When it comes to monetary damages, usually a plaintiff must show some type of harm to recover.  That apparently is not the case, however, when seeking plan reformation as a remedy for an alleged failure to disclose certain information.

In Osberg v. Foot Locker, Case No. 13-187-cv (2d Cir. Feb. 13, 2014) (summary order), plaintiff filed suit on behalf of himself and a class of participants over a defined benefit plan that had been converted to a cash balance plan.  Plaintiff alleged defendants had violated ERISA by: (i) issuing false and misleading SPDs in violation of ERISA Section 102(a) disclosure requirements; (ii) breaching fiduciary duties in violation of ERISA Section 404(a) by making such materially false statements; and (iii) failing to provide proper notice as required by ERISA Section 204(h) that the cash balance plan would reduce benefit accruals.  Plaintiff sought monetary damages under an equitable surcharge theory, and sought the equitable reformation of the plan document.  The district court granted summary judgment in favor of defendants, and the plaintiff appealed.

The Second Circuit Court of Appeals upheld the summary judgment as to the Section 204(h) claim, because the remedy plaintiff sought, the invalidation of portions of the plan amendment, was not achievable.  The only available remedy for such a purported violation was the complete invalidation of the plan amendment.

Regarding the disclosure claims, the district court had held plaintiff’s Section 102(a) claim time-barred, and had found he had failed to raise a genuine issue of material fact entitling him to surcharge and contract reformation on either his Section 102(a) or Section 404(a) claims.  The Second Circuit sidestepped the limitations issue given the Section 404(a) claim admittedly was timely, and instead addressed whether the district court properly found plaintiff had failed to raise a genuine issue of material fact with respect to his demand for “appropriate equitable relief” — specifically, surcharge or reformation — under ERISA Section 502(a)(3).  There, the district court had found plaintiff had failed to raise a genuine issue of material fact as to whether he suffered the type of “actual harm” necessary to obtain the equitable relief of reformation and surcharge.  On that issue the Second Circuit found that the district court erroneously applied an “actual harm” requirement.  Citing to CIGNA Corp. v. Amara, 131 S. Ct. 1866, 1881 (2011), wherein the Supreme Court determined that any requirement of harm must come from the law of equity, the Second Circuit found that equity does not demand  a showing of “actual harm” to obtain contract reformation.

Defendants argued that the district court’s decision should nevertheless be affirmed because plaintiff, as a former employee, lacked standing to pursue reformation.  Defendants basically read Amara to limit monetary relief to surcharge claims, and claimed that absent a viable surcharge claim the only beneficiaries with standing to pursue reformation  would be persons who could prospectively benefit from a modification of plan terms — something that would not include former employees.  The Court rejected that as well, finding such an interpretation supported neither by Amara nor equity.

The Court left it for the district court to decide in the first instance whether plaintiff could otherwise satisfy the basic requirements for plan reformation.  Moreover, while the Court upheld the dismissal of the surcharge claim as moot given its finding that plaintiff could obtain a full recovery via his reformation claim, the court did not foreclose the plaintiff from seeking to reinstate his surcharge claims if his reformation claim later failed.

The Second Circuit has made it clear that ERISA plaintiffs bringing equitable claims and seeking as a remedy plan reformation need not show actual harm — and yet nevertheless may still be entitled to some form of monetary relief.  How this will work in practice remains to be seen.