Jordan v. Federal Express Corp.

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit
6-19-1997
Jordan v. Fed Express Corp
Precedential or Non-Precedential:
Docket 96-3103
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Filed June 19, 1997
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 96-3103
CAPT. JOHN PAUL JORDAN
v.
FEDERAL EXPRESS CORPORATION, Administrator;
FIXED PENSION PLAN FOR SEABOARD WORLD AIRLINE
PILOTS; FLYING TIGER LINE, INC. VARIABLE ANNUITY
PENSION PLAN FOR PILOTS; FEDERAL EXPRESS
CORPORATION EMPLOYEE'S PENSION PLAN
JOHN PAUL JORDAN,
Appellant
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil Action No. 94-cv-00930)
Argued January 16, 1997
Before: SLOVITER, Chief Judge, SCIRICA and SEITZ,
Circuit Judges
(Filed June 19, 1997)
DANIEL M. KATZ, ESQUIRE
(ARGUED)
Katz & Ranzman
1015 18th Street, N.W., Suite 801
Washington, D.C. 20036
Attorney for Appellant
THOMAS L. HENDERSON, ESQUIRE
(ARGUED)
McKnight, Hudson, Lewis &
Henderson
6750 Poplar Avenue, Suite 301
P.O. Box 171375
Memphis, Tennessee 38187-1375
JAMES R. MULROY, ESQUIRE
ELIZABETH C. SMITH, ESQUIRE
Federal Express Corporation
1980 Nonconnah Boulevard,
3rd Floor
Memphis, Tennessee 38132
Attorneys for Appellees
OPINION OF THE COURT
SCIRICA, Circuit Judge.
This is an appeal under the Employee Retirement Income
Security Act involving the failure of a plan administrator to
notify a plan participant of the irrevocability of his
retirement benefit election and joint annuitant designation.
There are two principal issues on appeal. First, whether the
plan administrator's failure to disclose the irrevocability of
the retirement benefit election presents a cognizable ERISA
claim. Second, if it does, whether the failure to explain the
irrevocability of the benefit election was a breach of the
administrator's fiduciary duty. Finding the plan participant
did not state a cognizable claim under ERISA, the district
court granted summary judgment in favor of the plans and
the plan administrator. Jordan v. Federal Express Corp.,
914 F. Supp. 1180 (W.D. Pa. 1996). We will affirm in part,
reverse in part, and remand for proceedings consistent with
this opinion.
I
In May 1965, airline pilot Captain John Paul Jordan
commenced flying for Seaboard World Airlines, Inc. and
2
joined its Fixed Pension Plan for Seaboard World Airline
Pilots. Jordan continued to fly for Flying Tiger Line, Inc.
after it merged with Seaboard, until his disability
retirement on June 1, 1989. He also joined the Flying Tiger
Line, Inc. Variable Annuity Pension Plan for Pilots
(collectively with the Seaboard Plan, the "plans"). Flying
Tiger was the plan administrator until 1989, when it
merged with the Federal Express Corporation. Thereafter
Federal Express was the plan administrator. The plans are
"employee benefit plans" under the Employee Retirement
Income Security Act. 29 U.S.C. § 1002(3).
The plans provide retirement benefits for disabled
participants in the form of a Statutory Joint and Survivor
Annuity. According to the plans' provisions, Flying Tiger
was required to furnish participants with information on
the available retirement options prior to selection. The
plans provide:
Not less than 90 days prior to a Member's Disability
Retirement Date . . . the Company shall provide such
member with a written explanation of the availability of
an election to waive the Statutory Joint and Survivor
Annuity, and a written explanation of the terms and
conditions of the Statutory Benefit and the financial
effect of an election under Section 8.3 [or 7.3].1
The plans list other retirement benefit options available to
the participants besides the basic Joint and Survivor
Annuity.2 Of greater consequence here is the irrevocability
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1. The "Company" is defined under both plans as "Flying Tiger Line Inc.
or any successor corporation. The Company shall be the Plan
Administrator and a named Fiduciary with respect to the Plans."
2. Sections 7.3 of the Variable Annuity Pension Plan (Flying Tiger Plan)
and 8.3 of the Fixed Pension Plan (Seaboard Plan) provide that a
disabled participant:
may elect to waive the [Joint and Survivor Annuity Option] at any
time during the 90 days prior to retirement by filing [a] written
election with the Company on a form suitable for such purposes.
Such election shall clearly indicate that the Member is electing to
receive Retirement benefits in accordance with [the Joint and
Survivor Option, the Social Security Adjustment Option (only for
3
restriction placed on the participants' election. The plans
mandate that, "subsequent to a Member's Retirement Date
the election of [the Joint and Survivor Annuity] Option
cannot be rescinded nor can the designation of the joint
annuitant be changed."
In 1988, Jordan commenced a period of long-term sick
leave. By letter, Flying Tiger informed Jordan that after
exhaustion of sick leave benefits, he might be eligible for
disability retirement. To qualify, Jordan had to submit
documentation of his disqualifying medical condition and
the Federal Aviation Administration's refusal to issue him a
flying certificate at least sixty days prior to his retirement.
After receiving the necessary paperwork, the Benefits
Department would send Jordan a letter explaining his
benefit level and retirement options.
On March 14, 1989, Jordan asked Flying Tiger to begin
processing his disability retirement request. Rather than
providing the necessary medical and FAA documentation,
Jordan advised Flying Tiger that the FAA was evaluating
his certification status. Jordan eventually filed the
necessary documents on June 3, 1989.
Flying Tiger replied to Jordan's request on June 5, 1989,
four days after he retired and two days after receipt of the
FAA's letter denying flight certification and his physician's
letter describing his debilitating condition. Accompanying
the plans' response letter were blank copies of a
"Retirement Election Form" and a "Spousal Consent Form."3
The benefits letter advised Jordan of his projected monthly
disability benefits under three of "the most commonly
elected benefit payment options:" (1) the Straight Life
Annuity ($6,769.29); (2) the 50% Joint and Survivor
_________________________________________________________________
Seaboard Plan), and the Certain and Life Option]. An election under
this Paragraph may be revoked at any time prior to a Member's
Retirement Date by filing a further written request in like manner
that the election be changed . . . [N]o such election shall be valid
unless a Spousal Consent is filed with the Retirement Board.
