Daniels v. Thomas & Betts Corp.

Opinions of the United

2001 Decisions States Court of Appeals

for the Third Circuit

8-24-2001

Daniels v. Thomas & Betts Corp

Precedential or Non-Precedential:

Docket 00-1974

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Filed August 24, 2001

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

NO. 00-1974

IDA K. DANIELS, Widow of Charles P. Daniels, Deceased

v.

THOMAS & BETTS CORPORATION; ELECTRICAL

DIVISION OF THOMAS & BETTS CORPORATION; JOHN

SCHIERER; JOHN DOES I-X; ABC CORPORATION, I-X

Thomas & Betts Corporation, Electrical

Division Of Thomas & Betts Corporation

and John Schierer,

Appellants

On Appeal From the United States District Court

For the District of New Jersey

(D.C. Civil Action No. 95-cv-00490)

District Judge: Honorable John W. Bissell

Argued February 6, 2001

BEFORE: BECKER, Chief Judge, AMBRO and

STAPLETON, Circuit Judges

(Opinion Filed: August 24, 2001)

Steven B. Varick (Argued)

McBride, Baker & Coles

500 West Madison Street, 40th Floor

Chicago, IL 60606

Steven R. Weinstein

Dunetz Marcus

354 Eisenhower Parkway

Plaza II, Suite 1500

Livingston, NJ 07039

Attorneys for Appellants

John M. Esposito (Argued)

Unit A2

870 Pompton Avenue

Canfield Office Park

Cedar Grove, NJ 07009

Attorneys for Appellee

OPINION OF THE COURT

STAPLETON, Circuit Judge:

Appellee/Plaintiff Ida K. Daniels ("Mrs. Daniels"), widow

of Charles P. Daniels ("Mr. Daniels"), sued her husband's

former employer, Thomas & Betts Corporation ("T&B"), for

breach of fiduciary duty, delay in providing ERISA plan

documents, and attorney's fees. She alleged inter alia that

T&B materially misled Mr. Daniels into believing that he

had 1.5 times his annual salary in supplemental life

insurance in addition to the one times annual salary life

insurance T&B provided Mr. Daniels as an employment

benefit.

The District Court granted Mrs. Daniels' motion for

summary judgment as to liability on the breach of fiduciary

duty claim. It further held, however, that there were

genuine issues of material fact as to the type of equitable

relief that should be awarded as a result of that breach.

The District Court also granted Mrs. Daniels summary

judgment on her claim that T&B failed for 291 days to

provide her plan documents in violation of S 104(b)(4) of

2

ERISA, 29 U.S.C. S 1024(b)(4). It awarded her the maximum

statutory penalty of $100 per day, or $29,100.

The District Court referred the determination of equitable

relief on the breach of fiduciary duty claim to an arbitrator

who subsequently awarded Mrs. Daniels $40,545.

Thereafter, the District Court approved an attorney's fees

award of $34,482.28 and entered final judgment in the

amount of $104,127.28, plus interest and taxable costs.

T&B appeals. We will reverse the judgment of the District

Court and remand for further proceedings consistent with

this opinion.

I.

Mr. Daniels worked for T&B from 1955 until his death

from cancer in 1993. Prior to 1993, Mr. Daniels received life

insurance in the amount of one times his annual salary at

T&B's expense as an employment benefit. Also prior to

1993, Mr. Daniels elected to supplement this insurance by

purchasing group life insurance having a face value of 1.5

times his annual salary. The premiums for this

supplemental insurance were the same without regard to

the employee's age and were deducted from the employee's

paycheck.

T&B changed its insurance carrier and, concomitantly,

the structure of its life insurance benefits, effective

January, 1993. Under the new plan (the "MetLife plan"),

T&B continued to provide at its expense life insurance in

the amount of one times annual salary as an employment

benefit. Employees could continue to purchase

supplemental life insurance, but now only in whole (rather

than fractional) multiples of salary. Moreover, the

premiums for this supplemental coverage were "age-

banded" so that they increased with the employee's age.

In the fall of 1992, Mr. Daniels became ill and took a

medical leave from T&B. In early December, T&B sent Mr.

Daniels a number of documents explaining the life

insurance benefits changes that would become effective on

January 1, 1993. The information packet began with a

memorandum from John Schierer, T&B's Manager of

3

Employee Relations, to "ALL OFFICE EMPLOYEES." With

regard to life insurance, the memo stated that:

Life Insurance Maximums will be increased to a

maximum of five times base salary on [sic] $500,000

whichever is less. Thomas & Betts will continue to

provide one times base salary free of charge. Additional

multiples will be available on an age-banded basis.

Details are attached.

