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United States District Court, S.D. New York

February 3, 2004.


The opinion of the court was delivered by: BARBARA JONES, District Judge


At issue in this opinion is whether a pension trust fund can sue an ERISA pension participant for the return of moneys the trust improperly paid to him, pursuant to several remedies the Plaintiffs characterize as "equitable." The Court holds that if Defendant dissipated these funds, Plaintiffs may not obtain the remedies they seek.


  The following constitutes the undisputed facts of the case except where otherwise noted.

  Plaintiffs Robert Greenes, Justin McCarty, Lawrence Scuder, Bernard Pellegrino and Demos Demopoulos are the Trustees and Fiduciaries ("Trustees") of the Local 553 Pension Fund ("Fund") in which Defendant Joseph Adornato participated. This plan was governed both by the terms of the Pension Regulations/ Trust Page 2 Agreement and by ERISA, 29 U.S.C. § 1001, et seq.

  From January 1, 1986 through June 2000, Defendant received a monthly pension benefit from the Fund in the amount of $655.00. By letters dated May 12 and August 16, 200, the Fund notified Defendant that the Fund had committed an error in calculating his proper monthly benefit, and that he was in fact only entitled to $385.00 per month. The Fund therefore overpaid Defendant $270.00 per month over a sixteen year period, totaling $46,440.00. The Fund advised Defendant that he was required to return the $46,440.00.

  Defendant admits that the fund overpaid him $46,440.00, but to date, has failed and refused to pay this amount. On January 28, 2002, Plaintiffs filed a complaint in this Court, alleging the facts as stated above, and claiming (1) Defendant violated the terms of the Fund's Pension Plan and ERISA and should be enjoined to return the overpayments, (2) Plaintiffs were entitled to restitution and Defendant should be enjoined to return the overpayments, (3) Defendant was unjustly enriched and should be enjoined to return the overpayments, and (4) Defendant is holding the monies in constructive trust for the beneficiaries of the Fund and should be ordered to disgorge the monies to the Trustees. Both Plaintiffs and Defendants moved for summary judgment.

  Plaintiff does not dispute that he was overpaid the amount Page 3 of $46,440.00, and does not dispute that the Defendants have the standing and authority to pursue him for recovery of these funds. The only issue in this case is whether the Plaintiffs are entitled to recovery for the overpayments under ERISA and the governing law.


  ERISA Section 502(a)(3) confers authority upon fiduciaries to commence civil actions "to enjoin any act or practice which violates any provision of [ERISA Title I] or the terms of the plan . . . or to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of [ERISA Title I] or the terms of the plan." Gerosa v. Savista & Co., Inc., 329 F.3d 317, 320 (2d Cir. 2003)(quoting 29 U.S.C. § 1132 (a)(3)) (emphasis added). Fiduciaries, such as trustees of ERISA-based funds, have a duty to locate and reclaim trust fund assets that have been improperly taken or disbursed. Central States v. Central Transp., Inc., 472 U.S. 559, 572 (1985); Gerosa, 329 F.3d at 320.

  The core of the dispute here, however, is not whether ERISA authorizes suit against Defendant, but "rather whether the remedy the Plaintiffs seek falls within such `other appropriate equitable relief' as they may obtain" under Section 502. Gerosa, 329 F.3d at 321. Specifically, as the Supreme Court made clear in the recent opinion Great-West Life & Annuity Insurance Co. v. Page 4 Knudson, 534 U.S. 204, 210 (2002), a court must look to the "real nature" of the relief sought, and not just the "equitable" label put on it by the plaintiff.

  In Great-West, Petitioner insurance company sought reimbursement for insurance proceeds it previously paid to the Respondent, pursuant to the terms of the Plan that obligated the recipient of insurance proceeds to repay such moneys if the recipient later recovered at least that amount in a settlement or judgment., Id. at 207. Justice Scalia, delivering the majority opinion, drew a fine distinction between remedies that a court should consider equitable rather than legal, and clarified that even where a party seeks restitution, a court must still decide "whether it is legal or equitable [which] depends on the basis for the plaintiff'[s] claim and the nature of the underlying remedies sought." Id. at 214 (citations and quotation marks omitted); see also Neidich v. Estate of Neidich, 222 F. Supp.2d 357, 375 (S.D.N.Y. 2002) ("Restitution for unjust enrichment may be sought under ERISA only if the nature of the restitution is equitable, not legal.").

