Deschamps v. Bridgestone Americas, Inc. Salaried Employees Retirement Plan
Docket: No. 15-6112
Court: Court of Appeals for the Sixth Circuit; September 12, 2016; Federal Appellate Court
After ten years of employment at a Bridgestone plant in Canada, Andre Deschamps transferred to a Bridgestone facility in the U.S., having raised concerns about losing pension credit for his Canadian service. He received assurances from management that his service date would reflect his start date in Canada, August 8, 1983, which heavily influenced his decision to accept the position over competing offers. For over a decade, he received written confirmations of this service date. In 2010, Deschamps learned that Bridgestone had revised his service date to August 1, 1993, the start date at the U.S. plant. After unsuccessful internal appeals, he sued Bridgestone for equitable estoppel, breach of fiduciary duty, and an anti-cutback violation under ERISA. The district court ruled in his favor on all claims. Testimony revealed that Deschamps' concerns about his pension were discussed during his hiring process, and key management members confirmed that his Canadian employment would be credited. Although a pension analyst claimed no recollection of specific discussions about Deschamps's benefits, other management representatives testified that they had sought corporate confirmation regarding Deschamps’s pension credit based on his Canadian service, which was ultimately communicated to him.
Berg testified that Deschamps was offered employment with a condition that his benefits service date would be August 8, 1983. Deschamps received two job offers from Continental Tire in 2000 and 2003, which included higher salaries, but he chose to stay with Bridgestone for its superior pension benefits, believing he would receive ten years of service credit for his time in Canada. He stated that if he had known he would not receive this credit, he might have accepted the Continental offers. In 2005, Continental froze its pension plans and closed most operations in 2006, leading to significant layoffs. Throughout his time at Bridgestone, Deschamps's understanding of his pension service date was supported by written benefit materials, which contained disclaimers that these documents were estimates and that the actual pension plan documents governed the benefits.
In 2010, Deschamps learned that his service date was changed from 1983 to 1993, eliminating his pension credit for his Canadian employment. His benefits are governed by the Bridgestone/Firestone, Inc. 1984 Retirement Plan, which requires completion of one year of Eligibility Service for participation. William Phillips from Bridgestone's pension board stated that Deschamps's benefits did not start accruing until 1993 when he became a covered employee. The Plan defines "covered employee" with specific classifications, including those not represented by a collective bargaining agent. Bridgestone denied Deschamps’s appeals to revert his service date, citing that he did not qualify as a covered employee.
Deschamps filed a complaint alleging equitable estoppel, breach of fiduciary duty, and an anti-cutback violation under the Employee Retirement Income Security Act (ERISA). The parties submitted cross-motions for summary judgment, with the court granting Deschamps’s motion and denying Bridgestone’s. Summary judgment is appropriate when there are no genuine disputes over material facts, and the court reviews such orders de novo, considering evidence in favor of the nonmoving party.
A claim for equitable estoppel related to a pension plan requires the plaintiff to establish five primary elements: (1) a representation of material fact through conduct or language; (2) the party to be estopped is aware of the true facts; (3) intent by that party for the representation to be acted upon; (4) unawareness of the true facts by the party asserting estoppel; and (5) detrimental and justifiable reliance by the asserting party. If the pension plan is unambiguous, three additional elements must be proved: (6) a written representation; (7) provisions that do not allow for individual benefit calculations; and (8) extraordinary circumstances favoring estoppel application.
The inquiry first assesses whether the Plan provision is ambiguous. The Plan allows Deschamps to qualify as a covered employee under five conditions, as indicated by the use of "or." Bridgestone's claim that Deschamps can only be considered a 'United States salaried Employee' lacks justification. Subsection (ii), which includes 'foreman' or 'supervisor,' could apply to Deschamps’s role as a maintenance manager, but ambiguity arises since these terms are not defined in the Plan. Because of this ambiguity, there is no need to analyze the heightened standard's three additional elements.
Bridgestone challenges only elements two and five of equitable estoppel. For the second element, Deschamps must demonstrate Bridgestone's awareness of the true facts, interpreted as requiring either intentional deception or gross negligence amounting to constructive fraud. The parties dispute whether Bridgestone's actions constitute gross negligence. Bridgestone asserts that a reasonable factfinder could conclude Deschamps failed to make inquiries about the Plan to those in authority. Previous cases illustrate the necessary conduct to establish gross negligence; for instance, in a prior decision, the employer's failure to ascertain true facts despite repeated assurances to the plaintiff constituted constructive fraud. Similarly, in another case, the employer's promise of 'bridged' status was not honored, and their inaction despite the employee's inquiries was deemed gross negligence.
In Crosby v. Rohm, Haas Co., the court determined that the employer did not exhibit gross negligence concerning erroneous life insurance benefits information provided to an employee. The employer had issued a booklet with a worksheet listing benefits, which contained mistakes. Despite multiple attempts to correct these errors and a warning to employees to verify the information, the errors were deemed understandable, leading to the conclusion that the employer made an honest mistake rather than committing malfeasance.
In contrast, Deschamps, who was concerned about losing pension credit from his prior employment in Canada, received an employment offer from Bridgestone with a confirmed service date. This information was consistently represented over many years, leading Deschamps to trust its accuracy. Unlike the employer in Crosby, Bridgestone failed to clarify that its definition of 'supervisor' diverged from the conventional meaning and did not correct its misrepresentation for 16 to 17 years. Bridgestone's lack of notification and the misleading nature of the information constituted gross negligence amounting to constructive fraud.
