ERISA-Eleventh Circuit Affirms Judgment Awarding Medical Plan The Benefits It Paid To A Participant, When The Participant Settled Her Case Against The Party Causing Her Injury, Even Though The Benefits Could Not Be Traced To The Settlement Amount.

In Airtran Airways, Inc. v. Elem, Nos. 13-11738 and 13-14912 (11th Cir. 2014), the issue to be decided is whether an employee welfare benefit plan may recover medical costs it spent on behalf of a beneficiary after she and her attorney conspired to hide and disburse settlement funds she received after a car accident.

In this case, Brenda Elem participated, as an employee of AirTran, in a self-funded employee welfare benefit plan. After Elem suffered injuries in a car accident and the plan paid over $100,000 for her medical care, Elem sued the other driver and settled for $500,000. AirTran sought reimbursement from Elem under an equitable lien created under the plan, but Elem’s attorney, Mark Link, misrepresented that Elem had settled for only $25,000. The truth was discovered when Link accidentally sent the plan a copy of a settlement check for $475,000. After AirTran sued Elem, Link, and Link & Smith, P.C., for violations of ERISA under section 502(a)(3), seeking equitable relief (that is, to enforce the equitable lien), the district court granted summary judgment for the $100,000 plus in medical benefits to AirTran, and awarded attorney’s fees and costs in favor of AirTran. The defendants appeal.

In analyzing the case, the Eleventh Circuit Court of Appeals (the “Court”) said that Elem, Link, and the law firm challenge three orders. They contest the summary judgment for the $100,000 plus in medical benefits on the ground that AirTran failed to satisfy the strict tracing rules of equitable restitution, but these rules do not apply to the equitable lien by agreement that the AirTran plan created. See Sereboff v. Mid Atlantic Med. Serv.,Inc., 547 U.S. 356, 364-65, 126 S. Ct. 1869, 1875 (2006). Elem and Link argue that the district court abused its discretion when it awarded AirTran attorney’s fees and costs, but the district court had the authority to sanction them for their bad faith. Elem and Link also complain that the district court misapplied Federal Rule of Civil Procedure 70 when the court ordered enforcement of the judgment, but that issue became moot when Link and his law firm complied with the order. Therefore, the Court affirmed the summary judgment and award of fees and costs and dismissed as moot the appeal of the order to enforce the judgment.

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