Estoppel Claims Can Prevail Over Unambiguous Plan Language

Defendants argue that the first amended complaint is deficient because, with the exception of Count Four, which is identified as a claim for benefits pursuant to §1132(a)(1)(B), plaintiff fails to specify the ERISA statutory provisions upon which her claims are based. This argument is not well taken.

A plaintiff is not required to plead legal theories or cases, or specify the statute or common law principle that a defendant has allegedly violated. Shah v. Inter-Contental Hotel Chicago Operating Corp., 314 F.3d 278, 282 (7th Cir. 2002).

Even the failure to correctly categorize the legal theory giving rise to a claim does not require dismissal if the complaint otherwise alleges facts upon which relief can be granted. Counts Two and Three are labeled as promissory estoppel and equitable estoppel claims. They are based on federal common law.

In Stark v. Mars, the district court engaged in a thoughtful analysis of several  important ERISA legal theories for relief in the context of the defendants’ motion to dismiss.  The case involved the all too common scenario of a plan participant who was informed that her benefits would be at a level that exceeded what the plan ultimately paid.

The issues challenged for legal sufficiency by the motion are summarized as follows:

#1.            In Count One, [which was essentially a claim based upon breach of fiduciary duty] plaintiff alleges that the defendants exercise discretionary authority or control respecting the management of the plan and the disposition of its assets, and/or have discretionary authority or responsibility in the administration of the Plan. Plaintiff further alleges that defendants are fiduciaries and that they were acting in a fiduciary capacity when they [mis]represented to her that her monthly payments would be $5,364.63.

#2.            In Count Two, the promissory estoppel claim, plaintiff alleges that defendants promised that plaintiff would receive a monthly benefit of $5,364.63, that defendants reasonably should have expected that this promise would induce her to choose this option, and that she did in fact choose this option.

#3.            In Count Three, the equitable estoppel claim, plaintiff alleges that the representations made by defendants that her monthly benefits would be $5,364.63 were material, that defendants were aware that plaintiff was entitled to no more than $2,303.12 per month under the single life annuity with five-year certain pension payment option, that plaintiff reasonably believed that defendants intended for plaintiff to act on their representations, that plaintiff was unaware that she was only entitled to the lesser amount, and that plaintiff detrimentally and justifiably relied on the representations made by defendants.

#4.            In Count Four, plaintiff asserts a claim for benefits under §1132(a)(1)(B). This claim is based on the allegations that plaintiff sent a formal claim letter to the Plan administrator, that her request for benefits in the amount of $5,364.63 was denied by the Committee, and that her appeal of that decision was denied by the Appeals Committee.

The court ultimately found that the complaint sufficiently stated a claim on all counts.

Repackaging Claims

The Plaintiffs’ first hurdle was the inclusion of a claim for benefits under §1132(a)(1)(B). (See # 4. above).  That gave the Defendants the occasion to argue that:

plaintiff cannot pursue  the claim for breach of fiduciary duty in Count One and the estoppel claims in Counts Two and Three because she has asserted a claim for benefits in Count Four.

The court sided with the plaintiff however, stating:

The fact that plaintiff states in her complaint that she is seeking to obtain the higher retirement benefit by way of equitable and injunctive relief does not automatically convert her equitable claims into a claim for Plan benefits under §1132(a)(1)(B). Plaintiff’s claims of breach of fiduciary duty and estoppel are not simply restated benefit claims under §1132(a)(1)(B), and this branch of defendants’ motion to dismiss is denied.

Regarding the estoppel claims, the court noted that those claims were based upon federal common law.  The Sixth Circuit has left open the question of whether whether an equitable or promissory estoppel claim based on misrepresentations could be categorized as a §1132(a)(1)(B) claim or a §1132(a)(3) claim.   In the end, the question was of no moment.

Regardless of whether the estoppel claims can be reclassified as falling within the statutory framework of §1132(a), the estoppel claims are also based on the alleged misrepresentations made to plaintiff, not to plaintiff’s actual entitlement to benefits under the terms of the Plan, and are not simply repackaged benefits claims.

Labels Unimportant

The Defendants also argued that Defendants argue that the complaint was deficient because,

with the exception of Count Four, which is identified as a claim for benefits pursuant to §1132(a)(1)(B), plaintiff fails to specify the ERISA statutory provisions upon which her claims are based.

The court dismissed this argument, stating that:

A plaintiff is not required to plead legal theories or cases, or specify the statute or common law principle that a defendant has allegedly violated. Shah v. Inter-Contental Hotel Chicago Operating Corp., 314 F.3d 278, 282 (7th Cir. 2002). Even the failure to correctly categorize the legal theory giving rise to a claim does not require dismissal if the complaint otherwise alleges facts upon which relief can be granted.

Unambiguous Plan Provisions

Whenever estoppel arguments arise, defenses based upon “unambiguous” plan language are sure to follow.   The basic premise makes sense.  If the plan language is clear enough, how can the plaintiff argue the elements of estoppel?

The argument in this case took a different turn, however, based upon the holding in Bloemker v. Laborers’ Local 265 Pension Fund, 605 F.3d 436 (6th Cir. Ohio 2010).

