Kaufman v. Unum Life Insurance Company et al

Filing 77

ORDER that Unums motion for summary judgment 55 is GRANTED IN PART AND DENIED IN PART on the basis that while Unum is entitled to summary judgment on Kaufmans claims for declaratory relief and breach of the employee benefit plan, Unum is not entit led to summary judgment on its counterclaims for equitable restitution pursuant to 29 U.S.C. § 1132(a)(3), unjust enrichment, and constructive trust. Kaufmans cross-motion for summary judgment 64 is GRANTED IN PART AND DENIED IN PART on the ba sis that while Kaufman is entitled to summary judgment on Unums counterclaims, he is not entitled to summary judgment on Kaufmans claims. Clerk to enter Judgment. Signed by Judge Edward C. Reed, Jr on 7/18/11. (Copies have been distributed pursuant to the NEF - ECS)

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1 2 3 4 UNITED STATES DISTRICT COURT DISTRICT OF NEVADA 5 6 7 JOSEPH A. KAUFMAN, M.D., 8 9 10 11 12 13 14 15 16 17 18 ) ) ) Plaintiff, ) ) vs. ) ) UNUM LIFE INSURANCE COMPANY OF ) AMERICA, a Maine corporation, ) ) Defendant. ) ___________________________________) ) UNUM LIFE INSURANCE COMPANY OF ) AMERICA, a Maine corporation, ) ) Counterclaimant, ) vs. ) ) JOSEPH A. KAUFMAN, M.D., ) ) Counterdefendant. ) ) 2:06-CV-00621-ECR-LRL Order 19 This action arises out of a dispute over an ERISA plan 20 providing long-term disability benefits. Now pending are a motion 21 for summary judgment (#55) filed by Defendant, and a cross-motion 22 for summary judgment (#64) filed by Plaintiff. The motions are 23 ripe, and we now rule on them. 24 25 I. Factual and Procedural Background 26 Plaintiff Joseph A. Kaufman, M.D. (“Kaufman”) worked as a 27 cardiologist until 1998, when he suffered orthopaedic and 28 1 neurological injuries which have prevented him from working as a 2 cardiologist. (Second Am. Compl. ¶ 9 (#18).) Since the injuries, 3 Kaufman has worked in an administrative position. (Id.) Kaufman 4 was insured under a long-term disability benefits plan (“the Plan”) 5 issued by Defendant Unum Life Insurance Company of America (“Unum”). 6 (Id. ¶ 6-8.) The Plan is an employee welfare benefit plan governed 7 by the Employee Retirement Income Security Act of 1974 (“ERISA”). 8 (D’s Mot. for Summary Judgment at 2 (#55).) Kaufman submitted a 9 claim to Unum for long-term disability benefits. 10 Compl. ¶ 10 (#18).) (Second Am. Unum determined that Kaufman was eligible for 11 benefits, with certain reductions pertaining to his current 12 earnings. (D’s Mot. for Summary Judgment at 2 (#55).) Unum 13 terminated all benefit payments when Kaufman’s income reached eighty 14 percent of Kaufman’s pre-disability income. (Id.) Unum also 15 determined that there had been an overpayment of benefits due to 16 errors in Kaufman’s reported income. (Id.) Kaufman disputes that 17 there was any overpayment, and claims that his benefits should never 18 have been reduced by his post-disability income under the terms of 19 the long-term disability plan issued by Unum. (Second Am. Compl. ¶ 20 11 (#18).) 21 On April 13, 2006, Kaufman sued Unum in Clark County, Nevada. 22 On May 18, 2006, Unum removed (#1) the action from the Clark County 23 Nevada District Court to the United States District Court for the 24 District of Nevada. On May 11, 2007, Kaufman filed an amended 25 complaint (#11), along with the Cardiovascular Center of Southern 26 Nevada Long Term Disability Plan as an additional plaintiff. 27 25, 2007, Unum filed its answer (#12) to the amended complaint On May 28 2 1 (#11), with counterclaims for equitable restitution and unjust 2 enrichment for the amount of the allegedly overpaid benefits. On 3 September 14, 2007, Kaufman filed his second amended complaint 4 (#18), along with a stipulation that all claims of the 5 Cardiovascular Center of Southern Nevada Long Term Disability Plan 6 were being dismissed with prejudice. On October 4, 2007, Unum filed 7 its answer (#21) to the second amended complaint (#18). 8 On September 10, 2010, Unum filed its motion for summary 9 judgment (#55). On November 5, 2010, Kaufman filed his response and 10 cross-motion for summary judgment (##63, 64) to Unum’s motion for 11 summary judgment (#55). On December 3, 2010, Unum filed its reply 12 (#67) in support of its motion for summary judgment (#55) and 13 response (#68) to the cross-motion for summary judgment (#64). On 14 December 17, 2010, Kaufman filed a reply (#69) in support of his 15 cross-motion for summary judgment (#64). On January 31, 2011, Unum 16 filed a notice of supplemental authority (#70) relating to its 17 motion for summary judgment (#55). On February 3, 2011, Kaufman 18 filed his response (#71) to Unum’s notice of supplemental authority 19 (#70). On July 5, 2011, Kaufman filed a notice of supplemental 20 authority (#74). On July 7, 2011, a hearing was held on the motion 21 for summary judgment (#55) and the cross-motion for summary judgment 22 (#64). 