''Sereboff v. Mid Atlantic Medical Services, Inc.'', 547 U.S. 356 (2006), was a case decided by the Supreme Court of the United States involving the ability of an

Employee Retirement Income Security Act The Employee Retirement Income Security Act of 1974 (ERISA) (, codified in part at ) is a U.S. federal tax and labor law that establishes minimum standards for pension plans in private industry. It contains rules on the federal income tax e ...

(ERISA) plan

fiduciary A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. One party, for examp ...

to recover medical costs from a beneficiary who has been reimbursed for injuries by a third party. The Court ruled unanimously that ERISA permitted the fiduciary to recover costs from the

settlement Settlement may refer to: *Human settlement, a community where people live *Settlement (structural), the distortion or disruption of parts of a building * Closing (real estate), the final step in executing a real estate transaction *Settlement (fin ...

proceeds a beneficiary received in a

personal injury Personal injury is a legal term for an injury to the body, mind or emotions, as opposed to an injury to property. In common law jurisdictions the term is most commonly used to refer to a type of tort lawsuit in which the person bringing the suit (t ...

lawsuit.

Background

ERISA plan, injuries, and settlement

Marlene Sereboff and her husband Joel were the beneficiaries of a health insurance plan administered by Mid Atlantic Medical Services, Inc., and covered by ERISA. The plan contained an "Acts of Third Parties" provision, which applied if a third party was responsible for their illness or injury, and required the beneficiaries to reimburse Mid Atlantic for plan benefits from any recovery from that third party. The provision further stated that Mid Atlantic's share of the recovery would not be reduced because the beneficiary did not receive the full damages claimed. The Sereboffs were injured in a car accident in

California California is a state in the Western United States, located along the Pacific Coast. With nearly 39.2million residents across a total area of approximately , it is the most populous U.S. state and the 3rd largest by area. It is also the m ...

, and the plan paid the couple's medical expenses. They filed a

tort A tort is a civil wrong that causes a claimant to suffer loss or harm, resulting in legal liability for the person who commits the tortious act. Tort law can be contrasted with criminal law, which deals with criminal wrongs that are punishable ...

action Action may refer to: * Action (narrative), a literary mode * Action fiction, a type of genre fiction * Action game, a genre of video game Film * Action film, a genre of film * ''Action'' (1921 film), a film by John Ford * ''Action'' (1980 fil ...

in state court against several third parties, seeking

compensatory damages At common law, damages are a remedy in the form of a monetary award to be paid to a claimant as compensation for loss or injury. To warrant the award, the claimant must show that a breach of duty has caused foreseeable loss. To be recognised at ...

for their injuries. Beginning soon after the suit was commenced, Mid Atlantic sent the Sereboffs and their attorney several letters in which it asserted a

lien A lien ( or ) is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. The owner of the property, who grants the lien, is referred to as the ''lienee'' and the per ...

on the anticipated proceeds from the suit for paid medical expenses eventually totaling $74,869.37. The Sereboffs eventually

settled A settler is a person who has migrated to an area and established a permanent residence there, often to colonize the area. A settler who migrates to an area previously uninhabited or sparsely inhabited may be described as a pioneer. Settle ...

their tort suit for $750,000, but did not distribute anything to Mid Atlantic.

Collection suit

Mid Atlantic filed suit in the U.S. District Court for the District of Maryland, claiming a right to collect from the Sereboffs under § 502(a)(3) of ERISA.. Because the Sereboffs' attorney had already distributed the settlement proceeds to them, Mid Atlantic sought a

temporary restraining order An injunction is a legal and equitable remedy in the form of a special court order that compels a party to do or refrain from specific acts. ("The court of appeals ... has exclusive jurisdiction to enjoin, set aside, suspend (in whole or in par ...

and preliminary injunction requiring the couple to retain and set aside at least $74,869.37 from the proceeds. The District Court approved a

stipulation In United States law, a stipulation is a formal legal acknowledgment and agreement made between opposing parties before a pending hearing or trial. For example, both parties might stipulate to certain facts and so not have to argue them in court. A ...

