The June 8, 2016 edition of the Los Angeles Daily Journal features an article written by Robert McKennon of the McKennon Law Group entitled: “9th Circuit OKs Multiple Claims for Relief under ERISA.” In the article, Mr. McKennon discusses an important decision from the U.S. Court of Appeals for the Ninth Circuit, Moyle v. Liberty Mut. Retirement Ben. Plan, 2016 DJDAR 4747 (9th Cir. May 20, 2016), in which the Ninth Circuit Court of Appeals allowed Insureds/plan participants to sue an insurer simultaneously for benefits due under an ERISA plan (such as a short-term or long-term disability insurance policy) and also for equitable relief, thus expanding the remedies available to them.

The article is posted below with the permission of the Los Angeles Daily Journal.

9th Circuit OKs Multiple Claims for Relief under ERISA

By Robert J. McKennon

One of the most significant developments in the law concerning the Employee Retirement Income Security Act of 1974 (ERISA) in the last four years has been the expansion in the availability of claims for equitable remedies, including equitable estoppel, restitution and surcharge.

In its landmark 2011 decision in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), the U.S. Supreme Court signaled a broad expansion of the availability of equitable remedies to plan participants. Amara was followed by similar rulings in McCravy v. Metropolitan Life Insurance Co., 690 F.3d 176 (4th Cir. 2012) and Kenseth v. Dean Health Plan Inc., 722 F.3d 869 (7th Cir. 2013). These cases create an important new avenue for ERISA plan participants and beneficiaries to obtain redress for ERISA violations by claim fiduciaries, such as insurance companies.

Despite Amara and the other circuit court rulings, many district courts have mistakenly ruled that if plan participants seek legal relief to recover plan benefits, enforce their rights under a plan, or clarify their rights under a plan, they are prohibited from alternatively seeking equitable relief. Thankfully, the 9th U.S. Circuit Court of Appeals, in Moyle v. Liberty Mut. Retirement Ben. Plan, 2016 DJDAR 4747 (9th Cir. May 20, 2016), recently clarified that plan participants may plead multiple, alternative, claims for relief, both legal and equitable, as available remedies under ERISA. These legal and equitable claims may proceed simultaneously, even if the equitable relief sought takes a monetary form.

The plaintiffs and appellants in Moyle were former employees of Old Golden Eagle Insurance Company, an entity purchased by Liberty Mutual Insurance Company in 1997 through a conservatorship proceeding. In order to win a bidding war for the acquisition of Golden Eagle and secure the court’s approval of the sale, Liberty’s bid included a retirement plan for Golden Eagle’s former employees. Liberty represented that the Golden Eagle employees would receive a credit for their past service with Golden Eagle that would count for the purposes of eligibility, vesting, early retirement and spousal benefits under Liberty’s retirement benefit plan.

According to the appellants, presenters at a series of benefit enrollment meetings hosted by Liberty represented that the Golden Eagle employees would receive pension benefits for their time worked at Golden Eagle. Liberty’s Retirement Plan and Summary Plan Description were amended in 2002 to state that Golden Eagle employees would be “credited for eligibility, vesting, early retirement and spouse’s benefits.” After Liberty Mutual purchased Golden Eagle, Liberty Mutual denied the appellants’ claims for past service credit. Liberty Mutual argued that it never made any representation to the appellants that they would receive past service credit for their time with Golden Eagle. Liberty Mutual also argued that under the terms of the retirement plan, the appellants were entitled only to past service credit for purposes of eligibility, vesting, early retirement and spousal benefits, and not for retirement benefits accrual. Thus, the administrator denied the Golden Eagle employees’ claims for past service credit.

The appellants filed a class action against Liberty for ERISA violations, seeking legal relief for past service credits under 29 U.S.C. Section 1132(a)(1)(B) and, alternatively, seeking equitable relief under Section 1132(a)(3) for reformation (modification of the plan to reflect the past service credits), estoppel and surcharge (monetary relief for losses suffered). The district court granted Liberty’s motion for summary judgment on all claims and held that the Golden Eagle employees were not entitled to past service credit under the terms of the plan, and they could not prove harm or detrimental reliance on Liberty’s failure to disclose information about the past service credit in the plan.

