Equitable estoppel as a remedy under ERISA.
I. THE HISTORY, PASSAGE, AND INTENT OF ERISA
Before addressing why and how equitable estoppel has a rightful place in the law of ERISA, it is helpful to have some understanding of the facts and circumstances that led to ERISA's enactment and the way the Supreme Court has interpreted ERISA since its passage. The Supreme Court has stated:
On September 2, 1974, following almost a decade of studying the Nation's private pension plans, Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA).... (1) As a predicate for this comprehensive and reticulated statute, Congress made detailed findings which recited, in part, "that the continued well-being and security of millions of employees and their dependents are directly affected by these [retirement] plans; [and] that owing to the termination of plans before requisite funds have been accumulated, employees and their beneficiaries have been deprived of anticipated benefits...." (2)
In Nachman, the Supreme Court discussed the detailed history of pension plan failures in America, which prompted the United States Congress to address the situation, resulting in the enactment of ERISA in 1974 (when the law was finally enacted it applied to much more than retirement/pension plans). (3) The Court went on to state:
One of Congress' central purposes in enacting this complex legislation was to prevent the "great personal tragedy" suffered by employees whose vested benefits are not paid when pension plans are terminated. Congress found "that owing to the inadequacy of current minimum standards, the soundness and stability of plans with respect to adequate funds to pay promised benefits may be endangered; that owing to the termination of plans before requisite funds have been accumulated, employees and their beneficiaries have been deprived of anticipated benefits." Congress wanted to correct this condition by making sure that if a worker has been promised a defined pension benefit upon retirement--and if he has fulfilled whatever conditions are required to obtain a vested benefit--he actually will receive it. (4)
There had been several well-publicized failures in America's pension system in the decade or so before ERISA was passed. In Nachman, Senator Williams, a sponsor of the ERISA legislation is quoted as saying:
A classic case, of course, is the shutdown of Studebaker operations in South Bend, [Indiana], in 1963, with the result that 4,500 workers lost 85 percent of their vested benefits because the plan had insufficient assets to pay its liabilities. While this was a spectacularly tragic instance, it was by no means unique.... [F]or example, P. Ballantine and Sons, a substantial contributor to a multiemployer plan, sold its operations and withdrew from the plan. Because the plan did not have sufficient assets to cover vested liabilities, several hundred employees, with as many as 30 years service, will lose a substantial portion of their vested benefits. These, of course, are by no means isolated cases. According to a ... study by the Departments of Labor and Treasury, over 19,000 workers lost vested benefits [in the early 1970s] because of the termination of insufficiently funded plans. (5)
To address the ever increasing problem, Congress debated many different issues, and options before enacting ERISA. The scope of remedies that would be available under ERISA was debated extensively and "an early version of the statute contained a provision for 'legal or equitable' relief that was described in both the Senate and House Committee Reports as authorizing 'the full range of legal and equitable remedies available in both state and federal courts.'" (6) Congress "repeatedly emphasized [a] purpose to protect contractually defined benefits[.]" (7) But, "there is a stark absence--in the statute itself and in its [sic] legislative history--of any reference to an intention to authorize the recovery of extracontractual damages." (8) Additionally, "'neither the statute nor the legislative history reveals a congressional intent to create a private right of action....'" (9)
Clearly, Congress sought to protect American workers' rights to retirement benefits, which addressed the original problem that led to ERISA. However, at the same time, Congress attempted to optimally balance that goal with the interests of the employer who would sponsor ERISA plans. Congress' intent to not subject employers to excessive liability regarding employee benefit issues rested in the fear that the prospect of such liability would "discourage" employers from offering benefits. (10)
Although there is scant evidence indicating a Congressional intent to provide a private right of action for ERISA plan participants to recover extra-contractual damages, ERISA provides "a panoply of remedial devices" for participants and beneficiaries of benefit plans. (11) Available remedies, based in trust law, include the right to recover plan "benefits" and the right to enjoin or remove a duty-breaching fiduciary. The United States Supreme Court has explained:
[A participant] could have filed an action pursuant to [section] 502(a)(1)(B) to recover accrued benefits, to obtain a declaratory judgment that [the participant] is entitled to benefits under the provisions of the plan contract, and to enjoin the plan administrator from improperly refusing to pay benefits in the future. If the plan administrator's refusal to pay contractually authorized benefits had been willful and part of a larger systematic breach of fiduciary obligations, respondent in this hypothetical could have asked for removal of the fiduciary pursuant to [section][section] 502(a)(2) and 409. (12)
Since ERISA's enactment, the Supreme Court has consistently recognized two fundamental principles that resonate in its ERISA jurisprudence. The first is that ERISA is based on trust law. Recently, the Court stressed this oft-repeated point by stating that:
[A] court should be 'guided by principles of trust law'; in doing so, it should analogize a plan administrator to the trustee of a common-law trust; and it should consider a benefit determination to be a fiduciary act (i.e., an act in which the administrator owes a special duty of loyalty to the plan beneficiaries). (13)
The second guiding principle is that given the enactment of the statute and the recognition of its purposes, the federal court system is to develop a "federal common law of rights and obligations under ERISA-regulated plans...." (14) Summarizing these fundamental concepts, the Court stated:
ERISA abounds with the language and terminology of trust law. ERISA's legislative history confirms that the Act's fiduciary responsibility provisions, 29 U.S.C. [section][section] 1101-1114, "codif[y] and mak[e] applicable to [ERISA] fiduciaries certain principles developed in the evolution of the law of trusts." Given this language and history, we have held that courts are to develop a "federal common law of rights and obligations under ERISA-regulated plans." (15)
Although this article presents a brief synopsis of the history leading to the enactment of ERISA, it provides a framework for understanding how the Supreme Court has and will continue to recognize doctrines as grounds for relief under ERISA. Analogizing ERISA to trust law and invoking equitable principles is fundamental to the development of ERISA common law, particularly to the recognition of remedies available under ERISA.
II. SUPREME COURT JURISPRUDENCE: THE SCOPE OF APPROPRIATE EQUITABLE RELIEF UNDER ERISA AND THE QUEST FOR NATIONAL UNIFORMITY
A. DEFINING "APPROPRIATE EQUITABLE RELIEF" FOR ERISA
ERISA's remedial provision is codified at 29 U.S.C. section 1132. (16) Specifically, section 1132(a)(3) (17) of the remedial provision provides that:
A civil action may be brought ... (3) by a participant, beneficiary, ... (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.... (18)
The Supreme Court first meaningfully discussed the types of relief encompassed by 29 U.S.C. section 1132(a)(3) in Mertens v. Hewett Associates. (19) In Mertens, a group of former employees of Kaiser Steele Corporation sued the fiduciaries of the Kaiser Steele Retirement Plan seeking monetary relief for alleged breaches of fiduciary duty. (20) The plan participants contended that they were entitled to monetary relief under 29 U.S.C. section 1132(a)(3). The Court took the occasion to address the meaning of the words "appropriate equitable relief" as used in ERISA. The Court began by noting that ERISA "does not, after all, authorize 'appropriate equitable relief' at large, but only 'appropriate equitable relief' for the purpose of 'redress[ing any] violations or ... enforc[ing] any provisions' of ERISA or an ERISA plan." (21) The Court held that equitable relief sought under 29 U.S.C. section 1132(a)(3) must have "typically" been available in equity. The Court explained:
