Opinion ID: 44548
Heading Depth: 2
Heading Rank: 2

Heading: Whether ERISA-Estoppel or Waiver Applies

Text: 14 Because the application of ERISA-estoppel is a legal theory rather than an interpretation of the Plan's terms, it should be reviewed de novo. Mello v. Sara Lee Corp., 431 F.3d 440, 444 (5th Cir.2005); see Rhorer v. Raytheon Eng'rs & Const'rs, Inc., 181 F.3d 634, 639 (5th Cir.1999).
15 In late 2005, this court in Mello joined other circuits in explicitly adopting ERISA-estoppel as a cognizable theory. To establish an ERISA-estoppel claim, the plaintiff must establish: (1) a material misrepresentation; (2) reasonable and detrimental reliance upon the representation; and (3) extraordinary circumstances. Mello, 431 F.3d at 444-45. In Mello, a disagreement arose between Frank Mello and his employer, Sara Lee, who acquired Mello's original employer, Bil Mar Foods, over whether Mello's pension benefits should be calculated using a hire date of September 17, 1984, (the date Mello began working for Bil Mar Foods) or October 31, 1994 (the date Mello and other Bil Mar Foods executives were allowed to enter the Sara Lee pension plan.) If the former date was used, Mello would receive $6,500 each month in pension benefits, but if the latter date was used, he would only receive $950 a month. Bil Mar Foods maintained its own retirement plan and Mello participated in it from 1984 to 1994; therefore, he remained entitled to receive benefits from that plan. Like the E-Systems Plan, Sara Lee was given the discretion to enforce its plan. 16 In introducing the doctrine of ERISA-estoppel to this circuit, the panel analyzed the elements of Mello's estoppel claim. The panel held that Sara Lee had made a material representation to Mello by providing benefits statements misrepresenting the details of the benefit payments he was to receive. The panel stated that a misrepresentation is material if there is a substantial likelihood that it would mislead a reasonable employee in making an adequately informed decision. Furthermore, the panel explained that ERISA-estoppel requires Mello to show reliance upon the representations made by Sara Lee. The reliance must be both reasonable and detrimental. Id. at 445. Ultimately, the panel stated that though Mello's reliance may have been detrimental, it was not reasonable, as Mello relied on the benefits statements and an employee's assertions rather than the unambiguous provisions provided in the plan. Id. Accordingly, the court held that the doctrine of ERISA-estoppel was inapplicable to the facts of Mello's case; the panel did not even reach the extraordinary circumstances element of the test. 17 Assuming arguendo that the actual disability benefits paid by E-Systems and received by High at a certain consistent amount for a six year period is sufficient to meet the material misrepresentation element, taking into account that his benefits were subsequently significantly reduced, we move to the second prong of the test: whether High's reliance is both detrimental and reasonable. High argues and we agree that he did rely to his detriment on these payments; he was permanently disabled and depended on these disability payments as a replacement for the salary that he once drew. High even asserts that he used the pre-1998 monthly income total to secure certain loans. Therefore, we find that High did rely on receiving a check for $1,200 rather than a check for $50, to his detriment. The question before us, however, is a conjunctive one; High's reliance must also be reasonable. 18 In answering this question, the Sixth Circuit in Sprague v. GMC, 133 F.3d 388, 404 (6th Cir.1998), reasoned that 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. The court held that allowing estoppel to override the clear terms of plan documents would be to enforce something other than the plan documents themselves. That would not be consistent with ERISA. Id. Additionally, in In re Unisys Corp. Retiree Medical Benefit ERISA Litigation, 58 F.3d 896, 902 (3d Cir.1995), the Third Circuit emphasized that a basic principle of ERISA is that a plan cannot be modified or superceded by extrinsic evidence. In that case, a company engaged in a systematic campaign of confusion that led employees to believe that their benefits continued for life. Id. at 907 n. 20. The court agreed that many of these employees may have relied on these bald assertions to their detriment; however, because the actual plan included unambiguous reservation of rights clauses, the court determined that the employees' estoppel claims were precluded because relying to their detriment that they would receive lifetime benefits, which conflicted with the plain language of the plan, was unreasonable. The court ultimately held: 19 While our decisions have not required an express finding of plan ambiguity as an element for establishing an estoppel claim, we have required that reliance be reasonable. Because our decisions require that any detrimental reliance on plan language also be reasonable, our finding that the [terms of the Plan] are unambiguous undercuts the reasonableness of any detrimental reliance by the retirees. Accordingly, we hold that the district court did not err in concluding, on summary judgment, that the retirees' estoppel claim failed as a matter of law. 20 Id. at 908. 21 Therefore, because we have determined that the language of the E-Systems Plan granting complete discretion to the plan administrator to offset group disability plan and other income benefits is not ambiguous, we hold that the doctrine of ERISA-estoppel does not apply in this case. High cannot reasonably rely on the actual receipt of disability benefits when the policy itself details that such reliance is unreasonable. 3 22 In High's final argument, he asserts that the doctrine of waiver applies; he argues that when E-Systems paid the full amount of his benefits without offsetting VA benefits for a six year period, it waived the right to subsequently take those benefits away from him. E-Systems urges that this theory is preempted by ERISA. Even if the doctrine of waiver were to apply to any effort by E-Systems to recover the overpayments, the case law, including that relied upon by High, does not support an application of it here. 23 Our caselaw defines waiver as a voluntary or intentional relinquishment of a known right. Pitts v. Am. Sec. Life Ins. Co., 931 F.2d 351 (5th Cir.1991); Rhorer, 181 F.3d at 639 (5th Cir.1999). 4 In this case, however, once MetLife discovered the overpayments, it conducted an investigation and adjusted the benefits payments accordingly; the actions of MetLife cannot be referred to as waiver because they cannot be referred to as intentional, as it was not MetLife who initially failed to offset High's VA benefits. Therefore, keeping in mind the fact that MetLife did not even provide claims administration services when High began receiving payments in 1992, we find the doctrine of waiver inapplicable.