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)

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No. 14-723

IN THE

Supreme Court of the United States

ROBERT MONTANILE,

Petitioner,

Vv.

BOARD OF TRUSTEES OF THE NATIONAL ELEVATOR

INDUSTRY HEALTH BENEFIT PLAN,

Respondent.

On Writ of Certiorari

to the United States Court of Appeals

for the Eleventh Circuit

BRIEF OF AMICI CURIAE IBEW-NECA

SOUTHWESTERN HEALTH & BENEFIT

FUND AND THE CHAMBER OF COMMERCE

OF THE UNITED STATES OF AMERICA

SUPPORTING RESPONDENT

DAVID SCHILLER AARON M. STREETT

BAKER BOTTs L.L.P. Counsel of Record

2001 Ross Ave. J. MARK LITTLE

Dallas, Texas 75201 BAKER BotTs L.L.P.

(214) 953-6656 910 Louisiana St.

Houston, Texas 77002

KATE COMERFORD TODD (713) 299-1855

WARREN POSTMAN

U.S. CHAMBER LITIGATION aaron.streett @ bakerbotts.com

CENTER, INC.

1615 H St., NW

Washington, D.C. 20062

(202) 659-6000

Counsel for Amici Curiae IBEW-NECA

Southwestern Health & Benefit Fund and The

Chamber of Commerce of the United States of America

WILSON-EPES PRINTING Cu. INC. (202) 789-0096 WasHimcTos, D.C. 20002

QUESTION PRESENTED

Whether a beneficiary of a benefit plan governed by

the Employee Retirement and Income Security Act of

1974 (ERISA) can defeat enforcement of the plan’s valid

equitable lien by agreement—after the lien attached—by

spending the funds subject to the lien.

(i)

TABLE OF CONTENTS

eI saiissicssasiuininsatncsitchiohinnidhiainnialiapsiiaitaiia

Interest Of Armmict Civtae..........ec.cscccoccescescescesessceeseses

I. Health And Benefit Plans Are Not-For-

Profit Entities That Exist Solely To

Serve Their Participants.............cssccseseseeeees

Il. Impediments To Reimbursement

Impose Real Costs That The Plan

Participants Must Beav.....................:ss:0s0:00

Ill. The Right To Recover Against The

Beneficiary For Dissipated Funds Is

The Most Efficient And Effective

Protection Against Double Recovery..........

IV. Equity Disfavors A Beneficiary’s

I aicicinicrnatienaicindiinisniiiitisinas

REESE PEER Se MEW

(ii)

TABLE OF AUTHORITIES

CASES

Bilyeu v. Morgan Stanley Long Term

Disability Plan,

683 F.3d 1083 (9th Cir. 2012)... ccceceseesesseseeneeees

Coral Springs St. Sys., Inc. v. City of

Sunrise,

371 F.3d 1320 (11th Cir. 2004) occ eccsesesseeees

Egelhoff v. Egelhoff ex rel. Breiner,

ee Se icreesiinieniaiendintacieeniintainsaai 12,

Fort Halifax Packing Co. v. Coyne,

I Be Sat bhcricstsisicericsersesieerinsieiencstereinocietiiceenianeintn

Ingersoll-Rand Co. v. McClendon,

Kress v. Food Emp’rs Labor Relations

Ass'n,

391 F.3d 563 (4th Cir, 2004)... ccsecesessssssesnesesneses 7

Milwaukee & M.R. Co. v. Soutter,

Precision Instrument Mfg. Co. v. Auto.

Maint. Mach. Co.,

i icriiineriniasiniitincaiinaaiies

Timmons v. Twin Cities Area New Party,

a ee Se ect tcsintsicccrritarinisicnientnencetentnetiasts

Treasurer, Trs. of Drury Indus., Inc.

Health Care Plan & Trust v. Goding,

692 F.3d 888 (Sth Cir. 2012).............cccsessssesssesereees

Zurich Am. Ins. Co. y. O’Hara,

604 F.3d 1232 (11th Cir. 2010)... ee

STATUTES

BD Cade SNEED cenerarcnsnssersezncenenenensnenenennscntaseneesenee 6

TABLE OF AUTHORITIES—Continued

Page

yg ee eee 2, 4, 13, 15

OTHER AUTHORITIES

Baron & Lamb, The Revictimization of

Personal Injury Victims by ERISA

Subrogation Claims, 45 Creighton L.

