1. CIGNA Corp. v. Amara Revisited:
The Ongoing Fallout From this
Landmark Case and Its Progeny

2. Presented by:
Deidre A. Grossman
Littler Mendelson, P.C.
Evan Miller
Jones Day
James P. McElligott Jr
McGuire Woods
Thomas G. Moukawsher
Moukawsher & Walsh LLC
Mark D. Spencer
McAfee & Taft

3. CIGNA Corp. v. Amara
131 S. Ct. 1866 (2011)
 The Supreme Court Opinion:
– Summary Plan Description (SPD) is
not a plan document
– ERISA 502(a)(1)(B) v. 502(a)(3)
– Equitable relief under 502(a)(3)
 Implications for ERISA
communication claims
 Implications for monetary relief
 Post-Amara Rulings

4. Amara’s Pro-Plaintiff Implications
 Cabins Mertens’ limitations on monetary relief to non-fiduciaries
– Major change: lower courts had consistently applied Mertens to
claims against fiduciaries
– Not dicta. Even if dicta, it is Supreme Court dicta
– What is Amara’s impact, if any, on ERISA 510 claims?
 What is surcharge trust law remedy?
– Punishment of errant trustees.
– Benefits otherwise had “but for” breach (e.g., failure to provide
application for benefits) seem to fit comfortably within trust law
remedies
– Is relief beyond this “extracontractual” or not typically equitable?
(e.g., misinformed had benefits did not have)

5. Amara’s Implications for ERISA
Communication Claims & Class Actions
 Reformation – is some form of reliance or causation and harm
required to justify reformatory remedy?
– Not needed?
– Individualized or group?
– Distinction between intentional/fraudulent or merely negligent
misrepresentation?
– See following Wal-Mart discussion on “common answers”
 Actual harm from “loss of a right protected by ERISA”
– What is harm, causation, and remedy in relation to this?
– See majority’s discussion of loss of being informed of negative
changes through workplace discussion

6. Amara’s Pro-Defendant Implications
 Does Amara negate “implied in law” remedies under
ERISA 502(a)(1)(B)?
– Are statutory violation claims limited to ERISA 502(a)(3)?
– Must equitable requirements also be complied with?
– Is ERISA’s “two-step” (reform under ERISA
502(a)(3)/enforce under 502(a)(1)(B)) dead or alive?
– Impact on fiduciary insurance and/or taxes if remedies are
construed to be non-plan relief?
 Does Amara’s actual harm and causation requirements
limit class actions for 502(a)(3) claims?

7. Amara v. CIGNA –Remand
 Court awarded under 502(a)(3):
– 204(h) notice
– Reformation to eliminate undisclosed benefit
reduction
– CIGNA enjoined and ordered to enforce reformed
plan
– Interest

8. Amara v. CIGNA - Remand
 Key holdings:
– Surcharge, reformation and estoppel are remedies
generally available under 502 (a)(3) even if relief is a
monetary payment
– Reformation can be awarded under contract or trust
case law

9. Amara key holdings (cont.)
Reformation is appropriate here on the grounds of unilateral
mistake paired with “fraud” or “similarly inequitable conduct”.
• Mistake is measure by comparing actual terms to reasonable
expectations
– “Actual harm” is only relevant to surcharge
– Surcharge can be awarded on “make-whole” or “unjust
enrichment” grounds

10. Amara key holdings (cont.)
-Surcharge is not confined to losses to the trust
- “Actual harm” means the loss caused by the breach
- For make whole surcharge Plaintiffs must show a breach
and a “related loss”
- If shown, defendant must show “loss would have occurred
in the absence of a breach of duty”
- For unjust enrichment surcharge but for breach would not
have obtained savings.
- Reformation adequate here, surcharge not needed.

