U.S. Airways, Inc. v. McCutchen

• Decision Date: 16 April 2013
• Docket Number: No. 11–1285.,11–1285.
• Citation: 185 L.Ed.2d 654,133 S.Ct. 1537,569 U.S. 88
• Parties: US AIRWAYS, INC., in its capacity as fiduciary and plan administrator of the US Airways, Inc. Employee Benefits Plan, Petitioner v. James E. McCUTCHEN et al.
• Court: U.S. Supreme Court

569 U.S. 88

133 S.Ct. 1537

185 L.Ed.2d 654

US AIRWAYS, INC., in its capacity as fiduciary and plan administrator of the US Airways, Inc. Employee Benefits Plan, Petitioner

v.James E. McCUTCHEN et al.

No. 11–1285.

Supreme Court of the United States

Argued Nov. 27, 2012.

Decided April 16, 2013.

Neal Kumar Katyal, argued, Washington, DC, for Petitioner.

Joseph R. Palmore, for the United States as amicus curiae, by special leave of the Court, supporting neither party.

Matthew W.H. Wessler, Washington, DC, for Respondents.

Noah G. Lipschultz, Littler Mendelson, P.C., Minneapolis, MN, Susan Katz Hoffman, Littler Mendelson, P.C., Philadelphia, PA, Neal Kumar Katyal, Counsel of Record, Catherine E. Stetson, Dominic F. Perella, Mary Helen Wimberly, Sean Marotta, Hogan Lovells US LLP, Washington, DC, for Petitioner.

Leslie A. Brueckner, Arthur H. Bryant, Public Justice, P.C., Oakland, CA, Peter K. Stris, Brendan S. Maher, Stris & Maher LLP, Dallas, TX, Matthew W.H. Wessler, Counsel of Record, Leah M. Nicholls, Public Justice, P.C., Washington, DC, Jon R. Perry, Paul A. Hilko, Rosen Louik & Perry, P.C., Pittsburgh, PA, for Respondents.

Justice KAGAN delivered the opinion of the Court.

Respondent James McCutchen participated in a health benefits plan that his employer, petitioner U.S. Airways, established under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. That plan obliged U.S. Airways to pay any medical expenses McCutchen incurred as a result of a third party's actions—for example, another person's negligent driving. The plan in turn entitled U.S. Airways to reimbursement if McCutchen later recovered money from the third party.

This Court has held that a health-plan administrator like U.S. Airways may enforce such a reimbursement provision by filing suit under § 502(a)(3) of ERISA, 88 Stat. 891, 29 U.S.C. § 1132(a)(3). See Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356, 126 S.Ct. 1869, 164 L.Ed.2d 612 (2006). That section authorizes a civil action "to obtain ... appropriate equitable relief ... to enforce ... the terms of the plan." We here consider whether in that kind of suit, a plan participant like McCutchen may raise certain equitable defenses deriving from principles of unjust enrichment. In particular, we address one equitable doctrine limiting reimbursement to the amount of an insured's "double recovery" and another requiring the party seeking reimbursement to pay a share of the attorney's fees incurred in securing funds from the third party. We hold that neither of those equitable rules can override the clear terms of a plan. But we explain that the latter, usually called the common-fund doctrine, plays a role in interpreting U.S. Airways' plan because the plan is silent about allocating the costs of recovery.

I

In January 2007, McCutchen suffered serious injuries when another driver lost control of her car and collided with McCutchen's. At the time, McCutchen was an employee of U.S. Airways and a participant in its self-funded health plan. The plan paid $66,866 in medical expenses arising from the accident on McCutchen's behalf.

McCutchen retained attorneys, in exchange for a 40% contingency fee, to seek recovery of all his accident-related damages, estimated to exceed $1 million. The attorneys sued the driver responsible for the crash, but settled for only $10,000 because she had limited insurance coverage and the accident had killed or seriously injured three other people. Counsel also secured a payment from McCutchen's own automobile insurer of $100,000, the maximum amount available under his policy. McCutchen thus received $110,000—and after deducting $44,000 for the lawyer's fee, $66,000.

On learning of McCutchen's recovery, U.S. Airways demanded reimbursement of the $66,866 it had paid in medical expenses. In support of that claim, U.S. Airways relied on the following statement in its summary plan description:

"If [US Airways] pays benefits for any claim you incur as the result of negligence, willful misconduct, or other actions of a third party, ... [y]ou will be required to reimburse [US Airways] for amounts paid for claims out of any monies recovered from [the] third party, including, but not limited to, your own insurance company as the result of judgment, settlement, or otherwise." App. 20.¹

McCutchen denied that U.S. Airways was entitled to any reimbursement, but his attorneys placed $41,500 in an escrow account pending resolution of the dispute. That amount represented U.S. Airways' full claim minus a proportionate share of the promised attorney's fees.

