Debbie McCRAVY, Plaintiff-Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee. Secretary of the United States Department of Labor, Amicus Supporting Appellant. Debbie McCravy, Plaintiff-Appellee, v. Metropolitan Life Insurance Company, Defendant-Appellant. Secretary of the United States Department of Labor, Amicus Supporting Appellee.
Nos. 10-1074, 10-1131
United States Court of Appeals, Fourth Circuit
Decided: July 5, 2012
690 F.3d 176
Argued: May 15, 2012.
Before TRAXLER, Chief Judge, and KING and WYNN, Circuit Judges.
No. 10-1074 reversed and remanded; No. 10-1131 vacated by published opinion. Judge WYNN wrote the opinion, in which Chief Judge TRAXLER and Judge KING concurred.
WYNN, Circuit Judge:
I.
As a full-time employee for Bank of America, McCravy participated in the company‘s life insurance and accidental death and dismemberment (“AD & D“) plan issued and administered by MetLife. Under the plan, an insured could purchase coverage for “eligible dependent children.” McCravy elected to buy coverage for her daughter, Leslie McCravy, and paid premiums, which MetLife accepted, from before Leslie‘s nineteenth birthday until she was murdered in 2007 at the age of 25.
Following Leslie‘s death, McCravy, the beneficiary of the policy insuring her daughter, filed a claim for benefits. MetLife denied McCravy‘s claim, contending that Leslie did not qualify for coverage under the plan‘s “eligible dependent children” provision. Per the summary plan description, “eligible dependent children” are children of the insured who are unmarried, dependent upon the insured for financial support, and either under the age of 19 or under the age of 24 if enrolled full-time in school. According to MetLife, because Leslie was 25 at the time of her death, she no longer qualified as an “eligible dependent child[].” MetLife therefore denied McCravy‘s claim and attempted to refund the multiple years’ worth of premiums MetLife had accepted to provide coverage for Leslie.
McCravy, however, refused to accept the refund check. Instead, she filed suit in federal court in May 2008. In her complaint, McCravy alleged, among other things, that
[I]t was represented to Plaintiff by Defendant that Leslie had dependent life and [AD & D] insurance coverage up to the time of her tragic death.... In fact, premiums were actually paid to Defendant and Defendant accepted such premiums for coverage for Leslie up until her death and it was represented to the Plaintiff that Leslie remained a participant in the plan.
J.A. 6. Nevertheless, per the complaint, “[u]nbeknownst to [McCravy], Leslie was not eligible to actively participate in the plan because Leslie was over the age of 19. [But b]ecause [McCravy] and Leslie believed Leslie had life insurance and [AD & D] coverage and believed Leslie was participating in the plan, Leslie did not purchase different ... insurance....” Id.
McCravy asserted that MetLife‘s actions constituted a breach of fiduciary duty under
In September 2008, MetLife filed a “Memorandum in Support of Preemption,” which the district court treated as a motion to dismiss. On June 12, 2009, the district court ruled that McCravy‘s state law claims were preempted by ERISA. Regarding her breach of fiduciary duty claim, the district court ruled that McCravy could not recover under
As for McCravy‘s claim under
[W]hile this Court is compelled to such a holding by the law of ERISA as interpreted by higher courts, it cannot ignore the dangerous practical implications of this application. The law in this area is now ripe for abuse by plan providers, which are almost uniformly more sophisticated than the people to whom they provide coverage. With their damages limited to a refund of wrongfully withheld premiums, there seems to be little, if any, legal disincentive for plan providers not to misrepresent the extent of plan coverage to employees or to wrongfully accept and retain premiums for coverage which is, in actuality, not available to the employee in question under the written terms of the plan.
If the employee never discovers the discrepancy, the plan provider continues to receive windfall profits on the provision in question without bearing the financial risk of having to provide coverage. If the worst happens and the employee does file for the benefits for which he or she had been paying and seeks the coverage he or she believed was provided, the plan provider may then simply deny the employee‘s benefits claim, and have their legal liability limited to a refund of the premiums. The worst case scenario for fiduciary behavior which is either irresponsible or dishonest, then, in this context, is simply that the plan provider does not profit, but they would never be punished and would not be required to provide the coverage for which the employee was paying and for which, in cases like the present matter and Amschwand [v. Spherion Corp., 505 F.3d 342 (5th Cir.2007)], the employee asserts he or she was assured by the provider existed.
Plaintiff‘s allegations in this case present a compelling case for the availability of some sort of remedy for the breach of fiduciary duty above and beyond the mere refund of wrongfully retained premiums.
J.A. 158-59.
On June 22, 2009, McCravy moved for summary judgment regarding the wrongfully retained premiums and reserved her right to appeal the district court‘s limitation of her recovery under
II.
On appeal, McCravy challenges the district court‘s limitation of her available remedies under ERISA, arguing that
A.
