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Big Case #3 - Sereboff v. Mid Atlantic Medical Services
August 15, 2006 by Ross Runkel at LawMemo
#3 in the Big Cases Series for 2006: Sereboff v. Mid Atlantic Medical Services, 126 S.Ct. 1869 (US Supreme Court 05/15/2006)
Facts: The Sereboffs were injured in a traffic accident, and their ERISA plan paid their medical expenses of about $75,000. Later, the Sereboffs recovered about $750,000 in a settlement from a third party. The ERISA plan had an “Acts of Third Parties” provision which requires a beneficiary who is injured as a result of an act or omission of a third party to reimburse the plan for benefits it pays on account of those injuries, if the beneficiary recovers for those injuries from the third party. The plan sued under ERISA §502(a)(3), seeking to collect from the Sereboffs’ tort recovery the medical expenses it had paid on the Sereboffs’ behalf. The Sereboffs agreed to set aside from their tort recovery a sum equal to the amount the plan claimed, and preserve this sum in an investment account pending the outcome of the suit.
Statute: A fiduciary may bring a civil action under §502(a)(3)(B) "to obtain … appropriate equitable relief … to enforce … the terms of the plan."
Held: The plan's suit properly sought “equitable relief” under §502(a)(3).
The Court distinguished Great-West Life & Annuity Ins. Co. v. Knudson, 534 U. S. 204 (2002), which involved a provision in an ERISA plan similar to the "Acts of Third Parties" provision in the Sereboffs’ plan. Relying on such a provision, Great-West sought equitable restitution of benefits it had paid when Knudson recovered in tort from a third party. In considering whether §502(a)(3)(b) authorized such relief, the Court asked whether the restitutionary remedy Great-West sought would have been equitable in "the days of the divided bench," id., at 212. The Court found that it would not have been equitable, because the funds Great-West sought were not in Knudson’s possession but had been placed in a trust under California law.
In contrast, in the Sereboff case the plan sought identifiable funds within the Sereboffs’ possession and control - that part of the tort settlement due to the plan and set aside in the investment account.
Later cases:
- Coan v. Kaufman, ___ F.3d ___ (2nd Cir 07/21/2006) (plan participant's suit against trustees alleging breach of fiduciary duty did not seek equitable relief)
- Dillard's Inc v. Liberty Life Assurance, ___ F.3d ___ (8th Cir 07/19/2006) (reimbursement claim for overpayments resulting from payment of social security benefits sought equitable relief)
- LaRue v. DeWolff, Boberg & Assoc, 450 F.3d 570 (4th Cir 06/19/2006) (401(k) plan participant's Section 1132(a)(3) suit against plan administrator alleging failure to follow investment instructions was not seeking equitable relief)
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Editor: Ross Runkel, Professor of Law Emeritus. email Ross@LawMemo.Com, Phone 503-399-8028. Copyright LawMemo, Inc.
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