Bloemker v. Laborers' Local 265 Pension Fund

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 10a0149p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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RICHARD L. BLOEMKER, LYNN G. BLOEMKER, X

Plaintiffs-Appellants, -

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No. 09-3536

v.

,

>

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LABORERS’ LOCAL 265 PENSION FUND,

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BOARD OF TRUSTEES LABORERS’ LOCAL 265

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PENSION FUND, STONER & ASSOCIATES,

Defendants-Appellees. -

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Appeal from the United States District Court

for the Southern District of Ohio at Cincinnati.

No. 07-00985—Michael R. Barrett, District Judge.

Argued: March 5, 2010

Decided and Filed: May 19, 2010

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Before: SILER and ROGERS, Circuit Judges; BELL, District Judge.

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COUNSEL

ARGUED: Robert Armand Perez, Sr., THE PEREZ LAW FIRM CO., L.P.A.,

Cincinnati, Ohio, for Appellants. Bernard William Wharton, McCASLIN, IMBUS &

McCASLIN, Cincinnati, Ohio, Patricia A. Shlonsky, ULMER & BERNE LLP,

Columbus, Ohio, for Appellees. ON BRIEF: Robert Armand Perez, Sr., THE PEREZ

LAW FIRM CO., L.P.A., Cincinnati, Ohio, for Appellants. R. Gary Winters,

McCASLIN, IMBUS & McCASLIN, Cincinnati, Ohio, Patricia A. Shlonsky, Rebecca

B. Jacobs, ULMER & BERNE LLP, Columbus, Ohio, Paul J. Cosgrove, ULMER &

BERNE LLP, Cincinnati, Ohio, for Appellees.

SILER, J., delivered the opinion of the court, in which ROGERS, J., joined.

BELL, D. J. (p. 12), delivered a separate dissenting opinion.

*

The Honorable Robert Holmes Bell, United States District Judge for the Western District of

Michigan, sitting by designation.

1

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OPINION

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SILER, Circuit Judge. Richard L. Bloemker1 received early retirement benefits

from his employer-sponsored ERISA plan. After Bloemker received benefits for nearly

two years, the actuary administering the plan notified Bloemker that the certified

benefits calculation was incorrect, his monthly payments would be decreased to reflect

the appropriate amount, and Bloemker would be required to repay the excess he had

received. Bloemker filed suit, alleging that the plan and the actuary had breached a

contractual agreement with him, that he detrimentally relied on the misrepresentations

of the defendants, and that they breached their fiduciary duties under the plan. The

district court dismissed Bloemker’s claims, and he timely appeals. For the reasons

explained herein, we affirm in part, reverse in part, and remand to the district court.

FACTUAL AND PROCEDURAL BACKGROUND

Bloemker worked as a laborer and was a member of the Laborers’ Local 265

Union (“the Union”). He participated in the Laborers’ Local 265 Pension Plan (“the

Plan”), a defined benefit ERISA plan, and had 27.9 years of service credit on January

10, 2005. The Plan provides that participants can be eligible for benefits when they take

normal retirement, early retirement, late retirement, or disability retirement. The Plan

sets out the requirements a participant must meet to be eligible for each of these forms

of retirement and provides formulas for calculating benefits under each of these options

using the participant’s information and actuarial calculations. Generally, an employee

is eligible for normal retirement when he reaches age 62 and has at least five years’

participation in the plan. A participant can become eligible for early retirement at as

early as age 55 if he has participated in the plan for at least five years. The proper

1

Richard is married to Lynn Bloemker, and under the Plan she is entitled to benefits as his spouse.

Both Richard and Lynn are plaintiffs in this action, and all claims and arguments asserted by Mr. Bloemker

are also asserted by his wife. Nevertheless, the singular form of Bloemker is used here.

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formula for calculating early retirement benefits under the Plan depends on the age of

the participant and his number of years with the Plan. The Plan provides participants

with annual benefits statements which estimate the benefits to which they would be

entitled at normal retirement age.

On January 10, 2005, Bloemker received his annual statement of status, which

estimated that if he retired he would be entitled to a monthly benefit pension of

$2,666.99. The statement also explained that this was only an estimate of benefits.

Based on this information, Bloemker contacted Jennifer Bielamowicz of Stoner &

Associates (“Stoner”), the third-party administrator of his plan, who acted as a pension

administrator, to discuss the possibility of early retirement. He received a letter from her

stating that if he were to retire on April 1, 2005, he would be eligible for “approximately

$2,564.00 per month, single life annuity, payable for your lifetime only.” The letter also

explained that once Stoner received an application, it would send Bloemker an estimate

of his joint and survivor benefits.

