:: Assessing The Value Of A Promise – A Primer On ERISA Estoppel Claims
The written plan document ordinarily governs ERISA plan administration; statements or conduct by individuals implementing the plan can only estop an employer from enforcing the plan’s written terms in “extreme circumstances.†. . . We have consistently required that modifications to an ERISA plan must be in writing because ERISA exists, in part, to protect the financial integrity of pension and welfare plans by confining the payment of benefits to a plan’s written terms. Kannapien v. Quaker Oats Co., — F.3d —-, 2007 WL 3355718 (C.A.7 (Ill.)) (November 14, 2007)
A recent Seventh Circuit decision sets forth a helpful overview of the narrow circumstances in which ERISA plan participants may successful state a claim based upon misrepresentations of benefits.
The Facts
The plaintiffs had elected to take a severance package offered after their employer shut down a product line after a merger. The participants had previously received an estimate of benefits under the retirement plan that misstated the date of hire to include pre-merger service (though the benefits were evidently estimated using the correct length of service). In discussions about the severance incentives, additional misstatements were made.
At his meetings with Kannapien and Rozhon, Satterlee did not discuss their respective standard benefits under the Retirement Plan, nor did Satterlee represent that the offer of additional Severance Plan and change-in-control benefits would alter the unambiguous language of the Retirement Plan. In fact, Satterlee told both women that he “couldn’t calculate their pension benefit,†and advised each of them to contact the Employee Administration Center to obtain an estimate. However, at his meetings with Kannapien and Rozhon, Satterlee mistakenly informed each of them that their change-in-control benefits would be calculated based on their original Golden Grain hire dates instead of the proper date under the terms of the Retirement Plan, July 1, 1990. Kannapien and Rozhon admitted in separate depositions that Satterlee made an honest mistake in misstating the pertinent dates to them, and that they relied heavily on this mistake in deciding to retire.
Written Plan Requirement
When the participants retired and ultimately received benefits calculated on the shorter length of service, the filed suit under ERISA. Of the various claims asserted, the more interesting analysis focused on the claims of misrepresentation.
The Seventh Circuit affirmed the district court’s decision that the plaintiffs failed to make out a claim for estoppel. The Court began with the fundamental rule that:
The written plan document ordinarily governs ERISA plan administration; statements or conduct by individuals implementing the plan can only estop an employer from enforcing the plan’s written terms in “extreme circumstances.â€
(citing, Vallone, 375 F.3d at 639; Sandstrom v. Cultor Food Sci., Inc., 214 F.3d 795, 797 (7th Cir.2000); see also Downs v. World Color Press, 214 F.3d 802, 805 (7th Cir.2000).
The rationale for the rule was stated as follows:
We have consistently required that modifications to an ERISA plan must be in writing because ERISA exists, in part, to protect the financial integrity of pension and welfare plans by confining the payment of benefits to a plan’s written terms. See Operating Eng’rs Local 139 Health Benefit Fund v. Gustafson Constr. Corp., 258 F.3d 645, 650 (7th Cir.2001); Downs, 214 F.3d at 805.
Elements OF An ERISA Estoppel Claim
The Seventh Circuit went on to enumerate the essential elements of an ERISA estoppel claim. To prevail on an estoppel claim under ERISA, plaintiffs must ordinarily show:
(1) a knowing misrepresentation;
(2) made in writing;
(3) reasonable reliance on that representation by them;
(4) to their detriment.
The Court held that the plaintiffs failed to satisfy any required element of an ERISA estoppel claim.
Innocent Oral Misrepresentations
The plaintiffs lacked an essential element in that they could not prove that the defendant knowingly misrepresented the terms of the Retirement Plan to them. In fact, they actually conceded that the “clerical errors” in the estimate statements were unintentional.
No Written Misrepresentations
Further, since the retirement plan document stipulated that the pre-merger service would not be included in benefit calculations, the plaintiffs had to provided evidence of written mispresentations.
In light of the Retirement Plan’s clear language, [the plaintiffs] must present a written misrepresentation to trigger estoppel. See Bowerman, 226 F.3d at 588 (“We have made clear in our earlier cases that the oral representations of an ERISA plan may not be relied upon by a plan participant when the representation is contrary to the written terms of the plan and those terms are set forth clearly.â€). In their brief and at oral argument, [the plaintiffs] focused almost exclusively on the oral statements made to them by Satterlee and Winters. Even if we agreed that these oral statements were misrepresentations (which we do not), they are insufficient grounds for estoppel.
