Opinion ID: 2784330
Heading Depth: 2
Heading Rank: 1

Heading: erisa defines lina’s duties as a fiduciary

Text: “ERISA is a comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983). Congress imposed fiduciary duties on ERISA plan sponsors and administrators that are No. 12-2074 Rochow v. Life Ins. Co. of N. Am. Page 28 the highest known to the law, Gregg v. Transp. Workers of Am. Int’l, 343 F.3d 833, 841 (6th Cir. 2003), and in doing so, Congress drew much of ERISA’s content from the common law of trusts. Varity Corp., 516 U.S. at 496. These fiduciary duties attach to particular persons or entities engaged in the performance of specific ERISA functions. Edmonson v. Lincoln Nat’l Life. Ins. Co., 725 F.3d 406, 413 (3d Cir. 2013). A fiduciary’s first obligation is to “discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries.” 29 U.S.C. § 1104(a)(1). This duty of loyalty extends to the individual plan participants and beneficiaries, not only to the ERISA plan itself. Varity Corp., 516 U.S. at 507; Cent. States, S.E. & S.W. Areas Pension Fund v. Cent. Transp., Inc., 472 U.S. 559, 571–72 (1985). A fiduciary has “an unwavering duty” to act as a prudent person would act in a similar situation and “for the exclusive purpose” of insuring that benefits are provided to plan participants and their beneficiaries. 29 U.S.C. § 1104(a); Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Mich., 751 F.3d 740, 751 (6th Cir. 2014); Gregg, 343 F.3d at 841; James v. Pirelli Armstrong Tire Corp., 305 F.3d 439, 448–49 (6th Cir. 2002). ERISA expressly forbids a fiduciary from “deal[ing] with the assets of the plan in his own interest or for his own account.” 29 U.S.C. § 1106(b)(1). The “absolute bar against self dealing” prevents a fiduciary from “realizing a financial gain” at the expense of the plan participants or beneficiaries. Hi-Lex Controls, Inc., 751 F.3d at 750 (quoting Brock v. Hendershott, 840 F.2d 339, 341 (6th Cir. 1988)); Pipefitters Local 636 Ins. Fund v. Blue Cross and Blue Shield of Mich., 722 F.3d 861, 868 (6th Cir. 2013). II. ERISA DEFINES REMEDIES FOR BREACH OF FIDUCIARY DUTY A. Congress authorized equitable remedies in § 1132(a)(3) Congress designed ERISA to include equitable remedies that run directly to the individual plan participant or beneficiary who is injured by a fiduciary breach. The Supreme Court tells us that the “words of [§ 1132(a)(3)]—‘appropriate equitable relief’ to ‘redress’ any ‘act or practice which violates any provision of this title’—are broad enough to cover individual relief for breach of a fiduciary obligation.” Varity Corp., 516 U.S. at 510. The structure of § 1132 reveals that one of the two catchall provisions providing appropriate equitable relief for breaches of fiduciary duty that run to an injured beneficiary is § 1132(a)(3). Id. at 512. This No. 12-2074 Rochow v. Life Ins. Co. of N. Am. Page 29 catchall remedial provision acts “as a safety net, offering appropriate equitable relief for injuries caused by violations that [§ 1132] does not elsewhere adequately remedy.” Id. In the majority’s view, Varity Corp. emphasizes “that ERISA remedies are concerned with the adequacy of relief to redress the claimant’s injury” and that “equitable relief is not ordinarily appropriate where Congress has elsewhere provided adequate means of redress for a claimant’s injury. In other words, a claimant cannot pursue a breach-of-fiduciary-duty claim under § [1132](a)(3) based solely on an arbitrary and capricious denial of benefits where the § [1132](a)(1)(B) remedy is adequate to make the claimant whole.” Maj. Op. at 8–9. If that were the case, the majority worries, then any arbitrary and capricious denial of plan benefits would potentially subject a plan fiduciary to disgorgement of profits under § 1132(a)(3) “after the claimant recovered for wrongful denial of benefits” under § 1132(a)(1)(B). Maj. Op. at 9. This unfounded fear is allayed by a proper interpretation of Varity Corp., the cases following it, and the Supreme Court’s recent decision in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011). These cases demonstrate that a participant or beneficiary may recover under § 1132(a)(1)(B) for an arbitrary and capricious denial of plan benefits and may recover further equitable relief under § 1132(a)(3) to redress a breach of fiduciary duty. Together these remedies provide the make-whole relief Congress intended. In Varity Corp., the plaintiffs’ employer, serving also as administrator of a self-funded employee welfare benefit plan, persuaded the plaintiffs by deception to transfer their employment to a newly-formed subsidiary, thereby withdrawing voluntarily from the welfare benefit plan and forfeiting benefits under it in exchange for the employer’s assurances that the plaintiffs would receive the same benefits following transfer. 