Hogan Lovells has secured a victory in the Supreme Court on behalf of its client, US Airways, in US Airways v McCutchen.
The decision provides clear guidance to employer sponsors that reimbursement provisions will be enforced by the courts as written. Neal Katyal, former acting solicitor-general of the US, argued the case (his 17th oral argument at the court, with 15 of those arguments taking place in the last four years).
All nine justices agreed with the argument made by Hogan Lovells that an employee who receives medical payments for an injury pursuant to an employer-sponsored health benefits plan may not avoid the reimbursement requirements of that plan by arguing that such reimbursement is ‘inequitable’.
The case arose from a car accident in which James McCutchen, a US Airways employee and health benefits plan participant, was injured. US Airways paid McCutchen’s medical expenses in full and according to the plan terms.
However, when McCutchen later recovered money in settlement with third parties for the accident, he did not comply with the terms of the plan — he refused to reimburse US Airways out of the third-party recovery.
US Airways pursued relief in federal court under Section 502(a)(3) of ERISA, seeking an ‘equitable lien by agreement’ — an equitable remedy that enforces the terms of an agreement between two parties.
The Supreme Court decision reverses a ruling of the Third Circuit Court and holds that ‘enforcing the lien’ under Section 502(a)(3) ‘means holding the parties to their mutual promises’ and ‘declining to apply rules, even if they would be equitable in a contract’s absence, at odds with the parties’ expressed commitments.’
This means that employer sponsors of health benefits plans may now rely on courts to enforce the plain language of those plans, which increases predictability for plan sponsors and participants alike.
Katyal argued the case before the court. He was joined on the briefs by a team of Hogan Lovells lawyers from the Washington DC office, including appellate practice co-director Cate Stetson and associates Dominic Perella, Mary Helen Wimberly and Sean Marotta.