The Court was unwilling to consider the estimates as written evidence since it viewed those misstatements as “clerical”. In a perhaps question-begging analysis, the Court observed that:
The only alleged written misrepresentations [the plaintiffs] cite are contained in the December 2002 estimate statements and in the Employee Administration Center documents provided to them by Satterlee in early 2003. But as we have already explained, these estimate statements merely contained a clerical error; they did not misrepresent the actual amounts that [the plaintiffs] were entitled to under the Retirement Plan.
No Detrimental Reliance
Moreover, the Court was unwilling to accept the plaintiffs proof of reliance. The Court stated:
there is no evidence in the record of any reliance-detrimental or otherwise-by [the plaintiffs] either on the December 2002 estimate statements or on the Employee Administration Center documents in making their decisions to retire. In fact, [the plaintiffs] each acknowledged at separate depositions that the benefits under the Severance Plan, which were properly paid and are not at issue in this case, significantly motivated her decision to retire; each also admitted that she relied on the honest mistake conveyed to her orally by Satterlee. These admissions, even taking all facts in the light most favorable to [the plaintiffs], make it impossible for either to prove that she relied on any written statement to provided to her by Quaker.
Note: In Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574, 587-90 (7th Cir.2000) the court applied estoppel based on innocent oral misrepresentations. The court distinguished that case, stating that “a brief examination makes it clear that Bowerman is inapposite.” In that case, the Court stated that “we applied ERISA estoppel to Wal-Mart because its written health plan contained ambiguous provisions, and its employees made repeated incorrect statements that misled Bowerman into declining additional coverage provided under federal law. Yet,
Three distinctions between this case and Bowerman are immediately apparent. First, and most critically, the written plan at issue in Bowerman contained ambiguous language, while it is conceded here that the Quaker Plan is unambiguous. Second, the plaintiff in Bowerman detrimentally relied on statements by employees, and her reliance deprived her of benefits that she would have been eligible for under the terms of the plan had she made the additional-coverage election; here, it is uncontested that [the plaintiffs] received the full benefits to which the written terms of the Retirement Plan entitled them, regardless of any alleged reliance. Third, Bowerman concerned an employee health plan, while the instant case concerns a pension plan. See Helfrich v. Carle Clinic Ass’n, 328 F.3d 915, 918 (7th Cir.2003) (stating that unlike welfare benefits plans, ERISA requires pension plans to be very formal). We therefore see no reason to depart from the traditional rubric we use to evaluate the sufficiency of an ERISA estoppel set forth in Vallone. See 375 F.3d at 639.
No Breach Of Fiduciary Duty - The plaintiffs also asserted ERISA claims for breach of fiduciary duty, also under 29 U.S.C. § 1132(a)(3). The arguments were rejected as well:
In order to prevail on a claim for breach of fiduciary duty under ERISA, a plaintiff must prove (1) that defendants are plan fiduciaries; (2) that defendants breached their fiduciary duties; and (3) that their breach caused harm to the plaintiffs. Jenkins v. Yager, 444 F.3d 916, 924 (7th Cir.2006); Brosted, 421 F.3d at 465. An ERISA plan fiduciary does not breach its fiduciary duties under ERISA by merely providing negligent misinformation about the contours of a Plan. See Vallone, 375 F.3d at 642; Frahm, 137 F.3d at 955.
The Vallone Test - In Vallone, the Seventh Circuit stated the test used in Kannapien v. Quaker Oats Co
In order to prevail on an estoppel claim under ERISA, we ordinarily require that plaintiffs show (1) a knowing misrepresentation; (2) that was made in writing; (3) with reasonable reliance on that misrepresentation by them; (4) to their detriment. See Coker v. TWA, 165 F.3d 579 (7th Cir.1999). However, we have found an exception when plan documents are ambiguous or misleading, in which case oral representations as to the meaning of the documents may be relevant. See Bowerman v. Wal-Mart Stores, 226 F.3d 574, 588 (7th Cir.2000).
