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)

sVO. 14-120

EE

IN THE

Supreme Court of the United States

ROBERT MONTANILE,

Petitioner,

v.

BOARD OF TRUSTEES OF THE NATIONAL

ELEVATOR INDUSTRY HEALTH BENEFIT PLAN,

Respondent.

On Writ oF CERTIORARI TO THE UNITED States Court

Or APPEALS FOR THE ELEVENTH Circult

BRIEF OF THE NATIONAL ASSOCIATION

OF SUBROGATION PROFESSIONALS AND

THE SELF-INSURANCE INSTITUTE OF

AMERICA, INC. AS AMICI CURIAE

IN SUPPORT OF RESPONDENT

BryYAn B. DAVENPORT

Law Orrices Or Bryan

B. Davenport, P.C.

160 Fairway Lakes Dr.

Franklin, IN 46131

LauRA D. SCHMIDT

Downs STANFORD, P.C.

2001 Bryan St.

Suite 4000

Dallas, TX 75093

(214) 748-7900

Counsel for Amici Curiae

October 2, 2015

WILLIAM S. Consovoy

Counsel of Record

PATRICK STRAWBRIDGE

J. MICHAEL CONNOLLY

Consovoy McCartuy

Park PLLC

3033 Wilson Boulevard

Suite 700

Arlington, VA 22201

will@consovoymecarthy.com

DarAN P. KIEFER

KREINER & Peters Co.,

L.P.A.

2570 Superior Avenue

Suite 401

Cleveland, OH 44114

“Saory of Congress

Law Library

261810

t

TABLE OF CONTENTS

Page

pe PF A ge ree pian

TABLE OF CITED AUTHORITIES..... —_...... ili

INTEREST OF AMICI CURIAE .. ....... — ....- 1

SUMMARY OF THE ARGUMENT. ........ ‘oan

DECGcGes ddetie “xiness sxdavaxs 9

I. ERISA Requires The Enforcement Of Plan

Terms, And Should Not Be Read To Allow

Beneficiaries To Avoid Reimbursement

Obligations Through Dissipation. ......... 9

A. RequiringA Beneficiary To Comply With

His Or Her Reimbursement Obligation

Advances Congress’s Goal Of Ensuring

The Enforcement Of Plan Terms. es

B. Sereboff Held That ERISA Permits A

Plan’s Action For Reimbursement From

A Particular Fund Without The Need

To Satisfy Any Strict Tracing Rules... .12

Il. Permitting Beneficiaries To Avoid

Reimbursement Obligations Would Have

Drastic And Detrimental Effects On

Plans And Their Participants .... ........ .16

12

Table of Contents

A. The Enforceability Of Reimbursement

Provisions Is Important To Plans’

MT cdgubee ¢hidars deaues sos 17

B. Plans Cannot Reliably Protect

Their Right To Reimbursement

Outside Of An Enforcement Action

SP GEE, vnccccs § § cocvccccces 22

C. If Plans Cannot Enforce

Reimbursement Provisions, They

Will Impose Offsetting Cost-Control

Mechanisms That Will Be Detrimental

To Plan Participants. ...... ..... .29

PE wishin “hetawn: Vadudes wcacdas 32

110

TABLE OF CITED AUTHORITIES

CASES

Aetna Health Inc. v. Davila,

Sas SE as heahene” Gaus

Barnes v. Alexander,

2) Se

Black & Decker Disability Plan v. Nord,

538 U.S. 822 (2008). ........ secceee .

Carpenters Pension and Annuity Plan v.

Grosso,

No. 07-5013, 2009 WL 2431340

(E.D. Pa. Aug. 6, B008) .. ccc cee cece

City of Los Angeles v. Lyons,

eT ee

Curtiss-Wright Corp. v. Schoonejongen,

te Se eee

Cutting v. Jerome Foods, Inc.,

993 F.2d 1293 (7th Cir. 1993)... ......

Dairyland Ins. v. Herman,

954 P.2d 56 (N.M. 1997)....... .......

Egelhoff v. Egelhoff,

a 8 Ee oe

_

. 28

. 10

WwW

Cited Authorities

Page

Fort Halifax Packing Co. v. Coyne,

Es csbides sspeee veces —

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

ee 5-6, 12, 15

Heimeshoff v. Hartford Life & Acc. Ins. Co.,

ee sec ec de suscccoescees 12

Holmberg v. Armbrecht,

re cecckccuce eesecees 15

Ingersoll-Rand Co. v. McClendon,

ns ca deb sccccocenees . 28

Int'l Painters and Allied Trades

Indus. Pension Fund v. Aragones,

643 F. Supp. 2d 1329 (M.D. Fla. 2008).... ..... 16

Kress v. Food Empires Labor Relations Ass'n,

391 F.3d 563 (4th Cir. 2004)............ ....0. 30

Langdon v. Champion,

752 P.2d 999 (Alaska 1988) ..... ..... weseceeee 23

Massachusetts Mut. Life Ins. Co. v. Russell,

ECG LS: cecceuceee eseeees 10, 11

McGann v. H & H Music Co.,

742 F. Supp. 392 (S.D. Tex. 1990)............. .22

Vv

Cited Authorities

Page

Mertens v. Hewitt Assocs.,

i 8 err sce

Metropolitan Life Ins. Co. v. } 1383.,

EES cccecae ouuuese waédudeen a 31

Nachman Corp. v.

Pension Benefit Guaranty Corporation,

SPs swollen sindece § eaxes 10

Ryan by Capria Ryan v. Federal Express Co.,

78 F.3d 123 (8d Cir. 1996) ww. kc eee eee 31

Sereboff v. Mid Atlantic Medical Services, Inc.,

SEF Ue GEE osc csccee ccccess passim

Taransky v. Secretary of the U.S. Dept.

of Health and Human Servs.,

760 F.3d 307 (8d Cir.2014) ...... 0 2.2.20... 19

Thurber v. Aetna Life Ins. Co.,

712 F.3d 654 (2d Cir. 2013) ....-. ....... ae

Unisys Medical Plan v. Timm,

98 F.3d 971 (7th Cir. 1996)... ...... cccceeees 26

US Airways, Inc. v. McCutchen,

Pe ET cdss ° ctice cncvae 5, 10, 11, 29

Varity Corp. v. Howe,

516 U.S. 489 (1996).... .... weeeee .. 5, 12, 28

vi

Cited Authorities

Page

West Virginia Laborers Pension Trust Fund v.

