Amicus Curiae Brief — Montanile v. Bd. of Trs. of the Nat'l Elevator Indus. Health Benefit Plan, 135 S. Ct. 1700 (2015) (No. 14-723)

No. 14-723

ee ee

In the Supreme Court of the Cmited States

ROBERT MONTANILE, PETITIONER

Vv.

BOARD OF TRUSTEES OF THE NATIONAL ELEVATOR

INDUSTRY HEALTH BENEFIT PLAN

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING PETITIONER

DONALD B. VERRILLI, JR.

M. PATRICIA SMITH Solicitor General

Solicitor of Labor Counsel of Record

G. WILLIAM SCOTT EDWIN S. KNEEDLER

_ Associate Solicitor Deputy Solicitor General

ELIZABETH HOPKINS GINGER D. ANDERS

Counsel for Appellate and Assistant to the Solicitor

Special Litigation General

ANNA O. AREA Department of Justice

Attorney Washington, D.C. 20530-0001

Department of Labor SupremeCtBriefs@usdo}. gov

Washington, D.C. 20210 (202) 514-2217

QUESTION PRESENTED

Section 502(a)(3) of the Employee Retirement In-

come Security Act of 1974 (ERISA), 29 U.S.C.

1132(a)(3), allows a plan participant, beneficiary, or

fiduciary to obtain an injunction or “other appropriate

equitable relief” to redress statutory violations or to

enforce ERISA or the terms of the plan. The question

presented is:

Whether an action by an ERISA fiduciary against a

plan participant to recover an overpayment by the

plan seeks “equitable relief” within the meaning of

ERISA Section 502(a)(3), 29 U.S.C. 1132(a)(3), where

the fiduciary has not identified a particular fund that

is in the participant’s possession and control at the

time that the fiduciary asserts its claim.

(I)

TABLE OF CONTENTS

Page

ETC ATA l

EEE SE TEL Ee NTA a ET a One RE 1

ey Cr IE ccnsenemcnnnsamnnimmnnsingiannenie 4

Argument:

I. A fiduciary may not obtain reimbursement under

Section 502(a\3) when the beneficiary no longer

possesses the funds recovered from a third party........7

A. This Court’s precedents establish that Section

502(a)(3) permits a fiduciary to assert an

equitable lien or constructive trust against

identified funds or property in the benefi-

ciary’s possession, but does not permit an

award of legal damages against the benefi-

1. This Court has held that an equitable

lien or constructive trust may be enforced

only when the identified funds are in the

beneficiary’S POSSESSION ............cccccecsseseseseneeeeees 8

2. Respondent’s attempts to avoid the

import of Great-West and Sereboff

ne 13

B. Traditional principles of equity confirm

that an equitable lien is enforceable only

against identified funds in the defendant’s

II cteeensarsresserereeseneaneenemameeennen 18

1. An equitable lien or constructive trust

must be enforced against particular

property in the defendant’s possession......... 18

2. Respondent is incorrect in arguing that

monetary compensation for dissipated

property was traditionally treated as

ETL Ta 21

a. Deficiency judgments ...................cccceeceee 21

b. Damages for destruction of a lien............ 24

(IIT)

IV

Table of Contents—Continued: Page

3. Respondent may not obtain legal relief

under Section 502(a)(3) simply because

equity courts had authority to award that

C. Permitting a fiduciary to enforce an equitable

lien only against identified third-party recovery

funds in the defendant’s possession is consistent

iciccenrniesenernneerntiinss 26

1. Great-West indicates that the present-

possession requirement is not inconsistent

ETT SS aaa 26

2. Plan fiduciaries have available methods

of protecting their reimbursement

SEA ERE ee 29

D. Aremand is necessary to determine the

extent to which petitioner possesses funds

or property against which respondent may

enforce its equitable lien................-sccsesseseeeenereenees 31

Il. Ifthe Court concludes that a deficiency judgment

or lien-destruction damages constitutes “equitable

relief,” the Court should remand to permit the lower

courts to determine whether respondent has

established the elements of those claims ..................... 32

ETT EET aT Re IT eee ee RT 34

TABLE OF AUTHORITIES

Cases:

Aetna Health Inc. v. Davila, 542 U.S. 200 (2004)............... 28

AirTran Airways, Inc. v. Elem, 767 F.3d 1192 (11th

Cir. 2014), petition for cert. pending, No. 14-1061

a te NEED sncersicieeseanicsiiianinnlinenininisisinianinaniuel 4, 13, 15

Cases—Continued: Page

Atteberry v. Memorial-Hermann Healthcare Sys.,

405 F.3d 344 (5th Cir.), cert. denied, 546 U.S. 936

GRE enctessssrncennessensemaveemenemnmnesnnieeneamamenanenensesneseies 30

CIGNA Corp. v. Amara, 131 S. Ct. 1866

NN 11, 16, 20, 25, 32

City Bank v. Plank, 124 N.W. 1000 (Wis. 1910).........ccc000 33

Continental-Equitable Title & Trust Co. vy. National

Props. Co., 273 F. 967 (D. Del. 1921) ........ssssssssesseserssersseees 23

Crawford & Co. Med. Benefit Trust v. Repp, No.

11050155, 2011 WL 2531844 (N.D. Ill. June 24,

| 30

Crump v. Wal-Mart Grp. Health Plan, 925 F. Supp.

ee a i acscicinintceniztincnaniehinaieiiiinsiisiniaasiintibininaninnssnni 30

Dayton Hudson Dep't Store Co. v. Auto-Owners Ins.

Co., 953 F. Supp. 177 (W.D. Mich. 1995) ...........ccccccceseeeee 30

Diamond Crystal Brands, Inc. v. Wallace,

531 F. Supp. 2d 13866 (N.D. Ga 2008) .........ccccecesesceeseneeees 31

Frank v. Davis, 31 N.E. 1100 (N.Y. 1892) ........ccccccccsesesesees 23

Freshwater v. Colonial Prod. Credit Ass'n,

334 S.E.2d 142 (S.C. Ct. App. 1985) 00... ccccccesesesecesesesenens 19

George Adams & Frederick Co. v. South Omaha

Nat'l Bank, 123 F. 641 (8th Cir. 1908) ........cccesesssecsesesenes 33

Great-West Life & Annuity Ins. Co. v. Knudson,

8 passim

Hale vy. Omaha Nat'l Bank, 64 N.Y. 550 (1876) «0.0... 24

Hartford Accident & Indem. Co. v. Southern Pac.

as Ne iia atari 23

Hovey v. Elliott, 23 N.E. 475 (N.Y. 1890) .........cccccecseeee. 24, 33

J.G. White Eng’g Corp. v. People’s State Bank,

ee ee IE ntisstinieensicennintintientinmaniqinsemnmamatinns 24

Jefferson Standard Life Ins. Co. v. Buckman,

ie ft ee 22, 23

Cases—Continued: Page

Kimble v. Marvel Entm't, LLC, No. 13-720, 2015 WL

NN TTI icici ceiininistnisieniisicaiinientntionsneneieeeanl 28

Mank v. Green, 297 F. Supp. 2d 297 (D. Me. 2008)............ 31

Maricco v. Meco Corp., 316 F. Supp. 2d 524

cr MNS MIE cciectniceesebisiannbicsiibinnenltatinininetapanicaee 30

Mertens v. Hewitt Assocs., 508 U.S. 248

EERIE ERIS RE CARER ore lease ees 6, 8, 9, 20, 25

Noonan v. Lee, G7 U.S. 400 (18GB) ...........0cccccocccccccosssccccseeees 22

Northwestern Mut. Life Ins. Co. v. Keith, T7 F. 374

Ne Ginn iiiaciiinceechietdiicadatin inciteniaitabeniiianniaiaaisin 24

Otis v. Otis, 45 N.E. 737 (Mass. 1897) .........cc.ccsscsessssssessesees 24

Phelps v. Loyhed, 19 F. Cas. 461 (C.C.D. Minn. 1871).......28

Schuyler v. Littlefield, 232 U.S. TO7 (1914).........ccccceeeeeseees 20

Sereboffv. Mid Atl. Med. Servs., Inc., 547 U.S. 356

[Rn seiiecliisiasieiecicibeeaiieanitaieniitdinaeiiliaaietaniiinaedeg passim

Shultz v. Shively, 143 P. 1115 (Or. 1914)... eeeeseneees 24

US Airways, Inc. v. McCutchen, 133 S. Ct. 1587

IST sisserisseileniiesiinieipianicenaiaceiehabahaatasitendharataienaie 2, 12, 26

Whiting v. Hudson Trust Co., 188 N.E. 33 (N.Y.

