CIGNA v. Amara: Back to the Future, All Over Again
By Michael R. Shpiece,1 Kitch Drutchas Wagner Valitutti & Sherbrook, Detroit, MI
On May 16, 2011, the US Supreme Court handed down another in a series of decisions it has issued over the past 20 years defining the remedies available for violations of the Employment Retirement and Income Security Act of 1974 (ERISA).
ERISA Section 502(a)2 lists the civil remedies available to remedy a breach of ERISA or an ERISA plan’s terms. ERISA aficionados know that the U.S. Supreme Court has determined that ERISA’s enforcement provisions are “comprehensive and reticulated” and must be read technically.3 The Court has been reluctant to permit remedies not specifically recognized in ERISA Section 502(a). For example, the Court has held that the use of the term “appropriate equitable relief” in ERISA Section 502(a)(3)4 evidenced an intent by Congress to return to the days of the “divided bench” in medieval England. Only relief “typically available” in medieval courts of equity is available under ERISA -- that is, injunction, mandamus, and restitution.5 And only equitable restitution, as opposed to legal restitution, is available.6
THE CIGNA v. ARAMA DECISION
The Supreme Court further clarified this approach recently in CIGNA v Amara.7 CIGNA made major, structural changes to its retirement plan. As part of these changes, the plaintiffs, participants in the plan, alleged that CIGNA issued “incomplete” or “misle[adding]” information that suggested that participants would be entitled to a greater benefit than what the actual language of the new plan provided.8 In other words, the materials that were distributed to the employees promised benefits greater than those provided in the “officially-adopted” plan document. The participants sued to get these greater benefits.
As noted above, ERISA Section 502(a) includes more than a dozen possible causes of action. Employees will generally bring their actions under either ERISA Sections 502(a)(1)(B) or 502(a)(3).9
The plaintiffs brought their lawsuit under ERISA Section 502(a)(1)(B)10 -- to enforce the terms of the plan and recover the benefits to which they were entitled under the terms of the plan.
The Court rejected this claim. When considering a claim under Section 502(a)(1)(B), a court can only consider the plan that had been adopted. The documents promising greater benefits had not been officially adopted as part of the plan and thus could not support the plaintiffs’ Section 502(a)(1)(B) claim.
But, for the Court, that was not the end.11 The Court would eventually remand to determine whether ERISA Section 502(a)(3) might provide a remedy for CIGNA’s violations. But because the District Court showed some confusion over that section’s applicability,12 the Court decided to share its views of Section 502(a)(3).13 The Court made no pronouncement on the case at hand; it simply discussed possible remedies that Section 502(a)(3) might provide.
POSSIBLE SECTION 502(a)(3) REMEDIES
Because no specific remedy was before it, the Court did not make any formal holdings. Rather, it offered its views on a variety of possible remedies. Underlying this discussion is a need to identify a specific equitable remedy, determine the elements of that specific remedy, and then determine if the plaintiffs have proven each of those elements.14 Different remedies will have different requirements; and an element of one remedy may not be an element of another.
First, even though the documents did not amend the plan, they could serve as the basis of an equitable claim -- such as reformation or equitable estoppel/detrimental reliance. On that basis, the plaintiffs could recover additional benefits using the so-called “ERISA two-step”:
Step 1: Reform the plan’s language to comply with the other documents, as permitted by 502(a)(3); and then,
Step 2: Award the benefits to which the plaintiffs were entitled under the new reformed plan, as permitted by 502(a)(1)(B).15
Even what a plaintiff has to show under Step 1 will depend on the cause of action he or she asserts. For example, if seeking reformation, courts of equity typically required a showing of mistake or fraud.16 If, on the other hand, if he or she is asserting estoppel, detrimental reliance will probably be required.17
But other remedies will have other elements. If the plaintiff were seeking a surcharge on a trustee, the plaintiff would apparently have to show (1) the defendant was akin to the plan’s trustee, (2) the defendant breached a duty under ERISA or pre-ERISA trust law; and (3) the breach caused harm to the plaintiff.18 That is, the plaintiff must show harm, but not necessarily detrimental reliance.
Another point: some courts have viewed the prior decisions as limiting Section 502(a)(3) claims as limited to mandamus, restitution, and injunction.19 However, the Amara court discussed other remedies, i.e., surcharges and both affirmative and negative injunctions.20 This strongly suggests that any remedy that was traditionally considered an equitable remedy will now be available under ERISA.
EFFECT OF DECISION
So, besides re-enforcing the need to dig out the old, dusty books on medieval equity, what does Amara mean?
First, it places a greater need to identify the actual documents governing the plan that were legally adopted by the employer. This will be a problem, particularly with health plans sponsored by small employers who rarely have a separately labeled document that has been officially adopted by the employer’s Board of Directors (or an authorized officer). What happens when neither the employer/insurer nor the patient can prove that a particular document was formally adopted as the plan document?21
Beyond that, one can expect both sides (i.e., participants and employers) to herald the decision as supporting its view. And there will be courts who will adopt that view with little real analysis. This has happened repeatedly in the past.22 And while both sides can find language in this decision to support their arguments, this will reflect a superficial analysis.
For example, defendants/employers will claim that the decision means that only the “Official Plan Document” will govern a benefit claim and summary plan descriptions (SPDs) or other documents are immaterial. That is certainly correct for a claim brought under ERISA Section 502(a)(1)(B), but not for a claim brought under ERISA Section 502(a)(3): the SPD is not the official plan document, but it may serve as support for a claim for equitable relief such as reformation or estoppel. Further, the plan administrator is still required to prepare and distribute the SPD and that SPD must be “sufficiently accurate and comprehensive to reasonably appraise” the participants of their rights and the plan’s benefits23. An incomplete, inaccurate, or misleading SPD will violate ERISA. And it might serve as a basis for an equitable action brought under Section 502(a)(3).