23 24 II. Standard of Review 25 A. Legal Standard for Summary Judgment 26 Summary judgment allows courts to avoid unnecessary trials 27 where no material factual dispute exists. 28 3 N.W. Motorcycle Ass’n v. 1 U.S. Dep’t of Agric., 18 F.3d 1468, 1471 (9th Cir. 1994). The court 2 must view the evidence and the inferences arising therefrom in the 3 light most favorable to the nonmoving party, Bagdadi v. Nazar, 84 4 F.3d 1194, 1197 (9th Cir. 1996), and should award summary judgment 5 where no genuine issues of material fact remain in dispute and the 6 moving party is entitled to judgment as a matter of law. 7 CIV. P. 56(c). FED . R. Judgment as a matter of law is appropriate where 8 there is no legally sufficient evidentiary basis for a reasonable 9 jury to find for the nonmoving party. FED . R. CIV . P. 50(a). Where 10 reasonable minds could differ on the material facts at issue, 11 however, summary judgment should not be granted. Warren v. City of 12 Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995), cert. denied, 116 S.Ct. 13 1261 (1996). 14 The moving party bears the burden of informing the court of the 15 basis for its motion, together with evidence demonstrating the 16 absence of any genuine issue of material fact. 17 Catrett, 477 U.S. 317, 323 (1986). Celotex Corp. v. Once the moving party has met 18 its burden, the party opposing the motion may not rest upon mere 19 allegations or denials in the pleadings, but must set forth specific 20 facts showing that there exists a genuine issue for trial. 21 v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Anderson Although the 22 parties may submit evidence in an inadmissible form — namely, 23 depositions, admissions, interrogatory answers, and affidavits — 24 only evidence which might be admissible at trial may be considered 25 by a trial court in ruling on a motion for summary judgment. FED . 26 R. CIV . P. 56(c); Beyene v. Coleman Sec. Servs., Inc., 854 F.2d 1179, 27 1181 (9th Cir. 1988). 28 4 1 In deciding whether to grant summary judgment, a court must 2 take three necessary steps: (1) it must determine whether a fact is 3 material; (2) it must determine whether there exists a genuine issue 4 for the trier of fact, as determined by the documents submitted to 5 the court; and (3) it must consider that evidence in light of the 6 appropriate standard of proof. Anderson, 477 U.S. at 248. Summary 7 judgment is not proper if material factual issues exist for trial. 8 B.C. v. Plumas Unified Sch. Dist., 192 F.3d 1260, 1264 (9th Cir. 9 1999). “As to materiality, only disputes over facts that might 10 affect the outcome of the suit under the governing law will properly 11 preclude the entry of summary judgment.” Anderson, 477 U.S. at 248. 12 Disputes over irrelevant or unnecessary facts should not be 13 considered. Id. Where there is a complete failure of proof on an 14 essential element of the nonmoving party’s case, all other facts 15 become immaterial, and the moving party is entitled to judgment as a 16 matter of law. Celotex, 477 U.S. at 323. Summary judgment is not a 17 disfavored procedural shortcut, but rather an integral part of the 18 federal rules as a whole. Id. 19 B. Standard of Review for Cases Arising Under ERISA 20 The applicable standard of review of ERISA disability benefits 21 is de novo unless the plan gives the administrator discretionary 22 authority to determine eligibility for benefits, in which case the 23 more deferential abuse of discretion standard applies. 24 Life Ins. Co. v. Glenn, 554 U.S. 105, 111 (2008). Metropolitan However, when the 25 plan gives discretion to an administrator who “operate[s] under a 26 conflict of interest, that conflict must be weighed as a ‘factor in 27 determining whether there is an abuse of discretion.’” Id. (quoting 28 5 1 Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 103 (1989). 2 In this case, while the Plan gives Unum discretionary authority as 3 the administrator, Unum is also the insurer of the Plan, creating a 4 conflict of interest which we must consider when evaluating Unum’s 5 determinations regarding Kaufman’s benefits. See id. However, a 6 court “may not merely substitute [its] view for that of the fact 7 finder,” and should consider whether the plan administrator acted 8 illogically, implausibly, or without support in inferences that 9 could reasonably be drawn from facts in the record. Salomaa v. 10 Honda Long Term Disability Plan, 642 F.3d 666, 676 (9th Cir. 2011). 