Daniels v. Thomas & Betts Corp. ( 2001 )

Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
8-24-2001
Daniels v. Thomas & Betts Corp
Precedential or Non-Precedential:
Docket 00-1974
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Filed August 24, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
NO. 00-1974
IDA K. DANIELS, Widow of Charles P. Daniels, Deceased
v.
THOMAS & BETTS CORPORATION; ELECTRICAL
DIVISION OF THOMAS & BETTS CORPORATION; JOHN
SCHIERER; JOHN DOES I-X; ABC CORPORATION, I-X
Thomas & Betts Corporation, Electrical
Division Of Thomas & Betts Corporation
and John Schierer,
Appellants
On Appeal From the United States District Court
For the District of New Jersey
(D.C. Civil Action No. 95-cv-00490)
District Judge: Honorable John W. Bissell
Argued February 6, 2001
BEFORE: BECKER, Chief Judge, AMBRO and
STAPLETON, Circuit Judges
(Opinion Filed: August 24, 2001)
Steven B. Varick (Argued)
McBride, Baker & Coles
500 West Madison Street, 40th Floor
Chicago, IL 60606
Steven R. Weinstein
Dunetz Marcus
354 Eisenhower Parkway
Plaza II, Suite 1500
Livingston, NJ 07039
Attorneys for Appellants
John M. Esposito (Argued)
Unit A2
870 Pompton Avenue
Canfield Office Park
Cedar Grove, NJ 07009
Attorneys for Appellee
OPINION OF THE COURT
STAPLETON, Circuit Judge:
Appellee/Plaintiff Ida K. Daniels ("Mrs. Daniels"), widow
of Charles P. Daniels ("Mr. Daniels"), sued her husband's
former employer, Thomas & Betts Corporation ("T&B"), for
breach of fiduciary duty, delay in providing ERISA plan
documents, and attorney's fees. She alleged inter alia that
T&B materially misled Mr. Daniels into believing that he
had 1.5 times his annual salary in supplemental life
insurance in addition to the one times annual salary life
insurance T&B provided Mr. Daniels as an employment
benefit.
The District Court granted Mrs. Daniels' motion for
summary judgment as to liability on the breach of fiduciary
duty claim. It further held, however, that there were
genuine issues of material fact as to the type of equitable
relief that should be awarded as a result of that breach.
The District Court also granted Mrs. Daniels summary
judgment on her claim that T&B failed for 291 days to
provide her plan documents in violation of S 104(b)(4) of
2
ERISA, 29 U.S.C. S 1024(b)(4). It awarded her the maximum
statutory penalty of $100 per day, or $29,100.
The District Court referred the determination of equitable
relief on the breach of fiduciary duty claim to an arbitrator
who subsequently awarded Mrs. Daniels $40,545.
Thereafter, the District Court approved an attorney's fees
award of $34,482.28 and entered final judgment in the
amount of $104,127.28, plus interest and taxable costs.
T&B appeals. We will reverse the judgment of the District
Court and remand for further proceedings consistent with
this opinion.
I.
Mr. Daniels worked for T&B from 1955 until his death
from cancer in 1993. Prior to 1993, Mr. Daniels received life
insurance in the amount of one times his annual salary at
T&B's expense as an employment benefit. Also prior to
1993, Mr. Daniels elected to supplement this insurance by
purchasing group life insurance having a face value of 1.5
times his annual salary. The premiums for this
supplemental insurance were the same without regard to
the employee's age and were deducted from the employee's
paycheck.
T&B changed its insurance carrier and, concomitantly,
the structure of its life insurance benefits, effective
January, 1993. Under the new plan (the "MetLife plan"),
T&B continued to provide at its expense life insurance in
the amount of one times annual salary as an employment
benefit. Employees could continue to purchase
supplemental life insurance, but now only in whole (rather
than fractional) multiples of salary. Moreover, the
premiums for this supplemental coverage were "age-
banded" so that they increased with the employee's age.
In the fall of 1992, Mr. Daniels became ill and took a
medical leave from T&B. In early December, T&B sent Mr.
Daniels a number of documents explaining the life
insurance benefits changes that would become effective on
January 1, 1993. The information packet began with a
memorandum from John Schierer, T&B's Manager of
3
Employee Relations, to "ALL OFFICE EMPLOYEES." With
regard to life insurance, the memo stated that:
Life Insurance Maximums will be increased to a
maximum of five times base salary on [sic] $500,000
whichever is less. Thomas & Betts will continue to
provide one times base salary free of charge. Additional
multiples will be available on an age-banded basis.
Details are attached.
The first attached document is entitled, "OPEN
ENROLLMENT / GROUP TERM LIFE INSURANCE /
EFFECTIVE JANUARY 1, 1993." The document again
explains that T&B "will provide salaried employees one
times their base salary in group term life insurance to a
maximum $500,000." The document then sets forth the
following two paragraphs which give rise to this suit:
If you currently have supplemental coverage, you will
be grandfathered up to your current amount. If your
current coverage amount is less than 5 times base
salary, you then have the option of electing an
additional 1 times base salary up to an incremental
$100,000 without additional proof of insurability.