The first attached document is entitled, "OPEN

ENROLLMENT / GROUP TERM LIFE INSURANCE /

EFFECTIVE JANUARY 1, 1993." The document again

explains that T&B "will provide salaried employees one

times their base salary in group term life insurance to a

maximum $500,000." The document then sets forth the

following two paragraphs which give rise to this suit:

If you currently have supplemental coverage, you will

be grandfathered up to your current amount. If your

current coverage amount is less than 5 times base

salary, you then have the option of electing an

additional 1 times base salary up to an incremental

$100,000 without additional proof of insurability.

Employees who do not currently have supplemental

coverage will be guaranteed coverage for 2 times base

salary up to $200,000. Proof of insurability will be

required for the additional coverage chosen in excess of

2 times.

An additional document, entitled "LIFE INSURANCE,"

further explains T&B's employees' supplemental life

insurance benefits as follows:

In addition to your Basic Life Insurance, you may

purchase Supplemental Life Insurance by enrolling in

the program and paying the required premium.

Amount of Coverage

You may purchase Supplemental Life Insurance in

amounts of one, two, three, four or five times your base

salary.

On December 20, 1992, Mr. Daniels met with Schierer.

Mr. Daniels asked a number of questions about his

4

benefits, none of which related to supplemental life

insurance. In the context of his health care benefits, Mr.

Daniels expressed an interest in increasing his take-home

pay in light of the layoff T&B had warned him he would

soon face. At some point during the conference, Mr. Daniels

executed a "Group Insurance Enrollment/Change Form."

The form provided an option for "Your Supplemental Life

Insurance" and stated, "I wish to purchase Supplemental

Life Insurance in the amount indicated below.*" The

possible choices were "None," "1 time,""2 times," "3 times,"

"4 times," and "5 times my annual earnings." The "asterisk"

footnote stated: "I understand that I may have to provide

medical evidence of insurability before this coverage

becomes effective." Mr. Daniels placed an "X" in the blank

next to "None."

In her deposition, Mrs. Daniels testified to statements Mr.

Daniels made after the December 20 meeting that tended to

show what he thought he had done with respect to his

supplemental life insurance. Mrs. Daniels testified that

after the terminal nature of her husband's condition

became known in January, 1993, he told her "four or five

times" that she would receive 2.5 times his salary in life

insurance benefits. She further testified that subsequent to

the new benefits plan becoming effective, her husband

reviewed his payroll deductions for a supplemental life

insurance entry and, finding one, told her that"it was in

order."1

_________________________________________________________________

1. Mr. Daniels' January 14, 1993, pay statement showed an insurance

deduction in the same amount as his prior statements. His February 11,

1993, pay statement appears to contain a $50.97 insurance deduction;

that amount is listed under the heading "Deduction Type." Despite this

entry's appearance, it is in fact a credit. The pay statement itself

contains no visible indicia that this entry, listed as it is below the

heading "Deduction Type" and next to other, true deductions, is in fact

a credit. One only discovers that this entry is in fact a credit if one

takes

Mr. Daniels' February 11, 1993, gross pay and actually calculates his

net pay. Mr. Daniels' March 15, 1993, pay statement, issued four days

after his death, shows no deduction for supplemental insurance.

T&B explains that because it had not implemented all of the MetLife

benefits changes as of Mr. Daniels' January 14, 1993, paycheck, it

erroneously deducted $20.54 for supplemental life insurance. Although

T&B is correct that the February 13, 1993, entry is in fact a credit and

not a deduction, it points to no record evidence to support its

explanation of what necessitated this pay adjustment.

5

After Mr. Daniels' death, Mrs. Daniels received payment

of $53,000, representing one times her husband's annual

salary. Mr. Daniels' son, Charles, Jr., asked Schierer if the

family was entitled to any additional life insurance benefits

in light of the supplemental life insurance his father had

been electing. Schierer produced the form on which Mr.

Daniels had marked "None" and informed the Daniels that

there were no additional life insurance benefits. Mrs.

Daniels then obtained counsel who, on September 29,

1994, wrote to T&B and requested "all benefit plan

document [sic] or plan summaries which explain any and

all plan terms, benefits, and procedures applicable to

benefits available to Mr. Daniels." T&B did not respond to

Mrs. Daniels' attorney's request until July 17, 1995, 291

days later.

II.

The District Court held that T&B, as the administrator of

an ERISA plan, had a fiduciary duty not to "materially

mislead those to whom the duty of loyalty and prudence are

owed." App. at 16 (quoting from In re Unisys Corp. Retiree

Med. Benefit "ERISA" Litig., 57 F.3d 1255, 1261 (3d Cir.

1995)). A misrepresentation, it explained, is material if

"there is substantial likelihood that it would mislead a

reasonable employee into making" a decision to his or her

detriment. Id. T&B does not dispute that it had a fiduciary

duty; it does dispute that it breached that duty.

