In US Airways, Inc. v. McCutchen, the United States Supreme Court has again addressed the proper scope of relief available under section 502(a)(3) of the Employment Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. § 1001, et seq. Its decision underscores the importance of clear and unambiguous plan language and holds that traditional equitable principles cannot be used to trump clear plan provisions.

James McCutchen, an employee of US Airways, was injured in an accident by a third party. His employer-sponsored health care plan paid his medical expenses related to the accident, which totaled $66,866. McCutchen filed suit against the third party, seeking damages for his injuries, including damages representing his health care costs. The case ultimately settled for the sum of $110,000. After deducting attorney fees and costs, McCutchen took home $66,000.

Like most health care plans, US Airways' plan contained a reimbursement provision that required participants to reimburse it should a participant recover damages from a third party. The clause stated that participants must reimburse the plan for all expenses paid, regardless of whether the participant was made whole through his or her settlement. The plan did not address whether it would be responsible for attorney fees incurred in pursuing recovery from the third party.

When McCutchen refused to reimburse his plan from his $66,000 recovery, the plan administrator filed suit against him pursuant to ERISA § 502(a)(3). That section states that a plan fiduciary may file a civil suit to "obtain ... appropriate equitable relief ... to enforce ... the terms of the plan." Through the suit, the plan sought imposition of an equitable lien upon the settlement funds and an order enforcing the reimbursement provision.

McCutchen raised two equitable defenses to the plan's claim for reimbursement. First, he claimed that, absent double recovery by him, the plan's right to reimbursement was barred by principles of equity. Second, he asserted that the equitable "common fund" doctrine applied, requiring the plan to pay a fair share of attorney fees and costs incurred in recovering from the third party wrongdoer.

The district court rejected both arguments, holding that the reimbursement provision was enforceable as written and ordered McCutchen to pay the disputed amount.The US Court of Appeals for the Third Circuit vacated the district court's decision, holding that traditional equitable principles applied to suits brought under § 502(a)(3). The appellate court held that principles of unjust enrichment overrode the plan's reimbursement clause because enforcing the clause would leave McCutchen with less than full payment for his medical bills and would also give US Airways a windfall.

The US Supreme Court, in an opinion authored by Justice Kagan, vacated the Third Circuit's decision and remanded the case to the district court. In its opinion, the court framed the issue as whether, in a suit for reimbursement brought under § 502(a)(3), a participant may raise equitable defenses deriving from principles of unjust enrichment. The court held that such defenses were unavailable to contradict the plain terms of a health care plan.

Relying on its past precedent, the court noted that the plan's suit was the equivalent of an "equitable lien by agreement." The court noted that equitable remedies such as this were designed to "carry out a contract's provisions," not contradict those provisions. The court noted that by enforcing such a lien, equity was merely "holding the parties to their mutual promises." In the court's analysis, whether such plan terms are fair, or resulted in the plan's unjust enrichment, were "beside the point." Instead, the plan language controls and equity is not harmed by holding each party to the benefit of the bargain clearly described in the plan.

A different result was reached with regard to whether the "common fund" doctrine applied to limit the plan's ability to enforce its reimbursement provision. That doctrine generally provides that a litigant who recovers a common fund for the benefit of persons other than himself is entitled to a reasonable attorney's fee from the fund as a whole. The US Airways plan was silent on allocation of attorney fees. Accordingly, the court held that no clear plan language resolved this issue, and this traditional equitable principle could be used to fill in "gaps" in the parties' agreement. The court implied that if the plan had clearly disclaimed application of that doctrine, a different result would be required.

The McCutchen opinion notes that the court's decision is rooted in its long-standing precedent stating that ERISA's principal function is to protect contractually defined benefits, and that its statutory scheme is "built around reliance on the face of written plan documents." As the opinion notes, "The plan, in short, is at the center of ERISA." Where the plan language clearly defines rights and obligations of the parties, principles of equity cannot be used to limit those rights and obligations.

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