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March 2013

The Supreme Court To Decide Whether Equitable Defenses Can Preclude A Plan's Recovery Under Section 502(a)(3)

The Supreme Court recently heard oral argument in U.S. Airways, Inc. v. McCutchen, which will hopefully resolve a current Circuit Court split on the issue of whether plan administrators may recover wrongful payments under ERISA § 502(a)(3) in reliance on plan terms allowing for such recoveries.

In McCutchen, the US Airways medical benefits plan had paid medical expenses for McCutchen as a result of injuries he has sustained in an automobile accident.  After McCutchen recovered money from third parties as a result of the accident, the plan sought subrogation of the amounts it had paid to McCutchen.  The District Court granted summary judgment to US Airways based on language in the plan allowing full reimbursement of any amounts recovered by the participant. The Third Circuit overturned the District Court’s decision, holding that "Congress intended to limit the equitable relief available under § 502(a)(3) through the application of equitable defense and principles that were typically available in equity despite the negation of such defenses and principles in an ERISA plan.”  666 F.3d 671, 676 (3d Cir. 2011). 

The Ninth Circuit followed the McCutchen decision in CGI Techs. & Solutions, Inc. v. Rose, 683 F.3d 1113, 1124 (9th Cir. 2012), holding that, the parties may not by contract deprive the district court of its power to act as a court in equity in a § 502(a)(3) action. Contract terms should be considered by the court in assessing what is the proper scope of equitable relief. But notwithstanding the express terms of the Plan disclaiming the application of the make-whole doctrine and the common fund doctrine, it is within the district court's broad equitable powers under § 502(a)(3) not to give those provisions a controlling weight in fashioning ‘appropriate equitable relief.’” 

To the contrary, a majority of Circuit courts have held that equitable defenses do not defeat express plan terms, finding that equitable defenses fall outside the scope of ERISA § 502(a)(3).  See Bombadier Aerospace Employee Welfare Benefits Plan v. Ferrer, Poirot and Wansbrough, 354 F.3d 348, 361 (5th Cir. 2003) (holding that “neither the federal nor Texas common fund doctrine  may be invoked to prevent or reduce the Plan's recovery of the funds that it advanced”); Administrative Committee of Wal-Mart Stores, Inc. Assocs.' Health & Welfare Plan v. Varco, 338 F.3d 680, 691-92 (7th Cir. 2003) (finding that "[n]othing in the statute suggests Congress intended that section 502(a)(3)'s limitation of the [plan's] recovery to ‘appropriate equitable relief’” could trump the terms of the plan); Admin. Comm. of Wal-Mart Stores, Inc. Associates' Health & Welfare Plan v. Shank, 500 F.3d 834, 839 (8th Cir. 2007) (recognizing the primacy of the written plan); and Zurich Am. Ins. Co. v. O'Hara, 604 F.3d 1232, 1238 (11th Cir. 2010) (holding that the Plan’s language controls).

The primacy of the terms of an ERISA plan is well-established.  Hopefully, the Supreme Court acknowledge this in determining that a plan can seek reimbursement pursuant to its terms. 


Courtney Culwell Hill

Life, Health & Disability