SOUT aihinscietendetaniinitig cant itil aasas lina hd i ainttcigeastiietamaiiaea ital 19

Yates v. Joyce, 11 Johns. 136 (N.Y. Sup. Ct. 1814)............. 33

Statutes and rule:

Employee Retirement Income Security Act of 1974,

29 U.S.C. 1001 et seq.:

Ng nel 27

29 U.S.C. 1132(aX3) (§ 502(a)(3)) 2.0... eeseeseeeneeees passim

I i 3

Pension Annuitants Protection Act of 1994,

Pub. L. No. 108-401, 108 Stat. 4172............ccccccccosscsssossceees 28

a ees I i ceterteteniitsicininciennseainaesaiicienibiannannennens 23

Vil

Miscellaneous: Page

ABA, Model Rules of Professional Conduct 1.15(e)

ERRERES LE ero eve NS Noe CTD OO PE ROE 31

BN CeO Ce icicecienrcercctecicnscsncesetenietenenetunensintiia 28

90 C.J.S. Trover and Conversion (2010) ......ccccccccccesecesesesees 34

1 Dan B. Dobbs, Law of Remedies (2d ed. 1999) .......... 21, 22

Employee Pension Freedom Act of 2002, H.R. 3657,

SD CITT iecisssiecechiescinisnhenlicnseitinnianiesibeieainaduensteensinnion 29

C. Mark Humbert, The Supreme Court Revisits

Third-Party Reimbursement Claims Under

ERISA: Sereboff v. Mid-Atlantic Medical Services,

Inc., 18 Health Law. 1 (Aug. 2006) ...........ccccscssssssseseseseees 30

1 Leonard A. Jones, A Treatise on the Law of Liens

I Bea SU aiaiinsniciscctietiiiiceninindinssaneidinatienseiedies 19, 24, 33

Bart A. Karwath, ERISA Health Plan Reimburse-

ment Claims After Great-West Life & Annuity

Insurance Co. v. Knudson, 47 Res Gestae 36

Philip R. O’Brien & Sarah A. Huck, Preservation of

Plan Assets Through Subrogation and Reim-

bursement Rights—Part 2, 44 Benefits & Comp.

Digest 24 (Feb. 2008), http/www.reinhartlaw.

com/Publications/Documents/art080100%20EB

Johnny Parker, The Common Fund Doctrine: Com-

ing of Age in the Law of Insurance Subrogation,

Be es ie Se asictitteniiisienittiptepniienisimsatinnnsinninenies 29

John Norton Pomeroy, A Treatise on Equity Juris-

prudence (Spencer W. Symons ed., Bancroft-

Whitney Co. 5th ed. 1941) (1883):

TRI: Fe iocnnrsnvntcniteonsnvsiastnepainmaeibeninesiensaneanen 9, 21, 22, 23, 25, 33

, ER Seen one nn EET RITE 6, 18, 19, 20

1 Restatement of Restitution (1987)......... 6, 10, 16, 18, 19, 20

Vill

Miscellaneous—Continued: Page

5 Austin Wakeman Scott, The Law of Trusts

a ssasiisendseniieiaiiaianesiill

In the Supreme Court of the Anited States

No. 14-723

ROBERT MONTANILE, PETITIONER

v.

BOARD OF TRUSTEES OF THE NATIONAL ELEVATOR

INDUSTRY HEALTH BENEFIT PLAN

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURLAE SUPPORTING PETITIONER

INTEREST OF THE UNITED STATES

The question presented in this case concerns the

scope of “appropriate equitable relief” available in a

civil action by a plan fiduciary under Section 502(a)(3)

of the Employee Retirement Income Security Act of

1974 (ERISA), 29 U.S.C. 1132(a)(3). The Secretary of

Labor has primary authority for administering Title I

of ERISA.

STATEMENT

1. Petitioner was a participant in the National Ele-

vator Industry Health Benefit Plan (the Plan), an

employee welfare plan governed by ERISA and ad-

ministered by respondent. Pet. App. 2-3. The Plan,

which afforded health-care benefits to participants,

provided that respondent had “the right to recover

(1)

2

benefits advanced by the Plan to a covered person for

expenses or losses caused by another party.” Id. at

22. The Plan further provided that “[a]mounts that

have been recovered by a covered person from anoth-

er party are assets of the Plan by virtue of the Plan’s

subrogation interest and are not distributable to any

person or entity without the Plan’s written release of

its subrogation interest.” /bid.

In December 2008, petitioner was injured in a car

accident. Pet. App. 6. The Plan paid petitioner’s

initial medical expenses of $121,044.02. Jbid. Peti-

tioner sued the driver of the other car and obtained a

$500,000 settlement. /bid. Respondent then attempt-

ed to recover from petitioner the medical expenses the

Plan had paid. Jd. at 7. Between June 2011 and Jan-

uary 2012, respondent and petitioner engaged in nego-

tiations concerning whether the Plan’s provisions gave

respondent a right to reimbursement, and if so, the

amount respondent was owed. /bid. When negotia-

tions broke down in January 2012, petitioner’s counsel

informed respondent that he would disburse the funds

received in the settlement to petitioner in 14 days.

J.A. 35. In February 2012, having received no re-

sponse, petitioner’s counsel disbursed the funds. /bid.

2. In July 2012, respondent filed this suit under

ERISA Section 502(a)(3), seeking reimbursement of

the medical expenses paid by the Plan. Section

502(a)(3) authorizes a plan fiduciary to bring a civil

action “to obtain * * * appropriate equitable relief

' The relevant provisions are contained in a summary plan de-

scription that the court of appeals concluded was a “governing

Plan document” containing “enforceable plan terms.” Pet. App.

16-17. Petitioner does not challenge that ruling. See US Airways,

Inc. v. McCutchen, 133 S. Ct. 1587, 1541 n.1 (2013).

3

* * * to enforce any provisions of [ERISA] or the

terms of the plan.” 29 U.S.C. 1132(a)(3)(B)(ii); Pet.

App. 24-25. Respondent alleged that “all or part of

the settlement proceeds are within the actual or con-

structive possession of [petitioner]” and claimed that

the Plan was “entitled to equitable restitution in the

form of a constructive trust or equitable lien with

respect to the disputed funds held in [petitioner’s]

actual or constructive possession.” Pet. App. 7.

Respondent moved for summary judgment, relying

on Sereboff v. Mid Atlantic Medical Services, Inc.,

547 U.S. 356 (2006), which held that a fiduciary seeks

“equitable relief’ within the meaning of Section

502(a)(3) when it seeks to enforce an equitable lien by

agreement against “specifically identifiable funds”—

ie., those funds recovered from a third party—that

are “within the possession and control” of the partici-

pant or beneficiary. /d. at 362-363 (citation and inter-

nal quotation marks omitted). Petitioner cross-moved

for summary judgment, arguing, among other things,

that he no longer possessed the settlement funds.

Pet. App. 8. Under Great-West Life & Annuity In-

surance Co. v. Knudson, 534 U.S. 204 (2002), petition-

er contended, a fiduciary may not enforce an equitable

lien when the relevant funds are not in the benefi-

ciary’s possession. In that situation, petitioner main-

tained, a claim for reimbursement seeks legal relief

because it seeks recovery from the beneficiary’s gen-

eral assets. Pet. App. 8.

The district court held that respondent was entitled

to reimbursement for the full amount of the medical

costs it had provided to petitioner. Pet. App. 19-45.

The court reasoned that the Plan’s terms created an

equitable lien by agreement in any third-party recov-

4

ery petitioner received, and “a beneficiary’s dissipa-

tion of assets is immaterial when a fiduciary asserts

an equitable lien by agreement.” /d. at 40.

3. The court of appeals affirmed, Pet. App. 1-18,

concluding that this case was controlled by its recent

decision in AirTran Airways, Inc. v. Elem, 767 F.3d

1192 (2014), petition for cert. pending, No. 14-1061

(filed Feb. 27, 2015). Pet. App. 10-11. In AirTran, the

court of appeals held that where a plan provision gave

the plan a first-priority claim to all payments made by

a third party, an equitable lien attached to any settle-

ment funds the beneficiary received. 767 F.3d at 1198.

In the court’s view, the beneficiary’s subsequent dis-

sipation of the funds “could not destroy the lien that

attached before” the dissipation. Jbid. The court

based that conclusion on Sereboff, which held that a

fiduciary “need not trace the settlement fund back to

[the fiduciary] to enforce its equitable lien.” Jbid.

