The Employee Retirement Income Security Act of 1974 was enacted to set minimum participation, fiduciary and nondiscrimination standards for employee benefit plans and to protect employees when an employer voluntarily established retirement and health care plans in private industry. 1See
http://www.dol.gov/dol/topic/health-plans/erisa.htm Employers also benefited from ERISA’s enactment because ERISA made nationwide administration of benefit plans easier through federal preemption of most conflicting state laws. 2Shaw v. Delta Air Lines Inc., 462 U.S. 85, 105 n.5, 4 EBC 1593 (1983); Alessi v. Raybestos-Manhattan Inc., 451 U.S. 504, 523, 2 EBC 1297 (1981). Although ERISA preemption covers most state laws that impact plan administration, judicial rulings on certain ERISA issues, including estoppel claims, are creating new challenges for nationwide and uniform benefit administration.
ERISA estoppel claims typically involve the alleged misrepresentation of benefit plan provisions, either orally or in writing, by a plan administrator or fiduciary. When such a misrepresentation of plan terms occurs, ERISA estoppel plaintiffs generally allege that their reliance on the misrepresentation results in an injury—either a loss of benefits or some other right existing under the plan or ERISA. Estoppel theory under ERISA was born in the 1980s, when the U.S. Court of Appeals for the Third Circuit permitted a participant to estop a pension fund from denying him benefits based on a plan provision that mandated certain contributions to the plan be made by the employer, not the employee, and that the plan pay benefits based on the required employer contributions. 3Rosen v. Hotel & Restaurant Employees & Bartenders Union, 637 F.2d 592, 598, 2 EBC 1054 (3d Cir. 1981). From that beginning, ERISA-based estoppel claims have slowly increased over the years. In 2009, an ERISA litigation study found that material misrepresentation claims (i.e., estoppel claims) were included in approximately 37 percent of ERISA fiduciary breach lawsuits. 4See “ERISA Litigation Study – April 15, 2009,” Pension Governance Inc. and the Michel-Shaked Group. More recently, the U.S. Supreme Court found, in dicta, that detrimental reliance (and estoppel) remedies were the type of equitable relief that could be addressed under ERISA Section 502(a)(3)’s call for “appropriate equitable relief.” 5CIGNA Corp. v. Amara, 131 S.Ct. 1866, 1880-1882, 50 EBC 2569 (2011)(95 PBD, 5/17/11; 38 BPR 990, 5/24/11); 29 U.S.C. §1132(a)(3).
As litigants increasingly focus on estoppel and detrimental reliance remedies, the role of the courts in ERISA plan administration increases, and currently, the judicial approach to these claims varies greatly across the country. Not only do the various courts of appeal fail to agree on a set framework for stating an estoppel claim under ERISA, they cannot agree that such a remedy even exists under ERISA—even though estoppel was introduced under ERISA over 30 years ago.
There are three major areas where appellate courts disagree in their approach to ERISA estoppel claims: (i) whether estoppel claims are even actionable under ERISA; (ii) whether estoppel claims may involve unambiguous plan terms; and (iii) whether estoppel claims may be based on oral misrepresentations. This vast disagreement over the existence and framework of these ERISA estoppel issues can lead to very different results between jurisdictions and can be the difference between success and failure in litigation. The only way that these conflicts in the law will be corrected is through Supreme Court intervention on the topic. However, due to the Supreme Court’s limited docket, these issues may remain cloudy for the foreseeable future.
Are Estoppel Claims Even Actionable
Under ERISA?
