author: TORRUELLA, Circuit Judge.

text:
    Nilda RODRÍGUEZ-LÓPEZ, Plaintiff, Appellant, v. TRIPLE-S VIDA, INC., Defendant, Appellee.
    No. 15-2413
    United States Court of Appeals, First Circuit.
    March 1, 2017

      Víctor Gratacós-Díaz, with whom Grata-cós Law Firm, PSC, Caguas, PR, was on brief, for appellant.
    Diana Pérez-Seda, with whom César T. Alcover and Casellas Alcover & Burgos, PSC, San Juan, PR, were on brief, for appellee.
    Before TORRUELLA, THOMPSON, and KAYATTA, Circuit Judges.
   TORRUELLA, Circuit Judge.

Plaintiff-appellant Nilda Rodríguez-Ló-pez (“Rodriguez”) appeals from the district court’s grant of summary judgment in favor of defendant-appellee Triple-S Vida, Inc. (“Triple-S”). The district court reviewed and sustairiéd Triple-S’s denial of Rodriguez’s claim for long-term disability (“LTD”) benefits under the deferential arbitrary and capricious standard. Because the plan contained no clear delegation of authority to Triple-S, we hold that TripleS’s decision was not entitled to deference. Accordingly, we reverse and remand to the district court to decide the case under the de novo standard of review.

I. Factual Background

The following facts have been drawn largely from the district court’s opinion in this ease.

A. Rodriguez’s History

Rodríguez, a licensed chemist, worked as a senior chemist/quality control laboratory supervisor for Mova Pharmaceutical Corporation (“Mova”) from 1995 to 2004. Her job required her to perform some physical activity, such as standing, walking, bending, reaching, lifting, carrying, and writing.

Rodriguez, first started to experience symptoms on March 12, 2004 — which was also her last day of work — and was then diagnosed with several physical and mental conditions. She was prescribed medications to mitigate some of the symptoms. She subsequently, underwent a series of medical exams and began treatment with Dr. Héctor J. Cases, a neurologist, in June 2004. Dr. Cases filled out a “Functional Capacity Estimate” form on November 29, 2004, where he concluded that she could not work full-time or part-time, even if her employer accommodated her limitations and restrictions. Accordingly, Rodriguez filed a claim for disability benefits under Mova’s LTD plan.

B. Plan Provisions

Mova’s LTD plan is an employee welfare benefits plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq. Jefferson-Pilot Life Insurance Company (“Jefferson-Pilot”) originally issued a group policy (the “Plan”) to Mova. The summary plan description (“SPD”) named Mova as the Plan sponsor' and administrator, and stated that “[t]he Plan Sponsor is granted the discretionary authority to determine eligibility for benefits and to construe the terms of the Plan.”

Under the Plan, the forms to claim benefits and proof of loss for a disability were to be submitted to Jefferson-Pilot. Jefferson-Pilot had the right, at its own expense, to examine the claimant, when and as often as was reasonably required while the claim was pending. If the claim was wholly or partially denied, Jefferson-Pilot would furnish a written notice that stated the specific reasons for the denial and the basis in the Plan provisions, explain the Plan’s claim review procedures, and describe any additional material or information needed to reconsider the decision. Also, an officer designated by Jefferson-Pilot would review requests for review of a claim, and Jefferson-Pilot would furnish a written decision. ■

Triple-S claims that at some point it replaced Jefferson-Pilot in the contractual relationship between Mova and Jefferson-Pilot and that it notified Mova that TripleS would pay the benefits provided under the Plan, subject to all the policy’s provisions. Thereafter, all the things that the Plan stated would be performed by Jefferson-Pilot were actually performed by Triple-S. The Plan, however, was not amended to reflect this change. Nor was a new SPD or summary of material modifications furnished to plan participants notifying them of this change and naming Triple-S as claims administrator and/or insurer.

The Plan offered LTD benefits due to total disability. To qualify for these benefits, the beneficiary had to comply with the Plan’s definition of “total disability” or “totally disabled” and be under a doctor’s care during the entire time of the total disability. “ ‘Total disability’ ... means ... that you are unable to perform all of the material and substantial duties of your occupation on a full-time basis because of disability: (1) caused by injury or sickness; and (2) that started while you are insured.” A beneficiary is “totally disabled” if she is “unable to perform with reasonable continuity all of the material and substantial duties of [her] own or any other occupation for which [she is] or become[s] reasonably fitted by training, education, experience, age[,] and physical and mental capacity.” Benefits would be paid when the beneficiary is totally disabled for longer than the applicable Elimination Period until the earliest of: (1) the day the total disability ends, (2) death, or (3) the .end of the maximum payment period. For mental illness, however, the plan limited payment of benefits to twenty-four months.

C. Rodriguez’s Claim for LTD Benefits

Triple-S received Rodriguez’s application for LTD benefits on January 13, 2005. She claimed to be experiencing various symptoms which rendered her unable to work. She stated that she did not anticipate working in the near future, either in her previous occupation or in any other occupation, and was not interested in getting training or in working in another type of occupation or work activity.

Rodriguez’s claim was initially denied, but it was later approved on administrative appeal once Rodriguez supplemented her record with additional evidence. Her LTD benefits were granted on October 10, 2005, under the mental illness disability provision of the Plan, but it was effective retroactively to September 24, 2004. Since the Plan provided that disability benefits due to mental illness could be granted for a maximum term of twenty-four months, Rodriguez’s mental-illness benefits expired September 24, 2006. Rodriguez was not awarded LTD benefits for her physical ailments, but she was notified that her physical condition would be further investigated.

From 2007 to 2012, Rodriguez was notified on various occasions that her claim for LTD benefits for physical disability was being evaluated, as the Plan’s twenty-four-month term for mental illness had expired. During this time period, Triple-S continued issuing the same monthly disability payments Rodriguez had been receiving for her mental illness. On December 16, 2009, the Social Security Administration found Rodriguez to be disabled, retroactive to March 12, 2004. Rodriguez submitted evidence of her Social Security claim to Triple-S. Since Social Security benefits were to be deducted from the amount payable for disability under the Plan, Triple-S requested a refund of all excess LTD benefits.

Rodriguez also submitted updated copies of progress notes from her treating physicians, including her rheumatologist and endocrinologist, which stated that she was unable to perform a gainful job since her disability was permanent and total. After further medical exams were performed on Rodriguez, her neurologist, Dr. Cases, filled out additional “Functional Capacity Estimate” forms on February 9, 2009, and January 18, 2013, where he stated that Rodriguez was not able to work full-time or part-time. He certified that Rodriguez was completely disabled, that she had reached the maximum medical improvement, and that she was not fit to return to work, despite any work accommodations available for her limitations and restrictions. Rodriguez also filled out and submitted various Triple-S resource questionnaires, in which she stated her symptoms and claimed to be unable to work because her conditions were permanent.

Triple-S referred Rodriguez’s case to Dr. Alfonso Bello, a rheumatologist, for an Independent Medical Review of her medical file. After reviewing the medical file provided to him, Dr. Bello concluded that, from a rheumatologic perspective, Rodriguez’s medical record did not support a finding that she suffered from an active and disabling disorder, and, hence, she was not totally disabled.

