Jette v. United of Omaha Life Ins. Co.

• Decision Date: 11 July 2019
• Docket Number: Civil Action No. 18-11650-JCB
• Citation: 387 F.Supp.3d 149
• Parties: Karen JETTE, Plaintiff, v. UNITED OF OMAHA LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Massachusetts

387 F.Supp.3d 149

Karen JETTE, Plaintiff,

v.UNITED OF OMAHA LIFE INSURANCE COMPANY, Defendant.

Civil Action No. 18-11650-JCB

United States District Court, D. Massachusetts.

Filed July 11, 2019

Jonathan M. Feigenbaum, Boston, MA, for Plaintiff.

Brooks R. Magratten, Cheryl Lorraine Allen-Ricciardi, Pierce Atwood LLP, Providence, RI, for Defendant.

ORDER ON PLAINTIFF'S MOTION TO DISMISS COUNTERCLAIM

[Docket No. 9]

JENNIFER C. BOAL, United States Magistrate Judge

In this ERISA action, plaintiff Karen Jette seeks to recover long-term disability benefits from defendant United of Omaha Life Insurance Company ("United"). United has filed counterclaims against Jette, seeking to recover $15,745.99 it allegedly overpaid to Jette due to her receipt of disability benefits under the Social Security Act. Jette has moved to dismiss United's counterclaims. Docket No. 9.¹ This Court heard oral argument on July 10, 2019. For the following reasons, this Court grants the motion without prejudice to United seeking leave to amend the answer to add counterclaims after limited discovery.

I. FACTS ²

Jette seeks long-term disability ("LTD") benefits under an employee welfare benefit plan sponsored and maintained by her former employer (the "Plan"). Counterclaim at ¶ 6. LTD benefits under the Plan were at all relevant times funded by a group disability insurance policy issued by United to Jette's former employer. Id. at ¶ 7.

United served as the Claim Administrator of the Plan. Id. at ¶ 8.

Jette applied for and received LTD benefits under the Plan. Id. at ¶ 9. The Plan defines the monthly LTD benefit, in part, as follows:

Total Disability

If you are Disabled and earning less than 20% of Your Basic Monthly Earnings, the Monthly Benefit while Disabled is the lesser of:

a) 60% of Your Basic Monthly Earnings, less Other Income Sources; or

b) the Maximum Monthly Benefit, less any Other Income Sources ...

Id. at ¶ 10. The Plan defines "Other Income Sources," in part, as follows:

We take into account the total of all Your income from other sources of income in determining the amount of Your Monthly Benefit. Your Other Income Sources are any of the following amounts that You receive or are eligible to receive as a result of Your Disability or the Sickness and/or Injury that caused, in whole or in part, Your Disability: ...

(e) Any benefits for You or Your Spouse and Dependent Child under:

1. the U.S. Social Security Act; ...

Id. at ¶ 11. The Plan provides United the right to seek a refund from a Plan participant in the event of an overpayment:

Refund to Us

If it is found that We paid more benefits than We should have paid under the Policy, We have the right to a refund from You or the recipient of benefits.

Id. at ¶ 12. In addition, on May 14, 2014, Jette executed a Group Disability Benefits Reimbursement Agreement in which she agreed that:

I will repay the Company, in a lump sum, all monthly and/or weekly benefits that have been paid to me, and which exceed the amount I was entitled under the terms of the Policy, as a result of receipt of Other Benefits. I will make this repayment within 30 days from the date on which Other Benefits are received.

Id. at ¶ 15.

After United began paying LTD benefits to Jette, she also began to receive Social Security Disability Income ("SSDI") benefits under the Social Security Act. Id. at ¶ 13. United alleges that Jette's receipt of SSDI benefits resulted in an overpayment of LTD benefits to her in the amount of $15,745.99. Id. at ¶ 14.

United has made multiple demands upon Jette for a refund of the overpayment balance. Id. at ¶ 16. Jette has failed to refund the overpayment balance in violation of the terms of the Reimbursement Agreement, the Plan, and ERISA. Id. at ¶ 17.

United's counterclaim contains four counts: (1) a claim for enforcement of the Plan provisions; (2) a claim to enforce a lien or constructive trust; (3) a claim for unjust enrichment; and (4) a claim for attorney's fees pursuant to 29 U.S.C. § 1132(g)(1) and/or the federal common law of ERISA. Counterclaim at ¶¶ 18-38.

