Just over a year ago, a panel decision by the Sixth Circuit Court of Appeals in Rochow v. Life Insurance Company of North America, 737 F.3d 415 made big news when the court upheld the district court’s award of $3.8 million in equitable relief on a theory of unjust enrichment and held that an Employee Retirement Income Security Act (ERISA) plan participant can seek disgorgement of profits from an insurer in addition to a claim for denied benefits. The Sixth Circuit later granted the petition for hearing en banc and recently vacated the earlier panel opinion.

On March 5, 2015, the Sixth Circuit’s long-awaited en banc decision was issued. In Rochow v. Life Insurance Company of North America, No. 12-2074 (6th Cir. Mich. 2015) the court vacated the district court’s disgorgement award under ERISA § 502(a)(3) and remanded the case to the district court for consideration of whether, and, if so, to what extent, an award of prejudgment interest is warranted under ERISA § 502(a)(1)(B) to make the plaintiff “whole.”

The issue before the Sixth Circuit was whether a participant who was entitled to recover denied benefits under an ERISA plan pursuant to § 502(a)(1)(B) could also recover disgorged profits under § 502(a)(3), all based on the defendant’s arbitrary and capricious denial of those benefits. The Sixth Circuit held that “[a]llowing [the plaintiff] to recover disgorged profits under § 502(a)(3), in addition to his recovery under § 502(a)(1)(B), based on the claim that the wrongful denial of benefits also constituted a breach of fiduciary duty, would—absent a showing that the § 502(a)(1)(B) remedy is inadequate—result in an impermissible duplicative recovery, contrary to clear Supreme Court and Sixth Circuit precedent.” The court made clear that in order to obtain further equitable relief pursuant to ERISA § 502(a)(3), the plaintiff would need to demonstrate that he or she (a) could not be made whole by remedies available under ERISA § 502(a)(1)(B), or (b) the participant sustained a separate injury separate and distinct from the denial of benefits.

The Sixth Circuit found that “there is no showing that the benefits recovered by [the plaintiff], plus the attorney’s fees awarded, plus the prejudgment interest that may be awarded on remand, are inadequate to make [the plaintiff] whole. Absent such a showing, there is no trigger for ‘further equitable relief’.” The court further explained that a denial of benefits and withholding of benefits “comprise a single injury” which is adequately remedied under ERISA § 502(a)(1)(B). The court concluded that permitting the plaintiff to obtain further equitable relief for the same injury would contravene the scheme established by Congress to establish customized remedies for specified injuries under ERISA plans.

The court remanded for a determination of whether prejudgment interest should be awarded under ERISA § 502(a)(1)(B). However, the court warned that “[a]wards of prejudgment interest are compensatory, not punitive, and a finding of wrongdoing by the defendant is not a prerequisite to such an award” but that an excessive prejudgment interest rate would amount to punitive damages and “would ‘contravene ERISA’s remedial goal of simply placing the plaintiff in the position he or she would have occupied but for the defendant’s wrongdoing.’”

There was a concurring opinion, a dissenting opinion, and an opinion concurring and dissenting. Interestingly, all judges seemed to agree that make-whole relief is available under either ERISA § 502(a)(1)(B) or § 502(a)(3) but not both. However, even on this point of apparent agreement, there were diverging opinions on whether disgorgement of profits constitutes make-whole relief or punitive relief against the defendant.

Given the obvious incentives for doing so, we expect that plaintiffs’ attorneys will make further attempts to repackage traditional denial of benefits claims as breach of fiduciary duty claims in an effort to expand the monetary remedies available under ERISA. But the Sixth Circuit’s en banc decision seems to indicate that it will be very difficult to do so in the context of a denial of plan benefits, thus minimizing the possibility of outsized damage awards of the kind approved by the earlier district court and panel decisions in most situations. Having said that, nothing in either the majority or the minority opinions suggests that disgorgement is never an appropriate remedy under ERISA, given the right circumstances.