U.S. Airways, Inc. v. McCutchen ( 2013 )

(Slip Opinion) OCTOBER TERM, 2012 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
US AIRWAYS, INC., IN ITS CAPACITY AS FIDUCIARY AND
PLAN ADMINISTRATOR OF THE US AIRWAYS, INC.
EMPLOYEE BENEFITS PLAN v. MCCUTCHEN ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE THIRD CIRCUIT
No. 11–1285. Argued November 27, 2012—Decided April 16, 2013
The health benefits plan established by petitioner US Airways paid
$66,866 in medical expenses for injuries suffered by respondent
McCutchen, a US Airways employee, in a car accident caused by a
third party. The plan entitled US Airways to reimbursement if
McCutchen later recovered money from the third party. McCutchen’s
attorneys secured $110,000 in payments, and McCutchen received
$66,000 after deducting the lawyers’ 40% contingency fee. US Air-
ways demanded reimbursement of the full $66,866 it had paid. When
McCutchen did not comply, US Airways filed suit under §502(a)(3) of
the Employee Retirement Income Security Act of 1974 (ERISA),
which authorizes health-plan administrators to bring a civil action
“to obtain . . . appropriate equitable relief . . . to enforce . . . the terms
of the plan.” McCutchen raised two defenses to US Airways’ request
for an equitable lien on the $66,866 it demanded: that, absent over-
recovery on his part, US Airways’ right to reimbursement did not
kick in; and that US Airways had to contribute its fair share to the
costs he incurred to get his recovery, so any reimbursement had to be
reduced by 40%, to cover the contingency fee. Rejecting both argu-
ments, the District Court granted summary judgment to US Airways.
The Third Circuit vacated. Reasoning that traditional “equitable
doctrines and defenses” applied to §502(a)(3) suits, it held that the
principle of unjust enrichment overrode US Airways’ reimbursement
clause because the clause would leave McCutchen with less than full
payment for his medical bills and would give US Airways a windfall.
2 US AIRWAYS, INC. v. MCCUTCHEN
Syllabus
Held:
1. In a §502(a)(3) action based on an equitable lien by agreement—
like this one—the ERISA plan’s terms govern. Neither general un-
just enrichment principles nor specific doctrines reflecting those prin-
ciples—such as the double-recovery or common-fund rules invoked by
McCutchen—can override the applicable contract. Pp. 5–11.
(a) Section 502(a)(3) authorizes the kinds of relief “typically
available in equity” before the merger of law and equity. Mertens v.
Hewitt Associates, 508 U.S. 248, 256. In Sereboff v. Mid Atlantic
Medical Services, Inc., 547 U.S. 356, the Court permitted a health-
plan administrator to bring a suit just like this one. The administra-
tor’s claim to enforce its reimbursement clause, the Court explained,
was the modern-day equivalent of an action in equity to enforce a
contract-based lien—called an “equitable lien ‘by agreement.’ ” Id., at
364–365. Accordingly, the administrator could use §502(a)(3) to ob-
tain funds that its beneficiaries had promised to turn over. The par-
ties agree that US Airways can do the same here. Pp. 5–6.
(b) Sereboff’s logic dooms McCutchen’s argument that two equi-
table doctrines meant to prevent unjust enrichment—the double-
recovery rule and common-fund doctrine—can override the terms of
an ERISA plan in such a suit. As in Sereboff, US Airways is seeking
to enforce the modern-day equivalent of an equitable lien by agree-
ment. Such a lien both arises from and serves to carry out a con-
tract’s provisions. See 547 U. S., at 363–364. Thus, enforcing the
lien means holding the parties to their mutual promises and declin-
ing to apply rules—even if they would be “equitable” absent a con-
tract—at odds with the parties’ expressed commitments. The Court
has found nothing to the contrary in the historic practice of equity
courts. McCutchen identifies a slew of cases in which courts applied
the equitable doctrines invoked here, but none in which they did so to
override a clear contract that provided otherwise. This result com-
ports with ERISA’s focus on what a plan provides: §502(a)(3) does not
“authorize ‘appropriate equitable relief’ at large,” Mertens, 508 U. S.,
at 253, but countenances only such relief as will enforce “the terms of
the plan” or the statute. Pp. 6–11.
2. While McCutchen’s equitable rules cannot trump a reimburse-
ment provision, they may aid in properly construing it. US Airways’
plan is silent on the allocation of attorney’s fees, and the common-
fund doctrine provides the appropriate default rule to fill that gap.
Pp. 12–16.
(a) Ordinary contract interpretation principles support this con-
clusion. Courts construe ERISA plans, as they do other contracts, by
“looking to the terms of the plan” as well as to “other manifestations
of the parties’ intent.” Firestone Tire & Rubber Co. v. Bruch, 489
Cite as: 569 U. S. ____ (2013) 3
Syllabus
U. S. 101, 113. Where the terms of a plan leave gaps, courts must
“look outside the plan’s written language” to decide the agreement’s
meaning, CIGNA Corp. v. Amara, 563 U.S. ___, ___, and they proper-
ly take account of the doctrines that typically or traditionally have
governed a given situation when no agreement states otherwise.
Pp. 12–13.