Petitioners maintain that the object of their suit is "appropriate equitable relief" under [section] 502(a)(3). They do not, however, seek a remedy traditionally viewed as "equitable," such as injunction or restitution.... Although they often dance around the word, what petitioners in fact seek is nothing other than compensatory damages--monetary relief for all losses their plan sustained as a result of the alleged breach of fiduciary duties. Money damages are, of course, the classic form of legal relief. And though we have never interpreted the precise phrase "other appropriate equitable relief," we have construed the similar language of Title VII of the Civil Rights Act of 1964 (before its 1991 amendments)--"any other equitable relief as the court deems appropriate,"--to preclude "awards for compensatory or punitive damages." Petitioners assert, however, that this reading of "equitable relief" fails to acknowledge ERISA's roots in the common law of trusts.... "[A]lthough a beneficiary's action to recover losses resulting from a breach of duty superficially resembles an action at law for damages," the Solicitor General suggests, "such relief traditionally has been obtained in courts of equity" and therefore "is, by definition, 'equitable relief.'" It is true that, at common law, the courts of equity had exclusive jurisdiction over virtually all actions by beneficiaries for breach of trust. It is also true that money damages were available in those courts against the trustee, and against third persons who knowingly participated in the trustee's breach.... At common law, however, there were many situations--not limited to those involving enforcement of a trust--in which an equity court could "establish purely legal rights and grant legal remedies which would otherwise be beyond the scope of its authority." The term "equitable relief" can assuredly mean, as petitioners and the Solicitor General would have it, whatever relief a court of equity is empowered to provide in the particular case at issue. But as indicated by the foregoing quotation--which speaks of "legal remedies" granted by an equity court--"equitable relief" can also refer to those categories of relief that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages). As memories of the divided bench, and familiarity with its technical refinements, recede further into the past, the former meaning becomes, perhaps, increasingly unlikely; but it remains a question of interpretation in each case which meaning is intended. In the context of the present statute, we think there can be no doubt. Since all relief available for breach of trust could be obtained from a court of equity, limiting the sort of relief obtainable under [section] 502(a)(3) to "equitable relief" in the sense of "whatever relief a common-law court of equity could provide in such a case" would limit the relief not at all. We will not read the statute to render the modifier superfluous. (22)
At the end of the majority opinion in Mertens, the Court stresses, as it would in nearly every following decision addressing remedies under ERISA, the competing interests that Congress sought to balance in enacting ERISA. Emphasizing employees' rights verses not discouraging employers from providing employee benefits in the first place, the Court stated:
In the last analysis, petitioners and the United States ask us to give a strained interpretation to [section] 502(a)(3) in order to achieve the "purpose of ERISA to protect plan participants and beneficiaries." They note, as we have, that before ERISA nonfiduciaries were generally liable under state trust law for damages resulting from knowing participation in a trustees's breach of duty, and they assert that such actions are now pre-empted by ERISA's broad pre-emption clause, [section] 514(a), 29 U.S.C. [section] 1144(a).... Thus, they contend, our construction of [section] 502(a)(3) leaves beneficiaries like petitioners with less protection than existed before ERISA, contradicting ERISA's basic goal of "promot[ing] the interests of employees and their beneficiaries in employee benefit plans." Even assuming (without deciding) that petitioners are correct about the pre-emption of previously available state-court actions, vague notions of a statute's "basic purpose" are nonetheless inadequate to overcome the words of its text regarding the specific issue under consideration. This is especially true with legislation such as ERISA, an enormously complex and detailed statute that resolved innumerable disputes between powerful competing interests--not all in favor of potential plaintiffs. The text that we have described is certainly not nonsensical; it allocates liability for plan-related misdeeds in reasonable proportion to respective actors' power to control and prevent the misdeeds. Under traditional trust law, although a beneficiary could obtain damages from third persons for knowing participation in a trustee's breach of fiduciary duties, only the trustee had fiduciary duties. ERISA, however, defines "fiduciary" not in terms of formal trusteeship, but in functional terms of control and authority over the plan, ... thus expanding the universe of persons subject to fiduciary duties--and to damages--under [section] 409(a). Professional service providers such as actuaries become liable for damages when they cross the line from advisor to fiduciary; must disgorge assets and profits obtained through participation as parties-in-interest in transactions prohibited by [section] 406, and pay related civil penalties, see [section] 502(i), 29 U.S.C. [section] 1132(i), or excise taxes, see 26 U.S.C. [section] 4975; and (assuming nonfiduciaries can be sued under [section] 502(a)(3)) may be enjoined from participating in a fiduciary's breaches, compelled to make restitution, and subjected to other equitable decrees. All that ERISA has eliminated, on these assumptions, is the common law's joint and several liability, for all direct and consequential damages suffered by the plan, on the part of persons who had no real power to control what the plan did. Exposure to that sort of liability would impose high insurance costs upon persons who regularly deal with and offer advice to ERISA plans, and hence upon ERISA plans themselves. There is, in other words, a "tension between the primary [ERISA] goal of benefiting employees and the subsidiary goal of containing pension costs." We will not attempt to adjust the balance between those competing goals that the text adopted by Congress has struck. (23)
The Court would later revisit the scope of relief allowed under ERISA in Great-West Life & Annuity Insurance Co. v. Knudson. (24) Knudson was in an automobile accident that rendered her a quadriplegic. (25) She was a participant in an ERISA governed health benefit plan that had paid $411,157.11 for her medical expenses. (26) Knudson settled a personal injury case for $650,000.00. (27) The health insurer, Great-West, sued Knudson to recover the amount of money it had paid for Knudson's medical bills. (28) The suit was brought under ERISA, 29 U.S.C. section 1132(a)(3), seeking "appropriate equitable relief." (29) The Supreme Court defeated the insurer's claim reiterating that 29 U.S.C. section 1132(a)(3) only allows relief that was typically available at equity, and that money damages are not such relief. (30)
The Court began its legal discussion in Great-West by discussing Mertens and reaffirming its holding that "the term 'equitable relief' in [section] 502(a)(3) must refer to 'those categories of relief that were typically available in equity....'" (31) Turning to Great-West's argument, the Court delved into the history of equitable restitution, distinguishing between that type of restitution, which was typically only available in equity courts, and legal restitution which could be awarded by courts at law. The Court stated:
[P]etitioners argue that their suit is authorized by [section] 502(a)(3)(B) because they seek restitution, which they characterize as a form of equitable relief. However, not all relief falling under the rubric of restitution is available in equity. In the days of the divided bench, restitution was available in certain cases at law, and in certain others in equity. Thus, "restitution is a legal remedy when ordered in a case at law and an equitable remedy ... when ordered in an equity case," and whether it is legal or equitable depends on "the basis for [the plaintiff's] claim" and the nature of the underlying remedies sought. (32)
The Court explained the circumstances in which restitution might be considered a legal remedy, as opposed to equitable, are when a plaintiff could not assert entitlement to a particular piece of property, and instead sought to impose personal liability by way of a money judgment. The Court contrasted that situation from when a plaintiff seeks to impose a constructive trust or equitable lien upon a specifically identified piece of property or fund. The Court took great care to distinguish between the facts that give rise to an equitable restitution claim as opposed to a legal one. Stressing the importance of those factual distinctions, the Court stated:
Admittedly, our cases have not previously drawn this fine distinction between restitution at law and restitution in equity, but neither have they involved an issue to which the distinction was relevant. In Mertens, we mentioned in dicta that "injunction, mandamus, and restitution" are categories of relief that were typically available in equity. Mertens, however, did not involve a claim for restitution at all; rather, we addressed the question whether a nonfiduciary who knowingly participates in the breach of a fiduciary duty imposed by ERISA is liable to the plan for compensatory damages. Thus, as courts and commentators have noted, "all the [Supreme] Court meant [in Mertens and other cases] was that restitution, in contrast to damages, is a remedy commonly ordered in equity cases and therefore an equitable remedy in a sense in which damages, though occasionally awarded in equity cases, are not." Mertens did not purport to change the well-settled principle that restitution is "not an exclusively equitable remedy," and whether it is legal or equitable in a particular case (and hence whether it is authorized by [section] 502(a)(3)) remains dependent on the nature of the relief sought. (33) It is easy to disparage the law-equity dichotomy as "an ancient classification," and an "obsolete distinctio[n.]" Like it or not, however, that classification and distinction has been specified by the statute; and there is no way to give the specification meaning --indeed, there is no way to render the unmistakable limitation of the statute a limitation at all except by adverting to the differences between law and equity to which the statute refers. The dissents greatly exaggerate, moreover, the difficulty of that task. Congress felt comfortable referring to equitable relief in this statute--as it has in many others--precisely because the basic contours of the term are well known. Rarely will there be need for any more "antiquarian inquiry," than consulting, as we have done, standard current works such as Dobbs, Palmer, Corbin, and the Restatements, which make the answer clear. (34)
Great-West made clear that factual distinctions between doctrines traditionally available in equity, as opposed to their at law counter-parts, may sometimes be necessary to discern whether a doctrine will be available as a ground for relief under ERISA.