Triple-S also referred the case to a Vocational Specialist for an Employability Evaluation from a physical standpoint. The Vocational Specialist found that there were 162 sedentary and light duty occupations, including her previous job, available in the San Juan, Caguas, and Guaynabo metropolitan area, which Rodriguez could perform given her education, training, and previous work experience, and that met or exceeded her reasonable wage of $12.62 per hour. Some of these jobs are similar to the work she performed at Mova, including technical and supervisory duties in laboratories.

D. Denial of Claim and Administrative Appeal

On July 23, 2013, Triple-S denied Rodriguez’s application for LTD benefits, finding she no longer met the Plan’s definition of disabled. According to Triple-S, her administrative record did not contain enough clinical evidence to support a finding that she was unable to physically perform the tasks of her previous job or any other occupation. Triple-S also terminated her mental illness disability benefits, as the benefits had been paid beyond the twenty-four-month limit allowed by the Plan. It did not request reimbursement for the excess benefits paid.

In accordance with the Plan’s internal appeal process, on August 23, 2013, Rodriguez administratively appealed Triple-S’s decision and submitted new evidence, copies of her medical files, and Social Security documents. Rodriguez underwent additional medical exams that suggested deterioration of an injury when compared to the same study conducted in 2004.

Triple-S referred the case to Dr. Ino-cencio A. Cuesta, an internist with a sub-specialty in adult rheumatology, who performed an independent peer review on October 11, 2013. Dr. Cuesta noted that, although the record sustained subjective evidence of pain and evidence of a rheu-matologie condition, there was no objective evidence that indicated these findings impaired Rodriguez. He opined that the record contained no clinical information as to how her physical ailments affected her ability to return to work and concluded that Rodriguez did not suffer from physical deterioration based on a rheumatoid condition that would prevent her from working full-time in a light or sedentary occupation.

Another employability evaluation was conducted, taking.into account only her physical condition. The occupational specialist concluded that there were jobs that Rodriguez could perform given her education and experience that might not require additional training, modification, or restructuring, and that would meet or exceed her reasonable wage of $12.62 per hour.

On December 3, 2013, Triple-S notified Rodriguez that it was denying benefits because the medical record did not support a finding that she suffered from a physical condition that prevented her from performing light or sedentary occupations, and that disability benefits under the mental illness provision of the LTD plan had already been exhausted, even if she continued to be disabled due to a mental health condition. She was also advised of her right to sue under § 502(a) of ERISA since she had already exhausted the administrative remedies.

E. Procedural Background

On May 21, 2014, Rodriguez filed suit in a Puerto Rico state court. Triple-S removed the action to the federal district court. The parties cross-moved for summary judgment. On September 30, 2015, the district court granted Triple-S’s motion and denied Rodriguez’s cross-motion. In granting Triple-S’s motion, the district court found that

[ujpon review of the group policy, administrative documents, and related correspondence between Rodriguez, her treating physician, her legal representatives, and Triple-S, it is clear that Triple-S had discretionary authority to determine benefits eligibility. Under 29 U.S.C. § 1002(21) (A)(iii), although Mova was designated as plan administrator of the employee benefit plan, Triple-S was plan fiduciary with administrative authority to interpret the terms of the plan and determine eligibility for and entitlement to plan benefits.

Rodríguez-López v. Triple-S Vida, Inc., No. 14-1498, 2015 WL 5792621 at *3 (D.P.R. Sept. 30, 2015). It therefore applied the arbitrary and capricious standard of review. Under this deferential standard, the district court concluded that, in light of the medical evidence in the administrative record, Triple-S’s denial of LTD benefits for physical illness was reasonable and based on substantial Evidence and, consequently, was neither arbitrary nor capricious.

On appeal, Rodriguez contends that the district court employed an incorrect standard of review and that the denial of LTD benefits was insupportable under the more stringent de novo standard.

II. Discussion

A. Applicable Law

The question of what standard of review is applicable to a benefits decision governed by ERISA is a question of law that this Court reviews de novo. Maher v. Mass. Gen. Hosp. Long Term Disability Plan, 665 F.3d 289, 291 (1st Cir. 2011) (citing Smart v. Gillette Co. Long-Term Disability Plan, 70 F.3d 173, 178 (1st Cir. 1995)).

“[T]he rights and responsibilities of parties in relation to employee pension and welfare plans” are regulated by ERISA. Terry v. Bayer Corp., 145 F.3d 28, 34 (1st Cir. 1998). ERISA provides a cause of action for plan participants, and other beneficiaries, to recover benefits due to them under the terms of the Plan. See 29 U.S.C. § 1132(a)(1)(B). “It is under this statutory provision that claims, such as this one, challenging denials and termination of employer-sponsored disability benefits are brought.” Terry, 145 F.3d at 34.

ERISA does not establish the standard of review which courts should apply when reviewing determinations made regarding benefits claims. However, the Supreme Court has held that a denial of benefits challenged “is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989); see also Stephanie C. v. Blue Cross Blue Shield of Mass. HMO Blue, Inc., 813 F.3d 420, 427 (1st Cir. 2016) (“The default rule favors de novo review....”). If the plan gives the plan participant or covered beneficiary adequate notice of such reservation, then “a deferential arbitrary and capricious or abuse of discretion standard” is applied. Gross v. Sun Life Assur. Co. of Can., 734 F.3d 1, 11 (1st Cir. 2013) (internal quotation marks omitted) (quoting Maher, 665 F.3d at 291); see also id. at 14; Stephanie C., 813 F.3d at 427 (noting that discretionary authority “must be expressly provided for, and notice of that reservation must appropriately be given to Plan participants” for the deferential standard to apply) (internal citations omitted). “[T]he threshold question in determining the standard of review is whether the provisions of the benefit plan at issue ‘reflect a clear grant of discretionary authority to determine eligibility for benefits.’ ” Gross, 734 F.3d at 13 (quoting Leahy v. Raytheon Co., 315 F.3d 11, 15 (1st Cir. 2002)). Although “[t]here are no required ‘magic words,’ ” id. (quoting Brigham v. Sun Life of Can., 317 F.3d 72, 81 (1st Cir. 2003)), “to secure discretionary review, a plan administrator must offer more than subtle inferences drawn from ... unrevealing language,” id. at 16.

B. Analysis

The parties disagree on the standard of review that the district court should have applied in reviewing Triple-S’s denial of Rodriguez’s claim for benefits. Rodriguez alleges that the Plan did not reflect a clear grant of authority to Triple-S to make eligibility determinations under the Plan because such authority was explicitly delegated to Mova. She alleges that if, as the district court found, this discretionary authority was at some later time transferred to Triple-S, this would have constituted a “contractual violation,” since the Plan required an amendment to change its provisions and no amendment was “found in [Triple-S’s] administrative record.” Thus, her argument goes, because it is not clear that Triple-S has been granted discretionary authority under the Plan, its determination to deny her LTD benefits was subject to the de novo standard of review. Accordingly, she requests that the case be remanded to the district court so that Triple-S’s determination be reviewed under the de novo standard.

In assessing whether a plan reflects a clear grant of discretionary authority, “we review the language of the Plan de novo, just as we would review the language of any contract.” Stephanie C., 813 F.3d at 428 (quoting Ramsey v. Hercules Inc., 77 F.3d 199, 205 (7th Cir. 1996)). A careful review of the language of the Plan leads us to conclude that it does not reflect a clear grant of discretionary authority to Triple-S to determine eligibility for benefits.

