22. In support, Fine relies on Martorello v. Sun Life Assur., Co., 704 F.Supp.2d 918 (N.D.Cal.2010), in which the district court found that bonuses did not constitute disability earnings under the relevant policy terms, which were similar to those in the Policy applicable to Fine.
Martorello is unpersuasive because the court reached its conclusion under Ninth Circuit precedent, which dictates "that an ambiguity exists wherever two reasonable interpretations of a disputed provision . . . are possible" and that "such ambiguity must be interpreted in favor of the employee." Id. at 920. In contrast, the Fourth Circuit has expressly rejected its former rule "whereby ambiguities in ERISA plans were construed against the drafter whenever a conflict of interest existed." Carden, 559 F.3d at 260 (indicating that the Supreme Court's decision in Glenn forecloses the "application of that rule to curb the discretion given an administrator by a plan"). Moreover, Martorello actually lends support to Sun Life's position in this action because the court acknowledged that the defendant's interpretation of "disability earnings" as including "all income derived from employment, regardless of source characterization (e.g., bonuses, direct salary draw, etc.)" was reasonable, which is all that is required under abuse of discretion review. See Martorello, 704 F.Supp.2d at 919.
Sun Life further contends that—given the Policy's express exclusion of bonuses from the computation of Total Monthly Earnings—if the Policy intended to exclude bonuses from the computation of Disability Earnings, it would have done so just as explicitly. In addition, Sun Life argues that the Policy intentionally excludes bonuses from Total Monthly Earnings and includes them in Disability Earnings "to provide disability benefits that will protect a certain percentage of an employee's `basic' earnings (i.e. salary), while at the same time prevent an employee from `double-dipping' by characterizing his post-disability earnings as bonuses or some other form of non-salary compensation to avoid inclusion in the Disability Earnings Calculation." Def.'s Mem. Supp. Mot. Summ. J. ("Def.'s Mem. Supp. MSJ") 23. This reasoning has been approved by at least one federal appellate court. See Riddell v. Unum Life Ins. Co. of Am., 457 F.3d 861, 864-65 (8th Cir.2006). Sun Life further elaborates on this point:
Fine's argument that Sun Life did not engage in a deliberate, principled decision-making process in deciding to terminate Fine's LTD benefits is unsupported by the administrative record, which shows that Sun Life thoroughly investigated both Fine's medical condition and finances. Sun Life also engaged the services of two separate third-party CPAs, Bannon and Bristol, to review Fine's financial records and determine which sources of income were or were not excludable from Disability Earnings, as well as to determine the amount of any benefit to which Fine was entitled. In both his July and August 2011 reports, Bannon mentioned that any annual discretionary bonus under the NEC Agreements, "when received," "would be considered Disability Earnings and should be pro-rated on a retrospective basis" over the period for which it was paid. S40-42, S1972-73. After Fine appealed its decision, Sun Life submitted the evidence to Bristol, a different CPA, who reached the same conclusion as Bannon. S614-15. Given this evidence, Fine fails to establish that the process Sun Life employed in making its denial decision was not deliberate and reasonable.
Fine further argues that Sun Life's retroactive allocation of the bonus to each month in 2012 was arbitrary. Not only is it a common accounting technique used by ERISA plans, it often favors claimants by increasing the amount they can receive before they reach the maximum threshold for ineligibility. Because the Policy is silent as to whether retroactive allocation would apply to lump sum earnings payments, it was a reasonable exercise of Sun Life's discretion to use this technique as opposed to considering the full bonus only for the month of December 2012 (when Fine actually received the bonus).
Lastly, Fine argues that Sun Life's decision reflects a conflict of interest because Sun Life was motivated by a desire "to avoid paying a substantial monthly benefit for 20 years."
