BAYLSON, District Judge:
Oregon Teamster Employers Trust ("OTET") appeals the grant of summary judgment in favor of Defendants Hillsboro Garbage Disposal, Inc. ("Hillsboro Garbage"), Robert Henderson ("Henderson"), and the Estate of Darrol Jackson ("Jackson"). The district court, adopting the findings of a magistrate judge, granted summary judgment in favor of Defendants on (1) OTET's breach of contract claims because the court found those claims to be preempted by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"); and (2) OTET's restitution and specific performance claims because the court concluded that those claims were not cognizable under ERISA as they sought legal — not equitable — relief.
The issues presented are:
We affirm the district court's judgment.
OTET is an Employer Health and Benefit Plan governed by ERISA. OTET provides health and welfare benefits to the employees whose employers have entered into collective bargaining agreements with Joint Council No. 37 of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers of America, and local union affiliates.
In September 2003, Hillsboro Garbage and Teamsters Local Union No. 305 ("Union") entered into a collective bargaining agreement ("CBA") which made Hillsboro Garbage a subscriber to OTET, effective March 1, 2003, through February 28, 2007.
Under the terms of the Subscription Agreements, Hillsboro Garbage and the Union agreed to be bound by the provisions of the Trust Agreement governing OTET, chose the Health & Welfare Plan F/W ("Plan") for eligible employees and their dependents, and agreed that Hillsboro Garbage would be subject to periodic audits to detect unauthorized contributions.
The Trust Agreement also authorized OTET's Trustees to enter into special agreements with Hillsboro Garbage under which OTET would provide health and welfare benefits for the company's non-bargaining unit employees (the "NBU Agreements"). The NBU Agreements specify that only individuals with a bona
Starting in 2003, OTET received contributions for health care benefits coverage for Henderson and Jackson, purportedly as employees of Hillsboro Garbage. In fact, Henderson and Jackson were not employed by Hillsboro Garbage, but by a separate company, RonJons Unlimited, Inc. ("RonJons"), which had common ownership with Hillsboro Garbage.
In 2006, an audit revealed that Hillsboro Garbage had made unauthorized contributions on behalf of Henderson and Jackson. OTET sent Hillsboro Garbage a letter on August 21, 2006, enclosing a copy of the 2006 audit, stating that the audit uncovered $70,000 in unauthorized contributions, and advising Hillsboro Garbage that it had six months to make a written refund request.
Following the 2006 audit, OTET continued to accept contributions from Hillsboro on behalf of Henderson and Jackson and to pay medical claims for their benefit. In 2011, after another audit, OTET removed the two men from the plan and filed this lawsuit seeking recovery of benefits paid in excess of the contributions received from Hillsboro Garbage on their behalf. Count I of OTET's second amended complaint seeks restitution from all Defendants, Count II seeks specific performance against Hillsboro Garbage to repay the benefits wrongly paid, and Counts III and IV assert common law breach of contract claims against Hillsboro Garbage.
After discovery, OTET moved for partial summary judgment. The magistrate judge recommended that OTET's motion be denied and that the district court instead grant summary judgment in favor of Defendants. The magistrate judge concluded that Counts III and IV of OTET's second amended complaint, the common law breach of contract claims, were preempted by ERISA. The magistrate also concluded that the claims for legal restitution and specific performance were not cognizable under ERISA. After supplemental briefing and argument, the district judge approved the magistrate judge's recommendation, granting summary judgment to Defendants and dismissing the case with prejudice.
The district court found OTET's state law claims preempted by ERISA because they are "premised on the existence of an ERISA plan, and the existence of the plan is essential to the claim[s'] survival" and they have a "genuine impact ... on a relationship governed by ERISA" — that between the plan and the employer. See Providence Health Plan v. McDowell, 385 F.3d 1168, 1172 (9th Cir.2004). We review de novo the question of whether ERISA preempts state law. Carmona v. Carmona, 603 F.3d 1041, 1050 (9th Cir.2010).
