Court Opinion

ID: 9492451
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:41:32.588908+00
Date Added: 2024-06-11T17:55:18.743581
License: Public Domain

FERNANDEZ, Circuit Judge,
concurring and dissenting:
I agree with the majority opinion to the extent that it holds that the proper test for answering employee inquiries is the serious consideration test.1 However, I cannot agree that we should further destabilize this area of the law by requiring employers to announce possible new plans to some or all or their employees before the plans are actually adopted. Nor do I agree with the glosses put on Fischer II. Thus, I concur in part and dissent in part.
Bins asserts that once the SPOSA was under serious consideration, Exxon Corp. did owe him an affirmative duty of voluntary disclosure of the SPOSA’s possible adoption. If so, the duty to him was violated because his literal retirement date came six days later. However, I do not agree that the duty existed.
Bins’ argument rests primarily on Eddy v. Colonial Life Ins. Co., 919 F.2d 747 (D.C.Cir.1990), although he also cites a litany of other cases in support. See Estate of Becker v. Eastman Kodak Co., 120 F.3d 5 (2d Cir.1997); Jordan v. Federal Express Corp., 116 F.3d 1005 (3rd Cir.1997); Bixler v. Central Pennsylvania Teamsters Health & Welfare Fund, 12 F.3d 1292 (3rd Cir.1993); Anweiler v. American Elec. Power Serv. Corp., 3 F.3d 986 (7th Cir.1993). He also cites two cases from this circuit, see Farr v. U.S. West Comm., Inc., 151 F.3d 908 (9th Cir.1998); Barker v. American Mobil Power Corp., 64 F.3d 1397 (9th Cir.1995). However, none of those cases supports the existence of an affirmative duty of voluntary disclosure in the context of the prospective adoption of a plan where the fiduciary is not responding to an inquiry from a beneficiary.
Eddy involved a plaintiff with AIDS who was scheduled to undergo surgery the day his insurance policy was unexpectedly terminated. The termination was because the employing company had been sold. See 919 F.2d at 748. Eddy called the insurance company of the new owner to see if he could continue (or convert) his existing policy because the information he was given indicated that the new employer’s policy would not directly cover his surgery. Id. He was told that he could not continue it. That was an at least disingenuous answer because he could convert the policy. The court held that the insurance company “has a duty upon inquiry to convey to a lay beneficiary ... correct and complete material information about his status and options when a group policy is canceled....” Id. at 750. The court also rejected the defendant’s assertion that Eddy asked only about continuation rights, not conversion rights. “Once Eddy presented his predicament, Colonial Life was required to do more than simply not misinform, Colonial Life also had an affirmative obligation to inform — to provide complete and correct material information on Eddy’s status and options.” Id. at 751. Thus, at root, Eddy was a case involving misinformation about existing rights under an existing plan.
Bins’ other cases are in accord with the rule that even if the question framed by the beneficiary is limited, a duty of full disclosure is triggered when a beneficiary asks the fiduciary about a policy or plan. See Becker, 120 F.3d at 9-10 (It was a breach of fiduciary duty to fail to provide the beneficiary with complete and accurate information about retirement options when the dying beneficiary inquired about the possibility of retiring “anytime” while on disability leave and the counselor said “right,” but did not explain that when on disability leave retirement was only effective the first of the following month.); Jordan, 116 F.3d at 1008, 1016 (A plan ad*942ministrator’s furnishing of information regarding a retirement beneficiary election that did not mention that a post-retirement change of the named beneficiary was prohibited could constitute a breach of fiduciary duty because “[i]t is apparent why a participant might consider irrevocability material” and “ ‘circumstances known to the fiduciary can give rise to this affirmative obligation [to inform] even absent a request by the beneficiary.’ ” (citation omitted)); Bixler, 12 F.3d at 1300 (“This duty to inform is a constant thread in the relationship between beneficiary and trustee; it entails not only a negative duty not to misinform, but also an affirmative duty to inform when the trustee knows that silence might be harmful.” A beneficiary’s inquiries about the end of coverage triggered a duty to inform about COBRA options.); Anweiler, 3 F.3d at 989-92 (It was a breach of fiduciary duty when employee was asked to sign a reimbursement agreement but was not told that he did not have to sign the agreement in order to receive his long-term disability benefits.).
Our cases are to the same effect. In Farr, plaintiffs’ action was based on defendants’ failure to give information about the negative tax consequences of an adopted, existing early retirement plan. See 151 F.3d at 912. We first noted that the Supreme Court2 had not reached the “question of whether ERISA imposes a duty on fiduciaries to disclose truthful information on their own initiative, or in response to employee inquiries ... [but] we have previously held that [when making disclosures] a ‘fiduciary has an obligation to convey complete and accurate information material to the beneficiary’s circumstance, even when a beneficiary has not specifically asked for the information.’ ” Id. at 914 (citation omitted). As such, providing incomplete and misleading information about the tax consequences of the retirement plan was a breach of fiduciary duty. Id. at 915; see also Barker, 64 F.3d at 1402-04 (holding that a fiduciary who suspects plan funds are being mismanaged breaches his fiduciary duty by failing to convey complete information regarding those suspicions). Again, Farr involved the giving of information about the effects of taking advantage of an existing plan; at most it stands for the proposition that misleading information cannot be given.
Therefore, each of the prior cases stands for the proposition that upon inquiry the fiduciary must volunteer all material information and cannot play “scope of the question” games. See Eddy, 919 F.2d at 750-51. To rely upon those cases begs the question before us — what information is material and what must be communicated in the absence of a request, and when?3 They do not speak to a requirement of sua sponte disclosure of information about a yet-unadopted plan. In this case, no inquiry was made after the fiduciary duty to answer questions arose. Thus, no information was disclosed at all, let alone incomplete and misleading information. The duty to answer truthfully was not breached, and none of the authority cited to us holds that a fiduciary must, even without inquiry, volunteer information about an unadopted, prospective, albeit seriously considered, plan.
Indeed, the closest authorities are to the contrary. See Pocchia v. NYNEX Corp., 81 F.3d 275, 278 (2d Cir.1996) (“[P]lan fiduciaries may not affirmatively mislead plan participants about changes, effective or under consideration, to employee pension benefit plans.” However, “a fiduciary is not required to voluntarily *943disclose changes in a benefit plan before they are adopted.”); Berlin v. Michigan Bell Tel. Co., 858 F.2d 1154, 1164 (6th Cir.1988) (“It is also important to note what our decision does not hold.... [We] do [not] hold that defendants had any duties ... to say anything at all or to communicate with potential participants about the future availability of [the special severance plan].”); Stanton v. Gulf Oil Corp., 792 F.2d 432, 435 (4th Cir.1986) (“It is not a violation of ERISA to fail to furnish information regarding amendments before these amendments are put into effect.”). Moreover, sound reasons militate against creating a rule of mandatory disclosure, in the absence of inquiry, of a plan that is under serious consideration. Under a rule of that sort, it is not clear what information should be disclosed. As the court put it in Pocchia, 81 F.3d at 278-79:
Until a plan is adopted, there is no plan, simply the possibility of one. Insisting on voluntary disclosure during the formulation of a plan and prior to its adoption would, we think, increase the likelihood of confusion on the part of beneficiaries and, at the same time, unduly burden management, which would be faced with continuing uncertainty as to what to disclose and when to disclose it. Moreover, any requirement of pre-adoption disclosure could impair the achievement of legitimate business goals....
Permitting plan fiduciaries to keep secret their pre-adoption deliberations and discussions in no way frustrates [the purposes of ERISA]. Rather, such a bright-line rule protects the interests of the beneficiaries, who will receive information at the earliest point at which their rights can possibly be affected, as well as the interest of fiduciaries, who will be required to provide information only at the point at which it becomes complete and accurate.
I agree with Pocchia. I agree that once serious consideration begins, a plan administrator may not make material misrepresentations which suggest lack of knowledge, but must answer questions honestly and fully. However, I would not hold that an administrator also has an affirmative duty to voluntarily disclose possible prospective changes in retirement plans to all, or some, employees. As I see it, that extension of the rule places fiduciaries in an unenviable position between the Scylla of misleading employees by encouraging expectations about inchoate changes that might never occur, and the Charybdis of misleading employees by discouraging expectations about inchoate changes that are ultimately adopted. In either event, the employee might feel aggrieved because he has acted or failed to act.4 Today we move further from the policy of “encouraging the formation of employee benefits plans,” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54, 107 S.Ct. 1549, 1556, 95 L.Ed.2d 39 (1987),5 by making that undertaking even more parlous than it was before. We have, alas, given Scylla a seventh head and increased Charybdis’ capacity.
Thus, I respectfully dissent from the majority’s voluntary disclosure decision, although I concur in its opinion to the extent that it adopts the Fischer II serious consideration test.6

