Or Teamster Employers Trust v. Hillsboro Garbage Disposal , 800 F.3d 1151 ( 2015 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
OREGON TEAMSTER EMPLOYERS No. 13-35555
TRUST,
Plaintiff-Appellant, D.C. No.
3:11-cv-01487-
v. ST
HILLSBORO GARBAGE DISPOSAL,
INC.; ROBERT E. HENDERSON; ESTATE OPINION
OF DARROLL JACKSON,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Oregon
Michael H. Simon, District Judge, Presiding
Argued and Submitted
May 8, 2015–Portland, Oregon
Filed September 8, 2015
2 OTET .V HILLSBORO GARBAGE DISPOSAL
Before: William A. Fletcher and Andrew D. Hurwitz,
Circuit Judges, and Michael M. Baylson, * Senior District
Judge.
Opinion by Judge Baylson;
Concurrence by Judge W. Fletcher
SUMMARY **
Employee Retirement Income Security Act
The panel affirmed the district court’s summary
judgment in favor of Hillsboro Garbage Disposal in an
action brought against a subscribing employer by a health
and benefit plan that was governed by the Employee
Retirement Income Security Act.
The plan provided health and welfare benefits to
workers pursuant to a collective bargaining agreement
between a union and the employer, Hillsboro Garbage
Disposal. Non-bargaining unit workers were eligible to
participate in the plan if they were bona fide employees of
Hillsboro Garbage. Hillsboro Garbage, however, made
*
The Honorable Michael M. Baylson, Senior District Judge for the
U.S. District Court for the Eastern District of Pennsylvania, sitting by
designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
OTET V. HILLSBORO GARBAGE DISPOSAL 3
unauthorized plan contributions on behalf of two workers
who were employed by a separate company.
The panel held that the ERISA plan’s common law
claims for breach of contract were preempted by ERISA
because the claims “related to” the plan. Distinguishing
Providence Health Plan v. McDowell, 385 F.3d 1168 (9th
Cir. 2004), which allowed a contract claim to enforce a
reimbursement provision on the basis that plan
interpretation was not required, the panel stated that this
case turned on whether the two workers were eligible plan
participants, and thus required analysis of the ERISA plan
terms. The panel rejected the argument that it must
interpret ERISA to be consistent with the Labor
Management Relations Act and ensure that the plan was
not in violation of the LMRA due to the unauthorized
contributions and benefits payments.
The panel affirmed the district court’s grant of
summary judgment on the plan’s claims for specific
performance and restitution under ERISA § 502(a)(3). The
panel held that these claims were not authorized equitable
claims under ERISA because specific performance is
typically a legal remedy, and the reimbursement provision
of the plan did not amount to an equitable lien by
agreement.
Concurring, Judge W. Fletcher wrote that this case
should be taken en banc to reverse McDowell because
McDowell is contrary to ERISA’s enforcement scheme and
broad preemption clause in allowing a contract claim to
enforce the terms of an ERISA plan.
4 OTET .V HILLSBORO GARBAGE DISPOSAL
COUNSEL
Michael J. Morris (argued) and Linda J. Larkin, Bennett,
Hartman, Morris & Kaplan, LLP, Portland, Oregon, for
Plaintiff-Appellant.
Iris K. Tilley (argued) and Edwin A. Harnden, Barran
Liebman LLP, Portland, Oregon, for Defendants-
Appellants.
OPINION
BAYLSON, District Judge:
Oregon Teamster Employers Trust (“OTET”) appeals
the grant of summary judgment in favor of Defendants
Hillsboro Garbage Disposal, Inc. (“Hillsboro Garbage”),
Robert Henderson (“Henderson”), and the Estate of Darrol
Jackson (“Jackson”). The district court, adopting the
findings of a magistrate judge, granted summary judgment
in favor of Defendants on (1) OTET’s breach of contract
claims because the court found those claims to be
preempted by the Employee Retirement Income Security
Act of 1974, 29 U.S.C. § 1001 et seq. (“ERISA”); and
(2) OTET’s restitution and specific performance claims
because the court concluded that those claims were not
cognizable under ERISA as they sought legal—not
equitable—relief.
The issues presented are:
1. Whether OTET, an Employer Health and
Benefit Plan, governed by ERISA, can
recover damages, on a breach of contract
claim, against a business which received
OTET V. HILLSBORO GARBAGE DISPOSAL 5
health care benefits for two ineligible
employees.
2. Whether OTET’s claims for restitution
and specific performance are permitted.
3. Whether the district court abused its
discretion in refusing to allow OTET to
amend its complaint to allege fraud.
We affirm the district court’s judgment.
