On June 27, 2008, the United States Supreme Court denied review in the case of Amschwand v. Spherion Corp., No. 07-841. In this author’s opinion, the Supreme Court should have accepted cert, and should thereafter have overturned the lower court’s decision in the case.
The question presented in Amschwand was whether an action by a plan beneficiary against a plan fiduciary for monetary relief equal to the insurance benefits that the beneficiary would have received absent the fiduciary’s breach of fiduciary duties seeks “equitable relief” within the meaning of ERISA §502(a)(3). To understand the question presented, a review of the facts is necessary. Mr. Amschwand was employed by Spherion Corp. and was a participant in Spherion’s group life plan, which was insured by Aetna Life Insurance Company. In 1999, Amschwand was diagnosed with cancer and took leave from his job.While on leave, Spherion changed life insurance carriers and purchased a new policy from Aetna. Amschwand elected to be covered under the new policy. His employer, Spherion, confirmed that Amschwand was enrolled under the new policy. Spherion cashed the premium checks. However, Spherion failed to list Amschwand’s name on a list to Aetna of those employees who were on leave on the effective date of the new Aetna group policy. Spherion never informed Amschwand of the requirement to be actively at work, and Aetna’s agreement to waive the Active Work Rule for those individuals who were on leave.
After Amschwand’s death, his widow filed a claim for life insurance benefits with Aetna. Aetna denied the claim on the ground that Amschwand was ineligible for the benefits under the active work rule. Basically, the benefit was clearly denied because of the failures of the employer, Spherion, a plan fiduciary to inform Aetna of Amschwand’s status. Spherion clearly breached its fiduciary duties under ERISA by failing to provide the appropriate paperwork to Aetna. Amschwand’s widow sought to recover from Spherion “all monetary losses caused by its breach of fiduciary duty,” specifically the value of the life insurance benefits she would have received but for the breach.
What is probably quite surprising to non-practitioners in the ERISA arena, Amschwand’s widow lost her case. The courts of appeals have generally followed the rule that monetary damages equal to the benefits a beneficiary would have received but for the fiduciary’s breach do not constitute “equitable relief” and are therefore not an available remedy under ERISA. The 10th Circuit decision in Callery v. United States Life Ins. Co., 392 F.3d 401 (2004) reached the same conclusion as the 5th Circuit in this Amschwand case.
However, a close review of the history of equitable claims for relief against fiduciaries under trust law clearly shows that the relief sought by the Amschwand’s would have been considered equitable in the days of the divided bench (when we had both courts of law and courts of equity). Despite this, the United States Supreme Court has refused to review the 5th Circuit decision in Amschwand.
The narrow view of § 502(a)(3) adopted by most courts of appeals leaves plan participants and beneficiaries who have been harmed by fiduciary breaches without any meaningful remedy. ERISA’s express statutory goal is to “protect…the interests of participants in employee benefit plans and their beneficiaries” by imposing stringent duties on plan fiduciaries and providing ready access to the federal courts to remedy breaches of those duties. The courts of appeals, and now the United States Supreme Court, have lost sight of the purpose of ERISA and, essentially, what is fair.
Our office handles breach of fiduciary duty claims as well as direct benefit claims. Feel free to visit our ERISA Claims section of the website.