Employees who do not currently have supplemental
coverage will be guaranteed coverage for 2 times base
salary up to $200,000. Proof of insurability will be
required for the additional coverage chosen in excess of
2 times.
An additional document, entitled "LIFE INSURANCE,"
further explains T&B's employees' supplemental life
insurance benefits as follows:
In addition to your Basic Life Insurance, you may
purchase Supplemental Life Insurance by enrolling in
the program and paying the required premium.
Amount of Coverage
You may purchase Supplemental Life Insurance in
amounts of one, two, three, four or five times your base
salary.
On December 20, 1992, Mr. Daniels met with Schierer.
Mr. Daniels asked a number of questions about his
4
benefits, none of which related to supplemental life
insurance. In the context of his health care benefits, Mr.
Daniels expressed an interest in increasing his take-home
pay in light of the layoff T&B had warned him he would
soon face. At some point during the conference, Mr. Daniels
executed a "Group Insurance Enrollment/Change Form."
The form provided an option for "Your Supplemental Life
Insurance" and stated, "I wish to purchase Supplemental
Life Insurance in the amount indicated below.*" The
possible choices were "None," "1 time,"2 times," "3 times,"
"4 times," and "5 times my annual earnings." The "asterisk"
footnote stated: "I understand that I may have to provide
medical evidence of insurability before this coverage
becomes effective." Mr. Daniels placed an "X" in the blank
next to "None."
In her deposition, Mrs. Daniels testified to statements Mr.
Daniels made after the December 20 meeting that tended to
show what he thought he had done with respect to his
supplemental life insurance. Mrs. Daniels testified that
after the terminal nature of her husband's condition
became known in January, 1993, he told her "four or five
times" that she would receive 2.5 times his salary in life
insurance benefits. She further testified that subsequent to
the new benefits plan becoming effective, her husband
reviewed his payroll deductions for a supplemental life
insurance entry and, finding one, told her that"it was in
order."1
_________________________________________________________________
1. Mr. Daniels' January 14, 1993, pay statement showed an insurance
deduction in the same amount as his prior statements. His February 11,
1993, pay statement appears to contain a $50.97 insurance deduction;
that amount is listed under the heading "Deduction Type." Despite this
entry's appearance, it is in fact a credit. The pay statement itself
contains no visible indicia that this entry, listed as it is below the
heading "Deduction Type" and next to other, true deductions, is in fact
a credit. One only discovers that this entry is in fact a credit if one
takes
Mr. Daniels' February 11, 1993, gross pay and actually calculates his
net pay. Mr. Daniels' March 15, 1993, pay statement, issued four days
after his death, shows no deduction for supplemental insurance.
T&B explains that because it had not implemented all of the MetLife
benefits changes as of Mr. Daniels' January 14, 1993, paycheck, it
erroneously deducted $20.54 for supplemental life insurance. Although
T&B is correct that the February 13, 1993, entry is in fact a credit and
not a deduction, it points to no record evidence to support its
explanation of what necessitated this pay adjustment.
5
After Mr. Daniels' death, Mrs. Daniels received payment
of $53,000, representing one times her husband's annual
salary. Mr. Daniels' son, Charles, Jr., asked Schierer if the
family was entitled to any additional life insurance benefits
in light of the supplemental life insurance his father had
been electing. Schierer produced the form on which Mr.
Daniels had marked "None" and informed the Daniels that
there were no additional life insurance benefits. Mrs.
Daniels then obtained counsel who, on September 29,
1994, wrote to T&B and requested "all benefit plan
document [sic] or plan summaries which explain any and
all plan terms, benefits, and procedures applicable to
benefits available to Mr. Daniels." T&B did not respond to
Mrs. Daniels' attorney's request until July 17, 1995, 291
days later.
II.
The District Court held that T&B, as the administrator of
an ERISA plan, had a fiduciary duty not to "materially
mislead those to whom the duty of loyalty and prudence are
owed." App. at 16 (quoting from In re Unisys Corp. Retiree
Med. Benefit "ERISA" Litig., 57 F.3d 1255, 1261 (3d Cir.
1995)). A misrepresentation, it explained, is material if
"there is substantial likelihood that it would mislead a
reasonable employee into making" a decision to his or her
detriment. Id. T&B does not dispute that it had a fiduciary
duty; it does dispute that it breached that duty.