516 U.S. at 491–94. Just as Varity Corporation had planned, the insolvency of the new subsidiary stripped the employees of welfare benefits. Id. at 494. The employees could not sue under § 1132(a)(1)(B) to recover benefits because the plan was defunct. They could, however, and did sue for and obtain “appropriate equitable relief” under § 1132(a)(3)—their reinstatement to a different employee plan. Id. at 495. The Supreme Court affirmed the reinstatement, holding that individuals may sue under the catchall provision of § 1132(a)(3) to obtain “other appropriate equitable relief” to remedy a No. 12-2074 Rochow v. Life Ins. Co. of N. Am. Page 30 breach of fiduciary duty. Id. at 510–13. Given the objectives of the ERISA statute, the case explains, “it is hard to imagine why Congress would want to immunize breaches of fiduciary obligation that harm individuals by denying injured beneficiaries a remedy.” Id. at 513. Like the majority here, the amici in Varity Corp. worried that an individual would be able to “repackage” a denial of benefits claim that is normally reviewed deferentially under the arbitrary and capricious standard of Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), and transform it into a breach of fiduciary duty claim decided under the “rigid level of conduct” expected of fiduciaries. Id. at 513–14. The Supreme Court dismissed their concern. “[C]haracterizing a denial of benefits as a breach of fiduciary duty does not necessarily change the standard a court would apply when reviewing the administrator’s decision to deny benefits.” Id. at 514. “After all, Firestone . . . based its decision upon the same common-law trust doctrines that govern standards of fiduciary conduct.” Id. at 514–15. Dismissing amici’s concern that “lawyers will complicate ordinary benefit claims by dressing them up in ‘fiduciary duty’ clothing,” id. at 514, the Court explained “that where Congress elsewhere provided adequate relief for a beneficiary’s injury, there will likely be no need for further equitable relief, in which case such relief normally would not be ‘appropriate.’” Id. at 515 (emphasis added). The majority transforms the Supreme Court’s conditional language into an absolute bar to Rochow’s claims, misconstruing the Court’s instruction that ERISA authorizes “further equitable relief” if relief available “elsewhere” is inadequate. This may be the unusual case that entails two injuries, but Varity Corp. provides no basis for denying an equitable remedy necessary to accomplish make-whole relief. The repackaging fears the majority expresses, like those raised by amici in Varity Corp., should be met with the same response: there is not “any ERISArelated purpose that denial of a remedy would serve. Rather, . . . granting a remedy is consistent with the literal language of the statute, the Act’s purposes, and pre-existing trust law.” Id. B. Remedies under § 1132(a)(3) were traditionally available in equity Section 1132(a)(3) “countenances only such relief as will enforce” ERISA’s provisions or the terms of the plan, and it “authorizes the kinds of relief ‘typically available in equity’ in the No. 12-2074 Rochow v. Life Ins. Co. of N. Am. Page 31 days of ‘the divided bench,’ before law and equity merged.” US Airways, Inc. v. McCutchen, 133 S. Ct. 1537, 1544, 1548 (2013) (quoting Mertens v. Hewitt Assoc., 508 U.S. 248, 256 (1993)). The most definitive explanation of the types of equitable remedies available under § 1132(a)(3) is found in the Supreme Court’s pronouncement in Cigna Corp. v. Amara, 131 S. Ct. 1866 (2011). Because Congress specified that courts may grant “other appropriate equitable relief” under § 1132(a)(3), courts may employ remedies that were traditionally available in equity, including reformation of contract, injunctions, mandamus, restitution, and surcharge, which is a monetary remedy against a trustee or fiduciary. Id. at 1878–80. “[T]he fact that this relief takes the form of a money payment does not remove it from the category of traditionally equitable relief.” Id. at 1880. This is because courts sitting in equity “possessed the power to provide relief in the form of monetary ‘compensation’ for a loss resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment.” Id. (citing Restatement (Third) of Trusts § 95, and Comment a (Tent. Draft No. 5, Mar. 2, 2009)). The surcharge remedy extends “to a breach of trust committed by a fiduciary encompassing any violation of a duty imposed upon that fiduciary” and can be used to accomplish “make-whole relief.” Id. The equity courts did not require a showing of detrimental reliance in surcharge cases but “would ‘mold the relief to protect the rights of the beneficiary according to the situation involved.’” Id. at 1881 (quoting Bogert’s Trusts & Trustees § 861, at 4). A fiduciary may be surcharged under § 1132(a)(3) if the plaintiff proves actual harm and causation by a preponderance of the evidence, and actual harm might “come from the loss of a right protected by ERISA or its trust-law antecedents.” Id. In explaining the scope of equitable remedies available under § 1132(a)(3), Amara also clarified two previous Supreme Court cases, correcting lower court decisions that had interpreted the cases as narrowing the scope of “other appropriate equitable relief” available under § 1132(a)(3). Amara, 131 S. Ct. at 1878 (referring to Mertens v. Hewitt Assoc., 508 U.S. 248 (1993), and Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002). Mertens