Under 29 U.S.C. § 1144(a), ERISA's provisions "supersede any and all State laws insofar as they ... relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title." A common law claim "relates to" an ERISA plan "if it has a connection with or reference to such a plan." McDowell, 385 F.3d at 1172 (internal quotation marks omitted); see N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995). In determining whether a common law claim has "reference to" an ERISA plan, "the focus is whether the claim is premised on the existence of an ERISA plan, and whether the existence of the plan is essential to the claim's survival."
OTET's primary argument is that the district court's preemption ruling is contrary to this court's McDowell opinion. McDowell was a breach of contract action by a health insurer against two plan participants who were injured in an automobile accident, seeking reimbursement of benefits paid on the participants' behalf out of a settlement in a tort action. 385 F.3d at 1170-71. The insurer alleged the participants breached both the reimbursement provision of the ERISA plan and separate agreements in which the participants directed their attorney to reimburse the insurer out of any third-party recovery. Id. at 1172. The district court concluded that ERISA preempted the action and dismissed. Id. at 1171. We reversed, holding that the insurer's "action for breach of contract does not have the requisite `connection with' or `reference to' an ERISA plan" because the parties "are not disputing the correctness of the benefits paid," but rather the insurer "is simply attempting, through contract law, to enforce the reimbursement provision[s]" in the plan and subsequent separate agreements. Id. at 1172. "Adjudication of its claim does not require interpreting the plan or dictate any sort of distribution of benefits." Id.
The district court distinguished McDowell, finding that the key question in this case was the eligibility of Henderson and Jackson to participate in the OTET plan. OTET contends McDowell is controlling because adjudication of its breach of contract claims does not require an interpretation of the plan or any distribution of benefits. There is no need to interpret the plan, OTET argues, because there is no dispute that Henderson and Jackson were not employees of Hillsboro Garbage and or that RonJons never entered into a CBA with a labor organization specified in the plan's Trust Agreement.
The district court properly rejected this argument. McDowell did not turn on whether the beneficiaries were eligible plan participants. Cf. Peralta v. Hispanic Bus., Inc., 419 F.3d 1064, 1069 (9th Cir. 2005) (distinguishing McDowell in a case involving whether an ERISA plan administrator breached its fiduciary duty by failing to timely provide notification of plan cancellation because "interpretation of ERISA law lies at the heart of the dispute"). Here, however, although analysis of the employment status of the two individuals and whether RonJons had entered the CBA is admittedly straightforward, analysis of the terms of the ERISA plan is nonetheless required. Moreover, OTET alleged in its second amended complaint that Hillsboro Garbage breached the terms of the ERISA plan — not separate agreements. See Bui v. Am. Tel. & Tel. Co. Inc., 310 F.3d 1143, 1152 (9th Cir.2002) (holding ERISA preempted plaintiff's breach of contract claims "because the contract allegedly breached is the ERISA plan itself").
The Labor Management Relations Act ("LMRA"), 29 U.S.C. § 186, bars employers from contributing to a trust fund on behalf of individuals who are not employees of the contributing employer. 29 U.S.C. § 186(c)(5); see also Davidian v. S. Cal. Meat Cutters Union & Food Emps. Benefit Fund, 859 F.2d 134, 135 (9th Cir. 1988). The LMRA also prohibits contributions
OTET's assertion that the district court's finding of preemption would subject it to LMRA liability is entirely speculative. "The dominant purpose of [§] 302 is to prevent employers from tampering with the loyalty of union officials and to prevent union officials from extorting tribute from employers." Turner v. Local Union No. 302, 604 F.2d 1219, 1227 (9th Cir.1979). Congress intended § 302 to target practices harmful to the collective bargaining process, including "bribery by employers during collective bargaining, extortion by employee representatives, and abuse of power by union officers who have sole control over welfare funds." Toyota Landscaping Co., Inc. v. S. Cal. Dist. Council of Laborers, 11 F.3d 114, 117-18 (9th Cir.1993); see also Maxwell v. Lucky Constr. Co., Inc., 710 F.2d 1395, 1398 (9th Cir.1983) ("The congressional objective in enacting § 302 was to inhibit corrupt practices in the administration of employee welfare funds established through the collective bargaining process."). These objectives are plainly not implicated in this case.
