Great-West Life and Annuity Ins. v. Knudson - Oral Argument
Transcript:
Argument of James F. Jorden
Chief Justice Rehnquist: We'll hear argument next in No. 99-1786, Great-West Life & Annuity Insurance Company v. Janette Knudson.
Mr. Jorden.
Mr. Jorden: Mr. Chief Justice, and may it please the Court: Petitioners' claim for injunctive and declaratory relief to enforce the terms of the reimbursement clause in the benefit plan at issue in this case falls squarely within the language of ERISA, section 502(a)(3)(A), which appears in full text at page 13 of our brief, which provides for a civil action by a fiduciary to enjoin any act or practice which violates the terms of the plan.
In its first amended complaint, Great-West sought injunctive and declaratory relief prior to the time any of the funds were disbursed in this matter in the State court proceeding.
It sought injunctive relief and other appropriate equitable relief to enforce the terms of the employee benefit plan.
Justice Scalia: Now, you say to enjoy any act or... do you think that includes to enjoin your refusing to pay me money that you owe me?
Because it doesn't just say to enjoin.
It says, to enjoin any act or practice, or (B) to obtain other... other... appropriate equitable relief.
So, I... you know, I take that to mean an injunction that is a normal equitable injunction, an injunction... an injunction that is equitable relief.
And... and that puts the burden on you to... to show that refusing to pay me money that you owe me can be enjoined in equity, which I don't think it can.
Mr. Jorden: Well, Your Honor, we believe that the language and the structure and the purpose of ERISA support the proposition that section 502(a)(3)(A), specifically in this case (a)(3)(A), to enjoin the Knudsons from disbursing funds as to which they had power to determine--
Justice Scalia: Well, if you want to talk about purpose, I frankly don't see why it is in accord with the purpose to limit the relief to equitable relief.
Mr. Jorden: --Well, Your Honor, we believe it is equitable relief.
Justice Scalia: You know, if the only way to get the relief is at law, the purpose of the act would... would allow you to get relief at... at law.
But... but the act chose not to go that far.
It just says, you know, to enjoin any act or to obtain other appropriate equitable relief.
So, you don't think the injunction portion, to enjoin any act or practice, refers to normal equitable injunction.
It could be... it's a type of injunction that would not have been available in equity.
Mr. Jorden: Well, Your Honor, two things.
First, I believe in this case on these facts the injunction was a typical injunction.
Prior to the time actions were taken by the Knudsons to disburse any of the funds from... from Hyundai, an injunction was sought against them to prevent them from disbursing those funds until the Federal claim under 502(a)(3)--
Justice Breyer: Why isn't that clearly wrong?
I mean, if you have an adequate remedy at law, I don't think you can issue an injunction.
What's wrong with the perfectly adequate remedy, that you go bring a suit under State law?
You attach the asset, and if you win, you get the money.
What's inadequate about that?
Mr. Jorden: --Two points on that, Your Honor.
First... first is that if you're assuming that there's an adequate remedy at law--
Justice Breyer: I didn't assume it.
I want you... I say why isn't it an adequate remedy at law.
And if it is an adequate remedy at law, why isn't that the end of this case?
Mr. Jorden: --Well, one would have to presume that we were seeking money damages in this case.
Justice Breyer: You could go into a court of equity in the year 1750 where they really knew equity--
Unknown Speaker: [Laughter]
Justice Breyer: --and I guess that they would have said, I'm not going to issue you the injunction that you happened to get here because you have an adequate remedy at law.
And... and as I read this, I can't get over in my mind that there is an adequate remedy at law.
That's why I asked you the question.
I'm trying to get your answer.
Mr. Jorden: In fact, Your Honor, the concept of a constructive trust, which is... which is employed by many of the lower courts, the courts of appeals, to enforce these reimbursement causes--
Justice Breyer: Well, I know many constructive... I'm going to stop you because... right where you're going.
I've found many cases where you impose a constructive trust on funds that go out of the trust and you trace those funds.
But I can't find the case... and you may be able to get me one... where you impose a constructive trust on money that never originated from a trust that has nothing to do with this.
Now, maybe if you... so, in your answer right now, maybe you can cite me that case.
Mr. Jorden: --Judge Posner... Judge Posner in Health Cost Controls, Your Honor, v. Washington held that a constructive trust was a proper remedy in this context.
And indeed, at common law, a... in imposing a constructive trust, courts of equity decided... concluded, because after all, a constructive trust was essentially imploding legal remedies because the person attempting to... to impose the constructive trust did not have legal title to the property, therefore courts of equity had to step in and impose an equitable remedy.
Chief Justice Rehnquist: What you... what you sought here, Mr. Jorden, was an injunction, I take it.
Mr. Jorden: That is correct, Your Honor, and that is precisely within the language--
Chief Justice Rehnquist: Yes, and I want to ask you some detail about the injunction that was granted.
Was it simply an injunction that required the respondent here to hold onto the funds, or was it an... an injunction against their refusing to pay the funds to you?
Mr. Jorden: --We sought an... an injunction at several levels, Your Honor.
Chief Justice Rehnquist: Yes.
Which one was finally issued?
Mr. Jorden: None, Your Honor.
Chief Justice Rehnquist: Well--
Mr. Jorden: No injunction was issued.
No injunction was issued.
The injunction was denied by the district court.
Justice O'Connor: --And... excuse me.
Chief Justice Rehnquist: And what... what were the terms of the injunction which you sought?
Mr. Jorden: We sought an injunction either to... for the Federal court to enjoin the State court proceeding from... from the second... from enforcing that settlement or to enjoin the Knudsons, the respondents in this case, from disbursing the funds that were ultimately paid out in that settlement or from directing parties who received those funds from disbursing those funds.
Chief Justice Rehnquist: But you didn't seek an injunction against them for refusing to pay you the funds?
