Litigating the Scope of ERISA’s ‘Catchall’ Civil Enforcement Provision

Health Highlights

In recent Employee Retirement Income Security Act of 1974 (ERISA) litigation challenging benefit decisions by plan administrators and fiduciaries, litigants have been pleading closely related claims under multiple ERISA statutory civil remedy provisions. Responding to these attempts, several federal courts of appeals have expanded the types of claims that litigants may bring under ERISA’s “catchall” equitable remedy provision, 29 U.S.C. Section 1132(a)(3).

This expansion has drawn scrutiny due to issues related to the appropriate standard of review and the availability and scope of discovery for certain ERISA claims. Future decisions clarifying the law on these issues would be a welcome development.

Background: Section 1132(a)(3), Varity and Subsequent Appellate Decisions

29 U.S.C. Section 1132 provides the exclusive means of civil enforcement of ERISA. Subsection 1132(a) generally sets forth a list of 11 different actions that ERISA plaintiffs (and in some cases states or the Secretary of Labor) may bring. Among these, 29 U.S.C. Section 1132(a)(3) permits a participant, beneficiary or fiduciary to bring a civil action to:

  • Enjoin “any act or practice” that violates “any provision” of ERISA Subchapter I or the plan; or
  • Obtain “other appropriate equitable relief” to redress such violations or to enforce “any provisions” of ERISA Subchapter I or the plan.

This language is broad and seemingly invites civil actions of any type to enforce ERISA requirements. But this statute has a more complex relationship with other, more specific causes of action in Section 1132(a)—such as Section 1132(a)(1)(B), which authorizes civil actions by a participant or beneficiary “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan[.]”

In Varity Corp. v. Howe, the Supreme Court characterized Section 1132(a)(3) as a “catchall” safety net, “offering appropriate equitable relief for injuries caused by violations that [Section 1132] does not elsewhere adequately remedy.” 516 U.S. 489, 512 (1996). But when addressing the interaction between Section 1132(a)(3) and other provisions of Section 1132(a) that do provide commonly invoked remedies—such as the recovery of plan benefits available under Section 1132(a)(1)(B)—the Court expressed doubt that a plaintiff could simultaneously invoke both statutes. “[W]e should expect that where Congress elsewhere provided adequate relief for a beneficiary’s injury, there will likely be no need for further equitable relief, in which case such relief normally would not be ‘appropriate.’” Varity, 516 U.S. at 515. The Supreme Court later revisited Section 1132(a)(3) in CIGNA Corp. v. Amara, 563 U.S. 421 (2011), in which it upheld a district court’s “reformation” of the terms of a plan through Section 1132(a)(3) and reaffirmed prior holdings that Section 1132(a)(3) provided a vehicle for a variety of remedies that, “traditionally speaking[,]” were typically available in the old courts of equity. See id. at 438-441.

In the wake of Varity, district courts often dismissed claims brought under Section 1132(a)(3) when they were satisfied that another, more specific ERISA civil remedy was available to redress the claimed injuries, such as in the context of disputes over access to plan benefits under Section 1132(a)(1)(B). More recently, however, the Second, Eighth and Ninth Circuits have issued decisions permitting plaintiffs to proceed simultaneously under Sections 1132(a)(1)(B) and 1132(a)(3) in some circumstances, at least at the pleading stage, under alternative theories of liability. See New York State PsychiatricAss’n, Inc. v. UnitedHealth Group, 798 F.3d 125, 134-135 (2d Cir. 2015); Silva v. Metro. Life Ins. Co., 762 F.3d 711, 726-727 (8th Cir. 2014); Moyle v. Liberty Mut. Ret. Benefit Plan, 823 F.3d 948, 960-961 (9th Cir. 2016).

