Cgi Technologies and Solutions v. Rhonda Rose ( 2012 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CGI TECHNOLOGIES AND SOLUTIONS 
INC, in its capacity as sponsor and
fiduciary for CGI Technologies
and Solutions, Inc Welfare Benefit
Plan, No. 11-35127
Plaintiff-Appellee,  D.C. No.
v. 2:10-cv-00298-RSM
RHONDA ROSE; NELSON LANGER
ENGLE PLLC,
Defendants-Appellants.

CGI TECHNOLOGIES AND SOLUTIONS 
INC, in its capacity as sponsor and
fiduciary for CGI Technologies
and Solutions, Inc Welfare Benefit No. 11-35128
Plan,
Plaintiff-Appellant,  D.C. No.
2:10-cv-00298-RSM
v. OPINION
RHONDA ROSE; NELSON LANGER
ENGLE PLLC,
Defendants-Appellees.

Appeal from the United States District Court
for the Western District of Washington
Ricardo S. Martinez, District Judge, Presiding
Argued and Submitted
February 9, 2012—Seattle, Washington
Filed June 20, 2012
7219
7220 CGI TECHNOLOGIES AND SOLUTIONS v. ROSE
Before: Mary M. Schroeder and Ronald M. Gould, Circuit
Judges, and Ralph R. Beistline, Chief District Judge.*
Opinion by Judge Gould;
Concurrence by Judge Schroeder;
Dissent by Chief District Judge Beistline
*The Honorable Ralph R. Beistline, Chief District Judge for the United
States District Court for Alaska, sitting by designation.
CGI TECHNOLOGIES AND SOLUTIONS v. ROSE 7223
COUNSEL
Matthew W.H. Wessler (argued), Public Justice, P.C., Wash-
ington, D.C., Leslie A. Brueckner, Public Justice, P.C., Oak-
land, California, Michael Nelson, Nelson Langer Engle
PLLC, Paul L. Stritmatter, Strittmatter Kessler Whelan Coluc-
cio, Hoquiam, Washington, for the defendants-
appellants/cross-appellees.
Noah G. Lipschultz (argued), Littler Mendelson, P.C., Minne-
apolis, MN, Leigh Ann Tift, Littler Mendelson, P.C., Seattle,
Washington, Joanna M. Silverstein, Littler Mendelson, P.C.,
Seattle, Washington, for the plaintiff-appellee/cross-appellant.
7224 CGI TECHNOLOGIES AND SOLUTIONS v. ROSE
OPINION
GOULD, Circuit Judge:
Rhonda Rose (“Rose”) appeals the district court’s grant of
partial summary judgment in favor of CGI Technologies and
Solutions, Inc. (“CGI”) in its action seeking “appropriate
equitable relief” under § 502(a)(3) of the Employee Retire-
ment Income Security Act of 1974 (“ERISA”), 29 U.S.C.
§ 1001, et seq. CGI appeals the district court’s grant of partial
summary judgment in favor of Rose’s counsel and co-
defendant, Nelson Langer Engle, PLLC (“NLE”), dismissing
NLE from the action. CGI also appeals the district court’s
grant of proportional fees and costs to NLE, deducted from
CGI’s recovery from Rose. We affirm in part and reverse in
part, remanding the matter to the district court for further pro-
ceedings consistent with our decision.
I
Rose was employed by CGI which provides to its employ-
ees and their dependents a self-funded welfare benefits plan
(“the Plan”) governed by ERISA. The Plan includes a subro-
gation and reimbursement clause that expressly: (1) gives to
CGI the right to full reimbursement for medical expenses paid
on behalf of the beneficiary from any funds recovered by the
beneficiary from a third party tortfeasor, (2) exempts CGI
from responsibility for attorneys’ fees paid in any such recov-
ery, expressly disclaiming the application of the common
fund doctrine; and (3) requires full reimbursement to CGI
regardless of whether the beneficiary is made whole by the
recovery.
In 2003, Rose was seriously injured in a car accident with
a drunk driver, and consequently she had nerve damage and
neck and back injuries that required surgical intervention.
From this accident Rose also suffered several types of dam-
ages including past and future medical expenses, past and
CGI TECHNOLOGIES AND SOLUTIONS v. ROSE 7225
future loss of wages, and pain and suffering. The parties stipu-
lated that her personal injury claim was at least
$1,757,943.08. With the assistance of NLE, Rose recovered a
combined total of $376,906.84 from her action against the
third party tortfeasor and from her underinsured motorist
claim with her automobile insurance provider. The parties
stipulated that this recovery represents only 21.44% of Rose’s
total damages.
Between 2007 and 2010, the Plan, on behalf of Rose, paid
about $32,000 in medical expenses incurred as a result of
Rose’s injuries related to the accident. After Rose’s recovery
of these damages partially compensating her for her injuries,
CGI asserted a first priority of payment and demanded to be
reimbursed for the full amount the Plan had paid in medical
expenses on Rose’s behalf. Rose, through her counsel,
declined to reimburse the Plan, and NLE placed the disputed
amount in trust. CGI filed suit in the district court against both
Rose and NLE seeking “appropriate equitable relief,” under
§ 502(a)(3) in the form of a constructive trust and/or an equi-
table lien.
