What’s at stake? 
Holding corporations accountable when they deceive employees about retirement benefits.

Issue:
Whether beneficiaries of an ERISA retirement plan must show actual reliance on an incorrect Summary Plan Description of benefits or if a showing of “likely harm” is sufficient to recover benefits.   

Decision date:
May 16, 2011

Outcome:
8-0 in favor of CIGNA Corp.  Justice Breyer delivered the opinion, joined by Chief Justice Roberts, and Justices Kennedy, Ginsburg, Alito, and Kagan.  Justice Scalia filed an opinion concurring in the judgment, joined by Justice Thomas.  Justice Sotomayor recused. 

What the court held:
The Supreme Court overturned a district court order, upheld by the Second Circuit, which compelled CIGNA to provide retirement benefits as they were described in a deceptive summary rather than the less generous benefits described in the plan itself. However, the Court handed employees an important victory by adding that they could seek restoration of their benefits under a separate section of the relevant statute.

In order to avoid a backlash among its employees, CIGNA buried in fine print a change to its retirement plan that reduced benefits. CIGNA accurately detailed the change in the complete description of the plan but implied in a shorter summary that employees were more likely to read that no change had been made. Affected employees filed a class action suit to recover retirement benefits as described in the summary.

CIGNA argued on appeal that beneficiaries should be required to prove that they personally relied, to their detriment, on the summary description of the plan. The employees argued that the federal statute that governs retirement plans, ERISA, does not include a reliance requirement and that the employees should benefit from a presumption that they relied on the summary.

The Supreme Court held that the section of ERISA under which the district court ordered an employee-friendly change to the retirement plan does not empower courts to grant such relief, which the Court held to be equitable rather than legal. Discussing the terms of the retirement plan, the Court stated that “we have found nothing suggesting that the provision authorizes a court to alter those terms…where that change, akin to the reform of a contract, seems less like the simple enforcement of a contract as written and more like an equitable remedy.”

Nonetheless, the Court described in detail why a different ERISA provision might empower the lower court to order the same remedy and remanded the case with a strong suggestion that the employees seek relief under that provision. The district court did not determine whether the separate provision of the statute allowed a correction of the retirement plan. That provision “allows a participant, beneficiary, or fiduciary ‘to obtain other appropriate equitable relief’ to redress violations of (here relevant) parts of ERISA.” Justice Scalia, joined by Justice Thomas in concurrence, argued that the Court should have stopped once it determined the district court’s remedy could not be sustained under the section of ERISA it had relied on.

Justice Scalia then went on to suggest that the plaintiffs may not be able to establish the elements required under the alternative equitable remedies suggested by the Court, noting the district court did not use this alternative provision because it found it “particularly complicated” and “knotty.” By holding that employees could use an alternative section of ERISA, the Court provided a road map for employees to seek justice for CIGNA’s deceptive corporate practices.