In Gabriel v. Alaska Electrical Pension Fund, the Ninth Circuit ruled that a pension plan participant could not be “made whole” by using the equitable remedy of surcharge to recover pension benefits he was erroneously told he would receive.
As explained below, the Alaska Electrical opinion is significant because it clarifies and limits the reach of equitable remedies, such as surcharge, in ERISA cases under the Supreme Court’s 2011 decision in Cigna v. Amara. In doing so, the Ninth Circuit declined to follow decisions in the Fourth, Fifth and Seventh Circuits that suggested a broader application for equitable remedies under Amara.
Gabriel was a former participant in an ERISA-governed pension plan. In 1997, Gabriel inquired about his pension benefits, and the plan informed him that his monthly benefit was $1,236. The plan then paid him those benefits for three years. But this was an error. The plan had previously determined – and told Gabriel – that he was not entitled to benefits because his participation in the plan terminated before he vested.
When the plan discovered its error, it stopped making benefit payments to Gabriel and asked him to repay the benefits. In response, Gabriel filed suit against the plan, alleging claims for equitable estoppel, reformation and surcharge. The district court granted summary judgment in favor of the plan, and the Ninth Circuit affirmed.
The court rejected Gabriel’s surcharge claim, holding that recovery for surcharge is limited to situations where the plan is unjustly enriched or where plan losses are sought to be restored. In so holding, the Ninth Circuit clarified that Amara did not allow for “[m]ake-whole relief” at the plan’s expense. On that issue, Justice Berzon dissented, finding that Amara did not so limit the surcharge remedy.
The court also held that the plan was not equitably estopped from denying benefits because the plan’s error did not the result from an interpretation of ambiguous plan language. The court explained that “[s]uch an error in calculating benefits is just the sort of mistake that we repeatedly have held cannot provide a basis for equitable estoppel” and that recovery would be inconsistent with the written terms of the plan.
Similarly, the court rejected Gabriel’s reformation claim on the grounds that he failed to show that “a mistake of fact or law affected the terms” of the plan or that there was any fraud involved in the plan’s determination.