U.S. Airways v. McCutchen
Issues
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?
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 as Framed for the Court by the Parties
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.
Early in 2007, a young driver lost control of her car and crashed into James McCutchen’s vehicle. US Airways, Inc. v. McCutchen, 663 F.3d 671, 673 (3d Cir.
Written by
Edited by
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.