PLAINTIFF’S OPPOSITION TO MOTION TO DISMISS
OF DEFENDANTS CIGNA CORP. AND CIGNA PENSION PLAN
Stephen R. Bruce
Washington, DC
Thomas Moukawsher
Walsh & Moukawsher
Groton, CT
Attorneys for Plaintiff
TABLE OF CONTENTS
Introduction
I. Defendants have not shown any insuperable barrier to relief that
justifies
dismissal under Rule 12(b)(6)
II. Plaintiff’s first claim that Cigna is conditioning the payment
of annual
benefit accruals in violation of ERISA’s vesting rules states a claim
upon
which relief may be granted
III. Plaintiff’s claim that the disclosures in
the SPD are inaccurate and incomplete
also states a claim for relief upon which relief may be granted
Conclusion
Introduction
Plaintiff Janice Amara’s Complaint complies with the standard in
the Federal Rules of Civil Procedure that a complaint contain “a short
and plain statement of the claim showing that the pleader is entitled to
relief.” Fed. R. Civ. P. 8; Swierkiewicz v. Sorema, __ U.S. __, 2002
WL 261807, 2002 U.S. Lexis 1374 at *12 (Feb. 26, 2002). The Amara Complaint
sets forth two claims for relief under the Employee Retirement Income Security
Act of 1974 (“ERISA”), 29 U.S.C. 1001, et seq. First, Plaintiff
alleges that after Cigna converted to a “cash balance pension” plan
effective at the start of 1998, Cigna offered her “annual rates” of
accrual, as it was required to do to comply with ERISA’s accrual rules.
However, Cigna’s plan document unlawfully conditions the payment of
those annual accruals based on whether she gives up part of the value of
retirement benefits she has “previously earned.” Plaintiff alleges
that this condition violates ERISA’s anti-forfeiture rules because
payment of her annual rates of benefit accruals is not “unconditional” as
required by ERISA’s vesting rules. In the second claim, Plaintiff alleges
that Cigna’s summary plan description (“SPD”) fails to
disclose the condition on benefit payment as ERISA, its regulations, and
the controlling cases require.
Cigna’s motion to dismiss should be denied for two principal reasons:
(1) Cigna ignores Esden v. Bank of Boston, 229 F.3d 154 (2000), and other
controlling authorities permitting relief, and (2) Cigna contests factual
allegations related to both claims and thereby seeks factual adjudications
rather than dismissal under Rule 12(b)(6).
I. Defendants have not shown any insuperable barrier to relief that
justifies dismissal under Rule 12(b)(6) I.
The Federal Rules of Civil Procedure rely on “liberal discovery rules
and summary judgment motions to define disputed facts and issues and to dispose
of unmeritorious claims.” Swierkiewicz, supra, 2002 U.S. Lexis 1374
at *12. “The purpose of a motion [to dismiss] under Rule 12(b)(6) is
to test the formal sufficiency of the statement of the claim for relief;
it is not a procedure for resolving a contest about the facts or the merits
of the case.” Wright & Miller, Federal Practice & Procedure,
vol. 5A, § 1356. The defendants must accept all the allegations in the
complaint as true and also convince the Court that “it is clear that
no relief could be granted under any set of facts that could be proved consistent
with the allegations.” Swierkiewicz, supra, 2002 U.S. Lexis 1374 at
*14 (quoting Hishon v. King & Spaulding, 467 U.S. 69, 73 (1984)).
“ The issue is not whether a plaintiff will ultimately prevail, but
whether the claimant is entitled to offer evidence to support the claims.” Scheuer
v. Rhodes, 416 U.S. 232, 236 (1974). Claims should be dismissed under Rule
12(b)(6) only when there is “some insuperable bar to relief”;
they should not be dismissed based on an assessment that the court doubts
the plaintiff will prevail in the action.” Wright & Miller, supra,
at §1357. Indeed, “before discovery has unearthed relevant facts
and evidence, it may be difficult to define the precise formulation of the
required prima facie case in a particular case.” Swierkiewicz, supra,
2002 U.S. Lexis 1374 at *11.
Thus, a Rule 12(b)(6) motion is designed to to detect some settled “insuperable
bar to relief” in the pleadings. In 19 pages of briefing, defendants
have failed to show any insuperable barrier to relief that justifies dismissal
under Rule 12(b)(6).
