                                                         United States Court of Appeals
                                                                  Fifth Circuit

                     REVISED JANUARY 5, 2004
                                                                 F I L E D
               IN THE UNITED STATES COURT OF APPEALS            December 17, 2003

                         FOR THE FIFTH CIRCUIT                Charles R. Fulbruge III
                         _____________________                        Clerk
                              No. 03-10195
                         _____________________

BOMBARDIER AEROSPACE EMPLOYEE
WELFARE BENEFITS PLAN,
                                                  Plaintiff - Appellee,

versus

FERRER, POIROT AND WANSBROUGH; ET ALS,
                                                                 Defendants,

FERRER, POIROT AND WANSBROUGH;
STEVEN MESTEMACHER,
                                               Defendants - Appellants.


                        ---------------------
   Appeal from the United States District Court for the Northern
                 District of Texas, Dallas Division
                        ---------------------

Before JOLLY and WIENER, Circuit Judges and WALTER,* District Judge.

WIENER, Circuit Judge:

     Defendants-Appellants Ferrer, Poirot & Wansbrough, P.C. (the “law

firm”) and Steven Mestemacher appeal the district court’s grant of the

summary judgment motion of Plaintiff-Appellee Bombardier Aerospace

Employee Welfare Benefits Plan (the “Plan”), an ERISA-governed, self-

funded employee welfare benefit plan, to enforce the terms of the

Plan’s reimbursement provision against the law firm and Mestemacher.

They also appeal the district court’s denial of their respective

motions to dismiss the Plan’s action for lack of subject matter


     *
       District Judge for     the   Western   District   of    Louisiana,
sitting by designation.
jurisdiction and for failure to state a claim, as well as its denial

of their joint motion for summary judgment.          We affirm.

                        I.    FACTS AND PROCEEDINGS

A.   Background

     The Plan was established by Bombardier Aerospace to provide

managed    care   services   for   its   employees   and   their    dependents.1

Mestemacher was an employee of Bombardier Aerospace and a participant

in the Plan.      After he was injured in an automobile accident, he

sought $13,643.63 from the Plan for medical expenses.              The Plan paid

Mestemacher’s     medical    expenses    in   that   amount,   subject    to   a

“Reduction, Reimbursement and Subrogation” provision contained in the

Plan’s documents.     That provision gave the Plan “the right to recover

or subrogate 100% of the Benefits paid...by the Plan for Covered

Persons to the extent of...[a]ny judgment, settlement, or payment made

or to be made, because of an accident, including but not limited to

insurance.”    The documents further specified that “attorneys fees and

court costs are the responsibility of the participant, not the Plan.”

     Mestemacher retained the law firm on a one-third contingent fee

basis to seek recovery from the tortfeasor responsible for the

automobile accident.     After negotiating a $65,000 settlement, the law

firm received the settlement payment on Mestemacher’s behalf and

placed the funds in a trust account at Bank of America in the law

firm’s name.



     1
          See 29 U.S.C. § 1002(1).

                                         2
B.    The Instant Litigation

      This   action     arises   out   of       the    Plan’s   efforts       to   obtain

reimbursement for the funds advanced to Mestemacher.                  The Plan filed

suit in district court against the law firm, Mestemacher, and Bank of

America before Mestemacher’s settlement funds were ever disbursed to

him from the law firm’s trust account at Bank of America.2                         In its

efforts to recover the funds that it had advanced to Mestemacher for

medical expenses, the Plan sought (1) the imposition of a constructive

trust over $13,643.63 of the funds being held for Mestemacher in the

law firm’s trust account, (2) a declaration that the Plan is entitled

to ownership of that amount out of the settlement funds that remained

in the trust account, (3) an order directing the law firm and Bank of

America to execute any instruments necessary to transfer legal title

of   the   “converted    property”     to       the   Plan,   and   (4)   a   temporary

restraining order and a preliminary injunction prohibiting the law

firm from disbursing the share of the settlement funds claimed by the

Plan.

      In an agreed order, the law firm consented to hold $18,500.00 of

the settlement proceeds in its trust account, an amount more than

sufficient to satisfy the Plan’s reimbursement demand.                    The law firm

nevertheless maintained that it was entitled                    to one-third of the

proceeds of the settlement ($21,666.66) plus costs ($302.24), by

virtue of its contingent fee agreement with Mestemacher. The law firm


      2
       Bank of America was voluntarily dismissed from this suit
after settling with all parties.

                                            3
and Mestemacher each filed a motion to dismiss for lack of subject

matter jurisdiction, contending that § 502(a)(3) of ERISA does not

provide a cause of action against an entity like the law firm, which

is neither a plan fiduciary nor a signatory to the plan, and does not

authorize the Plan’s claim for a constructive trust over funds not in

the possession of its participant, Mestemacher.

      Agreeing with the Plan’s assertion that it was seeking “equitable

relief” within the contemplation of § 502(a)(3), the district court

accepted subject matter jurisdiction over the Plan’s action and denied

Mestemacher’s and the law firm’s motions to dismiss. Agreeing further

that the terms contained in the Plan’s documents provide a right of

reimbursement, the district court granted summary judgment in favor

of the Plan and ordered the law firm to transfer to the Plan the sum

of $13,643.63 from the settlement proceeds being held in its trust

account.     This judgment further ordered that nothing be deducted from

the Plan’s funds for attorneys’ fees and costs.

