ERISA Equitable Relief Case Recommended to Supreme Court

May 28, 2008 ( - U.S. Solicitor General Paul D. Clement is recommending the Supreme Court hear a case involving a test of Employee Retirement Income Security Act (ERISA) Section 502(a)(3), which allows beneficiaries to sue "to enjoin any act or practice which violates" ERISA or "to obtain other appropriate equitable relief to redress such violations."

According to a news release, the suit was brought by the widow of former Spherion employee, Thomas Amschwand, over the denial of a $426,000 life insurance claim on a group life policy held by the Amschwands. Amschwand died in February 2001 of a rare form of heart cancer that had forced him to take leave from work starting in August 1999.

During the period after his diagnosis and before his death, Spherion changed its group life carrier from Prudential Financial Services to Aetna Life Insurance Co. and Aetna denied Amschwand’s claim based on an “active at work” requirement – which provides that, if an employee is not at work on the day a policy goes into force, it will only become effective on the first day he or she returns to work. Amschwand’s widow claimed a breach of fiduciary duty by Spherion, but an appeals court ruled that under ERISA a plan beneficiary could not sue a fiduciary “for monetary relief equal to the insurance benefits that the beneficiary would have received but for the fiduciary’s breach of its fiduciary duty,” the news release said.

Clement wrote in his brief to the Supreme Court: “That kind of suit is directly analogous to an action against a breaching trustee for monetary redress of a breach of trust, an action that was typically available in courts of equity in the days of the divided bench. The suit therefore seeks ‘equitable relief’ and is authorized by Section 502(a)(3).”

In a separate brief, Clement recommended holding the petition in Geddes vs. United Staffing Alliance Employee Medical Plan, on appeal from the 10th U.S. Circuit, until the court had completed its deliberations in MetLife v. Glenn. A decision in the MetLife case is expected to determine how much the conflict of a dual role of a plan administrator that is also a payer of benefits should be considered when reviewing the administrator’s denial of benefits (See Supreme Court Considers Conflict for Plan Administrators That are Also Payers ).