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SUPREME COURT OF THE UNITED STATES
_________________
No. 14–723
_________________
ROBERT MONTANILE, PETITIONER
v. BOARD
OF TRUSTEES of the NATIONAL ELEVATOR INDUSTRY HEALTH BENEFIT
PLAN
on writ of certiorari to the united states
court of appeals for the eleventh circuit
[January 20, 2016]
Justice Thomas delivered the opinion of the
Court.[
1]*
When a third party injures a participant in an
employee benefits plan under the Employee Retirement Income
Security Act of 1974 (ERISA), 88Stat. 829, as amended, 29
U. S. C. §1001
et seq., the plan frequently
pays covered medical expenses. The terms of these plans often
include a subrogation clause requiring a participant to reimburse
the plan if the participant later recovers money from the third
party for his injuries. And under ERISA §502(a)(3), 29
U. S. C. §1132(a)(3), plan fiduciaries can file
civil suits “to obtain . . . appropriate equitable
relief . . . to enforce . . . the terms of the
plan.”[
2]
In this case, we consider what happens when a
participant obtains a settlement fund from a third party, but
spends the whole settlement on nontraceable items (for instance, on
services or consumable items like food). We evaluate in particular
whether a plan fiduciary can sue under §502(a)(3) to recover
from the participant’s remaining assets the medical expenses
it paid on the participant’s behalf. We hold that, when a
participant dissipates the whole settlement on nontraceable items,
the fiduciary cannot bring a suit to attach the participant’s
general assets under §502(a)(3) because the suit is not one
for “appropriate equitable relief.” In this case, it is
unclear whether the participant dissipated all of his settlement in
this manner, so we remand for further proceedings.
I
Petitioner Robert Montanile was a participant
in a health benefits plan governed by ERISA and administered by
respondent, the Board of Trustees of the National Elevator Industry
Health Benefit Plan (Board of Trustees or Board). The plan must pay
for certain medical ex-penses that beneficiaries or participants
incur. The plan may demand reimbursement, however, when a
participant recovers money from a third party for medical expenses.
The plan states: “Amounts that have been recovered by a
[ participant] from another party are assets of the Plan
. . . and are not distributable to any person or entity
without the Plan’s written release of its subrogation
interest.” App. 45. The plan also provides that “any
amounts” that a participant “recover[s] from another
party by award, judgment, settlement or otherwise . . .
will promptly be applied first to reimburse the Plan in full for
benefits advanced by the Plan . . . and without reduction
for attorneys’ fees, costs, expenses or damages claimed by
the covered person.”
Id., at 46. Participants must
notify the plan and obtain its consent before settling claims.
In December 2008, a drunk driver ran through a
stop sign and crashed into Montanile’s vehicle. The accident
severely injured Montanile, and the plan paid at least $121,044.02
for his initial medical care. Montanile signed a reimbursement
agreement reaffirming his obligation to reimburse the plan from any
recovery he obtained “as a result of any legal action or
settlement or otherwise.”
Id., at 51 (emphasis
deleted).
Thereafter, Montanile filed a negligence claim
against the drunk driver and made a claim for uninsured motorist
benefits under Montanile’s car insurance. He obtained a
$500,000 settlement. Montanile then paid his attorneys $200,000 and
repaid about $60,000 that they had advanced him. Thus, about
$240,000 remained of the settlement. Montanile’s attorneys
held most of that sum in a client trust account. This included
enough money to satisfy Montanile’s obligations to the
plan.
The Board of Trustees sought reimbursement from
Montanile on behalf of the plan, and Montanile’s attorney
argued that the plan was not entitled to any recovery. The parties
attempted but failed to reach an agreement about reimbursement.
After discussions broke down, Montanile’s attorney informed
the Board that he would distribute the remaining settlement funds
to Montanile unless the Board objected within 14 days. The Board
did not respond within that time, so Montanile’s attorney
gave Montanile the remainder of the funds.
Six months after negotiations ended, the Board
sued Montanile in District Court under ERISA §502(a)(3), 29
U. S. C. §1132(a)(3), seeking repayment of the
$121,044.02 the plan had expended on his medical care. The Board
asked the court to enforce an equitable lien upon any settlement
funds or any property which are “ ‘in
[ Montanile’s] actual or constructive
possession.’ ” 593 Fed. Appx. 903, 906 (CA11 2014)
(quoting complaint). Because Montanile had already taken possession
of the settlement funds, the Board also sought an order enjoining
Montanile from dissipating any such funds. Montanile then
stipulated that he still possessed some of the settlement
proceeds.