Beginning with the Third Circuit in 1981, many of the appeals courts slowly began to recognize the existence of an estoppel theory under ERISA. In 1991, the Sixth Circuit recognized a cause of action for estoppel under federal common law, but limited the application of estoppel to welfare plans and not pension plans. 6Armistead v. Vernitron Corp., 944 F.2d 1287, 1300, 14 EBC 1632 (6th Cir. 1991). In 1993, the Second Circuit acknowledged that the principles of estoppel could apply in ERISA cases, but only in the face of ambiguous plan provisions and when “extraordinary circumstances” exist. 7Lee v. Burkhart, 991 F.2d 1004, 1009, 16 EBC 2198 (2nd Cir. 1993). In 1994, the Eleventh Circuit created its own very narrow common law doctrine for equitable estoppel under ERISA, finding that such a remedy is available only when (i) the plan provisions at issue are ambiguous and (ii) the representations made involve an interpretation of that ambiguity. 8Glass v. United of Omaha Life Ins. Co., 33 F.3d 1341, 1347, 18 EBC 2002 (11th Cir. 1994). Later in the 1990s, the Eighth and Ninth Circuits joined suit and declared estoppel actionable under ERISA, although the Eighth Circuit still finds such a remedy questionable. 9Pisciotta v. Teledyne Indus. Inc., 91 F.3d 1326, 1331 (9th Cir. 1996 (per curium); Fink v. Union Cent. Life Ins. Co., 94 F.3d 489, 492 (8th Cir. 1996) (“we would not use federal common law to allow a damages claim against a nonfiduciary because ERISA’s carefully drafted enforcement provisions ‘provide strong evidence that Congress did not intend to authorize other remedies’ that it simply forgot to incorporate expressly,” citing Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146, 6 EBC 1733 (1985)). In the late 1990s, the Seventh Circuit declared that estoppel claims could proceed; however, it required that the misrepresentations at the heart of the claims must be in writing. 10Schmidt v. Sheet Metal Workers’ Nat. Pension Fund, 128 F.3d 541, 546, 21 EBC 1937 (7th Cir. 1997)(1028 PBD, 10/28/97). In 2005, the Fifth Circuit also adopted estoppel as a cognizable ERISA theory, explicitly stating that a plaintiff who can establish that she reasonably and detrimentally relied on a written material misrepresentation of a benefit plan may recover equitable relief under ERISA so long as extraordinary circumstances exist. 11Mello v. Sara Lee Corp., 431 F.3d 440, 445-46, 36 EBC 1458 (5th Cir. 2005)(227 PBD, 11/29/05; 32 BPR 2654, 12/6/05)(although acknowledging that estoppel exists, the court dismissed the claim based on a faulty pension estimate because reasonable reliance on the alleged misrepresentation did not exist).
Although at least six circuits have allowed ERISA estoppel claims, a few still refuse to acknowledge estoppel as an actionable ERISA remedy. For example, the First Circuit, while admitting that “[m]ost of our sister circuits have recognized estoppel claims under ERISA’s civil enforcement provisions,” continues to find that estoppel is not an actionable ERISA remedy. 12Livick v. The Gillette Co., 524 F.3d 24, 31, 43 EBC 2025 (1st Cir. 2008)(75 PBD, 4/18/08; 35 BPR 912, 4/22/08). The First Circuit justifies its rejection of ERISA estoppel because (i) ERISA plans must be in writing and cannot be modified orally, and (ii) it is unreasonable for a plan participant to rely on informal plan communications to contradict clear plan terms. 13Id.; see also Todisco v. Verizon Commc’ns Inc., 497 F.3d 95, 99 n.4, 41 EBC 1417 (1st Cir. 2007)(151 PBD, 8/7/07; 34 BPR 1912, 8/14/07); Mauser v. Raytheon Co. Pension Plan, 239 F.3d 51, 57, 25 EBC 1833 (1st Cir. 2001)(29 PBD, 2/12/01; 28 BPR 660, 2/13/01); City of Hope Nat’l Med. Ctr. v. HealthPlus Inc., 156 F.3d 223, 230 n.9, 22 EBC 1914 (1st Cir. 1998). The Tenth Circuit has also declined to add estoppel as an actionable ERISA remedy. While the Tenth Circuit has left open the possibility that an ERISA estoppel claim may be viable in “egregious cases,” such as where the claim is premised upon an employer’s lies, fraud or intentional deception, it has yet to find an alleged fact pattern where such a claim has been successfully pled. 14Kerber v. Qwest Group Life Ins. Plan, 647 F.3d 950, 962, 51 EBC 2013 (10th Cir. 2011)(108 PBD, 6/6/11; 38 BPR 1118, 6/14/11); see also Callery v. U.S. Life Ins. Co., 392 F.3d 401, 407, 34 EBC 1001 (10th Cir. 2004)(238 PBD, 12/14/04; 31 BPR 2834, 12/28/04); Averhart v. U.S. West Mgmt. Pension Plan, 46 F.3d 1480, 1485, 18 EBC 2400 (10th Cir. 1994).