Central to the resolution of this case is the Supreme Court‘s decision in Amara. Before Amara, various lower courts, including this one, had (mis)construed Supreme Court precedent to limit severely the remedies available to plaintiffs suing fiduciaries under
But with Amara, “[a] striking development,” the Supreme Court “expanded the relief and remedies available to plaintiffs asserting breach of fiduciary duty under [Section 1132(a)(3)] and therefore seeking make-whole relief such as equitable relief in the form of ‘surcharge.‘” Lee T. Polk, Statutory Provisions—Civil Remedies, 1 ERISA Practice and Litigation § 5:4 (West 2012). In Amara, employees filed a class action against an employer and pension plan, claiming that the employer‘s conversion of a traditional defined benefit plan to a cash balance retirement plan “provided them with less generous benefits.” 131 S.Ct. at 1870. According to the plaintiffs, the employer‘s disclosures and notices regarding the change and the new plan were defective, harmful, and contrary to ERISA. Id.
The Supreme Court addressed whether broad remedies were available under
[Section 1132(a)(3)] ... allows a participant, beneficiary, or fiduciary “to obtain other appropriate equitable relief” to redress violations of (here relevant) parts of ERISA “or the terms of the plan.”
* * *
We have interpreted the term “appropriate equitable relief” in [Section 1132(a)(3)] as referring to “those categories of relief” that, traditionally speaking (i.e., prior to the merger of law and equity) “were typically available in equity.”
* * *
The case before us concerns a suit by a beneficiary against a plan fiduciary (whom ERISA typically treats as a trustee) about the terms of a plan (which ERISA typically treats as a trust). It is the kind of lawsuit that, before the merger of law and equity, respondents could have brought only in a court of equity, not a court of law.
* * *
[T]he District Court‘s remedy essentially held CIGNA to what it had promised, namely, that the new plan would not take from its employees benefits they had already accrued. This aspect of the remedy resembles estoppel, a traditional equitable remedy. Equitable estoppel “operates to place the person entitled to its benefit in the same position he would have been in had the representations
been true.” And, as Justice Story long ago pointed out, equitable estoppel “forms a very essential element in ... fair dealing, and rebuke of all fraudulent misrepresentation, which it is the boast of courts of equity constantly to promote.” [T]he District Court injunctions require the plan administrator to pay to already retired beneficiaries money owed them under the plan as reformed. But the fact that this relief takes the form of a money payment does not remove it from the category of traditionally equitable relief. Equity courts possessed the power to provide relief in the form of monetary “compensation” for a loss resulting from a trustee‘s breach of duty, or to prevent the trustee‘s unjust enrichment. Indeed, prior to the merger of law and equity this kind of monetary remedy against a trustee, sometimes called a “surcharge,” was “exclusively equitable.”
The surcharge remedy extended to a breach of trust committed by a fiduciary encompassing any violation of a duty imposed upon that fiduciary. Thus, insofar as an award of make-whole relief is concerned, the fact that the defendant in this case ... is analogous to a trustee makes a critical difference. In sum, contrary to the District Court‘s fears, the types of remedies the court entered here fall within the scope of the term “appropriate equitable relief” in [Section 1132(a)(3)].
Id. at 1878-80 (citations omitted).
In sum, the portion of Amara in which the Supreme Court addressed
B.
In this case, McCravy first argues that the district court committed legal error by limiting her damages to premiums wrongfully withheld by MetLife because the remedy of surcharge is available to her under
As the Supreme Court pronounced in Amara, “surcharge,” i.e., “make-whole relief,” constitutes “appropriate equitable relief” under
The Supreme Court has made quite clear that surcharge is available to plaintiffs suing fiduciaries under
C.
McCravy next argues that the remedy of equitable estoppel is also available under
As the Supreme Court stated in Amara, “[e]quitable estoppel operates to place the person entitled to its benefit in the same position he would have been in had the representations been true.” 131 S.Ct. at 1880 (quotation marks omitted). In Amara, that meant holding the defendant fiduciary “to what it had promised, namely, that the new plan would not take from its employees benefits they had already accrued.” Id. And the Supreme Court made plain that such estoppel is “a traditional equitable remedy“—i.e., a remedy available to plaintiffs suing a fiduciary under
Thus, we agree with McCravy that her potential recovery in this case is not limited, as a matter of law, to a premium refund and that she may indeed seek equitable estoppel under
In sum, with Amara, the Supreme Court clarified that remedies beyond mere premium refunds—including the surcharge and equitable estoppel remedies at issue here—are indeed available to ERISA plaintiffs suing fiduciaries under
MetLife, as cross-appellant, challenges the district court‘s order granting summary judgment for McCravy and awarding her $311.09, the amount of premiums she had paid to MetLife to insure Leslie. Notably, however, the district court, in its order, nowhere addressed the merits of McCravy‘s breach of fiduciary duty claim. It simply noted that “[b]oth parties agree that McCravy is entitled to a return of $311.09 in premiums. Based on this stipulation, the court grants McCravy‘s motion for summary judgment.” J.A. 171.
Crucially, the district court‘s summary judgment order rested on its prior determination, in its dismissal order, that Plaintiff‘s damages under
IV.
In sum, we reverse the district court‘s determination in its dismissal order that McCravy‘s remedy under
No. 10-1074 REVERSED AND REMANDED
No. 10-1131 VACATED