Bloemker applied for early retirement benefits on February 10, 2005, and

selected Basic Joint and Survivor as the type of his benefit. On March 1, 2005,

Bielamowicz drafted a document titled “Laborers’ Local #265 Pension Plan Benefit

Election Form” (“BEF”). The BEF was stamped by Stoner and contained a certification

stating:

Based on our records of your hours worked under the Plan and the

contributions which have been made on your behalf, we hereby certify

that you are entitled to receive the retirement benefit specified above, and

that the amount shown for any optional forms of payment are equivalent

to your basic benefit.

It stated that Bloemker would receive $2,339.47 per month for his life and that his wife

would receive $1,169.75 per month if she were still living after his death.

Bloemker commenced early retirement and began receiving benefits under the

Plan in the amount certified in the BEF. He later received a letter from Stoner on Plan

letterhead dated September 26, 2006, indicating that Stoner had recently conducted an

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audit and had determined that it may have erred in calculating his early retirement

benefits. In December 2006, he received another letter from Stoner. This letter

explained that “a computer programming error” caused it to incorrectly calculate

Bloemker’s early retirement benefits. It further explained that his benefit should be

$1,829.71 per month instead of the $2,339.49 per month he was currently receiving and

that his benefit amount would be reduced to $1,829.71 effective January 1, 2007. The

letter also stated that he had been overpaid the amount of $509.78 per month for 22

months and that he was required to repay the $11,215.16 that he was overpaid. It set out

several options for him to repay this amount including by making a single lump sum

payment or by having his monthly benefit reduced even further to account for the

overpayment.

Bloemker exhausted his administrative remedies under the Plan and commenced

suit. In his complaint Bloemker claims that he had a contract with the Plan, which was

executed through Stoner, for the larger amount of early retirement benefits. He argues

that the Plan and Stoner made material misrepresentations to him on which he relied to

his detriment. Finally, he contends that the Plan and Stoner breached their fiduciary

duties to him under ERISA. While Stoner and the Plan urged the district court that the

first two of these claims were preempted by ERISA, see Thurman v. Pfizer, Inc., 484

F.3d 855, 860 (6th Cir. 2007), the district court construed the first two claims as being

brought under ERISA rather than state law and accordingly not preempted.2 The district

court also construed the complaint as asserting a claim of equitable estoppel under

federal common law. The district court concluded that Bloemker could not make out a

contract claim or a claim to recover benefits under ERISA. It also held that Stoner was

not a fiduciary and that Bloemker failed to plead that the Plan or its Trustees breached

a fiduciary duty. Finally, the district court noted that estoppel claims were limited to

2

“ERISA preempts state laws that ‘relate to’ an employee benefit plan because Congress was

concerned that state laws might interfere with the administration and management of such plans.” Mello

v. Sara Lee Corp., 431 F.3d 440, 444 (5th Cir. 2005) (citing Shaw v. Delta Air Lines Inc., 463 U.S. 85, 96-

97 (1983)). Because we construe Bloemker’s complaint as stating claims under the statutory and federal

common law of ERSIA, even though his contract, misrepresentation, and estoppel claims are similar to

some state law claims, they are not preempted.

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welfare benefit plans, not retirement benefit plans like the one in question here, and that

even if Bloemker could bring an estoppel claim, his complaint failed to sufficiently

allege such a claim. The district court granted the Defendants’ motions to dismiss each

of the claims, and denied Bloemker’s motion for summary judgment as moot.

DISCUSSION

I. Equitable Estoppel

The district court construed Bloemker’s complaint as stating a claim for federal

common law equitable estoppel. We have recognized that “equitable estoppel may be

a viable theory in ERISA cases,” and have treated promissory estoppel in the same way.

Sprague v. Gen. Motors Corp., 133 F.3d 388, 403-04, 403 n.13 (6th Cir. 1998) (en banc).

Yet we have not previously recognized equitable estoppel as a viable claim in the

pension benefit—as opposed to the welfare benefit—context. See id. at 403 (citing

Armistead v. Vernitron Corp., 944 F.2d 1287, 1298 (6th Cir. 1991)). Our reluctance to

extend estoppel has been based on the following observation from Armistead:

[P]ension benefits are typically paid out of funds to which both

employers and employees contribute. Contributions and pay-outs are

determined by actuarial assumptions reflected in the terms of the plan. If

the effective terms of the plan may be altered by transactions between

officers of the plan and individual plan participants or discrete groups of

them, the rights and legitimate expectations of third parties to retirement

income may be prejudiced.