The District Court granted summary judgment to
the Board. No. 12–80746–Civ. (SD Fla., Apr. 18, 2014),
2014 WL 8514011, *1. The court rejected Montanile’s argument
that, because he had by that time spent almost all of the
settlement funds, there was no specific, identifiable fund separate
from his general assets against which the Board’s equitable
lien could be enforced.
Id., at *8–*11. The court held
that, even if Montanile had dissipated some or all of the
settlement funds, the Board was entitled to reimbursement from
Montanile’s general assets.
Id., at *10–*11. The
court entered judgment for the Board in the amount of
$121,044.02.
The Court of Appeals for the Eleventh Circuit
affirmed. It reasoned that a plan can always enforce an equitable
lien once the lien attaches, and that dissipation of the specific
fund to which the lien attached cannot destroy the underlying
reimbursement obligation. The court therefore held that the plan
can recover out of a participant’s general assets when the
participant dissipates the specifically identified fund. 593 Fed.
Appx., at 908.
We granted certiorari to resolve a conflict
among the Courts of Appeals over whether an ERISA fiduciary can
enforce an equitable lien against a defendant’s general
assets under these circumstances.[
3] 575 U. S. ___ (2015). We hold that it cannot, and
accordingly reverse the judgment of the Eleventh Circuit and remand
for further proceedings.
II
A
As previously stated, §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.” 29 U. S. C. §1132(a)(3). Our cases
explain that the term “equitable relief” in
§502(a)(3) is limited to “those categories of relief
that were
typically available in equity” during the
days of the divided bench (meaning, the period before 1938 when
courts oflaw and equity were separate).
Mertens v.
Hewitt
Associates, 508 U. S. 248, 256 (1993) . Under this
Court’s precedents, whether the remedy a plaintiff seeks
“is legal or equitable depends on [(1)] the basis for [the
plaintiff’s] claim and [(2)] the nature of the underlying
remedies sought.”
Sereboff v.
Mid Atlantic Medical
Services, Inc., 547 U. S. 356, 363 (2006) (internal
quotation marks omitted). Our precedents also prescribe a framework
for resolving this inquiry. To determine how to characterize the
basis of a plaintiff’s claim and the nature of the remedies
sought, we turn to standard treatises on equity, which establish
the “basic contours” of what equitable relief was
typically available in premerger equity courts.
Great-West Life
& Annuity Ins. Co. v.
Knudson, 534 U. S. 204,
217 (2002) .
We have employed this approach in three earlier
cases where, as here, the plan fiduciary sought reimbursement for
medical expenses after the plan beneficiary or participant
recovered money from a third party. Under these precedents, the
basis for the Board’s claim is equitable. But our cases do
not resolve whether the
remedy the Board now
seeks—enforcement of an equitable lien by agreement against
the defendant’s general assets—is equitable in
nature.
First, in
Great-West, we held that a plan
with a claim for an equitable lien was—in the circumstances
presented- seeking a legal rather than an equitable remedy. In that
case, a plan sought to enforce an equitable lien by obtaining a
money judgment from the defendants. The plan could not enforce the
lien against the third-party settlement that the defendants had
obtained because the defendants never actually possessed that fund;
the fund went directly to the defendants’ attorneys and to a
restricted trust. We held that the plan sought a legal rem-edy, not
an equitable one, even though the plan claimed that the money
judgment was a form of restitution.
Id., at 208–209,
213–214. We explained that restitution in equity typically
involved enforcement of “a constructive trust or an equitable
lien, where money or property identified as belonging in good
conscience to the plaintiff could clearly be traced to particular
funds or property in the defendant’s possession.”
Id., at 213. But the restitution sought in
Great-West
was legal—not equitable—because the specific funds to
which the fiduciaries “claim[ed] an entitlement
. . . [we]re not in [the defendants’]
possession.”
Id., at 214. Since both the basis for the
claim and the particular remedy sought were not equitable, the plan
could not sue under §502(a)(3).