Burkhammer,

No. 2:10-ev-01120, 2013 WL 3754822

Gee We CU MIRE cc cdcsce cocece seces 16

Winter v. NRDC,

REE ea Pe ee ne A! 28

Wurtz v. Rawlings Co., LLC,

, be |) | ( 5 — FORRES ee 7, 25

Zurich American Ins. Co. v. O'Hara,

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

STATUTES

ee cen eaeeab —

Re st EE connccecsess cocene —

SOUR ns «= cucccesuccess suse passim

DO, ccscas eveees beens eS

29 U.S.C. § 1I04GMIMD).. 005 cece ee cecee —

PCs ED cccccs cocee encnue oeeed 16

PUREE EEK sccces cence sadcotesuses a

vit

Cited Authorities

Page

PUNE don aencets eineee seonss . 4

29 U.S.C. § 1132(aX2) www, wwe te eee ...16

EL, wcldndssta0 aoancun . .10, 12

SP UEIG, 6 MMIII oon sicc veces cecccee 25, 28

I dics Gagan.” Sovesd- vadeuen 19

EEE cbkun: cicun, sénee- wenean 26

ES ntuce: suuie secnae. seddecan 26

Fed. Equity R.10(1912)........ 0 cece. cece eee 14

Ga. R. Prof. Cond. 1.15(D(b)..... .....-. 00 cee e eee 27

Kan. Admin. Regs. § 40-1-20... ...... 0 ....... .26

PE sics chake sncsy “conces .26

ics; succes soanshs sesuans .26

2 Joseph Story, Commentaries on Equity

Jurisprudence as Administered in England

& America

(Isaac F. Redfield ed. 10th ed. 1870) ...... ..... 14

2014 Medical Malpractice Annual Report,

vitt

Cited Authorities

Washington State Office of the Insurance

Commissioner (Aug. 2014)... ..... ...... 12:20

Annual Report on Self-Insured Group

Health Plans (March 2015)... ..... ...... . .20

Department of Legislative Services, Maryland

General Assembly, Senate Bill 903: Contracts

Between Health Maintenance Organizations

and Subscribers or Groups of Subscribers —

Subrogation Provisions (2000) ........ ......... 17

J. Thomas Allen, ERISA Subrogation and

Reimbursement Claims: A Vote to Reject

Federal Common Law Adoption of A Default

“Make Whole” Rule,

41 Ariz. St. L.J. 223 (2009).... ..... 0 ceeeee 17-18

Jeffrey A. Freenblatt, /nswrance and

Subrogation: Where the Pie Isn't Big Enough,

Who Eats Last?

64 U. Chi. L. Rev. 1837 (1997)..... ...... 0 eee 18

Marc A. Franklin et al., Accidents, Money,

and the Law: A Study of the Economics of

Personal Injury Litigation,

61 Colum. L. Rev. 1 (1961)... .......22 secess .23

x

Cited Authorities

Randal M. Whitlatch, Subrogation Under

ERISA and the Search for “Appropriate

Equitable Relief,”

41 Tort Trial & Ins. Prac. L.J. 1049 (2006)

Stephen Miller, House Hearing Scrutinizes

Self-Insured Plans: Federal regulators eye

restrictions on stop-loss coverage

Gs “dceeven eeedese-

Stephen Miller, More Employees Covered by

Self-Insured Health Plans (Dec. 3, 2012) . .

The Henry J. Kaiser Family Foundation,

Health Care Costs, A Primer (May 2012)... .

The Henry J. Kaiser Family Foundation, The

Uninsured: A Primer: Key Facts About

Americans Without Health Insurance

GL aera? aoe ON ei

Virginia Legal Ethics Opinion 1747, Attorney

.+. 24,25

Breaching Contract to Pay Medical Bills Out

of Settlement Proceeds ...... .......

l

INTEREST OF AMICI CURIAE'!

National Association of Subrogation Professionals

(“NASP”). NASP is a non-profit trade association

of insurance companies, third-party administrators,

subrogation specialists, and attorneys practicing in the

field of subrogation and recovery. NASP has approximately

2,300 members, representing more than 425 insurance

companies and self-funded entities (including employers

and groups of employees). NASP’s mission is to create

a national forum for education, training, networking,

advocacy, sharing of information, and, ultimately, the most

effective pursuit of subrogation on an industry-wide basis.

Through NASP, members are able to retrieve,

organize, and exchange information, as well as expand the

use of technology to promote subrogation efforts on a cost-

effective basis. The members of NASP recover billions of

dollars annually, including hundreds of millions of dollars

in health care expenditures every year for insured and

self-funded employee benefit plans through subrogation

and recovery practices. One of NASP’s goals is to be the

“voice of subrogation” for the public, government, and

other organizations.

Because the members of NASP recover hundreds of

millions of dollars in health care expenditures every year

for insured and self-funded employee benefit plans, NASP

1. No counsel for a party authored this brief in whole or in

part, and no such counsel or party made a monetary contribution

intended to fund the preparation or submission of this brief. No

person other than the amici curiae, or their counsel, made a

monetary contribution to its preparation or submission. The parties

have consented to the filing of this brief.

2

has an interest in whether the Employee Retirement

Income Security Act (“ERISA”) permits parties who have

agreed to use funds recovered from responsible parties

to reimburse health plans for medical expenses advanced

on their behalf to nonetheless avoid that promise through

dissipation. The Court’s decision will have a profound

impact on employee benefit plans’ financial stability, which

in turn will have far-reaching implications for the nation’s

health care system.

Self-Insurance Institute of America, Inc. (“SILA”).

SIIA is a non-profit organization with nearly 1,000

members, serving tens of millions of health plan

beneficiaries, dedicated to the advancement and protection

of the self-insurance industry. SILA’s membership includes

self-insured entities such as employer plan sponsors, as well

as service providers such as third-party administrators,

reinsurance companies, and other entities that support

the self-insurance business. SILA is the only organization

in the United States that exclusively represents firms,

professionals, and organizations that participate in the

broad spectrum of self-insurance, including self-insured

group health plans.

Through SIIA, its members coordinate their views

and provide practical information and recommendations to

government and the public at large on a range of subjects

relevant to the effective functioning of the self-insurance

system, including the provisions of ERISA that concern

self-insured health plans and plan participants. SIIA’s

mission includes rendering assistance to courts in their

deliberations on significant self-insured health plan issues

of broad concern to its members.

3

Collectively, SILA and NASP have a strong interest

in preserving their members’ ability to recover plan

funds from participants that accept medical benefits but

then refuse to honor the reimbursement terms of their

agreements after obtaining compensation for medical

expenses through legal action against or settlement with

persons not covered by the plan. Amici’s members depend

on reimbursement to ensure solvency of their plans and

to provide benefits to all participants at lower costs. To

the extent that Amici’s members are barred from seeking

reimbursement according to the terms of the plan, they

might be forced to take dramatic action, such as increasing

required plan contributions by covered employees (the

equivalent of insurance premiums), reducing benefits, or

otherwise amending plan terms to protect against this

growing and unnecessary risk. Each of these scenarios

would have the unfortunate result of reducing the

availability of health insurance for the nation’s workforce.

SUMMARY OF THE ARGUMENT

Employer-sponsored health plans offered pursuant

to ERISA typically require beneficiaries (whose medical

expenses are paid by the health plan) to reimburse the

plan for that expenditure if the beneficiary later recovers

a judgment or legal settlement from a responsible person

(such as the driver at fault in a traffic accident). These

reimbursement provisions provide a valuable source

of cost recovery to the plan. The savings realized from

reimbursement obligations help keep premiums and other

plan costs lower, to the benefit of all participants. And they

are eminently fair, as they seek only to recoup payments

already made on behalf of the covered participant, and

only from funds, benefits, or proceeds that the participant

4

receives from a party not covered by or administering

the plan, and which arise from a tort or insurance claim.”

The Petitioner in this case, Robert Montanile, asks

this Court to upend this established and important cost-

containment practice and instead interpret ERISA’s

remedies provision, 29 U.S.C. § 1132(a), to prohibit actions

for reimbursement when the beneficiary has spent the

settlement funds he received—notwithstanding the Plan’s

existing equitable lien by agreement. Montanile contends

that a beneficiary’s dissipation of the fund cuts off the

ability of a plan to obtain “appropriate equitable relief”

under ERISA—even when the beneficiary was fully

aware of the plan’s requirement of reimbursement at the

time he sought and accepted benefits from the plan, and

even when the dissipation occurred after the beneficiary

was aware of the plan’s specific interest in a particular

settlement. Under Montanile’s desired ruling, participants

would be encouraged—even incentivized—to knowingly

and willfully spend settlement funds quickly to prevent

the plan from recovering on its lien.

