It was Xomed's alleged failure to apprise Cerasoli that he was not yet eligible for benefits that constituted the alleged breach of its fiduciary duty to him. Furthermore, this claim is not one for benefits under the plan; it is a claim against Xomed itself. See Smith, 6 F.3d at 141 n. 13 (action against employer for misrepresenting to employee extent of her coverage did not "implicate concerns regarding the actuarial soundness of an ERISA plan ..., because we hold the employer, not the Plan, is liable, and the employer need not satisfy any liabilities out of the Plan").
Plaintiff has also stated a valid equitable estoppel claim. The Second Circuit has held that "under 'extraordinary circumstances' principles of estoppel can apply in ERISA cases." Lee v. Burkhart, 991 F.2d 1004, 1009 (2d Cir. 1993) (quoting Chambless v. Masters, Mates & Pilots Pension Plan, 772 F.2d 1032, 1039 (2d Cir. 1985), cert. denied, 475 U.S. 1016 (1986)). "The elements of estoppel are (1) material misrepresentation, (2) reliance and (3) damage." Lee, 991 F.2d at 1009. Since this is an ERISA case, plaintiff must also demonstrate the existence of "extraordinary circumstances." Id.; Curcio, 33 F.3d at 235.
As already noted, there are clearly issues of fact about whether there was a material misrepresentation upon which plaintiff detrimentally relied. I also believe that there are issues concerning whether the circumstances here were "extraordinary" enough to apply estoppel principles to this case.
I recognize that, as defendants point out, there is case authority holding that the "extraordinary circumstances" test is met only in situations in which an employer makes representations about an ambiguous term in a plan. See James v. New York City District Council of Carpenters' Benefits Funds, 947 F. Supp. 622, 632 (S.D.N.Y. 1996) (collecting cases from other circuits). The Second Circuit has not addressed this issue, however, and if the facts are as alleged in the complaint, this case might illustrate why such a rule would be undesirable. To adopt this rule would mean that employers could make gross misrepresentations about the terms of plan and be shielded from liability simply because their statements did contradict the terms of the plan. See Curcio, 33 F.3d at 238 (employer's misrepresentation about type of coverage for which recipients could enroll, with result that plaintiff received $ 150,000 less in life insurance benefits than she believed she was entitled to, was "demonstrative of extraordinary circumstances").
Furthermore, it appears that plaintiff not have received a copy of the plan summary at the time of his injury. Defendants contend that this is irrelevant because plaintiff did not request a copy. Aside from the fact that that is a factual issue, Xomed may have had a duty to inform Cerasoli of the ninety-day waiting period regardless of whether he specifically asked for the plan summary or other documents. "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." Jordan v. Federal Express Corp., 116 F.3d 1005, 1997 U.S. App. LEXIS 14801, 1997 WL 333823 *11 (3d Cir. 1997). At any rate, whether the circumstances of this case were truly extraordinary cannot be determined at this early stage of the case. See Green v. First Reliance Std. Life Ins. Co., 1997 U.S. Dist. LEXIS 6607, No. 96 CIV. 6859, 1997 WL 249967 *3 (S.D.N.Y. May 12, 1997) (denying motion to dismiss estoppel claim under ERISA, since whether extraordinary circumstances existed was question of fact).
II. Modification of the Plan
Plaintiff's second and third causes of action allege that Xomed modified the plan, and then violated the plan as modified by denying plaintiff's claim for benefits. Counts two and three are similar to each other; the only difference is that count three is based upon Xomed's employment offer to plaintiff, and count two is based upon unspecified documents that Xomed gave plaintiff and other employees, and upon Xomed's alleged oral representations that benefits were available immediately upon employment.
In support of its motion for summary judgment on these claims, Xomed relies upon the rule that "absent a showing tantamount to proof of fraud, an ERISA welfare plan is not subject to amendment as a result of informal communications between an employer and plan beneficiaries." Moore v. Metropolitan Life Ins. Co., however, 856 F.2d 488, 492 (2d Cir. 1988). The court in Moore affirmed summary judgment for the employer because the record in that case "contained no hint of bad faith, intent to deceive or even conduct that was objectively, if unintentionally, misleading on Metropolitan's part." Id.
One significant difference between Moore and the case at bar, though, is that the defendant in Moore moved for summary judgment after discovery. Id. at 491. There has been no discovery in the case at bar, however, and based on the allegations of the complaint I cannot say that plaintiff will not be able to adduce evidence "tantamount to proof of fraud."
