This morning, the
Sixth Circuit Court of Appeals affirmed summary judgment for an employee on
three ERISA claims after the defendant pension plan reduced his pension credits
for the 10 years that he worked for the defendant employer in Canada. Deschamps
v. Bridgestone of Americas, Inc. Salaried Employees Pension Plan, No. 15-6112 (6th Cir.
9-12-16). The plaintiff had refused to
accept the transfer to the U.S. in 1993 unless he was given pension credit for
his prior 10 years in Canada. The HR
and plant managers confirmed with corporate HQ that he would receive that
pension credit, which was also included on all of his pension written and
online pension summaries until 2010, when the employer reinterpreted the terms
of the plan and reduced the pension credits previously awarded to him and other
expatriate transfers. He appealed
internally with the Plan, but his appeals were denied and the lawsuit
followed. The Court of Appeals agreed
that the undisputed issues of fact in the record confirmed that the employer
had been grossly negligent, breached its fiduciary duty and violated the
anti-cutback rules in leading him to believe that he would receive the pension
credit and then revoking those credits more than 17 years after his transfer
and after he rejected two job offers from a competitor (which subsequently went
bankrupt). The employer’s convoluted
interpretation of the definition of “supervisor” (which was not otherwise
defined in the plan) to exclude the plaintiff (who was an hourly maintenance
manager) contributed to the Court’s decision.
According to the
Court’s opinion, the plaintiff sought and received assurances from the U.S.
plant and human resources managers that they had checked with their corporate
office and he would receive pension credit for his 10 years working in Canada
if he were to transfer to the U.S. facility in 1993 as the plant maintenance
manager. (The retired corporate actuary, however, denied ever approving this
information). For his first 16 years of
employment, his online and written pension summaries also listed his 1983
seniority date. Granted, most (if not
all) of these documents stated that they were only estimates and that the
actual Plan document governed his eligibility for benefits. In 2010, the company sought to correct the
misapplication of the seniority dates for employees who transferred from
outside the U.S. and deducted those 10 years from the plaintiff’s pension
accrual. He appealed internally, but the
Plan denied his appeal on the grounds that he was not eligible because he had
not been salaried or a “supervisor.” “Supervisor”
was not defined in the Plan or SPD, but the Plan defined it to exclude non-exempt
managers like him. The plaintiff brought
suit against the Plan, his employer and its parent company alleging promissory
estoppel under 29 U.S.C. § 1132(a)(3), breach of fiduciary duty pursuant to 29
U.S.C. § 1104, and an anti-cutback violation pursuant to 29 U.S.C. §1054(g). The
trial court granted him summary judgment on all three claims. The employer, parent and Plan appealed.
Plaintiffs have a
long burden of proof when it comes to promissory estopped claims. They must show:
(1) conduct or
language amounting to a representation of material fact; (2) awareness of the
true facts by the party to be estopped; (3) an intention on the part of the
party to be estopped that the representation be acted on, or conduct toward the
party asserting the estoppel such that the latter has a right to believe that
the former’s conduct is so intended; (4) unawareness of the true facts by the party
asserting the estoppel; and (5) detrimental and justifiable reliance by the
party asserting estoppel on the representation. . . . In the case of an unambiguous pension plan, the plaintiff
must also prove three additional elements: “[(6)] a written representation; [(7)] plan provisions
which, although unambiguous, did not allow for individual calculation of benefits; and [(8)]
extraordinary circumstances in which the balance of equities strongly favors
the application of estoppel.”
The Court found that
the terms of the Plan were ambiguous because of how it interpreted “foremen”
and “supervisors” to exclude non-salaried managers like the Plaintiff when
those terms were not defined within the Plan itself. Further, the defendants conceded that the
plaintiff could prove elements (1), (3) and (4).
