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Summary Judgment For Defendant On Some Grounds, Not Others, Federal Court Rules In Latest Decision In ERISA Case

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An ERISA claimant’s lawsuit survived summary judgment by a defendant law firm on some grounds but not others, in a recent decision of a federal district court.
In Clark v. Feder, Semo & Bard, P.C., Civil Action No. 07-0470 (D.D.C. 2011), the federal district court for the District of Columbia addressed the summary judgment motion by the defendant law firm, Federal, Semo & Bard.

The court said that the plaintiff’s anti-cutback claim – alleging that Feder Semo violated ERISA’s anti-cutback rule, 29 U .S.C. § 1054(g), when it proportionately reduced the aggregate amount distributed to Plan participants to match the Plan’s assets – failed as a matter of law. The defendants also were granted summary judgment on the plaintiff’s claim that the plan’s fiduciaries failed to comply with the distribution restrictions in Treas. Reg. 1 .401(a)(4)–5 with the effect of reducing the benefits received by most plan participants – a failure that the court said was not an ERISA violation.

Because the defendants did not demonstrate that the plaintiff “was provided information ‘clearly identifying circumstances which may result in . . . loss’ of benefits, and she did not receive the complete value of her accrued benefit, the court denied summary judgment on the plaintiff’s claim that defendants violated ERISA’s disclosure requirements by failing to disclose the consequences of plan termination and the Plan’s lack of insurance. The court also permitted the plaintiff to proceed with her claim that the plan’s “fiduciaries failed to use a reasonable actuarial assumption for an interest that caused the Plan to be underfunded.”

The court rejected summary judgment for the defendants on the plaintiff’s improper grouping claim, which involved a contention by the plaintiff that Feder Semo improperly grouped her for purposes of her account credit, thereby understating her benefits substantially.

There, the court said that the plaintiff may proceed only under 29 U.S.C. § 1132(a)(1)(B) or § 1132(a)(3). On that issue, the court also explained that examples of “appropriate equitable relief” that a beneficiary might obtain against a plan fiduciary under § 1132(a)(3) – and as indicated in Sereboff v. Mid Atlantic Med. Srvs., 547 U.S. 356 (2006), and Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002), as well as a 2011 U.S. Supreme Court decision – may include monetary relief:

Plaintiff contends that ‘[i]f a monetary recovery for the [§ 1132(a)(1)(B) ] violation is unavailable because the Plan’s assets have been distributed, the fiduciaries who decided not to correct her benefit calculation before distributing the Plan’s assets can be held responsible under [§ 1132(a)(3) ] for breach of fiduciary duty.’ . . . . First, this Court has already ruled that a plaintiff may not proceed with claims under both § 1132(a)(1)(B) and § 1132(a)(3). . . . This Court relied on Variety Corp. v. Howe,516 U.S. 489 (1996), in which the Supreme Court concluded that § 1132(a)(3) is a ‘catchall’ provision that acts ‘as a safety net, offering appropriate equitable relief for injuries caused by violations that [§ 1132(a) ] does not elsewhere adequately remedy,’ 516 U.S. at 512. The plaintiffs in Variety Corp.could not proceed under § 1132(a)(1) because they were no longer plan beneficiaries, nor under § 1132(a)(2), which does not provide relief for individual beneficiaries, so they ‘must rely on the third subsection, [§ 1132(a)(3) ], or they ha[d] no remedy at all.’ 515. The Court in Variety Corp. explained that ‘where Congress elsewhere provided adequate relief for a beneficiary’s injury, there will likely be no need for further equitable relief.’ Id.
Following Variety Corp., the majority of circuits that have decided this issue have held that a breach of fiduciary duty claim cannot stand where a plaintiff has an adequate remedy through a claim for benefits under § 1132(a)(1)(B). . . .

Hence, this Court ruled that ‘b]ecause the gravamen of plaintiff’s complaint is that she was improperly denied benefits, the remedies under [§ 1132(a)(1)(B) ] would make plaintiff whole if she were to prevail on her claim. Plaintiff, therefore, has an adequate remedy under [§ 1132(a)(1)(B) ], and accordingly her [§ 1132(a)(3) ] claim must be dismissed.’ . . . . Concerned that the Plan lacked assets, and would, therefore, leave Clark without an ‘adequate remedy’ under § 1132(a)(1)(B), Clark maintained that ‘she should [also] be allowed to proceed under section 1132(a)(3).’ . . . . Plaintiff now again urges that to the extent ‘monetary recovery for that violation is unavailable because the Plan’s assets have been distributed,’ she may also proceed under § 1132(a)(3) against plan fiduciaries for breach of duty. . . . Not so. Plaintiff must choose. If, because the Plan is terminated and lacks assets (which plaintiff currently maintains is a material fact in dispute), plaintiff does not have an adequate remedy under § 1132(a)(1)(B), then plaintiff may pursue a claim under § 1132(a)(3) instead of her inadequate claim under § 1132(a)(1)(B). Hence, the Court will permit Clark to proceed on a claim under either § 1132(a)(1)(B) or § 1132(a)(3), but not both.

Defendants contend that in any event, Clark may not proceed under § 1132(a)(3) because that section only provides for ‘appropriate equitable relief,’ and Clark ‘seeks to impose personal liability for money damages on Semo and Bard.’ . . . . The Supreme Court’s recent decision, CIGNA Corp. v. Amara, 131 S.Ct. 1866 (2011), is instructive here. In CIGNA, the district court ruled that CIGNA failed to properly notify its employees-and defined-benefit retirement plan beneficiaries-of changes to their benefits. See131 S.Ct. at 1872. For relief, the court reformed the new plan, providing benefits according to the terms of the old plan when it was favorable to the plaintiffs, and ordered CIGNA to pay benefits accordingly. Id. at 1871. The district court ruled that § 1132(a)(1)(B) provided authority to reform the plan and noted that Supreme Court precedent indicated that such relief would not be available under § 1132(a)(3). 1876. The Supreme Court reversed, holding that § 1132(a)(1)(B) did not authorize the district court’s reformation of CIGNA’s pension plan, but the Court then explained that § 1132(a)(3) could permit the district court to fashion similar equitable relief. Id. at 1878–80.
[S]imply because a plaintiff is seeking monetary relief for a breach of fiduciary duty ‘does not remove it from the category of traditionally equitable relief.’ . . . Indeed, ‘[e]quity 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.’ . . . . Here, [the plaintiff] Clark has demonstrated that defendants Semo and Bard were aware of her grouping in a less advantageous category and failed to provide a reasonable explanation for why she was so classified and why her benefits were not adjusted prior to the disbursement of Plan assets upon its termination. . . . These facts support Clark’s claim for breach of fiduciary duty under § 1132(a)(3), which is not precluded by the statutory limitation to ‘appropriate equitable relief.’ Hence, summary judgment for defendants on the improper grouping claim is denied. However . . . Clark may proceed only under § 1132(a)(1)(B) or § 1132(a)(3), not under both provisions.

The full opinion is available beginning here.