However, the First and Tenth Circuits’ continued rejection of ERISA estoppel theories has not been revisited since the Supreme Court’s decision in CIGNA Corp. v. Amara, and thus Amara may be the basis for these circuits to change their approach to estoppel claims. Notably, the Fourth Circuit had long rejected ERISA estoppel claims based on the belief that the “[u]se of estoppel principles to effect a modification of a written employee benefit plan would conflict with ERISA’s emphatic preference for written agreements.” 15McCravy v. Metropolitan Life Ins. Co., 650 F.3d 414, 421, 50 EBC 2773 (4th Cir. 2011)(96 PBD, 5/18/11; 38 BPR 993, 5/24/11); see also Coleman v. Nationwide Life Ins. Co., 969 F.2d 54, 15 EBC 1865 (4th Cir. 1992). However, after Amara, the Fourth Circuit reconsidered its approach and held that “the Supreme Court clarified that remedies beyond mere premium refunds—including the surcharge and equitable estoppel remedies at issue here—are indeed available to ERISA plaintiffs suing fiduciaries under Section 1132(a)(3).” 16McCravy v. Metropolitan Life Ins. Co., 690 F.3d 176, 183, 53 EBC 2605 (4th Cir. 2012)(130 PBD, 7/9/12; 39 BPR 1339, 7/10/12).
Perhaps the First and Tenth Circuits will follow the Fourth Circuit’s post-Amara approach and clarify this conflicted question of ERISA estoppel jurisprudence in the appeals courts. However, until that happens, the continued disharmony amongst the circuits can create very different litigation results for plaintiffs and for defendant benefit plans and fiduciaries, depending upon where a particular case is filed. For example, consider this typical estoppel fact scenario: a plan contains a vague provision related to whether retiree medical benefits are to continue for life, or whether the employer may modify or terminate those benefits at will. If a plaintiff lives in Massachusetts and seeks to bring such an estoppel claim, existing First Circuit law will bar that claim at the motion to dismiss stage. However, if the same plaintiff lives just over the Connecticut-Massachusetts state line, she may bring that claim in the Second Circuit, and the defendant benefit plan or fiduciary will be required to defend that claim beyond a motion to dismiss.
A similar scenario exists in other areas as well: (i) West Virginia (Fourth Circuit) versus Kentucky (Sixth Circuit); or (ii) Oklahoma (Tenth Circuit) versus Texas (Fifth Circuit). Maybe the most telling example would be for a plaintiff bringing such an estoppel claim in Kansas City. If the plaintiff lives in Kansas City, Kansas, her estoppel claim is barred under Tenth Circuit precedent. However, if she files in Kansas City, Missouri, her claim will likely survive a motion to dismiss under Eighth Circuit law. When ERISA authorized nationwide administration of benefit plans, these scenarios could not have been what legislators or employers (or even participants) expected. The varied acceptance of ERISA estoppel claims among the circuit courts of appeal is contrary to ERISA’s intended purpose of uniform treatment of participants in employee benefit plans.
Can Estoppel Claims Involve
Unambiguous Plan Terms?