This Court should reject this argument and affirm the

sound decision of the Eleventh Circuit below. The text and

goals of ERISA, and the legal principles established by

this Court’s prior jurisprudence, make clear that a plan

reimbursement provision gives rise to an enforceable

2. There are other sources of funds that also may be subject

to reimbursement provisions, such as a plan beneficiary’s other

insurance policies. Regardless of the source of these funds, it is

important to ensure the enforceability of plan reimbursement

and subrogation provisions, and to discourage beneficiaries from

avoiding their obligations under the plan by dissipating funds they

have promised to repay.

5

equitable lien on any funds issued by the plan due to the

occurrence of a particular event and thereafter recovered

by a beneficiary arising from the same event. Any other

holding would contradict the language and the logic of the

ERISA statutory scheme and this Court’s precedents.

And the financial consequences for plans—and the other

beneficiaries of them—would be swift and severe.

To begin, this Court must recoguize that the primary

purpose of ERISA’s civil remedies provision, section

502(a)(3), is to enforce plan terms. As this Court has

recognized, the plan is “at the center of ERISA,” US

Airways, Inc. v. McCutchen, 133 S. Ct. 1537, 1548 (2013).

This Court’s reading of the statute must be consistent

with the statute’s broader purpose of encouraging “a

system that is [not] so complex that administrative costs,

or litigation expenses, unduly discourage employers from

offering welfare benefit plans in the first place.” Varity

Corp. v. Howe, 516 U.S. 489, 497 (1996).

Moreover, this Court already has held that a

reimbursement provision like the one at issue here gives

rise to an equitable remedy, and thus falls squarely within

section 502(a)(3)’s provision of “appropriate equitable

relief.” Sereboff v. Mid Atlantic Medical Services, Inc.,

547 U.S. 356, 361-63 (2006). Under Sereboff, once the

beneficiary obtains control over the settlement funds,

an equitable lien by agreement attaches and “no tracing

requirement ... applies[.]” Jd. at 365. The decision in

Sereboff controls the outcome here.

Montanile and his amici rely extensively on Great-

West Life & Annuity Ins. Co. v. Knudson, in which

this Court held that no equitable lien attaches when a

6

beneficiary never acquires possession over a settlement

fund. 534 U.S. 204, 214 (2002). But that is not the case

here; Montanile concedes that he gained control over

the settlement fund, and that he already had agreed to

repay the Plan from that fund. Sereboff makes clear that

tracing rules that applied to claims for restitutionary

liens do not apply to equitable liens by agreement, and

that Montanile’s dissipation of the settlement fund cannot

be used to avoid the Plan’s equitable lien by agreement.

A contrary construction of ERISA’s remedies

provision would have disastrous consequences for plans.

The right to recover costs through reimbursement

and subrogation are critically important to ensuring

the solvency of plans. This is particularly so for the

large segment of plans that are self-insured and for

which the recovery of every dollar directly benefits

all other participants in the plan. Self-insured plans

already represent a majority of participants covered

through large employer-sponsored plans. This segment

of the market is expected to increase with the ongoing

implementation of health care reform.

If this Court were to deprive plans of the ability to

recoup costs from dissipating beneficiaries by accepting

Montanile’s reading of section 502(a)(3), there would be

no other effective way for plans to protect their right to

reimbursement for costs advanced to beneficiaries. To

begin, there is no way for plans to ensure that they receive

notice of pre-litigation settlements, for which no public

records exist. For those cases that do end up in court,

monitoring the thousands of potential jurisdictions where

a beneficiary may file a tort claim would be prohibitively

expensive. Ultimately, with the ever-increasing rush of

7

jurisdictions looking to limit the rights of benefit plans

to recoup funds, there is no guarantee that a plan could

intervene in any state court tort action and thus be

assured of direct participation in settlement negotiations.

Plans asserting a subrogation claim directly against

the alleged tortfeasor may face an additional hurdle in

a number of states that have prohibited insurers from

seeking subrogation of any medical expenses. New York,

for example, has made repeated attempts through its

legislature to avoid ERISA’s preemption scheme and

create hurdles to recovery for insured and employer

sponsored benefits plans alike. These same efforts have

seemingly leached into the Second Circuit. See Wurtz

v. Rawlings Co., LLC, 761 F.3d 232 (2d Cir. 2014), cert.

denied, 1358S. Ct. 1400 (Feb. 23, 2015) (holding that ERISA

did not pre-empt enforcement of New York state statute

prohibiting subrogation actions). Nor do the professional

rules governing attorneys’ obligations to the creditors

of clients provide any effective protection, as those rules

contain numerous caveats and differ substantially among

jurisdictions. And all of these alternative enforcement

mechanisms highlighted by Montanile and his amici run

counter to the organizing principle of ERISA: “to provide

a uniform regulatory regime over employee benefit plans.”

Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004)

(emphasis added).

Montanile also suggests that plans can protect

themselves by seeking a protective injunction in federal

court, but this is not an effective or practical option in most

cases. It would do nothing in the substantial number of

cases where plans cannot ensure they receive notice of pre-

litigation settlements. And even when plan administrators

8

learned of a potential settlement fund, they would face

substantial legal and evidentiary obstacles to obtaining

a federal injunction that would effectively prevent the

dissipation of settlement funds. Moreover, requiring plan

administrators (who have fiduciary obligations to the

plan) to seek a protective injunction in every case would

overwhelm the federal judiciary and drive up plan costs.

Because reimbursement and subrogation remedies

are important to plans’ solvency, if there is no effective

way to enforce a beneficiary’s reimbursement obligation,

plans will have to make other adjustments to protect

themselves and the majority of participants who have

not dissipated funds from which they promised to repay

medical expenses. Plans may raise required contributions

or premiums to account for the increased financial risk

that arises from dissipation. They may limit or cease

advances to participants, waiting to pay medical bills until

any alternative source has been definitively identified and

held responsible. Or they may entirely exclude coverage

for traffic accidents or other sources of large claims,

which would force participants to purchase additional

insurance coverage on the open market. All of these

proposals would harm plan participants and disrupt a

federal scheme for employer-sponsored benefit plans that

has been remarkably effective to date.

In sum, there are no legitimate legal or policy

reasons supporting Montanile’s effort to secure a right

to dissipation that overcomes his agreement to reimburse

the plan for payments advanced on his behalf. Holding

otherwise would contravene the logic of Sereboff and

Congress’s unmistakable intent to ensure an enforcement

scheme that is uniform, cost-effective, and predictable.

9

This Court should affirm the decision of the Eleventh

Circuit.

ARGUMENT

I. ERISA Requires The Enforcement Of Plan Terms,

And Should Not Be Read To Allow Beneficiaries

To Avoid Reimbursement Obligations Through

Dissipation.

Montanile’s attempt to undermine the enforceability

of plan terms strikes at the heart of ERISA. It is

inconsistent with the statute’s text and its broader purpose

of encouraging the creation of employer-sponsored benefit

plans and providing uniformity and predictability as to

the enforcement of the terms of those plans. It also runs

afoul of prior decisions of this Court, which already have

held that a plan’s reimbursement provision creates an

equitable lien by agreement that attaches to a subsequent

settlement as soon as it comes into the possession of the

beneficiary. This Court should adhere to the statutory

framework and its prior decisions and reject Montanile’s

attempt to create a loophole to plan enforcement that

would frustrate a plan’s right to reimbursement.

