[author: Mark E. Schmidtke]*

The Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, regulates virtually every private employee benefit program in the United States. Among other things, ERISA contains its own civil enforcement section, §502(a), which the Supreme Court has held is “one of the essential tools for accomplishing the stated purposes of ERISA.” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 52 (1987). Section 502 provides a “panoply of remedial devices.” Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146 (1985). Yet, at the same time, it creates limits on those same remedies. Russell, supra, at 146 (“The six carefully integrated civil enforcement provisions found in § 502(a) of the statute as finally enacted... provide strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly.”)

One area where ERISA remedies are limited is in §502(a)(3), which provides for injunctive or “other appropriate equitable relief” to remedy violations of ERISA or an ERISA plan or to enforce the terms of ERISA or an ERISA plan. In Mertens v. Hewitt Associates, 508 U.S. 248 (1993) the Supreme Court held that “appropriate equitable relief” is limited to the types of relief that were “typically available” in equity courts during the days of the divided bench. For many years after Mertens, most courts, including the Supreme Court, seemed to understand this to mean that monetary relief was not available under §502(a)(3).

That perspective started to change after courts read dicta in CIGNA Corp. v. Amara, 563 U.S. 421 (2011), as suggesting that appropriate equitable relief under §502(a)(3) might include monetary make-whole relief in the form of surcharge when applied against fiduciaries who breach their ERISA duties. However, some again questioned the accuracy of that dicta five years later when the Supreme Court decided Montanile v. Bd. Of Trs., 577 U.S. 136 (2016). There, the Court held that monetary relief asserted against a defendant’s general assets and not traceable to a specific fund in the defendant’s possession was not “typically available in equity” and therefore not a form of relief available under §502(a)(3). This line of cases left litigants and the courts with substantial uncertainty about the types of monetary remedies, if any, that are or are not available as “appropriate equitable relief” under §502(a)(3).

The recent Fourth Circuit decision in Rose v. PSA Airlines, Inc., 80 F.4th 488 (2023) attempts to make sense of it all. A panel of the Fourth Circuit held that Montanile clarifies that surcharge as a form of monetary make-whole relief is not a remedy that was “typically available in equity” and is therefore not available under §502(a)(3). Monetary relief is only available under §502(a)(3) where a plaintiff can identify a specific property or fund to which the defendant has taken possession and that belongs to the plaintiff. A general claim for monetary relief against a defendant’s general assets is not a proper remedy under §502(a)(3) because such a remedy, including surcharge, was not “typically available in equity.”

Mertens and its Supreme Court Progeny

In Mertens, supra, a class of former employees sued their retirement plan actuary, alleging that the actuary’s actions resulted in a funding shortfall. Their only remedial avenue under ERISA was §502(a)(3). Section 502(a)(3) permits ERISA plan participants to obtain injunctive or “other appropriate equitable relief” to remedy violations of ERISA. Thus, the issue was whether the former employees could hold the nonfiduciary actuary liable for the funding losses as a form of “appropriate equitable relief.” The Supreme Court held that monetary relief sought by the plaintiffs was a form of damages, which is legal relief and therefore not equitable. Only relief that was “typically available in equity” is appropriate under §502(a)(3). 508 U.S. at 255.

The first post-Mertens case that the Supreme Court chose to revisit the scope of “appropriate equitable relief” under §502(a)(3) was Great-West Life & Ann. Inc. Co. v. Knudson, 534 U.S. 204 (2002). There, a plan participant was injured in an automobile accident. Her ERISA health plan paid medical bills which totaled over $400,000. Most of the bills were ultimately paid by the health plan’s stop-loss carrier, Great-West. The medical plan included a reimbursement provision stating that where there was any recovery from a third-party tortfeasor, the participant was obligated to reimburse the health plan up to the amount of benefits paid by the plan. After the participant’s medical bills were paid, she obtained a tort settlement. Most of the tort recovery was assigned to attorney’s fees and a trust established for the participant’s ongoing medical care. Less than $14,000 was earmarked for reimbursement of the health plan.

