Court Makes Repeat Decision in Amara v. CIGNA

The U.S. District Court for the District of Connecticut found 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. U.S. District Judge Janet Bond Arterton wrote in her opinion that though she heavily relies on the high court decision, there remains lingering uncertainty about the proper resolution in the case. She noted that, previously, the district court’s judgment was stayed sua sponte—acting on its own, not at the request of one of the parties—to allow the parties to pursue an appeal to the 2^nd U.S. Circuit Court of appeals in light of this uncertainty and the high stakes for CIGNA and its employees, and that it will again sua sponte stay its judgment, based on the same reasoning, to allow the parties to seek guidance from the 2^nd Circuit.  

Though the court previously ruled there was no wrongdoing on CIGNA’s part in its calculation of benefits when it moved from a traditional defined benefit (DB) plan to a cash balance plan, it found CIGNA liable for inadequate disclosures relating to the conversion from the traditional pension (what the court calls Part A) to the cash balance plan (Part B). The court applied the 2^nd 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,” and 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.”  

Arterton noted that the Supreme Court did not disturb the underlying findings of fact regarding CIGNA’s notice violations, nor suggest that the remedies chosen were improper in any respect aside from the fact that they were ordered pursuant to the Employee Retirement Income Security Act (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,” Arterton wrote.  

CIGNA argued that the court should apply the standard for trust rather than contract reformation, noting that the Supreme Court observed that ERISA generally treats plans as trusts. But, the district court said the economic reality is that the CIGNA Pension Plan arises out of employment contracts with plaintiffs; as such, the court believes that contract reformation is as or more appropriate than trust reformation.   

The court noted that equity courts traditionally had the power to reform contracts that failed to express the agreement of the parties, owing either to mutual mistake or to the fraud of one party and the mistake of the other. The court found CIGNA engaged in fraud or similarly inequitable conduct. CIGNA’s deficient notice led to its employees’ misunderstanding of the content of the contract, and CIGNA did not take steps to correct their mistake. Instead, CIGNA affirmatively misled and prevented employees from obtaining information that would have aided them in evaluating the distinctions between the old and new plans. Furthermore, CIGNA sought and obtained an advantage from its inequitable actions, based on the previous finding that CIGNA intentionally and successfully avoided adverse employee reactions, which had caused other employers to modify their intended cash balance plans. As a result of CIGNA’s fraud, its employees were mistaken as to their retirement benefits. The court previously found that plaintiffs reasonably believed that Part B would protect the retirement benefits that they had theretofore accrued.