Source: https://law.justia.com/cases/federal/appellate-courts/F2/956/364/326179/
Timestamp: 2020-08-05 16:59:51
Document Index: 162832188

Matched Legal Cases: ['§ 1132', '§ 1132', '§ 894', '§ 1132', '§ 1132', '§ 1102', '§ 1132', '§ 1002', '§ 1132', '§ 1132', '§ 1002', '§ 1025', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1102', '§ 1102', '§ 1102', '§ 1132']

Donald Law, Plaintiff, Appellee, v. Ernst & Young, Etc., Defendant, Appellant, 956 F.2d 364 (1st Cir. 1992) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › First Circuit › 1992 › Donald Law, Plaintiff, Appellee, v. Ernst & Young, Etc., Defendant, Appellant
Donald Law, Plaintiff, Appellee, v. Ernst & Young, Etc., Defendant, Appellant, 956 F.2d 364 (1st Cir. 1992)
U.S. Court of Appeals for the First Circuit - 956 F.2d 364 (1st Cir. 1992) Heard Oct. 9, 1991. Decided Feb. 12, 1992
The district court issued a pretrial ruling holding that the plaintiff was limited to relief provided by ERISA because state law claims relating to the plans were preempted under Ingersoll Rand Co. v. McClendon, --- U.S. ----, 111 S. Ct. 478, 112 L. Ed. 2d 474 (1990).3 The court also denied without explanation Ernst & Young's request for a transfer to the Southern District of New York. Ernst & Young had claimed that transfer was warranted by a forum selection clause in Arthur Young's partnership agreement.
Following a bench trial, the district court denied Law's claim for breach of fiduciary duty on the ground that ERISA provides a cause of action for such breach only to the fund as a whole, not to individual participants. See Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134, 105 S. Ct. 3085, 87 L. Ed. 2d 96 (1985). However, the court found that Law had satisfied the elements of an estoppel claim because he had relied to his detriment on Arthur Young's erroneous calculation of his benefit level by retiring from his own business. Although the court had held that state law claims were preempted, it held that Law's estoppel claim was nevertheless actionable under 29 U.S.C. § 1132, ERISA's civil enforcement provision. The court therefore ordered that Ernst & Young was estopped to deny that Law was entitled to benefits of $19,193 per year. Finally, the court assessed a penalty of $12,600 against Ernst & Young for the late response to Law's request for information concerning his ERISA plan. This penalty was based on 29 U.S.C. § 1132(c) which provides that a plan "administrator" may be held liable for $100 per day when the administrator fails to respond within 30 days to a request for information concerning an ERISA plan.
It is not the function of an appellate court to issue advisory opinions in order to help parties to a proceeding before it enforce their legal rights in some other tribunal. See generally Boston Chapter, NAACP v. Beecher, 716 F.2d 931, 933 (1st Cir. 1983) (federal courts forbidden by Article III to render advisory opinions). In asking for a declaration that the trial court erred in refusing to transfer, without seeking any relief based on such error, Ernst & Young is reduced to asking for an advisory opinion with no practical bearing on the outcome of the district court proceeding under review. We lack the power under Article III to issue such an opinion and decline to do so.
Although the point does not appear to be contested by Ernst & Young, Law argues in his brief that he made out the elements of an estoppel claim. We disagree. This court explained the elements of an estoppel claim in Phelps v. Federal Emergency Management Agency, 785 F.2d 13 (1st Cir. 1986). First, the party to be charged must " 'make[ ] a definite misrepresentation of fact to another person having reason to believe that the other will rely upon it.' " Id. at 16 (quoting Restatement (Second) of Torts § 894(1) (1977)) . Second, the other party must rely reasonably on the misrepresentation to his detriment:
Heckler v. Community Health Services of Crawford County, Inc., 467 U.S. 51, 59, 104 S. Ct. 2218, 2223, 81 L. Ed. 2d 42 (1984) (footnotes and citations omitted).
29 U.S.C. § 1132(a) (emphasis added). Subsection (c), referred to in subsection (a) (1) (A) above, requires a plan administrator to respond within 30 days to a participant's request for information concerning his plan. 29 U.S.C. § 1132(c).
