By a vote of 5-4, the Supreme Court ruled 1/8/02 that an action by an ERISA fiduciary for reimbursement of payments made to a beneficiary of an ERISA plan is an action for legal relief, not equitable relief, and is therefore not covered under 29 U.S.C. § 1132(a)(3). After an automobile accident left Janette Knudson a paraplegic, her health plan paid benefits totaling approximately $411,000 to her medical providers. The plan included a provision entitling it to recover third-party benefits paid to Knudson for her medical expenses. After Knudson settled a lawsuit related to the accident, the plan sought reimbursement for its medical expense payments. The Supreme Court affirmed the Ninth Circuit's ruling and held that a reimbursement action does not seek equitable relief, and that federal courts therefore lack jurisdiction under § 1132(a)(3). The dissenting justices thought Congress did not mean to perpetuate the obsolete English-based distinction between legal and equitable remedies in this part of ERISA.
The Court’s opinion means that ERISA trustees must generally try to obtain their remedies in cases like this in state court, although many such suits may be prohibited by state law. The decision will make it harder for ERISA plan administrators to obtain reimbursement of health benefits paid to beneficiaries that are also compensated by third parties.