The District Court concluded that T&B made a material
misrepresentation to Mr. Daniels. As the Court succinctly
put it:
The Court concludes that defendants made a
material misrepresentation to Mr. Daniels when they
stated in documents sent to him to explain the change
in benefits: "If you currently have supplemental
coverage, you will be grandfathered up to your current
coverage amount." (Esposito Cert., Exh. F). Black's Law
Dictionary defines "grandfather clause," in relevant
part, as: "Provision in a new law or regulation
exempting those already in or a part of the existing
system which is being regulated." (Id.) On its face,
6
defendants' statement conveyed that employees who
already had supplemental insurance coverage would be
exempted from the changes to defendants' policy.
* * *
There is no elaboration on this grandfather clause
anywhere in the remainder of the explanatory
memorandum where that sentence is found or in the
other information defendants provided to Mr. Daniels,
i.e., the cover memorandum, the enrollment form, and
the information Mr. Schierer says he conveyed to Mr.
Daniels at the December 20, 1992 meeting.
* * *
Defendants' statement that "[i]f you currently have
supplemental coverage, you will be grandfathered up to
your current coverage amount" was a material
misrepresentation. (Esposito Cert., Exh. F). In fact,
employees who already had supplemental insurance
were not grandfathered up to their current coverage
amounts. Instead, they had to elect to be
grandfathered up to those amounts . . . .
App. at 17, 17-18, 18.
In the District Court's view, this finding of a material
misrepresentation by an ERISA fiduciary was sufficient
alone to warrant summary judgment against T&B "as to
[its] liability." App. at 36. The Court made no finding as to
whether Mr. Daniels actually relied on T&B's
misrepresentation. Instead, it concluded that "genuine
issues of material fact remain as to the type of equitable
relief that should be awarded." In the course of so
concluding, the District Court acknowledged that Mr.
Daniels may not have relied upon the misrepresentation at
all; instead, Mr. Daniels may have "purposely elected not to
continue to pay for supplemental insurance." On the other
hand, the Court observed, the evidence would support an
inference that the "grandfathered" misrepresentation led
Mr. Daniels to believe that he did not have to do anything
to continue his existing supplemental insurance and that
he should check "None" on the enrollment form to indicate
that he did not wish to purchase any additional
supplemental insurance.
7
The arbitrator explicitly acknowledged that the District
Court had yet to find reliance: "This case boils down to the
following questions. Did the grandfather clause cause the
decline of the supplemental plan under the new policy and
if so what is the remedy?" Having recognized the unresolved
reliance issue, the arbitrator stated cursorily,"Considering
the pros and cons of each party's argument makes[this] a
case which should be decided equitably." The arbitrator
then summarily awarded Mrs. Daniels $40,545 (or fifty-one
percent of her desired recovery) plus costs.
With respect to appellees' claim that T&B violated 29
U.S.C. S 1024(b)(4) by refusing to comply with a request for
the "instruments under which [an ERISA] plan is
established or operated," the District Court held that: (1) a
request from the attorney of a participant or beneficiary
triggers the statutory duty to respond; and (2) Mrs. Daniels
was a "beneficiary" as defined in ERISA at the time of her
attorney's request even though she had previously received
all of the insurance proceeds she was entitled to receive
under the MetLife Plan. The District Court then noted that
T&B had offered no excuses for its failure to provide the
documents other than the legal arguments the Court had
just rejected and pointed out that there had not even been
a response to Mrs. Daniels asserting these legal positions.
As a result, it imposed penalties of $100 per day for the
291 days T&B had refused to respond.2
_________________________________________________________________
2. The District Court had jurisdiction pursuant to 28 U.S.C. S 1331 and
29 U.S.C. S 1132(f).
This court has jurisdiction pursuant to 28 U.S.C.S 1291. We reject
Mrs. Daniels' argument that 28 U.S.C. S 657(a) deprives this court of
jurisdiction to hear this appeal. Section 657(a) provides that arbitration
awards made under Chapter 44 of Title 28 "shall be entered as the
judgment of the court after the time [30 days] has expired for requesting
a trial de novo. The judgment so entered shall be subject to the same
provisions of law and shall have the same force and effect as a judgment
of the court in a civil action, except that the judgment shall not be
subject
to review in any other court by appeal or otherwise ." (emphasis added).
The arbitrator's award was entered on November 8, 1999, and T&B filed
its demand for a trial de novo twenty-nine days later on December 7,
1999. In its notice demanding trial de novo, T&B stated that it only
wished to preserve its right to challenge the District Court's liability
8
III.
Both sides claim to be entitled to summary judgment
with respect to T&B's liability on the breach of fiduciary
duty claim. Moreover, T&B insists that, even if it is not
entitled to such a summary judgment, the issue of liability
must be tried. In order to resolve these contentions and the
arguments addressed in support of them, we must
determine: (1) whether there is a material dispute of fact as
to whether T&B made a material misrepresentation; (2)
whether detrimental reliance is an essential element of Mrs.
Daniels' case on liability and, if so, whether there is a
material dispute of fact as to whether Mr. Daniels relied on
the "grandfathered" statement; and (3) whether summary
judgment could properly be entered against T&B on the
liability issue in the alleged absence of any evidence
tending to show that it was aware of confusion on Mr.
