In court filings and a series of public statements, the Department of Labor (DOL) has argued that the Supreme Court’s recent decision in CIGNA Corporation v. Amara, 131 S.Ct. 1866 (May 16, 2011) broadly authorizes monetary relief under ERISA §502(a)(3), contrary to the view of most lower federal courts. For example, the DOL has filed an amicus brief in support of a petition for rehearing in McCravy v. Metropolitan Life Insurance Co., No. 10-1074, 2011 U.S. App. LEXIS 9914 (4th Cir., May 16, 2011), a case decided on the same day as Amara, that rejected a claim for damages under § 502(a)(3).
The plaintiff in McCravy participated in an employer-provided life insurance plan that allowed her to purchase insurance on “eligible dependent children.” She paid premiums for coverage on her daughter. The daughter died under tragic circumstances, but the plan’s insurer denied the mother’s claim for benefits, because the plan defined “eligible dependent children” to include only children who were either under age 19 or full-time students under age 24. The daughter was 25 at the time of her death. The insurance company had, however, continued to accept premiums after her coverage lapsed. Her mother argued that the insurer therefore had violated its fiduciary duties and brought suit demanding payment of the insurance proceeds as “appropriate equitable relief” under § 502(a)(3).
The district court agreed that, if the plaintiff could show that the insurer had breached its duties under ERISA, she could recover under § 502(a)(3) – but no more than the premiums that she had paid for nonexistent coverage. “Appropriate equitable relief,” in the judge’s view, consisted of the restoration of the parties to the positions that they would have been in if there had been no breach. Since the Supreme Court has held that “appropriate equitable relief” is limited to relief that was typically available in the courts of equity before “law” and “equity” were merged, the plaintiff could not avail herself of the classically “legal” remedy of consequential damages for breach of contract.
The Fourth Circuit affirmed this decision. The plaintiff, supported by the DOL, has petitioned for rehearing, contending that Amara dramatically rearranged the § 502(a)(3) landscape. That argument rests on the long discussion in Justice Breyer’s opinion (joined by five other Justices) of possible §502(a)(3) grounds for upholding the lower court’s decision in favor of the Amara plaintiffs. None of those grounds was before the Court. It granted certiorari to consider what degree of prejudice or harm a participant must show in order to substitute the language of a summary plan description for the terms of the underlying plan when the two conflict. Its unanimous conclusion was that no circumstances justify giving the SPD preference over the plan document. The lower courts did not rule on the plaintiffs’ §502(a)(3) claims, the briefs presented to the Court did not address them, and Justice Breyer’s discourse said nothing about consequential damages, which were not an issue in Amara.
In the DOL’s reading of Justice Breyer’s obiter dictum, the Court didn’t merely restate the truism that a fiduciary who improperly deprives beneficiaries of funds can be compelled to give the money back (an action known in equity as “surcharge” and precisely what the McCravy decision held). Instead, the DOL argues that Amara fashioned an essentially new equitable remedy, one that the Department is likely to urge on the courts in cases yet to come.