Court’s Award of $3.8 Million Raises Questions About the Scope of ERISA Remedies

by Williams Mullen

The U.S. Court of Appeals for the Sixth Circuit has affirmed an unusually large award of $3.8 million in a case involving the denial of long-term disability benefits. In Rochow v. Life Insurance Company of North America, No. 12-2074 (6th Cir. Dec. 6, 2013), the Sixth Circuit held that the district court did not abuse its discretion in awarding the plaintiff participant both the denied long-term disability benefits and also damages for fiduciary breach arising from the benefit denial. The holding provoked a strong dissent which argued that the ruling departed from U.S. Supreme Court and Sixth Circuit precedent in calculating that the total damages base could properly include profits that the defendant allegedly earned on the benefit amount at issue.

Background. Daniel Rochow was covered by a disability plan sponsored by his employer, Arthur J. Gallagher & Co., and administered by defendant Life Insurance Company of North America (“LINA”). Rochow was president of Arthur J. Gallagher & Co., but, due to a progressively worsening disablement, he was demoted in 2001 and resigned effective January 2, 2002. In February 2002, Rochow’s condition was diagnosed as a debilitating brain infection, and that year he filed a claim for long-term disability benefits under the plan. LINA denied his claim on the ground that his employment ended before his disability began. Rochow filed suit under ERISA, pleading two claims: one to recover benefits allegedly due under the plan, and the other to remedy an alleged breach of fiduciary duty, namely, an abuse of discretion in denying his benefits claim.

The U.S. district court ruled in Rochow’s favor in 2005, and LINA appealed. The Sixth Circuit affirmed the finding that LINA’s denial of Rochow’s claims was arbitrary and capricious, and remanded for further proceedings. On remand, the district court held that the proper remedy was both the award of benefits and the equitable remedy of a “disgorgement of profits” that LINA allegedly earned on the amounts not paid to Rochow[1]. The amount of the denied benefits was determined to be approximately $900,000. The court then calculated the award of profits using a “Return on (Average) Equity” offered in testimony from Rochow’s expert, who asserted that LINA earned between 11 percent and 39 percent annually and therefore unjustly earned approximately $2.8 million on benefits it should have paid to Rochow beginning in 2002. LINA appealed this second ruling.


The Sixth Circuit’s Ruling. LINA objected that the award for fiduciary breach, in addition to the award of the disability benefits, was inconsistent with Varity Corp. v. Howe, 516 U.S. 489 (1996), and Sixth Circuit precedent. In Varity Corp., the U.S. Supreme Court held that equitable relief under ERISA § 503(a)(3) “normally would not be ‘appropriate’” where the plaintiff already had an adequate remedy under another applicable ERISA provision. ERISA § 502(a)(1)(B) provides a remedy for benefits due under a plan, and LINA argued that this remedy was sufficient to make Rochow whole for the denial of his claim.

The majority of the Sixth Circuit panel, however, held that where a plan administrator acts “arbitrarily and capriciously,” the equitable remedy of disgorgement of profits could be “appropriate equitable relief” under ERISA § 503(a)(3), in addition to the award of benefits under ERISA § 502(a)(1)(B). This holding differs from post-Varity Corp. holdings in the other Circuits, which have generally construed Varity Corp. to interpret ERISA as providing a “make whole” remedy for plan participants who have been denied benefits due under a plan, and to allow relief under the equitable remedies of ERISA § 503(a)(3) only when such relief is needed for an injury distinct from the denial of benefits. By contrast, the majority of the Rochow court ruled that the equitable remedy of disgorgement was a logical extension of Varity Corp. and Sixth Circuit precedent and that the award of benefits alone would not redress the alleged unjust enrichment of the plan fiduciary or assure that the fiduciary acted solely in the interests of participants as ERISA requires.

In dissent, the remaining judge on the Sixth Circuit panel described the majority’s ruling as taking “an unprecedented and extraordinary step to expand the scope of ERISA coverage. The disgorgement of profits undermines ERISA’s remedial scheme and grants the plaintiff an astonishing $3,797,867.82 windfall under the catchall provision in § 502(a)(3).” The dissent argued that the award of benefits, pre-judgment interest for the denied benefits, and the participant’s attorney’s fees, was an adequate remedy under ERISA § 502(a)(1)(B) to make Rochow whole. The dissent also characterized the award of disgorged profits as resulting “in an improper repackaging of the benefit claims” that constituted an unauthorized departure from Varity Corp. and a contravention of ERISA’s basic purposes.

The Significant Lesson. Rochow will undoubtedly give encouragement to ERISA participants and beneficiaries seeking recovery of plan benefits, especially in cases involving fully insured benefit plans where the plan fiduciary is both the entity funding the benefits and the entity deciding whether a claim for benefits is paid. Many ERISA plans grant discretion to the plan administrator or claims fiduciary, such that reversing a denial of benefits may require the finding that the plan fiduciary abused its discretion. As a result, the holding in Rochow, if followed to its logical conclusion, might be broadly applicable to virtually any award of benefits under ERISA based on an abuse of discretion standard. It remains to be seen whether Rochow will be followed in other federal circuits, but the case is a stark reminder that ERISA plaintiffs seek to expand the scope of equitable remedies available under that statute.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Williams Mullen | Attorney Advertising

Written by:

Williams Mullen

Williams Mullen on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.