The parties filed cross-motions for summary judgment. The
district court granted partial summary judgment in favor of
NLE, concluding that the Plan’s reimbursement provision
could not be enforced against NLE. The district court granted
partial summary judgment in favor of CGI, concluding that
under § 502(a)(3), CGI, per the express terms of the Plan, was
entitled to recover the full amount it paid in medical expenses
on Rose’s behalf. Finally, despite the Plan’s language to the
contrary, the district court also ruled that CGI was responsible
for a proportional amount of the costs and fees incurred by
NLE in recovering damages on Rose’s behalf, and that this
amount would be deducted from CGI’s recovery from Rose.
The parties now cross-appeal.
7226 CGI TECHNOLOGIES AND SOLUTIONS v. ROSE
II
We consider the parties’ cross-appeals in turn.1
A
We first address CGI’s appeal of the district court’s grant
of partial summary judgment in favor of NLE. The district
court dismissed NLE from the action, concluding that NLE
was not a proper defendant under § 502(a)(3). Section
502(a)(3) states:
A civil action may be brought . . . by a participant,
beneficiary, or fiduciary (A) to enjoin any act or
practice which violates any provision of this sub-
chapter or 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 this
subchapter or the terms of the plan.
29 U.S.C. § 1132(a)(3) (emphasis added). The district court
concluded that equitable relief under § 502(a)(3) could not be
enforced against NLE because NLE, as Rose’s counsel, was
not a signatory to the Plan with its reimbursement provision.
In reaching this conclusion, the district court relied principally
on Hotel Employees & Restaurant Employees International
Union Welfare Fund v. Gentner, 50 F.3d 719 (9th Cir. 1995).
In Gentner, we affirmed the district court’s dismissal of the
beneficiary’s attorney from the plan’s action for reimburse-
ment under § 502(a)(3), deciding that because the attorney
was not a signatory to the plan, he was not a proper defendant.
Id. at 721-22. Gentner in its holding established a general rule
1
We review the district court’s grant of summary judgment de novo.
Gonzales v. Arrow Fin. Servs., LLC, 660 F.3d 1055, 1060 (9th Cir. 2011).
“Summary judgment is appropriate where ‘there is no genuine dispute as
to any material fact and the movant is entitled to judgment as a matter of
law.’ ” Id. (quoting Fed.R.Civ.P. 56(a)).
 CGI TECHNOLOGIES AND SOLUTIONS v. ROSE 7227
that a plan fiduciary may not assert a claim under § 502(a)(3)
against a beneficiary’s attorney who is not a signatory of the
plan.
[1] Here, although we agree with the district court’s con-
clusion that CGI may not enforce the Plan’s reimbursement
provision against NLE, we clarify that Gentner’s holding is
no longer valid after the Supreme Court’s ruling in Harris
Trust and Savings Bank v. Salomon Smith Barney, 530 U.S.
238 (2000). See Miller v. Gammie, 335 F.3d 889, 900 (9th
Cir. 2003) (en banc) (holding that an intervening decision by
a court of last resort controls where “the relevant court of last
resort [has] undercut the theory or reasoning underlying the
prior circuit precedent in such a way that the cases are clearly
irreconcilable”). In Harris Trust, the Court considered
whether § 502(a)(3) authorized an action against a nonfiduci-
ary “party in interest” who, acting in concert with a plan fidu-
ciary, violated ERISA. Noting that “[t]he common law of
trusts . . . offers a starting point for analysis of ERISA unless
it is inconsistent with the language of the statute, its structure,
or its purposes,” the Court stated that under the common law
of trusts:
[I]t has long been settled that when a trustee in
breach of his fiduciary duty to the beneficiaries
transfers trust property to a third person, the third
person takes the property subject to the trust, unless
he has purchased the property for value and without
notice of the fiduciary’s breach of duty. The trustee
or beneficiaries may then maintain an action for res-
titution of the property (if not already disposed of) or
disgorgement of proceeds (if already disposed of),
and disgorgement of the third person’s profits
derived therefrom.
530 U.S. at 250. Accordingly, the Court rejected the argument
that liability under § 502(a)(3) depended “on whether
ERISA’s substantive provisions impose a specific duty on the
7228 CGI TECHNOLOGIES AND SOLUTIONS v. ROSE
party being sued,” id. at 245, and concluded that a third party
transferee of “ill-gotten trust assets” could be held liable
under ERISA provided that it is shown that “the transferee . . .
had actual or constructive knowledge of the circumstances
that rendered the transaction unlawful.” Id. at 251. Thus, “an
action for restitution against a transferee of tainted plan assets
satisfies the appropriate[ness] criterion in § 502(a)(3).” Id. at
253.
[2] Harris Trust left open “the universe of possible defen-
dants” in an action for “appropriate equitable relief” under
§ 502(a)(3), which, contrary to our holding in Gentner, could
include an attorney who was not a signatory to the plan. Id.
at 246; see also Cyr v. Reliance Standard Life Ins. Co., 642
F.3d 1202, 1206 (9th Cir. 2011) (en banc) (“In short, the
Court [in Harris Trust] did not find a limit in § [502](a)(3) as
to who could be sued.”).