EE seihieinissisesniasiibectnistinibbiaaitinnesencsnereniinsoivennia

Br. of Amicus Curiae America’s Health

Ins. Plans, Inc. et al. in Support of

Respondent, Sereboff v. Mid Atl. Med.

Servs., 547 U.S. 356 (2006), 2006 WL

Healthcare Subrogation and Recovery,

https://Awww.xerox.com/en-

us/services/healthcare-

payers/subrogation-recove Py ............:essesesereseereenes

Incurred Health and Disability Claims,

Actuarial Standard of Practice No. 5

(Actuarial Standards Bd. 2011),

http:/Awww.actuarialstandardsboard.or

~ eindacnmemensied 12/asop005

TIGTA, Efforts Are Resulting in the

Improved Identification of Fraudulent

Taz Returns Involving Identity Theft

(April 24, 2015), https://www.treasury.

gov/tigta/auditreports/2015reports/201

Soa TIEN sicnsiteieitpalicisincenstacscieiimesintshaiatiigssanavesineienbia

IN THE

Supreme Court of the United States

No. 14-723

ROBERT MONTANILE,

Petitioner,

Vv.

BOARD OF TRUSTEES OF THE NATIONAL ELEVATOR

INDUSTRY HEALTH BENEFIT PLAN,

Respondent.

On Writ of Certiorari

to the United States Court of Appeals

for the Eleventh Circuit

BRIEF OF AMICI CURIAE THE IBEW-NECA

SOUTHWESTERN HEALTH & BENEFIT

FUND AND THE CHAMBER OF COMMERCE

OF THE UNITED STATES OF AMERICA

SUPPORTING RESPONDENT

INTEREST OF AMICI CURIAE'

The IBEW-NECA Southwestern Health & Benefit

Fund (“the Fund”) is a self-funded multiemployer wel-

fare benefit plan subject to regulation under the Em-

ployee Retirement Income Security Act of 1974

(“ERISA”), 29 U.S.C. § 1001 et seg. The International

' All counsel of record consented to the filing of this brief by filing

blanket consents with the Clerk. Amici state that no portion of this

brief was authored by counsel for a party and that no person or enti-

ty other than amici, their counsel, or their members made a mone-

tary contribution intended to fund the preparation or submission of

this brief.

Brotherhood of Electrical Workers, a union with approx-

imately 750,000 members, created the Fund to provide

benefits to many of its members. The Fund pays out

substantial benefits each year, but only on the condition

that injured participants or beneficiaries will reimburse

the Fund if they recover the same expenses from respon-

sible third parties.

The Chamber of Commerce of the United States of

America (“the Chamber”) is the world’s largest business

federation. It represents 300,000 direct members and

indirectly represents the interests of more than three

million businesses and organizations of every size, in eve-

ry sector, and from every region of the country. An im-

portant function of the Chamber is to represent the in-

terests of its members in matters before Congress, the

Executive Branch, and the courts. To that end, the

Chamber regularly files amicus curiae briefs in cases

that raise issues of vital concern to the Nation’s business

community.

This case concerns the circumstances under which a

plan fiduciary can bring a civil action under Section

502(aX(3) of ERISA, 29 U.S.C. § 1132(a)(3), to enforce its

reimbursement rights for plan-paid medical expenses.

Reimbursement provisions serve a vital role in limiting a

plan’s costs and preserving its ability to provide mean-

ingful benefits to all participants. When costs rise, plans

face pressure to increase everyone’s plan contributions or

reduce the overall level of benefits. Reimbursement pro-

visions restore balance to a plan’s promise to provide

medical coverage to its participants: those participants

receive immediate payment of their medical expenses in

return for the participant repaying the plan in the event

of a subsequent recovery from responsible third parties.

