:: Sixth Circuit Opinions Applying Estoppel In ERISA Cases – An Anthology

Estoppel under ERISA is an equitable doctrine of the federal common law of contracts designed to enforce ERISA and the agreements made under it. Armistead v. Vernitron, 944 F.3d 1287, 1298 (6th Cir. 1991). There are five elements to an estoppel claim under ERISA: (1) a representation of fact made with gross negligence or fraudulent intent; (2) made by a party aware of the true facts; (3) intended to induce reliance or reasonably believed to be so intended; where the party asserting the estoppel is (4) unaware of the true facts; and (5) reasonably or justifiably relies on the representation to his detriment. Trustees of the Mich. Labors’ Health Care Fund v. Gibbons, 209 F.3d 587, 591 (6th Cir. 2007).

Smiljanich v. GMC 2008 U.S. App. LEXIS 24605 (December 5, 2008)

The Sixth Circuit has proven to be receptive to the incorporation of estoppel principles into the federal common law of ERISA.  In this recent unpublished opinion, the Sixth Circuit panel found the requirements of estoppel met.

The Court employed a two part test to find that interim employment with other employers did not defeat the bridging of service credits.

Subjective understanding goes to the reasonable reliance prong of the estoppel claim; the threshold ambiguity determination is concerned not only with reliance but also with ERISA policy. This requires an objective inquiry.

I discussed the case in more detail here.

Additional Information On Estoppel In The Sixth Circuit

Prior Sixth Circuit cases incorporating the estoppel theory include:

  • Thomas v. Miller, 489 F.3d 293 (2007):

Equitable estoppel often operates to prevent a party from contesting an issue of fact or advancing a particular claim or defense.

  • Trustees of the Mich. Laborers’ Health Care Fund v. Gibbons, 209 F.3d 587 (2000):

In past ERISA cases involving a claim of equitable estoppel, we have required a showing of five common-law elements: 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.

  • Armistead v. Vernitron Corp., 944 F.2d 1287 (1991):

Both the LMRA and ERISA authorize the federal courts to fashion a body of federal common law to enforce the agreement that these statutes bring within their jurisdiction. Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399, 403, 108 S. Ct. 1877, 1880, 100 L. Ed. 2d 410 (1988). In Apponi v. Sunshine Biscuits, Inc., 809 F.2d 1210, 1217 (6th Cir. 1987), this circuit incorporated the doctrine of equitable estoppel into the federal common law of contracts, at least in so far as the agreement at issue is before the federal courts under the LMRA

Apponi v. Sunshine Biscuits, Inc., 652 F.2d 643, 649 (6th Cir. 1981), frequently cited in these opinions, was a pivotal case wherein the Sixth Circuit incorporated estoppel into the federal common law of contracts.

Note: The estoppel theory in this cases is often presented as at war with the written plan requirement.  Many feel that the free use of estoppel in the ERISA context undercuts a fundamental policy underlying ERISA.

That point of view is discussed in :: Finding A Median – The Constraint Of Promissory Estoppel Versus The Broad Ambit Of Deferential Review

The counter to this concern, if there is one, seems to lie in limiting the application of estoppel to cases in which the plan terms are ambiguous.

Consider, for example, this observation:

A party’s reliance can seldom, if ever, be reasonable or justifiable if it is inconsistent with the clear and unambiguous terms of plan documents available to or furnished to the party. Otherwise, the court would be permitting estoppel to override the clear terms of plan documents and in the end would be permitting the party to enforce something other than the plan documents themselves, which is prohibited by ERISA.

Crosby v. Rohm & Haas Co., 480 F.3d 423

Class Actions Limitations – The Sixth Circuit has declined to approve class action treatment on the theory, stating:

The plaintiffs’ estoppel theory was even less susceptible to class-wide treatment. HN5An estoppel claim requires proof of what statements were made to a particular person, how the person interpreted those statements, and whether the person justifiably relied on the statements to his detriment. See Part IV, infra; Armistead v. Vernitron Corp., 944 F.2d 1287, 1298 (6th Cir. 1991). Because of their focus on individualized proof, estoppel claims are typically inappropriate for class treatment. See Jensen v. SIPCO, Inc., 38 F.3d 945, 953 (8th Cir. 1994) (estoppel “must be applied with factual precision and therefore is not a suitable basis for class-wide relief”), cert. denied, 514 U.S. 1050, 131 L. Ed. 2d 310, 115 S. Ct. 1428 (1995).

Sprague v. GMC, 133 F.3d 388 (1997)

Nature Of Representations –  In Gibbons, the nature of representations was examined in some detail.  The representation must be more than a careless statement.  The court stated that:

The Sixth Circuit has followed the nation’s highest court in requiring that such representations must contain an element of fraud, either intended deception or “such gross negligence . . . as to amount to constructive fraud.” Brant v. Virginia Coal and Iron Co., 93 U.S. 326, 335, 23 L. Ed. 927 (1876); [**8] see also TWM Mfg. Co., Inc. v. Dura Corp., 592 F.2d 346, 350 (6th Cir. 1979) (requiring a showing of either “misrepresentations, affirmative acts of misconduct, or intentionally misleading silence” to establish estoppel). Fraudulent conduct alone is not enough, however; the party asserting estoppel must not know the truth behind the other party’s representations, see Heckler v. Community Health Servs., 467 U.S. 51, 59 n.10, 81 L. Ed. 2d 42, 104 S. Ct. 2218 (1984), must reasonably rely on the other’s actions, see id. at 59, and must suffer substantial detriment as a result. See Ashwander v. Tennessee Valley Auth., 297 U.S. 288, 323, 80 L. Ed. 688, 56 S. Ct. 466 (1936); see also Teamster’s Local 348 Health and Welfare Fund v. Kohn Beverage Co., 749 F.2d 315, 319 (6th Cir. 1984) (”Estoppel requires a representation, to a party without knowledge of the facts and without the means to ascertain them, upon which the party asserting the estoppel justifiably relies in good faith to his detriment.”).

Welfare Plans Versus Pension Plans – A somewhat dubious distinction has been made between welfare plans and pension plans as follows:

When a party is estopped from asserting a right in a written plan, the plan as enforced is not the same as the plan as written. For this reason, ERISA would seem to preclude application of equitable estoppel to disputes over benefit plans under the statute.

This reasoning applies primarily to cases involving pension plans and is much less cogent when welfare benefit plans are at issue. The reason is that pension benefits are typically paid out of funds to which both employers and employee contribute. Contributions and pay-outs are determined by actuarial assumptions reflected in the terms of the plan. If the effective terms of the plan may [**37] be altered by transactions between officers of the plan and individual plan participants or discrete groups of them, the rights and legitimate expectations of third parties to retirement income may be prejudiced.

This is not necessarily the case with insurance benefit plans. Typically the employer pays policy premiums out of its own assets, perhaps with a contribution from the employee. The actuarial soundness of a fund, which might be depleted if strict vesting and accrual requirements were not observed, is not an issue where a plan of this description is involved. We conclude therefore that in such a case, the purpose of Congress in enacting 29 U.S.C. § 1102(a) would not be frustrated by recourse to estoppel principles, which are generally applicable to all legal actions.