The District Court concluded that T&B made a material

misrepresentation to Mr. Daniels. As the Court succinctly

put it:

The Court concludes that defendants made a

material misrepresentation to Mr. Daniels when they

stated in documents sent to him to explain the change

in benefits: "If you currently have supplemental

coverage, you will be grandfathered up to your current

coverage amount." (Esposito Cert., Exh. F). Black's Law

Dictionary defines "grandfather clause," in relevant

part, as: "Provision in a new law or regulation

exempting those already in or a part of the existing

system which is being regulated." (Id.) On its face,

6

defendants' statement conveyed that employees who

already had supplemental insurance coverage would be

exempted from the changes to defendants' policy.

* * *

There is no elaboration on this grandfather clause

anywhere in the remainder of the explanatory

memorandum where that sentence is found or in the

other information defendants provided to Mr. Daniels,

i.e., the cover memorandum, the enrollment form, and

the information Mr. Schierer says he conveyed to Mr.

Daniels at the December 20, 1992 meeting.

* * *

Defendants' statement that "[i]f you currently have

supplemental coverage, you will be grandfathered up to

your current coverage amount" was a material

misrepresentation. (Esposito Cert., Exh. F). In fact,

employees who already had supplemental insurance

were not grandfathered up to their current coverage

amounts. Instead, they had to elect to be

grandfathered up to those amounts . . . .

App. at 17, 17-18, 18.

In the District Court's view, this finding of a material

misrepresentation by an ERISA fiduciary was sufficient

alone to warrant summary judgment against T&B "as to

[its] liability." App. at 36. The Court made no finding as to

whether Mr. Daniels actually relied on T&B's

misrepresentation. Instead, it concluded that "genuine

issues of material fact remain as to the type of equitable

relief that should be awarded." In the course of so

concluding, the District Court acknowledged that Mr.

Daniels may not have relied upon the misrepresentation at

all; instead, Mr. Daniels may have "purposely elected not to

continue to pay for supplemental insurance." On the other

hand, the Court observed, the evidence would support an

inference that the "grandfathered" misrepresentation led

Mr. Daniels to believe that he did not have to do anything

to continue his existing supplemental insurance and that

he should check "None" on the enrollment form to indicate

that he did not wish to purchase any additional

supplemental insurance.

7

The arbitrator explicitly acknowledged that the District

Court had yet to find reliance: "This case boils down to the

following questions. Did the grandfather clause cause the

decline of the supplemental plan under the new policy and

if so what is the remedy?" Having recognized the unresolved

reliance issue, the arbitrator stated cursorily,"Considering

the pros and cons of each party's argument makes[this] a

case which should be decided equitably." The arbitrator

then summarily awarded Mrs. Daniels $40,545 (or fifty-one

percent of her desired recovery) plus costs.

With respect to appellees' claim that T&B violated 29

U.S.C. S 1024(b)(4) by refusing to comply with a request for

the "instruments under which [an ERISA] plan is

established or operated," the District Court held that: (1) a

request from the attorney of a participant or beneficiary

triggers the statutory duty to respond; and (2) Mrs. Daniels

was a "beneficiary" as defined in ERISA at the time of her

attorney's request even though she had previously received

all of the insurance proceeds she was entitled to receive

under the MetLife Plan. The District Court then noted that

T&B had offered no excuses for its failure to provide the

documents other than the legal arguments the Court had

just rejected and pointed out that there had not even been

a response to Mrs. Daniels asserting these legal positions.

As a result, it imposed penalties of $100 per day for the

291 days T&B had refused to respond.2

_________________________________________________________________

2. The District Court had jurisdiction pursuant to 28 U.S.C. S 1331 and

29 U.S.C. S 1132(f).

This court has jurisdiction pursuant to 28 U.S.C.S 1291. We reject

Mrs. Daniels' argument that 28 U.S.C. S 657(a) deprives this court of

jurisdiction to hear this appeal. Section 657(a) provides that arbitration

awards made under Chapter 44 of Title 28 "shall be entered as the

judgment of the court after the time [30 days] has expired for requesting

a trial de novo. The judgment so entered shall be subject to the same

provisions of law and shall have the same force and effect as a judgment

of the court in a civil action, except that the judgment shall not be

subject

to review in any other court by appeal or otherwise ." (emphasis added).

The arbitrator's award was entered on November 8, 1999, and T&B filed

its demand for a trial de novo twenty-nine days later on December 7,

1999. In its notice demanding trial de novo, T&B stated that it only

wished to preserve its right to challenge the District Court's liability

8

III.

Both sides claim to be entitled to summary judgment

with respect to T&B's liability on the breach of fiduciary

duty claim. Moreover, T&B insists that, even if it is not

entitled to such a summary judgment, the issue of liability

must be tried. In order to resolve these contentions and the

arguments addressed in support of them, we must

determine: (1) whether there is a material dispute of fact as

to whether T&B made a material misrepresentation; (2)

whether detrimental reliance is an essential element of Mrs.

Daniels' case on liability and, if so, whether there is a

material dispute of fact as to whether Mr. Daniels relied on

the "grandfathered" statement; and (3) whether summary

judgment could properly be entered against T&B on the

liability issue in the alleged absence of any evidence

tending to show that it was aware of confusion on Mr.

