Earlier today, the U.S. Supreme Court reversed a decision by the Eleventh Circuit and held that when a ERISA plan participant obtains a third-party settlement subject to a plan’s subrogation provision, and then dissipates the settlement on “nontraceable” items, the plan cannot enforce a lien against the participant’s general assets under Section 502(a)(3) of ERISA.  In so holding, the Court made clear that: (i) a plaintiff could enforce an equitable lien only against specifically identified funds in the defendant’s possession, or traceable items purchased with the funds (e.g., a car); and (ii) expenditure of the entire identifiable fund on nontraceable items (e.g., food) destroys an equitable lien, and any personal claim against the defendant’s general assets would be a legal, not equitable, remedy, and thus not available under Section 502(a)(3).  Because the lower courts did not determine whether the plan participant kept his settlement monies separate from his general assets, or dissipated the entirety of the funds on nontraceable assets, the Court remanded the case to the district court to make that determination.  The case is Montanile v. Bd. of Trustees of Nat. Elevator Indus. Health Ben. Plan, 2016 WL 228344 (U.S. Jan. 20, 2016).

Stay tuned for Proskauer’s perspective on the implications of the Court’s decision.

Photo of Joseph Clark Joseph Clark

Joseph E. Clark is a senior counsel in the Labor & Employment Law Department and a member of the Employee Benefits & Executive Compensation Group where he focuses on complex employee benefits litigation.

Joe represents a diverse range of clients from the time…

Joseph E. Clark is a senior counsel in the Labor & Employment Law Department and a member of the Employee Benefits & Executive Compensation Group where he focuses on complex employee benefits litigation.

Joe represents a diverse range of clients from the time a claim is asserted through trial or arbitration, whether it is defending plan fiduciaries against class action claims of fiduciary breach or prohibited transactions or in connection with government investigations, or defending employers against multiemployer pension plan claims for withdrawal liability.  These clients include financial service providers, investment managers, Fortune 500 corporations, and benefit plan committees.

Outside of the context of litigation, Joe also advises fiduciary clients regarding their fiduciary responsibilities and employers regarding various withdrawal liability issues.

A co-editor of Proskauer’s Employee Benefits & Executive Compensation blog, Joe has authored pieces on employee stock ownership plans, excessive fee claims, fiduciary breach, investigation and determination of benefits claims, and best practices for plan drafting. He has also published several articles regarding these issues in BNA Insights.