United States Court of Appeals, Third Circuit
United States Court of Appeals, Third Circuit
2d 1155
12 Employee Benefits Ca 2449
and that plaintiffs received all the benefits to which they were entitled under the
amended, less generous plan.
2
Plaintiffs contend that in evaluating their entitlement to benefits under the 1985
plan, the trier of fact must consider not only the terms of that plan, but also the
defendants' failure to comply with ERISA's reporting and disclosure provisions.
We reject this contention. However, we conclude that the terms of the plan,
considered in light of other record evidence bearing on the proper construction
of those terms, are sufficiently ambiguous that a reasonable trier of fact could
find that plaintiffs are entitled to benefits. Accordingly, we will reverse and
remand for a trial on that issue.
I. BACKGROUND
4
The following facts are essentially undisputed. Prior to July 1985, defendant
Erico International Corporation ("EIC") was involved in the stud welding
industry through the Erico-Jones Company, a wholly owned subsidiary of EIC.
On July 15, 1985, EIC purchased KSM Fastening Systems, Inc. ("KSM"), a
competitor of Erico-Jones. EIC then began to consolidate the various
operations of Erico-Jones and KSM, eliminating unnecessarily duplicative
positions within those companies. Ultimately, EIC planned to merge EricoJones and KSM into Erico Fastening Systems, Inc. ("EFS"), a new subsidiary it
had created for that purpose.
severance package ... is to be used for the lay-off of [employees] for the merger
of Erico Jones and KSM" and that the package "cancels out any other severance
policy for the time frame involved in adjustment of workload and
responsibilities that is involved in this merger."
6
The "package" consisted of three attachments: (1) a table setting out amount of
severance pay as an increasing function of the affected employee's age and
years of service; (2) a list of various details of the policy (none of which is
relevant here); and (3) an outline of a three-page letter drawn up "for the
merger" to be given to each covered employee. The letter informs the employee
of his impending termination and the amount of his particular severance
payment. A copy of the table was again distributed to a select group of
executives on August 29, 1986. Attached was a cover letter written on EFS
stationery by Annmarie Horan, personnel director first of KSM and later EFS,
which described the table as "a copy of EFS' severance pay guidelines."
10
Plaintiffs are five former sales employees who were terminated, effective July
31, 1987, in the layoffs that ensued. Pursuant to Craven's severance policy,
plaintiffs each received two weeks of severance pay. Had their payment been
calculated under the terms of the 1985 package, each plaintiff would have
received a far more generous payment.
11
Plaintiffs filed a three-count complaint against Midwest and EIC to recover the
additional benefits. Count one charged that defendants, in unilaterally
amending or terminating the 1985 severance package, violated fiduciary duties
imposed on them by ERISA. Count two sought a declaratory judgment that
plaintiffs are entitled to benefits because of defendants' violations of ERISA's
reporting and disclosure provisions. Count three sought benefits under the
terms of the 1985 severance plan. The parties filed cross motions for summary
judgment. The district court denied plaintiffs' motion, granted defendants'
motion on all counts, and entered judgment for defendants. This appeal
followed.1
12
13
For ease of exposition, we shall address count one of the complaint first, then
count three, then count two.
Count one alleges the breach of fiduciary duties imposed by ERISA. Plaintiffs
locate that breach in Craven's decision to amend the terms of the 1985
severance plan, because Craven allegedly failed to administer the plan in
accordance with its terms. A proper analysis of this argument must begin with
ERISA's statutory scheme regarding fiduciaries and their duties.
15
Fiduciary duties under ERISA attach not just to particular persons, but to
17 person is a fiduciary with respect to a plan to the extent (i) he exercises any
[A]
discretionary authority or discretionary control respecting management of such plan
or exercises any authority or control respecting management or disposition of its
assets, (ii) he renders investment advice for a fee or other compensation, direct or
indirect, with respect to any moneys or other property of such plan, or has any
authority or responsibility to do so, or (iii) he has any discretionary authority or
discretionary responsibility in the administration of such plan.
