CGI Technologies and Solutions v. Rose

Courts cannot be limited by contract terms in their ability to act as a court of equity, and may consider traditional equitable defenses under § 502(a)(3) of the Employee Retirement Income Security Act of 1974.

CGI Technologies and Solutions (“CGI”) appealed the district court’s decision to dismiss co-defendant, Nelson Langer Engle, PLLC (“NLE”), counsel for Rhonda Rose, the defendant. CGI provided a self-funded welfare plan (the “Plan”) that entitled CGI to subrogation and reimbursement in the event an employee requires medical care and recovers from a third-party tortfeasor. Rose was in a car accident and recovered only 21.44% of her total damages. Rose denied CGI’s request to be reimbursed and NLE placed the disputed money in a trust. CGI sought to enforce the Plan provisions. The district court held that NLE was not a proper defendant and dismissed NLE from the action. In so doing, the district court relied on Hotel Employees & Restaurant Employees International Union Welfare Fund v. Gentner. However, the Ninth Circuit noted that under the United State Supreme Court’s ruling in Harris Trust and Savings Bank v. Salomon Smith Barney, Gentner is no longer valid. However, maintaining an action against NLE when NLE was merely acting as the beneficiary’s agent would violate traditional and lawful attorney-client interactions. Because there was no unlawful transaction, as Harris Trust implicitly requires, the Court affirmed the dismissal of NLE from the suit. Rose appealed the district court’s grant of full reimbursement less CGI’s proportional share of attorney’s fees and costs. Rose argued that this was not “appropriate equitable relief.” The Court concluded that under § 502(a)(3) of the Employee Retirement Income Security Act of 1974, the district court may consider traditional equitable defenses. Parties may not contract to limit the power of the court to act as a court in equity. AFFIRMED in part and VACATED and REMANDED in part.