944 F.2d at 1300. Following a number of other circuits, we now conclude that this

interest is not sufficiently weighty to defeat estoppel claims in pension cases where the

representation was made in writing and where the plaintiff can demonstrate

extraordinary circumstances.

The Seventh Circuit has applied its ERISA estoppel rules, which include a

written representation requirement, to a case involving a pension. Kannapien v. Quaker

Oats Co., 507 F.3d 629, 636 (7th Cir. 2007). The Seventh Circuit has also recently

explained the importance—both in terms of the statutory language and in terms of

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ERISA policy—of requiring ERISA estoppel plaintiffs to rely on written promises. It

first noted that “ERISA plans must be ‘maintained pursuant to a written instrument.’”

Orth v. Wis. State Employees Union, Council 24, 546 F.3d 868, 872 (7th Cir. 2008)

(quoting 29 U.S.C. § 1102(a)(1)). The court then explained that its previous precedents

had established that the “main objection,” in policy terms, to oral modifications of

ERISA plans “is that they would enable the plan’s integrity, and possibly its actuarial

soundness, to be eroded by relatively low-level employees.” Id. (quoting Miller v.

Taylor Insulation Co., 39 F.3d 755, 758-59 (7th Cir. 1994)). This policy concern is

greatly lessened when the representations at issue are made in writing, and, particularly

here, where the representations constituted formal certifications. The formality of the

writing requirement thus lessens the danger discussed in Armistead that estoppel claims

could undermine the financial integrity of ERISA pension plans. See Armistead, 944

F.2d at 1299 (“[P]ermitting oral modification of pension plans would undermine the

security of pension rights, the goal Congress sought to serve by requiring that they be

put in writing.”)

The Second, Third, Fifth, and Ninth Circuits have also applied their ERISA

estoppel rules to pension cases; each of these circuits imposes an extraordinary

circumstances requirement.3 See Bonovich v. Knights of Columbus, 146 F.3d 57, 62-63

(2d Cir. 1998) (applying the Second Circuit’s estoppel rules to an ERISA pension

claim); Pell v. E.I. DuPont de Nemours & Co., 539 F.3d 292, 300-05 (3d Cir. 2008)

3

The First Circuit has not yet determined whether it will “recognize[] estoppel claims under

ERISA’s civil enforcement provisions.” Livick v. Gillette Co., 524 F.3d 24, 30-31 (1st Cir. 2008). The

Fourth Circuit considers waiver and estoppel to be “prohibited concepts” with respect to ERISA. Gagliano

v. Reliance Standard Life Ins. Co., 547 F.3d 230, 239 (4th Cir. 2008). The Eighth Circuit applies the

doctrine of estoppel to ERISA cases, Fink v. Union Cent. Life Ins. Co., 94 F.3d 489, 492 (8th Cir. 1996),

but we find no case from the Eighth Circuit applying, or refusing to apply, ERISA estoppel to a pension

claim. The Tenth Circuit has not recognized equitable estoppel in the context of ERISA, though it has

suggested that it might do so in an egregious case. Callery v. U.S. Life Ins. Co. in N.Y., 392 F.3d 401, 407-

08 (10th Cir. 2004). The Eleventh Circuit has applied (in an unpublished case) its ERISA estoppel rules

to a pension claim. Schena v. Metro. Life Ret. Plan for U.S. Employees, 244 F. App’x 281, 285 (11th Cir.

2007). Uniquely, the Eleventh Circuit does not apply either a written representation or an extraordinary

circumstances requirement, but it employs a comparatively rigid ambiguity requirement. See id. We find

no cases from the District of Columbia Circuit discussing the applicability of estoppel to ERISA actions.

We find no circuit that has recognized estoppel claims under ERISA but held those claims

categorically inapplicable to pension benefits. However, many of our sister circuits would reject the claim

at issue here on grounds other than the fact that it is a pension claim, including some circuits’ apparently

strict rules requiring ambiguity.

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(discussed in detail below); Mello v. Sara Lee Corp., 431 F.3d 440, 444-45 (5th Cir.

