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March 2012

Skinner, et al. v. Northrup Grumman Retirement Plan B, et al. ? Ninth Circuit Relies On Amara In Affirming Dismissal Of ERISA Claims Based On Inaccurate SPD

Equitable Remedies of Reformation and Surcharge Unavailable Where Plaintiffs Offer No Evidence of Mistake or Fraud

(9th Cir. March 16, 2012) ___ F.3d ___

Appellants Charles Skinner and Gregory Stratton ("Appellants") were employees of Litton Industries, Inc., and participated in its retirement plan.  Following corporate mergers and plan modifications, the Northrup Grumman Retirement Plan B ("Plan") replaced Litton's retirement plan.  Prior to their respective retirements, Appellants received pension calculation packets illustrating their benefit calculations including an "annuity equivalent offset."  Appellants sued the Plan to enforce their understanding of their rights under the Plan. 

The district court granted defendants' motion for summary judgment.  On appeal, Appellants contended ambiguity between summary plan descriptions ("SPD") and the Plan master documents related to the annuity offset created a triable issue.  The Ninth Circuit agreed and remanded the case to the district court.

The district court again granted summary judgment and Appellants again appealed.  The Ninth Circuit deferred argument until the Supreme Court's resolution of CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), in which the Supreme Court held SPD language does not constitute enforceable terms of the plan.  In response to the Amara decision, Appellants abandoned their principal theory of relief and instead sought equitable remedies based on the Amara Court's dictum indicating Section 502(a)(3), which allows a plan participant "to obtain other appropriate equitable relief" under ERISA, may authorize three possible equitable remedies: estoppel, reformation and surcharge.

Plaintiffs conceded they did not rely on the SPD and did not claim estoppel, but they did seek reformation and surcharge.  The Ninth Circuit rejected Appellants' contentions and affirmed the trial court's grant of summary judgment.  The court explained reformation is proper only in cases of mistake and fraud, and concluded there was no evidence the Plan failed to reflect the drafter's true intent or included terms that were induced by fraud, duress or undue influence.  The court also distinguished Amara, in which the Supreme Court had already found the employer had intentionally misled its employees.  

In support of the remedy of surcharge, Appellants contended the administrative committee breached its fiduciary duty by failing to enforce the terms of the SPD rather than the terms of the Plan master document.  Citing Amara, the court held no such duty exists because the terms of an SPD are not the terms of the plan.  The court noted the committee may have breached its statutory duty to provide participants with an SPD that was "sufficiently accurate and comprehensive" and clearly identified offsets and reductions.  But because Appellants failed to show the committee gained a benefit by failing to provide an accurate SPD, and admitted they had not relied on the SPD, this claim also failed.  Plaintiff's contended the "harm" of being deprived of an accurate SPD was a compensable harm, but the court rejected this argument, explaining that "Appellants' interpretation would render the advisory committee strictly liable for every mistake in summary documents."

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This decision is not final.  It may be withdrawn from publication, modified on rehearing, or review may be granted by the United States Supreme Court.  These events would render the opinion unavailable for use as legal authority.

This and other case bulletins, as well as other publications of Gordon & Rees LLP, may be found at www.gordonrees.com.

 

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Jordan S. Altura


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