Jan 22, 2017
The day before yesterday the Supreme Court issued its ruling in CIGNA v. Amara, Case No. 09-804, 2011 U.S. LEXIS 3540. You can find it in the website library here. The case involved misstatements by CIGNA to its employees about changes in their pension plan. The summaries of the changes CIGNA provided to its employees characterized them as being more generous than they actually were. The district court actually found that this was more than a simple mistake and that CIGNA had taken steps to withhold accurate information from the employees about the pension plan changes. The employees brought a class action to ask that the terms of the plan be reformed to reflect what CIGNA told the employees rather than the less generous terms the changes in the plan documents actually provided. The district court and U.S. Court of Appeals for the Second Circuit gave that relief to the employees. CIGNA appealed.
The Supreme Court reversed. In a 8-0 decision (Justice Sotomayor recused herself) written by Justice Breyer, the Court held that summaries of the plan were not part of the documents that formed rights and obligations between ERISA plans and their participants and beneficiaries. Consequently, the section of ERISA that allows plan participants to bring a claim to recover benefits or enforce rights under the terms of the plan, 29 U.S.C. §1132(a)(1)(B), §502(a)(1)(B) of ERISA, was not available to the employees.
However, the Court was clearly troubled by the behavior of CIGNA. It remanded the case for further proceedings before the district court and made clear that, whether the erroneous information provided to the employees occurred by mistake or with bad intent by CIGNA, 29 U.S.C. §1132(a)(3), §502(a)(3) of the Act, may well provide money damages to the participants. That section of ERISA provides ERISA participants (employees) with "appropriate equitable relief" to redress violations of an ERISA plan or the Act, or to enforce the terms of a plan or the Act. CIGNA argued that in order to obtain any recovery based on the faulty information in the summaries of the pension plan changes, each employee had to demonstrate they detrimentally relied on those summaries. Thus, CIGNA argued that treatment of the case as a class action was improper in light of the individual inquiry required of each claimant. The district court and circuit courts rejected that argument but did require the employees to demonstrate that the erroneous information likely harmed them.
In providing guidance to the district court on remand, the Supreme Court in Amara significantly expands the power and substance of the remedies available under §502(a)(3) of ERISA. The language of the decision affirms that where there is a violation of the terms of an ERISA plan or the requirements of the Act itself for which no remedy exists elsewhere in the Act, as in Amara, that equity will provide a remedy. Slip Op., p. 18. The majority opinion (which was joined by Chief Justice Roberts and Justices Kennedy, Ginsburg, Alito and Kagan) goes on to state that the scope of remedies available at equity is broad and includes both affirmative and negative injunctions, mandamus, and restitution. The majority emphasize both the flexibility of equity and the need to tailor the appropriate remedy to redress injury based on the facts of the specific case before the court. Under the circumstances in Amara, the Court makes clear that providing false or misleading information, whether occurring by fraud or mistake, may form the basis for reforming a contract in equity in a manner very similar to what the district court attempted to do under §502(a)(1)(B) of the Act. The Court went on to state that other aspects of the district court's order also resembled equitable estoppel and surcharge. Surcharge is an "exclusively equitable" remedy and involves a monetary award against a trustee who violates any fiduciary duty. Slip Op., p. 19. The Court specifically states that "make-whole" relief is available to trust beneficiaries against a breaching trustee under appropriate circumstances. Slip Op., p. 20.
Finally, the decision states that ERISA does not establish any particular standard for determining harm under the Act. "Hence, any requirement of harm must come from the law of equity." Slip Op., p. 21. Reviewing that body of law, the Court stated that "detrimental reliance," the standard of harm CIGNA urged the Court to adopt, was not uniformly applicable in equity. Detrimental reliance must be proven by a party invoking estoppel. But neither surcharge nor contract reformation require such a level of proof. Equity's "flexible approach belies a strict requirement of 'detrimental reliance.'" Id. The Court does state that surcharging a trustee when there is no harm arising out of a breach of fiduciary duty would not be appropriate. But if a breach by a trustee does cause harm, the equitable remedy of surcharge may be appropriate. In such a case the majority doubts Congress would have wanted to deny those employees a remedy. Silp Op., p. 22.
Justices Scalia, joined by Justice Thomas, concurred in the decision but wrote to state that anything in the opinion beyond reversing the lower courts' erroneous use of §502(a)(1)(B) of the Act was unnecessary dicta.
The Supreme Court has issued several cases since 1993 addressing the breadth and strength of the "appropriate and equitable relief" language in §502(a)(3) of ERISA. However, Amara is significant because, more than any Supreme Court ERISA case to date, it makes clear the potential for this section of ERISA to provide meaningful remedies, including monetary relief, to ERISA plan participants and beneficiaries when faced with fiduciaries who have violated the terms of their plans or the requirements of the statute and for which a remedy does not exist elsewhere in ERISA.
Post a Comment to "Supreme Court Expands ERISA's Equitable Remedies in CIGNA v. Amara"To reply to this message, enter your reply in the box labeled "Message", hit "Post Message."