Schmidt v. Sheet Metal Workers' National Pension Fund
128 F.3d 541 (1997)
Rule of Law:
Under ERISA, oral representations that conflict with a written plan's terms generally do not equitably estop a fund from applying its literal terms, and plan fiduciaries are not liable for a non-fiduciary ministerial employee's negligent misrepresentation if the fiduciaries provided adequate written plan disclosures and were not involved in the misstatement, and there is no showing of a failure in hiring, training, or retaining the employee.
Facts:
- On March 4, 1994, Alen J. Schmidt was diagnosed with terminal pancreatic cancer and wished to designate his son, Richard A. Schmidt, as the sole beneficiary of his pension death benefit from the Sheet Metal Workers’ National Pension Fund (NPF).
- On March 10, 1994, Alen and Richard called the NPF administrative office and spoke with benefit analyst Eunjae Lee, explaining Alen's terminal illness and his desire to designate Richard as the sole death benefit beneficiary.
- Lee indicated she understood and would send the proper paperwork for beneficiary designation.
- The Schmidts subsequently received, completed, and returned a “Pension or Vesting Application” form, on which Alen designated Richard as his primary beneficiary and his daughter Ginger Riphahn as the successor beneficiary.
- The form Lee sent was incorrect; the proper mechanism for designating a death benefit beneficiary was a specific “benefit designation card” included in the NPF's pension plan booklet (the “Booklet”), which had been mailed to all plan participants in 1990.
- Alen died on April 16, 1994, without having filed the correct benefit designation card.
- On August 29, 1994, Richard received a letter from Lee explaining that because Alen had failed to name a beneficiary for his death benefit, the $22,693.13 benefit would be divided evenly between Alen’s two surviving children, Richard and Ginger, in accordance with the pension plan's Section 7.01.
Procedural Posture:
- After being notified that Alen Schmidt's death benefit would be divided equally, Richard Schmidt contacted the Fund's administrative office and was advised to write an appeal letter to the Fund's Board of Trustees.
- Richard mailed his appeal letter on September 30, 1994, which was subsequently denied by the Appeals Committee of the Board of Trustees by letter dated May 30, 1995.
- Richard A. Schmidt initiated an ERISA action against the Sheet Metal Workers’ National Pension Fund and its Board of Trustees in district court to recover the portion of his father's death benefit disbursed to his sister.
- After discovery, the district court granted summary judgment to the defendants on each of Richard's claims.
- The district court denied the defendants' request for an award of attorney's fees.
- Richard appealed the district court's grant of summary judgment to the Seventh Circuit Court of Appeals.
- The defendants (appellees) cross-appealed the district court's denial of attorney's fees to the Seventh Circuit Court of Appeals.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
1) Does a multi-employer ERISA benefit fund become equitably estopped from enforcing the literal terms of its written plan by an oral misrepresentation of a non-fiduciary benefit analyst regarding beneficiary designation? 2) Are the fund's fiduciaries (Trustees) liable for breach of fiduciary duty for a non-fiduciary employee's negligent misrepresentation, where the fiduciaries provided adequate written plan materials and were not involved in the misstatement?
Opinions:
Majority - Ilana Diamond Rovner
No, a multi-employer ERISA benefit fund is not equitably estopped from applying the literal terms of its written plan by an oral misrepresentation, and plan fiduciaries are not liable for a non-fiduciary employee's negligent misrepresentation under these circumstances. The court held that oral representations conflicting with the terms of a written ERISA plan are not given effect, as the written instrument must control, particularly when the plan requires all beneficiary designations to be in a specific written form to prevent disputes. Richard’s estoppel claim relied on oral statements made during a telephone conversation and the subsequent mailing of an incorrect form, neither of which satisfied the written modification requirement or explicitly indicated it was for death benefit designation. The court further determined that a claim for breach of fiduciary duty lies only against an ERISA 'fiduciary.' Eunjae Lee, as a benefit analyst performing ministerial and clerical functions without discretionary authority, was not an ERISA fiduciary. While the Trustees are fiduciaries, there was no evidence they authorized, participated in, or knew of Lee’s misstatement, nor that they deliberately withheld information from her. Crucially, the Trustees had provided complete and accurate information in the Plan and Booklet to all participants. Therefore, absent a showing that the Trustees failed to exercise due care in hiring, retaining, or training Lee, they cannot be held liable for her negligent misrepresentation. Lastly, the court found that Richard received adequate notice of his appeal rights under 29 U.S.C. § 1133(2) and that the district court did not abuse its discretion in denying attorney’s fees to the defendants, as Richard’s position was substantially justified.
Analysis:
This case reinforces the strict adherence to written plan terms in ERISA, making it difficult for plaintiffs to succeed on estoppel claims based on oral misrepresentations, even if detrimental reliance is shown. It also clarifies the limits of fiduciary liability for the actions of non-fiduciary employees, emphasizing that fiduciaries are generally protected if they provide clear written plan documents and are not directly involved in the misstatement or negligent in hiring/training staff. Future cases involving similar facts will likely face an uphill battle in proving either estoppel or breach of fiduciary duty against plan trustees for errors by ministerial employees, provided the written plan documents are clear and accurate.
