News & Events

Sixth Circuit Issues Shocking Opinion Against ERISA Insurer, Dramatically Changes The ERISA Landscape

Submitted By Firm: Baker, Donelson, Bearman, Caldwell & Berkowitz, PC

Contact(s): Kathlyn Perez, Phyllis G. Cancienne, Robert C. Divine


Marcie Kiggans Bradley

Date Published: 1/23/2014

Article Type:

Share This:

In what can only be described as a shocking opinion, the Sixth Circuit Court of Appeals issued a 2-1 decision affirming a lower court's award of $3.8 million dollars in disgorged profits to a former president of Arthur J. Gallagher & Co., after finding that Life Insurance Company of North America (LINA) arbitrarily and capriciously denied him disability benefits. Rochow v. Life Ins. Co. of N. Am., No. 12-2074 (6th Cir. Dec. 6, 2013). What makes this opinion so dramatic is that traditionally an award for wrongful denial of benefits has been limited to payment of disability benefits and attorneys' fees under § 502(a)(1)(B). In this case, however, the majority awarded the plaintiff disability benefits, attorneys' fees and disgorgement of profits it earned on the wrongfully retained benefits under an equitable theory of unjust enrichment. Judge David W. McKeague, dissenting, described it as "an unprecedented and extraordinary step to expand the scope of ERISA coverage."

The plaintiff initially sued LINA for recovery of benefits and alleged breach of fiduciary duty after LINA denied him benefits. LINA argued that the plaintiff's employment ended before his disability began because he filed for benefits after he resigned. The district court concluded that LINA's denial was arbitrary and capricious, and the Sixth Circuit Court of Appeals affirmed.

On remand, the plaintiff filed a motion seeking an equitable accounting and disgorgement of LINA's profits that it earned on the retained benefits. The plaintiff argued that he[1] was entitled to disgorgement because it was necessary to prevent LINA from being unjustly enriched by retaining the profits it earned on his benefits. The plaintiff's expert calculated that his benefits earned LINA between 11-39% annually and, therefore, made LINA approximately $2.8 million by retaining his benefits. The district court adopted the plaintiff's reasoning and granted his motion for an equitable accounting of profits and disgorgement.

After significant briefing, LINA appealed the disgorgement issue to the Sixth Circuit Court of Appeals. On appeal, the plaintiff argued that he was entitled to disgorgement of profits because LINA breached its fiduciary duties under § 502(a)(3), and disgorgement was necessary as stated to the lower court. In addition to making numerous procedural arguments, LINA asserted that disgorgement was inappropriate because equitable relief under § 502(a)(3) is only available where § 502(a) does not otherwise provide an adequate remedy, and the award of benefits under § 502(a)(1)(B) is the appropriate remedy. Permitting the additional award would violate the holdings in Varity Corp. v. Howe, 516 U.S. 489 (1996) and Wilkins v. Baptist Healthcare System, Inc., 150 F.3d 609 (1998), which both either held or suggested that a claimant cannot seek to recover under both claims for denial of benefits and breach of fiduciary duty.

The Court noted that "[a]lthough courts initially interpreted Wilkins as a complete bar to simultaneous claims for benefits under § 502(a)(1)(B) and breaches of fiduciary duty under § 502 (a)(3), several exceptions have emerged." Upholding the district court's decision, the Sixth Circuit found that this case was a logical extension of the prior exceptions because "§ 502(a)(1)(B) cannot provide all the relief Rochow seeks." Specifically, § 502 (a)(1)(B) could not provide "the equitable redress of preventing LINA's unjust enrichment" because it only allows plaintiff to recover benefits to him. The court further noted that "[n]othing in ERISA itself or Varity limits this Court to allowing remedies under § 503 (a)(3) that focus on the plaintiff's injuries" and "disgorgement does not result in double compensation," nor "offend the doctrine against double recovery." Accordingly, the Court held that "disgorgement is an appropriate equitable remedy under § 502(a)(3) and can provide a separate remedy on top of a benefit recovery."