(b) US Airways’ reimbursement provision precludes looking to
the double-recovery rule in this manner because it provides an alloca-
tion formula that expressly contradicts the equitable rule. By con-
trast, the plan says nothing specific about how to pay for the costs of
recovery. Given that contractual gap, the common-fund doctrine pro-
vides the best indication of the parties’ intent. This Court’s cases
make clear that the doctrine would govern here in the absence of a
contrary agreement. See, e.g., Boeing Co. v. Van Gemert, 444 U.S.
472, 478. Because a party would not typically expect or intend a plan
saying nothing about attorney’s fees to abrogate so strong and uni-
form a background rule, a court should be loath to read the plan in
that way. The common-fund rule’s rationale reinforces this conclu-
sion: Without the rule, the insurer can free ride on the beneficiary’s
efforts, and the beneficiary, as in this case, may be made worse off for
having pursued a third party. A contract should not be read to pro-
duce these strange results unless it specifically provides as much.
Pp. 13–16.
663 F.3d 671, vacated and remanded.
KAGAN, J., delivered the opinion of the Court, in which KENNEDY,
GINSBURG, BREYER, and SOTOMAYOR, JJ., joined. SCALIA, J., filed a dis-
senting opinion, in which ROBERTS, C. J., and THOMAS and ALITO, JJ.,
joined.
Cite as: 569 U. S. ____ (2013) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash­
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 11–1285
_________________
US AIRWAYS, INC., IN ITS CAPACITY AS FIDUCIARY AND
PLAN ADMINISTRATOR OF THE US AIRWAYS, INC.
EMPLOYEE BENEFITS PLAN, PETITIONER
v. JAMES E. MCCUTCHEN ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE THIRD CIRCUIT
[April 16, 2013]
JUSTICE KAGAN delivered the opinion of the Court.
Respondent James McCutchen participated in a health
benefits plan that his employer, petitioner US Airways,
established under the Employee Retirement Income
Security Act of 1974 (ERISA), 29 U.S. C. §1001 et seq.
That plan obliged US Airways to pay any medical ex-
penses McCutchen incurred as a result of a third party’s
actions—for example, another person’s negligent driving. The
plan in turn entitled US Airways to reimbursement if
McCutchen later recovered money from the third party.
This Court has held that a health-plan administrator
like US Airways may enforce such a reimbursement provi­
sion by filing suit under §502(a)(3) of ERISA, 88 Stat. 891,
29 U.S. C. §1132(a)(3). See Sereboff v. Mid Atlantic Medi-
cal Services, Inc., 547 U.S. 356 (2006). That section au­
thorizes a civil action “to obtain . . . appropriate equitable
relief . . . to enforce . . . the terms of the plan.” We here
consider whether in that kind of suit, a plan participant
like McCutchen may raise certain equitable defenses
2 US AIRWAYS, INC. v. MCCUTCHEN
Opinion of the Court
deriving from principles of unjust enrichment. In particu­
lar, we address one equitable doctrine limiting reim­
bursement to the amount of an insured’s “double recovery”
and another requiring the party seeking reimbursement to
pay a share of the attorney’s fees incurred in securing
funds from the third party. We hold that neither of those
equitable rules can override the clear terms of a plan. But
we explain that the latter, usually called the common-fund
doctrine, plays a role in interpreting US Airways’ plan
because the plan is silent about allocating the costs of
recovery.
I
In January 2007, McCutchen suffered serious injuries
when another driver lost control of her car and collided
with McCutchen’s. At the time, McCutchen was an em­
ployee of US Airways and a participant in its self-funded
health plan. The plan paid $66,866 in medical expenses
arising from the accident on McCutchen’s behalf.
McCutchen retained attorneys, in exchange for a 40%
contingency fee, to seek recovery of all his accident-related
damages, estimated to exceed $1 million. The attorneys
sued the driver responsible for the crash, but settled for
only $10,000 because she had limited insurance coverage
and the accident had killed or seriously injured three
other people. Counsel also secured a payment from
McCutchen’s own automobile insurer of $100,000, the
maximum amount available under his policy. McCutchen
thus received $110,000—and after deducting $44,000 for
the lawyer’s fee, $66,000.
On learning of McCutchen’s recovery, US Airways de­
manded reimbursement of the $66,866 it had paid in
medical expenses. In support of that claim, US Airways
relied on the following statement in its summary plan
description:
“If [US Airways] pays benefits for any claim you incur
Cite as: 569 U. S. ____ (2013) 3
Opinion of the Court
as the result of negligence, willful misconduct, or other
actions of a third party, . . . [y]ou will be required to
reimburse [US Airways] for amounts paid for claims
out of any monies recovered from [the] third party,
including, but not limited to, your own insurance
company as the result of judgment, settlement, or
otherwise.” App. 20.1
McCutchen denied that US Airways was entitled to any
reimbursement, but his attorneys placed $41,500 in an
escrow account pending resolution of the dispute. That
amount represented US Airways’ full claim minus a pro­
portionate share of the promised attorney’s fees.
US Airways then filed this action under §502(a)(3),
seeking “appropriate equitable relief ” to enforce the plan’s
reimbursement provision. The suit requested an equitable
lien on $66,866—the $41,500 in the escrow account and
$25,366 more in McCutchen’s possession. McCutchen
countered by raising two defenses relevant here. First, he
maintained that US Airways could not receive the relief it
sought because he had recovered only a small portion of
his total damages; absent over-recovery on his part, US
Airways’ right to reimbursement did not kick in. Second,
he contended that US Airways at least had to contribute
its fair share to the costs he incurred to get his recovery;
——————
1 We have made clear that the statements in a summary plan descrip­
tion “communicat[e] with beneficiaries about the plan, but . . . do
not themselves constitute the terms of the plan.” CIGNA Corp. v.