The court of appeals distinguished Great-West,

which had held that the fiduciary sought legal relief

because the funds subject to the lien were not in the

beneficiary’s possession, on the ground that the bene-

ficiary in Great-West had “never possessed the set-

tlement fund” because it had been placed directly in a

special needs trust. AirTran, 767 F.3d at 1198.

SUMMARY OF ARGUMENT

Section 502(a)(3) of ERISA authorizes “appropriate

equitable relief * * * to enforce * * * the terms of

{an ERISA] plan.” 29 U.S.C. 1132(a)(3). This Court’s

decisions and traditional principles of equity establish

that an ERISA fiduciary may use Section 502(a)(3) to

obtain reimbursement from a beneficiary only if the

fiduciary seeks to enforce an equitable lien or con-

structive trust against identified funds that remain in

5

the beneficiary’s possession and contro! at the time of

suit.

I. In Great-West Life & Annuity Insurance Co. v.

Knudson, 534 U.S. 204 (2002), this Court held that

Section 502(a)(3) does not permit a fiduciary to obtain

legal damages against a plan participant or benefi-

ciary who has failed to reimburse the plan for medical

expenses paid by the plan and later recovered from a

third party. Jd. at 207. To seek relief that qualifies as

“equitable” under Section 502(a)(3), the fiduciary must

assert an equitable lien or constructive trust against

identified funds in the beneficiary's possession—

namely, the funds recovered from the third party. /d.

at 213-214 (citation omitted). If the beneficiary has

“dissipated [the recovery] so that no product re-

mains,” the fiduciary can no longer “enforce a con-

structive trust or an equitable lien” against those

funds. Ibid. In that situation, any pecuniary award

would come out of the beneficiary’s general assets and

would constitute legal relief not authorized by Section

502(a)(3). [bid.

Accordingly, because the beneficiary in Great-West

did not possess the funds in question—they had been

disbursed to a special needs trust—the Court held

that the fiduciary could not recover under Section

502(a)(3). The Court reaffirmed that understanding of

“equitable relief” in Sereboff v. Mid Atlantic Medical

Services, Inc., 547 U.S. 356 (2006), in which it held

that the fiduciary could assert an equitable lien under

Section 502(a)(3) because the funds in question re-

mained in the beneficiaries’ possession.

Great-West and Sereboff thus establish that a fidu-

ciary may assert an equitable lien only against identi-

fied funds in the plan participant’s possession at the

6

time of suit. That conclusion is reinforced by the

traditional equitable principles on which this Court

has relied in construing Section 502(a)(3). At equity,

an equitable lien or constructive trust was understood

to be an interest in particular property, rather than a

right to a money judgment against the defendant’s

general assets. 4 John Norton Pomeroy, A Treatise

on Equity Jurisprudence § 1234, at 694 (Spencer W.

Symons ed., Bancroft-Whitney Co. 5th ed. 1941) (1883)

(Pomeroy). If the defendant dissipated the property,

the lien or trust could no longer be enforced. 1 Re-

statement of Restitution § 161 cmt. e, at 653 (1937)

(Restatement); id. § 160 cmt. g, at 648.

Respondent argues that equity courts could award

monetary relief in the form of a deficiency judgment

or damages when the property subject to a lien had

been partially or wholly dissipated. But those reme-

dies were understood to be legal, not equitable, relief

that an equity court could award as a matter of ancil-

lary jurisdiction. This Court has explained that “equi-

table relief” under Section 502(a)(3) does not include

the legal remedies a court of equity was “empowered

to provide in the particular case at issue.” Mertens v.

Hewitt Assocs., 508 U.S. 248, 256 (1993).

Permitting a fiduciary to enforce an equitable lien

only against identified third-party recovery funds in

the defendant’s possession is consistent with ERISA’s

design. To be sure, in some cases, the beneficiary’s

disposition of the funds will prevent the fiduciary from

recovering the reimbursement to which it is entitled.

But that possibility has been clear since Great-West,

and Congress has not acted to override this Court’s

construction of Section 502(a)(3) in reimbursement

cases. In addition, fiduciaries have adopted several

7

practices designed to protect their rights to reim-

bursement, including pursuing third-party recoveries

as subrogee of the beneficiary’s claims, or restraining

the beneficiary’s disposition of any recovery obtained.

II. Even if this Court were to conclude that the

monetary remedies respondent proposes are “equita-

ble relief’ under Section 502(a)(3), respondent would

not be entitled to relief unless it can satisfy those

remedies’ prerequisites. At equity, courts awarded

deficiency judgments only when the defendant still

possessed some property subject to the lien, and they

awarded damages only when the defendant had dis-

posed of the property in bad faith. Because respond-

ent did not press those theories below, a remand

would be necessary to permit the lower courts to ad-

dress them in the first instance.

ARGUMENT

I. A FIDUCIARY MAY NOT OBTAIN REIMBURSEMENT

UNDER SECTION 502(a)(3) WHEN THE BENEFI-

CIARY NO LONGER POSSESSES THE FUNDS RE-

COVERED FROM A THIRD PARTY

The court of appeals erred in holding that ERISA

Section 502(a)(3) allows a plan fiduciary to recoup

payments from a participant or beneficiary who has

received a third-party tort recovery regardless of

whether the participant still possesses those funds.

This Court’s decisions in Great-West and Sereboff, as

well as traditional equitable principles, establish that

a fiduciary seeks “equitable relief” within the meaning

of Section 502(a)(3) if it asserts an equitable lien by

agreement against identified funds or property in the

beneficiary’s possession and control at the time of

suit. But where the funds are no longer in the benefi-

ciary’s possession, the fiduciary’s claim is one for

8

reimbursement out of the beneficiary’s general as-

sets—in other words, it is a claim for legal damages

rather than “equitable relief” under Section 502(a)(3).

Although the beneficiary’s disposition of recovered

funds may thus prevent the fiduciary from obtaining

reimbursement in some cases, since Great-West, fidu-

ciaries have mitigated the potential unfairness of that

result by employing a number of methods.

A. This Court’s Precedents Establish That Section

502(a)(3) Permits A Fiduciary To Assert An Equitable

Lien Or Constructive Trust Against Identified Funds

Or Property In The Beneficiary’s Possession, But

Does Not Permit An Award Of Legal Damages Against

The Beneficiary’s General Assets

I. This Court has held that an equitable lien or con-

structive trust may be enforced only when the iden-

tified funds are in the beneficiary’s possession

a. In Mertens v. Hewitt Associates, 508 U.S. 248

(1993), this Court construed Section 502(a)(3)’s provi-

sion for plan participants, beneficiaries, and fiduciar-

ies to seek appropriate “equitable relief’ to enforce

the terms of an ERISA plan. The Court held that a

claim by plan participants against a non-fiduciary

third party who provided services to a plan, seeking

“monetary relief for all losses their plan sustained as a

result of the alleged breach of fiduciary duties,” did

not seek “equitable relief.” Jd. at 255. In substance,

the Court explained, the plaintiffs sought “[mJjoney

damages” compensating for the plan’s losses—in other

words, “the classic form of legal relief.” Ibid.

The Court held that “equitable relief’ under Sec-

tion 502(a)(3) includes only “those categories of relief

that were typically available in equity (such as injunc-

9

tion, mandamus, and restitution, but not compensato-

ry damages).” Mertens, 508 U.S. at 256. The Court

rejected the argument that legal damages could be

considered relief “typically available in equity” be-

cause an equity court could in certain circumstances

award damages. /bid. (emphasis omitted). The Court

recognized that “there were many situations * * * in

which an equity court could ‘establish purely legal

rights and grant legal remedies which would other-

wise be beyond the scope of its authority.’” Jd. at 256

(quoting 1 Pomeroy § 181, at 257); see also 1 Pomeroy

§ 231, at 410. But the Court concluded that if Section

502(a)(3) permitted courts to award “whatever [legal]

relief a court of equity is empowered to provide in the

particular case at issue,” Mertens, 508 U.S. at 256,

Congress’s provision that the relief must be “equita-

ble” would cease to have meaning, id. at 257.

b. The Court has twice applied the principles set

forth in Mertens to a fiduciary’s attempt to enforce a

plan reimbursement provision against a plan partici-

pant or beneficiary who received medical benefits

following an injury.

i. In Great-West, the Court determined that Sec-

tion 502(a)(3) did not permit a reimbursement action

against a plan beneficiary who received medical bene-

fits following a car accident. 534 U.S. at 207. The

beneficiary had obtained a recovery in a tort settle-

ment with third parties, and the plan’s terms gave the

plan a right to reimbursement out of that recovery.

