As part of our big, new redesign of the Alliance for Justice website, the Justice Watch blog has moved. To be sure you're getting all the latest news about the fight for a fairer America, visit us at www.afj.org/blog

Monday, May 16, 2011

Supreme Court Overturns Decision Holding Corporation Accountable for Deceptive Retirement Benefit Practices

Today the Supreme Court overturned a district court order in CIGNA Corp. v. Amara that compelled CIGNA to provide retirement benefits as they were described in a deceptive summary rather than the less generous benefits described in the plan itself. The Second Circuit upheld the district court’s order.

In order to avoid a backlash among its employees, CIGNA buried in fine print a change to its retirement plan that reduced benefits. CIGNA accurately detailed the change in the complete description of the plan but implied in a shorter summary that employees were more likely to read that no change had been made. Affected employees filed a class action suit to recover retirement benefits as described in the summary.

CIGNA argued on appeal that beneficiaries should be required to prove that they personally relied, to their detriment, on the summary description of the plan. The employees argued that the federal statute that governs retirement plans, ERISA, does not include a reliance requirement and that the employees should benefit from a presumption that they relied on the summary.

The Supreme Court held that the section of ERISA under which the district court ordered an employee-friendly change to the retirement plan does not empower courts to grant such relief, which the Court held to be equitable rather than legal. Discussing the terms of the retirement plan, the Court stated that “we have found nothing suggesting that the provision authorizes a court to alter those terms…where that change, akin to the reform of a contract, seems less like the simple enforcement of a contract as written and more like an equitable remedy.” As a result, the court overturned the district court’s decision.

However, the Supreme Court described in detail why a different ERISA provision might empower the lower court to order the same remedy and remanded the case with a strong suggestion that the employees seek relief under that provision. The district court did not determine whether the separate provision of the statute allowed a correction of the retirement plan. That provision “allows a participant, beneficiary, or fiduciary ‘to obtain other appropriate equitable relief’ to redress violations of (here relevant) parts of ERISA.”

Justice Scalia, joined by Justice Thomas in concurrence, argued that the Court should have stopped once it determined the district court’s remedy could not be sustained under the section of ERISA it had relied on. Justice Scalia then went on to suggest that the plaintiffs may not be able to establish the elements required under the alternative equitable remedies suggested by the Court, noting the district court did not use this alternative provision because it found it “particularly complicated” and “knotty.”

Although the Supreme Court provided a potential road map for employees to seek justice for CIGNA’s deceptive corporate practices, this holding overturned relief already granted and forced the employee plaintiffs back to starting gate in the district court.

No comments: