Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan (14-723)


Under the Employee Retirement Income Security Act (ERISA), is it “appropriate equitable relief” for an ERISA fiduciary to sue a beneficiary for reimbursement of an alleged overpayment if the fiduciary does not identify specific funds to recover?

Oral argument: 
November 9, 2015

The Supreme Court will determine whether it is “appropriate equitable relief” under the Employee Retirement Income Security Act of 1974 (ERISA) to require a person to reimburse his benefits plan for medical expenses even though his settlement proceeds are dissipated. ERISA governs the administration of private pension funds. ERISA section 502(a)(3) provides that “[a] civil action may be brought . . . by . . . [a] fiduciary . . . to obtain . . . appropriate equitable relief.” Robert Montanile received a $500,000 settlement in connection with injuries he sustained when he was in an accident with a drunk driver. Pursuant to an agreement, the Board of Trustees (the “Board”) of Montanile’s insurance plan sought to recover $120,044.02 from the settlement proceeds to reimburse the plan for covering Montanile’s medical expenses. When the parties were unable to settle, the Board sued Montanile under section 502(a)(3). But Montanile argues that reimbursement is not an appropriate equitable remedy here, because his settlement fund has been dissipated and an equitable lien by agreement can only be enforced against identifiable property and not Montanile’s general assets. The Board maintains that reimbursement is appropriate equitable relief, because the insurance plan has a reimbursement provision requiring Montanile to repay medical expenses. The Board contends that dissipation of the settlement fund does not nullify the insurance plan’s reimbursement provision. The Court’s decision in this case could change benefit plans’ method of reimbursement and may cause beneficiaries to incur additional costs.

Questions as Framed for the Court by the Parties 

Does a lawsuit by an Employee Retirement Income Security Act (ERISA) fiduciary against a participant to recover an alleged overpayment by the plan seek “equitable relief” within the meaning of ERISA §502(a)(3), 29 U.S.C. § 1132(a)(3), if the fiduciary has not identified a particular fund that is in the participant’s possession and control at the time the fiduciary asserts its claim?


On December 1, 2008, a drunk driver injured Robert Montanile in a car accident. . Montanile suffered injuries to his neck and lower back that required surgery and other medical care. Montanile was a covered member of the National Elevator Industry Health Benefit Plan (the “Plan”) and received $120,044.02 to cover his medical expenses. EventuallyMontanile sued the drunk driver and received a $500,000 settlement. Montanile used part of the settlement proceeds to pay his attorney and to “reimburse out-of-pocket expenses.”

After Montanile won the settlement, the Board of Trustees (the “Board”) of the Plan demanded that Montanile reimburse the Plan the $120,044.02 it distributed to cover Montanile’s medical expenses. The Board asserted that “the Plan had the right to be reimbursed out of the settlement proceeds” according to the terms of the National Elevator Industry Benefit Plan Summary Plan Description (“Plan Description”), which outlined the “Plan’s rights to subrogation and first-recovery reimbursement out of any amounts recovered by the Plan participants from another party.” When Montanile and the Board were unable to reach an agreement, the Board sued Montanile under section 502(a)(3) of the Employee Retirement Income Security Act (ERISA) to enforce the Plan’s reimbursement provisions. ERISA governs the administration of private pension funds. Section 502(a)(3) provides that “[a] civil action may be brought . . . by . . . [a fund’s] fiduciary . . . to obtain . . . appropriate equitable relief.”

In district court, the Board asserted that the Plan Description granted them the right to reimbursement. Montanile moved for summary judgment, arguing that the Plan’s reimbursement rights must be found in the Restated Agreement and Declaration of Trust (“Trust Agreement”) and/or the National Elevator Bargaining Association Agreement with International Union of Elevator Constructors (“Bargaining Agreement”), not the Plan Description. . The Board opposed Montanile’s summary judgment motion and argued that the Plan Description did establish reimbursement rights, because it was the only document that met ERISA’s requirement of a written plan of welfare benefits. The Board argued that neither the Bargaining Agreement nor Trust Agreement outlined a covered member’s “right to benefits under the Plan.” The Board subsequently filed a cross-motion for summary judgment. Montanile, in opposing the Board’s cross-motion for summary judgment, argued that the reimbursement sought by the Board was not “appropriate equitable relief” under ERISA section 502(a)(3), because the funds on which the Plan was asserting a lien had already been dissipated. The district court granted summary judgment in favor of the Board, stating that the Plan Description required Montanile to reimburse the Plan $120,044.02. The court stated that reimbursement was “appropriate equitable relief,” because there was an identifiable source of funds within Montanile’s possession: the $500,000 settlement.

Montanile appealed to the U.S. Court of Appeals for the Eleventh Circuit, claiming that the repayment was inequitable because the settlement had been “spent or dissipated.” The Eleventh Circuit held that the Plan had a right to reimbursement and the $120,044.02 lien against Montanile attached before he spent the funds. Thus, the Eleventh Circuit maintained that Montanile could not avert repayment by arguing that the settlement funds had been spent.

Montanile petitioned the U.S. Supreme Court for a writ of certiorari, which the Court granted on March 30, 2015.


