• Kenseth v. Dean Health Plan, Inc.
  • May 24, 2011 | Authors: Kathryn M. Almar; Arthur N. Lerner
  • Law Firm: Crowell & Moring LLP - Washington Office
  • The district court for the Western District of Wisconsin ruled that ERISA claims brought by a plan beneficiary seeking "appropriate equitable relief" under 29 U.S.C. § 1132(a)(3) are not justiciable where the relief being sought is plan payment of medical expenses.

    The plaintiff in Kenseth had a weight loss procedure in 1987 during which physicians applied gastric bands, but in 2005 she required surgery to remove the bands. Despite being mistakenly told by her ERISA plan's customer service office that the surgery could be covered, the defendant, Dean Health Plan, Inc., denied coverage after the fact under policy terms precluding coverage for obesity-related procedures.

    The Western District of Wisconsin acquired the case on remand from the Seventh Circuit, which had denied summary judgment to the defendant after finding a viable claim for breach of fiduciary duty under ERISA. On remand, the district court, among other things, was left to determine whether the plaintiff's claims alleged any form of equitable relief authorized under § 1132(a)(3). Specifically, the plaintiff requested that she be held harmless for at least some extent of the medical expenses incurred as a result of the procedure, that the plan amend its policies and procedures to prevent similar mistakes, and that she be entitled to attorneys fees under 29 U.S.C. § 1132(g)(1). The Secretary of the Department of Labor ("Secretary") filed an amicus brief in the case in support of the plaintiff, arguing that the "appropriate equitable relief" provision should permit "make-whole monetary recoveries and disgorgement of ill-gotten gains."

    First, the district court rejected the Secretary's argument that compensatory money damages could constitute "appropriate equitable relief." The Secretary had analogized the relief sought by the plaintiff to historical equitable grants of make-whole monetary relief to beneficiaries in actions for breach of trust, arguing that such monetary relief is likewise warranted particularly in cases where the plaintiff is a fiduciary. Rejecting this argument, the district court held that the holding in Mertens v. Hewitt Associates, 508 U.S. 248 (1993), viewing monetary damages as classic legal relief, made no distinction between fiduciaries and other plaintiffs.

    The district court further held that even if the damages sought qualified as equitable relief, they were not "appropriate" where the same relief sought was available under a different ERISA provision (for denial of benefit claims) or where there was an insufficient connection between the relief sought and the defendant's violation of law. In this case, the plaintiff failed to show that the breach of fiduciary duty resulted in any increased expenses, since there was no evidence that the plaintiff had the option of foregoing the surgery or obtaining it by less expensive means.

    Second, the district court denied the plaintiff's alternative characterization of her monetary claim as one for equitable restitution. The Seventh Circuit had expressed skepticism about the plaintiff's claim for restitution, commenting that "there is no evidence in the record suggesting [that the defendant] is holding money or property that rightfully belongs to her," as is the case under traditional restitution principles. The district court further recognized that even if the facts supported a claim for restitution, such relief is not "appropriate" for the same reasons that compensatory money damages were found not appropriate.

    The district court also rejected plaintiff's claims for traditional injunctive relief and for attorneys' fees. Regarding plaintiff's claim for policy and procedural amendments to the plan, the court found standing to be lacking. Specifically, because plaintiff was no longer a plan member, she did not stand to benefit from any changes to the plan. Regarding plaintiff's claim to attorneys fees under § 1132(g)(1), the court found that neither the Seventh Circuit's remand nor the policy changes undertaken by the defendant qualified as "some degree of success on the merits," the standard for recovery of attorneys fees under the statute.