Under the principles of liability expressed in Harris Trust,
we conclude that there is no unlawful transaction that would
support CGI’s action against NLE under § 502(a)(3). In Har-
ris Trust, the third party defendant, Salomon Smith Barney,
induced the plan’s fiduciary to enter into a transaction prohib-
ited under another provision of ERISA. Id. at 243. The Court
concluded that Salomon Smith Barney’s unlawful transaction
supported the petitioners’ § 502(a)(3) claim seeking rescis-
sion, restitution, and disgorgement. Here, by contrast, NLE
engaged in no similar unlawful transaction. NLE merely hon-
ored Rose’s request that it hold the entire disputed amount in
trust subject to the resolution of CGI’s claim for reimburse-
ment.
The Fifth Circuit has interpreted Harris Trust to recognize
a cause of action under § 502(a)(3) against an attorney who,
on behalf of his client, holds disputed funds in trust pending
adjudication of the rightful owner. In Bombadier Aerospace
Employee Welfare Benefits Plan v. Ferrer, Poirot and Wans-
brough, 354 F.3d 348 (5th Cir. 2003), the Fifth Circuit con-
CGI TECHNOLOGIES AND SOLUTIONS v. ROSE 7229
cluded that Harris Trust supports a cause of action against “a
non-‘party in interest’ attorney-at-law when he holds disputed
settlement funds on behalf of a plan-participant client who is
a traditional ERISA party.” Id. at 353. Relying on the
Supreme Court’s decision in Great-West Life & Annuity Ins.
Co. v. Knudson, 534 U.S. 204 (2002), the Fifth Circuit rea-
soned that the action against the attorney was appropriate
under § 502(a)(3) because it was an in rem action to establish
a constructive trust, the beneficiary had “constructive posses-
sion of the disputed funds,” and the attorney held the funds in
trust subject to the beneficiary’s direction to release the funds.
354 F.3d at 356.
[3] We disagree with the Fifth Circuit on the merits
because as Harris Trust counsels, we find no unlawful trans-
action on the part of NLE to support NLE as a defendant. As
did the attorneys in Bombadier, NLE has placed the entire
disputed amount in trust pending the outcome of CGI’s litiga-
tion. It has not asserted a right to the specific funds, nor
appropriated the funds in any unlawful way.2 NLE has agreed
that pending the final adjudication of CGI’s claim, it stands
ready to disburse the fund in accordance with the court’s
order. We conclude that this holding of disputed funds in trust
is reasonable conduct by the law firm. To conclude otherwise
would introduce into ERISA a duty on the part of a benefi-
ciary’s counsel that unreasonably interferes with traditional
and lawful attorney-client interactions. Moreover, there is no
need to maintain a suit against an attorney who merely acts
as a beneficiary’s agent because naming the beneficiary who
has constructive possession over the disputed funds will
ensure proper disbursal where the presiding court so orders.
2
By contrast, an attorney who before adjudication pays himself out of
the disputed funds, effectively reducing the available amount to less than
the plan’s claim, would be an appropriate defendant under Harris Trust.
See Wal-Mart Stores, Inc. Assocs.’ Health and Welfare Plan v. Wells, 213
F.3d 398, 401 (7th Cir. 2000) (describing as “clearly wrongful” the action
of a beneficiary’s attorney in actual possession of the disputed funds who
diminishes the disputed funds by paying himself).
7230 CGI TECHNOLOGIES AND SOLUTIONS v. ROSE
Because NLE did not engage in an unlawful transaction by
placing the entire disputed amount in trust while the issue of
CGI’s rightful recovery remained unresolved, we conclude
that CGI cannot maintain an action against NLE under
§ 502(a)(3).
B
We next consider together Rose’s appeal from the district
court’s grant of partial summary judgment in favor of CGI
and CGI’s appeal from the district court’s grant of partial
summary judgment in favor of Rose, with respect to CGI’s
responsibility for its proportional share of NLE’s attorneys’
fees. The Plan called for full reimbursement to CGI regardless
of whether Rose was made whole and disclaimed the applica-
tion of the common fund doctrine to require CGI to contribute
to attorneys’ fees incurred in recovering funds from a third
party tortfeasor. The district court concluded that under
§ 502(a)(3), CGI was entitled to full reimbursement of its out-
lay of the funds for medical expenses based on the Plan’s
express terms, but that notwithstanding the express terms of
the Plan, CGI was responsible for its proportional share of the
attorneys’ fees that permitted Rose’s recovery on her tort
claim. Rose argues that full reimbursement was not “appro-
priate equitable relief,” as mandated by § 502(a)(3), because
it amounted to simple contract interpretation, a classic form
of legal relief. She contends that “appropriate equitable
relief” must encompass traditional equitable principles,
including consideration of applicable traditional equitable
defenses such as the make-whole doctrine which Rose argues
should reasonably limit CGI’s relief to less than full reimburse-
ment.3 CGI argues that the district court was required to honor
3
Accordingly, Rose invokes a derivative version of the make-whole
doctrine by arguing that CGI is entitled to a pro rata share in line with her
limited recovery of 21.44% of her total damages estimate instead of argu-
ing that CGI is not entitled to any recovery because she was not made
whole.
