In my previous post I briefly discussed the U.S. Supreme Court’s 2011 decision in Cigna Corp. v. Amara. The question in that case was the scope of relief available under Section 502(a)(1)(B) compared to Section 502(a)(3) of ERISA. “Garden variety” ERISA benefit cases are brought under Section 502(a)(1)(B) and seek enforcement of the terms of a plan. For instance, a plaintiff wrongfully denied long-term disability insurance benefits seeks to enforce the terms of the plan providing benefits to a totally disabled plan participant. In Amara the plaintiff class alleged misrepresentations regarding the effect of a defined benefits to cash balance pension plan conversion. The Supreme Court held that Section 502(a)(1)(B) was an inappropriate vehicle to conform the benefits to what plan participants and beneficiaries expected. This was the “victory” gained by Cigna.
The problematic portion of the decision for Cigna was the court’s “guidance” to the district court on remand. The court observed in dictum (but probably persuasive dictum at that) that the court could award the requested relief pursuant to Section 502(a)(3). The court foresaw three theories of possibly viable equitable relief upon remand: equitable estoppel, reformation and surcharge. Equitable reformation under Section 502(a)(3) would require detrimental reliance by plan participants. A showing of detrimental reliance would not be required for reformation based upon fraudulent supression, omission or an insertion materially affecting the contract. Nor would detrimental reliance be required for surcharge based on a trustee’s breach of duty. Futher, the court observed that a remedy based upon the failure to provide complete and accurate information in summary plan descriptions and summaries of material modification would require only a showing of actual harm and causation, not detrimental reliance.
One of the cornerstones of ERISA litigation is the notion that ERISA law is based in equity (as is the general body of trust law). Consequently, most practitioners would say that money damages are not available in ERISA cases. The Amara decision is the latest in a series of decisions that has blurred the distinction between money damages at law and equitable relief. A surcharge, for instance, is going to look and feel like a money damage award to a party that has to pay it.
The scope of equitable relief available under ERISA is one of the hottest topics in ERISA litigation. Another setting where the scope of remedies is playing out is an ERISA plan’s right to equitably subrogate against a personal injury settlement: one of the most important considerations in any personal injury case where an employee’s health plan has paid for a portion or all of the medical care. In my next blog post I will explore U.S. Airways v. McCutchen a pending case where the Supreme Court will again address the limits of equitable relief.