US Airways v. McCutchen

It is somewhat rare for a trial and appellate court to disagree and, upon appeal to the United States Supreme Court, find out they were both wrong. It is even rarer for both parties in this action to win and lose simultaneously in a decision. And yet, on Tuesday, April 16, 2013, the scenario described above happened in US Airways v. McCutchen. The ruling from Justice Elena Kagan was a mixed bag. On one hand, the court ruled that clear policy terms in an employer provided health care plan trump unjust enrichment and other equitable remedies. However, in the absence of a clear provision otherwise, employees who must reimburse their employers for medical expenses can deduct attorneyaEUR(TM)s fees. James McCutchen, an employee of U.S. Airways was injured by a third party. The company medical plan paid his medical expenses to the tune of $66,866. However, a clause in the plan allowed U.S. Airways to seek reimbursement if the employee received any money from the third party. In this case, the third party paid the employee $110,000. McCutchen took home $66,000 after the 40 percent attorney contingency fee was deducted. US Airways sued under ERISA ? 502(a)(3) for reimbursement. ?502(a)(3) states that an employer may file a civil suit to aEURoeobtain … appropriate equitable relief … to enforce … the terms of the plan.aEUR? The courtaEUR(TM)s decision focused on whether aEURoeequitable defensesaEUR? aEURoecan override the clear terms of the plan. The court looked at two specific equitable doctrines. First, could reimbursement be limited to the amount that would constitute aEURoedouble recoveryaEUR? for the insured? Second, should the party seeking reimbursement from a judgment against a third party be forced to contribute to the attorneyaEUR(TM)s fees aEURoeincurred in securing the funds from that third partyaEUR?? Justice KaganaEUR(TM)s decision was a win of sorts for both parties. On one hand, the court held that when an action is commenced under ?502(a)(3), aEURoethe terms of the ERISA plan governaEUR? and these types of defenses cannot override the contract. However, because the language of the allocation rules associated with this plan did not discuss attorneyaEUR(TM)s fees, Justice Kagan applied the aEURoecommon-fund ruleaEUR?. The aEURoecommon-fund ruleaEUR? states that someone who recovers [money] for the benefit of persons other than himself [] is due a reasonable attorneyaEUR(TM)s fee from the fund as a whole.aEUR? In short, because the contract did not expressly state that attorneyaEUR(TM)s fees are out, McCutchen could have claim to attorneyaEUR(TM)s fees. To allow otherwise would be to turn the employee into a aEURoecollections agentaEUR? for the company. McCutchen probably would not have pursued the third-party claim if that was the case. In short, both parties are flying just a little high but both are also probably feeling just a bit grounded.