11.  Claimed that Foot Locker did not adequately explain the impact of
transitioning from a DB to a cash balance plan (i.e., did not explain “wear
away”) (ERISA 404(a));
 Harm alleged: had employees received an adequate explanation, they
would have rebelled and management would have either maintained the
status quo or implemented a better plan (i.e., employees would have been
better off financially);
 Relief sought: Surcharge against trustees and reformation of the Plan;
 Holding: Summary Judgment for Foot Locker;
 Reasoning: Alleged harm is entirely speculative (no evidence that plaintiff
would have selected another option) and no evidence that any conceivable
harm was caused by Foot Locker (no evidence that management would have
refused to implement transition or implemented a not-yet designed plan more
favorable to plaintiff).
Osberg v. Foot Locker, Inc.
(S.D.N.Y. Dec. 2012)

12. Tomlinson v. El Paso Corp.
(10th Cir. 2011)
 Tomlinson v. El Paso Corp. (10th Cir. 2011)
– Plaintiffs claimed SPD was inadequate – did not include information
about “wear-away” and reductions
– Evidence showed that plaintiffs did not read SPD
– Post-Amara, reliance need not turn on reading the SPD (can be
based on Amara’s water cooler theory)
– But SPD was not faulty under Section 102 – wear-away need not
have been disclosed in SPD because wear-away is a “consequence
of the change in plan terms,” not “a new eligibility requirement”
– Absent evidence of deceit or failure to communicate “manner of
conversion to cash balance accounts,” SPD that does not disclose
wear-away will not be invalidated. Claim dismissed

13. Skinner v. Northrop Grumman Ret.
Plan B (9th Cir. 2012)
 Skinner v. Northrop Grumman Ret. Plan B
(9th Cir. 2012)
– SPD failed to explain benefit offset contained in the plan
– Record showed that plaintiffs did not rely
on SPD
– Plaintiffs pursued reformation and
surcharge, but not estoppel (no reliance)

14. Skinner v. Northrop Grumman Ret.
Plan B (9th Cir. 2012)
 Reformation of plan to conform to SPD – claim dismissed
– No mistake – no evidence that plan did not reflect true intent
– No fraud – no misleading statement or reliance (distinguished Amara)
 Surcharge – claim dismissed
– No duty on the plan’s administrative committee to enforce SPD over plan
– Committee did not gain benefit from allegedly inaccurate SPD (no unjust
enrichment)
– Deprivation of statutory right to compliant SPD held insufficient to justify
surcharge remedy absent reliance (no actual harm)

15. McCravy v. MetLife
(4th Cir. 2012)
 McCravy v. MetLife (4th Cir. 2012)
 Participant paid (and insurance company accepted)
premiums for dependent life insurance after dependent was
no longer eligible (age 25).
She sued when daughter died and claim for insurance
was denied
 Fourth Circuit dismissed claims for policy
proceeds; only relief was refund of premiums
 Fourth Circuit granted rehearing in light of Amara

16. McCravy v. MetLife
(4th Cir. 2012)
 Surcharge (if applicable) would allow recovery of full
proceeds – monetary loss caused by fiduciary breach
 Estoppel (if applicable) would preclude fiduciary from
enforcing 30 day period for policy conversion and allow
recovery of full proceeds
 Case remanded to determine if there
was a fiduciary breach and whether
surcharge and estoppel are
available remedies given
circumstances of the case

17. Killian v. Concert Health Plan
(7th Cir. 2012)
 Killian v. Concert Health Plan (7th Cir. 2012)
 Participant received treatment from facility outside
network and brought claims (benefit and fiduciary
breach) to recover expenses
 Fiduciary breach claim based on: (i) failure to distribute
a valid SPD; (ii) failure to disclose during phone calls
that facility was outside network
 Court notes that Amara changed the landscape of ERISA
remedies – active concealment, bad faith, and/or
detrimental reliance not always required

18. Killian v. Concert Health Plan
(7th Cir. 2012)
 But court avoids addressing relief issue because it finds
no fiduciary breaches occurred
 Absence of a valid SPD did not cause harm because
participant would have sought treatment from out-of-
network facility regardless of the breach
 No duty to disclose, including because no inquiry and
fiduciary was unaware of participant’s predicament from
calls
 Decision vacated and rehearing en banc granted, but
maybe just on duty to disclose issue

