Amara v. CIGNA Corp.

• Decision Date: 23 December 2014
• Docket Number: 13–526XAP.,Nos. 13–447–cv Lead,s. 13–447–cv Lead
• Citation: 775 F.3d 510
• Parties: Janice C. AMARA, Gisela R. Broderick, and Annette S. Glanz, individually and on behalf of others similarly situated, Plaintiffs–Appellants–Cross–Appellees, v. CIGNA CORPORATION and Cigna Pension Plan, Defendants–Appellees–Cross–Appellants.
• Court: U.S. Court of Appeals — Second Circuit

775 F.3d 510

Janice C. AMARA, Gisela R. Broderick, and Annette S. Glanz, individually and on behalf of others similarly situated, Plaintiffs–Appellants–Cross–Appellees

v.CIGNA CORPORATION and Cigna Pension Plan, Defendants–Appellees–Cross–Appellants.

Nos. 13–447–cv Lead

13–526XAP.

United States Court of Appeals, Second Circuit.

Argued: Feb. 10, 2014.

Decided: Dec. 23, 2014.

Stephen R. Bruce (Allison C. Pienta, on the brief), Stephen R. Bruce Law Offices, Washington, D.C.; Christopher J. Wright, Wiltshire & Grannis, LLP, Washington, D.C., for Plaintiffs–Appellants–Cross–Appellees.

Jeremy P. Blumenfeld (Joseph J. Costello and A. Klair Fitzpatrick, Morgan, Lewis & Bockius LLP, Philadelphia, PA; Stephanie R. Reiss, Morgan, Lewis & Bockius LLP, Pittsburgh PA, on the brief), for Defendants–Appellees–Cross–Appellants.

Before: JACOBS, LIVINGSTON, LYNCH, Circuit Judges.

Opinion

DEBRA ANN LIVINGSTON, Circuit Judge:

This long-running dispute arises from certain misleading communications made by CIGNA Corporation (“CIGNA”) and CIGNA Pension Plan (together with CIGNA, “defendants”) to CIGNA's employees regarding the terms of the CIGNA Pension Plan and, in particular, the effects of the 1998 conversion of CIGNA's defined benefit plan (“Part A”) to a cash balance plan (“Part B”). The case was brought in December 2001 by individual plan participants on behalf of themselves and others similarly situated (“plaintiffs”). The district court granted plaintiffs' motion to certify the class. After trial, it held, inter alia, that defendants had failed to provide notice of a significant reduction in the rate of future benefit accrual under the Part B retirement plan in violation of § 204(h) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1054(h), and that defendants failed adequately to disclose material modifications to the plan in violation of ERISA § 102, 29 U.S.C. § 1022. Amara v. CIGNA Corp., 534 F.Supp.2d 288, 363 (D.Conn.2008) [hereinafter “Amara I ”]. The district court then issued a decision regarding appropriate relief under ERISA for that violation, ordering defendants to provide the benefits accrued under Part A at the time of the conversion plus the benefits accrued thereafter under Part B, i.e. “A+B” benefits, and to issue new or corrected notices to all class members under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). Amara v. CIGNA Corp., 559 F.Supp.2d 192, 222 (D.Conn.2008) [hereinafter “Amara II ”]. This Court affirmed those decisions by summary order, Amara v. CIGNA Corp., 348 Fed.Appx. 627 (2d Cir.2009), and both parties petitioned for certiorari.

The Supreme Court granted defendants' petition and, in a decision issued on May 16, 2011, vacated this Court's judgment and remanded the case, concluding that the relief afforded by the district court was not available under § 502(a)(1)(B). CIGNA Corp. v. Amara, ––– U.S. ––––, 131 S.Ct. 1866, 1870–71, 179 L.Ed.2d 843 (2011) [hereinafter “Amara III ”]. The Supreme Court instructed, however, that the district court should consider on remand whether plaintiffs are entitled to relief under § 502(a)(3), 29 U.S.C. § 1132(a)(3), which provides for “appropriate equitable relief” to redress specified violations of ERISA or of plan terms. Amara III, 131 S.Ct. at 1882. In light of its decision to grant defendants' petition for certiorari and remand the case, a week later, on May 23, 2011, the Supreme Court also granted plaintiffs' petition, see Amara v. CIGNA Corp., ––– U.S. ––––, 131 S.Ct. 2900, 179 L.Ed.2d 1243 (2011) [hereinafter “GVR Order ”], which requested the Supreme Court to review this Court's affirmance of the district court's decision to order A+B benefits rather than a return to the Part A plan. See Petition for Writ of Certiorari, Amara v. CIGNA Corp., 131 S.Ct. 2900 (2011) (No. 09–784), 2010 WL 17042. In accordance with the Supreme Court's decisions, this Court vacated the district court's judgment on July 11, 2011, and remanded the case for further proceedings.