Sun Life has taken such protective measures. Sun Life is structured such that its claims department is separate from its appeals department, and the claims and appeals departments are separate
For all the foregoing reasons, the Court finds that Sun Life did not abuse its discretion by determining Fine's $280,000 bonus for 2012 constituted Disability Earnings and then terminating Fine's LTD benefits effective January 1, 2012. The only question remaining is whether Sun Life can recoup any of the amount it paid to Fine after January 1, 2012.
Sun Life has filed a counterclaim for restitution under § 502(a)(3) of ERISA, codified at 29 U.S.C. § 1132(a)(3)(B), to recover $203,121.01, the amount it overpaid to Fine after his eligibility terminated on January 1, 2012, and both parties have moved for summary judgment on the counterclaim.
"A fiduciary may bring a civil action under § 502(a)(3) of ERISA `(A) to enjoin any act or practice which violates any provision of this subchapter 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 subchapter or the terms of the plan.'"
Sun Life's counterclaim seeks restitution. "However, not all relief falling under the rubric of restitution is available in equity." Knudson, 534 U.S. at 212, 122 S.Ct. 708. Whether restitution "is legal or equitable depends on the basis for [the plaintiffs] claim and the nature of the underlying remedies sought." Id. at 213, 122 S.Ct. 708 (internal quotation marks omitted). The Supreme Court has elaborated on the distinction between legal and equitable restitution:
Id. at 213-14, 122 S.Ct. 708 (some citations omitted) (all emphases in original).
In Knudson, the petitioners, an insurance company, the health plan, and the former employer, brought an ERISA action for specific performance of the reimbursement provision of a health plan after the injured plan beneficiary recovered from a third party tortfeasor. Id. at 207-09, 122 S.Ct. 708. The plan's reimbursement provision provided for the recovery of payments made by the third party to the beneficiary. Id. at 207, 122 S.Ct. 708. The Supreme Court, however, held that the petitioners were seeking legal, not equitable, relief because the proceeds from the settlement of the tort action to which the petitioners laid claim were not in the beneficiary's possession; rather, the funds had been placed in a "Special Needs Trust" under state law. Id. at 214, 122 S.Ct. 708.
The Court again addressed the circumstances under which a fiduciary may sue a beneficiary for reimbursement of medical expenses paid by an ERISA plan in Sereboff but this time found that the nature and basis of the relief sought were equitable. The fiduciary of a health plan brought suit against plan beneficiaries to enforce the reimbursement provision of the plan. 547 U.S. at 360, 126 S.Ct. 1869. The fiduciary sought reimbursement for amounts paid for beneficiaries' medical expenses after the beneficiaries obtained a settlement with third party tortfeasors. Id. The beneficiaries agreed to set aside from their tort recovery the amount claimed by the fiduciary, and they preserved this sum in an investment account pending the outcome of the suit. Id. The Court held that the fiduciary was seeking equitable, not legal, relief because, unlike in Knudson, the fiduciary sought "specifically identifiable funds that were within the possession and control of the [beneficiaries]—that portion of the tort settlement due [to the fiduciary] under the terms of the ERISA plan, set aside and preserved [in the beneficiaries'] investment accounts." Id. at 362-63, 126 S.Ct. 1869.
First, the Court is not convinced that Sun Life is entitled to rescission of each of its monthly payments to Fine after January 1, 2012. Sun Life mainly relies on three cases in which courts found that rescission was a permissible remedy under § 502(a)(3) of ERISA. See Griggs v. E.I. DuPont de Nemours & Co., 385 F.3d 440 (4th Cir.2004); Adams v. Brink's Co., 261 Fed.Appx. 583 (4th Cir.2008); Avalon v. Atlantastaff, Inc. Grp. Med. & Dental Ben. Program, 95 F.3d 1156 (9th Cir. Aug.