      Citing our opinion in Sunbeam-Oster Company, Inc. Group Benefits

Plan for Salaried and Non-bargaining Hourly Employees v. Whitehurst,3

the district court observed that the Plan contained “clear and

unambiguous reimbursement provisions, including a provision allowing

the   Plan    reimbursement    from   third   party   beneficiaries   such   as

settlement proceeds.”4        As for whether the Plan had stated a claim


      3
          102 F.3d 1368 (5th Cir. 1996).
      4
       All parties agree that the Plan’s language unambiguously
provides for a right of reimbursement and subrogation. As neither

                                        4
under § 502(a)(3), the court noted that the Plan did not seek to

impose in personam liability on any of the defendants, but merely

sought the in rem imposition of a constructive trust over funds in the

trust account.   Thus, the district court concluded, the Plan’s claim

was for “appropriate equitable relief” under § 502(a)(3) and fell

comfortably within that jurisdictional grant.      Finally, the court

refused to apply either the Texas or the federal version of the common

fund doctrine to block the Plan’s recovery, noting that “the Plan

expressly provides that attorney’s fees and court costs are the

responsibility of Mestemacher and not the Plan.”   Final judgment was

entered in the Plan’s favor, and Mestemacher and the law firm timely

filed a notice of appeal.

                            II. ANALYSIS

A. Standard of Review

     We review de novo both a grant of a motion to dismiss and a grant

of a motion for summary judgment.5      In our de novo review of a

district court’s ruling on a motion to dismiss under either Rule

12(b)(1) or 12(b)(6), we apply the same standard as does the district

court: “[A] claim may not be dismissed unless it appears certain that




party seeks a construction of the Plan’s terms, we need not engage
in application of the deference principles articulated by the
Supreme Court in Firestone Tire and Rubber Co. v. Bruch, 489 U.S.
101 (1989).
     5
       See St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425,
440 n.8 (5th Cir. 2000).

                                  5
the plaintiff cannot prove any set of facts in support of her claim

which would entitle her to relief.”6

B. Subject Matter Jurisdiction

         To determine whether the district court properly exercised

subject matter jurisdiction over the instant action, we first must

decide    whether   §   502(a)(3)   authorizes   the   Plan’s   suit   for   a

constructive trust over the funds held in the law firm’s trust

account.7   The law firm and Mestemacher assert two bases for holding

that § 502(a)(3) does not authorize the Plan’s suit.             They first

contend that, because the law firm was not a signatory to the Plan,

it is not a fiduciary; thus the Plan cannot maintain an action for

equitable relief against the law firm under § 502(a)(3). They contend

secondly that the Plan’s action for a constructive trust is not one

“typically available in equity” and thus falls outside § 502(a)(3)’s

jurisdictional grant.

1.   The “Universe of Possible Defendants” under § 502(a)(3).

     Section 502(a)(3) authorizes a civil action “by a participant,

beneficiary, or fiduciary (A) to enjoin any act or practice which



     6
       Benton v. United States, 960 F.2d 19, 21 (5th Cir. 1992);
see also St. Paul Mercury Ins. Co., 224 F.3d at 440 n.8 (“[T]he
central issue [in reviewing a motion to dismiss] is whether, in the
light most favorable to the plaintiff, the complaint states a valid
claim for relief.”).
     7
       See Bauhaus USA, Inc. v. Copeland, 292 F.3d 439, 442 (5th
Cir. 2002)(“ERISA grants the federal courts “exclusive jurisdiction
of civil actions under this title brought by . . . [a]
fiduciary.”). The parties agree that the Plan is governed by ERISA
and that the Plan is a “fiduciary” under ERISA.

                                      6
violates any provision of this title or the terms of the plan, or (B)

to obtain other appropriate equitable relief (i) to redress such

violations or (ii) to enforce any provisions of this title or the

terms of the plan.”8     The law firm and Mestemacher contend that this

authorization is contingent on the existence of a professional or

contractual relationship between the Plan and the particular defendant

that is subject to suit. In other words, according to them, an entity

must owe a duty to an ERISA plan before it can properly be named as

a defendant in a § 502(a)(3) suit for equitable relief.      Because it

is not a signatory of the Plan, insists the law firm, it owes no

fiduciary duty to the Plan, and thus no cause of action can be

maintained against it under § 502(a)(3).9     We disagree.

     Although neither we nor the Supreme Court has squarely addressed

the question whether a plan participant’s or beneficiary’s attorney

who possesses disputed settlement funds on his client’s behalf can be

subject to suit under § 502(a)(3), the Supreme Court has ruled that

§ 502(a)(3) liability is not dependent on an entity’s status as a plan

fiduciary.     In Harris Trust and Savings Bank v. Salomon Smith Barney,

Inc.,10 the Court squarely held that § 502(a)(3) authorizes suit


     8
          29 U.S.C. § 1132(a)(3).
     9
       For purposes of this case, a person is a plan fiduciary to
the extent that he exercises discretionary authority or control
over the management or administration of the plan or its assets, or
renders investment advice to the plan for compensation. See 29
U.S.C. § 1002(21)(A). The parties agree that the law firm is not
a plan fiduciary.
     10
          530 U.S. 238 (2000).