After the fiduciary’s effort to obtain a temporary

restraining order (TRO) preventing dissipation of the

settlement funds was unsuccessful, see id. at 226

(Ginsburg, J., dissenting), the funds were disbursed.

One portion went directly into a special needs trust

10

for the beneficiary, and another went to the partici-

pant’s attorney, who deducted his own fees and used

the remainder to pay the beneficiary’s other creditors.

Id. at 214.

In rejecting the fiduciary’s argument that it sought

“equitable relief” in the form of restitution, the Court

explained that restitution can be either legal or equi-

table, depending upon the basis for the claim and the

nature of the underlying remedies sought. Great-

West, 534 U.S. at 212-213 (citations omitted). A

“plaintiff could seek restitution in equity, ordinarily in

the form of a constructive trust or an equitable lien,

where money or property identified as belonging in

good conscience to the plaintiff could clearly be traced

to particular funds or property in the defendant’s

possession.” Jd. at 213. But where the plaintiff did

not seek to impose a constructive trust or equitable

lien on particular funds or property in the defendant’s

possession, the Court explained, the suit did not seek

equitable relief, but instead sought “the imposition of

personal liability,” a legal remedy. /d. at 214.

The Court further noted that “where ‘the property

[sought to be recovered] or its proceeds have been

dissipated so that no product remains, [the plaintiff's]

claim is only that of a general creditor,’ and the plain-

tiff ‘cannot enforce a constructive trust or an equitable

lien upon other property of the [defendant].’” Great-

West, 534 U.S. at 213-214 (brackets in original) (quot-

ing Restatement § 215 cmt. a, at 867). Because the

settlement funds in Great-West were not in the bene-

ficiary’s possession, the Court held that the fiduciary

sought, “in essence, to impose personal liability on

{the participant] for a contractual obligation to pay

money—relief that was not typically available in equi-

11

ty,” and thus not available under ERISA Section

502(a)(3). Id. at 210; see CIGNA Corp. v. Amara, 131

S. Ct. 1866, 1878-1879 (2011).

ii, Subsequently, in Sereboff, the Court addressed a

claim for reimbursement where the beneficiaries had

placed the portion of their tort recovery claimed by

the plan in an investment account pending resolution

of the reimbursement dispute. 547 U.S. at 360. The

Court explained that to qualify as “equitable relief”

under Section 502(a)(3), a claim must fulfill two re-

quirements: (1) the remedy sought must be equitable

in nature, and (2) the “basis for [the] claim” must also

be equitable. /d. at 363 (citing Great-West, 534 U.S. at

213). With respect to the latter requirement, the

Court held that basis for the fiduciary’s claim was

equitable because the fiduciary sought to enforce an

“equitable lien ‘by agreement’” based on plan terms

identifying a specific fund (7e., any third-party recov-

ery received by the beneficiary) to which the fiduciary

was entitled. Jd. at 364-365 (citation omitted).

With respect to the equitable-remedy requirement,

the Court held that because the beneficiaries, unlike

the beneficiary in Great-West, possessed the particu-

lar funds in question, the “impediment to characteriz-

ing the relief in [Great-West] as equitable is not pre-

sent.” Sereboff, 547 U.S. at 362. Although the fiduci-

ary in Sereboff, like the fiduciary in Great-West, “al-

leged breach of contract and sought money,” its claim

was directed to “‘specifically identifiable funds’ that

were ‘within the possession and control of the [benefi-

ciaries]|—that portion of the tort settlement due [the

fiduciary] under the terms of the ERISA plan, set

aside and ‘preserved’ [in the beneficiaries’] investment

accounts.” Jd. at 362-363 (citation omitted). The fidu-

12

ciary’s claim could therefore be characterized as seek-

ing “recovery through a constructive trust or equita-

ble lien on a specifically identified fund, not from the

(beneficiaries’} assets generally, as would be the case

with a contract action at law.” Jd. at 363; see US Air-

ways, Inc. v. McCutchen, 133 S. Ct. 1537, 1544-1545

(2013) (the “nature of the recovery” requested in Sere-

boff was “equitable because [the fiduciary] claimed

‘specifically identifiable funds’ within the [beneficiar-

ies’] control”).

c. Great-West and Sereboff thus make clear that a

claim seeking monetary relief for a beneficiary's

breach of plan terms must be directed at particular

funds or property in the defendant’s possession. Oth-

erwise, the plan would be seeking reimbursement

from the beneficiary’s general assets. That relief is

legal, not equitable, in nature. Great-West, 534 U.S.

at 213-214; Sereboff, 547 U.S. at 362-363.

In this case, petitioner asserts that he no longer

possesses the bulk of the third-party tort settlement

he received. Pet. Br. 9; see Pet. App. 35 n.2.* Under

Great-West, respondent may seek to enforce an equi-

table lien or constructive trust only against the por-

tion of the recovery (if any) that petitioner still pos-

sesses. To the extent the “property * * * or its

proceeds have been dissipated so that no product

remains,” respondent may not “enforce a constructive

trust of or an equitable lien upon other property of”

* As the district court explained, the record does not reveal how

much, if any, of the settlement funds petitioner still possesses.

Pet. App. 35-36 & n.2. Petitioner asserted that after making var-

ious payments, he was left with “approximately $90,000,” most of

which he spent on living expenses. /d. at 36. Respondent disputes

the accuracy of that account.

13

petitioner. Great-West, 534 U.S. at 213-214 (citation

omitted). The Court reaffirmed that principle in Sere-

boff, explaining that where, as here, the “particular

fund” identified by the fiduciary has been dissipated,

the fact that the fiduciary would have to seek reim-

bursement from the beneficiary’s general assets cre-

ates an “impediment to characterizing the relief

* * * as equitable.” 547 U.S. at 362-363.

2. Respondent's attempts to avoid the import of Great-

West and Sereboff are unpersuasive

In its effort to avoid the force of Great-West and

Sereboff, respondent reiterates the arguments on

which the court of appeals relied in AirTran Airways,

Inc. v. Elem, 767 F.3d 1192 (11th Cir. 2014). Those

arguments lack merit.

a. Respondent first relies on the Court’s statement

in Sereboff that the plan’s “inability to satisfy the

‘strict tracing rules’ for ‘equitable restitution’ is of no

consequence,” 547 U.S. at 365 (citation omitted). See

Br. in Opp. 17; AirTran, 767 F.3d at 1198. That

statement, respondent argues, negates the need to

identify specific funds in the beneficiary’s possession

against which an equitable lien can be enforced. In

respondent’s view, so long as the beneficiary pos-

sessed the funds at some point, “the beneficiary's

promise will be enforced in equity,” even if the funds

can no longer be “traced” because the beneficiary has

spent them. Br. in Opp. 17.

Respondent misunderstands Sereboff’s discussion

of the equitable-tracing rule at issue in that case. The

beneficiaries in Sereboff claimed that an equitable lien

could not be enforced unless the fiduciary could

“trace” the identified funds in the beneficiaries’ pos-

session back to property that had been in the ERISA

14

plan’s possession when the beneficiaries had wrong-

fully appropriated it. 547 U.S. at 364 (citation omit-

ted). In rejectirg that argument, the Court explained

that an “equitable lien was imposed as restitutionary

relief’ in several different situations, one of which

involved misappropriation—namely, a claim that “an

asset belonging to the plaintiff had been improperly

acquired by the defendant.” J/bid. When a plaintiff

asserted an equitable lien based on misappropriation,

he was required to demonstrate that the property in

the defendant’s possession could be “trace[{d]” to

property originally held by the plaintiff. /d. at 364-

365. By contrast, a fiduciary’s claim for reimburse-

ment required by plan terms is based on a “different

species” of equitable lien: an “equitable lien ‘by

agreement’” that arises out of the beneficiary’s con-

tractual promise to reimburse the plan out of any

third-party recovery. /d. at 365 (citation omitted); see

id. at 364. An equitable lien by agreement, the Court

explained, was traditionally not subject to the re-

quirement that the property in the defendant’s pos-

session be traceable to the plaintiff because the prop-

erty in question might have been transferred to the

defendant by a third party. Jd. at 365. The Court

therefore concluded that it would be inappropriate to

impose a tracing requirement “of the sort asserted by

the [beneficiaries]” in the context of a reimbursement

suit by a fiduciary. /bid.

