On April 17, the Supreme Court announced its decision in U.S. Airways, Inc. v. McCutchen. The case considered whether under Employee Retirement Income Security Act (ERISA) an injured employee who has medical expenses paid through his employer’s benefit plan--and who then sues and recovers damages from the third party who was responsible for the injury--is required to reimburse the benefit plan in full, even when some of the damages went to cover attorney’s fees.
In an opinion delivered by Justice Kagan, the Court held 5-4 that in an ERISA section 502(a)(3) action based on equitable lien by agreement (like that in the present case), the ERISA plan's terms govern. Neither general unjust enrichment principles nor specific doctrines reflecting those principles can override the applicable contract. Because the plan here is silent with respect to allocating costs of recovery, however, the common-fund doctrine still applies. As a result, the lower court opinion must be vacated and the case remanded for further proceedings.
Justices Kennedy, Ginsburg, Breyer, and Sotomayor joined the majority opinion. Justice Scalia filed a dissenting opinion, which was joined by Chief Justice Roberts and Justices Alito and Thomas.
To discuss the case, we have Jason Mendro, who is a partner in the Washington, D.C. office of Gibson, Dunn and Crutcher.
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