Triple-S has not been able to point to any Plan language specifically establishing that it (Triple-S) had discretionary decisionmaking authority. Rather, it argues that the Plan grants this authority to Mova but, because Triple-S was actually making the benefit decisions in place of Mova, it is implied that the discretionary authority has been transferred to Triple-S. Case law, however, requires that the delegation of discretionary authority to an administrator or fiduciary be clearly stated in the plan. See id. at 428 (finding language in plan certificate “not sufficiently clear to give notice to either a plan participant or covered beneficiary that the claims administrator enjoys discretion in interpreting and applying plan provisions”); Gross, 734 F.3d at 14 (“[T]he critical question is whether the plan gives the employee adequate notice that the plan administrator ... has the latitude to shape the application, interpretation, and content of the rules in each case.”) (quoting Diaz v. Prudential Ins. Co. of Am., 424 F.3d 635, 637 (7th Cir. 2005)). The Plan fails to meet this degree of clarity since it states that Mova, not Triple-S, had this authority. If Triple-S wanted to benefit from the delegation of authority and the deferential standard it provides, the Plan needed to clearly state it so that Plan participants, such as Rodriguez, received adequate notice that Triple-S had been granted, discretionary authority to interpret the Plan. There is no evidence in the record that this was done. See Stephanie C., 813 F.3d at 429, n.3 (finding that ambiguity as to whether the claims administrator had discretionary authority could not be cured by document defining relationship between the employer and the claims administrator because there was no evidence that the document was ever disclosed to plan participants, and noting that plan participant “had no obligation to go in search of undelivered documents in order to ascertain whether [the claims administrator] had reserved for itself discretionary decisionmak-ing authority”); see also Maher, 665 F.3d at 291 (“absent a proper delegation, the ... Plan could not rely on [grant of discretionary authority to plan sponsor] to defend a denial by an independent entity”); Terry, 145 F.3d at 37 (finding plan sponsor effectively delegated discretionary authority to Benefit Committee following plan-outlined procedure, and so Committee’s decision subject to abuse-of-discretion review).

Triple-S also argues that its delegation of discretionary authority is “clear” because the Plan “undoubtedly establishes that Triple-S Vida’s role is to grant and deny benefits both after an initial review and after an administrative appeal and contains detailed specifications as to how Triple-S Vida will make [these] determinations.” Contrary to Triple-S’s assertions, the Plan establishes that Jefferson-Pilot, and not Triple-S, has the role to grant or deny benefits. Although Triple-S claims that it is Jefferson-Pilot’s successor, the Plan was not amended to reflect this change. Nevertheless, we need not determine what consequence, if any, this failure to amend may have because even if we were to read “Triple-S” into the Plan where “Jefferson-Pilot” appears, the Jefferson-Pilot provisions only give Jefferson-Pilot the power to determine whether or not “benefits ... are due.” The power to decide does not necessarily imply the existence of discretion. See Stephanie C., 813 F.3d at 428; Diaz, 424 F.3d at 637 (noting that because “[a]ll plans require an administrator first to determine [eligibility for benefits] before paying them[,] ... the fact that an administrator is deciding on a case-by-case basis who is entitled to benefits does not reveal whether a plan does or does not reserve ‘discretion’ to the administrator”). Here the Jefferson-Pilot provisions grant the power to decide, but no more — the provisions do not grant discretionary authority. See Stephanie C., 813 F.3d at 428 (finding that “[plan administrator] decides which health care services .., are medically necessary” clause did not grant discretionary authority and “merely restates the obvious: that no benefits will be paid if [the administrator] determines they are not due”); Gross, 734 F.3d at 12-15 (holding formulation “[p]roof [of claim] must be satisfactory to [claims administrator]” insufficient to confer discretionary authority) (second alteration in the original); Heasley v. Belden & Blake Corp., 2 F.3d 1249, 1254-56 (3d Cir. 1993) (holding formulation that claims administrator “will evaluate the proposed admission for certification of medical necessity and appropriateness under the terms of the [policy]” similarly insufficient).

Finally, Triple-S argues that it has been granted discretionary authority because the Plan recognizes the existence of plan fiduciaries and it is a Plan “fiduciary with administrative authority to interpret the terms of the plan and determine eligibility for and entitlement to plan benefits.” Rodríguez-López, 2015 WL 5792621 at *3. This, it argues, is evidenced by several provisions of the policy that vest Triple-S with authority to examine the claimant as often as reasonably required; furnish notices of denial of benefits, specifying the reasons for the denial, informing of review procedures and describing additional materials that could be submitted for review; and appoint an administrative review officer to make final determinations as to eligibility. Its argument fails.

Named fiduciaries may be granted discretionary decisionmaking authority. See 29 U.S.C. § 1105(c)(1); Rodríguez-Abreu v. Chase Manhattan Bank, N.A., 986 F.2d 580, 584 (1st Cir. 1993). In such a case, however, the Plan’s language must clearly grant this authority. See Stephanie C, 813 F.3d at 428; Rodríguez-Abreu, 986 F.2d at 583-84. ERISA also “allows named fiduciaries to delegate responsibilities (other than trustee responsibilities) through express procedures provided in the plan.” Rodríguez-Abreu, 986 F.2d at 584 (citing 29 U.S.C. § 1105(c)(1)). For the delegation of discretionary authority to be effective so that the deferential standard of review applies, however, the delegation must be clear and the fiduciary must properly designate a delegate for the fiduciary’s discretionary authority. Id. (citing Madden v. ITT Long Term Disability Plan, 914 F.2d 1279, 1283-84 (9th Cir. 1990)).

In support of its assertions, Triple-S cites to language from a section of the SPD titled “Statement of ERISA Rights,” which states that,

In addition to creating rights for plan participants, ERISA imposes obligations upon the people who are responsible for the operation of the plan. The people who operate your plan[,] called “fiduciaries” of the plan, have a duty to do so prudently and in the interest of all plan participants and beneficiaries.

This language, however, cannot be afforded the effect that Triple-S attributes to it. It does not grant discretionary authority to named fiduciaries, does not include Triple-S as a named fiduciary under the Plan, and does not properly designate Triple-S as a delegate for a fiduciary with discretionary authority. All this language does is state that those who operate the Plan-— plan fiduciaries — have obligations under ERISA. The inclusion of this statement in the SPD is even required by ERISA regulations. See 29 C.F.R. 2520.102-3(t)(l) (stating that SPDs must include “[t]he statement of ERISA rights described in section 104(c) of the Act, containing the items of information applicable to the plan included in the model statement of paragraph (t)(2) of this section,” which in turn includes the paragraph referenced by Triple-S under the header “Prudent Actions by Plan Fiduciaries”). Thus, if this were enough to confer discretionary authority, decisions under all regulations-compliant plans would be subject tu the deferential standard of review.

Finally, Triple-S posits that Rodriguez always “dealt directly with Triple-S by filing all forms and pursuing all available administrative review proceedings before it,” which supports a finding that Triple-S, and not Mova, had the authority to make eligibility determinations. But these facts do not mean that Triple-S was “clearly” delegated with discretionary authority. As we have noted, it just means that Triple-S had the power to decide, but power to decide does not amount to the existence of discretion. See Stephanie C., 813 F.3d at 428; Rodríguez-Abreu, 986 F.2d at 584 (fact that plan administrator denied benefits claim did not cure failure to delegate discretionary authority, so denial reviewed de novo).

We hold that the Plan does not confer discretionary authority upon Triple-S. Thus, de novo review applies. Because the district court looked at Triple-S’s denial of benefits through the wrong standard-of-review lens, we must vacate its judgment and remand for reconsideration.