The Court’s rejection of the tracing requirements

applicable to equitable liens based on misappropria-

tion does not suggest that the Court abandoned the

requirement—applicable to equitable liens generally

—that the lien may be enforced only against identified

funds in the defendant’s possession. To the contrary,

15

the Court had just reaffirmed Great-West’s holding

that for reimbursement relief to be equitable in na-

ture, the plan must identify funds in the beneficiary’s

possession against which the lien could be enforced.

Sereboff, 547 U.S. at 362-363. And the Court had just

distinguished Great-West on the ground that the

Sereboffs, unlike the participant in Great-West, re-

tained possession of the funds at issue. /bid. It is

exceedingly unlikely that the Sereboff Court immedi-

ately followed those admonitions with (as respondent

would have it) directly contrary reasoning that would

permit a plan to pursue recovery out of the benefi-

ciary’s general assets when the beneficiary has al-

ready spent the specific funds in question.

b. Respondent, like the court of appeals, seeks to

distinguish Great-West on the ground that there the

beneficiary never possessed the settlement fund, “so

the lien never attached to anything held by the benefi-

ciary. Br. in Opp. 18; see AirTran, 767 F.3d at 1198.

In this case, respondent argues, “the lien * * * at-

tached” when the funds came into petitioner’s posses-

sion, and therefore the lien must be enforceable with-

out regard to whether the funds are still in petition-

er’s possession. Br. in Opp. 18. That argument is

refuted by Great-West and the equity authorities on

which it relied.

The Court in Great-West never suggested that the

dispositive consideration was that the beneficiary had

never possessed the funds. Rather, Great-West relied

on the fact that the funds “are not in [the beneficiar-

ies’] possession.” 534 U.S. at 214 (emphasis added).

For purposes of characterizing the plan’s claim as

either legal or equitable, what mattered was whether

the beneficiaries “hold [the] particular funds.” Jbid.

16

Because the beneficiaries did not hold the funds at the

time the fiduciary sought to enforce the lien, there

was no property against which that lien could be en-

forced. /bid. The Court reaffirmed that conclusion in

CIGNA, stating that “relief that sought a lien or a

constructive trust was legal relief, not equitable relief,

unless the funds in question were ‘particular funds or

property in the defendant’s possession.” 131 S. Ct. at

1879 (quoting Great-West, 534 U.S. at 213). The equi-

table authorities on which Great-West relied reinforce

the point, explaining that an equitable lien cannot be

enforced when the defendant “once had property”

subject to the lien but then “dissipate[d]” it. Re-

statement § 215 cmt. a, at 866; see pp. 18-21, infra.

c. Finally, respondent contends (Br. in Opp. 18)

that Great-West “dealt only with equitable restitu-

tion,” that “equitable restitution” and “equitable liens

by agreement” are categorically different types of

relief, and that Sereboff established that any “present-

possession” requirement recognized in Great-West

does not apply to equitable liens by agreement. /d. at

17. Respondent is incorrect.

As Sereboff explained, to qualify as “equitable re-

lief’ under Section 502(a)(3), the remedy sought must

be equitable in nature, and the “basis for [the] claim”

must also be equitable. 547 U.S. at 363. Great-West’s

discussion of the “present-possession” requirement

pertained to the equitable-remedy element. 534 U.S.

at 213. A claim for monetary reimbursement qualifies

as an equitable remedy if it can be characterized as

“restitution in equity”—.e., if the plaintiff seeks to

enforce an equitable lien or constructive trust against

“particular funds or property in the defendant’s pos-

session.” bid.

17

Sereboff then elaborated on the requirement that

the “basis for [the] claim” must be equitable. 547 U.S.

at 363. The Court explained that there are multiple

“claim[s]” or theories that could underlie a request for

an equitable lien, distinguishing between an “equita-

ble lien sought as a matter of restitution” (7.e., where

the defendant has misappropriated the plaintiff's

property) and “an equitable lien ‘by agreement,’” (7.e.,

where the defendant has breached an agreement). /d.

at 363-365. In rejecting the beneficiary’s argument

that the tracing rules for equitable liens based on

misappropriation should apply to plan reimbursement

claims, Sereboff clarified that the type of claim assert-

ed by an ERISA fiduciary seeking reimbursement is

an equitable lien by agreement. Jd. at 364-365. Sere-

boff further explained that Great-West had addressed

only the equitable-remedy aspect of the analysis and

had not implicitly held that plan reimbursement

claims are subject to the requirements for equitable

liens based on misappropriation. /d. at 365; but cf. Br.

in Opp. 18.

Sereboff did not suggest, as respondent contends,

that Great-West’s present-possession requirement

disappears when a fiduciary asserts an equitable lien

by agreement. It is true that when a fiduciary seeks

to enforce an equitable lien by agreement, it has as-

serted an equitable “basis for its claim”; but it must

then also establish that it seeks an equitable reme-

dy—in other words, that it seeks reimbursement from

specified funds in the beneficiary’s possession. Sere-

boff, 547 U.S. at 363, 365. Sereboff made that clear by

applying the present-possession requirement to the

fiduciary’s claim based on an equitable lien by agree-

ment. /d. at 362.

18

B. Traditional Principles Of Equity Confirm That An

Equitable Lien Is Enforceable Only Against Identified

Funds In The Defendant’s Possession

The conclusion that a fiduciary may enforce an eq-

uitable lien or constructive trust only against identi-

fied funds in the beneficiary’s possession is reinforced

by the principles of equity to which this Court has

looked when analyzing the types of relief available

under ERISA Section 502(a)(3). See, e.g., Sereboff,

547 U.S. at 362-363; Great-West, 534 U.S. at 213-214;

Mertens, 508 U.S. at 256.

1. An equitable lien or constructive trust must be en-

forced against particular property in the defend-

ant’s possession

a. An equitable lien “constitutes a charge or en-

cumbrance upon [a particular] thing, so that the very

thing itself may be proceeded against in an equitable

action, and either sold or sequestered under a judicial

decree,” with the proceeds “applied upon the demand

of the creditor in whose favor the lien exists.” 4

Pomeroy § 1233, at 692. That general rule holds when

the equitable lien is established by agreement: the

contract in question “recognizes, in addition to the

personal obligation, a peculiar right over the thing

concerning which the contract deals.” Jd. § 1234, at

695. When an agreement establishes such a right,

“the plaintiff is enabled to follow the identical thing,

and to enforce the defendant’s obligation by a remedy

which operates directly upon that thing.” /bid.

At equity, it followed from those general principles

that an “equitable lien [could] be established and

enforced only if there [was] some property which

[was] subject to the lien.” Restatement § 161 cmt. e,

at 652. The authorities thus emphasized that “[iJt is

19

essential to an equitable lien that the property to be

charged should be capable of identification.” 1 Leon-

ard A. Jones, A Treatise on the Law of Liens § 34, at

24 (rev. 2d ed. 1894) (Jones); see 4 Pomeroy § 1234, at

695 (“The doctrine of ‘equitable liens’ * * * was

introduced for the sole purpose of furnishing a ground

for the specific remedies which equity confers, operat-

ing upon particular identified property, instead of the

general pecuniary recoveries granted by courts of

law.”). To be sure, “[w]here property is subject to an

equitable lien and the owner of the property disposes

of it and acquires other property in exchange, he holds

the property so acquired subject to the lien.”* Re-

statement § 161 cmt. e, at 652-653; see id. §§ 202(b),

203, at 818, 828. Similarly, when the property in ques-

tion is “mingled with other property in one indistin-

guishable mass, the lien can be enforced against the

mingled mass.” /d. § 161 cmt. e, at 653.

As particularly relevant here, however, where “the

property subject to the equitable lien [or constructive

trust] can no longer be traced, the equitable lien can-

not be enforced.” Restatement § 161 cmt. e, at 653;

see, ¢.g., Freshwater v. Colonial Prod. Credit Ass'n,

334 S.E.2d 142, 145 (S.C. Ct. App. 1985) (where party

“dissipated” proceeds allegedly subject to an equitable

lien by agreement, there was “nothing to which the

equitable lien could attach”). That is because “[t]he

equitable lien is destroyed by the dissipation of the

fund.” Whiting v. Hudson Trust Co., 138 N.E. 33, 38

* If petitioner had exchanged the identified funds for other iden-

tifiable property, respondent could enforce the lien against that

property. In addition, if a third party had taken possession of the

identified funds with notice of the lien, respondent could enforce

the lien against that party. See 4 Pomeroy § 1235, at 696.

