Silva v. Metropolitan Life Insurance Company

Silva v. Metropolitan Life Insurance Company

Case No. 13–2233.

Submitted January 14, 2014. Filed on August 7, 2014 United States Court of Appeals, Eighth Circuit

Silva v. Metropolitan Life Insurance Company, No. 13-2233 [8th Cir]

Brief of the Secretary of Labor, Thomas E. Perez-As Amicus Curiae in support of plaintiff


Ramifications of Court Decision:

  1. Following the Supreme Court’s decision in Amara, the 8th Circuit recognizes the remedy of surcharge could be available to provide monetary “compensation” for a loss resulting from a trustee’s breach of duty.  The court cited the 4th circuit decision saying,”The Fourth Circuit stressed why allowing plan participants to seek the full amount of benefits for a breach of fiduciary obligations under § 1132(a)(3) is so important:
    [W]ith Amara, the Supreme Court clarified that remedies beyond mere premium refunds . . . are indeed available to ERISA plaintiffs suing fiduciaries under Section 1132(a)(3). This makes sense—otherwise, the stifled state of the law interpreting Section 1132(a)(3) would encourage abuse by fiduciaries. Indeed, fiduciaries would have every incentive to wrongfully accept premiums, even if they had no idea as to whether coverage existed—or even if they affirmatively knew that it did not. The biggest risk fiduciaries would face would be the return of their ill-gotten gains, and even this risk would only materialize in the (likely small) subset of circumstances where plan participants actually needed the benefits for which they had paid. Meanwhile, fiduciaries would enjoy essentially risk-free windfall profits from employees who paid premiums on non-existent benefits but who never filed a claim for those benefits. With Amara, the Supreme Court has put these perverse incentives to rest and paved the way for [the plaintiff] to seek a remedy beyond mere premium refund.
  2. Reformation and Equitable Estoppel could be allowed as a remedy to the fiduciary’s failure to provide the SPD.  According to the court, “Silva argues that MetLife “waived” the “evidence of insurability” provision in the Plan because the company appeared to approve Abel’s request for coverage when it began to deduct premium payments. Silva argues a remedy for his claim exists in the equitable theory of reformation. We find support for this in Amara’s discussion of reformation under § 1132(a)(3).See Amara, 131 S. Ct. at 1879. There, the Court stated that “[t]he power to reform contracts (as contrasted with the power to enforce contracts as written) is a traditional power of an equity court, not a court of law, and was used to prevent fraud.” Id. (citations omitted). On remand, the District of Connecticut described the reformation remedy available under § 1132(a)(3) as allowing courts “to reform contracts that failed to express the agreement of the parties, owing either to mutual mistake or to the fraud of one party and the mistake of the other.” Amara v. CIGNA, 925 F. Supp. 2d 242, 252 (D. Conn. 2012).
  3. The court finds that a claimant can plead, in the alternative, claims for benefits and breach of fiduciary duty.  The court goes on to say“It [is] well established in [the Sixth] Circuit that plaintiffs [can] bring claims for breaches of fiduciary duty in ERISA cases, and [can] even do so alongside a claim for benefits in certain circumstances.”


According to the court documents, “However, the Supreme Court’s decision in Amara changed the legal landscape by clearly spelling out the possibility of an equitable remedy under ERISA for breaches of fiduciary obligations by plan administrators. Amara, 131 S. Ct. at 1881. The Amara Court directly addressed the need for this remedy, stating: “[i]t is not difficult to imagine how the failure to provide proper summary information, in violation of the statute, injured employees. . . . We doubt that Congress would have wanted to bar those employees from relief.” Amara, 131 S. Ct. at 1881.

Silva argues the remedy for his claim against Savvis is the equitable theory of surcharge. The Amara Court described equitable surcharge under § 1132(a)(3) as follows:

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. Indeed, prior to the merger of law and equity this kind of monetary remedy against a trustee, sometimes called a “surcharge,” was “exclusively equitable.”
The surcharge remedy extended to a breach of trust committed by a fiduciary encompassing any violation of a duty imposed upon that fiduciary.

Amara, 131 S.Ct. at 1880 (internal citations and citations to authority omitted). To obtain relief under the surcharge theory, a plan participant is required to show harm resulting from the plan administrator’s breach of a fiduciary duty. See Amara, 131 S. Ct. at 1881–82 (“We believe that, to obtain relief by surcharge for violations of §§ [1022 and 1024(b)], a plan participant or beneficiary must show that the violation injured him or her. But to do so, he or she need only show harm and causation. Although it is not always necessary to meet the more rigorous standard implicit in the words ‘detrimental reliance,’ actual harm must be shown.”).”

With respect to the Reformation remedies, the court concluded:”On remand, Silva may be able to show mutual mistake or “fraud of one party and the mistake of the other.” See Id. It was arguably fraudulent for MetLife to collect premiums from a Savvis employee who, MetLife now argues, never had an approved policy. Further, MetLife did not just erroneously collect premiums from Abel—an internal MetLife investigation showed that roughly 200 Savvis employees had been paying premiums for policies that were never approved by MetLife. We conclude that Silva is allowed to make his waiver argument on remand, and if successful, receive monetary damages, as will be discussed below.”

The court goes on to recognize an equitable estoppel remedy may be available, “Because MetLife admitted error in collecting the premiums and Abel relied on that collection as proof that he had a policy, Silva argues that MetLife should also be equitably estopped from claiming that no policy existed. Again, without resolving Silva’s claim on the merits, we find that this alleged wrong can survive a Rule 12(b)(6) motion because relief could be granted under § 1132(a)(3)’s catchall provision using the traditional equitable estoppel theory discussed in Amara, 131 S. Ct. at 1880. The concept of equitable estoppel is simple; it “operates to place the person entitled to its benefit in the same position he would have been in had the representations been true.” Id. (citation omitted).




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