11 When interpreting terms in an ERISA plan, “the starting point 12 is the wording of the plan.” Abatie v. Alta Health and Life Ins. 13 Co., 458 F.3d 955, 963 (9th Cir. 2006). “When disputes arise, 14 courts should first look to explicit language of the agreement to 15 determine, if possible, the clear intent of the parties.” Gilliam 16 v. Nevada Power Co., 488 F.3d 1189, 1194 (9th Cir. 2007) (quoting 17 Armistead v. Vernitron Corp., 944 F.2d 1287, 1293 (6th Cir. 1991)). 18 However, the usual rule that ambiguities will be construed in favor 19 of the insured no longer applies when a plan administrator has 20 discretion to interpret the policy. Ehrensaft v. Dimension Works 21 Inc. Long Term Disability Plan, 33 Fed. Appx. 908, 910 (9th Cir. 22 2002) 23 Under Ninth Circuit law, interpretation of an ERISA insurance 24 policy is “governed by a uniform body of federal law.” Evans v. 25 Safeco Life Ins. Co., 916 F.2d 1437, 1441 (9th Cir. 1990) (quoting 26 Sampson v. Mutual Benefit Life Ins. Co., 863 F.2d 108, 109-110 (1st 27 Cir. 1988). 28 ERISA, however, excludes from preemption “any law of 6 1 any State which regulates insurance.” 29 U.S.C. § 1144(b)(2)(A); 2 Evans, 916 F.2d at 1440. 3 Kaufman contends that California law requiring that courts 4 deviate from the explicit policy definition of “total disability” in 5 the occupational policy context controls. See Hangarter v. 6 Provident Life and Acc. Ins. Co., 373 F.3d 998, 1006 (9th Cir. 7 2004); Erreca v. Western States Life Ins. Co., 121 P.2d 689 (Cal. 8 1942). We disagree. This case is governed by ERISA, and not by 9 California state law. In an unpublished opinion, the Ninth Circuit 10 affirmed a district court case holding that “Nevada state law does 11 not govern the interpretation of the term ‘total disability’ in 12 Standard Insurance’s long term disability policy.” Buchanan v. 13 Standard Ins. Co., No. 05-16651, 2007 WL 2988756, at *1 (9th Cir. 14 2007). Rather, “[t]he interpretation of terms in an ERISA insurance 15 policy is governed by federal common law, not state law.” Id. We 16 therefore reject Kaufman’s contention that California state law 17 interpreting the term “total disability” applies to this case. 18 Furthermore, even if we look to state law to interpret this 19 insurance policy, we would look to Nevada law, which has not adopted 20 Erreca. 21 22 III. Statute of Limitations 23 In ERISA actions, the statute of limitations is provided by 24 state law. Northern California Retail Clerks Unions and Food Emp’rs 25 Joint Pension Trust Fund v. Jumbo Markets, Inc., 906 F.2d 1371, 1372 26 (9th Cir. 1990). Under Nevada law, the statute of limitations for 27 actions founded on a written contract is six years. 28 7 NEV . REV . STAT . § 1 11.190(1). In ERISA underpayment cases, “[t]he statue of 2 limitations did not begin to run until [Plaintiff] had reason to 3 know of the underpayment.” 4 Jumbo Markets, 906 F.2d at 1373. Unum first broached its statute of limitations defense in its 5 reply (#67) in support of its motion for summary judgment (#55) and 6 as a response (#68) to Kaufman’s cross-motion for summary judgment 7 (#64). 8 Previously, failure to raise the statute of limitations as an 9 affirmative defense was considered waiver of the defense. See, e.g., 10 389 Orange Street Partners v. Arnold, 179 F.3d 656, 663 n.3 (9th 11 Cir. 1999). In Randle v. Crawford, the Ninth Circuit considers a 12 waiver of statute of limitations argument. 13 Cir. 2010). 604 F.3d 1047, 1052 (9th The Ninth Circuit quotes a previous opinion, in which 14 it stated that “[t]here is no dispute that [the] statute of 15 limitations [for habeas petitions] is an affirmative defense. . . . 16 Accordingly, Federal Rules of Civil Procedure 8(c) and 12(b) require 17 that the state raise the statute of limitations in its first 18 responsive pleading to avoid waiving the defense.” Id. (quoting 19 Morrison v. Mahoney, 399 F.3d 1042, 1046 (9th Cir. 2005)). The 20 Ninth Circuit stated that a “pleading” is a complaint or answer, a 21 reply to a counterclaim, an answer to a cross-claim, and a third22 party complaint or answer. In an unpublished opinion, the Ninth 23 Circuit briefly stated that “the DEA litigated [the plaintiff’s] 24 claim for roughly seven years to a decision on the merits before the 25 agency, and failed to affirmatively set forth statute of limitations 26 as a defense in its first responsive pleading before the district 27 court as required by Fed. R. Civ. P. 8(c). 28 8 As a result, we conclude 1 that the Government waived its timeliness objection.” Burnett v. 2 Mukasey, 256 Fed. Appx. 940, 940 (9th Cir. 2007). 3 This strict rule, however, has been liberalized to some extent, 4 at least in cases outside of the habeas context, where the 5 Government may be held to a higher standard. In Magana v. 6 Commonwealth of the Northern Mariana Islands, the Ninth Circuit 7 stated that “defendants may raise an affirmative defense for the 8 first time in a motion for summary judgment only if the delay does 9 not prejudice the plaintiff.” 