Moreover, to the extent that there is an LMRA violation, OTET bears at least some responsibility. OTET learned in 2006 that Hillsboro Garbage had allowed Henderson and Jackson to enroll and had made contributions on their behalf, but OTET took no action to address the issue until after a second audit in 2010.
Section 502(a)(3) of ERISA authorizes civil suits "by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates ... 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 ... the terms of the plan." 29 U.S.C. § 1132(a)(3).
Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002), considered the scope of relief available under
The Supreme Court rejected this claim. The Court explained that only "those categories of relief that were typically available in equity" are permitted under § 502(a)(3), but Great-West sought, "in essence, to impose personal liability on respondents for a contractual obligation to pay money — relief that was not typically available in equity" but only in an action at law. Id. at 210, 122 S.Ct. 708 (internal quotation marks omitted). The Court likewise rejected Great-West's characterization of its claim as an equitable claim for restitution. See id. at 218, 122 S.Ct. 708. Because the settlement funds Great-West sought were not in Knudson's possession, but instead had been distributed to a trust and to her attorney, the Court found "[t]he basis for petitioners' claim" to be, at bottom, "that petitioners are contractually entitled to some funds for benefits that they conferred"; what they really sought was "imposition of personal liability for the benefits that they conferred upon respondents." Id. at 214, 122 S.Ct. 708.
In Sereboff v. Mid Atlantic Medical Services, Inc., the Court "consider[ed] again the circumstances in which a fiduciary under [ERISA] may sue a beneficiary for reimbursement of medical expenses paid by the ERISA plan, when the beneficiary has recovered for its injuries from a third party." 547 U.S. 356, 359, 126 S.Ct. 1869, 164 L.Ed.2d 612 (2006). The Sereboffs had received a settlement stemming from a car accident. Id. at 360, 126 S.Ct. 1869. They failed to reimburse Mid Atlantic, their health insurer, for medical expenses it had paid, but, pursuant to stipulation, put that amount in an investment account while the parties litigated their dispute.
The Supreme Court held, in contrast to Knudson, that the relief "Mid Atlantic sought" was equitable because it was directed at "specifically identifiable funds... within the possession and control of the Sereboffs — that portion of the tort settlement due Mid Atlantic under the terms of the ERISA plan, set aside and preserved [in the Sereboffs'] investment accounts." Id. at 362-63, 126 S.Ct. 1869 (second alteration in original) (internal quotation marks omitted).
The Court characterized Mid Atlantic's claim as indistinguishable from an "equitable lien by agreement," which arises where two parties "contract to convey a specific object even before it is acquired," making the defendant a trustee over the property after he or she obtains it from a third party. Id. at 363-64, 126 S.Ct. 1869 (internal quotation marks omitted). The Court thus found Mid Atlantic's claim against the Sereboffs viable because it was based on a plan provision that "specifically identified a particular fund, distinct from the Sereboffs' general assets," as well as "a particular share of that fund to which Mid Atlantic was entitled."
In Bilyeu v. Morgan Stanley Long Term Disability Plan, we vacated a district court judgment reimbursing a plan administrator's overpayments of long-term disability benefits to a beneficiary because it did not constitute equitable relief under § 502(a)(3). 683 F.3d 1083, 1086 (9th Cir. 2012). The plan required Bilyeu to "reimburse Unum [the plan administrator] for any overpayment arising from her receipt of disability payments from any other source." Id. at 1087. After Bilyeu contested termination of her long-term disability benefits, Unum filed a counterclaim seeking reimbursement of allegedly overpaid benefits. Id. at 1087-88.