A. Requiring A Beneficiary To Comply With His

Or Her Reimbursement Obligation Advances

Congress's Goal Of Ensuring The Enforcement

Of Plan Terms.

This case turns on the meaning of section 502(a)(3)

of ERISA, which permits “a participant, beneficiary,

or fiduciary” to seek “appropriate equitable relief ... to

enforce any provisions of this subchapter or the terms

10

of the plan.” 29 U.S.C. § 1132(a)(3) (emphasis added).

That is precisely what the Plan seeks here: enforcement

of Montanile’s agreement to reimburse the plan for

expenses it advanced to pay for his medical care. Allowing

a beneficiary to ignore this express promise and instead

convert or dissipate the portion of the settlement that he

agreed to repay would frustrate, rather than enforce,

the terms of the Plan. Because section 502(a)(3) reflects

Congress’s intent to strengthen—rather than weaken—

the enforceability of plan terms, this Court should affirm

the decision below.

ERISA is a “‘comprehensive and reticulated statute,’

the product of a decade of congressional study of the

Nation’s private employee benefit system.” Mertens v.

Hewitt Assocs., 508 U.S. 248, 251 (1993) (quoting Nachman

Corp. v. Pension Benefit Guaranty Corporation, 446 U.S.

359, 361 (1980)). The written plan is at the heart of this

“interlocking, interrelated, and interdependent remedial

scheme.” Massachusetts Mut. Life Ins. Co. v. Russell, 473

U.S. 134, 146 (1985). This Court has repeatedly observed

that ERISA “is built around reliance on the face of written

plan documents.” Curtiss-Wright Corp. v. Schoonejongen,

514 U.S. 73, 83 (1995); see also US Airways, Inc. v.

McCutchen, 123 S. Ct. 1537, 1548 (2013). ERISA expressly

requires “[e}very employee benefit plan” to “be established

and maintained pursuant to a written instrument.” 29

U.S.C. § 1102(a)(1). The plan’s administrator must in turn

act “in accordance with the documents and instruments

governing the plan[.]” Jd. § 1104(a)(1)(D). “The plan, in

short, is at the center of ERISA.” McCutchen, 133 S. Ct.

at 1548.

11

Given the statute’s “repeatedly emphasized purpose

to protect contractually defined benefits,” Russell, 473

U.S. at 148, it is unsurprising that Congress provided

remedies through ERISA that would serve to advance

the terms of the plan, not defeat them. Section 502(a)(3)

“does not, after all, authorize ‘appropriate equitable relief

at large[.!” McCutchen, 133 S. Ct. at 1548 (quotations

omitted). “[Rjather, it countenances only such relief as

will enforce ‘the terms of the plan’ or the statute.” Jd.

(emphasis in original). See also Mertens, 508 U.S. at 253

(noting that section 502(a)(3) authorizes “appropriate

equitable relief’ for the purpose of ‘redress[ing any]

violations or ... enforc[ing] any provisions’ of ERISA or

an ERISA plan.”).

That is all that Respondent is seeking here:

enforcement of the reimbursement provision in the Plan.

Montanile no longer disputes that he agreed to reimburse

the Plan for medical expenses it paid on his behalf from

any settlement or judgment he later obtained. Petitioner’s

Brief (“Pet. Br.”) at 11 & n.4. In reliance on this promise,

the Plan advanced more than $121,000 to pay Montanile’s

medical expenses. Pet. Br. at 2. Montanile later obtained

possession of a settlement that included funds from a party

alleged to have been responsible for his injuries. /d. But

despite his knowledge of his reimbursement obligation and

the Plan’s assertion of a claim to a portion of the resulting

proceeds, Montanile failed to reimburse the plan. He now

contends that by spending all the money, he is freed from

his reimbursement promise, and the Plan is without any

recourse. /d.

Permitting such easy avoidance of plan terms would

undermine not only the express terms of section 502(aX3),

12

but also the broader statutory goal of encouraging “a

system that is [not] so complex that administrative costs,

or litigation expenses, unduly discourage employers from

offering welfare benefit plans in the first place.” Varity

Corp., 516 U.S. at 497. In other contexts, this Court has

“recognized the particular importance of enforcing plan

terms as written,” Heimeshoff v. Hartford Life & Acc.

Ins. Co., 184 S. Ct. 604, 612 (2013), and this principle

should apply with no less force here. The text of section

502(a)(3) and this Court’s prior interpretations of ERISA’s

remedial provisions strongly weigh in favor of the Plan’s

attempt to enforce the reimbursement provision, rather

than Montanile’s blatant effort to avoid it.

B. Sereboff Held That ERISA Permits A Plan’s

Action For Reimbursement From A Particular

Fund Without The Need To Satisfy Any Strict

Tracing Rules.

To be sure, section 502(a)(3) permits “appropriate

equitable relief” to enforce a plan’s terms. 29 U.S.C. § 1132(a)

(3) (emphasis added). Plans therefore may not enforce a

particular term by bringing a claim for purely legal

relief—that is, “the imposition of personal liability for

the benefits that [a plan] conferred upon respondents.”

Knudson, 534 U.S. at 214. In Sereboff, however, this Court

squarely held that reimbursement provisions like the one

at issue here give rise to an equitable lien by agreement,

which attaches to a subsequent settlement once the

beneficiary obtains possession of the settlement funds.

547 U.S. at 362-63. And Sereboff further held that once

the lien attaches, “no tracing requirement ... applies to

equitable liens by agreement or assignment|[.]” Jd. at 365.

13

That rule decides this case. An equitable lien by

agreement in favor of the Plan attached to the settlement

fund as soon as it came into Montanile’s control. Under

Sereboff, it is of no consequence that, after receiving

the dedicated settlement, Montanile ignored his

reimbursement obligation and spent that money. Because

the Plan’s claim is consistent with section 502(a)(3)’s text,

traditional principles that apply to equitable liens by

agreement, and the broader statutory goal of ensuring

enforcement of the plan’s terms, this Court should affirm

the Eleventh Circuit’s decision.

Sereboff involved a plan—like the one at issue here—

that required, among other things, a beneficiary receiving

benefits under the plan to reimburse the plan for those

benefits from any settlement or other recovery from a

responsible party. Compare 547 U.S. at 359, with Pet. App.

5-7. As in this case, the beneficiary in Sereboff was injured,

and thus received benefits toward medical! care from

the plan. 547 U.S. at 360. And, as here, the beneficiary

later settled litigation with the person alleged to have

been responsible for the injuries. Jd. Most importantly,

in both cases the beneficiary exercised control of a single

settlement fund. Compare id. with Pet. App. at 12.

Once that occurred, this Court held, the equitable

lien by agreement attached to those proceeds. Sereboff

relied upon Barnes v. Alexander, 232 U.S. 117, 121 (1914),

which applied “the familiar rul[e] of equity that a contract

to convey a specific object even before it is acquired will

make the contractor a trustee as soon as he gets a title to

the thing.” Sereboff, 547 U.S. at 363-64. The Court found

that the plan covering the Sereboffs “specifically identified

a particular fund, distinct from the Sereboffs’ general

14

assets—‘[a]ll recoveries from a third party (whether by

lawsuit, settlement, or otherwise)’—and a particular share

of that fund to which Mid Atlantic was entitled—‘that

portion of the total recovery which is due [Mid Atlantic] for

benefits paid.” /d. at 364. The plan could therefore “follow’

a portion of the recovery ‘into the [Sereboffs’] hands’ ‘as

soon as [the settlement fund] was identified,’ and impose

on that portion a constructive trust or equitable lien.” Jd.