Another example of divergent federal estoppel case law is found in the question of whether an estoppel claim may exist when the misrepresented benefit plan terms are allegedly unambiguous. For many years, even circuits that permitted ERISA estoppel claims held that estoppel could not be applied to vary the terms of the unambiguous benefit plan documents. 17See, e.g., Sprague v. General Motors Corp., 133 F.3d 388, 404, 21 EBC 2267 (6th Cir. 1998)(0109 PBD, 1/9/98); In re: Unisys Corp. Retiree Medical Benefit “ERISA” Lit., 58 F.3d 896, 908, 19 EBC 1545 (3d Cir. 1995); Mello, 431 F.3d at 447; Slice v. Sons of Norway, 34 F.3d 630, 633-34 (8th Cir. 1994); Pisciotta, 91 F.3d at 1331; Jones v. American Gen. Life and Accident Ins. Co., 370 F.3d 1065, 1069, 32 EBC 2484 (11th Cir. 2004)(97 PBD, 5/20/04; 31 BPR 1150, 5/25/04). Because an estoppel claim is based on a misrepresentation of a plan’s written governing documents, if a plan provision is unambiguous, then it is subject to only one representation and cannot be misrepresented. As the Sixth Circuit once held, when a participant argues that she is reasonably and justifiably relying on an administrator’s representation that is inconsistent with a benefit plan’s unambiguous terms, then she is seeking to have the court enforce something other than the plan terms themselves, which ERISA forbids. 18See Marks v. NewCourt Credit Group Inc., 342 F.3d 444, 456, 31 EBC 1333 (6th Cir. 2003)(171 PBD, 9/5/03; 30 BPR 1981, 9/9/03).
However, in 2010, the Sixth Circuit rejected this long standing rule and determined that estoppel claims could be actionable even when the plan provision allegedly misrepresented is unambiguous. 19See Bloemker v. Laborers’ Local 265 Pension Fund, 605 F.3d 436, 444, 49 EBC 1175 (6th Cir. 2010)(96 PBD, 5/20/10; 37 BPR 1213, 5/25/10). In Bloemker, the plaintiff had received pension plan benefits for almost two years when the plan administrator notified the plaintiff that his benefit calculation was incorrect. The plan administrator informed the participant that his future monthly payments would be decreased to reflect the correct benefit amount, and the plaintiff would be required to repay the amount of benefits he was overpaid. On appeal, the Sixth Circuit refused to apply the general rule that an estoppel claim could not vary the terms of an unambiguous plan document. The Sixth Circuit found that the extraordinary circumstances of the case—where the plaintiff had received a statement certified by the plan administrator that reflected an incorrect benefit amount and then received that amount of benefits for almost two years—required that the estoppel claim be permitted to proceed past the motion to dismiss stage. Since Bloemker, the Sixth Circuit has permitted similar estoppel theories to proceed past the motion to dismiss stage even though the plan provision at issue was unambiguous. 20See, e.g., Stark v. Mars Inc., No. 12-3956, 55 EBC 1852 (6th Cir. May 9, 2013)(91 PBD, 5/10/13; 40 BPR 1189, 5/14/13)(ultimately upholding dismissal of estoppel claim involving unambiguous plan provision because the plaintiff could not satisfy all elements of the claim). While no other district or appellate court has adopted the Sixth Circuit’s novel Bloemker theory, the fact that estoppel claims relating to unambiguous plan terms can proceed in even one Circuit cuts against ERISA’s purpose to ensure consistent nationwide benefit plan administration.
Can Estoppel Claims Be Based
On Alleged Oral Misrepresentations?
Once it is determined that an estoppel claim is actionable within a given circuit, the test for proving such a claim is relatively standard across the circuits. However, the circuits are split on whether an oral statement misrepresenting the plan’s terms may result in an actionable estoppel claim.
