ERISA & Pleading In The Alternative
The notion the a plaintiff in a civil lawsuit may plead different claims in the alternative is well established in both case law and formal rule. Federal Rule of Civil Procedure 8(a) specifically states that “[r]elief in the alternative or of several different types may be demanded.” The practical effect of this rule is that plaintiffs are not required, when litigation begins, to choose the particular basket into which they will put all their argument eggs.
Plaintiffs can plead, for example, that the defendant breached the contract between the parties. In the alternative, the facts could very well develop in a way to show that while a contract did not exist between the parties, facts to support a claim for negligent misrepresentation are present. So as a completely separate basis for recovery, Rule 8(a) allows plaintiffs to plead recovery under negligent misrepresentation. Or, as a third alternative, that the facts may end up supporting neither of these legal theories but may provide a right to recover for the defendant’s failure to comply with a statutory requirement regarding disclosure of material information relating to a benefit claim. What is very clear under FRCP 8(a) is that plaintiffs are not required to choose which of these theories to rely on to the exclusion of other possible theories before carrying out any investigation in the litigation .
So what does this have to do with ERISA? Plenty. The Supreme Court has described the statute’s remedial scheme as “reticulated,” a fancy word for networked or interrelated. On its face this would suggest that Rule 8(a)’s allowance for plaintiffs to plead in the alternative would fit quite comfortably. But no. In fact, the federal judiciary has gone in the opposite direction and has ruled in many cases that ERISA generally does not allow pleading in the alternative.
The source of the confusion is language in Varity v. Howe Corp., 516 U.S. 489 (1996). Varity involves claims brought by a group of employees who were fraudulently induced to transfer their membership in a solvent ERISA welfare benefits plan to one that was basically insolvent from the day it was created. The employees sued under ERISA not for recovery of benefits owed under the terms of the insolvent plan (which would have benefitted them not at all), but for reinstatement into the former, solvent, plan they has been wrongfully tricked into abandoning. Part of ERISA’s remedies, 29 U.S.C Sec. 1132(a)(1)(B), provides beneficiaries the right to sue for benefits wrongfully denied under the terms of the plan. That is the remedies workhorse of ERISA; the great majority of claims brought by beneficiaries fall under this section of the statute.
However, ERISA also makes available “appropriate equitable relief” to beneficiaries who are damaged by a fiduciary’s violation of the statute or the terms of the ERISA plan. This is the section of ERISA, found at 29 U.S.C. §1132(a)(3), under which the beneficiaries in Varity brought suit. And they won. The Supreme Court allowed the beneficiaries to be reinstated into the plan they were duped into withdrawing from.
But accompanying the Supreme Court’s ruling was this side comment: “where Congress elsewhere provided adequate relief for a beneficiary’s injury, there will likely be no need for further equitable relief, in which case such relief normally would not be ‘appropriate.’” This makes sense. If a person receives the benefits he is due by bringing an action to recover money for a fiduciary’s wongful denial of benefits, there would generally be no need for the court to provide additional relief.
But defendants seized on the language to take the idea a significant number of steps farther down the road. Insurers and employers claimed that plaintiffs should be cut off from any attempt to bring a claim for “appropriate equitable relief” under 29 U.S.C. §1132(a)(3) if a claim is also brought in the same case for benefits under the terms of the plan. Defendants asserted this was certainly true if a court had ruled that a plaintiff had a valid claim for benefits under the terms of the plan (thus arguably making additional “appropriate equitable relief” unnecessary or unavailable). Defendants did not even wait until after the facts of the case had been investigated and are known to both parties to make this argument. Rather, defendants began to make the argument in motions to dismiss before any discovery had been carried out at all. Often, the first pleading defendants file when faced with alternative causes of action for benefits under the terms of a plan and for appropriate equitable relief in the same lawsuit is a motion to dismiss the claim for appropriate equitable relief. And, amazingly, courts have generally granted these motions to dismiss!
The bases for these rulings is usually nothing more than the language from Varity I’ve quoted above. A recent example of such a ruling is from the U.S. Court of Appeals for the Fourth Circuit in Korotynska v. Met. Life Ins. Co, 2006 U.S. App. LEXIS 30535 (4th Cir. 2006). In Korotynska the only claim the plaintiff brought was for appropriate equitable relief under 29 U.S.C. §1132(a)(3). No claim for benefits due under the terms of the plan was asserted at all by the plaintiff for herself or other members of the class she attempted to represent. Nevertheless, the Fourth Circuit dismissed the case asserting that Korotynska could have asserted a claim for benefits under the terms of the plan if she wanted to and that this possibility, with nothing more, prevented her from asserting a claim for “appropriate equitable relief” based on Met Life’s violation of the fiduciary and claims procedure requirements of ERISA.
I have reviewed at least two dozen cases granting motions to dismiss claims for appropriate equitable relief on this dubious rationale and can count on one hand the number of times the courts have referenced Rule 8(a) of the FRCP. It is as if collective amnesia has enveloped the federal judiciary about the concept of pleading in the alternative. This is especially odd in light of plaintiffs’ common practice of pleading in the alternative in other types of cases and defendants’ and judges’ routine acceptance of that practice. I've filed hundreds of cases in which I've pled in the alternative different causes of action that were, to one degree or another, inconsistent and that awaited development of the facts to determine which theory was valid. I've don't recall one time a defendant has asked the court to dismiss a cause of action solely on the basis that it was inconsistent, to one degree or another, with another cause of action I'd pled.
I’d be interested in reader’s comments informing me of other situations where, on such thin authority (or any authority at all), the express terms of FRCP 8(a) authorizing pleading in the alternative are simply ignored.