Today the Supreme Court entertained oral argument on yet another ERISA remedies case. In Montanile v. Board of Trustees of the Nat’l Elevator Indus. Health Benefit Plan, No. 14-723, the Court will again attempt to apply the phrase “appropriate equitable relief” to a plan’s claim for reimbursement of medical benefits.

The scenario is a familiar one to the Court, which has addressed very similar issues in Great-West Life & Annuity v. Knudson (2002), Sereboff v. Mid-Atlantic Medical Services (2006), and US Airways v. McCutchen (2013). Like those other cases, Montanile arose from a plan’s attempt to recoup medical benefits paid to an injured participant, after the participant received a recovery from the tortfeasor causing the injury.

The question in Montanile, however, involved dissipation of the funds — that is, is the plan’s claim for “equitable relief” still viable when the settlement funds have been spent, distributed and/or commingled with the participant’s general assets? Defending the claim in the district court, the participant (Montanile) argued that ERISA did not allow the plan’s recovery because there was no specifically identifiable sum of money in Montanile’s possession that could be traced back to his tort settlement. According to Montanile, this precluded any claim for “equitable relief” under existing Supreme Court jurisprudence. The lower courts rejected the “dissipation” defense, ruling that the plan’s reimbursement provisions gave rise to an equitable lien by agreement, which attached as soon as the participant came into possession of the settlement funds. As a result, the lower courts found that the participant’s dissipation of the funds was immaterial to the plan’s right of recovery.

This question was starkly presented to the Court in Montanile. There was no dispute that the plan established an equitable lien by agreement, nor was there any dispute that Montanile had dissipated most or all of the settlement proceeds with knowledge of the plan’s reimbursement right.

At oral argument, the Court initially focused on the participant’s argument that a plan can protect its rights by notifying the parties to the tort suit, as well as counsel. According to the participant’s counsel, a plan can protect itself by notifying the participant, the tortfeasor and their counsel of the plan’s lien on any personal-injury recovery. Curiously, in Montanile, the Eleventh Circuit followed its decision in AirTran v. Elem, a decision it considered binding, and in which the participant had dissipated settlement proceeds in spite of plan’s efforts to protect itself in this exact way. (A petition for certiorari is pending in the AirTran case.) Chief Justice Roberts, in particular, expressed concerns that a complicated and expensive reimbursement process would discourage employers from sponsoring benefits plans voluntarily, contrary to one of ERISA’s central goals.

During his argument, the plan’s counsel offered a starting premise – namely, that a defendant-participant cannot defeat the plan’s claim by knowingly frustrating the plan’s equitable rights (by dissipating the subject funds). In this construct, plan counsel proposes that the plan becomes a general creditor with respect to the participant’s general assets. Plan counsel suggested that this would distinguish reimbursement claims in the context of pension and disability plans, where the participant’s dissipation of the funds is less likely to be in bad faith (i.e., with knowledge of a reimbursement claim). In addition, plan counsel argued, the Court’s interpretation of the equitable tradition would be consistent with ERISA’s emphasis on enforcing plan terms as written. In any event, the plan’s emphasis on intentional dissipation does seem to have resonated with some of the Justices.

Of course, it’s impossible to predict how the Court will rule. However, the two cases before the Court (Montanile and AirTran) offer some favorable “equities” for the plans. Despite that, the dialogue at oral argument suggests that some Justices are loath to issue any expansive interpretation of the statute. If the Court affirms the rulings below, the most interesting aspect of that decision may be the Court’s attempt to limit its holding to avoid future undesirable consequences that might flow from its decision.


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Photo of Charles F. Seemann III Charles F. Seemann III

Charles F. Seemann III is office managing principal of the New Orleans, Louisiana office of Jackson Lewis P.C. His practice emphasizes ERISA class action defense and employment law, but encompasses a wide variety of litigation and counseling matters as well.

Charles’s primary practice…

Charles F. Seemann III is office managing principal of the New Orleans, Louisiana office of Jackson Lewis P.C. His practice emphasizes ERISA class action defense and employment law, but encompasses a wide variety of litigation and counseling matters as well.

Charles’s primary practice focus includes the defense of ERISA plans and plan fiduciaries at both public and private companies, multi-employer plans and plan fiduciaries, and financial institutions providing services to ERISA plans. Routinely, he defends large ERISA class actions, COBRA class actions, and ESOP litigations.  In addition to ERISA, Charles has extensive experience in a wide range of employment matters, including stock-option disputes and executive compensation litigation; wage and hour advice and litigation; and private litigation and regulatory investigations in discrimination, hostile-environment and similar matters. Charles is admitted to practice in both Louisiana and Texas, but has represented clients in complex and class action matters in numerous jurisdictions, including New York, California, Ohio, Illinois, Pennsylvania, Michigan, Massachusetts, Indiana, Florida, Oklahoma, Georgia, Tennessee, Virginia, Mississippi, and Washington D.C.

Since 2012, Chambers USA has listed Charles among the nation’s pre-eminent lawyers, noting his “strong reputation” as a “real gentleman” among his peers, as well as remarks that “he thinks outside the box” and “knows everything that’s ever happened in a case.”

Charles’s activities include regular speaking and writing engagements around the country, on topics including class-action litigation, ERISA fiduciary litigation and risk management, employment law, and best practices for in-house counsel. He also is active in community and civic affairs and donates his time and professional services to numerous causes. While attending law school, he served as articles editor of the Louisiana Law Review.