II. Plaintiff’s first claim that Cigna is conditioning the payment
of annual benefit accruals in violation of ERISA’s vesting rules
states a claim upon which relief may be granted.
ERISA is a classic reform statute that, in pertinent part, closely regulates
forfeitures of vested retirement benefits. In essence, Cigna seeks to imply
authorization to forfeit benefit accruals where the reform statute’s
words and implementing regulations provide no authorization. The forfeitures
which Cigna seeks are in contradiction to ERISA’s remedial purpose
of protecting employees against the loss of “anticipated benefits owing
to the lack of vesting provisions in such plans,” ERISA Section 2(a),
29 U.S.C. 1001(a), and to this Circuit’s holding in Esden v. Bank of
Boston, 229 F.3d 154 (2000).
To distill the first claim, Cigna has a type of defined benefit pension
plan that must comply with an accrual rule in ERISA called the “133
1/3%” rule. To comply with that rule, Cigna will claim that participants
like Janice Amara have accrued benefits in 1998 and subsequent years with
values ranging from $7,500 to over $8,500 per year (the total current value
for Janice Amara is over $30,000 for the period from 1998 to 2001). However,
Cigna actually conditions payment of those accruals on whether Mrs. Amara
will accept a valuation of benefits that she “previously earned” before
1998 which would exclude a substantial part of their value. If she wants
to receive the full value of her previously-earned benefits, Cigna requires
her to forego the new benefit accruals. The plaintiff’s position is
that an employer cannot satisfy ERISA’s accrual and vesting rules if
part or all the value of the accruals can be lost or forfeited before payment.
Simply put, the rules are not satisfied by annual accruals that appear to
be worth over $7,500 per annum, but are actually conditional on the employee
giving up part of benefits that she previously earned.
In a more detailed form, Janice Amara’s claim is based on the following
facts: In 1998, Cigna converted to a “cash balance” type of defined
benefit pension plan. Before that time, Janice Amara had worked for Cigna
for over 23 years. Paras. 17 and 19. She had earned $1,833.65 per month in
accrued pension benefits that were payable beginning at age 55. Paras. 23
and 26. ERISA Section 204(g), 29 U.S.C. §1054(g), requires the pension
benefits that she earned prior to 1998 to be “protected” against
any reduction from a plan amendment. Para. 25.
After Cigna converted to a cash balance pension plan at the start of 1998,
Mrs. Amara was to earn annual benefits under the new cash balance plan. Paras.
28-29. Because of the way they are designed, cash balance pension plans must
comply with the 133 1/3% rule in ERISA. This rule requires that pension plans
offer “annual rates” of benefit accrual which do not increase
by more than 33% in any later year. Para. 33. Consistent with this, Cigna
offered Mrs. Amara annual accruals equivalent to over 7% of her annual pay
up to one-half of the social security wage base and 8.5% of her annual pay
above that level. Para. 28. Cigna sent Mrs. Amara an SPD which said that “Each
dollar’s worth of credit [under the cash balance plan] is a dollar
of retirement benefits payable to you after you are vested.” Para.
40. Each year, Cigna has also mailed Mrs. Amara statements showing annual
benefit credits to her account of over $7,500 each year. The annual statement
for 2001 showing a benefit credit of $8,591 for 2001 is attached. Amara Declaration
at Para. 3.
