On June 13, 2013, the Seventh Circuit held that the Supreme Court’s decision CIGNA Corp. v. Amara authorized an ERISA plaintiff seeking equitable relief under ERISA § 502(a)(3) to receive money damages in a fiduciary breach action.  In Kenseth v. Dean Health Plan, Inc., Case No. 11-1560, the Seventh Circuit concluded that if Kenseth could demonstrate a breach of fiduciary duty and demonstrate that the breach caused her damages, she could seek an appropriate equitable remedy that included money damages.  The Court remanded the case for further proceedings.

Kenseth alleged that her HMO breached its fiduciary duties by denying payment for a gastric banding procedure. She alleged that the plan’s customer call center told her the procedure would be covered when, in fact, the procedure was not covered. Kenseth only discovered that the procedure was not covered after she had already undergone the procedure. 

The lower court ultimately granted summary judgment in favor of the plan, concluding that Kenseth’s “request for defendant to ‘hold her harmless for the cost of her surgery and treatment’ [was] a thinly disguised request for compensatory damages that may not be awarded.”  Thus, the lower court found that Kenseth could not be awarded the relief she requested even if she proved that there was a breach of fiduciary duty.

The Seventh Circuit disagreed.  By largely adopting the position of the Department of Labor, as it advocated in amicus briefing, the Court explained that Amara clarified that “equitable relief may come in the form of money damages when the defendant is a trustee in breach of a fiduciary duty.”  Under Amara, “[m]onetary compensation is not automatically considered ‘legal’ rather than ‘equitable.’” Rather, “[t]he identity of the defendant as a fiduciary, the breach of a fiduciary duty, and the nature of the harm are important in characterizing the relief.”  Accordingly, the Court concluded that Kenseth could seek make-whole money damages as an equitable remedy under § 502(a)(3) if she demonstrated that she suffered a breach of fiduciary duty and that the breach caused her damages.  The Seventh Circuit also held that to succeed on an equitable claim, a plaintiff need not show detrimental reliance, unless the type of equitable relief sought—such as surcharge, reformation, or estoppel—required a showing.  The Seventh Circuit then remanded the case to the district court to determine the appropriate relief and to determine whether surcharge or some other equitable remedy was appropriate under the circumstances.

In a separate concurring opinion, Judge Manion, although he agreed that remand was appropriated in light of Amara, disagreed with the majority’s opinion that Amara entitled Kenseth to seek make-whole relief in the form of money damages.  Judge Manion found that Amara did not hold that money damages are an appropriate equitable remedy.

This decision demonstrates the evolving impact of the Amara decision.  Employers and plan sponsors should keep an eye to the courts to see if other courts follow suit and determine that similar claims based on miscommunications can give rise to monetary damage remedies.