Daniels' part.

Mrs. Daniels' claim is that T&B breached its fiduciary

duty by misrepresenting that existing supplemental

insurance would be "grandfathered." We have reviewed the

elements of such a claim in two recent decisions, Adams v.

Freedom Forge Corp., 204 F.3d 475 (3d Cir. 2000), and In

re Unisys Corp. Retiree Medical Benefit "ERISA" Litigation,

_________________________________________________________________

determinations on both the breach of fiduciary duty and S 1024(b)(4)

claims. T&B stipulated that "[t]o the extent . . . that the arbitration

award determined only the amount of the remedy to be awarded to [Mrs.

Daniels], . . . [T&B] do[es] not demand trial de novo and will accept

$40,545 as a reasonable calculation of the remedy, subject to [T&B's]

right to appeal the underlying issues of liability."

We have some question as to whether S 657(a) or Local Civil Rule

201.1 (the authority the arbitrator purported to exercise) can be read to

authorize referral to arbitration of an issue , as opposed to an action or

a claim. We need not determine that issue, however, because even if

those provisions are understood to authorize such a referral, they should

not be read to bar appellate review of issues that were adjudicated by the

court and not by the arbitrator. At least where a party makes it clear, as

did T&B, that it intends to preserve its right to appeal issues resolved

by

the court, neither Section 657(a) nor Local Civil Rule 201.1 precludes

our exercise of jurisdiction under 28 U.S.C. S 1291 to review issues that

were not resolved by the arbitrator.

9

242 F.3d 497 (3d Cir. 2001) [hereinafter Unisys III]. In

Adams, we stated:

An employee may recover for a breach of fiduciary

duty [under ERISA] if he or she proves that any

employer, acting as a fiduciary, made a material

misrepresentation that would confuse a reasonable

beneficiary about his or her benefits, and the

beneficiary acted thereupon to his or her detriment.

Id. at 492; see also Unisys III, 242 F.3d at 505 (quoting

Adams and noting that it elucidates "the elements of a

breach of fiduciary claim"). Following Adams and Unisys III,

it is thus clear that, in order to make out a breach of

fiduciary duty claim of the kind here asserted, a plaintiff

must establish each of the following elements: (1) the

defendant's status as an ERISA fiduciary acting as a

fiduciary; (2) a misrepresentation on the part of the

defendant; (3) the materiality of that misrepresentation; and

(4) detrimental reliance by the plaintiff on the

misrepresentation.

Like the District Court here, we explained in Adams that

a misrepresentation is material if there is a substantial

likelihood that it would mislead a reasonable employee in

making a decision regarding his benefits under the ERISA

plan. See id. "Summary judgment on the`question of

materiality' is appropriate only if `reasonable minds cannot

differ.' " Fischer v. Phila. Elec. Co., 994 F.2d 130, 135 (3d

Cir. 1993) (quoting from TSC Indus., Inc. v. Northway, Inc.,

426 U.S. 438, 450 (1976)).

A. Material Misrepresentation

The portion of T&B's explanatory materials on which Mrs.

Daniels primarily bases her case is set forth again in the

margin for the reader's convenience.3 Mrs. Daniels

_________________________________________________________________

3. If you currently have supplemental coverage, you will be

grandfathered up to your current amount. If your current coverage

amount is less than 5 times base salary, you then have the option

of electing an additional 1 times base salary up to an incremental

$100,000 without additional proof of insurability.

Employees who do not currently have supplemental coverage will

be guaranteed coverage for 2 times base salary up to $200,000.

Proof of insurability will be required for the additional coverage

chosen in excess of 2 times.

10

emphasizes that this portion advises someone in Mr.

Daniels' position that his existing supplemental coverage

"will be grandfathered up to your current amount." This

clearly connotes, in her view, that existing supplemental

insurance would continue unaffected by the new plan and

that it would do so without further action on the part of the

employee. While she acknowledges that this advice is

followed by information about proof of insurability, she

points out that everything following the first sentence

expressly refers only to "additional" supplemental coverage

or to "employees who do not currently have supplemental

coverage." She insists that the notion that no action was

required on the part of an employee who wished to continue

only existing coverage was confirmed by the fact that the

election form signed by Mr. Daniels provided an

opportunity to elect coverage of only 1, 2, 3, 4 or 5 times

earnings but provided no way to elect continuation of

coverage of 1.5, 2.5, 3.5 or 4.5 times earnings. This aspect

of the form clearly suggested that its purpose was to

provide an opportunity to purchase supplemental

insurance in "addition" to existing coverage, a suggestion

that is supported by the footnote indicating that, whichever

election was made, it might be subject to proof of

insurability.