Amara, 563 U.S. ___, ___ (2011) (slip op., at 15). Nonetheless, the
parties litigated this case, and both lower courts decided it, based solely
on the language quoted above. See 663 F.3d 671, 673 (CA3 2011); App.
to Pet. for Cert. 26a. Only in this Court, in response to a request from
the Solicitor General, did the plan itself come to light. See Letter from
Matthew W. H. Wessler to William K. Suter, Clerk of Court (Nov. 19,
2012) (available in Clerk of Court’s case file). That is too late to affect
what happens here: Because everyone in this case has treated the
language from the summary description as though it came from the
plan, we do so as well.
4 US AIRWAYS, INC. v. MCCUTCHEN
Opinion of the Court
any reimbursement therefore had to be marked down by
40%, to cover the promised contingency fee. The District
Court rejected both arguments, granting summary judg­
ment to US Airways on the ground that the plan “clear[ly]
and unambiguous[ly]” provided for full reimbursement of
the medical expenses paid. App. to Pet. for Cert. 30a; see
id., at 32a.
The Court of Appeals for the Third Circuit vacated the
District Court’s order. The Third Circuit reasoned that in
a suit for “appropriate equitable relief ” under §502(a)(3), a
court must apply any “equitable doctrines and defenses”
that traditionally limited the relief requested. 663 F.3d
671, 676 (CA3 2011). And here, the court continued, “ ‘the
principle of unjust enrichment’ ” should “ ‘serve to limit the
effectiveness’ ” of the plan’s reimbursement provision. See
id., at 677 (quoting 4 G. Palmer, Law of Restitution
§23.18, p. 472–473 (1978)). Full reimbursement, the Third
Circuit thought, would “leav[e] [McCutchen] with less
than full payment” for his medical bills; at the same time,
it would provide a “windfall” to US Airways given its
failure to “contribute to the cost of obtaining the third­
party recovery.” 663 F. 3d, at 679. The Third Circuit then
instructed the District Court to determine what amount,
shy of the entire $66,866, would qualify as “appropriate
equitable relief.” Ibid.
We granted certiorari, 567 U. S. ___ (2012), to resolve a
circuit split on whether equitable defenses can so override
an ERISA plan’s reimbursement provision.2 We now
——————
2 Compare 663 F.3d 671, 673 (CA3 2011) (case below) (holding that
equitable doctrines can trump a plan’s terms); CGI Technologies &
Solutions Inc. v. Rose, 683 F.3d 1113, 1124 (CA9 2012) (same), with
Zurich Am. Ins. Co. v. O’Hara, 604 F.3d 1232, 1237 (CA11 2010)
(holding that they cannot do so); Administrative Comm. of Wal-Mart
Stores, Inc. v. Shank, 500 F.3d 834, 838 (CA8 2007) (same); Moore v.
CapitalCare, Inc., 461 F.3d 1, 9–10 and n. 10 (CADC 2006) (same);
Bombadier Aerospace Employee Welfare Benefits Plan v. Ferror, Poirot,
Cite as: 569 U. S. ____ (2013) 5
Opinion of the Court
vacate the Third Circuit’s decision.
II
A health-plan administrator like US Airways may bring
suit under §502(a)(3) for “appropriate equitable relief . . .
to enforce . . . the terms of the plan.”3 That provision, we
have held, authorizes the kinds of relief “typically availa­
ble in equity” in the days of “the divided bench,” before law
and equity merged. Mertens v. Hewitt Associates, 508
U.S. 248, 256 (1993) (emphasis deleted).
In Sereboff v. Mid Atlantic Medical Services, we allowed
a health-plan administrator to bring a suit just like this
one under §502(a)(3). Mid Atlantic had paid medical
expenses for the Sereboffs after they were injured in a car
crash. When they settled a tort suit against the other
driver, Mid Atlantic claimed a share of the proceeds,
invoking the plan’s reimbursement clause. We held
that Mid Atlantic’s action sought “equitable relief,” as
§502(a)(3) requires. See 547 U. S., at 369. The “nature of
the recovery” requested was equitable because Mid Atlan­
tic claimed “specifically identifiable funds” within the
Sereboffs’ control—that is, a portion of the settlement they
had gotten. Id., at 362–363 (internal quotation marks
omitted). And the “basis for [the] claim” was equitable too,
because Mid Atlantic relied on “ ‘the familiar rul[e] of
equity that a contract to convey a specific object’ ” not yet
acquired “ ‘create[s] a lien’ ” on that object as soon as “ ‘the
contractor . . . gets a title to the thing.’ ” Id., at 363–364
——————
& Wansbrough, 354 F.3d 348, 362 (CA5 2003) (same); Administrative
Comm. of Wal-Mart Stores, Inc. v. Varco, 338 F.3d 680, 692 (CA7 2003)
(same).
