David Knieriem v. Group Health Plan ( 2006 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 05-1139
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David Knieriem, as personal *
representative of the Estate of *
Troy Siade, deceased, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Missouri.
Group Health Plan, Inc.; *
Bernard Mansheim, *
*
Appellees. *
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Submitted: October 12, 2005
Filed: January 19, 2006
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Before RILEY, HANSEN, and COLLOTON, Circuit Judges.
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RILEY, Circuit Judge.
David Knieriem (Knieriem), as personal representative of the estate of Troy
Siade (Siade), appeals the order of the district court1 dismissing his claim, because the
relief sought against Siade’s employer-sponsored health care plan was not available
1
The Honorable Audrey G. Fleissig, United States Magistrate Judge for the
United States District Court for the Eastern District of Missouri, presiding by consent
of the parties pursuant to 28 U.S.C. § 636(c)(1).
under the Employee Retirement Income Security Act of 1974 (ERISA),
§ 502(a)(3)(B), 29 U.S.C. § 1132(a)(3)(B). We affirm.
I. BACKGROUND
Siade had an employer-sponsored health care plan provided by Group Health
Plan, Inc. (GHP). The plan was governed by ERISA. GHP issued the health
insurance policy for the plan. In 2001, Siade was diagnosed with non-Hodgkin’s
lymphoma and sought GHP’s pre-approval for an allogeneic stem cell transplant.
GHP denied coverage on the basis the procedure was “investigational and unproven”
and therefore excluded under the plan’s policy.
In April 2004, following GHP’s denial of coverage, Siade filed a lawsuit in
Missouri state court seeking damages against GHP and Dr. Bernard Mansheim, Chief
Medical Officer of Coventry Health Care, GHP’s parent company (collectively, GHP).
Siade alleged GHP’s wrongful denial of coverage amounted to medical malpractice
and intentional infliction of emotional distress under Missouri law. GHP removed the
case to federal court based on ERISA preemption. The district court denied Siade’s
motion to remand, finding the state claims were preempted by ERISA, but granted
Siade leave to file an amended complaint to plead a claim under ERISA.
In his amended complaint, Siade2 requested a jury trial and alleged GHP
breached its fiduciary duty by denying coverage. For relief, Siade requested the court
“order restitution by defendants to Plaintiff; to award Plaintiff a ‘surcharge’ as that
term was used in equity prior to the fusion of law and equity; to provide compensation
to Plaintiff for defendants’ breach of fiduciary duty; [and] to award attorney’s fees.”
GHP then moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for
failure to state a claim under ERISA. The district court granted the motion, reasoning
2
Siade passed away shortly after the case was removed. Knieriem was
appointed personal representative of Siade’s estate. The district court permitted
Knieriem to be substituted as plaintiff, and allowed Knieriem to serve as both personal
representative and counsel in this action.
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“[w]hile Plaintiff has phrased his request as for ‘restitution’ and a ‘surcharge for
breach of a fiduciary duty,’ Plaintiff is actually seeking monetary relief, and such
relief is not available under ERISA.”
On appeal, Knieriem argues the district court erred in dismissing the claim
because ERISA allows a monetary award of restitution and a surcharge to the
beneficiaries of a decedent when the plan administrator improperly fails to authorize
a procedure.
II. DISCUSSION
We review de novo the district court’s grant of a motion to dismiss pursuant to
Rule 12(b)(6), accepting all factual allegations in the complaint as true and granting
every reasonable inference in favor of the nonmovant. MM&S Fin., Inc. v. Nat’l
Ass’n of Sec. Dealers, Inc., 364 F.3d 908, 909 (8th Cir. 2004) (citing Stone Motor Co.
v. GMC, 293 F.3d 456, 464 (8th Cir. 2002)). “A motion to dismiss should be granted
only if it appears beyond doubt that the plaintiff can prove no set of facts to warrant
a grant of relief.” Gilmore v. County of Douglas, Neb., 406 F.3d 935, 937 (8th Cir.
2005) (citing Carter v. Arkansas, 392 F.3d 965, 968 (8th Cir. 2004)).
There is no dispute Siade did not receive the allogeneic stem cell transplant.