III. Conclusion

For the reasons stated above, we vacate the judgment and remand for further proceedings consistent with this opinion. No costs are awarded.

Vacated and Remanded.

      . Benefits for mental illness could be extended longer than twenty-four months under certain conditions not present here.

      . The claim was dated December 9, 2004.

      . Triple-S alleges that we need not analyze this because, by arguing in the district court that Triple-S abused its discretion in denying her claim for benefits, Rodriguez waived any argument that the applicable standard of review should have been de novo. Although Triple-S acknowledges that Rodriguez also argued in her motion for summary judgment that Mova was the plan administrator and that Triple-S had no authority to make eligibility determinations, Triple-S claims that this argument “was not tied to a rejection of the abuse of discretion standard.” We note that the district court found Rodriguez had sufficiently preserved her standard of review argument, and we find so as well.

      . Because here a notice of a reservation of discretionary decisionmaking authority as to Triple-S was not made in any way or in any document, we need not decide whether it can be effected only through the Plan itself. See Stephanie C., 813 F.3d at 429 n.4; Maher, 665 F.3d at 301 (Lipez, J., dissenting) (citing Ringwald v. Prudential Ins. Co., 609 F.3d 946, 948-49 (8th Cir. 2010), which disregarded grant of discretionary authority that appeared only in the SPD).

      . This may be an appropriate time for the parties to seriously consider settlement.


source: Caselaw Access Project

author: SELYA, Circuit Judge.

license: Public Domain

text:
    ROBB EVANS & ASSOCIATES, LLC, as receiver, etc., Plaintiff, Appellee, v. UNITED STATES of America, Defendant, Appellant. Robb Evans & Associates, LLC, as receiver, etc., Plaintiff, Appellant, v. United States of America, Defendant, Appellee.
    No. 15-2540, No. 15-2552
    United States Court of Appeals, First Circuit.
    March 3, 2017

      Paul A. Allulis, Attorney, Tax Division, United States Department of Justice, with whom Caroline D. Ciraolo, Principal Deputy Assistant Attorney General, Tax Division, United States Department of Justice, Teresa E. McLaughlin and Gilbert S. Rothenberg, Attorneys, Tax Division, and Carmen M. Ortiz, United States Attorney, were on brief, for the United States.
    David J. Vendler, with whom Morris Polich & Purdy LLP, Los Angeles, CA, Gregory S. Duncan, Charlottesville, VA, Stephen G. Hennessy, Milton, MA, Joseph S. Tusa, and Tusa P.C. were on brief, for Robb Evans & Associates, LLC.
    Before LYNCH, Circuit Judge, SOÚTER, Associate Justice, and SELYA, Circuit Judge.

       Hon. David H. Souter, Associate Justice (Ret.) of the Supreme Court of the United States, sitting by designation.

   SELYA, Circuit Judge.

These appeals require us to construe and apply 26 U.S.C. § 1341(a), reproduced in the Appendix, a statutory provision that addresses the situation of a taxpayer who pays taxes on income that she must later restore because it is established in a subsequent year that she did not have an unrestricted right to the income. The statute permits such a taxpayer to reduce her tax liability for the year of repayment by the amount that her taxes in the year of inclusion would have decreased had the restored funds been excluded from her income in that year. But there is a catch: by its terms, section 1341(a) requires that the taxpayer must have had what appeared to be an unrestricted right to the income when she first reported it.

Here, the controversy over the meaning and application of section 1341(a) arises in the course of a tax-refund suit brought by a court-appointed receiver. The court below, noting that Congress had enacted section 1341 in a spirit of fairness, fashioned a judicially created exception to the statute’s “unrestricted right” requirement. Applying that judicially created exception, the court proceeded to deny the government’s motion to dismiss and granted a modicum of relief. Both sides appeal. After careful consideration of these appeals, we conclude that the district court erred: that Congress, in the spirit of fairness, tailored a statute to iron out a wrinkle in the Internal Revenue Code does not give a court license to make the application of the statute wrinkle-free. This conclusion leads us to apply the luminously clear language of the statute as written, sustain the government’s appeal, reject the cross-appeal, reverse the judgment below, and remand for entry of judgment dismissing the tax-refund suit.

I. BACKGROUND

This tax-refund suit has its genesis in the efforts of Robb Evans & Associates, LLC, a court-appointed receiver (the Receiver), acting on behalf of a class of defrauded persons (the underlying plaintiffs), to collect judgments previously rendered against a-network of interlocking corporations and their proprietors, John and Richard Puedo. The twists and turns of the Puccios’ fraudulent scheme are by now well-documented. See, e.g., Zimmerman v. Epstein Becker & Green, P.C. (Zimmerman V), 657 F.3d 80 (1st Cir. 2011); Zimmerman v. Puccio (Zimmerman IV), 613 F.3d 60 (1st Cir. 2010); Zimmerman v. Cambridge Credit Counseling Corp. (Zimmerman II), 409 F.3d 473 (1st Cir. 2005). We assume the reader’s familiarity with these opinions and with the district court’s exegetic accounts of the facts undergirding the class action litigation. See Zimmerman v. Cambridge Credit Counseling Corp. (Zimmerman III) 529 F.Supp.2d 254, 256-64 (D. Mass. 2008); Zimmerman v. Cambridge Credit Counseling Corp. (Zimmerman I), 322 F.Supp.2d 95, 96-98 (D. Mass. 2004). Consequently, we rehearse here only those skeletal facts needed to put these appeals into workable perspective.

In 1996, the Puccio brothers formed Cambridge Credit Counseling Corporation (CCCC), a non-profit corporation organized under Massachusetts law. At around the same time, they formed parallel nonprofit corporations in Florida and New York. These other corporations operated in much the same way as CCCC and, for simplicity’s sake, we refer to the three non-profits, collectively, as CCCC.

CCCC held itself out as skilled in improving credit ratings and trumpeted its ability to help financially strapped individuals by creating “debt management plans” for a fee. Under such a plan, an individual in straitened circumstances would make a single monthly payment to CCCC, and CCCC would (at least in theory) sprinkle payments around to the individual’s creditors. As part of its service, CCCC aspired to “re-age” clients’ debt, that is, to persuade creditors to mark clients’ accounts as current in exchange for promises that CCCC would make regular payments. Business boomed: from 1996 to 2004, CCCC harvested over $250,000,000 from hopeful clients.

The Puccio brothers likewise owned and controlled an array of for-profit businesses, some of which provided back-office support to the non-profit entities. The assets and operations of these businesses were inextricably intertwined with those of the non-profit entities: all of them shared management, staff, office space, clients, and funds. For example, CCCC freely transferred clients’ accounts to its for-profit brethren without bothering to notify the affected clients.

The balloon went up in 2003, when the underlying plaintiffs brought a class action against the Puccios and several of their corporations (both for-profit and non-profit). Roughly five years later, the district court granted summary judgment in favor of the underlying plaintiffs on their state-law consumer protection claims, Mass. Gen. Laws ch. 98A, and their claims under the federal Credit Repair Organizations Act (CROA), 15 U.S.C. § 1679 et seq. Judgment was entered against the corporations in the amount of $259,085,983 and against the Puccios in the amount of $256,527,000. The Puccios unsuccessfully appealed. See Zimmerman IV, 613 F.3d at 69, 76.