3. The Spousal Consent Form was required to be executed by Jordan
and his wife if he selected the Straight Life Annuity over the Joint and
Survivor Annuity. This was explained in the letter.
4
Annuity ($6,109.08); and (3) the 100% Joint and Survivor
Annuity ($5,576.79).4
The letter did not mention that the plans prohibit post-
retirement changes either to the form of the annuity elected
or to the beneficiary designation if the Joint and Survivor
Option were chosen.5 Jordan never requested information
from the administrator on the revocability of his election,
nor did he receive, before his retirement election, a copy of
the terms and conditions of the plans or their Summary
Plan Descriptions.
Jordan executed and returned the Retirement Election
Form, selecting the Joint and Survivor 50% Annuity Option
and designating his wife, Linda Jordan, as his joint
annuitant. Jordan claims he and his wife were unaware
that his election was irrevocable. Had they known it was
irrevocable they would have chosen the Straight Life
Annuity because of the tenuous state of their marriage.
In September 1989, Jordan received his first disability
retirement check.6 Soon thereafter Captain Jordan divorced
Linda Jordan and married Patricia Jordan. Under the
property settlement, Linda Jordan relinquished all claim to
_________________________________________________________________
4. Even though the plans stipulated that Jordan should receive an
explanation of the 75% Joint and Survivor Annuity Option and the
Certain and Life Option in sections 8.3 and 7.3, the letter failed to
mention them.
5. Jordan was informed that his INVEST pension plan selection was
revocable as he was entitled to receive additional benefits under the
terms of the "INVEST" pension plan, and "after a period of five years
ha[d] elapsed from [his] disability retirement date, [he] may elect a
different option for benefit payments, including a single lump sum
payment, based on the current account balance at that time." But this
was independent and unrelated to his disability retirement election.
6. The benefits letter stated that Jordan's "Disability Retirement would
commence the first day of the month following or coincident with
approval of disability, exhaustion of all sick pay and vacation, receipt of
your FAA Letter of Denial and your request for disability benefits."
Despite Jordan's failure to submit in a timely fashion the requisite FAA
certified documents and retirement election form, the pension plans
agreed to pay him the retirement benefits retroactive as of June 1, 1989.
Therefore the September 1989 check included payment for the months
of June, July, and August.
5
Captain Jordan's retirement benefits, including her Joint
and Survivor beneficiary interest.
In February 1992, Federal Express, the present
administrator of the plans, denied Jordan's request to
substitute Patricia Jordan for Linda Jordan as his
designated joint annuitant because "there are no provisions
[under the plans] for making changes to the payment form,
thus your initial election is irrevocable." The letter advised
him that "your payments will continue as is, with Linda E.
Jordan as your survivor, in the absence of a Qualified
Domestic Relations Order certified by the court."
Jordan sent Federal Express a copy of a Qualified
Domestic Relations Order issued by the Mercer County
Court of Common Pleas directing that "all rights and
interests of Linda E. Jordan [under the plans] . . . are
hereby terminated and extinguished in their entirety, the
same as if such rights and interests had never accrued in
the first instance." He asked the plans either to raise his
benefit payment to match the monthly amount disbursed
under the Straight Life Annuity or to recognize Patricia
Jordan as the beneficiary of his Joint and Survivor 50%
Annuity. In response, Federal Express canceled Linda
Jordan's right to receive the benefits under the plans
without either increasing Jordan's monthly benefits or
designating Patricia Jordan as the new beneficiary.7
Jordan appealed the denial of survivor benefits to the
Federal Express Corporation Qualified Employee Benefits
Committee, which acts as fiduciary for the Federal Express
pension plan. The Qualified Employee Benefits Committee
_________________________________________________________________
7. Federal Express contends that several months before Jordan
requested the change in his retirement option, one of its staff attorneys
explained to Jordan's domestic relations attorney that the Qualified
Domestic Relations Order would only extinguish Linda Jordan's rights,
and not permit Patricia Jordan to receive Linda Jordan's benefits or
increase Jordan's monthly retirement payments. Federal Express claims
it suggested to Jordan that he negotiate a settlement with his former
wife. But Jordan asserts these conversations did not occur and under
Federal Rule of Civil Procedure 56 all inferences must be made in his
favor. In any event, the content of these phone conversations is
immaterial for purposes of this appeal.
6
denied the appeal but offered to reinstate Jordan's
previously designated beneficiary (Linda Jordan) if he so
desired.
In June 1994, Jordan filed this action alleging the plans
and the administrator violated statutory, regulatory, and
plan requirements in their administration of his request for
disability retirement benefits. In his amended complaint,
Jordan claims he is entitled to revoke his election of his
former wife Linda Jordan as his joint annuitant because (1)
he did not receive timely written notice of his benefits; (2)
he was not informed in advance of his election that he was
barred from post-retirement changes in his election; (3) he
did not receive a Summary Plan Description; and (4) the
plans are being unjustly enriched by "charging" Jordan for
the Qualified Joint and Survivor Annuity through reduced
pension benefits without his receiving the benefit of having
a designated joint annuitant.
On cross motions, the district court granted summary
judgment to Federal Express, holding that Jordan failed to
state valid claims under ERISA §§ 502(a)(1)(B) and
502(a)(3), or federal common law. Specifically the court
found (1) the alleged violations of the plans' reporting and
disclosure provisions could not be remedied under ERISA
§ 502(a)(1)(B), which only permits enforcement of the "terms
of a plan;" (2) Jordan had failed to allege or put in issue
any "extraordinary circumstances" required for a § 502(a)(3)
claim; and (3) a federal common law claim for "unjust
enrichment" was not available. This appeal followed.