CGI TECHNOLOGIES AND SOLUTIONS v. ROSE 7231
the express terms of the Plan which mandated full reimburse-
ment to CGI and disclaimed the application of traditional
equitable defenses.
1
[4] The parties do not dispute that CGI’s claim is equitable
in nature, as is required for relief under § 502(a)(3). See Sere-
boff v. Mid Atlantic Med. Servs., Inc., 547 U.S. 356, 369
(2006). Much like the respondent plan’s claim in Sereboff,
CGI’s claim is equitable because it is “an action to enforce an
equitable lien established by agreement.” Id. at 368. Nor do
the parties dispute that CGI is entitled to some form of “ap-
propriate equitable relief.” The question we must decide,
however, is whether in granting “appropriate equitable
relief,” the district court, in its balancing of the equities,
should take into account traditional equitable defenses that
may limit CGI’s recovery to less than full reimbursement
despite Plan terms, or instead give primacy to basic contract
interpretation to entitle CGI to full reimbursement and to
exempt CGI from responsibility for attorneys’ fees.
[5] This question of ERISA interpretation has not been
decided previously by our circuit. Section 502(a) of ERISA
describes who may enforce ERISA plans by bringing civil
actions. 29 U.S.C. § 1132(a). Section 502(a)(1)(B) gives a
legal cause of action to plan participants and beneficiaries but
excludes plan fiduciaries from similarly enforcing the terms
of the plan. A plan fiduciary’s only means to seek relief is
found in § 502(a)(3) which expressly limits a fiduciary’s
cause of action to one based on equitable principles that gov-
ern injunction and other equitable relief. See 29 U.S.C.
§§ 1132(a)(1)(B), (a)(3); Knudson, 534 U.S. at 221 (noting
that ERISA only authorizes fiduciaries to seek equitable relief
under § 502(a)(3)).
[6] The Supreme Court has held that equitable principles
must be satisfied for an ERISA fiduciary to gain relief under
7232 CGI TECHNOLOGIES AND SOLUTIONS v. ROSE
§ 502(a)(3), but in considering such suits the Court has not yet
squarely addressed whether the statutory term “appropriate
equitable relief” requires consideration of traditional equitable
defenses. Stated another way, we do not read the Supreme
Court’s precedents to have clarified if in giving “appropriate
equitable relief” a court must take into account all or some
traditional equitable defenses and considerations. See Cigna
Corp. v. Amara, 131 S. Ct. 1866, 1880 (2011) (affirming that
“[§ ] 502(a)(3) invokes the equitable powers of the District
Court,” including the power to reform plan terms); Sereboff,
547 U.S. 356, 367-68 (2006) (holding that a contractual right
to reimbursement from funds recovered from a third party
supported a plan’s action under § 502(a)(3) because the clause
established an equitable lien by agreement); Knudson, 534
U.S. at 213 (holding that actions under § 502(a)(3) must be
equitable in nature and § 502(a)(3) did not support a plan’s
action seeking legal restitution; namely, “a judgment impos-
ing a merely personal liability upon the defendant to pay a
sum of money”); Varity Corp. v. Howe, 516 U.S. 489, 512
(1996) (describing § 502(a)(3) as a “catchall provision[ ] . . .
[that] offer[s] appropriate equitable relief for injuries caused
by violations that § 502 does not elsewhere adequately reme-
dy,” and noting that “[w]e should expect that courts, in fash-
ioning ‘appropriate’ equitable relief, will keep in mind the
special nature and purpose of employee benefit plans, and will
respect the policy choices reflected in the inclusion of certain
remedies and the exclusion of others); Mertens v. Hewitt
Associates, 508 U.S. 248, 256-58 & n.8 (1993) (holding that
“ ‘[e]quitable relief’ [in § 502(a)(3)] must mean something
less than all relief,” and refers only to “those categories of
relief that were typically available in equity (such as injunc-
tion, mandamus, and restitution, but not compensatory dam-
ages)).
2
[7] The Supreme Court’s decisions regarding § 502(a)(3)
highlight the traditional division between law and equity that
CGI TECHNOLOGIES AND SOLUTIONS v. ROSE 7233
evokes § 502(a)(3)’s authorization of “appropriate equitable
relief;” such relief must be based on relief traditionally avail-
able at equity. See Knudson, 534 U.S. at 216-17 (“It is easy
to disparage the law-equity dichotomy as ‘an ancient classifi-
cation’ and an ‘obsolete distinctio[n].’ Like it or not, however,
that classification and distinction has been specified by the
statute; and there is no way to give the specification meaning
—indeed, there is no way to render the unmistakable limita-
tion of the statue a limitation at all—except by adverting to
the differences between law and equity to which the statute
refers.”) (internal citations omitted).
