High Court, High Stakes: Cigna Corp. V. Amara
Law360, New York (December 20, 2010) -- In Cigna Corp. v. Amara, Case No.: 09-804, the Supreme Court was
presented with the opportunity to address the question of what level of harm, if any, a participant must demonstrate as a
condition for recovering where a plan’s summary plan description (SPD) failed to properly communicate information about
plan benefits. Last week’s oral argument calls into question the extent to which the court will directly address the core
issue presented for its consideration. Given the significance of the issue to plan sponsors and administrators, it would be
extremely unfortunate if the court passes up the opportunity to issue a definitive ruling.
The issue confronting the court arose in the context of a cash balance conversion, where a plan participant successfully
contended that language in the SPD led her to believe that she would be entitled to greater benefits than what were
actually provided for in the terms of the plan document. The district court awarded the participant, and the approximately
27,000 class members she represented, relief in the form of the benefits to which she believed she was entitled, based on
the language in the SPD, even though these benefits were never contemplated under the terms of the actual plan
document.
In so ruling, the district court assumed that all 27,000 class members were “likely harmed” by the misinformation about
their benefit rights under the cash balance plan. No participant was required to demonstrate that he/she detrimentally
relied on this misunderstanding, and the court found that the defendants had failed to exercise their opportunity to present
evidence indicating that they had not.
Much of the oral argument before the Supreme Court was consumed by questions as to whether plaintiffs could avert the
need for any showing of harm by proceeding on a contractual theory, pursuant to which they could recover based on the
terms of the language of the SPD, if that language conflicted with the terms of the actual plan document. Although several
Justices ultimately communicated a disinclination to embrace the contractual theory, there was little opportunity in the
remaining time to delve into the intricacies of the burden of proof with respect to harm.
There was a brief discussion, led by Justice Stephen Breyer, of the relative merits of relaxing the detrimental reliance
standard, in favor of the burden-shifting analysis endorsed by the Second Circuit. Under this standard, participants would
merely show, based on the surrounding facts and circumstances, that they were “likely harmed,” at which point the burden
would shift to the defendant to disprove the inference of harm on an individualized basis. There appeared to be no
consensus among the Justices as to whether this standard should replace the detrimental reliance standard and, if so,
what facts and circumstances would suffice to establish “likely harm,” and what type of evidence could disprove the
inference of harm, including whether such evidence would be evaluated on an individualized basis.
If the court were to eliminate the need for an individualized evaluation of harm, it would potentially remove what ought to
be a significant obstacle to class certification. The district court would be left with the task of evaluating the
appropriateness of the plan communications without regard to whether individual participants relied to their detriment on
these communications or were otherwise harmed in some individualized way. As so defined, this task would appear to be
suitable for class treatment. But if the Supreme Court instead were to recognize that individual recoveries should be
conditioned on a finding of individual harm, then the availability of class certification would be called into question.
Some of the Justices appeared to be keenly aware of the class certification implications of the issue. In fact, Justice Ruth
Bader Ginsburg at one point suggested that removing the burden of proving harm — e.g., by treating the claim as
contractual — would facilitate class treatment of these claims. The defendants argued, however, that any approach that
removed the element of harm for the sake of facilitating class certification would violate the Rules Enabling Act, which
prohibits using of practice and procedure rules to abridge, enlarge or modify substantive rights. If plaintiffs have a
substantive obligation to prove detrimental reliance or harm, or defendants have the right to offer evidence to disprove
such reliance or harm, these rights and obligations should not be abridged merely because the court is inclined to certify a
class.
Those Justices that seemed to favor a relaxed burden of proof appeared to be concerned with the difficulties posed to
participants in proving harm after-the-fact. But even if participants are not required to affirmatively prove harm, there
would still remain the question of whether such harm should be simply inferred. As defense counsel tried to tell the court,
a participant would only have been harmed if he/she would have taken different action if fully aware of the implications of
the cash balance conversion on his/her prospective benefits — such as changing employment or demanding a different
compensation package. But, the implications of the conversion — and hence the likelihood of harm — was clearly
dependent on the participant’s individual circumstances, including compensation and length of service before and after
the conversion. Indeed, many participants likely stood to gain from the conversion. Thus, even if the court were to relax
the initial burden of proof by not requiring participants to prove detrimental reliance, there would still be a question of
whether, sooner or later, the district court would have to confront individualized issues that ought to militate against class
certification.
The issues posed in Amara can be analogized to those presented in class action employment discrimination cases, in
which the first stage of the case is devoted to the issue of whether the employer engaged in a pattern and practice of
discrimination, and the second stage is devoted to issues of individual entitlement to monetary relief. In some jurisdictions,
courts have certified classes in theses cases by resorting to Fed. R. Civ. P. 23(b)(2), which allows courts to certify claims
seeking primarily declaratory and injunctive relief without inquiring into whether the common liability issue would
predominate over the individual issues.
This approach to class certification has now been called into question. On Dec. 6, 2010, the Supreme Court granted
certiorari in Wal-Mart Stores Inc. v. Dukes, Case No.: 10-277, specifically for the purpose of addressing the
appropriateness of granting of class certification under Fed. R. Civ. P. 23(b)(2) of employment discrimination claims
seeking monetary relief.
A ruling in Wal-Mart that prohibited resort to Fed. R. Civ. P. 23(b)(2) in these cases could signal that suits for monetary
relief in Employee Retirement Income Security Act cases should similarly not be certified absent a showing that common
issues predominate over individualized issues. In communication claims based on an alleged faulty SPD, this would mean
that the common question regarding the appropriateness of the SPD would have to predominate over individual issues of
entitlement to relief. Plaintiffs would be unlikely to sustain such a showing if, in Amara, the Supreme Court recognized the
need for some individual finding of harm, whether it be as part of the plaintiff’s initial burden of proof or the defendant’s
case in rebuttal. But absent any requirement of harm, plans and their sponsors will likely face the huge risks of classwide
relief in the form of retroactive awards of benefits that were never contemplated by the plan design.
Thus, the stakes in Amara are very high.
--By Myron D. Rumeld and Nicole A. Eichberger, Proskauer Rose LLP
Myron Rumeld (mrumeld@proskauer.com) is a partner in Proskauer's New York office. Nicole Eichberger
(neichberger@proskauer.com) is a senior associate in the firm’s New Orleans office.