107 F.3d 1436, 1446 (9th Cir. 1997). 10 In Magana, the Ninth Circuit concluded that there was no prejudice 11 because the defendant raised the statute of limitations defense 12 “three months after filing their answer.” 13 is distinguishable from Magana. Id. Our case, however, In Venters v. City of Delphi, the 14 Court of Appeals for the Seventh Circuit considered a case similar 15 to ours. 123 F.3d 956, 968-69 (7th Cir. 1997). The Seventh Circuit 16 noted that appellate courts no longer find a technical failure to 17 comply with Rule 8(c) fatal. Id. at 968. However, the Seventh 18 Circuit noted that in order for Rule 8(c) to not be a nullity, the 19 defense should not be invoked “at the eleventh hour,” but should be 20 brought at the earliest possible moment. Id. at 969. In Venters, 21 the Seventh Circuit refused to consider the defense, regardless of 22 its actual merits, because the defense was only brought in a reply 23 memorandum to a motion for summary judgment. Id. While in our 24 case, Plaintiff was given an opportunity to respond in his reply 25 brief in support of his cross-motion for summary judgment (#64), we 26 find that the great delay in bringing the defense has resulted in 27 28 9 1 prejudice that does not warrant forgiving Defendant’s failure to 2 assert the defense at an earlier time. 3 We agree with Kaufman that Unum’s statute of limitations 4 argument is simply too late. This action was filed in 2006. Unum 5 did not plead statute of limitations in its answer (#21) to the 6 second amended complaint (#18), nor did Unum file a separate motion 7 to dismiss, or a motion for summary judgment, based on the statute 8 of limitations. Discovery was conducted, and the case has now been 9 pending for many years. If we were to decide the case on statute of 10 limitations grounds and conclude that Kaufman’s claim is time11 barred, many years of costly litigation and discovery will have gone 12 to waste. We recognize that in some cases, the defense may only 13 become apparent after discovery, and therefore we are not stating 14 that there is a blanket rule that the defense may not be asserted 15 after discovery has been conducted. Without delving into the 16 merits, however, we note that Unum bases its statute of limitations 17 defense on the basis of a letter that Kaufman sent to Unum, 18 questioning Unum’s decisions regarding his benefit calculations. We 19 do not see how that letter, if it is properly the basis of a statute 20 of limitations defense, could only be discovered four years after 21 the suit was filed, two years after discovery began, and after the 22 parties were prompted to file a pretrial order. We conclude, 23 therefore, that Unum has waived its statute of limitations defense 24 due to the prejudice Kaufman has suffered in having to confront the 25 defense too late in the time line of the litigation. 26 //// 27 //// 28 10 1 2 IV. Discussion In order to resolve Unum’s motion for summary judgment (#55) 3 and Kaufman’s cross-motion for summary judgment (#64), we will 4 consider whether Kaufman’s benefits should be reduced by his post5 disability earnings, and if so, whether the benefits should be 6 reduced by all his income, or only by his monthly salary, and 7 whether Unum is entitled to repayment of overpaid benefits, if any. 8 A. Unum Correctly Determined that Kaufman’s Benefits Should Be 9 Reduced By Kaufman’s Post-Disability Earnings. 10 Unum initially paid out benefits to Kaufman with a reduction 11 for his post-disability income. Kaufman argues that Unum should not 12 have reduced Kaufman’s benefits by his earnings. Under Kaufman’s 13 interpretation of the policy, Kaufman is entitled to the maximum 14 monthly benefit of $15,000 regardless of any other income, as long 15 as Kaufman is considered disabled. That is, Kaufman contends that 16 the policy protects Kaufman’s ability to perform in his regular 17 occupation, and because Kaufman was unable to do so after his 18 disability, he is entitled to full benefits despite his ability to 19 work in other occupations. 20 The policy applies certain terms differently to the two 21 eligible classes. The eligible classes are Class 1, which is 22 comprised of physicians, and Class 2, comprised of all other 23 employees. Kaufman falls under Class 1. Class 1 employees are 24 eligible for a higher maximum monthly benefit, and are required to 25 make employee contributions, which Class 2 employees are not 26 required to do. 27 28 11 1 The policy sets out a general overview of benefits in its 2 “Amounts of Insurance” section. That section provides that for 3 Class 1 physicians, the amount of insurance is “60% (benefit 4 percentage) of basic monthly earnings not to exceed the maximum 5 monthly benefit, less other income benefits.” 