U.S. Airways, Inc. v. McCutchen

Case Updates

The Supreme Court reversed and remanded the decision of the Third Circuit. The Court held that “[i]n 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.”

The U.S. Chamber urged the U.S. Supreme Court to reverse a Third Circuit decision that authorized courts to use equitable principles to effectively “re-write” benefits contracts to relieve employees of reimbursement provisions. In this case, the lower court used equitable principles to relieve a beneficiary of his contractually-defined obligation to reimburse the benefit plan, which paid $66,000 to cover the beneficiary's medical expenses after an accident, from the $100,000 that the beneficiary recovered from third parties. The Chamber's amicus brief argued that re-writing plan terms to provide equitable relief is inconsistent with the text of the Employee Retirement Income Security Act (“ERISA”), and therefore an inappropriate remedy. The brief explained that ERISA places primacy on the written terms of benefit plans, requiring that employers honor the written terms of whatever benefit plan they decide to offer. Doing so benefits employers and participants alike; the participants know the benefits to which they are entitled, and employers are ensured a predictable set of liabilities and costs. If the lower court's decision is left to stand, denial of reimbursement will deplete plan assets, forcing them to compensate by increasing premiums or other costs, or by reducing benefits.