Securing a judgment and realizing the fruits of that judgment are two different things. Thus, the district court appointed the Receiver and tasked it with collecting the judgments on behalf of the underlying plaintiffs. For the most part, though, the money had vanished into thin air: the Receiver was able to recoup less than $2,500,000. Endeavoring to boost this total, the Receiver filed a tax-refund claim for $9,387,235. The essence of the Receiver’s claim follows.

• The Receiver can assert a refund claim on behalf of certain taxpayers, namely, the Puccios and their for-profit corporations, which were judgment debtors.
• In earlier years, those taxpayers reported as income, and paid taxes on, monies that they euchred from the underlying plaintiffs.
• By virtue of the class-action judgment, the taxpayers are now obligated to restore those monies to the underlying plaintiffs (through the Receiver).
• The taxpayers may deduct those repayments, see 26 U.S.C. § 162, and may reduce their tax liability for the year of repayment by the amount that they overpaid in the years that they originally reported the income, see M. § 1341(a).
• Because the amounts of these deductions will exceed the taxpayers’ tax liability for the year of repayment, refunds will be in order — and those refunds should be paid to the Receiver.

In June of 2011, the Internal Revenue Service (IRS) denied the tax-refund claim. The Receiver responded by bringing this suit. See 28 U.S.C. § 1346(a)(1). The government moved to dismiss, arguing among other things that the Receiver (who stands in the taxpayers’ shoés) was not entitled to the benefit of section 1341(a) because it never appeared to the taxpayers that they had an unrestricted right to the funds fraudulently obtained from the underlying plaintiffs. The district court denied the government’s motion to dismiss. Although it agreed that the taxpayers never appeared to have an unrestricted right to the funds reported as income, it nonetheless concluded that, as a matter of equity, “the fraudulent conduct of. the Puccios should not be imputed to [the Receiver].” Rob Evans & Assocs., LLC v. United States, 9 F.Supp.3d 165, 169 (D. Mass. 2014). Accordingly, the court denied the government’s motion to dismiss, holding that the government was obligated to honor the refund request. See id. at 171.

The Receiver, though, did not achieve a total victory. The court limited the amount of the refund by holding that it must be based on the amount the receiver had actually collected and deposited into the Qualified Settlement Fund, not on the full amount' of taxes paid by the taxpayers during the relevant years. See id. at 170-71; see also note 3, supra.

After deciding the motion to dismiss, the district court stayed the case so that the Receiver could file administrative refund claims for additional tax years. The IRS denied those claims, and the Receiver, in its own words, filed its first amended complaint in order to “include [claims for] additional tax years.” At that point, however, the Receiver gratuitously added two other sets of allegations in the first amended complaint: a constructive trust argument and a claim that section 1341(a) did not require actual restoration of the funds to the Qualified Settlement Fund as a condition precedent to deductibility. The government filed an answer and, since the district court’s earlier adjudication of the motion to dismiss had effectively resolved the essence of the dispute, the parties jointly moved for the entry of final judgment, reserving their rights to appeal. The court granted the joint motion without substantive comment, relying on the reasoning laid out in its prior decision on the motion to dismiss. These timely appeals followed.

II. ANALYSIS

In this venue, the government’s principal argument is that the district court erred in allowing the Receiver access to the balm of section 1341(a) because the taxpayers never appeared to have an unrestricted right to the reported income. In opposition, the Receiver starts by questioning our appellate jurisdiction. Past that point, the Receiver asserts that the taxpayers did have an apparent unrestricted right to the reported income and, in all events, that the district court did not err in fashioning an equitable exception to the statutory “unrestricted right” requirement. Finally, the Receiver submits that it is entitled to recoup all taxes paid to the government under a constructive trust theory. Before proceeding to more substantive matters, we briefly address the Receiver’s jurisdictional challenge.

A. Appellate Jurisdiction.

The Receiver’s jurisdictional challenge is premised on the contention that we lack jurisdiction because the government, despite reserving its right to appeal in the consent judgment, did not adequately manifest an intent to appeal. This challenge lacks force.

It is common ground that a party may preserve its right to appeal a consent judgment by “reserv[ing] that right unequivocally.” BIW Deceived v. Local S6, Indus. Union of Marine & Shipbldg. Workers of Am., 132 F.3d 824, 828 (1st Cir. 1997) (quoting Coughlin v. Regan, 768 F.2d 468, 470 (1st Cir. 1985)). Here, the joint motion for entry of final judgment unequivocally reserved the parties’ rights to appeal. To begin, the parties — according to the motion itself — “move[d] the Court ... to enter a final, appealable judgment.” Moreover, the motion made pellucid that the parties “reserve[d] their rights to appeal any of the Court’s rulings, findings or orders.” Erasing any vestige of doubt, the motion later reiterated that the parties “reservefd] their rights to challenge on appeal the Court’s legal and factual findings.”

Although this language seems clear as a bell, the Receiver suggests that something more was exigible. In the Receiver’s view, a specific statement of the government’s intention to appeal was essential. To support this view, the Receiver notes that some of the case law refers to an intent to appeal. See, e.g., Scanlon v. M.V. SUPER SERVANT 3, 429 F.3d 6, 10 (1st Cir. 2005). That language, though, does not set up a separate requirement: it merely confirms that statements of an intent to appeal can in some circumstances supply evidence of a reservation of a right to appeal. See BIW Deceived, 132 F.3d at 828. All that is needed to pave the way for appellate jurisdiction, however, is the clear reservation of a right to appeal, followed by the timely filing of a notice of appeal. See Fed. R. App. P. 4(a)(1); BIW Deceived, 132 F.3d at 828. Because that sequence of events occurred in this case, we have jurisdiction to hear and determine the government’s appeal.

B. The Government’s Appeal.

The government’s appeal challenges head-on the viability of the Receiver’s tax-refund claim. Before addressing this challenge, some stage-setting is useful.

A taxpayer must include all of her gross income in her taxable income each year. See N. Am. Oil Consol. v. Burnet, 286 U.S. 417, 424, 52 S.Ct. 613, 76 L.Ed. 1197 (1932). This obligation extends even to income obtained unlawfully. See James v. United States, 366 U.S. 213, 219, 81 S.Ct. 1052, 6 L.Ed.2d 246 (1961) (plurality opinion). At a later date, though, it may become evident that the taxpayer did not have a right to items previously included in her gross income. If the taxpayer restores such an item of income to its lawful owner, she may be able to deduct that repayment in the current year. See, e.g., 26 U.S.C. §§ 162, 165. But because the taxpayer’s situation may have changed (say, her annual income may have decreased or her tax bracket may have been lowered), it may disadvantage her to take the deduction in the year of repayment. See United States v. Skelly Oil Co., 394 U.S. 678, 681, 89 S.Ct. 1379, 22 L.Ed.2d 642 (1969).

To guard against any such inequity, Congress enacted 26 U.S.C. § 1341. This statute does not itself provide for a deduction but, rather, applies only if a deduction is available under some other provision of the Internal Revenue Code. See Fla. Progress Corp. & Subsids. v. Comm’r, 348 F.3d 954, 958 (11th Cir. 2003) (per curiam). In that event, section 1341(a) allows a taxpayer to choose between two different ways of calculating her otherwise available deduction for the restored funds. Under the first option, the taxpayer may simply deduct the amount of the restored funds in the year of repayment. See 26 U.S.C. § 1341(a)(4). Under the second option, the taxpayer may calculate her taxes for the year of repayment without deducting the amount of the restored funds and then reduce that tax liability “by the amount [her] taxes were increased in the year or years of receipt because the disputed items were included in gross income.” Skelly Oil, 394 U.S. at 682, 89 S.Ct. 1379; see 26 U.S.C. § 1341(a)(5). It is this latter method, which more or less puts the taxpayer in the position that she would have occupied had she never reported the income, that the Receiver wishes to employ.

