. . . a claim that “allege[s] breach of contract and [seeks] money” but “[seeks] recovery through a constructive trust or equitable lien on a specifically identified fund” in the defendant’s possession and control is equitable relief for purposes of § 1132(a)(3).

Popowski v. Parrott, 461 F.3d 1367, 1374 (11th Cir. Ga. 2006)

You may recall the Eleventh Circuit Court of Appeals opinion cited above in which the Court reversed the decision of a federal district court that it lacked jurisdiction to hear subrogation claims by ERISA health plans.  The case proceeded to another stage on remand recently.

The district court’s opinion, Popowski v. Parrott, 2008 U.S. Dist. LEXIS 71615 (N.D. Ga. Sept. 19, 2008), shows that the contructive trust remedy can extend to structured settlements, but also demonstrates that assets subject to the remedy can dissipate rather quickly after disbursement of a personal injury settlement.

After Remand

Following remand from  the Eleventh Circuit, the defendants (erstwhile personal injury plaintiffs), proceeded pro se as their counsel moved to withdraw and the court acceded in this request.  At this stage the case consisted of essentially two issues, the first, pertaining to a structured annuity and the second, to a discovery dispute.

Where The Money Went

The health plan had paid out $ 152,889.65 in medical expenses which it sought to recover.

The available funds amounted $ 500,000 the defendant had received in settlement for her injuries from her under-insured motorist’s insurance carrier.  The opinion relates that:

At the time of the settlement, Defendant had incurred $ 234,557.50 in medical expenses and lost wages of $ 9,061.54. Out of the settlement, $ 175,000 was paid to her attorney, $ 125,000 was placed in a structured annuity to the benefit of Defendant, and the remaining $ 200,000 was paid to Defendant and placed in a joint checking account with her husband. Defendant also received $ 25,000 from the tortfeasor’s insurance company. Some of that money went directly to medical expenses and attorney’s fees with a remainder of $ 2,374.64 going to Defendant and her husband.

The Structured Settlement

Defendant purchased a structured settlement from Amica Mutual Insurance Company at a cost of $ 125,000. The  structure requires payments to Defendant over a period of twenty years.

The district court held that this annuity was subject to the plan’s claims, stating that:

The court finds that through their statement of material facts, Plaintiffs have established that the Amica Structure Settlement is a specified fund that was purchased with the proceeds of the money Defendant received in settlement of her tort claims. Under the undisputed and unambiguous terms of the Plan, Plaintiffs are entitled to that property. When Amica is brought before the court, the court can make further instructions as to the disposition of that property.

The Remaining Assets

The other funds proved more elusive.  On this score, the court stated:

It appears to the court that the only tangible assets Defendant may have remaining from the settlement fund are a 2004 Jeep Cherokee, a couch, a chair, and her home purchased in August 2005. Defendant has admitted that the Jeep and the furniture were purchased with the proceeds of the settlement. The parties dispute the origin of the financing of the August 2005 home. Plaintiffs contend it was funded through the settlement; Defendant avers that it was purchased with a loan through her husband’s 401K. At this point, it is not clear the extent to which the court will need to delve into the issue of the August 2005 home.

Since Section 502(a)(3) does not provide for legal remedies, the availability of assets subject to the constructive trust remedy becomes an acute issue.  The plan fiduciary faces significant challenges in preventing dissipation of funds subject to the remedy.

The discovery dispute in the case largely related to the plan fiduciary’s attempt to identify and locate the settlement proceeds or property acquired with those proceeds. 

Note:  The 11th Circuit decision consolidated two cases:

The United Distributors Inc. Employee Health Benefit Plan, The Commerce Group, Third Party Administrator of the United Distributors Inc. Employee Health Benefit Plan, v. Deborah Parrott (and Blue Cross Blue Shield of South Carolina v. Josue Carillo, Vincente Carillo.  Popowski was a pro-plan case; Carillo went for the plan participant.