The Court next addressed the relevant principles in Sereboff v. Mid-Atlantic Medical Services, Inc. (35) Sereboff suffered injuries in an auto accident and incurred about $75,000.00 in medical bills. (36) She recovered approximately $750,000.00 on a personal injury claim, and her health insurer sought reimbursement for monies it paid for Sereboff's medical care from the settlement funds. (37) Sereboff relied heavily upon Knudson to argue that the insurer was not entitled to reimbursement. (38) Distinguishing Knudson from the instant case, the Court stated:
[The] impediment to characterizing the relief in Knudson as equitable is not present here. As the Fourth Circuit explained below, in this case Mid Atlantic sought "specifically identifiable" funds that were "within the possession and control of the Sereboffs"--that portion of the tort settlement due Mid Atlantic under the terms of the ERISA plan, set aside and "preserved [in the Sereboffs'] investment accounts." Unlike GreatWest, Mid Atlantic did not simply seek "to impose personal liability ... for a contractual obligation to pay money." It alleged breach of contract and sought money, to be sure, but it sought its recovery through a constructive trust or equitable lien on a specifically identified fund, not from the Sereboffs' assets generally, as would be the case with a contract action at law. ERISA provides for equitable remedies to enforce plan terms, so the fact that the action involves a breach of contract can hardly be enough to prove relief is not equitable; that would make [section] 502(a)(3)(B)(ii) an empty promise. This Court in Knudson did not reject Great-West's suit out of hand because it alleged a breach of contract and sought money, but because Great-West did not seek to recover a particular fund from the defendant. Mid Atlantic does. While Mid Atlantic's case for characterizing its relief as equitable thus does not falter because of the nature of the recovery it seeks, Mid Atlantic must still establish that the basis for its claim is equitable. Our case law from the days of the divided bench confirms that Mid Atlantic's claim is equitable. In Barnes v. Alexander, for instance, attorneys Street and Alexander performed work for Barnes, another attorney, who promised them "one-third of the contingent fee" he expected in the case. In upholding their equitable claim to this portion of the fee, Justice Holmes recited "the familiar rul[e] of equity that a contract to convey a specific object even before it is acquired will make the contractor a trustee as soon as he gets a title to the thing." On the basis of this rule, he concluded that Barnes' undertaking "create[d] a lien" upon the portion of the monetary recovery due Barnes from the client, which Street and Alexander could "follow ... into the hands of ... Barnes," "as soon as [the fund] was identified[.]" (39)
Great-West and Sereboff demonstrate that distinctions between factual circumstances may be the determining factor as to whether relief under 29 U.S.C. section 1132(a)(3) will be allowed. At first blush, the facts in each case appear similar, but the insurer in Sereboff was able to recover under ERISA whereas the insurer in Great-West was not. However, the factual distinction between the two cases was that in Sereboff the insurer sought to recover from a specifically traceable fund whereas no such fund was identified as being in the possession of Knudson in Great-West. The Supreme Court made clear that in order to be recognized as being appropriate equitable relief for the purpose of 29 U.S.C. section 1132(a)(3), the asserted doctrine must have been typically available in equity. Additionally, the doctrine must be applied in appropriate factual circumstances, such as when the asserted doctrine was available in equity as opposed to at law.
B. THE PLAN DOCUMENTS RULE AND THE QUEST FOR NATIONAL UNIFORMITY
Although the Supreme Court has routinely stressed trust law as a guiding source for ERISA decisions, the Court has also been careful to point out that trust law is not the "be all and end all." The Court has also consistently stated a desired goal to create national uniformity for employer plan sponsors and administrators. This principle was squarely at issue in Kennedy v. Plan Administrator for DuPont Savings & Investment Plan. (40) Mr. Kennedy worked for DuPont and participated in an ERISA governed pension plan. (41) Based upon his 1971 marriage, Mr. Kennedy named his wife, Liv, as his ERISA plan beneficiary. (42) Mr. and Mrs. Kennedy divorced in 1994. (43) Mr. Kennedy retired and died with Mrs. Kennedy still named as his beneficiary. (44) The issue was whether a divorce order effectively waived Mrs. Kennedy's right to take death benefits under the ERISA pension plan. (45)
The Kennedy Court initially discussed trust law recognizing that a trust beneficiary can knowingly waive his rights. The Court explained:
Our doubts, and the exceptions that call the Fifth Circuit's reading into question, point us toward authority we have drawn on before, the law of trusts that "serves as ERISA's backdrop." We explained before that [section] 1056(d)(1) is much like a spendthrift trust provision barring assignment or alienation of a benefit, and the cognate trust law is highly suggestive here. Although the beneficiary of a spendthrift trust traditionally lacked the means to transfer his beneficial interest to anyone else, he did have the power to disclaim prior to accepting it, so long as the disclaimer made no attempt to direct the interest to a beneficiary in his stead. We do not mean that the whole law of spendthrift trusts and disclaimers turns up in [section] 1056(d)(1), but the general principle that a designated spendthrift can disclaim his trust interest magnifies the improbability that a statute written with an eye on the old law would effectively force a beneficiary to take an interest willy-nilly. Common sense and common law both say that "[t]he law certainly is not so absurd as to force a man to take an estate against his will." (46)
In Kennedy, however, trust law was not the end of the analysis, nor was it dispositive. Instead, the Court based its decision on the interest and goal of national uniformity for sponsors and administrators of ERISA benefit plans. Even though a trust beneficiary could traditionally waive his interest, the Court rejected the purported waiver in Kennedy because it was not in a form compliant with the plan documents' terms. The Court stated:
What goes for inconsistent state law goes for a federal common law of waiver that might obscure a plan administrator's duty to act "in accordance with the documents and instruments." And this case does as well as any other in pointing out the wisdom of protecting the plan documents role. Under the terms of the SIP Liv was William's designated beneficiary. The plan provided an easy way for William to change the designation, but for whatever reason he did not. The plan provided a way to disclaim an interest in the SIP account, but Liv did not purport to follow it. The plan administrator therefore did exactly what [section] 1104(a)(1)(D) required: "the documents control, and those name [the ex-wife]." (47)
As Kennedy demonstrates, the Roberts Court seems to be guided by trust law in interpreting ERISA, similar to predecessor courts. When application of trust law principles conflict with the specific language of a plan document, then the latter may trump the former.
In Conkright v. Frommert, (48) the Court again stressed the interest of protecting plan sponsors, referencing the goal of national uniformity. (49) In Conkright, Xerox administered a plan and interpreted the plan document to require a particular method of calculation. (50) Plan participants challenged the interpretation and the Second Circuit Court of Appeals found the first interpretation to be wrong. (51) On remand, Xerox proposed a second plan interpretation. (52) Since Xerox had already made one wrong interpretation, the District Court held that it was not required to afford any deference to the second plan determination presented by Xerox. (53) The Second Circuit affirmed.
In Conkright, the Supreme Court again began its analysis by examining trust law. However, the majority concluded that trust law is not dispositive on the relevant issue. (54) "The unclear state of trust law on [this] question was perhaps best captured by the Texas Supreme Court[,]" which stated:
There is authority for ordering a dismissal of the case to afford the trustee an opportunity to exercise a reasonable discretion in arriving at the amount of payments to be made in the light of our discussion of the problem and after a proper consideration of the many factors involved. On the other hand, there is authority for remanding the case to the trial court to hear evidence and in the exercise of its supervisory jurisdiction to fix the amount of such payments. There is still other authority for remanding the case to the trial court to hear evidence and fix the boundaries of a reasonable discretion to be exercised by the trustee within maximum and minimum limits. (55)
Having concluded that trust law does not clearly resolve the dispute, the Conkright Court abandoned trust law as the legal beacon to guide its decision, and instead, turned to "the guiding principles we have identified [as] underlying ERISA...." (56) Namely, the Court underscores Congress' intent to balance the interest of participants and plan sponsors/administrators. Ultimately, the Court turned to the stated goal of national uniformity, explaining:
Moreover, Firestone deference serves the interest of uniformity, helping to avoid a patchwork of different interpretations of a plan, like the one here, that covers employees in different jurisdictions--a result that "would introduce considerable inefficiencies in benefit program operation, which might lead those employers with existing plans to reduce benefits, and those without such plans to refrain from adopting them." Indeed, a group of prominent actuaries tells us that it is impossible even to determine whether an ERISA plan is solvent (a duty imposed on actuaries by federal law), if the plan is interpreted to mean different things in different places. (57) As we recognized in Glenn, there is little place in the ERISA context for these sorts of "special procedural rules [that] would create further complexity, adding time and expense to a process that may already be too costly for many of those who seek redress." (58) Finally, this case demonstrates the uniformity problems that arise from creating ad hoc exceptions to Firestone deference. If other courts were to adopt an interpretation of the Plan that does account for the time value of money, Xerox could be placed in an impossible situation. Similar Xerox employees could be entitled to different benefits depending on where they live, or perhaps where they bring a legal action. In fact, that may already be the case. In similar litigation over the Plan, the Ninth Circuit also rejected the use of the phantom account method, but held that the Plan Administrator should utilize actuarial principles in accounting for rehired employees' past distributions--which would presumably include taking some cognizance of the time value of money. Thus, failing to defer to the Plan Administrator here could well cause the Plan to be subject to different interpretations in California and New York. "Uniformity is impossible, however, if plans are subject to different legal obligations in different States." Firestone deference serves to avoid that result and to preserve the "careful balancing" of interests that ERISA represents. (59)
Whether the Supreme Court will recognize a particular doctrine or remedy under ERISA now requires consideration of: (1) a traditional trust law analysis, (2) the plan documents rule, and (3) the Court's desire for national uniformity. Consider then how the Court might treat equitable estoppel as a remedy under ERISA in the context of the aforementioned considerations.