20

(N.Y. 1923) (citing Schuyler v. Littlefield, 232 U.S. 707

(1914)). Thus, “where a person wrongfully disposes of

the property of another but the property cannot be

traced into any product, the other has merely a per-

sonal claim against the wrongdoer and cannot enforce

a constructive trust or lien upon any part of the

wrongdoer’s property.”* Restatement § 215(1), at 866;

see Great-West, 534 U.S. at 213-214 (quoting Re-

statement § 215 cmt. a, at 867).

b. Similarly, a constructive trust may not be en-

forced against a constructive trustee, such as a plan

participant or beneficiary in an overpayment case,

who dissipated the assets at issue.’ See, e.g., 4 Pome-

roy § 1058c, at 148-149 (property is subject to con-

structive trust only if it can be identified); Restate-

ment § 160 cmt. g, at 648 (constructive trust cannot be

enforced when “property is transferred to a bona fide

purchaser” without notice); id. § 172, at 691-692. That

was so because a “constructive trust, unlike an ex-

press trust, is not a fiduciary relation.” Jd. § 160 cmt.

* It therefore does not matter that “the lien * * * attached”

when the funds came into petitioner’s possession. Br. in Opp. 18.

At equity, when the defendant disposed of property to which a lien

had attached, the lien could no longer be enforced.

* Because any trust in this case was constructive, not express,

make-whole relief against petitioner personally in the form of an

equitable surcharge is unavailable. This Court recently held that

ERISA Section 502(a)(3) allows a suit by a plan participant for an

equitable surcharge against a plan fiduciary, “whom ERISA

typically treats as a trustee.” C/GNA, 131 S. Ct. at 1879. ERISA

fiduciaries are expressly charged under the statute with the high-

est trust-law duties of loyalty and care. See Mertens, 508 U.S. at

253, 262-263. But nothing in the statutory scheme itself imposes

similar fiduciary obligations on plan participants and beneficiaries.

21

a, at 641; see generally 5 Austin Wakeman Scott, The

Law of Trusts § 462.1, at 3415 (3d ed. 1967).

2. Respondent is incorrect in arguing that monetary

compensation for dissipated property was tradi-

tionally treated as equitable relief

Respondent contends (Br. in Opp. 18-20) that

courts of equity awarded monetary relief as a substi-

tute for enforcing an equitable lien or constructive

trust when the entire property subject to the lien was

no longer in the defendant’s possession. In particular,

respondent argues that it is entitled either to a defi-

ciency judgment or to damages. In equity, however,

both types of relief were considered legal in nature,

and equity courts awarded them purely as a matter of

ancillary jurisdiction.

a. Deficiency judgments

At equity, an equitable lien was traditionally en-

forced through foreclosure of the identified property

in the defendant’s possession. 1 Dan B. Dobbs, Law of

Remedies § 1.4, at 19 (2d ed. 1993) (Dobbs). When the

foreclosure sale of the property did not result in pro-

ceeds sufficient to satisfy the defendant’s debt to the

plaintiff, equity courts could award a money judg-

ment, often called a deficiency judgment, for the

amount of the shortfall. 1 Pomeroy § 240, at 450.

That remedy was legal in nature, however, and equity

courts had authority to award it only as part of their

ancillary jurisdiction to award complete relief between

the parties.

In cases in which “a court of equity ha[d] obtained

jurisdiction over some portion or feature of a contro-

versy,” it generally had ancillary jurisdiction to “pro-

ceed to decide the whole issues, and to award com-

22

plete relief, although the rights of the parties are

strictly legal, and the final remedy granted is of the

kind which might be conferred by a court of law.” 1

Pomeroy § 231, at 410; see id. § 181, at 257 (equity

court may “grant legal remedies which would other-

wise be beyond the scope of its authority”). Such

relief was sometimes called “clean up” relief, Dobbs

§ 2.7, at 180, and the rationale for permitting courts to

award it was to promote “economy of litigation.” ibid.;

1 Pomeroy § 242, at 456.

According to Pomeroy, one example of a supple-

mental legal remedy that could be awarded by an

equity court was a “money judgment[]” in the form of

a deficiency judgment. 1 Pomeroy § 240, at 450.

Thus, when equity courts awarded monetary relief

because the sale of the property securing an equitable

lien did not fully satisfy the plaintiff’s interest, they

understood that remedy to be legal, not equitable, in

nature. See, e.g., Jefferson Standard Life Ins. Co. v.

Buckman, 82 F.2d 125, 126 (5th Cir. 1936) (“the ascer-

tainment of the amount of a debt and giving judgment

for it is the function of a court of law, so that a defi-

ciency decree is ordinarily an encroachment upon the

jurisdiction of the law courts”).

Indeed, deficiency judgments were initially thought

to be a form of legal relief that fell outside of equity

jurisdiction altogether. Nineteenth-century chancery

courts in the United States and England viewed defi-

ciency judgments as an exception to the rule that

equity courts could award legal as well as equitable

relief, and they held that deficiency judgments “could

only be obtained by an action at law.” 1 Pomeroy

§ 240, at 451; see Noonan v. Lee, 67 U.S. 499, 509

(1863). Eventually, through “statutory provisions

23

authorizing a personal judgment or through judicial

decisions upholding the right,” equity courts obtained

the authority to “render a deficiency judgment” in

order to “relieve parties from the expense and vexa-

tion of two suits, one equitable and the other legal,

where the whole controversy could be adjusted in the

suit.” 1 Pomeroy § 240, at 451.

Federal Rule of Equity 10, on which respondent re-

lies (Br. in Opp. 19), was one such measure. That rule

provided that “[iJn suits for the foreclosure of mort-

gages, or the enforcement of other liens, a decree may

be rendered for any balance that may be found due to

the plaintiff over and above the proceeds of the sale.”

Fed. R. Equity 10 (1912). As this Court explained,

Rule 10 and its predecessor, Rule 92, “enlarg[ed] the

Chancellor’s jurisdiction, in order to completely dis-

pose of the cause before him.” Hartford Accident &

Indem. Co. v. Southern Pac. Co., 273 U.S. 207, 217-218

(1927). It was thus an application of the general equi-

table principle that a court may “award complete

relief, even where the rights of parties are strictly

legal and the final remedy granted is of the kind which

might be conferred by a court of law.” /bid. After the

Rule’s adoption, courts continued to characterize the

deficiency judgment as legal in nature.® See, e.g.,

Jefferson Standard, 82 F.2d at 126 (Rule 10 permits a

* The decisions on which respondent relies (Br. in Opp. 19) do not

suggest that a deficiency judgment under Rule 10 was considered

equitable in nature. See Continental-Equitable Title & Trust Co.

v. National Props. Co., 273 F. 967, 969 (D. Del. 1921) (explaining

that Rule 10 provided ancillary jurisdiction, and approvingly citing

Frank v. Davis, 31 N.E. 1100 (N.Y. 1892), which stated that defi-

ciency judgments were legal relief); Phelps v. Loyhed, 19 F. Cas.

461 (C.C.D. Minn. 1871) (No. 11,077) (stating that court had power

to grant deficiency decree).

24

deficiency decree notwithstanding its legal nature.);

Northwestern Mut. Life Ins. Co. v. Keith, 77 F. 374,

375 (8th Cir. 1896) (same). Contrary to respondent’s

contention, then, Rule 10 does not suggest that a defi-

ciency judgment was equitable in nature; rather, it

demonstrates the opposite.

b. Damages for destruction of a lien

Respondent also suggests that equity courts could

award “compensation” when a defendant dissipated or

destroyed property to which a lien had attached. See

Br. in Opp. 19 (citing Otis v. Otis, 45 N.E. 737 (Mass.

1897)). But that remedy was also legal in nature.

In equity, some courts stated that “[iJf the owner of

property subject to an equitable lien disposes of it, in

hostility to the lien, so that the lien is destroyed,” the

lienor may seek “damages for the destruction of the

lien.” Jones § 95, at 65; see Hale v. Omaha Nat’

Bank, 64 N.Y. 550, 555 (1876). A damages award for

destruction of a lien was, like a deficiency judgment,

legal relief that a court in equity could award as a

matter of its ancillary jurisdiction. See Jones §§ 1034,

1036, at 678-679 (remedy was action for trover, a legal

remedy, to obtain “compensation” for loss); see also

Hovey v. Elliott, 23 N.E. 475, 478 (N.Y. 1890) (“action

at law” for destruction of lien); J.G. White Eng’g Corp.

v. People’s State Bank, 87 So. 753, 756 (Fla. 1921)

(when property held subject to a mortgage is de-

stroyed, “such mortgagee’s remedy would be at law, in

an action on case, for such damages as he may sus-

tain”); Shultz v. Shively, 143 P. 1115, 1119 (Or. 1914)

(same).

