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Birmingham Bar Association Summer 2016

ERISA M. Clayborn Williams, Esq. ERISA Plan Reimbursements Rights After SCOTUS’s Decision in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan Many things in life improve with age, including fine wi single-malt scotch whiskey, and a pair of old blue jeans. But you will not find an ERISA plan fiduciary’s right of equitable reimbursement against a plan beneficiary or participant on that list. On January 20, 2016, the Supreme Court of the United States released its decision in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, __ U.S. __, 136 S. Ct. 651, 193 L. Ed. 2d 556 (2016), involving an attempt by an ERISA-governed health plan to enforce a lien against a third-party settlement. The Court held that when a plan participant has wholly dissipated the funds from such a settlement on things that cannot be traced (like food or travel, for instance), ERISA does not permit a plan fiduciary to enforce its right of reimbursement right against the participant’s general assets when the settlement funds no longer can be identified or traced. Montanile was a participant in a health benefits plan administered by the Board of Trustees of the National Elevator Industry Health Benefit Plan (“the plan”) when a drunk driver ran a stop sign and crashed into his vehicle, severely injuring him. As a result of Montanile’s injuries, the plan paid out more than $121,000 in medical benefits. Like most health plans, Montanile’s plan required him to reimburse the plan from any recovery he might obtain at a later date by way of “any legal action or settlement or otherwise.” Montanile eventually obtained a $500,000 settlement, which after attorneys’ fees and costs, resulted in net proceeds totaling $240,000. Mindful of the plan’s lien, Montanile’s attorney retained most of that sum in his trust account to satisfy Montanile’s reimbursement obligation. When Montanile’s attorney and the plan failed to reach an agreement about the amount to be reimbursed to the plan and negotiations stalled, Montanile’s attorney informed the plan that he intended to distribute the remaining settlement funds to Montanile unless the plan objected within 14 days. When the plan failed to respond, Montanile’s attorney carried through with his promise and disbursed the remainder of the funds being held in trust to his client. Perhaps the most lasting lesson a practitioner learns from his or her first encounter with ERISA is that if an employee benefit becomes governed by this comprehensive enactment, the only remedies available to any of the involved parties – whether the participant, a plan fiduciary, or even the plan itself – are those which the Act explicitly permits. Among the statutory remedies left in the wake of this “super-preemption” is that created by 29 U.S.C. § 1132(a)(3), which is the statutory claim that the plan in Montanile asserted in its lawsuit filed six months after Montanile’s attorney disbursed the remaining settlement from his trust account. Section § 1132(a)(3) provision authorizes a plan fiduciary to bring a civil suit “to obtain other appropriate equitable relief … to enforce … the terms of the plan.” The term “equitable relief ” as used in this provision, however, includes only “those categories of relief that were typically available in equity.” Mertens v. Hewitt Associates, 508 U.S. 248, 256, 113 S. Ct. 2063, 124 L. Ed. 2d 161 (1993). Against this background, the plan in Montanile claimed it had an equitable lien against the disbursed settlement proceeds and sought enforcement of that lien against Montanile. But because Montanile had already spent the settlement 16 Birmingham Bar Association


Birmingham Bar Association Summer 2016
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