III. HISTORY OF EQUITABLE ESTOPPEL
Equitable estoppel, or estoppel in pais, is defined as:
The doctrine by which a person may be precluded by his act or conduct, or silence when it is his duty to speak, from asserting a right which he otherwise would have had. The effect of voluntary conduct of a party whereby he is precluded from asserting rights against another who has justifiably relied upon such conduct and changed his position so that he will suffer injury if the former is allowed to repudiate the conduct. Elements or essentials of such estoppel include change of position for the worse by party asserting estoppel; conduct by party stopped such that it would be contrary to equity and good conscience for him to allege and prove the truth; false representation or concealment of facts; ignorance of party asserting estoppel of facts and absence of opportunity to ascertain them; injury from declarations, acts, or omissions of party were he permitted to gainsay their truth; intent that representation should be acted on; knowledge, actual or constructive, of facts by party stopped; misleading person to his prejudice; omission, misconduct or misrepresentation misleading another. It is based on some affirmative action, by word or conduct, of the person against whom it is invoked, and some action of the other party, relying on the representations made. (60)
More simply stated:
Lord Kenyon's definition of the maxim, while dated, still works to describe equitable estoppel. It is "that a man [or woman] should not be permitted to 'blow hot and cold' with reference to the same transaction, or insist, at different times, on the truth of each of two conflicting allegations, according to the promptings of his [or her] private interests." (61)
Without question, equitable estoppel is a traditionally and "preeminently" (62) equitable theory with deep roots in the law of trusts. (63) The doctrine has also been widely used at law. For instance:
In the case of Horn v. Cole, it was said, among other things: "It thus appears that what has sometimes been called an equitable estoppel, and sometimes with less propriety an estoppel in pais, is properly and peculiarly a doctrine of equity, originally introduced there to prevent a party from taking a dishonest and unconscientious advantage of his strict legal rights, though now with us, like many other doctrines of equity habitually administered at law." (64)
Equitable estoppel has a long and deeply entrenched history as a doctrine used to prevent injustice. The Court explains:
"What I induce my neighbor to regard as true is the truth as between us, if he has been misled by my asseveration," became a settled rule of property at a very early period, in courts of equity. The same principle is thus stated by Chancellor Kent in Wendell v. Van Bensselaer: "There is no principle better established, in this court, nor one founded on more solid considerations of equity and public utility, than that which declares, that if one man, knowingly, though he does it passively, by looking on, suffers another to purchase and expend money on land, under an erroneous opinion of title, without making known his own claim, shall not afterwards be permitted to exercise his legal fight against such person. It would be an act of fraud and injustice, and his conscience is bound by this equitable estoppel." (65)
There are multiple types of estoppels and those based in equity are a much different legal creature than those available at law. For example:
While equitable estoppel arises from facts which are all matters in pais, there is an essential and marked distinction between them [equitable estoppel] and legal estoppel in pais. The equitable estoppel and legal estoppel in pais agree, however, in that they both preclude a person from showing the truth in an individual case. But the legal estoppel shuts out the truth, and also the equity and justice of the individual case, on account of the supposed paramount importance of rigorously enforcing a certain and unvarying maxim of the law. It excludes evidence of the truth, and the equity of the particular case to support a strict rule of law on grounds of public policy. Equitable estoppel are admitted on the exactly opposite ground of promoting the equity and justice of the individual case by preventing a party from asserting his rights under a general technical rule of law, when he has so conducted himself that it would be contrary to equity and good conscious for him to allege to prove the truth. (66)
It is the true equitable estoppel with which this article is concerned. That is, the use of the doctrine to prevent a party from relying upon or asserting a technical right when that party has misled another party into acting, or failing to act, and to allow subsequent enforcement of such a technical fight would be unjust. More precisely, this article addresses the issue of promoting the equity and justice of the ERISA plan participant by preventing an ERISA plan and/or its sponsor/administrator from asserting technical rights that might otherwise be exerted when the participant has been misled. The equitable estoppel doctrine also prohibits the enforcement of technical rights that would defeat the best interest of the participant and would be contrary to equity and good conscience.
IV. MOST OF THE FEDERAL CIRCUIT COURTS RECOGNIZE EQUITABLE ESTOPPEL AS PART OF THE LAW OF ERISA
Although the Supreme Court has not yet decided whether equitable estoppel has any place in the law of ERISA, almost every federal circuit court recognizes equitable estoppel principles as part of their ERISA case law. The First Circuit has observed, "[m]ost of our sister circuits have recognized estoppel claims under ERISA's civil enforcement provisions." (67)
The Second, Third, Fifth, Sixth, Seventh, Eighth, Ninth and Eleventh Circuits have all recognized equitable estoppel as a doctrine available in certain circumstances in ERISA litigation. As discussed below, the First, Tenth and D.C. Circuits have not yet decided to adopt the doctrine, but have not rejected it. The Fourth Circuit has consistently rejected the doctrine of equitable estoppel as a grounds for relief. Among the circuits to recognize equitable estoppel, the circumstances vary in which they do so. The Second Circuit lists the necessary elements as: "(1) a promise, (2) reliance on the promise, (3) injury caused by the reliance, and (4) an injustice if the promise is not enforced" coupled with (5) "extraordinary circumstances." (68)
Unlike most of its sister circuits, the Second Circuit allows equitable estoppel principles even to avoid unambiguous plan terms in extraordinary circumstances. (69) The Sixth Circuit has a similar view to the Second. In the Sixth Circuit, a cognizable equitable estoppel claim requires that there was a fraudulent representation, and the plaintiff is unaware of the truth behind the representations, and detrimentally and justifiably relied on the representations. (70)
For many years, the Sixth Circuit would not allow equitable estoppel to alter plainly written plan terms. (71) The court has recently held, however, that estoppel can be used even in the face of unambiguous plan terms in very limited and extraordinary circumstances. The Sixth Circuit Court of Appeals stated:
Nevertheless, we have previously held that estoppel "cannot be applied to vary the terms of the unambiguous plan documents." We do not apply that rule here, because neither of the rationales invoked by Sprague to justify its general prohibition against application of estoppel to unambiguous provisions is sufficient to outweigh the extraordinary circumstances presented by this case. Sprague stated two justifications for its general rule: "First, as we have seen, estoppel requires reasonable or justifiable reliance by the party asserting the estoppel. That party's reliance can seldom, if ever, be reasonable or justifiable if it is inconsistent with the clear and unambiguous terms of plan documents available to or furnished to the party. Second, to allow estoppel to override the clear terms of plan documents would be to enforce something other than the plan documents themselves. That would not be consistent with ERISA." (72) Sprague also asserts that enforcement of something other than the plan documents is inconsistent with ERISA; our precedents already recognize that this is not true in all circumstances, and we determine that this assertion is not applicable in the present case. In Armistead, we acknowledged the defendant's argument that recognizing equitable estoppel would lead to enforcement of something other than the plan provisions and thus effect an impermissible oral modification of an ERISA plan. We rejected the argument that applying estoppel was always inconsistent with ERISA and held that estoppel was permissible even though "[e]quitable estoppel ... precludes a party from exercising contractual rights because of his own inequitable conduct toward the party asserting the estoppel." We have thus allowed enforcement of something other than the plan documents based on estoppel under appropriate circumstances. We hold that a plaintiff can invoke equitable estoppel in the case of unambiguous pension plan provisions where the plaintiff can demonstrate the traditional elements of estoppel, including that the defendant engaged in intended deception or such gross negligence as to amount to constructive fraud, plus (1) a written representation; (2) plan provisions which, although unambiguous, did not allow for individual calculation of benefits; and (3) extraordinary circumstances in which the balance of equities strongly favors the application of estoppel. (73)
The other circuits that have recognized equitable estoppel principles in their ERISA jurisprudence will not allow the doctrine to be used to avoid unambiguous plan terms. For an ERISA plaintiff to succeed under a theory of equitable estoppel in the Third and Fifth Circuits, the plaintiff "must establish (1) a material representation, (2) reasonable and detrimental reliance upon the representation, and (3) extraordinary circumstances." (74) The Third and Fifth Circuits also limit the use of equitable estoppel to situations where a party is not seeking to rely on oral or informal amendments to an ERISA benefit plan. (75)
In the Seventh Circuit, "in order to prevail on an estoppel claim under ERISA, [the court] ordinarily require[s] that plaintiffs show: (1) a knowing misrepresentation; (2) made in writing; (3) reasonable reliance on that representation by them; (4) to their detriment." (76) The Seventh Circuit will not allow equitable estoppel to alter clear plan terms, stating:
We have emphasized on several occasions, however, that the availability of estoppel in the ERISA context is constrained by other important considerations animating ERISA. Most notably, we have stressed repeatedly that equitable estoppel cannot dilute the rule forbidding oral modifications to an ERISA plan. We simply have rejected the claim that "bad advice delivered verbally entitles plan participants to whatever the oral statement promised, when written documents provide accurate information." (77)
The Eighth Circuit will only allow a plaintiff to proceed under an equitable estoppel theory where the terms of the plan document are ambiguous. (78) The Eighth Circuit will not allow equitable estoppel principles to be used to alter unambiguous plan terms. (79)
In the Ninth Circuit, estoppel is only allowed when the plan is ambiguous or unclear. The Ninth Circuit Court of Appeals explained that an equitable estoppel cause of action requires that the plaintiff must (1) "allege a material misrepresentation," (2) "reasonable and detrimental reliance upon the representation," (3) "extraordinary circumstances," (4) "that the provisions of the plan at issue were ambiguous such that reasonable persons could disagree as to their meaning or effect," and (5) "that representations were made involving oral interpretation of the plan." (80)
The Eleventh Circuit recognizes equitable estoppel if the plaintiff can show certain elements. Explaining these elements, the Eleventh Circuit Court of Appeals stated, "(1) the relevant provisions of the plan at issue are ambiguous, and (2) the plan provider or administrator has made representations to the plaintiff that constitute an informal interpretation of the ambiguity." (81)
Thus far, the Fourth Circuit seems to be alone in rejecting estoppel. In the cases where it has done so, the doctrine was sought to be used to overcome unambiguous plan terms. The Fourth Circuit Court of Appeals has stated:
Use of estoppel principles to effect a modification of a written employee benefit plan would conflict with "ERISA's emphatic preference for written agreements." The statute requires that all ERISA plans be "established and maintained pursuant to a written instrument," and that the written instrument describe the formal procedures by which the plan can be amended. Based upon this statutory scheme, any modification to a plan must be implemented in conformity with the formal amendment procedures and must be in writing. Oral or informal written modifications to a plan, such as those alleged by Coleman in this case, are of no effect. Equitable estoppel principles, whether denominated as state or federal common law, have not been permitted to vary the written terms of a plan. Indeed, this circuit has said that "resort to federal common law generally is inappropriate when its application would ... threaten to override the explicit terms of an established ERISA benefit plan." (82)
The First and Tenth Circuits have not decided whether to recognize equitable estoppel in appropriate circumstances, but they will not allow use of the doctrine to alter unambiguous written plan terms. (83) The D.C. Circuit recognizes the doctrine in dicta, but has not meaningfully addressed whether it will recognize the doctrine as a grounds for relief. (84)