I. Facts & Procedural History
OTET is an Employer Health and Benefit Plan
governed by ERISA. OTET provides health and welfare
benefits to the employees whose employers have entered
into collective bargaining agreements with Joint Council
No. 37 of the International Brotherhood of Teamsters,
Chauffeurs, Warehousemen & Helpers of America, and
local union affiliates.
In September 2003, Hillsboro Garbage and Teamsters
Local Union No. 305 (“Union”) entered into a collective
bargaining agreement (“CBA”) which made Hillsboro
Garbage a subscriber to OTET, effective March 1, 2003,
through February 28, 2007. 1 The CBA was renewed in
April 2007 through February 28, 2012.
1
OTET is a self-funded plan which provides health and welfare
benefits to bargaining unit (and, in some cases, non-bargaining unit)
employees. OTET contracts with Regence Blue Cross (“Blue Cross”)
to process and pay claims.
6 OTET .V HILLSBORO GARBAGE DISPOSAL
Under the terms of the Subscription Agreements,
Hillsboro Garbage and the Union agreed to be bound by the
provisions of the Trust Agreement governing OTET, chose
the Health & Welfare Plan F/W (“Plan”) for eligible
employees and their dependents, and agreed that Hillsboro
Garbage would be subject to periodic audits to detect
unauthorized contributions.
The Trust Agreement also authorized OTET’s Trustees
to enter into special agreements with Hillsboro Garbage
under which OTET would provide health and welfare
benefits for the company’s non-bargaining unit employees
(the “NBU Agreements”). The NBU Agreements specify
that only individuals with a bona fide employment
relationship with Hillsboro Garbage are eligible to
participate in OTET benefit plans.
Starting in 2003, OTET received contributions for
health care benefits coverage for Henderson and Jackson,
purportedly as employees of Hillsboro Garbage. In fact,
Henderson and Jackson were not employed by Hillsboro
Garbage, but by a separate company, RonJons Unlimited,
Inc. (“RonJons”), which had common ownership with
Hillsboro Garbage.
In 2006, an audit revealed that Hillsboro Garbage had
made unauthorized contributions on behalf of Henderson
and Jackson. OTET sent Hillsboro Garbage a letter on
August 21, 2006, enclosing a copy of the 2006 audit,
stating that the audit uncovered $70,000 in unauthorized
contributions, and advising Hillsboro Garbage that it had
six months to make a written refund request.
Following the 2006 audit, OTET continued to accept
contributions from Hillsboro on behalf of Henderson and
Jackson and to pay medical claims for their benefit. In
2011, after another audit, OTET removed the two men
OTET V. HILLSBORO GARBAGE DISPOSAL 7
from the plan and filed this lawsuit seeking recovery of
benefits paid in excess of the contributions received from
Hillsboro Garbage on their behalf. Count I of OTET’s
second amended complaint seeks restitution from all
Defendants, Count II seeks specific performance against
Hillsboro Garbage to repay the benefits wrongly paid, and
Counts III and IV assert common law breach of contract
claims against Hillsboro Garbage.
After discovery, OTET moved for partial summary
judgment. The magistrate judge recommended that
OTET’s motion be denied and that the district court instead
grant summary judgment in favor of Defendants. The
magistrate judge concluded that Counts III and IV of
OTET’s second amended complaint, the common law
breach of contract claims, were preempted by ERISA. The
magistrate also concluded that the claims for legal
restitution and specific performance were not cognizable
under ERISA. After supplemental briefing and argument,
the district judge approved the magistrate judge’s
recommendation, granting summary judgment to
Defendants and dismissing the case with prejudice.
II. The District Court Properly Dismissed Counts
III and IV (Common Law Breach of Contract) as
Preempted by ERISA
A. ERISA Preemption
The district court found OTET’s state law claims
preempted by ERISA because they are “premised on the
existence of an ERISA plan, and the existence of the plan is
essential to the claim[s’] survival” and they have a
“genuine impact . . . on a relationship governed by
ERISA”—that between the plan and the employer. See
Providence Health Plan v. McDowell, 385 F.3d 1168, 1172
(9th Cir. 2004). We review de novo the question of
8 OTET .V HILLSBORO GARBAGE DISPOSAL
whether ERISA preempts state law. Carmona v. Carmona,
603 F.3d 1041, 1050 (9th Cir. 2008).
Under 29 U.S.C. § 1144(a), ERISA’s provisions
“supersede any and all State laws insofar as they . . . relate
to any employee benefit plan described in section 1003(a)
of this title and not exempt under section 1003(b) of this
title.” A common law claim “relates to” an ERISA plan “if
it has a connection with or reference to such a plan.”