T&B counters by insisting that, in the context of its

material as a whole, there was no significant risk that a

reasonable employee would receive the understanding for

which Mrs. Daniels contends. It emphasizes that under the

old program, as well as the new, the "Basic Life Insurance"

provided at T&B's expense was the only thing that was

automatic and that supplemental insurance at the

employee's expense had to be elected annually by him or

her. It points out that Mr. Schierer's covering letter, which

explains supplemental coverage and its cost to the

employee, begins by stating, "It is once again time to make

your Benefit Choices for 1993. Please note that you will

have the following choices effective 1/1/93." App. at 56.

T&B further notes that in the accompanying materials, the

Basic Life Insurance is the only thing described as

"automatic," and supplemental coverage is consistently

described as elective.4 The term"grandfathered" appears

_________________________________________________________________

4. "You are automatically covered for Basic Life Insurance . . . . You are

also eligible to purchase Supplemental Life Insurance . . . ." App. at 59.

11

only once in this overall general context of elective

supplemental coverage and then only in the specific context

of proof of insurability. As a result, T&B argues that no

reasonable employee was likely to conclude from its

materials that supplemental insurance under the old

program was being imposed on employees at their own

expense with no opportunity provided on the form for

opting out. The reasonable inference to be drawn from the

materials, T&B insists, is that "grandfathered" referred to a

right to elect to continue existing coverage without proof of

insurability and that the only opportunities available for

supplemental coverage were those provided for on the form,

with those employees who had existing supplemental

coverage being entitled to elect supplemental coverage

without proof of insurability not to exceed existing

supplemental coverage, i.e., in Mr. Daniels' case, 1 times

earnings, since 2 times earnings would exceed his existing

supplemental coverage of 1.5 times earnings.

We conclude that the message conveyed by the materials

as a whole is a matter about which reasonable minds could

differ. Accordingly, we conclude that summary judgment

was entered contrary to the teachings of Fischer .

B. Detrimental Reliance

Mrs. Daniels claims that she is in a worse position than

she would have been in if T&B had not made its

"grandfathered" statement and seeks relief on that basis.

Consistent with the above discussion of the elements of

such a breach of fiduciary duty claim and contrary to the

conclusion of the District Court here, she is not entitled to

relief unless she can establish that her failure to receive

more than $53,000 was attributable to Mr. Daniels' reliance

on the alleged misrepresentation, i.e., that he wished his

1.5 times earnings coverage to continue and failed to

effectuate that wish because he was misled by T&B's

"grandfathered" statement. See also Unisys III, 242 F.3d at

505. It necessarily follows that the District Court erred in

entering summary judgment against T&B on the issue of its

liability for breach of fiduciary duty without the required

finding of uncontroverted evidence of detrimental reliance.

12

T&B asks that we remand with instructions to enter

summary judgment in its favor because there is no

competent evidence from which a trier of fact could find

detrimental reliance by Mr. Daniels. Finding that there is a

material dispute of fact on this issue, we decline to so

instruct the District Court.

We believe that a trier of fact, having concluded that

T&B's grandfathering statement held a substantial risk of

misleading one in Mr. Daniels' position, could infer from

this record that he intended for his supplemental insurance

to continue and failed to effectuate that intent because the

grandfathering statement led him to check "None" on the

form and to take no other steps to elect new supplemental

coverage under the MetLife plan. Mrs. Daniels' testimony

that her husband assured her in January of 1993 that he

had coverage amounting to 2.5 times earnings and that the

deduction from his pay for supplemental insurance was in

order would clearly support the conclusion that he desired

to have his supplemental coverage continue and that he

believed it was continuing. This could be viewed as

consistent with his having checked "None" only if he

mistakenly believed that the election form was directed to

additional supplemental insurance and that continuing

existing coverage required no further action on his part.

Since this mistaken belief is precisely the risk that the trier

of fact would have previously found inherent in T&B's

"grandfathered" statement, a conclusion of a causal

connection between the two could naturally follow.

On the other hand, a conclusion of detrimental reliance

is not mandated by this record. It would also support an

inference that Mr. Daniels, facing a period of

unemployment, wanted to reduce the deductions from his

pay and checked "None" in order to accomplish that

objective.

C. T&B's Knowledge of Confusion

T&B insists that it can have no liability for a breach of

fiduciary duty in the absence of evidence of knowledge on

its part "that Mr. Daniels was confused when he declined to

purchase supplemental life insurance." Appellants' Br. at

13

14. Finding no such evidence, T&B urges us to direct the

entry of summary judgment in its favor.

Again, as the above discussion of the elements of Mrs.

Daniels' breach of fiduciary duty claim indicates, if an

employee proves that an employer, acting as a fiduciary,

made an inaccurate statement holding a substantial

likelihood of misleading a reasonable employee into making

a harmful decision regarding benefits, and that he relied to

his detriment on that statement in making such a decision,

the employee is entitled to equitable relief. If the statement

creates a substantial risk of misleading a reasonable

employee, it is foreseeable that an employee will be misled

to his detriment. That foreseeability and reasonable reliance

by a beneficiary are all that is required. See Unisys III, 242

F.3d at 507-10. In such circumstances, we have never

required a showing that the employer had actual knowledge

that a particular employee was about to be misled.