This upfront bargain guarantees that plan assets are

preserved for all participants and avoids the inequitable

windfall of a double recovery—a beneficiary’s attempt to

collect medical expenses once from the plan and again

from responsible third parties. Due to obvious fiscal con-

siderations—and common notions of fairness—these

provisions are ubiquitous in ERISA-regulated employee-

benefit plans, including the Fund and many of the plans

of the Chamber’s members.

Amici have a strong interest in this case because of

the costs that would result if plan beneficiaries are al-

lowed to accept plans’ medical benefits without also ac-

cepting their corresponding reimbursement obligations.

If Petitioner’s self-interested loophole is allowed to stand,

reimbursement will be transformed into an empty obliga-

tion. Beneficiaries will be able to avoid their reimburse-

ment obligations by quickly spending any tort recoveries

on consumable or intangible goods or services. That re-

sult would undermine the long-term financial health of

ERISA plans, increase the costs of providing benefits to

all participants, and impair each plan’s ability to maintain

existing benefit levels without demanding additional con-

tributions from employers and employees alike.

SUMMARY OF ARGUMENT

Nearly half of Americans rely on ERISA health and

benefit plans to protect them in their darkest hours.

These not-for-profit plans provide much needed financial

support in times of great stress and tragedy. In doing so,

the plans shield their participants from the devastating

financial burdens that often accompany severe injuries

and illnesses. But these plans can fulfill that vital func-

tion only if they remain financially solvent. Part of main-

taining their financial health comes from receiving con-

tributions from participants and their employers. Also

important are the reimbursements that plans receive

from the third parties responsible for their participants’

injuries.

This latter funding stream is what is at stake here.

Health and welfare plans immediately pay the medical

expenses of a plan participant who is injured by a third

party. What they require in return is that the benefi-

ciary reimburse them for those costs out of any tort re-

covery from taat third party. The question in this case is

whether a beneficiary can shirk that obligation by spend-

ing the tort recovery on consumable or intangible goods

or services before the plan brings a legal action to en-

force its undisputed right to reimbursement.

Respondent has ably explained why ERISA allows an

equitable lien by agreement to be enforced even where

the promisor has dissipated the funds subject to the lien.

See Resp. Br. 25-46. This brief explains in further detail

why a contrary rule would undermine the financial health

of these plans and be fundamentally inconsistent with the

equitable nature of Section 502(aX3) of ERISA. Plans

recover over $1 billion from reimbursement every year.

That important funding stream will be threatened if ben-

eficiaries could so easily avoid surrendering a double re-

covery to the plan. Even with rigorous and costly en-

forcement efforts, plans will not be able to keep up with

the speed at which beneficiaries can secure and spend

their tort recoveries. Each time a plan loses that race,

more dollars will flow out of the plan and into the hands

of a double-recovering beneficiary. To make matters

worse, the expenses of these enforcement efforts will fur-

ther erode a plan’s financial ability to provide the same

level of benefits without increasing the required contri-

butions.

Crippling plans’ ability to recover reimbursements will

harm the participants themselves the most. They are the

ones who will pay the increased premiums or make do

with the reduced benefits required to bridge that billion-

dollar shortfall. Thus, the loophole Petitioner seeks

would enrich the few on the backs of the many. A rela-

tively small percentage of participants would use it to ob-

tain double recoveries to which they concededly have no

legal claim, and their fellow participants will pay the

price for those windfalls. A statute grounded in equity

cannot tolerate that unjust result.

ARGUMENT

I. HEALTH AND BENEFIT PLANS ARE NOT-FOR-

PROFIT ENTITIES THAT EXIST SOLELY TO SERVE

THEIR PARTICIPANTS

Health and benefit plans and related trust funds pro-

vide health and welfare benefits to their participants.

That is their sole function, and there is no profit in it.

These plans must amass assets to cover contingent liabil-

ities and the costs of administration, but they do not pro-

duce any profit. Instead, the contributions, reimburse-

ments, and other sources of revenue go towards funding

the participants’ benefits. Any excess is used to provide

an insurance reserve to cover future contingencies (in-

creased future health costs; decreased employer and em-

ployee contributions in times of unemployment; and fluc-

tuations in market investments). Accordingly, plan par-

ticipants have the greatest interest in the financial stabil-

ity of the plans. They gain the most from a funding sur-

plus, and they lose the most from a funding shortfall.