II
This case arose under the Employee Retirement Income
Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461. We have
jurisdiction under 28 U.S.C. § 1291 and our scope of review
is plenary. "When we review a grant of summary judgment,
we apply the same test as the district court should have
applied initially." Sempier v. Johnson & Higgins, 45 F.3d
724, 727 (3d Cir.), cert. denied, 115 S. Ct. 2611 (1995). A
court may grant summary judgment when "there is no
genuine issue as to any material fact and the moving party
7
is entitled to judgment as a matter of law." Fed. R. Civ. P.
56(c).8
III
Jordan's cause of action is predicated on the
administrator's failure to disclose material features of his
retirement benefit election and his joint annuitant
designation. The plans and the administrator contend the
alleged violations are not cognizable under ERISA. Citing
our prior decisions, they assert there is no § 502(a)(1)(B)
liability for ERISA disclosure violations and no
"extraordinary circumstances" that would permit a
§ 502(a)(3) claim. See Hozier v. Midwest Fasteners, Inc., 908
F.2d 1155, 1169 (3d Cir. 1990); Ackerman v. Warnaco, Inc.,
55 F.3d 117, 124 (3d Cir. 1995). In response, Jordan
claims there is a valid distinction between disclosure
violations predicated on the ERISA statute and those based
solely on the plans' language. The latter he contends are
cognizable under ERISA. He also maintains his breach of
_________________________________________________________________
8. An administrator's benefit eligibility determination is reviewed under
an arbitrary and capricious standard if the plan grants the administrator
discretionary authority to determine benefits or construe the terms of the
plan. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989);
Abnathya v. Hoffmann-La Roche, Inc., 2 F.3d 40, 44 (3d Cir. 1993);
Taylor v. Continental Group in Control Severance Pay Plan, 933 F.2d
1227, 1232 (3d Cir. 1991). Whether the administrator or fiduciary is
operating under a possible or actual conflict of interest is a factor which
must be weighed in determining whether the decision was arbitrary and
capricious. Firestone Tire & Rubber Co., 489 U.S. at 115. But it appears
that this deferential standard only applies to actions brought under
§ 502(a)(1)(B) and not those brought under§ 502(a)(3). See id., at 108
("The discussion which follows is limited to the appropriate standard of
review in § 1132(a)(1)(B) actions challenging denials of benefits based on
plan interpretations. We express no view as to the appropriate standard
of review for actions under other remedial provisions of ERISA"); Luby v.
Teamsters Health, Welfare, and Pension Trust Funds , 944 F.2d 1176,
1183 (3d Cir. 1991) ("[W]e read the sentence limiting the scope of the
Firestone Court's discussion as intended to distinguish between remedial
actions challenging claim denials brought under 29 U.S.C.
§ 1132(a)(1)(B) and remedial actions based on or brought under other
ERISA provisions."). Because we hold there is no § 502(a)(1)(B) cause of
action, we exercise plenary review.
8
fiduciary duty claim should not be evaluated under the
Ackerman "extraordinary circumstances" test.
A
The district court held that under Hozier, Jordan did not
have a viable basis under § 502(a)(1)(B) for his disclosure
claims. Jordan, 914 F. Supp. at 1188 (citing Hozier v.
Midwest Fasteners, Inc., 908 F.2d 1155 (3d Cir. 1990)).9
Section 502(a)(1)(B) provides a participant with a cause of
action "to recover benefits due to him under the terms of
his plan, to enforce his rights under the terms of the plan,
or to clarify his rights to future benefits under the terms of
his plan." 29 U.S.C. § 1132(a)(1)(B).
In Hozier we held that while reporting and disclosure
violations may cause "substantive harm," they cannot form
the basis for § 502(a)(1)(B) liability when "the plan defines
the scope of the entitlements it creates without any
reference to reporting and disclosure issues." Hozier, 908
F.2d at 1168. Because the employees in Hozier were only
entitled to benefits under the plan if they were terminated
because of a merger, we refused to find a § 502(a)(1)(B)
cause of action since the plan entitlement provision did not
create disclosure and reporting obligations. Id. ("[T]he
determination of whether a particular employee was
terminated ``for the merger,' . . . does not depend on the
extent to which the employee was made aware that he
would receive certain severance benefits if terminated ``for
the merger.' ").
In Hozier, we acknowledged that imposing § 502(a)(1)(B)
liability for statutory disclosure and reporting violations
might serve the ERISA objective of ensuring that plan
participants receive adequate information about their plans
in order to protect their interests. Hozier, 908 F.2d at 1169
_________________________________________________________________
9. The district court describes Jordan's attempt to state a § 502(a)(1)(B)
claim as "halfhearted" because "his claims clearly are not based on the
terms of his retirement plans which, just as clearly, preclude the
revocation of election or designation of another joint annuitants (sic) he
seeks." Jordan v. Federal Express Corp., 914 F. Supp. at 1188 (emphasis
in original).
9
(citing H.R. Rep. No. 93-533 (1974), reprinted in 1974
U.S.C.C.A.N. 4639, 4649). But there was also the
countervailing ERISA consideration "that employees
themselves are best served by an enforcement regime that
minimizes employers' expected liability for reporting and
disclosure violations--and with it, the disincentives against
creating employee benefit plans in the first place . . . ." Id.,
at 1170. Because Congress chose to provide plan
participants with a limited set of remedies for statutory
disclosure violations, we refused to fashion an implied
remedy which altered ERISA's comprehensive remedial
scheme. Id., at 1171; see also Massachusetts Mut. Life Ins.