2005) (“explicitly adopting ERISA-estoppel as a cognizable theory” in a pension case);

Spink v. Lockheed Corp., 125 F.3d 1257, 1261-63 (9th Cir. 1997).

In Pell, the plaintiff Pell was employed by a company that became a DuPont

subsidiary. 539 F.3d at 297. Pell accepted a permanent position at DuPont based in part

on a representation to him that he would receive credit under the DuPont pension plan

for his time working for the subsidiary. Id. at 297-98. The DuPont pension plan credited

years of service from the first date of employment — for Pell, this was 1971. Id. After

Pell began working for DuPont, DuPont repeatedly informed Pell in written statements

that his beginning service date was 1971. Id. In 2001, when he retired, DuPont

determined that Pell’s actual beginning service date was 1975. Id. at 299. Pell sued

DuPont under ERISA, and the Third Circuit applied its rule that, “[t]o succeed under [an

equitable estoppel] theory of relief, an ERISA plaintiff must establish (1) a material

representation, (2) reasonable and detrimental reliance upon the representation, and

(3) extraordinary circumstances.” Id. at 300 (quoting Curcio v. John Hancock Mut. Life

Ins. Co., 33 F.3d 226, 235 (3d Cir. 1994)). The court held that the statements regarding

Pell’s beginning service date were material to his retirement and that his reliance on

those representations was reasonable, particularly in light of an email from a DuPont

pre-retirement counselor who, in response to a direct question from Pell, stated that his

beginning service date was 1971. Id. at 300-02. Pell demonstrated detrimental reliance

based on his forgoing of opportunities because of his expected pension. Id. at 303. The

Third Circuit held that “DuPont’s repeated affirmative misrepresentations, combined

with Pell’s diligence, demonstrate that there are extraordinary circumstances.” Id. at

304-05. It further held that the appropriate relief was an injunction requiring DuPont to

calculate Pell’s pension based on a beginning service date of 1971. Id. at 311.

In Spink, the plaintiff, Spink, was employed by Lockheed from 1939 to 1950.

125 F.3d at 1259. Then, in 1979, when Spink was 61 years old, Lockheed rehired Spink

and represented to him that he would accrue credited service time under Lockheed’s

pension plan. Id. From 1979 to 1984, Lockheed sent Spink notifications indicating that

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he was accruing credited service time, but in 1984 Lockheed notified Spink that he was

not eligible for participation in the pension plan due to a plan rule excluding employees

hired after their sixtieth birthday. Id. Spink sued Lockheed, asserting among other

claims that Lockheed was equitably estopped from denying him credit beginning in 1979

based upon Lockheed’s false representations about his pension eligibility. Id. at 1261.

The district court dismissed this claim on a motion to dismiss. Id. On appeal, the Ninth

Circuit held that

Spink must allege a material misrepresentation, reasonable and

detrimental reliance upon the representation, extraordinary

circumstances, that the provisions of the plan at issue were ambiguous

such that reasonable persons could disagree as to their meaning or effect,

and finally, that representations were made involving an oral

interpretation of the plan.

Id. at 1262. After a discussion that focused on the ambiguity requirement, the court

concluded that Spink had alleged sufficient facts to meet all of these requirements. Id.

at 1262-63. Following Pell and Spink, we hold that ERISA equitable estoppel applies

to pension plans where a plaintiff can demonstrate extraordinary circumstances in

addition to the traditional estoppel elements.

Under our precedent, the elements of an equitable estoppel claim are: 1) conduct

or language amounting to a representation of material fact; 2) awareness of the true facts

by the party to be estopped; 3) an intention on the part of the party to be estopped that

the representation be acted on, or conduct toward the party asserting the estoppel such

that the latter has a right to believe that the former’s conduct is so intended;

4) unawareness of the true facts by the party asserting the estoppel; and 5) detrimental

and justifiable reliance by the party asserting estoppel on the representation. Armistead,

944 F.2d at 1298 (citing Apponi v. Sunshine Biscuits, Inc., 809 F.2d 1210, 1217 (6th Cir.

1987)).

Bloemker has alleged a valid claim for equitable estoppel according to these

elements. He alleges that he received a document stating that he could elect a pension

benefit of $2,339.40 per month for life with an additional benefit of $1,169.75 per month

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for his wife after his death if she survived him. This document stated that Stoner

certified that Bloemker was entitled to receive that benefit. It clearly satisfies the first

estoppel requirement. The second element requires the plaintiff to demonstrate that the

defendant’s actions “contain[ed] an element of fraud, either intended deception or such

gross negligence as to amount to constructive fraud,” Crosby v. Rohm & Haas Co., 480

F.3d 423, 431 (6th Cir. 2007) (quoting Trs. of Mich. Laborers’ Health Care Fund v.