The Fifth and Sixth Circuits reached a different conclusion, however, holding that a plaintiff may not plead a duplicative or redundant remedy under Section 1132(a)(3) where another section, such as Section 1132(a)(1)(B), provides an adequate remedy. See Rochow v. Life Ins. Co. of N. Am., 780 F.3d 364, 371 (6th Cir. 2015) (en banc); Tolson v. Avondale Indus., Inc., 141 F.3d 604, 610 (5th Cir. 1998). This has led one district court to characterize current law as “murky and inconclusive” on the issue of “whether a plaintiff may simultaneously plead claims under Section [1132(a)(1)(B)] and Section [1132(a)(3)] and proceed past a motion to dismiss[.]” Christine S. v. Blue Cross Blue Shield of N.M., --- F. Supp. 3d ---, 2019 WL 6974772, at *11 (D. Utah Dec. 19, 2019).

Most recently, the Second Circuit addressed the scope of Section 1132(a)(3) in its December 23, 2019, opinion in Laurent v. PricewaterhouseCoopers LLP, 945 F.3d 739 (2d Cir. 2019). In Laurent, a putative class action, the plaintiffs sought relief under Section 1132(a)(3) in the form of contract reformation of pension plan terms that they contended were necessary under ERISA and IRS pension benefit calculation requirements, and they also sought enforcement of the terms of the plan as reformed under Section 1132(a)(1)(B) in the same case. Laurent, 945 F.3d at 742-743. In an apparent matter of first impression, the Second Circuit held that this “two-step” remedy under both sections is available under ERISA, reversing the district court’s grant of judgment on the pleadings. Id. at 745-747. On February 12, 2020, the Second Circuit denied the Laurent defendants’ petition for panel rehearing or, in the alternative, for rehearing en banc.

Recent District Court Cases Reveal Practical Issues

Recent ERISA benefits denial cases show that allowing more types of Section 1132(a)(3) claims past the pleading stage has consequences, not all of which may have been intended—particularly where those claims are closely related to, or in some cases duplicative of, Section 1132(a)(1)(B) claims advanced in the same case.

1. The proper standard of review

For example, one potential consequence is the prospect of having to litigate closely related ERISA claims under separate standards of review in a single case. It is well established that ERISA plans may grant administrators discretion to determine benefit eligibility and construe plan terms. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989).1 Where the plan does so, courts review the administrator’s decisions for an abuse of discretion. Id. Yet under this new line of circuit court opinions, this could lead to a situation where an ERISA litigant could, at least theoretically, plead around the discretionary authority provisions in the ERISA plan terms in an attempt to avoid the highly deferential standard articulated in Firestone Tire, simply by pleading equitable claims that are indistinguishable from claims for benefits. Supporting the Varity petitioners, several amici brought this potential consequence to the  U.S. Supreme Court’s attention. See Varity, 516 U.S. at 513-514; see also Christine S., 2019 WL 6974772, at *11 (“The Varity Court was concerned that if a plaintiff could repackage a denial of benefits claim as a breach of fiduciary duty claim, she could avoid the deferential arbitrary and capricious standard of review applied to denial of benefits claims under Firestone Tire … and instead avail herself to the rigid level of conduct expected of fiduciaries.”) (internal quotation marks omitted).

District courts have responded in various ways. Some courts have held that “the same arbitrary and capricious standard” applies whether a plaintiff chooses to articulate a claim under Section 1132(a)(1)(B) or Section 1132(a)(3). See Lees v. Munich Reinsurance Am., Inc., 2016 WL 164611, at *4 (D.N.J. Jan. 13, 2016) (citing Varity). Other courts, however, have held that a de novo standard of review should apply to Section 1132(a)(3) claims, even where the claim challenges a denial of benefits, if the plaintiff challenges the administrator’s decision by reference to alleged breaches of fiduciary duties imposed by ERISA rather than by invoking Section 1132(a)(1)(B). See Galante v. Fin. Indus. Regulatory Auth., Inc., 2018 WL 2063748, at *1, 5 n.8 (E.D. Penn. May 2, 2018).