Daniels' part.
Mrs. Daniels' claim is that T&B breached its fiduciary
duty by misrepresenting that existing supplemental
insurance would be "grandfathered." We have reviewed the
elements of such a claim in two recent decisions, Adams v.
Freedom Forge Corp., 204 F.3d 475 (3d Cir. 2000), and In
re Unisys Corp. Retiree Medical Benefit "ERISA" Litigation,
_________________________________________________________________
determinations on both the breach of fiduciary duty and S 1024(b)(4)
claims. T&B stipulated that "[t]o the extent . . . that the arbitration
award determined only the amount of the remedy to be awarded to [Mrs.
Daniels], . . . [T&B] do[es] not demand trial de novo and will accept
$40,545 as a reasonable calculation of the remedy, subject to [T&B's]
right to appeal the underlying issues of liability."
We have some question as to whether S 657(a) or Local Civil Rule
201.1 (the authority the arbitrator purported to exercise) can be read to
authorize referral to arbitration of an issue , as opposed to an action or
a claim. We need not determine that issue, however, because even if
those provisions are understood to authorize such a referral, they should
not be read to bar appellate review of issues that were adjudicated by the
court and not by the arbitrator. At least where a party makes it clear, as
did T&B, that it intends to preserve its right to appeal issues resolved
by
the court, neither Section 657(a) nor Local Civil Rule 201.1 precludes
our exercise of jurisdiction under 28 U.S.C. S 1291 to review issues that
were not resolved by the arbitrator.
9
242 F.3d 497 (3d Cir. 2001) [hereinafter Unisys III]. In
Adams, we stated:
An employee may recover for a breach of fiduciary
duty [under ERISA] if he or she proves that any
employer, acting as a fiduciary, made a material
misrepresentation that would confuse a reasonable
beneficiary about his or her benefits, and the
beneficiary acted thereupon to his or her detriment.
Id. at 492; see also Unisys III, 242 F.3d at 505 (quoting
Adams and noting that it elucidates "the elements of a
breach of fiduciary claim"). Following Adams and Unisys III,
it is thus clear that, in order to make out a breach of
fiduciary duty claim of the kind here asserted, a plaintiff
must establish each of the following elements: (1) the
defendant's status as an ERISA fiduciary acting as a
fiduciary; (2) a misrepresentation on the part of the
defendant; (3) the materiality of that misrepresentation; and
(4) detrimental reliance by the plaintiff on the
misrepresentation.
Like the District Court here, we explained in Adams that
a misrepresentation is material if there is a substantial
likelihood that it would mislead a reasonable employee in
making a decision regarding his benefits under the ERISA
plan. See id. "Summary judgment on the``question of
materiality' is appropriate only if ``reasonable minds cannot
differ.' " Fischer v. Phila. Elec. Co., 994 F.2d 130, 135 (3d
Cir. 1993) (quoting from TSC Indus., Inc. v. Northway, Inc.,
426 U.S. 438, 450 (1976)).
A. Material Misrepresentation
The portion of T&B's explanatory materials on which Mrs.
Daniels primarily bases her case is set forth again in the
margin for the reader's convenience.3 Mrs. Daniels
_________________________________________________________________
3. If you currently have supplemental coverage, you will be
grandfathered up to your current amount. If your current coverage
amount is less than 5 times base salary, you then have the option
of electing an additional 1 times base salary up to an incremental
$100,000 without additional proof of insurability.
Employees who do not currently have supplemental coverage will
be guaranteed coverage for 2 times base salary up to $200,000.
Proof of insurability will be required for the additional coverage
chosen in excess of 2 times.
10
emphasizes that this portion advises someone in Mr.
Daniels' position that his existing supplemental coverage
"will be grandfathered up to your current amount." This
clearly connotes, in her view, that existing supplemental
insurance would continue unaffected by the new plan and
that it would do so without further action on the part of the
employee. While she acknowledges that this advice is
followed by information about proof of insurability, she
points out that everything following the first sentence
expressly refers only to "additional" supplemental coverage
or to "employees who do not currently have supplemental
coverage." She insists that the notion that no action was
required on the part of an employee who wished to continue
only existing coverage was confirmed by the fact that the
election form signed by Mr. Daniels provided an
opportunity to elect coverage of only 1, 2, 3, 4 or 5 times
earnings but provided no way to elect continuation of
coverage of 1.5, 2.5, 3.5 or 4.5 times earnings. This aspect
of the form clearly suggested that its purpose was to
provide an opportunity to purchase supplemental
insurance in "addition" to existing coverage, a suggestion
that is supported by the footnote indicating that, whichever
election was made, it might be subject to proof of
insurability.