The district court found that Law was "a beneficiary seeking to obtain equitable relief for a failure to make timely and proper clarification of his rights under the plan." Then, noting the Supreme Court's language that the "appropriate equitable relief" provision of subsection (A) (3) demonstrated Congress's intent that the federal courts fashion federal common law, Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134, 156, 105 S. Ct. 3085, 3097, 87 L. Ed. 2d 96 (1985) (Brennan, J., concurring in judgment), the district court held that estoppel relief was proper under ERISA where the defendant's misrepresentations constituted a plausible interpretation, not a modification, of the plan. See Kane v. Aetna Life Insurance, 893 F.2d 1283 (11th Cir. 1990) (ERISA plan administrator may be estopped to deny an earlier interpretation of a plan).
This distinction between an interpretation about which "reasonable persons could disagree" and a plan modification was crucial to the Kane holding. The Eleventh Circuit cited to authority that the coverage of an insurance policy may not be modified by the doctrine of estoppel. Id. at n. 3. The court also distinguished an earlier case which had declined to hold that an estoppel claim based on an oral representation could be used to modify the terms of an ERISA plan. Id. at 1285. This earlier case had held that such a modification would violate Congress's direction that a plan be "established and maintained pursuant to a written instrument." See Nachwalter v. Christie, 805 F.2d 956, 960 (11th Cir. 1986) (quoting 29 U.S.C. § 1102(a)).8 Thus, the Kane court acknowledged that an ERISA plan could not be modified by the doctrine of estoppel. The Kane court, however, found a narrow window for estoppel recovery where the representation relied upon reflected an interpretation of the plan about which reasonable persons could disagree.
29 U.S.C. § 1132(c) (1) (emphasis added). The court found that Law had made his first request for information on September 28, 1988, the date of Gail Paduch's letter acknowledging his inquiry. Thus, because 126 days had elapsed between October 30, 1988 (slightly more than 30 days after September 28) and March 3, 1989 (the date of Arthur Young's first response), the court found Ernst & Young liable for the maximum amount of $100 per day, or $12,600.
Ernst & Young argues that it cannot be held personally liable under this statute because its predecessor, Arthur Young, was not the plan administrator. ERISA provides that "[t]he term 'administrator' means--(i) the person specifically so designated by the terms of the instrument under which the plan is operated...." 29 U.S.C. § 1002(16) (A) (i). In this case the relevant documents provide that the plan administrator is a "Retirement Committee" to be appointed by Arthur Young's "Management Committee." Thus, Ernst & Young argues that only the Arthur Young Retirement Committee, not Ernst & Young (successor to Arthur Young), may be held liable for the statutory penalty. The district court rejected this argument. Noting that "[s]ince its employees responded to Law's inquiries, [Arthur Young] led Law to believe that he was in contact with the correct department," the court concluded that "[Arthur Young] itself was the plan administrator."
A number of courts have stated that a party may be treated as a plan administrator where it is shown to control the administration of a plan. In Boyer v. J.A. Majors Co. Employees Profit Sharing Plan, 481 F. Supp. 454 (N.D. Ga. 1979), a beneficiary brought suit against his employer and a number of other entities seeking benefits under an ERISA plan. The employer moved to dismiss on the ground that it was not the plan administrator, which role had been assigned to an internal committee. On the facts of that case, the court accepted the employer's argument because "there [was] no evidence that the Company controlled the Plan or had anything to do with its administration." Id. at 458. A "Profit Sharing Committee" had been elected at a meeting of the company board of directors, and there was no evidence that the employer had subsequently played any role in administration of the plan.
The same legal standard was applied to a different factual scenario in Foulke v. Bethlehem 1980 Salaried Pension Plan, 565 F. Supp. 882 (E.D. Pa. 1983). There, a beneficiary sued his employer and others for improperly denying a lump sum payment of his benefits. The employer sought summary judgment on the ground that it could not be liable because the payment decision had been made by a separate entity, the General Pension Board. The court refused to grant summary judgment because the employer's vice chairman had written a letter to the employees, on company letterhead, discussing changes to the plan. Distinguishing Boyer, the court concluded that the "employer may, as a matter of fact, have taken an active part in the administration of the pension plan," in which case it could be held liable for claims arising out of such administration. Id. at 883. Both Boyer and Foulke were cited with approval in Daniel v. Eaton Corp., 839 F.2d 263, 266 (6th Cir. 1988), in which the Sixth Circuit stated that "[u]nless an employer is shown to control administration of a plan, it is not a proper party defendant in an action concerning benefits."
