SCOTUS takes up an ERISA reimbursement case

What's "equitable relief" under ERISA § 502(a)(3)?

Robert Montanile was a beneficiary of a welfare benefit plan administered by the Board of Trustees of the National Elevator Industry Health Benefit Plan. When Montanile was injured in a car accident, the Plan paid his initial medical expenses, totaling $121,044.02.

Montanile sued the drunk driver that caused his injuries, and recovered a $500,000 settlement. Much of that went toward attorney fees and costs, yet more than $235,000 remained. After Montanile spent it all, the Plan sued to get reimbursed.

The Plan documents say that the Plan is entitled to be reimbursed, but Montanile refused to do so. The 11th Circuit sided with the Plan. The US Supreme Court granted certiorari and will schedule oral argument for the Fall of 2015. Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan.

Here are the basic arguments:

  • The Plan says it has an equitable lien on the settlement proceeds, so Montanile must pay the Plan back.
  • Montanile says the Plan cannot enforce the lien because he has spent all the funds.
  • The Plan responds saying that the lien attached as soon as Montanile had the funds in his possession, and the lien is not destroyed simply because Montanile spent the money.
  • Montanile responds saying that at the time the Plan brought its suit there was no fund to which an equitable lien could attach.

It's interesting to see how the two parties express the issue.

  • Montanile: Does a lawsuit by an ERISA fiduciary against a participant to recover an alleged overpayment by the plan seek “equitable relief” within the meaning of ERISA section 502(a)(3), 29 U.S.C. § 1132(a)(3), if the fiduciary has not identified a particular fund that is in the participant’s possession and control at the time the fiduciary asserts its claim?
  • The Plan: Whether a beneficiary of a benefit plan governed by the Employee Retirement and Income Security Act of 1974 can defeat enforcement of the plan’s valid equitable lien by agreement—after the lien attaches—by dissipating the fund subject to the lien.

What we know for sure is that there is a clear-cut Circuit split on resolving this issue.