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Unum Life Insurance Co. v. Pittman

United States District Court, D. Maryland

December 2, 2014

JOHN D. PITTMAN, Defendant.


TIMOTHY J. SULLIVAN, Magistrate Judge.

This Report and Recommendation addresses the Motion for Entry of Default Judgment ("the Motion") filed by Plaintiff Unum Life Insurance Company of America ("Unum") against Defendant John D. Pittman ("Mr. Pittman").[1] (ECF No. 7.) Mr. Pittman has not filed a response, and the time for doing so has passed. See Loc. R. 105.2.a. On July 21, 2014, in accordance with 28 U.S.C. § 636 and Local Rule 301, Judge Quarles referred this case to me for a report and recommendation on Unum's Motion. (ECF No. 8.) I find that a hearing is unnecessary in this case. See Fed.R.Civ.P. 55(b)(2); Loc. R. 105.6. For the reasons set forth below, I respectfully recommend that Plaintiff's Motion be GRANTED IN PART and DENIED IN PART.


In this case, Unum filed suit against Mr. Pittman for the breach of a contract governed by the Employee Retirement Income Security Act of 1974, as Amended ("ERISA"), 29 U.S.C. §§ 1001, et seq., and for unjust enrichment. (ECF No. 1.) Mr. Pittman was personally served with the Complaint and summons but did not file an answer or responsive pleading within the requisite time period. On June 18, 2014, Unum moved for the Clerk's entry of default (ECF No. 5), and the Clerk entered default against Mr. Pittman on June 19, 2014 (ECF No. 6). On July 21, 2014, Unum filed the Motion, to which Mr. Pittman has not responded. Mr. Pittman has also not filed any response to Unum's supplemental motions (ECF Nos. 10 & 12).


A. Standard for Entry of Default Judgment

In determining whether to award a default judgment, the Court accepts as true the wellpleaded factual allegations in the complaint as to liability. See Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780-81 (4th Cir. 2001); United States ex rel. Durrett-Sheppard Steel Co. v. SEF Stainless Steel, Inc., No. RDB-11-2410, 2012 WL 2446151, at *1 (D. Md. June 26, 2012). Nonetheless, the Court must consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit mere conclusions of law. United States v. Redden, No. WDQ-09-2688, 2010 WL 2651607, at *2 (D. Md. June 30, 2012) (citing Ryan, 253 F.3d at 790). Although the Fourth Circuit has a "strong policy that cases be decided on the merits, " United States v. Shaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993), default judgment "is appropriate when the adversary process has been halted because of an essentially unresponsive party." S.E.C. v. Lawbaugh, 359 F.Supp.2d 418, 421 (D. Md. 2005). If the Court determines that liability is established, the court must then determine the appropriate amount of damages. CGI Finance, Inc., v. Johnson, No. ELH-12-1985, 2013 WL 1192353, at *1 (D. Md. March 21, 2013). The Court does not accept factual allegations regarding damages as true, but rather must make an independent determination regarding such allegations. Durrett-Sheppard Steel Co., 2012 WL 2446151 at *1.

Rule 55 of the Federal Rules of Civil Procedure provides that "[i]f, after entry of default, the Plaintiff's Complaint does not specify a sum certain' amount of damages, the court may enter a default judgment against the defendant pursuant to Fed.R.Civ.P. 55(b)(2)." A plaintiff's assertion of a sum in a complaint does not make the sum "certain" unless the plaintiff claims liquidated damages; otherwise, the complaint must be supported by affidavit or documentary evidence. United States v. Redden, No. WDQ-09-2688, 2010 WL 2651607, at *2 (D. Md. June 30, 2012). Rule 55(b)(2) provides that "the court may conduct hearings or make referrals... when, to enter or effectuate judgment, it needs to... determine the amount of damages." The Court is not required to conduct an evidentiary hearing to determine damages, however; it may rely instead on affidavits or documentary evidence in the record to determine the appropriate sum. See, e.g., Mongue v. Portofino Ristorante, 751 F.Supp.2d 789, 795 (D. Md. 2010).