3 Sans ellipses, §502(a)(3) provides that a plan administrator may
bring a civil action “(A) to enjoin any act or practice which violates any
provision of this subchapter or the terms of the plan, or (B) to obtain
other appropriate equitable relief (i) to redress such violations or (ii) to
enforce any provisions of this subchapter or the terms of the plan.” 29
U.S. C. §1132(a)(3).
6 US AIRWAYS, INC. v. MCCUTCHEN
Opinion of the Court
(quoting Barnes v. Alexander, 232 U.S. 117, 121 (1914)).
Mid Atlantic’s claim for reimbursement, we determined,
was the modern-day equivalent of an action in equity to
enforce such a contract-based lien—called an “equitable
lien by agreement.” 547 U. S., at 364–365 (internal quota­
tion marks omitted). Accordingly, Mid Atlantic could
bring an action under §502(a)(3) seeking the funds that its
beneficiaries had promised to turn over. And here, as all
parties agree, US Airways can do the same thing.
The question in this case concerns the role that equita­
ble defenses alleging unjust enrichment can play in such a
suit. As earlier noted, the Third Circuit held that “the
principle of unjust enrichment” overrides US Airways’
reimbursement clause if and when they come into conflict.
663 F. 3d, at 677. McCutchen offers a more refined ver­
sion of that view, alleging that two specific equitable
doctrines meant to “prevent unjust enrichment” defeat the
reimbursement provision. Brief for Respondents i. First,
he contends that in equity, an insurer in US Airways’
position could recoup no more than an insured’s “double
recovery”—the amount the insured has received from a
third party to compensate for the same loss the insurance
covered. That rule would limit US Airways’ reimburse­
ment to the share of McCutchen’s settlements paying for
medical expenses; McCutchen would keep the rest (e.g.,
damages for loss of future earnings or pain and suffering),
even though the plan gives US Airways first claim on the
whole third-party recovery. Second, McCutchen claims
that in equity the common-fund doctrine would have
operated to reduce any award to US Airways. Under that
rule, “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.” Boeing Co. v. Van Gemert, 444 U.S. 472, 478
(1980). McCutchen urges that this doctrine, which is
designed to prevent freeloading, enables him to pass on a
Cite as: 569 U. S. ____ (2013) 7
Opinion of the Court
share of his lawyer’s fees to US Airways, no matter what
the plan provides.4
We rejected a similar claim in Sereboff, though without
altogether foreclosing McCutchen’s position. The Sere­
boffs argued, among other things, that the lower courts
erred in enforcing Mid Atlantic’s reimbursement clause
“without imposing various limitations” that would “apply
to truly equitable relief grounded in principles of subroga­
tion.”5 547 U. S., at 368 (internal quotation marks omit­
ted). In particular, the Sereboffs contended that a variant
of the double-recovery rule, called the make-whole doc­
trine, trumped the plan’s terms. We rebuffed that argu­
ment, explaining that the Sereboffs were improperly
mixing and matching rules from different equitable boxes.
The Sereboffs asserted a “parcel of equitable defenses”
available when an out-of-pocket insurer brought a “free­
standing action for equitable subrogation,” not founded on
a contract, to succeed to an insured’s judgment against a
third party. Ibid. But Mid Atlantic’s reimbursement
——————
4 Both our prior cases and secondary sources confirm McCutchen’s
characterization of the common-fund and double-recovery rules as
deriving primarily from principles of unjust enrichment. See Boeing,
444 U. S., at 478 (“The [common-fund] doctrine rests on the perception
that persons who obtain the benefit of a lawsuit without contributing to
its cost are unjustly enriched”); Mills v. Electric Auto-Lite Co., 396 U.S.
375, 392 (1970) (similar); 1 D. Dobbs, Law of Remedies §3.10(2), p. 395
(2d ed. 1993) (hereinafter Dobbs) (similar); 4 G. Palmer, Law of Restitu­
tion §23.16(b), p. 444 (“[T]he injured person is unjustly enriched” only
when he has received “in excess of full compensation” from two sources
“for the same loss”); 16 G. Couch, Cyclopedia of Insurance Law §61:18
(2d ed. 1983) (similar); 8B J. Appleman & J. Appleman, Insurance Law
and Practice §4941, p. 11 (Cum. Supp. 2012) (hereinafter Appleman)
(similar).
5 “Subrogation simply means substitution of one person for another;
that is, one person is allowed to stand in the shoes of another and
assert that person’s rights against” a third party. 1 Dobbs §4.3(4), at
604; see 8B Appleman §4941, at 11 (“ ‘Subrogation’ involves the substi­
tution of the insurer . . . to the rights of the insured”).
8 US AIRWAYS, INC. v. MCCUTCHEN
Opinion of the Court
claim was “considered equitable,” we replied, because it
sought to enforce a “ lien based on agreement ”—not a lien
imposed independent of contract by virtue of equitable
subrogation.6 Ibid. (internal quotation marks omitted). In
light of that fact, we viewed the Sereboffs’ equitable de­
fenses—which again, closely resemble McCutchen’s—as
“beside the point.” Ibid. And yet, we left a narrow open­
ing for future litigants in the Sereboffs’ position to make a
like claim. In a footnote, we observed that the Sereboffs
had forfeited a “distinct assertion” that the contract-based
relief Mid Atlantic requested, although “equitable,” was
not “appropriate” under §502(a)(3) because “it contravened
principles like the make-whole doctrine.” Id., at 368–369
n. 2. Enter McCutchen, to make that basic argument.
