:: Plaintiff’s Misrepresentation Claims Survive Preemption Challenge
. . . Pfizer’s alleged misrepresentations induced Thurman to accept employment and become a member of its pension plan. Just as in other cases, the crux of the matter is the nature of the remedies that Thurman requests. For this reason, to the extent that his claims are based on the expectation damages that Thurman requested in his complaint (i.e., the difference between the benefits promised and the benefits to which he was entitled), they are clearly preempted. However, Thurman’s state-law claims for other benefits lost in reliance on the alleged misrepresentation-for example, decreased wages, moving expenses, and forfeited stock options-have such a “ ‘tenuous, remote or peripheral’ effect on the plan†that they are not preempted. Thurman v. Pfizer, Inc., — F.3d —-, 2007 WL 1324889 C.A.6 (Mich.) (May 08, 2007)
In this case, an employee of Pfizer, Dr. Thurman, filed suit alleging that Pfizer misrepresented the monthly pension to which he would be entitled after five years of employment with the company.
Thurman alleges that during employment negotiations, the parties discussed the amount of Thurman’s expected retirement benefits. According to his complaint, Pfizer’s Recruiting Manager, Ruth Butts, orally informed Thurman that he would be eligible for full retirement at age 62 and would receive a monthly pension allowance of approximately $3,100 per month. In reliance on the benefits promised by Pfizer, Thurman left his former job in Ohio for the Pfizer position in Michigan.
Shortly after he began working for Pfizer, however, Pfizer’s Human Resources notified him that his pension would not be $3,100 per month but rather approximately $816 per month.
Thurman sued Pfizer in Michigan state court for rescission and to recover either expectation damages or reliance damages. Pfizer removed the case to federal court where the district court dismissed Thurman’s claims as preempted by ERISA. Thurman appealed.
The Case Before The Sixth Circuit
On appeal, Thurman abandoned his claims for expectation damages. Thus, the “sole question” on appeal was whether Thurman’s claims were preempted under ERISA. The Court held that the portions of Thurman’s state-law claims requesting reliance damages and rescission of his participation in the plan were not preempted by ERISA.
Plaintiff Claims Not Preempted Under ERISA § 1132
“[W]here there is no other independent legal duty that is implicated by a defendant’s actions,†any claim that could have been brought under § 1132, will be completely preempted by § 1132. See, Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004). In this case, the status of the plaintiff made the critical difference.
Pfizer argued that the plaintiff’s claims were essentially claims for fiduciary breach. On this theory, the plaintiff’s state law misrepresentation claims would be preempted by ERISA’s civil remedies scheme. The Court rejected this argument based upon the status of the plaintiff at the time the alleged misrepresentations occurred.
The Court stated:
Here, it is clear from Thurman’s complaint that at the time the alleged misrepresentation was made, Thurman was a potential employee. He was not yet a participant or beneficiary under the plan and, therefore, no fiduciary relationship existed. For this reason, we hold that Thurman could not have brought a claim for breach of fiduciary duty for the alleged misrepresentations, and, therefore, that his claims are not preempted by § 1132.
Thus, ERISA did not preclude the plaintiff’s claims since he could not have asserted a claim under ERISA.
Plaintiff’s Claims “Too Remote” To Be Preempted
Even though the plaintiff’s claims did not conflict with ERISA’s remedial scheme, the Court nonetheless had to consider whether 29 U.S.C. § 1144, “ERISA’s express preemption provision” preempted his claims. Section 1144(a) preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan†governed by ERISA. When a claim “relates to” a plan so as to be preempted, and when it is too remote to be preempted remains one of the perennial controversies in ERISA jurisprudence.
On the one hand, the Supreme Court has held that even general state contract and tort laws may also be preempted by ERISA (Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46 (1987)) – yet other state laws affect ERISA-governed plans in a way that is “too tenuous, remote, or peripheral†to say that they “relate to†the plan (Shaw v. Delta Airlines, 463 U.S. 85, 100 n. 21 (1983) (citing AT & T Co. v. Merry, 592 F.2d 118, 121 (2d Cir.1979) (holding that ERISA did not preempt a state’s garnishment of a spouse’s pension income to enforce alimony and support orders)).
