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AMARA V. CIGNA DECISION RESTORES EQUITY PRINCIPLES TO ERISA

May 19, 2011

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The Supreme Court of our land issued a new ERISA decision on May 16, 2011 titled Amara v CIGNA, Case No. 09-804, which restores equity to the law of employee benefits.

Here, the plaintiffs were understandably perturbed when CIGNA converted their defined benefit plan to a cash balance plan. The summary plan description of the changes provided by CIGNA to its employees was misleading in that it characterized the new plan as being more generous than it actually was. At the district court level, the judge found that CIGNA had withheld accurate information from the employees. CIGNA appealed. The Second Circuit agreed with the district court, and the case ultimately ended up at the Supreme Court. Although CIGNA technically won the battle with Amara (who was the representative plaintiff in the class action), the ultimate impact of the decision should well benefit plan participants. The Supreme Court agreed with CIGNA that the lower courts had incorrectly used an ERISA enforcement provision found at 29 USC Section 1132 (a)(1)(B) to reform CIGNA’s pension plan. Generally speaking, an ERISA claim against a plan or plan insurer under section 1132 (a)(1)(b) allows courts to award claimants the benefits due under the plan.

However, importantly, the Court went on to hold the plan could be reformed under a different subsection of the same statute, subsection (a)(3), which provides ERISA participants with “appropriate equitable relief” to redress violations of an ERISA plan or to enforce the terms of a plan. The Supreme Court ruled that pension plan fiduciaries could in fact be held liable for “make-whole” relief for the harm they cause employees (participants in the plan) in failing to comply with their duties in administering the pension plan. In the end, the Court really seems to have opened the door for the employees to recover what an employer promises would be received in exchange for their employment efforts. Yes, I know this sounds obvious to the casual reader, but the past 20 years of ERISA decisions by our courts had so twisted this arena that many wrongs committed by plan fiduciaries did not result in an actual, fair remedy to the aggrieved employee. Hopefully the tide is turning.

Insurers and their ilk are already attempting to spin this decision in their favor, as CIGNA was in fact successful in having the lower court decision overturned. But the only thing that really happened was that the Supreme Court clarified which section of the ERISA enforcement statute provides the relief sought by the class plaintiff, and clarity was provided as to the scope and substance of remedies available under subsection (a)(3) which could include money damages.

Click here for further information on ERISA welfare benefit claims.

Categories: ERISA Claims

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