We will assume, as we must in reviewing a dismissal for failure to state a claim, GHP
breached its fiduciary duty by denying coverage for the procedure. The question
before us is whether the requested relief is available under ERISA.
Knieriem does not deny the relief requested is money damages. Instead, he
contends ERISA’s roots in the equitable law of trusts allow for monetary damages in
the present case. First, Knieriem argues, as a fiduciary, GHP held the money Siade
paid for health benefits in trust. Therefore, recovery is nothing more than the
restitution of the funds the fiduciary had an obligation to release. Knieriem’s second
argument is monetary recovery in the form of a surcharge is available as an equitable
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remedy when, as here, a trustee has gained personally from wrongful action taken in
managing a trust. We disagree.
A. Restitution
As the Supreme Court has oft-iterated, “ERISA is a comprehensive and
reticulated statute, the product of a decade of congressional study of the Nation’s
private employee benefit system.” Great-West Life & Annuity Ins. Co. v. Knudson,
534 U.S. 204, 209 (2002) (internal quotations omitted). The Court similarly has
repeated its reluctance “‘to tamper with [the] enforcement scheme’ embodied in the
statute by extending remedies not specifically authorized by its text.” Id. (quoting
Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 147 (1985)) (alteration in original).
The statute’s failure to include certain remedies, as the Court has noted, was not an
oversight; rather, “ERISA’s carefully crafted and detailed enforcement scheme
provides strong evidence that Congress did not intend to authorize other remedies that
it simply forgot to incorporate expressly.” Id. (internal quotations omitted). Vague
notions that ERISA’s purpose would be defeated if recovery was limited are
inadequate to overcome the basic words of the statute. Mertens v. Hewitt Assocs.,
508 U.S. 248, 261 (1993); Kerr v. Charles F. Vatterott & Co., 184 F.3d 938, 943 (8th
Cir. 1999).
ERISA’s civil enforcement provision, found in section 1132, lists six types of
civil actions that may be pursued for violations of the statute. See Russell, 473 U.S.
at 139-40. The present case was brought pursuant to section 1132(a)(3), which allows
a civil action, “by a participant, beneficiary, or fiduciary . . . (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)(B). This provision
allows an individual plan participant to seek equitable remedies for breach of fiduciary
duty in his individual capacity. See Varity Corp. v. Howe, 516 U.S. 489, 510-13, 515
(1996) (finding section 1132(a)(3) allows individual actions for equitable relief for
breaches of fiduciary duty). Recovery is limited, however, to “classic” equitable
remedies, Mertens, 508 U.S. at 257-58, “such as injunctive, restitutionary, or
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mandamus relief, and does not extend to compensatory damages,” Kerr, 184 F.3d at
943.
Restitution can be equitable or compensatory, and the distinction lies in the
origin of the award sought. Id. at 944. “Restitution seeks to punish the wrongdoer by
taking his ill-gotten gains, thus, removing his incentive to perform the wrongful act
again. Compensatory damages on the other hand focus on the plaintiff’s losses and
seek to recover in money the value of the harm done to him.” Id. (citing 1 Dan B.
Dobbs, Law of Remedies § 4.1(1), at 369-71 (2d ed.1993)). Therefore, despite the
label attached to the remedy in the present case, we must look to the origin of the
relief sought to determine whether it is equitable or compensatory.
Knieriem requests monetary relief for the harm suffered. Knieriem states in his
brief, “The relief the estate seeks is the monetary benefit that GHP should have paid
for the withheld procedure, including any ancillary profit either GHP or Mansheim
made from the denial of the benefit.” In his prayer, Knieriem asks for restitution,
surcharge, and “compensation to Plaintiff for defendants’ breach of fiduciary duty.”
Knieriem’s requested relief is essentially compensatory.
The Supreme Court and this circuit precedent precludes an award of
compensatory damages under section 1132(a)(3)(B). See Mertens, 508 U.S. at 258-
59, cited in Kuhl v. Lincoln Nat’l Health Plan of Kansas City, Inc., 999 F.2d 298, 304-
05 (8th Cir. 1993). In Kuhl, the insurer delayed authorizing a covered surgical
procedure while searching for a network hospital to perform the procedure. Id. at 300.
