Retirement Committee of DAK Americas LLC v. Brewer
867 F.3d 471
4th Cir.2017Background
- DAK Americas amended its defined-benefit pension Plan after a plant closing to add an optional immediate, unsubsidized lump-sum distribution for affected employees ("Cape Fear Participants").
- The Amendment provided the lump sum be “Actuarially Equivalent to the Cape Fear Participant’s Accrued Benefit,” and the Plan defined "Accrued Benefit" by reference to the participant’s Normal Retirement Benefit (i.e., benefit commencing at normal retirement age).
- Transamerica miscalculated the initial September 30, 2013 lump-sum notices using Early Retirement dates (producing larger payments). Defendants received roughly $2.6M total, including $928,000 in alleged overpayments.
- Plaintiffs notified participants of the error in December 2013, gave corrected calculations and a second 60-day election window, and warned of tax consequences for failing to return overpayments; most participants did not timely return the disputed amounts.
- Plaintiffs sued under ERISA § 502(a)(3) for equitable restitution to recover the overpayments; Defendants counterclaimed for breach of fiduciary duty (seeking surcharge) and asserted equitable estoppel. District court granted Plaintiffs summary judgment; appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Amendment’s lump sum must be calculated using Normal Retirement (Accrued Benefit) or Early Retirement | Lump sum is actuarially equivalent to Accrued Benefit as defined by Plan (Normal Retirement) | Amendment intended an immediate lump sum equal to actuarial value at Early Retirement | Held for Plaintiff: plain Plan language requires Normal Retirement-based (unsubsidized) calculation |
| Whether overpayments must be returned via equitable restitution under ERISA §502(a)(3) | Overpayments are specifically identifiable, belong in good conscience to the Plan, and are in defendants’ control | Defendants dispute "belong in good conscience" because they relied on initial notice | Held for Plaintiff: all elements met; overpayments recoverable |
| Whether equitable estoppel bars recovery because participants relied on erroneous notices | Plaintiffs: estoppel cannot override clear written Plan terms or amend the Plan | Defendants: Plaintiffs’ corrected calculations improperly altered promised benefits; estoppel should apply | Held for Plaintiff: equitable estoppel cannot be used to modify written ERISA plan terms |
| Whether defendants may obtain surcharge for fiduciary breach (actual harm requirement) | Plaintiffs: no demonstrable actual harm; defendants were warned and had chance to return funds | Defendants: alleged harms (taxes, foregone jobs, investment decisions) flowed from reliance on error | Held: All defendants’ surcharge claims denied for lack of triable actual-harm proof except Rodney Smith — his claim remanded because he presented evidence he declined a specific DAK job in reliance on the erroneous lump-sum calculation |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (ERISA plans interpreted under federal common law)
- Sereboff v. Mid Atl. Med. Servs., Inc., 547 U.S. 356 (elements for equitable restitution in ERISA context)
- Conkright v. Frommert, 559 U.S. 506 (administrator’s prior incorrect constructions do not forever bar correction)
- CIGNA Corp. v. Amara, 563 U.S. 421 (availability and limits of equitable remedies like surcharge under ERISA)
- Cent. Laborers’ Pension Fund v. Heinz, 541 U.S. 739 (anti-cutback rule—when plan amendment violates protections)
- United McGill Corp. v. Stinnett, 154 F.3d 168 (enforce plain language of ERISA plans)
- Esden v. Bank of Boston, 229 F.3d 154 (accrued benefit valued as annuity at normal retirement age)
- Booth v. Wal-Mart Stores, Inc., 201 F.3d 335 (ERISA plan interpretation de novo)
- Wheeler v. Dynamic Eng’g, Inc., 62 F.3d 634 (ERISA plans are contractual)
- Kress v. Food Emp’rs Labor Relations, 391 F.3d 563 (discretion not implicated when plan terms are clear)
- Blackshear v. Reliance Standard Life Ins. Co., 509 F.3d 634 (administrator cannot ignore unambiguous plan terms)
- Coleman v. Nationwide Life Ins. Co., 969 F.2d 54 (equitable estoppel cannot vary written plan terms under ERISA)
- US Airways, Inc. v. McCutchen, 569 U.S. 88 (equitable principles cannot override clear plan terms)
- Gabriel v. Alaska Elec. Pension Fund, 773 F.3d 945 (limitations on estoppel in ERISA cases)
- Livick v. Gillette Co., 524 F.3d 24 (same principle on estoppel and plan terms)