As we noted in Unisys III, there are situations in which

the employer's knowledge of an employee's knowledge and

understanding is important to the liability issue. Most

frequent are those situations in which an employer has not

affirmatively misled the employee but has failed to provide

the employee information which the employer knows the

employee needs in order to protect himself from harm. See

Bixler v. Central Pa. Teamsters Health & Welfare Fund, 12

F.3d 1292, 1300 (3d Cir. 1993) (finding a fiduciary duty on

the part of an employer to communicate to the beneficiary

material facts affecting the interest of the beneficiary which

the employer knows the beneficiary does not know and

which the beneficiary needs to know for his protection). In

such a situation, harm to the beneficiary may not be

reasonably foreseeable in the absence of employer

knowledge of the employee's knowledge and understanding.

See Unisys III, 242 F.3d at 509. Where the fiduciary makes

an affirmative statement that creates a substantial

likelihood of injury to a reasonable beneficiary, however,

any harm occasioned by the detrimental reliance on the

affirmative misrepresentation is foreseeable and gives rise

to liability.

Contrary to T&B's suggestion, neither International Union,

United Automobile, Aerospace & Agricultural Implement

14

Workers, U.A.W. v. Skinner Engine Company, 188 F.3d 130

(3d Cir. 1999), nor In re Unisys Corp. Retiree Medical

Benefit "ERISA" Litigation, 57 F.3d 1255 (3d Cir. 1995)

[hereinafter Unisys II], holds that knowledge of employee

confusion is an element of a breach of fiduciary duty claim

like that made by Mrs. Daniels. Those cases, like Bixler,

involved situations in which the plan administrator

allegedly failed to provide complete and adequate

information when it knew that such information was

necessary to avoid harm to beneficiaries. The portions of

the opinions in those cases to which T&B directs our

attention do not involve claims of affirmative

misrepresentation. See, e.g., Skinner , 188 F.3d at 150

("[T]here is no competent evidence which suggests that the

company made any affirmative misrepresentations

concerning the duration of retiree benefits."); id. at 148,

150 (characterizing the plaintiffs as arguing that the

defendant breached its fiduciary duty "by failing to inform

them that the CBAs did not provide lifetime welfare

benefits" and "by failing to correct the retirees' mistaken

belief ") (emphasis added); Unisys II, 57 F.3d at 1265 n.15,

1266 ("[W]e hold that the district court did not err as a

matter of law in concluding that the duty to convey

complete and accurate information that was material to its

employees' circumstance arose from these facts since the

trustees had to know that their silence might cause

harm.").

IV.

Section 1024(b)(4) of Title 29 provides in relevant part

that "[t]he administrator shall, upon written request of any

participant or beneficiary, furnish a copy of the . . .

instruments under which the plan is established or

operated." T&B insists that the judgment entered by the

District Court against it must be reversed because (1) a

written request from an attorney purporting to represent a

participant or beneficiary does not trigger the duty to

respond unless it is accompanied by written authorization

from the client; (2) Mrs. Daniels was not a "beneficiary," as

that term is used in ERISA; and (3) the amount of the

penalty imposed constitutes an abuse of discretion.

15

A. Sufficiency of the Request

As we noted in Bruch v. Firestone Tire and Rubber Co.,

828 F.2d 134, 153 (3d Cir. 1987), "ERISA's legislative

history makes clear that Congress intended the

information-producing provisions to enable claimants to

make their own decisions on how best to enforce their

rights." We conclude that this objective will be best served

by a rule that a representation by an attorney that he is

making a request on behalf of a participant or beneficiary

triggers the duty to respond under S 1024(b)(4) when the

administrator has no reason to question the attorney's

authority. In the rare case where the administrator has

reason to question that authority, it can respond by

requesting further evidence. The objective of the statute

would be ill served, however, by permitting administrators

to refuse to respond with no indication that authority is

even an issue. We believe the facts of this case forcefully

compel that conclusion.

T&B has asked that we defer to the interpretation of

S 1024(b)(4) that it finds in the Department of Labor's

Advisory Opinion Letter 82-021A. That letter addressed a

request for documents by a non-attorney third party. In

that context, the Department gave the following advice:

[I]f information is required to be furnished to a

participant or beneficiary under section 104(b)(4)[29

U.S.C. S 1024(b)(4)], the information must also be

furnished to a third party where the participant or

beneficiary has authorized in writing the release of the

information to such third party. Absent such

authorization, it is the Department's view that a plan is

not required by section 104 of ERISA to provide such

information to persons who are neither participants

nor beneficiaries.

See Bartling v. Fruehauf Corp., 29 F.3d 1062, 1072 (6th Cir.

