A recent decision by the Eighth  Circuit Court of Appeals, Jones v. Aetna Life Ins. Co., No. 16-1714, 2017 U.S. App. LEXIS 8112 (8th Cir. May 8, 2017), provides another signal that those of us defending against benefit claims increasingly may have to contend with simultaneous equitable claims for breach of fiduciary duty. Though the law is developing in this area (when is ERISA law not “developing”?), and likely will vary from circuit to circuit, you can expect more plaintiffs to add an equitable claim to a benefits complaint, and you can expect at least some courts to allow those claims to go forward. What strategies will prove most effective in responding to this latest tactic? While there are no definitive answers at this point, there are some ideas to consider.

Background on the interplay between benefit claims and equitable claims

Section 1132(a)(1)(B), governing benefit claims, provides: “A civil action may be brought … by a participant or beneficiary … to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan[.]”

Section 1132(a)(3), governing equitable claims, provides: “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 such violations or (ii) to enforce any provisions of this title or the terms of the plan[.]”

In 1996, the Supreme Court confirmed that a plan beneficiary can maintain an action under section 1132(a)(3) for equitable relief arising out of breach of fiduciary duty, but included a couple of caveats that effectively eliminated claims for breach of fiduciary duty in most benefits disputes. Varity Corp. v. Howe, 516 U.S. 489, 116 S. Ct. 1065 (1996):

• A fiduciary obligation “does not necessarily favor payment over nonpayment. The common law of trusts recognizes the need to preserve assets to satisfy future, as well as present, claims and requires a trustee to take impartial account of the interests of all beneficiaries.” Varity, 516 U.S. at 514
• “[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.”
• Most significantly, section 1132(a)(3) authorizes only “appropriate” equitable relief, and “we should expect 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.’” at 514-15

Following Varity, federal courts almost uniformly concluded that if a plaintiff could pursue benefits under section 1132(a)(1), there was an adequate remedy under the plan that barred a claim under section 1132(a)(3). See LaRocca v. Borden, Inc., 276 F.3d 22, 28-29 (1st Cir. 2002); Whelehan v. Bank of Am. Pension Plan for Legacy Cos.-Fleet-Traditional Benefit, 621 F. App’x 70, 72 (2d Cir. 2015) (“1132(a)(3) may not be relied on by a claimant to pursue relief — in this case, pension benefits — available under a separate ERISA provision”); Korotynska v. Metro. Life Ins. Co., 474 F.3d 101, 102 (4th Cir. 2006) (“[i]ndividualized equitable relief under § 1132(a)(3) is normally appropriate only for injuries that do not find adequate redress in ERISA’s other provisions”); Tolson v. Avondale Indus. Inc., 141 F.3d 604, 610 (5th Cir. 1998) (“Because [plaintiff] has adequate relief available for the alleged improper denial of benefits through his right to sue the Plans directly under section 1132(a)(1), relief through the application of section 1132(a)(3) would be inappropriate”); Wilkins v. Baptist Healthcare System, Inc., 150 F.3d 609, 615 (6th Cir. 1998) (Varity “clearly limited the applicability of § 1132(a)(3) to beneficiaries who may not avail themselves of § 1132’s other remedies”); Wald v. Southwestern Bell Corp. Customcare Med. Plan, 83 F.3d 1002, 1006 (8th Cir. 1996); Katz v. Comprehensive Plan of Group Ins., 197 F.3d 1084, 1088-89 (11th Cir. 1999); Forsyth v. Humana, Inc., 114 F.3d 1467, 1475 (9th Cir. 1997) (“equitable relief under section 1132(a)(3) is not ‘appropriate’ because section 1132(a)(1) provides an adequate remedy in this case”); but cf. Koert v. GE Grp. Life Assur. Co., No. 04-CIV-5745, 2005 U.S. Dist. LEXIS 14132, at *9 (E.D. Pa. July 14, 2005) (“District courts within the Third Circuit are divided on this issue”).

Amara changed the rules, maybe

In CIGNA Corp. v. Amara, 131 S. Ct. 1866, 179 L. Ed. 2d 843 (2011), the Supreme Court confirmed that section 1132(a)(1)(B) did not permit a court to award benefits not set forth in the plan, but stated that section 1132(a)(3) authorized various forms of monetary relief against a plan fiduciary under the circumstances present in that case. Though the discussion of equitable remedies arguably was dictum, several circuits interpreted Amara as requiring them to re-evaluate whether the availability of a claim for benefits precluded a claim for equitable relief.  See, e.g., N.Y. State Psychiatric Ass’n v. UnitedHealth Grp., 798 F.3d 125, 134 (2d Cir. 2015) (“We therefore hold that the District Court prematurely dismissed Denbo’s claims under § 502(a)(3) on the ground that § 502(a)(1)(B) provides Denbo with adequate relief.”); Moyle v. Liberty Mut. Ret. Benefit Plan, Nos. 13-56330, 13-56412, 2016 U.S. App. LEXIS 15202, at *26 (9th Cir. Aug. 18, 2016)  (“While Amara did not explicitly state that litigants may seek equitable remedies under § 1132(a)(3) if § 1132(a)(1)(B) provides adequate relief, Amara’s holding in effect does precisely that.”).

