Supreme Court Grants Review Of “Equitable Relief” Case Involving Dissipated Funds


The Supreme Court has agreed to review the Eleventh Circuit’s ruling in an unpublished opinion regarding the meaning of “equitable relief” under ERISA Sec. 502(a)(3). The petition for certiorari indicates that there is a 6-2 circuit split on the issue and that the question presented “requires a uniform national answer.” The case is Robert Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan (No. 14-723).

The petition’s question presented is as follows: “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 Sec. 502(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?”

Background. On December 1, 2008, Robert Montanile was injured in a car accident involving a drunk driver. Montanile suffered injuries to his neck and lower back, requiring lumbar spinal fusion surgery and other medical treatment to reduce his pain and loss of function. The National Elevator Industry Health Benefit Plan (Plan), in which Montanile was a participant, paid Montanile’s initial medical expenses of $121,044.02.

Montanile filed a lawsuit against the driver of the other car for negligence and eventually obtained a $500,000 settlement. Out of the settlement funds, Montanile paid his attorneys a $200,000 contingency fee and $63,788.48 to reimburse out-of-pocket expenses.

After Montanile accepted the settlement, the Board of Trustees of the National Elevator Industry Health Benefit Plan (Board), as fiduciary for the Plan, asserted that the Plan had the right to be reimbursed out of the settlement proceeds for the medical expenses paid on Montanile’s behalf. The Board and Montanile, through counsel, attempted to negotiate a resolution from June 2011 through January 2012. After settlement discussions reached an impasse, the Board filed a single-count ERISA lawsuit to enforce the Plan’s reimbursement provision. The district court granted summary judgment in the Board’s favor in the amount of $121,044.02, which was what the Board had paid as Montanile’s medical expenses.

Dissipation of funds. On appeal, Montanile argued that the district court erred in finding that the Board could impose an equitable lien on the settlement funds because the funds had been spent or dissipated. The Eleventh Circuit explained that this argument was foreclosed by the court’s then-recent holding in AirTran Airways, Inc. v. Elem., which held that an equitable lien immediately attached to settlement funds where a plan provision’s unambiguous terms gave the plan a first-priority claim to all payments made by a third party. The AirTran court held that the settlement funds were “specifically identifiable,” and a plan participant’s dissipation of the funds thus “could not destroy the lien that attached before” the dissipation. As such, the Eleventh Circuit found that the Board could impose an equitable lien on Montanile’s settlement, even if dissipated, if his health benefit Plan gave the Plan a first-priority claim to the settlement payments Montanile received.

Terms of SPD. Because the summary plan description (SPD) did give the Plan a first-priority claim to settlement proceeds Montanile received from a third party, Montanile resorted to an alternative argument. He contended the SPD was not a governing Plan document and thus its terms were not enforceable as part of the Plan.

The Eleventh Circuit disagreed, holding that the SPD constituted a written instrument that set out enforceable “terms of the plan.” Thus, pursuant to ERISA Sec. 502(a)(3), the Board could enforce the term found in the SPD that gave it a subrogation interest in sums recovered from third parties. As such, the court affirmed the district court’s grant of summary judgment in favor of the Board in the amount of $121,044.02.

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