US Airways then filed this action under § 502(a)(3), seeking "appropriate equitable relief" to enforce the plan's reimbursement provision. The suit requested an equitable lien on $66,866—the $41,500 in the escrow account and $25,366 more in McCutchen's possession. McCutchen countered by raising two defenses relevant here. First, he maintained that U.S. Airways could not receive the relief it sought because he had recovered only a small portion of his total damages; absent over-recovery on his part, U.S. Airways' right to reimbursement did not kick in. Second, he contended that U.S. Airways at least had to contribute its fair share to the costs he incurred to get his recovery; any reimbursement therefore had to be marked down by 40%, to cover the promised contingency fee. The District Court rejected both arguments, granting summary judgment to U.S. Airways on the ground that the plan "clear[ly] and unambiguous[ly]" provided for full reimbursement of the medical expenses paid. App. to Pet. for Cert. 30a; see id., at 32a.

The Court of Appeals for the Third Circuit vacated the District Court's order. The Third Circuit reasoned that in a suit for "appropriate equitable relief" under § 502(a)(3), a court must apply any "equitable doctrines and defenses" that traditionally limited the relief requested. 663 F.3d 671, 676 (C.A.3 2011). And here, the court continued, " ‘the principle of unjust enrichment’ " should " ‘serve to limit the effectiveness' " of the plan's reimbursement provision. See id., at 677 (quoting 4 G. Palmer, Law of Restitution § 23.18, p. 472–473 (1978)). Full reimbursement, the Third Circuit thought, would "leav[e] [McCutchen] with less than full payment" for his medical bills; at the same time, it would provide a "windfall" to U.S. Airways given its failure to "contribute to the cost of obtaining the third-party recovery." 663 F.3d, at 679. The Third Circuit then instructed the District Court to determine what amount, shy of the entire $66,866, would qualify as "appropriate equitable relief." Ibid.

We granted certiorari, 567 U.S. ––––, 133 S.Ct. 36, 183 L.Ed.2d 674 (2012), to resolve a circuit split on whether equitable defenses can so override an ERISA plan's reimbursement provision.² We now vacate the Third Circuit's decision.

II

A health-plan administrator like U.S. Airways may bring suit under § 502(a)(3) for "appropriate equitable relief ... to enforce ... the terms of the plan."³ That provision, we have held, authorizes the kinds of relief "typically available in equity" in the days of "the divided bench," before law and equity merged. Mertens v. Hewitt Associates, 508 U.S. 248, 256, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993) (emphasis deleted).

In Sereboff v. Mid Atlantic Medical Services, we allowed a health-plan administrator to bring a suit just like this one under § 502(a)(3). Mid Atlantic had paid medical expenses for the Sereboffs after they were injured in a car crash. When they settled a tort suit against the other driver, Mid Atlantic claimed a share of the proceeds, invoking the plan's reimbursement clause. We held that Mid Atlantic's action sought "equitable relief," as § 502(a)(3) requires. See 547 U.S., at 369, 126 S.Ct. 1869. The "nature of the recovery" requested was equitable because Mid Atlantic claimed "specifically identifiable funds" within the Sereboffs' control—that is, a portion of the settlement they had gotten. Id., at 362–363, 126 S.Ct. 1869 (internal quotation marks omitted). And the "basis for [the] claim" was equitable too, because Mid Atlantic relied on " ‘the familiar rul[e] of equity that a contract to convey a specific object’ " not yet acquired " ‘create[s] a lien’ " on that object as soon as " ‘the contractor ... gets a title to the thing.’ " Id., at 363–364, 126 S.Ct. 1869 (quoting Barnes v. Alexander, 232 U.S. 117, 121, 34 S.Ct. 276, 58 L.Ed. 530 (1914) ). Mid Atlantic's claim for reimbursement, we determined, was the modern-day equivalent of an action in equity to enforce such a contract-based lien—called an "equitable lien by agreement." 547 U.S., at 364–365, 126 S.Ct. 1869 (internal quotation marks omitted). Accordingly, Mid Atlantic could bring an action under § 502(a)(3) seeking the funds that its beneficiaries had promised to turn over. And here, as all parties agree, U.S. Airways can do the same thing.

The question in this case concerns the role that equitable defenses alleging unjust enrichment can play in such a suit. As earlier noted, the Third Circuit held that "the principle of unjust enrichment" overrides U.S. Airways' reimbursement clause if and when they come into conflict. 663 F.3d, at 677. McCutchen offers a more refined version of that view, alleging that two specific equitable doctrines meant to "prevent unjust enrichment" defeat the reimbursement provision . Brief for Respondents i. First, he contends that in equity, an insurer in U.S. Airways' position could recoup no more than an insured's "double recovery"—the amount the insured has received from a third party to compensate for the same loss the insurance covered. That rule would limit U.S. Airways' reimbursement to the share of McCutchen's settlements paying for medical expenses; McCutchen would keep the rest (e.g., damages for loss of future earnings or pain and suffering), even though the plan gives U.S. Airways first claim on the whole third-party recovery. Second, McCutchen claims...