T&B counters by insisting that, in the context of its
material as a whole, there was no significant risk that a
reasonable employee would receive the understanding for
which Mrs. Daniels contends. It emphasizes that under the
old program, as well as the new, the "Basic Life Insurance"
provided at T&B's expense was the only thing that was
automatic and that supplemental insurance at the
employee's expense had to be elected annually by him or
her. It points out that Mr. Schierer's covering letter, which
explains supplemental coverage and its cost to the
employee, begins by stating, "It is once again time to make
your Benefit Choices for 1993. Please note that you will
have the following choices effective 1/1/93." App. at 56.
T&B further notes that in the accompanying materials, the
Basic Life Insurance is the only thing described as
"automatic," and supplemental coverage is consistently
described as elective.4 The term"grandfathered" appears
_________________________________________________________________
4. "You are automatically covered for Basic Life Insurance . . . . You are
also eligible to purchase Supplemental Life Insurance . . . ." App. at 59.
11
only once in this overall general context of elective
supplemental coverage and then only in the specific context
of proof of insurability. As a result, T&B argues that no
reasonable employee was likely to conclude from its
materials that supplemental insurance under the old
program was being imposed on employees at their own
expense with no opportunity provided on the form for
opting out. The reasonable inference to be drawn from the
materials, T&B insists, is that "grandfathered" referred to a
right to elect to continue existing coverage without proof of
insurability and that the only opportunities available for
supplemental coverage were those provided for on the form,
with those employees who had existing supplemental
coverage being entitled to elect supplemental coverage
without proof of insurability not to exceed existing
supplemental coverage, i.e., in Mr. Daniels' case, 1 times
earnings, since 2 times earnings would exceed his existing
supplemental coverage of 1.5 times earnings.
We conclude that the message conveyed by the materials
as a whole is a matter about which reasonable minds could
differ. Accordingly, we conclude that summary judgment
was entered contrary to the teachings of Fischer .
B. Detrimental Reliance
Mrs. Daniels claims that she is in a worse position than
she would have been in if T&B had not made its
"grandfathered" statement and seeks relief on that basis.
Consistent with the above discussion of the elements of
such a breach of fiduciary duty claim and contrary to the
conclusion of the District Court here, she is not entitled to
relief unless she can establish that her failure to receive
more than $53,000 was attributable to Mr. Daniels' reliance
on the alleged misrepresentation, i.e., that he wished his
1.5 times earnings coverage to continue and failed to
effectuate that wish because he was misled by T&B's
"grandfathered" statement. See also Unisys III, 242 F.3d at
505. It necessarily follows that the District Court erred in
entering summary judgment against T&B on the issue of its
liability for breach of fiduciary duty without the required
finding of uncontroverted evidence of detrimental reliance.
12
T&B asks that we remand with instructions to enter
summary judgment in its favor because there is no
competent evidence from which a trier of fact could find
detrimental reliance by Mr. Daniels. Finding that there is a
material dispute of fact on this issue, we decline to so
instruct the District Court.
We believe that a trier of fact, having concluded that
T&B's grandfathering statement held a substantial risk of
misleading one in Mr. Daniels' position, could infer from
this record that he intended for his supplemental insurance
to continue and failed to effectuate that intent because the
grandfathering statement led him to check "None" on the
form and to take no other steps to elect new supplemental
coverage under the MetLife plan. Mrs. Daniels' testimony
that her husband assured her in January of 1993 that he
had coverage amounting to 2.5 times earnings and that the
deduction from his pay for supplemental insurance was in
order would clearly support the conclusion that he desired
to have his supplemental coverage continue and that he
believed it was continuing. This could be viewed as
consistent with his having checked "None" only if he
mistakenly believed that the election form was directed to
additional supplemental insurance and that continuing
existing coverage required no further action on his part.
Since this mistaken belief is precisely the risk that the trier
of fact would have previously found inherent in T&B's
"grandfathered" statement, a conclusion of a causal
connection between the two could naturally follow.
On the other hand, a conclusion of detrimental reliance
is not mandated by this record. It would also support an
inference that Mr. Daniels, facing a period of
unemployment, wanted to reduce the deductions from his
pay and checked "None" in order to accomplish that
objective.
C. T&B's Knowledge of Confusion
T&B insists that it can have no liability for a breach of
fiduciary duty in the absence of evidence of knowledge on
its part "that Mr. Daniels was confused when he declined to
purchase supplemental life insurance." Appellants' Br. at
13
14. Finding no such evidence, T&B urges us to direct the
entry of summary judgment in its favor.
Again, as the above discussion of the elements of Mrs.
Daniels' breach of fiduciary duty claim indicates, if an
employee proves that an employer, acting as a fiduciary,
made an inaccurate statement holding a substantial
likelihood of misleading a reasonable employee into making
a harmful decision regarding benefits, and that he relied to
his detriment on that statement in making such a decision,
the employee is entitled to equitable relief. If the statement
creates a substantial risk of misleading a reasonable
employee, it is foreseeable that an employee will be misled
to his detriment. That foreseeability and reasonable reliance
by a beneficiary are all that is required. See Unisys III, 242
F.3d at 507-10. In such circumstances, we have never
required a showing that the employer had actual knowledge
that a particular employee was about to be misled.