Typically, a plaintiff must prove the existence of (i) a knowing misrepresentation of plan terms; (ii) reasonable reliance on that misrepresentation by the plaintiff; and (iii) reliance that results in a detriment or injury to the plaintiff. 21See Coker v. Trans World Airlines Inc., 165 F.3d 579, 585, 22 EBC 2370 (7th Cir. 1999); Sprague, 133 F.3d at 403 n. 13; Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72, 79, 28 EBC 1122 (2d Cir. 1996). In several circuits, there is the additional factor that a plaintiff must prove “extraordinary circumstances” exist, which amounts to repeated misrepresentations over long periods of time or fraudulent or intentional deception. 22See Pell v. DuPont de Nemours & Co.,539 F.3d 292, 44 EBC 1944 (3d Cir. 2008)(154 PBD, 8/11/08; 35 BPR 1868, 8/12/08); Mello, 431 F.3d at 444; Spink v. Lockheed Corp., 125 F.3d 1257, 21 EBC 1593 (9th Cir. 1997). In most circuits, oral promises or misrepresentations are unenforceable and cannot serve to vary the terms of an ERISA plan. 23See, e.g., Slice, 34 F.3d at 634-45; Perreca v. Gluck, 295 F.3d 215, 225, 28 EBC 1513 (2d Cir. 2002)(132 PBD, 7/10/02; 29 BPR 1954, 7/16/02); Weir v. Fed. Asset Disposition Ass’n, 123 F.3d 281, 290 (5th Cir. 1997). Most circuits reject estoppel claims based on oral misrepresentations because ERISA provides that “every employee benefit plan shall be established and maintained pursuant to a written instrument.” 2429 U.S.C. §1102(a)(1). However, the Eleventh Circuit was the first circuit to allow oral misrepresentation claims, holding that an oral misrepresentation of benefit plan’s terms could support an estoppel claim. In Kane v. Aetna Life Ins., the Eleventh Circuit determined that when a benefit plan’s provisions are ambiguous, a plaintiff may rely on an alleged oral misrepresentation of the ambiguous plan language to state an estoppel claim so long as the oral statement interprets, and does not modify, the plan’s governing terms. 25Kane v. Aetna Life Ins., 893 F.2d 1283, 1285-86, 11 EBC 2772 (11th Cir. 1990). After Kane, the Seventh and Ninth Circuits adopted similar theories. 26Bowerman v. Wal-Mart Stores Inc., 226 F.3d 574, 589-90, 25 EBC 1517 (7th Cir. 2000)(166 PBD, 8/25/00; 27 BPR 2029, 8/29/00); Greany v. Western Farm Bureau Life Ins. Co., 973 F.2d 812, 821-22 (9th Cir. 1992).
Again, this divergence in estoppel rules amongst the circuits could result in different results for the same claim. For example, in Bowerman, a plaintiff relied on the oral statement of a company representative to her detriment in deciding not to purchase COBRA continuation coverage during a period of unemployment. In that case, because the Seventh Circuit decided to follow the Eleventh Circuit’s holding in Kane, her claim was successful when filed in Indiana. However, if her estoppel claim had been filed in Arkansas where the benefit plan was administered, her claim would likely have been rejected at the motion to dismiss stage under Eighth Circuit law. Again, such disharmony in the case law interpreting estoppel claims negatively impacts uniform nationwide plan administration.
Can These Circuit Splits Be Fixed?
The simple fix to cure these very conflicting legal principles amongst the circuits would be for the Supreme Court to grant certiorari in an ERISA estoppel case involving one of these issues. However, because ERISA estoppel claims require plaintiffs to prove detrimental and reasonable reliance on alleged misrepresentations, these claims tend to be very individualized in their fact scenarios and do not present the type of general proof scenarios that the Supreme Court normally tends to review. In addition, ERISA estoppel claims generally tend to involve single or small groups of plan participants alleging misrepresentations and, because the cost of pursuing a claim to the Supreme Court is very expensive, many claims are settled or abandoned before reaching that level.
Given the legal divergence in accepting estoppel as a valid ERISA remedy, the success and failure in prosecuting and defending ERISA estoppel actions has become extremely dependent upon the jurisdiction in which the case is filed. The inconsistent approach to ERISA estoppel claims by the federal appellate courts is an open invitation for forum shopping, both by plaintiffs and benefit plans. The current status of ERISA estoppel case law also will likely result in increases in ERISA estoppel claims and a further degradation of ERISA’s promise of uniform and nationwide plan administration.
