Tuesday morning, with Justice Sotomayor recused, the Supreme Court will hear oral arguments in CIGNA v. Amara, a case that will test the Court’s pro-corporate leanings, in this case, whether it will become harder for employees to hold their employers accountable for providing inaccurate summaries of major changes in their pensions plans.
Cigna has 27,000 employees participating in the pension plan at issue. Several years ago, Cigna made a number of significant changes to its plan. As required by federal law (ERISA, or the Employee Retirement Income Security Act), the company gave its employees a summary of the major changes written in a way that the average plan participant would understand.
Unfortunately for the 27,000 participants in Cigna’s pension system, Cigna gave them a misleading summary, one that did not reveal some of the financial disadvantages of the plan. In a class action suit against the company, a federal district court found that Cigna had deliberately misled its employees in order to avoid a backlash, one that might have led the company to roll back some of the changes. Had employees known the truth, they could have protested, they could have sued to stop the changes, or they could have begun looking for work elsewhere with a better retirement plan. In a decision affirmed on appeal, the court concluded that since the class of plaintiffs suffered "likely harm" as a result of the misleading summary, Cigna has to give them some measure of recovered benefits.
So Cigna has turned to the Roberts Court for a bailout.
The corporation argues that employees need to do more than show "likely harm" to recover benefits. Instead, according to Cigna, the standard should be "detrimental reliance:" Each of the up to 27,000 plaintiffs in this class action suit should be required to convince a court that they (1) actually read the summary document; (2) had no knowledge of plan terms contradicting the summary; and (3) relied on the summary to make a detrimental employment or retirement decision that he would not otherwise have made (e.g., prove that they would have moved to a company with better retirement benefits but for the misleading summary).
That’s an extremely high hurdle for each individual. How likely is it that employees will be able to prove that they read a summary document that they may have received years ago? How does it help employees who relied on their coworkers to explain the summary document to them? How will employees prove that if they had known the truth about the pension plan, they would have challenged their employer to change it or, alternatively, would have found a new employer with a better pension package?
In addition, forcing the employees to prove their individual cases rather than act as a class would be an administrative nightmare for a court, and a boon to large corporations with thousands of employees.
The statutorily mandated summary document is the central mechanism for achieving one of ERISA’s fundamental goals – ensuring that participants accurately understand their rights and obligations under the plan. Cigna’s "detrimental reliance" standard threatens to frustrate that goal, taking power from the employees who Congress sought to protect and handing it to the corporations.