does not foreclose equitable relief against a plan fiduciary, as some courts had held, because in that case a plan beneficiary sought compensatory damages from a non-fiduciary, a private firm that provided actuarial services to a trustee. Id. (citing Mertens, 508 U.S. at 253, 255, 256). Relief was not available under § 1132(a)(3) because the beneficiary sought traditionally legal, not equitable relief, against a non-fiduciary. Id. In Great-West, the suit was brought by the fiduciary No. 12-2074 Rochow v. Life Ins. Co. of N. Am. Page 32 against the beneficiary. After the injured beneficiary recovered compensatory damages from a tortfeasor, the fiduciary sought reimbursement for the medical expenses it had paid on the beneficiary’s behalf. Id. The fiduciary tried to place a lien on the money the beneficiary collected, but a lien is traditionally considered to be legal, not equitable, relief. Id. at 1878–79. Because the fiduciary did not seek an equitable remedy—the placement of a constructive trust on the particular money the tortfeasor paid to the beneficiary—the Court determined that equitable relief under § 1132(a)(3) was not available. Id. Mertens and Great-West thus do not present any obstacle to Rochow’s use of § 1132(a)(3) to recover traditional equitable relief from LINA, a breaching fiduciary, even if that remedy is formulated to avoid the unjust enrichment of the fiduciary. See Amara, 131 S. Ct. at 1879–80. Reading Amara and Varity Corp. together, we see that the remedies awarded to Rochow comport with the statute, its purposes, and trust law. The principle is clear that a plaintiff may pursue relief under both § 1132(a)(1)(B) and (a)(3) if wrongly denied benefits are recovered under (a)(1)(B) and “other appropriate equitable relief”—something in addition to the award of benefits—is necessary to make the plaintiff whole for a breach of fiduciary duty. In this case, requiring LINA to disgorge its profits earned on wrongly withheld benefits, accomplished under (a)(3), was necessary to make Rochow whole and to prevent LINA’s unjust enrichment. Our sister circuits recognize that Amara corrects misunderstandings of the lower courts that have led to the denial of equitable remedies authorized by § 1132(a)(3). After Amara, the Fourth Circuit explained, it is clear “that Section § 1132(a)(3) allows for remedies traditionally available at equity and that those remedies include surcharge and estoppel[,]” remedies “at the heart” of the appeal before that court. McCravy v. Metro. Life Ins. Co., 690 F.3d 176, 177–78 (4th Cir. 2012). The Fifth Circuit characterized Amara as stating “an expansion of the kind of relief available” under § 1132(a)(3) “when the plaintiff is suing a plan fiduciary and the relief sought makes the plaintiff whole for losses caused by the defendant’s breach of a fiduciary duty.” Gearlds v. Entergy Servs., Inc., 709 F.3d 448, 450 (5th Cir. 2013). The Seventh Circuit pointed to Amara as “clarify[ing] that equitable relief may come in the form of money damages when the defendant is a trustee in breach of a fiduciary duty.” Kenseth v. Dean Health Plan, Inc., 722 F.3d 869, 878–79 (7th Cir. 2013). The Eighth Circuit observed that “Amara changed No. 12-2074 Rochow v. Life Ins. Co. of N. Am. Page 33 the legal landscape by clearly spelling out the possibility of an equitable remedy under [§ 1132(a)(3)] for breaches of fiduciary obligations by plan administrators.” Silva v. Metro. Life Ins. Co., 762 F.3d 711, 722 (8th Cir. 2014). And the Ninth Circuit recently reversed and remanded an ERISA case in part so that the district court could determine in the first instance under § 1132(a)(3) whether a trustee’s fiduciary breach injured the beneficiary and whether the surcharge remedy discussed in Amara is available to the beneficiary. Gabriel v. Alaska Elec. Pension Fund, 773 F.3d 945, 962–63 (9th Cir. 2014). Members in the majority here have read Amara to leave “open the possibility that ‘appropriate equitable relief’ could potentially be awarded” under § 1132(a)(3). Lipker v. AK Steel Corp., 698 F.3d 923, 931 n.4 (6th Cir. 2012). In this case, the majority agrees with Lipker and the other circuit cases cited above that equitable relief is available under § 1132(a)(3) “to redress an ERISA violation by a plan fiduciary.” Maj. Op. at 14. And two of our prior cases acknowledge the availability of dual ERISA claims and remedies under certain circumstances. In Hill v. Blue Cross & Blue Shield of Michigan, 409 F.3d 710, 718 (6th Cir. 2005), we reversed the dismissal of a claim under § 1132(a)(3), because that claim challenged defects in systemic, plan-wide claims-handling procedures, an injury different from the denial of claims for individual benefits brought under § 1132(a)(1)(B). Similar reasoning is apparent in Gore v. El Paso Energy Corp. Long Term Disability Plan, 477 F.3d 833, 840–41 (6th Cir. 2007), where we determined that the plaintiff asserted two distinct injuries permitting claims and recovery under both § 1132(a)(1)(B) and (a)(3). We thus learn from our own cases that ERISA’s remedy provisions are not mutually exclusive.