In the end, however, Sereboff ’s logic dooms McCutchen’s
effort. US Airways, like Mid Atlantic, is seeking to enforce
the modern-day equivalent of an “equitable lien by agree­
ment.” And that kind of lien—as its name announces—
both arises from and serves to carry out a contract’s provi­
sions. See id., at 363–364; 4 S. Symons, Pomeroy’s Equity
Jurisprudence §1234, p. 695 (5th ed. 1941). So enforcing
the lien means holding the parties to their mutual promis­
es. See, e.g., Barnes, 232 U. S., at 121; Walker v. Brown,
165 U.S. 654, 664 (1897). Conversely, it means declining
to apply rules—even if they would be “equitable” in a
contract’s absence—at odds with the parties’ expressed
commitments. McCutchen therefore cannot rely on theo­
——————
6 The Sereboff Court’s analysis concerned only subrogation actions
based on equitable principles independent of any agreement. A subro­
gation action may also be founded on a contract incorporating those
principles. See 1 Dobbs §4.3(4), at 604. US Airways suggested at oral
argument that McCutchen’s case would “ge[t] a lot stronger” if the plan
here spoke only of subrogation, without separately granting a right of
reimbursement. Tr. of Oral Arg. 18. We need not consider that ques­
tion because US Airways seeks to enforce a reimbursement provision, of
the same kind we considered in Sereboff.
Cite as: 569 U. S. ____ (2013) 9
Opinion of the Court
ries of unjust enrichment to defeat US Airways’ appeal to
the plan’s clear terms. Those principles, as we said in
Sereboff, are “beside the point” when parties demand what
they bargained for in a valid agreement. See Restatement
(Third) of Restitution and Unjust Enrichment §2(2), p. 15
(2010) (“A valid contract defines the obligations of the
parties as to matters within its scope, displacing to that
extent any inquiry into unjust enrichment”). In those
circumstances, hewing to the parties’ exchange yields
“appropriate” as well as “equitable” relief.
We have found nothing to the contrary in the historic
practice of equity courts. McCutchen offers us a slew of
cases in which those courts applied the double-recovery or
common-fund rule to limit insurers’ efforts to recoup funds
from their beneficiaries’ tort judgments. See Brief for
Respondents 21–25. But his citations are not on point. In
some of McCutchen’s cases, courts apparently applied
equitable doctrines in the absence of any relevant contract
provision. See, e.g., Washtenaw Mut. Fire Ins. Co. v.
Budd, 208 Mich. 483, 486–487, 175 N.W. 231, 232 (1919);
Fire Assn. of Philadelphia v. Wells, 84 N. J. Eq. 484, 487,
94 A. 619, 621 (1915). In others, courts found those rules
to comport with the applicable contract term. For exam­
ple, in Svea Assurance Co. v. Packham, 92 Md. 464, 48 A.
359 (1901)—the case McCutchen calls his best, see Tr. of
Oral Arg. 47–48—the court viewed the double-recovery
rule as according with “the intention” of the contracting
parties; “[b]road as [the] language is,” the court explained,
the agreement “cannot be construed to” give the insurer
any greater recovery. 92 Md., at 478, 48 A., at 362; see
also Knaffl v. Knoxville Banking & Trust Co., 133 Tenn.
655, 661, 182 S.W. 232, 233 (1916); Camden Fire Ins.
Assn. v. Prezioso, 93 N. J. Eq. 318, 319–320, 116 A. 694,
694 (Ch. Div. 1922). But in none of these cases—nor in
any other we can find—did an equity court apply the
double-recovery or common-fund rule to override a plain
10 US AIRWAYS, INC. v. MCCUTCHEN
Opinion of the Court
contract term. That is, in none did an equity court do
what McCutchen asks of us.
Nevertheless, the United States, appearing as amicus
curiae, claims that the common-fund rule has a special
capacity to trump a conflicting contract. The Government
begins its brief foursquare with our (and Sereboff ’s) analy­
sis: In a suit like this one, to enforce an equitable lien by
agreement, “the agreement, not general restitutionary
principles of unjust enrichment, provides the measure of
relief due.” Brief for United States 6. Because that is so,
the Government (naturally enough) concludes, McCutchen
cannot invoke the double-recovery rule to defeat the plan.
But then the Government takes an unexpected turn.
“When it comes to the costs incurred” by a beneficiary to
obtain money from a third party, “the terms of the plan do
not control.” Id., at 21. An equity court, the Government
contends, has “inherent authority” to apportion litigation
costs in accord with the “longstanding equitable common­
fund doctrine,” even if that conflicts with the parties’
contract. Id., at 22.
But if the agreement governs, the agreement governs:
The reasons we have given (and the Government mostly ac­
cepts) for looking to the contract’s terms do not permit an
attorney’s-fees exception. We have no doubt that the common­
fund doctrine has deep roots in equity. See Sprague
v. Ticonic Nat. Bank, 307 U.S. 161, 164 (1939) (tracing
equity courts’ authority over fees to the First Judiciary
Act). Those roots, however, are set in the soil of unjust
enrichment: To allow “others to obtain full benefit from
the plaintiff ’s efforts without contributing . . . to the litiga­
tion expenses,” we have often noted, “would be to enrich
the others unjustly at the plaintiff ’s expense.” Mills v.