B. Liability

In this case, Mr. Pittman's liability is readily established. Mr. Pittman was a participant in a group long term disability plan ("Plan") offered by his employer and insured by Unum. (ECF No. 1 at 2.) On April 23, 2003, Mr. Pittman's claim for long term disability ("LTD") benefits under the Plan was approved. ( Id. ) Mr. Pittman elected to receive his LTD benefits "un-reduced" by any amount that he was entitled to receive under the U.S. Social Security Act, and agreed to "repay any overpayment that results from his continued receipt of his un-reduced" benefits to Unum. ( Id. ) Mr. Pittman's agreement to repay any overpayment that resulted from his receipt of Social Security benefits and LTD benefits under the Plan is documented in a Disability Payment Options/Reimbursement Agreement Form ("Reimbursement Agreement") dated February 28, 2005. (ECF Nos. 1-2 & 2.) On February 23, 2007, Mr. Pittman advised Unum that his claim for Social Security disability benefits had been approved. (ECF No. 1 at 3.) Unum reviewed information concerning Mr. Pittman's receipt of Social Security disability payments, and determined that the payments had resulted in an overpayment of LTD benefits by Unum under the Plan in the amount of $82, 096.77. ( Id. ) Unum demanded that Mr. Pittman repay the overpayment pursuant to the Reimbursement Agreement, but he failed to do so. Beginning on August 16, 2007, Unum began applying Mr. Pittman's monthly LTD benefit toward the overpayment balance. ( Id. at 4.)

Under Section 502(a)(3) of ERISA, a fiduciary may bring a civil action "(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provision of this subchapter or the terms of the plan." 29 U.S.C. § 1132(a)(3). Here, Unum seeks to recover an overpayment of group long term disability plan benefits made to Mr. Pittman as a result of his receipt of Social Security disability benefits. This action falls within the scope of "other appropriate equitable relief" of this section of ERISA. Id.

In Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204 (2002), the Supreme Court held that a plan administrator could not use an overpayment provision to recover proceeds paid to a beneficiary from a third party in a tort suit because the claim was legal rather than equitable. In Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356 (2006), without disturbing Knudson 's precedent, the Supreme Court held that a plan could recover for an overpayment of medical expenses when the beneficiary of the plan had received money from a third party as proceeds of a lawsuit. Courts that have sought to reconcile Knudson and Sereboff have focused on whether the funds that are sought for recovery were in the actual possession of the plan beneficiary (as in Sereboff ) or in a trust not immediately accessible to the beneficiary (as in Knudson ). See, e.g. Cusson v. Liberty Life Assur. Co. of Boston, 592 F.3d 215 (1st Cir. 2010) (holding that ERISA permits a plan administrator to recover the amount of an overpayment that resulted from a beneficiary's receipt of Social Security disability benefits).

I find that Sereboff, rather than Knudson, controls in this case. Here, Unum seeks to recover specific funds (Mr. Pittman's LTD payments) and identifies the specific portion to which it is entitled (the amount of LTD benefits it overpaid while Mr. Pittman was receiving Social Security disability benefits and LTD benefits at the same time). See Cusson, 592 F.3d at 231. Here, unlike in Knudson, the Social Security disability benefits Mr. Pittman received were paid directly to him, rather than to a separate trust over which he had no control. While Unum has not identified a specific financial account that Mr. Pittman's Social Security disability benefits were deposited into, or proven that they are still in his possession, I find that Unum is not required to do so. See Cusson, 592 F.3d at 231 (enforcing as an equitable claim a plan administrator's contract with a beneficiary that put the beneficiary on notice that she would be required to reimburse the plan for an amount equal to what she might get from Social Security); see also Funk v. CIGNA Group Ins., 648 F.3d 182, 195 (3d Cir. 2011) ("Because the Plan and Reimbursement Agreements at issue here likewise specify the receipt of Social Security benefits as the particular fund from which reimbursement is to be made, they give rise to an equitable lien by agreement over those Social Security funds that are overpayments under the Plan.").

While the Fourth Circuit has not addressed Sereboff 's application in the overpayment context, see J.J. Crewe & Son, Inc. Profit Sharing Plan v. Talbot, No. ELH-11-2871, 2012 WL 1994778, at *7 n.6 (D. Md. June 1, 2012), two cases in this district have addressed the issue. See Anderson v. Reliance Standard Life Insurance Company, No. WDQ-11-1188, 2013 WL 1190782, at *12 (D. Md. ...

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