ERISA class action litigation differs in important respects from many other types of employment class actions, in part because of its unique remedial provisions and continuing issues involving the scope of recovery.
In McCravy v. Metropolitan Life Insurance Co., the United States Court of Appeals for the Fourth Circuit held that equitable remedies were available to provide benefits in excess of those available under the plan to an ERISA life insurance beneficiary. The McCravy case involved sympathetic facts for the claimant.
In McCravy, the employee purchased employer-sponsored life insurance through Met Life for her daughter when the daughter was 19 years old.. The plan provided that the daughter’s eligibility ceased when she reached the age of 24, but the insurer continued to accept premiums after the daughter’s 24th birthday. Tragically, the daughter was murdered when she was 25, and the insurer sought simply to return the modest premiums paid after she became ineligible under the plan. McCravy then sued Met Life claiming violations of ERISA Sections 502(a)(2) and 502(a)(3).
The district court dismissed McCravy’s 502(a)(2) claim but granted McCravy summary judgment on her 502(a)(3) claim. The district court, however, limited her damages to return of premiums. The Fourth Circuit, which agreed to rehear the case in light of the Supreme Court’s decision in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), reversed the district court. According to the Fourth Circuit, McCravy’s potential recovery in the case was not limited, as a matter of law, to return of her premiums. In reaching its decision, the Fourth Circuit focused on the Supreme Court’s decision in Amara. According to the Fourth Circuit, the Supreme Court “expanded the relief available to plaintiffs asserting breach of duty under” Section 502(a)(3) and remedies such as estoppel and surcharge are remedies traditionally available in courts of equity and therefore are available under Section 502(a)(3). The Fourth Circuit’s decision is an indication that the debate over what types of remedies are in fact “equitable” for purposes of ERISA Section 502(a)(3) is far from over.
Equitable remedies likely will be further reshaped this fall. In the Supreme Court’s October 2012 term, the United States Supreme Court will hear U.S. Airways v. McCutchen, Case Number 11-1285. The Third Circuit in McCutchen, recognizing a split in the Circuits on the issue, held that equitable principles could limit a plan’s subrogation rights when the plan did not account for the attorney fees the claimant incurred in obtaining relief from a third party. In McCutchen, the Supreme Court will consider whether equitable principles may limit a benefit plan’s reimbursement rights under ERISA notwithstanding a plan’s plain terms. In essence, the Court will tackle the issue of whether equity allows the courts to override a plan’s language based on equitable principles of fairness to plan participations.
The Bottom Line: The scope of equitable claims and defenses in ERISA litigation, both class and individual claims, remains unsettled. Equitable remedies, however, are seldom—if ever—subject to bright lines rules, and this area will continue to generate controversy and litigation.