A Supreme Lesson on Diligence and Equity: Court Bars Recovery of Equitable Lien Under ERISA Plan

The Supreme Court issued its decision in Montanile v. Board of Trustees of National Elevator Industry Health Benefit Plan , holding that the fiduciary could not enforce its equitable lien against general assets. The court reversed the Eleventh Circuit, finding that where a plan participant has obtained a settlement from a third party — but has dissipated the settlement on nontraceable items — the fiduciary cannot bring a suit under Section 502(a)(3) to attach the general assets of the participant as the claim is not one seeking “appropriate equitable relief.”

In resolving the issue, the court relied upon standard principles of equitable liens, which ordinarily allow enforcement of an equitable lien against some particular thing, not generally out of a defendant’s assets. As was indicated during oral argument, the court noted that enforcement of the equitable lien and the burden to track settlements of injured participants is justifiably placed on the fiduciary. The court stated that the fiduciary here “had sufficient notice of [ ] settlement to have taken various steps to preserve those funds.” The fiduciary was given 14 days’ notice to object to the disbursement of funds to the participant, but it did not object — and then further waited six months before filing the instant action.

This case serves as an important reminder that where a recovery from a third party is likely, proactive establishment and enforcement of an equitable lien must be done without delay.

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