For several years now, there has been a faction on the U.S. Supreme Court that appears to be seeking the appropriate case in which to reevaluate the meaning of the phrase "appropriate equitable relief" under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3). The Court may have found its case in Amschwand v. Spherion Corp., 505 F.3d 342 (5th Cir. 2007), and is currently deciding whether to grant Amschwand's petition for certiorari. In fact, on March 3, 2008, the Supreme Court asked the U.S. Solicitor General for its opinion on the issue; based on the U.S. Department of Labor's longstanding public views, discussed below, it is expected that the Solicitor will argue that the Fifth Circuit's opinion was wrong and that certiorari should be granted.
The Department of Labor has consistently taken the position before the Supreme Court (and other courts) that the limitations imposed on equitable relief by Mertens v. Hewitt Associates, 113 S. Ct. 2063 (1993), and its progeny do not apply to claims brought against fiduciaries; rather, such limitations only apply to claims brought against nonfiduciaries. The lower courts have generally rejected this argument, and have read Mertens broadly. However, Justice Ginsburg's concurrence in Aetna Health Inc. v. Davila, 542 U.S. 200 (2004) suggested that at least some on the Court viewed this as an open issue:
More recently, in LaRue v. DeWolff, Boberg & Associates, Inc., 128 S. Ct. 1020 (2008) (discussed above), Justice Ginsberg suggested during oral argument that the Section 502(a)(3) issue was not ripe in that case, notwithstanding that the Court granted certiorari on the issue. Many thought this was a signal that LaRue was not viewed as the appropriate case in which to address this issue, and the Court specifically declined to address the Section 502(a)(3) issue in its written opinion.
Amschwand may be the appropriate case. During Amschwand's medical leave for a bout with cancer that he did not survive, his employer, Spherion, switched insurance companies. The new insurer's (Aetna's) policy provided, in relevant part, that if an employee is ill or injured and away from work on the date any of his coverage would become effective, the effective date of coverage will not begin until the date he returns to work for one full day (the "Active Work Rule"). Aetna and Spherion, however, agreed that the Active Work Rule would be waived for employees, like Amschwand, who were not currently working fulltime due to a medical condition that antedated the switch in insurance companies. Amschwand enrolled in Aetna's new plan and, to ensure his wife would have coverage upon his death, had multiple conversations with Spherion's human resources department. For reasons that the lower court noted were not explained by the parties, Amschwand was not among those who received coverage, despite being on disability leave when the policy took effect. Shortly after Amschwand's death in February 2001, his wife filed a claim with Aetna, only to be informed that because her husband had not satisfied the Active Work Rule, she was ineligible for benefits under the policy.
Despite what appeared to be highly sympathetic facts (all recounted in detail in the Fifth Circuit's opinion), the Fifth Circuit ruled that the widowed wife's claim must be dismissed because she had no remedy under Section 502(a)(3). The Fifth Circuit concluded that the lost policy proceeds sought by Amschwand were a form of makewhole damages, not equitable in derivation, but akin to the legal remedies of extracontractual or compensatory damages. As a result, the remedy sought was not typically available in courts of equity (as required by Mertens), and was unavailable under Section 502(a)(3).
* * * * * * * * * *It remains to be seen whether the Supreme Court will grant certiorari in Amschwand v. Spherion Corp. If and when the Court reaches the Section 502(a)(3) issue, the one thing that is certain is that its decision will be of great import. Among other things, if the Supreme Court grants certiorari, we could see the Court attempt to reconcile the remedies available depending on whether the plaintiff can couch the claim as impacting plan assets (and falling under Section 502(a)(2)) versus impacting only the plaintiff (and thus arising under Section 502(a)(3)). At a minimum, practitioners may be left scratching their heads as to why there are two different statutory provisions for fiduciary breach claims.
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