Mr. Jorden: Well, as a part of the mandatory injunction, the language of the mandatory injunction that was sought, Your Honor, was to pay the plan the $411,000 that the Knudsons, unjustly enriched, owed back to the plan.
Chief Justice Rehnquist: Well, supposing that you have a claim against somebody for $1,000 because you painted their house, could you go into court and get an injunction against them refusing to pay the claim to you?
Mr. Jorden: Well, Your Honor, the concept of specific performance for the payment... for the enforcement of an obligation is definitely an equitable concept.
And as this Court in Bowen determined, when you are seeking to enforce against someone that they... that they carry out the very obligation that, either under a statute or under the terms of a plan, they're obliged to carry out, as was the case in Bowen, the fact that money might ultimately be paid does not make that money damages.
That's still specific relief.
Justice Souter: Okay.
That doesn't... that doesn't rule out equity.
But take the case... I was going to ask you a question similar to the Chief Justice's.
Let's assume someone has signed a promissory note, and on the date the promissory note becomes due, the individual is entitled to an inheritance under a probate court decree.
Would equity grant an injunction at the behest of the noteholder against using the inheritance for any purpose other than paying the note?
I would have thought not.
And that seems to be very similar to the situation that you're in here.
Mr. Jorden: It is not clear to me if equity would have done that, Your Honor.
But I will say this.
If Congress decided in 502(a)(3) to permit fiduciaries to enforce the terms of a plan, they... they cited in 502(a)(3)(A) the authority to seek injunctions to enforce the terms of the plan.
It is clear that at common law injunctions were equitable in nature.
The fact that in a later portion of 502(a)(3) it refers to other appropriate equitable relief, it seems to us, simply reinforces the notion that fiduciaries... first of all, fiduciaries have an obligation--
Justice Souter: So, you're, in effect, saying that (B)... the reference to equity in (B) does not limit the breadth of the authority in (A).
That's your real argument, isn't it?
Mr. Jorden: --That's part of our argument, Your Honor.
It is absolutely.
Section 404(a) of ERISA obligates fiduciaries to enforce the terms of the plan.
It's one of their obligations.
Justice Kennedy: And is... is that--
Mr. Jorden: It's hard to--
Justice Kennedy: --Is that argument based on the assumption that if a legislature increases the injunctive authority of a court by statute, that injunctive authority is still equitable?
Mr. Jorden: --Your Honor, since I understand--
Justice Kennedy: If you think it would... I think you would want to say--
Mr. Jorden: --that the Congress cannot... cannot simply grant injunctive authority and call it equitable.
However, it is quite clear--
Justice Kennedy: --Yes, but--
Mr. Jorden: --that enforcing the terms of a trust are equitable.
Justice Kennedy: --I... I thought you would answer yes because it seems to me that helps you.
I... I--
Mr. Jorden: Well, I think--
Justice Kennedy: --I would assume that a legislature, if it's a State court... or the Congress, if it's a Federal court... can say the injunctive power extends beyond what was traditionally equity to A, B, and C and that you could still call it fairly equitable.
Mr. Jorden: --Oh, yes, Your Honor.
That is true.
Absolutely.
Justice Kennedy: And... and in this case it was in conjunction with declaratory relief I thought.
Have we ever said that declaratory relief is equitable or--
Mr. Jorden: Is equitable in nature?
I don't know, Your Honor.
Justice Ginsburg: --Isn't it clear that declaratory relief is neuter?
That is, you can have a declaratory relief, I... X owes Y X amount of money.
That's the declaration.
A declaratory judgment can be either, depending upon what else you ask for.
Mr. Jorden: Well--
Justice Ginsburg: What else you could ask for.
Mr. Jorden: --That's correct, Your Honor.
A declaratory relief can be both.
The declaratory relief here clearly would be equitable in nature because it's enforcing the terms of a plan.
The Congress--
Justice Ginsburg: You talk about injunction and specific performance.
The one word that I haven't heard from you yet... and I'm surprised I haven't... is restitution.
Mr. Jorden: --Yes, Your Honor.
Justice Ginsburg: That this is what you're seeking is to get back, to recoup what's owed the plan from this larger pot.
Mr. Jorden: We are seeking restitution, which is clearly an equitable remedy, which was recognized by this Court's decision in Mertens as an equitable remedy and... and reconfirmed in the more recent decision--
Justice O'Connor: Mr. Jorden, may I ask--
Mr. Jorden: --of Harris Trust.
Justice O'Connor: --a question not quite along these lines of whether you properly sought an injunction, but acknowledging that you did seek an injunction and it was refused?
And as I understand it, the Federal court, the district court, refused in part because the petitioner, Great-West, said that it only had a right to that part of the settlement allocated to past medical expenses and that only $13,828 was allocated to past medical expenses.
That was part of the reasoning in the denial.
Mr. Jorden: That is correct, Your Honor.
Justice O'Connor: And... and as I understand it, Great-West did not appeal from that.
I mean, it just... you've accepted that apparently.
Mr. Jorden: No, Your Honor.
Great-West--
Justice O'Connor: There was no appeal, was there?
Mr. Jorden: --Yes, Your Honor.
There was... there was a... that case, the pending case... a summary judgment motion was filed by Great-West seeking the Federal court, notwithstanding the judgment in the State court... of course, Great-West was not a party to the State court proceeding, Your Honor.
The Federal court proceeding... the summary judgment motion was filed seeking the reimbursement claim, the restitution amount.
The district court denied that, and that case was appealed to the Ninth Circuit.
The Ninth Circuit said we don't have jurisdiction because you're seeking money.
And... and our position is, first, we were seeking an injunction.
That gave the Federal district court jurisdiction.
That gave... that gave a cause of action which they could consider under 502(a)(3)(A).