Co. v. Russell, 473 U.S. 134, 147 (1985) ("We are reluctant
to tamper with an enforcement scheme crafted with such
evident care as the one in ERISA.").10
The plans here set forth disclosure and reporting
obligations. Sections 8.2 and 7.2 require the plan
administrator to provide the participants with "a written
explanation of the availability of an election to waive the
Statutory Joint and Survivor Annuity, and a written
explanation of the terms and conditions of the Statutory
Benefit and the financial effect of an election under Section
8.3 [or 7.3]." Prior to waiving their Joint and Survivor
Annuity and selecting a different retirement benefit option,
participants were to receive a written explanation
describing the "terms and conditions" of the Annuity from
the plan administrator. Even if the plans' disclosure
violations led Jordan to make an uninformed retirement
selection, he cannot bring a § 502(a)(1)(B) claim where his
"plan defines the scope of entitlements it creates without
any reference to reporting and disclosure issues." Hozier,
908 F.2d at 1168.11 This is such a case. Therefore, Jordan
_________________________________________________________________
10. Moreover, we found that Congress provided other viable routes for
the prosecution of the statutory disclosure violations under § 502(a)(1)(A)
or § 502(a)(4).
11. In Hozier we stated:
An employee who never receives information about gaps in the
coverage of his benefits package . . . is unable to make fully
informed decisions about whether to purchase alternative insurance,
or even to seek alternative employment. . . . It cannot, however,
10
does not have a cognizable § 502(a)(1)(B) claim against the
plans or the administrator for their alleged disclosure
failures.12
B
Jordan also sets forth a § 502(a)(3) claim. Under
§ 502(a)(3) a plan participant may bring a cause of action:
(A) to enjoin any act or practice which violates any
provision of this subchapter or the terms of the plan,
or (B) to obtain other appropriate equitable relief (i) to
redress such violations or (ii) to enforce any provisions
of this subchapter or the terms of the plan . . . .
29 U.S.C. § 1132(a)(3).
The district court properly dismissed Jordan's § 502(a)(3)
claim involving the ERISA statutory reporting and
disclosure violations. We have previously held that
"substantive remedies are generally not available for
violations of ERISA's reporting and disclosure
requirements" except "where the plaintiff can demonstrate
the presence of ``extraordinary circumstances.' " Ackerman
v. Warnaco, Inc., 55 F.3d 117, 124 (3d Cir. 1995). We have
not provided a rigid definition of "extraordinary
circumstances." But "extraordinary circumstances"
generally involve acts of bad faith on the part of the
employer, attempts to actively conceal a significant change
in the plan, or commission of fraud. See id. at 125; Kurz v.
_________________________________________________________________
plausibly be deemed relevant to a court's construction of "the terms
of [a] plan" where, as here, the plan defines the scope of the
entitlements it creates without any reference to reporting and
disclosure issues."
Hozier, 908 F.2d at 1168.
12. Even if the plans defined the scope of the benefit entitlements with
reference to disclosure and reporting issues, Jordan would still have to
demonstrate that the Qualified Employee Benefit Committee's denial of
his benefit request was arbitrary and capricious in order for him to
recover under § 502(a)(1)(B), as the plans provide the Committee with the
requisite discretionary authority. Firestone Tire & Rubber Co. v. Bruch,
489 U.S. 101 (1989).
11
Philadelphia Elec. Co., 96 F.3d 1544, 1553 (3d Cir. 1996)
("To support [the extraordinary circumstances] element, we
have previously required a showing of affirmative acts of
fraud or similarly inequitable conduct by an employer.");
Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226, 238
(3d Cir. 1994); Berger v. Edgewater Steel Co., 911 F.2d 911,
920-21 (3d Cir. 1990), cert. denied, 499 U.S. 920 (1991);
see also Panaras v. Liquid Carbonic Indus. Corp., 74 F.3d
786, 791 (7th Cir. 1996) ("[A] claim for monetary benefits in
a suit based on technical violations of the notice provisions
will be awarded only in ``exceptional circumstances'
involving bad faith, intentional concealment or prejudice to
the employee."). Jordan presented no evidence that Flying
Tiger acted in bad faith. Based on the record here, Jordan
failed to establish the requisite "extraordinary
circumstances," and the district court properly dismissed
his § 502(a)(3) ERISA disclosure claims.
C
In addition to his § 502(a)(3) ERISA disclosure claims,
Jordan raised a breach of fiduciary duty claim against the
plan administrator. The district court dismissed this claim
because there was insufficient evidence of "extraordinary
circumstances." In the alternative, the court suggested that
" ``absent a specific participant-initiated inquiry, a plan
administrator does not have any fiduciary duty to
determine whether confusion about a plan term or
condition exists.' " Jordan, 914 F. Supp. at 1192 (quoting
Switzer v. Wal-Mart Stores, Inc., 52 F.3d 1294, 1299 (5th
Cir. 1995)).
The Supreme Court has held that § 502(a)(3) acts as a
"safety net, offering appropriate equitable relief for injuries
caused by violations that § 502 does not elsewhere
adequately remedy." Varity Corp. v. Howe, ___ U.S. ___, 116
S. Ct. 1065, 1078 (1996).13 This includes breach of
fiduciary duty. Id. After Varity there is little doubt that
ERISA provides plan participants an equitable cause of
action for an administrator's breach of fiduciary duty. This
_________________________________________________________________
13. The district court did not have the benefit of this decision as it was
decided after the district court granted summary judgment.
12
is the claim that Jordan sets forth in Count II of his
amended complaint - that the administrator breached its
fiduciary obligation to inform him of the material aspects of
his retirement election.
As a threshold matter, we must consider whether the
district court erred when it required Jordan to satisfy the
"extraordinary circumstances" test in order to establish a
§ 502(a)(3) claim for breach of a fiduciary duty. While we
have required "extraordinary circumstances" to recover
under ERISA's disclosure and reporting provisions, we have
not employed the same test for breach of fiduciary duty
claims. We have previously held:
[S]atisfaction by an employer as plan administrator of
its statutory disclosure obligations under ERISA does
not foreclose the possibility that the plan administrator
may nonetheless breach its fiduciary duty owed plan
participants to communicate candidly, if the plan
administrator simultaneously or subsequently makes
material misrepresentations to those whom the duty of
loyalty and prudence are owed.
