19.4 Remedies and Damages

• Library: Employment Law in Virginia (Virginia CLE) (2020 Ed.)

19.4 REMEDIES AND DAMAGES

19.401 In General. The remedy available to plaintiffs depends on the nature of the ERISA cause of action.

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19.402 Plan Administrator's Failure to Provide Information: Section 502(c)(1). ⁴⁶⁹ A district court may, in its discretion, assess penalties of up to $110 per day against a plan administrator who fails to furnish requested documents as required by ERISA section 104(b)(4). ⁴⁷⁰ Prejudice to the party requesting the documents is not a prerequisite to the imposition of penalties. ⁴⁷¹ "The district court has the discretion to grant or deny . . . a request [for penalties]. In making its decision, the district court may and often should take into consideration the administrator's reasons for refusing to provide information." ⁴⁷² "To state a claim under [ERISA § 502(c)(1)(B)], ⁴⁷³ a plaintiff must allege that he submitted 'a request for . . . information' which was ignored by defendants." ⁴⁷⁴

19.403 Enforcing Terms of Plan: Section 502(a)(1)(B). ⁴⁷⁵ Upon finding a violation of plan terms, the court will ordinarily order the plan administrator or sponsor (who is usually the employer) to pay the plan benefit. In an action under section 502(a)(1)(B), a plaintiff is limited to recovery of the benefit and cannot obtain punitive or emotional distress damages. ⁴⁷⁶ Nor can a plaintiff recover an award of the present value of future benefits; instead, the plaintiff would obtain a declaratory judgment that he or she is entitled to future benefits if circumstances do not change. ⁴⁷⁷

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19.404 Breach of Fiduciary Duty: Section 502(a)(2). ⁴⁷⁸ In Massachusetts Mutual Life Insurance Co. v. Russell, ⁴⁷⁹ the Supreme Court held that ERISA's fiduciary duty provisions do not authorize a beneficiary's suit for compensatory and punitive damages for wrongful delay in paying benefits. The Court reasoned that section 409 ⁴⁸⁰ was "primarily concerned with the possible misuse of plan assets, and with remedies that would protect the entire plan, rather than with the rights of an individual beneficiary." ⁴⁸¹ The Court added that language in section 409 permitting "other equitable relief" does not authorize any relief except for the plan itself. ⁴⁸²

However, in Varity Corp. v. Howe, ⁴⁸³ the Supreme Court held that, where no remedy was otherwise available for a fiduciary breach because plaintiffs had no "benefits due [them] under the plan," plaintiffs could seek "appropriate equitable relief." ⁴⁸⁴ Varity included a finding that ERISA fiduciaries deliberately deceived plan beneficiaries into forfeiting their benefits.

In LaRue v. Dewolff, Boberg & Associates, Inc., ⁴⁸⁵ the Supreme Court clarified Russell and held that ERISA section 502(a)(2) allows for recovery for breaches of fiduciary duty that reduced a single participant's individual account in a defined contribution plan. The Court found that Russell's requirement that relief benefit the entire plan presumed a defined benefit plan, and that loss to the plan as a whole was not required for ERISA section 502(a)(2) relief in the case of a fiduciary breach that causes a loss to a participant's 401(k) account.

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Extracontractual and punitive damages are not available under section 502(a)(3). ⁴⁸⁶ In Coyne & Delany Co. v. Blue Cross & Blue Shield, ⁴⁸⁷ the court held that a plan administrator's action against the plan's stop-loss insurer for breach of fiduciary duty was, in reality, a claim for benefits which a fiduciary had no standing to bring.

19.405 Enforcing ERISA Provisions: Section 502(a)(3). ⁴⁸⁸ In Mertens v. Hewitt Associates, Inc., ⁴⁸⁹ the Supreme Court held that the term "appropriate equitable relief" under section 502(a)(3) means traditional equitable remedies such as injunction, mandamus, and restitution, but not compensatory damages. However, where Congress has provided a remedy elsewhere in ERISA, there is normally no need for further equitable relief under section 502(a)(3). ⁴⁹⁰

In CIGNA Corp. v. Amara, ⁴⁹¹ the Supreme Court expanded the remedies available as "other appropriate equitable relief" under ERISA section 502(a)(3), including estoppel, reformation, and surcharge, beyond those that lower courts had found available. Participants, beneficiaries, and fiduciaries can seek "appropriate equitable relief" for any act or practice that violates the terms of the plan, or to enforce the terms of the plan or the statute. ⁴⁹²

