650 F.3d 414 (4th Cir. 2011), 10-1074, McCravy v. Metropolitan Life Ins. Co.

Docket Nº:10-1074, 10-1131.
Citation:650 F.3d 414
Opinion Judge:WYNN, Circuit Judge:
Party Name:Debbie McCRAVY, Plaintiff-Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee. Secretary of the United States Department of Labor, Amicus Supporting Appellant. Debbie McCravy, Plaintiff-Appellee, v. Metropolitan Life Insurance Company, Defendant-Appellant. Secretary of the United States Department of Labor, Amicus Supporting Appel
Attorney:Robert Edward Hoskins, Foster Law Firm, LLP, Greenville, SC, for Debbie McCravy. Elizabeth Hopkins, United States Department of Labor, Washington, D.C., for Secretary of the United States Department of Labor. Ian Seth Linker, Metropolitan Life Insurance Company, New York, NY, for Metropolitan Lif...
Judge Panel:Before TRAXLER, Chief Judge, and KING and WYNN, Circuit Judges. Affirmed by published opinion. Judge WYNN wrote the opinion, in which Chief Judge TRAXLER and Judge KING joined.
Case Date:May 16, 2011
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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650 F.3d 414 (4th Cir. 2011)

Debbie McCRAVY, Plaintiff-Appellant,

v.

METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee.

Secretary of the United States Department of Labor, Amicus Supporting Appellant.

Debbie McCravy, Plaintiff-Appellee,

v.

Metropolitan Life Insurance Company, Defendant-Appellant.

Secretary of the United States Department of Labor, Amicus Supporting Appellee.

Nos. 10-1074, 10-1131.

United States Court of Appeals, Fourth Circuit.

May 16, 2011

         Argued: Jan. 27, 2011.

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[Copyrighted Material Omitted]

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         ARGUED:

         Robert Edward Hoskins, Foster Law Firm, LLP, Greenville, SC, for Debbie McCravy.

         Elizabeth Hopkins, United States Department of Labor, Washington, D.C., for Secretary of the United States Department of Labor. Ian Seth Linker, Metropolitan Life Insurance Company, New York, NY, for Metropolitan Life Insurance Company.

         ON BRIEF:

         Peter Stris, Stris & Maher, LLP, Dallas, TX, for Debbie McCravy. J.D. Quattlebaum, Haynsworth, Sinkler & Boyd, PA, Greenville, SC, for Metropolitan Life Insurance Company.

         M. Patricia Smith, Solicitor of Labor, Timothy D. Hauser, Associate Solicitor, Plan Benefits Security Division, James L. Craig, Jr., Senior Regulations Attorney, United States Department of Labor, Washington, D.C., for Secretary of the United States Department of Labor.

          Before TRAXLER, Chief Judge, and KING and WYNN, Circuit Judges.

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          Affirmed by published opinion. Judge WYNN wrote the opinion, in which Chief Judge TRAXLER and Judge KING joined.

         OPINION

          WYNN, Circuit Judge:

         Plaintiff Debbie McCravy sued Defendant Metropolitan Life Insurance Company (" MetLife" ), alleging, among other things, breach of fiduciary duty, and seeking damages under the " other appropriate equitable relief" provision of the Employee Retirement Income Security Act (" ERISA" ), 29 U.S.C. § 1132(a)(3). The district court granted McCravy summary judgment, but limited her damages to the return of her premiums. Both parties appealed. We now affirm.

         I.

         McCravy works for Bank of America. As a full-time employee, she participated in Bank of America's life insurance and accidental death and dismemberment (" AD & D" ) plan, which was issued and administered by MetLife. The plan provided that an insured could purchase accidental death and dismemberment coverage for " eligible dependent children." Under the plan, McCravy elected to obtain such insurance coverage for her daughter Leslie McCravy and paid premiums, which were accepted and retained by MetLife.

         In 2007, while named as a covered dependent on McCravy's insurance plan, Leslie was murdered at the age of 25. McCravy, who was the beneficiary of the policy insuring her daughter, filed a claim for benefits. MetLife denied McCravy's claim on the grounds that Leslie did not qualify for coverage under the plan's " eligible dependent children" provision.

