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.
The dispute centered around a fairly common provision in a disability plan that contemplates payment of benefits while a claimant is working. The plan contained the following provision:
Indexed predisability earnings means your predisability earnings increased by 7%. The first increase will take place on the date the 13th Monthly Benefit is payable. Subsequent increases will take effect on each anniversary of the first increase. You must have been continually receiving Monthly Benefits under This Plan. [emphasis by the court]
The employer, International Steel, issued an SPD that stated:
The predisability earnings on which your LTD replacement income is based are indexed—that is, increased annually by a percentage. After you have received LTD benefits of [sic] 12 months, your predisability earnings are increased by 7%. If you continue receiving LTD benefits, your predisability earnings for purposes of the plan are increased 7% annually on the anniversary of your previous increase. [emphasis by the court]
Practitioners will recognize this language as relating to the determination of the percentage loss of income attributable to a disability when a claimant is disabled but working. That situation requires a comparison between post-disability and predisability earnings, and it is common for plans to index – increase – pre-disability earnings by some factor (often cost-of-living, but here a flat percentage).
International Steel argued that the SPD language concerned this issue, but the Sixth Circuit disagreed, and found that the language would cause a plan participant to believe that his disability benefit would increase by 7% each year:
The language refers only to an increase in benefits after continually receiving benefits for a certain amount of time. Plaintiff reasonably assumed that the adjustment to predisability earnings, indexed or otherwise, by 7% annually necessarily increases his monthly benefit by the same amount. There is no limiting or qualifying language, nor does the language refer to other sections of the summary regarding “work incentive” or “working while disabled” on which International Steel relies to rationalize its refusal to pay the 7% annual increase. The language used would obviously lead a beneficiary like plaintiff reasonably to expect that he would receive a 7% cost-of-living increase if he was unable to return to work due to his disability.
The plaintiff claimed that International Steel breached its fiduciary duty “by promising claims that were then renounced.” The court agreed, and held: “By furnishing plaintiff with a summary plan description that was misleading as to the benefits it intended to provide, regardless of whether the statements were made intentionally or negligently, the fiduciary duty owed plaintiff was breached.”
The court also explained that “International Steel breached its fiduciary duty by issuing a summary plan description that did not accurately reflect the terms of the plan.”
The court then turned to MetLife, which had discretionary authority to interpret the Plan, and which had denied plaintiff’s claim to increase his disability benefit by 7% annually. The Court ruled that MetLife’s discretionary authority made it a fiduciary, and then held:
Having concluded that MetLife is an ERISA fiduciary, we must consider whether its interpretation of plan documents, and its denial of relief based on those documents, was a breach of the fiduciary duty it owed plaintiff under ERISA. Plaintiff’s claim against MetLife is premised on its “interpret[ation] of the Plan in a manner which benefited itself rather than the plan beneficiaries” and “in a manner to serve its own financial interests and knowingly contrary to the promises of the [summary plan description].” Plaintiff’s Br. at 26. ERISA supports plaintiff’s claim. See 29 U.S.C. § 1104(a)(1) (“[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and … for the exclusive purpose of … providing benefits to participants and their beneficiaries”). Viewing MetLife’s conduct, as we must, in accordance with the common law of trusts, it is to act for the sole purpose of providing benefits to plan beneficiaries like plaintiff. Dudenhoefer, 692 F.3d at 417. Its self-serving interpretation of the language in the summary plan description to deny relief to plaintiff was a breach of its fiduciary duty.
But a close reading shows that the ruling against MetLife is undercut by the ruling against International Steel, and may violate Cigna v. Amara, 131 S. Cit. 1866 (2011). Amara held that an SPD is not itself a plan document, but, rather, is merely a summary of plan documents. The Sixth Circuit held that MetLife engaged in a self-serving interpretation “of the language in the summary plan description” but it never held that MetLife incorrectly (or unreasonably) interpreted the language of the Plan itself. Indeed, the court never actually evaluated the terms of the Plan, and never expressly determined whether the Plan language provided for an increase in disability benefits.
Moreover, if the court had interpreted the Plan to provide for an increase of the disability benefit, then plaintiff would have a remedy under 502(a)(1)(B) to enforce the terms of the Plan, which would make his claim for breach of fiduciary duty improper.
Thus, there would appear to be no logical, or legal, mechanism to find that Met Life violated its fiduciary duties. If the Plan provided for an increase in benefits, then plaintiff has a 502(a)(1)(B) claim against MetLife (and no breach of fiduciary duty claim against anyone). If the Plan did not provide for an increase in benefits, then International Steel may have violated its fiduciary duty by issuing a misleading SPD, but MetLife’s determination accurately interpreted the Plan. Put simply, the court’s ruling that International Steel “breached its duty by issuing a summary plan description that did not accurately reflect the terms of the plan,” compels the conclusion that MetLife accurately interpreted the Plan and upheld its fiduciary duty.
The court compounded this lack of logic when it noted in a footnote that the en banc decision in Rochow “does not control.” The court explained:
There, we held that a plan participant could not recover both plan benefits under § 502(a)(1)(B) and disgorgement of the defendant’s profits under § 502(a)(3) for a single injury. Id . at 370–74. Here, plaintiff seeks one remedy under § 502(a)(3) for one injury—the defendants’ breach of fiduciary duty in providing a summary plan description to plan participants that did not fully and accurately communicate the plan provisions. This path to equitable relief was expressly recognized in Amara, 113 S.Ct. at 1880–82.
Of course, the court did not hold that MetLife breached its fiduciary duty by providing an inaccurate SPD. In fact, it never held that MetLife owed a fiduciary duty to issue an accurate SPD (which is an obligation of the employer, not the claims administrator). Met Life interpreted Plan documents to pay a benefit, which the court held was the wrong benefit. It is not clear how that can be considered a distinct injury.
It is clear that (in the Sixth Circuit at least) the fight over the scope of equitable remedies is not over.