Source: https://law.justia.com/cases/federal/appellate-courts/F3/238/205/515324/
Timestamp: 2019-06-24 13:29:36
Document Index: 137751760

Matched Legal Cases: ['§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1022', '§ 1022', '§ 1022', '§ 1022', '§ 1022', '§ 2520', '§ 1132', '§ 1022', '§ 1132', '§ 1132', '§ 1132', '§ 1132']

John Layaou, Plaintiff-appellant,paul J. Frommert, et al., Intervenors, v. Xerox Corporation, Peter Demauro, Individually and in His Capacity As an Employee of Xerox Corporation and the Retirement Income Guarantee Plan (rigp), Defendants-appellees, 238 F.3d 205 (2d Cir. 2001) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Second Circuit › 2001 › John Layaou, Plaintiff-appellant,paul J. Frommert, et al., Intervenors, v. Xerox Corporation, Peter...
John Layaou, Plaintiff-appellant,paul J. Frommert, et al., Intervenors, v. Xerox Corporation, Peter Demauro, Individually and in His Capacity As an Employee of Xerox Corporation and the Retirement Income Guarantee Plan (rigp), Defendants-appellees, 238 F.3d 205 (2d Cir. 2001)
US Court of Appeals for the Second Circuit - 238 F.3d 205 (2d Cir. 2001)
Argued: September 29, 2000Decided: January 18, 2001
Layaou filed a second amended complaint, alleging a claim for additional benefits under ERISA, 29 U.S.C. § 1132. Defendants' moved for summary judgment on the ERISA claim. In a decision and order entered on September 29, 1999, the district court granted defendants' motion. Because Layaou's complaint did not specify under which subsection of 29 U.S.C. § 1132 his claim fell, the district court identified Layaou's claim as one for benefits under 29 U.S.C. § 1132(a) (1) (B) and not a claim for breach of fiduciary duty under § 1132(a) (2) or for equitable relief under § 1132(a) (3).7 Layaou II, 69 F. Supp. 2d at 422-24. The court then determined that it should review the plan administrator's calculation of benefits under an abuse of discretion standard, rather than conduct a de novo review.8 Id. at 425-26. The district court reviewed Xerox's SPD and found that it did not conflict with the terms of the Plan, was not ambiguous, contained sufficient details to give employees notice of situations in which their benefits might be reduced, and complied with the requirements for SPDs under ERISA. Id. at 426-28. Accordingly, the district court granted summary judgment in favor of defendants, concluding that "plaintiff has not presented a basis upon which a factfinder could reasonably conclude that the SPD precluded the Plan Administrator from reducing plaintiff's benefit amount based on the appreciated amount of his prior distribution in accordance with the terms of the Plan. Not only was the Administrator's determination in that regard not arbitrary and capricious, it was plainly correct." Id. at 428 (emphasis in original).
We review the district court's grant of summary judgment in favor of defendants de novo. See Quinn v. Green Tree Credit Corp., 159 F.3d 759, 764 (2d Cir. 1998). In doing so, we must consider the evidence in a light most favorable to the plaintiff, drawing all reasonable inferences in his favor. See id. at 764-65. A court may only grant summary judgment " [w]hen no rational jury could find in favor of the nonmoving party because the evidence to support [his] case is so slight." Gallo v. Prudential Residential Servs., 22 F.3d 1219, 1224 (2d Cir. 1994). Reversal of the district court's grant of summary judgment "is required if there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72, 77 (2d Cir. 1996) (internal quotation marks omitted).
The format of the summary plan description must not have the effect [of] misleading, misinforming or failing to inform participants and beneficiaries. Any description of exception [s], limitations, reductions, [or] restrictions of plan benefits shall not be minimized, rendered obscure or otherwise made to appear unimportant . . . [and] shall be described or summarized in a manner not less prominent than the style, captions, printing type, and prominence used to describe or summarize plan benefits.
The only relevant language in Xerox's SPD states that " [t]he amount you receive may also be reduced if you had previously left the Company and received a distribution at that time." The SPD does not mention the term "phantom account," describe the "phantom account" offset concept, or even indicate that the choice among the three methods of calculating future benefits will be made by first adding on, and then later offsetting, not the amount of the prior distributions but instead an appreciated value of the prior lump-sum distributions. Nor does the SPD offer any example of how to calculate benefits for individuals who had received prior lump-sum distributions.
In Chambless v. Masters, Mates & Pilots Pension Plan, 772 F.2d 1032 (2d Cir. 1985), this Court set forth the standard that an SPD must meet to satisfy ERISA's disclosure requirements under 29 U.S.C. § 1022. The amendment to the plan at issue in Chambless addressed how employees' benefits would be affected if they accepted employment with companies that did not participate in the same plan. Id. at 1035-36. Soon after the amendment was adopted, the plaintiff employee accepted employment with a company that did not participate in the plan, which caused his benefits to be reduced from approximately $920 per month beginning at age 55 to about $470 per month beginning at age 65. Id. at 1036. In finding that the notice of the amendment failed to comply with § 1022, we stated that because "neither of the publications regarding [the amendment] explained the full import of the interaction of the wage-related provision and the Amendment for someone in [the plaintiff's] position [,] . . . the notice was insufficient to satisfy the requirements of ERISA, 29 U.S.C. § 1022(a) and (b) . . . ." Id. at 1040 (emphasis added); see also Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574, 587 (7th Cir. 2000) (holding that because "the explanations provided in the SPD . . . did not provide the critical information needed by employees in [plaintiff's] circumstances [,] . . . the [] SPD lacked the clarity and completeness required by § 1022").