18
29 U.S.C. Sec. 1002(21)(A) (1982). Because the severance plan at issue in this
case was unfunded, there is no question regarding the management or
investment of a separate trust. There is also no question that Craven, acting on
behalf of Midwest, was an "administrator" with "discretionary authority" over
the plan.2 Thus, the precise issue we must consider is whether Craven's
decision to amend the terms of the 1985 severance plan constituted a decision
regarding the "administration" of a plan within the meaning of section 3(21)(A)
(iii) of ERISA. If not, Craven was acting in his capacity as a Midwest
executive, not as a plan administrator, and as such was unconstrained by
ERISA's fiduciary requirements.3
19
21
22
determine the range of estimated costs to private pension plans resulting from
compliance with minimum vesting requirements under several proposed
minimum vesting standards." D. Grubbs, Summary of Report: Study of the Cost
of Mandatory Vesting Provisions (1972), reprinted in 1974 U.S.Code Cong. &
Admin.News 4884, 4885. Moreover, Congress imposed no vesting
requirements on welfare plans because it determined that "[t]o require the
vesting of these ancillary benefits would seriously complicate the
administration and increase the cost of plans whose primary function is to
provide retirement income." H.Rep. No. 807, 93rd Cong., 2d Sess. 60, reprinted
in 1974 U.S.Code Cong. & Admin. News 4670, 4726; S.Rep. No. 383, 93rd
Cong., 1st Sess. 51, reprinted in 1974 U.S.Code Cong. & Admin.News 4890,
4935.
23
24
Virtually every circuit has rejected the proposition that ERISA's fiduciary
duties attach to an employer's decision whether or not to amend an employee
benefit plan. For example, in Sutton v. Weirton Steel Division, 724 F.2d 406
(4th Cir.1983), cert. denied, 467 U.S. 1205, 104 S.Ct. 2387, 81 L.Ed.2d 345
(1984), the Fourth Circuit held that an employer's decision "to renegotiate or
amend ... unfunded contingent benefits" was "not to be reviewed by fiduciary
standards." Id. at 411. Similarly, the Eleventh Circuit has held that "ERISA
simply does not prohibit a company from eliminating previously offered
benefits that are neither vested nor accrued." Phillips v. Amoco Oil Co., 799
F.2d 1464, 1471 (11th Cir.1986), cert. denied, 481 U.S. 1016, 107 S.Ct. 1893,
95 L.Ed.2d 500 (1987). See also, e.g., Musto v. American General Corp., 861
F.2d 897, 912 (6th Cir.1988) ("[W]hen an employer decides to establish,
amend, or terminate a benefits plan, as opposed to managing any assets of the
plan and administering the plan in accordance with its terms, its actions are not
to be judged by fiduciary standards."), cert. denied, --- U.S. ----, 109 S.Ct. 1745,
104 L.Ed.2d 182 (1989); Young v. Standard Oil (Indiana), 849 F.2d 1039, 1045
(7th Cir.1988) ("In short, an employer does not owe its employees a fiduciary
duty when it amends or abolishes a severance benefit plan."), cert. denied, 488
U.S. 981, 109 S.Ct. 529, 102 L.Ed.2d 561 (1989); Anderson v. John Morrell &
Co., 830 F.2d 872, 876 (8th Cir.1987) ("[T]he terms of ERISA do not provide a
cause of action against the Company for unilaterally eliminating the policy.");
Cunha v. Ward Foods, Inc., 804 F.2d 1418, 1432-33 (9th Cir.1986) ("[The
employer] was not acting in connection with its fiduciary responsibilities as
Plan administrator, but instead, was acting in its corporate capacity. The
decision to terminate the Plan was a business decision that properly rested with
[the employer's] corporate offices."); Amato v. Western Union International,
Inc., 773 F.2d 1402, 1417 (2d Cir.1985) ("[The] officers acted on behalf of a
corporate employer and not as Plan fiduciaries in amending its pension plan."),
cert. dismissed, 474 U.S. 1113, 106 S.Ct. 1167, 89 L.Ed.2d 288 (1986). We
know of no decision by any court of appeals to the contrary.