II. ANALYSIS

A. Standard Of Review

A complaint must contain only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "Like a complaint, a counterclaim is subject to dismissal if, after accepting all well-pleaded facts as true and drawing all reasonable inferences in favor of the nonmoving party, the court determines that it ‘fails to state a claim upon which relief can be granted.’ " Parent v. Principal Life Ins. Co., 763 F. Supp. 2d 257, 260 (D. Mass. 2011) (citations omitted). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. "The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id.

In assessing the sufficiency of a claim, "an inquiring court must first separate wheat from chaff; that is, the court must separate the [counterclaim's] factual allegations (which must be accepted as true) from its conclusory legal allegations (which need not be credited)." Guadalupe-Baez v. Pesquera, 819 F.3d 509, 514 (1st Cir. 2016) (citing Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012) ). The Court must then determine "whether the well-pleaded facts, taken in their entirety, permit ‘the reasonable inference that the [plaintiff] is liable for the misconduct alleged.’ " Id. (citations omitted).

B. Section 502(a)(3) Of ERISA

Under Section 502(a)(3) of ERISA a fiduciary such as a United may bring an action:

(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). Thus, United cannot sue for damages under ERISA; it must show that it is seeking equitable relief. Mertens v. Hewitt Assocs., 508 U.S. 248, 256, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993). Jette argues that United's counterclaim seeking reimbursement of overpayments does not pursue equitable relief and, therefore, must be dismissed. Docket No. 10 at 1-2, 10.

The Supreme Court has interpreted "equitable relief" under Section 502(a)(3) as being "limited to ‘those categories of relief that were typically available in equity’ during the days of the divided bench (meaning, the period before 1938 when courts of law and equity were separate)." Montanile v. Bd. of Trustees of Nat. Elevator Indus. Health Benefit Plan, ––– U.S. ––––, 136 S. Ct. 651, 657, 193 L.Ed.2d 556 (2016) (quoting Mertens, 508 U.S. at 256, 113 S.Ct. 2063 ) (emphasis in original). "[W]hether the remedy a plaintiff seeks ‘is legal or equitable depends on [ (1) ] the basis for [the plaintiff's] claim and [ (2) ] the nature of the underlying remedies sought." Id. (quoting Sereboff v. Mid Atlantic Medical Servs., Inc., 547 U.S. 356, 363, 126 S.Ct. 1869, 164 L.Ed.2d 612 (2006) ).

In a series of cases involving plan fiduciaries seeking reimbursement of benefits after the plan beneficiary recovered money from a third party, the Supreme Court has developed the meaning of equitable relief for purposes of Section 502(a)(3). In each case, ERISA beneficiaries suffered injuries in car accidents and the ERISA plans paid for their medical care. When the beneficiaries later obtained monetary settlements from tortfeasors, the ERISA plans demanded reimbursement from the settlement proceeds. After the beneficiaries refused, the ERISA plans brought claims under Section 502(a)(3) to enforce reimbursement provisions in their plan documents.

First, in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002), the Supreme Court held that a plan with a claim for an equitable lien was—in the circumstances presented—seeking a legal rather than an equitable remedy. Montanile, 136 S.Ct. at 657. In that case, a plan sought to enforce an equitable lien by obtaining a money judgment from the beneficiaries. The plan could not enforce the lien against the third-party settlement because the beneficiaries never actually possessed that fund; the fund went directly to the beneficiaries' attorneys and a restricted trust. Knudson, 534 U.S. at 214, 122 S.Ct. 708. The Supreme Court held that the plan sought a legal remedy, not an equitable one, even though the plan claimed that the money judgment was a form of restitution. Id. at 208-209, 213-214, 122 S.Ct. 708. The Supreme Court explained that restitution in equity typically involved enforcement 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." Id. at 213, 122 S.Ct. 708. The plan sought legal, not equitable, restitution because "the basis for petitioners' claim [was] not that respondents hold particular funds that, in good conscience, belong to petitioners, but that petitioners [were] contractually entitled to some funds for benefits that they conferred." Id. at 214, 122 S.Ct. 708 (emphasis in original). In other words, the plan was seeking "the imposition of personal liability for the benefits that they conferred upon respondents." Id. Because neither the basis for the claim nor the particular remedy sought were equitable, the plan could not sue under Section 502(a)(3). Id. at 218, 122 S.Ct. 708.

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