United States District Court, S.D. New York
February 3, 2004.
ROBERT GREENES, JUSTIN McCARTHY, LAWRENCE SCUDER, BERNARD PELLEGRINO, and DEMOS DEMOPOLOUS, as Trustees and Fiduciaries of the LOCAL 553 PENSION TRUST FUND, Plaintiffs,
JOSEPH ADORNATO, Defendant
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
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
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
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
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.
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
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
(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
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.
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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