# 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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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2015

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0315%3A12. Public record. Not legal advice.