Factor Analysis Applied
The Sixth Circuit applied the factors set forth in Penny/Ohlmann/Nieman, Inc. v. Miami Valley Pension Corp., 399 F.3d 692, 698 (6th Cir.2005) (”PONI”) in evaluating the issue. Under that authority, ERISA preempts claims that:
(1) ‘mandate employee benefit structures or their administration;’
(2) provide ‘alternate enforcement mechanisms;’ or
(3) ‘bind employers or plan administrators to particular choices or preclude uniform administrative practice, thereby functioning as a regulation of an ERISA plan itself.’ See. Marks v. Newcourt Credit Group, Inc., 342 F.3d 444, 453 (6th Cir.2003)
No Alternative Enforcement Mechanism
Only the second factor was pertinent in the view of the Court, and the plaintiff’s claims escaped that category based upon the type of relief sought.
[T]he crux of the matter is the nature of the remedies that Thurman requests. For this reason, to the extent that his claims are based on the expectation damages that Thurman requested in his complaint (i.e., the difference between the benefits promised and the benefits to which he was entitled), they are clearly preempted. However, Thurman’s state-law claims for other benefits lost in reliance on the alleged misrepresentation-for example, decreased wages, moving expenses, and forfeited stock options-have such a “ ‘tenuous, remote or peripheral’ effect on the plan†that they are not preempted.
Therefore, the Sixth Circuit reversed the district court’s decision. The Court remanded the case for further proceedings regarding Thurman’s state-law claims of fraudulent and innocent misrepresentation.
Note: The Sixth Circuit has decided several important cases relating to misrepresentation of benefits. In addition to the PONI case, the Court decided Briscoe v. Fine, 444 F.3d 478 (6th Cir.2006) in which the plainiffs’ claims were found to be preempted. The Sixth Circuit distinguished Briscoe in that:
1. The Briscoe plaintiffs were clearly disguising what should have been properly brought as a claim for a breach of fiduciary duty under ERISA and
2. The Briscoe plaintiffs sued in order to recover benefits under the plan.
Here, Thurman was a non-participant, who was induced to enter into employment with Pfizer based on certain representations, and who sought “something that is clearly outside the provisions of his benefit plan: what he gave up in reliance on Pfizer’s alleged misrepresentations.”
Clarification Of Precedent - In another Sixth Circuit opinion, cited in Thurman, Perry v. P*I*E Nationwide Inc., 872 F.2d 157, (6th Cir. 1989), the Court permitted plaintiffs misrepresentation claims to go forward to recoup irrevocable wage reductions associated with an ERISA plan set up to encourage employee retention. The defendants sold the company despite allegedly promising the employees that it would not be sold. The Court clarified the Perry decision stating:
Parties litigating cases subsequent to Perry have cited it for the proposition that there was no preemption because the claimed misrepresentation occurred prior to the plan coming into existence. However, this Court has explained that this is an inaccurate explanation of Perry’s holding; Perry is about the remedy requested, not the timeline of events.
In Perry, the key factor was that the plaintiffs’ request “not to be bound as participants and thus recoup their wage reductions†did not seek plan benefits.
Limited Holding - The Court took pains to put its holding in perspective stating:
We stress that our holding is a narrow one, constrained to the particular scenario presented in the case at bar. What we have here is simply a case of a person who left his old employer based on promises made by his new employer. These promises could have concerned anything-for example, an increase in wages, more vacation days, or free parking. Here, these promises just so happened to concern retirement benefits. We see no reason to bind employers to some promises used to induce acceptance of an employment offer, but give them a ‘get out of jail free card’ when their promises concern the scope of a plan governed by ERISA.
Expectation Damages - The claim for expectation damages could not survive ERISA preemption. This conclusion is derived from the following comment:
Thurman also requests rescission from the plan. Like his request for reliance damages, and unlike his now-abandoned request for expectation damages, awarding Thurman this relief does not in any way depend on an interpretation of the plan. See Lion’s, 195 F.3d at 809 (explaining that the plaintiff’s prayer for relief, which would require calculation of benefits that would have been owed, “is clearly unlike Perry, in which the plaintiffs sought an equitable remedy (recission) and a clearly defined monetary amount (lost wages) that in no way depended on an ERISA plan for determinationâ€). Therefore, Thurman’s request for rescission through his state-law claims is not preempted. (emphasis added)
