Groups Ask High Court to Reverse Equitable Remedies Decision

The ERISA Industry Committee (ERIC), along with the American Benefits Council, the Society for Human Resource Management and the U.S. Chamber of Commerce filed with the U.S. Supreme Court an amicus curiae (“friend of the court”) brief that argues, among other things, that “[a]llowing individual courts to decide for themselves, under the guise of equity, which plan provisions will be enforced and under what circumstances, is squarely at odds with ERISA’s objective of establishing uniformity, certainty and predictability.  Plan benefits are not established by equity but by plan terms, which should not be overridden because a court might have provided for different plan benefits and terms.”  

In addition, the brief argues that subrogation provisions have long been recognized under ERISA (including by the Supreme Court), and that allowing equitable defenses to take precedence over plan provisions would undermine the uniform application and administration of plans and increase plan costs.    

In U.S. Airways v. McCutchen, a district granted summary judgment to U.S Airways, agreeing the language in its benefits plan permits it to recoup money it provided for McCutchen’s medical care out of the total he recovered from a third party due to an auto accident. On appeal, the 3rd U.S. Circuit Court of Appeals concluded that U.S. Airways’s claim for reimbursement is subject to equitable limitations, and vacated the district court’s judgment, remanding the case for further proceedings.   

In June, the Supreme Court agreed to hear the case (see “Supreme Court to Revisit Reimbursement of Benefits Issue”).  

“Indeed, if the 3rd Circuit ruling is allowed to stand, this will open the door to an influx of litigation from participants using equitable defense claims to rewrite the clear terms of a plan, and thus undermine the principles of ERISA,” ERIC President & CEO Scott Macey added.  Macey further stated that plan benefits are set by plan terms not equitable arguments or defenses.    

The brief noted Section 502(a)(3) of ERISA authorizes courts to grant “appropriate equitable relief” only to enforce the provisions of ERISA or the terms of the benefit plan.  Instead of granting equitable relief that was an “appropriate” means to enforce the terms of the plan, the court below granted equitable relief to rewrite the terms of the plan, the brief explains.    

The brief warns that if the Third Circuit decision is affirmed, and “courts begin opening equitable escape hatches to the enforcement of unambiguous reimbursement provisions and other plan terms, there is little doubt that premiums will increase, or benefits will be reduced, or both.”    

Finally, the brief argues that enforcing plan reimbursement provisions does not produce unjust results, and reflects a rational and fair contractual bargain.  “When an employer sponsors an employee benefits plan, it is agreeing to provide only those benefits that are specified in the text of the governing documents, and only on such terms as those documents provide,” the brief says.  “Here, the governing documents could hardly be more clear that the plan would be entitled to reimbursement to the full extent of any third-party recovery.”