The same is true here. An equitable lien by agreement

attached to Montanile’s settlement fund when that

money—distinct from his other assets—came into his

control. The fact that he exchanged or dissipated the

funds thereafter is irrelevant, in light of Sereboff’s holding

that “no tracing requirement ... applies to equitable liens

by agreement.” Jd. at 365. “[AJll that matters is that the

beneficiary did, at some point, have possession and control

of the specific portion of the particular fund sought by the

insurer.” Thurber v. Aetna Life Ins. Co., 712 F.3d 654, 664

(2d Cir. 2013).

And, as Respondent explains in detail, see Respondent’s

Brief (“Resp. Br.”) at 25-46, this rule is in conformity

with the general principles of equity and the established

practice in the days of the divided bench. See, e.g., 2

Joseph Story, Commentaries on Equity Jurisprudence

as Administered in England & America § 798 (Isaac F.

Redfield ed. 10th ed. 1870) (discussing substitutionary

monetary decrees when assets at issue were transferred

without notice to bona fide purchaser); Fed. Equity R. 10

(1912) (permitting deficiency judgments for any shortfall

upon sale of the property in question). And equity courts of

the past would not permit an equitable lien by agreement

to be easily discharged by simply spending down the fund

15

with full knowledge of the lienor’s claim; such a result is

antithetical to equity, which “eschews mechanical rules”

and “depends on flexibility.” Holmberg v. Armbrecht, 327

U.S. 392, 396 (1946) (Frankfurter, J.).

Nothing in this straightforward application of

principles from Sereboff contradicts the decision in

Knudson. In Knudson, the plan was pursuing a claim of

equitable restitution—not an equitable lien by agreement.

For restitutionary claims, the court held, it was necessary

to trace the claim to particular funds in the defendant’s

possession. It thus was decisive that the beneficiary in

Knudson never came into possession or control of the

particular fund of settlement agreement. Under those

circumstances, no equitable restitution claim against

the beneficiary could be traced to those funds, and the

action was indistinguishable from an attempt “to impose

personal liability ... for a contractual obligation to pay

money.” Knudson, 534 U.S. at 210. It is thus incorrect to

assume—as both the United States and Montanile do—

that Knudson “endorsed ... restitutionary tracing rules

... to every action for an equitable lien under § 502(a)(8).”

Sereboff, 547 U.S. at 365. To the contrary, Sereboff left no

doubt that “no tracing requirement ... applies to equitable

liens by agreement.” Jd. at 365.

Knudson remains good law with respect to claims

for equitable restitution seeking funds that never come

into the control of a beneficiary who agreed to reimburse

a plan. But Sereboff teaches that a beneficiary who has

granted a plan an equitable lien by agreement may recover

on its lien from the beneficiary without any need to trace

its ultimate recovery to the actual funds turned over to the

beneficiary. This Court should hold fast to the principles

set forth in Sereboff, and affirm the decision below.

16

II. Permitting Beneficiaries To Avoid Reimbursement

Obligations Would Have Drastic And Detrimental

Effects On Plans And Their Participants

Adopting Montanile’s misguided interpretation of

section 502(a)(3)* would directly threaten the financial

stability of thousands of employer-sponsored health plans.

The elimination of effective reimbursement remedies will

inevitably increase those plans’ annual costs by millions of

dollars. These losses cannot easily be recouped or offset

through other methods of reimbursement or subrogation.

3. Contrary to the suggestion of the Petitioner, see Pet. Br. at

19-20, section 502(a)(3) of ERISA is not the only statutory provision

that imposes liability on plan participants who wrongfully retain

or dissipate plan funds. Anybody who acts as a fiduciary over plan

assets is personally liable for resulting damages, and the plan may

obtain all appropriate relief—not just equitable relief—to enforce

that liability. See 29 U.S.C. §§ 1109, 1132(a)(2). ERISA’s provisions

of fiduciary liability includes a “participant” who exercises “control

over assets” of a plan, 29 U.S.C. § 1104(C)(1)(A), and a number of

courts have applied the statutory language and concluded that

beneficiaries who wrongfully retain or dissipate assets they know are

not theirs qualify as fiduciaries, and thus are properly liable under

§ 1132(a)(2). See, e.g., West Virginia Laborers Pension Trust Fund

v. Burkhammer, No. 2:10-cv-01120, 2013 WL 3754822, at *2 (S.D.

W. Va. July 15, 2013) (holding that a “person who wrongly retains

benefit payments” is liable as a fiduciary under section 502(a)(2)

and entering default judgment against beneficiary); Jnt’l Painters

and Allied Trades Indus. Pension Fund v. Aragones, 643 F. Supp.

2d 1329, 1336-37 (M.D. Fla. 2008) (same); Carpenters Pension and

Annuity Plan v. Grosso, No. 07-5013, 2009 WL 2431340, at *5-6 (E.D.

Pa. Aug. 6, 2009) (same). While this route to relief does not alter the

sound legal and policy reasons for permitting the enforcement of

plan reimbursement provisions pursuant to section 502(a)(3) as an

equitable lien by agreement, any decision by this Court should leave

open this alternate form of liability.

17

Instead, they will require substantial adjustments to plan

practices that currently benefit participants. This Court

should not impose restrictions on ERISA’s remedies that

inevitably will harm plans and their participants.

A. The Enforceability Of Reimbursement

Provisions Is Important To Plans’ Solvency.

Subrogation and reimbursement are important

mechanisms for preserving plan assets. In an era of

rising health care expenses, cost containment measures

are essential to keep benefits affordable. The elimination

or reduction of recoveries from settlements or judgments

would make health coverage, which is already difficult for

many Americans to afford, even more expensive. One state

has estimated that health insurance premiums for state

workers would rise between 1% and 2% if insurers’ ability

to enforce subrogation and reimbursement provisions

were eliminated.‘

The importance of reimbursement and subrogation is

a matter of basic economics. “Funds recovered through

subrogation serve as a source of revenue” for plans or

their insurers, and this revenue is taken into account when

calculating the historical cost to determine “the basis of

future actuarial rate setting” or required contributions. J.

Thomas Allen, ERISA Subrogation and Reimbursement

Claims: A Vote to Reject Federal Common Law Adoption

4. See Department of Legislative Services, Maryland

General Assembly, Senate Bill 903: Contracts Between

Health Maintenance Organizations and Subscribers

or Groups of Subscribers - Subrogation Provisions (2000),

available at http://mlis.state.md.us/2000rs/fnotes/bil_0003/

sb0903.PDF (last accessed Oct. 1, 2015).

18

of A Default “Make Whole” Rule, 41 Ariz. St. L.J. 223,

240 (2009). As an example:

(S]uppose an insurance plan covers 100 people

and during the first year the plan pays a total

of $20,000 in damage claims. Based on that

year, the calculation for the cost of insurance

the following year will be $200 per person in

order to cover the entire risk (assuming that, in

the following year, the trend will stay the same

and $20,000 in damage claims will be paid). Now

suppose that the insurance company is able to

subrogate and recover $5,000 of the $20,000 it

paid that first year. The cost per person will

now be $150, because of the increased revenue

brought in through subrogation.