25
26
For the reasons given, we think that Sutton and its progeny are sound, so we
convert Payonk's assumption into an explicit holding--that an employer's
decision to amend or terminate an employee benefit plan is unconstrained by
the fiduciary duties that ERISA imposes on plan administration. Our conclusion
does not imply that an employer has unfettered discretion to amend or terminate
plans at will. In the case of pension plans, ERISA's detailed accrual and vesting
provisions substantially limit this power. Moreover, employees and their unions
remain free to bargain for vesting requirements in the terms of their plans above
and beyond those required by statute. Finally, plaintiffs might be correct that an
employer's purported amendment is invalid if the original plan's governing
documents fail to reserve an amendment power expressly, or if employees are
never notified of the amendment, or if an employer fails to follow certain
formalities that ERISA mandates for effecting amendments, though we need
Plaintiffs' third cause of action seeks benefits under the terms of defendants'
severance plan. See ERISA Sec. 502(a)(1)(B), 29 U.S.C. Sec. 1132(a)(1)(B).8
The plan, however, was purportedly amended in 1987, before plaintiffs'
termination, so as to make plaintiffs ineligible for any benefits above and
beyond what they have already received. Thus, plaintiffs must establish two
propositions in order to prevail: first, that the purported 1987 amendment had
no legal effect as of the date they were discharged, and second, that they are
entitled to benefits under the terms of the unamended 1985 plan.
We agree with the plaintiffs' contention that ERISA precludes oral amendments
to employee benefit plans. Because defendants concede that the purported 1987
amendment was never reduced to a writing before plaintiffs were terminated,
we conclude as a matter of law that the unamended 1985 plan must govern
plaintiffs' claims for benefits.9
31
Section 402(a)(1) of ERISA requires that "[e]very employee benefit plan shall
be established and maintained pursuant to a written instrument." 29 U.S.C. Sec.
1102(a)(1). Relying primarily on this provision, the Eleventh Circuit in
Nachwalter v. Christie, 805 F.2d 956 (11th Cir.1986), held that "ERISA
precludes oral modifications of employee benefit plans." Id. at 960. Since
Nachwalter, at least five different circuits have agreed. See Pizlo v. Bethlehem
Steel Corp., 884 F.2d 116, 120 (4th Cir.1989) (stating that "informal" or
"unauthorized" modification of pension plans is "impermissible" under
ERISA); Degan v. Ford Motor Co., 869 F.2d 889, 895 (5th Cir.1989) ("ERISA
mandates that [a] plan itself and any changes made to it [are] to be in writing.");
Musto v. American General Corp., 861 F.2d 897, 910 (6th Cir.1988) ("[A]
Each of these cases rebuffed an attempt to hold an employer to some sort of oral
promise to increase benefits from those provided in formal written plans. As a
textual matter, however, section 402(a)(1) draws no distinction between oral
promises to increase benefits and oral decrees, like Craven's, that benefits be
decreased. Indeed, to the extent that ERISA is primarily concerned with
"promot[ing] the interests of employees and their beneficiaries," Shaw v. Delta
Air Lines, Inc., 463 U.S. 85, 90, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490 (1983),
the argument for disallowing oral amendments, at least as a policy matter, is
even more compelling when such amendments purport to decrease benefits.
