Here is some of the California law (federal law which applies to California) on this FAQ:
Sereboff v. Mid Atlantic Medical Services, Inc. 126 S. Ct. 1869, 547 U.S. 356 (2006) ERISA plan may enforce a subrogation or reimbursement provision through an action for constructive trust or equitable lien against a plan participant holding settlement funds. The Ct distinguished its 2002 ruling in Knudson, supra, on the basis that the ERISA plan there sued persons not holding the funds (which had been deposited in a Special Needs Trust). Also distinguished Knudson on the basis that instead of seeking to impose personal liability as in Knudson, the Sereboff action “sought its recovery through a constructive trust or equitable lien on a specifically Identified fund.” Id at 363. The Ct declined to decide the application of the "make whole" doctrine but suggested in dicta that said defense would not apply to an action for equitable lien. Ct did not address the common fund doctrine which had been applied by both lower courts because it was included in the reimbursement provision in the plan.
This case is inconsistent with all 9th Circuit precedent since 1994 holding that ERISA plans cannot enforce their contractual reimbursement provisions under ERISA because 29 USC 1132(a)(3) only allows plans to sue for "equitable relief to enforce the terms of the plan." Ct relies heavily on its 1914 decision in Barnes for the proposition that one promising to convey property to be recovered in the future becomes a constructive trustee “as soon as he recovers a title to the thing...” suggesting title argument.
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