V. WOULD THE SUPREME COURT RECOGNIZE EQUITABLE ESTOPPEL AS A REMEDY UNDER ERISA?
Would the Supreme Court allow ERISA plan participants to use the doctrine of equitable estoppel as a ground for relief? Equitable estoppel has typically been available in equity, (85) and is deeply entrenched in the law of trusts, (86) and therefore, the Court would likely devote little analysis to those points. Instead, the Court would most certainly focus on three primary points: (1) the facts, (2) the plan language, and (3) uniformity.
First, the Court would use the same analysis it employed in Great-West and Sereboff and distinguish between true equitable estoppel and legal estoppel. (87) Such an analysis would require close scrutiny of the facts of a particular case. In Great-West and Sereboff each insurer asserted a fight to recover money based upon restitution. The Court went to great lengths to distinguish between the factual circumstances in which restitution was available at equity as opposed to at law. In Sereboff the insurer was allowed to recover because it evidenced facts where restitution was traditionally available at equity as opposed to at law. The insurer in Great-West did not. The Court would conduct the same sort of factual analysis in evaluating whether to recognize estoppel in the context of ERISA. Legal estoppel "excludes evidence of the truth...." (88) A legal estoppel comes into play when a representation is made that is not true and someone acts upon the misstatement to his detriment. An example of legal estoppel is an estoppel by deed, defined as:
A grantor in a warranty deed who does not have title at the time of the conveyance but who subsequently acquires title is estopped from denying that he had title at the time of the transfer and such after-acquired title inures to the benefit of a grantee or his successors. (89)
The person guilty of the misstatement is precluded by legal estoppel from later asserting the truth.
An analogous factual example to a legal estoppel in an ERISA context would be a situation as follows. A plan administrator misrepresents that there is health insurance coverage for a particular individual and, in reliance, the participant undergoes a medical procedure incurring a debt for services rendered. Thereafter, it becomes evident that, in reality, the individual was not eligible for coverage under the terms of the plan document. If estoppel was available with those facts, the estoppel would preclude the truth, that there was no coverage. The truth is dictated by the terms of the plan document. The use of estoppel to bind the plan to coverage and payment of the debt would be contrary to the plan's written terms. The above example presents precisely the facts that were before the Fourth Circuit in Healthsouth Rehabilitation Hospital v. American National Red Cross, (90) and the court refused to allow estoppel principles to overcome the written terms of a plan. (91) If facts similar to the example come before the Supreme Court, the Court would most certainly reject the use of estoppel in those circumstances for three reasons. First, under the Sereboff and Great-West analysis, the factual circumstance of the example would necessitate applying a legal estoppel doctrine as opposed to the equitable estoppel doctrine. The exemplary facts are not akin to those where estoppel was typically available in equity. Second, in the example above, the estoppel would be in contrast to unambiguous plan terms precluding coverage, which would run afoul of the plan documents rule. Finally, allowing estoppel in circumstances like the example would not be in the interest of national uniformity. Allowing relief by legal estoppel with the exemplary facts would mean that prospective plan participants who have coverage misrepresented to them would enjoy rights to coverage that are not afforded by the plan and that are not extended to other plan participants to whom misrepresentations were not made. To allow legal estoppel as a ground for relief, plan administrators would be required to examine the facts and circumstances of unique cases and make exception coverage available where appropriate. This is contrary to simply looking at the language of the plan to discern whether actual coverage was available. To recognize equitable estoppel, the Court will require facts where the doctrine was traditionally available in equity. For example, the Court will require facts where the aim is not to shut out the truth, but to prevent a party from relying upon a technical right.
With appropriate facts, a true equitable estoppel would prevent an ERISA plan or its fiduciary from asserting technical rights to defeat a participant's claim when a misrepresentation induced a plan participant to act, or fail to act, to his detriment. In other words, if a participant has been misled by a plan or its fiduciary, equitable estoppel would preclude the plan administrator from benefiting from the misrepresentation and defeating the participant's claim. Based upon Great-West and Sereboff the Court would limit the use of estoppel theories only to scenarios that truly invoke equitable estoppel as opposed to legal estoppel. Such an approach would require courts to focus upon "'the basis for [the] claim' and the nature of the underlying remedies sought." (92)
Second, the Court would have to consider the plan documents rule and analyze the language of the plan at issue to ensure that use of estoppel principles are not contrary to any plan terms. Based upon Kennedy, (93) the Supreme Court, like the majority of the Circuit Courts, (94) would not allow equitable estoppel principles to be employed to overcome clear and unambiguous language of a plan document. The plan documents rule would greatly narrow the circumstances where estoppel principles may be appropriate in an ERISA case.
Finally, similar to Conkright's holding, the Court would consider the interest of national uniformity for plan sponsors and fiduciaries. Most certainly, the Court would not allow equitable estoppel principles to be used to create exceptions or special arrangements for particular plan participants. The Court would only allow equitable estoppel to be used if application of the doctrine served the interest of uniformity for a plan and its participants.
In what factual circumstances might an ERISA plan participant assert a true equitable estoppel theory while not running afoul of the plan documents rule and while serving the interest of uniformity?
Most frequently, the appropriateness of allowing equitable estoppel arises when a plan representative has misrepresented facts relevant to a plan participant's need to exercise a right by a certain deadline. Time deadlines and limitation periods are as technical of a right as a party, such as a plan administrator, can have. A plan administrator misrepresenting true facts that result in a plan participant failing to exercise a right in a timely manner presents an ideal factual situation to recognize equitable estoppel as a remedy under ERISA. In doing so, the Court would not have to contravene the plan documents rule because the participant would not be "shutting off the truth" as in a situation where a person seeks to compel coverage that was not really available to him. Instead, the individual asserting the estoppel would merely be seeking to accomplish a right to which he was entitled to under the terms of the plan document, but which he failed to previously obtain due to a misrepresentation. The Court could afford a remedy based on equitable estoppel principles, by mandating that a deadline will be tolled until the true facts that put a participant on notice to act are disclosed. In other words, if an individual had a certain time period within which to act, but did not do so due to a misrepresentation by a plan sponsor or administrator, the Court could toll the deadline until the actual facts are disclosed. The deadline could still be enforced if the individual did not act in a timely manner after disclosure of the true facts and the grant of relief. Such a holding would also serve the interest of national uniformity by ensuring that those participants who are unfortunate enough to be misled are protected and enjoy the same options and rights as their fellow plan participants who have not been misled.