25

3. Respondent may not obtain legal relief under Sec-

tion 502(a)(3) simply because equity courts had au-

thority to award that relief

The monetary relief that respondent seeks here is

precisely the sort of relief that this Court has held is

unavailable under Section 502(a)(3). In Mertens, the

Court expressly rejected the argument that legal

relief that an equity court could award pursuant to its

ancillary jurisdiction constituted “equitable relief” for

purposes of Section 502(a)(3). 508 U.S. at 256 (citing

Pomeroy’s discussion of “clean up” relief, 1 Pomeroy

§ 181, at 257); see pp. 8-9, supra. And in Great-West,

all nine Members of the Court reaffirmed that com-

pensatory damages against a non-fiduciary awarded

by equity courts as ancillary “clean up” relief consti-

tuted legal relief that should not be available under

Section 502(a)(3). See 534 U.S. at 210; see id. at 234

(Ginsburg, J., dissenting) (under the dissenting Jus-

tices’ construction of Section 502(a)(3), compensatory

and punitive “clean up” relief would be unavailable);

cf. CIGNA, 131 S. Ct. at 1880 (recognizing that “equi-

table relief” encompasses compensation from a fidu-

ciary for losses).

Permitting plan fiduciaries to seek a deficiency

judgment when the beneficiary no longer possesses

the funds in question would render Section 502(a)(3)’s

limitation on available relief “superfluous.” Mertens,

508 U.S. at 258. If a plan could simply seek a deficien-

cy judgment whenever there is no longer an identified

fund in the beneficiary’s possession, the equitable-lien

action recognized in Great-West would become an

empty formality. Simply by invoking an equitable lien

in its pleadings, the fiduciary would be able to obtain

26

compensatory relief out of the beneficiary’s general

assets.

C. Permitting A Fiduciary To Enforce An Equitable Lien

Only Against Identified Third-Party Recovery Funds

In The Defendant's Possession Is Consistent With

ERISA’s Design

Under Great-West and the relevant equitable prin-

ciples, a fiduciary may obtain reimbursement from a

beneficiary by enforcing an equitable lien on an identi-

fied fund (or commingled funds or identifiable proper-

ty for which the fund was exchanged) in the benefi-

ciary’s possession, but it may not seek to impose per-

sonal liability on a beneficiary who has spent the funds

in question. 534 U.S. at 220-221. That result follows

from Congress's decision to limit the available relief to

“equitable relief.” 29 U.S.C. 1132(a)(3).

It is true that there will be some cases in which the

fiduciary will be unable to recover the reimbursement

to which it is entitled under the plan. That conse-

quence can prevent full effectuation of ERISA’s pur-

pose to protect and enforce plan terms. See US Air-

ways, 133 S. Ct. at 1548. But the potential for benefi-

ciaries to dissipate third-party recoveries has been

clear since Great-West. Congress has not acted to

override this Court’s construction of Section 502(a)(3)

in reimbursement cases. Fiduciaries, moreover, have

adopted several practices that should enable them to

protect their rights to reimbursement in most cases.

I. Great-West indicates that the present-possession

requirement is not inconsistent with ERISA

Respondent contends that it would be “truly ineq-

uitable” to hold that plan fiduciaries may not obtain

reimbursement when the beneficiary no longer pos-

27

sesses the funds in question. Br. in Opp. 20. This

Court rejected that same argument in Great-West,

where the equities between the parties were material-

ly similar to those at issue here. 534 U.S. at 220.

There, the fiduciary had attempted to protect its in-

terest in reimbursement by notifying the beneficiary

of that interest, attempting to negotiate a settlement

of its claim, and seeking an order restraining dissipa-

tion of the settlement fund. /d. at 207-208. Despite

knowing of the fiduciary’s claim, the beneficiary

sought state-court approval of a settlement contem-

plating that the money would be disbursed without

reserving the amount in dispute. Ct. Appointed Ami-

cus Br. at 10, Great-West, supra (No. 99-1786); Great-

West, 534 U.S. at 208, 214. Notwithstanding the fidu-

ciary’s contention that the beneficiary had knowingly

breached her obligations under the plan by refusing to

reimburse the plan, Pet. Br. at 24, Great-West, supra

(No. 99-1786), the Court held that the fact that the

beneficiary did not possess the funds in question was

dispositive. 534 U.S. at 214-215, 220.

Great-West also rejected the fiduciary’s argument

that disallowing reimbursement when the beneficiary

did not possess the funds in question was inconsistent

with ERISA’s “basic purpose” of enforcing plan

terms. 534 U.S. at 220-221 (citation omitted). The

Court explained that while Congress provided benefi-

ciaries with a broad right to file suit “to enforce [their]

rights under the terms of the plan,” 29 U.S.C.

1132(a)(1)(B), Congress “did not extend the same

authorization to fiduciaries.” Great-West, 534 U.S. at

221. Instead, Congress limited the situations in which

fiduciaries may use Section 502(a)(3) to enforce plan

terms to cases in which they seek “equitable relief.”

28

Since Great-West, moreover, the possibility that fi-

duciaries may be unable to obtain reimbursement of

already-disbursed funds has been clear.’ Had Con-

gress disagreed with the Court’s construction of “eq-

uitable relief” in Mertens and Great-West, or the logi-

cal implication that fiduciaries may be left without a

reimbursement remedy when the beneficiary does not

possess the third-party recovery fund (or substitute

assets) at the time of suit, it could have amended Sec-

tion 502(a)(3). See Kimble v. Marvel Entm’t, LLC,

No. 13-720, 2015 WL 2473380, at *7 (June 22, 2015);

see also Aetna Health Inc. v. Davila, 542 U.S. 200, 222

(2004) (Ginsburg, J., concurring) (suggesting that

Congress should overturn this Court’s construction of

Section 502(a)(3)).

Notably, Congress has overturned the Court’s con-

struction of “equitable relief” in the context of certain

claims by participants and beneficiaries. In 1994,

Congress amended Section 502(a)(3) to provide that

beneficiaries and the Secretary of Labor may sue for

“appropriate relief” in connection with a fiduciary’s

conduct in terminating certain pension plans. See

Pension Annuitants Protection Act of 1994, Pub. L.

No. 103-401, 108 Stat. 4172, 4172; 1389 Cong. Rec.

’ See, eg., Bart A. Karwath, ERISA Health Plan Reimburse-

ment Claims After Great-West Life & Annuity Insurance Co. v.

Knudson, 47 Res Gestae 36, 39 (Apr. 2004) (“The Supreme Court’s

decision in Great-West has made it more difficult for ERISA plans

to enforce their reimbursement provisions.”); see also Philip R.

O’Brien & Sarah A. Huck, Preservation of Plan Assets Through

Subrogation and Reimbursement Rights—Part 2, 44 Benefits &

Comp. Digest 24, 26 (Feb. 2008) (“One of the major problems

created by [Great-West] is that its requirement that the settlement

funds be identifiable and not paid out provides an incentive for

plan participants to try to ‘hide’ and ‘dissipate’ settlement funds.”).

29

17,876 (1993) (statement of Sen. Metzenbaum) (bill

was intended to overturn Mertens’ construction of

“equitable relief” as applied to certain pension claims).

After Great-West, Congress considered amending

Section 502(a)(3), but did not ultimately do so. See,

e.g., Employee Pension Freedom Act of 2002, H.R.

3657, 107th Cong. § 403(c) (2002).

2. Plan fiduciaries have available methods of protect-

ing their reimbursement interests

Since Great-West, fiduciaries have used several

methods to protect their right to reimbursement and

preserve their ability to enforce an equitable lien.

As an initial matter, fiduciaries have taken a num-

ber of steps to ensure that they receive adequate

notice when their reimbursement rights are implicat-

ed. A fiduciary will generally learn that it may have

reimbursement rights when the participant requests

medical or other benefits after an incident for which a

third party may be liable. Plans often require the

participant to pursue a third-party recovery, and then

require the participant to provide notice of any tort

action or settlement. See Johnny Parker, The Com-

mon Fund Doctrine: Coming of Age in the Law of

Insurance Subrogation, 31 Ind. L. Rev. 313, 331

(1998). Supplementing notice requirements, plans

monitor the progress of participant suits against

third-party sources. See Philip R. O’Brien & Sarah A.