Electric Auto-Lite Co., 396 U.S. 375, 392 (1970); see Boe-
ing, 444 U. S., at 478; Trustees v. Greenough, 105 U.S.
527, 532 (1882); supra, at 6–7 and n. 4. And as we have
just explained, principles of unjust enrichment give way
Cite as: 569 U. S. ____ (2013) 11
Opinion of the Court
when a court enforces an equitable lien by agreement. See
supra, at 8–9. The agreement itself becomes the measure
of the parties’ equities; so if a contract abrogates the com­
mon-fund doctrine, the insurer is not unjustly enriched by
claiming the benefit of its bargain. That is why the Gov­
ernment, like McCutchen, fails to produce a single case in
which an equity court applied the common-fund rule (any
more than the double-recovery rule) when a contract
provided to the contrary. Even in equity, when a party
sought to enforce a lien by agreement, all provisions of
that agreement controlled. So too, then, in a suit like this
one.
The result we reach, based on the historical analysis our
prior cases prescribe, fits lock and key with ERISA’s focus
on what a plan provides. The section under which this
suit is brought “does not, after all, authorize ‘appropriate
equitable relief ’ at large,” Mertens, 508 U. S., at 253 (quot­
ing §1132(a)(3)); rather, it countenances only such relief
as will enforce “the terms of the plan” or the statute,
§1132(a)(3) (emphasis added). That limitation reflects
ERISA’s principal function: to “protect contractually de­
fined benefits.” Massachusetts Mut. Life Ins. Co. v. Rus-
sell, 473 U.S. 134, 148 (1985). The statutory scheme, we
have often noted, “is built around reliance on the face
of written plan documents.” Curtiss-Wright Corp. v.
Schoonejongen, 514 U.S. 73, 83 (1995). “Every employee
benefit plan shall be established and maintained pursuant
to a written instrument,” §1102(a)(1), and an administra­
tor must act “in accordance with the documents and in­
struments governing the plan” insofar as they accord with
the statute, §1104(a)(1)(D). The plan, in short, is at the
center of ERISA. And precluding McCutchen’s equitable
defenses from overriding plain contract terms helps it to
remain there.
12 US AIRWAYS, INC. v. MCCUTCHEN
Opinion of the Court
III
Yet McCutchen’s arguments are not all for naught. If
the equitable rules he describes cannot trump a reim­
bursement provision, they still might aid in properly
construing it. And for US Airways’ plan, the common-fund
doctrine (though not the double-recovery rule) serves that
function. The plan is silent on the allocation of attorney’s
fees, and in those circumstances, the common-fund doc­
trine provides the appropriate default. In other words, if
US Airways wished to depart from the well-established
common-fund rule, it had to draft its contract to say so—
and here it did not.7
Ordinary principles of contract interpretation point
toward this conclusion. Courts construe ERISA plans, as
they do other contracts, by “looking to the terms of the
plan” as well as to “other manifestations of the parties’
——————
7 The dissent faults us for addressing this issue, but we think it ade­
quately preserved and presented. The language the dissent highlights
in McCutchen’s brief in opposition, indicating that the plan clearly
abrogates the common-fund doctrine, comes from his description of US
Airways’ claim in the District Court. See post, at 1 (opinion of SCALIA,
J.); Brief in Opposition 5. McCutchen’s argument in that court urged
the very position we adopt—that the common-fund doctrine applies
because the plan is silent. See App. to Pet. for Cert. 30a; Defendants’
Memorandum in Opposition to Plaintiff’s Motion for Summary Judg­
ment in No. 2:08–cv–1593 (WD Pa., Dec. 4, 2011), Doc. 33, pp. 12–13
(“If [US Airways] wanted to exclude a deduction for attorney fees, it
easily could have so expressed”). To be sure, McCutchen shifted ground
on appeal because the District Court ruled that Third Circuit precedent
foreclosed his contract-based argument, see App. to Pet. for Cert. 31a;
the Court of Appeals’ decision then put front-and-center his alternative
contention that the common-fund rule trumps a contract. But both
claims have the same basis (the nature and function of the common­
fund doctrine), which the parties have disputed throughout this litiga­
tion. And similarly, the question we decide here is included in the
question presented. The principal clause of that question asks whether
a court may use “equitable principles to rewrite contractual language.”
Pet. for Cert. i. We answer “not rewrite, but inform”—a reply well
within the question’s scope.
Cite as: 569 U. S. ____ (2013) 13
Opinion of the Court
intent.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
101, 113 (1989). The words of a plan may speak clearly,
but they may also leave gaps. And so a court must often
“look outside the plan’s written language” to decide what
an agreement means. CIGNA Corp. v. Amara, 563 U.S.
___, ___ (slip op., at 13); see Curtiss-Wright, 514 U. S., at
80–81. In undertaking that task, a court properly takes
account of background legal rules—the doctrines that
typically or traditionally have governed a given situation
when no agreement states otherwise. See Wal-Mart
Stores, Inc. Assoc. Health & Welfare Plan v. Wells, 213
F.3d 398, 402 (CA7 2000) (Posner, J.) (“[C]ontracts . . . are
enacted against a background of common-sense under­
standings and legal principles that the parties may not
have bothered to incorporate expressly but that operate as
default rules to govern in the absence of a clear expression
of the parties’ [contrary] intent”); 11 R. Lord, Williston on
Contracts §31:7 (4th ed. 2012); Restatement (Second) of
Contracts §221 (1979). Indeed, ignoring those rules is
likely to frustrate the parties’ intent and produce perverse
consequences.
