UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK
April 30, 2009
DAVID R. BURNS, PLAINTIFF,
THE MARLEY COMPANY PENSION PLAN FOR HOURLY EMPLOYEES AT STOCKTON, CALIFORNIA, THE ADMINISTRATIVE COMMITTEE OF MARLEY COMPANY PENSION PLAN FOR HOURLY EMPLOYEES AT STOCKTON, CALIFORNIA, SPX CORPORATION, SPX RETIREMENT AND WELFARE PLAN ADMINISTRATIVE COMMITTEE, SPX PENSION SERVICE, AND JP MORGAN CHASE BANK, N.A., BENEFITS PAYMENT SERVICES, DEFENDANTS.
The opinion of the court was delivered by: Charles P. Sifton (electronically signed) United States District Judge
MEMORANDUM OPINION AND ORDER
SIFTON, Senior Judge.
Plaintiff David R. Burns commenced this action on September 16, 2008, against the Marley Company Pension Plan for Hourly Employees at Stockton, California ("the Plan"), the Administrative Committee of the Marley Plan, the SPX Corporation ("SPX"), the SPX Retirement and Welfare Plan Administrative Committee ("SPX Administrative Committee"), the SPX Pension Service, and JP Morgan Chase Bank, N.A., Benefits Payment Services ("JP Morgan"). Plaintiff claims that defendants, in denying plaintiff's claim for disability retirement benefits, breached the duty of absolute loyalty they owed to plaintiff as his fiduciaries under § 404 of the Employee Retirement Income Security Program ("ERISA"), 29 U.S.C. § 1104. Plaintiff seeks money damages, injunctive relief, and costs. Presently before this Court is defendants' motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). For the reasons set forth below, defendants' motion is granted. Plaintiff is granted leave to amend his complaint within 30 days of the date of this memorandum opinion.
The following facts are drawn from the Complaint and the exhibits attached thereto, and are assumed to be true for the purposes of this motion.
Plaintiff is a resident of Nevada, and a participant in the defendant Plan. Compl. ¶ 3. On September 27, 1994, he was hired by the Marley Tooling Tower Company to work at its Stockton factory, where he continued to work until it closed in 2002. Id. ¶¶ 3, 6.
The defendant Plan was created by the Marley Company, which was the parent corporation of the Marley Cooling Tower Company (collectively, "Marley"), plaintiff's employer from his date of hire in 1994 until 2001, when Marley was acquired by defendant SPX. Id. ¶ 4. The Plan's 1993 Summary Plan Description names the Marley Company as the Plan administrator. Id. The Marley Company chooses the Plan Administrative Committee, which is endowed with discretionary authority to construe the terms of the Plan and to determine eligibility for benefits, pursuant to section 9.2 of the Plan. Id. ¶¶ 4-5; see also id. Ex. A (copy of 1993 Summary Plan Description) at 8.
Defendant JP Morgan is named as the Plan's trustee in the Summary Plan Description effective July 26, 2002. Id. ¶ 4. JP Morgan, as trustee, is the successor to Deutsche Bank, which on or about June 4, 1999, acquired the Bankers Trust Company, which had been named trustee in the Plan's 1993 Summary Plan Description. Id.
Defendant SPX is the successor to Marley. Id. ¶ 5. SPX is a publicly owned company whose shares are traded on the New York Stock Exchange, with its principal office in Charlotte, North Carolina. Id. According to the Plan's Summary Plan Description, effective July 26, 2002, defendant SPX Administrative Committee is the successor to defendant Marley Company Administrative Committee. Id.
Plaintiff worked continuously at the Stockton factory from September 27, 1994, to July 26, 2002. Id. ¶¶ 6-7. In late 2001 or early 2002, plaintiff was provided with a copy of a document on defendant SPX's letterhead captioned "UDI Master Pension Plan for Hourly Employees: Marley Cooling Tower Stockton Plant," and sub-captioned "Statement of Estimated Benefits as of December 31, 2001" (the "Pension Statement"). Id. ¶ 8. According to the Pension Statement, plaintiff was estimated to have 8.0833 years of "credited service" and 7 years of "vesting service"*fn1 as of December 31, 2001. Id.; see also id. Ex. B (copy of Pension Statement). The Pension Statement further explains that "[t]he data shown on this statement reflects information currently on file and hours earned through December 31, 2001. When you retire or terminate employment, your benefit is calculated based on your actual Years of Credited Service and may be higher or lower than the amount shown." Id. Ex. B (emphasis in original).
