U.S. Airways, Inc. v. McCutchen
April 16, 2013
Case #: 11-1285
Kagan, J., delivered the opinion of the Court, in which Kennedy, Ginsburg, Breyer, and Sotomayor, JJ., joined. Scalia, J., filed a dissenting opinion, in which Roberts, C. J., and Thomas and Alito, JJ., joined
Full Text Opinion: http://www.supremecourt.gov/opinions/12pdf/11-1285_i4dk.pdf
Employment Law: The Employee Retirement Income Security Act (ERISA) does not authorize courts to use equitable principles to rewrite contractual language.
After Respondent suffered a serious injury, Petitioner administered a benefit plan which paid $66,866 for Respondent's medical expenses. Respondent also recovered $110,000 from third parties. Deducting the 40% for attorney contingency fees, Respondent received $66,000. Petitioner sought to enforce its subrogation right and demanded reimbursement of the entire $66,866 owed. Petitioner filed suit for “appropriate equitable relief” pursuant to §502(a)(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"). The District Court allowed the subrogation claim ordering Respondent to repay Petitioner in full. The Court of Appeals for the Third Circuit reversed, remanded and held that unjust enrichment overrode Petitioner’s subrogation rights because the clause would leave Respondent with insufficient funds to cover medical expenses.
Petitioner appealed to the Supreme Court. On appeal Petitioner argues that the Third Circuit incorrectly held that §502(a)(3) of ERISA authorizes courts to use equitable principles to rewrite contractual language. The Court vacated, remanded and held that the ERISA terms govern. Under ERISA §502(a)(3), an action based on an equitable lien by agreement is governed by the terms of the plan. Neither general unjust enrichment principles nor specific doctrines reflecting those principles override the applicable contract language of the parties.