By the time the insurer approved surgery, the insured’s condition had deteriorated
such that surgery was no longer a viable option. The insured died, and his estate filed
an action against the insurer in state court alleging, inter alia, medical malpractice and
emotional distress. Id. Following removal based on ERISA preemption, the court
found plaintiff’s state tort claims were preempted. Id. at 301. Pertinent to the case at
bar, the court also dismissed a subsequent complaint for breach of fiduciary duty
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brought pursuant to 29 U.S.C. § 1132(a)(3)(B). Id. Citing circuit and Supreme Court
precedent, we said,
We have previously held that monetary damages are not available
under section [1132](a)(3)(B)(i). In Novak [v. Andersen Corp.], we . . .
held that an award of monetary damages is a legal remedy, not an
equitable one. This interpretation has recently been vindicated by the
Supreme Court. After an extensive review of the history of equitable
remedies and the statutory language of section [1132](a)(3), the Court
concluded that damages do not constitute “other equitable relief.”
Id. at 304-05 (citing Mertens, 508 U.S. at 258-59; Novak v. Andersen Corp., 962 F.2d
757, 759, 761 (8th Cir.1992)) (internal citations omitted). We concluded the “claim
for monetary damages was not cognizable under section [1132](a)(3)(B)(i).” Id. at
305.
Knieriem argues his case is distinguishable from Kuhl, because in the present
case the funds sought were held in trust, are identifiable, and should have been used
to pay for the procedure. These distinctions are unavailing. The funds sought are not
identifiable, or even known, because Siade never incurred the requested transplant
costs. As noted supra, whether a remedy is restitutionary or compensatory is
determined by the origin of the award. In Kuhl, the action for breach of fiduciary duty
was brought pursuant to section 1132(a)(3)(B), and the recovery sought was a
monetary award from the insurer to compensate the estate for the insurer having
delayed treatment to the insured. Id. at 304. In the present case, Knieriem alleged
breach of fiduciary duty pursuant to section 1132(a)(3)(B), and he sought monetary
recovery from the insurer to compensate the estate for the insurer denying the
requested procedure. The remedy sought in this case is premised on the same theory
as the remedy sought in Kuhl.
Knieriem next argues if Siade were still alive, this action would readily be
available under ERISA and, therefore, his death should not give GHP a free pass. The
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crux of Knieriem’s argument is GHP was unjustly enriched by denying the treatment,
and the remedy is restitution of the funds to Siade’s estate. Knieriem suggests the
district court reached the opposite result by misapplying this court’s holding in Geissal
v. Moore Medical Corp., 338 F.3d 926 (8th Cir. 2003).
In Geissal, the insurer (the Moore Plan) wrongfully terminated Geissal’s health
insurance policy on the basis he was covered by another policy (the TWA Plan). Id.
at 929. After the Moore Plan terminated coverage, the TWA Plan covered the costs
of Geissal’s cancer treatment, paying over $86,000 to health care providers, and
reimbursing Geissal over $6,500 for out-of-pocket expenses. Id. at 929-30. Geissal
incurred approximately $4,400 in non-covered medical expenses. Id. at 930. Geissal
filed a lawsuit against the Moore Plan seeking compensation for past due benefits, as
well as injunctive and equitable relief pursuant to section 1132(a)(1)(B). Id. at 930.
Geissal died, and his wife, as representative of his estate, was substituted as plaintiff.
Id. The estate had no obligation to reimburse the TWA Plan, nor did the TWA Plan
assert claims against the Moore Plan. Id. Nonetheless, the estate sought to recover
the amount of benefit payments paid by the TWA Plan, arguing the Moore Plan would
have been obligated to pay those expenses but for its wrongful termination of
coverage. Id. Geissal claimed the estate was entitled to recover those benefit
payments to prevent the self-funded Moore Plan from being unjustly enriched. Id. at
930-31. The district court denied recovery under section 1132(a)(1)(B) on the basis
the plan beneficiary was deceased. Id. at 931. On appeal, we found section
1132(a)(1)(B) would allow the estate to recover any money benefits due under the
plan before the beneficiary died. Id. at 931 n.1. However, we concluded the language
of the statute, as well as the terms of the Moore Plan, precluded the estate from
recovering medical payments paid by a third party–the TWA Plan. Id. at 932. The
estate had “no claim for legal restitution.” Id.