Section 402(a)(1) was designed to ensure that "every employee may, on
examining the plan documents, determine exactly what his rights and
obligations are under the plan." H.Rep. No. 1280, 93rd Cong., 2d Sess. 297,
reprinted in 1974 U.S.Code Cong. & Admin. News 5038, 5077-78. Employees
entitled to rely on the terms of a written benefit plan "should not have their
benefits eroded by oral modifications to the ... plan." Cefalu v. B.F. Goodrich
Co., 871 F.2d 1290, 1296 (5th Cir.1989). "Congress, in passing ERISA, did not
intend that participants in employee benefit plans should be left to the
uncertainties of oral communications in finding out precisely what rights they
were given under their plan." Musto, 861 F.2d at 909-10.
33
34
36
With a good deal of force, defendants argue that the 1985 plan, as a matter of
law, extends at most to employees terminated before the merger of Erico-Jones
and KSM was completed. The "plan" itself is suffused with references to the
merger. The cover page is entitled "Severance Pay Erico Jones-KSM Merger."
It states that the severance policy is to be used "for the merger of Erico Jones
and KSM," that the policy "cancels out any other severance policy for the time
frame involved in adjustment of workload and responsibilities that is involved
in this merger," and that a letter "drawn up by attorneys representing Erico and
KSM, for the merger" must be handed out to covered employees.
37
Pointing out that the formal merger of Erico-Jones and KSM did not occur until
over four months after they had been terminated, plaintiffs respond that a plan
developed "for the merger of Erico Jones and KSM" can reasonably be
construed as providing benefits at least until those two companies have been
formally merged, not just operationally consolidated. We believe that the
reference in the 1985 plan to "the time frame involved in adjustment of
workload and responsibilities" cuts against plaintiffs' proposed construction.
Moreover, we note that defendants introduced direct and unqualified testimony
that the policy as originally conceived extended only to employees fired as a
result of the operational consolidation. Craven, who was on the committee that
drafted the package, testified that it was developed "specifically" for the
"merger," a term defined as "the consolidation of [the] two operations, App.
277, and that the plan "applied only to people who were affected by this
merger," App. 287. Annmarie Horan, KSM's personnel manager at the time in
question, corroborated Craven's account. She testified that the plan was
intended to apply to employees terminated "only as a result of the
consolidation." App. 387.
38
39
40
We believe that this memo at least suggests that the 1985 plan was intended to
extend beyond employees terminated as a result of the consolidation. Horan
herself testified that the consolidation of Erico-Jones and KSM occurred
between July 1985 and September 1986. App. 387. A reasonable factfinder
could conclude that as of August 29, 1986, the consolidation was almost
complete and Horan knew it. On that date, however, Horan circulated a memo
about the "severance pay guidelines" of EFS, the merged entity, which
contemplated future application of those guidelines but which made no hint
whatsoever of their impending termination. Under these circumstances, such an
omission seems odd, especially from someone with "personal knowledge" of
the scope of the plan from its inception, App. 387. The omission seems less
odd, however, on the assumption that the 1985 plan was to continue in effect
through the future foreseeable as of August 29, 1986--for example, at least until
the formal merger, which occurred over 15 months after the Horan memo was
written.
41
We do not mean to suggest that the Horan memo is conclusive evidence to that
The summary judgment record indicates that during this period, at least nine
employees of Midwest received severance benefits consistent with the terms of
the 1985 plan. Accepting defendants' contention that the consolidation had
been completed before Midwest was sold to Neff, it follows that each of these
employees was paid benefits even though none was terminated as a result of the
consolidation. Moreover, the decision to grant benefits was made in each case
by Hartmann, who had been a member of the original EIC committee that
created the 1985 package. During this same period, Hartmann decided not to
grant benefits to at least six other employees terminated by Midwest. Of these,
however, three left the company voluntarily to begin other joint ventures with
Neff and Hartmann, and a fourth was apparently granted a consulting
agreement in lieu of severance.