1994). While we agree with this advice as applied to non-

attorney third parties, we believe an attorney's

representation regarding the authority conferred upon him

or her by the client adds a material factor not present in

the situation the Department was addressing. The law has

traditionally accepted such representations in the absence

16

of reason to question them,5 and the statutory objective

behind S 1024(b)(4) counsels in favor of accepting them

here. For this reason, we respectfully disagree with the

conclusion reached by the Sixth Circuit Court of Appeals in

Bartling. See Moothart v. Bell, 21 F.3d 1499, 1503-04 (10th

Cir. 1994) (recognizing an attorney's letter similar in all

material respects to that of Mrs. Daniels' attorney as

constituting a "request" under the statute and triggering a

duty to respond).

B. "Beneficiary"

Even if a letter from a lawyer on behalf of a beneficiary is

sufficient to implicate S 1024(b)(4), the attorney must still

write on behalf of either a "participant" or a"beneficiary."

Mr. Daniels, not Mrs. Daniels, was the participant; to

invoke the protection of S 1024(b)(4), Mrs. Daniels, then,

must be a beneficiary.

Section 1002(8) of Title 29 defines an ERISA "beneficiary"

as "a person designated by a participant, or by the terms of

an employee benefit plan, who is or may become entitled to

a benefit thereunder." This requires that we resolve two

issues: (1) what constitutes a relevant "benefit"?; and (2)

when does an individual making a request for plan

documents qualify as "a person . . . who is or may become

entitled" to such a benefit?6

_________________________________________________________________

5. See Graves v. United States Coast Guard , 692 F.2d 71, 74 (9th Cir.

1982) ("The designation `attorney for Leonard Graves' [on an

administrative Tort Claims Act claim] is particularly important in view of

the body of case law holding that the appearance of an attorney for a

party raises a presumption that the attorney has the authority to act on

that party's behalf.") See also Anderson v. Flexel, Inc., 47 F.3d 243, 249

(7th Cir. 1995) (recognizing in the context of an attorney's request under

S 1024(b)(4) "the existence of the long-standing legal presumption that an

attorney has authority to act on behalf of the person he" purports to

represent).

6. Mrs. Daniels brought her breach of fiduciary duty claim under 29

U.S.C. S 1132(a)(3) which provides in part that a "civil action may be

brought . . . by a participant, beneficiary or fiduciary . . . to obtain .

. .

appropriate equitable relief . . . to redress . . . violations" of ERISA.

T&B

does not contend that Mrs. Daniels fails to qualify as a beneficiary under

this section, and we thus have no occasion to address the relationship

between it and section 1002(8).

17

With regard to the first of these two questions, the

specific relief that Mrs. Daniels seeks in the instant case--

damages stemming from T&B's alleged breach of fiduciary

duty--does not constitute a "benefit" within the meaning of

S 1002(8). The Ninth Circuit Court of Appeals came to this

same conclusion in Kuntz v. Reese, 785 F.2d 1410, 1411

(9th Cir. 1986), in which the court observed: "The . . .

plaintiffs do not allege that their vested benefits were

improperly computed, rather they allege breach of fiduciary

duty or of a duty to disclose information about benefits,

thus any recoverable damages would not be benefits from

the plan."

Consequently, if we were to assess "beneficiary" status as

of the time of the present appeal, Mrs. Daniels would not be

a "beneficiary" and, therefore, would not be entitled to lodge

a request for plan documents to which T&B would be

legally obligated to respond. As of the time of the present

appeal, Mrs. Daniels presses only a claim for damages

stemming from T&B's alleged breach of fiduciary duty. Any

recovery Mrs. Daniels would receive as a consequence of

the present cause of action for fiduciary breach would come

out of T&B's pocket (i.e., on the theory that T&B made

materially misleading statements about the plan), and not

out of MetLife's (i.e., on the theory that the plan's

provisions entitle Mrs. Daniels to payment pursuant to its

terms).

We conclude, however, that ERISA beneficiary status

should not be measured as of the time of the present

appeal. Instead, the temporal focus of the "beneficiary"

inquiry should be the time the request for plan documents

was made. An individual who "is . . . entitled" to a plan

benefit or who "may become entitled" to such a benefit, as

of the time that individual makes the request of the plan

administrator, thus constitutes a "beneficiary."

As of the time of her request, Mrs. Daniels had no reason

to believe that events would happen in the future which

would entitle her to a benefit, i.e., that she would "become

entitled" at some future date. The issue for decision is thus

narrowed to whether Mrs. Daniels was "entitled" to a plan

benefit on September 29, 1994, when her request for

documents was made. In order for her to be "entitled," it is

18

not necessary that she establish that she had a meritorious

claim; it is sufficient if she demonstrates that she had a

"colorable claim that . . . she will prevail in a suit for

benefits." Firestone Tire & Rubber Co. v. Bruch, 489 U.S.

