December 10, 2012 | Posted by Emily Catherine Hootkins |
On November 27, 2012, the Supreme Court heard oral argument in US Airways, Inc. v. McCutchen. The question presented before the Supreme Court was “whether. . . Section 502(a)(3) of the Employee Retirement Income Security Act (ERISA) authorizes courts to use equitable principles to rewrite contractual language and refuse to order participants to reimburse their plan for benefits paid, even where the plan’s terms give it an absolute right to full reimbursement.” Despite the specificity of this question, the topics considered during oral argument were far-reaching and suggest that the Supreme Court’s eventual opinion may also stray from answering the narrow question presented.
Appearing on behalf of Petitioner US Airways, Inc., in its capacity as fiduciary and plan administrator of the US Airways, Inc. Employee Benefits Plan, was Neal Kumar Katyal. Mr. Katyal argued that “because the plan’s claim here is one for an equitable lien by agreement . . . equitable defenses . . . offer no help to Respondents.” (Official Transcript – Subject to Final Review (“Transcript) at 4:16-19.) Justice Sotomayor quickly jumped in with the first question, asking “if you go to equity, why aren’t you bound by equity?,” to which Mr. Katyal responded “the rules in equity say that it is the agreement that controls . . . when we’re talking about an equitable lien by agreement.” (Transcript at 4:20-12 and 6:5-8.)
Shortly after Mr. Katyal’s overview of Petitioner’s position, argument was diverted into a discussion of the adequacy of the plan’s reimbursement language. Apparently, during lower court proceedings, the parties cited to and relied upon the Summary Plan Description, rather than the plan itself. Justices Ginsburg, Kennedy and Sotomayor pressed Mr. Katyal to identify controlling plan language. Mr. Katyal responded that Plaintiffs had waived any argument regarding the sufficiency of the plan language, and had even conceded in their brief that the plan language was clear. Justice Scalia supported attempts to gloss over this side argument, asking “I didn’t think we took this case to review the plan. . . . had that point been raised, we would not have taken the case.” (Transcript at 10:10-16.) However, the other Justices attention to this issue raises a real possibility that the Court will revisit its discussion in CIGNA v. Amara regarding the supremacy of plan language in comparison to language in a summary plan description. Of particular interest would be a confirmation for the benefits community that language in a summary plan description can rightfully be given controlling weight if (as in this case) there is no conflicting plan language.
Assistant to the Solicitor General Joseph Palmore argued on behalf of the United States, as amicus curiae. In supporting its position that the common fund doctrine should be considered, Mr. Palmore argued that “a plan can’t add to or subtract from the powers of the court in equity under Section 502(a)(3).” (Transcript at 30:1-3.) He further advocated the position of the United States “strikes the right balance and in particular it avoids the negative recovery scenario that is a particularly harsh result of Petitioner’s position.” (Transcript at 33:2-4.) Chief Justice Roberts pointedly criticized Mr. Palmore for disingenuity in the amicus brief describing the Secretary of Labor’s change from its prior position as based on “further reflection.” (Transcript at 31:20.) Chief Justice Roberts admonished, “It wasn’t further reflection. We have a new secretary now, under a new administration, right?” (Transcript at 31:21-23.)
Arguing on behalf of McCutchen/Respondents was Matthew W.H. Wessler. Mr. Wessler advocated, “in our view, when an insurer sought to enforce through an equitable lien by agreement a claim or a lien on a fund, it must agree to take that relief subject to the way equity would have treated the claim.” (Transcript at 46:1-5.) Thus, Mr. Wessler argued that the plan’s reimbursement should be limited by the common fund doctrine, which would reduce the plan’s claim on the fund by the lien for attorney’s fees expended in securing the fund. Some of the Justices pushed back on this idea, with Justice Ginsburg asking “[w]hy is the plan unjustly enriched by receiving exactly what the plan entitles it to receive?” and Justice Breyer asking “it’s just your lawyer who’s going to come at the end of the queue, okay? What’s – why is that unfair? (Transcript at 40:20-21 and 42:25-43:1-2.)
In sum, oral argument shed some light on the Supreme Court’s current thoughts on McCutchen, while leaving much answered. The ERISA community will now have to sit back and wait to see whether the Supreme Court will resolve the question of whether “equitable defenses” can trump express plan language to limit a plan’s recovery under § 502(a)(3). It will also be interesting to see whether the Court’s eventual opinion revisits a discussion of Amara and the supremacy of plan language.
To see the transcript from the oral argument, click here.
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