McDowell, 385 F.3d at 1172 (internal quotation marks
omitted); see N.Y. State Conference of Blue Cross & Blue
Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656
(1995). In determining whether a common law claim has
“reference to” an ERISA plan, “the focus is whether the
claim is premised on the existence of an ERISA plan, and
whether the existence of the plan is essential to the claim’s
survival.” McDowell, 385 F.3d at 1172. In evaluating
whether a claim has a “connection with” an ERISA plan,
we use a “relationship test” that focuses whether the “claim
bears on an ERISA-regulated relationship, e.g., the
relationship between plan and plan member, between plan
and employer, between employer and employee.” Paulsen
v. CNF Inc., 559 F.3d 1061, 1082 (9th Cir. 2009).
OTET’s primary argument is that the district court’s
preemption ruling is contrary to this court’s McDowell
opinion. McDowell was a breach of contract action by a
health insurer against two plan participants who were
injured in an automobile accident, seeking reimbursement
of benefits paid on the participants’ behalf out of a
settlement in a tort action. 385 F.3d at 1170–71. The
insurer alleged the participants breached both the
reimbursement provision of the ERISA plan and separate
agreements in which the participants directed their attorney
to reimburse the insurer out of any third-party recovery. Id.
at 1172. The district court concluded that ERISA
OTET V. HILLSBORO GARBAGE DISPOSAL 9
preempted the action and dismissed. Id. at 1171. We
reversed, holding that the insurer’s “action for breach of
contract does not have the requisite ‘connection with’ or
‘reference to’ an ERISA plan” because the parties “are not
disputing the correctness of the benefits paid,” but rather
the insurer “is simply attempting, through contract law, to
enforce the reimbursement provision[s]” in the plan and
subsequent separate agreements. Id. at 1172.
“Adjudication of its claim does not require interpreting the
plan or dictate any sort of distribution of benefits.” Id.The district court distinguished McDowell, finding that
the key question in this case was the eligibility of
Henderson and Jackson to participate in the OTET plan.
OTET contends McDowell is controlling because
adjudication of its breach of contract claims does not
require an interpretation of the plan or any distribution of
benefits. There is no need to interpret the plan, OTET
argues, because there is no dispute that Henderson and
Jackson were not employees of Hillsboro Garbage and or
that RonJons never entered into a CBA with a labor
organization specified in the plan’s Trust Agreement.
The district court properly rejected this argument.
McDowell did not turn on whether the beneficiaries were
eligible plan participants. Cf. Peralta v. Hispanic Bus.,
Inc., 419 F.3d 1064, 1069 (9th Cir. 2005) (distinguishing
McDowell in a case involving whether an ERISA plan
administrator breached its fiduciary duty by failing to
timely provide notification of plan cancellation because
“interpretation of ERISA law lies at the heart of the
dispute”). Here, however, although analysis of the
employment status of the two individuals and whether
RonJons had entered the CBA is admittedly
straightforward, analysis of the terms of the ERISA plan is
nonetheless required. Moreover, OTET alleged in its
10 OTET .V HILLSBORO GARBAGE DISPOSAL
second amended complaint that Hillsboro Garbage
breached the terms of the ERISA plan—not separate
agreements. See Bui v. Am. Tel. & Tel. Co. Inc., 310 F.3d
1143, 1152 (9th Cir. 2002) (holding ERISA preempted
plaintiff’s breach of contract claims “because the contract
allegedly breached is the ERISA plan itself”).
B. Potential Liability Under the Labor
Management Relations Act
The Labor Management Relations Act (“LMRA”),
29 U.S.C. § 186, bars employers from contributing to a
trust fund on behalf of individuals who are not employees
of the contributing employer. 29 U.S.C. § 186(c)(5); see
also Davidian v. S. Cal. Meat Cutters Union & Food Emps.
Benefit Fund, 859 F.2d 134, 135 (9th Cir. 1988). The
LMRA also prohibits contributions by employers into
employee trust funds made other than in conformity with
the provisions of written agreements detailing the basis on
which those payments are to be made. See Producers
Dairy Delivery Co., Inc. v. W. Conference of Teamsters
Pension Trust Fund, 654 F.2d 625, 627 (9th Cir. 1981).
OTET argues that we must interpret ERISA to be
consistent with the LMRA and ensure that OTET is not in
violation of the LMRA. See Guthart v. White, 263 F.3d
1099, 1103 (9th Cir. 2001) (noting that unless employee
could point to a written agreement providing the basis on
which his employer was to make payments to an ERISA
fund, “it would be illegal for the fund to pay benefits” to
him under the LMRA). 2
2
OTET expressly disclaims any argument that the LMRA preempts
ERISA, and we would reject such an argument had it been advanced.
