View From Proskauer: The Availability Of Surcharge As Relief For Individual ERISA Fiduciary Breach Claims

Three years ago, the U.S. Supreme Court identified three forms of appropriate equitable relief — reformation, equitable estoppel and surcharge — that are available under Section 502(a)(3) of the Employee Retirement Income Security Act (''ERISA''). See Cigna Corp. v. Amara, 131 S. Ct. 1866, 50 EBC 2569, 2011 BL 128629 (2011). This article focuses on the availability of surcharge and, in particular, a division among the lower courts on whether surcharge is available to plaintiffs seeking monetary recovery for personal loss as opposed to a loss to the plan.

The Evolution of Appropriate Equitable Relief

Section 502(a)(3) of ERISA generally authorizes a participant, beneficiary or fiduciary to sue for ''appropriate equitable relief.'' Prior to Amara, the lower courts interpreted the Supreme Court's ruling in Mertens v. Hewitt Assocs., 508 U.S. 248, 16 EBC 2169 (1993) as precluding the recovery of any monetary relief under Section 502(a)(3) because monetary relief was not considered to be equitable relief. Thus, a participant seeking to recover monetary relief from a plan under ERISA typically had to show he was entitled to those benefits under the terms of the plan pursuant to Section 502(a)(1)(B) of ERISA, or was entitled to derivate relief by suing on behalf of the plan pursuant to Section 502(a)(2) of ERISA.

In Amara, the Supreme Court ruled that monetary relief is available under Section 502(a)(3). Since Amara, the lowers courts have determined that a participant can employ at least two theories to recover for personal losses resulting from a fiduciary breach: First, a participant can seek to have a court reform the plan, i.e., rewrite the plan's terms to accord with the parties' understanding in the event of mutual mistake or fraud. The participant could then recover under the terms of the reformed plan. See Johnson v. Meriter Health Servs. Emp. Ret. Plan,702 F.3d 364, 369, 54 EBC 1865, 2012 BL 316792 (7th Cir. 2012). Second, a participant can seek to recover under equitable estoppel, which, under certain conditions, ''operates to place the person entitled to its benefit in the same position he would have been in had the representations been true.'' Amara, 508 U.S. at 1880. The lower courts do not, however, appear to be in agreement on whether a plaintiff can seek monetary recovery for personal loss via surcharge, which generally allows for monetary recovery for a loss resulting from a fiduciary breach.

A Narrow Reading of Surcharge

While...