Bowerman v. Wal-Mart Stores, Inc. presented such a case. (95) In Bowerman, a pregnant Wal-Mart employee had health insurance coverage. (96) The employee ceased working for approximately one month and lost her coverage due to not actively being at work. (97) After being out for one month, the employee returned to work and resumed coverage as a regular employee under the plan. (98) Unbeknownst to the employee, however, her pregnancy became a pre-existing condition such that no medical bills incurred for her pregnancy were covered. (99) The employee could have avoided the pre-existing condition issue had she only been properly advised that she needed to elect COBRA coverage, to which she was entitled, during the month she was off of work. (100) In ruling for the employee, the Seventh Circuit noted its longstanding precedent that estoppel principles cannot be used to alter unambiguous plan terms, but the court also recognized that estoppel principles are properly incorporated into the common law of ERISA in appropriate fact circumstances. (101) The Seventh Circuit Court of Appeals explained:
[W]e have applied estoppel principles when countervailing ERISA principles would not be impeded and "one party has made a misleading representation to another party and the other has reasonably relied to his detriment on that representation." As the court recently explained in [Gallegos v. Mount Sinai Medical Center], the "basic policy consideration arguing in favor of applying estoppel is the principle of contract law that 'a party who prevents the occurrence of a condition precedent may not stand on that condition's nonoccurrence to refuse to perform his part of the contract.'" In Gallegos, the court noted that we have applied estoppel principles to ERISA claims "where the claimant was misled by written representations of the insurer or plan administrator into failing to take an action that would have enabled the claimant to receive benefits under the Plan." We further noted that estoppel is appropriate in an ERISA action "where the defendant insurer misrepresented the contractual limitations period in the plan summary" because "'a defendant whose own activities made the plaintiff miss the deadline should not be allowed to litigate over whether the plaintiff could have sued earlier.'" Furthermore, in [Swaback v. American Information Technologies Corp.] we held that when an employer has provided "repeated misinformation" to an ERISA claimant, and that misinformation prevented the claimant from making an election of benefits, estoppel should be applied to prevent the employer from denying those benefits to the claimant. (102)
Ultimately in Bowerman, the Seventh Circuit held that the employee could rely upon equitable estoppel principles because she was not properly advised of the need to pay her COBRA premium in order to avoid the pre-existing condition limitation. (103) The rationale explains that if the employee had known she would lose coverage during her absence, she could have timely elected COBRA coverage for one month while she was out. In essence, applying equitable estoppel merely allowed the employee to do what she would have done in a timely manner, but for the misinformation. If the time to act is deemed to run from the time the true facts are known, then the actual equitable remedy would be to simply turn back the clock. The technical fight that the plan is prohibited from enforcing by way of the estoppel is the deadline within which the employee was required to elect COBRA coverage. The only reason the employee did not elect COBRA coverage in a timely manner is because she was misled into believing there was no need to do so. By affording the employee the right to elect COBRA coverage after the true facts are revealed, a court essentially puts both parties in the exact same position they would have occupied but for the misrepresentation. Simply said, once the true facts are known, the participant's time to act begins to run. This is exactly the relief the Seventh Circuit allowed in Bowerman, explaining:
Ms. Bowerman ought to have an opportunity to tender the COBRA payment that would have been paid if the plan had lived up to its obligation to inform her fully of the operation of the Plan. If she makes that payment, the plan then must pay the maternity-related medical expenses that it has refused to pay in reliance on the pre-existing condition limitation. (104)
A couple of circuits have touched upon equitable principles, although not labeling them estoppel, in slightly different but similar factual contexts. In Gayle v. United Parcel Service, Inc., (105) an employee sought to avoid the consequences of an untimely claim denial appeal based upon equitable tolling principles. The court held that the plan had not made any misrepresentations to induce the late appeal. With that factual circumstance, the court would not apply equitable tolling. However, the court recognized that, "[e]quitable tolling, while rare, does allow for exceptions to the strict enforcement of deadlines." (106) "Such exceptions are narrow...." (107) "Equitable tolling has also been appropriate 'where the complainant has been induced or tricked by his adversary's misconduct into allowing the filing deadline to pass." (108)
In White v. Aetna Life Insurance Co., (109) the court was faced with a similar situation where an employee had failed to timely appeal the denial of an ERISA benefit claim. The court relieved the participant of the late appeal for equitable reasons, specifically that the denial letter was deficient and misleading. In reality, equitable tolling is nothing more than a true form of equitable estoppel.
Epright v. Environmental Resources Management, Inc. Health & Welfare Plan, (110) presents another fact scenario where equitable estoppel would be appropriate. In Epright, a prospective plan participant was misled into missing an initial enrollment deadline. The Third Circuit granted him relief, stating:
If an employee knew that he or she was eligible for plan benefits and yet did not complete the requisite enrollment forms through procrastination or indecision, ERM might have an argument that the employee was not covered by the Plan. Such is not the case here. Due to ERM's erroneous interpretation of the Plan, Mr. Epright was under the mistaken impression that he was not eligible for Plan coverage. He had made numerous inquiries into when his employee status would change so that he would be eligible for Plan benefits. Thus, it was not through lack of diligence on his part that the enrollment forms were not completed; rather, it was solely due to ERM's erroneous interpretation of its own Plan. ERM should not now be allowed to benefit from its own mistake at the expense of its employee. To the extent that completed enrollment forms are a prerequisite to eligibility for plan benefits, such a requirement is excused in the instant case as their lack of existence is due to the defendant's mistake, and not the plaintiff's. (111)
Compare the facts in Healthsouth Rehabilitation Hospital, as discussed above, to those in Epright. The contrast is analogous to the factual distinctions between Great-West and Sereboff In Great-West, the facts were such that restitution at law was invoked. In Sereboff the facts were consistent with restitution typically available in equity. In Healthsouth Rehabilitation Hospital, a misrepresentation was made that an individual had coverage to which he was not truly entitled. With those facts, a court would have to "shut out the truth" and use legal estoppel principles to bind the plan to the misrepresented coverage. Such a ruling would require the invocation of an estoppel where the doctrine has traditionally been used at law. But, with Epright, the facts are such that the doctrine is not used to avoid the truth, but, instead, to prevent the plan from exercising a technical right. Just like with Great-West and Sereboff the facts with which the doctrine of estoppel is sought to be used would be determinative of whether the court will allow the remedy.
There are a number of other fact scenarios where true equitable estoppel may be useful. For instance, many ERISA governed life and health insurance policies provide the right for a plan participant who loses coverage to convert to an individual policy within a certain time after regular coverage terminates. If a plan participant is misled into not acting to convert the coverage in a timely manner, such as a representation that the insurance coverage was still in place after it was not, then that would be another situation where equitable estoppel could provide relief. The difference between a conversion right and the facts in Healthsouth Rehabilitation Hospital is that a conversion right is a right to coverage that could have been exercised. While in Healthsouth Rehabilitation Hospital, there was no right to coverage given the facts and under the plan's terms.
In another example, suppose a plan participant has a newborn child that he seeks to enroll in his company's ERISA health insurance plan but he fails to properly do so based upon misinformation provided by the employer. As a result, he does not get the child timely enrolled. Equitable estoppel would prevent the employer from enforcing the technical enrollment requirement and would allow the participant a meaningful opportunity to comply. As in Bowerman, the aggrieved plan participants in the above examples would be allowed an opportunity to do what they could and, likely, would have done in a timely manner had they not been misled.
Even courts, like the Fourth Circuit, which have not expressly recognized equitable estoppel, recognize the appropriateness of "reinstatement to the status quo" (112) that would put the parties to an ERISA case back in the position they would have occupied but for a misrepresentation. Recognizing equitable estoppel in appropriate circumstances would be nothing more than a doctrinal vehicle to accomplish reinstatement to the status quo.
Further, allowing relief on equitable estoppel principles in appropriate fact scenarios would not violate the plan documents rule. The key to the examples cited above is that the plan participants are not seeking something to which they are not entitled under the terms of the plan, such as coverage when there is none available. There is no need to "shut out the truth." Instead, equitable estoppel would only be an appropriate basis for relief where a plan participant seeks that to which a plan document entitles him and would have been available and accepted had the participant not been misled concerning the true facts. Therefore, use of the doctrine would not be contrary to the terms of the plan such as a situation where estoppel is used to bind a plan to pay benefits that are not due under the terms of the plan. Instead, the examples above present facts where true equitable estoppel could be used to prevent plan administrators from exercising technical rights in appropriate circumstances.
Finally, using equitable estoppel principles in appropriate fact circumstances, like the examples above, would not hinder the Court's desired goal of national uniformity. In fact, recognizing equitable estoppel in appropriate factual circumstances would foster that goal by allowing plan participants, unfortunate enough to receive misinformation, the same rights allowed by plan terms that their fellow plan participants who were provided accurate information enjoy.
With the right facts before it, one would expect the Supreme Court to recognize that true equitable estoppel has a place in the federal common law of ERISA. Such a holding would be consistent with the Mertens to Sereboff line of cases, would not contravene the plan documents rule that was so crucial to the holding in Kennedy, and would, actually, accomplish the goal of national uniformity stressed in Conkright. It is inevitable that the Supreme Court will someday consider whether equitable estoppel has a place in ERISA law and whether it allows such relief will almost certainly depend on the facts before it.
(1.) Employee Retirement Income Security Act, 29 U.S.C. [section] 1001 et. seq. (2006).
(2.) Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359, 361-62 (1980).
(3.) ERISA does apply to retirement plans, which are referred to in the legislation as "pension plan(s)" and are defined as:
any plan, fund, or program which was ... established or maintained by an employer or by an employee organization, or by both, to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program--
(i) provides retirement income to employees, or
(ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond....
