Verdict - Summer 2013 - (Page 31)
COMPILED BY KIM JOHNSON
& SHAUN O’HARA
US Airways, Inc. v. McCutchen et al, 133
S.Ct. 1537 (April 16, 2013)
On April 17, 2013, the Supreme Court issued its opinion
in US Airways, Inc. v. McCutchen et al, 133 S.Ct. 1537 (April 16,
2013). In McCutchen, the Court considered whether under the
Employee Retirement Income Security Act (“ERISA”) an injured
employee who has medical expenses paid through his employer’s
beneﬁt plan – and subsequently sues and recovers damages from
a third party who was responsible for the injury – is required
to reimburse the beneﬁt plan in full, even when some of the
damages went to cover attorney’s fees.
The question presented to the Supreme Court was whether
the Third Circuit correctly held – in conﬂ ict with the Fifth,
Seventh, Eighth, Eleventh, and D.C. Circuits – that ERISA
Section 502(a)(3) 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.
The underlying facts were as follows. In 2007, a driver
crashed into James McCutchen’s vehicle. As a result of the
initial impact, another vehicle crashed into McCutchen’s car.
The combined accidents resulted in one death and caused
two others to suffer brain injuries. McCutchen suffered lifethreatening injuries that required surgery and later required
hip replacement surgery and physical therapy. The accident
left McCutchen disabled.
Prior to the accident, McCutchen entered into a Health
Beneﬁt Plan administered by his employer, US Airways. The
Plan paid McCutchen $66,866 to cover medical expenses
incurred from the accident. After receiving the Plan payout
McCutchen sued the driver who caused the crash. McCutchen’s
lawyers estimated that McCutchen’s recovery would exceed
$1 million; however, they ultimately settled for only $10,000
because the negligent driver had limited insurance coverage and
the accident had killed or seriously injured three other people.
Subsequently, McCutchen recovered $100,000 in underinsured
motorist coverage. From his $110,000 net recovery, McCutchen
paid his lawyers 40% in contingency fees and legal expenses
and retained less than $66,000.
Upon learning of McCutchen’s recovery, US Airways
demanded full reimbursement for the $66,866 it paid to cover
McCutchen’s medical expenses. In response, McCutchen’s
lawyers placed $41,500 in a trust account to reimburse US
Airways. US Airways ﬁ led suit for the $41,500 in trust as well
as the remaining $25,366 from McCutchen personally. US
Airways suit was centered on Section 502(a)(3) of ERISA, which
allows plan ﬁduciaries to sue for “appropriate equitable relief.”
Relying on a subrogation clause in the Plan, which required
reimbursement for “any monies recovered from a third party,”
the trial court decided that US Airways was entitled to the
entire $66,866, regardless of legal expenses. On appeal, the
Court of Appeals for the Third Circuit decided that Section
502(a)(3) requires courts to provide relief in a manner that is
equitable to both parties. The Third Circuit determined that
requiring McCutchen to reimburse the Plan fully would be
inequitable because it would leave McCutchen with less than
full coverage for his medical expenses while unjustly enriching
US Airways, which did not exercise its subrogation rights or
contribute to the cost of obtaining third-party recovery. The
Third Circuit ruled that McCutchen did not have to reimburse
US Airways for the entire amount of his medical expenses. US
Airways appealed the Third Circuit’s decision to the Supreme
Court of the United States.
Justice Kagan authored the opinion for the Court, and
in a 5-4 vote held that in an ERISA section 502(a)(3) action
based on an equitable lien by agreement, the ERISA plan’s
terms govern. Neither general unjust enrichment principles
nor speciﬁc doctrines reﬂecting those principles can override
the applicable contract. The Court, however, held that because
the plan was silent with respect to allocating costs of recovery,
the common-fund doctrine applies. Under the common fund
doctrine, “a litigant or a lawyer who recovers a common fund
for the beneﬁt of persons other than himself or his client
is entitled to a reasonable attorney’s fee from the fund as a
whole. As a result, the Third Circuit and the District Court’s
opinions were vacated and the case was remanded for further
Wellstar Health System, Inc. v. Jordan,
No. S12G1629, 2013 WL 2150809 (Ga.
May 20, 2013)
The Supreme Court of Georgia in Wellstar Health System, Inc.
v. Jordan, No. S12G1629, 2013 WL 2150809 (Ga. May 20, 2013),
held that the Health Insurance Portability and Accountability
Act of 1996 (HIPAA) does not entitle an individual to access
protected attorney-client work product simply by virtue of the
fact that the product contains protected health information.
In 2006, James Sutherland performed an elective vaginal
hysterectomy on Marilyn Kay Adams Jordan due to a uterine
prolapse. Following the surgery, Sutherland informed the
Jordans, that he was unable to safely remove Mrs. Jordan’s fallopian tubes and ovaries at the same time during the procedure.
In June 2008, Mrs. Jordan was diagnosed with advanced
stage ovarian cancer, from which she died in January 2010. Her
husband sued Sutherland and Wellstar, Sutherland’s employer,
Summer 2013 31
Table of Contents for the Digital Edition of Verdict - Summer 2013
A Primer on Birth Injury Cases and How to Keep Them “Simple” for the Jury
Online Research of Potential Jurors: A Survey of Resources and Ethical Boundaries
Jury Selection and The Millennials
Confessions of a Trial Lawyer Geek: Great iPad Apps for Trial
GTLA Out & About
Ten Ways to Protect Clients Through Workers’ Compensation Settlements
A Letter from Your Listserv Committee
Case Updates: What’s New?
Workers’ Comp: Recent Developments
Welcome New GTLA Members!
Court Reporters Marketplace
Notes: What’s New with GTLA Members
Verdict - Summer 2013