For section 1341(a)(5) to apply, a taxpayer must satisfy three prerequisites. She must show that:

(1) an item was included in gross income for a prior taxable year (or years) because it appeared that the taxpayer had an unrestricted right to such item;
(2) a deduction is allowable for the taxable year because it was established after the close of such prior taxable year (or years) that the taxpayer did not have an unrestricted right to such item or to a portion of such item; and
(3)the amount of such deduction exceeds $3,000.

26 U.S.C. § 1341(a)(l)-(3). Here, the government does not gainsay that the taxpayers included the funds at issue in income for prior years; that, if the funds are restored, a deduction will be available; and that the deduction, whatever its precise amount, exceeds $3,000. The Receiver’s claim is derivative of the taxpayers’ rights. For present purposes, then, the dispositive issue reduces to whether, at the time the income was reported, it appeared to the taxpayers that they had an unrestricted right to the funds. As we explain below, if the funds were derived from fraudulent activity, it could not have appeared to the taxpayers that they had an unrestricted right to them.

The district court (despite its eventual ruling in favor of the Receiver) thought not. It held that the Receiver was collaterally estopped from advancing such an argument because the funds were derived from fraudulent activity: the taxpayers “were found ... to have committed fraud” and, therefore, could not have had (or appeared to have had) an unrestricted right to the funds. Rob Evans, 9 F.Supp.3d at 169 & n.5. Our review of the Receiver’s challenge to the district court’s application of the collateral estoppel doctrine is de novo. See Faigin v. Kelly, 184 F.3d 67, 78 (1st.Cir. 1999).

Collateral estoppel, sometimes called issue preclusion, bars parties from re-litigating issues of either fact or law that were adjudicated in an earlier proceeding. See Manganella v. Evanston Ins. Co., 700 F.3d 585, 591 (1st Cir. 2012); Kale v. Combined Ins. Co., 924 F.2d 1161, 1168 (1st Cir. 1991). Here, the district court regarded certain determinations made in the federal class action suit as preclusive. In the absence of. any objection, we follow the usual rule that “[t]he preclusive effect of a federal-court judgment is determined by federal common law.” Taylor v. Sturgell, 553 U.S. 880, 891, 128 S.Ct. 2161, 171 L.Ed.2d 155 (2008).

Under federal common law, there are four prerequisites to the application of collateral estoppel. The party seeking preclusion must show that “(1) both proceedings involve[] the same issue of law or fact, (2) the parties actually litigated that issue [in the prior proceeding], (3) the prior court decided that issue in a final judgment, and (4) resolution of that issue was essential to judgment on the merits.” Global NAPs, Inc. v. Verizon New Eng. Inc., 603 F.3d 71, 95 (1st Cir. 2010). We employ this framework to determine whether the Receiver is collaterally es-topped from asserting that the taxpayers could have believed that they had an unrestricted right to the funds at issue.

In this case, our inquiry is considerably shortened: the Receiver does not contest that the prior proceeding (the federal class action) satisfies the second, third, and fourth prerequisites for collateral estoppel. The critical factor is whether both proceedings involve the same issue. This factor turns on whether the district court’s earlier finding of fraud effectively resolved the question of whether the taxpayers had an apparent unrestricted right to the income reported on their tax returns.

The “unrestricted right” question cannot be answered in a vacuum but, rather, must be answered in light of section 1341(a). According to Treasury Department regulations, section 1341(a) covers “an item included in gross income because it appeared from all the facts available in the year of inclusion that the taxpayer had an unrestricted right to such item.” 26 C.F.R. § 1.1341 — 1 (a)(2). The law is clear, though, that it cannot be said to appear to an embezzler or fraudster that he has an unrestricted right to his ill-gotten gains (notwithstanding the fact that he is obligated to report those gains in his annual gross income). See Culley v. United States, 222 F.3d 1331, 1335-36 (Fed. Cir. 2000); Kraft v. United States, 991 F.2d 292, 299 (6th Cir. 1993); McKinney v. United States, 574 F.2d 1240, 1243 (5th Cir. 1978). In short, section 1341(a)’s “unrestricted right” language excludes all income reaped by taxpayers who know at the time of receipt that they have no right to the income. “When a taxpayer knowingly obtains funds as the result of fraudulent action, it simply cannot appear from the facts known to him at the time that he has a legitimate, unrestricted claim to the money.” Culley, 222 F.3d at 1335. It follows inexorably that if the taxpayers acquired the funds at issue by fraud, they could not have thought that they had an unrestricted right to those funds.

That ends this aspect of the matter. The district court squarely decided, in the earlier class action, that the taxpayers were swindlers who had obtained the underlying plaintiffs’ funds by fraud. In this regard, the district court held that the taxpayers’ “representation^] that CCCC was a nonprofit entity” were “material,” and that the taxpayers “betrayed Plaintiffs’ trust when, as was [their] policy for all CCCC clients, [they] transferred Plaintiffs’ accounts to [their for-profit businesses].” Zimmerman III, 529 F.Supp.2d at 279. The court considered this more than adequate to show that the taxpayers were engaged in fraud. See id. at 280. In a separate order, the court added frosting to the cake: it found that the Puccio brothers’ noncompliance with CROA “involved false pretenses, the use of false representations[,] and amounted to actual fraud.” Zimmerman v. Cambridge Credit Corp., No. 03-30261, slip op. at 1-2 (D. Mass. Mar. 18, 2009). The brothers, through their network of corporations, had “engaged in a pervasively deceptive course of business involving fraudulent misrepresentations to consumers.” Id at 5-6.

This finding of pervasive fraud was affirmed on appeal, see Zimmerman IV, 613 F.3d at 62, and the class action judgments against the taxpayers have become final. Thus, the Receiver is collaterally estopped from challenging the finding. And because it has been conclusively determined that the taxpayers procured the funds at issue through fraud, the taxpayers could not have thought that they had an unrestricted right to the funds. See Culley, 222 F.3d at 1335. Consequently, the Receiver, standing in their place and stead, is collaterally estopped from asserting that the taxpayers satisfied the requirements of section 1341(a).

The Receiver offers virtually nothing in the way of developed argumentation against the application of collateral estop-pel. The' Receiver does, however, make two points. First, it laments that the government “was in large part responsible for providing the [taxpayers] with the[ ] legal cover” that enabled them to execute their fraudulent scheme. This boils down to a suggestion that the government should be equitably estopped from disputing whether the taxpayers had an apparent unrestricted right to the funds. But estoppel against the government is hen’s-teeth rare, especially when, as in this case, the proposed estoppel involves public funds. See OPM v. Richmond, 496 U.S. 414, 426-27, 110 S.Ct. 2465, 110 L.Ed.2d 387 (1990); see also Heckler v. Cmty. Health Servs. of Crawford Cty., Inc., 467 U.S. 51, 60, 104 S.Ct. 2218, 81 L.Ed.2d 42 (1984) (“[I]t is well settled that the Government may not be estopped on the same terms as any other litigant.”).

In all events, the estoppel argument is suggested in an off-handed manner, unaccompanied by any fully formed argument. Accordingly, we deem it waived. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990).

