Amara v. Cigna Corp.

925 F.Supp.2d 242

Janice C. AMARA, individually and on behalf of others similarly situated, Plaintiff,

v.CIGNA CORPORATION and CIGNA Pension Plan, Defendants.

Civil No. 3:01cv2361 (JBA).

United States District Court, D. Connecticut.

Dec. 20, 2012.

Allison C. Caalim, Law Offices of Stephen R. Bruce, Stephen R. Bruce, Washington, DC, Thomas G. Moukawsher, Moukawsher & Walsh, Groton, CT, for Plaintiff.

Bradford S. Babbitt, Brett J. Boskiewicz, James A. Wade, Robinson & Cole, Hartford, CT, Christopher A. Parlo, Morgan, Lewis & Bockius, New York, NY, Jeremy P. Blumenfeld, Morgan, Lewis & Bockius, LLP, Joseph J. Costello, Philadelphia, PA, for Defendants.

MEMORANDUM OF DECISION ON REMEDIES AND CLASS CERTIFICATION

JANET BOND ARTERTON, District Judge.

The facts of this case have been discussed in numerous opinions and need not be repeated here in full detail.¹ Suffice it to say that Plaintiff Janice C. Amara and other similarly situated individuals brought suit against Defendants CIGNA Corporation and the CIGNA Pension Plan (collectively, “CIGNA”) challenging the validity of the adoption of a new employee pension plan under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1022(a), 1024(b), 1054(h). After an extensive bench trial, Judge Mark R. Kravitz found in Plaintiffs' favor, issuing separate opinions determining CIGNA's liability and setting the appropriate remedy. See Amara v. CIGNA Corp. (Amara I), 534 F.Supp.2d 288 (D.Conn.2008) (liability decision); Amara v. CIGNA Corp. (Amara II), 559 F.Supp.2d 192 (D.Conn.2008) (remedy decision). In determining relief, he ordered that the terms of the CIGNA Plan be reformed, finding legal authority under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). After the Second Circuit affirmed, the Supreme Court vacated the judgment, holding that ERISA § 502(a)(1)(B) did not provide the Court with the power to reform the terms of the CIGNA Plan. See CIGNA Corp. v. Amara (Amara III), ––– U.S. ––––, 131 S.Ct. 1866, 1878, 1882, 179 L.Ed.2d 843 (2011). Although the Supreme Court determined that § 502(a)(1)(B) did not empower the Court to reform the terms of the CIGNA Plan, it also found that “nearby” § 502(a)(3) authorizes equitable forms of relief similar to the remedy Judge Kravitz had entered. See id. at 1878–80. However, given that the district court's exclusive reliance on § 502(a)(1)(B) as the basis for relief, see Amara II, 559 F.Supp.2d at 206, the Supreme Court remanded the matter to determine in the first instance the appropriate remedy under § 502(a)(3). Amara III, 131 S.Ct. at 1882. The case was subsequently transferred to the undersigned following Judge Kravitz's death.

After remand, the parties briefed the question of what relief was appropriate under ERISA § 502(a)(3). In addition, CIGNA filed a Motion to Decertify the Class [Doc. # 323], requesting that the Court decertify the class if it finds that an equitable remedy is available under ERISA § 502(a)(3). As discussed below, this Court finds that both reformation and surcharge are appropriate equitable remedies that allow it to provide Plaintiffs with the same form of relief that was ordered previously. The Court further finds that it is unnecessary to decertify the class and thus DENIES the pending Motion to Decertify the Class.

As noted in an earlier opinion, the remedy issues presented here are as complex as they are important to the American workplace. While the Court is grateful for the Supreme Court's thoughtful opinion in this case, and heavily relies on it, there remains lingering uncertainty about the proper resolution of many of these issues. Previously, the district court's judgment was stayed sua sponte to allow the parties to pursue an appeal to the Second Circuit, in light of this uncertainty and the high stakes for CIGNA and its employees. See Amara II, 559 F.Supp.2d at 195. The Court will again sua sponte stay this judgment, based on the same reasoning, to allow the parties to seek guidance from the Second Circuit.

I.

At the outset, the Court will review the essential facts, its prior opinions, and the Supreme Court's decision in order to frame the legal issues that are relevant on remand.

This suit arises from revisions made to CIGNA's pension plan in 1998. Prior to that year, CIGNA offered its employees a defined-benefit plan—an annuity in an amount determined by the employee's salary and duration of employment. In keeping with past nomenclature, the Court refers to CIGNA's pre–1998 defined-benefit plan as “Part A.” In November 1997, CIGNA notified its employees via newsletter that Part A would last through year's end, to be replaced in the new year by an “account balance plan,” which the Court refers to as “Part B.” Under Part B, retiring employees receive a lump-sum payment based on annual contributions from CIGNA that earn interest. As part of the transition from Part A to Part B, CIGNA promised that an employee's accrued benefits under Part A would be converted into an equivalent contribution to the employee's individual cash-benefit account. CIGNA guaranteed that each employee upon retirement would receive the “greater of A or B”— i.e., the higher of an employee's guaranteed annuity or the benefits accrued under the cash balance plan.