Since there is no “deep pocket” insurance company or

for-profit corporation behind the health fund (especially

in the case of multiemployer funds, such as the one at is-

sue in this case), a funding shortfall imperils participants’

benefits and increases their costs. The bottom line is that

these plans are created for workers (and often by work-

ers), and anything that harms them harms the workers

as well.

A. Amicus the Fund illustrates these basic facts.

The Fund is the result of collective bargaining between

the International Brotherhood of Electrical Workers un-

ion and the National Electrical Contractors Association

contractors. Workers in the construction industry often

work by the job and change employers frequently, mak-

ing it difficult to maintain health and welfare benefits.

The Fund solves that problem by offering those benefits

directly to the union participants who work in the indus-

try rather than routing them through a particular em-

ployer.

Actuarial calculations estimate the cost of providing

the benefits and yield a recommended contribution rate

for employers and workers so that the Fund can remain

solvent. The Fund’s Board of Trustees (which is divided

equally between representatives from management and

labor) then sets the contribution rate based on that anal-

ysis.

The Fund makes no profit for the employers. Indeed,

it is statutorily prohibited from doing so. The Fund is a

Voluntary Employees Beneficiary Association under In-

ternal Revenue Code Section 501(c)(9), which specifically

prohibits any “part of the net earnings of such association

inur{ing] * * * to the benefit of any private shareholder

or individual.” 26 U.S.C. § 501(c)(9). The only statutorily

authorized distributions are those “for the payment of

life, sick, accident, or other benefits to the members of

such association or their dependents or designated bene-

ficiaries.” /bid. Any excess funds that are not needed for

that sole purpose remain in the Fund and create a sur-

plus. The surplus provides a reserve against future costs,

which in turn holds down premiums.

B. As the Fund’s example demonstrates, workers

depend on these plans and count on them being financial-

ly stable. That is why the plans place so much emphasis

on cost projection, premium calibration, and obtaining

reimbursement when possible. This last focus is particu-

larly important because these plans are zero-sum games.

Each extra dollar distributed to a plan participant is a

dollar that cannot secure benefits for the other workers

covered by the plan absent an added dollar in plan pre-

miums.

Plans have developed detailed rules for payment and

reimbursement of benefits to address that issue. As

highlighted in this case, one common rule provides that

the plan will pay benefits for a worker injured by a third

party on the condition that the worker will reimburse the

plan for those payments out of any tort recovery secured

from the third party. See Kress v. Food Emp’rs Labor

Relations Ass'n, 391 F.3d 563, 569 (4th Cir. 2004) (“Sub-

rogation clauses requiring reimbursement are * * * quite

common.”). The purpose of that rule is not to enrich plan

administrators or employers, but to ensure equitable dis-

tribution of plan funds to the participants. Indeed, plans

do not charge workers interest on the large sums ad-

vanced for payment of medical expenses prior to recov-

ery from a third party. All they ask is that the worker

pay the plan back the principal if the responsible third

party is ultimately called to account.

Workers who obtain a double recovery by avoiding

their reimbursement obligations are, in effect, taking

money out of the pockets of their fellow participants.

That is why plans need the most effective tools possible

to enforce these reimbursement provisions that safe-

guard the financial health of the plan and prevent the in-

equitable distribution of plan funds.

II. IMPEDIMENTS TO REIMBURSEMENT IMPOSE REAL

Costs THAT THE PLAN PARTICIPANTS MUST BEAR

Allowing beneficiaries to avoid their undisputed reim-

bursement obligations imposes steep costs on plans, costs

that ultimately fall on the plan participants. Reimburse-

ments from tort recoveries constitute a substantial fund-

ing stream for plans. Petitioner's own amicus The

American Association for Justice (“AAJ”) cites a study

concluding that such reimbursements return “in excess

of $1 billion” to plans every year. AAJ Br. 20 n.2 (citing

Baron & Lamb, The Revictimization of Personal Injury

Victims by ERISA Subrogation Claims, 45 Creighton L.

