Bilyeu v. Morgan Stanley Long Term Disability Plan
2012 U.S. App. LEXIS 12554
| 9th Cir. | 2012Background
- Bilyeu challenged the district court’s dismissal of her ERISA denial-of-benefits claim and the grant of summary judgment on Unum’s overpayment counterclaim.
- The Plan, administered by Unum, provides LTD benefits with a 24-month mental-illness cap; Unum terminated after 24 months and claimed sedentary work capacity.
- Unum’s December 27, 2006 termination letter advised two options: provide additional information or file a written appeal within 180 days.
- Dr. Proefrock responded on April 19, 2007 with “To Whom It May Concern,” which Unum treated as new information but did not re-contact Bilyeu.
- Bilyeu sued in 2008 alleging wrongful termination; Unum counterclaimed for repayment of overpaid benefits, asserting an equitable lien by agreement, and Bilyeu moved to dismiss for failure to exhaust.
- The district court granted Unum’s counterclaim for repayment, but this court vacated and remanded on exhaustion and on whether Unum sought equitable relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether exhaustion of administrative remedies was properly excused | Bilyeu acted reasonably given ambiguity in Unum’s letter | Exhaustion required; Dr. Proefrock’s letter did not count as an appeal | Exhaustion not properly excused; but remanded for clarity on the dialogue |
| Whether Unum’s counterclaim seeks equitable relief under ERISA | Unum seeks equitable restitution (equitable lien by agreement) | Unum must show equitable relief; Sereboff controls | Unum failed to show an equitable lien by agreement; relief is not equitable; remand for proper showing |
| Whether Unum has statutory standing as fiduciary to seek equitable relief | Not raised below; Unum lacks fiduciary standing | Standing can be waived; ERISA fiduciary status not jurisdictional | Bilyeu waived statutory standing argument; District Court decision stands on standing |
| Whether the district court erred in granting summary judgment on the counterclaim | Equitable lien by agreement not proven (fund in possession) | Rejects tracing requirement; funds can be earmarked | District court erred in granting lien-based relief; remand |
| Whether the punishment/fix should be a money judgment or equitable relief | Remedies should be equitable; funds dissipated | Equitable relief may still apply under Sereboff | No, improper form of relief; remand for proper equitable framework |
Key Cases Cited
- Sereboff v. Mid Atlantic Medical Servs., Inc., 547 U.S. 356 (U.S. 2006) (equitable lien by agreement noted; tracing not required in certain liens)
- Knudson, 534 U.S. 204 (U.S. 2002) (funds dissipated; recovery as general creditor unless lien on remaining funds)
- CIGNA Corp. v. Amara, 131 S. Ct. 1866 (S. Ct. 2011) (equitable relief; funds must be particular funds or in possession for traditional lien)
- Diaz v. United Agricultural Employee Welfare Benefit Plan & Trust, 50 F.3d 1478 (9th Cir. 1995) (exhaustion principle and protective dialogue context)
- Barboza v. Cal. Ass’n of Prof'l Firefighters, 651 F.3d 1073 (9th Cir. 2011) (practice on exhaustion and procedures relevance)
- Saffon v. Wells Fargo & Co. Long Term Disability Plan, 522 F.3d 863 (9th Cir. 2008) (claims communications and clarity in notices)
- White v. Jacobs Eng’g Grp. Long Term Disability Benefit Plan, 896 F.2d 344 (9th Cir. 1990) (interpretation of appeal procedures in notices)
- Bonneville Power Admin. v. Wash. Pub. Power Supply Sys., 956 F.2d 1497 (9th Cir. 1992) (equitable relief; res requirement for liens)