                                    7
against    a   non-fiduciary   “party       in   interest”   to   a    transaction

prohibited under § 406(a).11      In so holding, the Court rejected the

Seventh Circuit’s holding that no cause of action exists under §

502(a)(3) absent a substantive provision of ERISA expressly imposing

a duty on the party being sued.      The Court observed that § 502(a)(3)

“admits of no limit (aside from the ‘appropriate equitable relief’

caveat...) on the universe of possible defendants.”12                  Indeed, the

Court noted that, in contrast to other provisions of ERISA which

expressly delineate the entities subject to suit,13 “§ 502(a)(3) makes

no mention at all of which parties may be proper defendants.”14                 This

is   because     “502(a)(3)    itself       imposes    certain        duties,   and

therefore...liability under that provision does not depend on whether

ERISA’s substantive provisions impose a specific duty on the party

being sued.”15


     11
        See id. at       241.   ERISA both imposes a general duty of
loyalty on plan         fiduciaries, § 406(a); 29 U.S.C. § 1104,
and,“categorically      bar[s] certain transactions deemed ‘likely to
injure the pension      plan.’” § 406(a)(1); 29 U.S.C. § 1106.
     12
          Id. at 244-246.
     13
        For example, the following ERISA provisions explicitly
delineate the entities subject to suit: (1) “§ 409(a), 29 U.S.C. §
1109(a)(“Any person who is a fiduciary with respect to a plan who
breaches any of the responsibilities, obligations, or duties
imposed upon fiduciaries by this subchapter shall be personally
liable”);” and (2) “§502(l), 20 U.S.C. § 1132(1)(authorizing
imposition of civil penalties only against a ‘fiduciary’ who
violates part 4 of Title I or ‘any other person’ who knowingly
participates in such a violation).” Id. at 246-47.
     14
          Id. at 246.
     15
          Id. at 245.

                                        8
      The litigation in Harris Trust arose out of a soured business

deal between an ERISA plan and a “party in interest.”                      National

Investment Services of America (“NISA”) had been hired by the plan’s

administrator to act as an investment manager for the plan.16               Because

it had “discretionary control” over plan assets, NISA qualified as a

plan fiduciary.17          Salomon Smith Barney, Inc. (“Salomon”) furnished

the   plan       with    broker-dealer   services   at   the   direction    of   the

fiduciaries, thus qualifying under § 3(14) as a “party in interest.”18

 During the relevant time, Salomon sold to the plan, through NISA,

interests in several motel properties that later turned out to be

worthless.19

      On learning of the nature of this transaction, the plan’s

administrator and its trustee filed suit against Salomon under §

502(a)(3), claiming, inter alia, “that NISA, as plan fiduciary, had

caused the plan to engage in a per se prohibited transaction under §

406(a) in purchasing the motel interests from Salomon.”20                   Salomon

countered that § 502(a)(3) authorizes suit “only against the party

expressly constrained by 406(a),” namely, the fiduciary who caused the

party      to    enter    into   the   prohibited   transaction,   and     not   the



      16
           See id. at 242-43.
      17
           Id. at 243.
      18
           See id. at 242.
      19
           Id. at 243.
      20
           Id.

                                           9
“counterparty to the transaction.”21      The Seventh Circuit agreed with

Salomon, but the Supreme Court reversed for the reasons stated

above.22 Therefore, even though, in the instant litigation, the law

firm is not a “party in interest,” as that term is defined by ERISA,23

the Supreme Court’s reasoning in Harris Trust influences us to

conclude today that § 502(a)(3) authorizes a cause of action against

a non-fiduciary, non-“party in interest” attorney-at-law when he holds

disputed settlement funds on behalf of a plan-participant client who

is a traditional ERISA party.    As Harris Trust makes clear, an entity

need not be acting under a duty imposed by one of ERISA’s substantive

provisions to be subject to liability under § 502(a)(3).

     To this end, we note that the law firm’s reliance on the Seventh

Circuit’s opinion in Health Cost Controls of Illinois, Inc. v.

Washington24 in support of the law firm’s contrary position —— that an

entity must be a plan fiduciary before it can be properly named as a

defendant in a § 502(a)(3) action —— is badly misplaced. The question

before the Health Cost court was not, as here, which entities can be

subject to suit under § 502(a)(3), but rather which entities are


     21
          Id.
     22
          See id. at 244-45.
     23
       The term “‘party in interest’...encompasses those entities
that a fiduciary might be inclined to favor at the expense of the
plan’s beneficiaries.” Harris Trust, 530 U.S. at 242.     Finding
nothing in the record that would suggest that the law firm is an
entity likely to be favored by the plan’s fiduciaries, we will
assume that the law firm is not a “party in interest.”
     24
          187 F.3d 703 (7th Cir. 1999).

                                   10
entitled to bring suit under § 502(a)(3). In Health Cost, the Seventh

Circuit addressed, inter alia, whether the assignee of an ERISA plan’s

reimbursement claims qualified as an ERISA fiduciary and thus as a

proper plaintiff in a suit for a constructive trust under § 502(a)(3).

Although the court noted that a lawyer hired by an ERISA plan to bring

suit on the plan’s behalf is not an ERISA fiduciary, and thus not a

proper plaintiff to a § 502(a)(3) action, it held that, because an

assignee of a plan’s reimbursement claims exercises greater discretion

over the plan’s assets than does the plan’s lawyer, the assignee

qualified as a fiduciary and thus as a proper plaintiff under §

502(a)(3).25

     Without a doubt, the text of § 502(a)(3) places limits on the

proper plaintiffs to a suit for equitable relief:   As the language of

that provision expressly states, a civil action for equitable relief

may be brought only by a “participant, beneficiary, or fiduciary” of

an ERISA plan.26      Congress did not see fit, however, to include a

similar limitation on the set of proper defendants to a § 502(a)(3)

action, and we decline the law firm’s invitation to impose such limits

judicially today.27


     25
          See id. at 709.
     26
        See Harris Trust, 530 U.S. at 248 (“502(a) itself
demonstrates Congress’ care in delineating the universe of
plaintiffs who may bring certain civil actions.”).
     27
        The other cases cited by the law firm in support of its
proposition that it must be a plan fiduciary to be a proper
defendant under § 502(a)(3) are equally inapposite. The issue in
each of these cases was whether the plan could properly maintain an

                                   11
     In sum, the law firm’s status as a non-fiduciary would have some

relevance to this case if the Plan were seeking to saddle the lawyers

with personal liability for the breach of a fiduciary duty.              As it

stands, however, the only action that the Plan asserts is one for

equitable in rem relief under § 502(a)(3).       As liability under that

provision does not depend on whether a substantive provision of ERISA

imposes a duty on the particular defendant subject to suit, we hold

that the law firm, as counsel for the plan participant and stake

holder of specifically identifiable settlement funds in a trust

account —— on that beneficiary’s behalf —— fits comfortably within the

“universe    of   possible   defendants”   subject   to   suit   under    that

provision.

