Oral Misrepresentation Enough to State a Claim Under ERISA

A pension plan participant who claims he didn’t receive promised credit for service can proceed with his lawsuit. 

A federal court has rejected Munich Reinsurance America’s argument that a lawsuit against it should be dismissed because the plaintiff only asserts informal oral representations as amendments to its pension plan and not Employee Retirement Income Security Act (ERISA) plan documents.

Richard Lees was hired by Munich’s predecessor, American Re-Insurance Company. From approximately October 28, 1996, through August 15, 1999, Lees worked for American but was paid by “an entity known as SMS.” In June 1999, American sought to transfer Lees from SMS’s payroll to American’s, and he advised the firm that he would agree to the transfer if it agreed to treat his time on the SMS payroll as time on the American payroll for the purpose of his pension benefits. According to the court opinion, human resource employees of American advised Lees that the firm would do so.

U.S. District Judge Michael A. Shipp of the U.S. District Court for the District of New Jersey granted Munich’s motion to dismiss the claim that the pension plan committee’s decision to deny Lees credit for his previous service was “arbitrary and capricious” because Lees did not provide facts to support that claim. However, considering the claim that Munich violated its fiduciary duties under ERISA by not adhering to the oral agreement to give Lees credit for his previous service, Shipp found nothing in 3rd U.S. Circuit Court of Appeals precedent excludes oral misrepresentations from ERISA’s reach to support a breach of fiduciary duty claim.

Shipp noted in his opinion that a claim under ERISA for breach of fiduciary duty requires proof that the defendant was acting in a fiduciary capacity; the defendant made affirmative misrepresentations or failed to adequately inform plan participants and beneficiaries; the misrepresentation or inadequate disclosure was material; and the plaintiff detrimentally relied on the misrepresentation or inadequate disclosure.

Looking at 2nd Circuit precedent, Shipp found that in Ladouceur v. Credit Lyonnais, the 2nd Circuit held that oral representations purporting to change an employee pension benefits plan did not support an employees’ breach of fiduciary duty claim under ERISA. However, at the motion to dismiss stage, the appellate court vacated a district court’s dismissal and remanded for further proceedings “on the ground that plaintiffs had alleged facts sufficient to support their claims, and that further discovery might reveal a sufficient writing.”

Shipp determined that Lees alleges sufficient facts to support a breach of fiduciary claim, and further discovery into his employee file may reveal additional written materials to support his claim.

The opinion in Lees v. Munich Reinsurance America is here.