In its current term, the Supreme Court is set to hear oral arguments on three cases that interpret the Employee Retirement Income Security Act of 1974 (ERISA).  The three ERISA cases will inevitably have an effect on plan administration for employers and plan sponsors going forward.  After several pivotal decisions impacting ERISA during last term, the next round of cases further confirms the dynamic legal landscape of employee benefits and the need for plan sponsors to stay up to date with judicial decisions of ERISA compliance.

This three-part blog series will summarize the issues that are being argued before the Supreme Court during the current term and how the high court’s decisions will affect plan administration going forward.  The first case argued on November 9th was Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan regarding interpretation of ERISA’s equitable relief provision.

In this case, an appeal from the Eleventh Circuit,  the participant of a health benefit plan is petitioning the Supreme Court to decide whether subrogation for overpayment from settlement proceeds awarded to a participant is considered “equitable relief” under ERISA §502(a)(3).


Robert Montanile was a participant in the National Elevator Industry Health Benefit Plan (the “Plan”) through his membership in a union.  The pertinent documents that made reference to health benefits were a trust agreement, a collective bargaining agreement, and the summary plan description (the “SPD”).  The SPD, though, was the only document that contained detailed information regarding the types of benefits offered, claims filing procedures, and reimbursement to the Plan for amounts recovered from a third party.

At some point after Montanile became a covered employee under the Plan, he was involved in a car accident and suffered severe injuries which required surgery and care, the costs of which totaled approximately $121,000.  The Plan paid the costs of the medical expenses.  After the Plan had paid for the medical expenses, Montanile received $500,000 through a civil settlement with a third party.  Montanile spent the majority of his settlement proceeds on attorney’s fees and other expenditures without reimbursing the Plan.

Litigation and Implications of High Court Ruling

The Plan sought reimbursement through an equitable lien provision in the SPD.  Montanile argued that the SPD was not the governing plan document, and even if it were, the equitable lien cannot be enforced because he did not have possession or control over the majority of the settlement proceeds.

Both the district court and Eleventh Circuit found in favor of the Plan holding that the SPD was the governing plan document and the subrogation provision was enforceable.  That being said, there is currently a split among the circuits regarding whether an equitable lien can be enforced if the participant does not have possession of or control over the funds on which the lien is being enforced.

The Supreme Court Justices did not seem to be swayed by either side during oral arguments.  Their questions did not focus on the enforceability of the provisions in the Plan, but rather on the Court’s precedent regarding equitable claims and effect on plan administration going forward.  The Justices did not seem to be persuaded that an equitable remedy was still available to a plan when the funds were no longer traceable.  At the same time, they seemed to be concerned with how plans could protect or monitor third party litigation or settlements if participants became judgment proof once the funds were dissipated.   That being said, questions from the Justices during oral arguments are rarely indicators of how the Supreme Court will decide a case.

It is apparent that there is a disconnect between the limit of available remedies under ERISA and protecting plan assets from potential wrongdoing or manipulation by participants that will be resolved by the Supreme Court.  However the Supreme Court decides, its ruling will have a significant impact on ERISA litigation and remedies for both plan sponsors and participants.  A ruling in the Plan’s favor would allow plan participants to recover monetary relief from third parties regardless of whether the participant spends the overpaid benefits.  On the other hand, reversal of the Eleventh Circuit decision would appear to give participants the incentive to spend through any overpaid benefits received from a third party in order to escape any repayment obligations stated in plan documents.  The Supreme Court should be issuing a ruling sometime in Summer 2016.