43
We believe that this evidence could support a finding that Hartmann, a member
of the committee that created the 1985 severance package, believed that it
obliged him to grant benefits to employees terminated before the merger was
legally effected, even though the operational consolidation had already been
completed. A similar belief might be imputed to Richard Ripley, another
Midwest executive formerly a member of the 1985 committee, on the basis of a
letter Ripley wrote to Midwest's counsel on July 25, 1987. The letter states that
"we need to know our position if we make further cuts but do not offer ...
severance [pursuant to the 1985 package]," App. 123, which at least suggests
that Ripley too had some doubts in his mind. Moreover, we believe that a
reasonable factfinder could deemphasize defendants' extrinsic evidence, which
consists of testimony of officials who either are or were employees of
defendants themselves. Finally, in light of plaintiffs' evidence regarding the
Horan memo and Hartmann's 1987 practices, we believe that a reasonable
factfinder could construe a plan created "for the merger" as continuing in effect
at least until the merger has been legally consummated, despite the narrower
construction suggested at first glance by the original plan's reference to "the
time frame involved in adjustment of workload and responsibilities that is
We do not suggest, of course, that this is the correct, or even the most plausible,
way to view the evidence in the summary judgment record. At this point, we
are only concerned with whether a reasonable factfinder could synthesize all
this evidence into a judgment for plaintiffs. Under the chain of reasoning
outlined above, we conclude that it could, and that the district court therefore
erred in granting summary judgment to defendants on plaintiffs' claim for
benefits under the terms of the 1985 plan.11
46
48
The frequent usage of the term "arbitrary and capricious" in this context is
perhaps unfortunate, for it tends to elide a critical distinction between the
applicable substantive standard of liability and the applicable standard of
judicial review. In ordinary parlance, it seems reasonable to posit that an
administrator who repeatedly or intentionally violates ERISA's reporting and
disclosure provisions is behaving arbitrarily and capriciously. ERISA, however,
does not entitle a participant to benefits whenever the administrator behaves
arbitrarily; rather, it entitles him to benefits whenever "the terms of his plan" so
provide. See ERISA Sec. 502(a)(1)(B), 29 U.S.C. Sec. 1132(a)(1)(B). Properly
understood, therefore, the phrase "arbitrary and capricious" in this context
connotes a deferential standard of judicial review, not a substantive standard of
liability. It requires simply that a district court, in reviewing an administrator's
construction of "the terms of [a] plan" so as to deny benefits to the plaintiff,
afford some degree of deference to that construction.
49
To the extent that Blau was simply attempting to avoid a perceived unfairness
in affording only deferential review in this context, its holding is no longer
necessary. After Blau was decided, the Supreme Court rejected the arbitrary
and capricious standard of review, holding instead that in actions challenging
an administrator's denial of benefits under section 502(a)(1)(B), the district
court must construe the terms of a plan de novo, unless the plan itself expressly
provides otherwise. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,
109 S.Ct. 948, 956, 103 L.Ed.2d 80 (1989). Blau, however, can plausibly be
read as holding that reporting and disclosure violations are relevant in
evaluating a section 502(a)(1)(B) claim regardless of whether the district court
construes the terms of the plan deferentially or de novo. Since plaintiffs have
asked us to endorse the Blau theory post-Bruch, we assume that this the
principle they would have us announce.
50
51
52
reporting and disclosure violations as such give rise to different remedies under
different statutory provisions, the plaintiff recovers benefits nonetheless. In
effect, Blau creates a kind of hybrid action designed to afford the section 502(a)
(1)(B) remedy (recovery of benefits) to redress violations of rights (to certain
information) made remediable under section 502(a)(1)(A)--an action outside
the literal scope of each, but implied from the penumbras of both, the
recognition of which obliterates the limitations expressly built into the section
502(a)(1)(A) remedy.
