ninth circuit weighs in on appropriate equitable relief

The Ninth Circuit Weighs in on Appropriate Equitable Relief in Scope of ERISA Reimbursement Claim

For the second time in less than a year, a Federal court of appeals has ventured outside the normal analysis of equitable relief under ERISA and examined how the term “appropriate” may affect a reimbursement claim made under ERISA. In November, the Third Circuit became the first to do so in its decision of U.S. Airways, Inc. v. McCutchen, 663 F.3d 671 (3d Cir. 2011); Petition for Writ of Certiorari filed. In the US Airways decision the court found that Congress intended equitable considerations be taken into account when considering the reimbursement claims of ERISA plans, which are based in contractual plan language. In the CGI Technologies decision on June 20th, the Ninth Circuit held that while a court should take plan language into consideration, that court is not obligated to follow language in determining appropriate equitable relief. Specifically a court may consider traditional equitable defenses such as the make whole and common fund doctrines, notwithstanding the express terms of an ERISA plan to the contrary. So what does this all mean? These cases are not suggesting that there should be a systematic reversal of written plan language nor are they to be read to imply that “equitable considerations” are now an affirmative defense in every case regardless of factual circumstances. Rather, we believe they provide a framework for going beyond plan language review to include an individualized, fact-based analysis (specifically loss to recovery ratio). The framework derived from these cases strikes a balance which is conducive to production of an equitable outcome for all involved parties. As such, these cases serve as another reminder that a process to verify and resolve ERISA liens must take into account increasing complexities.