The stop-loss carrier, as assignee of the health plan, sued the participant to enforce the plan’s reimbursement provision under §502(a)(3), seeking injunctive relief and restitution. Unfortunately, the plan did not sue the trust fund or the participant’s tort attorney. Instead, the plan sued the participant directly, seeking “restitution” of the health benefits previously paid for the participant’s medical care. The participant argued that the relief sought by the plan was not “equitable” and that the plan had no available relief under §502(a)(3).

The Supreme Court agreed with the participant and held that the plan was seeking legal relief, not “appropriate equitable relief.” The Court held that the plan was not seeking injunctive relief because it was merely pursuing the payment of money due under a contract. With regard to the plan’s restitution claim, the Court noted that in the days of the divided bench, there was a distinction between “legal restitution” and “equitable restitution.” The Court characterized “equitable restitution” as “a claim to specific property (or its proceeds) held by the defendant.” 534 U.S. at 215. The participant in Knudson was not in possession of any specific property or fund over which the plan was attempting to assert a claim because the tort settlement proceeds were placed in a special needs trust and/or paid to the participant’s tort lawyer. Because the plan was not seeking relief with respect to any specific fund in the possession of the defendant, the Supreme Court held that the plan was merely seeking “the imposition of personal liability on respondents for a contractual obligation to pay money.” The Court held that this constituted a claim for legal relief (or “legal restitution”) and therefore was not available as “appropriate equitable relief” under §502(a)(3).

After Knudson, the Court again addressed the scope of §502(a)(3) “appropriate equitable relief” in Sereboff v. Mid-Atl. Med. Servs, Inc., 547 U.S. 356 (2006). In Sereboff, an ERISA health plan paid accident-related medical bills totaling $75,000. The Sereboffs eventually recovered $750,000 from the tortfeasor, but refused to reimburse the health plan. Instead, they put their share of the settlement funds into investment accounts. When the plan fiduciary sued for reimbursement, the Sereboffs agreed to set aside the reimbursement amount, pending a ruling on the plan’s reimbursement claim.

Discussing its previous decision in Knudson, the Court noted that “[w]e explained that one feature of equitable restitution was that it sought to impose a constructive trust or equitable lien on ‘particular funds or property in the defendant’s possession.’” In contrast to Knudson, the health plan in Sereboff “sought ‘specifically identifiable’ funds that were ‘within the possession and control of the Sereboffs.’” The fact that the health plan was asserting its action against a defendant who controlled an identifiable fund was a sufficient basis to show that the health plan was seeking an equitable remedy:

[The health plan] alleged breach of contract and sought money, to be sure, but it sought its recovery through a constructive trust or equitable lien on a specifically identifiable fund, not from the Sereboffs’ assets generally, as would be the case with a contract action at law. 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; that would make §502(a)(3)(B)(ii) an empty promise. This Court in Knudson did not reject Great-West’s suit out of hand because it alleged a breach of contract and sought money, but because Great-West did not seek to recover a particular fund from the defendant. Mid-Atlantic does.

The Supreme Court emphasized that, in addition to seeking an equitable remedy, a plaintiff under §502(a)(3) must also “establish that the basis for its claim was equitable.” The Court distinguished between equitable liens as a matter of restitution and equitable liens by agreement or assignment. An equitable lien as a matter of restitution requires that the plaintiff trace the funds at issue to the fund against which the lien is asserted. An equitable lien by agreement or assignment does not require tracing. The Supreme Court held that the health plan in Sereboff was asserting an equitable lien by agreement or assignment, and that it was not required to trace the specific funds at issue. The only requirement of such a claim is that the lien be asserted against the fund identified by the contract. The agreement (i.e., the health plan) in Sereboff identified the fund that was the target of the lien (i.e., “[a]ll recoveries from a third party”). As a result, the Court rejected the Sereboffs’ argument that in order for the health plan’s action to be equitable, it was required to show that the fund against which the lien was asserted contained the actual health plan benefits originally paid by the health plan. In pursuing an equitable lien by agreement or assignment, “the fund over which a lien is asserted need not be in existence when the contract containing the lien provision is executed.”