At a May 17, 2002 meeting convened by his employer, and in a letter dated July 26, 2002, plaintiff was informed that the Stockton factory was being closed. Compl. ¶ 10. In the following months, company representatives assured employees that they would be permitted to transfer to another SPX-affiliated facility. Id. ¶ 11. These assurances were made, in plaintiff's presence: (1) during a meeting on the Stockton plant closure; (2) during contract negotiations with union leaders; and (3) at a dinner held at the conclusion of negotiations after the union voted to accept the terms of the contract for plant closure. Id.
During the meetings concerning the plant closure, company representatives told union members that terminating employees would be credited for Pension Plan purposes with actual service through the date of plant closure, plus and additional 18 months of service. Id. ¶ 12. In addition, plaintiff, in particular, was told that he would be credited with 7 months for service through July 27, 2002, as well as the aforementioned 18 months of service. Id. ¶ 13. Plaintiff was therefore led to believe that, in addition to the 8.0833 years of credit referred to in the Pension Statement, he had an additional 25 months of credit, and therefore a total in excess of 10 years of credit. Id. ¶ 14.
On June 12, 2002, while working at SPX's water treatment plant, plaintiff slipped and fell into a contaminated sludge pit. Id. ¶ 15. As a consequence of this accident, plaintiff injured his right wrist, arm and hand, and his knee (including his anterior cruciate ligament). Id. ¶ 16. Plaintiff received medical treatment for his injuries, but alleges that the injuries ultimately rendered him "permanently and totally disabled." Id.
According to the Plan's 1993 Summary Plan Description, participants in the Plan are eligible for a disability pension if they "become permanently and totally disabled,"*fn2 and have "at least 10 years of service at the time [they] become disabled." Compl. ¶ 17; see also id. Ex. A (copy of 1993 Summary Plan Description) at 5. "Years of Credited Service" is defined as follows: "You earn a year of credited service for each calendar year during which you complete 1,500 hours of service. Also, you receive a partial year of credited service if you complete at least 1,000 but less than 1,500 hours of service in a calendar year." Id. Ex. A at 3. Plaintiff alleges that because he believed he had sufficient credits for a disability retirement pension, he declined to pursue the opportunity to transfer to another SPX-affiliated facility. Id. ¶ 18. Instead, plaintiff agreed to sever his employment and enter into a Separation Agreement and General Release. Id. According to SPX records, plaintiff's employment was terminated on July 26, 2002. Id. ¶ 19.
By letter dated August 10, 2005, plaintiff asked the Plan to grant him a disability retirement benefit retroactive to January 13, 2004. Id. ¶ 20. On September 19, 2005, SPX sent plaintiff a letter ("the Initial Denial Letter") informing him that his claim had been rejected. Id. ¶ 21. The Initial Denial Letter stated that plaintiff had 8.0833 years of credited service as of July 26, 2002. Id.; see also id. Ex. C (copy of Initial Denial Letter). The letter made no reference to the additional months of credit plaintiff had been promised. Id.
On November 1, 2005, plaintiff appealed the denial. Id. ¶ 22. By letter dated December 22, 2005 (the "Second Denial Letter"), the SPX Appeals Subcommittee ("the Subcommittee") informed plaintiff that the denial of his claim had been affirmed. Id. ¶ 23. Unlike the Initial Denial Letter, the Second Denial Letter confirmed that plaintiff was credited with 7 months of service during 2002 through the date of the plant closure on July 26, 2002, and an additional 18 months of post-termination service, as previously promised. Id. ¶ 24; see also id. Ex. D (copy of Second Denial Letter). However, in the Second Denial Letter, the Subcommittee informed plaintiff that he did not have 8.0833 years of credited service through the end of 2001, as was reflected in both the Pension Statement and the Initial Denial Letter; rather, plaintiff had 7 years of credited service as of December 31, 2001. Id. With the additional credit for 25 months, the Second Denial Letter found that plaintiff had earned nine years of credited service -- one year short of the ten years of credited service required for permanent disability benefits. Id.
This action followed on September 16, 2008.
I. Standard for Motion for Judgment on the Pleadings
In deciding a Rule 12(c) motion for judgment on the pleadings, courts apply the same standard as that applicable to a motion to dismiss under Rule 12(b)(6), accepting the allegations contained in the complaint as true and drawing all reasonable inferences in favor of the non-moving party. Burnette v. Carothers, 192 F.3d 52, 56 (2d Cir. 1999). Accordingly, courts must look at whether the complaint has pled "enough facts to state a claim to relief that is plausible on its face." Ruotolo v. City of New York, 514 F.3d 184, 188 (2d Cir. 2008) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The complaint must satisfy Twombly's "flexible 'plausibility standard,' which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007) (emphasis in original). If plaintiff "ha[s] not nudged [his] claims across the line from conceivable to plausible, [his] complaint must be dismissed." Twombly, 550 U.S. at 570.