Still other courts have applied different standards of review to closely related claims under Section 1132(a)(1)(B) and Section 1132(a)(3), finding liability under one cause of action but not the other. See Snitselaar v. Unum Life Ins. Co. of Am., 2019 WL 279995, at *3-10 (N.D. Iowa Jan. 22, 2019). Other courts have sidestepped the issue completely, finding it unnecessary to determine the applicable standard of review for a Section 1132(a)(3) claim and holding the plan administrator’s “rejection of [the] claim for benefits … erroneous under any standard of review[.]” See Berman v. Microchip Technology Inc., 2019 WL 1318550, at *9 (N.D. Cal. March 22, 2019).

And still other courts have taken a different approach. For example, in Clark v. Ford Motor Co., --- F. Supp. 3d ---, 2019 WL 7212692 (E.D. Mich. Dec. 26, 2019), the court analyzed issues that arise from parallel ERISA claims in the context of Section 1132(a)(2) and permitted actions to remedy breaches of fiduciary duties specifically, rather than under catchall Section 1132(a)(3). Referring to Varity and its progeny in discussing the practical effects of permitting both claims to continue, the court quoted Chief Justice Roberts’ concurring opinion in Larue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248, 258-59 (2009), for the proposition that “the significance of the distinction … is not merely a matter of picking the right provision to cite in the complaint. Allowing a … claim to be recast … might permit plaintiffs to circumvent safeguards for plan administrators that have developed under [Section 1132(a)(1)(B),]” such as the discretionary standard of review under Firestone Tire. See Clark, 2019 WL 7212692, at *6-9. The Clark court dismissed the Section 1132(a)(2) claim as duplicative of the plaintiff’s Section 1132(a)(1)(B) claim. Id. at *9.

2. Availability and scope of discovery

A second area of concern stemming from these circuit court rulings involves discovery. The law in many jurisdictions is that when reviewing an ERISA benefits denial claim under the abuse of discretion standard, a court is generally limited to considering the materials that were available to the administrator when making the challenged benefits determination—i.e., the administrative record. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 970 (9th Cir. 2006); Urbania v. Cent. States, Se. & Sw. Areas Pension Fund, 421 F.3d 580, 586 (7th Cir. 2005); Kosiba v. Merck & Co., 384 F.3d 58, 67 n.5 (3d Cir. 2004).

But how should courts approach cases where a plaintiff advances a separate cause of action under Section 1132(a)(3), premised on essentially the same facts concerning denial of benefits but seeking equitable remedies? Some ERISA litigants have argued that ERISA’s goal of providing an orderly methodology for the disposition of claims forbids wide-ranging and burdensome discovery. See Meidi v. Aetna, Inc., 346 F. Supp. 3d 223, 234-237 (D. Conn. 2018). Others argue that limiting review of a Section 1132(a)(3) claim to the administrative record would be inappropriate, because the claim may allege statutory or plan violations that are not limited to a single, identifiable decision by an administrator. See Milby v. Liberty Life Assurance Co. of Boston, 2016 WL 4599919, at *4-5 (W.D. Ky. Sept. 2, 2016). Courts have ruled both ways. Compare Berman, 2019 WL 1318550, at *6-8 (ruling on administrative record), with Cotton v. Altice USA, Inc., 2020 WL 32433, at *3-4 (E.D.N.Y. Jan. 2, 2020) (permitting limited discovery).

The recent increase in Section 1132(a)(3) claims that advance past the pleading stage has led to an increase in litigation of discovery issues, and the law is in flux. ERISA litigants can continue to expect uncertainty until the issue is resolved.

Conclusion

At some point, the Supreme Court may be required to revisit Section 1132(a)(3) and assess how lower courts have interpreted Varity and Amara. Until that time, ERISA practitioners should be aware of the practical concerns that may arise in litigating ERISA health plan claims simultaneously under multiple ERISA civil remedy provisions, including evidentiary issues and the possible application of differing standards of review for parallel claims.

1 While some states have sought to ban or curtail the use of “discretionary clauses” in plans governed by ERISA, many others have not, leaving the deferential Firestone Tire standard of review in place.

manatt-black

ATTORNEY ADVERTISING

pursuant to New York DR 2-101(f)

© 2021 Manatt, Phelps & Phillips, LLP.

All rights reserved