However, when one examines the fine print of Cigna’s pension plan
document, it turns out that Cigna is actually conditioning its obligation
to pay her these annual benefit credits. Para. 31-32. In the fine print,
Cigna provides that Mrs. Amara can only receive her annual cash balance accruals
since 1998 if she accepts a valuation of her previously earned benefits that
excludes a substantial part of their value. If she wants the full value of
her previously earned benefits, Cigna requires her to forego the new cash
balance accruals. Id. Thus, although Mrs. Amara is to have earned benefits
with a value of over $30,000 in the 4 years since the cash balance conversion,
Cigna actually intends to pay her no more than what she had previously earned
at the end of 1997. Paras.26-27. If Cigna’s position were to prevail,
the annual rates of accrual for 1998-2001 would be a sham.
Plaintiff’s first claim for relief is built on the Second Circuit’s
September 2000 decision in Esden v. Bank of Boston, 229 F.3d 154, and the
authorities cited therein: Namely, ERISA’s “133 1/3%” accrual
rule, ERISA’s anti-forfeiture rule, and the Treasury Department regulations
on forfeitures. The Esden decision is one of only two circuit court decisions
that have addressed accruals and vesting under cash balance pension plans;
the other decision, Lyons v. Georgia Pacific, 221 F.3d 1235 (11th Cir. 2000),
is discussed in Esden.
In Esden, the Bank of Boston converted to a cash balance plan in 1989.
In accordance with ERISA, the Bank of Boston protected the benefits that
Lynn Esden had earned with her 16 years of service before the change and
offered her additional accruals for her service after the change. However,
the Bank of Boston next offered Ms. Esden an option under which it would
actually only pay part of the value of the benefits she was to have accrued
after the change. The Second Circuit held that the “only test that
[a cash balance pension plan like the Bank of Boston’s] might satisfy
is the so-called 133 1/3 percent test under ERISA section 204(b)(1)(B).” Id.
at 167. This accrual test requires that the plan offer annual rates of benefit
accrual which do not escalate by more than 33%. Id. According to the Court,
a plan sponsor “tries to have it both ways” if it claims compliance
with ERISA’s benefit accrual rules, but then conditions the actual
right to payment. Id. at 167 n.8 and 168. The Court relied on the Treasury
Department’s nonforfeitability regulation which prohibits conditions
on entitlement to accrued benefits based upon subsequent events or forbearance.
The Court concluded that “part of [Lynn Esden’s] pension benefit
was made conditional on the distribution option chosen, in violation of the
anti-forfeiture provisions of ERISA § 203(a).” Id. at 158 and
168. The Second Circuit also held that ERISA prohibits “allowing a
plan to offer an employee” the “choice of a partial forfeiture
in exchange for a particular form of payment.” Id. at 173.
In its 19-page memorandum, Cigna does not address Esden or any of the authorities
cited in it on which the Plaintiff relies. Because Cigna does not mention
the authorities on which Plaintiff relies for her claim, it goes without
saying that Cigna’s motion does not describe any reason why Plaintiff
cannot rely on those authorities as the basis for relief.
Instead of discussing the authorities cited in the Complaint, Cigna turns
to the Supreme Court’s decision in Alessi v. Raybestos-Manhattan, 451
U.S. 504 (1981). See Defs. Mem. at 10, 14, 15, 16, and 19. Alessi addressed
a pension formula which offset awards of worker’s compensation benefits.
The Court recognized that plan provisions that offset worker’s compensation
benefits were not among the forfeitures that Congress expressly permitted
in ERISA. However, the Supreme Court held that worker’s compensation
offsets were permissible nevertheless because the IRS had permitted offsets
of worker’s compensation in revenue rulings issued before ERISA was
enacted and the Treasury Department had permitted such offsets, too, in regulations
interpreting ERISA’s vesting rules that the Treasury Department issued
after ERISA’s enactment. 451 U.S. at 521 and 526.
The limits of Alessi’s holdings are not subject to serious debate.
