An ex-wife must repay Ford Motor Company more than $243,000 that she mistakenly received as part of her ex-husband’s retirement benefits in her divorce, the 6th U.S. Circuit Court of Appeals has ruled.

In Zirbel v Ford Motor Co (Docket No. 20-1149), Ford Motor Company (Ford) paid Donna Zirbel a lump-sum of $351,000. The payment was supposedly her portion of her ex-husband’s retirement benefits. However, Ford later learned that Zirbel was mistakenly paid $243,000 too much and it asked her to return the overpayment. Zirbel refused and filed this action in the U.S. District Court for the Eastern District of Michigan, seeking a declaration that she was entitled to keep the money.

The Eastern District granted summary judgment to Ford and ordered Zirbel to repay the $243,000.

The 6th Circuit affirmed in a published opinion, finding that Ford had obtained an equitable lien on the funds. The 6th Circuit specifically rejected Zirbel’s arguments that 1) Ford was equitably estopped from recovering the overpayment and 2) the repayment was inequitable.

“Zirbel knew that the retroactive payment was too high when she got it, the text of the plan put her on notice that Ford could demand repayment, and she admits she has the capacity to return the money - all preventing her from wrongly keeping money from a finite retirement fund meant to benefit many other Ford retirees and their spouses,” 6th Circuit Judge Jeffrey S. Sutton wrote, joined by Judges Amul R. Thapar and Chad A. Readler.

Background

In her divorce, Zirbel received a portion of the retirement benefits that her ex-husband had with Ford. She agreed to take a lump-sum payment. However, Ford mistakenly calculated the amount of benefits to which Zirbel was entitled, resulting in Zirbel receiving $243,190 more than she should have.

Ford notified Zirbel of the mistake and asked her to return the money. She refused. She unsuccessfully appealed to the third-party actuarial service that operates Ford’s benefit plan and to the committee that oversees the pension plan.

The plan committee then informed Zirbel that she could apply for a hardship reduction, which would require full disclosure of her finances, including her other retirement funds, her other investments and her inheritance from her mother. Zirbel did not apply.

Thereafter, Zirbel filed this action in the Eastern District of Michigan, seeking a declaration that she should be able to keep the money. Ford counterclaimed, seeking restitution of the overpayment.

Eastern District Judge Nancy Edmunds granted summary judgment to Ford (Case No. 18-13212). Zirbel appealed that decision.

Nothing Arbitrary Or Capricious

In its opinion, the 6th Circuit first addressed whether the plan committee had appropriately asked Zirbel to return the overpaid funds.

“It did,” the 6th Circuit said. “The committee’s request for its money back was neither wrong nor arbitrary nor capricious. … The plan’s text calls for repayment. The initial request for repayment indeed was required (‘shall’) by the plan’s fiduciary duty to the other beneficiaries of the plan.”

Moreover, the plan permitted Ford to reduce a repayment or waive it altogether on hardship grounds. “But Zirbel never applied for a waiver,” the 6th Circuit observed. “And nothing requires Ford to provide a waiver on its own initiative. Decisions that respect a plan’s terms aren’t arbitrary or capricious.”

Also, there was nothing problematic about the process that was offered to Zirbel, the 6th Circuit explained. “The plan gave her several opportunities to appeal the decision, and she took each one. At the final stage, the committee reviewed the appeal record, examined Zirbel’s exhibits, discussed the facts of the case, and denied the appeal. The committee also gave her an opportunity to apply for a hardship waiver. She opted not to make the application. Nothing about this process sunk to the level of arbitrariness or (to the extent there’s a difference) capriciousness.”

Appropriate Remedy

Next, the 6th Circuit focused on Ford’s counterclaim for repayment, which it brought under the Employee Retirement Income Security Act (ERISA), 29 USC § 1001 et seq. - specifically the provision that says it can “obtain … appropriate equitable relief … to enforce any provisions of this [Act] or the terms of the plan.”

According to the 6th Circuit, “That prompts this question: Does the judgment directing Zirbel to pay Ford $243,190 in restitution provide ‘equitable relief’ as opposed to legal relief?”

The 6th Circuit found it provided equitable relief. “A court awards equitable restitution when it imposes a lien on ‘particular funds or property in the defendant’s possession’ but legal restitution when it holds the defendant liable for a sum of money.”

Here, the plan’s reimbursement provision “gave it a right to recover a particular fund: the overpayment,” the 6th Circuit explained. “As soon as Zirbel received the overpayment, a lien attached, permitting the plan to seek equitable restitution in the amount of the $243,190. Nothing from the receipt of those funds to the start of the lawsuit changed that calculation. Once she received the overpayment, she placed it into her accounts. This commingling gave Ford an equitable lien against those accounts up to the overpayment. Because Zirbel does not argue that she dissipated the funds in those accounts into nontraceable items, that’s all we need to know. Ford could recover through this equitable lien.”

Meanwhile, Zirbel argued the funds were no longer in her possession because she put them in investment accounts, made gifts to children, paid taxes and so forth, the 6th Circuit observed. “But simply commingling funds into accounts and spending the money does not by itself extinguish a lien. She has no answer to Ford’s analysis on this front.”

In conclusion, the 6th Circuit rejected Zirbel’s arguments that 1) Ford should be equitably estopped from recouping the overpayment and 2) the repayment was inequitable.

“When she received the lump sum offer, she thought the numbers were wrong,” the 6th Circuit said. “As a result, she asked Ford to recalculate her benefits, and it did not change the sum owed. This confirmation, she claims, binds Ford now. But to bring an equitable-estoppel claim, Zirbel had to show that Ford made fraudulent representations to her, that she did ‘not know the truth behind [Ford’s] representations,’ … and that she justifiably relied on Ford’s representations to her detriment, …. Zirbel cannot satisfy these requirements.”

Addressing Zirbel’s claim that the recoupment was inequitable under Wells v US Steel & Carnegie Pension Fund, Inc, 950 F 2d 1244 (6th Cir 1991), the 6th Circuit noted that the parties disputed “when, whether and how” Wells fits into the overall analysis.

“We need not resolve the point because this repayment is hardly inequitable,” the 6th Circuit concluded. “Zirbel knew that the retroactive payment was too high when she got it, the text of the plan put her on notice that Ford could demand repayment, and she admits she has the capacity to return the money - all preventing her from wrongly keeping money from a finite retirement fund meant to benefit many other Ford retirees and their spouses. As for the indignity of paying taxes on money she must now return, we can sympathize. While we are not tax advisors, she may have recourse: say re-opening the past tax returns or seeking a tax credit for future tax returns. She has not claimed at any rate that these options are unavailable.”