Rosy Relief in Sight for the Plan in CGI Technologies & Solutions v Rose; Guest blog by Emily Hootkins (Hoort)

April 25, 2013 | Posted by Emily Catherine Hootkins | Topic(s): Benefit Claims & Claims Process Litigation, Other Interesting Cases & Issues

On April 22, 2013, the Supreme Court granted the petition for a writ of certiorari in CGI Technologies & Solutions v. Rose, et al., and then immediately vacated and remanded the Ninth Circuit’s judgment in light of US Airways, Inc. v. McCutchen, No. 11-1285, 2013 WL 1567371 (U.S. Apr. 16, 2013).

In McCutchen, the Supreme Court issued a two-part opinion in which it held that (1) equitable principles cannot override clear plan terms, but (2) equitable principles can be used to construe ambiguous or missing plan terms.

Last June, we blogged about CGI Technologies & Solutions v. Rose after the Ninth Circuit ruled that equitable defenses (such as the common-fund rule) can trump express contractual language in lawsuits seeking “appropriate equitable relief” under ERISA § 502(a)(3). 683 F.3d 1113 (9th Cir. 2012). The facts of this case are quite similar to McCutchen. Thus, it is not surprising that the Supreme Court simply vacated and remanded with a reference to its recent opinion in McCutchen.

In CGI Technologies & Solutions v. Rose, plaintiff Rhonda Rose was seriously injured in a car accident. Her ERISA-governed employee welfare benefits plan paid about $32,000 in her ensuing medical expenses. Rose later recovered $376,906.84 from the third party tortfeasor and her automobile insurance provider. After Rose’s recovery, CGI sought reimbursement of the full $32,000 the plan had paid in medical expenses in accordance with the plan’s subrogation and reimbursement provisions. When Rose refused to reimburse the plan in full (she later argued that any reimbursement must be reduced by the make-whole and common fund doctrines), CGI filed suit seeking “appropriate equitable relief,” under ERISA § 502(a)(3) in the form of a constructive trust and/or equitable lien.

At this point, the facts of CGI Technologies & Solutions v. Rose seem quite similar to McCutchen, and it may appear that these two cases will face similar fates on remand. However, we actually expect opposite results on remand of these two cases due to the Supreme Court’s two-part opinion in McCutchen.  Unlike in McCutchen, the plan in CGI Technologies & Solutions v. Rose expressly disclaims the common-fund doctrine and requires full reimbursement to the plan regardless of whether the beneficiary is made whole by their recovery. Thus, on remand under McCutchen, the Ninth Circuit must not consider equitable doctrines such as the common-fund or make-whole rules. Instead, the Ninth Circuit must stick to part-one of McCutchen, namely that the express terms of the plan trump any conflicting equitable principles.

This case is a good example of the importance of unambiguous plan provisions. Here, because the plan expressly disclaims the common-fund and make-whole doctrines, there is no need for the Ninth Circuit to reach part-two of McCutchen, where equitable principles may be considered to fill in plan gaps.