The reimbursement provision at issue here precludes
looking to the double-recovery rule in this manner. Both
the contract term and the equitable principle address the
same problem: how to apportion, as between an insurer
and a beneficiary, a third party’s payment to recompense
an injury. But the allocation formulas they prescribe
differ markedly. According to the plan, US Airways has
first claim on the entire recovery—as the plan description
states, on “any monies recovered from [the] third party”;
McCutchen receives only whatever is left over (if any­
thing). See supra, at 3. By contrast, the double-recovery
rule would give McCutchen first dibs on the portion of the
recovery compensating for losses that the plan did not
cover (e.g., future earnings or pain and suffering); US
Airways’ claim would attach only to the share of the recov­
14 US AIRWAYS, INC. v. MCCUTCHEN
Opinion of the Court
ery for medical expenses. See supra, at 6–7. The express
contract term, in short, contradicts the background equi­
table rule; and where that is so, for all the reasons we
have given, the agreement must govern.
By contrast, the plan provision here leaves space for the
common-fund rule to operate. That equitable doctrine, as
earlier noted, addresses not how to allocate a third-party
recovery, but instead how to pay for the costs of obtaining
it. See supra, at 7. And the contract, for its part, says
nothing specific about that issue. The District Court
below thus erred when it found that the plan clearly repu­
diated the common-fund rule. See supra, at 4. To be sure,
the plan’s allocation formula—first claim on the recovery
goes to US Airways—might operate on every dollar re­
ceived from a third party, even those covering the benefi­
ciary’s litigation costs. But alternatively, that formula
could apply to only the true recovery, after the costs of
obtaining it are deducted. (Consider, for comparative
purposes, how an income tax is levied on net, not gross,
receipts.) See Dawson, Lawyers and Involuntary Clients:
Attorney Fees From Funds, 87 Harv. L. Rev. 1597, 1606–
1607 (1974) (“[T]he claim for legal services is a first charge
on the fund and must be satisfied before any distribution
occurs”). The plan’s terms fail to select between these two
alternatives: whether the recovery to which US Airways
has first claim is every cent the third party paid or, in­
stead, the money the beneficiary took away.
Given that contractual gap, the common-fund doctrine
provides the best indication of the parties’ intent. No one
can doubt that the common-fund rule would govern here
in the absence of a contrary agreement. This Court has
“recognized consistently” that someone “who recovers a
common fund for the benefit of persons other than him­
self” is due “a reasonable attorney’s fee from the fund as
whole.” Boeing Co., 444 U. S., at 478. We have under­
stood that rule as “reflect[ing] the traditional practice in
Cite as: 569 U. S. ____ (2013) 15
Opinion of the Court
courts of equity.” Ibid.; see Sprague, 307 U. S., at 164–
166; supra, at 11. And we have applied it in a wide range
of circumstances as part of our inherent authority. See
Boeing Co., 444 U. S., at 474, 478; Hall v. Cole, 412 U.S.
1, 6–7 and n. 7 (1973); Mills, 396 U. S., at 389–390, 392;
Sprague, 307 U. S., at 166; Central Railroad & Banking
Co. of Ga. v. Pettus, 113 U.S. 116, 126–127 (1885); Green-
ough, 105 U. S., at 528, 531–533. State courts have done
the same; the “overwhelming majority” routinely use the
common-fund rule to allocate the costs of third-party
recoveries between insurers and beneficiaries. 8A Apple­
man §4903.85, at 335 (1981); see Annot., 2 A. L. R. 3d
1441, §§2–3 (1965 and Supp. 2012). A party would not
typically expect or intend a plan saying nothing about
attorney’s fees to abrogate so strong and uniform a back­
ground rule. And that means a court should be loath to
read such a plan in that way.8
——————
8 For that reason, almost every state court that has confronted the
issue has done what we do here: apply the common-fund doctrine in
the face of a contract giving an insurer a general right to recoup funds
from an insured’s third-party recovery, without specifically addressing
attorney’s fees. See, e.g., Ex parte State Farm Mut. Auto. Ins. Co., 105
So. 3d 1199, 1212 and n. 6 (Ala. 2012); York Ins. Group of Me. v. Van
Hall, 1997 ME 230, ¶8, 704 A.2d 366, 369; Barreca v. Cobb, 95–1651,
pp. 2–3, 5 and n. 5 (La. 2/28/96), 668 So. 2d 1129, 1131–1132 and n. 5;
Federal Kemper Ins. Co. v. Arnold, 183 W. Va. 31, 33–34, 393 S.E.2d
669, 671–672 (1990); State Farm Mut. Auto. Ins. Co. v. Clinton, 267
Ore. 653, 661–662, 518 P.2d 645, 649 (1974); Northern Buckeye Educ.
Council Group Health Benefits Plan v. Lawson, 154 Ohio App. 3d 659,
669, 2003–Ohio–5196, 798 N.E.2d 667, 675; Lancer Corp. v. Murillo,
909 S.W.2d 122, 126–127 and n. 2 (Tex. App. 1995); Breslin v. Liberty
Mut. Ins. Co., 134 N. J. Super. 357, 362, 341 A.2d 342, 344 (App. Div.
