Client Alert
Supreme Court Declares That Plan Terms Trump Equity (McCutchen v. U.S. Airways)
April 23, 2013
BY THE GLOBAL COMPENSATION, BENEFITS, AND ERISA PRACTICE
In U.S. Airways v. McCutchen, the Supreme Court found that in actions by health plans to enforce contractual reimbursement rights against participants, courts may not apply equitable defenses, such as unjust enrichment, to override clear plan terms -- but that courts may apply equitable defenses that the plan does not clearly override. McCutchen is a win for plan sponsors, but the Supreme Court assigned plan sponsors homework: ensure that plan recovery rights are clearly stated and that equitable defenses are clearly disclaimed. There is a broader message for plan sponsors: ERISA plan documents govern in all respects, from determining eligibility and benefits, to the terms for resolving litigation when participants and employers disagree.
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