Posted May 16, 2011 03:43 pm CDT
The U.S. Supreme Court is giving about 25,000 Cigna Corp. employees another chance to force changes in the company’s pension plan.
The Supreme Court opinion (PDF) said the employees may be entitled to relief under the Employee Retirement Income Security Act, but not under the provision applied by the federal court. The employees had claimed the company failed to notify them about pension changes that would cut their benefits. A federal judge had sided with the workers and required Cigna to reform the new plan so it was in accord with promises made.
The opinion by Justice Stephen G. Breyer said the employees may be entitled to relief under Section 502(a)(3) of ERISA, which authorizes “appropriate equitable relief” for violations of the law. Under this section, employees would have to show injury from the ERISA violation, but they don’t necessarily have to meet the more difficult standard of “detrimental reliance,” Breyer said. The opinion remanded to the district court to determine whether an appropriate remedy may be imposed under this section.
Justice Sonia Sotomayor did not participate in the case. There were no dissenters.
Justice Antonin Scalia, in an opinion joined by Justice Clarence Thomas, concurred in the court’s conclusion that the employees were not entitled to relief under the ERISA section applied by the district court. “Nothing else needs to be said to dispose of this case,” Scalia wrote.
“Why the court embarks on this peculiar path is beyond me,” Scalia said. “It cannot even be explained by an eagerness to demonstrate—by blatant dictum, if necessary—that, by George, plan members misled by [a summary plan description] will be compensated. That they will normally be compensated is not in doubt.”
Plan changes that were not preceded by proper notice could simply be invalidated under precedent by the New York-based 2nd U.S. Circuit Court of Appeals, Scalia said.
Scalia hits Breyer’s opinion for noting that the district court had “strongly implied” it would apply Section 502(a)(3), had it not relied on the other ERISA section that turned out to be inapplicable. Scalia calls the statement “speculation upon speculation” and says it does not make the majority’s discussion of Section 502(a)(3) any more relevant.
“Rather than attempting to read the district judge’s palm, I would simply remand,” Scalia says.
Bloomberg News calls the decision a partial victory for Cigna. The case is Cigna Corp. v. Amara.