II. ERISA Claims
Plaintiff seeks to enforce his alleged right to disability benefit payments under the Plan, or in the alternative, an equitable remedy pursuant to ERISA. Section 502(a)(1)(B) of ERISA authorizes a suit by a plan participant to enforce rights under the terms of an employee benefits plan. 29 U.S.C. § 1132(a)(1)(B); Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 108 (1989). Section 502(a)(3) of ERISA authorizes a suit in equity for breach of fiduciary duty. 29 U.S.C. § 1132(a)(3); Krauss v. Oxford Health Plans, Inc., 517 F.3d 614, 630 (2d Cir. 2008).
A. Section 502(a)(1)(B) Claim for Benefit Payments
1. Standard Governing 502(a)(1)(B) Claims
A denial of benefits challenged under § 502(a)(1)(B) of ERISA is "to be reviewed under a de novo standard, unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone, 489 U.S. at 115. Where the written plan documents confer such authority upon a plan administrator, a court confronted with a claim challenging the denial of benefits under ERISA should "not disturb the administrator's ultimate conclusion unless it is 'arbitrary and capricious.'" Pagan v. NYNEX Pension Plan, 52 F.3d 438, 441 (2d Cir. 1995); Kinstler v. First Reliance Standard Life Ins. Co., 181 F.3d 243, 249 (2d Cir. 1999). In this case, the Plan vests the SPX Administrative Committee with responsibility for the construction, interpretation, and administration of the Plan, and discretionary authority to determine eligibility for benefits and to construe the terms of the plan. The undersigned, as well as other courts in this Circuit, have held that this language is sufficient to trigger application of the arbitrary and capricious standard. Burgie v. Euro Brokers, Inc., 482 F. Supp. 2d 302, 312 (E.D.N.Y. 2007); Greenberg v. Unum Life Ins. Co. of America, No. CV-03-1396, 2006 WL 842395, at *6 (E.D.N.Y. 2006); see also Snyder v. First Unum Life Ins. Co., 144 Fed. Appx. 134, 136 (2d Cir. 2005).
The arbitrary and capricious standard of review is narrow, and a court should not disturb an administrator's decision unless "it was without reason, unsupported by substantial evidence or erroneous as a matter of law." Pagan, 52 F.3d at 442. Substantial evidence is "such evidence that a reasonable mind might accept as adequate to support the conclusion reached." Celardo v. GYN Auto. Dealers Health & Welfare Trust., 318 F.3d 142, 146 (2d Cir. 2003). Thus, the administrator's decision will be upheld so long as it "falls somewhere on a continuum of reasonableness -- even if on the low end." Davis v. Commercial Bank of New York, 275 F. Supp. 2d 418, 425 (S.D.N.Y. 2003). Review under this standard is based on the record before the administrator at the time of decision. Risk v. Long Term Disability Plan of the Dun & Bradstreet Corp., 862 F.Supp. 783, 791 (E.D.N.Y. 1994).
2. Plaintiff's Claim to Disability Benefits*fn3
The description of the plan provided by plaintiff provides that participants in the Plan are eligible for a disability pension if they "become permanently and totally disabled," and have "at least 10 years of service at the time [they] become disabled." Although plaintiff alleges that he was rendered permanently and totally disabled by the accident in June of 2002, he does not allege that he is entitled to credit for ten years of service -- and indeed, reiterates that he does not so allege in his brief.*fn4 Pl.'s Mem. in Opp'n at 5. Construing all facts and reasonable inferences in favor of plaintiff, plaintiff has failed to allege that he is entitled to benefits "under the terms of the plan," as Section 502(a)(1)(B) of ERISA requires. See, e.g., Stewart v. Nynex Corp., 78 F. Supp. 2d 172, 188 (S.D.N.Y. 1999) (noting that "[a]ny entitlement to relief under § 502(a)(1)(B) must be found only 'under the terms of the plan'"). Accordingly, plaintiff's § 502(a)(1)(B) claim is dismissed.
