When One Door Closes, Another Opens… Maybe. Fourth Circuit Holds That Surcharge Is Not Equitable Relief Available Under ERISA But Paves the way for Unjust Enrichment Claims

In an ERISA case for wrongful denial of health insurance benefits, the U.S. Court of Appeals for the Fourth Circuit addressed when a plaintiff may recover monetary relief under §§ 502(a)(1)(B) and (a)(3). The Fourth Circuit unsurprisingly held that ERISA § 502(a)(1)(B) limits recovery to benefits due under the terms of a plan, and a plaintiff cannot recover the cost of a denied surgery because the cost is not a “benefit” due; coverage for the cost, and payment to the provider, is the benefit. Unless a plaintiff pays the bill first, the plaintiff cannot recover the cost from an insurer.

The court’s discussion of the § 502(a)(3) claim was not so straight-forward, however, and ultimately much more important. The Fourth Circuit held that § 502(a)(3), which expressly permits only “appropriate equitable relief,” does allow some forms of monetary relief (traditionally thought of as legal, and not equitable), but prohibits others.

In Rose, the plaintiff sought to recover the cost of heart surgery for her deceased son. She brought two claims, one under ERISA § 502(a)(1)(B), and a second under ERISA § 502(a)(3). She requested payment for the cost of surgery, and also some amount for the defendants’ alleged “unjust enrichment.” A claim under ERISA § 502(a)(1)(B) only allows recovery of benefits due under the terms of a plan, and the health-insurance plan’s express benefits did not include payment of cash to participants. The court explained that if the plaintiff had paid the surgery costs out-of-pocket, then the court could award reimbursement as benefits. But the plaintiff had not alleged that she had paid, and thus the plan did not entitle her (or her son) to a cash payment.

With respect to ERISA § 502(a)(3), that is a claim for “appropriate equitable relief” to remedy an ERISA or plan breach or enforce ERISA or the terms of a plan. In perhaps the Fourth Circuit’s most in-depth discussions of equitable remedies available under ERISA to date, the court addressed the meaning of “equitable” under ERISA § 502(a)(3). The court began by extensively examining the Supreme Court’s prior decisions interpreting ERISA § 502(a)(3), in which the Supreme Court explained that ERISA § 502(a)(3) allows only those remedies that were “traditionally” available in equity. To determine what remedies were traditionally available in equity, courts had to look to the days of the divided bench, when courts of equity were separate from courts of law (that was prior to 1928 in U.S. federal courts).

Yet even in the days of the divided bench, courts of equity heard two types of cases: cases in which courts of equity had “exclusive” jurisdiction, such as trust-law cases, and cases in which courts of equity had “concurrent” jurisdiction with courts of law. The Fourth Circuit determined that the “traditionally” available remedies were those available in “concurrent” jurisdiction cases, not “exclusive” jurisdiction cases.

To be sure, the court went to great lengths to address the Supreme Court decision in which the Supreme Court suggested that “make-whole, loss-based, monetary relief” might be available under § 502 (a)(3). Make-whole monetary relief was not available in concurrent jurisdiction cases, calling into question whether the Supreme Court would agree with limiting § 502(a)(3) remedies to only those available in concurrent-jurisdiction cases. The Fourth Circuit explained that the Supreme Court’s Amara language was merely dicta, and it departed from the Supreme Court’s rulings in Great-West Life & Annuity Ins. Co. v. Knudson1, Mertens v. Hewitt Assocs.2 and Montanile v. Bd. of Trs.3 Furthermore, the Supreme Court has since backed away from “make whole relief” in subsequent decisions.

Thus, in the Fourth Circuit’s view, ERISA § 502(a)(3) permits a specific remedy, including for monetary relief, if it was ‘typically available in equity,’ which means that “a court of equity could have awarded it in a concurrent-jurisdiction case.” A “surcharge,” however, which the Fourth Circuit described as “a remedy essentially equivalent to money damages” that “subjected the trustee to personal liability based on the plaintiff’s losses”, was not a remedy that was “typically” available in courts of equity. It is a remedy that was available in exclusive-jurisdiction trust cases against a fiduciary. Therefore, it is unavailable under § 502 (a)(3).

A court of equity in a concurrent-jurisdiction case could, however, award money in very limited circumstances, namely when a plaintiff identified specific funds that he rightfully owned but that the defendant possessed as a result of unjust enrichment. Unjust enrichment, unlike surcharge, allows plaintiffs to recover based on “a defendant’s unjustly gained benefit rather than merely trying to recover their losses.” Put differently, under unjust enrichment, a plaintiff must “suffer some type of harm at the hands of the unjustly enriched that made him the rightful owner of the enrichment, [but] that harm did not have to be a tangible loss.”

Further, per the Supreme Court’s ruling in Great-West, the types of equitable remedies used to address unjust enrichment have their own requirements. Restitution, in the form of a constructive trust or equitable lien, can “remedy unjust enrichment, but it must be proprietary, not personal[.]” This means that “[t]he plaintiff cannot recover out of the defendant’s general assets. Instead, the plaintiff must (1) identify certain property or money ‘belonging in good conscience’ to him, and (2) that property must ‘clearly be traced to particular funds or property in the defendant’s possession.’” Plaintiffs must trace their harm back to some specific “thing,” because “equitable remedies . . . give or enforce a right to or over some particular thing rather than a right to recover a sum of money generally out of the defendant’s assets.”

In a footnote, the court also stated that “the funds sought need not have originated with the plaintiff. It is enough that the funds are an unjust benefit that rightfully belong to the plaintiff — either because they were stolen from him or because the defendant interfered with the plaintiff’s interest to get them.” It is curious that the court would state this in a footnote without further discussion about its implication in ERISA cases, because it might lend itself to misinterpretation. ERISA generally is limited in scope, and ERISA § 502(a)(3) does not simply allow equitable remedies without limitation. It remains to be seen how courts interpret this language.

There are additional issues with ERISA § 502(a)(3) that the court did not address. The court said little about what exactly plaintiffs needed to do to trace funds. The court also did not address other requirements and limitations in ERISA § 502(a)(3), such as the limitation on recovery to “other,” “appropriate” equitable relief, in order to redress a violation of ERISA or a plan or enforce ERISA or a plan.

So, the Fourth Circuit does not require an actual tracing to a plaintiff’s specific funds under these types of claims. But claims are strictly limited to equitable claims for equitable relief, traditionally available in courts of equity concurrent-jurisdiction cases. If a plaintiff believes that a defendant possesses any funds that should belong to the plaintiff, the plaintiff may be able to bring an ERISA § 502(a)(3) claim for unjust enrichment or other claim to recover restitutionary relief.


  1. 534 U.S. 204 (2002).
  2. 508 U.S. 248 (1993).
  3. 577 U.S. 136 (2016).

The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

About Author: Rick Pearl

A trusted authority on ERISA matters, Richard Pearl is passionate about representing trustees, plan sponsors, boards of directors, shareholders and service providers in high-stakes and complex ERISA matters. Rick has earned national recognition for his thought leadership, particularly in employee stock ownership plan (ESOP) litigation matters. He has an extensive knowledge of ERISA legislative history and complex issues. View all posts by

©2024 Faegre Drinker Biddle & Reath LLP. All Rights Reserved. Attorney Advertising.
Privacy Policy