This circuit’s Bonovich v. Knights of Columbus decision, written by
Judge Calabresi, states that Alessi concluded that integration of workers’ compensation
payments “does not necessarily violate ERISA” and “refused
to strike down” such offsets because a Treasury Regulation expressly
permitted them. 146 F.3d 57, 59 (1998). Judge Calabresi writes that “What
else Alessi did is, however, far from clear.” 146 F.3d at 60. Although
Cigna repeatedly quotes dicta from the Alessi opinion, see Defs. Mem. at
10, 14, 15, 16, and 19, the Bonovich opinion agreed with an Eighth Circuit
decision by Judge Cudahy that the dicta on which Cigna relies is “logically
unstable” because “any contractual provision that called for
the forfeiture of benefits could be described as defining the content of
the nonforfeitable benefit.” 146 F.3d at 60 n.2. In Hughes Aircraft
Co. v. Jacobson, 525 U.S. 432, 441 (1999), the Supreme Court also qualified
the dicta in Alessi that the “level of pension benefits is not prescribed
by ERISA” as “assuming that an employee’s minimum accrued
benefit is provided” and that the vesting standards are satisfied.
Not only does Alessi contain no relevant holding and dicta that has subsequently
been limited, but the Court’s reasoning is inapplicable here: The Treasury
Department has never issued regulations or revenue rulings permitting employers
to impose conditions on the payment of new accruals that are required to
comply with ERISA’s accrual rules. Indeed, the relevant Treasury Department
regulation is the one on which the Plaintiff relies (see Para. 36 of the
Complaint, relying on 26 C.F.R. 1.411(a)-4): That regulation specifically
prohibits forfeitures of accrued benefits based on subsequent events or forbearance.
Cigna next looks for support in the Bonovich v. Knights of Columbus decision
and in decisions from the Seventh and Ninth Circuits. All of the decisions
cited by Cigna suggest that ERISA does not prohibit, per se, all forms of “integration” between
a pension plan’s benefits and other company benefits that an employee
concurrently earns. However, Defendants seek to use these decisions as if
they hold that ERISA allows the plan sponsor to impose any type of conditions
that it wants on the payment of retirement benefit accruals, including conditions
based on foregoing previously earned benefits. This holding is found no where
in these decisions.
As the most critical example, Cigna relies on the circuit opinion and Judge
Arterton’s decision below in Bonovich v. Knights of Columbus, 146 F.3d
57 (1998), aff’g, 963 F. Supp. 143 (D. Conn. 1997). Bonovich addressed
and approved of a pension benefit formula that integrated benefits from another
source–sales commissions from renewals of life insurance policies.
However, the Bonovich decision, which was issued two years before Esden,
specifically states that the benefits that the Knights of Columbus were offsetting “cannot
be construed as being previously earned and vested deferred wages.” 146
F.3d at 61. By contrast, the condition on payment which is at issue here
is based on whether Mrs. Amara foregoes part of the value of her “previously
earned and vested deferred wages.” Cigna is conditioning the payment
of new accruals for the years since 1998 based on whether or not Mrs. Amara
accepts a deep discount in the value of her previously-earned benefits from
23 years of employment before 1998. Because it predates Esden, Bonovich obviously
cannot be interpreted, moreover, to distinguish or narrow that decision.
The decisions from the Seventh Circuit which Cigna cites also do not address
Esden or the rules on which it relies. Defendants quote from White v. Sundstrand
Corp., 256 F.3d 580 (7th Cir. 2001), cert. denied, 122 S.Ct. 666 (2001).
Defs. Mem. at 10 and 12. White concerns what is called a “floor offset” plan.
Under long-standing IRS revenue rulings, floor offset plans are arrangements
under which a participant’s benefits under a defined benefit plan act
as a floor for “benefits provided by a concurrently operating profit-sharing
plan.” Rev. Rul. 76-259, 1976-2 C.B. 111 (emph. added). If a plan complies
with the IRS’s requirements for a floor offset plan, including the
requirement that the “benefits provided . . . concurrently” are
nonforfeitable, the IRS will test the “accrued benefit . . . determined
without regard to the offset” for compliance with ERISA’s accrual
rules. Id. The Seventh Circuit’s White decision only addresses “floor
offset” arrangements which meet these standards. 256 F.3d at 581-82.