In re Unisys Corp. Retiree Med. Benefit "ERISA" Litig., 57
F.3d 1255, 1264 (3d Cir. 1995), cert. denied, 116 S. Ct.
1316 (1996); see also Kurz, 96 F.3d at 1552 (treatment of
the breach of fiduciary duty claim is treated as independent
and distinct from the equitable estoppel claim based on
ERISA disclosure violations); Bixler v. Cent. Pa. Teamsters
Health & Welfare Fund, 12 F.3d 1292 (3d Cir. 1993)
(employee's claim that the employer violated its fiduciary
duty to inform not analyzed under the "extraordinary
circumstances" test); Genter v. Acme Scale & Supply Co.,
776 F.2d 1180 (3d Cir. 1985) (same).
It would appear that the Supreme Court has also
determined that fiduciary duties operate both
independently from and in conjunction with ERISA's
specifically delineated requirements. See Varity Corp., 116
S. Ct. at 1074 ("If the fiduciary duty applied to nothing
more than activities already controlled by other specific
legal duties, it would serve no purpose."); see also Central
States, Southeast and Southwest Areas Pension Fund v.
Central Transp., Inc., 472 U.S. 559, 569 n.9 (1985)
13
("ERISA's rules concerning reporting, disclosure, and
fiduciary responsibility apply to all employee benefit
plans.").
As we acknowledged in Hozier, one of ERISA's objectives
was to provide plan participants with greater disclosure
protection. Hozier, 908 F.2d at 1170. Congress determined
the prior Welfare and Pension Plans Disclosure Act was
deficient in that employees were not given sufficient
information from the plans to protect their interests. H.R.
Rep. No. 93-533 (1974), reprinted in 1974 U.S.C.C.A.N.
4639, 4649; Board of Trustees of the CWA/ITU Negotiated
Pension Plan v. Weinstein, 107 F.3d 139, 143-44 (2d Cir.
1997) ("Finding that the Disclosure Act was ``weak in its
limited disclosure requirements,' and ``inadequate in
protecting rights and benefits due workers,' . . . Congress
enacted broader disclosure requirements in ERISA . .. .")
(citations omitted). To afford the plan participants and
beneficiaries with greater disclosure protection, Congress
created reporting and disclosure requirements as well as a
fiduciary duty framework which "[assures] the equitable
character of the plans." Central States, 472 U.S. at 570.
This is reflected in the legislative history. S. Rep. No. 93-
127 (1974), reprinted in 1974 U.S.C.C.A.N. 4838, 4863
("Title V amends the Welfare and Pension Plans Disclosure
Act in two significant ways. First, by addition to and
changes in the reporting requirements designed to disclose
more . . . information . . . to participants . . . . Second, by
the addition of a new section setting forth responsibilities
. . . applicable to persons occupying a fiduciary relationship
to employee benefit plans."); H.R. Rep. No. 93-1280 (1974),
reprinted in 1974 U.S.C.C.A.N. 5038, 5171 ("The conferees
also improved a number of House and Senate provisions
which are vital for the protection of the pension rights of
employees. This includes full disclosure of the features and
operation of pension plans.").
While the statutory disclosure and reporting
requirements are clearly set forth in ERISA, see , e.g., 29
U.S.C. § 1055; 29 U.S.C. § 1025; 29 U.S.C. § 1024,
Congress chose not to enumerate all the fiduciary duties
owed. Varity, 116 S. Ct. at 1070 ("[W]e recognize that these
fiduciary duties draw much of their content from the
14
common law of trusts . . . . We also recognize, however,
that trust law does not tell the entire story.") (citations
omitted). Rather a broader approach was adopted where
Congress assumed "the courts would interpret the prudent
man rule (and other fiduciary standards) bearing in mind
the special nature and purpose of employee benefit plans"
as they develop a federal common law of rights and
obligations under ERISA-regulated plans. Varity Corp., 116
S. Ct. at 1070 (citing H.R. Rep. No. 93-1280 (1974),
reprinted in 1974 U.S.C.C.A.N. 5038, 5083); see Franchise
Tax Bd. of the State of Cal. v. Construction Laborers
Vacation Trust for S. Cal., 463 U.S. 1, 24 n.26 (1983) ("[A]
body of Federal substantive law will be developed by the
courts to deal with issues involving rights and obligations
under private welfare and pension plans."); Ream v. Frey,
107 F.3d 147, 154 n.6 (3d Cir. 1997) ("Consequently, the
Court has indicated that courts must create federal
common law to flesh out the meaning of ERISA and
effectuate fully its meaning and purpose."). Because the
statutory reporting and disclosure requirements and
remedies were carefully considered and described by
Congress, we required a showing of "extraordinary
circumstances" for a participant to receive an equitable
remedy under § 502(a)(3). See Ackerman, 55 F.3d at 124
(citing Gridley v. Cleveland Pneumatic Co., 924 F.2d 1310,
1319 (3d Cir. 1991)). But for breach of fiduciary duty
violations, Congress has left it to the courts to "develop a
federal common law of rights and obligations under ERISA-
regulated plans." Varity, 116 S. Ct. at 1070 (quoting
Firestone Tire & Rubber Co., 489 U.S. at 110-11); see
Menhorn v. Firestone Tire & Rubber Co., 738 F.2d 1496,
1499 (9th Cir. 1984) ("But Congress realized that the bare
terms, however detailed, of these statutory [ERISA]
provisions would not be sufficient to establish a
comprehensive regulatory scheme. It accordingly,
empowered the courts to develop, in the light of reason and
experience, a body of federal common law governing
employee benefit plans."). This has been done through the
employment of trust principles and the creation of federal
common law.