OTET V. HILLSBORO GARBAGE DISPOSAL 11
OTET’s assertion that the district court’s finding of
preemption would subject it to LMRA liability is entirely
speculative. “The dominant purpose of [§] 302 is to
prevent employers from tampering with the loyalty of
union officials and to prevent union officials from extorting
tribute from employers.” Turner v. Local Union No. 302,
604 F.2d 1219, 1227 (9th Cir. 1979). Congress intended
§ 302 to target practices harmful to the collective
bargaining process, including “bribery by employers during
collective bargaining, extortion by employee
representatives, and abuse of power by union officers who
have sole control over welfare funds.” Toyota Landscaping
Co., Inc. v. S. Cal. Dist. Council of Laborers, 11 F.3d 114,
117–18 (9th Cir. 1993); see also Maxwell v. Lucky Constr.
Co., Inc., 710 F.2d 1395, 1398 (9th Cir. 1983) (“The
congressional objective in enacting § 302 was to inhibit
corrupt practices in the administration of employee welfare
funds established through the collective bargaining
process.”). These objectives are plainly not implicated in
this case. 3
Moreover, to the extent that there is an LMRA
violation, OTET bears at least some responsibility. OTET
learned in 2006 that Hillsboro Garbage had allowed
See Saridakis v. United Airlines, 166 F.3d 1272, 1276 (9th Cir. 1999)
(“The preemption doctrine per se does not govern questions relating to
the compatibility of two or more federal laws.”).
3
Although we indicated in Guthart that an ERISA trust’s payments
to an employee would be unlawful under the LMRA absent a written
agreement, that case did not address “the availability of remedies
under, or in light of” ERISA. 263 F.3d at 1102 n.3.
12 OTET .V HILLSBORO GARBAGE DISPOSAL
Henderson and Jackson to enroll and had made
contributions on their behalf, but OTET took no action to
address the issue until after a second audit in 2010. 4
III. The District Court Properly Dismissed Counts I
and II
A. Restitution and Specific Performance Under
ERISA § 502(a)(3)
Section 502(a)(3) of ERISA authorizes civil suits “by a
participant, beneficiary, or fiduciary (A) to enjoin any act
or practice which violates . . . 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 . . . the
terms of the plan.” 29 U.S.C. § 1132(a)(3).
Great-West Life & Annuity Insurance Co. v. Knudson,
534 U.S. 204 (2002), considered the scope of relief
available under § 502(a)(3). After a car accident left
Knudson quadriplegic, Great-West paid the majority of her
medical expenses under an ERISA plan that contained a
reimbursement provision giving the plan “‘a first lien upon
any recovery, whether by settlement, judgment or
otherwise,’ that the beneficiary receives from the third
party” and made the beneficiary “personally liable to [the
Plan] . . . up to the amount of the first lien” for failure to
4
To the extent that OTET complains that a finding of preemption
would leave it without a remedy, the Supreme Court has made clear
that ERISA preemption is appropriate even where ERISA would not
provide a remedy for a state law complaint. See Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41, 54 (1987); Wise v. Verizon Commc’ns, Inc.,
600 F.3d 1180, 1190–91 (9th Cir. 2010).
OTET V. HILLSBORO GARBAGE DISPOSAL 13
reimburse expenses. Id. at 207 (alterations in original).
Knudson later received $650,000 in a settlement. Id. The
settlement allocated the majority of the funds to attorneys’
fees and a special needs trust, but only the “portion of the
settlement attributable to past medical expenses”—
$13,828.70—to reimburse the plan. Id. at 207–08. Great-
West sued to recover the full value of the benefits it paid.
Id. at 208–09.
The Supreme Court rejected this claim. The Court
explained that only “those categories of relief that were
typically available in equity” are permitted under
§ 502(a)(3), but Great-West sought, “in essence, to impose
personal liability on respondents for a contractual
obligation to pay money—relief that was not typically
available in equity” but only in an action at law. Id. at 210
(internal quotation marks omitted). The Court likewise
rejected Great-West’s characterization of its claim as an
equitable claim for restitution. See id. at 218. Because the
settlement funds Great-West sought were not in Knudson’s
possession, but instead had been distributed to a trust and to
her attorney, the Court found “[t]he basis for petitioners’
claim” to be, at bottom, “that petitioners are contractually
entitled to some funds for benefits that they conferred”;
what they really sought was “imposition of personal
liability for the benefits that they conferred upon
respondents.” Id. at 214.
