By: Ian Morrison

On March 16, 2012, the Ninth Circuit ruled that two plan participants had no remedy for an allegedly faulty Summary Plan Description (“SPD”).  Skinner v. Northrop Grumman Retirement Plan B, No. 10-55161 (9th Cir. March 16, 2012).  The two participants claimed additional pension benefits because the SPD did not adequately disclose an “annuity equivalent offset” that was used in calculating their pensions.  Despite having previously given credence to this theory, the Ninth Circuit held the case when it came back a second time until after the Supreme Court decided CIGNA Corp. v. Amara, 131 S.C. 1866 (2011).  In light of Amara, the Court acknowledged that the plaintiffs’ claim for recovery based upon the SPD failed as a matter of law.  The Court went on to consider whether the plaintiffs were entitled to any equitable relief pursuant to ERISA § 502(a)(3). 

After Amara, the Ninth Circuit identified three possible equitable remedies:  estoppel, reformation, or surcharge.  The Court noted that the plaintiffs did not offer evidence of reliance on the inaccurate SPD and did not allege estoppel.  According to the Court, reformation is available under either trust or contract law and based upon either mistake or fraud.  Trust law allows an instrument to be reformed if it is clear that a mistake of law or fact caused it to not reflect the settlor’s intent.  Under contract law, the mistake must be mutual.  In either instance, the written instrument can be reformed to match the drafter’s intent.  The Court found both varieties of reformation inapplicable because there was no evidence of a mistake in drafting the applicable plan documents.  Reformation based upon fraud requires (in trust law) evidence that the trust was procured by fraud or (in contract) that one party’s assent to the contract was induced by the other party’s misrepresentations.  The Court found no evidence that the inconsistency between the plan and the SPD was obtained by fraud, distinguishing Amara’s dictum on this issue because there the Court assumed that the employer had “intentionally misled its employees.”

The Court held that surcharge can be used either in the case of unjust enrichment or to address harm based upon a breach of fiduciary duty.  The Court found no evidence, however, that the defendants had profited by failing to ensure publication of an accurate SPD or that the plaintiffs had relied upon (i.e., been harmed by) the alleged misrepresentation.  Finding no possible remedy, the Court affirmed summary judgment to the defendants.

Skinner is an important decision for ERISA litigators because it is one of the first and most comprehensive appellate court discussions of equitable remedies after Amara.  It also suggests that many of these remedies are fundamentally incompatible with the facts of many ERISA cases.