These cases are readily distinguishable from the instant counterclaim in which Sun Life seeks to rescind monetary payments. As the Court explained in Knudson, "`[e]quitable' relief must mean something less than all relief." Knudson, 534 U.S. at 209, 122 S.Ct. 708 (emphasis in original). If a plan administrator or fiduciary could always seek rescission of monetary payments that were later determined to be improper, then a plan could always recover all overpayments it made, thereby rendering the "equitable" modifier in § 502(a)(3)(B) meaningless. Cf. id. at 211, 122 S.Ct. 708 (explaining that, without the limitations upon the availability of injunctions under § 502(a)(3)(A) that equity typically imposes, the "statutory limitation to injunctive relief would be meaningless, since any claim for legal relief can, with lawyerly inventiveness, be phrased in terms of an injunction"). Moreover, rescinding payments and holding the beneficiary liable for the entire rescinded amount, without regard to what became of the payments after they were received, would have the effect of "impos[ing] personal liability on the defendant." Id. at 213-14, 122 S.Ct. 708. Most significantly, unlike in Ayalon, no provision of the Policy permits rescission to recover overpayments. Therefore, rescission is not an appropriate equitable basis for Sun Life's restitution counterclaim.
Next, Sun Life argues that it is entitled to restitution through an equitable lien on the present value of one of Fine's bank accounts and on a portion of the proceeds from the eventual sale of Fine and his wife's apartment. To reiterate, "for restitution to lie in equity, the action generally 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." Knudson, 534 U.S. at 213-14, 122 S.Ct. 708. "[W]here the property [sought to be recovered] or its proceeds have been dissipated so that no product remains, . . . the plaintiff cannot enforce a constructive trust of or an equitable lien upon other property of the [defendant]." Id. (alterations in original). It is Sun Life's burden to establish its claim for equitable relief; to do so, it must show both that Fine "once had property legally or equitably belonging to [Sun Life]" and that he "still holds the property or property which is in whole or in part its product."
Of the benefit payments Fine received from January 2012 through August 2013, all but two months' worth were deposited into his JF Schwab account, which later dropped to a balance of $9,943.61 in December 2013. Accordingly, Sun Life is only entitled to an equitable lien on the bank account in the amount of $9,943.61; any funds deposited into the account after that time did not come from Sun Life and Sun Life is, therefore, not entitled to an equitable lien on them. See Restatement (First) of Restitution § 212 ("Where a person wrongfully mingles money of another with money of his own and makes withdrawals from the mingled fund and dissipates the money so withdrawn, and subsequently adds money of his own to the fund, the other can enforce an equitable lien upon the fund only for the amount of the lowest intermediate balance. . . .").
Sun Life correctly asserts, however, that the mere fact that Fine spent the majority of the Sun Life funds that were deposited into his JF Schwab account does not automatically bar equitable restitution. Instead, Sun Life can still recover if it can trace the spent funds to an identifiable product in Fine's possession. See Bilyeu v. Morgan Stanley Long Term Disability Plan, 683 F.3d 1083, 1096 (9th Cir.2012); Restatement (First) of Restitution § 161 cmt. e (1937) ("An equitable lien can be established and enforced only if there is some property which is subject to the lien. Where property is subject to an equitable lien and the owner of the property disposes of it and acquires other property in exchange, he holds the property so acquired subject to the lien. . . . So also, where the property which is subject to the lien is mingled with other property in one indistinguishable mass, the lien can be enforced against the mingled mass. . . . Where, however, the property subject to the equitable lien can no longer be traced, the equitable lien cannot be enforced. . . ."); id. § 215(1) ("[W]here a person wrongfully disposes of the property of another but the property cannot be traced into any product, the other has merely a personal claim against the wrongdoer and cannot enforce a constructive trust or lien upon any part of the wrongdoer's property."); id. § 215 cmt. a ("[I]f it is shown that the property or its proceeds have been dissipated so that no product remains,. . . the claimant cannot enforce . . . an equitable lien upon other property of the wrongdoer, and has only a personal claim against the wrongdoer.").
