Equitable estoppel as a remedy under ERISA.

AuthorHoskins, Robert E.

The Employee Retirement Income Security Act of 1974 (ERISA) is a comprehensive law that encompasses almost all aspects of employer-provided benefits in America. ERISA is premised on trust law and equitable principles. Since its passage, the Supreme Court has developed certain criteria to determine whether various equitable principles are available as grounds for relief under ERISA's remedial provision. Estoppel is one of the oldest and most firmly entrenched equitable principles in the American court system. Nearly every Federal Court of Appeals has recognized equitable estoppel as a doctrine available under ERISA to some extent, but the United States Supreme Court has never directly decided the issue of whether estoppel has a place in ERISA jurisprudence. This article explores the history of equitable estoppel, the passage of ERISA, and the development of the federal common law of ERISA through Supreme Court precedent. The article next provides an overview of the circumstances in which the various Federal Courts of Appeal recognize equitable estoppel with ERISA cases. Finally, the article analyzes the method by which the United States Supreme Court might come to recognize that equitable estoppel has a place in ERISA jurisprudence and concludes that the Court would likely allow use of estoppel principles only in very limited factual circumstances.

  1. THE HISTORY, PASSAGE, AND INTENT OF ERISA

    Before addressing why and how equitable estoppel has a rightful place in the law of ERISA, it is helpful to have some understanding of the facts and circumstances that led to ERISA's enactment and the way the Supreme Court has interpreted ERISA since its passage. The Supreme Court has stated:

    On September 2, 1974, following almost a decade of studying the Nation's private pension plans, Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA).... (1) As a predicate for this comprehensive and reticulated statute, Congress made detailed findings which recited, in part, "that the continued well-being and security of millions of employees and their dependents are directly affected by these [retirement] plans; [and] that owing to the termination of plans before requisite funds have been accumulated, employees and their beneficiaries have been deprived of anticipated benefits...." (2) In Nachman, the Supreme Court discussed the detailed history of pension plan failures in America, which prompted the United States Congress to address the situation, resulting in the enactment of ERISA in 1974 (when the law was finally enacted it applied to much more than retirement/pension plans). (3) The Court went on to state:

    One of Congress' central purposes in enacting this complex legislation was to prevent the "great personal tragedy" suffered by employees whose vested benefits are not paid when pension plans are terminated. Congress found "that owing to the inadequacy of current minimum standards, the soundness and stability of plans with respect to adequate funds to pay promised benefits may be endangered; that owing to the termination of plans before requisite funds have been accumulated, employees and their beneficiaries have been deprived of anticipated benefits." Congress wanted to correct this condition by making sure that if a worker has been promised a defined pension benefit upon retirement--and if he has fulfilled whatever conditions are required to obtain a vested benefit--he actually will receive it. (4) There had been several well-publicized failures in America's pension system in the decade or so before ERISA was passed. In Nachman, Senator Williams, a sponsor of the ERISA legislation is quoted as saying:

    A classic case, of course, is the shutdown of Studebaker operations in South Bend, [Indiana], in 1963, with the result that 4,500 workers lost 85 percent of their vested benefits because the plan had insufficient assets to pay its liabilities. While this was a spectacularly tragic instance, it was by no means unique.... [F]or example, P. Ballantine and Sons, a substantial contributor to a multiemployer plan, sold its operations and withdrew from the plan. Because the plan did not have sufficient assets to cover vested liabilities, several hundred employees, with as many as 30 years service, will lose a substantial portion of their vested benefits. These, of course, are by no means isolated cases. According to a ... study by the Departments of Labor and Treasury, over 19,000 workers lost vested benefits [in the early 1970s] because of the termination of insufficiently funded plans. (5) To address the ever increasing problem, Congress debated many different issues, and options before enacting ERISA. The scope of remedies that would be available under ERISA was debated extensively and "an early version of the statute contained a provision for 'legal or equitable' relief that was described in both the Senate and House Committee Reports as authorizing 'the full range of legal and equitable remedies available in both state and federal courts.'" (6) Congress "repeatedly emphasized [a] purpose to protect contractually defined benefits[.]" (7) But, "there is a stark absence--in the statute itself and in its [sic] legislative history--of any reference to an intention to authorize the recovery of extracontractual damages." (8) Additionally, "'neither the statute nor the legislative history reveals a congressional intent to create a private right of action....'" (9)