It nowhere addresses the reservation in Bonovich for “previously earned
and vested” benefits or this circuit’s Esden decision on whether
conditions may be placed on the payment of accruals required under ERISA’s
133 1/3% rule.
Likewise, in Williams v. Caterpillar, 944 F.2d 658 (9th Cir. 1991), the
Ninth Circuit reviewed a benefit offset that was “part of the formula” for
determining accrued benefits. According to the Ninth Circuit, the formula
complied with ERISA’s accrual rules. The Williams panel was careful
to point out that the “appellants have not identified or demonstrated
a substantive ERISA violation in the calculation of their benefits” and
that the “offset at issue in this case is itself part of the formula
for determining the amount of appellants’ pension payments; it is not
a subsequent deduction from that sum.” 944 F.2d at 664 .
In contrast to Williams, Mrs. Amara’s claim involves a condition “subsequent” to
payment of her new accruals that is not part of the formula for determining
her annual benefit amount. Her annual benefit accruals are computed under
the formula that complies with ERISA’s 133 1/3% accrual rule. As discussed
above, this circuit’s Esden decision addresses how a retirement plan
that complies with ERISA’s 133 1/3% accrual rule “cannot have
it both ways”: The plan cannot comply with the 133 1/3% rule by offering
certain accruals but then condition payment of those same accruals on foregoing
part of a previously earned benefit. Williams discusses none of these authorities.
Plaintiff’s counsel do not know whether some of the claims Mrs. Amara
has raised could have been raised in Williams. What we know is that many
of Mrs. Amara’s claims were raised in Esden. It is beyond debate that
a case is not controlled by a decision in a different circuit involving different
parties in which the same claims were not raised. Given Esden, a dismissal
of Mrs. Amara’s claims under Rule 12(b)(6) would clearly be improper.
In addition to not addressing the Esden decision or showing an insuperable
barrier to relief, Cigna’s motion to dismiss is defective because Cigna’s
memorandum challenges the facts alleged in the Amara Complaint. At pages
13 through 14, Cigna contends that Plaintiff’s complaint “does
not accurately reflect the terms of the Plan” and then questions whether
Mrs. Amara’s rights to her new accrued benefits are conditional at
all. Without citing to any Plan terms, Cigna contends that if Mrs. Amara’s
previously-earned benefits (which Cigna calls the Minimum Benefit) are higher
than the cash balance account that contains her post-1998 accruals, the “higher
benefit is coming from both the Minimum Benefit [i.e., her previously-earned
benefits] and her Part B Account balance.” Defs. Mem. at 14. This position
is both difficult to follow and illogical. If Mrs. Amara only receives her
previously-earned benefits, it does not logically follow that she can be
receiving both that benefit and her new account balance. In advancing this
argument, Cigna casts aside not only logic, but also the terms of the Plan
document which are described in Paragraph 32 of the Complaint. This is clearly
inappropriate on a Rule 12(b)(6) motion where the Complaint’s allegations
must be accepted as true.
At the conclusion of this part of its memorandum, Cigna maintains that “Plaintiff
simply wants to have her proverbial cake and eat it too.” Defs. Mem.
at 16. This is an inapt metaphor: An individual who wants to “have
her cake and eat it, too,” is a person who wants two items both of
which they inherently cannot possess. Mrs. Amara is a dedicated and highly-regarded
27 year Cigna employee who has financial responsibilities for herself and
her family. She wants to receive the statutorily-protected retirement benefits
that she earned with her 23 years of employment before 1998 and the new annual
accruals that she has earned with her 4 years (and counting) of employment
after 1998. Comparing her with someone who wants to have her “cake
and to eat it too” is inapt. Tellingly, however, the adage appears
to characterize Cigna’s own position: The Esden decision tells us that
the plan sponsor cannot “have it both ways”: Cigna cannot claim
that it is providing Janice Amara annual benefits of over $7,500 for the
purpose of complying with ERISA’s 133 1/3% accrual rule, but then condition
payment of those benefits on whether she gives up part of the value of the
benefits that she earned before 1998.