Furthermore, a review of the case law indicates that the
fiduciary duty jurisprudence has evolved from a different
15
set of policy concerns from those animating ERISA's
statutory disclosure requirements. The "extraordinary
circumstances" limitation set forth in Ackerman flows from
"Congress's judgment that employees themselves are best
served by an enforcement regime that minimizes employers'
expected liability for reporting and disclosure violations--
and with it, the disincentives against creating employee
benefit plans in the first place . . . ." Hozier, 908 F.2d at
1170. But the basis for fiduciary duty jurisprudence is "to
protect and strengthen the rights of employees, to enforce
fiduciary standards, and to encourage the development of
private retirement plans." In re Unisys Sav. Plan Litig., 74
F.3d 420, 434 (3d Cir.), cert. denied, 117 S. Ct. 56 (1996).
Congress believed this protection would best be provided
through the enforcement of fiduciary duties and the
provision of information concerning the plans. H.R. Rep.
No. 93-533 (1974), reprinted in 1974 U.S.C.C.A.N. 4639,
4649. Moreover, Congress has stated that its objectives
behind adopting the fiduciary duty requirement are "that
reliance on conventional trust law often is insufficient to
adequately protect the interests of plan participants and
beneficiaries . . . [and] assuming that the law of trusts is
applicable, . . . without standards by which a participant
can measure the fiduciary's conduct he is not equipped to
safeguard either his own rights or the plan assets." Id.As a consequence, we evaluate fiduciary duty to inform
claims differently from violations of ERISA's reporting and
disclosure requirements. Because "extraordinary
circumstance" is not required under our fiduciary duty
analysis, the district court erred when it held there was no
cognizable § 502(a)(3) claim for a fiduciary breach.
IV
A
In the alternative, the district court suggested that even
if there were a cognizable claim for breach of fiduciary duty,
there was no basis to find the administrator breached that
duty by failing to disclose the irrevocability of Jordan's
election beforehand.14 Jordan contends the administrator
violated its duty to disclose by providing him with an
_________________________________________________________________
14. Because the district court held there was no cognizable § 502(a)(3)
claim, it did not reach the fiduciary breach issue, even though it
discussed the claims' merits.
16
incomplete explanation of the terms and conditions of his
election.15 The district court correctly found that neither
ERISA, the Internal Revenue Code, nor the Treasury
Regulations specifically require administrators to inform
plan participants that the retirement benefit election as well
as the joint annuitant designation is irrevocable during the
post-retirement period. But this is not dispositive of
whether the administrator breached its fiduciary duty to
inform.
It is undisputed that Flying Tiger, as the administrator of
the plans, was a fiduciary. In fact, the plans define the role
of administrator as "a named fiduciary." 16 The question here
is whether the administrator breached its duty to disclose
even though the participant made no specific inquiry.
On June 5, 1989, Jordan received a four page letter
which provided information "pertinent to [his] interest in
Disability Retirement effective June 1, 1989." The letter
failed to mention that post-retirement changes to the
participant's retirement plan selection are prohibited.
Unaware of the revocability restriction, Jordan selected the
50% Joint and Survivor Annuity and designated his wife
Linda Jordan as the beneficiary, even though they had
marital difficulties at the time. Jordan brought this action,
in part claiming that Flying Tiger maintained a duty to
inform him of the irrevocability of his decision, and its
failure to do so constitutes a breach of its fiduciary duties
under ERISA.
_________________________________________________________________
15. Under the plans' disclosure requirements found in § 7.2 and § 8.2,
the administrator was required to provide the participants in advance of
their retirement selection with a "written explanation of the availability
of an election to waive the Statutory Joint and Survivor Annuity, and a
written explanation of the terms and conditions of the Statutory Benefit
and the financial effect of an election under 8.3[or 7.3]."
16. "There are three ways to acquire fiduciary status under ERISA: (1)
being named as the fiduciary in the instrument establishing the
employee benefit plan, 29 U.S.C. § 1102(a)(2); (2) being named as a
fiduciary pursuant to a procedure specified in the plan instrument, . . .
29 U.S.C. § 1102(a)(2); 29 U.S.C. § 1002(38); and (3) being a fiduciary
under the provisions of 29 U.S.C. § 1002(21)(A) . . . ." Glaziers &
Glassworkers Union Local No. 252 Annuity Fund v. Newbridge Securities,
Inc., 93 F.3d 1171, 1179 (3d Cir. 1996).
17
ERISA defines the scope of a fiduciary's duty as follows:
[A] fiduciary shall discharge his duties with respect to
a plan in the interest of the participants and
beneficiaries and --
(A) for the exclusive purpose of:
(i) providing benefits to participants and their
beneficiaries; and
(ii) defraying reasonable expenses of administerin g
the plan;
(B) with the care, skill, prudence, and diligence under
the circumstances then prevailing that a prudent man
acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like
character and with like aims . . . .
29 U.S.C. § 1104(a). Furthermore, the Supreme Court has
found that "Congress intended by § 404(a) to incorporate
the fiduciary standards of trust law into ERISA, and . . .
that fiduciaries owe strict duties running directly to
beneficiaries in the administration and payment of trust
benefits." Massachusetts Mut. Life Ins. Co. v. Russell, 473
U.S. 134, 152-53 (1985); Ream, 107 F.3d at 153 ("A
fiduciary's duties under ERISA are based both on ERISA,
particularly the prudent person standard as set forth in
ERISA § 404, 29 U.S.C. § 1104, and on the common law of
trusts."); In re Unisys Sav. Plan Litig., 74 F.3d 420, 434 (3d
Cir. 1996) ("We also bear in mind that Congress has
instructed that section 1104 ``in essence, codifies and
makes applicable to . . . fiduciaries certain principles
developed in the evolution of the law of trusts.' ") (quoting
S. Rep. No. 93-127 (1974), reprinted in 1974 U.S.C.C.A.N.
4838, 4863).
