CIGNA v. Amara - Supreme Court recognizes a new ERISA remedy for aggrieved participants!

The insurance industry, oddly, is characterizing this case as a victory for CIGNA. If it's a victory for insurers and employers, it's a pyrrhic one at best. The case does hold that the remedies available under ERISA § 502(a)(1)(B) are limited to those specifically identified in that section of the statute, i.e., benefits, or a declaration of the right to future benefits. Under 502(a)(1)(B), a court does not have authority to reform a plan or award other remedies or damages.

However, the Court significantly altered the remedies available under § 502(a)(3). This provision is a catch all that imposes liability upon fiduciaries and parties in interest for breaches of fiduciary duty not otherwise remedied by (a)(1)(B), or by 502(a)(2). The Court has consistently held that the only rememdies available under (a)(3) are equitable remedies (which the Court has held to mean such remedies as were traditionally authorized and available in court of equity in the era of the English divided bench). Mertens v. Hewitt, 508 U.S. 248 (1993), Great-West v. Knudsen, 534 U.S. 204 (2002). That limitation -- equitable remedies only -- has consistently been held not to include the imposition of monetary damages.

In Amara, however, the Court wrote that in addition to remedies like reformation of plan documents, and injunctive relief, the traditional equitable remedy of "surcharge" is indeed available under (a)(3) to remedy a fiduciary breach. The Court in Amara wrote

[The] District Court injunctions require the planadministrator to pay to already retired beneficiariesmoney owed them under the plan as reformed. But the fact that this relief takes the form of a money paymentdoes not remove it from the category of traditionally equitable relief. Equity courts possessed the power to providerelief 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. Restatement (Third) of Trusts §95, and Comment a (Tent. Draft No. 5, Mar. 2,2009) (hereinafter Third Restatement); Eaton §§211–212,at 440. Indeed, prior to the merger of law and equity thiskind of monetary remedy against a trustee, sometimes called a “surcharge,” was “exclusively equitable.” Princess Lida of Thurn and Taxis v. Thompson, 305 U. S. 456, 464 (1939); Third Restatement §95, and Comment a; G. Bogert& G. Bogert, Trusts and Trustees §862 (rev. 2d ed. 1995) (hereinafter Bogert); 4 Scott & Ascher §§24.2, 24.9, at 1659–1660, 1686; Second Restatement §197; see also Manhattan Bank of Memphis v. Walker, 130 U. S. 267, 271 (1889) (“The suit is plainly one of equitable cognizance, the bill being filed to charge the defendant, as a trustee, for a breach of trust”); 1 J. Perry, A Treatise on the Law ofTrusts and Trustees §17, p. 13 (2d ed. 1874) (common-law attempts “to punish trustees for a breach of trust in damages, . . . w[ere] soon abandoned”).

The surcharge remedy extended to a breach of trust committed by a fiduciary encompassing any violation of aduty imposed upon that fiduciary. See Second Restatement §201; Adams 59; 4 Pomeroy §1079; 2 Story §§1261,1268. Thus, insofar as an award of make-whole relief is concerned, the fact that the defendant in this case, unlike the defendant in Mertens, is analogous to a trustee makes a critical difference. See 508 U. S., at 262–263. In sum, contrary to the District Court’s fears, the types of remedies the court entered here fall within the scope of theterm “appropriate equitable relief” in §502(a)(3).

What does it all mean? It means a huge victory for participants and beneficiaries bringing suit against ERISA plan fiduciaries who have breached their duties. For the first time, the Supreme Court has explicitly recognized that what would normally be characterized as "consequential damages" are an available remedy for breached of fiduciary duty under ERISA § 502(a)(3). This is a game changer for plaintiffs and a huge loss -- not a win -- for CIGNA.

Notably, the Court also rejected CIGNA’s argument that plan beneficiaries must always show detrimental reliance to obtain relief for violations of ERISA's notice provisions, but the Court also emphasized that the class members were required to make at least some showing of actual harm.

If you find yourself struggling with your ERISA plan's administrator or insurer over your benefits (pension, disability, health, or otherwise), let us see if we can help.