Rev. 325, 325 (2012)).2 Each impediment to enforcing

those reimbursement rights results in more of that mon-

ey remaining an inequitable windfall to a few beneficiar-

ies that cannot be returned to the plans to work for the

benefit of all participants.

A. The sheer size of that $1 billion-plus figure speaks

for itself. It represents a staggering amount of doctor

visits, medications, surgeries, and other needed benefits

for participants.

Amicus AAJ attempts to downplay the enormity of

this $1 billion funding stream by dividing it by the 137

million people covered by these plans. The result, it ar-

gues, is that Petitioner’s rule may only impose a

“miniscule” cost of $5.84 per covered person per year.

AAJ Br. 21. This per-person metric is misleading, be-

cause many of the 137 million covered persons are family

members of a worker who gain coverage under a family

health plan. Accordingly, that few dollars per person per

year becomes tens of dollars per family, which can add up

over time to many hundreds of dollars.

More fundamentally, however, AAJ’s argument

proves too much. Unwarranted windfalls to a select few

can always be minimized by dividing them among a large

group that bears the cost. But such math ignores the ag-

gregate impact of these windfalls and the fact that organ-

izations must work to hold down costs on numerous

fronts. For example, the Treasury Inspector General for

* See also Br. of Amicus Curiae America’s Health Ins. Plans, Inc. et

al. in Support of Respondent, Sereboff v. Mid Atl Med. Servs., 547

U.S. 356 (2006), 2006 WL 460877, at *3 n.3 (independently calculat-

ing reimbursement recoveries at over $1 billion per year);

Healthcare Subrogation and Recovery, https:/Avww.xerox.com/en-

us/services/healthcare-payers/subrogation-recovery (last visited

September 4, 2015) (noting that Xerox recovery services “has recov-

ered over a billion dollars on behalf of our healthcare subrogation

clients” in just the past three years).

Tax Administration (“TIGTA”) has estimated that the

IRS paid out $3.3 billion in refunds for fraudulent tax re-

turns in 2013. See TIGTA, Efforts Are Resulting in the

Improved Identification of Fraudulent Tax Returns In-

volving Identity Theft (April 24, 2015),

https://www.treasury.gov/tigta/auditreports/2015reports/

201540026fr.pdf. Yet this fraud obviously cannot be justi-

fied or minimized by dividing that number by the 318 mil-

lion residents of the United States.

It is undisputed that participants in these cases have

agreed and have a legal obligation to reimburse the plan

with funds recovered from third parties. The attempts of

some to escape that obligation and obtain a double recov-

ery clearly cannot be justified under equity by the fact

that this windfall will be financed by a large number of

plan participants.

B. The minority view held by the Eighth and Ninth

Circuits threatens to cut off, or at least substantially re-

duce, the sizeable funding stream represented by reim-

bursements. See Treasurer, Trs. of Drury Indus., Inc.

Health Care Plan & Trust v. Goding, 692 F.3d 888, 897

(8th Cir. 2012); Bilyeu v. Morgan Stanley Long Term

Disability Plan, 683 F.3d 1083, 1095 (9th Cir. 2012). On-

ly a .<w years have passed since those troubling deci-

sions, and plan participants in those circuits may not yet

be aware of their new route to double recovery created

by these courts. The passage of time will change that,

particularly if this Court enshrines that flawed approach

as the law of the land. See Timmons v. Twin Cities Area

New Party, 520 U.S. 351, 357, 364-365 (1997) (recognizing

possible ill effects of permitting multi-party candidates

despite the fact a few states allow such candidates); cf. id.

at 375 n.3 (Ginsburg, J, dissenting).

Once participants learn that spending any tort recov-

ery on consumable or intangible goods or services im-

munizes them from later claims of reimbursement from

the plans, the strategic choice for some participants will

be to do just that. The participant will spend the recov-

ery as quickly as possible on consumables and intangibles

or risk losing it altogether when the plan comes around

to collect its reimbursement.