The defendants
attempted to dispute that the Plaintiff could prove that the defendants were
aware of the “true facts” because he did not inquire of the corporate HQ
pension officials himself, but instead, relied on the plant managers to contact
corporate HQ for him. The Court
described this element to require the plaintiff to show “either intended
deception or such gross negligence as to amount to constructive fraud.” The Court construed prior precedent and found
that the employer was grossly negligent in assuring the plaintiff for 16 years
that he would receive the pension credit and not attempting to correct that
mistake (if it was a mistake) shortly after making it in response to his specific
inquiries. Further, the plaintiff could
not be held responsible for earlier realizing the mistake in light of the
convoluted interpretation of “supervisor” which the Plan adopted (to exclude
managers). Thus, the Court found that
the employer could be found liable for “constructive fraud.”
The employer also
disputed whether the plaintiff could prove that he detrimentally relied upon
the employer’s assurances. In
particular, the plaintiff had rejected attractive job offers from a competitor
which subsequently went bankrupt and laid off thousands of employees. The Court rejected the employer’s argument
because there was no evidence that the plaintiff would definitely have been
laid off by the competitor. In
addition, there was no legal requirement that the competing job offer be
economically better, as long as it was an opportunity which the plaintiff
rejected in reliance on his employer’s representations about his pension
status. Further, the plaintiff’s reliance for 16 years
on the employer’s written and oral (mis)representation were reasonable when he
rejected the competitor’s offer of a higher salary.
As for the breach of
fiduciary duty claims, the plaintiff was required to show
(1) Bridgestone acted in a fiduciary capacity in making misrepresentations
to Deschamps, (2) those misrepresentations were material, and (3) Deschamps
detrimentally relied on the misrepresentations. . . . The second element [was]
not disputed.
The disputed issue was whether the
employer was a fiduciary:
A fiduciary is
defined by ERISA to include a corporation10 who “exercises any discretionary
authority or discretionary control respecting management of [a] plan” or “has
any discretionary authority or discretionary responsibility in the
administration of such plan.” 29 U.S.C. § 1002(21)(A). In determining whether a corporation is a
fiduciary, rather than looking to the formal title, we use a functional
approach, looking to whether it acts in a fiduciary capacity with respect to
the conduct at issue.
While making business decisions which have a
collateral effect on employee benefits (such as terminating a plan), processing
claims, applying eligibility rules or calculating benefits are not
fiduciary functions, explaining the
terms of the plan, and conveying information about likely future plan benefits
are fiduciary functions. Accordingly, in
this case, conveying information to the Plaintiff about receiving pension
credits and the likely benefits he would receive in the future were fiduciary
functions. The Court also found that the
plant and HR managers had apparent authority to bind the employer: “Bridgestone
acted as a fiduciary when it, through its agents with apparent authority,
misrepresented to Deschamps the status of his pension benefits.”
The employer
disputed that it had ever construed the Plan to cover the plaintiff, and,
therefore, could not have violated the anti-cutback provisions when in 2010 it
retracted his credit for the 10 years he worked in Canada between 1983 and 1993. It construed the contrary assurances to the
plaintiff as a “clerical error.”
ERISA prohibits plan
amendments that decrease a participant’s accrued benefits, with two exceptions
that do not apply here. 29 U.S.C. §
1054(g). At issue is whether we look to
the text of the Plan or the administrator’s interpretation of the Plan in
determining if Deschamps accrued a benefit prior to 1993.
In essence, an
employer can illegally cut-back benefits if it changes or reinterprets the
terms of the plan to reduce benefits that a plaintiff reasonably believed
provided higher benefits based on a different and plausible interpretation of
the plan.
As discussed above,
the text of the Plan is at worst ambiguous, but at best, favors Deschamps’s
argument that he was a covered employee in 1983 under the classification of “supervisor.”
It is not untenable that Deschamps, in his capacity as a maintenance
manager, was a supervisor under the language of the Plan. Further, it is undisputed that as a result of
the [2010] change in the interpretation of this provision that excluded foreign
employees from being classified as covered employees, Deschamps’s benefits were
decreased. Therefore, Deschamps has established an anti-cutback violation . . .
NOTICE: This summary
is designed merely to inform and alert you of recent legal developments. It
does not constitute legal advice and does not apply to any particular situation
because different facts could lead to different results. Information here can
be changed or amended without notice. Readers should not act upon this information
without legal advice. If you have any questions about anything you have read,
you should consult with or retain an employment attorney.