29 U.S.C. [section] 1002(2)(A) (2006). ERISA also applies to "welfare plans," which are defined as:
any plan, fund, or program ... established or maintained by an employer ... for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services....
29 U.S.C. [section] 1002(1) (2006).
(4.) Nachman, 446 U.S. at 374-75 (internal citations omitted).
(5.) Id. at 375 n.22.
(6.) Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 145-46 (1985).
(7.) Id. at 148.
(10.) Nachman, 446 U.S. at 379. Some other Congressional concerns and intents regarding the enactment of ERISA are set forth in the text of the statute itself:
(a) ... Congress finds that the growth in size, scope, and numbers of employee benefit plans in recent years has been rapid and substantial; ... that the continued well-being and security of millions of employees and their dependents are directly affected by these plans; that they are affected with a national public interest; that they have become an important factor affecting the stability of employment and the successful development of industrial relations; ... safeguards [need to] be provided with respect to the establishment, operation, and administration of such plans; ... despite the enormous growth in such plans many employees with long years of employment are losing anticipated retirement benefits owing to the lack of vesting provisions in such plans; ... the inadequacy of current minimum standards, the soundness and stability of plans with respect to adequate funds to pay promised benefits may be endangered; that owing to the termination of plans before requisite funds have been accumulated, employees and their beneficiaries have been deprived of anticipated benefits; and that it is therefore desirable and in the interests of employees and their beneficiaries, ... that minimum standards be provided assuring the equitable character of such plans and their financial soundness.
(b) ... It is hereby declared to be the policy of this chapter to protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.
(c) ... [we should protect] the interests of participants in private pension plans and their beneficiaries by improving the equitable character and the soundness of such plans by requiring them to vest the accrued benefits of employees with significant periods of service, to meet minimum standards of funding, and by requiring plan termination insurance.
29 U.S.C. [section] 1001 (2006).
(11.) See Mass. Mut., 473 U.S. at 146.
(12.) Id. at 147.
(13.) Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111 (2008).
(14.) Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987).
(15.) Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989) (internal citations omitted).
(16.) 29 U.S.C. [section] 1132 (2006).
(17.) Some academic authorities have noted that there is a distinction between recognizing equitable estoppel as a remedy available under 29 U.S.C. section 1132(a)(3) as opposed to simply recognizing the doctrine as a part of the federal law of ERISA generally. One of those authorities stated:
More recent cases addressing equitable estoppel under Section 502(a)(3) have characterized equitable estoppel as a remedy available under Section 502(a)(3), rather than as a federal common law claim. The purpose of characterizing equitable estoppel as an equitable remedy under Section 502(a)(3) is to avoid the paradoxical result that an adequate remedy otherwise may not be available under Section 502(a)(3) for the plaintiff's injury.
Colleen E. Medill, Appendix A, Federal Common Law Claims Under Section 502(A)(3), 39 J. MARSHALL L. REV. 943, 947 (2006). The reference to an adequate remedy is to the fact that the Supreme Court has stated that 29 U.S.C. section 1132(a)(3) ([section] 502(a)(3)) is a "catchall" provision when no relief is available under any other section of ERISA's remedial provision. See Varity Corp. v. Howe, 516 U.S. 489 (1996). This article will not address whether recognition of equitable estoppel principles for the purpose of ERISA jurisprudence is more properly considered a remedy under section 1132(a)(3) or, more generally, as a part of the general common law of ERISA. This article will trace Supreme Court jurisprudence as it has developed concerning remedies available under 29 U.S.C. section 1132(a)(3) and will analyze equitable estoppel in that context. Any reference to the "common law of ERISA" within this article is not intended to be different or distinguished from remedies available under 29 U.S.C. section 1132(a)(3). The term "common law of ERISA," as used herein, is intended to mean more broadly all case law concerning doctrines and remedies available under ERISA.
(18.) 29 U.S.C. [section] 1132(a)(3) (2006) (emphasis added).
(19.) 508 U.S. 248 (1993).
(20.) Id. at 250.
(21.) Id. at 254 (emphasis in original).
(22.) Id. at 255-58 (emphasis added) (internal citations omitted).
(23.) Id. at 261-63 (emphasis in original) (internal citations omitted).
(24.) 534 U.S. 204 (2002).
(25.) Id. at 207.
(28.) Id. at 208. Technically, the plan was self-funded and Great-West was a reinsurer/stop-loss carrier that filed suit after obtaining an assignment of rights from the plan administrator. See id. at 207.
(29.) See id. at 206.
(30.) See Great-West, 534 U.S. 204.
(31.) Id. at 210 (emphasis in original).
(32.) Id. at 212-13 (internal citations omitted).
(33.) Id. at 214-15 (internal citations omitted).
(34.) Id. at 216-17 (internal citations omitted).
(35.) 547 U.S. 356 (2006).
(36.) Id. at 360.
(38.) See id at 361-62.
(39.) Id. at 362-64 (internal citations omitted).
(40.) 555 U.S. 285, 129 S. Ct. 865 (2009).
(41.) Id. at 868.
(42.) Id. at 869.
(45.) Id. at 868.
(46.) Id. at 871-72 (internal citations omitted).
(47.) Id. at 877 (internal citations omitted).
(48.) 30 S. Ct. 1640 (2010).
(49.) See id.
(50.) Id. at 1645.
(53.) See id.
(54.) The dissent felt much differently, believing that trust law was clear and dictated the outcome. See id at 1655 (Breyer, J., dissenting).
(55.) Id. at 1648 (internal citations omitted).
(57.) Id. at 1649 (internal citations omitted).
(58.) Id. at 1650 (internal citations omitted).
(59.) Id. at 1650-51 (internal citations omitted).
(60.) BLACK'S LAW DICTIONARY 538-39 (6th ed. 1990) (internal citations omitted).
(61.) T. Leigh Anenson, The Triumph of Equity: Equitable Estoppel in Modern Litigation, 27 REV. LITIG. 377, 386 (2008) (quoting Walter S. Beck, Estoppel Against Inconsistent Position in Judicial Proceedings, 9 BROOK. L. REV. 245, 245 (1940) (quoting HERBERT BROOM, A SELECTION OF LEGAL MAXIMS 119 (4th ed. 1854))).
(62.) 3 JOHN NORTON POMEROY, A TREATISE ON EQUITY JURISPRUDENCE: AS ADMINISTERED IN THE UNITED STATES OF AMERICA: AS ADAPTED FOR ALL THE STATES, AND TO THE UNION OF LEGAL AND EQUITABLE REMEDIES UNDER THE REFORMED PROCEDURE 181 (5th ed. 1941).
(63.) See Jacobs v. Jacobs, 2008 U.S. Dist. LEXIS 23968 (N.D. Ohio 2008). Beneficiaries' counterclaim for equitable estoppel against a trustee's tardy request for compensation for his services over the past fifteen years is plausible and survives a motion to dismiss, Id. at *6. See Erbe v. Lincoln Rochester Trust Co., 214 N.Y.S.2d 849, 852-54 (N.Y. App. Div. 1961). The trial court erred because, "it should not be held that a trustee can take advantage of the limitations statute when the beneficiaries of the trust may have been led to believe that there was no breach of the relationship by statements of false facts or concealment of true facts by the fiduciary." Id. at 852. In reversing the trial court's dismissal, the Court explained that there may "in equity, be a basis for an equitable estoppel" and the motion to dismiss should be denied such that the equitable estoppel issue can be litigated, Id. at 852, 854. See Byrne v. Laura, 52 Cal. App. 4th 1054, 1068-70 (Cal. Ct. App. 1997). The Court held that "[e]quitable estoppel may preclude the use of a statute of frauds defense." Id. at 1068. "[I]t is settled that the doctrine [of equitable estoppel] may be employed to enforce an oral trust in land where the beneficiary has 'irrevocably change[d] his position in reliance upon the trust.'" Id at 1070 (quoting RESTATEMENT (SECOND) OF TRUSTS [section] 50 (1959)). See also Drexel v. Berney, 122 U.S. 241 (1887). The Court determined that the possible equitable estoppel defense is the basis for equitable jurisdiction, because it would not be available in the same form in a court of law. See id. at 253.
(64.) JAMES W. EATON, HANDBOOK OF EQUITY JURISPRUDENCE 167 n.8 (1901) (internal citations omitted).
(65.) Kirk v. Hamilton, 102 U.S. 68, 76-77 (1880) (internal citation omitted).
(66.) EATON, supra note 64, at 166-67 (citing Horn v. Cole, 51 N.H. 287, 289 (1868)).
