Amara: Why Reformation Is Better Than Estoppel

Here is a worthwhile, almost Cliffnotes (do they still exist?), guide to the ruling in Amara from the American Lawyer. It continues what is quickly becoming the norm for published pieces discussing the case, which is to present the opinion in an “on the one hand, on the other hand fashion,” by describing it as partly a win for employers, partly a win for employees, and a decision whose real impact and meaning cannot be determined yet. On that last point, I think it is more clear what the decision means long term than various writers are assuming. The opinion firmly directs – whether one calls it a holding or instead dicta is almost irrelevant, since when the majority of the Supreme Court says a case should proceed a particular way, as occurred here, whether that clear direction to the lower courts is actually a holding or just guidance seems to be at most of academic interest – that the proper approach to a case involving a conflict between the language of the SPD and the language of the plan terms is not to treat it as an estoppel question, as the courts have done, but to instead view it as a reformation question, and determine which set of language more accurately fits the intended scope of the plan’s benefits. If you think about it, this more properly and cleanly resolves the question of how to resolve a conflict between the language of the plan and the language of an SPD, as it results in providing the benefits that the plan itself was intended to provide, rather than whatever may be the outcome of a scrivener’s mistake, whether that inaccuracy was buried in the plan (and thus the phrasing of the SPD more accurately reflects the original intent of the plan) or in the SPD itself (in which case the SPD has the language that should be ignored). Moreover, it results in the consistent application of the plan across all plan participants, by enforcing the plan in its proper and intended terms and scope, rather than simply revising it or applying the SPD terms on an ad-hoc basis or case by case basis to suit the circumstances of the particular plan participant who is suing and who may or may not have been prejudiced by the discrepancy. An estoppel theory, and a requirement that a plan participant have been harmed by inconsistent language in the SPD as opposed to the plan terms themselves, almost guarantees that some participants – namely those who relied upon and were prejudiced by differing language in an SPD – will get different and likely greater benefits than those who cannot show this. The reformation approach to reconciling differences between the language of an SPD and the language of a plan is a much cleaner, more consistent and more appropriate way to remedy this type of problem that results in consistent treatment of plan participants in a way that an estoppel theory likely cannot do.

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