And beyond that, we're seeking restitution for the balance of the money that is owed the plan based on the unjust enrichment of the--
Justice O'Connor: Why was it that Great-West didn't intervene in the State suit?
Certainly it knew about it.
Mr. Jorden: --Yes, it did.
Justice O'Connor: Or try to subrogate the claims some way?
Mr. Jorden: Well, that goes to the question of whether Great-West... Great-West had no obligation to intervene.
In... in some cases, in fact, in Jefferson... Pilot v. Krafka, which is... which appears at page 29 of our... of our brief, in the footnote 11... State courts have no jurisdiction to construe the terms of an ERISA plan except under section 502(a)(1)(B) of ERISA which allows a participant to bring a claim for benefits.
Now, if the participant had wanted, as the Court-appointed amicus brief argues that this should have all been decided in one court... if the participant had wanted to have this decided in State court, they could have brought Great-West in by alleging a claim under 502(a)(1)(B).
Now, the State court would have had concurrent jurisdiction.
That is the only place in ERISA which gives State courts jurisdiction to construe the terms of a plan.
Bearing that in mind, Justice O'Connor, if Great-West were to intervene, it would be asking the State court to construe the terms of the plan to determine the status of its restitution rights.
Justice Stevens: May I just interrupt you?
I'm not quite clear on that.
Why do you have to construe the plan?
It seems to me the plan is perfectly clear.
You're enforcing the plan.
You're not construing it.
Mr. Jorden: Well, I think, Your Honor, if you look at the... at the district court's decision, which... excuse me... the State court decision, joint appendix 143, the State court makes very clear that it is in the process of making its decision reviewing... it calls it the health insurance policy.
It's not really that... reviewing the terms of the plan and construing the terms of the plan for the purpose of determining what's the appropriate restitution, what's the appropriate reimbursement.
Our position is the State court had no jurisdiction to do that unless they were doing so under a claim brought by the respondents under 502(a)(1)(B), in which case, of course, we could have removed that to Federal court.
Not having done so, we also don't have a right to go into State court and ask the State court to construe that.
Now, one of the reasons why 502(a)(3) has to give us a right to enforce the terms of the plan is because we know the beneficiary has a right to do that.
Under 502(a)(1)(B), it can go into State court or Federal court and enforce the terms of a plan, including to get benefits and money.
Second, we ought to be able to go into a Federal court and enforce the terms of the plan.
And the fact that we get money shouldn't preclude us from doing that.
And finally, Congress requires us to go in and enforce the terms of a plan under 404.
And indeed, courts have uniformly said we're entitled to do that.
For example... a very clear contract case... if an employer fails to make the contributions to a plan, where is the fiduciary going to get the authority to go and sue the employer?
Under 502(a)(3)(A).
That is where they go.
So, there is no reason why... Congress clearly intended under 502(a)(3)(A), when you're enforcing the terms of a plan, unlike as in Mertens where you were not enforcing the terms of a plan, where you were not enforcing the terms of a specific provision of ERISA, here it is clear that we should be entitled to enforce the terms of a plan even if that means preserving... returning money to the plan.
Justice Ginsburg: But you--
Chief Justice Rehnquist: --But it has... it has to come within the limits of... of the equitable adjectives in... in the section you're talking about.
Mr. Jorden: Well, Your Honor, if it's an injunction, it doesn't... our view is it... it is equitable.
By... by definition, Congress has said it's equitable.
Chief Justice Rehnquist: Well, you... well, you say then Congress, when it said you can grant an injunction, didn't mean an injunction of the kind that the courts of equity traditionally grant, but just anything the court felt like.
Mr. Jorden: Well, we believe, Your Honor--
Chief Justice Rehnquist: Is that what... is that what you're arguing?
Mr. Jorden: --No, I would say not, Your Honor.
I would say that Congress... as this Court has said, ERISA principles start from trust principles unless the language, the structure, or the purpose of ERISA is to the contrary with respect to the particular issue.
There are... trust principles apply in enforcing the terms of a plan.
You can't enforce the terms of a plan unless you're applying trust principles.
That means any injunction to enforce the terms of a plan by definition must be equitable in nature.
Chief Justice Rehnquist: Well, I... I certainly don't follow that at all.
But you're certainly entitled to make the argument.
Justice Ginsburg: You were making the argument that in any case restitution was an equitable remedy.
Therefore, even if we leave injunction and specific performance out of it, what you're seeking--
Mr. Jorden: Yes, Your Honor.
Justice Ginsburg: --is restitution--
Justice Breyer: --But it isn't equitable.
Mr. Jorden: Restitution--
Justice Breyer: My... my book of restitution says sometimes it's equitable, sometimes it's legal.
Mr. Jorden: --That is true, Your Honor.
And... and citing to Judge Posner again in... in Health Cost Controls, he says it's legal in a legal case and equitable in an equitable case.
Justice Breyer: It's just what my book says.
Mr. Jorden: And in that case... in those cases where... where a plan is seeking restitution, it's equitable in nature.
If I may reserve, Your Honor.
Argument of Paul R. Q. Wolfson
Chief Justice Rehnquist: Very well, Mr. Jorden.
Mr. Wolfson, we'll hear from you.
Mr. Wolfson: Mr. Chief Justice, and may it please the Court: I'd like to start with the point that was being made by my colleague, which is that this is the only mechanism by which a plan can enforce a term of the plan.
This is equitable relief under ERISA.
It can be... a number of kinds of equitable relief are available.
If not a mandatory injunction, then the classic forms of equitable relief, specific enforcement of the terms of a plan--
Justice Breyer: I've looked up every one of those, and having looked up every one of them, our research so far shows that there is no category, specific, restitution, anything else, that this would count as equitable because in each instance, they would have said that there is an adequate remedy at law and there is no basis for a constructive trust, because this is not funds that come out of the trust.