In Sereboff v. Mid Atlantic Medical Services, Inc., the
Court “consider[ed] again the circumstances in which a
fiduciary under [ERISA] may sue a beneficiary for
reimbursement of medical expenses paid by the ERISA
plan, when the beneficiary has recovered for its injuries
from a third party.” 547 U.S. 356, 359 (2006). The
Sereboffs had received a settlement stemming from a car
accident. Id. at 360. They failed to reimburse Mid
14 OTET .V HILLSBORO GARBAGE DISPOSAL
Atlantic, their health insurer, for medical expenses it had
paid, but, pursuant to stipulation, put that amount in an
investment account while the parties litigated their dispute.
The Supreme Court held, in contrast to Knudson, that
the relief “Mid Atlantic sought” was equitable because it
was directed at “specifically identifiable funds . . . within
the possession and control of the Sereboffs—that portion of
the tort settlement due Mid Atlantic under the terms of the
ERISA plan, set aside and preserved [in the Sereboffs’]
investment accounts.” Id. at 362–63 (second alteration in
original) (internal quotation marks omitted).
The Court characterized Mid Atlantic’s claim as
indistinguishable from an “equitable lien by agreement,”
which arises where two parties “contract to convey a
specific object even before it is acquired,” making the
defendant a trustee over the property after he or she obtains
it from a third party. Id. at 363–64 (internal quotation
marks omitted). The Court thus found Mid Atlantic’s claim
against the Sereboffs viable because it was based on a plan
provision that “specifically identified a particular fund,
distinct from the Sereboffs’ general assets,” as well as “a
particular share of that fund to which Mid Atlantic was
entitled.” 5 Id. at 364.
5
US Airways, Inc. v. McCutchen, 133 S. Ct. 1537 (2013), the most
recent case in which the Supreme Court interpreted § 502(a)(3), is not
relevant here because Defendants have not asserted any equitable
defenses.
OTET V. HILLSBORO GARBAGE DISPOSAL 15
B. Recent Ninth Circuit Precedent on Restitution
and Specific Performance Under ERISA § 502(a)(3)
Does Not Support OTET’s Argument
In Bilyeu v. Morgan Stanley Long Term Disability Plan,
we vacated a district court judgment reimbursing a plan
administrator’s overpayments of long-term disability
benefits to a beneficiary because it did not constitute
equitable relief under § 502(a)(3). 683 F.3d 1083, 1086
(9th Cir. 2012). The plan required Bilyeu to “reimburse
Unum [the plan administrator] for any overpayment arising
from her receipt of disability payments from any other
source.” Id. at 1087. After Bilyeu contested termination of
her long-term disability benefits, Unum filed a
counterclaim seeking reimbursement of allegedly overpaid
benefits. Id. at 1087–88.
The district court awarded reimbursement, id. at 1088,
but we reversed, holding that the district court had
improperly awarded legal relief unavailable under ERISA,
id. at 1096. We explained that Sereboff “establish[ed] at
least three criteria for securing an equitable lien by
agreement in an ERISA action”:
First, there must be a promise by the
beneficiary to reimburse the fiduciary for
benefits paid under the plan in the event of a
recovery from a third party. Second, the
reimbursement agreement must specifically
identify a particular fund, distinct from the
beneficiary’s general assets, from which the
fiduciary will be reimbursed. Third, the
funds specifically identified by the fiduciary
must be within the possession and control of
the beneficiary.
16 OTET .V HILLSBORO GARBAGE DISPOSAL
Id. at 1092–93 (alterations, citations, and internal quotation
marks omitted).
Unum’s claim met the first element because Bilyeu had
promised to reimburse the plan for any overpayment
resulting from Social Security benefits she received. Id. at
1093. But we found Unum’s argument that the claim met
the second element “problematic” because the “overpaid
disability benefits are not a particular fund, but a specific
amount of money encompassed within a particular fund—
the long-term disability benefits Unum paid to Bilyeu.” Id.And, even if the overpaid benefits qualified as a “particular
fund,” Unum had not established the funds were within
Bilyeu’s “possession or control” because “Bilyeu ha[d]
spent the overpaid benefits.” Id. at 1094. Moreover, we
held that an equitable lien cannot “be enforced against
general assets when the specifically identified property has
been dissipated.” Id. at 1095. “Nothing in Sereboff
suggests that a fiduciary can enforce an equitable lien
against a beneficiary’s general assets when specifically
identified funds are no longer in a beneficiary’s
possession.” Id.In McDowell, we evaluated a claim for reimbursement
of medical expenses pursuant to an ERISA plan’s
reimbursement provision after the beneficiary received a
settlement relating to injuries from an automobile accident.
385 F.3d at 1170–71. Although the plan argued that relief
was authorized under § 502(a)(3) because it had “term[ed
its claim] an action in equity for specific performance,” we
affirmed the district court’s dismissal of the plan’s claim
for failure to state a claim. Id. at 1174. The plan was
“simply attempting to enforce a contractual obligation for
repayment,” and “such monetary reimbursement constitutes
legal rather than equitable relief,” and not an allowable
“constructive trust or equitable lien on particular property.”