As we noted in Unisys III, there are situations in which
the employer's knowledge of an employee's knowledge and
understanding is important to the liability issue. Most
frequent are those situations in which an employer has not
affirmatively misled the employee but has failed to provide
the employee information which the employer knows the
employee needs in order to protect himself from harm. See
Bixler v. Central Pa. Teamsters Health & Welfare Fund, 12
F.3d 1292, 1300 (3d Cir. 1993) (finding a fiduciary duty on
the part of an employer to communicate to the beneficiary
material facts affecting the interest of the beneficiary which
the employer knows the beneficiary does not know and
which the beneficiary needs to know for his protection). In
such a situation, harm to the beneficiary may not be
reasonably foreseeable in the absence of employer
knowledge of the employee's knowledge and understanding.
See Unisys III, 242 F.3d at 509. Where the fiduciary makes
an affirmative statement that creates a substantial
likelihood of injury to a reasonable beneficiary, however,
any harm occasioned by the detrimental reliance on the
affirmative misrepresentation is foreseeable and gives rise
to liability.
Contrary to T&B's suggestion, neither International Union,
United Automobile, Aerospace & Agricultural Implement
14
Workers, U.A.W. v. Skinner Engine Company, 188 F.3d 130
(3d Cir. 1999), nor In re Unisys Corp. Retiree Medical
Benefit "ERISA" Litigation, 57 F.3d 1255 (3d Cir. 1995)
[hereinafter Unisys II], holds that knowledge of employee
confusion is an element of a breach of fiduciary duty claim
like that made by Mrs. Daniels. Those cases, like Bixler,
involved situations in which the plan administrator
allegedly failed to provide complete and adequate
information when it knew that such information was
necessary to avoid harm to beneficiaries. The portions of
the opinions in those cases to which T&B directs our
attention do not involve claims of affirmative
misrepresentation. See, e.g., Skinner , 188 F.3d at 150
("[T]here is no competent evidence which suggests that the
company made any affirmative misrepresentations
concerning the duration of retiree benefits."); id. at 148,
150 (characterizing the plaintiffs as arguing that the
defendant breached its fiduciary duty "by failing to inform
them that the CBAs did not provide lifetime welfare
benefits" and "by failing to correct the retirees' mistaken
belief ") (emphasis added); Unisys II, 57 F.3d at 1265 n.15,
1266 ("[W]e hold that the district court did not err as a
matter of law in concluding that the duty to convey
complete and accurate information that was material to its
employees' circumstance arose from these facts since the
trustees had to know that their silence might cause
harm.").
IV.
Section 1024(b)(4) of Title 29 provides in relevant part
that "[t]he administrator shall, upon written request of any
participant or beneficiary, furnish a copy of the . . .
instruments under which the plan is established or
operated." T&B insists that the judgment entered by the
District Court against it must be reversed because (1) a
written request from an attorney purporting to represent a
participant or beneficiary does not trigger the duty to
respond unless it is accompanied by written authorization
from the client; (2) Mrs. Daniels was not a "beneficiary," as
that term is used in ERISA; and (3) the amount of the
penalty imposed constitutes an abuse of discretion.
15
A. Sufficiency of the Request
As we noted in Bruch v. Firestone Tire and Rubber Co.,
828 F.2d 134, 153 (3d Cir. 1987), "ERISA's legislative
history makes clear that Congress intended the
information-producing provisions to enable claimants to
make their own decisions on how best to enforce their
rights." We conclude that this objective will be best served
by a rule that a representation by an attorney that he is
making a request on behalf of a participant or beneficiary
triggers the duty to respond under S 1024(b)(4) when the
administrator has no reason to question the attorney's
authority. In the rare case where the administrator has
reason to question that authority, it can respond by
requesting further evidence. The objective of the statute
would be ill served, however, by permitting administrators
to refuse to respond with no indication that authority is
even an issue. We believe the facts of this case forcefully
compel that conclusion.
T&B has asked that we defer to the interpretation of
S 1024(b)(4) that it finds in the Department of Labor's
Advisory Opinion Letter 82-021A. That letter addressed a
request for documents by a non-attorney third party. In
that context, the Department gave the following advice:
[I]f information is required to be furnished to a
participant or beneficiary under section 104(b)(4)[29
U.S.C. S 1024(b)(4)], the information must also be
furnished to a third party where the participant or
beneficiary has authorized in writing the release of the
information to such third party. Absent such
authorization, it is the Department's view that a plan is
not required by section 104 of ERISA to provide such
information to persons who are neither participants
nor beneficiaries.
