In Osberg v. Foot Locker, Inc., No. 13-187-cv. (2nd Cir. 2014) (Summary Order), the plaintiff, Geoffrey Osberg (“Osberg”), was appealing the district court’s award of summary judgment to the defendants, his former employer Foot Locker, Inc., and Foot Locker Retirement Plan (“Foot Locker”), on claims that Foot Locker violated ERISA, in connection with converting its defined benefit plan to a cash balance plan, by (1) issuing false and misleading summary plan descriptions in violation of ERISA’s disclosure requirements; (2) breaching fiduciary duties in making such materially false and misleading statements and omissions and (3) failing to provide plan participants with notice, as required by ERISA § 204(h).
In analyzing the case, the Second Circuit Court of Appeals (the “Court”) said first, as to the Section 204(h) notice claim (claim (3) above), that Section 204 (h) does not, in any event, afford Osberg the remedy he seeks, i.e., a pension benefit calculated under the cash balance plan but with an opening balance equal to the value of the retirement annuity he had already earned under the old formula. This is because insufficient notice in violation of § 204(h) does not, as Osberg contends, invalidate only the undisclosed portion of the plan amendment, but rather voids the entire amendment. Thus, the Court affirmed the district court’s dismissal of his § 204(h) claim.
As to Osberg’s disclosure claims (claims (1) and (2) above), the Court said that to survive summary judgment, Osberg was required to raise a genuine issue of material fact with respect to his demand for “appropriate equitable relief”–specifically, surcharge or reformation–under ERISA § 502(a)(3). The Court noted that, in CIGNA Corp. v. Amara, the U.S. Supreme Court recognized surcharge and reformation as traditional equitable remedies that may allow for awarding monetary compensation based on misleading disclosures. The Court further noted that it had recently articulated the following two questions to be answered in determining entitlement to these remedies: (i) what remedy is appropriate and (ii) whether the plaintiffs have established the requisite level of harm as a result of the notice violations.
Here, the Court continued, the district court concluded that Osberg’s disclosure claim failed to raise an issue of fact as to whether he suffered the type of “actual harm” necessary to obtain the equitable relief of reformation and surcharge. As such, the district court erroneously applied an “actual harm” requirement. Since, in this case, reformation of the plan in question would afford Osberg the total relief sought, there is no need for the Court to decide now whether he would also be entitled to recovery under surcharge. Thus, the Court overturns the district court’s summary judgment, and remands to the case back to the district court, as it applies to a request for reformation.