Rather, it's exactly what Justice Souter said.
Mr. Wolfson: --Several points--
Justice Breyer: That's the question I posed, and that's what I would like--
Mr. Wolfson: --Several points, Justice Breyer.
First of all, there is no adequate remedy... there is no adequate or certain remedy at law in a situation like this.
ERISA itself does not provide for a claim of money damages.
And it's very important to remember we're talking about whether a... a term of the plan can be enforced.
There is a strong Federal policy in favor of some mechanism for enforcement of the term of the plan.
Now, there's no... Mertens teaches us there's no Federal action for damages based on a violation of the plan.
There is no State law action for damages for a violation of the plan because this... this is governed exclusively by Federal law.
It involves the construction of a term of the plan.
And indeed, if the plan were... if the plan were to seek an action for damages or an injunction under State law, that would be deemed completely preempted by Federal law under... under this Court's previous decisions.
So... excuse me.
Justice Scalia: --So, you say that... that under this, since it's exclusively Federal causes of action and since the Federal statute does not provide for any legal remedy, that any so-called equitable remedy is available because there is no legal relief.
Mr. Wolfson: My point, Justice Scalia, is--
Justice Scalia: Is that... is that your point?
So, you could bring an injunction... if a plan provided that somebody would pay a lump amount of cash to the plan on a certain day, you could bring an injunction to prevent that person from failing to pay the lump amount of cash.
Mr. Wolfson: --Well, if... if the plan provided... it's quite possible if the plan provided, for example, that an employer would make a contribution to the plan, to ensure that the plan was adequately funded, in the amount of $1,000 a month and then the employer refused to do so, it's difficult to believe Congress intended that there be absolutely no remedy for enforcement of such a central term of the plan which would be necessary to make sure that the plan could continue in existence.
Chief Justice Rehnquist: Well, but... okay.
Why did... why did Congress limit the relief to the term equitable then?
It could have... it could have given a much broader charter, but our cases interpreting it have said it means equitable.
Mr. Wolfson: Mr. Chief Justice--
Chief Justice Rehnquist: That is a real limitation.
Mr. Wolfson: --There are... there are in... this ties to one of Justice Breyer's points.
There are examples under which courts of equity would enforce, by specific enforcements, contracts to pay money.
And these are... we've cited to Pomeroy, and there's a lengthy footnote in that page at Pomeroy we've cited in our brief.
Examples, contracts to pay insurance, contracts to pay indemnity, contracts to hold harmless, all of which bear a strong family resemblance to the kind of thing we're discussing--
Justice Breyer: But the key to this is your statement that there is no remedy in the State court because it's interpreting the plan.
If a beneficiary... can a beneficiary sue the plan in State court where interpretation of something is required?
Is there some kind of lawsuit where they can do that?
Mr. Wolfson: --A beneficiary could... could sue the plan under 502(a)--
Justice Breyer: Okay.
Now, that being so--
Mr. Wolfson: --Right.
Justice Breyer: --because... follow me because it's quite important to me.
Why then couldn't you say, but of course this isn't preempted, of course the right remedy is the State court remedy for damages, and of course in that situation Congress intended the plan to be able to sue to get their money back, and whatever interpretation is necessary by the State judge is fine?
Why can't you say that?
Mr. Wolfson: Well, first of all, even if the beneficiary sued the plan under 502(a)(1)(B) of ERISA, that is a Federal law lawsuit.
So, there's no question that still Federal law governs.
So, there's no question at all about resorting to a separate corpus of State law to interpret the plan.
Second, Congress for various reasons said that the beneficiary could sue the plan in State... in State court.
It did not provide that the plan could sue the beneficiary in State court.
ERISA is quite clear that that has to be in Federal court.
There's exclusive... exclusive jurisdiction over a civil action brought to enforce an action brought by a fiduciary for... for the various kinds of equitable relief set forth in section 502(a)(3).
So, for one, as is in the plan's shoes, it is equitable relief under ERISA or nothing.
And that--
Chief Justice Rehnquist: So, we should have a Bivens cause of action.
[Laughter]
Mr. Wolfson: --Well, it... it did occur... that did occur to me in the last hour, Mr. Chief Justice.
Now... now, one other point.
The complaint does say for... the complaint was framed when the money had not yet left Hyundai and was framed at that point in terms of a prohibitory injunction.
It did ask for such other equitable relief as might be available.
And there are classic forms of equitable relief that would be available, restitution, a constructive trust, or an equitable lien, which might... any number of which might be applied in this case depending on who might be the appropriate defendant or what... what theory or where the money is and so forth.
Now--
Justice Souter: But you're... you're saying that given the timing of the suit, this falls literally squarely within subsection (A).
Mr. Wolfson: --At the timing of the suit, I think there would have been... there would have been no problem.
A prohibitory injunction would have very properly been issued by the district court to prevent the funds in the settlement from being disbursed in violation of the plan, which is how (a)(3)(A) is framed.
And there is a res, by the way.
It may not be money that came... it may not be the exact same dollars that came from the plan, but the settlement check and the amounts that are derived from it are a res over which a constructive trust might properly issue.
Another point about money coming from the plan.
In Harris Trust, the case that the Court decided a couple of years ago, that was a claim... an equitable claim for restitution.
And the Court had no difficulty with concluding that such an equitable claim would lie.
But I don't think anybody thought that Salomon Brothers, which had participated in the fiduciary breach... I don't think anybody thought they were still holding the same dollars that they had obtained by participating in the breach of the fiduciary duty.
I mean, it was... it was a question of replacing those dollars, and that's... and that's a proper application of the equitable remedy of restitution.
Justice Scalia: Mr. Wolfson, I... I want to be clear about the Government's position.
The Government's position is that if you're under (a)(3)(A), it must be a classic equitable injunction that you're seeking?