Ms. Amara, on behalf of approximately 25,000 beneficiaries, sued, alleging, inter alia, that CIGNA's 1998 plan revisions violated ERISA §§ 1022(a), 1024(b), and 1054(h). Judge Kravitz conducted a seven-day bench trial and found CIGNA liable for inadequate disclosures relating to the conversion from Part A to Part B. See Amara I, 534 F.Supp.2d at 329–54. Specifically, he found that CIGNA's November 1997 Newsletter materially misled employees in violation of ERISA § 204(h), see id. at 344, and that CIGNA included other materially misleading statements in its Summary of Material Modifications (“SMMs”) and Summary Plan Descriptions (“SPDs”), see id. at 351. Having found CIGNA's disclosures and notices statutorily defective, the Court applied the Second Circuit's “likely harm” standard, a “presumption of prejudice in favor of the plan participant after an initial showing that he was likely to have been harmed.” See id. at 352 (quoting Burke v. Kodak Ret. Income Plan, 336 F.3d 103, 113–14 (2d Cir.2003)). As the evidence at trial raised the Burke presumption of actual prejudice, and because CIGNA had failed to rebut this presumption as to individual Plaintiffs, Judge Kravitz concluded that a classwide finding of liability was appropriate. See id. at 352–54;see also Amara II, 559 F.Supp.2d at 197 (“[T]he Court believes that its [Amara I] holding unambiguously applies to the entire Class, and that no individual issues remain with respect to likely prejudice/harmless error.”).

In a second decision setting remedies, Judge Kravitz ordered “A + B” relief, whereby the CIGNA Plan would provide class members with “all accrued Part A benefits in the form those benefits were available under Part A, plus all accrued Part B benefits in the form those benefits are available under Part B.” Amara II, 559 F.Supp.2d at 214. He set A + B relief based on the following determinations. First, he found that no individual issues remained and that classwide relief was appropriate under Rule 23(b)(2) of the Federal Rules of Civil Procedure. See id. at 200, 203. Second, he concluded that ERISA § 502(a)(1)(B) authorized A + B relief, expressly declining to decide whether he could order the same or similar relief under ERISA § 502(a)(3). See id. at 206 (“[T]he Court need not, and does not, decide whether Plaintiffs could obtain relief under § 502(a)(3).”). Third, Judge Kravitz determined, in his equitable discretion, that reforming the CIGNA Plan to provide A + B benefits was an appropriate remedy for the misrepresentations in CIGNA's notices. See id. at 214.

After this judgment was affirmed by the Second Circuit, the Supreme Court granted certiorari on the question of “whether a showing of ‘likely harm’ is sufficient to entitle plan participants to recover benefits based on faulty disclosures.” Amara III, 131 S.Ct. at 1876. In resolving this question, the Supreme Court announced three principles of law. First, the Supreme Court held that it was error to have relied on ERISA § 502(a)(1)(B) to reform the CIGNA Plan. See id. at 1876–78. Second, “given the likelihood that, on remand, [the District Court would] turn to and rely upon” ERISA § 502(a)(3), the Supreme Court considered whether a remedy similar to that entered was authorized as “appropriate equitable relief” pursuant to ERISA § 502(a)(3), concluding that substantially similar relief could be obtained under § 502(a)(3). Id. at 1878, 1880. Third, turning to the legal standard for prejudice, the question on which certiorari was granted, the Supreme Court declared that “the standard of prejudice must be borrowed from equitable principles, as modified by the obligations and injuries identified by ERISA itself,” leaving it to the District Court “to conduct that analysis in the first instance....” Id. at 1871, 1882.

The Supreme Court did not, however, disturb the underlying findings of fact regarding CIGNA's notice violations. See id. at 1882 (“We are not asked to reassess the evidence.”). Nor did the Supreme Court suggest that the remedies chosen were improper in any respect aside from the fact that they were ordered pursuant to ERISA § 502(a)(1)(B). Thus, there seems to be little reason why this Court should depart from the relief previously ordered, in the event that it finds that the same relief may be granted pursuant to ERISA § 502(a)(3) and consistent with Rule 23 of the Federal Rules of Civil Procedure. Neither party has put forward compelling reasons why, as a matter of remedial discretion, this Court should alter the form of relief granted four years ago. See Amara II, 559 F.Supp.2d at 206–19(fashioning appropriate remedies for each of CIGNA's ERISA violations).

Accordingly, the primary...