The district court awarded reimbursement, id. at 1088, but we reversed, holding that the district court had improperly awarded legal relief unavailable under ERISA, id. at 1096. We explained that Sereboff "establish[ed] at least three criteria for securing an equitable lien by agreement in an ERISA action":
Id. at 1092-93 (alterations, citations, and internal quotation marks omitted).
Unum's claim met the first element because Bilyeu had promised to reimburse the plan for any overpayment resulting from Social Security benefits she received. Id. at 1093. But we found Unum's argument that the claim met the second element "problematic" because the "overpaid disability benefits are not a particular fund, but a specific amount of money encompassed within a particular fund — the long-term disability benefits Unum paid to Bilyeu." Id. And, even if the overpaid benefits qualified as a "particular fund," Unum had not established the funds were within Bilyeu's "possession or control" because "Bilyeu ha[d] spent the overpaid benefits." Id. at 1094. Moreover, we held that an equitable lien cannot "be enforced against general assets when the specifically identified property has been dissipated." Id. at 1095. "Nothing in Sereboff suggests that a fiduciary can enforce an equitable lien against a beneficiary's general assets when specifically identified funds are no longer in a beneficiary's possession." Id.
In McDowell, we evaluated a claim for reimbursement of medical expenses pursuant to an ERISA plan's reimbursement provision after the beneficiary received a settlement relating to injuries from an automobile accident. 385 F.3d at 1170-71. Although the plan argued that relief was authorized under § 502(a)(3) because it had "term[ed its claim] an action in equity for specific performance," we affirmed the district court's dismissal of the plan's claim for failure to state a claim. Id. at 1174. The plan was "simply attempting to enforce a contractual obligation for repayment," and "such monetary reimbursement constitutes legal rather than equitable relief," and not an allowable "constructive trust or equitable lien on particular property." Id. (internal quotation marks omitted); see also Honolulu Joint Apprenticeship & Training Comm. of United Ass'n
In support of its specific performance claim, OTET relies on the statement in Sereboff that "ERISA provides for equitable remedies to enforce plan terms, so the fact that the action involves a breach of contract can hardly be enough to prove relief is not equitable." 547 U.S. at 363, 126 S.Ct. 1869. OTET also points out that the Supreme Court has, outside the ERISA context, explained that specific performance of reimbursement obligations "attempt[s] to give the plaintiff the very thing to which he was entitled," and is therefore equitable relief. Bowen v. Massachusetts, 487 U.S. 879, 895, 108 S.Ct. 2722, 101 L.Ed.2d 749 (1988) (internal quotation marks omitted).
But OTET's claim for "specific performance of the reimbursement provisions of the plan" is squarely foreclosed by Knudson and McDowell. Knudson held that specific performance is typically a legal remedy unless it is "sought to prevent future losses that either were incalculable or would be greater than the sum awarded." 534 U.S. at 211, 122 S.Ct. 708. The exception Sereboff carved out to this rule was for restitution sought from a particular fund (or "res"), not specific performance. Sereboff, 547 U.S. at 362-63, 126 S.Ct. 1869.
OTET also characterizes the reimbursement provision of the plan as an equitable lien by agreement, allowing for recovery under Sereboff. See id. at 363-65, 126 S.Ct. 1869. But OTET does not seek recovery from an identifiable res, as Sereboff requires. See id. at 363, 126 S.Ct. 1869 (requiring that equitable restitution be sought from a "particular fund"). As in Honolulu Joint Apprenticeship & Training Committee of United Ass'n Local Union No. 675 v. Foster, OTET wishes to recover from the general assets of Defendants' funds that were never "actually transferred" to them — in this case funds paid directly to medical providers. 332 F.3d at 1238. Moreover, the plan's reimbursement provision "specifically provides for the remedies sought," which "reinforces the conclusion that this is essentially an action at law to remedy ... breach of a legal obligation." Id.