OTET V. HILLSBORO GARBAGE DISPOSAL 17
Id. (internal quotation marks omitted); see also Honolulu
Joint Apprenticeship & Training Comm. of United Ass’n
Local Union No. 675 v. Foster, 332 F.3d 1234, 1236–38
(9th Cir. 2003) (holding that a union could not sue a
defendant who obtained a scholarship loan under
§ 502(a)(3) for unjust enrichment after the defendant went
to work for a non-union employer and failed to pay back
the loan, contrary to the scholarship agreement).
C. Analysis
1. Specific Performance
In support of its specific performance claim, OTET
relies on the statement in Sereboff that “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.” 547 U.S. at 363.
OTET also points out that the Supreme Court has, outside
the ERISA context, explained that specific performance of
reimbursement obligations “attempt[s] to give the plaintiff
the very thing to which he was entitled,” and is therefore
equitable relief. Bowen v. Massachusetts, 487 U.S. 879,
895 (1988) (internal quotation marks omitted).
But OTET’s claim for “specific performance of the
reimbursement provisions of the plan” is squarely
foreclosed by Knudson and McDowell. Knudson held that
specific performance is typically a legal remedy unless it is
“sought to prevent future losses that either were
incalculable or would be greater than the sum awarded.”
534 U.S. at 211. The exception Sereboff carved out to this
rule was for restitution sought from a particular fund (or
“res”), not specific performance. Sereboff, 547 U.S. at362–63.
18 OTET .V HILLSBORO GARBAGE DISPOSAL
2. Restitution
OTET also characterizes the reimbursement provision
of the plan as an equitable lien by agreement, allowing for
recovery under Sereboff. See id. at 363–65. But OTET
does not seek recovery from an identifiable res, as Sereboff
requires. See id. at 363 (requiring that equitable restitution
be sought from a “particular fund”). As in Honolulu Joint
Apprenticeship & Training Committee of United Ass’n
Local Union No. 675 v. Foster, OTET wishes to recover
from the general assets of Defendants’ funds that were
never “actually transferred” to them—in this case funds
paid directly to medical providers. 332 F.3d at 1238.
Moreover, the plan’s reimbursement provision “specifically
provides for the remedies sought,” which “reinforces the
conclusion that this is essentially an action at law to remedy
. . . breach of a legal obligation.” Id.OTET likewise cannot meet the “three criteria for
securing an equitable lien by agreement in an ERISA
action” that we have interpreted Sereboff to require. See
Bilyeu, 683 F.3d at 1092–93. Although the plan contained
“a promise by the beneficiary to reimburse” OTET, it did
not “specifically identify a particular fund, distinct from the
beneficiary’s general assets, from which the fiduciary will
be reimbursed”—that is, there is no res from which OTET
seeks recovery. See id. (alterations and internal quotation
marks omitted). Moreover, even if the agreement
specifically identified funds from which OTET could
recover, the amounts it paid for the individual defendants’
OTET V. HILLSBORO GARBAGE DISPOSAL 19
medical expenses are not in their “possession and control.” 6
See id. (internal quotation marks omitted).
IV. The District Court Did Not Abuse Its Discretion
in Denying OTET the Right to File a Third Amended
Complaint
OTET contends in its appeal that the district court
abused its discretion in denying OTET leave to amend its
complaint to allege fraud. We review the district court’s
denial of leave to amend for abuse of discretion. Sharkey v.
O’Neal, 778 F.3d 767, 774 (9th Cir. 2015).
OTET included a fraud count in its first amended
complaint but voluntarily abandoned that claim when it
filed the second amended complaint because it “believed”
its “breach of contract claims were not preempted,” and
thus the fraud claim “was superfluous.” Because OTET
was given two opportunities to amend its complaint and
unilaterally decided to eliminate the fraud count, it cannot
6
OTET’s argument that it is entitled to restitution of “ill-gotten
gains” is similarly unavailing. Even if it were possible to obtain
restitution of “ill-gotten gains” without identifying a specific res, which
we doubt, it has not shown the funds were obtained through “fraud or
wrongdoing.” Cement Masons Health & Welfare Trust Fund for N.
Cal. v. Stone, 197 F.3d 1003, 1007 (9th Cir. 1999) (same). OTET
voluntarily abandoned its fraud claim and concedes it knew Henderson
and Jackson were not employees of Hillsboro Garbage for the entire
time the benefits it paid on their behalf exceeded contributions made on
their behalf. Moreover, a beneficiary’s contractual obligation to
reimburse an ERISA trust “does not make money previously paid by
[the trust] ‘ill-gotten gains’ subject to restitution within the meaning of
§ 1132(a)(3).” Id.
