The United State Supreme Court’s recent decision in US Airways v. McCutchen forecloses the use of the equitable defense of unjust enrichment in cases where an ERISA plan administrator seeks reimbursement of benefits from a plan participant or beneficiary who received a third-party tort recovery. This ruling brings uniformity to reimbursement cases throughout the country and will limit a participant's or beneficiary’s defenses in a reimbursement claim to those provided by the written terms of an ERISA plan.
In the case before the Court, the U.S. District Court for the Western District of Pennsylvania granted US Airways’ motion for summary judgment on its reimbursement claim and, in doing so, rejected the defense of unjust enrichment. The case was filed after McCutchen received a tort recovery for a severe automobile accident and then refused to completely reimburse the US Airways-sponsored ERISA plan for medical expenses paid on his behalf, which he was required to do under the plan’s reimbursement provision. McCutchen claimed that US Airways would be unjustly enriched if he was required to reimburse the plan because, after paying attorney’s fees, he received less than the amount he owed the plan and also because the plan had not contributed anything in pursuing the tort action. The Third Circuit Court of Appeals reversed, holding that US Airways’ claims under ERISA §502(a)(3) for “appropriate equitable relief” were subject to the equitable defense of unjust enrichment.
The Supreme Court held that that the terms of an ERISA plan govern the obligation of the parties, and that the equitable defense of unjust enrichment was not available in a Section 502(a)(3) case to enforce an equitable lien by agreement. The Court also held that the common fund doctrine, which allows for equitable apportionment of attorney fees spent to recover from a third party and can be abrogated only where specifically set forth in an ERISA plan, applied to any recovery to US Airways because the plan was silent on the matter. The Court remanded the case so that the lower court could apply the principles of the common fund doctrine to determine US Airways’ recovery.
In general, this ruling is a victory for ERISA plan administrators because (1) it will create uniformity across the circuits, disallowing the use of equitable defense of unjust enrichment and (2) it reiterates that an ERISA plan’s terms control the parties’ respective obligations, which cannot be changed by courts after the fact based on a perceived inequity. Going forward, however, plans that opt to include reimbursement provisions should include language that specifically abrogates the common fund doctrine with regard to those recoveries so that the plan is not forced to pay any share of attorney fees.