- First Federal Appeals Court Opinion Interpreting CIGNA v. Amara: Ninth Circuit Rejects Claim for Equitable Relief under ERISA
- April 26, 2012 | Authors: Tiffany D. Downs; Isabella P. Lee
- Law Firm: Ford & Harrison LLP - Atlanta Office
Executive Summary: The Ninth Circuit recently held that employees who received an SPD that did not accurately explain their retirement plan benefits were not entitled to equitable relief under ERISA. See Skinner v. Northrop Grumman Ret. Plan B (9th Cir. Cal. Mar. 16, 2012). This is one of the first decisions from a federal appeals court analyzing reformation and reform as equitable remedies following the Supreme Court's 2011 decision in Cigna Corp. v. Amara.
In Amara, the Supreme Court held that when there was a conflict between a retirement plan document and the summary plan description, the retirement plan document controlled. The Supreme Court held in dicta, however, that reformation might be appropriate on remand because there was evidence in Amara that the employer had intentionally misled its employees.
In Skinner, the plaintiffs sued under ERISA, claiming the terms of their SPDs were misleading and that the administrative committee issuing the SPDs failed to provide them with an SPD that was sufficiently accurate and comprehensive. After the Supreme Court's decision in Amara foreclosed their primary theory of relief (damages under ERISA), the plaintiffs sought to obtain equitable relief under ERISA § 502(a)(3). Specifically, the plaintiffs asked the court to reform the terms of their retirement plan's master documents to be consistent with the terms of the SPD they received. The court held that reformation is proper only in the case of fraud and mistake.
The plaintiffs claimed that the SPD reflected the true intent of the drafters of the retirement plan's master document and, thus, the master document contained a mistake and should be reformed. The court rejected this argument because the plaintiffs presented no evidence of who authored the SPD or that the SPD captured any intent other than to create an "accurate and comprehensive" summary of the retirement plan master document.
The court also found no evidence that the retirement plan master document contained terms that were induced by fraud, duress or undue influence. "The inconsistency between the 2003 SPD and the plan master document is not evidence of fraudulent inducement." Additionally, the court noted that the SPD summarized the plan and appeared to have been created after the plan.
The court also refused to follow the reasoning in Amara's dicta suggesting reformation might be appropriate on remand in that case. In Skinner, the court held that, unlike Amara, there was no evidence that Northrup Grumman materially misled its employees. Further, even if the company had misled its employees, the plaintiffs admitted that they did not rely on any of the misleading information.
The court also held that the administrative committee had no fiduciary duty to enforce the terms of the SPD instead of the terms of the plan master document, but that it may have breached its duty to provide plaintiffs with an accurate and comprehensive SPD. However, the plaintiffs failed to show that the committee was unjustly enriched by the breach of this duty. Additionally, the plaintiffs failed to show they were entitled to compensatory damages for the committee's failure to provide an accurate and comprehensive SPD because they did not rely on the SPD and could not show any harm for which they should be compensated.
Employers' Bottom Line:
The court's decision in Skinner is good news for employers because it narrowly construes the Supreme Court's broad interpretation of equitable remedies that may potentially be available under ERISA.