53
It is well settled that implied remedies are disfavored in the context of statutes
that set out an expressly detailed remedial scheme. "The presumption that a
remedy was deliberately omitted from a statute is strongest when Congress has
enacted a comprehensive legislative scheme including an integrated system of
procedures for enforcement." Northwest Airlines, Inc. v. Transport Workers,
451 U.S. 77, 97, 101 S.Ct. 1571, 1583-84, 67 L.Ed.2d 750 (1981). ERISA is a
prime example of just such a statute. Thus, in Massachusetts Mutual Life
Insurance Company v. Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96
(1985), the Supreme Court refused to imply a cause of action for
extracontractual damages from ERISA. In language that could easily be
transposed into a dissent to Blau, the Court explained:
54 six carefully integrated civil enforcement provisions found in Sec. 502(a) of the
The
statute as finally enacted ... provide strong evidence that Congress did not intend to
authorize other remedies that it simply forgot to incorporate expressly. The
assumption of inadvertent omission is rendered especially suspect upon close
consideration of ERISA's interlocking, interrelated, and interdependent remedial
scheme, which is in turn part of a "comprehensive and reticulated statute."
55
Id. at 146, 105 S.Ct. at 3092 (emphasis in original; citation omitted). Following
the Supreme Court's warnings, we should be "reluctant to tamper with an
enforcement scheme crafted with such evident care as the one in ERISA." Id. at
147, 105 S.Ct. at 3093.
56
The Blau court correctly noted two salutary purposes behind ERISA's reporting
and disclosure provisions--to ensure that "the individual participant knows
exactly where he stands with respect to the plan" and to "enable employees to
police their plans." H. Rep. No. 533, 93rd Cong., 1st Sess. 11, reprinted in 1974
U.S.Code Cong. & Admin. News 4639, 4649; S.Rep. No. 127, 93rd Cong., 1st
Sess. 27, reprinted in 1974 U.S.Code Cong. & Admin. News 4838, 4863. We
believe that Blau 's rather freewheeling statutory construction, even though
embarked upon to vindicate correctly perceived underlying purposes, has little
place in the context of a carefully balanced and reticulated statute like ERISA.
Congress did seek to provide employees with more information about their
plans. However, Congress also chose to limit the remedies available for
violations of the very provisions designed to effect that purpose.
57
58
59
For the foregoing reasons, we hold that defendants' reporting and disclosure
violations are irrelevant in determining plaintiffs' entitlement to benefits under
the terms of the 1985 plan. To the extent plaintiffs seek benefits under section
502(a)(1)(B), they must do so on the basis of "the terms of [their] plan," which
defines the scope of the entitlements it creates without reference to the extent of
the disclosure of its terms. To the extent plaintiffs seek redress for defendants'
reporting and disclosure violations as such, they should have sought the
remedies available to them under section 502(a)(1)(A). We decline to use
section 502(a)(1)(B) as a device to undercut the limitations built into section
502(a)(1)(A), and we decline to follow Blau accordingly.
60
In sum, to the extent that count two of the complaint seeks to have the
purported 1987 amendment struck down because of defendants' failure to
satisfy the notice requirement of section 104(b)(1) of ERISA, see supra p. 1167,
this contention has been mooted by our determination that the amendment is
invalid on other grounds. To the extent that count two seeks to establish that
defendants' reporting and disclosure violations are relevant in determining
plaintiffs' entitlement to benefits under the terms of the 1985 plan, that
contention is without merit. Accordingly, we will affirm the district court's
grant of summary judgment for defendants on count two of plaintiffs'
complaint.
V. CONCLUSION
61
We conclude that the district court's grant of summary judgment for defendants
is appropriate on each of the first two counts of the plaintiffs' complaint. We
conclude that the claim for benefits must be evaluated under the terms of the
unamended 1985 severance plan, and that under those terms there exists a
genuine issue of material fact as to plaintiff's entitlement. Therefore, we
conclude that the district court's grant of summary judgment on count three was
inappropriate. Accordingly, we will affirm in part, reverse in part, and remand
for further proceedings consistent with this opinion.