The impact of this reduced funding will be borne by all

participants, as they must reach into their own pockets to

make up the difference in the form of higher contribu-

tions or reduced benefits. See Fort Halifax Packing Co.

v. Coyne, 482 U.S. 1, 11 (1987) (“{I]nefficiencies in benefit

program operation * * * might lead those employers with

existing plans to reduce benefits *** ”); Zurich Am.

Ins. Co. v. O'Hara, 604 F.3d 1232, 1238 (11th Cir. 2010)

(“If O’Hara were relieved of his obligation to reimburse

Zurich for the medical benefits it paid on his behalf, the

cost of those benefits would be defrayed by other plan

members and beneficiaries in the form of higher premi-

um payments.”).

C. AAJ attempts to obscure this fact, questioning the

mechanism by which reduced reimbursement recovery

could affect plan premiums. See AAJ Br. 15-21. But the

mechanism is basic economics. Plans are not-for-profit

entities, and actuarial standards demand taking reim-

bursement recoveries into account when recommending

contribution levels: “The actuary should take into account

the relevant organizational practices and regulatory re-

quirements related to** * subrogation. In particular,

the actuary should consider how these items are reflected

in the data (for example, negative claims or income) and

make appropriate adjustments for * * * subrogation, or

other adjustments or recoveries.” Incurred Health and

Disability Claims, Actuarial Standard of Practice No. 5,

§ 3.3.5 (Actuarial Standards Bd. 2011),

http//www.actuarialstandardsboard.org/wp-content/uplo

ads/2013/12/asop005 126.pdf. Thus, under actuarial

practice, each dollar returned to the plan through reim-

bursement is one less dollar that must be raised through

contributions paid by plan participants.

AAJ speculates that actuaries might not follow these

standards and claims there is inadequate proof that re-

duced reimbursements in fact affect premiums. See AAJ

Br. 17-18. Yet AAJ offers no explanation of why, in a not-

for-profit entity, reduced costs would not, in the long run,

be passed on to the ultimate consumer. See ibid. In-

stead, it simply offers the glib and unsupported claim

that “[t]here are plenty of uses for found money.” /d. at

17. That assertion ignores the not-for-profit nature of

ERISA plans. These plans obtain funding from three

sources: contributions, reimbursements, and investment

income. A reduction in any of these three sources de-

mands a corresponding increase in one of the other two

funding streams or a reduction in expenses, ie., benefit

payments. Therefore, the workers necessarily will pay

for decreased reimbursements one way or another. Ei-

ther premiums will rise to make up the shortfall, with the

workers contributing to those premiums directly or indi-

rectly, or the workers’ benefits will be cut. There is no

free lunch in these plans, and the workers who abide by

the terms of the plans will be the ones who foot the bill

for the few participants who fail to honor their reim-

bursement obligations.

Ill. THE RiGHt To RECOVER AGAINST THE BENEFI-

CIARY FOR DISSIPATED FUNDS IS THE Most EFFI-

CIENT AND EFFECTIVE PROTECTION AGAINST DOU-

BLE RECOVERY

A. There is only one surefire way to deter double re-

coveries and correct them when they do occur: authoriz-

ing a direct action against the offending beneficiary for

the reimbursement owed. The mere existence of such a

right will stop most of the reimbursement violations be-

fore they happen. It eliminates the incentive to dissipate

tort recoveries that rightly belong to the plan. Partici-

pants will abide by the terms of the plan agreement if

they know the plan can effectively enforce those terms

against them.

In addition to deterrence, this direct approach also

provides the plans a relatively inexpensive method of en-

forcing their reimbursement rights. Maintaining a con-

stant state of readiness and the ability to pounce on tort

recoveries before funds are dissipated is a costly proposi-

tion. But that will not be necessary if the plans can se-

cure reimbursement directly from the offending benefi-

ciaries even if they have already dissipated the recovery

that rightly belongs to the plans. Under that regime,

plans will be able to conduct a proper investigation of

each claim before filing suit, rather than immediately fil-

ing suit whenever any reimbursement right may possibly

exist. The result will be significant cost savings. This

common-sense path achieves “ERISA’s objective of effi-

cient plan administration.” Egelhoff v. Egelhoff ex rel.