The Receiver’s remaining argument is no more convincing. In it, the Receiver asserts that' subsequent legislation, namely, a provision of the Pension Protection Act of 2006, 26 U.S.C. § 501(q), demonstrates that the taxpayers reasonably could have believed that they had an unrestricted right to the fraudulently derived income. This assertion, though, arrives too late: the finding of fraud was an essential element of a final judgment in an earlier proceeding, and the Receiver is bound by that result. See Manganella, 700 F.3d at 591, 594-95.

The Receiver has a fallback position, arguing that it can obtain a refund even though the taxpayers themselves could not. This argument tracks the district court’s reasoning. Stressing that section 1341(a) was enacted to alleviate inequities, not to perpetuate them, the court concluded that Congress could not have intended to impute the taxpayers’ fraud to the Receiver and thus deny relief to fraud victims. See Rob Evans, 9 F.Supp.3d at 169-70. As a result, the district court determined that the Receiver can not only “step into [the taxpayers’] boots, but it can also, as it were, knock the mud off them before putting them on.” Id. at 170.

This determination, which has the effect of giving the Receiver the benefits of the taxpayers’ status without compelling the Receiver to shoulder any of the burdens of that status, weaves an equitable exception into the fabric of section 1341(a). Such one-sided formulations are generally disfavored. Cf. United States v. Tierney, 760 F.2d 382, 388 (1st Cir. 1985) (“Having one’s cake and eating it, too, is not in fashion in this circuit.”). The text of the statute at issue does not support such a generous construction.

We review matters of statutory interpretation de novo. See MedChem (P.R.), Inc. v. Comm’r, 295 F.3d 118, 122 (1st Cir. 2002). Here, we start with the background principle that “income tax deductions and credits are matters of legislative grace.” Id. at 123. “[Deductions are strictly construed and allowed only ‘as there is a clear provision therefor.’ ” INDOPCO, Inc. v. Comm’r, 503 U.S. 79, 84, 112 S.Ct. 1039, 117 L.Ed.2d 226 (1992) (quoting New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440, 54 S.Ct. 788, 78 L.Ed. 1348 (1934)). Section 1341(a)(5) is simply a method for calculating a deduction, so this principle controls. See ni

Of course, the most reliable guide to.the meaning of a statute is the statutory text. See Conn. Nat’l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992) (“We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there.”). If the plain language of a statute elucidates its meaning, that meaning governs. The fact that the equities (real or perceived) may favor the taxpayer does not allow an inquiring court to distort the statute’s plain meaning by importing its own notions of fairness. See Batchelor-Robjohns v. United States, 788 F.3d 1280, 1297 (11th Cir. 2015).

In this instance, Congress did not sound an uncertain trumpet, and we believe that the district court erred in refusing to follow section 1341(a)’s unambiguous textual mandate. Nothing in the discernable legislative intent justifies carving out a special exemption from the “unrestricted right” requirement for parties in either the Receiver’s or the underlying plaintiffs’ position. Indeed, the legislative history of section 1341 does not contain even a glimmer of a reason to think that the provision was intended to give the victims of a taxpayer’s fraud a free pass around the “unrestricted right” requirement. The statute was plainly designed to alleviate an entirely separate problem: the plight of taxpayers who are inadequately compensated for taxes paid on income later restored. See H.R. Rep. No. 83-1337 (1954), reprinted in 1954 U.S.C.C.A.N. 4017, 4113; S. Rep. No. 83-1622 (1954), reprinted in 1954 U.S.C.C.A.N. 4621, 4751; see also Skelly Oil, 394 U.S. at 681, 89 S.Ct. 1379.

We add that although section 1341 was enacted to alleviate a perceived inequity, the inequity that the Receiver deplores differs materially from the inequity that the statute was intended to correct. When a statute is aimed at addressing a particular inequity in the tax code, it does not follow that the statute may be interpreted to address every inequity attributable to the tax code. The opposite is true: when a statute’s plain language permits only one interpretation, a court may not make an end run around that language by the simple expedient of pointing to the statute’s equitable purpose. See Lopez-Soto v. Hawayek, 175 F.3d 170, 176 (1st Cir. 1999).

Relatedly, the Receiver — again echoing the district court — asseverates that, we should refuse to impute the taxpayers’ fraud to the Receiver because doing so “would not further the purpose of the fraud exception to recovery under [section] 1341.” Rob Evans, 9 F.Supp.3d at 169-70 (citing Cooper v. United States, 362 F.Supp.2d 649, 656 (W.D.N.C. 2005)). This asseveration relies almost exclusively on the decision in Cooper, a case similarly configured but arising in the bankruptcy context, in which the court predicated its holding on the ipse dixit that public policy would not be “served by mechanically applying the statute.” Cooper, 362 F.Supp.2d at 655. In our view, Cooper is wrongly decided: the issue is not one of public policy but, rather, one of statutory construction. That issue, in turn, depends on whether the taxpayer appeared to have an unrestricted right to the funds. See Culley, 222 F.3d at 1335-36. Such an unrestricted right is what the plain language of section 1341 requires. See id. at 1336; McKinney, 574 F.2d at 1243; see also Seggerman Farms, Inc. v. Comm’r, 308 F.3d 803, 808 (7th Cir. 2002) (declining “to disregard the plain language of the tax code” even if the code subjects taxpayers to “harsh tax consequences”).

In a variation on the same theme, the Receiver says that its special status qua receiver justifies special treatment. See Rob Evans, 9 F.Supp.3d at 170 (noting that “[cjourts have exhibited a ... disinclination to impute fraud to a receiver in the corporate context”). In support, the Receiver cites McGinness v. United States, 90 F.3d 143 (6th Cir. 1996). That decision is inapposite, though, because the court there specifically found that — unlike here — the receiver did “not stand in the place of the taxpayer.” Id. at 146.

C. The Receiver’s Appeal.

In its cross-appeal, the Receiver advances an entirely separate theory through which it endeavors to reach the same goal: to recover, for the benefit of the underlying plaintiffs, monies that the taxpayers paid to the IRS. The Receiver submits that the class action imposed a constructive trust on all monies that the taxpayers procured by fraud from the underlying plaintiffs. In the Receiver’s view, this constructive trust was effectively retroactive, stripping the taxpayers of any entitlement to the fraudulently obtained funds from the moment those funds were paid over to them. Because the funds at all times remained the property of the underlying plaintiffs qua beneficiaries of the constructive trust, the Receiver’s thesis runs, the government took that money from the taxpayers subject to the constructive trust and must return it now.

The district court deemed this argument waived, noting that the Receiver had neglected to make it before the magistrate judge. See Rob Evans, 9 F.Supp.3d at 168. That ruling rested on a firm foundation: the law is settled that a litigant must put its best foot forward before a magistrate judge, and cannot introduce new arguments for the first time on the district court’s review of the magistrate judge’s ruling or recommendation. See Perez v. Lorraine Enters., Inc., 769 F.3d 23, 32 (1st Cir. 2014); Paterson-Leitch Co. v. Mass. Mun. Wholesale Elec. Co., 840 F.2d 985, 990 (1st Cir. 1988).