OTET likewise cannot meet the "three criteria for securing an equitable lien by agreement in an ERISA action" that we have interpreted Sereboff to require. See Bilyeu, 683 F.3d at 1092-93. Although the plan contained "a promise by the beneficiary to reimburse" OTET, it did not "specifically identify a particular fund, distinct from the beneficiary's general assets, from which the fiduciary will be reimbursed" — that is, there is no res from which OTET seeks recovery. See id. (alterations and internal quotation marks omitted). Moreover, even if the agreement specifically identified funds from which OTET could recover, the amounts it paid for the individual defendants' medical expenses are not in their "possession and control."
OTET contends in its appeal that the district court abused its discretion in denying OTET leave to amend its complaint to allege fraud. We review the district court's denial of leave to amend for abuse of discretion. Sharkey v. O'Neal, 778 F.3d 767, 774 (9th Cir.2015).
OTET included a fraud count in its first amended complaint but voluntarily abandoned that claim when it filed the second amended complaint because it "believed" its "breach of contract claims were not preempted," and thus the fraud claim "was superfluous." Because OTET was given two opportunities to amend its complaint and unilaterally decided to eliminate the fraud count, it cannot establish abuse of discretion in denying the motion to amend, as it does not contend that it acquired any new knowledge or that there was any misconduct by Defendants that caused it to omit the fraud claim from the second amended complaint. See Royal Ins. Co. of Am. v. Sw. Marine, 194 F.3d 1009, 1017 (9th Cir.1999) (finding district court did not abuse its discretion denying leave to amend when the plaintiff had twice been given the opportunity to amend and the additional proposed amendment "did nothing more than reassert an old theory of liability based on previously-known facts").
The judgment of the district court is
W. FLETCHER, Circuit Judge, concurring:
Oregon Teamster Employers Trust ("OTET")'s primary argument on appeal is that the district court erred in concluding that its claim for breach of contract was preempted by ERISA. In particular, OTET argues that, like the trust in Providence Health Plan v. McDowell, 385 F.3d 1168 (9th Cir.2004), it is merely "attempting, through contract law," to enforce a contractual provision that is incorporated into the ERISA plan. Id. at 1172. The panel opinion distinguishes McDowell on the ground that here, unlike in McDowell, "analysis of the terms of the ERISA plan is ... required." Op. at 1156. I agree that McDowell can be distinguished from this case, but the distinction is narrow and unconvincing. I think the better course would be to take this case en banc to reverse McDowell. McDowell was wrong when it was decided and is wrong today.
As the panel opinion observes, ERISA has a broad preemption clause, "one of the broadest preemption clauses ever enacted by Congress." Security Life Ins. Co. of America v. Meyling, 146 F.3d 1184, 1188 (9th Cir.1998) (quoting Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1439 (9th Cir.1990)). ERISA "supersede[s] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). The clause is broad because ERISA contains within itself a "carefully crafted and detailed enforcement scheme" that specifies in exacting detail just how an ERISA plan may be enforced. Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 209, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002) (quoting
In McDowell, we invented an exception to this rule that circumvents both the enforcement scheme Congress created and the accompanying preemption clause. The plaintiff in McDowell was an ERISA health plan fiduciary that had paid over $30,000 in medical expenses arising out of a car accident between two plan participants and a third party. 385 F.3d at 1170. The plan contained a reimbursement provision that required plan participants to remit the proceeds of any settlement to the fiduciary "up to the amount of benefits paid." Id. When the participants, the McDowells, received a settlement from the driver of the other vehicle involved in the accident, the plan fiduciary sought to enforce the reimbursement provision. Id. at 1171. Because ERISA does not permit a plan fiduciary to sue for damages, the fiduciary filed a state-law breach of contract suit, seeking damages for breach of the reimbursement clause of the plan. Id.
It is clear that a plan fiduciary has no remedy under ERISA in such a situation. An ERISA fiduciary cannot bring a damages suit to enforce an ERISA plan; it can sue only for equitable relief. See 29 U.S.C. § 1132(a)(3); Bilyeu, 683 F.3d at 1091. Nor can such a fiduciary bring a state-law breach of contract suit to enforce the terms of the ERISA plan, because such a suit would clearly "relate to an[] employee benefit plan" and thus be preempted. 29 U.S.C. § 1144(a). But the panel in McDowell reached the opposite conclusion. It held that, because enforcing the reimbursement provision "does not require interpreting the plan or dictat[ing] any sort of distribution of benefits," the fiduciary's contract suit did not "relate to" the plan and was not preempted. McDowell, 385 F.3d at 1172. The fiduciary, the panel explained, was "simply attempting, through contract law, to enforce the reimbursement provision." Id.
