It Says So, Therefore It Is - Supreme Court Holds in McCutchen that Plan Terms Control the Scope of a Reimbursement Claim

On April 16, the Supreme Court decided the case of US Airways v. McCutchen. In McCutchen, the Supreme Court considered the question of whether reimbursement provisions in a self-funded employee welfare benefit plan governed by ERISA are required to be enforced as they are written. The answer was a resounding yes, continuing the Court’s line of reasoning that focuses on what the ERISA plan documents say, and reinforcing the importance of the actual words used in the plan. To quote the Court, “The plan, in short, is at the center of ERISA.”

In the McCutchen case, Mr. McCutchen, a US Airways employee, was seriously injured in a car accident and received $66,866 in medical payments from the employer’s health plan. Separately, Mr. McCutchen hired a lawyer and recovered $10,000 in a settlement with the other driver and $100,000 from his own UIM policy, which, after attorney’s fees, left Mr. McCutchen with $66,000. The employer then sued for repayment of the full $66,866, under provisions requiring plan participants to reimburse the employer for amounts paid under the plan out of recoveries from third parties. The district court held for the employer and ordered Mr. McCutchen to pay the entire amount, but the Third Circuit, focusing on ERISA’s provisions relating to “appropriate equitable relief,” reversed, deciding that plan terms were not sacrosanct, and that courts could apply principles of equity to limit the availability of relief.

McCutchen argued before the Supreme Court that, under equitable principles, the employer (1) could not recoup more than the employee’s “double recovery,” and (2) must agree to pay its fair share of attorney’s fees. The Court disagreed that equitable principles trump clear plan terms, deciding instead that the plan provisions are to be enforced as written. However, the Court further held that, because the plan was silent as to attorney’s fees, the equitable “common fund” doctrine applied to the employer’s claim, and required that the employer share in the costs of recovery.

Attorneys involved in both sides of the McCutchen case will discuss its background and impact. Included on the panel will be Noah G. Lipschultz of Littler Mendelson P.C., who represented US Airways at various stages of the litigation, and Matthew W.H. Wessler of Public Justice, P.C., who argued the case for Mr. McCutchen in both the Third Circuit and the Supreme Court. The discussion will be moderated by Dechert partner Andrew L. Oringer, who has hosted PLI’s series of Hot Topic Briefings on various ERISA cases as they are decided.

Topics to be addressed will include:

• A summary of the background and decision in the McCutchen case, including the development of the law leading up to McCutchen
• A discussion of what language in a plan may be helpful to getting certainty regarding reimbursement rights
• Consideration of whether certain drafting alternatives that are permissible under McCutchen may or may not ultimately be desirable from a plan-design perspective