Bos v. Bd. of Trustees, 795 F.3d 1006 (9th Cir. 2015), involved the owner of a company that participated in a multi-employer pension plan. Because the owner had full control over the company finances, he was personally responsible for making the required contributions. Moreover, he signed a promissory note for some $360,000 in payments that the company had failed to make. Then he filed bankruptcy. The bankruptcy court and the district court held that the debt was not dischargeable, because it was incurred due to the debtor’s “fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.” 11 U.S.C. § 523(a)(4). To so hold, the lower courts had concluded that the unpaid contributions were plan assets, and plaintiff’s control over those unpaid contributions made him a fiduciary, which gave rise to non-dischargeability.
The 9th Circuit reversed. It first noted that it had consistently held that unpaid contributions to employee pension plans are not plan assets. It then noted that several districts within the 9th Circuit, and some other circuits (particularly the 2d and 11th), had recognized that unpaid contributions could be plan assets if the plan expressly so provided (making the employer who failed to pay a fiduciary). Other circuits (the 6th and 10th) had reached contrary conclusions. The 10th, for example, held that, regardless of plan language, a plan can only hold a contractual right to collect unpaid contributions, and not the unpaid contributions themselves. The 6th held that, even if a plan could make an unpaid contribution a plan asset, an employer cannot become a fiduciary by virtue of failing to make a required contribution.
The court agreed with the 6th and 10th Circuits. The court noted that fiduciary status should not be imposed unless the individual is clearly aware of his status, and that a typical employer never has sufficient control over a plan asset to make it a fiduciary. The court further held that, no matter how one described the supposed “asset” – a right to collect payments, unpaid past-due contributions, or amounts that must be paid but are not yet due – an employer did not have sufficient control over that asset to make it a fiduciary.
Because unpaid contributions cannot be plan assets, the failure to pay cannot be a breach of fiduciary duty, and plaintiff’s debt was dischargeable.
In Humana Health Plan, Inc. v. Nguyen, 785 F.3d 1023 (5th Cir. 2015), Humana entered into a Plan Management Agreement (“PMA”) with the API Enterprises Employee Benefits Plan. The PMA stated that API had the right to make all discretionary decisions about the plan’s administration and management. The PMA authorized Humana to provide “subrogation/recovery services” to the plan. Continue reading
The Sixth Circuit is fast making itself the center of case law on equitable remedies under ERISA. In Pearce v. Chrysler Group LLC Pension Plan, 2015 WL 3797385 (6th Cir. June 18, 2015), the court held that a material conflict between an SPD and the plan permits a claim for equitable relief, apparently without any other element (like reliance) being required. For more discussion of the Sixth Circuit rulings on this subject in the last year or so, see Rochow 1, Rochow 2, and Stiso. Continue reading
In Stiso v. Intl. Steel Group, 2015 WL 3555917 (6th Cir. June 9, 2015), the court reversed a ruling by the district court that dismissed a claim for make-whole relief, and directed the district court “to grant an equitable remedy [against the employer and insurer] equivalent to the promised increase in benefits to plaintiff.”
The decision was written by Judge Merritt, a senior judge who did not participate in the en banc decision in Rochow v. Life Ins. Co. of N. Am., 780 F.3d 364 (6th Cir. 2015), which rejected a claim for make-whole relief in the form of disgorgement of profits. The Stiso panel also included Judge Boggs, who was in the majority in Rochow, and Judge Stranch, who had issued the lengthy dissent in Rochow. Continue reading
We previously reported on Gabriel v. Alaska Electrical Pension Fund, 755 F.3d 647 (9th Cir. 2014), which addressed limits on make-whole relief under 1132(a)(3), and affirmed judgment for the plan fiduciary. That decision was a divided one, with a partial dissent by Judge Berzon. In December, the panel withdrew its earlier decision, and replaced it with a new decision, Gabriel v. Alaska Electrical Pension Fund, — F.3d –, 2014 WL 7139686 (9th Cir. Dec. 16, 2014). The new decision affirmed summary judgment on two of the three measures of damages, and remanded to the district court on the third. Continue reading
In 2011, the Supreme Court issued a major ERISA decision, Cigna Corp. v. Amara, 131 S.Ct. 1866 (2011), holding that courts could not reform an ERISA plan as part of a claim for benefits under 29 U.S.C. 1132(a)(1)(B), but could do so as an equitable remedy under 29 U.S.C. 1132(a)(3). The case involved a situation in which the district court had ruled that Cigna had misrepresented the terms of a new pension plan when asking employees with vested rights in an outgoing plan to accept transfer. The district court had reformed the plan under 1132(a)(1)(B) to provide the benefits Cigna had promised; the Supreme Court held that the district court had used the wrong section of ERISA as the basis for its ruling.The Supreme Court then remanded for further consideration under the rules and limitations it had announced.
Amara v. CIGNA Corp., 775 F.3d 510, 513 (2d Cir. 2014), presumably is the final decision in this long-running dispute. Continue reading
In 2013, the 6th Circuit made waves in the ERISA world when it held that LINA could be ordered to disgorge almost $3 million in profits it allegedly made on benefits it had improperly withheld, on top of payment of the benefits themselves. A few months later, the court granted LINA’s petition for en banc review, and vacated the 2013 decision .
Last week a divided 6th Circuit vacated the disgorgement of profits in a ruling that restores sanity to ERISA benefits litigation. Continue reading
In Santomenno ex rel. John Hancock Trust v. John Hancock Life Ins. Co. (U.S.A), — F.3d –, 2014 WL 4783665 (3d Cir. Sept. 26, 2014), the plaintiffs, who were participants in employer-sponsored 401(k) benefit plans, claimed that John Hancock, an administrator that provided investment services to plans, breached its fiduciary duty by allegedly charging the retirement plans excessive fees. Continue reading
In Gabriel v. Alaska Electrical Pension Fund, 755 F.3d 647 (9th Cir. 2014), a venal claimant met a not-very competent plan administrator, and the result was a helpful discussion of limits on make-whole equitable claims. [Note, on December 16, 2014, the Ninth Circuit panel withdrew this opinion, and replaced it with a new one, at 773 F.3d 945] Continue reading
In a recent decision involving fiduciary duties in Employee Stock Ownership Plans (ESOPs), the Supreme Court emphasized an important limit on the pre-eminence of the plan document. Recent Supreme Court decisions, primarily in the welfare benefit plan context, have emphasized the primary importance of the plan document in establishing a fiduciary’s obligations and a participant’s rights.