ERISA governs the administration of private pension funds. ERISA section 502(a)(3) provides that “[a] civil action may be brought . . . by . . . [a] fiduciary . . . to obtain . . . appropriate equitable relief.” In this case, the Supreme Court will consider whether it is appropriate equitable relief for the Board, a fiduciary of the Plan, to enforce an “equitable lien by agreement” when Montanile’s funds (i.e., the settlement) are dissipated.

Montanile contends that the Court has prohibited fiduciaries from asserting equitable liens by agreement if the agreements do not identify specific funds to which the fiduciaries are entitled. Montanile explains that the Court has identified personal money judgment, and not equitable relief, as the proper relief in cases when specific property is not identified. However, the Board maintains that the Court’s decisions do not preclude liens by agreement in these situations. The Board argues that equity courts were historically able to award an equitable lien by agreement, which makes it an appropriate interpretation of “equitable relief” under ERISA.


Montanile points to the Court’s decision in Mertens v. Hewitt Associates, 509 U.S. 248 (1993), in which the Court limited “equitable relief” under section 502(a)(3) to “categories of relief that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages).” Montanile then considers the Court’s application of the Mertens standard in Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204 (2002). Montanile explains that in Great-West, the Court held that “equitable relief” does not include the “imposition of personal liability on plan participants for breach of contract.” Accordingly, Montanile maintains that the Board’s remedy is inequitable because it is an imposition of personal liability on Montanile for breach of contract. Moreover, Montanile contends that the Board cannot assert a claim as a fiduciary because in Great-West, the Court stated that an equitable lien requires tracing the money to a specifically identifiable fund and in this case, the settlement funds no longer exist. Montanile distinguishes his case from Sereboff v. Mid-Atlantic Medical Services, 547 U.S. 356 (2006), in which an ERISA fiduciary successfully brought a section 502(a)(3) claim against a beneficiary for reimbursement from a tort recovery. Montanile differentiates Sereboff by explaining that Sereboff involved a specific fund that was set-aside in the beneficiary’s possession, against which an equitable lien could be asserted.

The Board claims that Montanile mischaracterizes the Court’s decisions in Mertens, Great-West, and Sereboff by articulating an overly broad interpretation of the ruling. Instead, the Board contends that the decisions were narrow, and only limited ERISA plaintiffs from pursuing a theory of equitable restitution, but not equitable liens by agreement. The Board explains that Great-West barred recovery under section 502(a)(3) for funds not in the beneficiary’s possession when the desired relief was equitable restitution. And the Board claims that Sereboff did not create a so-called “tracing” requirement for equitable liens by agreement. Accordingly, the Board concludes that “a plan fiduciary need not prove that the fund is presently in the defendant’s possession” to enforce an equitable lien by agreement. The Board maintains that the moment Montanile received the settlement funds, the equitable lien attached—regardless of the fund’s dissipating afterwards—because Montanile contractually promised to reimburse the Plan as part of his coverage .


Montanile insists that the Board’s interpretation of Sereboff is incorrect, because it conflicts with historical equity practice, which limited enforcement of equitable liens by agreement to specific property or traceable product. Montanile argues that the mere fact that the desired funds were ever within the possession of Montanile is insufficient grounds to enforce the equitable lien; and that without a res to assert the lien against, the lien is merely an attempt to recover money from Montanile’s general assets. Montanile explains that using an equitable lien to recover money from his general assets would be pecuniary relief, but Montanile emphasizes that pecuniary recoveries are not part of traditional equitable remedies. To that end, Montanile maintains that the seeker of an equitable lien on a fund bears the burden of proving that it has not dissipated, and in cases in which it has, the plaintiff must trace the proceeds in order to properly uphold the lien.

The Board disagrees with Montanile’s explanation of equitable liens, arguing that Montanile’s dissipation of the fund before a claim could be brought against him did not destroy the full scope of the Board’s available remedies at equity. The Board maintains that a lien attached once Montanile made a promise to pay money out of a specific fund that came into his possession, even if the fund was later dissipated. The Board explains that in historical equity practice, “equity suffers not a right to be without a remedy”—that is, equity provides a remedy for every valid right. In this case, the Board explains that courts have allowed an individual’s general assets to be subjected to equitable liens. The Board maintains that it does not lose all equitable remedies simply because the funds have been dissipated. The Board asserts that many courts have adopted the “swollen-asset doctrine,” in which courts allow equitable liens against a defendant’s general assets because money is fungible (i.e., interchangeable) and a defendant’s assets are “augmented” by the “possession of the plaintiff’s money.” In the event that the equitable lien is unavailing, the Board claims that it is entitled to other equitable remedies in the form of a substitutionary monetary decree—a right to compensation if the desired fund is exhausted—or a deficiency judgment.


Montanile maintains that if Congress wanted to enable fiduciaries to assert personal liability against beneficiaries, it would have done so explicitly in the statute. Montanile cites other ERISA provisions that draw explicit distinctions between legal and equitable remedies to support this notion, and argues that the decision to preclude legal relief in section 502(a)(3) was a deliberate policy choice to prevent participants from becoming insurers of plan negligence. Moreover, Montanile points to recent failed attempts by Congress to redefine the meaning of “appropriate equitable relief” as an indication that Congress accepts that certain ERISA stakeholders are remediless.

