ACI’s 13th National Forum on ERISA Litigation October 27-28, 2016 Remedies: Appropriate Equitable Relief Under ERISA After Montanile R. Joseph Barton Eric G. Serron Stephen Rosenberg Partner Partner Partner Cohen Milstein Sellers & Toll PLLC Steptoe & Johnson LLP The Wagner Law Group Tweeting about this conference? #ERISA Hot Topics in Remedies •What is “appropriate equitable relief” under ERISA § 502(a)(3)? •Claims against participants & non-fiduciaries •Claims against fiduciaries for individual recovery #ERISA ERISA § 502(a)(3) “a civil action may be brought by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this title or the terms of the Plan, or (B) to obtain other appropriate equitable relief (i) to redress [] violations [of ERISA or the terms of the plan] or (ii) to enforce any provisions of this subchapter or the terms of the plan.” #ERISA Claims Against Participants and Non- Fiduciaries • Montanile v. Bd. Of Trustees of Nat. Elevator Indus. Health Benefit Plan, 136 S.Ct. 651 (2016): • 502(a)(3) does not permit equitable lien by agreement against beneficiary’s general assets. #ERISA Montanile continued • ERISA health plan paid for Montanile’s medical expenses after he was hit by drunk driver. Montanile received a $500k settlement from drunk driver. • Plan has subrogation clause and health plan sought reimbursement; attorney refused the request and paid the settlement to Montanile. • Plan sued under 502(a)(3) for equitable lien. • Held: Where funds are completely dissipated on non- traceable items, no 502(a)(3) suit allowed to attach to participant’s general assets. Remand to determine if $ was completely dissipated on non-traceable assets. #ERISA Implications of Montanile • Lump Sum Overpayments? • LTD Plan – Right of Offset Against Future Payments? • Constructive Trust? • Impact on Interpleader Actions? #ERISA Post-Montanile – Pleading Standards • Metzgar v. U.A. Plumbers & Steamfitters Local No. 22 Pension Fund, 2016 WL 1554295, at *5 (W.D.N.Y. Mar. 1, 2016), report and recommendation adopted, 2016 WL 1545186 (W.D.N.Y. Apr. 15, 2016): • party seeking equitable relief does not need to specifically identify whether assets are traceable in complaint. #ERISA Post-Montanile – Equitable Liens • Sun Life Assurance Co. of Canada v. Jackson, No. 3:14-CV-41, 2016 WL 4184444, at *12 (S.D. Ohio Aug. 5, 2016): • Finding insurer could not collect proceeds which have been dissipated when not done in violation of any term of the Plan, but ordering participant to provide an accounting • Connecticut Gen. Life Ins. Co. v. Humble Surgical Hosp., LLC, No. 4:13-CV-3291, 2016 WL 3077405, at *11 (S.D. Tex. June 1, 2016): • Burden of establishing traceable funds is on party (here, the insurer) seeking to establish tracing #ERISA Post-Montanile – Equitable Liens • Unitedhealth Group v. MacElree Harvey Ltd, 2016 WL 4440358 (E.D. Pa. Aug 23, 2016): • Non-dissipated funds not actually in physical possession of defendant could be recovered where traceable – an equitable lien by agreement creates a superior lien over other creditors (here the participant’s attorney). #ERISA Post-Montanile – Disgorgement • Spear v. Fenkell, 2016 WL 5661720, *32 (E.D. Pa. Sept. 30, 2016): • Accounting/disgorgement are equitable remedies available even if no loss and even where there are no traceable assets • Perez v. Chimes D.C., Inc., No. CV RDB-15-3315, 2016 WL 5938827, at *7 (D. Md. Oct. 12, 2016): • Equitable accounting for profits does not require equitable tracing #ERISA Claims by Participants • Common situations where Section 502(a)(1)(B) and 502(a)(2) remedies are of little or no use: • Where a participant is promised benefits to which he is not entitled under the plan’s terms • Where a participant is given misinformation and consequently fails to take steps necessary to secure benefits • Where a participant would be entitled to benefits but for a plan fiduciary’s mishandling of his claim • Where a participant is given misinformation about the tax consequences of receiving benefits • Where a participant brings a Section 510 discrimination claim #ERISA Pre-Amara Supreme Court Guidance on Appropriate Equitable Relief • Those categories of relief that were typically available in equity. Mertens v. Hewitt Assocs., 508 U.S. 248 (1993). • Equitable restitution only, not legal restitution. Great- West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002). • “Almost invariably suits seeking to compel the defendant to pay a sum of money . are suits for money damages.” Id. at 210. #ERISA Pre-Amara, Post-Mertens Treatment of Equitable Relief Under ERISA • Even as to non-fiduciaries, Supreme Court pre- Amara recognized injunction, mandamus, equitable lien, equitable restitution, disgorgement, accounting for profits, but not compensatory damages. • Pre-Amara, courts varied on what equitable relief could be awarded for fiduciary