III. Plaintiff’s claim that the disclosures in the SPD are inaccurate
and incomplete also states a claim for relief upon which relief may be
granted.
Cigna has also moved to dismiss Mrs. Amara’s claim that Cigna’s
summary plan description (“SPD”) violates ERISA. To comply with
ERISA Section 102, 29 U.S.C. §1022, SPD’s are required to “clearly
identify[],” in language “calculated to be understood by the
average plan participant,” “circumstances which may result in
. . . denial, loss, forfeiture or suspension of any benefits that a participant
or beneficiary might otherwise reasonably expect the plan to provide on the
basis of the description of benefits.” 29 C.F.R. 2520.102-2(a) and
-3(l); Layaou v. Xerox Corp., 238 F.3d 205, 209 (2d Cir. 2001). As set out
in Paragraph 40 of the Amara Complaint, Cigna’s 1998 and 1999 SPDs
affirmatively state: “Each dollar’s worth of credit is a dollar
of retirement benefits payable to you after you are vested.” Cigna’s
SPDs then fail to identify any circumstances which may result in the denial,
loss, or forfeiture of those dollars. Id. The SPDs offer no “clear” or “understandable” disclosure
that the pay credits are conditional on the employee giving up part of the
value of their previously earned benefits.
Although the Amara complaint clearly alleges that the SPD “does not
disclose any conditions on receipt of the new cash balance pension accruals,” para.
40, Cigna’s motion contends exactly the opposite: Cigna maintains that
the SPD is "complete and accurate in its description of benefits under
Part B." Defs. Mem. at 17. In asserting this, Cigna does not accept
the factual allegations in the Complaint as true. As a cover, Cigna's memo
quotes four passages from the SPD which Cigna says, "Plaintiff has failed
to cite or attach to her Complaint." See Memo. at 16. However, none
of those passages comes close to identifying the conditional payment rule
which Cigna has adopted. For example, Cigna quotes a passage that says “If
you participated in the Pension Plan before 1998, your old plan benefits
were converted into an opening account balance in this Plan.” Defs.
Mem. at 17. This does not disclose that payment of the new benefit accruals
is conditional and it does nothing to correct the impression that “[e]ach
dollar’s worth of credit is a dollar of retirement benefits payable
to you after you are vested.”
As the authorities on motions to dismiss show, Defendants may only dispute
the allegations in a complaint when documents that are part of the complaint “contradict” the
complaint’s allegations. See Defs. Mem. at 9 (citing In re Colonial
Limited Partnership Litigation, 854 F. Supp. 64, 79 (D. Conn. 1994). This
is not one of those cases. Like the emperor with no clothes, Cigna seems
to believe that if it quotes several passages from the SPD in its memo, no
one will notice that the passages do not “contradict” the Complaint’s
allegations at all. Regardless of how Cigna characterizes its motion, it
is clear that Cigna has not accepted the Complaint’s allegations as
true but is contesting them in a Rule 12(b)(6) motion. It is hornbook law
that this is not permitted.
Cigna’s contention that Plaintiff fails to state a claim also overlooks
the relevant authority in this circuit on claims for relief based on disclosure
violations. In Layaou v. Xerox Corp., 238 F.3d 205 (2d Cir. 2001), the Second
Circuit held that an SPD violated ERISA when it did not describe the "full
import" of an offset provision contained in the plan document. In Layaou,
Xerox failed to mention in its SPD that retirement benefits were offset by
a “phantom account” based on the appreciated value of prior distributions.
The Second Circuit held that “as a matter of law,” the SPD “failed
to provide notice to Layaou and other similarly situated employees that their
future benefits would be offset by an appreciated value of their prior lump
sum distributions.” 238 F.3d at 209.