Through the application of trust principles, we have held
that fiduciaries have a duty to inform which "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." Bixler, 12 F.3d at 1300.17 But "a
_________________________________________________________________
17. The Restatement (Second) of Trusts provides:
18
fiduciary has a legal duty to disclose to the beneficiary only
those material facts known to the fiduciary but unknown to
the beneficiary, which the beneficiary must know for its
own protection." Glaziers, 93 F.3d at 1182; see also Bixler,
12 F.3d at 1300 ("[T]he duty to disclose material
information ``is the core of a fiduciary's responsibility.' ")
(quoting Eddy v. Colonial Life Ins. Co. of America, 919 F.2d
747, 750 (D.C. Cir. 1990)). The inquiry here is whether the
administrator failed to inform Jordan of a material aspect of
his upcoming benefit election. See In re Unisys, 57 F.3d at1265 n.15 ("An ERISA fiduciary does have . . .``a duty to
communicate complete and accurate information about a
beneficiary's status.' ") (quoting Eddy, 919 F.2d at 751).
In Unisys we held a misrepresentation rises to a material
level if "there is a substantial likelihood that it would
mislead a reasonable employee in making an adequately
informed retirement decision." In re Unisys, 57 F.3d at 1264.18
_________________________________________________________________
d. Duty in the absence of a request by the beneficiary. Ordinarily
the trustee is not under a duty to the beneficiary to furnish
information to him in the absence of a request for such information.
. . . In dealing with the beneficiary on the trustee's own account,
however, he is under a duty to communicate to the beneficiary all
material facts in connection with the transaction which the trustee
knows or should know. . . . Even if the trustee is not dealing with
the beneficiary on the trustee's own account, he is under a duty to
communicate to the beneficiary material facts affecting the interest
of the beneficiary which he knows the beneficiary does not know
and which the beneficiary needs to know for his protection in
dealing with a third person.
Restatement (Second) of Trusts § 173, comment d (1959) "(cited in,
Bixler, 12 F.3d at 1300).
18. Similar tests for materiality have been adopted in other contexts. A
representation is material for purposes of the Immigration and
Nationality Act if it "had a natural tendency to influence the decisions of
. . ." a party. Kungys v. United States, 485 U.S. 759, 772 (1988). Also "an
omitted fact is material [for purposes of the securities law] if there is a
``substantial likelihood that, under all the circumstances, the omitted fact
would have assumed actual significance in the deliberations of the
reasonable shareholder.' " Shapiro v. UJB Fin. Corp., 964 F.2d 272, 280
n.11 (3d Cir.) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438,
19
An omission may rise to a material level for the same
reason. Irrevocability is arguably of material importance.
We need not take judicial notice of the national divorce rate
to hold that the non-disclosure of the irrevocability of a
joint annuitant's designation may be a material omission
on the part of an administrator. Plan participants might
reasonably expect that a written explanation of a
Retirement Benefit would inform them of the permanence of
their benefit election post-retirement.
It is apparent why a participant might consider
irrevocability material. According to the Jordans' affidavits,
both Linda Jordan and Captain Jordan would have chosen
to forego the Joint and Survivor benefit package in favor of
the Straight Life Annuity option if they had known of the
irrevocability of the selection. In fact, only a few months
after his election they divorced and reached a settlement
where Linda Jordan relinquished all entitlement to her
beneficiary interest. According to Jordan, this unrealized
expectation resulted in his relying on an incomplete written
explanation and making an uninformed benefit selection.
Barring post-retirement changes to a participant's
election or joint annuitant designation is justified. This
policy is necessary to avoid manipulation of annuity
disbursements through the selection of a Straight Life
Annuity or the designation of a younger joint annuitant
when the original joint annuitant's life expectancy
diminishes. But there is an issue of fact here whether the
plan administrator breached its duty to inform Jordan in
its June 5th letter of the existence of such a restriction
before he made his irrevocable election.
We recognize that participants have a duty to inform
themselves of the details provided in their plans, Genter v.
Acme Scale & Supply Co., 776 F.2d 1180, 1185 (3d Cir.
1985), and that the irrevocability restriction was contained
_________________________________________________________________
449 (1976)), cert. denied, 506 U.S. 934 (1992). Additionally, Black's Law
Dictionary defines a "Material representation" as something that "relates
to a matter upon which plaintiff could be expected to rely in determining
to engage in the conduct in question." Black's Law Dictionary at 977 (6th
ed. 1990).
20
in Jordan's plans. But it is uncontested that Jordan did not
receive copies of the plans or their Summary Plan
Descriptions before his election. We also recognize that
Jordan never requested information on irrevocability. The
district court held this potentially dispositive since " ``absent
a specific participant-initiated inquiry, a plan administrator
does not have any fiduciary duty to determine whether
confusion about a plan term or condition exists. It is only
after the plan administrator does receive an inquiry that it
has a fiduciary obligation to respond promptly and
adequately in a way that is not misleading.' " Jordan, 914
F. Supp. at 1192 (quoting Switzer v. Wal-Mart Stores, Inc.,
52 F.3d 1294, 1299 (5th Cir. 1995)).
But in prior cases, we have held a specific request for
information is not necessarily a prerequisite forfinding a
fiduciary breach to inform. As we held in Glaziers, "it is
clear that circumstances known to the fiduciary can give
rise to this affirmative obligation [to inform] even absent a
request by the beneficiary." Glaziers, 93 F.3d at 1181.
Moreover, in Bixler we held that "while the beneficiary may,
at times, bear a burden of informing the fiduciary of her
material circumstance, the fiduciary's obligations will not
be excused merely because she failed to comprehend or ask
about a technical aspect of the plan." Bixler, 12 F.3d at
1300. Here, we do not believe Jordan's failure to inquire is
fatal to his claim. Glaziers, 93 F.3d at 1181 ("Indeed,
absent such information, the beneficiary may have no
reason to suspect that it should make inquiry into what
may appear to be a routine matter."). Under the terms of
the plans, the administrator was obligated to provide all
participants, before they made their retirement selection,
with a written explanation of the annuity, which contained
"information pertinent to [their] interest in Disability
Retirement." Letter from Flying Tiger to Jordan of 6/5/89
at 1. Although the eighty-one page Flying Tiger Plan and
the fifty-one page Seaboard Plan described the irrevocability
of the participant's retirement election post-retirement, the
June 5th letter describing his retirement options contained
no reference to irrevocability. Interestingly, the June 5th
letter explicitly discussed Jordan's ability to revoke his
INVEST pension plan election. And before retirement,
Jordan was permitted to freely change his retirement plan
21
option. But once Jordan retired, his annuity election
became irrevocable. The letter describing his retirement
options did not notify him of this crucial difference.