20 OTET .V HILLSBORO GARBAGE DISPOSAL
establish abuse of discretion in denying the motion to
amend, as it does not contend that it acquired any new
knowledge or that there was any misconduct by Defendants
that caused it to omit the fraud claim from the second
amended complaint. See Royal Ins. Co. of Am. v. Sw.
Marine, 194 F.3d 1009, 1017 (9th Cir. 1999) (finding
district court did not abuse its discretion denying leave to
amend when the plaintiff had twice been given the
opportunity to amend and the additional proposed
amendment “did nothing more than reassert an old theory
of liability based on previously-known facts”).
V. Conclusion
The judgment of the district court is AFFIRMED.
W. FLETCHER, Circuit Judge, concurring:
Oregon Teamster Employers Trust (“OTET”)’s primary
argument on appeal is that the district court erred in
concluding that its claim for breach of contract was
preempted by ERISA. In particular, OTET argues that, like
the trust in Providence Health Plan v. McDowell, 385 F.3d
1168 (9th Cir. 2004), it is merely “attempting, through
contract law,” to enforce a contractual provision that is
incorporated into the ERISA plan. Id. at 1172. The panel
opinion distinguishes McDowell on the ground that here,
unlike in McDowell, “analysis of the terms of the ERISA
plan is . . . required.” Op. at 9. I agree that McDowell can
be distinguished from this case, but the distinction is
narrow and unconvincing. I think the better course would
be to take this case en banc to reverse McDowell.
McDowell was wrong when it was decided and is wrong
today.
OTET V. HILLSBORO GARBAGE DISPOSAL 21
As the panel opinion observes, ERISA has a broad
preemption clause, “one of the broadest preemption clauses
ever enacted by Congress.” Security Life Ins. Co. of
America v. Meyling, 146 F.3d 1184, 1188 (9th Cir. 1998)
(quoting Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1439
(9th Cir. 1990)). ERISA “supersede[s] any and all State
laws insofar as they may now or hereafter relate to any
employee benefit plan.” 29 U.S.C. § 1144(a). The clause
is broad because ERISA contains within itself a “carefully
crafted and detailed enforcement scheme” that specifies in
exacting detail just how an ERISA plan may be enforced.
Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S.
204, 209 (2002) (quoting Mertens v. Hewitt Assocs.,
508 U.S. 248, 254 (1993)); see 29 U.S.C. § 1132(a). Under
the terms of that scheme, a plan fiduciary like OTET
cannot sue for damages, even when it believes (as OTET
does) that it has distributed benefits in violation of the plan.
See Bilyeu v. Morgan Stanley Long Term Disability Plan,
683 F.3d 1083, 1091 (9th Cir. 2012).
In McDowell, we invented an exception to this rule that
circumvents both the enforcement scheme Congress created
and the accompanying preemption clause. The plaintiff in
McDowell was an ERISA health plan fiduciary that had
paid over $30,000 in medical expenses arising out of a car
accident between two plan participants and a third party.
385 F.3d at 1170. The plan contained a reimbursement
provision that required plan participants to remit the
proceeds of any settlement to the fiduciary “up to the
amount of benefits paid.” Id. When the participants, the
McDowells, received a settlement from the driver of the
other vehicle involved in the accident, the plan fiduciary
sought to enforce the reimbursement provision. Id. at 1171.
Because ERISA does not permit a plan fiduciary to sue for
damages, the fiduciary filed a state-law breach of contract
22 OTET .V HILLSBORO GARBAGE DISPOSAL
suit, seeking damages for breach of the reimbursement
clause of the plan. Id.It is clear that a plan fiduciary has no remedy under
ERISA in such a situation. An ERISA fiduciary cannot
bring a damages suit to enforce an ERISA plan; it can sue
only for equitable relief. See 29 U.S.C. § 1132(a)(3);
Bilyeu, 683 F.3d at 1091. Nor can such a fiduciary bring a
state-law breach of contract suit to enforce the terms of the
ERISA plan, because such a suit would clearly “relate to
an[] employee benefit plan” and thus be preempted.
