Sixth Circuit Reverses ERISA Disgorgement Award

In this case, the Sixth Circuit reversed a panel decision relating to “appropriate equitable relief.”  As one can see, these decisions can often be confusing, even to the courts involved.  This case had several dissenting opinions that demonstrate that even the judges involved can’t agree on how the law should be interpreted.  If you need help with your long-term disability case, call us.  We are here to help.

The original panel decision (which we previously discussed here) held that an ERISA plaintiff could recover under Section 502(a)(3), which allows for “appropriate equitable relief,” in addition to receiving his benefits under Section 502(a)(1)(B).  The district court had awarded $900,000 in benefits as well as $3.7 million for disgorgement of profits in equitable relief.  Judge McKeague, who dissented from the original panel opinion, wrote the decision for the en banc court.The Court’s holding can be easily summarized:  Absent a showing that the remedy for denial of benefits  remedy under 502(a)(1)(B) is inadequate to make plaintiff whole, a recovery under Section 502(a)(3) is unavailable.  This decision was animated by concerns that otherwise successful ERISA plaintiffs could collect huge damage awards:  “If an arbitrary and capricious denial of benefits implicated a breach of fiduciary duty entitling the claimant to disgorgement of the defendant’s profits in addition to recovery of benefits, then equitable relief would be potentially available whenever a benefits denial is held to be arbitrary or capricious. This would be plainly beyond and inconsistent with ERISA’s purpose.”  The Court also remanded for a determination of whether the plaintiff should have been awarded prejudgment interest.

The opinion generated a number of separate opinions.  Judge Gibbons agreed with the Court’s reasoning, but wrote to state that she believed that the district court violated the mandate from a prior appeal in that case when it ordered disgorgement after remand.  Judge White wrote to disagree with the assumption in both the majority and dissent that the question should be whether the disRochow’s fiduciary-duty claim is merely a repackaging of his benefits-denial claim.”  Finally, a strong dissent from Judge Stranch argues that there the defendant committed two distinct wrongs, allowing for both remedies.