Amschwand? Or am not Schwand?


 It's that Dean guy again. Sheesh.

In Amschwand v Spherion Corp., 505 F.3d 342, 41 EBC 2697 (5th Cir. 2007), Mr. A was on medical leave for terminal cancer and still covered by Spherion's life insurance plan. At the end of the year, Spherion changed to a new insurance carrier and was supposed to list Mr. A as one of the carryovers to the new policy -- but didn't. Mr. A was reassured time and again, orally and in writing, that he would still be covered by the new policy, and there were no writings yet issued from which he would have learned otherwise. He dies and the life insurance benefits were denied. Widow sues and loses, because the Circuit says she's seeking damages, not benefits. Supreme Court asks the Solicitor of Labor for opinion on cert petition, and SOL says they should grant and hold (a) that Mertens/Great-West/Sereboff don't apply because fiduciaries were not defendants in those cases and, since fiduciaries are a creature of trusts which are solely a creature of equity, all remedies against a fiduciary are necessarily "equitable." (b) in any event, where the action is against a messing up fiduciary, plaintiff is entitled to have the fiduciary make good by way of "surcharge," an equitable remedy.

I think two additional arguments should have been made: (1) That because Mr. A was no longer a participant in the plan, having been unceremoniously bounced from it, there is no ERISA preemption of a state law claim. In Miller v Rite-Aid, 504 F.3d 1102, 41 EBC 2537 (9th Cir 2007) on nearly identical facts (apparently the 9th Circuit exists in a parallel universe -- hey, watch your language), the court held that since Miller wasn't a participant there could be no preemption, with that wonderful quote: "Unlike the Cheshire cat, one cannot have the stripes of preemption without the smile of participation." I think we all know why the Solicitor doesn't like that argument. (2) Sereboff said money was equitable relief if it were based on an "equitable lien established by agreement." This is so even if the "fund" on which the lien existed had not yet come into being, as long as it was identifiable. Here, insurance companies create "reserves" to pay expected benefits. If I took discovery from the new insurance company, I would find out that if Spherion included one more participant in their list, someone who was terminal with a life expectency of months and whose benefit would be $426,000, I would also learn that Spherion's premium would have been increased by $426,000. Thus, Spherion had an ill-gotten gain of $426,000, and the "fund" is the diamonds in the lockbox -- with the diamond Spherion kept for itself being worth $426,000. The indentifiable fund is the whole of the premiums, and the equitable lien by assignment (the reassurances) is on the diamond Spherion kept for itself.

Roy Harmon's blog today mentioned Fitzgerald v. H&R Block Fin. Advisors, 2008 U.S. Dist. LEXIS 45472 (E.D. Mich. June 11, 2008) (115 PBD, 6/16/08) where the district court, upholding an arbitration award, said that under ERISA § 510, where plaintiff said he was prevented from obtaining shares of company stock, plaintiff was indeed claiming equitable relief by identifying a specific fund upon which he claimed an equitable lien by assignment -- the pool of company stock owned by the company.

So? Whaddya think?