Gibbons, 209 F.3d 587, 591 (6th Cir. 2000)), which Bloemker has done by alleging that

the Plan and Stoner were aware of the true facts and that they intended for Bloemker to

rely upon their representations. These allegations also satisfy the third estoppel element.

Finally, Bloemker has alleged that he was not aware of the true facts, and that he relied

upon these misrepresentations when deciding to retire, which is sufficient to satisfy the

remaining elements of estoppel.

Nevertheless, we have previously held that estoppel “cannot be applied to vary

the terms of the unambiguous plan documents.” Sprague, 133 F.3d at 303. 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.

Id. Assuming the truth of Bloemker’s allegations, as we must on a motion to dismiss,

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007), the first of these rationales is

inapplicable. Bloemker alleges that it would have been impossible for him to determine

his correct pension benefit given the complexity of the actuarial calculations and his lack

of knowledge about the relevant actuarial assumptions. He has therefore alleged

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sufficient facts such that a fact finder could determine that his reliance on the

certification of his pension benefits was reasonable.

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.4 944

F.2d at 1299. 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.” Id. 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. Bloemker has alleged facts that could fulfill all of

these requirements; therefore, dismissal of his estoppel claim was not appropriate.

II. Fiduciary Duty

Because Flacche v. Sun Life Assurance Co., 958 F.2d 730 (6th Cir. 1992), is

controlling, we affirm the district court’s determination that Bloemker cannot assert a

claim for breach of fiduciary duty against any of the defendants.

4

We did not impose in Armistead the written representation requirement that we impose in this

case because Armistead involved a welfare rather than a pension benefit. See 944 F.2d at 1299-1300.

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III. Contract Claim

Section 1132(a)(1)(B) of ERISA provides that a plan beneficiary may bring suit

“to recover benefits due to him under the terms of his plan.” 29 U.S.C. § 1132(a)(1)(B).

As discussed above, the written ERISA plan documents govern the rights and benefits

of ERISA plan beneficiaries. Sprague, 133 F.3d at 402. Where a retirement plan creates

benefits in excess of those established by ERISA, however, those rights may be

enforceable in contract under federal common law. See Cattin v. Gen. Motors Corp.,

955 F.2d 416, 425 n.6 (6th Cir. 1992). Furthermore, when additional documents operate

to modify or amend the plan, a beneficiary can rely on those modifications to determine

his benefits. See Sprague, 133 F.3d at 403.

Here the written Plan documents provide the formula for calculating benefits to

which a beneficiary would be entitled depending on whether the beneficiary retired

early, on time, or late. The BEF signed by Bloemker did not purport to be an

amendment or a modification to the Plan. Nor did it purport to create a separate contract

for benefits in addition to those provided by the Plan. Instead, it simply claimed to

provide the actuarially certified benefit Bloemker was entitled to, based on the Plan.

Accordingly, the district court was correct to conclude that Bloemker cannot recover

benefits under § 1132 of ERISA based on a modification of the Plan or a separate

supplemental contract.

AFFIRMED IN PART, REVERSED IN PART, and REMANDED for further

proceedings consistent with this opinion.

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DISSENT

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ROBERT HOLMES BELL, District Judge, dissenting. I agree with the

desirability of a rule that permits an equitable estoppel claim to vary ERISA pension

plan provisions which, although unambiguous, do not allow for individual calculation

of benefits. Nevertheless, it appears that any rule that permits an equitable estoppel

claim to vary ERISA pension plan provisions that are unambiguous conflicts with the

rule announced in Sprague v. General Motors Co., 133 F.3d 388 (6th Cir. 1998) (en

banc), that estoppel cannot be applied to vary the terms of unambiguous provisions. Id.

at 404. Accordingly, until Sprague is overturned by an en banc panel of this Court or

the United States Supreme Court, I believe we are required to affirm the dismissal of

Bloemker’s equitable estoppel claim. United States v. Simpson, 520 F.3d 531, 540-41

(6th Cir. 2008) (quoting Darrah v. City of Oak Park, 255 F.3d 301, 309 (6th Cir. 2001));

6th Cir. R. 206(c).