\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0In CIGNA Corp. v. Amara, 1 the Supreme Court dramatically expanded the types of remedies available to participants of employee pension and welfare plans governed by the Employee Retirement Income Security Act (ERISA).2 Before Amara, it was well-accepted that, with one narrow exception, participants were unable to recover monetary relief for a plan fiduciary's breach of its fiduciary duties. Instead, participants were generally only permitted to recover injunctive or other similar equitable relief.
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Amara changed that regime. Now, participants may recover monetary relief for fiduciaries' breaches of duty under theories of, at least, reformation, equitable estoppel and surcharge. The precise scope and contours of these theories, however, are not yet clear. This article will explore the background law before Amara, explain the Amara decision and briefly discuss the ensuing fallout, including a recent Fourth Circuit case that arguably expands the remedies available under Amara.
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The structure of ERISA
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0ERISA comprehensively regulates almost all employee benefit plans, including employee retirement, health care, disability, life and accident insurance plans.3 In doing so, ERISA incorporates concepts from trust law.4 Under ERISA, the employer is the sponsor of the plan, a position akin to the settlor of a trust.5 The employer may also serve as the plan administrator, a position akin to a trustee.6 In the alternative, the employer may appoint a third party (or parties) to serve as the plan administrator (or administrators).7 In either event, the plan administrator is generally responsible for the day-to-day operations of the plan, which can include, inter alia, maintaining plan funds, drafting the Summary Plan Descriptions and ruling on participants' claims for benefits.8 The plan administrator is a fiduciary of the plan and, by extension, its participants.9
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0ERISA's limited civil enforcement scheme
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Section 502(a) of ERISA sets forth a complicated enforcement regime under which participants (and others) have private rights of action in limited circumstances.10 These private rights of action are exclusive, and they broadly preempt any similar state law claims.11 For purposes of this article, the relevant provisions of ERISA's civil enforcement scheme are §§ 502(a)(1)(B), 502(a) and 502(a)(3).
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Section 502(a)(1)(B) creates a right of action for the improper denial of benefits.12 Section 502(a)(1)(B) claims, which are analogous to common law claims for breach of contract, are the most common type of ERISA claim. Generally speaking, a participant may sue under § 502(a)(1)(B) for the wrongful denial of benefits under the plan.
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Recovery under § 502(a)(1)(B) is not easy. For one thing, participants must exhaust their remedies with the plan administrator before filing a § 502(a)(1)(B) lawsuit.13 Moreover, courts apply an abuse of discretion standard of review to a plan administrator's benefits determination when the plan grants the plan administrator this interpretive discretion (and virtually all of them do).14 Furthermore, participants have only a limited right to discovery in § 502(a)(1)(B) claims.15 As a general matter, discovery is only permissible on the issue of whether the plan administrator abused its discretion in interpreting the plan.16 Finally, the remedies available under § 502(a)(1)(B) are limited.17 Participants may only recover the benefits due under the plan and their attorney's fees. They may not recover consequential, punitive or any other damages.18
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Section 502(a)(2) creates a right of action for "appropriate relief" for a fiduciary's breach of its duties.19 As a general matter, § 502(a)(2) claims do not have the same procedural limitations as those under § 502(a)(1)(B)—i.e., abuse of discretion standard of review and limited discovery.20 Importantly, however, § 502(a)(2) requires that participants bring their claims on behalf of the plan.21 In other words, participants may bring a claim to restore funds to the plan, but they generally may not bring a claim for individual relief.22 Thus, a successful § 502(a)(2) claim typically results in the fiduciary paying money into the plan, and not to the aggrieved participant directly23
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Section 502(a)(3) creates a right of action for "appropriate equitable relief for a fiduciary's breach of its duties under ERISA.24 The types of claims that are cognizable under § 502(a)(3) are legion, but a common example would be a claim against the plan administrator for preparing deficient Summary Plan Descriptions that misled participants into believing their benefits were greater than they actually were.25 Another common example would be a claim against a plan administrator for accepting premiums for an individual who is not covered under the plan.26 In these situations, the participants would likely not prevail under § 502(a)(1)(B)—because they are not entitled to benefits under the terms of the plan—and they would not be able to prevail on a claim for individual relief under § 502(a)(2)—because claims under that section must inure to the benefit of the plan. They would, however, be entitled to bring a § 502(a)(3) claim against the plan administrator.
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Thus, at first blush, § 502(a)(3) appears to afford participants a broad avenue of individual relief. Before Amara, however, § 502(a)(3) rarely afforded participants any real-world benefit for a number of reasons. For one thing, the Supreme Court has held that § 502(a)(3) is a "catch all" provision that is implicated only when ERISA does not otherwise provide a remedy27 Thus, if participants have a remedy under § 502(a)(1)(B) (or any other provision of ERISA), they may not seek additional relief under § 502(a)(3). Because many ERISA cases involve allegations of the wrongful denial of benefits, the situations under which participants may invoke § 502(a)(3) are limited.28
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0For another thing, in a trilogy of cases dating back to the early 1990s, the Supreme Court narrowly interpreted the types of relief available under § 502(a)(3) even when that section could be invoked. In Mertens v. Hewitt Associates, 29 the Supreme Court held that compensatory damages were not available under § 502(a)(3). According to the Supreme Court, the phrase "appropriate equitable relief in § 502(a)(3) was limited to only "those categories of relief that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages)."30 And although plaintiffs could recover monetary relief under a restitution theory, restitution is typically extremely limited.31 In the ERISA setting, the most obvious type of restitution claim would be a claim by a participant for return of his premium payments. Plainly, this type of relief is likely to be minimal in comparison to the potential...