Because of Jordan's previous experience with changing his
retirement options, the explicit reference to his ability to
revoke his INVEST plan selection, and the administrator's
failure to disclose the irrevocability of his retirement
annuity selection in the June 5th letter, Jordan was not
put on notice that a change in revocability would result
upon retirement. For these reasons, we do not believe
Jordan's failure to inquire bars his claim.
There still is an issue of fact whether the administrator's
failure to describe the irrevocability of Jordan's retirement
selection constituted a material omission and a breach of
its duty to exercise the "care, skill, prudence and diligence"
as required under ERISA.19 This question is left to the fact
finder.
If Jordan is entitled to relief, he may recover back
benefits, recision of his retirement selection, and the
opportunity to select a new disability retirement option. See
In re Unisys, 57 F.3d at 1269.
B
Jordan also contends the written explanation was
untimely as he did not receive it at least "ninety (90) days
prior to [his] Disability Retirement Date." It appears that
the administrator violated the plans' provision requiring at
least a ninety day review period. Jordan retired on June 1,
1989 and received his written explanation on June 5, 1989.
But we find as a matter of law that this does not constitute
a breach of the administrator's fiduciary duty. Before the
plans were to supply Jordan with the retirement election
information, he was required to provide the administrator,
at least sixty days prior to his projected retirement date,
with a written request for disability retirement, a letter from
_________________________________________________________________
19. "Summary judgment on ``the question of materiality' is appropriate
only if ``reasonable minds cannot differ.' " Fischer v. Philadelphia Elec.
Co., 994 F.2d 130, 135 (3d Cir.) (quoting TSC Indus., Inc. v. Northway
Inc., 426 U.S. 438, 450 (1976)), cert. denied, 510 U.S. 1020 (1993).
22
the FAA medical examiner which documented his
disqualifying medical condition, and supporting medical
documentation. Jordan failed to timely submit these
documents. Rather he sent the administrator a letter which
merely stated that the FAA was currently reviewing his
disability application.
The plan administrator would not have exercised its
fiduciary duties with the "care, skill, prudence and
diligence" of a "prudent man" if it started to process
Jordan's retirement application and sent him the
informational letter before it was assured that Jordan
qualified for disability retirement. It was not until June 3,
1989 that the Administrator received the documents
establishing Jordan's disability status. Once this
information was received, the administrator immediately
sent out the informational letter and selection forms. Under
the circumstances, the administrator did not breach its
fiduciary duty by sending Jordan the informational letter
on June 5, 1989.20
C
The administrator's failure to provide Jordan with all of
the required retirement alternatives in the benefits letter
was not raised before the district court. For this reason, we
will not reach this issue. Harris v. City of Phila., 35 F.3d
840, 845 (3d Cir. 1994) ("This Court has consistently held
that it will not consider issues that are raised for the first
time on appeal."); Newark Morning Ledger Co. v. United
States, 539 F.2d 929, 932 (3d Cir. 1976) (same).
D
Jordan also asserts a federal common law claim for
unjust enrichment. We have held that federal common law
causes of action are warranted when they are "necessary to
fill in interstitially or otherwise effectuate the statutory
pattern enacted in the large by Congress." Plucinski v.
_________________________________________________________________
20. As stated previously, Jordan's timeliness claim based on ERISA's
disclosure requirements is not cognizable. Ackerman, 55 F.3d 117 (3d
Cir. 1995).
23
I.A.M. Nat'l Pension Fund, 875 F.2d 1052, 1056 (3d Cir.
1989). Furthermore, we have previously held "that the
district courts should not easily fashion additional ERISA
claims . . . under the guise of federal common law." Curcio
v. John Hancock Mut. Life Ins. Co., 33 F.3d 226, 239 (3d
Cir. 1994); Van Orman v. American Ins. Co., 680 F.2d 301,
312 (3d Cir. 1982) ("Where Congress has established an
extensive regulatory network and has expressly announced
its intention to occupy the field, federal courts will not
lightly create additional rights under the rubric of federal
common law."); see also Massachusetts Mut. Life Ins. Co. v.
Russell, 473 U.S. 134, 146 (1985) ("The six carefully
integrated civil enforcement provisions found in § 502(a) of
the statute as finally enacted . . . provide strong evidence
that Congress did not intend to authorize other remedies
that it simply forgot to incorporate expressly.") (emphasis in
original). Because Jordan brought a claim under § 502(a)(3),
the district court correctly dismissed his federal common
law "unjust enrichment" claim because it was not needed to
"fill in interstices of ERISA."
E
Finally, Jordan presents a claim for damages based on
the plans' failure to provide Jordan with a Summary Plan
Description pursuant to ERISA sections 102(a)(1) and
104(b)(1). This ERISA statutory claim is not cognizable
under § 502(a)(1)(B) or § 502(a)(3). Hozier, 908 F.2d 1155;
see also Ackerman, 55 F.3d 117. We will affirm the district
court's dismissal.
V
In conclusion, we hold that Jordan's § 502(a)(3) breach of
fiduciary duty claim alleging failure of the administrator to
inform him of the irrevocability of his benefit selection is
cognizable under ERISA. We believe there is a factual issue
which precludes summary judgment - whether the
administrator's failure to mention irrevocability in its June
5, 1989 letter breached its fiduciary duty. We will affirm the
dismissal of the timeliness, unjust enrichment, and
summary plan description claims. We will also affirm the
24
dismissal of the other ERISA statutory and regulatory
claims.
For the foregoing reasons we will affirm in part, reverse
in part and remand for proceedings consistent with this
opinion.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
25