See Bartling v. Fruehauf Corp., 29 F.3d 1062, 1072 (6th Cir.
1994). While we agree with this advice as applied to non-
attorney third parties, we believe an attorney's
representation regarding the authority conferred upon him
or her by the client adds a material factor not present in
the situation the Department was addressing. The law has
traditionally accepted such representations in the absence
16
of reason to question them,5 and the statutory objective
behind S 1024(b)(4) counsels in favor of accepting them
here. For this reason, we respectfully disagree with the
conclusion reached by the Sixth Circuit Court of Appeals in
Bartling. See Moothart v. Bell, 21 F.3d 1499, 1503-04 (10th
Cir. 1994) (recognizing an attorney's letter similar in all
material respects to that of Mrs. Daniels' attorney as
constituting a "request" under the statute and triggering a
duty to respond).
B. "Beneficiary"
Even if a letter from a lawyer on behalf of a beneficiary is
sufficient to implicate S 1024(b)(4), the attorney must still
write on behalf of either a "participant" or a"beneficiary."
Mr. Daniels, not Mrs. Daniels, was the participant; to
invoke the protection of S 1024(b)(4), Mrs. Daniels, then,
must be a beneficiary.
Section 1002(8) of Title 29 defines an ERISA "beneficiary"
as "a person designated by a participant, or by the terms of
an employee benefit plan, who is or may become entitled to
a benefit thereunder." This requires that we resolve two
issues: (1) what constitutes a relevant "benefit"?; and (2)
when does an individual making a request for plan
documents qualify as "a person . . . who is or may become
entitled" to such a benefit?6
_________________________________________________________________
5. See Graves v. United States Coast Guard , 692 F.2d 71, 74 (9th Cir.
1982) ("The designation ``attorney for Leonard Graves' [on an
administrative Tort Claims Act claim] is particularly important in view of
the body of case law holding that the appearance of an attorney for a
party raises a presumption that the attorney has the authority to act on
that party's behalf.") See also Anderson v. Flexel, Inc., 47 F.3d 243, 249
(7th Cir. 1995) (recognizing in the context of an attorney's request under
S 1024(b)(4) "the existence of the long-standing legal presumption that an
attorney has authority to act on behalf of the person he" purports to
represent).
6. Mrs. Daniels brought her breach of fiduciary duty claim under 29
U.S.C. S 1132(a)(3) which provides in part that a "civil action may be
brought . . . by a participant, beneficiary or fiduciary . . . to obtain .
. .
appropriate equitable relief . . . to redress . . . violations" of ERISA.
T&B
does not contend that Mrs. Daniels fails to qualify as a beneficiary under
this section, and we thus have no occasion to address the relationship
between it and section 1002(8).
17
With regard to the first of these two questions, the
specific relief that Mrs. Daniels seeks in the instant case--
damages stemming from T&B's alleged breach of fiduciary
duty--does not constitute a "benefit" within the meaning of
S 1002(8). The Ninth Circuit Court of Appeals came to this
same conclusion in Kuntz v. Reese, 785 F.2d 1410, 1411
(9th Cir. 1986), in which the court observed: "The . . .
plaintiffs do not allege that their vested benefits were
improperly computed, rather they allege breach of fiduciary
duty or of a duty to disclose information about benefits,
thus any recoverable damages would not be benefits from
the plan."
Consequently, if we were to assess "beneficiary" status as
of the time of the present appeal, Mrs. Daniels would not be
a "beneficiary" and, therefore, would not be entitled to lodge
a request for plan documents to which T&B would be
legally obligated to respond. As of the time of the present
appeal, Mrs. Daniels presses only a claim for damages
stemming from T&B's alleged breach of fiduciary duty. Any
recovery Mrs. Daniels would receive as a consequence of
the present cause of action for fiduciary breach would come
out of T&B's pocket (i.e., on the theory that T&B made
materially misleading statements about the plan), and not
out of MetLife's (i.e., on the theory that the plan's
provisions entitle Mrs. Daniels to payment pursuant to its
terms).
We conclude, however, that ERISA beneficiary status
should not be measured as of the time of the present
appeal. Instead, the temporal focus of the "beneficiary"
inquiry should be the time the request for plan documents
was made. An individual who "is . . . entitled" to a plan
benefit or who "may become entitled" to such a benefit, as
of the time that individual makes the request of the plan
administrator, thus constitutes a "beneficiary."
As of the time of her request, Mrs. Daniels had no reason
to believe that events would happen in the future which
would entitle her to a benefit, i.e., that she would "become
entitled" at some future date. The issue for decision is thus
narrowed to whether Mrs. Daniels was "entitled" to a plan
benefit on September 29, 1994, when her request for
documents was made. In order for her to be "entitled," it is
18
not necessary that she establish that she had a meritorious
claim; it is sufficient if she demonstrates that she had a
"colorable claim that . . . she will prevail in a suit for
benefits." Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
101, 117 (1989). We conclude that she had such a claim.
