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December Supreme Court Roundup: Employment and ERISA

Vance v. Ball State University and U.S. Airways Inc. v. McCutchen are two cases at the high court that in-house counsel should keep an eye on

Each month, lawyers at Mayer Brown LLP, which has the nation’s largest and oldest Supreme Court & Appellate practice, are pleased to offer the readers of InsideCounsel their insights on the most compelling developments in the United States Supreme Court that are relevant to in-house counsel. Today, we look at two current cases, Vance v. Ball State University and U.S. Airways Inc. v. McCutchen, which were argued on November 26, 2012. They address critical questions relating to workplace harassment and ERISA litigation.

Employer’s vicarious liability for hostile work environment. Under Title VII, an employer may be vicariously liable for creating a hostile work environment, without any showing of negligence, if a supervisor commits actionable harassment. In Vance v. Ball State University, the Supreme Court granted review to resolve a circuit split regarding who qualifies as a supervisor for purposes of imposing vicarious liability. Several circuits, including the 7th Circuit, have held that only individuals possessing “the power to hire, fire, demote, promote, transfer, or discipline” the plaintiff-employee are supervisors. Other circuits, and the EEOC, have adopted a broader definition that embraces individuals who exercise control over the plaintiff’s daily work activities.

Equitable limitations on ERISA subrogation. In US Airways, Inc. v. McCutchen, the Supreme Court granted certiorari to resolve a circuit split regarding whether courts may equitably limit recovery by a plan of previously paid medical benefits from a participant who subsequently recovers from a third party. Previous Supreme Court decisions have left open whether such equitable limitations on reimbursement obligations are permissible.

After McCutchen was injured in an accident, US Airways’ self-insured medical plan paid approximately $66,866 in medical benefits. McCutchen obtained a settlement of $110,000 from the third party responsible for the accident, of which $44,000 was allegedly paid to McCutchen’s attorney. US Airways sued under the Employee Retirement Income Security Act (ERISA) § 502(a)(3), seeking to enforce the plan provision requiring McCutcheon “to reimburse the plan for amounts paid for claims out of any monies recovered from a third party…as a result of judgment, settlement or otherwise.” Strict enforcement of this provision would have required McCutchen to repay the plan more than he received from the settlement after attorneys’ fees and legal costs were subtracted. The 3rd Circuit held that a court may use equitable principles, specifically unjust enrichment, to revise the plan language and limit the participant’s reimbursement obligation to take account of attorneys’ fees. The 5th, 7th, 8th, and 11th Circuits have strictly enforced similar plan terms. The 9th Circuit has followed the 3rd Circuit.

Contributing Author

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Marcia Goodman

Marcia Goodman, based in Chicago, is Co-Chair of Mayer Brown’s Employment & ERISA Litigation Action Group.

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Maureen Gorman

Maureen Gorman is Co-Practice Leader of Mayer Brown’s Employment and Benefits Group.

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Miriam Nemetz

Miriam Nemetz is a member of the Supreme Court and Appellate Practice in Mayer Brown’s Washington, DC office.

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