Litigation and discovery under the Employee Retirement Income Security Act regarding the fiduciary status of people who make misstatements about an individual's benefits are likely to increase in light of a recent U.S. Supreme Court decision, employee benefit attorneys said July 6 during a BNA-sponsored webinar.
James P. McElligott Jr., of McGuireWoods in Richmond, Va., said as a result of the Supreme Court's decision in CIGNA Corp. v. Amara(131 S. Ct. 1866, 50 EBC 2569 (2011); 62 BTM 153, 5/17/11), there will be increased litigation and discovery over whether individuals such as call center representatives or human resources representatives qualify as fiduciaries under ERISA.
McElligott predicted that one question that may become a significant issue is whether plan fiduciaries provided the proper training so that nonfiduciaries can give correct information to plan participants. In anticipation of this, he said, employers might want to add a statement in their summary plan descriptions (SPDs) explaining the role of call center representatives and other similar individuals.
Bruce M. Steen, of McGuireWoods's Charlotte, N.C., office, agreed, and added that more individuals will be named as defendants in the future in these sorts of cases.
Amara involved misrepresentations made when CIGNA converted a defined benefit plan to a cash balance plan. The Supreme Court ruled that ERISA Section 502(a)(1)(B) does not provide a remedy for plan participants seeking relief when plan administrators issue SPDs that conflict with plan terms. However, the court divided on whether relief would be available under ERISA Section 502(a)(3)‘s equitable remedies provision. The high court added that ERISA does not set forth any particular standard for determining harm, but emphasized that a claimant must show actual harm.
Because errors and misleading communications can lead to high costs, more emphasis will be placed on ERISA compliance and “careful” participant communications, Steen said. Specifically, plans should review and consider renegotiating service agreements with respect to the liability of third-party service providers whose employees make misstatements to plan participants, he said.
Furthermore, because there may be an ERISA Section 502(a)(3) equitable remedy available, SPDs should be carefully reviewed for discrepancies and more accurate disclosures should be made to minimize any potential reliance claims, Steen added.
Steen commented that defense attorneys may use Amara in conjunction with another recent Supreme Court decision—Wal-Mart Stores Inc. v. Dukes (112 FEP Cases 769 (2011); 62 BTM 153, 5/17/11)—to try to prevent class actions in Amara-type ERISA cases.
In Dukes, the Supreme Court reversed the certification of a massive sex discrimination class action by more than 1 million female Wal-Mart employees, finding that there were problems meeting the commonality rule for class certification.
Looking to Amara, the speakers said an equitable estoppel remedy typically requires a showing of individual harm, explaining that traditionally an individual must show detrimental reliance on an alleged misrepresentation, and some surcharge cases require proof of damages with reasonable certainty. As several individualized inquiries must be made in Amara-type cases, and the “crux” of class actions is commonality, they questioned whether these sorts of cases are suitable for class treatment.
McElligott explained that the Dukes court disapproved of “trial by formula”—the notion that assumptions are made about classes of harm. The Dukes court also emphasized that defendants have the right to litigate individual defenses, which may include detrimental reliance, he added. As such, McElligott said, when one is looking at the two cases together, questions of reliance are individualized and are potentially inappropriate for class treatment.
Amara also could have an impact on health plans, McElligott said, because errors sometimes are made in communicating information about coverage for particular procedures to plan participants.
After Amara, claims for surcharge may be pursued as a remedy, as the Labor Department already is doing in its amicus brief to the U.S. Court of Appeals to the Seventh Circuit in Kenseth v. Dean Health Plan Inc. (7th Cir., No. 11-1560), McElligott said. He added that Amara did not distinguish between formal SPDs and informal benefit communications, and thus claims for relief under Amara might be made where SPDs, notices of plan amendments, annual benefit statements, summaries of material modifications, and oral statements have arguably misleading statements.
Among other things, Steen also questioned whether the Supreme Court's 2008 decision in LaRue v. DeWolff, Boberg & Associates(128 S. Ct. 1020, 42 EBC 2857 (2008): 59 BTM 65, 2/26/08), in which the court adopted an expanded view of ERISA Section 502(a)(2) to include fiduciary breaches that impair the value of plan assets in a participant's individual defined contribution plan account, is still necessary after Amara. After Amara, claims for monetary relief will be made under Section 502(a)(3) even when there is no conceivable loss to the plan and the only “loss” is experienced by the participant, McElligott said.
By Meredith Z. Maresca
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