Connie Edmonson v. Lincoln National Life Insuranc
725 F.3d 406
3rd Cir.2013Background
- Connie Edmonson, beneficiary of an ERISA-governed group life policy issued by Lincoln, was entitled to a $10,000 death benefit; Lincoln paid by creating a “SecureLine” retained asset account (RAA) in her name.
- Under the RAA Lincoln kept the funds in its general account, credited an account for Edmonson, issued a checkbook, paid a small contractual interest, and invested the underlying funds for its own profit until the beneficiary withdrew funds.
- Edmonson withdrew the full $10,000 three months later and received a modest interest payment; she claimed Lincoln earned substantially more by investing the retained assets and sought disgorgement of those profits.
- She sued under ERISA § 502(a)(3) for breach of fiduciary duty (duty of loyalty and prohibited self-dealing), seeking equitable disgorgement/accounting for profits.
- District Court denied standing and fiduciary breach at earlier stages but after discovery granted Lincoln summary judgment, concluding Lincoln was not acting as an ERISA fiduciary when it invested the retained assets. Edmonson appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing to seek disgorgement | Edmonson alleged an injury-in-fact measured by the "spread" (profit Lincoln earned minus interest paid); disgorgement need not require plaintiff to show a net financial loss. | Lincoln (and amicus) argued no injury because Edmonson received all benefits owed plus interest. | Court: Edmonson has Article III standing — disgorgement claims can present injury-in-fact where plaintiff has an individual right to the profit. |
| Statutory standing under ERISA § 502(a)(3) for equitable disgorgement | Disgorgement is equitable (an accounting for profits) and falls within § 502(a)(3) as restitutionary equitable relief. | Lincoln argued Great‑West restricts § 502(a)(3) to traditional equitable restitution and that many disgorgement claims are legal damages. | Court: Plaintiff's disgorgement/accounting-for-profits claim is an equitable remedy cognizable under § 502(a)(3) (fits Great‑West exception for accounting). |
| Whether selecting to pay via an RAA made Lincoln an ERISA fiduciary | Edmonson: choosing the payment method implicated discretionary plan administration and control over plan assets, invoking fiduciary duties. | Lincoln: selection was ministerial/authorized by plan or otherwise discharged fiduciary duties once benefits were credited. | Court: Selecting the RAA was a discretionary act of plan administration and triggered fiduciary status, but the choice did not breach the duty of loyalty. |
| Whether investing the retained assets was fiduciary conduct and breached ERISA | Edmonson: investing retained assets was management or control of plan assets and constituted self-dealing in breach of loyalty. | Lincoln: once it credited the RAA it had discharged plan-administration duties and the retained assets were not plan assets; relationship became creditor–debtor. | Court: Retained assets were not plan assets under ordinary property-rights analysis; Lincoln was not acting as an ERISA fiduciary when it invested them. No breach. |
Key Cases Cited
- Ingersoll‑Rand Co. v. McClendon, 498 U.S. 133 (1990) (ERISA is comprehensive statute protecting employees and beneficiaries)
- Varity Corp. v. Howe, 516 U.S. 489 (1996) (use of trust-law principles to define fiduciary administration and duties)
- Great‑West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) (§ 502(a)(3) provides only equitable restitution; limited accounting-for-profits exception)
- Horvath v. Keystone Health Plan East, Inc., 333 F.3d 450 (3d Cir. 2003) (distinguishing standing for injunctive relief from standing for individual restitution/disgorgement)
- Faber v. Metropolitan Life Ins. Co., 648 F.3d 98 (2d Cir. 2011) (RAA payments compliant with plan language: insurer discharged fiduciary duties and retained assets not plan assets)
- Mogel v. UNUM Life Ins. Co., 547 F.3d 23 (1st Cir. 2008) (where policy required lump-sum payment, RAA could be treated as an IOU and insurer remained fiduciary)
- Sec’y of Labor v. Doyle, 675 F.3d 187 (3d Cir. 2012) (plan assets normally defined by ordinary notions of property rights)