29 U.S.C. § 1144(a). But the panel in McDowell reached
the opposite conclusion. It held that, because enforcing the
reimbursement provision “does not require interpreting the
plan or dictat[ing] any sort of distribution of benefits,” the
fiduciary’s contract suit did not “relate to” the plan and was
not preempted. McDowell, 385 F.3d at 1172. The
fiduciary, the panel explained, was “simply attempting,
through contract law, to enforce the reimbursement
provision.” Id.As then-Judge Thomas explained in his dissent from
our failure to rehear McDowell en banc, the panel’s
conclusion was clearly wrong. See id. at 1175 (Thomas, J.,
dissenting from the denial of rehearing en banc). The
fiduciary in McDowell was not merely trying to use state
contract law to enforce a term in an unrelated contract. It
was, in the panel’s own words, “attempting, through
contract law, to enforce the reimbursement provision . . .
incorporated into the[] ERISA plan.” McDowell, 385 F.3d
at 1172 (emphasis added). I do not see how it is possible to
conclude, as the McDowell panel did, that a suit to enforce
the terms of an ERISA plan does not “relate to” an ERISA
plan.
OTET V. HILLSBORO GARBAGE DISPOSAL 23
McDowell and this case can be distinguished in two
ways, but neither finds significant support in ERISA. The
result in McDowell depends on the panel’s claim that
“[a]djudication of [the fiduciary’s] claim does not require
interpreting the plan or dictate any sort of distribution of
benefits.” Id. In this case, by contrast, as the panel opinion
explains, OTET’s breach of contract claim both requires
interpreting the plan and turns on a provision that dictates
the distribution of benefits. See Op. at 9. But the first
distinction is entirely illusory, and the second is a
distinction without a difference.
First, while it is true that OTET’s contract claim
requires interpreting the terms of the ERISA plan, the
fiduciary’s contract claim in McDowell did, too. The thrust
of the fiduciary’s claim in McDowell was that the ERISA
plan required participants to remit “the proceeds of any
settlement” that they obtained from third parties, and that
the McDowells, by refusing to do so, had breached the
plain terms of the plan. 385 F.3d at 1170. To adjudicate
the fiduciary’s claim, the district court would have been
required to determine whether the withheld funds were, in
fact, “proceeds” under the meaning of the ERISA plan. No
one doubted that the funds were “proceeds,” just as no one
doubts here that Henderson and Jackson were not
employees. As the panel opinion observes, the fact that an
interpretive exercise is de minimus does not mean that
interpretation is not required. It is true, in other words, that
OTET’s contract claim requires “interpreting the plan.” Id.
at 1172. But the panel in McDowell was wrong to state that
the contract claim in that case did not also require
“interpreting the plan.”
The second distinction between this case and McDowell
is hardly more convincing. The McDowell panel concluded
that the reimbursement claim in that case was not
24 OTET .V HILLSBORO GARBAGE DISPOSAL
preempted because the fiduciary was not attempting to
enforce a provision that would “dictate any sort of
distribution of benefits.” Id. at 1172. Here, by contrast,
OTET is trying to enforce a provision that does implicate
the payment of benefits. But I fail to see why this is a
meaningful difference. It should not matter, if a litigant is
attempting to enforce a provision in an employee benefits
plan, whether the provision in question governs payments
made from the trust to the participant (i.e., a benefits
provision) or payments made from the participant to the
trust (i.e., a reimbursement provision). Both are parts of
the contract between the two parties. By arbitrarily
deciding that a reimbursement provision may be enforced
through a breach of contract damages suit, whereas a
benefits provision may not, McDowell ignores the Supreme
Court’s repeated instructions that we may not discard the
explicit terms of an ERISA plan. See U.S. Airways, Inc. v.
McCutchen, 133 S. Ct. 1537, 1548 (2013) (“The plan, in
short, is at the center of ERISA.”).
As Judge Thomas’s dissent explained, the rule
McDowell establishes is deeply problematic. Under
McDowell, “insurers may sue plan participants for
reimbursement based on provisions in the insurance
contract, but . . . plan participants cannot file suits or
counter-claims[] against insurers for breach of contract or
bad faith in claim administration under the contract.”
McDowell, 385 F.3d at 1176 (Thomas, J., dissenting from
the denial of rehearing en banc). That is, while plan
fiduciaries may bring state-law claims against plan
participants to enforce their rights under an ERISA plan (at
least if they seek to enforce a reimbursement provision),
plan participants may not bring state-law claims against
plan fiduciaries to enforce their contractual rights under the
same plan. “The impact of this decision is to provide a
special exemption for one party while handcuffing the
OTET V. HILLSBORO GARBAGE DISPOSAL 25
other.” Id. at 1177. I do not believe that Congress intended
this “harsh and anomalous” result. Id. at 1176.
I concur in the panel’s opinion because I agree that
McDowell is narrowly distinguishable (if unconvincingly)
from this case, and because we must distinguish McDowell
if McDowell remains the law and we are to reach the
correct result in this case. But the underlying reality is that
McDowell was wrongly decided. We should take the
opportunity to rehear this case en banc and overrule
McDowell.