ERISA

U.S. Airways v. McCutchen (11-1285)

Oral argument:

November 27, 2012

Court below:

United States Court of Appeals for the Third Circuit

Following a serious car accident, James McCutchen received $66,866 to pay for his medical expenses from a benefit plan administered by his employer, US Airways. The Plan included a provision requiring beneficiaries to reimburse US Airways for claims “out of any monies recovered from a third party.” After receiving the Plan benefits, McCutchen hired counsel and sued third parties who were involved in accident, recovering a $10,000 settlement from one of the drivers involved in the accident and $100,000 in underinsured motorist coverage. US Airways subsequently sued McCutchen to recover the money they initially paid him by seeking “appropriate equitable relief” under ERISA Section 502(a)(3). US Airways maintains that the term “appropriate” in Section 502(a)(3) refers to the requirement that the type of “equitable relief” a plaintiff seeks be suitable under the circumstances to enforce the terms of the benefit plan and does not allow courts to use equity to rewrite contractual terms. McCutchen argues that courts have the authority to determine what constitutes “appropriate equitable relief” within the meaning of ERISA Section 502(a)(3) and, thus, are not required to enforce express plan terms. Supporters of the lower court’s decision argue that allowing courts to provide equitable relief would increase fairness and encourage beneficiaries to seek recovery from third parties. Opponents counter that affirming the lower court’s decision will increase ERISA litigation and threaten the financial viability of employee health benefit plans.

Questions Presented:

Whether the Third Circuit correctly held—in conflict with the Fifth, Seventh, Eighth, Eleventh, and D.C. Circuits—that ERISA Section 502(a)(3) authorizes courts to use equitable principles to rewrite contractual language and refuse to order participants to reimburse their plan for benefits paid, even where the plan’s terms give it an absolute right to full reimbursement.

[Question Presented]
[Issue]
[Facts]
[Discussion]
[Analysis]

Issue

Does ERISA Section 502(a)(3) allow courts to apply equitable principles to refuse to order a participant to reimburse the plan for medical coverage where the contract provides the plan with an absolute right to full reimbursement?

Written by:

Nathan Taylor

Cristina Quinones-Betancourt

Edited by:

Brandon Bodnar

Acknowledgments:

The authors would like to thank Professor Emily Sherwin for her insights into this case.

Additional Resources:

Strategic Recovery Project, Third Circuit makes a U-turn in US Airways v. McCutcheon (January 5, 2012).
Medicare, Medicaid & Subrogation Compliance Blog, U.S. Airways v. McCutcheon 1-Third Circuit Unanimously Holds ERISA Subrogation Limited by Equitable Defenses (November 22, 2011).
WillShapiro.com, A Win for the Good Guys-US Airways v. McCutchen, No. 10-3836 (3rd Circuit Nov. 16 2011) (June 18, 2012).
Wex, ERISA.

Cigna Corp. v. Amara (09-804)

Oral argument: Nov. 30, 2010

Appealed from: United States Court of Appeals for the Second Circuit (Oct. 6, 2009)

ERISA, STANDARD OF INJURY, LIKELY HARM, CASH BALANCE PLAN, SUMMARY PLAN DESCRIPTION

CIGNA Corporation changed its employee retirement plan from a traditional defined benefits plan to a cash balance plan. Under the Employee Retirement Income Security Act (“ERISA”), companies that change their retirement plan must release a summary plan description (“SPD”) that outlines the changes for employees in a manner that the average employee can understand. CIGNA released an SPD that described the change but did not mention a “wear-away” period during which the enrolled employees would continue earning credits under the plan while their minimum benefit would remain the same for a period of time. The Respondents, current and former CIGNA employees, sued in federal court, alleging that the inconsistency between the SPD and the actual benefit plan violated ERISA. The district court found for the plaintiffs, using a standard of “likely harm” to determine whether the employees were harmed by the inconsistency between the SPD and the original plan, and the Second Circuit affirmed. CIGNA appealed, arguing that a showing of “detrimental reliance” on the part of the employees is required before they can receive a remedy. The Court’s decision will likely affect the contents of SPDs and the availability of pension benefit plan class actions.

Hardt v. Reliance Standard Life Ins. (09-448)

Appealed from the United States Court of Appeals for the Fourth Circuit (July 14, 2009)

Oral argument: April 26, 2010

ERISA, PREVAILING PARTY, ATTORNEY’S FEES, DISABILTY BENEFITS, INSURANCE

Petitioner, Bridget Hardt (“Hardt”), a former employee of Dan River Inc., brought suit against Respondent, Reliance Insurance Co. (“Reliance”), the insurance provider for Dan River Inc., in an attempt to recover attorney’s fees for a previous suit Hardt had brought in the Eastern District of Virginia to recover benefits pursuant to Dan River Inc.’s Group Long-Term Disability Insurance Program Plan (“the Plan”). The Eastern District remanded the case to Reliance, which, under ERISA, not only administers the Plan, but also decides whether an applicant is entitled to benefits. On remand, Reliance provided Hardt with the requested benefits. Hardt now sues seeking attorney’s fees under ERISA § 502(g)(1). Reliance counters that Hardt did succeed on the merits in the lower court and, therefore, cannot satisfy ERISA’s definition of “prevailing party.” Hardt, on the other hand, argues that the text of the statute does not include a prevailing party standard as a prerequisite to recovering attorney fees. In this case, the Supreme Court will decide whether ERISA § 502(g)(1) requires a party to succeed on the merits before attorney’s fees may be awarded and, if so, whether Hardt satisfies that requirement.

Conkright v. Frommert (08-810)

Oral argument: Jan. 20, 2009

Appealed from: United States Court of Appeals for the Second Circuit (July 24, 2008)

ERISA, PENSIONS, JUDICIAL REVIEW, ARBITRARY AND CAPRICIOUS

Courts generally give deference to discretionary decisions made by ERISA pension plan administrators. This case will test the limits of that deference and will decide if a court is obligated to defer to a plan administrator’s proposed remedy for an ERISA violation, when the cause of the violation itself was the administrator’s prior interpretation. Petitioners and their amici argue that allowing judges to involve themselves in ERISA pension plan determinations without deferring to decisions made by the plan administrator will increase the costs and uncertainty of maintaining pension plans. Respondents and their amici, on the other hand, argue that deferring repeatedly to a plan administrator will increase costs through more and prolonged litigation, and will be unfair to plan participants who justifiably rely on promised benefits to plan for retirement.

LaRue v. DeWolff, Boberg & Assoc. (06-856)

Appealed from: United States Court of Appeals, 4th Circuit (June 19, 2006)

Oral argument: Nov. 26