The US Supreme Court [official website] heard arguments [day call, PDF] Tuesday in US Airways, Inc. v. McCutchen [transcript, PDF; JURIST report] on the Employee Retirement Income Security Act (ERISA) [materials]. The court is considering whether § 502(a)(3) of ERISA is susceptible to equitable principles of relief even where the plan's terms give it an absolute right to full reimbursement. An attorney for US Airways argued that ERISA allows fiduciaries of the plan to seek appropriate equitable relief and that the agreement plan signed by all parties, regardless of what it says, controls and is appropriate. The respondents argued that subrogation [backgrounder] agreements made for claims involved in the plan must be considered separate of the plan and ahead of it. "Reimbursement claims that are based on an express subrogation agreement are subject to equitable principles of subrogation. In equity, these claims were governed, according to the same principles that governed every other type of subrogation."
The case [SCOTUSblog backgrounder] concerns a former employee of US Airways, James McCutchen, who was injured in a car accident. McCutchen, as an employee, had a self-funded health plan that ended up paying out approximately $66,000 for his injuries. Through insurance payouts and a settlement from the negligent driver, even with a hefty attorney's fee levied against him, McCutchen ended up approximately $66,000 ahead. US Airways then demanded reimbursement of its health plan's payout, since McCutchen's medical care was covered by other insurance options, based on language in the plan itself. The US Court of Appeals for the Third Circuit, in defiance of several other circuits held [opinion] that "appropriate equitable relief" did not include revoking the payment to McCutchen.