6 Summary Judgment Ex. 1, at 4 (#63-1).) ((Resp. to Mot. for Basic monthly earnings 7 refers to the insured’s monthly rate of earnings from the employer 8 just prior to the disability date, but “does not include 9 commissions, bonuses, overtime pay and other extra compensation.” 10 (Id. at 5.) Income benefits are, inter alia, amounts the insured is 11 eligible for under workers’ compensation laws or other group 12 insurance plans. (Id. at 14.) The section then states “[n]ote: 13 This benefit is subject to reductions for earnings as provided in 14 the Monthly Benefit section of this policy.” (Id. at 4.) The 15 “Amounts of Insurance” section then caps the maximum monthly benefit 16 for Class 1 physicians at $15,000. 17 (Id.) The “Amounts of Insurance” for Class 2 employees contains the 18 same language, down to the note about “reductions for earnings,” 19 except that it caps the maximum monthly benefit for Class 2 20 employees at $5,000. (Id.) 21 The “Monthly Benefit” section of the policy states that for 22 Class 1, the monthly benefit is the lesser of sixty percent of the 23 insured’s basic monthly earnings or $15,000, minus other income 24 benefits. (Id. at 13.) This language corresponds to the language 25 in the “Amounts of Insurance” section prior to the “Note” about 26 reductions for earnings. 27 does not end there. 28 The “Monthly Benefit” section, however, It goes on to state that “if the insured is 12 1 earning more than 20% of his indexed pre-disability earnings in his 2 regular occupation or another occupation,” the monthly benefit will 3 be reduced by the insured’s monthly earnings received while 4 disabled. (Id. at 14.) This part of the “Monthly Benefit” section 5 corresponds to the “Note” contained in the “Amounts of Insurance” 6 section stating that benefits are subject to reductions for earing 7 as provided in the “Monthly Benefit” section. While Kaufman argues 8 that this provision applies only to Class 2 employees, to read the 9 policy to apply that language only to Class 2 employees would be to 10 disregard the clear directive in the previous section that benefits 11 are subject to reductions in earnings as provided in the “Monthly 12 Benefit” section. That directive was clearly stated for both Class 13 1 and Class 2 beneficiaries. Our reading of the policy coincides 14 with Unum’s initial determination of the amount of benefits to which 15 Kaufman was entitled. Nor did Kaufman dispute this interpretation 16 of the policy for many years. Kaufman relies heavily on the fact 17 that the “Monthly Benefit” section uses largely identical language 18 under the headings “Class 1" and “Class 2" concerning the basic 19 calculation of benefits, followed by a calculation of how to reduce 20 benefits by earnings, applicable to both classes. It is true that 21 Unum could have, perhaps, avoided any litigation on this issue by 22 more clearly labeling the latter part of the “Monthly Benefits” 23 section under a heading of “All Classes.” Unum did not do so, 24 however, we find no difficulty in agreeing with Unum’s 25 interpretation of the policy, considering that the “Amounts of 26 Insurance” section clearly gave notice that the “Monthly Benefits” 27 28 13 1 section would set out a calculation for “reductions for earnings” 2 for Class 1 physicians, as well as Class 2 employees. 3 We do not find persuasive Kaufman’s argument that the 4 “reductions for earnings” applies to the “less other income 5 benefits” language of the policy. The “less other income benefits” 6 language is already contained in the basic calculation of damages in 7 “Amounts of Insurance” before the “Note” that the benefit is subject 8 to earnings. Therefore, the policy indicates that the reductions 9 for earnings is something separate from the reduction for income 10 benefits. Furthermore, we agree with Unum that income benefits, 11 which are defined as benefits such as workers’ compensation or group 12 insurance benefits, are not “earnings.” 13 Any doubt about the applicability of the reduction for earnings 14 to Class 1 physicians is removed by examination of the summary plan 15 description (“SPD”) provided by Kaufman and cited to by Unum in its 16 motion. (Ex. 1 (#34-2).) 17 policy” by Kaufman. The SPD is referred to as a “copy of the It appears to be a detailed overview of the 18 policy that was provided to Kaufman. The SPD only overviews the 19 policy as it applies to Class 1 physicians, and contains the 20 language that “[b]ut, if you are earning more than 20% of your 21 indexed pre-disability earnings in your regular occupation or 22 another occupation, then the monthly benefit will be figured as 23 follows . . . .” 