A divided Ninth Circuit three-judge panel held that a plan was not entitled to equitable enforcement of the plan's subrogation right to reimbursement from a plan beneficiary's third-party injury settlement funds. The plan had sued the beneficiary's attorneys under the provision for equitable relief under ERISA section 502(a)(3) to enforce a plan lien for medical benefits paid on behalf of the beneficiary. The attorneys had disbursed the settlement money without paying the plan lien. The district court held that the plan's lien took priority over the attorneys' fees and ordered the attorneys to pay the plan out of the law firmʼs fees and costs.
On appeal, the plan argued that Sereboff v. Mid Atlantic Medical Services, Inc. overruled an earlier Ninth Circuit case, Hotel Employees & Restaurant Employees Intern. Union Welfare Fund v. Gentner, holding that a plan's lien could not be enforced against an attorney who did not sign the reimbursement agreement or expressly agree to honor the plan's lien. Sereboff, a Supreme Court decision, held that an ERISA plan was entitled to equitable enforcement of its reimbursement rights against identifiable settlement funds held by a beneficiary. Two of the judges on the panel disagreed, holding that Sereboff did not undermine the logic of Gentner, and accordingly reversed the district court's decision.