SCOTUS: US Airways v. McCutchen Overruled

On April 16, 2013 the Supreme Court of the United States released its holding in US Airways v. McCutchen overruling the 3rd Circuit’s decision. The 3rd Circuit’s decision was part of a recent line of ERISA lien / ERISA reimbursement / ERISA subrogation cases with results in both directions.  The following four cases are listed in chronological order of their decisions:

1. Cigna Corp. v. Amara in the Supreme Court: Although the district court did not have authority under Section 502(a)(1)(B) of ERISA to reform CIGNA’s pension plan, it did have authority to do so under another provision, Section 502(a)(3).  The SOCTUS Blog’s “Plain English Holding”: Courts may order changes to the terms of a pension plan to remedy false or otherwise unlawful disclosures by the plan to the plan participants.  The progeny ofAmara will begin to take this holding a step further.
2. Zurich American Ins. Co. v. O’Hara, 11th Circuit:  While Amara seemed to open the use of equitable defenses in ERISA liens, Zurich ignored this opening and relied strictly on the plain language of the ERISA plan.
3. U.S. Airways v. McCutchen, 3rd Circuit:   Citing Amara, the Court noted that an ERISA Plan’s ability to recover was limited by statute to “appropriate equitable relief.” The court then reasoned that appropriate equitable relief requires application of defenses available in equity actions.  These defenses include the common fund doctrine and perhaps the made whole doctrine.
4. CGI v. Rose, 9th Circuit: The 9th Circuit agreed with the 3rd Circuit, holding that “parties may not by contract deprive [a court] of its power to act as a court in equity,” and made clear that notwithstanding the express terms of a Plan, it is within a district court’s broad equitable powers under ERISA to apply principles of equity in fashioning appropriate relief.

Unfortunately for Plaintiffs, and fortunately for insurers, the Supreme Court overturned the 3rd Circuit holding in US Airways v. McCutchen. This also effectively overturns the 9th Circuit holding in CGI v. Rose.

The Supreme Court wrote:

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.

In reality, this leaves us with the status quo.  Reduction becomes more of a negotiation and is likely available only as a pre-settlement agreement.

One pro-plaintiff result of the holding is seen where the Court noted, “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.”  So, if the plan is silent as to any equitable remedy, that remedy can apply.

We believe the result of this case and the key to ERISA lien resolution becomes early discussion with the plan administrators and subrogation firms.

If you need help with any type of lien resolution we can assist you with Medicare lien resolution, Medicaid lien resolution, ERISA liens, private insurance liens, and more.  We’ll take care of getting you the “lien” and reducing it too.

 

Ryan J. Weiner

Lien Resolution Services

www.lienresolutionusa.com

https://lienblog.wordpress.com

rweiner@lienresolutionusa.com

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