Honorable Robert F. Kelly, United States District Judge for the Eastern District
of Pennsylvania, sitting by designation
In the district court, defendants argued that the 1985 severance package did not
constitute a "welfare plan" as that term is defined in Sec. 3(1) of ERISA, 29
U.S.C. Sec. 1002(1) (1982). The district court concluded otherwise, and
defendants no longer contest this issue
Our prior cases have approached similar questions within a similar analytical
framework. For example, in Hlinka v. Bethlehem Steel Corp., 863 F.2d 279 (3d
Cir.1988), we distinguished between an employer's "administration" decisions,
to which ERISA's fiduciary duties attach, and its "design" decisions, as to
which it remains free to "act[ ] as an employer and not a fiduciary." See id. at
285. The question presented here--whether a decision to amend involves plan
administration or plan design-arose in Trenton v. Scott Paper Co., 832 F.2d 806
(3d Cir.1987), cert. denied, 485 U.S. 1022, 108 S.Ct. 1576, 99 L.Ed.2d 891
(1988). That case, however, was decided on the alternative ground that the
purported fiduciary had not been granted discretionary authority over the
relevant amendment decision. See id. at 808-09
4
Admittedly, plaintiffs do not frame the issue in these terms. Rather, they
attempt to characterize Craven's actions as violating fiduciary duties only
insofar as they were allegedly inconsistent "with the documents and
instruments governing the plan." ERISA Sec. 404(a)(1)(D), 29 U.S.C. Sec.
1104(a)(1)(D). But Craven's actions in amending the 1985 plan cannot be
governed by the Sec. 404(a)(1)(D) fiduciary duty unless an amendment
decision involves plan "administration" within the meaning of Sec. 3(21)(A)
(iii) of ERISA, see supra p. 1159, in which case it must also be governed by the
Sec. 404(a)(1)(A)(i) fiduciary duty. See supra note 4 and accompanying text. In
short, we see no textual basis in either Sec. 3(21)(A) or Sec. 404(a)(1) of
ERISA from which to suppose that some conduct constitutes "administration"
for purposes of triggering the Sec. 404(a)(1)(D) fiduciary duty, but not the Sec.
404(a)(1)(A)(i) fiduciary duty
Delgrosso v. Spang & Co., 769 F.2d 928 (3d Cir.1985), cert. denied, 476 U.S.
1140, 106 S.Ct. 2246, 90 L.Ed.2d 692 (1986), relied on heavily by the
plaintiffs, is not controlling. Delgrosso involved a purported amendment to a
pension plan executed in violation of an express provision in the plan itself.
Admittedly, Delgrosso at times characterized the employer's action in seeking
to promulgate the amendment as a violation of its fiduciary duty to "administer
the plan according to plan documents," id. at 935 (citing ERISA Sec. 404(a)(1)
(D)), which presupposes that executing an amendment involves plan
"administration" within the meaning of Sec. 3(21)(A)(iii). We do not read
Delgrosso as so holding, however. Regardless of whether fiduciary duties do or
do not attach to an employer's amendment decision, the particular amendment
at issue in Delgrosso was invalid under the terms of the unamended plan's
governing documents. Because ERISA grants participants the right to seek
equitable relief from acts that violate the terms of their plan, see ERISA Sec.
502(a)(3), 29 U.S.C. Sec. 1132(a)(3) (quoted in Delgrosso, 769 F.2d at 937),
that invalidity alone was sufficient for the Delgrosso plaintiffs to obtain the
remedy they sought--reformation of the plan to strike the purported
amendment--regardless of whether any fiduciary duty had been breached.
Moreover, Sec. 502(a)(1)(B) of ERISA, 29 U.S.C. Sec. 1132(a)(1)(B), entitles a
participant to bring an action "to clarify his rights to future benefits under the
terms of the plan." Although not cited in Delgrosso, this provision, as well as
Sec. 502(a)(3), would plainly support the remedy sought and obtained in
Delgrosso regardless of whether any fiduciary duty had been breached
7
Even if plaintiffs could establish that a fiduciary duty owed to them has been
breached, it is unclear whether they could recover from defendants in their
fiduciary capacity. The liability of fiduciaries is governed by Sec. 409 of
ERISA, which provides that "[a]ny person who is a fiduciary with respect to a
plan who breaches any of the ... duties imposed upon fiduciaries by [ERISA]
shall be personally liable to make good to such plan any losses to the plan
resulting from each such breach." 29 U.S.C. Sec. 1109(a) (emphasis added).
