9th Circuit Revives Case for Consideration of Surcharge

A federal appellate court has sent a case back to a district court because the district court’s decision was made before a significant U.S. Supreme Court ruling.

Because a federal district court made its ruling in an Employee Retirement Income Security Act (ERISA) pension plan benefits case prior to the U.S. Supreme Court’s ruling in CIGNA Corp. v. Amara, a federal appellate court has sent the case back for the court to determine whether surcharge is an equitable remedy to the plaintiff.

Gregory R. Gabriel sued the Alaska Electrical Pension Fund and plan fiduciaries for terminating retirement benefits he was receiving after the fund determined Gabriel did not meet vesting requirements of the plan and was mistakenly paid benefits. The U.S. District Court for the District of Alaska ruled that Gabriel did not present evidence that he was entitled to the remedy of plan reformation or the remedy of equitable estoppel based on misrepresentations made to him about his entitlement to benefits.

The 9th U.S. Circuit Court of Appeals agreed with that ruling, but noted that the district court’s decision was made before the Supreme Court expressed in Amara that a third remedy may be available—surcharge—since many ERISA provisions are akin to trust law.

In its opinion, the 9th Circuit noted that the Supreme Court determined in Amara that to obtain relief by surcharge for a breach of ERISA duties, “a plan participant or beneficiary must show that the violation injured him or her,” but “need only show harm and causation,” not detrimental reliance.

The 9th Circuit determined that the district court did not consider whether Gabriel’s action was a suit by a beneficiary against a plan fiduciary for a loss “resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment.” Nor did the district court determine whether Gabriel had shown that the trustee’s breach of duty injured him.

While one judge on the panel agreed that the case should be remanded to the district court for these considerations, the judge expressed doubt that Gabriel would prevail.

The latest 9th Circuit opinion in Gabriel v. Alaska Electrical Pension Fund is here.