Todd Rochow v. Life Ins. Co. of N. Am.
737 F.3d 415
6th Cir.2013Background
- Rochow, an employee of Gallagher, held a LINA long-term disability policy; benefits were denied in 2002 as Rochow left employment before disability began.
- Rochow appealed denial; LINA’s reasons evolved, denying coverage despite encephalitis and memory loss evidence.
- A district court found LINA’s denial arbitrary and capricious and ordered disgorgement of $3.8 million under an unjust enrichment theory.
- The Rochow I decision affirmed the district court’s threshold liability ruling but did not specify a remedy; a mandate followed.
- On remand, the district court calculated profits using Croson’s ROE method to determine disgorgement and ordered $3,797,867.92.
- LINA appeals asserting (i) finality/law-of-the-case issues, (ii) propriety of 502(a)(3) relief alongside 502(a)(1)(B), and (iii) the disgorgement amount.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court’s later disgorgement proceedings violated the mandate. | Rochow fulfilled the appellate scope; mandate allowed further relief. | LINA argues the mandate limited relief and post-remand actions exceeded it. | No; district court acted within the mandate and authority to determine appropriate remedies. |
| Whether § 502(a)(3) disgorgement can accompany § 502(a)(1)(B) benefits. | Disgorgement provides additional equitable relief for LINA’s unjust enrichment. | Varity/Wilkins bar extraneous relief when adequate § 502(a)(1)(B) relief exists. | Disgorgement is available where it remedies a distinct injury and avoids double recovery. |
| Whether ROE-based disgorgement calculation was proper and within discretion. | ROE appropriately approximates LINA’s profits from withheld benefits. | Disgorgement should reflect true profits; ROE may mismeasure. | District court did not abuse discretion; ROE was a reasonable metric given facts. |
| Whether final disgorgement amount was excessive or error. | Disgorgement amount reflected profits from withheld funds. | Amount was an improper windfall and too large relative to injury. | Amount within the court’s equitable discretion and supported by the record. |
Key Cases Cited
- Varity Corp. v. Howe, 516 U.S. 489 (1996) (limits use of § 502(a)(3) when adequate relief exists and cautions against windfalls)
- Wilkins v. Baptist Healthcare System, Inc., 150 F.3d 609 (6th Cir.1998) (limits § 502(a)(3) relief where § 502(a)(1)(B) suffices)
- Hill v. Blue Cross and Blue Shield of Michigan, 409 F.3d 710 (6th Cir.2005) (allows certain plan-wide injunctive relief alongside benefits when distinct injury)
- Gore v. El Paso Energy Corp. Long Term Disability Plan, 477 F.3d 833 (6th Cir.2007) (distinct and unrelated injuries permit parallel relief but not double recovery)
- Nickel v. Bank of Am., 290 F.3d 1134 (9th Cir.2002) (procures disgorgement where funds are not traceable to specific profits)
- First Jersey Secs., Inc. v. SEC, 101 F.3d 1450 (2d Cir.1996) (disgorgement decisions reviewed for abuse of discretion; profits need only be a reasonable approximation)
- Parke v. First Reliance Standard Life Ins. Co., 368 F.3d 999 (8th Cir.2003) (disgorgement permitted; focus on profits and interest as remedy)