Rejecting ERISA claims brought by a class of participants from an acquired corporation seeking past service credit for accrued benefits under the previous pre-acquired employer, the United States District Court for the Southern District of California granted summary judgment to defendants (an insurance company, the retirement plan, its sponsor, and its administrator) on all four of plaintiffs’ causes of action holding, inter alia, that the administrator’s interpretation of the plan language was reasonable when she found that the participants were not entitled to the benefits sought. Moyle et. al. v. Liberty Mut. Ret. Benefit Plan, et. al., No. 3:10-2179-GPC-MDD (S.D. Cal. Jul. 1, 2013).*
A class of current and former employees of Golden Eagle Insurance Corporation (“New Golden Eagle”), a subsidiary of Liberty Mutual Group, Inc., seeking benefits credit for their years of service with Golden Eagle Insurance Company (“Old Golden Eagle”) prior to its acquisition by Liberty Mutual Insurance Company, brought a lawsuit against the Liberty Mutual Retirement Plan (“Plan”) and its owners, sponsors, and administrators (“Liberty Mutual”), under ERISA asserting a claim for benefits under 29 U.S.C. § 1132(a)(1)(B), a claim for breach of fiduciary duty under 29 U.S.C. § 1132(a)(3), and two other claims alleging regulatory violations under ERISA.
The dispute centered around whether the Old Golden Eagle employees should be credited for purposes of calculating the pension benefit accrual under the terms of the Plan. It was undisputed that the Plan provided former employees of Old Golden Eagle with past service credit for purposes of eligibility, participation, vesting, early retirement benefits and spouse’s death benefits. Defendants argued that the plan administrator reasonably interpreted the Plan when she concluded that the Plan did not provide Old Golden Eagle employees with past service credit for purposes of benefit accruals. Plaintiffs disagreed arguing that the Plan should be construed as providing the past service credit for accrual purposes. (Some of the named plaintiffs testified they were expressly told they would receive such credit). Plaintiffs also asserted that plan documents and related materials contained material omissions regarding past service credit.
During the course of litigation, the Supreme Court issued its opinion in Cigna Corp. v. Amara, 131 S. Ct. 1866 (2011) wherein the Court explained that “‘appropriate equitable relief’ in § 1132(a)(3) [refers] to ‘those categories of relief’ that, traditionally speaking . . . ‘were typically available in equity.'” The Court, in dicta, suggested that some of those theories included estoppel, reformation, and surcharge. Plaintiffs sought to capitalize on the language in Amara focusing their § 1132(a)(3) claim on all three of the equitable theories of relief in Amara, plus restitution. Relying on the recently announced theories in Amara, the plaintiffs argued that Liberty Mutual had a duty to disclose to the participants of the plan what they would not be getting under the Plan, i.e., past service credit for purposes of benefit accruals.
District Court’s Analysis
In considering the plaintiffs’ claim for retirement benefits under § 1132(a)(1)(B), the district court, reviewing the administrative record for an abuse of discretion with a conflict of interest between the administrator and the “funder” of the plan weighed as a factor, concluded that the plan administrator’s decision to deny past service credit was reasonable because, under the Plan, Old Golden Eagle was never a “participating employer,” the plaintiffs did not qualify as “eligible employees,” and the plaintiffs did not have a “year of credited service” prior to the date in which New Golden Eagle became a “participating employer.” For the district court, to read the Plan as plaintiffs do would “expand the Plan’s definitions and provisions . . . beyond their intended meaning.” Thus, the district court, affirming the reasonableness of the administrator’s interpretation of the Plan, held that the plaintiffs were not entitled to past service credit for purposes of benefit accruals and granted defendant summary judgment as to the first cause of action under § 1132(a)(1)(B).
With respect to the second cause of action and plaintiffs’ claim for equitable relief under § 1132(a)(3), the court was presented with a the issue of whether Amara allows plaintiffs to seek relief under both § 1132(a)(1)(B) and § 1132(a)(3) and whether Amara is reconciliable with Varity Corp. v. Howe, 516 U.S. 489 (1996). The district declined to dive into the debate, finding that it did not need to reach the novel questions raised by Amara. Relying on the Supreme Court’s decision in Varity Corp., the district court concluded that because relief was available to the class under § 1132(a)(1)(B) and because the relief sought under § 1132(a)(3) was essentially the same relief (retirement benefits) sought under § 1132(a)(1)(B), the class could not assert a claim for breach of fiduciary duty under the “catchall” provision of § 1132(a)(3). In doing so, the court followed a line of authority that was well-settled before Amara.
The court also granted summary judgment for defendants on the plaintiffs’ third cause of action, concluding that statutory penalties were unavailable, as a matter of law, for alleged violations of the ERISA full and fair review regulations. Lastly, the court rejected the plaintiffs’ claim that defendants violated the ERISA regulations governing the content of summary plan descriptions. The court held the plaintiffs provided no authority supporting their claim that failure to include language that past service credit with a prior employer does not count towards benefit accrual purposes violates ERISA, when such benefits were not offered by the prior employer.
The Moyle decision demonstrates that some of the traditional limitations on ERISA claims remain, despite the Supreme Court’s potentially expansive dicta in Amara. Namely, the case suggests that courts may be reluctant to permit plaintiffs to seek equitable relief under § 1132(a)(3) while they conconcurrently pursue a claim for benefits under § 1132(a)(1)(B). Moyle also reinforces what the Supreme Court recently made clear in US Airways, Inc. v. McCutcheon, 133 S. Ct. 1537 (2013) – that § 1132(a)(3) does not authorize equitable relief “at large,” but countenances only such relief as will enforce the “terms of the plan” or the ERISA statute.
*Jackson Lewis attorneys Ashley B. Abel, Jennifer L. Santa Maria, and Robert Wood represented Liberty Mutual Insurance.