Estoppel Elements

The basic estoppel claim requires:

(1) conduct or language amounting to a representation of material fact;

(2) awareness of the true facts by the party to be estopped;

(3) an intention on the part of the party to be estopped that the representation be acted on, or conduct toward the party asserting the estoppel such that the latter has a right to believe that the former’s conduct is so intended;

(4) unawareness of the true facts by the party asserting the estoppel; and

(5) detrimental and justifiable reliance by the party asserting estoppel on the representation.

Estoppel Elements . . . Plus

To the foregoing, an exception is added – in the Sixth Circuit at least based upon Bloemker v. Laborers’ Local 265 Pension Fund, 605 F.3d 436 (6th Cir. Ohio 2010).  A plaintiff can invoke equitable estoppel in the case of unambiguous pension plan provisions where plaintiff can  demonstrate the traditional elements of estoppel, (see above) and:

that the defendant engaged in intended deception or such gross negligence as to amount to constructive fraud, plus (1) a written representation; (2) plan provisions which, although unambiguous, did not allow for individual calculation of benefits; and (3) extraordinary circumstances in which the balance of equities strongly favors the application of estoppel.

Extraordinary circumstances could include complexity.  The court took this into account, observed that:

. . .  the court in Bloemker also considered as an extraordinary circumstance the fact that the plaintiff alleged that it would have been impossible for him to determine his correct pension benefit given the complexity of the calculations.  Although the plaintiff in this case does not specifically make such allegations, it is apparent from the Plan and  other documents supplementing the complaint that, even assuming that the Plan terms are unambiguous, the actuarial calculations are also complicated.

Overall, the plaintiff’s motion survived virtually intact.

Note: The court sorted out the plaintiff’s claims in some respects where the complaint did not support claims against certain parties. The complaint also fails to state a claim for benefits against Mars under §1132(a)(1)(B). The proper defendant in an ERISA action concerning benefits is the plan administrator. See Riverview Health Institute LLC, 601 F.3d at 522. An employer is not a proper party defendant in an action concerning benefits unless the employer “‘is shown to control administration of the plan.’” Gore v. El Paso Energy Corp. Long Term Disability Plan, 477 F.3d 833, 842 (6th Cir. 2007)(quoting  [*21] Daniel v. Eaton Corp., 839 F.2d 263, 266 (6th Cir. 1988)). In other words, the defendant in a §1132((a)(1)(B) action must be the parties or entities which made the decision to deny benefits, in this case, the Committee and the Appeal Committee. Counts One and Four, insofar as they pertain to defendant Mars, will be dismissed. In regard to the Appeals Committee, the complaint contains no allegations that the Appeals Committee made any misrepresentations to plaintiff about her benefits. Therefore, Counts One, Two and Three, insofar as they pertain to the Appeals Committee, will be dismissed. In regard to Count Four, the denial of benefits claim, the record reveals that the letter denying plaintiff’s appeal was from the Appeals Committee. Doc. 17, Ex. B. The letter states that the Committee “has delegated to the Appeals Committee the absolute discretionary authority and power to review and decide all claim appeals under the Plan.” There is sufficient information in the complaint and related documents to support the claim against the Appeals Committee for denial of benefits asserted in Count Four. The complaint also fails to state a claim for benefits against Mars under §1132(a)(1)(B). The proper defendant in an ERISA action concerning benefits is the plan administrator. See Riverview Health Institute LLC, 601 F.3d at 522. An employer is not a proper party defendant in an action concerning benefits unless the employer “‘is shown to control administration of the plan.’” Gore v. El Paso Energy Corp. Long Term Disability Plan, 477 F.3d 833, 842 (6th Cir. 2007)(quoting  [*21] Daniel v. Eaton Corp., 839 F.2d 263, 266 (6th Cir. 1988)). In other words, the defendant in a §1132((a)(1)(B) action must be the parties or entities which made the decision to deny benefits, in this case, the Committee and the Appeal Committee. Counts One and Four, insofar as they pertain to defendant Mars, will be dismissed.In regard to the Appeals Committee, the complaint contains no allegations that the Appeals Committee made any misrepresentations to plaintiff about her benefits. Therefore, Counts One, Two and Three, insofar as they pertain to the Appeals Committee, will be dismissed. In regard to Count Four, the denial of benefits claim, the record reveals that the letter denying plaintiff’s appeal was from the Appeals Committee. Doc. 17, Ex. B. The letter states that the Committee “has delegated to the Appeals Committee the absolute discretionary authority and power to review and decide all claim appeals under the Plan.” There is sufficient information in the complaint and related documents to support the claim against the Appeals Committee for denial of benefits asserted in Count Four.

Motion To Amend – The court disallowed a motion to amend, stating:

If plaintiff has any intent to pursue a claim for denial of benefits under §1132(a)(1)(B) or for breach of fiduciary duty, the time to do so is now. Since plaintiff’s motion for leave to amend her complaint is phrased in terms of a dismissal of Counts One and Four without prejudice,the motion is denied.

In support of the decision to deny the motion, the court stated reasons of judicial economy, fairness to the defendants, and potential issues for the plaintiff, if she sought to assert her claims in the future, given plan provisions imposing a short limitations period.