B. Section 502(a)(3) Claim for Breach of Fiduciary Duty
Plaintiff's second claim alleges that defendants breached their fiduciary duty of absolute loyalty owed to plaintiff pursuant to ERISA Section 404(a)(1), 29 U.S.C. § 1104(a)(1).*fn5
The claim is based upon defendants' estimate of plaintiff's years of credited service as relayed to plaintiff in the Pension Statement, which allegedly materially misrepresents plaintiff's actual years of credited service.*fn6 Plaintiff seeks equitable relief under ERISA Section 502(a)(3), 29 U.S.C. § 1132(a)(3),*fn7 for the alleged breach of fiduciary duty.
"To establish a breach of fiduciary duty based on alleged misrepresentations about coverage under an ERISA plan, Plaintiff must show that (1) Defendants were acting in a fiduciary capacity and that (2) they made a material misrepresentation or omission (3) on which Plaintiff relied to her detriment." Bell v. Pfizer Inc., 499 F.Supp.2d 404, 410 (S.D.N.Y. 2007) (internal citations omitted). Detrimental reliance on a material misrepresentation must be reasonable and in good faith in order to result in liability. See, e.g., Estate of Dermady v. Eastman Kodak Co., 136 F.Supp.2d 181, 190 (W.D.N.Y. 2001). Assuming without deciding that defendants were acting in a fiduciary capacity when they sent the Benefits Statement to plaintiff,*fn8 I conclude that plaintiff's breach of fiduciary duty claim fails because plaintiffs' allegations do not support a finding that defendants engaged in a material misstatement or omission on which plaintiff relied to his detriment.
1. Material Misrepresentation
An employer's conduct need not rise to the level of knowing misrepresentation in order to constitute a breach of its fiduciary duties under ERISA. Rather, "fiduciary duties can also be breached by . . . negligent material misrepresentations." Bell, 499 F.Supp.2d at 410-11 (S.D.N.Y. 2007) (citing Estate of Becker v. Eastman Kodak Co., 120 F.3d 5, 10 (2d Cir. 1997)). A misrepresentation is "material" if there is a substantial likelihood it "would mislead a reasonable employee in making an adequately informed decision about if and when to retire." Id. at 411 (citing Caputo v. Pfizer, Inc., 267 F.3d 181, 192 (2d Cir. 2001)).
Plaintiff argues that defendants' erroneous estimate of his years of credited service in the Pension Statement constituted a material misrepresentation. While defendants concede that the estimate of 8.0833 years of credited service recorded in the Statement was indeed erroneous, they argue that it did not constitute a material misrepresentation because other language in the Statement made clear that the estimate was only an estimate subject to review and not to be relied upon. The one-page Pension Statement refers to the calculations contained therein as "estimates" six times. Further, while the Statement does provide that the "data shown on this statement reflects information currently on file," it also alerts the reader in bold lettering that "[w]hen you retire or terminate employment, your benefit is calculated based on your actual Years of Credited Service and may be higher or lower than the amount shown."
In support of their argument, defendants cite Perreca v. Gluck, in which the Second Circuit held that where a routine statement of projected benefits contains prominent disclaimers that the calculations therein are estimates subject to review, the statement does not constitute a "promise" in the context of a promissory estoppel ERISA claim. 295 F.3d 215, 225 (2d Cir. 2002) ("In light of the prominent disclaimer printed on the statement that specifically cautioned Perreca that '[a]ctual benefits are . . . subject to verification before any payments are authorized,' . . . the statement of projected benefits cannot, in the circumstances of this case, reasonably be construed as a promise concerning the precise amount of benefits accrued"). At least one district court in this Circuit has applied Perreca in the context of case presenting an equitable estoppel claim and a breach of fiduciary claim, both of which require an element of material misrepresentation. In Hart v. Equitable Life Assurance Society, the district court held that in light of Perreca, "benefits statements that . . . contain explicit cautionary language" do not constitute a material misrepresentation supporting either an equitable estoppel or a breach of fiduciary duty claim. No. 02 Civ.2364, 2002 WL 31682383, at *5-6 (S.D.N.Y. Nov. 26, 2002).