Next, in
Sereboff, we held that both the
basis for the claim and the remedy sought were equitable. The plan
there sought reimbursement from beneficiaries who had retained
their settlement fund in a separate account. 547 U. S., at
359–360. We held that the basis for the plan’s claim
was equitable because the plan sought to enforce an equitable lien
by agreement, a type of equitable lien created by an agreement to
convey a particular fund to another party. See
id., at
363–364. The lien existed in
Sereboff because of the
beneficiaries’ agreement with the plan to convey the proceeds
of any third-party settlement. We explained that a claim to enforce
such a lien is equitable because the plan “could rely on a
familiar rul[e] of equity” to collect—specifically, the
rule “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.”
Ibid. (internal quotation
marks omitted; alteration in original). The underlying remedies
that the plan sought also were equitable, because the plan
“sought specifically identifiable funds that were within the
possession and control” of the beneficiaries—not
recovery from the beneficiaries’ “assets
generally.”
Id., at 362–363 (internal quotation
marks omitted).
Finally, in
US Airways, Inc. v.
McCutchen, 569 U. S. ___ (2013), we reaffirmed our
analysis in
Sereboff and again concluded that a plan sought
to enforce an equitable claim by seeking equitable remedies. As in
Sereboff, “the basis for [the plan’s] claim was
equitable” because the plan’s terms created an
equitable lien by agreement on a third-party settlement. See 569
U. S.
, at ___ (slip op., at 5) (internal quotation
marks omitted). And, as in
Sereboff, “[t]he nature of
the recovery requested” by the plan “was equitable
because [it] claimed specifically identifiable funds within the
[beneficiaries’] control—that is, a portion of the
settlement they had gotten.” 569 U. S., at ___ (slip
op., at 5) (internal quotation marks omitted).
Under these principles, the basis for the
Board’s claim here is equitable: The Board had an equitable
lien by agreement that attached to Montanile’s settlement
fund when he obtained title to that fund. And the nature of the
Board’s underlying
remedy would have been equitable
had it immediately sued to enforce the lien against the settlement
fund then in Montanile’s possession. That does not resolve
this case, however. Our prior cases do not address whether a plan
is still seeking an equitable remedy when the defendant, who once
possessed the settlement fund, has dissipated it all, and the plan
then seeks to recover out of the defendant’s general
assets.
B
To resolve this issue, we turn to standard
equity trea-tises. As we explain below, those 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). 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.
Equitable remedies “are, as a general
rule, directed against some specific thing; they give or enforce a
right to or over some particular thing . . . rather than
a right to recover a sum of money generally out of the
defendant’s assets.” 4 S. Symons, Pomeroy’s
Equity Jurisprudence §1234, p. 694 (5th ed. 1941) (Pomeroy).
Equitable liens thus are ordinarily enforceable only against a
specifically identified fund because an equitable lien “is
simply a right of a special nature
over the thing
. . . so that the very thing itself may be proceeded
against in an equitable action.”
Id., §1233, at
692; see also Restatement of Restitution §215, Comment
a, p. 866 (1936) (Restatement) (enforcement of equitable
lien requires showing that the defendant “still holds the
property or property which is in whole or in part its
product”); 1 D. Dobbs, Law of Remedies §1.4, p. 19 (2d
ed. 1993) (Dobbs) (similar). This general rule’s application
to equitable liens includes equitable liens by agreement, which
depend on “the notion . . . that the contract
creates some right or interest in or over specific property,”
and are enforceable only if “the decree of the court can lay
hold of” that specific property. 4 Pomeroy §1234, at
694–695.
If, instead of preserving the specific fund
subject to the lien, the defendant dissipated the entire fund on
nontraceable items, that complete dissipation eliminated the lien.
Even though the defendant’s conduct was wrongful, the
plaintiff could not attach the defendant’s general assets
instead. Absent specific exceptions not relevant here, “where
a person wrongfully dispose[d] of the property of another but the
property cannot be traced into any product, the other
. . . cannot enforce a constructive trust or lien
upon
any part of the wrongdoer’s property.” Restatement
§215(1), at 866 (emphasis added); see also
Great-West,
534 U. S., at 213–214 (citing Restatement §160).
The plaintiff had “merely a personal claim against the
wrongdoer”—a quintessential action at law.
