In Skinner v. Northrop Grumman Retirement Plan B, the U.S. Court of Appeals for the Ninth Circuit, applying the Supreme Court’s ruling in CIGNA Corp. v. Amara, held that the plaintiffparticipants could not sue for benefits allegedly promised by the summary plan description (SPD) but not the plan, because statements in an SPD do not constitute the terms of a plan.
The Ninth Circuit also held that the plaintiff-participants were not entitled to additional benefits based on the equitable remedies of estoppel, reformation, and surcharge, even if, as the plaintiffs alleged, the SPD did not accurately and completely communicate plan benefits. The court’s rulings with respect to the equitable remedies of estoppel, reformation, and surcharge are particularly noteworthy.
Estoppel. Under an estoppel theory, a court can order a plan to pay benefits not provided under the terms of the plan where a participant is able to establish that he or she detrimentally relied on conflicting statements in an SPD. In some circuits, like the Second Circuit, a plaintiff is not required to establish detrimental reliance (i.e., that he or she had actually read the SPD and that, but for the accurate description, would have acted differently) as long as the participant can show that a plan participant or beneficiary was likely to have been harmed as a result of the deficient SPD. The plaintiffs in Skinner admitted that they could not offer evidence that they relied to their detriment on the SPD and did not otherwise pursue an estoppel claim. The question that remains is whether the Ninth Circuit in Skinner can be said to have ruled out the notion that an equitable estoppel claim could proceed without evidence of actual reliance.
Reformation. Under the equitable remedy of reformation, a court could, under the right circumstances, order an employer to reform (i.e., amend) the terms of a plan document to match the terms of an SPD that contains a benefit promise not documented as part of the plan.
The plaintiffs in Skinner asked the Ninth Circuit to so rule, but the Ninth Circuit declined to do so on the basis that reformation is not appropriate absent fraud or mistake. The Ninth Circuit held that the plaintiffs had presented no evidence of fraud or mistake in documenting the terms of the plan. (Skinner v. Northrop Grumman Retirement Plan B, 9th Cir. 2012)
Surcharge. Under the equitable remedy of surcharge, a fiduciary could be “surcharged” for benefits gained through unjust enrichment or for harm caused by the fiduciary’s breach of duty. In this respect, the court held that even if the SPD was faulty, surcharge would not be an appropriate remedy in this case because there was no evidence that the plan’s administrative committee was unjustly enriched as a result of the allegedly faulty SPD, nor was there evidence that the plaintiffs were harmed by the statements in the SPD. In so ruling, the court rejected the plaintiffs’ argument, which was based on the majority opinion in Amara, that the “harm” sustained was the harm of being statutorily deprived of their statutory right to an accurate SPD.
The Lesson of Skinner
While plan sponsors and fiduciaries can take some comfort in the ruling, we must continue to emphasize the importance of paying careful attention when drafting plan documents and SPDs to ensure that the plan and SPD present consistent information. (Skinner v. Northrop Grumman Retirement Plan B, 9th Cir. 2012)