The district court also held that participants could not simultaneously seek benefits under Section 1132(a)(1)(B) and equitable relief under Section 1132(a)(3) pursuant to the Supreme Court’s decision in Varity Corp. v. Howe., 516 U.S. 489 (1996). In Varity, the court described Section 1132(a)(3) as a “‘catchall’ provision that acts as a safety net, offering appropriate equitable relief for injuries caused by violations that [Section 1132] does not elsewhere adequately remedy.” The district court followed the lead of other lower courts to rule that equitable relief under Section 1132(a)(3) is not available if Section 1132(a)(1)(B) provides an adequate remedy. The district court concluded that Appellants’ claim for surcharge, estoppel, and restitution were, in essence, monetary relief “couched in terms of equitable of relief,” and therefore could not be claimed as an equitable remedy.

The 9th Circuit reversed the district court, but only as to the issue of whether the appellants may pursue simultaneous claims for legal relief under Section 1132(a)(1)(B) and equitable relief under Section 1132(a)(3). As to the district court’s reliance on Varity, the 9th Circuit explained that the case did not explicitly prohibit a plaintiff from pursuing simultaneous claims under Section 1132(a)(3) and Section 1132(a)(1)(B), but rather prohibited duplicate recoveries when a more specific section of the statute [Section 1132(a)(1)(B)] provides a similar remedy to that which a plaintiff seeks under the catchall provision, Section 1132(a)(3). The court pointed out that the district court gave short shrift to Amara, which specifically held that Section 1132(a)(3) authorized equitable relief in the form of plan reformation, even though the plaintiffs also sought legal relief under Section 1132(a)(1)(B).

The court relied heavily on an analysis of Amara by the 8th Circuit in Silva v. Metro. Life Ins. Co., 762 F.3d 711 (8th Cir. 2014), to determine that a plaintiff can seek legal and equitable relief under Section 1132 since the Supreme Court did not say the appellants in that case would be barred from bringing a claim for equitable relief under the Section 1132(a)(3) simply because they already brought a claim for legal relief under the more specific provision, Section 1132(a)(1)(B). The court clarified that allowing plaintiffs to bring simultaneous claims not only adheres to Federal Rule of Civil Procedure 8(a)(3) which states that a pleading must contain “a demand for the relief sought, which may include relief in the alternative or different types of relief,” but it also is consistent with ERISA’s intended purpose of protecting participant’s and beneficiaries’ interests. See, e.g., 29 U.S.C. Section 1001; see also Varity, 516 U.S. at 513 (“ERISA’s basic purposes favor a reading … that provides the plaintiffs with a remedy.”) Thus, the court concluded that those cases holding to the contrary are now “clearly irreconcilable” with Amara and are no longer binding. The court noted that Amara makes it very clear that remedies such as reformation, surcharge, estoppel and restitution are traditionally equitable remedies, and the fact that they take a monetary form does not alter this classification.

The 9th Circuit then found that the district court improperly granted summary judgment on the equitable relief claim, stating that “the instant case turns on a factual determination of whether Liberty Mutual breached its fiduciary duty by failing to inform Golden Eagle employees that past service credit for the purpose of benefit accrual did not include the period prior to October 1, 1997, when they were first employed by Golden Eagle.” Because the court found triable issues of fact, it concluded that the district court erred in granting summary judgment on this claim.

Now that the 9th Circuit has interpreted Amara in the appropriately broad manner that the Supreme Court intended, we can expect the district courts in California will now be much more willing to allow equitable remedies in cases involving ERISA. This is welcome news to ERISA plan participants and beneficiaries.

Robert J. McKennon is a shareholder of McKennon Law Group PC in its Newport Beach office. His practice specializes in representing policyholders in life, health and disability insurance, insurance bad faith, ERISA and unfair business practices litigation. He can be reached at (714) 330-0474 or rm@mckennonlawgroup.com. His firm’s California Insurance Litigation Blog can be found at mslawllp.com/news-blog.