Huck, Preservation of Plan Assets Through Subroga-

tion and Reimbursement Rights—Part 2, 44 Benefits

& Comp. Digest 24, 26 (Feb. 2008) (Preservation)

(“[I]t is vital that plans * * * monitor continuously

the underlying actions to ensure that funds are not

spent before the plans are reimbursed.”).

30

In some cases, fiduciaries will not need to rely on a

subsequent reimbursement action under Section

502(a)(3) to recoup their costs. Plan terms often give

the fiduciary the right to file suit directly against any

third-party tortfeasors as a subrogee of the benefi-

ciary’s claims, and plans may exercise that option

when subrogation is permitted under state law. See,

e.g., Atteberry v. Memorial-Hermann Healthcare

Sys., 405 F.3d 344, 348-349 (5th Cir.), cert. denied, 546

U.S. 936 (2005); Dayton Hudson Dep't Store Co. v.

Auto-Owners Ins. Co., 953 F. Supp. 177, 179 (W.D.

Mich. 1995). Alternatively, the fiduciary may be able

to intervene in the participant’s tort suit in order to

protect its interest in any recovery. See, e.g., Maricco

v. Meco Corp., 316 F. Supp. 2d 524 (E.D. Mich. 2004);

Crump v. Wal-Mart Grp. Health Plan, 925 F. Supp.

1214, 1216 (W.D. Ky. 1996).

Even when a fiduciary does not participate directly

in an action against a third party, it can protect its

reimbursement rights by expeditiously asserting

them. See Preservation 26; C. Mark Humbert, The

Supreme Court Revisits Third-Party Reimbursement

Claims Under ERISA: Sereboff v. Mid-Atlantic Med-

ical Services, Inc., 18 Health Law. 1, 4 (Aug. 2006)

(fiduciaries should “act quickly to enforce an equitable

lien by assignment or agreement, * * * before the

recovery is dissipated”). Since Great-West, plans

seeking reimbursement have routinely been able to

obtain TROs requiring the disputed portion of the

recovery to be set aside pending resolution of the

reimbursement claim. See, e.g., Sereboff, 547 U.S. at

360 (fund was segregated after fiduciary sought TRO);

Crawford & Co. Med. Benefit Trust v. Repp, No.

11050155, 2011 WL 2531844 (N.D. Ill. June 24, 2011);

31

Mank v. Green, 297 F. Supp. 2d 297 (D. Me. 2003); see

also Diamond Crystal Brands, Inc. v. Wallace, 531 F.

Supp. 2d 1366 (N.D. Ga 2008). In addition, when set-

tlement funds are disbursed to the participant’s attor-

ney, ethical rules may require the attorney to set

aside funds in which the fiduciary has asserted an

interest. See, e.g., ABA, Model Rules of Professional

Conduct 1.15(e) (2013).

D. A Remand Is Necessary To Determine The Extent To

Which Petitioner Possesses Funds Or Property

Against Which Respondent May Enforce Its Equita-

ble Lien

Respondent may enforce its equitable lien only

against specific, identified funds (or commingled funds

or identifiable property for which the funds were

exchanged) that remain in petitioner’s possession. In

this case, such funds may no longer exist. Pet. App.

35 n.2; Pet. Br. 9.

Respondent does not appear to have availed itself

of any of the numerous ways in which fiduciaries may

protect their reimbursement rights. Respondent does

not assert that it attempted to participate in or moni-

tor petitioner’s action against potentially liable third

parties. See Compl. 19 14-15 (alleging on “information

and belief” that petitioner had filed suit and received a

settlement). Although the parties negotiated over

respondent’s reimbursement claim for several months,

respondent did not seek a TRO during that time, even

when petitioner’s attorney stated that he intended to

disburse funds after 14 days. Indeed, respondent

waited to file this suit until approximately six months

later. See p. 2, supra. In all, over a year passed be-

tween the start of negotiations and respondent's initi-

ation of this suit.

32

When the district court issued its decision, it was

unclear whether petitioner still possessed any of the

funds at issue. See note 2, supra. The district court

did not resolve the parties’ dispute about that ques-

tion. In addition, circumstances may have changed in

the intervening period. The case should be remanded

to permit the lower courts to determine the extent to

which respondent may enforce its equitable lien

against funds or property in petitioner’s possession.

il. IF THE COURT CONCLUDES THAT A DEFICIENCY

JUDGMENT OR LIEN-DESTRUCTION DAMAGES

CONSTITUTES “EQUITABLE RELIEF,” THE COURT

SHOULD REMAND TO PERMIT THE LOWER

COURTS TO DETERMINE WHETHER RESPONDENT

HAS ESTABLISHED THE ELEMENTS OF THOSE

CLAIMS

Even if this Court were to conclude that the mone-

tary remedies respondent proposes are “equitable

relief” under Section 502(a)(3), respondent would not

be entitled to relief unless it can satisfy the prerequi-

sites for receiving a deficiency judgment or damages.

Cf. CIGNA, 131 S. Ct. at 1881 (beneficiary seeking

equitable remedy of surcharge must satisfy the re-

quirements of that cause of action). Although re-

spondent argued below that it was entitled to reim-

bursement in the form of an equitable lien, it did not

also assert that the court should award a deficiency

judgment or damages. See J.A. 37-40. A remand

would therefore be necessary to permit the lower

courts to determine whether respondent is entitled to

any monetary relief under either theory.

A. Because a deficiency judgment is designed to

supplement the proceeds of a foreclosure sale, the

remedy presupposes that the defendant possessed

33

some property subject to the plaintiffs lien, and the

court was able to order a sale of that property. Courts

therefore did not award a deficiency judgment when

they were unable to order a foreclosure sale of the

underlying property subject to the lien. See 1 Pome-

roy § 240, at 451-452 (“(TJhere can be no deficiency

judgment in a foreclosure proceeding where the prin-

cipal cause of action fails.”); City Bank v. Plank, 124

N.W. 1000, 1003 (Wis. 1910) (“The order for deficiency

judgment is so dependent on, and merely ancillary to,

the foreclosure and sale that it would be absurd left

standing alone.”).

As a result, an ERISA fiduciary seeking a deficien-

cy judgment would have to demonstrate that the bene-

ficiary retains a portion of the recovery, such that the

fiduciary’s equitable lien is enforceable against that

portion. Only in that circumstance could the fiduciary

seek a deficiency judgment for the remainder of reim-

bursement amount. On remand, respondent would

need to demonstrate that petitioner still possesses a

portion of his recovery.

B. An action for damages for dissipating property

subject to a lien required the plaintiff to demonstrate

that the defendant had acted in bad faith, with

knowledge of the plaintiff's rights in the lien and the

intent to defeat those rights. See Hovey, 23 N.E. at

478 (“action at law” “would * * * lie” in event of sale

with “intent to defraud or injure the plaintiffs in their

lien, or with any purpose to defeat it”); see also

George Adams & Frederick Co. v. South Omaha Nat'l

Bank, 123 F. 641, 645 (8th Cir. 1903) (claim based on

defendant’s “wrongful[]” dissipation of property sub-

ject to a lien); Yates v. Joyce, 11 Johns. 136 (N.Y. Sup.

Ct. 1814); Jones § 95, at 65.

34

Respondent would therefore have to demonstrate

that petitioner spent the proceeds of his suit with

knowledge of respondent’s claim and the intent to

deprive respondent of its right to reimbursement. Cf.

Jones § 1036, at 679; 90 C.J.S. Trover and Conversion

§ 4 (2010) (stating intent requirement). While peti-

tioner’s knowledge of respondent’s claim may be in-

ferred from his attempt to settle the reimbursement

dispute, there is currently no other evidence in the

record concerning petitioner’s intent in spending the

portion of the recovery that he received.

CONCLUSION

The judgment of the court of appeals should be va-

cated and the case remanded for further proceedings.

Respectfully submitted.

DONALD B. VERRILLI, JR.

M. PATRICIA SMITH Solicitor General

ccmemcgam’ RENTS

; ve icitor

Associate Solicitor GINGER D. ANDERS

ELIZABETH HOPKINS Assistant to the Solicitor

Counsel for Appellate and General

Special Litigation

ANNAO. AREA

Attorney

Department of Labor

JULY 2015