On November 12, the United States State Supreme Court denied cert in ACS Recovery Services, Inc., v. Griffin 723 F.3d 518 (5th Cir. 2013), preserving a 5th Circuit Court ruling which closed the door on another means of avoiding reimbursement of ERISA plans when a catastrophically injured beneficiary is not made whole.
To gain more background information on ACS Recovery Services v Griffin, go to this U.S. 5th Circuit Court page.
Prior to the Griffin decision, some attorneys were attempting to shield their personal injury clients’ recoveries from ERISA plans by transferring these funds to a special needs or other type of trust outside the “possession and control” of the plaintiff. The position of these plaintiffs’ attorneys was that an ERISA plan could not seek “appropriate equitable relief” if the plaintiff and beneficiary of the ERISA plan did not have possession and control over the settlements funds. This view was based primarily on a 5th Circuit case Bombardier Aerospace Emp. Welfare Benefits Plan v. Ferrer, Poirot & Wansbrough, 354 F.3d 348 (5th Cir. 2003).
Unfortunately, Griffin partially overruled Bombardier, holding that because the ERISA plan held a pre-existing lien by agreement, the subsequent transfer of funds to the special needs trust was essentially tainted and did not destroy the ability of the ERISA plan to assert an equitable lien.
The take away is this - there was a thought that one way to defeat ERISA reimbursement is to simply disburse the money to the client, a trust, or a structure, and this would prevent the ERISA plan from asserting its lien because the money was no longer identifiable. Unfortunately, this won’t work and risks a judgment against your firm or the client for the lien asserted by the plan.
There is one glimmer of hope contained in the 5th Circuit opinion. The court held that under section 502(a)(3)(B) of ERISA, the ERISA plan could not chase settlement monies paid to another party for their personal claims arising out of an incident resulting in payments to a beneficiary. That is, if a spouse, dependant, or other individual has a derivative claim for loss of consortium or some other basis, this money cannot be reached by the plan.
Therefore, if you are structuring a recovery, it may benefit your client’s family to earmark as much of the recovery as possible as going towards loss of consortium claims and the like, as opposed to compensating the injured party, and thus put the money out of reach of an ERISA plan seeking reimbursement.