Opinion ID: 6330201
Heading Depth: 4
Heading Rank: 2

Heading: Allegations of Failure to Disclose

Text: The four remaining allegations seek to impose liability for Wal-Mart’s failure to disclose information that is not required to be disclosed under ERISA. The district court opined only on the allegation that Wal-Mart’s failure to disclose the conversion rights constituted a breach of fiduciary duty, which it summarily concluded fell outside the scope of ERISA and therefore failed to state a claim. The parties advance additional arguments pertaining to that allegation, which we address separately. In Sprague, 133 F.3d at 406, we “recognized a breach of fiduciary duty under three different conditions: (1) an early retiree asks a plan provider about the possibility of the plan changing and receives a misleading or inaccurate answer or (2) a plan provider on its own initiative provides misleading or inaccurate information about the future of the plan or (3) ERISA or its implementing regulations required the employer to forecast the future and the employer failed to do so.” Haviland, 730 F.3d at 572 (quoting James, 305 F.3d at 453). Therefore, the question here is whether Ms. Chelf has alleged facts sufficient to demonstrate that the failure to disclose allegations fall within one of these three Sprague categories. Ms. Chelf generally alleges that Wal-Mart failed to provide notice in four instances as a result of Defendants’ material misrepresentations and omissions concerning the Plan terms or Mr. Chelf’s rights. But the Complaint does not provide facts as to how the allegations fit in one of the Sprague categories. Regarding the first category, the Complaint offers no allegations suggesting that Wal-Mart omitted information or provided a misleading statement in response to one of the Chelfs’ inquiries. And it does not explain or point to any document or communication disseminated by Wal-Mart on its own initiative in which it failed to include material information or materially misled the Chelfs—the second Sprague category. Ms. Chelf, moreover, does not allege that the Plan’s SPD was misleading, that she requested or received any particularized information from Wal-Mart regarding the conversion rights, or that Wal-Mart provided incorrect No. 20-6097 Chelf v. Prudential Ins. Co., et al. Page 10 or misleading information regarding the conversion of the life insurance policy. Without such factual allegations, we cannot reach the conclusion that the Complaint plausibly alleges that WalMart breached a duty to disclose imposed under Sprague. Next, Ms. Chelf contends that the failure to advise Mr. Chelf of his conversion rights exists independently because it arises under the language of the Plan, which she references. Wal-Mart argues that the Plan language should not be considered because it was not in the record when the district court issued its opinion as to Wal-Mart; the Plan was introduced into the record by Prudential only after the district court had ruled on Wal-Mart’s motions to dismiss. And, Wal-Mart points out, at no point did Ms. Chelf formally move to amend her Complaint against Wal-Mart to include her argument based on the Plan text. Wal-Mart contends that her arguments based on the Plan text are therefore forfeited. We agree with Wal-Mart that the Plan language should not be considered at this point. Considering the Plan language at this juncture would contravene the principle that “[i]n general, the appellate court should have before it the record and facts considered by the District Court.” Barrow, 118 F.3d at 487 (citing S & E Shipping Corp. v. Chesapeake & Ohio Ry. Co., 678 F.2d 636, 641 (6th Cir. 1982)). But we disagree that this issue has been forfeited. “Ordinarily an appellate court does not give consideration to issues not raised below.” Hormel, 312 U.S. at 556. “This reticence to consider unraised issues is born of the need ‘to ease appellate review by ensuring that district courts consider issues first, and to prevent surprise to litigants.”’ Harris v. Klare, 902 F.3d 630, 635–36 (6th Cir. 2018) (quoting Great Am. Ins. Co. v. E.L. Bailey & Co., 841 F.3d 439, 443 (6th Cir. 2016)). But “[w]e have recognized a distinction between failing to properly raise a claim before the district court and failing to make an argument in support of that claim.” Leonor v. Provident Life & Acc. Co., 790 F.3d 682, 687 (6th Cir. 2015) (citing Gallenstein v. United States, 975 F.2d 286, 290 n.4 (6th Cir. 1992)). Thus, as long as a claim or issue was raised before the district court, a party may “formulate[] any argument they like[] in support of that claim here.” Yee v. City of Escondido, 503 U.S. 519, 534–35 (1992); see also Mills v. Barnard, 869 F.3d 473, 483 (6th Cir. 2017); Leonor, 790 F.3d at 687. Here, Ms. Chelf’s claim was that Wal-Mart breached its fiduciary duty by not providing notice about the right to convert—whether providing that notice was mandated by ERISA or the Plan is merely an No. 20-6097 Chelf v. Prudential Ins. Co., et al. Page 11 argument in support of the claim against Wal-Mart for failing to do so. See Leonor, 790 F.3d at 687. The problem, however, is that Ms. Chelf’s Complaint did not allege that the terms of the life insurance policy required Wal-Mart to provide Mr. Chelf with notice of his right to convert. Nor did she allege that the Plan or SPD had any such requirement that would have given rise to such an independent duty. That is not to say that Ms. Chelf is required to identify particular Plan provisions to state a claim. Indeed, in the ERISA context, we recognize that it may be difficult for plaintiffs to access the plan and its provisions, and for this reason, plaintiffs need not necessarily identify the specific language of every plan provision to survive a motion to dismiss. See Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 598 (8th Cir. 2009) (“No matter how clever or diligent, ERISA plaintiffs generally lack the inside information necessary to make out their claims in detail unless and until discovery commences.”); Allen v. GreatBanc Tr. Co., 835 F.3d 670, 678 (7th Cir. 2016) (“[A]n ERISA plaintiff alleging breach of fiduciary duty does not need to plead details to which she has no access, as long the facts alleged tell a plausible story.”). But Ms. Chelf must allege sufficient facts to allow an inference that she has a plausible claim. And if the basis for that claim hinges on the Plan itself, as is apparently the case for the allegations of failure to provide notification concerning Mr. Chelf’s conversion rights, then the Complaint must so allege to state a plausible claim for relief. Because the Complaint has not done so here, we conclude that the district court did not err in dismissing this claim. On remand, any petition by Ms. Chelf seeking leave to amend the Complaint is entrusted initially to the discretion of the district court. See Fed. R. Civ. P. 15(a)(2) (“The court shall freely give leave [to amend a pleading] when justice so requires.”).