under which the Sereboffs agreed to preserve the amount claimed in an investment account until after the case was decided on the merits and all appeals exhausted. The District Court ruled for Mid Atlantic and ordered the Sereboffs to pay $74,869.37, plus interest, with a deduction for Mid Atlantic's share of the attorney's fees and court costs that the Sereboffs had incurred in state court. On appeal, the

United States Court of Appeals for the Fourth Circuit The United States Court of Appeals for the Fourth Circuit (in case citations, 4th Cir.) is a federal court located in Richmond, Virginia, with appellate jurisdiction over the district courts in the following districts: * District of Maryland ...

affirmed in relevant part. though it observed that the circuits were divided on the question of whether § 502(a)(3) authorized recovery in those circumstances.

Opinion of the Court

The Court unanimously affirmed the Fourth Circuit in an opinion delivered by Chief Justice

John G. Roberts John Glover Roberts Jr. (born January 27, 1955) is an American lawyer and jurist who has served as the 17th chief justice of the United States since 2005. Roberts has authored the majority opinion in several landmark cases, including '' Nat ...

. Under § 502(a)(3) of ERISA, A fiduciary may bring a civil action "(A) to enjoin any act or practice which violates 11 any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." The Court believed the only question remaining in the case was whether the relief Mid Atlantic sought from the District Court was " equitable" under § 502(a)(3)(B). The Court analyzed this issue by considering both the nature of the remedy Mid Atlantic sought, and the basis for its claim against the Sereboffs.

Equitable nature of relief sought

The Court had previously construed section 502(a)(3)(B) of

ERISA The Employee Retirement Income Security Act of 1974 (ERISA) (, codified in part at ) is a U.S. federal tax and labor law that establishes minimum standards for pension plans in private industry. It contains rules on the federal income tax eff ...

to only authorize remedies "that were typically available in equity." This was elaborated upon in '' Great-West Life & Annuity Ins. Co. v. Knudson'', in which the Court rejected an ERISA

's claim for

restitution The law of restitution is the law of gains-based recovery, in which a court orders the defendant to ''give up'' their gains to the claimant. It should be contrasted with the law of compensation, the law of loss-based recovery, in which a court ...

. ''Knudson'' had involved similar facts, and the Court had ruled that the restitution sought was not equitable because the funds were not actually in the beneficiary's possession. The liability sought was therefore personal and legal. By contrast, equitable restitution sought to impose a constructive trust or equitable

on specific funds or property that were in the defendant's possession. The Court believed that Mid Atlantic's claim was one for equitable restitution, because the Sereboffs' possession of the settlement funds satisfied the requirement that was missing in ''Knudson''. Mid Atlantic was not simply seeking to recover from the Sereboffs' assets generally, but rather to recover through a constructive trust or equitable lien on a specifically identified fund. That this action involved a breach of contract claim did not mean that the relief was not equitable, because that would make the ERISA provision that expressly provides for equitable relief to enforce plan terms "an empty promise."

Equitable basis for claim

Regarding the basis for Mid Atlantic's claim, the Court considered '' Barnes v. Alexander'' to be instructive, in which attorneys sued their supervisor to recover the promised one third of the

contingency fee A contingent fee (also known as a contingency fee in the United States or a conditional fee in England and Wales) is any fee for services provided where the fee is payable only if there is a favourable result. Although such a fee may be used in many ...

in the case on which they had worked. The Court had ruled that a lien attached to the fee and followed it into the hands of the supervisor, based upon "the familiar rule of equity 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." The Court considered the "Acts of Third Parties" provision in the Sereboffs' ERISA plan analogous to the contingency fee claim, as the provision specifically identified a particular fund and a particular share of that fund to which Mid Atlantic was entitled. Under the rule of equity set forth in ''Barnes'', Mid Atlantic could "follow a portion of the recovery into the Sereboffs' hands as soon as the settlement fund was identified, and impose on that portion a constructive trust or equitable lien."Internal marks and citation omitted.

References

External links

* {{DEFAULTSORT:Sereboff V. Mid Atlantic Medical Services, Inc. Employee Retirement Income Security Act of 1974 United States Supreme Court cases United States Supreme Court cases of the Roberts Court 2006 in United States case law