24 Nor does the dispute over the use of the term “partial 25 disability” render our above conclusion incorrect. While the term 26 “partial disability” is only expressly defined under Class 2, the 27 definition of partial disability is included as one form of 28 14 1 disability under Class 1. That is, a Class 1 employee, such as 2 Kaufman, is disabled if he is earning at least twenty percent less 3 per month in his regular occupation or another occupation due to an 4 injury or sickness. Whether the term “partial disability” is used 5 or not does not appear to make any difference to the monthly benefit 6 calculation, which does not refer to the term “partial disability” 7 to determine any applicable reductions. The “Monthly Benefit” 8 section merely sets out that benefits will be reduced if the insured 9 is earning a certain amount in his regular occupation or another 10 occupation. Nothing in that section hinges upon whether an employee 11 is labeled “disabled” or “partially disabled.” 12 We also disagree with Kaufman’s argument pertaining to the use 13 of “or” between the alternative definitions of “disabled” for Class 14 1 employees. The challenged provision provides that: 15 “Disability” and “disabled” mean that because of 16 injury or sickness: 17 18 19 1. the insured cannot perform each of the material duties of his regular occupation; or 2. the insured while unable to perform all 20 of the material duties of his regular occupation 21 on a full-time basis, is: 22 a. performing at least one of the 23 material duties of his regular occupation or 24 another occupation on a part-time or full-time 25 basis; and 26 27 28 15 1 b. earning currently at least 20% less 2 per month than his indexed pre-disability 3 earnings due to that same injury or sickness. 4 (Resp. to Mot. for Summary Judgment Ex. 1, at 11 (#63-1).) Kaufman 5 argues that he falls under the first definition of disabled, that 6 is, that “the insured cannot perform each of the material duties of 7 his regular occupation” and therefore necessarily qualified for a 8 full benefit. Nothing in the policy mandates such a conclusion. In 9 fact, Kaufman fell under the second definition at times because he 10 was undisputedly working as a medical administrator following his 11 injuries and earning at least 20% less per month than his indexed 12 pre-disability earnings. Regardless, even were we to find that 13 Kaufman also falls under the first definition, the policy does not 14 state that those falling under the first definition of disability 15 are entitled to maximum monthly benefits regardless of any post16 disability earnings. 17 Finally, while we do apply a heightened skepticism to Unum’s 18 decisions in light of its conflict of interest as plan administrator 19 and provider, we note that the relevant standard is still abuse of 20 discretion, albeit not as deferential as in a case where no conflict 21 of interest exists. Here, however, even if we were to apply a de 22 novo standard of review, we would still agree with Unum’s conclusion 23 that Kaufman’s benefits should be reduced by his monthly earnings in 24 accordance with the policy. 25 //// 26 //// 27 28 16 1 B. Unum Did Not Abuse Its Discretion In Deciding that Kaufman’s 2 Benefits Should Be Reduced By All His Monthly Earnings. 3 While we conclude that Unum correctly applied the terms of the 4 policy when it determined that Kaufman’s benefits must be reduced by 5 his post-disability earnings, we must also decide whether Unum 6 abused its discretion in calculating the amount of that reduction. 7 The policy provides that benefits will be reduced by an insured’s 8 “monthly earnings” rather than specifying “basic monthly earnings” 9 or all monthly earnings. 10 at 14 (#63-1).) (Resp. to Mot. for Summary Judgment Ex. 1, Kaufman contends that Unum is not entitled to 11 reduce Kaufman’s benefits by extra compensation separate from basic 12 monthly earnings. While Unum agrees that the term “basic monthly 13 earnings” is defined to exclude extra compensation such as 14 commissions, bonuses, and overtime pay, Unum claims that the use of 15 “monthly earnings” rather than the more specific “basic monthly 16 earnings” was used purposefully to allow Unum to differentiate 17 between two different circumstances. Specifically, when an insured 18 continues to work in his regular occupation, Unum claims that only 19 his basic monthly earnings would be used to reduce benefits. 20 However, when an insured works in a different occupation after 21 becoming disabled, as in Kaufman’s case, all of the insured’s 22 compensation is used to determine the reduction amount from the 23 baseline benefits calculation in order to prevent an insured from 24 structuring his income heavily on extra compensation to maximize his 25 disability benefits. 