The Court also addressed LINA's argument that this extension will require significant discovery beyond the administrative record. While the Court acknowledged LINA's concerns about discovery slowing down litigation of benefits, it weighed more heavily "the risk of liability and extensive discovery regarding profits or interest will act as an incentive to ensure plan administration acts in the interest of the plan participants throughout the claims process." The Court also noted that not every plan administrator who acted arbitrarily and capriciously will have also breached its fiduciary duty.

Judge David W. McKeague, dissenting, argued that "disgorgement of profits undermines ERISA's remedial scheme and grants the plaintiff an astonishing $3,797,867.92 windfall under the catchall provision in § 502(a)(3)." Judge McKeague noted that "[a]t its core, ERISA is a remedial statute" that does not seek to punish violators. Rather, it attempts to put the claimant in a position he or she would have been in had the insurance company not wrongfully denied them benefits. He found that "Plaintiff was made whole when he was paid his disability benefits and attorney's fees. If not, an award of prejudgment interest certainly would have made him whole." Recovery for disgorged profits allowed the plaintiff to have a second recovery for the same injury, which the Supreme Court and the Sixth Circuit have interpreted ERISA to prevent. Plaintiffs have never been permitted to recover under both theories.

After distinguishing the exceptions the majority found to filing simultaneous claims for benefits under § 502(a)(1)(B) and breaches of fiduciary duty under § 502 (a)(3), Judge McKeague stated that "the majority's approach is an end run around the limitations placed on the use of § 502(a)(3) and is willfully blind to the negative repercussions that undoubtedly will ensure. As § 502(a)(1)(B) provided an adequate remedy, compensation under § 502(a)(3) was unnecessary."

So, what does Rochow mean for ERISA insurers or employers with ERISA plans? Money. ERISA insurers and employers should expect to see a sudden increase in lawsuits asserting breach of fiduciary claims and seeking disgorgement of profits. These new cases will slow litigation, increase discovery and litigation costs, and drive up settlement values. ERISA insurers and employers may want to reassess reserves and litigation budgets because this case has dramatically changed the ERISA landscape. They should also prepare their amicus curiae briefs because this case will be litigated up to the Supreme Court of the United States. Stay tuned to see what happens.



[1] The plaintiff died in October 2008. Thereafter, the representative for his estate was substituted as the plaintiff in this action. To simplify, plaintiff is referred to as "he."


Find an Employment Lawyer

View or print a complete ELA member list »

Client Successes

Altra Industrial Motion Inc.

Altra Industrial Motion Inc. has multiple locations in the U.S., as well as Central America, Europe, and Asia. The Employment Law Alliance has proved to be a great asset in assisting us in dealing with employment issues and matters in such diverse venues as Mexico, Australia, and Spain. We have obtained excellent results using the ELA network for matters ranging from a multi-state review of employment policies to assisting with individual employment issues in a variety of foreign jurisdictions.

In one instance, we were faced with an employment dispute with a former associate in Mexico that had the potential for substantial economic exposure. The matter had been pending for over a year, and we were not confident in the employment advice we had been receiving. I obtained a referral to the ELA counsel in Mexico, who was able to obtain a favorable resolution of the dispute in only a few days. Based on our experiences with the ELA, we would not hesitate to use its many resources for future employment law needs.

American University in Bulgaria

In my career I have been a practicing attorney, counsel to the Governor of Maine, and CEO of a major public utility. I have worked with many lawyers in many settings. When the American University in Bulgaria needed help with employment litigation in federal court in Syracuse, New York, we turned to Pierce Atwood, the ELA member we knew and trusted in Maine, for a referral. We were extremely pleased with the responsiveness and high quality of service we received from Bond Schoeneck & King, the ELA's firm in upstate New York. I would not hesitate to recommend the ELA to any employer.