         The plan defines " eligible dependent children" as children of the insured who are unmarried, dependent upon the insured for financial support, and either (a) under the age of 19 or (b) under the age of 24 if enrolled full-time in school. According to MetLife, because Leslie was 25 at the time of her death, she no longer fit the definition of " eligible dependent children." As a result, MetLife denied McCravy's claim and attempted to refund the premiums retained to provide coverage for Leslie. McCravy, however, refused to accept the refund check.

         Instead, McCravy filed suit in federal court in May 2008, alleging that MetLife's actions constituted a breach of fiduciary duty under ERISA, 29 U.S.C. § 1104, and seeking recovery under 29 U.S.C. § 1132(a)(2) or (a)(3). McCravy also alleged various claims under state law, including negligence, promissory estoppel, and breach of contract. In September 2008, MetLife filed a " Memorandum in Support of Preemption." With the parties' agreement, the district court treated the filing as a motion to dismiss.

         On June 12, 2009, the district court ruled that McCravy's state law claims were preempted by ERISA. Regarding McCravy's breach of fiduciary duty claim, the district court ruled that McCravy could not recover under § 1132(a)(2). McCravy does not challenge the district court's ruling on the preemption of her state law claims or the disposition of her § 1132(a)(2) claim.

         As for McCravy's claim under § 1132(a)(3), the district court ruled that, although McCravy was not entitled to recover full benefits under this provision, McCravy could recover the premiums withheld by MetLife for coverage that she never actually had on the life of her daughter. The district court therefore denied MetLife's motion to dismiss McCravy's § 1132(a)(3) claim and invited the parties to conduct further discovery.

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          On June 22, 2009, McCravy moved for summary judgment regarding the improperly withheld premiums, and reserved the right to appeal the district court's limitation of her recovery under § 1132(a)(3). On January 14, 2010, the district court entered a final order and judgment awarding McCravy the improperly withheld premiums.1 McCravy appealed, and MetLife cross-appealed.

         II.

          McCravy first argues that 29 U.S.C. § 1132(a)(3) allows the remedy of surcharge, which would permit recovery of the life insurance proceeds lost by McCravy because of MetLife's breach of fiduciary duty. 29 U.S.C. § 1132(a)(3) provides that a civil action may be brought:

by a participant, beneficiary, or fiduciary (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

....

29 U.S.C. § 1132(a)(3). This case concerns the scope of the " equitable relief" provision.2

         Surcharge is defined as " [t]he amount that a court may charge a fiduciary that has breached its duty." Black's Law Dictionary 1579 (9th ed.2009). McCravy alleges that surcharge encompasses the remedies provided by section 205 of the Restatement of Trusts, including charging a trustee with " (a) any loss or depreciation in value of the trust estate resulting from the breach of trust; or (b) any profit made by him through the breach of trust; or (c) any profit which would have accrued to the trust estate if there had been no breach of trust." Restatement of Trusts § 205 (1935). McCravy portrays surcharge as having a distinctly restitutionary focus and functioning as a sanction.

          In considering McCravy's claim for restitution, we are guided by the Supreme Court's opinion in Mertens v. Hewitt Associates, 508 U.S. 248, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993). The petitioners in Mertens (former employees of Kaiser Steel Corp.) sued the respondent (Kaiser's actuary), alleging breach of fiduciary and nonfiduciary duties. Id. at 251, 113 S.Ct. 2063. The Supreme Court recognized that " [s]ince all relief available for breach of trust could be obtained from a court of equity, limiting the sort of relief obtainable under § [1132(a)(3) ] to ‘ equitable relief’ in the sense of ‘ whatever relief a common-law court of equity could provide in such a case’ would limit the relief not at all." Id. at 257, 113 S.Ct. 2063 (emphasis omitted). The Court held that the phrase " other

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equitable relief" refers only " to those categories of relief that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages)." Id. at 256, 113 S.Ct. 2063 (emphasis omitted).

         The Supreme Court refined the Mertens rule in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002). There, the Court stated that whether restitution is legal or equitable depends on " the basis for the plaintiff's claim and the nature of the underlying remedies sought." Id. at 213, 122 S.Ct. 708 (internal quotation marks and citation omitted). A plaintiff could seek restitution in equity, the Court explained, when " 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." Id. The Court therefore held that " 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...

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