1975); Hospital Service Corp. of R. I. v. Pennsylvania Ins. Co., 101 Rawle I.
708, 710, 716, 227 A.2d 105, 108, 111 (1967); National Union Fire Ins.
Co. v. Grimes, 278 Minn. 45, 46–47, 51, 153 N.W.2d 152, 153, 156
(1967); Foremost Life Ins. Co. v. Waters, 125 Mich. App. 799, 801, 805,
337 N.W.2d 29, 30, 32 (1983) (citing Foremost Life Ins. Co. v. Waters,
88 Mich. App. 599, 602, 278 N.W.2d 688, 689 (1979)); Lee v. State
Farm Mut. Auto. Ins. Co., 57 Cal. App. 3d 458, 462, 469, 129 Cal. Rptr.
16 US AIRWAYS, INC. v. MCCUTCHEN
Opinion of the Court
The rationale for the common-fund rule reinforces that
conclusion. Third-party recoveries do not often come free:
To get one, an insured must incur lawyer’s fees and ex­
penses. Without cost sharing, the insurer free rides on its
beneficiary’s efforts—taking the fruits while contributing
nothing to the labor. Odder still, in some cases—indeed,
in this case—the beneficiary is made worse off by pursuing
a third party. Recall that McCutchen spent $44,000 (rep­
resenting a 40% contingency fee) to get $110,000, leaving
him with a real recovery of $66,000. But US 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 US Airways’ collection agent. We
think McCutchen would not have foreseen that result
when he signed on to the plan. And we doubt if even US
Airways should want it. When the next McCutchen comes
along, he is not likely to relieve US Airways of the costs of
recovery. See Blackburn v. Sundstrand Corp., 115 F.3d
493, 496 (CA7 1997) (Easterbrook, J.) (“[I]f . . . injured
persons could not charge legal costs against recoveries,
people like [McCutchen] would in the future have every
reason” to make different judgments about bringing suit,
“throwing on plans the burden and expense of collection”).
The prospect of generating those strange results again
militates against reading a general reimbursement provi­
sion—like the one here—for more than it is worth. Only if
US Airways’ plan expressly addressed the costs of recovery
would it alter the common-fund doctrine.
IV
Our holding today has two parts, one favoring US Air­
ways, the other McCutchen. First, in an action brought
under §502(a)(3) based on an equitable lien by agreement,
the terms of the ERISA plan govern. Neither general
——————
271, 273–274, 278 (1976).
Cite as: 569 U. S. ____ (2013) 17
Opinion of the Court
principles of unjust enrichment nor specific doctrines
reflecting those principles—such as the double-recovery or
common-fund rules—can override the applicable contract.
We therefore reject the Third Circuit’s decision. But
second, the common-fund rule informs interpretation of
US Airways’ reimbursement provision. Because that term
does not advert to the costs of recovery, it is properly read
to retain the common-fund doctrine. We therefore also
disagree with the District Court’s decision. In light of
these rulings, we vacate the judgment below and re-
mand the case for further proceedings consistent with this
opinion.
It is so ordered.
Cite as: 569 U. S. ____ (2013) 1
SCALIA, J., dissenting
SUPREME COURT OF THE UNITED STATES
_________________
No. 11–1285
_________________
US AIRWAYS, INC., IN ITS CAPACITY AS FIDUCIARY AND
PLAN ADMINISTRATOR OF THE US AIRWAYS, INC.
EMPLOYEE BENEFITS PLAN, PETITIONER
v. JAMES E. MCCUTCHEN ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE THIRD CIRCUIT
[April 16, 2013]
JUSTICE SCALIA, with whom THE CHIEF JUSTICE, JUS-
TICE THOMAS, and JUSTICE ALITO join, dissenting.
I agree with Parts I and II of the Court’s opinion, which
conclude that equity cannot override the plain terms of the
contract.
The Court goes on in Parts III and IV, however, to hold
that the terms are not plain and to apply the “common-
fund” doctrine to fill that “contractual gap,” ante, at 14.
The problem with this is that we granted certiorari on
a question that presumed the contract’s terms were
unambiguous—namely, “where the plan’s terms give it an
absolute right to full reimbursement.” Pet. for Cert. i. Re-
spondents interpreted “full reimbursement” to mean what
it plainly says—reimbursement of all the funds the Plan
had expended. In their brief in opposition to the petition
they conceded that, under the contract, “a beneficiary is
required to reimburse the Plan for any amounts it has
paid out of any monies the beneficiary recovers from a
third-party, without any contribution to attorney’s fees and
expenses.” Brief in Opposition 5 (emphasis added). All the
parties, as well as the Solicitor General, have treated that
concession as valid. See Brief for Petitioner 18, and n. 6;
Brief for Respondents 29; Brief for United States as Ami-
2 US AIRWAYS, INC. v. MCCUTCHEN
SCALIA, J., dissenting
cus Curiae 21. The Court thus has no business deploying
against petitioner an argument that was neither pre-
served, see Baldwin v. Reese, 541 U.S. 27, 34 (2004), nor
fairly included within the question presented, see Yee v.
Escondido, 503 U.S. 519, 535 (1992).
I would reverse the judgment of the Third Circuit.