In a new 5th Circuit Court ruling known as Gearlds v. Entergy Services, Inc., 2013 wl 610543(5th Circuit 2013) the 5th Circuit reversed its ruling in Amschwand v. Spherion Corp. (5th Circuit 2007) where it held that a breach of fiduciary duty claim would not net a claimant any money. Previously in the 5th Circuit the court had held that equitable relief, which would include anything that was not an actual benefit claim, only allowed the claimant to sue for an injunction or a mandamus or similar type relief. That means that the court could issue an order directing the plan administrator or the defendant to do something but could not actually award money to the plaintiff. That could be a big problem in many ERISA cases and it was certainly one for Mr. Gearlds.
Mr. Gearlds was to receive a long term disability benefit until 2002 at which time the LTD carrier cut off his benefits but apparently either they failed to tell the employer this or the employer failed to note this. Either way Mr. Gearlds remained on the company’s payroll as an inactive employee. In 2005, only three years later he took early retirement at age 55 and under early retirement he was eligible to receive full medical, dental and vision benefits. Once he began to receive these benefits he waived his right to receive any of these health benefits under his wife’s retirement plan.
Now here is the problem: in 2010 Entergy told Gearlds that it was discontinuing all of his health benefits because it learned that he did not receive long term disability benefits between 2002 and 2005. Therefore, these years would not count towards his early retirement and this would cause him not to receive any of the health benefits. Entergy was retroactively cutting off his health benefits back to 2005 leaving a big gap in coverage for Mr. Gearlds. Apparently this gap also caused him to be unable to obtain health insurance coverage on his wife’s pension and retirement plan.
Gearlds filed suit under ERISA §502(a)(3) for a breach of fiduciary duty and under § 502(a)(2) for equitable estoppel. The district court dismissed the whole case and found that he wasn’t entitled to any monetary type relief. Gearlds appealed that and argued a Supreme Court opinion known asCigna Corp. v. Amara in which it made clear that breach of fiduciary claims should be alive and well and that actual make whole or surcharge type relief could be granted under these claims. The district court had found that the language in the Supreme Court opinion was merely dicta and so it could not rely on that language. This was also argued to the 5th Circuit but the 5th Circuit reversed the district court decision finding that while sometimes Supreme Court opinions have dicta in them this was an instance where it was to be taken as instruction for lower courts. Accordingly, the 5th Circuit held that a breach of fiduciary duty claim or an equitable estoppel claim could indeed proceed and could be the basis for relief in this instance for Mr. Gearlds. So now the case is going back to the district court and hopefully Mr. Gearlds will have this problem fixed, so that he does have health insurance coverage which he always thought he did have.