19. Kenseth v. Dean Health Plans, Inc.
(7th Cir., under submission)
 Plaintiff alleges that health plan told her it would cover
surgery to correct complications of previous surgery for
obesity
 Claim denied post-surgery under exclusion for obesity-
related medical expenses
 Pre-Amara, district court held that 502(a)(3) did not
authorize monetary relief
 On appeal post-Amara, plaintiff and Sec. of Labor argue
that plaintiff can elect between surcharge remedy (cost
of surgery), or disgorgement of amounts paid by plan to
its affiliated doctors

20. U.S. Airways, Inc. v. McCutchen
(3d Cir. 2011)
 U.S. Airways, Inc. v. McCutchen (3d Cir. 2011)
 Plan paid for $66k in medical expenses
 Participant received settlement of $110k
 Paid attorney first, leaving less than $66k
 Plan contained clause requiring reimbursement from
“any monies recovered from third parties” and
precluding any negotiations that would undermine
subrogation
 Plan sued Participant for $66k
 Language created equitable lien by agreement

21. U.S. Airways, Inc. v. McCutchen
(3d Cir. 2011)
 Defenses to “appropriate equitable relief” (make
whole, common fund, unjust enrichment, equitable
reformation)
 Third Circuit relied on equitable principles discussed in
Amara to reform the plan under inapposite
circumstances
 Plan would be unjustly enriched because it would
receive full recovery without contributing toward
attorney’s fees or exercising subrogation rights
 Participant would receive less than he would have had
he not commenced a lawsuit
 Plan terms are not “inviolable” where equity so requires

22. U.S. Airways, Inc. v. McCutchen
(3d Cir. 2011)
 Accord CGI Tech. & Solutions Inc. v. Rose
(9th Cir. 2012)
 Certiorari granted in McCutchen

23. Gearlds v. Entergy Services
(S.D. Miss. 2012)
 Gearlds v. Entergy Services
(S.D. Miss May 14, 2012):
– Plaintiff overpaid health and pension benefits because misclassified as
disabled
– Plaintiff claims harmed because passed on coverage on his wife’s health plan
offered by her employer since thought he was covered under his employer’s
plan
– District court dismisses: money for lost coverage not equitable relief under
ERISA 502(a)(3), and no showing of “extraordinary circumstances” to
warrant equitable estoppel
 On appeal to Fifth Circuit.
 U.S. DOL filed brief as amicus - Does surcharge extend beyond
harm from loss of benefits?

24. State Law Trust Authority
Cited by Amara
 Reformation - Baltzer v. Raleigh & A. R. Co., 115 U.S. 634, 645 (U.S. 1885):
“[E]quity would reform the contract, and enforce it, as reformed, if the
mistake or fraud were shown. But the mistake must be clearly shown. If the
proofs are doubtful and unsatisfactory, and if the mistake is not made
entirely plain, equity will withhold relief. “ Reformation denied.
 Estoppel - Merwin, Principles of Equity and Equity Pleading (1895)
 Surcharge - Princess Lida of Thurn and Taxis v. Thompson, 305 U.S.
456, 464 (1939). “[T]he court has the power to fix the compensation of the
trustee, to require him to take over from the trust investments improperly
made and to restore the amount expended for them to the trust estate, to
surcharge him with losses incurred, to allow him his proper expenses, to
find against him a balance due the estate, and to make the balance found
due a lien upon his real estate.”

25. Reformation
 Contract reformation is a remedy for altering the terms of a writing that fails
to express the agreement of the parties “owing to the fraud of one of the
parties and mistake of the other.” 27 Williston on Contracts 69:55, p. 160
(4th ed. 2010). (Cited by Scalia)
 “Reformation is an appropriate remedy when the evidence clearly and
unequivocally shows that an instrument does not express the true intent or
agreement of the parties." Boyles Bros. Drilling Co. v. Orion
Indus., Ltd., 761 P.2d 278, 281 (Colo. 1988); Thomas Revocable Trust v.
Inland Pac. , 2012 U.S. Dist. LEXIS 138615, 44-45 (D. Colo. Sept. 25, 2012)
 Scalia in Amara, “Although in this case CIGNA wrote both the plan and the
SPD, it did so in different capacities: as sponsor when writing the plan, and
as administrator when preparing the SPD.” ERISA “carefully distinguishes
these roles.”

