Amara v. CIGNA Corp.
775 F.3d 510
| 2d Cir. | 2014Background
- CIGNA converted its defined-benefit pension (Part A) to a cash-balance plan (Part B) in 1998, sending summaries and notices that framed the change as preserving employees’ accrued Part A benefits and assuring steady accruals.
- The Part B design in fact reduced some employees’ expected benefits (via a "haircut" on converted Part A lump sums, exposure to interest-rate risk, and potential "wear away") and produced ~$10 million in annual employer savings.
- Plaintiffs (≈25,000 plan participants) sued in 2001 under ERISA §§102 and 204(h); the district court found defendants made materially misleading disclosures and awarded a remedy under §502(a)(1)(B) requiring the plan to provide accrued Part A benefits (as of 12/31/1997) plus Part B accruals going forward (the “A+B” remedy).
- The Second Circuit affirmed; the Supreme Court granted certiorari, vacated that judgment as to §502(a)(1)(B), and remanded to permit consideration of equitable relief under §502(a)(3) (Amara III).
- On remand the district court (after finding reformation and surcharge were available) ordered reformation under §502(a)(3) to implement the A+B remedy for the Rule 23(b)(2) class; the Second Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Class certification under Rule 23(b)(2) | Class-wide injunctive/declaratory relief (reformation) appropriate; monetary relief is incidental | A+B harms some class members; (b)(2) improper when monetary relief not incidental or injunctive remedy cannot benefit all | Court affirmed certification: no evidence class members would be harmed; monetary relief incidental to class-wide injunctive/declaratory relief |
| Availability of §502(a)(3) equitable remedies (reformation) | §502(a)(3) authorizes equitable remedies (reformation, surcharge, estoppel) to remedy misleading disclosures | Relief should be limited; SPDs cannot become plan terms; administrator vs sponsor distinction limits reformation | Court held §502(a)(3) may authorize reformation here; SPDs and communications are evidence of fraud/misleading conduct supporting equitable relief |
| Legal standard for reformation (contract vs trust) | Reformation may be governed by contract principles because plan is part of employment compensation (consideration present) | Trust/settlor intent should control; employer (settlor) did not intend A+B so reformation improper | Court applied contract-reformation principles (federal common law) and found that consideration supports that approach |
| Sufficiency of proof for reformation (fraud/mistake) | Plaintiffs: uniform, material misrepresentations and concealment caused class-wide mistake; clear-and-convincing evidence supports reformation | CIGNA: individualized proof of mistake required; some individuals benefited under Part B so no class-wide fraud/mistake | Court held plaintiffs met elements: CIGNA engaged in fraudulent/inequitable conduct and uniform misrepresentations produced class-wide mistake; reformation available |
| Appropriate remedy: A+B vs return to Part A | Plaintiffs sought full return to Part A | CIGNA argued no remedial change or limited relief; some members may be worse off under A+B | Court affirmed district court’s discretion to order A+B: participants understood freeze and transition; A+B tailored to preserve expectations and minimizes administrative disruption |
Key Cases Cited
- CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011) (Supreme Court remanding to consider §502(a)(3) equitable remedies)
- Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) (standards for Rule 23(b)(2) and limits on class-wide monetary relief)
- Varity Corp. v. Howe, 516 U.S. 489 (1996) (§502(a)(3) equitable relief to redress administrator misconduct)
- In re U.S. Foodservice Inc. Pricing Litig., 729 F.3d 108 (2d Cir. 2013) (generalized circumstantial proof can establish classwide reliance)
- Frommert v. Conkright, 433 F.3d 254 (2d Cir. 2006) (SPD importance; interpretation interplay with plan document)
- Johnson v. Meriter Health Servs. Emp. Ret. Plan, 702 F.3d 364 (7th Cir. 2012) (reformation and incidental monetary relief in ERISA class context)