The statutory term “appropriate equitable relief” thus
places an “unmistakable limitation” on the availability of
equitable relief, and the scope of this Congressionally-
established limitation is set by referring to the differences
between law and equity. A court must assess the degree to
which the traditional equitable defenses that Rose raises here,
namely the make-whole doctrine and the common fund doc-
trine, are applicable in delimiting those categories of relief
that were typically available in equity and that therefore hem
in what is “appropriate equitable relief” within the meaning of
§ 502(a)(3).
Our law previously has set some guidelines about equitable
relief in other contexts, but it is not a certainty that each prin-
ciple thus established should be considered to be incorporated
within the limitation of § 502(a)(3) that equitable relief be
“appropriate.” For example, “it is a general equitable principle
of insurance law that, absent an agreement to the contrary, an
insurance company may not enforce a right to subrogation
until the insured has been fully compensated for her injuries,
that is, has been made whole.” Barnes v. Indep. Auto. Dealers
Ass’n of Cal. Health & Welfare Benefit Plan, 64 F.3d 1389,
1395 (9th Cir. 1995). Under the common fund doctrine, “a lit-
igant or a lawyer who recovers a common fund for the benefit
of persons other than himself or his client is entitled to a rea-
sonable attorney’s fee from the fund as a whole.” Boeing Co.
7234 CGI TECHNOLOGIES AND SOLUTIONS v. ROSE
v. Van Gemert, 444 U.S. 472, 478 (1980). “The common-fund
doctrine reflects the traditional practice in courts of equity,
and it stands as a well-recognized exception to the general
principle that requires every litigant to bear his own attorney’s
fees.” Id. Both the make-whole doctrine and the common
fund doctrine are rooted in concerns about unjust enrichment,
a traditional principle of equitable relief. See id. (common
fund rule); Chandler v. State Farm Mut. Auto. Ins. Co., 589
F.3d 1115, 1119-29 (9th Cir. 2010) (make-whole rule). Tradi-
tionally at equity, it was within the province of the court to
consider concerns of unjust enrichment when fashioning equi-
table remedies such as an equitable lien or a constructive
trust, even where contract terms attempted to limit their appli-
cation. See, e.g., 1 Palmer, The Law of Restitution § 1.1, at 4
(“In equity the principal remedy [to unjust enrichment] is con-
structive trust; but equitable lien, subrogation, and accounting
are techniques frequently used to prevent unjust enrichment”);
4 Palmer, The Law of Restitution § 23.18(d) at 472-74 (stat-
ing that “the principle of unjust enrichment . . . should serve
to limit the effectiveness of contract provisions which in
terms provide for reimbursement out of the insured’s tort
recovery without regard to whether or the extent to which,
that recovery includes medical expense”).
Relying on our decision in Barnes v. Indep. Auto. Dealers
Ass’n of Cal. Health & Welfare Benefit Plan, CGI argues that
the district court must remain faithful to the terms of the Plan
that disclaim the application of traditional equitable defenses.
64 F.3d 1389 (9th Cir. 1995). In Barnes, we stated that “[w]e
would not apply the interpretive ‘make-whole rule’ as a ‘gap-
filler’ if the subrogation clause in the Plan document specifi-
cally allowed the Plan the right of first reimbursement out of
any recovery Barnes was able to obtain even if Barnes were
not made whole.” Id. at 1392. Our discussion in Barnes is not
dispositive of the question we decide today, however, because
the relief sought in Barnes was purely legal in nature, namely
a beneficiary’s challenge of the plan’s denial of benefits, and
so appropriately subject to our observation that the parties
CGI TECHNOLOGIES AND SOLUTIONS v. ROSE 7235
could contract out of the application of the make-whole doc-
trine. Here, however, we consider the scope of “appropriate
equitable relief” under § 502(a)(3), and whether the district
court is bound by restrictive contract terms in its formulation
of equitable relief. Neither Congress nor the Supreme Court
has said that any such contractual limitation necessarily cur-
tails the district court’s equitable powers under § 502(a)(3).
To the contrary, the Court in Amara reasoned that the district
court, sitting as a court of equity in a § 502(a)(3) action, need
not honor the express terms of the Plan where traditional
notions of equitable relief so require. See Amara, 131 S. Ct.
at 1879 (stating that contract reformation is within the equita-
ble powers of the district court); see also US Airways v.
McCutchen, 663 F.3d 671, 679 (3rd Cir. 2011) (“The impor-
tance of the written benefit plan is not inviolable, but is
subject—based upon equitable doctrines and principles—to
modification and, indeed, equitable reformation under
§ 502(a)(3).” (citing Amara, 131 S. Ct. at 1879)).
3
[8] The Circuits have split on whether strict adherence to
the terms of an ERISA plan that disclaims the application of
traditional equitable defenses constitutes “appropriate equita-
ble relief.” Several circuits, and notably the Eleventh, Eighth,
Seventh and Fifth Circuits, have stressed the primacy of an
ERISA plan’s express language, and have decided that in bal-
ancing the equities, simple contract interpretation that pro-
vides for full reimbursement per the plain terms of a plan that
disclaims the application of traditional equitable defenses
such as the make-whole doctrine and the common fund doc-
trine, constitutes “appropriate equitable relief” under
§ 502(a)(3). See, e.g., Zurich Am. Ins. Co. v. O’Hara, 604
F.3d 1232, 1238 (11th Cir. 2010) (stating that the application
of “federal common law to override the Plan’s controlling
language, which expressly provides for reimbursement
regardless of whether [the beneficiary] was made whole by
his third-party recovery, would frustrate, rather than effectu-
7236 CGI TECHNOLOGIES AND SOLUTIONS v. ROSE
ate, ERISA’s ‘repeatedly emphasized purpose to protect con-
tractually defined benefits.’ ”); Admin. Comm. of Wal-Mart
Stores, Inc. Associates’ Health & Welfare Plan v. Shank, 500
F.3d 834, 839 (8th Cir. 2007) (stating that “[n]othing in the
statute suggests Congress intended that section 502(a)(3)’s
limitation of the [plan’s] recovery to “appropriate equitable
relief” would upset these contractually-defined expectations
[such as a make-whole rule disclaimer]. Indeed, ERISA’s
mandate that ‘[e]very employee benefit plan shall be estab-
lished and maintained pursuant to a written instrument,’ 29
U.S.C. § 1102(a)(1), establishes the primacy of the written
plan”); Administrative Committee of Wal-Mart Stores, Inc.
Assocs.’ Health & Welfare Plan v. Varco, 338 F.3d 680, 691-
92 (7th Cir. 2003) (stating that in an action under § 502(a)(3),
“it is inappropriate to fashion a common law rule that would
override the express terms of a private plan unless the overrid-
den plan provision conflicts with statutory provisions or other
policies underlying ERISA . . . . Those cases which have
applied the federal common fund doctrine in the favor of indi-
vidual ERISA participants have done so, correctly, only in the
absence of controlling plan language”); Bombadier Aerospace
Employee Welfare Benefits Plan v. Ferrer, Poirot and Wans-
brough, 354 F.3d 348, 361 (5th Cir. 2003) (stating that “the
Plan’s terms not only give it the right to recover benefits ‘to
the extent of any and all’ settlement payments, but explicitly
state that the participant must bear the fees and costs associ-
ated with his tort action . . . neither the federal nor Texas com-
mon fund doctrine may be invoked to prevent or reduce the
Plan’s recovery of the funds that it advanced to [the benefi-
ciary] up to the full amount of his recovery from the tortfea-
sor”); see also Wal-Mart Stores, Inc. Assocs.’ Health and
Welfare Plan v. Wells, 213 F.3d 398, 402 (7th Cir. 2000)
(suggesting that in an action under § 502(a)(3), the parties to
an ERISA plan could, by contract, alter the “background of
common-sense understandings and legal principles [such as
the common fund doctrine] that . . . operate as default rules
CGI TECHNOLOGIES AND SOLUTIONS v. ROSE 7237
to govern in the absence of a clear expression of the parties’
intent that they not govern”).
[9] By contrast, only the Third Circuit, in US Airways v.
McCutchen, has concluded “that Congress intended to limit
the equitable relief available under § 502(a)(3) through the
application of equitable defenses and principles that were typ-
ically available in equity” despite the negation of such
defenses and principles in an ERISA plan. 663 F.3d at 676.
McCutchen, who participated in an ERISA-governed
employee welfare benefits plan, was injured in a car accident
and the plan paid $66,866 in medical expenses on his behalf.
Id. at 672. McCutchen recovered $110,000 from third parties,
and the plan, based on a subrogation clause in the plan requir-
ing full reimbursement, sought to recover the full $66,866
from McCutchen even though McCutchen’s net recovery was
less than that amount after paying a 40% contingency fee to
his attorney. Id. at 673.
Like Rose here, McCutchen argued that notwithstanding
the plan terms, it was unfair to grant the plan full reimburse-
ment because he was not fully compensated for his injuries
and the plan did not contribute to attorneys’ fees and costs. Id.
at 674. The Third Circuit agreed, finding no indication in
ERISA or in the Supreme Court’s jurisprudence that Congress
intended to limit relief under § 502(a)(3) to “traditional equi-
table categories” yet not limit relief “by other equitable doc-
trines and defenses that were traditionally applicable to those
categories.” Id. at 676-79.
[10] We agree with the Third Circuit that under
§ 502(a)(3), the district court, in granting “appropriate equita-
ble relief,” may consider traditional equitable defenses not-
withstanding express terms disclaiming their application. Id.
at 679 (stating that in equity, “contractual language was not
as sacrosanct as it is normally considered to be when applying
breach of contract principles at common law . . . [, and] equi-
table principles can apply even where no one has committed
7238 CGI TECHNOLOGIES AND SOLUTIONS v. ROSE
a wrong”). While a weighing of the equities, including the
consideration of equitable defenses, might support that full
reimbursement per the Plan’s terms is “appropriate equitable
relief,” like the Third Circuit we disagree with the other cir-
cuits to the extent that they have held that § 502(a)(3) categor-
ically excludes the application of traditional equitable
defenses where the plan disclaims their application and
requires reimbursement as set by the plan. Id. at 678. Con-
gress in § 502(a)(3) empowered district courts to consider
equitable principles in granting injunctive relief to a plan fidu-
ciary against a plan beneficiary, and we will not read out of
the statute the limitation that equitable relief be appropriate.
