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17 May 2011

U.S. Supreme Court Issues Opinion in CIGNA Corp. v. Amara

The Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001 et seq., seeks to ensure that individuals receive accurate and understandable information regarding their rights and obligations under employee benefit plans. To this end, ERISA requires plan administrators to provide plan beneficiaries with a summary plan description (SPD) and a summary of material modifications (SMM). In CIGNA Corp. v. Amara, No. 09-804, the Supreme Court provided guidance on what plan beneficiaries must demonstrate in order to recover benefits when suing based on alleged inconsistencies between the plan’s terms and an SPD and SMM.

The case arises out of changes to an ERISA plan established by CIGNA. Plan beneficiaries sued, contending that the company had failed to adequately disclose certain terms of the modified plan. The district court found that CIGNA’s disclosures violated its obligations under ERISA and caused the employees “likely harm.” Slip op. 2. The court then reformed the modified plan and ordered CIGNA to enforce the plan as reformed, finding authority to do so in ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). The Second Circuit summarily affirmed.

The Supreme Court had granted certiorari “to decide whether the District Court applied the correct legal standard, namely, a ‘likely harm’ standard, in determining that CIGNA’s notice violations caused its employees sufficient injury to warrant legal relief.” Slip op. 2. In an opinion by Justice Breyer, however, the Supreme Court focused on a threshold question raised by CIGNA in its merits briefing—whether § 502(a)(1)(B) “authorizes entry of the relief the District Court provided.” Slip op. 2. The Court held that it does not. But the Court observed that a different provision—ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), which “authorizes ‘appropriate equitable relief’ for violations of ERISA”—covers the types of remedies entered by the district court. Slip op. 2. Accordingly, the Court vacated the judgment and remanded the case for further proceedings.

Without expressing a view on what equitable relief, if any, the district court should in its discretion order on remand, the Supreme Court briefly addressed the “likely harm” issue that was originally presented for review. Rather than adopt a single standard that would necessarily apply in all cases, the Court instead identified certain “equitable principles that the [trial] court might apply on remand,” observing that “the relevant standard of harm will depend upon the equitable theory by which the District Court provides relief.” Slip op. 2. The Court made clear that if “a court exercises its authority under § 502(a)(3) to impose a remedy equivalent to estoppel, a showing of detrimental reliance must be made.” Id. at 21. And although it emphasized that “actual harm must be shown” under all circumstances before any form of equitable relief is available, the Court noted that proof of detrimental reliance “is not always necessary” and that a plan beneficiary seeking “relief by surcharge” (i.e., by one of the few forms of monetary relief traditionally available in equity) “need only show harm and causation.” Id. at 22.

In an opinion concurring in the judgment and joined by Justice Thomas, Justice Scalia agreed that § 502(a)(1)(B) did not authorize the relief entered by the district court, but he declined to join the Court’s opinion because he believed that the Court had no need or justification to say anything else to dispose of the case.

Justice Sotomayor did not participate in the case.

For more information about the issues raised in this Legal Update, please contact Andrew Tauber, Robert P. Davis, or Reginald R. Goeke.

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