Montanile: The Supreme Court Traces its Roots and Denies ERISA Plan



The United States Supreme Court held yesterday in an 8-1 decision that the National Elevator Industry Health Plan (a self-funded ERISA plan) did not have a claim for reimbursement against a plan member’s general assets under ERISA – such a claim could only be maintained against specifically identifiable funds in the member’s possession or against traceable items that the plan member purchased. In sum, an ERISA plan cannot maintain a reimbursement lien against a plan member where settlement funds are dissipated in a non-traceable fashion and the plan failed to proactively preserve those funds. This is a case which GRG has closely monitored. Below you will find GRG’s synopsis of the decision and four important takeaways.

The Supreme Court reversed the Eleventh Circuit Court of Appeals 2014 ruling in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, which held that the plan could enforce its lien against a personal injury settlement through a claim against the plan member’s general assets. The claim against the general assets was brought because the personal injury settlement funds had allegedly already been dissipated by the plan member. The Court remanded the issue of tracing settlement funds still in the member’s possession to the district court.

The case arose from injuries sustained by Robert Montanile, a covered member of the National Elevator Industry Health Benefit Plan, in a 2008 auto accident. Montanile subsequently underwent surgery for related back injuries and received other medical care covered under the plan which totaled $121,402.02. Montanile sued the driver of the other vehicle and eventually received a $500,000 settlement. The plan asserted a reimbursement claim against the settlement in accordance with its written plan.

Montanile’s attorney and the plan were unable to reach an agreement regarding the resolution of the reimbursement claim. The attorney informed the plan that the remaining settlement funds (approximately $240,000 after attorney fees and expenses were paid) would be distributed to Montanile unless the plan objected within 14 days. The plan did not respond and the funds were distributed to Montanile.

Six months later the plan filed an ERISA claim in district court to recover the costs of Montanile’s medical treatment through the imposition of an equitable lien upon the settlement proceeds. In addition to the equitable lien claim the plan sought an order enjoining Montanile from dissipating any funds. Montanile argued that the reimbursement sought by the plan was not “appropriate equitable relief” under ERISA because the funds on which the plan was asserting the lien had already been dissipated. Despite this argument, the district court ruled against Montanile and granted National Elevator’s motion for summary judgment, effectively validating its lien and entitling the plan to reimbursement from Montanile’s general assets.

Montanile then made the same argument regarding “appropriate equitable relief” on appeal. In response, the Eleventh Circuit affirmed the district court’s decision and held that settlement funds were specifically identifiable even after they are no longer in the possession of the plan member; a plan member’s dissipation of the funds thus could not destroy the equitable lien by agreement that existed before the dissipation.  

The Supreme Court’s decision reverses the Eleventh Circuit and instead holds that the remedy sought by the plan – a claim against the plan member’s general assets in lieu of the dissipated settlement proceeds – was not a form of equitable relief available under ERISA. Such relief could only be construed as a legal remedy which is not available under the framework of ERISA. The basis of the plan’s claim as established by the governing plan documentation was equitable (an equitable lien by agreement) but the relief sought was not equitable. The plan was limited to seeking recovery from specifically identifiable funds within the possession and control of the member. Assuming that the plan could not identify these funds or otherwise trace those funds, the plan was not entitled to relief.  

Notably, the Court states that the plan’s remedy would have been equitable if the plan had immediately filed suit to recover the settlement proceeds within the member’s possession, prior to dissipation. In the alternative and to the extent that the plan could still trace those funds into the member’s hands (or traceable items purchased), the plan still has some remedy and this is reflected in the Court’s remanding to the district court for a closer analysis of the facts surrounding the use of funds.

The Court concludes its decision by rejecting the plan’s claim that ERISA plans will lack effective, cost-efficient means of seeking remedies in these types of cases. The Court specifically cites to the power of ERISA plans to thwart evasive plan members through active claims management, unambiguous plan provisions, and diligent attempts at fund preservation when a mutually agreed upon resolution is unavailable.

So what does this decision mean for you? The Montanile decision is another important piece of the ERISA puzzle and GRG believes there are four immediate takeaways. While disbursement of settlement funds to a claimant is an important consideration in resolving an ERISA claim, it should be considered as another point of discussion between the two sides rather than a means of disposal. This is a complex issue and many questions are still unanswered.

  1. ERISA claims are still valid, enforceable, and created by plan language. The Supreme Court clearly lays out the fact that an equitable lien by agreement created by plan language is an equitable claim which is enforceable under ERISA. The only limitation is that the claim must be asserted against specific, identifiable funds (settlement proceeds) within the possession of the plan member rather than the general assets of the member.
  2. A plan member who receives settlement proceeds may still be liable for an ERISA plan claim to the extent that those proceeds are still within their possession. It is important to remember that the Supreme Court remanded this issue to the district court for determination. Montanile may still have to repay the plan to the extent that settlement proceeds are identified within his possession or are otherwise considered “traceable” at the time the plan filed suit.
  3. ERISA plans may seek other forms of relief available based upon the contractual plan with the member. Many ERISA plans have cooperation clauses, future claim offset provisions, and coordination of benefit sections which can be utilized by the plan in the event that a member dissipated funds to avoid reimbursement to the plan. These contractual provisions could allow the plan to offset its reimbursement claim through the denial of future coverage, terminate coverage completely, or seek repayment of claims from providers; all of which could have very adverse effects on the plan member. There is also the potential for bad faith and ethical issues related to the disbursement of funds.
  4. The facts of Montanile are specific. The plan member’s attorney was actively engaged in negotiations with the plan. When those negotiations broke down the attorney informed the plan of his intentions to disburse funds unless the plan objected. The plan did not object, nor did it take any immediate legal action. Certainly the non-responsiveness of the plan played a role in the Court’s decision and intervention by plans may become a commonplace occurrence in the future.

Stay tuned for further updates on the impact of the Supreme Court’s decision. If you have any questions, please contact:

Michael Russell at or (704) 559-4300.

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