26 The policy does not define the term “monthly earnings” to 27 either exclude or include bonus compensation such as stock options, 28 17 1 commissions, or bonuses. We conclude that, at the very least, there 2 is an ambiguity as to the definition of “monthly earnings.” The 3 ambiguity is especially salient because under Unum’s interpretation, 4 the term “monthly earnings” is defined differently for employees 5 working in their regular occupations and for employees working in 6 different occupations. 7 language. This distinction is not made clear by policy In a normal insurance contract case, this ambiguity would 8 be construed in favor of the insured, and Unum would not be entitled 9 to include all of Kaufman’s earnings to reduce Kaufman’s benefits. 10 See Blankenship v. Liberty Life Assur. Co. of Boston, 486 F.3d 620, 11 625 (9th Cir. 2007) . However, “the rule of contra proferentem- 12 under which ambiguous policy language is construed in favor of the 13 insured-does not apply on review for abuse of discretion.” 14 Ehrensaft v. Dimension Works Inc. Long Term Disability Plan, 33 Fed. 15 Appx. 908, 910 (9th Cir. 2002). 16 The disability plan in this case undisputedly grants discretion 17 to Unum to interpret the policy. While we must consider Unum’s 18 conflict of interest in this case as a factor, we are still not at 19 liberty to merely substitute our own judgment for Unum’s in 20 interpreting the policy. See Conkright v. Frommert, 130 S.Ct. 1640, 21 1646 (2010) (“when the terms of a plan grant discretionary authority 22 to the plan administrator, a deferential standard of review remains 23 appropriate even in the face of a conflict.”). The Ninth Circuit 24 recently stated that the test for abuse of discretion is whether “we 25 are left with a definite and firm conviction that a mistake has been 26 committed,” although “a higher degree of skepticism is appropriate 27 where the administrator has a conflict of interest.” 28 18 Salomaa v. 1 Honda Long Term Disability Plan, 642 F.3d 666, 676 (9th Cir. 2011) 2 (quoting United States v. Hinkson, 585 F.3d 1247 (9th Cir. 2009) (en 3 banc)). 4 When a conflict of interest exists, the Ninth Circuit has held 5 that a court must consider whether the conflict influenced the 6 decision by the plan. Lang v. Long Term Disability Plan, 125 F.3d 7 794, 798 (9th Cir. 1997). The Ninth Circuit explained that a plan 8 may show that the conflict of interest did not affect its decision 9 by providing evidence that the “decision in fact benefitted the plan 10 as a whole and therefore the rest of the beneficiaries under the 11 plan.” Id. Unum asserts that its interpretation of the policy is 12 reasonable, and may not be disturbed upon review unless we find the 13 interpretation unreasonable. Unum is correct that we must find 14 Unum’s interpretation unreasonable in order to grant Kaufman’s claim 15 that only his basic monthly earnings may be used to calculate a 16 reduction in benefits. 17 The policy is of little help in this case. Unum could have 18 used the term “basic monthly earnings” which was defined to exclude 19 bonus compensation, but did not, which may indicate that all monthly 20 earnings were meant to be used in the calculation. 21 not Unum’s interpretation of the policy. However, that is Unum contends that the 22 term “monthly earnings” is construed separately based on whether the 23 insured is working for the same, or for a different employer. But 24 Unum failed to specifically provide guidance in the policy language 25 that benefits will be reduced differently if the insured changes 26 employers. Unum’s reading of the policy would be stronger if Unum 27 28 19 1 used all monthly earnings regardless of whether the insured works 2 for the same, or a different employer. 3 However, Unum asserts that it has good reason to interpret the 4 policy as it does. The reason is that when an insured continues to 5 work for the same employer, Unum may be reasonably assured that the 6 insured continues to be paid in a similar manner to that which had 7 been used pre-disability. When an insured works for a different 8 employer, however, Unum argues that the insured may be in a position 9 to structure his or her income in a way such that “basic monthly 10 earnings” is low, but bonus compensation is high. If Unum were only 11 to reduce benefits by basic monthly earnings in such a case, the 12 insured would be entitled to a windfall, because the insured would 13 be earning extra income while being entitled to the same benefits as 14 an insured with little to no bonus compensation. 