We think this principle is correct and that it applies to Law's § 1132(c) claim. If, to all appearances, Arthur Young acted as the plan administrator in respect to dissemination of information concerning plan benefits, it may properly be treated as such for purposes of the liability provided under § 1132(c). To be sure, § 1002(16) (A) (i) states that the plan administrator is the party "specifically so designated" by the plan documents, and those documents named the Arthur Young Retirement Committee. But 29 U.S.C. § 1025 also confers upon plan participants and beneficiaries an absolute right to receive from the administrator information of the type sought here; and where an entity of which the administrator is part in effect holds itself out as the plan administrator by officially disseminating such information, we think it is subject to § 1132(c) liability should it fail to discharge that role in a proper way. Hence, where as here plan documents place the responsibility for providing information upon an internal committee of a firm, but the firm in practice carries out that function, we see no reason not to hold the firm liable under § 1132(c) when it fails to provide the information in the timely manner required by law.
This result is not inconsistent with the decisions of other circuits refusing to impose § 1132(c) liability on entities other than the plan administrator. See Moran v. Aetna Life Insurance Company, 872 F.2d 296 (9th Cir. 1989) (divided panel) (refusing to hold insurance company liable under § 1132(c) because it was not plan administrator, even though its employee had represented to plan participant that it was); Davis v. Liberty Mutual Insurance Co., 871 F.2d 1134, 1139 n. 5 (D.C. Cir. 1989) (refusing to hold insurance company liable under § 1132(c) because it was not plan administrator). Those cases involved attempts to recover against entities which were clearly distinct from the plan administrator and which were not shown to have exercised actual control over the administrator's functions. Such a situation is different from that here, where the employer against whom recovery was sought had set up an internal committee with little, if any, separate identity, and in fact took control of the function allegedly delegated to that committee.
The test for implied consent to trial on a given issue is "whether a party did not object to the introduction of evidence or introduced evidence himself that was relevant only to that issue." Lynch v. Dukakis, 719 F.2d 504, 508 (1st Cir. 1983) (emphasis added). The evidence here concerning Law's penalty claim was presented through Law's own testimony. After Law had testified that he began thinking about early retirement in 1988, he was asked to identify the letter from Gail Paduch acknowledging his request for information. The following colloquy ensued:
In addition to Kane, Law cites two other cases, both of which are inapposite. See Ellenburg v. Brockway, 763 F.2d 1091 (9th Cir. 1985), and Rosen v. Hotel and Restaurant Employees, et al., 637 F.2d 592 (3d Cir.), cert. denied, 454 U.S. 898, 102 S. Ct. 398, 70 L. Ed. 2d 213 (1981). Rosen did not involve an ERISA plan. Ellenburg involved an ERISA plan but merely cited Rosen and another non-ERISA case, Lavin v. Marsh, 644 F.2d 1378 (9th Cir. 1981), for the proposition that "[e]stoppel principles have been applied to pension plans" and held that the elements of an estoppel had not been established. 763 F.2d at 1096
Two distinctions should be noted between the facts of this case and those of Kane. First, Kane involved an oral representation whereas this case involved a written representation. Law makes no attempt to distinguish Kane on this basis, arguing instead that recovery is warranted under the theory of that case. We think such an attempt would, in any event, fail. The importance of the oral nature of the representation in Kane was that any oral modification of a plan would be contrary to Congress's intent, expressed in 29 U.S.C. § 1102, that a plan be maintained in writing. However, that statute also requires that the plan set forth a "procedure for amending such plan." 29 U.S.C. § 1102(b) (3). Arthur Young's plan provided that it could only be amended "by action of its Management Committee." Although the timing of some of Kalin's correspondence with Law indicates a possibility that Kalin responded at one point to Law's letters to William Gladstone (chairman of the management committee), there was no finding that Kalin or Brewster were acting for the management committee. Thus, an amendment of the plan through their individual actions would contravene 29 U.S.C. § 1102 just as would an oral amendment.
In affirming the judgment against Ernst & Young, we do not actually decide whether personal liability under § 1132(c) may be imposed upon a successor entity. Ernst & Young has not argued that it may not, and any such argument contrary to the judgment below is therefore waived. See Pignons S.A. de Mecanique v. Polaroid Corp., 701 F.2d 1 (1st Cir. 1983)