Breiner, 532 U.S. 141, 149 n.3 (2001).

B. Petitioner and his amici suggest a number of half-

measures and circuitous routes to recovery as alterna-

tives to this direct method. See Pet. Br. 44; AAJ Br. 24-

25. But all of those fall woefully short of the benchmark

set by the direct action against the wrongdoer for the

amount of the reimbursement. Some of the suggested

alternatives might offer the plans some relief, but at the

cost of significant expenses that they would not otherwise

incur. Filing suit against the tortfeasor directly is a per-

fect example. See AAJ Br. 24. A plan could take this

route pursuant to its subrogation rights, but it would in-

cur many legal expenses in the process. And those are in

addition to the administrative expenses of managing

what would be a massive litigation docket and investigat-

ing all the potential suits it might have to file. Interven-

ing in a suit initiated by a participant is another option,

but that too entails steep costs. See id. at 24-25. Inter-

vention also does nothing to ensure that plans secure re-

imbursement from tort suits settled before the initiation

of litigation or before intervention is feasible.

As an alternative to full-fledged involvement in the

underlying litigation, Petitioner points out that a plan

could enjoin a participant from dissipating a tort recov-

ery that rightfully belongs to the plan. See Pet. Br. 44.

That is technically an option under 29 U.S.C. § 1132(a)(3),

but it is almost impossible to execute effectively and con-

sistently. As Respondent explains, courts have some-

times denied injunctive relief in these situations, and

even when relief is forthcoming, it may not be timely

enough to prevent dissipation. See Resp. Br. 51-52.

Additionally, the injunctive relief program envisioned

by Petitioner is not a realistic option given the adminis-

trative realities of these plans. Plans often serve a large

number of participants with a small administrative staff.

Yet Petitioner expects them to both discover and then

monitor in real time all of the litigation and out-of-court

negotiations between their beneficiaries and tortfeasors.

Not only that, but the plans also must be able to act at a

moment's notice, seeking an injunction as soon as it

learns of a participant’s recovery. That is unrealistic. In

a race between an individual beneficiary dissipating a

tort recovery and a plan taking action to enjoin that dis-

sipation, the beneficiary will win almost every time.

Even if plans were capable of such nimbleness, the reim-

bursements likely would not be worth the astronomical

costs of monitoring all of these potential tort recoveries

and maintaining a constant state of readiness.

Take the Fund as an example. It provide benefits to

over 15,000 people, and it does so quite efficiently, with a

team of only 11 people overseeing that massive operation.

The alternatives discussed above are not feasible with

such a small administrative team. Adopting Petitioner’s

approach would require the Fund to overhaul its opera-

tions and significantly expand the size of the team run-

ning the Fund. Each additional employee hired would

take more money away from providing benefits and re-

duce the efficiency of the Fund’s operations.

C. The alternatives get worse from there. If the ben-

eficiary uses the settlement funds to purchase an asset

rather than a consumable or intangible good or service,

then the plan can enforce its equitable lien against that

asset. See Pet. Br. 44. And if the beneficiary gives the

tort recovery to someone else, the plan can enforce its

lien against that person. See ibid. But those are not so-

lutions. They are acknowledgements that plans may

have recourse in the unlikely event a beneficiary inexpli-

cably fails to avail himself of the huge legal loophole Peti-

tioner seeks to create. And, in any event, these measures

would be more complicated and more costly than a direct

suit against the dissipating beneficiary.

Straining credulity, Petitioner and AAJ promise that

obtaining reimbursement will not be a problem because

legal ethics rules require personal-injury attorneys to

withhold the portion of the tort recovery subject to the

plans’ reimbursement rights. See Pet. Br. 42-43; AAJ

Br. 25-26. The real-world result is not as Petitioner and

AAJ claim. Where such ethics rules exist, they often

place the plaintiff's attorney’s interest in recovering his

contingent fee in direct conflict with the plan’s reim-

bursement right. Here, for example, the plan requires

full reimbursement of tort recoveries, “without reduction

for attorneys’ fees.” Resp. Br. 5 (quoting J.A. 46). Thus,

where the plaintiffs attorney facilitates reimbursement,

he is often working again his own interest—a dollar re-

imbursed to the plan is a dollar not recovered by the con-

tingency-fee attorney.

