Connecticut Employment Law Blog : Connecticut Employment Lawyer & Attorney : Daniel Schwartz : Stamford, Hartford New Haven, CT

Employee benefit cases (better known as ERISA cases, after the Employee Retirement Income Security Act) aren't the most exciting topic in the world.  At this point, just by my very mention of ERISA, I'm imagining your mouse wandering off to view another page.

But yesterday, the U.S. Supreme Court agreed to hear an important case that arises out of Connecticut about retirement benefits and alleged misrepresentations by the company of those benefits.  The case, CIGNA v. Amara, has been decided in the employees' favor at the lower court and appellate court thus far, but the issues that it raises are incredibly complex.  (The decision at the District Court level was 122 pages!) 

I've discussed this case in various posts over the last three years here, here and here.  The District Court said in early 2008 in words that would ring true even more:

Difficult, time-consuming, and expensive litigation with uncertain results – such as this case represents – is assuredly not a sensible way to manage the Nation's retirement system for either employers or employees. Sadly, at least for now, litigation appears to be the only option available to them.

So, what's the case about? Lawmemo does a good job recapping it here with copies of the briefs filed by the parties:

After CIGNA converted its traditional defined benefit pension plan to a cash balance plan, it issued a summary plan description (SPD) to plan participants. Amara brought a class action claiming that CIGNA failed to comply with ERISA's notice requirements and SPD provisions. The trial court held for Amara; the 2nd Circuit affirmed. The finding was that the SPD misrepresented the terms of the plan itself. Although CIGNA argued that the plaintiffs failed to show injury, the court found that the participants had shown "likely harm" and that CIGNA had failed to establish harmless error.

The U.S. Supreme Court agreed to hear the case during its 2010-2011 term. The issue to be decided is as follows:

Whether a showing of “likely harm” is sufficient entitle participants in or beneficiaries of an ERISA plan to recover benefits based on an alleged inconsistency between the explanation of benefits in the Summary Plan Description or similar disclosure and the terms of the plan itself.

In other words, what is the proper standard for a court to use to determine whether there should be a recovery for an alleged discrepancy between a SPD and the actual plan itself? It remains to be seen where the court will come out on this but for those employers who converted their pension plans to 401(k) plans, the case will have national significance. 

(In the interests of full disclosure, I should note that I am familiar with one of the named plaintiffs, although I have not discussed the case with her in any detail, nor do I have any role in the litigation.)

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It's a big holiday today. So, let me be the first to say: Happy Evacuation Day -- at least to my fellow blogger at Compliance Building.  To everyone else, a Happy St. Patrick's Day. 

Its been some time since my last look around the employment law universe, so here's some quick hits of what else has been going on this month:

• Last week, Congress held a hearing on pay equity.  The hearing focused on issues that relate to the Paycheck Fairness Act, sponsored by Senator Christopher Dodd of Connecticut. 
   
• The DOL has been beating the drum louder lately on the issue of employee misclassification. Our webinar on what's new in the area has been rescheduled to March 24th due to a court conflict.  In the meantime, you can play "20 Questions" on this issue with the Ohio Employer's Law Blog. 
   
• Law Tribune Columnist Karen Lee Torre has renewed her suggestion to eliminate the CHRO.  In a new twist, she criticizes the agency for allegedly allowing its employees to have a flexible work arrangement, as if that were unique to the agency or other employers: 

Another feature of the CHRO is its generous and unproductive employee work schedules. I remember getting steamed one time during a fact-finding investigation when we were told we’d have to come back on another day to finish up, even though it was mid-afternoon and we were but two hours away from concluding the evidence. The investigator had one of those democratic work schedules that allowed her to skip out in mid-afternoon to attend to one of her kids. I was forced to schlep to Waterbury again. Thousands more in fees on both sides because a normal work day is anathema to liberals.

• The U.S. Supreme Court has asked for the Solicitor General's views on the Connecticut case of Amara v. CIGNA, a significant case I've discussed at length before that discusses what the obligations are to make disclosures of changes to a pension plan. The Supreme Court is presently considering petitions from the company and the group of former employees that brought suit to take the matter.  A decision from the Supreme Court on whether to accept the petitions is expected by June 2010.
   
