{"id":299,"date":"2016-01-31T22:27:18","date_gmt":"2016-02-01T06:27:18","guid":{"rendered":"https:\/\/erisa-experts.com\/blog\/?p=299"},"modified":"2016-03-01T13:10:55","modified_gmt":"2016-03-01T21:10:55","slug":"montanile-may-be-a-mixed-result-for-plans-and-participants","status":"publish","type":"post","link":"https:\/\/erisa-experts.com\/blog\/2016\/01\/31\/montanile-may-be-a-mixed-result-for-plans-and-participants\/","title":{"rendered":"Montanile May Be a Mixed Result for Plans and Participants"},"content":{"rendered":"

By Joseph A. Garofolo<\/a><\/p>\n

At first glance, the Supreme Court’s recent decision interpreting \u201cappropriate equitable relief\u201d as used in ERISA \u00a7 502(a)(3) is a victory for health plan participants.\u00a0 But upon closer scrutiny, Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan<\/em>, 2016 U.S. LEXIS 843 (2016),\u00a0is a mixed result for participants and plans.<\/p>\n

The plan at issue paid $121,044.02 in\u00a0medical expenses for\u00a0a participant who was injured in a car accident caused by a drunk driver.\u00a0 The participant subsequently settled\u00a0his claim against the drunk driver for $500,000.\u00a0 The plan contained a subrogation clause that provided the following: \u201c[A]ny\u00a0amounts [that a participant] recover[s] from another party by award, judgment, settlement or otherwise . . . will promptly be applied first to reimburse the Plan in full for benefits advanced by the Plan . . . and without reduction for attorneys\u2019 fees, costs, expenses or damages claimed by the covered person.\u201d\u00a0 Id.\u00a0<\/em>at\u00a0*7\u00a0(internal quotations omitted).\u00a0\u00a0 The plan further\u00a0stated that \u201c[a]mounts that have been recovered by a [participant] from another party are assets of the Plan . . . and are not distributable to any person or entity without the Plan\u2019s written\u00a0<\/strong><\/span>release of its subrogation interest.\u201d\u00a0 Id.<\/em> at *6-*7.<\/p>\n

After the participant and the plan could not reach agreement regarding the plan\u2019s entitlement to the funds recovered by the participant, the participant\u2019s attorney distributed\u00a0$240,000 (the amount remaining after payment of attorney\u2019s fees and costs).\u00a0 The participant\u00a0subsequently spent some or all of the\u00a0$240,000 and the board of trustees\u00a0asserted a claim under\u00a0ERISA \u00a7 502(a)(3) against the participant\u00a0to enforce the plan\u2019s subrogation provision.<\/p>\n

The Supreme Court reversed the Eleventh Circuit\u2014which had\u00a0reasoned that the board of trustees could enforce the subrogation provision\u2014and held that \u201cwhen a participant dissipates the whole settlement on nontraceable items, the fiduciary cannot bring a suit to attach the participant\u2019s general assets under \u00a7 502(a)(3) because the suit is not one for \u2018appropriate equitable relief.\u2019\u201d Id.<\/em> at *6.\u00a0 As it had in previous decisions, the Court looked to \u201cstandard equity treatises.\u201d\u00a0 Id.<\/em> at *14.\u00a0 The Court explained the following:<\/p>\n

[The standard equity treatises] make clear that a plaintiff could ordinarily enforce an equitable lien only against specifically identified funds that remain in the defendant\u2019s possession or against traceable items that the defendant purchased with the funds (e.g., <\/em><\/span>identifiable property like a car). A defendant\u2019s expenditure of the entire identifiable fund on nontraceable items (like food or travel) destroys an equitable lien.<\/p>\n

Id. <\/em><\/p>\n

While the facts of\u00a0Montanile<\/em> are sympathetic to the participant, in other instances, the Court\u2019s reliance on standard equity treatises will likely continue to create impediments\u00a0for participants seeking to obtain relief against nonfiduciaries pursuant\u00a0to ERISA \u00a7 502(a)(3).\u00a0 In her dissent, Justice Ginsburg referred to the Court\u2019s holding as\u00a0\u201cbizarre\u201d and reiterated her\u00a0opinion expressed in another dissent\u00a0that \u201cthe Court [has] erred profoundly . . . by reading the work product of a Congress sitting in 1974 as unravel[ling] forty years of fusion of law and equity, solely by employing the benign sounding word \u2018equitable\u2019 when authorizing \u2018appropriate equitable relief.\u2019\u201d\u00a0 Id.<\/em> at *25\u00a0(some internal quotations omitted).\u00a0 Notably, in her concurrence in Aetna Health Inc.\u00a0v. Davila<\/em>, 542 U.S. 200, 223-24 (2004), Justice Ginsburg accurately interpreted the scope of relief available against fiduciaries under\u00a0ERISA \u00a7 502(a)(3)\u00a0years before the Supreme Court confirmed such interpretation in CIGNA Corp. v. Amara<\/em>, 563 U.S. 421 (2011).\u00a0 It remains to be seen whether the Court will come around to her interpretation of ERISA \u00a7 502(a)(3) as it pertains to nonfiduciaries.<\/p>\n

Moreover, in addition to bringing suit under ERISA \u00a7 502(a)(3) before a participant dissipates funds potentially subject to subrogation, a trustee may be able to recover funds\u00a0from a participant under the theory that such funds constitute plan assets when the participant receives the funds.\u00a0 The Eleventh\u00a0Circuit has applied a documentary test\u00a0when determining\u00a0whether particular funds constitute plan\u00a0assets.\u00a0 See<\/em> ITPE Pension Fund v. Hall<\/i>, 334 F.3d 1011, 1013 (11th Cir. 2003).\u00a0 The language of the plan in Montanile<\/em> appears to support an argument that the participant was handling plan assets.\u00a0 The theory would be that the participant\u00a0is exercising authority or control over the management or disposition of plan assets and is, therefore, a fiduciary within the meaning of ERISA\u00a0\u00a7 3(21)(A)(i).\u00a0 A suit could then be asserted against the participant\/fiduciary on behalf of the plan pursuant to ERISA \u00a7 502(a)(2).<\/p>\n

Accordingly, there may be more than meets the eye with regard to\u00a0issues implicated by Montanile.<\/em><\/p>\n

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By Joseph A. Garofolo At first glance, the Supreme Court’s recent decision interpreting \u201cappropriate equitable relief\u201d as used in ERISA \u00a7 502(a)(3) is a victory for health plan participants.\u00a0 But upon closer scrutiny, Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, 2016 U.S. LEXIS 843 (2016),\u00a0is a mixed result for … <\/a><\/span><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12,16,10,9],"tags":[],"class_list":{"0":"entry","1":"post","2":"publish","3":"author-jgarofolo","4":"post-299","6":"format-standard","7":"category-definition-of-fiduciary","8":"category-health-plans","9":"category-plan-interpretation","10":"category-supreme-court-decisions"},"_links":{"self":[{"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/posts\/299","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/comments?post=299"}],"version-history":[{"count":13,"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/posts\/299\/revisions"}],"predecessor-version":[{"id":317,"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/posts\/299\/revisions\/317"}],"wp:attachment":[{"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/media?parent=299"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/categories?post=299"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/erisa-experts.com\/blog\/wp-json\/wp\/v2\/tags?post=299"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}