Cyr v. Reliance Standard Life Ins. Co., No. 07-56869 (9th Cir. June 22, 2011)

| Jun 23, 2011 | Daily Developments in EEO Law |

In an ERISA case of importance to employees seeking to collect benefits, the en banc Ninth Circuit cleans up some dicta in its prior case law and – without dissent – holds that parties other than benefit plans and plan administrators may be liable for payment of benefits under 29 U.S.C. § 1132(a)(1)(B).

Cyr v. Reliance Standard Life Ins. Co., No. 07-56869 (9th Cir. June 22, 2011): ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), establishes a right of action to enforce the terms of ERISA benefit plans:

“A civil action may be brought . . . by a participant or beneficiary . . . to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.”

Some panels in the Ninth Circuit had previously held that this cause of action was limited to suits against the plan itself, or those in charge of administering the benefits (“plan administrators”). The question presented in Ms. Cyr’s case was whether other parties might owe a duty under this section.

Cyr was collecting long-term disability benefits based on a formula keyed to her compensation. While on long-term disability, she sued her former employer for pay discrimination on account of sex. This claim was settled, and her salary was retroactively adjusted from $85,000 to $155,000. She then approached the long-term disability insurer about adjusting her disability payments accordingly. The insurer said “no,” and Cyr sued the insurer . In the district court, the insurer argued (ultimately unsuccessfully) that it was not a proper party-defendant under § 502(a)(1)(B).

In the Ninth Circuit, the case was assigned to originally to a three-judge panel, but through the court’s internal procedures was reassigned to the en banc court to consider the § 502(a)(1)(B) issue.

The court holds unanimously that an insurer – even one that is not a plan administrator – may be sued under this section. Notably, the court begins by noting that neither the plain language of the section nor the Department of Labor regulations limit the category of party-defendants. The court also notes that in Harris Trust & Savings Bank v. Salomon Smith Barney, Inc., 530 U.S. 238 (2000), a case interpreting a companion section, § 502(a)(3), the Supreme Court declined to imply a limitation on who could be a proper defendant.

The court holds that opening up the category of permissible defendants under this section was supported by yet another remedial enforcement provision:

“Section 1132(d)(2) provides that ‘[a]ny money judgment under this subchapter against an employee benefit plan shall be enforceable only against the plan as an entity and shall not be enforceable against any other person unless liability against such person is established in his individual capacity under this subchapter.’ The ‘unless’ clause necessarily indicates that parties other than plans can be sued for money damages under other provisions of ERISA, such as § 1132(a)(1)(B), as long as that party’s individual liability is established.”

Finally, the court holds that Cyr selected the correct defendant:

“Reliance denied Cyr’s request for increased benefits even though, as the plan insurer, it was responsible for paying legitimate benefits claims. Reliance is, therefore, a logical defendant for an action by Cyr to recover benefits due to her under the terms of the plan and to enforce her rights under the terms of the plan, which is precisely the civil action authorized by § 1132(a)(1)(B).”

The court thus overrules the contrary language in Ford v. MCI Communications Corp. Health & Welfare Plan, 399 F.3d 1076, 1081 (9th Cir. 2005); Everhart v. Allmerica Financial Life Insurance Co., 275 F.3d 751, 756 (9th Cir. 2001); Spain v. Aetna Life Insurance Co., 13 F.3d 310, 312 (9th Cir. 1993); and Gelardi v. Pertec Computer Corp., 761 F.2d 1323 (9th Cir. 1985).

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