Id; see also Jeffrey A. Freenblatt, Jnsurance and

Subrogation: Where the Pie Isn't Big Enough, Who Eats

Last? 64 U. Chi. L. Rev. 1337, 1355 (1997) (“An insurance

company sets its rates based on historical net costs,”

and when subrogation or reimbursement lower those

costs, the corresponding savings will affect the resulting

actuarial premium.). “Without subrogation, a part of the

risk is shifted back to the insured, [who] pays more for the

insurance because he retains ... a right to obtain through

litigation a recovery that may actually exceed the actual

loss that (after receiving insurance proceeds) he suffered.”

Cutting v. Jerome Foods, Inc., 993 F.2d 1293, 1297 (7th

Cir. 1993) (Posner, J.).'

5. Indeed, the federal government itself recognizes the

economic importance of this cost-recovery mechanism, imposing

similar obligations upon recipients of medical benefits through

19

Subrogation and reimbursement provisions are

particularly important for self-funded employee welfare

plans sponsored by employers and unions. Allowing

these plans to recover paid medical expenses that are

the financial responsibility of third parties permits them

to eliminate duplicative payments to beneficiaries and

preserve limited benefit dollars for the benefit of all

participants. This permits empioyers to offer enhanced

benefits to covered participants. For self-funded plans,

there is no question that subrogation and reimbursement

recoveries “inure{] to the benefit of all participants and

beneficiaries by reducing the total cost of the plan.”

Zurich American Ins. Co. v. O'Hara, 604 F.3d 1232,

1238 (11th Cir. 2010) (enforcing reimbursement provision

over participant’s argument that recovery did not make

participant whole).

Some of Montanile’s amici minimize the importance of

self-funded plans, citing nearly 10-year-old court filings to

suggest that self-insured plans are an insignificant piece

of the market. See Amicus Curiae Brief for American

Association for Justice in Support of Petitioner (“AAJ

Br.”) at 17. This grossly understates the continued growth

of self-insured plans, which cover a majority of employer-

sponsored plans. This growth is likely to continue as

the Patient Protection and Affordable Care Act (“ACA”)

continues to reshape the health insurance market.

Medicare. See 42 U.S.C. § 1395y(b)(2); Taransky v. Secretary of the

U.S. Dept. of Health and Human Servs., 760 F.3d 307, 321-22 (3d Cir.

2014) (holding that the Medicare Secondary Payer Act “authorizes

the Government to seek reimbursement from Taransky’s settlement,

as she has received funds from a primary plan under the statute

that has a demonstrated responsibility for her medical expenses”).

20

Companies choose to self-fund employee health benefit

plans because they allow employers greater freedom to

offer benefits tailored to their particular needs. Under

ERISA, “employers have large leeway to design disability

and other welfare plans as they see fit.” Black & Decker

Disability Plan v. Nord, 538 U.S. 822, 833 (2003). By

offering self-insured plans, employers are able to exercise

direct control over claim settlements, to take advantage

of greater flexibility in the design and administration of

health plans to meet specific employee needs, to better

manage cash flows,‘ and to avoid onerous state insurance

regulations.

This flexibility has increased the attractiveness of

self-funded plans, particularly for large employers or

groups of employers. A recent report submitted by the

Department of Labor to Congress indicated that as of

2012 (the last year for which data was available), plans

with some self-insurance component covered more than

58 million participants.’ This number in fact understates

the percentage of the workforce covered by self-insured

plans, as it excludes all self-insured plans with fewer than

100 participants (i.e., most small businesses).* The same

6. For example, self-funded plans gain the financial advantage

of the time-value of their capital. Because medical claims are paid as

submitted, company assets can be retained as working capital and

invested. Thus, interest can be earned on funds that are retained

by the employer and that otherwise would be paid in the form of

premiums for conventional insurance.

7. Annual Report on Self-Insured Group Health Plans,

at iv (March 2015), availiable at https://www.dol.gov/ebsa/pdf/

ACAReportToCongress2015.pdf (last accessed Oct. 1, 2015).

8. Id. at ii.

2)

report indicated ongoing growth in both the number of

self-insured plans and the number of people covered by

them.® Other analysis indicates similar growth: “{s]elf-

insured plans provided insurance to 61 percent of all U.S.

workers covered by an employer-sponsored health plan in

2011, up from 41 percent in 1998.”" These numbers confirm

employers’ preference for self-insured plans as a cost-

effective way to provide health insurance to employees

and their dependents.

The increase in participant coverage by self-insured

plans is likely to continue in the wake of the enactment of

the ACA. One industry observer noted that “[e]mployers

generally, and small employers particularly, are concerned

about the rising cost of providing health coverage and may

view self-insurance as a better way to control expected

cost increases.”" Self-insured plans also are exempt from

some of the ACA’s mandates, leading some employers to

“view self-insurance as a way to avoid additional costs

under the ACA” while retaining the ability to provide

beneficial and affordable coverage to their employees. ”

9. Jd. at iv.

10. Stephen Miller, House Hearing Scrutinizes Self-

Insured Plans: Federal regulators eye restrictions

on stop-loss coverage (Feb. 28, 2014), available at http://

www.shrm.org/hrdisciplines/benefits/articles/pages/

self-insured-plans-scrutinized.aspx (last accessed Oct. 1, 2015).

11. Stephen Miller, More Employees Covered by Self-Insured

Health Plans (Dec. 3, 2012), available at http://www.shrm.org/

hrdisciplines/benefits/articles/ pages/self-insured-health-plans.aspx

(last accessed Oct. 1, 2015).

12. Miller, supra n.10.

22

The ongoing growth in self-insured plans—which

undoubtedly share the benefit of any reimbursement with

all other plan participants—underscores the importance of

retaining remedies that benefit all participants when they

are able to enforce plan requirements for reimbursement

and recover costs from settlements. Such recoveries are

essential to “protect the solvency of employee benefit plans

to ensure that the valid claims of employees and their

beneficiaries will be paid.” McGann v. H & H Music Co.,

742 F. Supp. 392, 393 (S.D. Tex. 1990) (citation omitted).

These plans, and the participants they serve, should not

be handcuffed by a cramped reading of section 502(a)(3)’s

right to “appropriate equitable relief.”

B. Plans Cannot Reliably Protect Their Right To

Reimbursement Outside Of An Enforcement

Action Under § 502(a)(3).

Some of Montanile’s amici contend that plans retain

adequate remedies to recover reimbursement even if

ERISA’s remedies are constrained so as not to permit an

action to recover settlements that have been dissipated.

For example, the American Association for Justice

contends that a plan “can assert its right of subrogation

and file its own action against the tortfeasor,” or “intervene

in the action filed by its beneficiary and participate in

settlement negotiations to ensure its reimbursement

rights are protected.” AAJ Br. at 24-25; see also Amicus

Curiae Brief of the United States in Support of Petitioner

(“U.S. Br.”) at 30-31. But these proposals are neither a

realistic nor efficient substitution for simple enforcement

of the plan’s reimbursement terms. Indeed, the cost

and complications of directly intervening in each case

would likely be so substantial as to leave plans looking

23

at alternative protections that will damage beneficiaries’

interests in the long run.

Consider first the suggestion that plans simply seek

to timely intervene in any dispute between a fiduciary

and a tortfeasor to protect their rights. To begin, “{iJt is

common knowledge that a large percentage of the claims

covered by insurance are settled without litigation and

that this is one of the usual methods by which the insured

receives protection.” Dairyland Ins. v. Herman, 954 P.2d

56, 61 (N.M. 1997) (citation omitted); see also Langdon

v. Champion, 752 P.2d 999, 1003 n.9 (Alaska 1988)

(“{I}t is well known that only a small fraction of [automobile

accident] claims involve litigation. The vast majority are

settled without litigation and without lawyers.”).