David T. Flanagan
Member of Board of Trustees 

Arcata Associates

I really enjoyed the Conducting an Effective Internal Investigation in the United States webinar.  We are in the midst of a rather delicate employee relations issue in California right now and the discussion helped me tremendously.  It also reinforced things that you tend to forget if you don't do these investigations frequently.  So, many, many thanks to the Employment Law Alliance for putting that webinar together.  It was extremely beneficial.

Lynn Clayton
Vice President, Human Resources

Barrett Business Services, Inc.

I recently participated in the ELA-sponsored webinar on the Employee Free Choice Act.  I was most impressed with that presentation.  It was extremely helpful and very worthwhile.  I have also been utilizing the ELA's online Global Employer Handbook.  This compliance tool is absolutely terrific. 

I am familiar with several other products that purport to provide up-to- date employment law information and I believe that this resource is superior to other similar compliance manuals.  I am delighted that the ELA provides this free to its members' clients.

Boyd Coffee Company

Employment Law Alliance (ELA) has provided Boyd Coffee Company with a highly valued connection to resources, important information and learning. With complex operations and employees working in approximately 20 states, we are continually striving to keep abreast of specific state laws, many of which vary from state to state. We have participated in the ELA web seminars and have found the content very useful. We appreciate the ease, cost effectiveness and quality of the content and presenters offered by these web seminars.  The Global Employer Handbook has provided our company with a very helpful overview of legal issues in the various states in which we operate, and the network of attorneys has helped us manage issues that have arisen in states other than where our Roastery and corporate headquarters are located in Portland, Oregon.

Capgemini Outsourcing Services GmbH

As an international operating outsourcing and consulting supplier Capgemini has used firms of the Employment Law Alliance in Central Europe. We were always highly satisfied with the quality of employment law advice and the responsiveness. I can really recommend the ELA lawyers.

Hirschfeld Kraemer

Stephen HirschfeldAs an employment lawyer based in San Francisco, I work closely with high tech clients with operations around the globe. Last year, one of my clients needed to implement a workforce reduction in a dozen countries simultaneously. And they gave me 48 hours to accomplish this. I don't know how I could have pulled this off without the resources of the ELA. I don't know of any single law firm that could have made this happen. My client received all of the help they needed in a timely fashion and on a cost effective basis.

Stephen J. Hirschfeld

Hollywood Entertainment Corporation

As the Vice President for Litigation & Associate General Counsel for my company, I need to ensure that we have a team of top-notch employment lawyers in place in every jurisdiction where we do business. And I want to be confident that those lawyers know our business so they don't have to reinvent the wheel when a new legal matter arises. With more than 3400 stores and 35,000 employees operating in all 50 U.S. states and across Canada, we rely on the ELA to partner with us to help accomplish our objectives. I have been delighted with the consistent high quality of the work performed by ELA lawyers. I encourage other in-house counsel to use their services, as well.

Ingram Micro

Ingram Micro is the world's largest technology distributor, providing sales, marketing, and logistics services for the IT industry around the globe. With over 13,000 employees working throughout the U.S. and in 35 international countries, we need employment lawyers who we can count on to ensure global legal compliance. Our experience with many multi-state and multi-national law firms is that their employment law services are not always a high priority for them, and many do not have experts in many of their offices. The ELA has assembled an excellent team of highly skilled employment lawyers, wherever and whenever I need them, and they have proven to be an invaluable resource to our company.

Konami Gaming

Our company, Konami Gaming, Inc., is growing rapidly in a very diverse and highly regulated industry. We are aggressively entering new markets outside the domestic U.S., including Canada and South America. I have had the recent opportunity to utilize the services provided by the ELA. The legal advice was both responsive and professional. Most of all, the entire process was seamless since our Nevada attorney coordinated the services and legal advice requested. I look forward to working with the ELA in the future, as it serves as a great resource to the legal community.

Jennifer Martinez
Vice President, Human Resources

Nikkiso Cryo, Inc.