Mr. Wolfson: No.
Justice Scalia: Or rather, it doesn't matter?
in which case, I don't know why you're going into all of this.
Is the Government's position that under (a)(3)(A) you can enjoin any act that is in violation of commitments made under the plan?
Mr. Wolfson: I don't think it is limited by (a)(3)(B) that says appropriate equitable relief.
I think--
Justice Scalia: Okay.
So, whether... whether it would be an ordinary injunction that a court of equity would give out or not, you... or courts have the power to enjoin.
Is that right?
Mr. Wolfson: --Well, Justice Scalia, I don't think Congress can simply declare that black is white.
I mean, Congress cannot simply declare that something is an injunction which isn't really an injunction.
But there is a question as to whether (a)(3)(A) might be limited to prohibitory injunctions as opposed to mandatory injunctions, but--
Justice Scalia: Yes, because it says enjoin any act, not... not any failure to act.
Mr. Wolfson: --But... but (3)... but (3)(B)(ii) also refers to enforcement of the term of the plan, and that... that is--
Justice Scalia: Well, do you think... do you think an injunction can issue under (B)?
Mr. Wolfson: --(B) little... (B)(ii), little Roman ii, refers to enforcement of the term of the plan I believe.
And I think specific enforcement of a term of the plan, which is again a remedy which was typically available in a court of equity, would classically fall under that situation and then not--
Chief Justice Rehnquist: Well, but can't... don't you think you can make an argument that since Congress has dealt with injunctions in (A), (B) does not authorize injunctions?
Mr. Wolfson: --Mr. Chief Justice, I... I wouldn't slice it that... you know, that closely.
Enforcement of the term of the plan very often might require an order in the nature of specific enforcement of a plan that might not fall... if... if (a)(3)(A) were limited to prohibitory injunctions, I think (a)(3)(B) would be there to remain.
And as the Court pointed out... made clear in Harris Trust, all of (a)(3) is really kind of a catchall or a safety net kind of remedy that's there to ensure that plans are enforced according to their terms.
That is a fundamental--
Justice Stevens: May I go back to--
Mr. Wolfson: --policy of ERISA.
Excuse me.
Justice Stevens: --to Justice Scalia's question about (a)(3)(A)?
Supposing the statute said to compel any party to do X, Y, or Z, and to... in such a case they may call the remedy an injunction, even though it wouldn't otherwise, would that be... does Congress have power to do that?
Compel the party to pay money, list all the things that the plaintiff here is asking for, but not describe it as an injunction and then say, and they may call that an injunction if that relief is granted.
Why couldn't they do that?
Mr. Wolfson: Well, Congress could do it, but I don't... I mean, Congress could do it.
But I think an ordinary understanding of the term injunction... it doesn't have to be limited to a specific analog that a court of equity might have issued in 1685, and Congress can expand the court's injunctive power.
I don't think that Congress was intending to say, well, it's really damages, but we'll just call it... call it an injunction.
But this is not--
Argument of Richard G. Taranto
Chief Justice Rehnquist: Thank you... thank you, Mr. Wolfson.
Mr. Taranto, we'll hear from you.
Mr. Taranto: Mr. Chief Justice, and may it please the Court: I'd like to summarize the three points I want to make for why petitioners' money suit does not request appropriate equitable relief and therefore is outside 502(a)(3).
My first point--
Justice Stevens: May I just be sure you cover it before you get through?
What about it being within (a)(3)(A) and that (a)(3)(A) just gives the word enjoin a very broad, non-historic meaning, according to my hypothetical a second ago?
Why is that impossible?
Mr. Taranto: --I... I think because of the word other in... in the... the provision.
To... to separate the enjoin clause from the other appropriate equitable relief I think does impossible violence to the congressional specification that injunctions are a subset of the appropriate equitable relief.
One practical consequence I think that would follow from wrenching those apart would be that a plan could write a liquidated damages or some other damages provision into the plan and then seek an injunction for payment of that money.
I don't think that that--
Justice Stevens: What would be so terrible about that?
Mr. Taranto: --Oh, I'm not sure that there would be anything terrible, and I don't think there would be a congressional... I mean, I think Congress could call a remedy anything it wants, subject to constitutional constraints, for example, Seventh Amendment constraints, and Seventh Amendment issues might well arise.
Justice Scalia: How would you enforce a liquidated damages provision, assuming a plan has one?
Mr. Taranto: I don't think one is enforceable.
Justice Scalia: So, there's a lot of stuff that's... that's permissible under ERISA that is simply not enforceable in courts.
Mr. Taranto: I don't know how much.
Liquidated damages... I will make specific reference to another provision of 502, which is 502(g).
The question... Congress specifically dealt with the question of delinquent contributions by enacting section 515.
It limited 515 to delinquent contributions from multi-employer plans and plans adopted pursuant to collective bargaining agreements.
And then it said there's a specific remedy for that, 502(g)(2), which talks about legal relief.
That expanded the universe of relief available for a particular kind of monetary issue which includes liquidated damages.
But the limitations that Mertens I think correctly identified in 502(a)(3)... namely, it's limited to equitable relief... by its terms, carves out of the universe of remedies that our legal system has traditionally thought necessary one particular or one... one subset of that relief and says this is all that's available.
There are other circumstances ERISA by virtue of a broad but not universal preemption in which plan terms are not, in fact, remediable.
When beneficiaries seek medical treatment to which they're guaranteed under the terms of a plan and don't get it in time before it becomes a moot point, those provisions become unenforceable.
It's not unheard of in ERISA.
Now, I do want to say that I think that the particular interest that we're talking about here, the plan's interest in recourse to recover money that ought to come from somebody else... namely Hyundai, the third-party tortfeasor or alleged third-party tortfeasor... I think need not be viewed as unavailable.