101, 117 (1989). We conclude that she had such a claim.

As we have recounted, Mrs. Daniels had been told by her

husband shortly before his death that he had life insurance

through his employer's plan in the amount of 2.5 times his

annual salary. He was in a position to have personal

knowledge of this matter and had an interest in accurately

advising her regarding it. As of September 29th, Mrs.

Daniels knew she had received materially less than 2.5

times Mr. Daniels' salary in insurance proceeds. While her

son had been shown the group insurance election form, its

significance could not be reliably assessed in isolation. With

this knowledge, we conclude that Mrs. Daniels had a

colorable claim to additional insurance proceeds and that

Congress intended that she have access to the documents

necessary to determine whether she had a meritorious

claim as well as a colorable one. The concept of a colorable

claim necessarily encompasses situations in which the

requester has a reasonable basis for believing that he or

she has a meritorious claim but is in fact mistaken. If Mrs.

Daniels' situation on September 29th were not one of these,

we would have difficulty hypothesizing one.

It is true, as T&B stresses, that the letter of Mrs. Daniels'

attorney was consistent with her contemplating a breach of

fiduciary duty claim.7 We do not believe, however, that one

in Mrs. Daniels' position should be held to have made an

election of remedies based on the precise wording of a letter

seeking access to the information necessary to make an

informed decision regarding available remedies. If an

administrator has concerns about whether someone

_________________________________________________________________

7. One paragraph of the letter reads as follows:

We are representing the family on their claims for damages

concerning the actions of Thomas & Betts, and its employees,

resulting in the denial of life insurance benefit payments on life

insurance benefits that were provided to Mr. Daniels prior to his

death.

App. at 69.

19

requesting access lacks a colorable claim, it is free to ask

for the facts upon which a claim to a benefit is being made.

If, like T&B, it fails to do so, it proceeds at its own risk.

C. The Penalty

Section 1132(c) provides that, in the court's discretion, a

plan administrator may be required to pay a beneficiary

penalties of up to $100 per day from the date of the

administrator's failure "to comply with a request for . . .

information . . . by mailing the material requested . . .

within 30 days . . . ." The District Court imposed the

maximum fine because T&B had refused to respond in any

way over a very extended period of time and offered no

explanation whatsoever for that refusal. As the Court noted,

there was no indication that T&B's refusal was "some sort

of administrative mistake," and the Court found it difficult

to accept that T&B acted based on the legal arguments

advanced here without giving any indication of its position

to Mrs. Daniels' attorney. T&B characterizes the District

Court's findings in this regard as findings of an absence of

bad faith and, on that basis, insists that the maximum fine

was an abuse of discretion. While we believe T&B's conduct

fell something short of a good faith effort at compliance, it

is not necessary for us to so characterize it. Suffice it to say

that the reasons identified by the District Court are

sufficient to bring its ultimate conclusion well within the

scope of its considerable discretion.

We will, however, direct that, on remand, the penalty be

reduced by $3,000. The District Court found that T&B

withheld plan documents for 291 days, from September 29,

1994, until July 17, 1995. Section 1132(c) directs that the

fine commence "from the date of such failure or refusal" to

provide the requested documents. Section 1132(c)

characterizes the relevant "failure" as the failure to provide

the documents within 30 days of the participant's or

beneficiary's request. Effectively, there is a 30 day grace

period in S 1132(c) before the "failure" to provide the

documents begins. Thus, although T&B produced the

documents 291 days after Mrs. Daniels' request, this is a

"failure" to produce the documents for 261 days. Thus, the

maximum penalty would be $26,100, not $29,100. See

20

Bartling v. Freuhauf Corp., 29 F.3d 1062, 1069 (6th Cir.

1994).

V.

Having found that T&B breached its fiduciary duty to Mr.

Daniels and that it improperly withheld plan documents

from Mrs. Daniels, the District Court awarded Mrs. Daniels

attorney's fees pursuant to 29 U.S.C. S 1132(g).8 Because

we have concluded that we must reverse the District

Court's grant of Mrs. Daniels' motion for summary

judgment as to her breach of fiduciary duty claim, we must

also vacate the District Court's imposition of attorney's fees.

After Mrs. Daniels' breach of fiduciary duty claim is finally

resolved, the District Court may, of course, revisit the

attorney's fee issue.

VI.

Because genuine issues of material fact exist as to

whether T&B's "grandfathered" statement is materially

misleading and, if it was, as to whether Mr. Daniels relied

on it in making his supplemental insurance election, we

will reverse the judgment of the District Court and remand

for further proceedings consistent with this opinion.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

_________________________________________________________________

8. Section 1132(g) provides as follows: "(1) In any action under this

subchapter (other than an action described in paragraph (2) [delinquent

contributions]) by a participant, beneficiary, or fiduciary, the court in

its

discretion may allow a reasonable attorney's fee and costs of action to

either party."

21