Case Summary: ERISA Liens and General Assets



Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan
No. 14-723, 577 U.S. ___ (Jan. 2016)

Supreme Court of the United States

Background

This case arose out of an automobile accident in which petitioner Robert Montanile (Montanile) was injured. His health benefits plan was provided by his employer, Board of Trustees (the Board), and administered under ERISA. The case focused on the ability of the ERISA plan to recover from a participating individual who gets a settlement, judgment, or otherwise collects from a third party.

Procedural History

The Board filed a suit against Montanile in U.S. District Court for the Southern District of Florida, seeking reimbursement of its lien under ERISA § 502(a)(3), codified at 29 U.S.C. § 1132(a)(3). The District Court granted summary judgment in favor of the Board, and also held that, “even if Montanile had dissipated all of the settlement funds, the Board was entitled to reimbursement from Montanile’s general assets.” 2014 WL 8514011, at *10-11.

Montanile appealed, but the Court of Appeals for the Eleventh Circuit affirmed the District Court’s decision. Montanile appealed to the Supreme Court of the United States, and the Court granted certiorari to resolve the conflict.

Facts

Montanile was involved in a car accident caused by a drunk driver. The accident resulted in severe injuries to Montanile. He was covered by an employee welfare benefit plan administered by the Board of Trustees of the National Elevator Industrial Health Benefit Plan(the Plan). The Plan paid $121,044.02 to cover his medical expenses as a result of that accident.

Montanile later sued the driver of the other car, and obtained a $500,000.00 settlement. After attorney’s fees of $200,000.00 and a $60,000.00 advancement was deducted, Montanile’s settlement had $240,000.00 remaining. Per its terms, the Plan then requested that Montanile reimburse the benefits paid, totaling over $120,000. Montanile and the Plan were unable to negotiate an agreement, and the Plan then sued Montanile for reimbursement under ERISA, 29 U.S.C. § 1132(a)(3).

Governing Law

The Plan is governed by ERISA, which allows plan administrators, (in this case, the Board), to recover overpayment from a beneficiary when the recovery would be “appropriate equitable relief.” Because Montanile had already spent a majority of the settlement, the Court had to determine if a reimbursement to an employee welfare benefit plan was “appropriate equitable relief” if the source of the reimbursement (i.e. the settlement or judgment) has already been spent. ERISA authorizes the Plan fiduciaries to “obtain other appropriate equitable relief . . . to enforce . . . the terms of the plan.” 29 U.S.C. 1132(a)(3).

Conclusion

The Court, in addressing such prior ERISA decisions including SereboffGreat West, and McCutchen, found that the Board had an equitable lien, which was created by the Plan agreement, and attached to Montanile’s settlement funds that were received from the third party. However, those prior decisions did not address whether the Plan may still seek reimbursement from a participant’s general assets, if that participant has already dissipated the settlement.

The Supreme Court noted that non-traceable items (i.e. services, food, etc.) were the majority of how Montanile’s settlement was spent, and that the language of ERISA does not allow reimbursement of a particular asset. The Court held that, while the Plan had a claim under ERISA to the settlement funds when the amount was still in Montanile’s possession, the claim extinguished once the fund was completely dissipated. Specifically, because the fund was dispersed, and the lien only attached to those specific funds, there was no remaining amount that the Board had claim to.

Essentially, the Board could not place a lien on Montanile’s general assets, because those assets were not part of the fund to which the Board’s lien attached (i.e. the settlement fund from his personal injury action). The Supreme Court ultimately reversed the judgment of the Eleventh Circuit, and held that ERISA law provides no equitable lien as to a participant’s general assets.



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