Cigna also does not cite the Second Circuit’s decision in Devlin
v. Blue Cross and Blue Shield, 274 F.3d 76 (2d Cir. 2001). Devlin holds that
even if the disclosures in an SPD have “ambiguities,” the trier
of fact must evaluate the defendants' communications "for affirmative
misrepresentations concerning plan benefits and for failure to provide completely
accurate plan information." 274 F.3d at 89-90. The district court is
not to decide such issues against a plaintiff on summary judgment–much
less on a motion to dismiss.
Cigna next contends that "Plaintiff has not alleged, and cannot reasonably
allege, any detrimental reliance" on the SPD. Defs. Mem. at 18. There
are two responses to this: First, Cigna appears to suggest improperly that
a complaint must plead each element of an SPD claim with particularity in
order to survive a motion under Rule 12(b)(6). The Federal Rules establish,
however, that plaintiffs do not need to engage in technical forms of pleading
except in pleading fraud, which Plaintiff has not done. See Fed. R. Civ.
P. 8(e) and 9(b); Swierkiewicz, supra, 2002 U.S. Lexis 1374 at *13 (following
Leatherman v. Tarrant County, 507 U.S. 163, 168 (1993), in declining to extend
exception to notice pleading for fraud “to other contexts”).
Second, the Second Circuit has not settled on whether an SPD claim requires
proof of “actual reliance” and “if so” how it is
to be proved. In Layaou, the Second Circuit observed that the circuit courts,
as well as district courts within the Second Circuit, are “divided
as to whether proof of actual reliance upon a faulty SPD is a prerequisite
to recovery.” 238 F.3d at 212. The Second Circuit remanded to the district
court to decide “whether Layaou must demonstrate detrimental reliance
and/or prejudice” and “if so, including whether Layaou’s
statements in his affidavit that he read and relied upon the faulty SPD .
. . were sufficient to create a triable issue of fact.” Id.
Layaou is, moreover, not, the only Second Circuit case to this effect:
The Second Circuit has made the point that the issue of reliance or prejudice
has not been resolved in three other decisions. See Moriarity v. United Tech.
Corp. Represented Employees Retirement Plan, 158 F.3d 157, 157-58 (2d Cir.
1998) (per curiam) (“we find it unnecessary to reach the issue” of
reliance, which “has not been the subject of a definitive ruling” by
this court); Heidgerd v. Olin Corp., 906 F.2d 903, 909 (2d Cir. 1990) (because
reliance issue was not before the court on appeal, “we express no view
as to the correctness of the ruling that proof of reliance is necessary to
the enforcement of the terms of an ERISA plan summary”); Howard v.
Gleason Corp., 901 F.2d 1154, 1161 (2d Cir. 1990) (court “leaves to
another day the question of whether reliance upon a faulty plan description
is a prerequisite to ERISA recovery”). Cigna’s memo does not
mention any of these decisions.
Where a duty to disclose exists, there is, moreover, precedent from securities
cases that reliance is presumed from the materiality of the information not
disclosed, following the Supreme Court’s decisions in Affiliated Ute
Citizens of Utah v. United States, 406 U.S. 128, 152-54 (1972), and Mills
v. Electric Auto-Lite Co., 396 U.S. 375, 384-85 (1970). “The presumption
of reliance exists . . . to aid plaintiffs when reliance on a negative would
be practically impossible to prove.” Joseph v. Wiles, 223 F.3d 1155,
at 1162-63 (10th Cir. 2000). In Simon DeBartolo Group v. Richard E. Jacobs
Group, 186 F.3d 157, 173 (2d Cir. 1999), this circuit held that “where
the claim rests on an omission, . . . reliance may be presumed upon a showing
that the omitted information was material.” See also Feinman v. Dean
Witter Reynolds, Inc., 84 F.3d 539, 541 (2d Cir. 1996).