I think that preemption law does not go so far as to rule out, in particular, the plan's suit as subrogee in State court, a plain, garden variety tort suit--
Justice Breyer: Why... why subrogee?
Because this to me now I'm thinking, having listened to this, is a key point to me.
Why can't the plan simply bring an ordinary contract action attaching the asset in State court?
Mr. Taranto: --That... that--
Justice Breyer: Why does it have to be a subrogee?
Mr. Taranto: --Well, I think that this Court's preemption decisions, as I read them, don't make that impossible, but make it more difficult.
Justice Breyer: All right.
Now, are we dealing with language in decisions that didn't focus on this circumstance?
Because it's very hard for me to believe that Congress would not have wanted the plan to be able to sue people who owed them money including beneficiaries.
After all, the purpose of ERISA is to protect the assets of the workers in plans.
So, I'm... I'm quite interested if you can say anything more about this point.
Mr. Taranto: Well, I... I do think that this Court's preemption decisions, from Pilot Life and some of its successors, have language in them that, taken all by themselves, might suggest that any contract cause of action on the same subject that is addressed in one of the ERISA remedial provisions would be preempted.
Each of those cases, in fact, involved requests for greater relief than was made available, and that might well be a problem for the kind of contract action you're talking about here.
If that relief is legal relief and it's covered by 502(a)(3) as a subject matter and Congress did not provide for it, there is a fairly strong inference that that kind of relief was relief that Congress did not want provided.
Justice Breyer: Now, which... which would be the easier route?
If I'm convinced that, of course, Congress wants the plan to be able to get its money back, legally now is it more proper to say it's not preempted the State court action, ordinary contract with attaching the assets?
Or is it more legally correct to say there is no State court action; therefore, there is no adequate remedy at law; therefore, an action close to restitution or specific performance lies?
Mr. Taranto: Well, I... I don't think that it, in the end, works to say that anytime equitable relief... that anytime there's no legal relief, then there must be equitable relief because then I think we've erased the distinction Congress has meant... has created.
I do think the subrogation action presents a much easier case, indeed a case that ought to fall outside preemption law.
It has not been the case under ERISA and it has not been the case under the Labor Management Relation Act section 301 provision that ERISA draws on that, as petitioners' counsel said, every suit involving interpretation of the plan is preempted, every State court suit.
This Court, for example, in the Lingle decision, which I did not cite in... in my brief, but Lingle against Magic Chef at the very end says plan interpretation... or I guess collective bargaining agreement interpretation in the 301 context... is something that State courts can do as an adjunct to a suit where the elements of liability and the duties are determined otherwise.
Justice Ginsburg: Mr. Taranto, what about the presence of State subrogation laws where the State has a strong law reflecting its policy that there shouldn't be any subrogation actions in the State court?
Mr. Taranto: Well, I... I think that I would agree with petitioners that the question of the plan's rights are matters of Federal law, and I don't think it is possible for a State to say an ERISA plan that does provide in terms for subrogation, stepping into the shoes of the beneficiary's tort claim... I don't think a State could properly deprive the plan of... of that right.
I think that would be a matter of... of Federal law.
But once the plan--
Justice Scalia: All other State restrictions on contracting are overridden simply because it's an ERISA contract?
Mr. Taranto: --I don't know about all... all--
Justice Scalia: Provisions for excessive punitive damages?
I mean, there are all sorts of State provisions for contract law.
They're... they're all to be set aside once... once you have an ERISA contract?
Mr. Taranto: --Well, I... I guess I... I should say, although I guess it's not my place to be doing a lot of conceding this morning, but I would be happy, of course, if... if many State laws were not preempted.
I think for purposes of this case in addressing the... the concern about whether plans have recourse, a very narrow question is presented, and that is whether plan's tort suit against the alleged tortfeasor is preempted because not in determining whether the... the third-party alleged tortfeasor violated a tort duty and is liable, not in determining the amount of... of overall harm caused, but rather, in deciding whether the plan can be there as a plaintiff and what portion of any such recovery would belong to the plan, those essentially ancillary matters, which might require interpretation of the plan... those, it seems to me, don't get preempted.
And as long as those don't get preempted--
Justice Kennedy: It's very odd that you'd have a... a body of Federal common law that can be applied only in State courts.
Mr. Taranto: --Well, I... I don't think that this would be only in... in State courts because there could be... I mean, the interpretation of... of many plan provisions is going to come through an (a)(1) action, the beneficiary suing for... for benefits.
There may be specific kinds of equitable relief that is... that are requested that would fall under 502(a)(3).
My... my point is that there is no reason to distort what I think is the natural meaning of equitable relief based on an admittedly serious concern that a plan might not have recourse for money because I think the plan does have recourse for money through bearing the burden of pursuing that money against the tortfeasor, in which the interpretation of the plan is ancillary and... and incidental just like at the very end of the Lingle against Magic Chef decision, which was then quoted and picked up again in the Livadas decision in 1994, in the labor contract context.
State courts are entitled, despite a generally very broad preemption of the labor contract interpretation, to interpret labor contracts.
So too with respect to the plan for this limited role for subrogation.
Justice Ginsburg: Mr. Taranto, you... what you're telling us then is that there would be no preemption in this class of cases, that in this class of cases where the plan insurer is saying we want to get from this recovery the amount that we advanced, that in this class of cases you would have an entirely Federal law governed claim that could only be brought in State court.
I don't want to talk about the other claims that you might have, but here where the plan insurance company says, here's this tort recovery, we want our piece of it, we want that restored, we want our advance restored to us, for that category of case, you're telling us you have a claim under Federal law that can be brought only in State courts.
Mr. Taranto: I... I... if I can say it slightly... slightly differently.
I think that the State tort law is the claim... creates a claim for negligence and any damages caused by that.