Until recently, I was unaware of the ELA's existence. We have subsidiaries and affiliates throughout the United States, as well as in Asia, the Middle East and Europe. When a recent legal issue arose in Texas, our long-time Nevada counsel, who is a member of the ELA, suggested that this matter be handled by his ELA colleague in Dallas. We are very pleased with the quality and timeliness of services provided by that firm, and we are excited to now have the ELA as an important asset to help us address employment law issues worldwide.

Palm, Inc.

The ELA network has been immensely important to our company in helping us address an array of human resources challenges around the world. I strongly encourage H.R. executives who have employees located in many different jurisdictions to utilize the ELA's unparalleled expertise and geographic coverage.

Stacy Murphy
Former Senior Director of Human Resources

Rich Products

As the General Counsel for a company with 6,500 employees operating across the U.S. and in eight countries, it is critical that I have top quality lawyers on the ground where we do business. The ELA is an indispensable resource. It has taken the guesswork out of finding the best employment counsel wherever we have a problem.

Jill K. Bond
Senior Vice President/General Counsel, Shared Services and Benefits

Ricoh Americas Corporation

We have direct sales and service offices all over the U.S., but have not necessarily had the need in the past for assistance with legal work in every state where we have a business presence. From time to time, we suddenly find ourselves facing a legal issue in a state where we have no outside counsel relationship. It has been a real benefit to know that the ELA has assembled such an impressive team of experts throughout the U.S. and overseas.

A few years ago, we faced a very tough discrimination lawsuit in Mississippi. We had never had to retain a lawyer there before. I was absolutely delighted with the Mississippi ELA firm. We received an excellent result. They will no doubt handle all of our employment law matters in Mississippi in the future. I have also obtained the assistance of several other ELA firms around the U.S. and have received the same outstanding service. The ELA is a tremendous resource for our company.

Roberts-Gordon LLC

Our affiliated companies have used the Employment Law Alliance in connection with numerous acquisitions, and have always been extremely pleased with our ability to obtain the highest quality legal advice on due diligence issues from jurisdiction to jurisdiction. We have found the Employment Law Alliance firms to be not only first rate with respect to their legal advice but also responsive and timely in assisting us with federal and state law issues critical to our due diligence efforts. We consider the Employment Law Alliance to be an important part of our team.

Rockwell Collins, Inc.

We have partnered with many ELA firms on the development and execution of case management strategies with very positive results. We have been very pleased with the legal advice and counsel provided by the law firms we have utilized who are affiliated with the Employment Law Alliance. The ELA firms we have worked with are customer focused, responsive, and thorough in their approach to handling labor and employment law matters.

Elizabeth Daly
Assistant General Counsel


Sanmina-SCI has facilities strategically located in key regions throughout the world. Our customers expect that we will provide them with the highest quality and most sophisticated services in the marketplace. We have that same expectation for the lawyers with whom we do business. With operations in 17 countries, we need to be certain that we have a team of lawyers working together to address our employment law needs worldwide. The ELA has delivered exactly what it promised-- seamless and consistent high quality services delivered in each locale around the globe. It has quickly become a key asset for our human resources department.


We own, manage, and franchise hotels throughout the U.S. and in more than 90 countries. With more than 145,000 employees worldwide, ensuring that we comply with the complex web of local labor and employment laws in every one of these jurisdictions is a daunting task. The Employment Law Alliance has served as an important resource for us and we have benefited greatly from its expertise and long reach. When a legal dispute or issue has arisen in some far-flung place, Employment Law Alliance lawyers have always provided responsive, practical, and cost-effective assistance.

Wilmington Trust Corporation

Wilmington Trust has used the ELA to locate firms in California, Washington State, Georgia, and Europe. Our experience with the ELA lawyers with whom we have worked has always been one of complete satisfaction and prompt, practical advice.

Michael A. DiGregorio
General Counsel