The Sixth Circuit quickly made itself a hotbed of equitable remedies decisions, and not in a good way.

• In Rochow v. LINA, 737 F.3d 415 (6th Cir. 2013) (“Rochow 2013”), the court ruled that a disability plan participant could recover benefits under 1132(a)(1)(B), and disgorgement of profits the insurer made from non-payment under 1132(a)(3).
• The Sixth Circuit granted LINA’s petition for rehearing en banc, and vacated Rochow 2013. In Rochow v. Life Ins. Co. of N. Am., 780 F.3d 364, 372 (6th Cir. 2015) (en banc) (“Rochow 2015”), the Sixth Circuit held: “A claimant can pursue a breach-of-fiduciary-duty claim under § 502(a)(3), irrespective of the degree of success obtained on a claim for recovery of benefits under § 502(a)(1)(B), only where the breach of fiduciary duty claim is based on an injury separate and distinct from the denial of benefits or where the remedy afforded by Congress under § 502(a)(1)(B) is otherwise shown to be inadequate.”
• In Stiso v. Intl. Steel Group, 604 Fed. Appx. 494 (6th Cir. June 9, 2015), the court reversed a ruling by the district court that dismissed a claim for make-whole equitable 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.”
• In Pearce v. Chrysler Group LLC Pension Plan, 615 Fed. Appx. 342 (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.

The most recent installment in this great debate comes from the Eighth Circuit. Jones v. Aetna Life Ins. Co., No. 16-1714, 2017 U.S. App. LEXIS 8112 (8th Cir. May 8, 2017), involved an appeal of the District Court’s decision denying plaintiff’s section 1132(a)(1)(B) claim (because Aetna’s determination was within its discretion), which had occurred sometime after the District Court had dismissed plaintiff’s section 1132(a)(3) claim as duplicative.

The Eighth Circuit upheld the decision on the merits of the 1132(a)(1)(B) claim, but, more significantly, found that there existed an “intracircuit conflict” regarding a plan participant’s ability to assert simultaneous claims under sections and 1132(a)(1)(B) and 1132(a)(3). In resolving that conflict, Jones held that Amara had changed the law enough that it was error to dismiss a section 1132(a)(3) merely because the plaintiff also asserted a section 1132(a)(1)(B) claim. The court held that “so long as two claims assert different theories of liability, plan beneficiaries may plead both.” [quotation marks omitted].  In analyzing the claims, the court found that the plaintiff had alleged different theories, because the equitable claim alleged “that Aetna used a claims-handling process that breached its fiduciary duties, not that Aetna denied her benefits due.”  Thus, after winning the benefits claim, twice, Aetna is faced with the prospect of litigating, from scratch, an equitable claim presumably seeking the same benefits.

In summary, at least four circuits to date have held that a plan participant can assert a claim for equitable relief while simultaneously seeking plan benefits, at least in some circumstances. Even if you’re in a circuit that has not expressly held that both claims can be asserted simultaneously, it is virtually certain that you will see increased claims of that nature, and will need to distinguish cases from circuits that allow such claims to proceed.

How to respond?

Move to dismiss, or wait until the merits? The Second and Eighth Circuits have previously observed that the stage of the litigation at which the court is considering the merit of a section 1132(a)(3) claim is important. Silva v. Metro. Life Ins. Co., 762 F.3d 711, 727 (8th Cir. 2014) (“At the motion to dismiss stage, however, it is difficult for a court to discern the intricacies of the plaintiff’s claims to determine if the claims are indeed duplicative, rather than alternative, and determine if one or both could provide adequate relief.”);  N.Y. State Psychiatric Ass’n v. UnitedHealth Grp., 798 F.3d 125, 134 (2d Cir. 2015) (“Denbo’s § 502(a)(3) claims are for breach of fiduciary duty, he has not yet succeeded on his § 502(a)(1)(B) claim, and it is not clear at the motion-to-dismiss stage of the litigation that monetary benefits under § 502(a)(1)(B) alone will provide him a sufficient remedy. In other words, it is too early to tell if his claims under § 502(a)(3) are in effect repackaged claims under § 502(a)(1)(B).”).

Certainly there are advantages to dismissing an equitable claim at the outset, the primary one being to eliminate any discovery that the plaintiff might be able to demand that is relevant only to that claim.

But Jones has heightened the potential risk of moving to dismiss. There, the case progressed after the equitable claim was dismissed; Aetna defeated the benefit claim by establishing that its determination was within its discretion; and then Aetna potentially has to go through the whole litigation again to allow the district court to consider the merits of the equitable claim.

Could it be wiser to leave the equitable claim pending until the time for a summary judgment motion? When the court reviews the merits of the underlying claim determination, and determines (presumably) that the claim administrator acted within its discretion, it would seem to be an easy step to go on to determine that the administrator did not breach its fiduciary duty.

