Montanile v. Bd. of Trs. of the Nat'l Elevator Indus. Health Benefit Plan

• Decision Date: 20 January 2016
• Docket Number: No. 14–723.,14–723.
• Citation: 136 S.Ct. 651,577 U.S. 136,193 L.Ed.2d 556
• Parties: Robert MONTANILE, Petitioner v. BOARD OF TRUSTEES OF the NATIONAL ELEVATOR INDUSTRY HEALTH BENEFIT PLAN.
• Court: U.S. Supreme Court

577 U.S. 136

136 S.Ct. 651

193 L.Ed.2d 556

Robert MONTANILE, Petitioner

v.BOARD OF TRUSTEES OF the NATIONAL ELEVATOR INDUSTRY HEALTH BENEFIT PLAN.

No. 14–723.

Supreme Court of the United States

Argued Nov. 9, 2015.

Decided Jan. 20, 2016.

Peter K. Stris, Los Angeles, CA, for Petitioner.

Neal K. Katyal, Washington, D.C., for Respondent.

Ginger D. Anders for the United States as amicus curiae, by special leave of the Court, supporting the Petitioner.

Radha A. Pathak, Whittier Law School, Costa Mesa, CA, Shaun P. Martin, University of San Diego School of Law, San Diego, CA, Peter K. Stris, Brendan S. Maher, Daniel L. Geyser, Dana Berkowitz, Victor O'Connell, Stris & Maher LLP, Los Angeles, CA, for Petitioner.

John D. Kolb, Gibson & Sharps, PSC, Louisville, KY, Neal Kumar Katyal, Jessica L. Ellsworth, Mary Helen Wimberly, Sean Marotta, Hogan Lovells US LLP, Washington, D.C., for Respondent.

Justice THOMAS delivered the opinion of the Court.^*

When a third party injures a participant in an employee benefits plan under the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq., the plan frequently pays covered medical expenses. The terms of these plans often include a subrogation clause requiring a participant to reimburse the plan if the participant later recovers money from the third party for his injuries. And under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), plan fiduciaries can file civil suits " to obtain ... appropriate equitable relief ... to enforce ... the terms of the plan."¹

In this case, we consider what happens when a participant obtains a settlement fund from a third party, but spends the whole settlement on nontraceable items (for instance, on services or consumable items like food). We evaluate in particular whether a plan fiduciary can sue under § 502(a)(3) to recover from the participant's remaining assets the medical expenses it paid on the participant's behalf. We hold that, when a participant dissipates the whole settlement on nontraceable items, the fiduciary cannot bring a suit to attach the participant's general assets under § 502(a)(3) because the suit is not one for "appropriate equitable relief." In this case, it is unclear whether the participant dissipated all of his settlement in this manner, so we remand for further proceedings.

I

Petitioner Robert Montanile was a participant in a health benefits plan governed by ERISA and administered by respondent, the Board of Trustees of the National Elevator Industry Health Benefit Plan (Board of Trustees or Board). The plan must pay for certain medical expenses that beneficiaries or participants incur. The plan may demand reimbursement, however, when a participant recovers money from a third party for medical expenses. The plan states: "Amounts 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's written release of its subrogation interest." App. 45. The plan also provides that "any amounts" 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' fees, costs, expenses or damages claimed by the covered person." Id., at 46. Participants must notify the plan and obtain its consent before settling claims.

In December 2008, a drunk driver ran through a stop sign and crashed into Montanile's vehicle. The accident severely injured Montanile, and the plan paid at least $121,044.02 for his initial medical care.

Montanile signed a reimbursement agreement reaffirming his obligation to reimburse the plan from any recovery he obtained "as a result of any legal action or settlement or otherwise." Id., at 51 (emphasis deleted).

Thereafter, Montanile filed a negligence claim against the drunk driver and made a claim for uninsured motorist benefits under Montanile's car insurance. He obtained a $500,000 settlement. Montanile then paid his attorneys $200,000 and repaid about $60,000 that they had advanced him. Thus, about $240,000 remained of the settlement. Montanile's attorneys held most of that sum in a client trust account. This included enough money to satisfy Montanile's obligations to the plan.

The Board of Trustees sought reimbursement from Montanile on behalf of the plan, and Montanile's attorney argued that the plan was not entitled to any recovery. The parties attempted but failed to reach an agreement about reimbursement. After discussions broke down, Montanile's attorney informed the Board that he would distribute the remaining settlement funds to Montanile unless the Board objected within 14 days. The Board did not respond within that time, so Montanile's attorney gave Montanile the remainder of the funds.