• Finally, are you looking for some new labor & employment law blogs to add to your reading list? The Workplace Prof blog recently compiled a list of such blogs.  It contains many of my must-reads in the morning. Take a peek. 

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Lawyers representing the class of retirees from CIGNA will argue that their clients are entitled to "hundreds of millions" of dollars in retirement benefits as a result of misrepresentations made by CIGNA, according to a report in yesterday's Hartford Courant. 

The Courant -- which finally reported on the decision 5 days after it came out and well after we posted on it  -- barely mentions the argument of whether the new cash balance plan is age discriminatory (which the court found it wasn't). Instead, it focuses on the fact that CIGNA failed to mention that the benefits could be subject to "wear-away". 

Eager to claim victory, the class representative attorneys now say that the disclosure argument is vitally important to the case:

Friday's ruling will serve as "an excellent blueprint for other courts to scrutinize these disclosures" that companies make concerning conversion to cash balance plans, said Tom Moukawsher in Hartford, co-counsel representing the CIGNA employees. "This court decision is a precedent for looking at the underbelly of the disclosures for basic honesty."

Certainly the court was disturbed by communications by CIGNA. For example, in a Newsletter discussing the changes, the Court found that: "nothing in the Newsletter indicated to plan participants that their rate of benefit accrual might decrease, much less by a significant margin. And yet that is exactly what happened." (Decision at 80.) Indeed, as the Court said later:

Taking all of this information into consideration, the Court concludes that CIGNA was aware of the significant reduction in the rate of future benefit accrual that would affect at least a substantial proportion of its employees as a result of the transition to Part B, that CIGNA wished to avoid the employee backlash likely to result from a thorough discussion of these aspects of Part B, and that CIGNA sought to negate the risk of backlash by producing affirmatively and materially misleading notices regarding Part B. As a result, its § 204(h) notice failed to meet ERISA's stringent standards.

As I indicated previously, both parties have until March 17th to brief the issue of what the appropriate remedy would be in this situation. 

Although the lawyers for the class have reason to be pleased with the decision, certainly CIGNA and other companies nationwide must be relieved that the underlying conversion from a defined benefit plan to a cash balance plan itself has been upheld.  If the court had found that the conversion was discriminatory, it could have had an impact nationwide; the decision here may have a more modest impact given the evidentiary findings of the court that are particular to this case.

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• First, I know one of the named class representative as a longtime family friend. Other than being aware generally of her involvement, we haven't discussed the case in any specifics and I didn't discuss the decision with her either.  I don't believe this impacts my reporting of the case but readers should be aware of that fact.
  
  
• Second, in my discussion of the age discrimination claim, one reader has suggested that I may have oversimplified the judge's rationale. I can't dispute that since, after all, I'm attempting to reduce a 122 page decision to a few paragraphs.  I did not, for example, discuss whether this case suggests "that more and more courts are buying into the Easterbrook line of argument that cash balance plan conversions are generally not age discrimination" as Workplace Prof did.  As I have suggested, however, readers should review the entire decision for its analysis.  But this additional quote from Judge Kravitz bears review too:
  
             Finally and importantly, the Court agrees with CIGNA that what Plaintiffs see as age
  discrimination is merely the transition from one plan that was heavily age-favored to another plan that is still age-favored but less so. In the Court's view, that transition is not age discrimination.
  
  
• Third, in my discussion of the remedies that may be appropriate, I pointed out that the court suggests at one point that only injunctive relief may be appropriate against CIGNA (versus the plan administrator) in one of the claims.   It is hardly conclusive, however, and it may be that the court fashions a remedy that is more far-reaching on the notice and disclosure provisions.  The court left a discussion of remedies (i.e. damages) for further briefing.  There are also individual claims that need to be resolved as well.
  

Counsel for each side distinguished themselves throughout this case by their skillful advocacy, professionalism, and civility. The Court is grateful to each of them.

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