26. Equitable Estoppel
 Equitable estoppel prevents one from doing an act differently than the manner
in which another was induced by word or deed to expect. Kreutzer v. Vehicle
Cnty Herald Co., 560 Pa. 600, 747 A.2d 358, 361 (Pa. 2000) (quoting Novelty
Knitting Mills v. Siskind, 500 Pa. 432, 457 A.2d 502, 503 (Pa. 1983)). Reese v.
Ford Motor Co., 2012 U.S. App. LEXIS 20341 (3d Cir. Sept. 28, 2012)
 "Equitable estoppel is not an independent cause of action, but instead a
doctrine that may assist a party by precluding the opposing party from
asserting or denying the existence of a particular fact." Conagra, Inc. v. Farmers
State Bank, 237 Mich. App. 109, 140-41, 602 N.W.2d 390 (1999); Presser v.
Fannie Mae, 2012 U.S. Dist. LEXIS 102947 ( E.D. Mich. July 24, 2012)
 "Parties seeking to invoke the doctrine of equitable estoppel must prove (1) that
promises or inducements were made; (2) that they reasonably relied upon the
promises; and (3) that they will be harmed if estoppel is not applied." Pollard v.
Southdale Gardens, 698 N.W.2d 449, 454 (Minn. App. 2005) Schmidt
Printing, Inc. v. Pitney Bowes, Inc., 2011 U.S. Dist. LEXIS 129552 (D. Minn. Aug.
29, 2011)

27. Surcharge
 In re Estate of Janes, 90 N.Y.2d 41 (N.Y. 1997): Executor failed to
diversify the trust, which consisted of a large amount of one type of
stock which lost one-third of its date-of-death value. Court
approved surcharge of fiduciary for losses incurred by the estate for
failure to diversify trust’s assets.
 See also Matter of Hunter, 27 Misc. 3d 1205A (N.Y. Sur. Ct. 2010)
 RESTATEMENT (SECOND) OF TRUSTS 205, comment (a): “the
beneficiaries may surcharge the trustee for the amount necessary to
compensate fully for the consequences of the breach.”
 In these cases, surcharge seems to be poor cousin to
ERISA 502(a)(2). Cf. Knieriem v. Group Health Plan, 434 F.3d
1058, 1064 (8th Cir. Mo. 2006) (cited in Scalia’s dissent).

28. Proof of Loss in Surcharge
 SunTrust Bank v. Farrar , 277 Va. 546, 675 S.E.2d 187
(2009) . Court reversed trial court’s surcharge award for
beneficiaries who claimed that trustee failed to properly
market trust property and allowed the property to
become unproductive and a wasting asset.
Beneficiaries had the burden of proving damages with
reasonable certainty and could not rely on speculation
and conjecture.
 Note that this would be an ERISA 502(a)(2) if brought
with respect to an ERISA plan.

29. Israel v. Prudential Ins. Co., US Dist. Lexis
106107 (D.S.C. July 31, 2012)
 Plaintiff’s wife was a dependent insured under Lockheed’s life
insurance plan under which eligibility for coverage for a spouse
ceased after divorce. Plaintiff’s wife died after they divorced.
Plaintiff claimed that Lockheed’s benefits department, had told him
that he could continue the life insurance coverage on his ex-
wife. Lockheed continued to deduct premiums from Plaintiff’s
paychecks for the life insurance coverage.
 Court granted summary judgment to Lockheed on Plaintiff’s benefit
claim under ERISA sec. 502(a)(1)(B), because plan’s terms did not
provide coverage.
 Court denied summary judgment on claim for equitable relief under
ERISA sec. 502(a)(3) because of fact disputes.
 Result: Discovery and trial.

