In a case before the 2nd U.S.
Circuit Court of Appeals in which Geoffrey Osberg claims his employer,
Foot Locker, issued false and misleading summary plan descriptions
(SPDs) in violation of the Employee Retirement Income Security Act’s
(ERISA) disclosure requirements when it converted from a traditional
defined benefit plan to a cash balance plan, the U.S. Department of
Labor (DOL) has filed a brief in support of a district court’s decision that plan reformation is justified.
said Foot Locker failed to provide plan participants with notice, as
required by ERISA, that the cash balance arrangement could potentially
reduce future benefit accruals.
The DOL says the district court
properly concluded that plaintiffs timely filed their complaint
asserting fiduciary breach claims under ERISA's provision allowing suit
within six years of discovery of a statutory breach or violation in
cases involving "fraud or concealment." Contrary to Foot Locker's
assertion, plaintiffs were not required to establish the elements of
common law fraud, including intentionality and reliance, to show
concealment for purposes of this statutory provision.
to the DOL, “Foot Locker likewise errs in arguing that each member of
the class must demonstrate that he or she detrimentally relied on Foot
Locker's misrepresentations in order to establish that Foot Locker
breached its duties as a fiduciary and to obtain equitable relief in the
form of reformation.” The brief says this argument ignores the 2nd
Circuit’s own precedent in Amara where, after remand from the Supreme
Court, it soundly rejected the argument that plan participants and
beneficiaries need to show detrimental reliance to obtain reformation
under ERISA Section 502(a)(3) as relief for fiduciary misrepresentations
The DOL adds that no pre-Amara case from the 2nd
actually holds that each member of a class of plan participants must
establish detrimental reliance to prove a fiduciary breach based on
misrepresentations or to obtain reformation as relief, nor does any
other case cited by Foot Locker so hold.
Just as each class
member need not establish detrimental reliance, each and every member
need not show mistake in order to obtain plan reformation, the brief
says. “Again, in arguing to the contrary, Foot Locker ignores this
Court's decision in Amara, which concluded that plan participants
can prove mistake for purposes of reformation ‘through generalized
circumstantial evidence in appropriate cases,’ such as where ‘defendants
have made uniform misrepresentations about an agreement's contents and
have undertaken efforts to conceal its effect.’” NEXT: Case history