In Sereboff v. Mid Atlantic, the Supreme Court again considered the circumstances in which a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) may sue a beneficiary for reimbursement of medical expenses paid by the ERISA plan when the beneficiary has also recovered for its injuries from a third party.
The 4 th US Circuit Court of Appeals had ruled that such recovery should be considered appropriate “equitable relief” under ERISA where the funds are specifically identifiable, belong in good conscience to the fiduciary and are within the possession and control of the plan participant.
The High Court revisited whether the equitable relief criteria established by the 4 th Circuit (as well as the 5 th , 7 th and 10 th Circuits) are proper under ERISA and re-evaluated its own earlier ruling in the Great West Life v. Knudson case (See Supreme Court to Provide Clarification of Equitable Relief ).
The Sereboff v Mid Atlantic case is similar to the Great West v. Knudson case decided by the Supreme Court in January 2002 (See Strict ERISA Read Results in No Benefit Reimbursement ), in which a fiduciary reserved “a first lien upon any recovery, whether by settlement, judgment or otherwise,’ the beneficiary receives from [a] third party.” In a 5-4 decision the court ruled in favor of Janette Knudson, finding she could not be forced to repay health insurer Great West nearly $400,000 for covering the medical work she received after a car accident.
In his Sereboff opinion Chief Justice John Roberts writes that [The] impediment to characterizing the relief in Knudson as equitable is not present here.” Roberts writes that in the case, Mid Atlantic sought “specifically identifiable” funds that were “within the possession and control of the Sereboffs” – that portion of the tort settlement due Mid Atlantic under the terms of the ERISA plan, set aside and “preserved [in the Sereboffs’] investment accounts.”
On the other hand, Roberts noted in the opinion that the relief that was sought by Great West was not equitable because it was no longer in Knudson’s possession, but in a “Special Needs Fund.”