By Mark Casciari and Jim Goodfellow
Once again, the Supreme Court will opine on how to write ERISA plans to maximize the right of fiduciaries to sue to recover monetary relief.
On March 30, 2015, the Supreme Court agreed to review the decision of the Court of Appeals for the Eleventh Circuit in Board of Trustees of the National Elevator Industry Health Benefit Plan v. Montanile. The issue that will be presented to the Supreme Court is:
Does a lawsuit by an ERISA fiduciary against a participant to recover an alleged overpayment by the plan seek “equitable relief” within the meaning of ERISA section 502(a)(3), 29 U.S.C. § 1132(a)(3), if the fiduciary has not identified a particular fund that is in the participant’s possession and control at the time the fiduciary asserts its claim?
The Eleventh Circuit answered this question in the affirmative, stating that plan terms allowed the settlement funds received by the plaintiff to be “specifically identified.” The Court also said that the plan provided a first priority claim to all payments made by a third party to plaintiff, even though the plaintiff no longer possessed the settlement money.
The dispute arose when the plan paid the plaintiff’s medical expenses after the plaintiff was injured in a car accident. The plaintiff received a settlement from the other driver, and the plan sought from the settlement funds reimbursement of plan medical expenses.
Affirmance of the Eleventh Circuit’s decision would represent a practical solution to a common problem faced by fiduciaries who attempt to recover from non-fiduciary plan participants or service providers asserting a right to plan benefits based on assignment. Often times, overpaid funds have been spent by the recipients. Should the Supreme Court reverse, non-fiduciary recipients of plan funds would be provided with a perverse incentive to spend plan money immediately upon receipt so as to avoid any repayment obligations set forth by plan terms.
Montanile may have implications in the provider fraud context, where fiduciaries routinely sue providers to recoup overpayments. The decision also may affect reimbursement claims that fiduciaries often assert to recover overpaid benefits.
Montanile also could address an open question after the Supreme Court’s decision in Cigna Corp. v. Amara, 131 S.Ct. 1866 (2011), which has been interpreted by the Fourth and Ninth Circuits to mean that SPDs are not plan documents for the purposes of determining enforceable plan terms. The Eighth and Eleventh Circuits have reached the opposite conclusion, creating a Circuit split.