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Friday, June 14, 2024 | Back issues
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Supreme Court Reversal|in Accident-Payout Case

WASHINGTON (CN) - The Supreme Court threw out a decision Wednesday that would have a car-accident victim who settled with the other driver reimburse medical coverage.

The Board of Trustees of the National Elevator Industry Health Benefit Plan paid more than $121,000 after Robert Montanile, a covered employee, suffered injuries in a Dec. 1, 2008, car accident.

Having required lumbar spinal fusion surgery and other treatment, Montanile sued the drunken driver from the accident and ultimately obtained a $500,000 settlement.

His attorneys took more than half of that amount, and the board demanded reimbursement as well.

It sued Montanile in Florida under the Employee Retirement Income Security Act, and a federal granted the board summary judgment in the amount of $121,044.22.

Montanile petitioned the U.S. Supreme Court for review after the 11th Circuit affirmed in 2014, finding that the plan had first priority to settlement proceeds Montanile received from a third party.

The Supreme Court reversed Wednesday finding it erroneous for the lower courts to let the plan recover out of Montanile's general assets, without determining whether Montanile kept his settlement fund separate from his general assets or dissipated the entire fund on what the court calls nontraceable items like food or services.

The ruling explains that Section 502(a)(3) of ERISA authorizes plan fiduciaries like the board of trustees to bring civil suits "to obtain other appropriate equitable relief ... to enforce ... the terms of the plan."

Relief could not be said to be equitable, however, without further proceedings to determine how Montanile spent the proceeds of his settlement, the majority found.

Standard-equity treatises "make clear that a plaintiff could ordinarily enforce an equitable lien only against specifically identified funds that remain in the defendant's possession or against traceable items that the defendant purchased with the funds (e.g., identifiable property like a car)," Justice Clarence Thomas wrote for the majority (parentheses in original). "A defendant's expenditure of the entire identifiable fund on nontraceable items (like food or travel) destroys an equitable lien. The plaintiff then may have a personal claim against the defendant's general assets - but recovering out of those assets is a legal remedy, not an equitable one and remanded."

Thomas shot down the trustee board's contention that it can enforce an equitable lien against Montanile's general assets, without showing commingling or identifying specific funds.

The board of trustees argued that finding otherwise would encourage plan participants to "dissipate any settlement as quickly as possible, before fiduciaries can sue."

Thomas countered that it was up to the board to track Montanile's lawsuit against the third party.

"The board had sufficient notice of Montanile's settlement to have taken various steps to preserve those funds," he wrote. "Most notably, when negotiations broke down and Montanile's lawyer expressed his intent to disburse the remaining settlement funds to Montanile unless the plan objected within 14 days, the board could have - but did not - object. Moreover, the board could have filed suit immediately, rather than waiting half a year."

Chief Justice John Roberts joined the majority decision, as did Justices Antonin Scalia, Anthony Kennedy, Stephen Breyer, Sonia Sotomayor and Elena Kagan.

Though Justice Samuel Alito joined the majority as well, he did not participate in a section of the opinion about the board's duty to track Montanile's litigation.

Justice Ruth Bader Ginsburg wrote a paragraph-long dissent that slams her colleagues' decision as "bizarre."

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