In a recent pension benefits misrepresentation decision, the Southern District of Ohio granted summary judgment for the defense on Plaintiff Virginia Stark’s claims for estoppel and breach of fiduciary duty. Stark v. Mars, Inc., et al., No. 2:10-cv-642, 2012 WL 2918410 (S.D. Ohio July 17, 2012).

At the time of the Court’s order, the sole Defendants in this action were Plaintiff’s former employer, Mars, Inc. (“Mars”), and the Mars Inc. U.S. Benefit Plans Committee (the “Committee”). The Court’s 40-page opinion contains a detailed recital of the precise misrepresentations at issue in this case. In short, Plaintiff was misinformed on multiple occasions on the amount of her pension benefits. Further, she was overpaid (in line with the misrepresentations) by approximately $15,000.

At the time that Plaintiff elected to begin receipt of her pension benefits, Hewitt Associates (“Hewitt”) was under contract with Mars to operate and maintain the computer database records for the Mars retirement plan involved in this lawsuit. Apparently due to a computer programming error, a web page and call center employees misinformed Plaintiff regarding the amount of her pension benefits. Once the error was discovered and Plaintiff’s benefits were properly reduced, Plaintiff brought suit alleging multiple claims, of which only estoppel and breach of fiduciary duty remained at the time of the Court’s decision.

Estoppel Claim

The Court in this case easily found that the Defendants were entitled to summary judgment on Plaintiff’s estoppel claim. First, the Court noted that “[b]ecause the Committee, not Mars, is charged with paying benefits. . . the Committee is the only proper defendant to the estoppel claims.” Id. at *7. Second, the Court found that several of the elements of estoppel were not met. Most significantly, Plaintiff lacked justifiable and detrimental reliance.

This case presents many lessons for plan sponsors and administrators. First, one of the main reasons Plaintiff’s claims failed was that the incorrect statements regarding the amount of Plaintiff’s pension benefits were consistently underscored as “estimates” and subject to various disclaimers. Thus, Plaintiff was on notice that the pension benefit figures were not guaranteed to be accurate. As a result, Plaintiff could not prove justifiable reliance.

Another smart choice by Mars was to permit Plaintiff to keep the $15,307.25 overpayment. Instead of demanding repayment from Plaintiff, Mars took it upon itself to reimburse the plan for the overpayment plus interest. In doing so, Mars nearly eliminated Plaintiff’s claim of detrimental reliance because even assuming that Plaintiff increased her discretionary spending during the overpayment period (which was not proven), those increases were more than covered by the inflated pension benefits which Plaintiff was allowed to keep. Of note, Plaintiff did not incur any major debt in reliance on the erroneous pension amounts.

Breach of Fiduciary Duty Claim

Plaintiff was also unable to establish a claim for breach of fiduciary duty based on the alleged misrepresentations. Under Sixth Circuit case law, the elements for this claim are: (1) that the defendant was acting in a fiduciary capacity when it made the challenged representations; (2) that these representations constituted material misrepresentations; and (3) that the plaintiff relied on those misrepresentations to her detriment.

Similar to its decision on the estoppel claims, the Court determined “the evidence is insufficient to show that plaintiff’s reliance on the representations was reasonable, particularly in light of the disclaimers.” Id. at *21. Thus, the third element for this claim was not met.

Further, Plaintiff’s breach of fiduciary duty claim failed because the misrepresentations were made by non-fiduciaries – Hewitt and employees at the call center. There was no evidence that Hewitt or any of the employees at the call center exercised the discretionary authority or control necessary for fiduciary status. The Court also determined that Mars and the Committee could not be faulted for relying on the information provided by Hewitt. There was no evidence that Hewitt had provided inaccurate information prior to this instance. Further, Mars audits ten percent of retirements on a monthly basis at random to ensure accuracy and Hewitt sent Mars audit reports. Thus, adequate steps were taken to insulate against a breach of fiduciary claim based on reliance on Hewitt.

Conclusion

This is a good opinion for plan sponsors and administrators. Plan sponsors and administrators should consider periodic auditing of retirement plan accounts in order to catch and fix any errors promptly (this will also help fend off a fiduciary breach claim). Further, disclaimers and limiting language should accompany any benefit representations. If an error is discovered, remedial measures should be promptly taken. Making some concessions to affected participants may be a wise choice to curb potential liability, for example waiving overpayments and allowing participants to suspend pension payments to resume at a later date and/or elect another form of payment.

The case is Virginia Stark v. Mars, Inc., et al., No. 2:10-cv-642, 2012 WL 2918410 (S.D. Ohio July 17, 2012).