  Accordingly, a suit seeking to compel a defendant to pay a sum of money, whether by judgment or injunction, "[a]lmost invariably . . . are suits for `money damages,' as that phrase has traditionally been applied," and thus considered a remedy at law. Id. at 210 (quoting Bowen v. Massachusetts, 487 U.S. 879, 918-919 Page 5 (1988)); see also id. at 210-11 (rejecting Petitioners' request for an injunction because an injunction "to compel the payment of money past due under a contract," and "specific performance of a contract to pay money" were not remedies typically available at equity unless the injunction sought to prevent future losses); Gerosa, 329 F.3d at 321 ("Section 1132(a)(3) permits money awards only in very limited circumstances.").

  The Court's decision that Petitioners actually sought to "impose personal liability" on respondents turned on the fact that the Respondent was not in actual possession of the money Petitioners sought. Great-West, 534 U.S. 210. The Court explained that where a plaintiff could not assert title or right to possession of particular property, but nevertheless "might be able to show just grounds for recovering money to pay for some benefit the defendant had received from him, the plaintiff had a right to restitution at law." Id. at 213 (citations and quotation marks omitted). The Court contrasted restitution in equity, which is usually sought through constructive trusts or equitable liens, where money or property "identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant's possession." Id. at 213; see also Restatement of Restitution § 160 cmt. i ("[A] constructive trust no longer continues when the person chargeable as constructive trustee of property no longer holds the property or Page 6 other property which is its product.").

  Courts interpreting Great-West have likewise held that a money or property must be traceable to a particular fund or property in a defendant's possession in order for the remedy to be considered equitable rather than legal. See, e.g., De Pace v. Matsushita Elec. Corp., 257 F. Supp.2d 542 (E.D.N.Y. 2003) (citing Great-West for the proposition that a plaintiff's claims are at law when he or she seeks restitution of property or funds that have been dissipated, and that such restitution cannot be sought through imposition of a constructive trust or equitable lien); Neidich, 222 F. Supp.2d at 375 ("The money already dispersed to [defendants] can not be recovered in equity pursuant to ERISA, § 502(a)(3), because these disbursements can no longer be traced to a particular fund."); Primax Recoveries Inc. v. Carey, 247 F. Supp.2d 337, 341-42 n.6 (S.D.N.Y. 2002) (suggesting that a case should be dismissed for failure to state a claim where a plaintiff seeks restitution of funds that have been dissipated or cannot be traced).

  In light of Great-West and its progeny, Plaintiffs state that they "seek statutory relief" rather than "enforcement of a contractual obligation," and otherwise maintain that all of the remedies that they seek are equitable rather than legal. (Plaintiffs' Mem. of Law in Support of its Mot. for Summ. J., dated Nov. 21, 2002, at 2). The Court, however, is not convinced. Page 7

  As the case law makes' clear, if Defendant dissipated the money he received from Plaintiffs, regardless of whether or not the receipt of the money could, at one time, have been considered unjust enrichment, the remedies sought by Plaintiffs would be legal because they would impose personal liability on Defendant.

  Defendant alleges — but provides no proof — that he dissipated these funds. (See Defendant's Mem. in Support of his Mot. for Summ. J., dated Sept. 3, 2002, at 8)("Said money is not being held in constructive trust but has in fact[] been dissipated by Defendant . . . over a period of 16 years beginning in 1986."). In order to reach a final resolution of the parties' claims, however, they must submit proof as to whether Defendant did in fact dissipate these funds.

  Accordingly, the Court directs the parties to conduct limited discovery on this issue and to confer with each other regarding the scheduling of this discovery. The parties are also directed to submit to the Court in writing a schedule for discovery and motions, if any, on or before Friday, February 13, 2004.



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