Six months after negotiations ended, the Board sued Montanile in District Court under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), seeking repayment of the $121,044.02 the plan had expended on his medical care. The Board asked the court to enforce an equitable lien upon any settlement funds or any property which are " ‘in [ Montanile's] actual or constructive possession.’ " 593 Fed.Appx. 903, 906 (C.A.11 2014) (quoting complaint). Because Montanile had already taken possession of the settlement funds, the Board also sought an order enjoining Montanile from dissipating any such funds. Montanile then stipulated that he still possessed some of the settlement proceeds.

The District Court granted summary judgment to the Board. No. 12–80746–Civ. (S.D.Fla., Apr. 18, 2014), 2014 WL 8514011, *1. The court rejected Montanile's argument that, because he had by that time spent almost all of the settlement funds, there was no specific, identifiable fund separate from his general assets against which the Board's equitable lien could be enforced. Id., at *8–*11. The court held that, even if Montanile had dissipated some or all of the settlement funds, the Board was entitled to reimbursement from Montanile's general assets. Id., at *10–*11. The court entered judgment for the Board in the amount of $121,044.02.

The Court of Appeals for the Eleventh Circuit affirmed. It reasoned that a plan can always enforce an equitable lien once the lien attaches, and that dissipation of the specific fund to which the lien attached cannot destroy the underlying reimbursement obligation. The court therefore held that the plan can recover out of a participant's general assets when the participant dissipates the specifically identified fund. 593 Fed.Appx., at 908.

We granted certiorari to resolve a conflict among the Courts of Appeals over whether an ERISA fiduciary can enforce an equitable lien against a defendant's general assets under these circumstances.²

575 U.S. ––––, 135 S.Ct. 1700, 191 L.Ed.2d 675 (2015). We hold that it cannot, and accordingly reverse the judgment of the Eleventh Circuit and remand for further proceedings.

II

A

As previously stated, § 502(a)(3) of ERISA authorizes plan fiduciaries like the Board of Trustees to bring civil suits "to obtain other appropriate equitable relief ... to enforce ... the terms of the plan." 29 U.S.C. § 1132(a)(3). Our cases explain that the term "equitable relief" in § 502(a)(3) is limited to "those categories of relief that were typically available in equity" during the days of the divided bench (meaning, the period before 1938 when courts of law and equity were separate). Mertens v. Hewitt Associates, 508 U.S. 248, 256, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993). Under this Court's precedents, whether the remedy a plaintiff seeks "is legal or equitable depends on [ (1) ] the basis for [the plaintiff's] claim and [ (2) ] the nature of the underlying remedies sought." Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356, 363, 126 S.Ct. 1869, 164 L.Ed.2d 612 (2006) (internal quotation marks omitted). Our precedents also prescribe a framework for resolving this inquiry. To determine how to characterize the basis of a plaintiff's claim and the nature of the remedies sought, we turn to standard treatises on equity, which establish the "basic contours" of what equitable relief was typically available in premerger equity courts. Great–West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 217, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002).

We have employed this approach in three earlier cases where, as here, the plan fiduciary sought reimbursement for medical expenses after the plan beneficiary or participant recovered money from a third party. Under these precedents, the basis for the Board's claim is equitable. But our cases do not resolve whether the remedy the Board now seeks—enforcement of an equitable lien by agreement against the defendant's general assets—is equitable in nature.

First, in Great–West, we held that a plan with a claim for an equitable lien was—in the circumstances presented— seeking a legal rather than an equitable remedy. In that case, a plan sought to enforce an equitable lien by obtaining a money judgment from the defendants. The plan could not enforce the lien against the third-party settlement that the defendants had obtained because the defendants never actually possessed that fund; the fund went directly to the defendants' attorneys and to a restricted trust. We held that the plan sought a legal remedy, not an equitable one, even though the plan claimed that the money judgment was a form of restitution. iD., at 208–209, 213–214, 122 S.CT. 708. wE explained that restitution in equity typically involved enforcement of "a constructive trust or an equitable lien, where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant's possession." Id., at 213, 122 S.Ct. 708. But the restitution sought in Great–West was legal—not equitable—because the specific funds to which the fiduciaries "claim[ed] an entitlement...