Then came CIGNA Corporation v. Amara, 563 U.S. 421 (2011). The Court granted review in that case to decide the level of proof required where a plan participant seeks to remedy violations of ERISA’s notice and disclosure provisions. Specifically, the question was whether the lower courts correctly applied a class-wide “likely harm” standard to such claims. According to Justice Scalia’s concurring opinion, that is where the decision should have ended. However, the majority felt differently and proceeded to address several other issues, including the potential remedies that may arise under §502(a)(3) as a result of a fiduciary’s violation of ERISA’s reporting and disclosure requirements.

The discussion drifted into the topic of available monetary relief. “Equity courts possessed the power to provide relief in the form of monetary ‘compensation’ for a loss resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment.” This type of equitable monetary remedy was known as “surcharge.” In courts of equity, the surcharge remedy “extended to a breach of trust committed by a fiduciary encompassing any violation of a duty imposed upon that fiduciary.” The Court distinguished its decision in Mertens, in which the Court held that monetary remedies were not available under §502(a)(3) against a nonfiduciary service provider, saying “insofar as an award of make-whole relief is concerned, the fact that the defendant in this case, unlike the defendant in Mertens, is analogous to a trustee makes a critical difference.” Justice Scalia, joined by Justice Thomas, wrote a concurring opinion in which he criticized the majority for addressing the question of the appropriate relief under §502(a)(3) because the district court never decided the issue.

The most recent Supreme Court pronouncement on the scope of monetary relief under §502(a)(3) is Montanile, supra. There, health plan fiduciaries sought to assert a lien against a participant’s tort recovery to recoup some of the benefits paid by the health plan. The participant’s personal injury attorney notified the plan of the recovery and that the money would be transferred to the client’s trust account unless the plan objected. The plan did not respond, the money was transferred, and the plan waited six months to sue the participant for the overpayment. By that point, the participant claimed that the money had been dissipated. The Supreme Court held that where a participant wholly dissipates a designated fund on non-traceable items, the plan no longer has a valid claim for appropriate equitable relief under ERISA, §502(a)(3).

The health plan argued that courts of equity were empowered to assert liens against a defendant’s general assets, so such relief should be available under §502(a)(3). The Court rejected this argument, holding that such relief was not “typically available in equity”:

We have long rejected the argument that “equitable relief” under §502(a)(3) means “whatever relief a court of equity is empowered to provide in the particular case at issue,” including ancillary legal remedies. Mertens, 508 U. S., at 256. In “many situations... an equity court could establish purely legal rights and grant legal remedies which would otherwise be beyond the scope of its authority.” Ibid. (internal quotation marks omitted). But these legal remedies were not relief “typically available in equity,” and interpreting them as such would eliminate any limit on the meaning of “equitable relief” and would render the modifier superfluous.” Id., at 256, 258 (emphasis deleted); see also Great-West, supra, at 210. As we have explained—and as the Board conceded at oral argument—as a general rule, plaintiffs cannot enforce an equitable lien against a defendant’s general assets... The Board contends that there is an exception if the defendant wrongfully dissipates the equitable lien to thwart its enforcement. But none of the Board’s examples show that such relief was “typically available” in equity. The specific methods by which equity courts might have awarded relief from a defendant’s general assets only confirm that the Board seeks legal, not equitable, remedies. While equity courts sometimes awarded money decrees as a substitute for the value of the equitable lien, they were still legal remedies, because they were “wholly pecuniary and personal.” 4 Pomeroy §1234, at 694.

577 U.S. at 148. The Court specifically rejected the plan’s argument that the requested relief was authorized by dicta in Amara, supra:

The Board also interprets CIGNA Corp. v. Amara, 563 U. S. 421 (2011), as all but overruling Mertens v. Hewitt Associates, 508 U. S. 248 (1993), and Great-West Life & Annuity Ins. Co. v. Knudson, 534 U. S. 204 (2002), in favor of the Board’s broad interpretation of “equitable relief” under §502(a)(3). But CIGNA reaffirmed that “traditionally speaking, relief that sought a lien or a constructive trust was legal relief, not equitable relief, unless the funds in question were ‘particular funds or property in the defendant’s possession.’” 563 U. S, at 439 (quoting Great-West, supra, at 213; emphasis deleted). In any event, the Court’s discussion of §502(a)(3) in CIGNA was not essential to resolving that case, and... our interpretation of “equitable relief” in Mertens, Great-West, and Sereboff v. Mid Atlantic Medical Services, Inc., 547 U. S. 356 (2006), remains unchanged.