(67.) Livick v. Gillette Co., 524 F.3d 24, 30-3l (1st Cir. 2008) (citing Hooven v. Exxon Mobil Corp., 465 F.3d 566, 578 (3d Cir. 2006); Mello v. Sara Lee Corp., 431 F.3d 440, 444 (5th Cir. 2005); Devlin v. Empire Blue Cross & Blue Shield, 274 F.3d 76, 85-86 (2d Cir. 2001); Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574, 586 (7th Cir. 2000); Sprague v. Gen. Motors Corp., 133 F.3d 388, 403 & n.13 (6th Cir. 1998) (en banc); Greany v. W. Farm Bureau Life Ins. Co., 973 F.2d 812, 821 (9th Cir. 1992); Kane v. Aetna Life Ins., 893 F.2d 1283, 1285 (11th Cir. 1990)). "The majority of other circuits, however, have adopted the theory of ERISA estoppel." Mello, 431 F.3d at 445 n.4 (citing Vallone v. CNA Fin. Corp., 375 F.3d 623, 639 (7th Cir. 2004); Jones v. Am. Gen. Life & Accident Ins. Co., 370 F.3d 1065, 1069 (11th Cir. 2004); Marks v. Newcourt Credit Group, Inc., 342 F.3d 444, 456 (6tb Cir. 2003); Bonovich v. Knights of Columbus, 146 F.3d 57, 62-63 (2d Cir. 1998); Pisciotta v. Teledyne Indus., Inc., 91 F.3d 1326, 1331 (9th Cir. 1996) (per curiam); Jensen v. Sipco, 38 F.3d 945,953 (8th Cir. 1994); Smith v. Hartford Ins. Group, 6 F.3d 131, 137 (3d Cir. 1993)).
(68.) Aramony v. United Way Replacement Benefit Plan, 191 F.3d 140, 151 (2d Cir. 1999) (internal citations omitted).
(69.) See Bonovich, 146 F.3d at 63. The court addressed the argument that estoppel was not a viable theory unless a plan had "facial ambiguity in its terms." Id. The court noted that the argument arose from Kane v. Aetna Life Insurance Co., and stated that "[t]he Kane rule is not the law in this circuit." Id. "Nor do we see any reason to adopt Kane at this time." Id. "Even if it did, however, it would not support the district court's analysis." Aramony, 191 F.3d at 152. "The effect of the Kane rule is to limit the category of cases capable of otherwise satisfying the 'extraordinary circumstances' requirement to the subset of those cases that involve an interpretation of an ambiguous ERISA plan provision...." Aramony, 191 F.3d at 152.
(70.) See Crosby v. Rohm & Haas Co., 480 F.3d 423, 431 (6th Cir. 2007).
(71.) See Armistead v. Vernitron Corp., 944 F.2d 1287, 1299 (6th Cir. 1991).
(72.) Bloemker v. Laborers' Local 265 Pension Fund, 605 F.3d 436, 443 (6th Cir. 2010) (internal citations omitted).
(73.) Id. at 443-44 (internal citations omitted).
(74.) Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226, 235 (3d Cir. 1994). See also Mello v. Sara Lee Corp., 431 F.3d 440,444-45 (5th Cir. 2005).
(75.) See Curcio, 33 F.3d at 236 n. 17; Mello, 431 F.3d at 446-47.
(76.) Kannapien v. Quaker Oats Co., 507 F.3d 629, 636 (7tb Cir. 2007) (internal citations omitted).
(77.) See Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574, 586 (7th Cir. 2000) (internal citations omitted).
(78.) See Wilson v. Prudential Ins. Co. of America, 97 F.3d 1010, 1014 n.2 (8th Cir. 1996).
(79.) See Slice v. Sons of Norway, 34 F.3d 630, 634-35 (8th Cir. 1994).
(80.) Spink v. Lockheed Corp., 125 F.3d 1257, 1262 (9th Cir. 1997).
(81.) Jones v. Am. Gen. Life & Accident Ins. Co., 370 F.3d 1065, 1069 (11th Cir. 2004). See Nachwalter v. Christie, 805 F.2d 956 (11th Cir. 1986).
(82.) Coleman v. Nationwide Life Ins. Co., 969 F.2d 54, 58-59 (4th Cir. 1992) (internal citations omitted). Subsequently, in Elmore v. Cone Mills Corp., an equally divided court incorporated "principles of equitable estoppel into the federal common law of ERISA.... " 23 F.3d 855, 863 (4th Cir. 1994) (en banc). However, as would be revealed by Healthsouth Rehabilitation Hospital v. American National Red Cross, Elmore carries no weight. 101 F.3d 1005, 1011 (4th Cir. 1996). The court in Healthsouth stated:
In Elmore, this court, sitting en banc, addressed the question of whether estoppel principles could be used to bind a plan fiduciary to oral modifications made before terms of the plan were written down and became binding. The plan at issue in Elmore was adopted subsequent to the contract that formed the basis for the plaintiff's estoppel claim. Thus, the alleged beneficiaries in Elmore did not seek to alter a pre-existing ERISA plan, they merely asked that a contract entered into prior to the ERISA plan's adoption be given binding effect. The district court held that an estoppel claim could go forward on those facts. An equally divided en banc court affirmed that decision.
Healthsouth, 101 F.3d at 1011 (internal citations omitted) (emphasis in original). "Thus, Elmore carries no precedential weight." Id. (citing Arkansas Writers' Project v. Ragland, 481 U.S. 221, 234 n.7 (1987)). See Gagliano v. Reliance Standard Life Ins. Co., 547 F.3d 230 (4th Cir. 2008); White v. Provident Life & Accident Ins. Co., 114 F.3d 26, 29 (4th Cir. 1997).
(83.) See Livick v. Gillette Co., 524 F.3d 24 (1st Cir. 2008); Callery v. U.S. Life Ins. Co., 392 F.3d 401 (10th Cir. 2004); Miller v. Coastal Corp., 978 F.2d 622, 624-25 (10th Cir. 1992), cert. denied, 507 U.S. 987 (1993); Cannon v. Group Health Service of Okla., Inc., 77 F.3d 1270, 1277 (10th Cir. 1996), cert. denied, 519 U.S. 816 (1996).
(84.) See Holt v. Winpisinger, 811 F.2d 1532, 1542 (D.C. Cir. 1987).
(85.) See supra Part III.
(87.) To reiterate the legal estoppel versus equitable estoppel distinction, it has been stated that:
... the legal estoppel shuts out the truth, and also the equity and justice of the individual case, on account of the supposed paramount importance of rigorously enforcing a certain and unvarying maxim of the law. It excludes evidence of the truth, and the equity of the particular case to support a strict rule of law on grounds of public policy. Equitable estoppel are admitted on the exactly opposite ground of promoting the equity and justice of the individual case by preventing a party from asserting his rights under a general technical rule of law, when he has so conducted himself that it would be contrary to equity and good conscious for him to allege to prove the truth.
EATON, supra note 64, at 166-67 (citing Horn v. Cole, 51 N.H. 287, 289 (1868)).
(88.) BLACK'S LAW DICTIONARY 894 (6th ed. 1990).
(89.) BLACK'S LAW DICTIONARY 551 (6th ed. 1990).
(90.) 101 F.3d 1005 (4th Cir. 1996).
(91.) Id. at 1010.
(92.) Sereboff v. Mid Atlantic Medical Servs., Inc., 547 U.S. 356, (2006) (quoting Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 213 (2002)). See supra Part III.
(93.) See supra Part II.B.
(94.) See supra Part IV.
(95.) 226 F.3d 574 (7th Cir. 2000).)
(96.) Id. at 577.
(98.) Id. at 580.
(99.) Id. at 581.
(100.) Id. at 582-83.
(101.) Id. at 589-90.
(102.) Id. at 585 (internal citations omitted).
(103.) Id. at 588-90.
(104.) Id. at 592 (emphasis added).
(105.) 401 F.3d 222 (4th Cir. 2005).
(106.) Id. at226.
(109.) 210 F.3d 412 (D.C. Cir. 2000).
(110.) 81 F.3d 335 (3rd Cir. 1996).
(111.) Id. at 341.
(112.) See Griggs v. E.I. DuPont de Nemours & Co., 237 F.3d 371, 384 (4th Cir. 2001).
* Author's Note: This article was completed approximately six months before the United States Supreme Court issued its decision in Cigna Corp., et. al. v. Amara, et. al., 563 U.S.--(decided May 16, 2011). In Amara, the Court indicates that equitable estoppel is relief allowed pursuant to 29 U.S.C. [section] 1132(a)(3) as this article predicts would occur. See Amara, 563 U.S. at (slip op. p. 19). However, in a concurring opinion, Justice Scalia indicates his view that the majority's recognition of estoppel is "blatant dictum." Id. at (slip op. p. 4 concurrence). Therefore, although some of the uncertainty that existed when this article was written has been resolved by Amara, the author hopes that the article will still be useful until such point as the Supreme Court clarifies exactly how equitable estoppel will work as a remedy under 29 U.S.C. [section] 1132(a)(3).
ROBERT E. HOSKINS, J.D., University of South Carolina School of Law, Columbia, South Carolina. The author would like to express his gratitude to Lucy Sanders for her invaluable research assistance.
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|Author:||Hoskins, Robert E.|
|Publication:||South Dakota Law Review|
|Date:||Sep 22, 2011|
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