Sun Life has failed to meet its burden of tracing the spent overpayments to a product still in Fine's possession. It attempts to trace its overpayments into improvements
Def.'s Opp'n 35. This percentage approach does not satisfy the "strict tracing rules" governing equitable restitution. The money withdrawn from the JF Schwab account was spent to pay for renovation services rather than to acquire other property. Expending the funds on services rather than on other property constituted a dissipation of those funds. And, even if such expenditures did not constitute a dissipation of the funds such that a product of the Sun Life funds still existed, Sun Life has failed to show that Fine still has possession of that product, given that Fine owns the apartment as a tenancy by the entirety with this wife. Cf. Bd. of Trustees for Hampton Roads Shipping Ass'n-Int'l Longshoremen's Ass'n v. Ransone-Gunnell, No. 2:09-cv-165, at 30-31 n. 10 (E.D.Va. Aug. 13, 2011) (finding that a beneficiary's transfer of the "vast majority" of settlement funds to her husband's account "had the effect of dissipating the potentially traceable funds in [the beneficiary's] possession" such that the plan administrator could not reach those funds). Sun Life has not cited any authority supporting its position that it can obtain an equitable lien on property (or on the sale proceeds of property) held in a tenancy by the entirety, especially where Sun Life is a creditor only of Fine and not a creditor of Fine's wife. Therefore, Sun Life has not met its burden of establishing its entitlement to an equitable lien on any portion of the eventual sale proceeds of Fine's apartment.
Lastly, the parties dispute whether Sun Life has properly raised an unjust enrichment claim and, if so, whether to characterize that claim as a common law claim under Provident Life & Acc. Insurance Co. v. Waller, 906 F.2d 985, 989 (4th Cir.1990), or as an appropriate equitable remedy falling within the scope of ERISA § 502(a)(3). Waller has been limited to situations in which a specific plan provision provides for reimbursement of erroneously paid benefits. See Life & Acci. Ins. Co. v. Cohen, 423 F.3d 413, 426 (4th Cir.2005). Because there is no such provision in the Policy at issue, Sun Life cannot succeed on an unjust enrichment claim under Waller. Likewise, Sun Life cannot succeed on an unjust enrichment claim under ERISA because the remedy would still be equitable restitution, for which Sun Life cannot meet the tracing requirements. See Food Employers Labor Relations Ass'n & United Food & Commercial Workers Health & Welfare Fund v. Dove, No. Civ. A. GJH-14-1273, 2014 WL 6388399, at *2 (D.Md. Nov. 13, 2014) (Report and Recommendation) (treating "an actionable [ERISA] claim for unjust enrichment as encompassing a related claim for restitution in the amount the defendant [beneficiary] ha[d] been unjustly enriched" and denying the plaintiff plan recovery because beneficiary did not possess the funds sought).
For the reasons stated above, Sun Life's motion for summary judgment will be granted as to plaintiff's ERISA claim and
S749.
S703.
S55.
Each of these cases is distinguishable and unpersuasive. In both Brown and Johnson, the plan was allowed to recoup its overpayment to beneficiaries by setting it off against future benefits the plan paid to those beneficiaries. Therefore, the courts did not need to consider tracing principles. In Sheward, the court first found that a plan's decision to recoup an overpayment by offsetting it against future benefits paid to a beneficiary was reasonable under express language in the plan that provided it with the responsibility to "correct errors." The court also found it was not inequitable for the plan to do so, given that the beneficiary had received a lump-sum double payment of his pension from a related plan and he had known that the plan intended to seek recoupment. Based on these findings, the court awarded a lump-sum amount to the plan, which represented the remaining unrecovered amount of the overpayment. It does not appear that the beneficiary opposed the lump-sum award based on Knudson and Sereboff, so the court did not address tracing principles. Sun Life has not argued that any of the terms of the Policy grant it authority to correct errors through recouping overpayments, and Sun Life is seeking a lump-sum award as opposed to a setoff against future benefits. Therefore, tracing rules apply to its restitution claim.