US Airways, Inc. v. McCutchen
569 U.S. ___ (2013)

Annotate this Case
Justia Opinion Summary
The US Airways health benefits plan paid $66,866 in medical expenses for injuries suffered by McCutchen, its employee, in a car accident caused by a third party. The plan entitled US Airways to reimbursement if McCutchen recovered money from the third party. McCutchen’s attorneys secured $110,000 in payments, and McCutchen received $66,000 after deducting the contingency fee. US Air¬ways demanded reimbursement of the full $66,866 and filed suit under section 502(a)(3) of the Employee Retirement Income Security Act, which authorizes health-plan administrators to bring a civil action “to obtain ... appropriate equitable relief ... to enforce .. the plan.” The district court granted US Airways summary judgment. The Third Circuit vacated, reasoning that equitable doctrines and defenses overrode the reimbursement clause, which would leave McCutchen with less than full payment for his medical bills and give US Airways a windfall. The Supreme Court vacated and remanded, holding that the plan’s terms govern. An administrator can use section 502(a)(3) to obtain funds that its beneficiaries promised to turn over. ERISA focuses on what a plan provides; section 502(a)(3) does not authorize “appropriate equitable relief” at large,” but only relief necessary to enforce “the terms of the plan” or the statute. While equitable rules cannot trump a reimbursement provision, they may aid in construing it. The plan is silent on allocation of attorney’s fees, and the common¬fund doctrine provides the appropriate default rule.

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321 .

SUPREME COURT OF THE UNITED STATES

Syllabus

US AIRWAYS, INC., in its capacity as fiduciary and plan administrator of the US AIRWAYS, INC. EMPLOYEE BENEFITS PLAN v. McCUTCHEN et al.

certiorari to the united states court of appeals for the third circuit

No. 11–1285. Argued November 27, 2012—Decided April 16, 2013

The health benefits plan established by petitioner US Airways paid $66,866 in medical expenses for injuries suffered by respondent McCutchen, a US Airways employee, in a car accident caused by a third party. The plan entitled US Airways to reimbursement if McCutchen later recovered money from the third party. McCutchen’s attorneys secured $110,000 in payments, and McCutchen received $66,000 after deducting the lawyers’ 40% contingency fee. US Airways demanded reimbursement of the full $66,866 it had paid. When McCutchen did not comply, US Airways filed suit under §502(a)(3) of the Employee Retirement Income Security Act of 1974 (ERISA), which authorizes health-plan administrators to bring a civil action “to obtain . . . appropriate equitable relief . . . to enforce . . . the terms of the plan.” McCutchen raised two defenses to US Airways’ request for an equitable lien on the $66,866 it demanded: that, absent over-recovery on his part, US Airways’ right to reimbursement did not kick in; and that US Airways had to contribute its fair share to the costs he incurred to get his recovery, so any reimbursement had to be reduced by 40%, to cover the contingency fee. Rejecting both arguments, the District Court granted summary judgment to US Airways. The Third Circuit vacated. Reasoning that traditional “equitable doctrines and defenses” applied to §502(a)(3) suits, it held that the principle of unjust enrichment overrode US Airways’ reimbursement clause because the clause would leave McCutchen with less than full payment for his medical bills and would give US Airways a windfall.

Held:

     1. In a §502(a)(3) action based on an equitable lien by agreement—like this one—the ERISA plan’s terms govern. Neither general unjust enrichment principles nor specific doctrines reflecting those principles—such as the double-recovery or common-fund rules invoked by McCutchen—can override the applicable contract. Pp. 5–11.

          (a) Section 502(a)(3) authorizes the kinds of relief “typically available in equity” before the merger of law and equity. Mertens v. Hewitt Associates, 508 U. S. 248 . In Sereboff v. Mid Atlantic Medical Services, Inc., 547 U. S. 356 , the Court permitted a health-plan administrator to bring a suit just like this one. The administrator’s claim to enforce its reimbursement clause, the Court explained, was the modern-day equivalent of an action in equity to enforce a contract-based lien—called an “equitable lien ‘by agreement.’ ” Id., at 364–365. Accordingly, the administrator could use §502(a)(3) to obtain funds that its beneficiaries had promised to turn over. The parties agree that US Airways can do the same here. Pp. 5–6.

          (b) Sereboff’s logic dooms McCutchen’s argument that two equitable doctrines meant to prevent unjust enrichment—the double-recovery rule and common-fund doctrine—can override the terms of an ERISA plan in such a suit. As in Sereboff, US Airways is seeking to enforce the modern-day equivalent of an equitable lien by agreement. Such a lien both arises from and serves to carry out a contract’s provisions. See 547 U. S., at 363–364. Thus, enforcing the lien means holding the parties to their mutual promises and declining to apply rules—even if they would be “equitable” absent a contract—at odds with the parties’ expressed commitments. The Court has found nothing to the contrary in the historic practice of equity courts. McCutchen identifies a slew of cases in which courts applied the equitable doctrines invoked here, but none in which they did so to override a clear contract that provided otherwise. This result comports with ERISA’s focus on what a plan provides: §502(a)(3) does not “authorize ‘appropriate equitable relief’ at large,” Mertens, 508 U. S., at 253, but countenances only such relief as will enforce “the terms of the plan” or the statute. Pp. 6–11.

     2. While McCutchen’s equitable rules cannot trump a reimbursement provision, they may aid in properly construing it. US Airways’ plan is silent on the allocation of attorney’s fees, and the common-fund doctrine provides the appropriate default rule to fill that gap. Pp. 12–16.

          (a) Ordinary contract interpretation principles support this conclusion. Courts construe ERISA plans, as they do other contracts, by “looking to the terms of the plan” as well as to “other manifestations of the parties’ intent.” Firestone Tire & Rubber Co. v. Bruch, 489 U. S. 101 . Where the terms of a plan leave gaps, courts must “look outside the plan’s written language” to decide the agreement’s meaning, CIGNA Corp. v. Amara, 563 U. S. ___, ___, and they properly take account of the doctrines that typically or traditionally have governed a given situation when no agreement states otherwise. Pp. 12–13.

          (b) US Airways’ reimbursement provision precludes looking to the double-recovery rule in this manner because it provides an allocation formula that expressly contradicts the equitable rule. By contrast, the plan says nothing specific about how to pay for the costs of recovery. Given that contractual gap, the common-fund doctrine provides the best indication of the parties’ intent. This Court’s cases make clear that the doctrine would govern here in the absence of a contrary agreement. See, e.g., Boeing Co. v. Van Gemert, 444 U. S. 472 . Because a party would not typically expect or intend a plan saying nothing about attorney’s fees to abrogate so strong and uniform a background rule, a court should be loath to read the plan in that way. The common-fund rule’s rationale reinforces this conclusion: Without the rule, the insurer can free ride on the beneficiary’s efforts, and the beneficiary, as in this case, may be made worse off for having pursued a third party. A contract should not be read to produce these strange results unless it specifically provides as much. Pp. 13–16.

663 F. 3d 671, vacated and remanded.

     Kagan, J., delivered the opinion of the Court, in which Kennedy, Ginsburg, Breyer, and Sotomayor, JJ., joined. Scalia, J., filed a dissenting opinion, in which Roberts, C. J., and Thomas and Alito, JJ., joined.

Official Supreme Court caselaw is only found in the print version of the United States Reports. Justia caselaw is provided for general informational purposes only, and may not reflect current legal developments, verdicts or settlements. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or information linked to from this site. Please check official sources.