2.   “Appropriate Equitable Relief” under § 502(a)(3)

     The law firm and Mestemacher contend next that, despite styling

its action as one for a “constructive trust” over the funds contained

in the law firm’s trust account, the Plan actually seeks to impose



action against the defendant-attorney for either breach of contract
or breach of fiduciary duty — not for equitable relief under §
502(a)(3). See Southern Council of Indus. Workers v. Ford, 83 F.3d
966, 969 (8th Cir. 1996)(subject matter jurisdiction exists over
plan’s claim for breach of fiduciary duty against beneficiary’s
attorney who signed the plan’s subrogation agreement); Witt v.
Allstate Ins. Co., 50 F.3d 536, 538 (8th Cir. 1995)(beneficiary’s
insurer is not a fiduciary subject to liability to the plan for
breach of fiduciary duty); Hotel Employees & Rest. Employees Int’l
Union Welfare Fund v. Gentner, 50 F.3d 719, 721 (9th Cir.
1994)(beneficiary’s attorney is not liable for breach of fiduciary
for failing to reimburse plan prior to distributing settlement
funds to the beneficiary); Chapman v. Klemick, 3 F.3d 1508, 1508-09
(11th Cir. 1993)(beneficiary’s attorney is not a fiduciary subject
to liability to the plan for breach of fiduciary duty).

                                    12
personal     liability    on    the   defendants       to     enforce   Mestemacher’s

contractual reimbursement obligation to the Plan for the amount he

received     in    benefits.      Thus,     they     argue,    the   Plan’s    suit    is

essentially legal in nature —— as distinguished from equitable —— and

falls outside the scope of “appropriate equitable relief” permitted

by § 502(a)(3).       The Plan responds —— correctly, we conclude —— that

because it seeks to recover specifically identifiable funds that are

in   the    constructive       possession      and   the     legal   control   of     the

participant but belong in good conscience to the Plan, its action for

a constructive trust in no way seeks to impose personal liability on

either defendant.       Instead, the Plan continues, it seeks relief that

indeed is equitable in nature and thus authorized by § 502(a)(3).

      In Mertens v. Hewitt Associates, the Supreme Court interpreted

“appropriate equitable relief” under § 502(a)(3) to include only

“those     categories    of    relief     that     were     typically   available      in

equity.”28        Subsequently, the Court, in Great-West Life & Annuity

Insurance Co. v. Knudson, elaborated on the distinction between

“legal” and “equitable” relief, stating that “a plaintiff could seek

restitution in equity, ordinarily in the form of a constructive trust

or an equitable lien, where money or property identified as belonging

in good conscience to the plaintiff could clearly be traced to

particular funds or property in the defendant’s possession.”29                         On

      28
           508 U.S. 248, 256 (1993).
      29
       534 U.S. 204, 213 (2002)(citations omitted). In Knudson,
the plan administrator sought to recover benefits paid to a

                                          13
the other hand, reasoned the Court, if “‘the property [sought to be

recovered] or its proceeds have been dissipated so that no product

remains,” “[the plaintiff’s] claim is only that of a general creditor,

and the plaintiff ‘cannot enforce a constructive trust of or an

equitable lien upon other property of the [defendant].’”30              In such an

instance, the plaintiff is seeking a legal remedy —— the imposition

of personal liability on the defendant to pay a sum of money to which

the plaintiff is owed —— so his claim falls outside § 502(a)(3)’s

jurisdictional grant.31

     Recently, in Bauhaus USA, Inc. v. Copeland,32 we interpreted

Mertens and Knudson in the context of a plan administrator’s suit to

recover    benefits   previously   paid   to   a   plan    beneficiary,      after

settlement funds from a third party tortfeasor were received on behalf

of the beneficiary.       The administrator of the plan sought the


beneficiary following the latter’s receipt of settlement funds from
a third-party tortfeasor.    See Knudson, 534 U.S. at 208.      The
funds, however, had been placed in a Special Needs Trust for the
beneficiary to provide for her medical care pursuant to California
law.   See id. at 207-08.    The Supreme Court rejected the plan
administrator’s argument that it sought equitable relief under §
502(a)(3), stating that “the funds to which [the plan] claims an
entitlement under the Plan’s reimbursement provision . . . are not
in the [beneficiary’s] possession.” Id. at 214.        As the plan
essentially sought “the imposition of personal liability [upon the
beneficiary] for the benefits” it had conferred, the Court held
that its claim was legal, rather than equitable, in nature and thus
fell outside the scope of relief authorized by § 502(a)(3). Id.
     30
       Id. at 213-14 (citing RESTATEMENT (FIRST)          OF   RESTITUTION § 215
(1937)).
     31
          See id. at 210 (citing Mertens, 508 U.S. at 256.)
     32
          292 F.3d 439 (5th Cir. 2002).