Id.,
§215(1), at 866.
In sum, at equity, a plaintiff ordinarily could
not enforce any type of equitable lien if the defendant once
possessed a separate, identifiable fund to which the lien attached,
but then dissipated it all. The plaintiff could not attach the
defendant’s general assets instead because those assets were
not part of the specific thing to which the lien attached. This
rule applied to equitable liens by agreement as well as other types
of equitable liens.
III
The Board of Trustees nonetheless maintains
that it can enforce its equitable lien against Montanile’s
general assets. We consider the Board’s arguments in
turn.
A
First, the Board argues that, while equity
courts ordinarily required plaintiffs to trace a specific,
identifiable fund in the defendant’s possession to which the
lien attached, there is an exception for equitable liens by
agreement. The Board asserts that equitable liens by agreement
require no such tracing, and can be enforced against a
defendant’s general assets. According to the Board, we
recognized this exception in
Sereboff by distinguishing
between equitable restitution (where a lien attaches because the
defendant misappropriated property from the plaintiff ) and
equitable liens by agreement.
The Board misreads
Sereboff, which left
untouched the rule that
all types of equitable liens must be
enforced against a specifically identified fund in the
defendant’s possession. See 1 Dobbs §4.3(3), at 601,
603. The question we faced in
Sereboff was whether
plaintiffs seeking an equitable lien by agreement must
“identify an asset they originally possessed, which was
improperly acquired and converted into property the defendant
held.” 547 U. S., at 365. We observed that such a
requirement, although characteristic of restitutionary relief, does
not “appl[y] to equitable liens by agreement or
assignment.”
Ibid. (discussing
Barnes v.
Alexander, 232 U. S. 117 (1914) ). That is because the
basic premise of an equitable lien by agreement is that, rather
than physically taking the plaintiff’s property, the
defendant constructively possesses a fund to which the plaintiff is
entitled. But the plaintiff must still identify a specific fund in
the defendant’s possession to enforce the lien. See
id., at 123 (“Having a lien upon the fund, as soon as
it was identified they could follow it into the hands of the
appellant”).
B
Second, the Board contends that historical
equity practice supports enforcement of its equitable lien against
Montanile’s general assets. The Board identifies three
methods that equity courts purportedly employed to effectuate this
principle: substitute money decrees, deficiency judgments, and the
swollen assets doctrine. This argument also fails.
We have long rejected the argument that
“equitable relief” under §502(a)(3) means
“whatever relief a court of equity is empowered to provide in
the particular case atissue,” including ancillary legal
remedies.
Mertens, 508 U. S.
, at 256. In
“many situations . . . an equity court could
establish purely legal rights and grant legal remedies which would
otherwise be beyond the scope of its authority.”
Ibid.
(internal quotation marks omitted). But these legal remedies were
not relief “typically available in equity,” and
interpreting them as such would eliminate any limit on the meaning
of “equitable relief” and would “render the
modifier superfluous.”
Id., at 256, 258 (emphasis
deleted); see also
Great-West,
supra, at 210. As we
have explained—and as the Board conceded at oral
argument—as a general rule, plaintiffs cannot enforce an
equitable lien against a defendant’s general assets. See Part
II–B,
supra. The Board contends that there is an
exception if the defendant wrongfully dissipates the equitable lien
to thwart its enforcement. But none of the Board’s examples
show that such relief was “typically available” in
equity.[
4]
The specific methods by which equity courts
might have awarded relief from a defendant’s general assets
only confirm that the Board seeks legal, not equitable, remedies.
While equity courts sometimes awarded money decrees as a substitute
for the value of the equitable lien, they were still legal
remedies, because they were “wholly pecuniary and
personal.” 4 Pomeroy §1234, at 694. The same is true
with respect to deficiency judgments. Equity courts could award
both of these remedies as part of their ancillary jurisdiction to
award complete relief. But the treatises make clear that when
equity courts did so, “the rights of the parties are strictly
legal, and the final remedy granted is of the kind which might be
conferred by a court of law.” 1
id., §231, at
410; see also 1 Dobbs §2.7, at 180–181, and
§4.3(3), at 602 (similar); New Federal Equity Rules 10 (rev.