CGI argues, however, that under Sereboff “appropriate
equitable relief” is consistent with simple interpretation of the
express terms of the plan provision in question requiring full
reimbursement without reference to traditional limitations to
recovery such as the make-whole doctrine and the common
fund doctrine. In Sereboff, the parties did not raise the issue
below, and the Court expressly declined to address whether
“appropriate equitable relief” encompasses equitable
defenses such as the make-whole doctrine or the common
fund doctrine. Sereboff, 547 U.S. at 368 n.2. CGI would have
us decide that the parties may, by contract, limit the district
court’s ability, in its capacity as a court of equity under
§ 502(a)(3), to fashion “appropriate equitable relief” along
these lines. But we are not persuaded that Congress intended
to permit a plan to so limit the equitable powers of the district
court in an action under § 502(a)(3). Instead, without limita-
tion, the Supreme Court has said that “[§ ] 502(a)(3) invokes
the equitable powers of the District Court.” See Amara, 131
S. Ct. at 1880. In other contexts the Supreme Court has made
clear that a federal court’s powers of traditional equitable
relief are broad. See, e.g., Brown v. Plata, 131 S. Ct. 1910,
1944 (2011) (stating that “[o]nce invoked, the scope of a dis-
trict court’s equitable powers . . . is broad, for breadth and
flexibility are inherent in equitable remedies”) (internal quota-
tion marks omitted); Grupo Mexicano de Desarrollo S.A. v.
CGI TECHNOLOGIES AND SOLUTIONS v. ROSE 7239
Alliance Bond Fund, Inc., 527 U.S. 308, 318-19, 322 (1999)
(stating “that equity is flexible; but in the federal system, at
least, that flexibility is confined within the broad boundaries
of traditional equitable relief.”); Swann v. Charlotte-
Mecklenburg Bd. of Educ., 402 U.S. 1, 12 (1970) (stating that
“[o]nce a right and a violation have been shown, the scope of
a district court’s equitable powers to remedy past wrongs is
broad, for breadth and flexibility are inherent in equitable
remedies”); Porter v. Warner Holding Co., 328 U.S. 395, 398
(1946) (stating that “[u]nless otherwise provided by statute,
all the inherent equitable powers of the District Court are
available for the proper and complete exercise of that jurisdic-
tion”); Hecht Co. v. Bowles, 321 U.S. 321, 330 (1944) (stating
that “[t]he essence of equity jurisdiction has been the power
of the Chancellor to do equity and to mould each decree to the
necessities of the particular case. Flexibility rather than rigid-
ity has distinguished it”). We, of course, have said the same.
See, e.g., S.E.C. v. Platforms Wireless Int’l Corp., 617 F.3d
1072, 1096 (9th Cir. 2010) (stating that “a district court has
broad equity powers to order the disgorgement of ill-gotten
gains obtained through the violation of the securities law”)
(internal quotation marks and alteration omitted); United
States v. Alisal Water Corp., 431 F.3d 643, 654 n.5 (9th Cir.
2005) (recognizing “district court’s broad authority to enforce
federal laws through exercise of its equitable powers”).
Absent an express indication that either Congress or the
Supreme Court has limited a district court’s powers to fashion
“appropriate equitable relief,” as contended by CGI, we
decline to read such a contractual limitation into a statutory
term. See Hecht, 321 U.S. at 330 (stating that “if Congress
desired to make such an abrupt departure from traditional
equity practice as is suggested, it would have made its desire
plain”).
[11] We do not see good reason in interpreting § 502(a)(3)
to recede from the traditional broad powers of a court in
equity. We therefore hold that the parties may not by contract
deprive the district court of its power to act as a court in
7240 CGI TECHNOLOGIES AND SOLUTIONS v. ROSE
equity in a § 502(a)(3) action. Contract terms should be con-
sidered by the court in assessing what is the proper scope of
equitable relief. But notwithstanding the express terms of the
Plan disclaiming the application of the make-whole doctrine
and the common fund doctrine, it is within the district court’s
broad equitable powers under § 502(a)(3) not to give those
provisions a controlling weight in fashioning “appropriate
equitable relief.”
We express no opinion at this time on what result the dis-
trict court, in exercising those powers, should reach. We do
not restrict the ability of the district court to hold further hear-
ings and take further evidence relevant to how the phrase “ap-
propriate equitable relief” should be interpreted in § 502(a)(3)
and applied in this case to the claim of CGI against Rose.
III
[12] We AFFIRM the district court’s grant of summary
judgment in favor of NLE, dismissing NLE from the action.
However, because we see no indication that in fashioning “ap-
propriate equitable relief” for CGI, the district court did more
than interpret the plain terms of the reimbursement provision,
and no indication that the district court considered traditional
equitable principles in assigning responsibility to CGI for
attorneys’ fees and costs, we VACATE the judgment in favor
of CGI, VACATE the judgment that NLE deduct fees and
costs from CGI’s entitlement, and REMAND to the district
court for such proceedings as are appropriate for the district
court to determine what is “appropriate equitable relief” in
context here. In doing so the district court should apply tradi-
tional equitable principles including consideration of tradi-
tional equitable defenses. The amount to which CGI is
entitled to recover under § 502(a)(3) and the proportional
amount of attorneys’ fees and costs for which CGI is respon-
sible under § 502(a)(3) must be consistent with principles of
equity and not merely contract.