                                     14
imposition of a constructive trust over the portion of the funds that

had been placed in the registry of the Mississippi Chancery Court,

pursuant to the terms of a tort settlement agreement, to satisfy any

liens against the funds.33             Focusing on the language in Knudson

regarding the beneficiary’s possession of the disputed funds, the

panel majority in Bauhaus found the facts of the case before it

legally indistinguishable from those considered by the Supreme Court

in Knudson.34         The court observed that the disputed funds in Knudson

were outside the “possession and control” of the beneficiary, having

been placed in a Special Needs Trust to cover the beneficiary’s

medical expenses.35 Reasoning that funds placed in the court registry

were    just    as    much   beyond   the   “possession   and   control”   of   the

beneficiary as those placed in a Special Needs Trust, the panel

majority held that the plan’s suit did not lie in equity and was

therefore unauthorized by § 502(a)(3).36

       Although the facts of Knudson and Bauhaus resemble those in

Mestemacher’s case in several respects, those cases are significantly

distinguishable from Mestemacher’s.              To verify this conclusion, one

need only compare the facts of these three cases by answering the

relevant three-part inquiry:          Does the Plan seek to recover funds (1)



       33
            See id. at 441.
       34
            See id. at 445.
       35
            See id.
       36
            See id.

                                            15
that are specifically identifiable, (2) that belong in good conscience

to the Plan, and (3) that are within the possession and control of the

defendant beneficiary? In both Knudson and Bauhaus, as in the instant

case, the benefit plans sought to recover funds from a specifically

identifiable corpus of money that they had paid out previously as

benefits.    Likewise, in each case, the plan’s terms contained an

express, unambiguous reimbursement provision which made the disputed

funds “belong in good conscience” to the plan.            It is, however, the

third   element     of    the   inquiry     ——   the   defendant-beneficiary’s

“possession and control” over the disputed funds —— that distinguishes

Knudson and Bauhaus from the case before us today.

      In Knudson and Bauhaus, the beneficiary had neither actual nor

constructive possession or control over the funds.             In Knudson, the

funds had been placed in a Special Needs Trust, as mandated by

California law, to provide for the beneficiary’s medical care, and the

trustee was totally independent of the plan beneficiary.            Similarly,

in Bauhaus, the funds had been deposited in the state court’s registry

in   anticipation    of    an   interpleader     action   to   determine   their

ownership.   Obviously, that court was totally independent of the plan

beneficiary.      Here, in stark contrast, the funds that the Plan is

seeking to recover belong to the participant and are simply being held

in a bank account in the name of the participant’s attorneys, who are

indisputably his agent.         Unlike the beneficiaries in Knudson and

Bauhaus, the Plan’s participant, Mestemacher, has ultimate control

over, and thus constructive possession of, the disputed funds.              The

                                       16
law firm and Mestemacher concede that the law firm is merely holding

the   funds    in   its   trust   account    on   Mestemacher’s   behalf      ——   as

Mestemacher’s agent —— and is legally obligated to disburse the funds

to Mestemacher the moment he directs their release.                  This crucial

distinction is more than sufficient to warrant a finding that the

Plan’s action is indeed “equitable” in nature.

      The Seventh Circuit’s recent opinion in Administrative Committee

of the Wal-Mart Stores, Inc. Associated Health and Welfare Plan v.

Varco offers further support for our determination that the Plan’s

action for a constructive trust lies in equity.37           In Varco, the ERISA

plan sought to enforce the provisions of a subrogation clause against

a   participant     through   imposition     of   a   constructive    trust    over

settlement funds from a third party tortfeasor.38            The participant’s

attorney had accepted delivery of the funds from the tortfeasor on the

participant’s behalf prior to the plan’s filing suit and, after taking

out an amount sufficient to cover his fees, the lawyer had placed the

remaining funds in a reserve account in the participant’s name.39

Noting that (1) the participant had “control” over the disputed funds,

(2) the funds were “identifiable, and [had] not been dissipated,” and

(3) the funds, “in good conscience,” belonged to the plan, the Seventh




      37
           338 F.3d 680 (7th Cir. 2003).
      38
           See id. at 683-84.
      39
           See id. at 684.

                                        17
Circuit held that the plan’s action for a constructive trust was

equitable in nature and therefore authorized by § 502(a)(3).40

     In making the same determination today, we remain unpersuaded by

the contention voiced by the law firm during oral argument to the

effect that Mestemacher lacks “possession and control” over the one-

third share of the $18,500 contained in the trust account to which the

law firm asserts ownership by virtue of its contingent fee agreement

with Mestemacher.    This assertion ignores Mestemacher’s pre-existing

contractual reimbursement obligation to the Plan, which requires him

to reimburse the Plan the full amount of the benefits that he had

received from the Plan and to do so out of any third-party recovery,

without deduction for attorney’s fees and costs.    This pre-existing

reimbursement obligation to the Plan precluded Mestemacher from

contracting away to the law firm that which he did not own himself,

namely, the right to all or any portion of the $13,643.63 that

rightfully belonged to the Plan.    In essence, Mestemacher could not

create a greater right in the funds by virtue of entering the

contingent fee arrangement with the law firm than Mestemacher had

himself.

     In addition, Mestemacher’s contingent fee agreement does not

restrict his obligation to compensate the law firm solely to the

proceeds of his recovery.      Rather, that agreement creates an in

personam obligation, requiring Mestemacher to pay counsel an amount


     40
          See id. at 687-88.

                                   18
equivalent to one-third of his recovery.                     Mestemacher is personally

responsible to the law firm for its attorneys’ fees in an amount equal

to one-third of his recovery.               The fact that he may have to satisfy

some part or even all of this personal obligation out of his own

pocket in no way diminishes his pre-existing reimbursement obligation

to the Plan vis-à-vis the funds recovered from his tortfeasor. We are

satisfied that neither Mestemacher’s contingency fee agreement with

the law firm nor the location of the settlement funds in the trust

account affects his legal “possession and control” over the disputed

$13,643.63.        Our conclusion in this regard is consistent with Judge

Posner’s opinion for the Seventh Circuit in Wal-Mart Stores, Inc.