577 U.S. at 148, n. 3.

The Fourth Circuit’s Perspective on Monetary Relief as Appropriate Equitable Relief Under §502(a)(3): Rose v. PSA Airlines

Ms. Rose’s son had a heart condition for which he sought treatment under an ERISA medical plan. After several delays, the treatment was not approved until shortly after the son died. Rose sued the plan’s administrator under ERISA, seeking benefits under §502(a)(1)(B) and relief for fiduciary breach (arising from alleged delay in approving the treatment) under §502(a)(3). Specifically, she sought the value of the cost of the treatment that was approved but never took place. The Fourth Circuit held that no relief was available under §502(a)(1)(B) because no benefits were available under the health plan for treatment that never took place.

The court then addressed the availability of a monetary remedy under §502(a)(3). The decision included a lengthy discussion of the history of equity courts’ concurrent jurisdiction (in which the only monetary remedy was equitable restitution) and equity courts’ exclusive jurisdiction over trust law (in which other monetary remedies such as surcharge were available). The court held that when the Supreme Court referred to remedies that are “typically” available in equity, the Court referred to remedies that were available in equity courts’ concurrent jurisdiction and not in their exclusive jurisdiction over trust law. This limits monetary remedies under §502(a)(3) to situations where a plaintiff can trace unjust gains to specifically identifiable funds that remain in the defendant’s possession or to items that the defendant purchased with those funds. Monetary remedies under §502(a)(3) do not include make-whole relief that creates personal liability on the defendant to pay over a sum of money from its general assets.

The Fourth Circuit acknowledged that Supreme Court dicta in Amara, supra, suggests that surcharge, a remedy unique to equity courts’ exclusive jurisdiction over trust law, is available under §502(a)(3). However, the Fourth Circuit went on to hold that the dicta is not only inconsistent with prior Supreme Court decisions in Mertens, Great-West, and Sereboff, but was effectively rejected in the Supreme Court’s later decision in Montanile, supra. See discussion above and, specifically, quotation at Montanile, 577 U.S. at 148, n. 3.

Based on pre- and post-Amara Supreme Court precedent, the Fourth Circuit held that its earlier decisions regarding the availability of surcharge make-whole monetary relief in McCravy v. Metropolitan Life Ins. Co., 690 F.3d 176 (4th Cir. 2012) and Peters v. Aetna, Inc., 2 F.4th 199 (4th Cir. 2021) did not reflect the law after Montanile.

The Fourth Circuit’s discussion of McCravy is particularly important because that case is frequently cited as a basis for monetary make-whole relief under §502(a)(3) in the form of benefits where benefits are not otherwise available under the terms of the ERISA plan. There, the plaintiff paid for dependent child life insurance coverage for several years after her child was no longer eligible for that coverage. When her child died, she claimed that she was entitled to benefits even though benefits were not due under the plan terms. The Fourth Circuit initially held that a monetary remedy in the form of surcharge was not available to the plaintiff. McCravy v. Metropolitan Life Ins. Co., 650 F.3d 414, 418-19 (4th Cir. 2011) (McCravy I). However, on rehearing after the Supreme Court decided Amara, supra, the Fourth Circuit issued a new decision and held that surcharge relief was available and remanded the matter to district court for further proceedings. McCravy v. Metropolitan Life Ins. Co., 690 F.3d 176, 180-81 (4th Cir. 2012) (McCravy II). Rose holds that McCravy II is no longer valid:

The problem is that the Supreme Court rejected the turn... that we took in McCravy. In Montanile, the Court went beyond labeling Amara’s reasoning as ‘dicta’ and expressly declared that the ‘interpretation of ‘equitable relief’ in Mertens [and] Great-West [Life & Ann. Ins. Co. v. Knudson, 534 U.S. 204 (2002)]... remains unchanged’... And, as discussed, that interpretation is flatly inconsistent with Amara’s suggestions. Indeed, aside from these chidings, Montanile did not otherwise cite Amara. The implication was clear: Amara’s approach is antithetical to a proper §502(a)(3) analysis.