Several surveys have confirmed the prevalence of

pre-litigation settlements. For example, a report from

Washington State determined that lawsuits were filed only

47.3 percent of the time, but for claims without litigation,

claimants were compensated 51.8 percent of the time. See

2014 Medical Malpractice Annual Report, Washington

State Office of the Insurance Commissioner (Aug. 2014),

http://www.insurance.wa.gov/about-oic/commissioner-

reports/documents/2014-med-mal-annual-report.pdf;

see also Marc A. Franklin et. al., Accidents, Money, and

the Law: A Study of the Economics of Personal Injury

Litigation, 61 Colum. L. Rev. 1, 10 (1961) (noting that of

193,000 accident victims with personal injury claims in

New York annually, 39,000 proceed without counsel, and

“(a]pproximately 116,000 are closed without suit”). This is

especially likely to be true when the injuries and financial

damages are serious and fault is not in doubt—not an

uncommon occurrence in serious automobile accidents. In

24

such cases, a plan is dependent almost entirely upon the

beneficiary to disclose the settlement process; there are

not, and never will be, any court records to check or filings

to monitor. Pre-litigation settlements may thus result in a

transfer of funds that the plan has no easy way to timely

discover, let alone intervene and participate in.

Even for those tort cases that do end up in court,

establishing a process to monitor the thousands of

jurisdictions where a tort claim may be filed is prohibitiveiy

expensive. For although claims under ERISA are subject

to exclusive jurisdiction in federal court, those injured

in automobile accidents, slip-and-falls, or other personal

injury torts may sue alleged tortfeasors in state or federa!

court (provided the requirements of diversity jurisdiction

are satisfied). Plans whose coverage extends nationwide

may have tens of thousands of potential reimbursement

claims a year. Each plan would have to implement “very

careful monitoring of all beneficiaries, which may prove to

be very costly [because each] plan would have to devise a

way to flag claims that have the potential for tort litigation

down the line.” Randal M. Whitlatch, Subrogation Under

ERISA and the Search for “Appropriate Equitable Relief,”

41 Tort Trial & Ins. Prac. L.J. 1049, 1075 (2006).

Additionally, there is no guarantee that a plan will be

permitted to intervene in a tort action, particularly if one

is pending in state court. Plans face potential variations

among local jurisdictions in the standards, deadlines, and

13. Although plan terms often require a beneficiary to

notify the plan of any potential third-party claim, a beneficiary intent

on avoiding their reimbursement obligation is unlikely to comply

with the notice requirement—and would have no incentive to do so

if Montanile prevails in this Court.

25

procedures for intervention. And even when those varying

requirements are met, there is still no assurance that

state courts would permit a plan to intervene in a pending

action. ERISA grants federal courts exclusive jurisdiction

in almost all cases, including actions by a plan for relief

against a beneficiary. See 29 U.S.C. § 1132(e)(1). Thus, “a

plan may intervene only to have its case dismissed due to

the complete preemption of ERISA.” Whitlach, supra, at

1075. Although the plan could still file a separate action

for enforcement against its beneficiary in federal] court, its

ability to participate directly in the state court action and

secure a right against dissipation is very much in doubt—

assuming state law does not prohibit exercise of that right

in the first place. See Wurtz, 761 F.3d at 245 (holding that

state law may prohibit enforcement of subrogation rights

notwithstanding contrary terms of an ERISA plan).

The same issues of notice and cost apply equally

to the argument that plans could protect themselves

against dissipation by filing subrogation actions directly

against tortfeasors. But this proposal comes with an

additional significant hurdle, at least for insured plans:

state anti-subrogation laws.“ The United States implicitly

acknowledges this restriction, noting (without further

elaboration) that “plans may exercise that option when

subregation is permitted under state law.” U.S. Br. at 30

(emphasis added). A number of states have anti-subrogation

statutes specifically designed to prevent insurers from

14. Although ERISA generally preempts state laws that affect

benefit plans subject to the statute, 11 U.S.C. § 1144(a), it excludes

from preemption “any law of any State which regulates insurance,

banking, or securities.” Jd. § 1144(b)(2)(A).

26

directly enforcing reimbursement provisions." See, e.g.,

C.G.S.A. § 52-225a; Kan. Admin. Regs. § 40-1-20; N.J.S.A.

§ 2A:15-97; 11 N.C.A.C. § 12.0319; Va. Stat. § 38.2-3405.

These laws may prevent a plan from directly asserting a

claim over any judgment or settlement in a case initiated

by a beneficiary, again forcing it to seek relief through a

parallel federal action that may ultimately be insufficient

to prevent a beneficiary’s dissipation of the actual dollars

received in a litigation settlement.

Nor can plans rely on attorneys’ professional obligations

under state law to protect their right to reimbursement

and the equitable lien created thereby. Such rules have no

applicability whatsoever when a case is settled via insurance

agents, where no attorney needs to get involved. See

supra at 23-24. Even for those cases that reach litigation,

states do not have uniform rules regarding an attorney’s

obligation to ignore client instructions to disburse funds

subject to an agreed-upon lien. See Resp. Br. at 53-54. And

even where some state’s professional code might require

an attorney to ignore her client’s direction to disburse

funds that are subject to a “valid assignment of rights

to the proceeds of a settlement or [] a consensual lien on

the settlement,” see Virginia Legal Ethics Opinion 1747,

Attorney Breaching Contract to Pay Medical Bills Out

of Settlement Proceeds (emphasis added), there is little

to stop a creative attorney from alleging that the plan’s

15. “Unlike subrogation, which arises under state law and

allows the insurer to stand in the shoes of its insured, reimbursement

is a contractual right governed by ERISA and comes into play only

after a plan member has received personal injury compensation.

While subrogation and reimbursement may have similar effects,

they are distinct doctrines.” Unisys Medical Plan v. Timm, 98 F.3d

971, 973 (7th Cir. 1996).

27

lien is somehow invalid or subject to a dispute, thereby

taking them out of the letter of the rule. See id; see also

Ga. R. Prof. Cond. 1.15(1)(b) (noting that “(t]he lawyer

may disregard the third person’s claimed interest if the

lawyer reasonably concludes that there is a valid defense

to such lien, judgment, or agreement”).

This case illustrates the point: Montanile’s attorney

alleged that the Plan’s reimbursement provision was

unenforceable because it appeared only in the plan

summary—a claim uniformly rejected by the courts below

and which has since been abandoned. Pet. Br. at 11. But

Montanile’s attorney did not wait for resolution of that

question by a court, or initiate an interpleader action

to preserve the funds. It disbursed them as directed,

resulting in their dissipation. Jd. at 11-12. There is no

evidence that professional discipline awaits—let alone that

there is an available legal remedy against an attorney for

improper disbursement that might make a plan whole.

Moreover, all of these suggestions that plans resort

to various state laws to protect their interests ignore

the overriding purpose of ERISA: “to establish a

uniform administrative scheme, which provides a set of

standard procedures to guide processing of claims and

disbursement of benefits.” Fort Halifax Packing Co. v.