Likewise, we find that Xerox's SPD did not describe the "full import" of the effect of receiving a prior lump-sum distribution on the calculation of future retirement benefits upon rehire, and therefore, did not meet the requirements of § 1022. The SPD fails to "clearly identif [y]" the "loss . . . of [ ] benefits" caused by a prior lump-sum distribution. 29 C.F.R. § 2520.102-3(l). The general language contained in the SPD that the benefits of employees who received prior distributions "may also be reduced" provided inadequate notice to Layaou that an appreciated value of his prior lump-sum distributions would first be added to his CBRA and TRA before making the comparison with the RIGP Formula annuity, and then would be offset from his retirement benefits, let alone provide notice that such an approach is mandatory. The SPD could have given sufficient notice, for example, by stating something like, "Any future benefit will be offset by the appreciated value of any prior distribution assuming that amount remained in the plan," or by providing an example calculating the benefits of an employee who had received a prior distribution. Given the significant reduction in Layaou's monthly benefits - from an estimated $924 per month to approximately $145 per month, one single sentence stating that Layaou's benefits "may also be reduced" if he "left the Company and received a distribution at that time" is wholly inadequate to provide meaningful notice regarding this loss of benefits. Because the SPD does not satisfy ERISA's disclosure requirements and employees are entitled to rely on the SPDs as their primary source of information about their benefits, we need not consider whether the language contained in the plan documents themselves was different than the language in the SPD.10 See Heidgerd, 906 F.2d at 908 ("It is of no effect to publish and distribute a plan summary booklet designed to simplify and explain a voluminous and complicated document, and then proclaim that any inconsistencies will be governed by the plan. Unfairness will flow to the employee for reasonably relying on the summary booklet.") (internal quotation marks omitted).
We have stated that if a summary plan "is inadequate to inform an employee of his rights under the plan, ERISA empowers plan participants and beneficiaries to bring civil actions against plan fiduciaries for any damages that result from the failure to disclose" under 29 U.S.C. § 1132(a) (1) (B).11 Howard v. Gleason Corp., 901 F.2d 1154, 1159 (2d Cir. 1990). The circuit courts are divided as to whether proof of actual detrimental reliance upon a faulty SPD is a prerequisite to recovery. Compare Palmisano v. Allina Health Sys., Inc., 190 F.3d 881, 887-88 (8th Cir. 1999) (reliance or prejudice must be shown); Andersen v. Chrysler Corp., 99 F.3d 846, 859 (7th Cir. 1996) (reliance, bad faith, or active concealment must be shown); Aiken v. Policy Management Sys. Corp., 13 F.3d 138, 141 (4th Cir. 1993) (per curiam) (reliance or prejudice must be shown); McKnight v. Southern Life and Health Ins. Co., 758 F.2d 1566, 1570 71 (11th Cir. 1985) (reliance was shown); and Govoni v. Bricklayers, Masons & Plasterers Int'l Union, 732 F.2d 250, 252 (1st Cir. 1984) (same) with Edwards v. State Farm Mut. Auto. Ins. Co., 851 F.2d 134, 137 (6th Cir. 1988) (employee need not show detrimental reliance to recover). The district courts in this Circuit that have addressed this issue have also reached differing conclusions. Compare Manginaro v. Welfare Fund of Local 771, 21 F. Supp. 2d 284, 295-96 (S.D.N.Y. 1998) (permitting plaintiff to prevail upon a showing of either detrimental reliance upon, or possible prejudice flowing from, a faulty summary plan document) and Ritzer v. National Org. of Indus. Trade Unions Ins. Trust Fund Hops., Med., Surgical Health Benefit, 822 F. Supp. 951, 955 (E.D.N.Y. 1993) (same), with Moriarity v. United Techs. Corp. Represented Employees Retirement Plan, 947 F. Supp. 43, 53 (D. Conn. 1996) ("Without having read the SPD, Plaintiff could not have relied on it or been prejudiced or misled by its contents."), aff'd, 158 F.3d 157 (2d Cir. 1998) (per curiam). The issue has not been definitively resolved in this Circuit. See Moriarity, 158 F.3d at 157-58; Howard, 901 F.2d at 1160-01. Because the issue of whether Layaou is required to demonstrate reliance and/or prejudice was not fully briefed on appeal, we leave it to the district court to decide in the first instance whether Layaou must demonstrate reliance on and/or prejudice flowing from Xerox's faulty SPD in order to prevail on his § 1022(a) claim, and if so, whether Layaou's statements in his affidavit that he read and relied upon the faulty SPD and his yearly benefit calculation are sufficient to raise a triable issue of fact on this issue.
The district court observed in a footnote that even if plaintiff's claim could be treated as one for equitable relief under § 1132(a) (3), it lacked merit. Layaou II, 69 F. Supp. 2d at 424 n.3.
Because we find that the district court erred in granting summary judgment against Layaou on his claim for benefits under 29 U.S.C. § 1132(a) (1) (B), we need not address the district court's suggestion that plaintiff's claim for benefits also could not survive summary judgment if analyzed as a claim for breach of fiduciary duty under § 1132(a) (2) or for equitable relief under § 1132(a) (3).