Background

Rochow arose under the following facts. In 2002, a participant in an ERISA-covered, long-term disability (“LTD”) plan resigned from his job for medical reasons. When he subsequently applied for benefits under the LTD plan, the insurer that provided benefits under the plan denied the claim because it concluded that the participant had not become disabled until after his employment (and coverage under the plan) had terminated.

The participant challenged the benefit denial in federal district court. The court held that the insurer acted arbitrarily in denying the claim, and that ruling was affirmed on appeal by the Sixth Circuit. Rochow v. LINA, 482 F.3d 860 (6th Cir. 2007). On remand, the district court concluded that the insurer was not only liable for the benefits that had been denied the participant but also for the profits it had earned on the benefits while they were wrongfully withheld from the participant.  The insurer was ordered to disgorge over $3.5 million in earnings. That ruling was affirmed by a divided panel of the Sixth Circuit, which determined that the wrongful withholding of the benefits constituted a breach of the insurer’s ERISA fiduciary duties that warranted the additional remedy of disgorgement. Rochow v. LINA, 737 F.3d 415 (6th Cir. 2013),

The Sixth Circuit granted the insurer’s motion for rehearing en banc, and the full court of appeals reversed the panel decision. The majority of the en banc court, in an opinion authored by Judge McKeague, noted that the participant had appropriately been awarded benefits under ERISA Section 502(a)(1)(B), which authorizes suit for benefits due under the plan. The question was whether the participant was entitled to additional relief – including disgorgement of the insurer’s profits – under ERISA Section 502(a)(3), which authorizes participants to sue for “appropriate equitable relief” to remedy violations of (among other things) ERISA fiduciary duties.

The majority held that the equitable relief, such as disgorgement of profits, was not available in this case because the participant’s fiduciary breach claim was simply a “repackaging” of his benefits claim. It observed that in Varity Corp. v. Howe, 516 U.S. 489 (1996), the Supreme Court indicated that equitable relief is not ordinarily appropriate under Section 502(a)(3) where ERISA otherwise provides an appropriate remedy for the plaintiff’s injury. The en banc majority viewed the participant’s injury flowing from the insurer’s fiduciary breach of wrongfully withholding of benefits to be the same as the injury associated with the improper benefits denial. Consequently, it concluded that the equitable remedy of disgorgement was unavailable. However, the majority noted that prejudgment interest may be awarded under ERISA Section 502(a)(1)(B) on improperly withheld benefits, and remanded for a determination whether prejudgment interest was appropriate in this case.

Judge Gibbons filed a concurring opinion, stating that the panel decision should have been reversed on procedural grounds.

Judge White filed an opinion concurring in part and dissenting in part, expressing the view that equitable relief may be appropriate in certain benefits denial cases, depending on the facts and circumstances.

Judge Stranch filed a dissenting opinion that was joined by six other judges. The dissent argued that the wrongful withholding of benefits and use of the amounts that should have been paid to the participant as benefits constituted a fiduciary breach and an injury to the plaintiff that was separate from the denial of benefits. In the dissent's view, requiring the insurer to pay the participant the benefits due him under the plan was not an adequate remedy for the separate fiduciary breach. The dissenting judges therefore would have affirmed the panel's decision to grant the disgorgement remedy.