Although the complaint does not expressly use the word "fraud," its factual allegations, if proved, could establish conduct on Xomed's part that is tantamount to fraud. The complaint alleges that Xomed consistently and repeatedly informed Cerasoli that his coverage began on March 20, 1995, the first day of his employment. At some point after he was injured on May 12, 1995, Xomed did an about-face, and told him that his coverage did not take effect until ninety days after March 20. Xomed's Human Resources Department also allegedly told Cerasoli that they had always known about the ninety-day waiting period, even though on March 20, they had informed him through a telephone call from Cerasoli's supervisor that his coverage began that day. The complaint further alleges that the Human Resources Department later told him that they had mistakenly told him on March 20 that his coverage began immediately, yet in still later conversations, they insisted that they had always told him about the waiting period, and even claimed that they had sent him written notification of the waiting period. Complaint PP 14-28.
If true, these allegations might support a finding that Xomed deliberately lied to, or concealed the truth from, Cerasoli, either by knowingly misinforming him that his disability coverage began on March 20, by failing to correct the error once Xomed realized that it was mistaken, or by falsely denying that it had given Cerasoli incorrect information. Whether any of these scenarios would be enough to find that Xomed had informally modified the plan under the Moore exception for fraudulent activity remains to be seen. There having been no discovery, however, I am unprepared to conclude at this juncture that under no set of circumstances will plaintiff be able to establish these claims. See Adler v. Aztech Chas. P. Young Co., 807 F. Supp. 1068, 1071 (S.D.N.Y. 1992) (denying motion to dismiss claim based on alleged modification of plan, since plaintiffs had alleged what could prove to be tantamount to proof of fraud).
III. Eligibility for Benefits "Under an ERISA Plan Sponsored by Defendant Xomed"
In count one of the amended complaint, plaintiff alleges that he "was entitled to disability benefits under an ERISA plan sponsored by defendant Xomed." Complaint P 31. Defendant contends that this claim should be dismissed because the only plan that plaintiff could possibly be referring to is the Paul Revere Plan, under which plaintiff is not entitled to benefits. In response, plaintiff asserts that the so-called Paul Revere Plan documents are not true plan documents, but simply insurance documents relating to an insurance contract between Paul Revere and Xomed.
Plaintiff has not identified the alleged plan that forms the basis for count one, nor has he pointed to any plan documents to support his allegation that he is entitled to benefits. Nevertheless, there having been no discovery in this case, I do not believe that summary judgment on this claim is warranted at this time. In particular, I note that at this point no formal written plan appears in the record; the only documents submitted thus far are an insurance policy and summaries prepared by Paul Revere. If no formal written plan does exist, the terms of the plan may be interpreted by reference to such factors as the parties' intent, understanding, and past practice. Alexander v. Primerica Holdings, Inc., 967 F.2d 90, 96 (3d Cir. 1992). It is possible that such evidence will support plaintiff's allegation that he is entitled to benefits. If after discovery plaintiff is unable to present any evidence in support of this claim, however, summary judgment will then be appropriate.
IV. Claim Based on Alleged "Separate and Distinct" Plan
In count four, plaintiff alleges that defendants' written and oral statements "constitute in [sic] a separate and distinct plan ..." Complaint P 50. This allegation is very similar to a claim that this court rejected in Thomson v. Saatchi & Saatchi Holdings (USA), Inc., 958 F. Supp. 808 (W.D.N.Y. 1997). In Thomson, the plaintiff alleged that his former employer had promised him that his pension benefits, combined with his Social Security benefits, would equal roughly half of his average salary over the last five years of his employment. When he left the defendant's employ, however, his pension benefits were considerably lower than that. The plaintiff alleged that the employer's promises in this regard, combined with its abortive attempts to make good on those promises, created what the plaintiff called a "Supplemental Plan" that would provide him with benefits in addition to those he received under the pension plan.
In rejecting this claim, I noted that the test for determining whether a plan exists was set forth by the Eleventh Circuit in Donovan v. Dillingham, 688 F.2d 1367 (11th Cir. 1982), which was cited with approval by the Second Circuit in Grimo v. Blue Cross/Blue Shield of Vermont, 34 F.3d 148, 151 (2d Cir. 1994):
[A] welfare plan requires (1) a "plan, fund, or program" (2) established or maintained (3) by an employer or an employee organization, or both, (4) for the purpose of providing medical, surgical, hospital care, sickness, accident, disability, death, unemployment or vacation benefits, apprenticeship or other training programs, day care centers, scholarship funds, prepaid legal services or severance benefits (5) to participants or their beneficiaries.