U.S. Airways, Inc. v. McCutchen
The Court ruled that when a health plan's contract clearly spells out how much of an employee's third-party settlement money must be paid back, judges cannot use general fairness principles to override that contract language.
But because the plan said nothing about who pays the lawyer's fees involved in getting that settlement, the Court said a traditional rule — that everyone who benefits from a lawsuit's proceeds should share the legal costs — fills that gap, potentially reducing what the employee owes.
How it got here: A federal trial court sided with US Airways; the Third Circuit vacated, applying fairness principles to limit reimbursement; the Supreme Court took the case to resolve a circuit split.
The Case in Depth
What happened
James McCutchen was badly hurt in a car accident caused by another driver. His employer's health plan, run by US Airways, paid $66,866 in his medical bills. McCutchen hired lawyers on a 40% contingency fee and recovered $110,000 from the other driver and his own insurer, netting $66,000 after fees. US Airways then demanded full reimbursement of the $66,866 it had paid.
The question before the Court
When a company's health plan pays a worker's medical bills after an accident, can the worker use fairness rules to avoid paying the company back in full, or does the plan's own wording control?
The Court's answer
Partly — the contract's clear terms control how much of a settlement an employee must repay a health plan, but when the contract is silent on a specific cost, traditional fairness rules can fill that gap. The Court held that because US Airways' plan clearly gave it first claim on settlement money, general fairness doctrines like the "double recovery" rule could not shrink that amount.
However, since the plan never mentioned who pays for the lawyer's work that produced the settlement, the Court applied the traditional "common-fund" rule, meaning US Airways likely has to share some of the cost of McCutchen's attorney rather than taking full reimbursement off the top.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Millions of workers covered by employer health plans that pay claims and then seek reimbursement from injury settlements will be affected. Employers gain certainty that clear reimbursement terms will be enforced as written, while employees may still get help from a default rule requiring the plan to share the cost of the lawyer who won the settlement.
What changes now
The case returns to the lower courts, which must now recalculate how much McCutchen owes US Airways using the fee-sharing rule to account for his lawyer's costs, since the plan itself did not address that issue. This is a final merits ruling on the two legal questions presented, though the exact dollar amount still needs to be worked out on remand.
What this does not decide
The Court did not decide the exact dollar amount McCutchen must repay — that calculation goes back to the lower courts. It also did not decide how this analysis would apply to plans that address attorney's fees explicitly or to claims based purely on equitable subrogation rather than a contract.
Concurrences and dissents
Dissent — Justice Scalia
Justice Scalia agreed that fairness principles cannot override clear contract terms, but objected that the majority went further than it should have. He argued the parties had already agreed, in their briefs, that the plan's language plainly required full reimbursement without any fee-sharing, so the Court had no business raising an argument that neither side had preserved or that fell outside the question the Court agreed to review. He would have simply reversed the Third Circuit.
How the Court got there
The legal reasoning, step by step
- The Court first asked what kind of lawsuit this was under the relevant ERISA provision, which lets plan administrators sue for 'appropriate equitable relief' to enforce plan terms. Following its own prior ruling in Sereboff, the Court treated this as an 'equitable lien by agreement' — essentially a contract-based claim to specific settlement funds the employee had promised to hand over.
- Because the claim was rooted in the contract itself, the Court reasoned that general fairness doctrines aimed at preventing one side from being unjustly enriched — like a rule capping reimbursement at the employee's 'double recovery' and a rule requiring cost-sharing for lawyers' fees — cannot override clear contract language. Enforcing a contract-based lien means holding parties to what they actually promised, not what fairness might otherwise suggest.
- Examining historical equity cases, the Court found no instance where courts had used these fairness doctrines to override a clear contract term, reinforcing that the plan's own words control when they speak clearly.
- The Court then turned to contract interpretation: when a plan's language leaves a genuine gap, courts may look to background legal rules that typically govern such situations to figure out what the parties meant. It found that the plan's reimbursement clause clearly addressed how to split the settlement money itself, leaving no room for the double-recovery rule.
- But the plan said nothing about who bears the cost of getting that settlement — the lawyer's fees — so the Court applied the traditional fee-sharing rule as the best guess at what the parties intended, since ignoring it would let the company get a free ride on the employee's legal work.
Doctrinal impact
Cases affected by this decision
Reaffirms Sereboff v. Mid Atlantic Medical Services, Inc. (547 U. S. 356)
The Court relied on Sereboff's framework to hold that a plan's reimbursement claim is an enforceable contract-based equitable lien.