The Receiver acknowledges this rule, but labors to shift the trajectory of the debate. It says that it is absolved from a finding of waiver because it raised the constructive trust argument both in its first amended complaint (filed after the district court’s denial of the motion to dismiss) and in the joint motion for entry of final judgment. As the Receiver sees it, these references are sufficient to resuscitate the constructive trust argument and defeat the apparent waiver because the parties are appealing not from the decision on the motion to dismiss but from the final judgment. •

This argument does not take the Receiver very far. The first amended complaint was filed as a preliminary step to tee up the case for appeal, that is, to ensure that the decision in the case covered all the tax years in dispute. The motion for entry of final judgment expressly acknowledged that no further deliberations were necessary because the district court already had decided “all disputed issues of law.” This was unarguably a reference to decisions that had been made in the court’s adjudication of the motion to dismiss. That fact is made crystal clear by the nature of the final judgment, which provides no new analysis but simply refers back to the denial of the motion to dismiss.

To sum up, the parties clearly intended to set the stage for appeals of the district court’s ruling on the motion to dismiss. Their filings achieved this end and, for all .practical purposes, the parties are now appealing the decision on the motion to dismiss. Although new claims may sometimes be raised for the first time in an amended complaint, see Fed. R. Civ. P. 15(a), it was not appropriate for the Receiver, in the unique circumstances of this case, to raise new claims in the first amended complaint. After all, substance ordinarily ought to prevail over form, and it was too late at that time for the Receiver to inject into the case issues that had not been raised at the motion-to-dismiss stage. See B & T Masonry Constr. Co. v. Pub. Serv. Mut. Ins. Co., 382 F.3d 36, 40 (1st Cir. 2004); Rocafort v. IBM Corp., 334 F.3d 115, 121-22 (1st Cir. 2003).

The pivotal question, then, is whether the Receiver advanced the constructive trust theory at the appropriate time. The record makes manifest that the Receiver did not — and that omission constituted a waiver. See Paterson-Leitch, 840 F.2d at 990-91. In the last analysis, “[cjourts are entitled to expect represented parties to incorporate all relevant arguments in the papers that directly address a pending motion.” McCoy v. Mass. Inst. of Tech., 950 F.2d 13, 22 n.7 (1st Cir. 1991). Consequently, theories not timely raised in the trial court cannot be raised on appeal. See Teamsters, Chauffeurs, Warehousemen & Helpers Union, Local No. 59 v. Superline Transp. Co., 953 F.2d 17, 21 (1st Cir. 1992); McCoy, 950 F.2d at 22. So it is here.

To be sure, appellate courts may, in their discretion, “relax the raise-or-waive rule in order to prevent miscarriages of justice ... in exceptional cases— cases in which ‘the previously omitted ground is “so compelling as virtually to insure appellant’s success.” ’ ” Iverson v. City of Bos., 452 F.3d 94, 103 (1st Cir. 2006) (quoting United States v. Slade, 980 F.2d 27, 31 (1st Cir. 1992)). The Receiver’s constructive trust argument, which posits a right to claw back monies paid to the federal fisc for lawfully levied taxes, does not come close to clearing that high.bar. This is especially so where, as here, we already have rejected an attempt to apply essentially the same argument to private parties. Earlier, the Receiver attempted to use the constructive trust as a mechanism to claw back funds paid as fees for professional services “in the ordinary course of business and in exchange for fair value.” Zimmerman V, 657 F.3d at 83. We rejected its claim, observing that “very little suggests that the order [creating the constructive trust] was intended to reach payments, made before the constructive trust was even imposed, to lawyers, accountants or the butcher, baker or candlestick maker.” Id. at 84.

If anything, the constructive trust argument is even weaker in the circumstances of this case. Whether or not the taxpayers could be held liable to the underlying plaintiffs (the victims of their fraud) on a constructive trust theory seems to have nothing to do with the statutory procedure for obtaining tax refunds. By the same token, it strains credulity to suggest that the IRS was somehow under a constructive trust.

Stripped of the constructive trust argument, the Receiver’s cross-appeal is im-puissant, and we reject it without further comment.

III. CONCLUSION

We need go no further. For the reasons elucidated above, we sustain the government’s appeal, reject the cross-appeal, reverse the judgment below, and remand for entry of judgment dismissing the tax-refund suit. No costs.

So ordered.

APPENDIX

26 U.S.C. § 1341. Computation of tax where taxpayer restores substantial amount held under claim of right

(a) General rule. If—

(1) an item was included in gross income for a prior taxable year (or years) because it appeared that the taxpayer had an unrestricted right to such item;

(2) a deduction is allowable for the taxable year because it was established after the close of such prior taxable year (or years) that the taxpayer did not have an unrestricted right to such item or to a portion of such item; and

(3) the amount of such deduction exceeds $3,000,

then the tax imposed by this chapter for the taxable year shall be the lesser of the following:

(4) the tax for the taxable year computed with such deduction; or

(5) an amount equal to—

(A) the tax for the taxable year computed without such deduction, minus

(B) the decrease in tax under this chapter (or the corresponding provisions of prior revenue laws) for the prior taxable year (or years) which would result solely from the exclusion of such item (or portion thereof) from gross income for such prior taxable year (or years).

For purposes of paragraph (5)(B), the corresponding provisions of the Internal Revenue Code of 1939 shall be chapter 1 of such code (other than subchapter E, relating to self-employment income) and sub-chapter E of chapter 2 of such code.

      . The district court initially referred the government's motion to dismiss to a magistrate judge. See Fed. R. Civ. P. 72(b). The district court, exercising de novo review, see id., later adopted the recommendation, adding its own gloss. For ease in exposition, we take an institutional view and refer to the determinations below as those of the district court.

      . For the sake of completeness, we note that the decision in Zimmerman III was affirmed by this court in Zimmerman IV, and the decision in Zimmerman I was reversed by this court in Zimmerman II. Neither of these appellate decisions calls into question the district court's factual accounts.

      . Pursuant to the district court's order of appointment, these proceeds were deposited into what the court denominated as a Qualified Settlement Fund. See Rob Evans & Assocs., LLC v. United States, 9 F.Supp.3d 165, 167 (D. Mass. 2014) (explaining that the Fund will "hold the monetary assets of the receivership as ... acquired”); see also 26 C.F.R. § 1.468B-1 (defining "qualified settlement fund”). Relatedly, we note that the district court, in the rescript that embodied this order, misspelled the Receiver's name (dropping a "b” from "Robb”). That bevue does not affect the substance of the court’s order.

      . This requirement should not be confused with the "claim of right” doctrine, which is broader and includes virtually everything that a taxpayer must report in her annual gross income. See Culley v. United States, 222 F.3d 1331, 1336 (Fed. Cir. 2000) (distinguishing claim of right doctrine from section 1341(a)’s "unrestricted right” requirement).

      . The Receiver argues that a 2004 district court ruling in the taxpayers’ favor provides an indication that the taxpayers could reasonably have believed that they had an unrestricted right to the income at the time of receipt. But that ruling was reversed on appeal, see Zimmerman II, 409 F.3d at 479, and it has no bearing on the outcome of the collateral es-toppel inquiry.

      . The Receiver's reliance on Scholes v. Lehmann, 56 F.3d 750 (7th Cir. 1995), is similarly misplaced. That case, which turns on Illinois law, see id. at 753-54, has no conceivable bearing on the proper interpretation of section 1341(a).

      . The Receiver's plaint about the size of the deduction allowed by the district court is of no concern. See Rob Evans, 9 F.Supp.3d at 170. Because we have held that the Receiver is not entitled to any deduction at all, see text supra, we need not address this plaint.