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From Roger Baron: “unclean hands” is equitable defense to claim under ERISA § 1132(a)(3) according to Oregon Federal Court

Reprinted with Permission of Roger Baron

In Ayers v. LINA, No. 6:08-cv-06287-AA, (D.Or. April 19, 2012), the court was adjudicating a dispute over LTD benefits under ERISA coverage.  The plaintiff sued alleging wrongful denial and the ERISA insurer counterclaimed for an alleged overpayment of $99,885.  This court ruled in favor of the plaintiff on coverage and then addressed whether the equitable defense of “unclean hands” is available as a defense to an action brought under ERISA § 1132(a)(3).  The court rejected LINA’s argument that “equitable theories do not apply to ERISA claims” by noting that LINA’s cited authorities merely stand for the proposition that “federal common law rules of contract interpretation cannot be applied to override the express terms of an ERISA plan.”   LINA’s cited authorities “do not address whether equitable defenses, such as unclean hands, are applicable to claims brought under section 1132(a)(3).”  The court then rules in favor of the participant, holding, “LINA cannot recover any overpaid amounts pursuant to 1132(a)(3) if Ayers can demonstrate that it was acting with unclean hands.”  As to whether or not “unclean hands” exists, the court holds that there is a “genuine issue of material fact,” overruling both parties’ motions for summary judgment on the counterclaim.

The discussion of “unclean hands” as an equitable defense to an action ERISA § 1132(a)(3) is found on pp. 36-47 of the court’s opinion.  To view the opinion click HERE

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