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Birmingham Bar Association Bulletin - Fall 2013

ERISA M. Clayborn Williams; SinclairWilliams LLC At the same time the Court rejected the notion that equitable rules can override the language of a plan, the Court concluded that “they still might aid in properly construing it.” Here, the Court allowed for the possibility that the existence of an equitable doctrine may be read into a plan if the plan is ambiguous. In U.S. Airways, the Court found the U.S. Airways plan to be silent on the allocation of attorneys’ fees (and therefore ambiguous), which led to the equitable common-fund doctrine to supply “the appropriate default.” Id. at 1548. Justifying its selection of this default rule, the Court concluded that “a party would not typically expect or intend a plan saying nothing about attorney’s fees to abrogate so strong and universal a background rule. And that means a court should be loath to read such a plan in that way.” Id. at 1550. The Court found this to have particular meaning in McCutchen’s case, where a contrary conclusion would have left McCutchen worse off by pursuing his tortfeasor. The Supreme Court explained this oddity this way: Recall that McCutchen spent $44,000 (representing a 40% contingency fee) to get $110,000 leaving him with a real recovery of $66,000. But U.S. Airways claimed $66,866 in medical expenses. That would put McCutchen $866 in the hole; in effect, he would pay for the privilege of serving as U.S. Airways’ collection agent. We think McCutchen would not have foreseen that result when he signed on to the plan. Id. at 1550. The essential holding to take away from U.S. Airways is that what the plan says, goes – or in the Supreme Court’s words, if the agreement governs, the agreement governs.1 Whether the “agreement governs” under U.S. Airways depends on whether the plan is unambiguous on whatever other issues 1 On April 15, 2013, the Supreme Court granted certiorari in another case which presents a similar issue addressing how far an ERISA plan may go when abrogating other rules of law. Heimeshoff v. Hartford Life & Acc. Ins. Co., __ U.S. __, 133 S. Ct. 1802 (2013). The issue presented there is whether a plan’s provision defining the time period in which an action must be brought can start the running of the limitations period without regard to when a legal cause of action accrues. That issue is currently being briefed. you are confronting. As the Supreme Court demonstrated in connection with the attorneys’ fee issue before it, if the plan is ambiguous, then equitable principles will dictate the result. For practitioners, U.S. Airways underscores the importance of obtaining the actual plan document when evaluating this issue and how it may affect you and your client if a recovery is obtained.2 A diligent practitioner must always pursue the plan document itself to consult the true terms that may apply to a reimbursement issue. Once that document is in hand, the practitioner must then read it carefully and in its entirety to ascertain whether and how it addresses reimbursements and in particular attorneys’ fees. This will become even more important as plan administrators continue to react to the U.S. Airways decision. As it stands, the Supreme Court has made it easier for a plan administrator to obtain monetary relief from plan participants, and at the same time, has given plans a blue-print for drafting amendments for existing plans allowing for this result where such a right may not have existed before. Under the Supreme Court’s reasoning, the plan participant has entered into an “agreement” with his or her employer and is bound by those terms – even though ERISA, originally enacted to address the unequal bargaining power between employees and employers, treats plans in all other contexts as trusts. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110, 109 S. Ct. 948, 954, 103 L. Ed 2d 80 (1989). It remains to be seen what new plan reimbursement provisions will develop and whether those provisions will allow a participant to recover his or her attorneys’ fees at the very least. G 2 Although the U.S. Airways Court decided the case before it based on summary plan description instead of the plan document itself, it noted the circumstance to be peculiar to that case where the parties never contested the summary plan description as being inconsistent with the plan. U.S. Airways, 133 S. Ct. at 1543 n. 1. Citing its earlier decision in CIGNA Corp. v. Amara, __ U.S. __, 131 S. Ct. 1866, 179 L. Ed. 2d 843 (2011), however, the Court reiterated that plan language has primacy over language found in a summary plan description. 32 Birmingham Bar Association


Birmingham Bar Association Bulletin - Fall 2013
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