Assoc. Health and Welfare Plan v. Wells,41 in which that court held,

on   substantially       similar      facts,      that   a    plan    administrator’s   §

502(a)(3) suit for a constructive trust over settlement funds presumed

to   be    held    in   escrow   by   the    participant’s        attorney   “nestle[d]

comfortably” within “ERISA’s concept of equity.”42

      Having closely examined the substance of the relief sought in the

case before us, we are convinced that, in its efforts to recoup the

amount paid to Mestemacher in benefits, the Plan does not seek to

impose personal liability on either Mestemacher or his counsel. Thus,

we   hold    the    Plan’s   requested         relief    ——     the   imposition   of   a

constructive trust over specifically identifiable settlement funds


      41
           213 F.3d 398, 401 (7th Cir. 2000).
      42
           Id.

                                             19
held in the trust account of the law firm as agent for Mestemacher ——

to be equitable in nature.       Accordingly, we further hold that §

502(a)(3) authorizes the Plan’s claim for relief, and we affirm the

district court’s exercise of subject matter jurisdiction over this

action.43

C.   Actual Fraud and Unjust Enrichment

     We turn next to the question whether a showing of either actual

fraud or unjust enrichment, or both, on the part of Mestemacher and

the law firm is required before a constructive trust can be imposed

on the disputed funds.    Noting correctly that ERISA does not specify

the elements of a constructive trust in a § 502(a)(3) action,44 the

law firm and Mestemacher maintain that this lacuna in the statutory

text should be filled by Texas law.       Under that State’s law, a

plaintiff seeking a constructive trust must establish, inter alia, (1)

     43
       We recognize that our holding today is at variance with the
Ninth Circuit’s recent opinion in Westaff (USA), Inc. v. Arce. See
298 F.3d 1164 (9th Cir. 2002). In Westaff, the Ninth Circuit held
that a plan administrator’s suit to recoup benefits paid to a
beneficiary upon the beneficiary’s receipt of settlement funds from
a third party tortfeasor was essentially legal in nature, even
though the beneficiary had placed the funds in an escrow account in
the beneficiary’s name pending a determination of to whom the money
was owed. See id. at 1167. Acknowledging that the disputed funds
held in escrow were “specifically identifiable,” the Ninth Circuit
nevertheless held that the funds were “a legitimate personal injury
settlement to which the beneficiary is entitled” and that the
administrator’s action was essentially “one for money damages”
falling outside the jurisdictional grant of § 502(a)(3). Id. We
perceive that decision to depart from the Supreme Court’s opinions
in Mertens and Knudson, and from our own precedent in Bauhaus, so
we decline to follow the Ninth Circuit’s more restrictive view of
the scope of “appropriate equitable relief” under § 502(a)(3).
     44
          See 29 U.S.C. § 1132(a)(2).

                                   20
the breach of a fiduciary relationship or, alternatively, actual

fraud, and (2) unjust enrichment of the wrongdoer.45

     In recognition of ERISA’s overarching aim of national uniformity,

we have consistently held that any hiatus in ERISA’s text must be

filled by application of federal common law rather than the law of any

particular state.46 Accordingly, Texas law is not directly applicable

     45
       See, e.g., Haber Oil Co. v. Swinehart, 12 F.3d 426, 437 (5th
Cir. 1994).      We recognize in passing that our precedent
interpreting Texas law as it relates to constructive trusts has not
been altogether consistent. In some cases, we have interpreted
Texas law as requiring a showing of actual fraud or breach of
fiduciary duty prior to imposition of a constructive trust. See
id. at 437 (the elements of a constructive trust under Texas law
include, inter alia, “breach of a fiduciary relationship, or in the
alternative, actual fraud....“)(citing In re Monnig’s Dept. Stores,
Inc. v. Azad Oriental Rugs, Inc., 929 F.2d 197, 201 (5th Cir.
1991)). More recently, we held that it was sufficient under Texas
law for a plaintiff to show merely constructive fraud, as opposed
to actual fraud or wrongdoing.       See Burkhart Grob Luft und
Raumfakrt GmbH & Co. v. E-Systems, Inc., 257 F.3d 461, 469 (5th
Cir. 2001)(the elements of a constructive trust under Texas law
include a showing of either actual or constructive fraud)(citing
Haber Oil Co., Inc. v. Swinehart, 12 F.3d 426, 437 (5th Cir.
1994)). If indeed constructive fraud is all that is required under
Texas law, then the district court clearly did not err in not
making a finding of fraud, for the requirement of “constructive
fraud” is “merely an expression of the idea that a constructive
trust may arise in the absence of fraud.” SCOTT ON TRUSTS § 462 (4th
ed. 2001). Nevertheless, because some confusion exists as to this
issue, and because the issue was not briefed by the parties, we
will assume arguendo for purposes of the instant analysis that
Texas law requires a showing of actual fraud or breach of fiduciary
duty prior to imposition of a constructive trust.
     46
        See Jamail, Inc. v. Carpenters Dist. Council of Houston
Pension & Welfare Trusts, 954 F.2d 299, 303 (5th Cir. 1992)(“Both
the legislative history and the case law pursuant to ERISA validate
our application of federal common law to ERISA.”); see also
Rodrigue v. Western and Southern Life Ins. Co., 948 F.2d 969, 971
(5th Cir. 1991)(“Congress intended that federal courts should
create federal common law when adjudicating disputes regarding
ERISA.”).