Of course, letting the equitable claim stand until the merits are reached can broaden discovery, and also a court a path to award some relief to a plaintiff it considers deserving, but who cannot prove her claim under the terms of the plan.

The determination when to challenge the pendency of a section 1132(a)(3) claim likely is going to vary significantly on the jurisdiction, the particulars of the case, and perhaps even the identity of counsel.

Focus on potential remedies? The types of equitable relief available under section 1132(a)(3) are those categories of relief that were typically available in a court of equity. Mertens v. Hewitt Associates, 113 S. Ct. 2063 (1993). This includes remedies such as injunction, restitution, estoppel and lien enforcement. Amara held that additional forms of relief also are appropriate, such as reformation and surcharge. After Amara, the fact that the relief sought takes the form of a money payment, or “make-whole” relief, does not necessarily preclude the remedy.

Each of these remedies has its own set of elements to be satisfied in order to recover. And it may not be possible for a plaintiff to allege or prove the appropriate elements for the remedy she seeks as an adjunct to a benefits claim.

In Gabriel v. Alaska Electrical Pension Fund, 773 F.3d 945 (9^th Cir. 2014), the court found that a pension plan’s alleged mis-statement regarding plaintiff’s entitlement to a benefit did not permit plaintiff to estop the administrator from denying his claim, nor did it authorize reformation. Regarding estoppel, the court held that plaintiff failed to prove that the plan terms at issue were ambiguous, and that the fiduciary’s statement was a binding interpretation of that ambiguous plan. Regarding reformation, there was no evidence that the settlor had made a mistake of law or fact that affected plan terms. The court also rejected plaintiff’s argument that ERISA permitted him to seek reformation of plan records about his length of service in order to qualify him for benefits.

Gabriel also held, however, that the plaintiff might be able to succeed on a surcharge claim. In particular, it noted that the questions to be considered included whether plaintiff suffered a loss resulting from a breach of fiduciary duty, or was seeking to prevent the trustee’s unjust enrichment; whether the fiduciary’s actions injured the plaintiff; and whether surcharge is available for the claimed injury. Judge Kozinski, in a concurring opinion, noted “I seriously doubt that Gabriel will prevail on such a surcharge claim[.]” (As a side note, the Gabriel panel had previously decided, in a 2-1 decision, that surcharge would only be available where the plan itself was injured, or where the fiduciary was unjustly enriched, which would effectively eliminate this remedy from many benefit claims. That decision was withdrawn.)

Focus on the plan? Another major Supreme Court decision on scope of equitable remedies is U.S. Airways v. McCutchen, 133 S. Ct. 1537 (2013). In that case, which involved a section 1132(a)(3) claim by the plan to recover health benefits, the Court held that the traditional equitable defenses available to the defendant/participant were limited by the language of the plan. Specifically, if a particular equitable defense is “at odds with the parties’ expressed commitments,” the participant could not assert it.

Though McCutchen dealt with equitable defenses, its reasoning should apply to remedies as well. As the Court explained:

The section under which this suit is brought [1132(a)(3)] does not, after all, authorize appropriate equitable relief at large…; rather, it countenances only such relief as will enforce the terms of the plan or the statute[.] … That limitation reflects ERISA’s principal function: to protect contractually defined benefits. …  The statutory scheme, we have often noted, is built around reliance on the face of written plan documents. …   The plan, in short, is at the center of ERISA. And precluding McCutchen’s equitable defenses from overriding plain contract terms helps it to remain there.

McCutchen, 133 S. Ct. at 1548 (quotation marks and citations omitted).

McCutchen  would appear to support an argument that a participant who loses his benefit claim cannot recover, through an equitable claim, a benefit that is not authorized under the terms of the plan. In other words, if the court confirms the fiduciary’s determination that the participant did not qualify for a benefit under the plan, then he should not be able to obtain that very benefit through other means (which sounds an awful lot like Varity!). Similarly, it is helpful to remember that section 1132(a)(3) authorizes a claim “to enforce … the terms of the plan[.]” If the terms of the plan yield no benefit for a plaintiff, he may not be able to override that with an equitable claim.

It should be noted that the Sixth Circuit has taken a potentially contrary view. In Pearce v. Chrysler Grp., L.L.C. Pension Plan, 615 F. App’x 342 (6th Cir. 2015), the court held that, even though the plaintiff clearly was not eligible for a particular benefit under the plan, he still could assert a claim for equitable relief for denial of that benefit.

Conclusions

As with many parts of ERISA litigation, there is no definitive answer to the question of the interplay between a claim for benefits and a claim for equitable relief. However, it is likely that claims for equitable relief will become more common, and that more of them will survive motions to dismiss (at least in some circuits). Will equitable claims become a way for plaintiffs to circumvent plan terms and obtain benefits to which the plan does not entitle them? Or will equitable claims prove to be a small detour that become unattractive after courts make clear that plan terms still control? Only time will tell, and perhaps this issue will be the basis for yet another Supreme Court ERISA decision.