Overturning ERISA and the Supreme Court Update

Washington, DCLast November, Matt Wessler, an attorney at Public Justice, argued an ERISA case before the Supreme Court that will impact every ERISA insurer in the country and almost 200 million Americans covered by the ERISA plan.

Here’s the issue in U.S. Airways v. McCutchen: When an employee is injured and recovers compensation from the person who injured him (or his own personal insurance, e.g., uninsured motorist coverage), can his employer’s ERISA health insurance plan - paid premiums to cover his medical expenses - force the employee to reimburse it for 100 percent of the medical expenses it covered before he or the lawyer who won that compensation can keep a penny, even if the injured employee only recovered a small fraction of his total damages?

When Public Justice’s Matt Wessler and his team argued the case before the U.S. Court of Appeals for the Third Circuit, it said “no.” When they argued the same issue to the U.S. Court of Appeals for the Ninth Circuit in CGI v. Rose, it said “no” too. Wessler, who won both of those appeals, then argued the issue before the U.S. Supreme Court.

Wessler says this is a key “Access to Justice” issue. If injury victims and their lawyers cannot keep a penny until the health insurers recover everything, many will not be able to obtain any compensation - or any representation. Because millions of employees nationwide are covered by ERISA plans, how the Court rules will have far-reaching implications.

Wessler, along with attorneys Jon Perry and Paul Hilko of Rosen, Louik & Perry P.C. of Pittsburgh, Pennsylvania, is defending James McCutchen (Case 11-1285, U.S. Airways v. McCutchen). Legally speaking, this is a difficult case to figure out, even for attorneys such as Wessler. He says there are lots of overlapping rules and questions that invoke different doctrines of the law, but at another level, it is a very straightforward and simple ERISA insurance practice.

The basic issue in this argument involves the practice of insurance subrogation. Wessler says that, although it has a very technical-sounding term, the practice is simple to understand. It refers to the ability of an insurance provider after that provider makes a payment on behalf of the insured for some loss that the insured has suffered. Got that?

“When an insurer pays some loss on behalf of the insured, the law will allow the insurer, in certain circumstances, to recover the money that it paid,” Wessler explains, adding that this is the most fundamental description of such a practice - it has roots that date back to Roman law. “The doctrine essentially means that an insurer can step into the shoes of the insured to recover the money that it paid from the party that caused the loss. In most of these cases, the party is the wrongdoer.”

So Wessler had his day in Supreme Court on November 29, 2012, but now it is a waiting game.

“The Supreme Court argues but doesn’t issue a decision immediately - it usually takes anywhere from two to four months after the argument,” says Wessler, who made the case to nine justices. As well, there were two other parties in the case and the justices heard arguments from three different lawyers.

“The ERISA lawyer representing US Airways argued that the lower court’s decision should be reversed,” Wessler explains. “The attorney for the government argued for a middle ground approach and I argued that the court should affirm the decision below - i.e., the lower court decision.”

Wessler added that the Supreme Court is back from its winter break and they are issuing decisions once or twice a week. They started hearing cases in October so he expects a decision sometime this month or March but they have until the end of June to issue all decisions. And they don’t tell you ahead of time. So Wessler finds out the decision when the public finds out. He is optimistic; however, predictions are dangerous and the issue was tricky and complicated.

“I think the hearing went about as well as we hoped,” Wessler says. “There seems to be a majority of justices who had fundamental concerns about allowing an insurer to get everything. In general they were not surprised to learn that insurers aggressively pursue recovery but I think they felt allowing categorical 100 percent recovery was unfair. The justices will have to go back and give the issue more thought. Whatever happens now is entirely out of everyone’s control - except for the nine justices."

When they issue the decision, obviously the impact and consequences of that decision for James McCutchen and every ERISA insurer in the country will have significant results and we will have to study the impact it will have going forward.”

As for McCutchen, he is still in a lot of pain and not working. Nothing has changed and US Airways still believes it is entitled to all its money. “Our position is that principals of equity limit the amount that US Airways can obtain,” adds Wessler. “We are grateful to work for an organization - and in a country - in which we can fight for justice and, up to now, win.”

If you are interested in more information on this case, read the transcript here or hear the audio file.

Matt Wessler is a Staff Attorney at Public Justice in Washington, D.C. He represents clients in a wide range of public interest areas, with a particular focus on issues surrounding the environment and access to justice, including ERISA, mandatory arbitration, preemption, and civil rights. In addition, the litigation team consists of senior Attorney Leslie Brueckner, Kazan-Budd Attorney Leah Nicholls, and co-counsel Jon Perry and Paul Hilko of Rosen, Louik & Perry P.C. in Pittsburgh; and Brendan Maher and Peter Stris of Stris & Maher LLP in Dallas.