30. Strickland v. AT&T Umbrella Benefit Plan, 2012
US Dist. LEXIS 14145 (W.D. NC Sept. 30, 2012)
 Plaintiff was a disabled participant of AT&T’s medical
benefit plan. After becoming eligible for Medicare, he
claimed that Blue Cross allegedly told him (contrary to
Plan terms) that he needed to purchase Part A of
Medicare, but not Part B. Blue Cross then denied
payment of his medical bills in accordance with the
terms of the plan.
 Court permitted plaintiff’s claim for equitable relief under
ERISA sec. 502(a)(3) to go forward for discovery and
trial, citing Amara and McCravy.

31. APPENDIX
 Amara Background

32. Amara Background
 Claims: age discrimination, backloading, non-
forfeiture, faulty SPD, deficient 204(h)
notice, and breach of fiduciary duty
 Allegations: participant communications failed
to give proper notice of “greater of”
formula, and caused participants to believe they
would receive the frozen pension benefit PLUS
the cash balance benefit (A + B)

33. Amara Procedural History:
District Court
 Class of approximately 27,000 participants
 Bench trial
 Liability as to: 204(h) notice and SPDs
– Failed to adequately disclose the “wear-away” phenomenon; participants
believed A + B rather than “greater of” A or B
– Court found CIGNA intentionally misled participants
 Plaintiffs need not demonstrate individual harm flowing
from deficient SPD; rather sufficient to show “likely
harm”
 CIGNA did not refute “likely harm” presumption

34. Amara Procedural History:
District Court
 Remedy awarded: Each participant receives the
benefit that the SPD suggested – the frozen
traditional defined benefit plus his cash balance
benefits (A + B)
 Court awarded relief for the SPD violation under
ERISA 502(a)(1)(B)
 Court doubted that the relief awarded was
permissible under ERISA 502(a)(3), citing
Mertens and Great-West

35. Amara Procedural History:
Second Circuit
 Summary Opinion Issued
 Adopted District Court’s Opinion
 Both Parties Sought Certiorari

36. Amara Supreme Court Opinion
 SPD is NOT binding contract
– SPD is meant to be a summary of the plan, not the plan itself
– Plan and SPD serve different roles, governed by different rules, and
drafted by separate entities
 Accordingly, no relief under ERISA
502(a)(1)(B):
– Participant can bring an action to “enforce” not “change” the terms of
the plan
– Reformation of plan more like an equitable remedy under ERISA
502(a)(3)

37. Amara Supreme Court Opinion
 ERISA 502(a)(3) - “appropriate equitable relief”
 Had generally been interpreted as precluding monetary
relief under Mertens v. Hewitt Assoc., 508 U.S. 248 (1993)
 Amara says Mertens precluded monetary relief against
non-fiduciaries; looking to trust law, concluded
appropriate equitable relief may include monetary relief
against fiduciaries
 Amara suggests various remedies may be appropriate
under ERISA 502(a)(3): Estoppel; Surcharge;
Reformation

38. Amara Supreme Court Opinion
 Elements of a valid claim/form of relief depend on nature of
the claim. For example:
 Equitable estoppel requires detrimental reliance
 Reformation: To reflect mutual understanding of parties
where “fraudulent suppression, omission, or insertions…
materially” affected the substance of the contact, even if the
complaining party was negligent in not realizing the mistake
 Surcharge (monetary relief for fiduciary breach): Showing of
actual harm by preponderance of the evidence.
– Possible harm from loss of statutory right: Had SPD been sufficient,
likely employees would have heard of negative change from
workplace discussions

39. Amara Supreme Court Opinion:
Scalia/Thomas Concurrence
 ERISA 204(h) most natural statutory basis for
remedying failure to disclose impact of plan
amendment
 ERISA 502(a)(3) discussion: “purely dicta”
 Remedy may be far different than what district
court imposed

40. Questions?