. See Fischer v. Philadelphia Elec. Co.. 96 F.3d 1533, 1539-40 (3rd Cir.1996) (Fischer II).

. See Varity Corp. v. Howe, 516 U.S. 489, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996). Bins' assertion that Varity supports his position lacks merit because Varity concerned intentional misrepresentations and the Court expressly refused to decide "whether ERISA fiduciaries have any fiduciary duty to disclose truthful information on their own initiative. ...” Id. at 506, 116 S.Ct. at 1075.

. Of course, fiduciaries may never engage in actual misrepresentation. See Ballone v. Eastman Kodak Co., 109 F.3d 117, 122-26 (2d Cir.1997); Drennan v. General Motors Corp., 977 F.2d 246, 251-52 (6th Cir.1992).

. See, e.g., Taylor v. Peoples Natural Gas Co., 49 F.3d 982, 985, 987-88 (3d Cir.1995).

. See also Kearney v. Standard Ins. Co., 175 F.3d 1084, 1102-03 (9th Cir.1999) (Fernandez, J. dissenting).

. I do not agree with the subtle, and not so subtle, accretions to that test, however. For example, the thought that Fischer II is merely an ingredient in some sort of indeterminate mix, see maj. op. at 938-39, might give litigants and courts more flexibility, but will hardly help employers plan their affairs. Similarly, the determination that senior management can mean those who run a mere section or division of a company, even though they are not the senior management of the company itself, maj. op. at 940, may offer wonderful new vistas to those who enjoy the litigation process, but do offer drear prospects *944for employers. The fact that some intrepid employers will ultimately avoid all of the new perils in the ERISA seas will not sufficiently compensate for the added transaction costs they will incur in doing so.