No. 09-804, 2011 WL 1832824 (S. Ct. May 16, 2011)
Ramifications of the Supreme Court Decision:
On May 16, 2011 The Supreme Court issued a major ERISA remedies decision in CIGNA Corp. v. Amara, No.09?804, 2011 WL 1832824, holding that ERISA’s authorization of suits by pension plan participants “to recover benefits due” or to “enforce [their] rights” under the terms of the plan (ERISA section 502(a)(1)(B)) is not authority for courts to enforce the terms of a summary plan description (SPD) or to revise the plan to conform it to representations made in the SPD. More importantly, however, the Court appeared to use the case to signal, in lengthy dicta, that it has rethought the scope of “other appropriate equitable relief” available under ERISA’s catch-all remedial provision (ERISA section 502(a)(3)) and now is prepared to allow plan participants to recover “monetary ‘compensation’” and “make-whole” relief against fiduciaries for breaches of duty, something the lower courts have long construed earlier Supreme Court cases to preclude.
The Court rejected CIGNA’s argument that plan beneficiaries must always show detrimental reliance to obtain relief for violations of the notice provisions.
Additionally, the court stated “Thus, to obtain relief by surcharge for violations of §§102(a) and 104(b), a plan participant or beneficiary must show that the violation caused injury, but need show only actual harm and causation, not detrimental reliance.”
“In the present case, it is not difficult to imagine how the failure to provide proper summary information, in violation of the statute, injured employees even if they did not themselves act in reliance on summary documents—which they might not themselves have seen—for they may have thought fellow employees, or informal workplace discussion, would have let them know if, say, plan changes would likely prove harmful”
Citing Mertens v. Hewitt Associates, 508 U.S. 248 (1993), the Court looked at traditional equitable remedies and concluded as follows:
- First, that reformation was such a remedy in courts of equity. Because the power to reform contracts was available in equity to prevent fraud or mistake, it likewise is available under Section 502(a)(3).
- Second, that equitable estoppel was a classic remedy in equity, and thus also available under Section 502(a)(3). Third, that equity courts “possessed the power to provide relief in the form of monetary ‘compensation’ for a loss resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment.” Known as “surcharge,” this remedy “extended to a breach of trust committed by a fiduciary encompassing any violation of a duty imposed upon that fiduciary.”
The Supreme Court’s decision will have many practical implications for plan sponsors, fiduciaries, and participants in the coming years. Here are two:
- First and foremost, it represents the first time the Supreme Court has signaled that “compensatory,” “make-whole” monetary relief is available under ERISA’s catch-all provision, Section 502(a)(3). For nearly 20 years, the lower courts overwhelmingly have construed Mertens and later Supreme Court decisions to preclude monetary relief under Section 502(a)(3) against fiduciaries in nearly all circumstances. CIGNA now appears to invite participants to challenge and remake that law.
- Second, the impact of the Supreme Court’s holding that the terms of an SPD cannot be enforced as if they were plan terms will have to be sorted out in future litigation. The decision appears to overturn the rule adopted by many circuits, including at least the Second, Fourth, Fifth, Sixth, Seventh, Ninth, Tenth and Eleventh, that an SPD with language more favorable to participants than the plan automatically controls when there is a conflict.
The McCravy Amicus Brief is in support of a petition for rehearing or rehearing en banc.
AS CIGNA NOW MAKES CLEAR, APPROPRIATE EQUITABLE RELIEF UNDER ERISA SECTION 502(a)(3) INCLUDES RELIEF THAT MAKES INJURED PARTICIPANTS AND BENEFICIARIES WHOLE AND THUS PERMITS THE COURT TO SURCHARGE METLIFE FOR THE INSURANCE PROCEEDS THAT MCCRAVY WOULD HAVE RECEIVED BUT FOR THE ALLEGED BREACHES OF FIDUCIARY DUTY