Law School Case Brief
Montanile v. Bd. of Trs. of the Nat'l Elevator Indus. Health Ben. Plan - 136 S. Ct. 651 (2016)
When a plan participant dissipates the whole settlement fund paid for expenses for which an ERISA plan paid benefits on nontraceable items, the plan fiduciary cannot bring a suit to attach the participant's general assets under § 502(a)(3) of the Employee Retirement Income Security Act of 1974, 29 U.S.C.S. § 1132(a)(3), because the suit is not one for appropriate equitable relief. Standard equity treatises make clear that a plaintiff could ordinarily enforce an equitable lien only against specifically identified funds that remain in the defendant’s possession or against traceable items that the defendant purchased with the funds (e.g., identifiable property like a car). A defendant’s expenditure of the entire identifiable fund on nontraceable items (like food or travel) destroys an equitable lien. The plaintiff then may have a personal claim against the defendant’s general assets, but recovering out of those assets is a legal remedy, not an equitable one.
Defendant Montanile was seriously injured by a drunk driver, and his ERISA plan fiduciary paid more than $120,000 for his medical expenses. Montanile later sued the drunk driver, obtaining a $500,000 settlement. Pursuant to the plan's subrogation clause, respondent ERISA plan fiduciary (the Board), sought reimbursement from the settlement. Montanile's attorney refused the request and subsequently informed the Board that the fund would be transferred from a client trust account to Montanile unless the Board objected. The Board did not respond, and Montanile received the settlement. Six months later, the Board sued Montanile in federal district court seeking an equitable lien on any settlement funds or property in Montanile's possession and an order enjoining Montanile from dissipating any such funds. Montanile argued that because he had already spent almost all of the settlement, no identifiable fund existed against which to enforce the lien. The district court rejected Montanile's argument. On appeal, the United States Court of Appeals for the Eleventh Circuit affirmed, holding that even if Montanile had completely dissipated the fund, the plan was entitled to reimbursement from Montanile's general assets.
Was the plan entitled to reimbursement from plan participant Montanile's general assets?
The United States Supreme Court reversed the judgment and remanded the case. It held that when a plan participant dissipated the whole settlement on nontraceable items, the fiduciary could not bring a suit to attach the participant’s general assets under § 502(a)(3) of the Employee Retirement Income Security Act of 1974 (ERISA) because the suit was not one for appropriate equitable relief. It further held that an ERISA fiduciary's § 1132(a)(3) action seeking to enforce an equitable lien by agreement against the plan participant's assets was equitable in nature where the lien attached to the settlement funds that the participant recovered in a negligence action, rather than the participant's general assets, where the right to recover money was a legal remedy, and the fiduciary had sufficient notice of the settlement to have taken steps to preserve those funds.
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