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.
In the 1970s, plaintiff received pension benefits from the plan to which he was not entitled. After the plan discovered its mistake, it recovered the overpayment, and plaintiff returned to work. Almost 20 years later, plaintiff reapplied for benefits, and was paid, again, though he was no more entitled than he had been before. When the plan administrator discovered its second mistake, plaintiff sued for breach of fiduciary duty, seeking the benefits the plan had mistakenly told him he qualified for.
The court held that equitable estoppel could not be used to vary plan terms, and required, inter alia, proof that the plan provisions at issue were ambiguous, and that the statement by the plan fiduciary was an “interpretation of the plan, not an amendment or modification of the plan.” The court rejected plaintiff’s claim because he “failed to show that the plan representative’s … letter was an interpretation of ambiguous language in the Plan, rather than a mere mistake in assessing Gabriel’s entitlement to benefits.” The court specifically held that a representation that conflicted with clear plan language did not “cast doubt on the meaning and effect of those sections[.]”
Next, the court held that reformation was not available, because there was no evidence that the settlor made a mistake of fact or law that affected plan terms. The court specifically rejected the argument that it could order reformation of plan records (about plaintiff’s length of service) to conform to misinformation provided to him by the plan: “reformation does not extend so far.”
Those two sections were substantially unchanged from the earlier decision. But the court provided a different analysis of plaintiff’s claim for surcharge.
In its initial decision, the panel had held that surcharge was available only when the plan itself was injured, or the trustee was unjustly enriched, and specifically held that Amara did not expand the remedy of surcharge to provide new types of make-whole relief. In the superseding decision, the panel eliminated that language, and explained, instead:
Because Amara involved “a suit by a beneficiary against a plan fiduciary,” id. at 1879, and it was within the power of traditional equity courts to grant a demand for “make-whole relief” in the form of the equitable remedy of surcharge, such a remedy was available to the beneficiaries in Amara, id. at 1880. The Court therefore distinguished Mertens, id., in which the plan participants had sued a defendant who was not a trustee[.]
In deciding that remand was appropriate on the surcharge claim, rather than summary judgment, the superseding decision explained:
Finally, we turn to Gabriel’s claim that he is entitled to the equitable remedy of surcharge, which he frames as entitlement to receive an amount equal to the benefits he would have received had he been a participant with the hours erroneously reflected in the Fund’s records when he applied for benefits. Because the district court held that monetary relief was not available under Mertens, it did not consider whether Gabriel’s action was “a suit by a beneficiary against a plan fiduciary,” Amara, 131 S.Ct. at 1879, for “a loss resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment,” id. at 1880, and thus constituted “appropriate equitable relief” for purposes of § 1132(a)(3)(B). Nor did the district court determine whether Gabriel had shown that the trustee’s breach of duty injured him, id. at 1881, or whether “the remedy of surcharge” is available for the claimed injury, see Skinner, 673 F.3d at 1167 (applying traditional equitable principles to determine whether “the remedy of surcharge could hold the [plan administrator] liable for benefits it gained through unjust enrichment or for harm caused as the result of its breach”).
The earlier decision also expressly rejected the plaintiff’s argument that McCravy v. Met. Life Ins. Co., 690 F.3d 176 (4th Cir.2012), Kenseth v. Dean Health Plan, Inc., 722 F.3d 869 (7th Cir.2013), and Gearlds v. Entergy Servs., Inc., 709 F.3d 448 (5th Cir.2013), held that surcharge was appropriate equitable relief “even if it comes at the expense of the trust estate.” In the new decision, however, the court determined that its decision to remand was “consistent with our sister circuits [citing McCravy and Kenseth].”
In a concurring opinion, Judge Kozinski wrote that, while he did not object to the decision to remand, “on the record before us, I seriously doubt that Gabriel will prevail on such a surcharge claim consistent with our opinion.”