As then-Judge Thomas explained in his dissent from our failure to rehear McDowell en banc, the panel's conclusion was clearly wrong. See id. at 1175 (Thomas, J., dissenting from the denial of rehearing en banc). The fiduciary in McDowell was not merely trying to use state contract law to enforce a term in an unrelated contract. It was, in the panel's own words, "attempting, through contract law, to enforce the reimbursement provision ... incorporated into the[] ERISA plan." McDowell, 385 F.3d at 1172 (emphasis added). I do not see how it is possible to conclude, as the McDowell panel did, that a suit to enforce the terms of an ERISA plan does not "relate to" an ERISA plan.
McDowell and this case can be distinguished in two ways, but neither finds significant support in ERISA. The result in McDowell depends on the panel's claim that "[a]djudication of [the fiduciary's] claim does not require interpreting the plan or dictate any sort of distribution of benefits." Id. In this case, by contrast, as the panel opinion explains, OTET's breach of contract claim both requires interpreting the plan and turns on a provision that dictates the distribution of benefits. See Op. at 1156. But the first distinction is entirely illusory, and the second is a distinction without a difference.
First, while it is true that OTET's contract claim requires interpreting the terms of the ERISA plan, the fiduciary's contract claim in McDowell did, too. The thrust of the fiduciary's claim in McDowell was that
The second distinction between this case and McDowell is hardly more convincing. The McDowell panel concluded that the reimbursement claim in that case was not preempted because the fiduciary was not attempting to enforce a provision that would "dictate any sort of distribution of benefits." Id. at 1172. Here, by contrast, OTET is trying to enforce a provision that does implicate the payment of benefits. But I fail to see why this is a meaningful difference. It should not matter, if a litigant is attempting to enforce a provision in an employee benefits plan, whether the provision in question governs payments made from the trust to the participant (i.e., a benefits provision) or payments made from the participant to the trust (i.e., a reimbursement provision). Both are parts of the contract between the two parties. By arbitrarily deciding that a reimbursement provision may be enforced through a breach of contract damages suit, whereas a benefits provision may not, McDowell ignores the Supreme Court's repeated instructions that we may not discard the explicit terms of an ERISA plan. See U.S. Airways, Inc. v. McCutchen, ___ U.S. ___, 133 S.Ct. 1537, 1548, 185 L.Ed.2d 654 (2013) ("The plan, in short, is at the center of ERISA.").
As Judge Thomas's dissent explained, the rule McDowell establishes is deeply problematic. Under McDowell, "insurers may sue plan participants for reimbursement based on provisions in the insurance contract, but ... plan participants cannot file suits or counter-claims[] against insurers for breach of contract or bad faith in claim administration under the contract." McDowell, 385 F.3d at 1176 (Thomas, J., dissenting from the denial of rehearing en banc). That is, while plan fiduciaries may bring state-law claims against plan participants to enforce their rights under an ERISA plan (at least if they seek to enforce a reimbursement provision), plan participants may not bring state-law claims against plan fiduciaries to enforce their contractual rights under the same plan. "The impact of this decision is to provide a special exemption for one party while handcuffing the other." Id. at 1177. I do not believe that Congress intended this "harsh and anomalous" result. Id. at 1176.
I concur in the panel's opinion because I agree that McDowell is narrowly distinguishable (if unconvincingly) from this case, and because we must distinguish McDowell if McDowell remains the law and we are to reach the correct result in this case. But the underlying reality is that McDowell was wrongly decided. We should take the opportunity to rehear this case en banc and overrule McDowell.