This liability accrues only to the plan itself, not to participants suing in their
individual capacities. See Massachusetts Mutual Life Ins. Co. v. Russell, 473
U.S. 134, 140, 105 S.Ct. 3085, 3089, 87 L.Ed.2d 96 (1985). Section 502(a)(2)
of ERISA entitles individual participants to sue "for appropriate relief" under
Sec. 409. 29 U.S.C. Sec. 1132(a)(2). Because Sec. 409 liability accrues only to
the plan itself, Sec. 502(a)(2) in effect allows individual participants to sue "in
a representative capacity on behalf of the plan as a whole." Russell, 473 U.S. at
142 n. 9, 105 S.Ct. at 3090 n. 9. Because plaintiffs here seek to recover benefits
allegedly owed to them in their individual capacities, their action is plainly not
authorized by either Sec. 409 or Sec. 502(a)(2). However, because we conclude
that defendants have not breached any fiduciary duties, we need not speculate
as to the circumstances, if any, under which allowing individual participants to
recover directly from a fiduciary can be justified under any of ERISA's other
10
did make, the contributions himself. On those facts, we allowed the use of
estoppel. As we noted, the case involved "more than mere assurances" by the
trustee, who also "deposited [the employee's] monies into the Fund's account."
Id. at 598. Thus, Rosen "can be classified as one of the 'extraordinary
circumstances' as outlined in [prior ERISA cases limiting the use of estoppel to
extraordinary circumstances]." Id.
We find no such "extraordinary circumstances" colorably present in this record.
The most plaintiffs could allege is that defendants' practice of paying benefits
to certain employees after the consolidation had been completed constituted an
implied representation to all other employees that such benefits would continue
to be provided, the scope of the original plan notwithstanding. We conclude
that in these circumstances, entertaining a judicially created estoppel claim
cannot be reconciled with section 402(a)(1) of ERISA.
11
Plaintiffs contend that they are entitled to summary judgment on this claim. As
our analysis has suggested, however, we think that there is sufficient evidence
from which a reasonable trier of fact could find for defendants. Accordingly,
we reject plaintiffs' contention
12
13
Arguably, this kind of "substantive" harm, where present, would justify shifting
onto the defendant the burden of proving that the plaintiffs are not entitled to
benefits under the terms of the plan--a kind of "procedural" gloss on section
502(a)(1)(B) designed to undo the prejudice threatened by the "procedural"
reporting and disclosure violations. See Flick v. Borg-Warner Corp., 892 F.2d
285, 292-94 & nn. 16-17 (Becker, J., concurring in part and dissenting in part).
Whatever the merits of that proposal, it is plainly distinct from--and narrower
than--the course adopted in Blau. See id. at 294 n. 17
14
Cf. Sibbach v. Wilson & Co., Inc., 312 U.S. 1, 61 S.Ct. 422, 85 L.Ed. 479
(1940) (rejecting a similar definition of "substance," as opposed to "procedure,"
for purposes of Rules Enabling Act analysis, see 28 U.S.C. Sec. 2072)
15
16
We need not determine the exact range of permissible remedies under Sec.
502(a)(1)(A), which varies according to how one balances the obvious tension
in Sec. 502(c) between the express $100 per day limitation and the immediately
following qualifier providing for "such other relief as [the court] deems
proper." Plaintiffs, who advance no claim under Sec. 502(a)(1)(A), do not
contend that their action to recover benefits can be sustained under the "such
other relief" clause in section 502(c)