                                  21
to the Plan’s claim, and the Plan will not be required to establish

actual fraud and unjust enrichment —— unless, that is, some basis

exists for concluding that these elements are required under a federal

common law standard for the imposition of a constructive trust.

     Although the law firm and Mestemacher argue alternatively that

we should incorporate the Texas law elements of actual fraud and

unjust enrichment into the federal common law rule, federal common law

—— like gaps in ERISA’s statutory provisions —— cannot be defined

solely by reference to the law of but a single state.              This is

especially true when adherence to the strictures of Texas law would

require the Plan to establish actual fraud on the part of either

Mestemacher or the law firm, an element that has never been required

by the Supreme Court or this Circuit.        Indeed, as discussed in the

preceding section, Knudson requires a § 502(a)(3) plaintiff seeking

a constructive trust to show only the existence of “money or property

identified as belonging in good conscience to the plaintiff [that can]

clearly be traced to particular funds or property in the defendant’s

possession,” and makes no mention of the necessity of showing actual

fraud or wrongdoing on the part of the defendant.47          Neither does

Bauhaus,     which   contains   our   most   recent   discussion   of   the

circumstances in which a constructive trust may be imposed under §




     47
          Knudson, 534 U.S. at 213.

                                      22
502(a)(3), suggest that a showing of actual fraud or wrongdoing is

required.

     Further, as did the Knudson Court in its efforts to define the

contours of “appropriate equitable relief” under § 502(a)(3), we look

to “standard current works, such as Dobbs, Palmer, Corbin, and the

Restatements” in ascertaining the federal common law rule to be

applied.48   Of those works, two that have squarely considered whether

a showing of fraud or wrongdoing is required for imposition of a

constructive trust have concluded that such a trust may properly be

imposed in the absence of fraud.49     Based on these expressions, as

well as the absence of any indication in our precedent or that of the

Supreme Court to the effect that federal common law requires that

actual fraud be established before a constructive trust can be imposed

under § 502(a)(3),50 we hold today that federal common law does not


     48
          Id. at 716.
     49
       SCOTT ON TRUSTS § 462 (4th ed. 2001)(“[T]here are numerous
situations in which a constructive trust may be imposed in the
absence of fraud.”); 1 DOBBS LAW OF REMEDIES § 4.3(2)(2d ed.
1993)(“Sometimes it is still said that the constructive trust
applies only to misdealings by fiduciaries or in cases of fraud .
. . but this is a misconception.”).
     50
       In considering whether federal common law permits imposition
of a constructive trust in the absence of a showing of actual fraud
or other wrongdoing, the Seventh Circuit has also answered the
question in the negative. See Health Cost Controls, 187 F.3d at
711. Writing for the panel in Health Cost, Judge Posner noted that
     although the Ninth Circuit appears to believe that the
     imposition of a constructive trust in an ERISA case is
     permissible only when there has been a breach of trust,
     FMC Medical Plan v. Owens, 122 F.3d 1258, 1261 (9th Cir.
     1997), it has given no reason for this belief and there

                                  23
require a plaintiff in a § 502(a)(3) action to show that he was the

victim of actual fraud or wrongdoing as a prerequisite to obtaining

a constructive trust.51

      As for the additional requirement of Texas law that the defendant

must have been unjustly enriched at the expense of the plaintiff, it

is axiomatic that a party who retains funds “belonging in good

conscience to another” is unjustly enriched at that other party’s

expense.      None disputes that the Plan’s terms unambiguously state a

right to recover benefits that it has previously paid, up to the full

extent of any settlement proceeds obtained by the participant or

beneficiary.       Thus, the disputed funds “belong in good conscience” to

the Plan, and the law firm’s and Mestemacher’s continued retention of

these      funds   would   unjustly   enrich   them   at   the   Plan’s   expense.


      is no basis for it either in ERISA or in the principles
      of equity.     Granted that in times of yore the
      constructive trust was available     only as a remedy
      against trustees and other fiduciaries, 1 Dobbs, supra,
      § 4.3(2), p. 597, there is nothing to suggest that
      ERISA’s drafters wanted to embed their work in a time
      warp.
Id.
      51
         As today we hold that actual fraud is not an element
required in a § 502(a)(3) action for a constructive trust, we do
not reach the question whether the Plan has demonstrated actual
fraud on the part of Mestemacher and the law firm.        We note,
however, that at least one other circuit has observed, on nearly
identical facts, that the refusal of a participant’s lawyer to turn
over settlement proceeds that rightfully belonged to the plan
constituted wrongdoing on the part of the lawyer. See Wal-Mart
Stores, Inc. Assoc. Health and Welfare Plan v. Wells, 213 F.3d 398,
401 (7th Cir. 2000)(lawyer’s refusal to hand over settlement check
to which plan claimed entitlement by virtue of its unambiguous
reimbursement provision was “clearly wrongful”).

                                        24
Accordingly, even if we assume arguendo that unjust enrichment is a

prerequisite, the Plan has produced sufficient evidence that the

defendants would be unjustly enriched, entitling the Plan to have a

constructive trust imposed on the disputed settlement funds.