In Peacock v. Thomas, ⁴⁹³ the Court held that ERISA does not confer jurisdiction over an independent suit to impose liability for a judgment previously obtained for ERISA violations. ⁴⁹⁴ Section 502(a)(3) is available only if the plaintiff alleges a violation of ERISA or the terms of a plan. Peacock reiterates the caution in Mertens that section 502(a)(3) "does not, after all, authorize 'appropriate equitable relief' at large, but only 'appropriate equitable

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relief' for the purpose of 'redress[ing any] violations or . . . enforc[ing] any provisions' of ERISA or an ERISA plan." ⁴⁹⁵

In Varity Corp. v. Howe, ⁴⁹⁶ the Court permitted individual relief (as opposed to relief only to the plan) where no remedy would otherwise exist. In Varity, participants were duped by their employer, a plan fiduciary, into forfeiting their plan rights by accepting employment with an undercapitalized new spinoff company.

In interpreting the nature of "appropriate equitable relief" under ERISA section 502(a)(3) following the Supreme Court's decision in Great-West Life & Annuity Insurance Co. v. Knudson, ⁴⁹⁷ the Fourth Circuit has distinguished between rescission in law, when the plaintiff has the right to unilaterally void a contract, and rescission in equity, when the plaintiff sues to have the court order rescission. ⁴⁹⁸ The court found rescission in equity to be an appropriate remedy under ERISA section 502(a)(3) when an employee retired and elected a lump sum retirement plan distribution based on incorrect tax information from the fiduciary. The court reversed the district court's order permitting the employee to repay the lump sum net of taxes because the plaintiff's delay in seeking rescission had prejudiced efforts to recoup taxes already paid. The court found partial rescission was permitted under the special circumstances.

In contrast, a former employee who retired allegedly in reliance on a high, but incorrect, pension benefit estimate received from the plan could not require the pension plan to pay that incorrect amount. ⁴⁹⁹ Because the former employee did not want reinstatement to his employment or other appropriate equitable relief, his lawsuit did not seek a remedy available under ERISA. The Fourth Circuit has held that section 1132(a)(3)(B) permits a plan administrator to sue to enjoin enforcement of a state law allegedly preempted by ERISA. ⁵⁰⁰

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In the Fourth Circuit, a claimant may not proceed with a claim under section 502(a)(3) of ERISA if the claimant's injury creates a cause of action under section 502(a)(1)(B). ⁵⁰¹

19.406 Interference with Protected Rights: Section 510. ⁵⁰² Section 510 incorporates the remedy provisions of section 502. Therefore, enforcement of section 510 may be sought through the provisions of section 502(a)(3). ⁵⁰³ Relief is limited to equitable relief. ⁵⁰⁴ Courts have permitted back pay and front pay as equitable relief. ⁵⁰⁵

At least one circuit has ruled that back pay is not an available remedy for employees whose jobs were terminated in violation of ERISA section 510. ⁵⁰⁶ The Tenth Circuit found that back pay does not qualify as "appropriate equitable relief" under ERISA section 502(a)(3). The court distinguished section 502(a)(3) from the broader remedies available under the National Labor Relations Act and Title VII of the Civil Rights Act, both of which provide for back pay. According to the court, the remedial purpose of section 502(a)(3) is not to make the aggrieved employee whole. The court noted that the Supreme Court in Great-West Life & Annuity Ins. Co. v. Knudson ⁵⁰⁷ rejected analogies to Title VII's remedial provision.

19.407 Attorney Fees.

A. In General. ERISA provides that "[i]n any action under this subchapter [other than an action for delinquent contributions to a multiemployer plan] by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." ⁵⁰⁸

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However, the Fourth Circuit "agree[s] with our sister circuits that have held ERISA attorney's fees to be categorically unavailable for expenses incurred while exhausting administrative remedies." ⁵⁰⁹ "The majority of claims should . . . be resolved through informal administrative processes, for which no award of attorney's fees is authorized." ⁵¹⁰

The Fourth Circuit has also denied attorney fees for time spent litigating a benefit claim in court, where a plaintiff sued before exhausting administrative proceedings, reasoning, "If [the plaintiff] had exhausted those remedies before commencing litigation, he would have no litigation-related expenses to which a fee award under [section] 1132(g)(1) could apply." ⁵¹¹

The Supreme Court has held that a party does not necessarily need to be a "prevailing party" to recover attorney...