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Retiree Not Entitled to Equitable Relief Under ERISA

By Frank Tobin  7/2/2014
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The 9th U.S. Circuit Court of Appeals found that equitable relief was not available to a retiree who, for more than a three-year period, erroneously received monthly pension benefits he had not earned pursuant to an Employee Retirement Income Security Act (ERISA) pension plan.

Gregory R. Gabriel received monthly pension plan benefits that he had not earned for a period of more than three years. When the plan determined that he had never become eligible for retirement benefits, the plan terminated Gabriel’s benefits and threatened to seek reimbursement for the $81,033 in benefits he had previously received. In response, Gabriel brought action against the plan, its board of trustees, its pension administrative committee, its appeals committee, and various other individuals responsible for administering the plan. His claims included that the defendants’ actions violated their fiduciary duties under ERISA or the terms of the plan, for which he was entitled to “appropriate equitable relief” under ERISA. The district court granted summary judgment in favor of the defendants, and Gabriel appealed.

The court discussed the equitable remedies available under ERISA, noting that the civil enforcement provisions of ERISA are the exclusive vehicle for actions by ERISA-plan participants and beneficiaries asserting improper processing of a claim for benefits, and that Congress did not intend to authorize other remedies that it did not incorporate expressly. The 9th Circuit noted that the Supreme Court has recognized three forms of traditional equitable relief that may be available. These are equitable estoppel, reformation and surcharge. Gabriel argued on appeal that he was entitled to relief under all three of these equitable remedies. The majority found otherwise. 

Gabriel claimed that he was entitled to an order equitably estopping the plan from relying on corrected records that show his actual years of service. The 9th Circuit found that a plaintiff could not avail himself of a federal ERISA estoppel claim based on statements of a plan employee that would enlarge his rights against the plan beyond what he could recover under the unambiguous language of the plan itself. Accordingly, Gabriel was not entitled to relief under an estoppel theory because such relief under these circumstances would have expanded the rights provided by the unambiguous express terms of the plan. 

Gabriel also argued that he was entitled to reformation of the plan’s administrative records to conform to the misinformation given to him by the plan representatives in connection with the erroneous payments. The court found reformation inapplicable here. The plan could not be modified based on misinformation provided by the plan representative or mistaken administrative records that are not part of the plan. Gabriel’s requested reformation would result in a payment of benefits inconsistent with the written plan, and equitable remedies are not available in such circumstances. 

Finally, Gabriel claimed he was entitled to a surcharge against the fiduciaries in the amount of the benefits he would have received if he had been a participant with the hours erroneously reflected in the plan’s records when he applied for benefits. When considering this claim, the 9th Circuit applied the Supreme Court case of Cigna Corporation v. Amara 131 S. Ct. 1866 (2011) and found that the equitable remedy of surcharge under ERISA was only available when a breach of trust committed by a breach of fiduciary duty resulted in a loss to the trust estate or allowed the fiduciary to profit at the expense of the trust. Contrary to the dissent, the majority did not find that Amara suggested that the remedy of surcharge is available to provide any sort of make-whole relief for breach of fiduciary duty against a trustee. Accordingly, because the grounds for surcharge were not present in this case, the request for surcharge was denied.

Because the 9th Circuit found that Gabriel was not entitled to any of the three remedies, the district court’s judgment was affirmed, and Gabriel recovered nothing. Irrespective of whether or not there might have been breaches of fiduciary duty and Gabriel might have been harmed as a result, there were no applicable equitable remedies available under ERISA, so the court summarily found in favor of the defendants.

Contrary to the majority, the dissenting justice found that surcharge was not limited in the manner found by the majority, but was available to remedy losses resulting from a trustee’s breach of duty. The dissent found that the majority misconstrued Amara and maintained that decisions from other U.S. Circuit Courts of Appeal confirm that the doctrine of surcharge is, after Amara, not as narrow as the majority contends. Because the dissenting justice believed that surcharge was broader than what the majority found and that there were triable issues of fact as to whether the plan fiduciary breached his duties by sending incorrect information to Gabriel and whether Gabriel was harmed, the dissenting justice found summary judgment should be denied.

Gabriel v. Alaska Elec. Pension Fund, 9th Cir. No. 12-35458 (June 6, 2014).

Professional Pointer: Even if errors by plan fiduciaries were to rise to the level of breach of fiduciary duty and result in harm to a participant, participants may be precluded from recovering for such harm unless one of the three remedies available under ERISA apply.

Frank Tobin is a shareholder in the San Diego office of Ogletree Deakins, an international labor and employment law firm representing management. 

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