    Clearly, Congress sought to protect American workers' rights to retirement benefits, which addressed the original problem that led to ERISA. However, at the same time, Congress attempted to optimally balance that goal with the interests of the employer who would sponsor ERISA plans. Congress' intent to not subject employers to excessive liability regarding employee benefit issues rested in the fear that the prospect of such liability would "discourage" employers from offering benefits. (10)

    Although there is scant evidence indicating a Congressional intent to provide a private right of action for ERISA plan participants to recover extra-contractual damages, ERISA provides "a panoply of remedial devices" for participants and beneficiaries of benefit plans. (11) Available remedies, based in trust law, include the right to recover plan "benefits" and the right to enjoin or remove a duty-breaching fiduciary. The United States Supreme Court has explained:

    [A participant] could have filed an action pursuant to [section] 502(a)(1)(B) to recover accrued benefits, to obtain a declaratory judgment that [the participant] is entitled to benefits under the provisions of the plan contract, and to enjoin the plan administrator from improperly refusing to pay benefits in the future. If the plan administrator's refusal to pay contractually authorized benefits had been willful and part of a larger systematic breach of fiduciary obligations, respondent in this hypothetical could have asked for removal of the fiduciary pursuant to [section][section] 502(a)(2) and 409. (12) Since ERISA's enactment, the Supreme Court has consistently recognized two fundamental principles that resonate in its ERISA jurisprudence. The first is that ERISA is based on trust law. Recently, the Court stressed this oft-repeated point by stating that:

    [A] court should be 'guided by principles of trust law'; in doing so, it should analogize a plan administrator to the trustee of a common-law trust; and it should consider a benefit determination to be a fiduciary act (i.e., an act in which the administrator owes a special duty of loyalty to the plan beneficiaries). (13) The second guiding principle is that given the enactment of the statute and the recognition of its purposes, the federal court system is to develop a "federal common law of rights and obligations under ERISA-regulated plans...." (14) Summarizing these fundamental concepts, the Court stated:

    ERISA abounds with the language and terminology of trust law. ERISA's legislative history confirms that the Act's fiduciary responsibility provisions, 29 U.S.C. [section][section] 1101-1114, "codif[y] and mak[e] applicable to [ERISA] fiduciaries certain principles developed in the evolution of the law of trusts." Given this language and history, we have held that courts are to develop a "federal common law of rights and obligations under ERISA-regulated plans." (15) Although this article presents a brief synopsis of the history leading to the enactment of ERISA, it provides a framework for understanding how the Supreme Court has and will continue to recognize doctrines as grounds for relief under ERISA. Analogizing ERISA to trust law and invoking equitable principles is fundamental to the development of ERISA common law, particularly to the recognition of remedies available under ERISA.

  2. SUPREME COURT JURISPRUDENCE: THE SCOPE OF APPROPRIATE EQUITABLE RELIEF UNDER ERISA AND THE QUEST FOR NATIONAL UNIFORMITY

    1. DEFINING "APPROPRIATE EQUITABLE RELIEF" FOR ERISA

      ERISA's remedial provision is codified at 29 U.S.C. section 1132. (16) Specifically, section 1132(a)(3) (17) of the remedial provision provides that:

      A civil action may be brought ... (3) by a participant, beneficiary, ... (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.... (18) The Supreme Court first meaningfully discussed the types of relief encompassed by 29 U.S.C. section 1132(a)(3) in Mertens v. Hewett Associates. (19) In Mertens, a group of former employees of Kaiser Steele Corporation sued the fiduciaries of the Kaiser Steele Retirement Plan seeking monetary relief for alleged breaches of fiduciary duty. (20) The plan participants contended that they were entitled to monetary relief under 29 U.S.C. section 1132(a)(3). The Court took the occasion to address...

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