What subrogation does, which I think ought to be a matter of Federal common law which probably just follows the terms of an ERISA plan, is say that the plan can step into the shoes of the beneficiary's rights under State law.
And I do think that that mode of proceeding to find essentially a... to find a recovery out of money that in justice, according to petitioners, ought to come from the third-party tortfeasor is available in State court.
And therefore, a principal worry about adhering to what I think is the natural meaning of equitable relief in (a)(2)... in (a)(3) weakens substantially.
Justice Breyer: I... I see that except for one point.
I don't see why you're going down the subrogation route, which at least one of the amicus briefs suggests would cause a lot of problems, rather than simply saying it's a straight contract action under State court... under State law.
Why?
What's the... you have a reason for doing it.
Mr. Taranto: The... the reason that I--
Justice Breyer: Is what?
Mr. Taranto: --that I have suggested is that the contract action between the plan or its fiduciary, which the cases have not treated as identical, but the contract action against the... against the beneficiary to... for a supposed violation of the terms of the plan feels an awful lot like the subject matter covered directly by (a)(3).
And if, therefore, that contract action would be requesting relief that could only really be legal relief, there would be a much stronger preemption argument, a conflict preemption argument, that says Congress really did say we want equitable relief, we don't want legal relief, and that would be a stronger preemption--
Justice Breyer: At which point you'd say that Congress certainly didn't mean they can't sue people to get money belonging to the plan.
We have the... am I right?
I'm trying to... it's a kind of circle, and I'm trying to see if I have the... all the parts.
Mr. Taranto: --I... I think we're understanding each other, and I... and I can see the way out of the... the stronger preemption argument as to... as to that.
I think the preemption argument as to the subrogation suit, the ordinary tort suit, is much, much weaker to begin with and therefore doesn't require as... as strong a... a response.
Justice Stevens: Mr. Taranto, can I ask you to respond to an argument that occurs to me?
If... going back to the text of (a)(3), if you just had (a)(3)(A), I... I think you've agreed one could read that to just have a sort of a statutory injunction that is divorced from prior equity practice and just includes doing anything that is necessary to comply with the plan.
But you respond to that by saying, but (B) says other equitable relief, which therefore has the effect of narrowing what otherwise might be a permissible reading of (A).
Am I correct that that's your--
Mr. Taranto: Yes.
Justice Stevens: --But my... my... the reason I'm concerned about that response is it seems to me that (B) was intended to broaden the remedies available rather than to narrow them, and you're necessarily construing it as a narrowing construction.
Mr. Taranto: Well, I... I think I'm construing it in... in two ways.
Perhaps as narrowing, but more importantly as clarifying what otherwise would, I think, be the more reasonable reading of (A), the enjoin clause, even if there were nothing else.
I think the more reasonable reading would be injunctions as equity made them available.
When I read... what your first comment said, if all that was there was the enjoin language, I think that language by itself might be taken to mean enjoin any violation of the terms of the plan.
I don't think that that would be the better reading even without the language that follows, but I think the language that follows compels adoption of that because it characterizes as equitable relief the injunctions provided for in the first clause.
Chief Justice Rehnquist: Is there any legislative history indicating why Congress limited the relief which it permitted in this section to equitable relief?
Mr. Taranto: I'm not aware of any.
I... I have reviewed the... the legislative history, the collective three-volume legislative history, and as I think some of this Court's decisions have... have indicated, some of the earlier bills contained broader relief provisions, legal or equitable relief, and that was cut back for reasons that at least I don't recall having seen.
In... in the one reference to... which I cited in... in my brief I think at page 27... in one of the Senate reports that discusses the immediate predecessor of this provision, there's no general reference to any kind of relief that's necessary to... to make plans protect all of their rights or vice versa.
It's been principally a beneficiary protection statute.
And there's also no general reference to restitution in the abstract.
There's a reference to injunctions and specifically to constructive trusts.
So, even there, there isn't a general idea that anytime we're talking about what sometimes are called direct damages or general damages or contractual damages, and therefore making whole the loser of a particular sum of money that's been promised, that that action would somehow be transformed into an equitable action when historically it very plainly wasn't.
Justice Ginsburg: Any more so--
Justice Breyer: --Well, couldn't you have historically gotten--
Justice Ginsburg: --Any more so than... than the back pay under title 7, which is money?
Why isn't this really comparable to that?
I mean, Congress, one would assume, didn't want compensatory damages or punitive damages, and that's what they meant when they said appropriate equitable relief.
But if back pay, which is fungible money, can be classified as equitable, why not this kind of restitution?
Mr. Taranto: Let me... let me try to answer that... that this way.
This Court has never said that for the important constitutional question, that back pay is indeed equitable relief for Seventh Amendment purposes.
It has several times said we are not deciding that and have not decided that.
The courts of appeals have, for many years, in fact so held.
But if you look back at the original decisions that so held back in the 1960's, they all rested on something that is suggested directly by the language of title 7, which is not that back pay standing alone is equitable and therefore outside the jury trial right, but that equity always had the power to award money when incidental to and intertwined with traditional equitable relief.
In... in the context of title 7, as in the context of the National Labor Relations Act on which title 7 was based, back pay enters not as a separately authorized remedy, but as reinstatement with or without back pay.
Justice Ginsburg: But you could have under both... I think this is correct... the Fair Labor Standards Act and under title 7, a monetary remedy without any reinstatement.
Mr. Taranto: And... and I agree that the courts of appeals have, for a long time, treated that as outside the jury trial right, but this Court has never said so.
And perhaps more importantly as a matter of congressional intent, there's no reason to think that Congress in 1974, when writing the ERISA provision, was adopting any specialized meaning of equitable relief that Congress may have had in mind in... in the title 7 context.
Justice Kennedy: Well, why wasn't there a reason given... the limitations on the plan's ability to sue elsewhere?