On the other hand, plaintiffs/employees will claim that the decision opens up the door to monetary and “make-whole” relief.24 Yes, but the plaintiff will still have to allege and prove a claim which “resembles forms of traditional equitable relief” which were recognized by the Courts of Equity during the days of the divided bench.25 Merely claiming damages will not be enough.26
This may be another Supreme Court ERISA decision that can be summarized as “we said what we meant in our prior remedy cases, and we meant what we said.27 In Mertens, Knudson, Sereboff, and now Arama, the Court has said that ERISA Section 503(a)(3) encompasses those claims traditionally recognized by Courts of Equity. ERISA practitioners need to learn the intricacies of Equity and how to craft their claims and defenses accordingly.
Michael R. Shpiece is Of Counsel in the Detroit office of Kitch Drutchas Wagner Valitutti & Sherbrook. He received his JD from The University of Michigan Law School and is an Adjunct Professor of Law at Wayne State University Law School.
29 U.S.C. 1132(a). Depending how one counts, over a dozen possible causes of actions are listed. The section also lists who may bring each action (e.g., a plan participant, employer, the Secretary of Labor, etc.).
See, e.g., Nachman Corp. v. PBGC, 446 U.S. 359, 361 (1980).
Mertens v. Hewitt Assocs., 508 U.S. 248, 256 (1993). Great-West Life & Annuity Co. v. Knudson, 534 U.S. 204, 212 (2002) and at 224-25, 232 (Ginsburg, J., dissenting).
Sereboff v. Mid Atlantic Medical Services, Inc., 534 U.S. 356, 362 (2006). The Court noted that traditionally, “legal restitution” focused on the loss or damages suffered by the plaintiff, while “equitable restitution” focused on the ill-gotten gains of the defendant.
CIGNA Corp. v. Amara, 563 U.S. __, 131 S. Ct. 1866, No. 09-804 (2011).
131 S. Ct. at 1872, stating the factual findings of the District Court.
ERISA Section 502(a)(1)(B) permits an action “to recover benefits due to him under the terms of his plan, [or] to enforce his rights under the terms of the plan. . . .” Section 503(a)(3) permits an action “to obtain other appropriate equitable relief ” either (i) to remedy a violation of ERISA; (ii) to remedy a violation of the plan, or (ii) to enforce the terms of ERISA or the plan.
29 USC 1132(a)(1)(B).
It should be noted that Justices Scalia and Thomas disagreed with this part of the Court’s decision, seeing “no need and no justification” for addressing these issues. 131 S. Ct., at 1882. They may be right to suggest that this part of the decision is dicta, but the line between dicta and guidance is often unclear.
121 S. Ct., at 1878.
“Whether or not the general principles we have discussed above are properly applicable in this case is for [the District Court] or the Court of Appeals to determine in the first instance. Because the District Court has not determined if an appropriate remedy may be imposed under § 502(a)(3), we must vacate the judgment below and remand this case for further proceedings consistent with this opinion.” 131 S. Ct., at 1882.
It is beyond the scope of this short note to survey all of the equitable claims that were available in the days of the divided bench, let alone their appropriateness in this matter.
131 S. Ct., at 1876, 1879-80.
See 131 S. Ct., at 1879-80.
Id., at 1879 and 1881.
Id., at 1881-82.
See note 4, above.
|20 ||131 S. Ct., at 1879.|
|18 ||Although the Court discussed the official plan document, this is really a misnomer. ERISA only requires that plans be “established and maintained pursuant to a written instrument.” ERISA Section 402(a)(1), 29 U.S.C. 1102(a)(1). Obviously, it is better practice for there to be a clearly identified document that has been formally adopted by whoever has authority to do so.|
|21 ||For example, after the Court issued a decision against a health plan’s subrogation claim, several courts and commentators proclaimed that no claims for money could be brought under ERISA. See Great-West Life & Assurity Ins. Co. v. Knudson, 534 U.S. 204(2002) and, e.g., Qualchoice v. Rowland, 367 F.3d 638, 649-50 (6th Cir. 2004). But Qualchoice was specifically abrogated by Great-West Life & Assurity Ins. Co. v. Knudson, 534 U.S. 204 (2002) because the Qualchoice court failed to analyze the applicable equitable claims.|
|22 ||ERISA Section 102(a), 29 USC 1022(a).|
|23 ||In fact, the DoL has already made this argument in an amicus brief filed in the 4th Circuit. McCrevy v. Metropolitan Life Ins. Co., Nos. 10-1074 and 10-1131. Filed on May 31, 2011, available at http://www.dol.gov/sol/media/briefs/mccravy(A)-5-31-2011.htm#ARGUMENT.|
|24 ||Cigna, slip opin, at 18. One piece of good news for plaintiffs is that the decision seems to recognize that.|
|26 ||In particular, Cigna did nothing to overrule its prior decisions that ERISA only recognizes “equitable” relief and that “legal” relief is not available. See Mertens v. Hewitt Assocs., 508 U.S. 248 (1993), Great-West Life & Assurity Ins. Co. v. Knudson, 534 U.S. 204(2002), and Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356 (2006).|
See, Metropolitan Life Ins. Co. v. Glenn , 554 U.S. 105 (2008) interpreting, Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989).
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