Coyne, 482 U.S. 1, 9 (1987); see also Aetna Health Inc.

v. Davila, 542 U.S. 200, 208 (2004) (“The purpose of

ERISA is to provide a uniform regulatory regime over

employee benefit plans.”). “Uniformity is impossible

however, if plans are subject to different lega} obligations

in different states .... Requiring ERISA administrators

to master the relevant laws of 50 States and to contend

with litigation would undermine the congressional goa]

28

of ‘minimizing the administrative and financial burdens

on plan administrators--burdens ultimately borne by the

beneficiaries.” Egelhoff v. Egelhoff, 532 U.S. 141, 149-150

(2001) (quoting /ngersoll-Rand Co. v. McClendon, 498

U.S. 133, 142 (1990)). To address this concern, Congress

gave plans a right to an exclusive federal forum to resolve

disputes. 29 U.S.C. § 1132(e)(1). Removing that right and

forcing ERISA plans to seek relief under the varying

procedural and substantive restrictions available in

the states is a recipe for the “administrative costs” and

“litigation expenses” that “unduly discourage employers

from offering plans in the first place.” Varity Corp., 516

U.S. at 497.

Montanile suggests that even without the ability to

intervene or file an action for subrogation, a plan may

seek and obtain an injunction in federal court. See Pet.

Br. at 3, 22 n.13. But even assuming that a plan becomes

aware of a potential settlement, as Respondent explains,

there is no guarantee that it will be able to meet the

strict standards for Article III standing or injunctive

relief at that time. See Resp. Br. at 51-52 (citing City of

Los Angeles v. Lyons, 461 U.S. 95, 102 (1983) and Winter

v. NRDC, 555 U.S. 7, 24 (2008)). And if an administrator

waits until a settlement is actually consummated, it

may be too late to stop the beneficiary from evading the

equitable lien and spending the funds. Moreover, reliance

on protective injunctions invites a tidal wave of federal

litigation, as ERISA fiduciaries may feel compelled to file

for a protective injunction in every single case.

A final suggestion from Montanile’s amict is particularly

telling—they argue that plans should simply accept the

fact that they are powerless to prevent dissipation, and

29

therefore they should “compromise with its beneficiary

on a lower reimbursement, rather than litigate for the

full amount, with the attendant risk of loss or inability to

collect on a judgment.” AAJ Br. at 25. This, of course, is

not an alternative method to enforcing a reimbursement

obligation; it is instead a capitulation to the party who

is refusing to honor the agreement to reimburse. This

“alternative” reveals the real goal of many supporters of

Montanile in this case: to enact new substantive hurdles to

plan enforcement that they were unsuccessful in obtaining

from this Court in McCutchen and Sereboff.

C. If Plans Cannot Enforce Reimbursement

Provisions, They Will Impose Offsetting Cost-

Control Mechanisms That Will Be Detrimental

To Plan Participants.

If this Court eliminates the ability of plans to enforce

reimbursement provisions against beneficiaries who

ignore the terms they agreed to and dissipate settlement

funds, it ultimately will harm plan participants. Plan

administrators have the ability and fiduciary obligation

to impose alternative cost-contro] mechanisms. The

predictable options all involve eliminating, or at least

restricting, practices that currently benefit injured plan

participants.

First, employers may be forced to reduce or eliminate

certain benefits, increase premiums, or do both, because a

plan’s ability to obtain reimbursement from participants is

a significant factor in establishing benefit levels and plan

rates. If the plan’s right to reimbursement is denied, the

cost of paying for the underlying benefits falls to those

who make the contributions that support plan benefits.

30

In the absence of a predictable right to recovery, plans

will be forced to protect against the resulting risk by

raising rates or decreasing benefits for all participants.

Plan participants that honor their obligations under plan

reimbursement provisions should not be forced to bear

these costs.

Second, an erosion of reimbursement rights may

force plan providers to adopt alternative approaches that

shift greater burdens to plan participants. For example,

plan providers faced with escalating costs could elect to

defer or delay payment of claims for medical expenses

related to another party’s negligence until the accident

liability issues have been fully resolved or until litigation

has concluded. See, e.g., Kress v. Food Empires Labor

Relations Ass'n, 391 F.3d 563, 568 (4th Cir. 2004) (“Since

third-party accident and sickness benefits are not even

covered by the Fund, nor required by ERISA, it makes

little sense to argue that ERISA precludes imposing

conditions on the receipt of benefits that are in effect an

interest-free loan.”).

Third, to secure the certainty of recovery of medical

expenses if section 502(a)(3) remedies are weakened, plans

could choose to offset future benefits. In other words, a

plan could add language to an existing reimbursement

provision permitting the fiduciary to deny future

benefits equal to the amount of money that should have

been reimbursed under the terms of the plan. Or more

drastically, plan sponsors might be compelled to amend

their plans to exclude coverage for medical expenses

related to the negligence of other parties. Such restrictions

are permissible because, as this Court has recognized,

ERISA “does not regulate the substantive content of

31

welfare-benefit plans.” Metropolitan Life Ins. Co. v.

Mass., 471 U.S. 724, 732 (1985), and nothing in federal law

“requires a welfare plan to contain a subrogation clause

nor does it bar such clauses or otherwise regulate their

content.” Ryan by Capria Ryan v. Federal Express Co., 78

F.3d 123, 127 (8d Cir. 1996). If plans were to eliminate this

coverage, participants will ultimately have to pay retail

rates for their medical expenses out of their own pockets

because individuals cannot negotiate the more favorable

group rates available to an employee benefit plan.

The net consequences of all of these possible outcomes

would be higher plan costs and reduced plan benefits,

harms that will be shifted to all plan participants,

including plan participants that honor the terms of their

agreements. This unnecessary and unwarranted shift

of risk allocation would come at a time when employers

are finding it increasingly difficult to provide benefits to

their employees. “Cost of employer-sponsored coverage is

the most common reason employers cite for not offering

health coverage.” Indeed, premiums have more than

doubled since 2001, and system-wide increases in health

care costs going forward are expected to outpace the

growth in national income for the foreseeable future—

despite the enactment of the ACA.” The relief requested

16. The Henry J. Kaiser Family Foundation, The Uninsured.

A Primer: Key Facts About Americans Without Health Insurance

(Jan. 2015), avatladle at http://files.kff.org/attachment/the-

uninsured-a-primer-key-facts-about-health-insurance-and-the-

uninsured-in-america-primer (accessed on Oct. 1, 2015).

17. See The Henry J. Kaiser Family Foundation, Health

Care Costs, A Primer at 2 (May 2012), available at http://

kaiserfamilyfoundation.files.wordpress.com/2013/01/7670-03.pdf

(accessed on Oct. 1, 2015).

32

by Montanile threatens to further increase costs, upend

beneficial aspects of qualified plans for all participants,

and provide a benefit only to those who seek to avoid

abiding by disclosed plan terms to which they agreed.

Neither law nor policy compels such an unwarranted and

inequitable result.

CONCLUSION

For the reasons stated, NASP and SIIA respectfully

ask that the Court affirm the judgment below.

Respectfully submitted,

Bryan B. DAVENPORT WILLIAM 8S. Consovoy

Law Orrices Or BRYAN Counsel of Record

B. DavENPoRT, P.C. PATRICK STRAWBRIDGE

160 Fairway Lakes Dr. J. MICHAEL CONNOLLY

Franklin, IN 46131 Consovoy McCarTHY

Laura D. SCHMIDT PARK P LLC

. 3033 Wilson Boulevard

Downs STANFORD, P.C.

2001 Bryan St. Suite 700

Suite 4000 Arlington, VA 22201

Dallas, TX 75093 will@consovoymecarthy.com

(214) 748-7900 DarRAN P. KIEFER

KREINER & Peters Co.,

L.P.A.

2570 Superior Avenue

Suite 401

Cleveland, OH 44114

Counsel for Amici Curiae

October 2, 2015