And as Justice Stevens and Justice Ginsburg's line of questioning suggests, it seems to me that if (A) and (B) are both going to do some work in the statute, that to insist that (A) simply embodies the historic definition of equity is... is too narrow.
And you can say that what Congress intended to do was to expand the injunctive power to analogs that are close to equitable actions here in accounting or instructions to a guardian or instructions to a trustee, it seems to me, is very close to historic equitable--
Mr. Taranto: But (B)... (B) does quite definitely, as Harris Trust indicates, expand beyond injunctions the available relief.
Because Harris Trust, after all, was a classic form of restitution where the money that was being sought was traceable.
It, of course, doesn't have to be the very same money.
It can be either money commingled with other funds or the product or profits from it, which are exactly the three things that this Court listed in... in Harris Trust.
That wouldn't, under any circumstance, be an injunction, but it would be a traditionally available form of equitable relief.
But that doesn't mean that the whole of 502(a)(3), both (A) and (B), can reach beyond the limits that equity made... set on the relief that the court of chancery would... would make available.
Justice Souter: --No, but your--
Justice Kennedy: --Even if Congress has directed otherwise.
Mr. Taranto: I'm sorry?
Justice Kennedy: The question is, hasn't Congress directed otherwise necessarily in (A)?
Mr. Taranto: I... I don't think so because, again, textually the two clauses are linked by the word other.
And if it weren't the case, then again a plan could write a damages provision into its... into itself and effectively turn (a)(3) into an authorization to get damages by saying we're just seeking, by enjoining the promised damages that you cause, an injunction.
Justice Souter: But you're... you're using the word other as... as implying in (A) a limitation of (A) to only those instances in which a 1750 or whatever court of equity would have awarded an injunction.
But isn't there another way of... of giving some... some meaning to other here?
And that is to say that other was referring back to injunctions which (A) refers to simply as a generic form of relief.
Everybody would agree.
What... what's an injunction?
A legal remedy or equitable remedy?
Sure, it's an equitable remedy.
And the only thing that... that other is referring to in (B) is the kinds of remedy.
It doesn't necessarily imply that that kind of remedy, when awarded under (A), was a... was a remedy only in those instances in which in the old law it could have been awarded.
So, why isn't the... the generic remedy meaning of other a satisfactory construction which then leaves the courts free to issue any kind of injunction under... under (A) to enjoin a violation of the plan?
Mr. Taranto: Well, I... I guess I... I find the... the much more natural reading of this provision in the context of (a)(2) which talks about equitable and other remedial relief and (g)(2) which talks about legal and equitable relief to be that Congress in (a)(3) said we want equitable relief available.
And I... I take it, at least, that a specific illustration of why it doesn't make much sense to separate those... those apart even aside from what I think is the more natural textual point is that it would allow the plan again to write damages provisions into their terms, the plan's, and then come into court and say, we want an injunction for the beneficiary to pay us any damages that are caused by... by some act because that's what--
Justice Souter: Yes, but... presumably, under... under (A), under any injunction practice, the... the court would require proof that there was need for an injunction in the first place.
In other words, one couldn't simply come in and say, gee, they might violate it, so give us an injunction.
But if one could make out a... a case in the first instance for their need... of a need for the injunction, that it seems to me would answer your concern that it could be... that (A) thereby could be turned, in effect, through a plan provision into a general legal remedy.
Mr. Taranto: --But I'm not sure, I guess, if... if a plan term said the beneficiary... I mean, I think this could go either way, but to take--
Justice Souter: You're going to take it one step further and say you can always get an injunction under any circumstances saying pay over the money.
Mr. Taranto: --Right, right.
And I... and I think that that's... that that's just so far outside any recognizable concept of... of equitable relief--
Justice Souter: Well, I... I agree but I think it's also pretty likely outside anything that Congress might have been thinking about too.
Isn't it?
In other words, the... the very fact that Congress perhaps didn't... didn't have that in mind, because it is so far-fetched, is a... is a good reason to read (A) as... as broadly as I'm suggesting.
Mr. Taranto: --Well, I... I guess I... I would say that it's... it is a better reason either to let Congress alter the statute if unanticipated problems have... have arisen or, more immediately, to make sure that preemption law isn't taken to an extreme that precludes what I think is the more... is the preferable solution anyway, which is that there is... by the very terms of the plan, there's an intrinsic reference of this interest, of this right, to an underlying State court suit.
It is preferable from a systemic point of view, from the point of view of avoiding the extra costs of duplicative litigation, of avoiding the potential conflict between Federal and State courts on either the very same or closely related questions for there to be a single, consolidated proceeding in which the entire question gets wrapped up who is supposed to get the single pot of money.
There may be special reasons, as there was in this case, where the State court is probably uniquely entitled to create the special needs trust.
There are good reasons for that consolidated State court proceeding to be the forum where the plan protects this interest, and preemption law I think very readily allows the plan to do that.
As long as there is that outlet, perhaps even under Mertens, if there isn't that outlet, but as long as there is that outlet, then I think the more natural reading of 502(a)(3) should be respected.
Justice Stevens: Mr. Taranto, I think there's some tension between the argument you're making now, which is certainly a persuasive argument, and the cases you cite on page 38 of your brief that talk about the gap between Federal law and State law.
Mr. Taranto: Well, those... I... I agree that there is... that there are certain gaps between Federal and State law that, in the beneficiary context, have become all but commonplace because there is an inference, which no court has yet figured a way to... to supersede, the way Justice Breyer was talking about, that when beneficiary relief under (a)(1) is limited to benefits, it's not that Congress has, in effect, determined that damages that flow from violation of term plans to... to provide necessary medical services are not available.
If the Court has no further questions.
Chief Justice Rehnquist: Thank you, Mr. Taranto.
The case is submitted.