15 While we find that the policy language is unnecessarily 16 ambiguous, and Unum’s interpretation only exacerbates that 17 ambiguity, we cannot find that Unum’s apparent conflict of interest 18 led to an unreasonable reading of the policy. The policy does not 19 indicate whether basic monthly earnings or all monthly earnings 20 should be used to calculate reduction of benefits. The fact that 21 the policy did not use the defined term “basic monthly earnings” 22 lends some credence to Unum’s claim that Kaufman’s benefits must be 23 reduced by all his monthly earnings. Furthermore, Unum’s 24 interpretation, while somewhat tortuous, is in accordance with the 25 Plan’s goals of compensating employees who become disabled, rather 26 than rewarding or creating a windfall for employees who are in the 27 position to dictate the structure of their compensation, or to 28 20 1 otherwise manipulate the Plan in order to receive more benefits than 2 an equivalently-placed insured might receive. We conclude, 3 therefore, that Unum is entitled to reduce Kaufman’s benefits by all 4 his monthly earnings, rather than merely his basic monthly earnings. 5 C. Unum is Not Entitled to Repayment. 6 Unum’s counterclaim alleges that Unum overpaid Kaufman, and 7 that Unum is entitled to reimbursement of the overpayment. 8 asserts that Unum has no right to repayment. Kaufman Under 29 U.S.C. § 9 1132(a)(3), ERISA authorizes civil actions “to obtain other 10 appropriate equitable relief” to enforce ERISA or to redress any 11 violation of ERISA. 12 In Sereboff v. Mid Atlantic Medical Services, the Supreme Court 13 held that the plan has a right to reimbursement under 29 U.S.C. § 14 1132(a)(3) when the plan contains a provision requiring repayment. 15 547 U.S. 356, 360 (2006). In our case, however, the Plan only 16 refers to repayment of overpayment caused by awards received under 17 the United States Social Security Act, the Canada Pension Plan, or 18 the Quebec Pension Plan, or similar plans or acts. 19 for Summary Judgment Ex. 1, at 15 (#63-1).) ((Resp. to Mot. The Plan has no express 20 provision providing for repayment in the case that Unum 21 miscalculates the benefits due to an insured. Other courts have 22 refused to extend Sereboff to cases in which there is no express 23 agreement to repay; rather, the courts hold that the strict tracing 24 rules found in Great-West Life & Annuity Ins. Co. v. Knudson, 534 25 U.S. 204, 215 (2002), prohibit plans from recovering overpayment 26 unless the overpayment could be traced to particular funds or 27 property in the defendant’s possession. 28 21 See, e.g., Sivalingam v. 1 Unum Life Ins. Co. of America, 2011 WL 1584055 *11 (E.D. Pa. April 2 26, 2011); Fier v. Unum Life Ins. Co. of America, 2009 WL 3644187 3 *14 (D. Nev. November 3, 2009). Because Unum cannot impose an 4 equitable lien under a theory of restitution without providing 5 evidence of “particular funds or property” in Kaufman’s possession, 6 we hold that Unum is not entitled to repayment of any overpayment 7 that Kaufman may have received under Unum’s calculation of damages. 8 Unum further argues that it may recover its overpayment under 9 state law, if ERISA does not provide a remedy. In Cooperative Ben 10 Administrators Inc. v. Ogden, the Court of Appeals for the Fifth 11 Circuit held that “ERISA plan fiduciaries do not have a federal 12 common law right to sue a beneficiary for legal (as distinct from 13 equitable) relief on a theory of unjust enrichment or restitution” 14 because Congress “specifically contemplated the possibility of 15 extending to plan fiduciaries a right to sue a participant for money 16 damages and chose instead to limit fiduciaries’ remedies to those 17 typically available in equity.” 367 F.3d 323, 332, 336 (5th Cir. 18 2004). 19 20 21 IV. Conclusion Under the policy, Unum is entitled to reduce Kaufman’s benefits 22 by the amount of all his monthly earnings. Unum is not entitled, 23 however, to repayment of any overpayment made to Kaufman because 24 there was no express agreement to repay, and Unum has not provided 25 any evidence of particular funds or property to which the 26 overpayment can be traced. 27 28 22 1 IT IS, THEREFORE, HEREBY ORDERED that Unum’s motion for summary 2 judgment (#55) is GRANTED IN PART AND DENIED IN PART on the basis 3 that while Unum is entitled to summary judgment on Kaufman’s claims 4 for declaratory relief and breach of the employee benefit plan, Unum 5 is not entitled to summary judgment on its counterclaims for 6 equitable restitution pursuant to 29 U.S.C. § 1132(a)(3), unjust 7 enrichment, and constructive trust. 8 9 IT IS FURTHER ORDERED that Kaufman’s cross-motion for summary 10 judgment (#64) is GRANTED IN PART AND DENIED IN PART on the basis 11 that while Kaufman is entitled to summary judgment on Unum’s 12 counterclaims, he is not entitled to summary judgment on Kaufman’s 13 claims. 14 15 The Clerk shall enter judgment accordingly. 16 17 DATED: July 18, 2011. 18 ____________________________ UNITED STATES DISTRICT JUDGE 19 20 21 22 23 24 25 26 27 28 23

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