The presumption of reliance on the non-disclosure of material information
should be applied to non-disclosure cases under ERISA. In Daniel v. Teamsters,
439 U.S. 551, 570 (1979), the Supreme Court decided that the Securities Acts
did not apply to employees’ “investment” interests in their
retirement plans, but ruled that “Whatever benefits employees might
derive from the effect of the Securities Act are now provided in more definite
form through ERISA.” The Court’s statement would be untrue if
enforcement of ERISA disclosure rules was stymied by a burden of proof that
requires employees, in contrast to other investors, to prove negatives in
cases involving material non-disclosures.
In view of the Federal Rules on pleading, the Second Circuit’s Layaou
decision, and the presumption of reliance on material non-disclosures, it
would be error to dismiss the plaintiff’s SPD claim under Rule 12(b)(6).
As the Supreme Court recently ruled, it “seems incongruous to require
a plaintiff, in order to survive a motion to dismiss, to plead more facts
than he may ultimately need to prove to succeed on the merits . . . .” Swierkiewicz,
supra, 2002 U.S. Lexis 1374 at *10-11. Finally, even if the elements of reliance
for an SPD claim were ultimately settled along the line that Cigna would
choose and technical forms of pleading were required, Plaintiff would ask
the court for leave to amend the pleadings to add additional allegations.
Mrs. Amara will testify, quite clearly, that she read Cigna's SPD and understood
that she was earning additional benefits. She did not learn that she was
not actually earning any additional benefits until she talked with an actuary
at a farewell party in Hartford on September 14, 2000 for two other Cigna
employees. Amara Declaration at Paras. 2-5.
Conclusion
For these reasons, Cigna’s motion to dismiss falls far short of the
standards for dismissing claims pursuant to Rule 12(b)(6). Plaintiff’s
complaint sets out two claims upon which relief may be granted. Defendants
have not addressed the Second Circuit’s Esden v. Bank of Boston decision
and the related authorities upon which the first claim is based. The Second
Circuit’s Bonovich decision, which predates Esden, is not adverse to
Plaintiff’s claim and contains an exception which actually anticipates
Plaintiff’s claim. With respect to the second claim about the non-disclosure
of material facts in the SPD, Cigna has not accepted the facts alleged in
the Complaint as true and has omitted authorities in this jurisdiction, including
the Second Circuit’s decision in Layaou, in order to justify an assertion
that the claim should be dismissed.
While Plaintiff does not want to deny Cigna’s right to contest her
claims, Defendants’ challenge to the legal sufficiency of her Complaint
under Rule 12(b)(6) was obviously made under the “it can’t hurt” school
as a way to see if the Court might accept some of Cigna’s arguments
before the case is fully developed. The Court has already denied Cigna’s
companion motion to stay discovery. Plaintiff respectfully submits that the
Court should deny the motion to dismiss, too. Indeed, Cigna could be sanctioned
under Rule 11 for advancing a motion to dismiss that is so plainly unwarranted
under the existing law on claims under ERISA.
Dated: March 11, 2002
Respectfully submitted,
Stephen R. Bruce
Suite 210
805 15th St., NW
Washington, DC 20005
(202) 371-8013
Thomas Moukawsher Ct08940
Moukawsher & Walsh, LLC
328 Mitchell St.
Groton, CT 06430
(860) 445-1809
CERTIFICATE OF SERVICE
This is to certify that copies of the foregoing Plaintiff’s
Opposition to Motion to Dismiss of Defendants Cigna Corp. and Cigna Pension
Plan and the accompanying Declaration of Janice C. Amara were mailed, postage
prepaid, on this 11th day of March 2002 to:
James A. Wade
Robinson & Cole
280 Trumbell St.
Hartford, CT 06103
Christopher A. Parlo
Morgan Lewis & Bockius
100 Park Ave.
New York, NY 10178
Joseph J. Costello
Jeremy P. Blumenfeld
Morgan Lewis & Bockius
1701 Market St.
Philadelphia, PA 19103-2921
_________________
Thomas Moukawser
