On January 20, 2016, the U.S. Supreme Court decided Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, No. 14-723, holding that where an ERISA-plan participant has dissipated a third-party settlement on nontraceable items, the plan administrator may not sue to attach the participant’s separate assets because such a lawsuit does not seek “appropriate equitable relief” under section 502(a)(3) of ERISA.
Robert Montanile was a participant in an ERISA health-benefits plan administered by the Board of Trustees of the National Elevator Industry Health Benefit Plan (Board). After a drunk driver crashed into Montanile’s vehicle and caused severe injuries, the plan paid more than $120,000 for Montanile’s medical expenses. Montanile later sued the drunk driver and obtained a $500,000 settlement.
Montanile’s ERISA plan provided that any amounts that Montanile recovered from a third party were assets of the plan, and could not be distributed to any other party. The plan also required Montanile to reimburse the plan from any amounts that he recovered from a third party. Thus, the Board demanded that Montanile reimburse the plan for its payment of his medical expenses. The parties could not reach an agreement about the reimbursement due to the plan. After negotiations stalled, Montanile spent some (but not all) of the settlement funds.
The Board sued Montanile, asking the court to impose an equitable lien on any settlement funds, or any other money or property in Montanile’s possession. Montanile argued that while the Board could attach any settlement funds still in his possession, or the traceable proceeds of such funds, the Board could not attach his other assets to satisfy its claim, because such a claim would not be “appropriate equitable relief” under § 502(a)(3) of ERISA.
The District Court granted summary judgment to the Board, holding that even if Montanile had dissipated some or all of the settlement funds, the Board was entitled to reimbursement from Montanile’s general assets. The Eleventh Circuit affirmed.
The Supreme Court reversed. It began by noting that § 502(a)(3) of ERISA provides for “appropriate equitable relief,” which the Court has previously held is limited to the categories of relief that were “typically available in equity” before law and equity were merged in the federal system in 1938. The Court turned to “standard equity treatises” and concluded that a plaintiff could ordinarily enforce an equitable lien like the one the Board had here “only against specifically identified funds that remain in the defendant’s possession or against traceable items that the defendant purchased with the funds.” But “[a] defendant’s expenditure of the entire identifiable fund on nontraceable items (like food or travel) destroys an equitable lien.” In such a case, the plaintiff has a personal claim against the defendant, and may try to recover that claim from the defendant’s general assets, but such a remedy is a legal remedy, not an equitable one. Thus, the Court held that to the extent that Montanile dissipated the settlement funds on nontraceable items, the Board could not enforce its claim against Montanile’s general assets, because that would be a legal remedy, and § 502(a)(3) provides only for equitable relief. The fact that the Board’s equitable lien was created by agreement did not change the result: whether the equitable lien is created by agreement or by law, it can be enforced only against the asset itself, or its traceable proceeds. Nor did equity courts’ periodic use of substitute money decrees, deficiency judgments, or the swollen-assets doctrine change the result, because those doctrines were not “typically available” in equity. Finally, the Court rejected the Board’s argument that a contrary ruling would encourage participants to dissipate settlement funds quickly, thus undermining ERISA’s purpose of protecting plan assets.
Because it was not clear how much of the original settlement proceeds Montanile retained or dissipated in a traceable manner, the Court remanded the case so the district court could determine the extent to which the Board could enforce its equitable lien.
Justice Thomas delivered the opinion of the Court. Justice Ginsburg filed a dissenting opinion.