breaches. • E.g., Mathews v. Chevron, 362 F.3d 1172 (9th Cir. 2004) (upholding instatement in the plan as injunctive relief) #ERISA Department of Labor’s Position • Mertens and Great-West did not address claims against fiduciaries • Historical practice of equity courts was to provide monetary relief against a breaching fiduciary to restore beneficiary’s losses resulting directly from the breach; sometimes called surcharge • Trust law fully supports such relief • Providing a remedy is consistent with ERISA’s purposes #ERISA Cigna Corp v. Amara, 563 U.S. 421 (2011): Overview • District court awarded § 502(a)(1)(B) remedy in misrepresentation action without addressing possibility of awarding equitable relief under § 502(a)(3) • Supreme Court rejected 502(a)(1)(B) remedy • The Supreme Court left it to the district court to analyze 502(a)(3) in the first instance, but went on to “identify equitable principles that the court might apply” #ERISA Cigna Corp. v. Amara: Overview • Amara is “a suit by a beneficiary against a plan fiduciary (whom ERISA typically treats as a trustee) about the terms of a plan (which ERISA typically treats as a trust). It is the kind of lawsuit that, before the merger of law and equity, [plaintiffs] could have brought only in a court of equity, not a court of law.” #ERISA Cigna Corp. v. Amara: Relief • Relief in courts of equity included Mertens relief: “affirmative and negative injunctions” (injunctions, mandamus, and restitution) • Plus more: A “maxim of equity states that ‘[e]quity suffers not a right to be without a remedy.’ R. Francis, Maxims of Equity 29 (1st Am. ed. 1823).” #ERISA Cigna Corp. v. Amara: Relief • “The power to reform contracts … was used to prevent fraud.” • “Equitable estoppel ‘operates to place the person entitled to its benefit in the same position he would have been in had the representations been true.’” #ERISA Cigna Corp. v. Amara: Relief • “Equity courts possessed the power to provide… monetary ‘compensation’ for a loss resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment. [T]his kind of monetary remedy against a trustee, sometimes called a ‘surcharge,’ was ‘exclusively equitable.’” #ERISA Cigna Corp. v. Amara: Relief • “[S]urcharge . extended to a breach of trust committed by a fiduciary encompassing any violation of a duty imposed upon that fiduciary. Thus, insofar as an award of make- whole relief is concerned, the fact that the defendant in this case, unlike the defendant in Mertens, is analogous to a trustee makes a critical difference.” • No requirement of “detrimental reliance” for all equitable remedies. #ERISA Simultaneous Claims Under ERISA § 502(a)(1)(B) and § 502(a)(3) • Varity noted ERISA § 502(a)(3) is “catch all” and duplicative relief generally not “appropriate.” • View #1: Duplicate recoveries are prohibited, but plaintiff may plead both ERISA § 502(a)(1)(B) and ERISA § 502(a)(3) claim. New York State Psych. Ass’n v. UnitedHealth Group, 798 F.3d 125 (2d Cir. 2015); Silva v. Metro. Life Ins. Co., 762 F.3d 711 (8th Cir. 2014). • View #2: Simultaneous claims allowed only where breach of fiduciary duty is based on an injury separate and distinct from the denial of benefits or where the remedy afforded by ERISA § 502(a)(1)(B) is inadequate. Rochow v. Life Ins. of N. Am., 780 F.3d 364 (6th Cir. 2015) #ERISA Simultaneous Claims Under ERISA § 502(a)(1)(B) and § 502(a)(3) • View #3: Categorical Rejection of Simultaneous § 502(a)(3) Claims Regardless of Whether Participant Has Any Redress under § 502(a)(1). E.g. Hollingshead v. Aetna Health Inc., 589 F. App'x 732, 737 (5th Cir. 2014) (“we agree that our decision in Tolson is fatal to Hollingshead's claim that Aetna breached its fiduciary duty in violation of ERISA § 502(a)(3). See 141 F.3d at 610 (holding that plaintiff could not maintain claim for breach of fiduciary duty under section 1132(a)(3) because he had “adequate redress for disavowed claims through his right to bring suit pursuant to section 1132(a)(1)”). As we explained in that case, “[t]he simple fact that [Hollingshead cannot] prevail on his claim under section 1132(a)(1) does not make his alternative claim under section 1132(a)(3) viable.”) #ERISA Impact on Federal Rules • Silva v. Metro. Life Ins. Co., 762 F.3d 711 (8th Cir. 2014) (“To dismiss an ERISA plaintiff's § 1132(a)(3) claim as duplicative at the pleading stage of a case would, in effect, require the plaintiff to elect a legal theory and would, therefore, violate the Federal Rules of Civil Procedure.”) • Laurenzano v. Blue Cross and Blue Shield of Massachusetts, Inc. Retirement Income Trust, 134 F.Supp.2d 189 (D.Mass.2001) (“Varity does not force a plaintiff to elect his remedy before filing a complaint, but rather prohibits a plaintiff from receiving equitable relief under ERISA § 502(a)(3) in addition to some other form of relief.”) • Newton v.