But the Board maintains that its actions comport with the limitations Congress placed on claims of “equitable relief” under section 502(a)(3), because the equitable lien by agreement targets a promised fund rather than the harm caused by a breach of contract. The Board defines this distinction as the difference between equitable and legal remedies respectively and asserts that since their remedy falls in the former category, the statute provides for it. As ERISA is “built around reliance on the face of written plan documents,” the Board also contends that Congress could not have intended the limitations in section 502(a)(3) to prevent fiduciaries from claiming relief of what was explicitly provided for in the agreement between the two parties. Accordingly, the Board considers Congress’ failure to amend the statute irrelevant, because the Board finds the remedy appropriate under the statute’s current language.


The Supreme Court will consider whether Montanile must use part of his settlement proceeds to reimburse the Plan for his medical expenses even if the proceeds have been dissipated. Montanile contends that the Plan does not have an equitable right to reimbursement under ERISA, because ERISA protection does not apply when fiduciaries are imposing personal liability on plan participants. The Board argues that the Plan requires reimbursement because it holds an equitable right to reimbursement under ERISA. The Court’s decision will affect how benefit plans seek reimbursement and the costs borne by plan participants.


United Policyholders (“UP”), supporting Montanile, agrees with the positions of the Eighth and Ninth Circuit Courts of Appeals, which UP asserts forbid ERISA fiduciaries from imposing equitable liens by agreement when the funds to which liens attach are dissipated or untraceable. UP maintains that this prohibition protects plan participants from insurance companies’ overly harsh reimbursement practices. UP contends that plan beneficiaries will be harmed if the Court allows ERISA fiduciaries to impose a lien on dissipated funds. UP maintains that “the typical disability claimant is already reduced to living on a percentage of her prior income” and has usually spent the money on life necessities. As such, UP argues that a lien for overpayment of disability benefits can impose additional financial constraints on plan participants.

The National Coordinating Committee for Multiemployer Plans (“NCCMP”), in support of the Board, argues that allowing benefit plans to recoup costs from settlements protects all beneficiaries from increased healthcare costs. NCCMP explains that Montanile received a “double recovery:” One from the Plan to cover his medical expenses, and another from the $500,000 settlement. NCCMP contends that the Plan rightly sought to recover its expenses through the lien, so that it could pass on the savings generated by the settlement to other plan beneficiaries. NCCMP concludes that allowing Montanile to keep the entire settlement gives him a $121,044.02 windfall, because the Plan, and not Montanile, paid that portion of his medical expenses. NCCMP asserts that benefit plans will stop providing advanced payments if their equitable rights to reimbursement do not exist. NCCMP maintains that if benefit plans stop providing advanced payments, it may force beneficiaries to deal with “medical bills, creditors, and delays…through the uncertain and lengthy process of personal injury lawsuits.”


The American Association for Justice (“AAJ”), in support of Montanile, contends that there are other, less risky reimbursement options for benefit plans than suing their beneficiaries. AAJ suggests benefit plans could file suits “against the tortfeasor[s]” and engage in settlement negotiations, or “compromise with [] beneficiar[ies] on a lower reimbursement.” The Board maintains that beneficiaries will simply spend their settlements “upon receipt” to avoid reimbursing their plans, but AAJ contends that the Board’s concern is unrealistic. AAJ explains that in every state, the law governing lawyers’ professional conduct requires lawyers to “hold tort proceeds subject to valid liens in trust accounts,” and these funds are not disbursable upon a client’s request.

But the IBEW-NECA Southwestern Health & Benefit Fund (“IBEW”) and the U.S. Chamber of Commerce (“Chamber”) maintain that the elimination of the equitable right to reimbursement will incentivize beneficiaries to immediately dissipate recovered funds. . Southwestern and the Chamber contend that the equitable right is more efficient and less expensive than the alternative methods of reimbursement that Montanile and supporting amici suggest. . Southwestern and the Chamber concede that injunctive relief is an alternative option, but they maintain that courts have denied relief in the past and “even when relief is forthcoming, it may not be timely enough to prevent dissipation.” Southwestern and the Chamber add that injunctive relief is unrealistic, because plans usually have a small administrative staff that would be unable to meet the demands of an “injunctive relief program.”


This case will impact the definition of “equitable relief” under ERISA section 502(a)(3) with regard to what claims a fiduciary can bring against a beneficiary who has dissipated funds that were intended for the fiduciary as reimbursement. Montanile argues that the dissipation of the settlement fund prevents the Board from asserting an equitable lien, and that the proposed remedy is in fact legal relief that is inappropriate under section 502(a)(3). Conversely, the Board claims that the proposed remedy is not legal relief; rather, it is an equitable lien that has been recognized by the Court’s prior jurisprudence and historical equitable practices. The Court’s decision may affect how benefit plans seek reimbursement and the costs borne by plan participants.

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