In CIGNA Corp. v. Amara, --- U.S. ----, 2011 U.S. LEXIS 3540, 50 EB Cases (BNA) 2569 (2011), CIGNA Corporation changed the pension plan for its employees. The employees challenged the change on the ground that “CIGNA had failed to give proper notice of changes to their benefits, particularly because the new plan in certain respects provided them with less generous benefits.” The District Court sided with the employees and ordered that the new plan be reformed finding legal authority to do so in Section 502(a)(1)(B). The Second Court affirmed the District Court’s decision and the parties appealed to the Supreme Court. The Supreme Court granted certiorari on one issue, “whether a showing of ‘likely harm’ is sufficient to entitle plan participants to recover benefits based on faulty disclosures.”
Before reaching the question on which it granted certiorari, the Supreme Court considered, based on CIGNA’s briefing, whether Section 502(a)(1)(B) authorized the relief the District Court awarded. The Supreme Court held that it does not. Rather than stopping there, the Court went on to state, in dicta, that the relief the District Court awarded could be provided under Section 502(a)(3). The Supreme Court reasoned that the relief provided by the District Court closely resembles three other traditional equitable remedies: reformation; equitable estoppel; and surcharge. Importantly, the Supreme Court opined that surcharge was a form of monetary compensation for a loss resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment. The further stated, “insofar as award of make-whole relief is concerned, the fact that the defendant in this case, unlike the defendant in Mertens, is analogous to a trustee makes a critical difference.” Nevertheless, the Supreme Court remanded the case to the District Court to revisit its determination of an appropriate remedy for the violations of ERISA it identified.
Justice Thomas joined Justice Scalia in concurring in the judgment. Justice Scalia emphasized, however, that neither the District Court nor the parties to the case squarely addressed whether relief was available under 502(a)(3). Thus, Justice Scalia reasoned, “[t]he Court’s discussion of the relief available under [Section] 502(a)(3) and Mertens is purely dicta, binding upon neither us nor the District Court. The District Court need not read any of it—and, indeed, if it takes our suggestions to heart, we may very well reverse.” The Supreme Court’s decision, therefore, places in doubt what relief is available under 502(a)(3) and exactly under what circumstances. These issues will likely be clarified by the lower courts in the time to come.