On remand, the district court denied a motion by defendants to decertify the class and again ordered CIGNA to provide plaintiffs with A+B benefits and new or corrected notices, this time ordering such relief under § 502(a)(3). Amara v. CIGNA Corp., 925 F.Supp.2d 242, 265–66 (D.Conn.2012) [hereinafter “Amara IV ”]. The present appeals ensued. CIGNA argues that the district court erred in declining to decertify the class and in ordering equitable relief pursuant to § 502(a)(3). Plaintiffs argue that the court erred in limiting relief to A+B benefits, as opposed to affording them the benefits they would have received pursuant to Part A.

We conclude, first, that the district court acted within the scope of its discretion in denying CIGNA's motion to decertify the plaintiff class. Next, we conclude that the district court did not abuse its discretion in determining that the elements of reformation have been satisfied and that the plan should be reformed to adhere to representations made by the plan administrator. Finally, based on the particular facts of this case, we hold that the district court did not abuse its discretion in limiting relief to A+B benefits rather than ordering a return to the terms of CIGNA's original retirement plan.

BACKGROUND

A. Facts

The facts of this case are set forth in considerable detail in the several prior opinions concerning this matter and we do not repeat them all here. This litigation stems from CIGNA's alteration of the terms of its standard pension benefit plan in 1998. CIGNA's original plan—Part A—granted beneficiaries defined benefits upon retirement. These defined benefits were generally provided in the form of an annuity in an amount based upon a number of factors such as the employee's salary, date of first employment at CIGNA, years of service, and age at retirement. By contrast, the new plan—Part B—provided benefits to most of CIGNA's employees in the form of a lump sum cash balance calculated on the basis of defined annual contributions.¹ Under Part B, an employee could choose at retirement to receive his or her account balance in lump sum form or else as whatever annuity that lump sum could buy at the time that employee retired. To facilitate the transition between the plans, the new Part B plan included a formula whereby an employee would accrue new benefits to be deposited into his or her retirement account, as well as a formula for converting an employee's already-accrued Part A benefits into a Part B cash balance. The new plan also guaranteed that employees would receive at least the value of their already-accrued Part A benefits. That is, if an employee's total Part B benefits at retirement, including that employee's initial account balance and all benefits accrued by that employee under Part B thereafter, amounted to less than the total of that employee's Part A benefits as of December 31, 1997, then the employee would receive the amount of his or her Part A benefits rather than the amount in the employee's account under Part B.

Instead of shifting immediately to Part B, CIGNA accomplished the transition between the plans in two stages. CIGNA first froze its Part A plan. As communicated to employees in a November 1997 newsletter, employees' Part A benefits ceased accruing as of December 31, 1997. Employees' account balances were then calculated during 1998, and balances were retroactively credited to each employee as of January 1, 1998.

CIGNA communicated the terms of the new plan and the process for plan conversion to its employees through that November 1997 newsletter, as well as through a summary of material modifications to the plan, two summary plan descriptions (“SPDs”), and other materials. Among other things, CIGNA told employees that the new plan would “significantly enhance its retirement program.” E–204. One SPD describing the plan informed each employee that “your benefit will grow steadily throughout your career.” E–265. It also told each employee that his or her “opening balance [in the new Part B plan] was equal to the lump sum value of the pension benefit [he or she] earned through December 31, 1997.” Id. In individualized compensation reports, CIGNA assured each employee that his or her initial account balance “represent[ed] the full value of the benefit [he or she] earned for service before 1998 payable to you at age 65.”² J.A. 138. CIGNA also stated in a newsletter introducing the new plan that it would not receive any cost savings from its conversion from Part A to Part B.

The parties do not dispute that CIGNA's communications regarding its new plan were inaccurate. CIGNA actually saved an estimated $10 million annually by converting to its Part B plan. Contrary to CIGNA's descriptions of the plan to its employees, moreover, the new Part B plan did not preserve the full value of each employee's Part A benefits. The new plan was inferior in a number of critical ways. For instance, under Part A, employees had a valuable right to retire early with only moderately diminished benefits—a right that the Part B plan did not preserve. And at least two additional features left many employees worse off:

First, the amount in each employee's initial retirement account actually did not reflect the entirety of that employee's Part A benefits because the calculation converting Part A benefits into the Part B lump sum included an adjustment that reduced each employee's account balance. This “haircut” was undertaken to offset the fact that under the new Part B plan, an employee's survivors were guaranteed to receive that employee's benefits (whether or not the employee died before retirement) whereas under Part A, the employee received benefits in annuity form (and therefore only received benefits if he or she was still alive at retirement). To compensate for this change, each employee's Part A benefits were not only converted into lump sum form, but were also discounted by the probability that the employee would live to retirement age. For...