Relying on Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. at
209, Geissal argued section 1132(a)(1)(B) allowed the estate to recover the benefits
paid by the TWA Plan under a legal restitution theory. Geissal, 338 F.3d at 932. We
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distinguished Knudson, reasoning the Court had not addressed recovery for legal
restitution under section 1132(a)(1)(B). Rather, in Knudson, the Court found legal
restitution was not recoverable under section 1132(a)(3)(B) because it was not
equitable relief. Id. We reasoned that under section 1132(a)(1)(B) the Court similarly
would limit recovery “to a claim in which the plaintiff can ‘show just grounds for
recovering money to pay for some benefit the defendant had received from him.’” Id.
(quoting Knudson, 534 U.S. at 213) (emphasis in original). We concluded Geissal’s
estate was not entitled to recover under a legal restitution theory pursuant to section
1132(a)(1)(B), because the Moore Plan was not unjustly enriched due to benefits
directly bestowed by Geissal or his estate. Id.
Applying our precedent, it is abundantly clear Knieriem seeks a remedy simply
not available under ERISA. Unlike Geissal, Siade never paid or incurred any covered
or potentially covered expenses. Knieriem seeks monetary damages for expenses
GHP would have paid, if Siade had received the transplant. Despite the use of
semantics, Knieriem seeks monetary relief that does not constitute “other appropriate
equitable relief” under section 1132(a)(3)(B). See Bast v. Prudential Ins. Co. of Am.,
150 F.3d 1003, 1010-11 (9th Cir. 1998) (finding the money saved by wrongfully
denying experimental cancer treatment was not “other appropriate equitable relief”
under section 1132(a)(3), because the money did not form the basis of a constructive
trust, and was distinguishable from cases where the money taken from pension plans
by fiduciaries did form the bases of constructive trusts).
B. Surcharge
As a second basis for recovery, Knieriem argues a surcharge is available as an
equitable remedy, providing monetary recovery when a trustee has gained personally
from a wrongful action taken in managing a trust. Knieriem contends this court
similarly awarded an insured the disgorged profits of his insurer in Parke v. First
Reliance Standard Life Insurance Co., 368 F.3d 999 (8th Cir. 2004). Knieriem
misapplies Parke to the present case.
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In Parke, plaintiff’s monthly long-term disability payments were wrongfully
withheld by the insurer. Id. at 1003. One question we addressed on appeal was
whether prejudgment interest was “other appropriate equitable relief” under section
1132(a)(3)(B) in light of Knudson. Id. at 1006-07. We determined the relief sought
was an “accounting for profits,” a limited exception under section 1132(a)(3)(B),
allowing legal relief to disgorge the profits realized by wrongfully withholding
plaintiff’s property. Id. at 1008-09 (citing Knudson, 534 U.S. at 214 n.2). As we
explained in Parke,
An accounting for profits is one of a category of traditionally
restitutionary remedies in equity, and is often invoked in conjunction
with a constructive trust. A constructive trust is imposed when a
defendant has possession of particular funds or property that in good
conscience belong to the plaintiff. The plaintiff must specifically identify
the particular funds or property in order to obtain the constructive trust;
it is not enough that the defendant merely owes the plaintiff some money.
Id. at 1008 (citations omitted) (emphasis added).
Siade did not receive the requested transplant and never incurred any related
medical or hospital expenses, i.e., benefits payable. Consequently, GHP holds no
readily identifiable funds or property belonging to Siade’s estate to form the basis of
a constructive trust. The accounting for profits exception in Parke (interest on
withheld benefits payable) has no application in the present case.
III. CONCLUSION
Merely re-labeling the relief sought as “restitution” or “surcharge” does not
alter the nature of a remedy from monetary to equitable. In the present case, Knieriem
seeks money damages which are unavailable under section 1132(a)(3)(B) of ERISA.
Thus, we affirm.
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