5th ed. 1925) (authorizing equity courts to award such relief). But
legal remedies—even legal remedies that a court of equity
could sometimes award—are not “equitable relief”
under §502(a)(3). See
Mertens,
supra, at
256–258.
The swollen assets doctrine also does not
establish that the relief the Board seeks is equitable. Under the
Board’s view of this doctrine, even if a defendant spends all
of a specifically identified fund, the mere fact that the defendant
wrongfully had assets that belonged to another increased the
defendant’s available assets, and justifies recovery from his
general assets. But most equity courts and treatises rejected that
theory. See Taft, Note, A Defense of a Limited Use of the Swollen
Assets Theory Where Money Has Wrongfully Been Mingled With Other
Money, 39 Colum. L. Rev. 172, 175 (1939) (describing the swollen
assets doctrine as “often . . . rejected by the
courts”); see also Oesterle, Deficiencies of the
Restitutionary Right to Trace Misappropriated Property in Equity
and in UCC §9–306, 68 Cornell L. Rev. 172, 189, and
n. 33 (1983) (similar). To the extent that courts endorsed any
version of the swollen assets theory, they adopted a more limited
rule: that commingling a specifically identified fund—to
which a lien attached—with a different fund of the
defendant’s did not destroy the lien. Instead, that
commingling allowed the plaintiff to recover the amount of the lien
from the entire pot of money. See Restatement §209, at 844;
Scott, The Right To Follow Money Wrong-fully Mingled With Other
Money, 27 Harv. L. Rev. 125, 125–126 (1913). Thus, even under
the version of the swollen assets doctrine adopted by some courts,
recovery out of Montanile’s general assets—in the
absence of commingling—would not have been “typically
available” relief.
C
Finally, the Board argues that ERISA’s
objectives—of enforcing plan documents according to their
terms and of protecting plan assets—would be best served by
allowing plans to enforce equitable liens against a
participant’s general assets. The Board also contends that,
unless plans can enforce reimbursement provisions against a
defendant’s general assets, plans will lack effective or
cost-efficient remedies, and participants will dissipate any
settlement as quickly as possible, before fiduciaries can sue.
We have rejected these arguments before, and do
so again. “[ V ]ague notions of a statute’s
‘basic purpose’ are . . . inadequate to
overcome the words of its text regarding the
specific issue
under consideration.”
Mertens,
supra, at 261.
Had Congress sought to prioritize the Board’s policy
arguments, it could have drafted §502(a)(3) to mirror ERISA
provisions governing civil actions. One of those provisions, for
instance, allows participants and beneficiaries to bring civil
actions “to enforce [their] rights under the terms of the
plan” and does not limit them to equitable relief.
Great-West, 534 U. S., at 221 (quoting 29
U. S. C. §1132(a)(1)(B) (1994 ed.)).
In any event, our interpretation of
§502(a)(3) promotes ERISA’s purposes by
“allocat[ing] liability for plan-related misdeeds in
reasonable proportion to respective actors’ power to control
and prevent the misdeeds.”
Mertens,
supra, at
262. More than a decade has passed since we decided
Great-West, and plans have developed safeguards against
participants’ and beneficiaries’ efforts to evade
reimbursement obligations. Plans that cover medical expenses know
how much medical care that participants and beneficiaries require,
and have the incentive to investigate and track expensive claims.
Plan provisions—like the ones here—obligate
participants and beneficiaries to notify the plan of legal process
against third parties and to give the plan a right of
subrogation.
The Board protests that tracking and
participating in legal proceedings is hard and costly, and that
settlements are often shrouded in secrecy. The facts of this case
undercut that argument. The Board had sufficient notice of
Montanile’s settlement to have taken various steps to
preserve those funds. 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.
IV
Because the lower courts erroneously held that
the plan could recover out of Montanile’s general assets,
they did not determine whether Montanile kept his settlement fund
separate from his general assets or dissipated the entire fund on
nontraceable assets. At oral argument, Montanile’s counsel
acknowledged “a genuine issue of . . . material
fact on how much dissipation there was” anda lack of record
evidence as to whether Montanile mixed the settlement fund with his
general assets. A remandis necessary so that the District Court can
make that determination.
* * *
We reverse the judgment of the Eleventh
Circuit and remand the case for further proceedings consistent with
this opinion.
It is so ordered.