Bridgestone contended that Deschamps could not demonstrate detrimental reliance since he would likely have been worse off had he accepted a job with Continental. To establish detrimental reliance, Deschamps needed to show that Bridgestone’s misrepresentations significantly influenced his decision-making, leading to a substantial disadvantage. The precedent from Smiljanich illustrated that a plaintiff could prove detriment by demonstrating a lost opportunity to improve one’s situation. Deschamps argued that had Bridgestone accurately represented his service date, he would have pursued the better job offer from Continental, which provided a more competitive salary than his Bridgestone position. Bridgestone's claim that Deschamps would have been worse off at Continental is thus challenged.
Deschamps's potential situation at Continental remains uncertain, as he may not have faced layoffs there. Bridgestone's arguments lack supporting authority for the claim that economic detriment is necessary; precedent emphasizes a 'loss of opportunity to improve one’s position,' which Deschamps experienced by declining higher salary offers from Continental. His reliance on Bridgestone's management's representations about his pension credit was reasonable, given their longstanding confirmation in various communications. Consequently, the district court correctly granted summary judgment to Deschamps on his equitable estoppel claim.
For the breach of fiduciary duty claim, Deschamps must demonstrate that Bridgestone acted in a fiduciary capacity through misrepresentations, that these misrepresentations were material, and that he detrimentally relied on them. The materiality of the misrepresentations is not contested. Under ERISA, fiduciaries must act solely in the interests of plan participants and beneficiaries. While it is not disputed that Bridgestone may have breached fiduciary duties, the core issue is whether it qualifies as a fiduciary. ERISA defines a fiduciary as an entity exercising discretionary authority over plan management or administration.
The determination of fiduciary status relies on a functional approach rather than formal titles, assessing actions related to plan administration, as illustrated by Varity Corp. v. Howe. Misrepresentations about a benefit plan can signify fiduciary actions. In Deschamps's case, Bridgestone's confirmation of his service date to grant pension credit involved discretionary decisions regarding plan terms, qualifying them as fiduciary acts. The district court found that Bridgestone's agents had apparent authority in making these misrepresentations, although Bridgestone disputes the relevance of apparent authority in this context.
Agency principles, specifically regarding apparent authority, have been applied in ERISA claims resolution. In the case of Richards v. General Motors Corp., a plaintiff was discharged for improperly back-dating transactions under GM’s employee savings plan, claiming he was authorized by the plan administrator. The court examined whether the administrator acted with apparent authority, which could bind the employer despite lacking actual authorization. Other circuits have also referenced agency law in ERISA matters, establishing that fiduciaries must provide complete and accurate information. A plan administrator breaches fiduciary duties if employees, upon whom participants rely for guidance, make material misstatements regarding pension plans.
In this context, the district court appropriately considered apparent authority, defined as when a principal indicates an agent’s authority, leading a third party to reasonably believe in that authority. Key figures, Ruccio and Russell, held significant managerial roles at Bridgestone, making it reasonable for Deschamps to trust their representations about his pension benefits, especially as they verified information with higher-level corporate employees. Consequently, Deschamps reasonably relied on Bridgestone's misrepresentations to his detriment, justifying the district court's summary judgment in his favor on the breach of fiduciary duty claim.
Regarding Deschamps's anti-cutback claim, Bridgestone contended that the district court wrongly assumed Deschamps was classified as a covered employee. Bridgestone argued that, according to testimony from Phillips, a pension board member, only classified "United States salaried employees" are covered, and thus there was no accrued benefit to diminish, merely a clerical correction. ERISA prohibits amendments that reduce accrued benefits, barring two exceptions not applicable here. The determination hinges on whether to consider the Plan's text or the administrator's interpretation to ascertain Deschamps’s accrued benefits before 1993. The vague definition of "accrued benefit" complicates this analysis. The Supreme Court has previously resolved similar issues by examining the plan's terms to determine if changes compromised promised benefits, supporting a participant's reasonable reliance on those terms for retirement planning.
Congress intentionally left the definition of "accrued benefits" to be determined by the terms of the pension plan, rather than providing a comprehensive definition. This is supported by ERISA's anti-cutback rule, which indicates that the determination of accrued benefits relies on the pension plan in effect during the employee's employment. In evaluating Deschamps's accrued benefits, the court must analyze the plan's terms rather than relying solely on the interpretations of a plan administrator. Prior case law does not support the notion that benefits can only be accrued based on the plan administrator’s post-hoc interpretations; instead, it emphasizes a review of the plan’s language and relevant provisions.
The text of the Plan suggests that Deschamps was classified as a "supervisor" in 1983, which supports his claim of being a covered employee. It is confirmed that a change in interpretation of employee classification adversely affected Deschamps's benefits, constituting an anti-cutback violation. The court affirmed the summary judgment in favor of Deschamps regarding his claims of equitable estoppel, breach of fiduciary duty, and the anti-cutback rule, but remanded for further appropriate proceedings on the issue of Plan reformation, which was not part of the appeal.
Bridgestone's assertion of material disputes was insufficient to counter the summary judgment, as the facts presented were uncontested and supported Deschamps’s claims. The definitions of "manager" and "supervisor" reinforce the argument that Deschamps had the necessary authority. Bridgestone’s claim of lack of awareness regarding these misrepresentations is invalid, given that gross negligence suffices for relief, and the misrepresentation of pension benefits constitutes a breach of fiduciary duty. Bridgestone is treated as a fiduciary, as misrepresentations by its agents implicate the company under ERISA’s definition of a fiduciary, which includes corporations.
