The Court is obliged to dismiss this action because Plaintiff has ultimately pleaded himself out of court. . . . Notably, Defendant has not pleaded that Plaintiff, in seeking to recoup and recouping the overpayments, violated either ERISA or the Plan.
Hesse v. Case New Holland Indus. (E.D. Wis. 2021)

Recovering plan overpayments will frequently lead to controversy as no plan participant wants to hear that he or she has been paid too much. In this case, based on an internal audit, the defendant discovered that it had been overpaying Plaintiff since 1999 in its plan distributions, totaling $15, 640.04. To recover the the alleged overpayments, the Defendant reduced Plaintiff’s monthly benefit by $63.32. The plaintiff appealed the plan’s decision to no avail.

The matter of benefit entitlement in this context suggests a claim under § 1132(a)(3)(B). That statutory provision provides that “a civil action may be brought . . . by a participant or beneficiary . . . to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan . . .”

But the plaintiff framed the issue in terms of equitable relief.

Plaintiff claims that, pursuant to the doctrine of laches, Defendant (1) waived any entitlement to overpayment recovery; (2) must reimburse Plaintiff for any overpayments Defendant recovered thus far; and (3) is enjoined from any further repayment recovery. Plaintiff also alleges that Defendant ‘is estopped from asserting or collecting any further overpayment recovery from the Plaintiff or his beneficiaries, to the extent any beneficiary is entitled to payments after [Plaintiff’s] death.‘”

The plan asserted that Plaintiff has failed to state a claim for equitable relief under § 1132(a)(3)(B) and noted the plaintiff did not make a case that the plan did not authorize the recoupment.

The court held for the defendant, finding the case controlled by a prior Seventh Circuit opinion.

The Court directs the parties to a Seventh Circuit decision, Kolbe & Kolbe Health & Welfare Benefit Plan v. Medical College of Wisconsin, Inc., 657 F.3d 496 (7th Cir. 2011), that makes clear that Plaintiff’s failure to allege that Defendant violated ERISA or the Plan forecloses Plaintiff from bringing his claims in federal court.

In Kolbe, a health plan sued medical care providers to recover amounts that the plaintiffs erroneously paid to the defendants. The error arose because the patient was determined not to be properly covered by the plan under its terms of eligibility.

“The plaintiffs brought a claim for equitable relief under 29 U.S.C. § 1132(a)(3). Id. However, “the premise of [the plaintiffs’] allegation is that [the employee’s daughter] is not and never was a Covered Person, ” and, thus, she was ineligible for plan coverage. Id. at 502. Because the plan sought to recoup money from the hospital that it had paid out on behalf of an uncovered person, the Seventh Circuit determined that “the ‘term’ of the Plan that plaintiffs allegedly seek to ‘enforce’ through § 502(a)(3) has nothing to do with this suit.” Id. at 503. The court reasoned that because “plaintiffs are seeking equitable relief to enforce a term of its [sic] Plan that by its [sic] own allegations was never violated and cannot be enforced with regard to the medical treatment [the uncovered person] received, ” the plaintiffs’ case was not to enforce the terms of a plan under § 1132(a)(3)(B) or even ERISA.”

The court applied Kolbe to the facts, stating that:

“Like in Kolbe, Plaintiff is seeking equitable relief from Defendant under ERISA, without alleging that Defendant ever violated either ERISA or the Plan. Moreover, Plaintiff does not allege that either ERISA or the Plan prohibit Defendant from recouping payment from Plaintiff. The Court agrees with Defendant’s counsel that Plaintiff tacitly admits that, pursuant to the Plan, Defendant is entitled to recoup the benefits paid to him.”

“Kolbe makes clear that a violation of either ERISA or an ERISA-covered plan’s terms is a requirement for one to obtain relief under § 1132(a)(B)(3). Based on the foregoing, the Court finds that Plaintiff has failed to state a claim under applicable federal law upon which relief may be granted.”

Note: Under ERISA, “[a] civil action may be brought . . . by a participant . . . to obtain other appropriate equitable relief to redress [violations of ERISA or of the terms of a plan] or . . . to enforce any [ERISA provision] or the terms of the plan.” 29 U.S.C. § 1132(a)(3)(B). Thus, “Plaintiff’s failure to state a § 1132(a)(3)(B) claim is, undoubtedly, the end of the matter.”

Federal Common Law – Again referring to Kolbe, the court disposed of the various equitable claims stating:

“Similarly, because Plaintiff has not alleged that Defendant violated ERISA or an ERISA-covered plan, the Court does not need to determine whether Plaintiff has adequately stated any federal common law claims, nor does the Court need to develop the same.”

Practice Tip – When challenging overpayments, the plaintiff must begin with the premise that the plan has violated ERISA in some respect. Kolbe is not actually so much an exact analogy as the court seems to suggest, however, since the plaintiff was not ever a participant on those facts. Here, the plaintiff was admittedly a plan participant – but the court did not find that the plaintiff challenged the plan’s interpretation of the plan document.