80 F.4th at 503.

The Rose court instructed the district court to decide in the first instance whether plaintiff could recover the monetary value of the benefits on a theory of unjust enrichment. However, citing Mertens, Montanile, and other post-Mertens Supreme Court authorities, the court noted the limits of such relief: “Equitable remedies are, as a general rule, directed against some specific thing; they give or enforce a right to or over some particular thing rather than a right to recover a sum of money generally out of the defendant’s assets.” Id. at 501-02 (quoting Montanile, 577 U.S. at 145). To qualify as equitable relief under §502(a)(3), “restitutionary relief imposed to remedy unjust enrichment must be proprietary, not personal: The plaintiff cannot recover out of the defendant’s assets. Instead, the plaintiff must (1) identify certain property or money ‘belonging in good conscience’ to him, and (2) that property must ‘clearly be traced to particular funds or property in the defendant’s possession.’” Id. at 501 (quoting Great-West, 534 U.S. at 213) (emphasis in original). Therefore, in order to obtain such relief under §502(a)(3), a plaintiff must satisfy the following requirements:

A plaintiff alleging unjust enrichment can get a monetary remedy under ERISA only if she seeks specific funds that are wrongfully in the defendant’s possession and rightfully belong to her. Courts cannot award her relief that amounts to personal liability paid from the defendant’s general assets to make the plaintiff whole.

80 F.4th at 502. Ultimately, the district court would have to decide whether the defendant was unjustly enriched and whether “the fruits of that unjust enrichment remain in the defendant’s possession or can be traced to other assets.” Id. at 505.

The Future of Monetary Relief Under ERISA Section 502(a)(3)

The Fourth Circuit’s decision in Rose is significant. The opinion contains one of the most detailed analyses of the types of relief that were typically available in equity courts of any circuit or district court decision since Mertens. It is certainly the most detailed analysis since Montanile.

A second reason the decision in Rose is significant is because it utterly rejected prior Fourth Circuit precedent in McCravy II, essentially returning Fourth Circuit law to what it was in McCravy I. All of this is based on the Fourth Circuit majority’s holding in Rose that the dicta in Amara that surcharge make-whole relief may be appropriate under §502(a)(3) was rejected by the Supreme Court in Montanile. The Rose decision runs counter to the assumption by some courts about the effect of the dicta in Amara. Granted, many of these decisions pre-date Montanile, so the courts did not have the opportunity to consider the effect of the latter decision on the Amara dicta.

The dicta in Amara appear to be based on the scope of relief available to equity courts when acting under their exclusive jurisdiction over trusts. Amara, 563 U.S. at 441 (“Equity courts possessed the power to provide relief in the form of monetary ‘compensation’ for a loss resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment.”) (Emphasis added.). According to Rose, because equity courts had exclusive jurisdiction over trusts, their scope of relief was broader than what was “typically” available in equity. If the holdings in Mertens and its progeny mean anything, then, the relief that was “typically” available in equity must be narrower and must be limited to the types of relief available in equity courts’ concurrent jurisdiction and not the much broader relief available in their exclusive jurisdiction over trusts. That is the message in Montanile. 577 U.S. at 147 (“We have long rejected the argument that “equitable relief” under §502(a)(3) means ‘whatever relief a court of equity is empowered to provide in the particular case at issue,’ including ancillary legal remedies.”).

Ultimately, Rose provides a strong basis for pushing back on claims for monetary relief that do not include situations where there is an identifiable fund. Such claims arise most often when a plaintiff is seeking to recover from a defendant’s general assets the value of a plan benefit that is not otherwise payable under the plan terms. Rose reinstates the understanding that most courts had prior to Amara about the limits of equitable relief: “Equitable remedies are, as a general rule, directed against some specific thing; they give or enforce a right to or over some particular thing rather than a right to recover a sum of money generally out of the defendant’s assets.” Rose at 501-02 (quoting Montanile, 577 U.S. at 145).

How the holding in Rose fares in other circuits remains to be seen. One can reasonably see another Supreme Court decision on the horizon as the impact of Rose ripples through the courts.

* Ogletree Deakins