CGI TECHNOLOGIES AND SOLUTIONS v. ROSE 7241
AFFIRMED in part and VACATED and REMANDED in
part for further proceedings consistent with our decision. Each
party shall bear its own costs.
SCHROEDER, Circuit Judge, concurring:
I concur in Judge Gould’s good opinion. It reaches the right
result, and reconciles ERISA’s statutory language, giving
courts power to fashion “appropriate equitable relief,” ERISA
§ 502(a)(3), with Supreme Court discussions of the statute.
The ERISA Plan document in this case provided that if the
Plan paid out benefits to a beneficiary who later recovered tort
damages from a third party, the Plan would have a first prior-
ity for total reimbursement from the recovery—even when, as
in this case, the recovery represented a small fraction of the
beneficiary’s damages and the beneficiary would be left with
very little. This unfairness was magnified by a provision pur-
porting to disclaim the equitable common fund doctrine—a
provision that, if enforced, would mean the Plan would not
have to contribute to the fees of the attorneys who recovered
the money from which the Plan would be reimbursed.
The district court considered itself bound to apply the pro-
visions of the Plan document. The result—leaving the benefi-
ciary here vastly undercompensated for her actual damages,
and the Plan unjustly enriched—is manifestly unfair. It is also
inconsistent with Congress’s purpose in enacting ERISA:
“promot[ing] the interests of employees and their beneficia-
ries in employee benefit plans.” Shaw v. Delta Air Lines, Inc.,
463 U.S. 85, 90 (1983). Thus in fashioning “appropriate equi-
table relief” under ERISA § 502(a)(3), the district court is not
necessarily bound to the terms of the Plan document. “The
power to reform contracts (as contrasted with the power to
enforce contracts as written) is a traditional power of an
equity court, not a court of law, and was used to prevent
fraud.” CIGNA Corp. v. Amara, 131 S. Ct. 1866, 1879 (2011).
7242 CGI TECHNOLOGIES AND SOLUTIONS v. ROSE
The Third Circuit recently decided a case materially identical
to this one, and refused to enforce the terms of the Plan as
written. It said:
“[T]he judgment requiring McCutchen to provide
full reimbursement to US Airways constitutes inap-
propriate and inequitable relief. Because the amount
of the judgment exceeds the net amount of McCutc-
hen’s third-party recovery, it leaves him with less
than full payment for his emergency medical bills,
thus undermining the entire purpose of the Plan. At
the same time, it amounts to a windfall for US Air-
ways, which did not exercise its subrogation rights
or contribute to the cost of obtaining the third-party
recovery. Equity abhors a windfall.”
US Airways, Inc. v. McCutchen, 663 F.3d 671, 679 (3d Cir.
2011).
We are therefore correctly vacating the district court’s
judgment and remanding for the district court to fashion “ap-
propriate equitable relief,” pursuant to § 502(a)(3). “Appro-
priate” relief would presumably include applying the
equitable make-whole doctrine, or fashioning other fair relief
by reducing the Plan’s recovery to an amount equivalent to
the proportion of the beneficiary’s actual damages that she
recovered. Traditional equitable remedies would also appear
to support requiring the Plan to contribute to the firm’s fees
under the common fund doctrine. The majority recognizes
such traditional equitable principles should apply to the facts
presented in this case.
BEISTLINE, Chief District Judge, dissenting:
I respectfully dissent. While the majority reaches a fair
result under the facts presented, it does so at the expense of
CGI TECHNOLOGIES AND SOLUTIONS v. ROSE 7243
the plain language of the Plan and effectively usurps the role
of Congress in establishing restrictions on how such plans
may manage themselves. In my view, the District Court
granted “appropriate equitable relief” when it enforced the
reimbursement provision of the Plan. The majority expresses
no opinion as to whether CGI is entitled to reimbursement,
but simply states that, in the interest of eliminating unjust
enrichment, the District Court should have considered the
make-whole doctrine and the common fund doctrine in its
determination of what constituted an appropriate equitable
remedy under 29 U.S.C. § 1132(a)(3). Yet, in reaching its
conclusion, the majority disregards the fact that both doctrines
are disclaimed in the language of the Plan. By expressly aban-
doning both doctrines, the Plan precludes their application.
While I can understand the merits of these doctrines, I do not
believe that we can now inject principles into the Plan that the
Plan purposefully and specifically excluded. I do not view the
“appropriate equitable relief” provision as a mechanism for
courts to rewrite ERISA plans. Such an interpretation invites
litigation and unnecessarily complicates management of these
plans. If Congress intended ERISA plans to include these
equitable defenses notwithstanding the express terms of the
plan disclaiming them, it certainly could have said so.
I would, therefore, AFFIRM the District Court to the extent
it applied the plain language of the Plan and REVERSE to the
extent that it did not.