961 F.3d 91
2d Cir.2020Background
- Kathleen Sullivan worked for a Verizon predecessor in the 1970s; her recorded annual salary was $18,600.
- In 2011 Verizon’s Benefits Center (administered by Aon Hewitt) sent a Retirement Enrollment Worksheet and other mailings indicating Sullivan had a “1× Pay” life policy worth ~$679,700; Aon Hewitt had mis-coded annual salary as weekly, producing the inflated figure.
- Sullivan repeatedly confirmed the coverage with Benefits Center representatives; Verizon’s communications (oral and written) reinforced the high coverage figure.
- Relying on that coverage, Sullivan’s daughter Kristine Sullivan‑Mestecky supported Sullivan financially, allowed her to live rent‑free, and took leave to care for her; Sullivan died in 2012.
- Prudential (claims administrator) paid only funeral expenses and a small remainder; Verizon and Prudential denied the larger death‑benefit claim; district court granted summary judgment for defendants on the ERISA §502(a)(1)(B) benefits claim and dismissed the §502(a)(3) fiduciary/equitable claim.
- On appeal the Second Circuit affirmed summary judgment on the benefits claim, reversed dismissal of the §502(a)(3) claim as to Verizon (but affirmed dismissal as to Prudential), and remanded as to Verizon.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Verizon/Prudential wrongly denied benefits under ERISA §502(a)(1)(B) | Sullivan‑Mestecky: plan communications and enrollments vested a larger death benefit (≈$582,600–$679,700). | Verizon/Prudential: plan terms (Section 5.4.1) govern; discretionary interpretation limits benefit to a percentage of annual salary (~$11,400); the worksheet was a clerical error. | Court: Affirmed summary judgment for defendants — plan terms control and defendants’ discretionary interpretation was not arbitrary and capricious. |
| Whether ERISA §502(a)(3) equitable relief (estoppel/surcharge/reformation) can proceed against Verizon | Sullivan‑Mestecky: Verizon’s repeated written and oral misrepresentations induced reliance, causing loss; Amara permits monetary equitable remedies (estoppel, surcharge, reformation). | Verizon: misstatements were by Aon Hewitt (agents), not Verizon; DeRogatis limits fiduciary liability for unintentional misrepresentations when plan terms are clear. | Court: Vacated dismissal as to Verizon — plaintiff plausibly alleged promissory estoppel, extraordinary circumstances (gross negligence), and alternative equitable remedies; claim may proceed. |
| Whether §502(a)(3) equitable claim can proceed against Prudential | Sullivan‑Mestecky: Prudential participated in communications and claims administration. | Prudential: sent only one explanatory mailing and did not engage in repeated misrepresentations; its conduct did not create extraordinary circumstances. | Court: Affirmed dismissal as to Prudential — single mailing insufficient to plead extraordinary circumstances or equitable fraud. |
Key Cases Cited
- CIGNA Corp. v. Amara, 563 U.S. 421 (2011) (recognizes §502(a)(3) equitable remedies including estoppel, surcharge, and reformation; monetary relief can be equitable)
- In re DeRogatis, 904 F.3d 174 (2d Cir. 2018) (plan administrators act as fiduciaries when communicating benefits; limits on liability where SPD clearly discloses terms)
- Blackshear v. Reliance Standard Life Ins. Co., 509 F.3d 634 (4th Cir. 2007) (clerical errors in plan documents can lead to vesting where erroneous terms unambiguously provide benefits)
- Weinreb v. Hospital for Joint Diseases Orthopaedic Inst., 404 F.3d 167 (2d Cir. 2005) (elements required to plead ERISA estoppel)
- Devlin v. Empire Blue Cross & Blue Shield, 274 F.3d 76 (2d Cir. 2001) (extraordinary circumstances for ERISA estoppel need not be limited to intentional inducement)
- Aramony v. United Way Replacement Benefit Plan, 191 F.3d 140 (2d Cir. 1999) (characterizes what counts as "extraordinary" or "remarkable" circumstances for estoppel in ERISA)