As we have recounted, Mrs. Daniels had been told by her
husband shortly before his death that he had life insurance
through his employer's plan in the amount of 2.5 times his
annual salary. He was in a position to have personal
knowledge of this matter and had an interest in accurately
advising her regarding it. As of September 29th, Mrs.
Daniels knew she had received materially less than 2.5
times Mr. Daniels' salary in insurance proceeds. While her
son had been shown the group insurance election form, its
significance could not be reliably assessed in isolation. With
this knowledge, we conclude that Mrs. Daniels had a
colorable claim to additional insurance proceeds and that
Congress intended that she have access to the documents
necessary to determine whether she had a meritorious
claim as well as a colorable one. The concept of a colorable
claim necessarily encompasses situations in which the
requester has a reasonable basis for believing that he or
she has a meritorious claim but is in fact mistaken. If Mrs.
Daniels' situation on September 29th were not one of these,
we would have difficulty hypothesizing one.
It is true, as T&B stresses, that the letter of Mrs. Daniels'
attorney was consistent with her contemplating a breach of
fiduciary duty claim.7 We do not believe, however, that one
in Mrs. Daniels' position should be held to have made an
election of remedies based on the precise wording of a letter
seeking access to the information necessary to make an
informed decision regarding available remedies. If an
administrator has concerns about whether someone
_________________________________________________________________
7. One paragraph of the letter reads as follows:
We are representing the family on their claims for damages
concerning the actions of Thomas & Betts, and its employees,
resulting in the denial of life insurance benefit payments on life
insurance benefits that were provided to Mr. Daniels prior to his
death.
App. at 69.
19
requesting access lacks a colorable claim, it is free to ask
for the facts upon which a claim to a benefit is being made.
If, like T&B, it fails to do so, it proceeds at its own risk.
C. The Penalty
Section 1132(c) provides that, in the court's discretion, a
plan administrator may be required to pay a beneficiary
penalties of up to $100 per day from the date of the
administrator's failure "to comply with a request for . . .
information . . . by mailing the material requested . . .
within 30 days . . . ." The District Court imposed the
maximum fine because T&B had refused to respond in any
way over a very extended period of time and offered no
explanation whatsoever for that refusal. As the Court noted,
there was no indication that T&B's refusal was "some sort
of administrative mistake," and the Court found it difficult
to accept that T&B acted based on the legal arguments
advanced here without giving any indication of its position
to Mrs. Daniels' attorney. T&B characterizes the District
Court's findings in this regard as findings of an absence of
bad faith and, on that basis, insists that the maximum fine
was an abuse of discretion. While we believe T&B's conduct
fell something short of a good faith effort at compliance, it
is not necessary for us to so characterize it. Suffice it to say
that the reasons identified by the District Court are
sufficient to bring its ultimate conclusion well within the
scope of its considerable discretion.
We will, however, direct that, on remand, the penalty be
reduced by $3,000. The District Court found that T&B
withheld plan documents for 291 days, from September 29,
1994, until July 17, 1995. Section 1132(c) directs that the
fine commence "from the date of such failure or refusal" to
provide the requested documents. Section 1132(c)
characterizes the relevant "failure" as the failure to provide
the documents within 30 days of the participant's or
beneficiary's request. Effectively, there is a 30 day grace
period in S 1132(c) before the "failure" to provide the
documents begins. Thus, although T&B produced the
documents 291 days after Mrs. Daniels' request, this is a
"failure" to produce the documents for 261 days. Thus, the
maximum penalty would be $26,100, not $29,100. See
20
Bartling v. Freuhauf Corp., 29 F.3d 1062, 1069 (6th Cir.
1994).
V.
Having found that T&B breached its fiduciary duty to Mr.
Daniels and that it improperly withheld plan documents
from Mrs. Daniels, the District Court awarded Mrs. Daniels
attorney's fees pursuant to 29 U.S.C. S 1132(g).8 Because
we have concluded that we must reverse the District
Court's grant of Mrs. Daniels' motion for summary
judgment as to her breach of fiduciary duty claim, we must
also vacate the District Court's imposition of attorney's fees.
After Mrs. Daniels' breach of fiduciary duty claim is finally
resolved, the District Court may, of course, revisit the
attorney's fee issue.
VI.
Because genuine issues of material fact exist as to
whether T&B's "grandfathered" statement is materially
misleading and, if it was, as to whether Mr. Daniels relied
on it in making his supplemental insurance election, we
will reverse the judgment of the District Court and remand
for further proceedings consistent with this opinion.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
_________________________________________________________________
8. Section 1132(g) provides as follows: "(1) In any action under this
subchapter (other than an action described in paragraph (2) [delinquent
contributions]) by a participant, beneficiary, or fiduciary, the court in
its
discretion may allow a reasonable attorney's fee and costs of action to
either party."
21