# 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) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0315%3A11 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 2015 ## Text No. 14-723 fe 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, TT Kress v. Food Emp’rs Labor Relations Ass'n, 391 F.3d 563 (4th Cir, 2004)... ccsecesessssssesnesesneses 7 Milwaukee & M.R. Co. v. Soutter, ee 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 iv 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. 2 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 3 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 4 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 5 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- 6 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. 7 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. 8 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). 9 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 .