Plaintiff argues that Perreca is inapposite here because plaintiff's claim is not based on a promissory estoppel theory. In support of this argument, plaintiff cites DePace v. Matsushita Electric Corporation of America, in which a court in this district distinguished Perreca in the context of an equitable estoppel claim. No. 02-CV-4312, 2004 WL 1588312 (E.D.N.Y. July 16, 2004). Noting that a promissory estoppel claim requires "reasonable reliance based on a promise, or a misstatement of future intent," whereas an equitable estoppel claim requires "reasonable reliance on a misrepresentation," the court in DePace distinguished Perreca and found that the estimated benefits statement at issue in DePace qualified as a material misrepresentation. Id. at *7-10. In so holding, however, it expressly distinguished the circumstances of DePace from those of Perreca. Unlike in Perreca, where the benefits statement was "an annual statement, and there was no evidence that Mr. Perreca's employer made the estimate in a conscious effort to induce immediate reliance," the DePace statement was made in connection with a voluntary resignation program and was "explicitly intended to induce reliance." Id. at 9. The court further noted:
In Perreca, there is no indication that Mr. Perreca was limited in his ability to seek a more precise estimate from his company before retiring, or making inquiries before relying upon it. [In DePace], the plaintiffs were faced with a narrow time window in which to make a decision. Moreover, because the [DePace] plan itself was vague, the only accessible information upon which they could rely was provided in the estimates.
Id. at 10. The DePace court concluded that under the circumstances presented by that case, "the use of boilerplate disclaimers should not preclude the application of equitable estoppel to the misrepresentations of fact made by Matsushita to its employees." Id.
The circumstances of this case are more akin to those of Perreca than to those of DePace. Here, the Pension Statement appears to have been a routine communication, and plaintiff has not alleged that it was generated to induce reliance or for any other specific purpose. Nor has plaintiff alleged that any circumstances existed which precluded him from requesting or rendered it difficult for him to obtain a more precise estimate of his years of credited service before retiring. Finally, unlike in DePace, the Plan documents describing the method for calculating years of credited service here are not ambiguous; rather, they clearly state how and when an employee will be credited for a year of service. Under these circumstances, the estimate recorded in the Pension Statement does not constitute a material misrepresentation.
2. Reasonable Detrimental Reliance
Even if the Pension Statement estimate did constitute a material misrepresentation, plaintiff's allegations do not support a conclusion that he reasonably relied to his detriment on the estimate. According to plaintiff, the June 12, 2002 accident "ultimately rendered [him] permanently and totally disabled." Compl. ¶ 16. Plantiff's employment was terminated on July 26, 2002. For undisclosed reasons, plaintiff did not file his application for disability benefits until August 10, 2005. Now, plaintiff claims that he relied to his detriment on the estimate in the Pension Statement because he believed, in 2002, that he had sufficient credits for a disability retirement pension, and therefore "declin[ed] to pursue the opportunity to transfer to another SPX-affiliated facility" following the closure of the Stockton plant. Compl. ¶ 18.
Other than arguing in his brief that "there is nothing in the Complaint indicating that [plaintiff] would have been unable to extend his employment for the short period needed to earn one additional pension credit," Pl.'s Mem. in Opp'n at 14, plaintiff does not explain how, if the June 12, 2002 accident ultimately rendered him totally and permanently disabled, he could have continued to work and to accrue the additional year of credited service required under the Plan.*fn9 Even viewed in the light most favorable to plaintiff, the allegations in the complaint do not support the inconsistent finding that plaintiff became permanently and totally disabled as a result of an accident in June 2002, and yet deliberately chose to cease work in reliance on the Pension Statement.*fn10 Accordingly, even if the Pension Statement estimate did constitute a material misrepresentation, judgment on the pleadings would still be granted in defendants' favor with regard to plaintiff's claim for breach of fiduciary duty.
C. Equitable Estoppel Claim*fn11
"To succeed on a claim of equitable estoppel, a plaintiff must show: (1) a material misrepresentation, (2) reasonable reliance thereon, and (3) damage resulting therefrom." DePace, 2004 WL 1588312, at *7 (E.D.N.Y. July 16, 2004) (citing Lee v. Burkhart, 991 F.2d 1004, 1009 (2d Cir. 1993)). In addition, principles of estoppel only apply in ERISA cases "under extraordinary circumstances." Id. (citing Devlin v. Transp. Comms. Int'l Union, 173 F.3d 94, 102 (2d Cir. 1999)). In light of my conclusions above that the Pension Statement did not constitute a material misrepresentation, and that plaintiff's allegations do not support an inference that he reasonably relied to his detriment on the Pension Statement, plaintiff's equitable estoppel claim also fails. Accordingly, defendants' motion for judgment on the pleadings is granted with regard to this claim.
For the reasons set forth above, defendants' motion for judgment on the pleadings is granted, and plaintiff's claims are dismissed. Plaintiff requests and is hereby granted leave to replead his claims in an amended complaint to be filed within 30 days of the date of this memorandum opinion. In the absence of such a timely filed amended pleading, all of the claims for relief dismissed herein shall be deemed dismissed with prejudice. The Clerk is hereby directed to transmit a copy of the within to the parties and the Magistrate Judge.