D.   Common Fund Doctrine

     Finally, we consider whether the Plan’s claim is subject to

either the Texas or the federal “common fund” doctrine.    There is no

substantive difference between the Texas and federal versions of this

doctrine; in essence, both provide that “a litigant or lawyer who

recovers a common fund for the benefit of persons other than himself

or his client is entitled to a reasonable attorney’s fee from the fund

as a whole.”52   “The doctrine rests on the perception that persons who

obtain the benefit of a lawsuit without contributing to its costs are

unjustly enriched at the successful litigant’s expense.”53      In the

instant case, the district court found this doctrine inapplicable to

the Plan’s claim for benefits because the language of the Plan

expressly provided —— long before Mestemacher was injured and long


     52
       Boeing Co. v. Van Gemert, 444 U.S. 47, 478 (1980); compare
Lancer Corp. v. Murillo, 909 S.W.2d 122 (Tex. App. — San Antonio
1995, no writ)(“Under the [Texas] common fund doctrine, the court
may allow reasonable attorney’s fees to a litigant who, at his own
expense, has maintained a suit which creates a fund benefitting
other parties as well as himself.”)(cites omitted).
     53
       Boeing, 444 U.S. at 478; compare Lancer Corp., 909 S.W.2d
at 126 (“The common fund doctrine is based on the principle that
those receiving the benefits of the suit should bear their fair
share of the expenses.”)(citing Trustees v. Greenough, 105 U.S.
527, 532-37 (1881); Knebel v. Capital Nat’l Bank, 518 S.W.2d 795,
799-801 (Tex. 1974)).

                                   25
before he retained the law firm on a contingent fee basis —— that

“[a]ttorney’s fees and court costs are the responsibility of the

participant, not the Plan.”   We agree.

     Although we have yet to address whether equitable fee sharing is

warranted under the common fund doctrine when the Plan language

expressly provides to the contrary, we held in Walker v. Wal-Mart

Stores, Inc. that, when a plan’s terms give it the right to recover

benefits “to the extent of any and all” settlement payments, but fail

to specify who bears the responsibility for fees and costs, the plan

is nevertheless entitled to full recovery of the amount of the

benefits paid without offset for fees and costs.54   Here, the Plan’s

terms not only give it the right to recover benefits “to the extent

of any and all” settlement payments, but explicitly state that the

participant must bear the fees and costs associated with his tort

action.   Our holding in Walker thus supports our determination here

that neither the federal nor Texas common fund doctrine may be invoked

to prevent or reduce the Plan’s recovery of the funds that it advanced




     54
       159 F.3d 938, 940 (5th Cir. 1998). Interpreting the plan’s
“‘any and all’ language,” the Walker panel held that such language
“plainly means the first dollar of recovery (any) and 100% recovery
(all) of the funds received by the plaintiff in the settlement, up
to the full amount of the benefits paid.” Id. The panel further
noted that the fact that the plan did not “specifically mention
attorneys’ fees or set out detailed distribution procedures d[id]
not constitute silence or ambiguity on behalf of the plan,”
reasoning that ERISA plans should not be labeled “silent or
unambiguous” simply for lack of “technical precision.” Id.

                                 26
to Mestemacher, up to the full amount of his recovery from the

tortfeasor.

     The    Seventh   Circuit’s   Varco   opinion   further   supports   this

conclusion.55    The Varco court refused to apply either the Illinois or

federal common fund doctrine to defeat an ERISA plan’s express

provision that fees and costs were the sole responsibility of the

participant.56    Considering the Illinois doctrine first, the court

held that, because application of that doctrine would contradict the

express terms of the Plan, it was preempted by § 514 of ERISA.57

Turning next to the federal common fund doctrine, the Varco court

declined to offset the plan’s recovery on that basis as well, noting

that application of “federal common law to override the Plan’s

reimbursement provision would contravene, rather than effectuate, the

underlying purposes of ERISA because the express terms of the Plan

provided for the appropriate distribution of attorney’s fees.”58

Thus, reasoned the Seventh Circuit, the federal common fund doctrine

should only be applied to offset an ERISA plan’s recovery in the



     55
          338 F.3d 680 (7th Cir. 2003)
     56
          See id. at 692-93.
     57
       See id. at 690. In addition to complete preemption under
§ 502(2), ERISA § 514 provides for conflict preemption when a state
statute “directly conflicts with ERISA’s requirements that the
plans be administered, and benefits be paid in accordance with plan
documents.” Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141,
150 (2001); 29 U.S.C. 1144(a).
     58
          Varco, 338 F.3d at 692.

                                     27
absence of controlling plan language that specifies the manner in

which the costs of the underlying litigation are to be distributed.59

     We agree with the Seventh Circuit’s determination in Varco that

the state and federal common fund doctrines are inapplicable when, as

here,     the   controlling   plan    language    clearly   and    unambiguously

expresses that fees and cost are the sole responsibility of the

participant.      Accordingly, we hold that the district court correctly

refused to apply either the Texas or federal common fund doctrines to

allow a deduction from the Plan’s recovery of a pro rata share of

Mestemacher’s attorney’s fees and costs.

                               III.    CONCLUSION

     We    affirm   the   district    court’s    exercise   of    subject   matter

jurisdiction based on ERISA § 502(a)(3) over the Plan’s action for a

constructive trust because it is equitable in nature.                   Further,

because federal common law does not require a showing of actual fraud

or wrongdoing as an element of imposing a constructive trust, we

affirm the district court’s grant of the Plan’s requested relief,

despite an absence of such a showing. Finally, we affirm the district

court’s holding that neither the federal nor Texas common fund

doctrine trumps the Plan’s express language specifying that all fees

and costs associated with the underlying tort litigation are to be




     59
       Id. (citing McIntosh v. Pacific Holding Co., 120 F.3d 911,
917 (8th Cir. 1997); Waller v. Hormel Foods Corp., 120 F.3d 138,
141 (8th Cir. 1997)).

                                        28
born by the participant.   Accordingly, the district court’s decision

is, in all respects,

AFFIRMED.




                                  29