The best evidence of this continuing reimbursement

problem despite whatever ethics rules may exist is this

case and the multitude of other cases that eventually re-

sulted in the circuit split on this very issue. These cases

arose only because a beneficiary obtained the tort recov-

ery and dissipated it before the plan could claim its fair

share. The reality is that legal ethics rules are not pro-

tecting plans’ reimbursement rights.

D. In the final stop on its tour of implausible alterna-

tives, AAJ recommends that plans “compromise” with

the participant over the amount of reimbursement. See

AAJ Br. 25. In other words, plans should recognize their

weakened legal position in light of Petitioner’s loophole

and look the other way as long as the double recovery is

not too egregious. Even if that were a solution, it is un-

clear why a participant armed with a right to dissipate

would bring his case to the plan’s attention and then

make an attractive settlement offer. But putting that

aside, the best-case scenario still leaves plans with a

greatly reduced reimbursement funding stream.

All of these suggested alternatives “undermine the

congressional goal of ‘minimiz{ing] the administrative

and:financial burden{s]’ on plan administrators—burdens

ultimately borne by the beneficiaries.” Egelhoff, 5382 U.S.

at 149-150 (quoting /ngersoll-Rand Co. v. McClendon,

498 U.S. 133, 142 (1990)). None of them can hold a candle

to the common-sense approach of allowing plans to seek

reimbursement from the person denying them that

right—the dissipating beneficiary. That direct method

offers the only efficient and effective way to enforce the

plans’ critical reimbursement rights.

IV. Equiry DisFAVorRS A BENEFICIARY’S UNLAWFUL

DISSIPATION

At bottom, the issue in this case is whether the relief

the Respondent seeks is “appropriate equitable relief”

under 29 U.S.C. § 1132(a)(3). Respondent has ably ex-

plained why the relief sought here qualifies as equitable

under this Court’s precedents and the historical under-

standing of that term. See Resp. Br. 25-46.

But the more basic point is that a statutory provision

grounded in equity should not be read to allow a benefi-

ciary to retain his ill-gotten double recovery. Petitioner's

attempt to do so flies in the face of the most fundamental

equitable principles. “{A] court of equity [w]as a vehicle

for affirmatively enforcing the requirements of con-

science and good faith.” Precision Instrument Mfg. Co.

v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945). Yet

Petitioner uses equity as a shield to avoid those very re-

quirements, claiming that equity cannot reach the funds

that rightfully belong to the plan once he has converted

them to consumable or intangible goods or services. See

Pet. Br. 23-36. Equity does not reward wrongdoers: “He

that hath committed iniquity shall not have equity.”

Milwaukee & M.R. Co. v. Soutier, 80 U.S. 517, 523-524

(1871). Nor does it create loopholes: “(CJourts of equity

are loath to allow loopholes, technicalities, or game-

playing to dictate results when those results would vio-

late basic notions of equity and fair play.” Coral Springs

St. Sys., Inc. v. City of Sunrise, 371 F.3d 1320, 1340 (11th

Cir. 2004). Equity thus offers no aid to a dissipating ben-

eficiary like Petitioner, for he is a wrongdoer in search of

a loophole to avoid honoring his reimbursement obliga-

tion to his plan and, by extension, to his fellow plan par-

ticipants.

CONCLUSION

For these reasons, the judgment of the court of ap-

peals should be affirmed.

Respectfully submitted.

DAVID SCHILLER AARON M. STREETT

BAKER BOTTs L.L.P. Counsel of Record

2001 Ross Ave. J. MARK LITTLE

Dallas, Texas 75201 BAKER BOTTs L.L.P.

(214) 953-6656 910 Louisiana St.

Houston, Texas 77002

KATE COMERFORD TODD (713) 229-1855

WARREN POSTMAN aaron.streett@bakerbotts.com

U.S. CHAMBER LITIGATION