In Reynolds Metal Co. v. Ellis, 202 F.3d 1246 (9^th Cir. 2000) an ERISA fiduciary sought to enforce a plan’s contractual reimbursement provisions under ERISA.  Reynolds sought reimbursement for payments it made to Robert Ellis.

Ellis, the defendant, was an employee of Reynolds and a beneficiary in its group medical plan. Ellis was involved in an auto accident in 1994 and was seriously injured.  In the aftermath of the accident, the plan paid "no less than $ 561,145.21" in benefits to Ellis and his health care providers.

The plan contains a contractual reimbursement provision which states:  "If the Plans paid for health care services, supplies or treatment and you receive payment from a third party, you must reimburse the Plans, but not more than the amount of the third-party payment you received."  The plan further requires reimbursement whether the payments received are partly or entirely "for health care expenses as the result of a legal settlement or other action arising from an accident, injury or illness."

Sometime in 1997, Ellis settled a claim against the third parties responsible for the accident, receiving an amount in excess of the benefits paid to him by the plan.  Since that time, he has refused to reimburse Reynolds for any of the benefits paid to him.

On August 15, 1997, Reynolds filed suit in federal district court seeking to enforce the contractual reimbursement provision pursuant to 29 U.S.C. §  1132(a)(3).  In lieu of answering the complaint, Ellis made a motion to dismiss the action.  The district court granted the motion.

ERISA provides for a federal cause of action for civil claims aimed at enforcing the provisions of an ERISA plan.[i]  To make such a claim, however, a plaintiff must fall within one of ERISA's nine specific civil enforcement provisions, each of which details who may bring suit and the available remedies.[ii]  Reynolds invoked the third of the nine categories.[iii] 

To prevail, Reynolds must demonstrate (1) that it is an ERISA fiduciary, and (2) that it is seeking equitable, rather than legal, relief.[iv] 

There was no serious dispute regarding the status of Reynolds as a fiduciary.  The sole issue was whether the relief the plaintiff sought - namely, reimbursement under the contractual reimbursement provisions of the ERISA plan - was properly characterized as "equitable" within the meaning of 29 U.S.C. § 1132(a)(3).

This court previously held, in Owens,[v] that courts should dismiss actions brought by fiduciaries under ERISA against beneficiaries to enforce reimbursement (or “subrogation”) clauses contained in ERISA plans. 

In Owens, FMC, in its capacity as plan administrator of the FMC Health Care Plan, sued Owens to enforce the terms of the plan and to obtain "equitable reimbursement" from Owens's third‑party recovery for the benefits previously paid to or on his behalf by the plan.  FMC contended that 29 U.S.C. § 1132(a)(3) authorized such a claim for reimbursement.  However, the Ninth Circuit held that the plan had no standing to bring such an action. In reaching its conclusion, the court relied on Mertens v. Hewitt Associates,[vi] in which the United States Supreme Court held that the term equitable relief in 29 U.S.C. § 1132(a)(3) only referred to the traditional forms of equitable relief‑‑injunctions, mandamus, and restitution. According to the Ninth Circuit, the substance of the remedy FMC sought was money damages.  29 U.S.C. § 1132(a)(3) does not allow the recovery of money damages.  Owens held that reimbursement under the contractual reimbursement provisions of an ERISA plan is not "equitable" relief within the meaning of § 1132(a)(3). 

The court noted that the existence of controlling Ninth Circuit precedent such as Owens should end the appeal.  However, the court noted that Reynolds asked the panel to call for a hearing en banc.  This the panel refused to do.

This court disputed Reynolds’ suggestion that Owens was based on an unduly narrow reading of Mertens.[vii]  Reynolds relied upon Blue Cross & Blue Shield of Alabama v. Sanders.[viii]  The Eleventh Circuit in Sanders, relying upon Owens – Illinois, Inc. v. Lake Store Land Co., Inc.,[ix] stated that it believed that specific performance may be equitable relief under 29 U.S.C. § 1132(a)(3)(B).[x]  The Ninth Circuit did not address the Eleventh Circuit in Sanders.  In this case, it found that the Owens panel had relied heavily upon Mertens and there was no conflict. 

Nor did this court agree that Owens conflicted with Varity.[xi]  It read that the Supreme Court, in Varity, endorsed the remedy of reinstatement – a purely equitable remedy.[xii]

Reynolds also claimed that Owens represented an intra-circuit split between two other panels.  The Ninth Circuit in Ellis said the first case Reynolds relied upon, Chitkin v. Lincoln National Life Ins. Co.,[xiii] was not binding precedent since it was unpublished.

Reynolds also relied upon Pacificare, Inc. v. Martin.[xiv]  The Ninth Circuit said the Martin case did not create an intra-circuit conflict since the Ninth Circuit never reached the question of whether reimbursement was an equitable remedy under 29 U.S.C. 1132(a)(3).

Plaintiffs should consider whether the Ellis and Owens holding would apply to attempts by plans to recover Social Security offsets.  I suggest that someone file a declaratory judgment action in the Ninth Circuit and test this theory.[xv]