ERISA Procedural Rights Violations Can Still State Federal Claims

by Manatt, Phelps & Phillips, LLP
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Last year, the United States Supreme Court decided Spokeo v. Robins, holding that a procedural violation of a statute is insufficient to create a “concrete” injury and confer standing if the plaintiff suffered no real harm. Spokeo arose in the context of the Fair Credit Reporting Act, cite (FCRA), but the question remained how Spokeo would impact alleged procedural violations of the Employment Retirement Income Security Act, 29 U.S.C. §§ 1001 et. seq. (ERISA). Subsequent decisions have acknowledged Spokeo applies in ERISA cases, but also provide guidance as to how such procedural violations may still be enough to establish Article III standing under ERISA.

Spokeo, Inc. v. Robins

In Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1549 (2016), as revised (May 24, 2016), the Court held that a plaintiff must show an injury in fact before pursuing a claim for violation of the FCRA, meaning “an invasion of a legally protected interest" that is "concrete and particularized" and "actual or imminent, not conjectural or hypothetical.” Spokeo, 136 S. Ct. at 1548. The Court concluded that even where a statutory scheme provided a private right of action to sue and receive damages for violations of a statutory provision, the mere procedural breach of a statute is insufficient to create a “concrete” injury sufficient to confer standing where there is no real harm. Id. at 1549. In the absence of such a concrete injury, the would-be plaintiff lacks standing to pursue her claim in federal court.

Not all violations of statutory procedural rights receive a free pass under Spokeo, however: The Supreme Court cautioned that the “violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact.” (Emphasis added.) In such a case, a plaintiff need not allege any additional harm beyond that identified by Congress. Spokeo at 1549-50 (citing as examples Federal Election Comm’n v. Akins, 524 U.S. 11, 20–25 (1998) (confirming voters’ inability to obtain information that Congress had decided to make public is a sufficient injury in fact) and Public Citizen v. Department of Justice, 491 U.S. 440, 449 (1989) (holding failure to disclose information under the Federal Advisory Committee Act constitutes a sufficiently distinct injury to provide standing to sue)).

Application of Spokeo in ERISA cases

Although Spokeo arose in the context of the FCRA, it was immediately apparent that the decision had broader impact to many federal statutory schemes, including ERISA. Sure enough, courts quickly were called upon to apply Spokeo’s rule to ERISA claims, and have wrestled to determine when an alleged ERISA violation satisfies Spokeo’s injury-in-fact standard. Two cases in particular, Brooks v. Georgia Pacific LLC and Limbach v. Weil Pump Company, Inc., provide guidance on how to examine an alleged ERISA claim where the injury is a mere procedural violation (i.e. not the denial of benefits) for standing after Spokeo.

In Brooks, plaintiff sued his plan for failure to provide plan information in a timely manner, seeking $100 per day. 2017 WL 1534219 (W.D. La. Mar. 21, 2017), report and recommendation adopted, 2017 WL 1538606 (W.D. La. Apr. 26, 2017). Brooks did not allege that he suffered any specific harm beyond delayed receipt of the required information, but the trial court held he had concrete harm under the Spokeo analysis, reasoning that “in contrast to other cases where an erstwhile plaintiff seeks statutory damages for the bare transgression of a federal procedural protection divorced from any material harm, Brooks actually required a copy of the plan for purposes of understanding his benefits and rights, which he then used . . . to administratively appeal the determination.” Id. at *5.

In its analysis, the court relied on the fact that compensatory or monetary damages are not required to award a statutory penalty under ERISA. Id. at *4-5. Rather, “frustration, trouble, and expense are pertinent factors for the court to consider when deciding whether to impose a penalty against the administrator.” Id. Brooks alleged difficulty in identifying the plan administrator such that he “was frustrated by defendant’s . . . delay in providing him with a copy of the plan . . .” Id. Based on this frustration, defendant’s failure to provide information to Brooks retarded his efforts to administratively appeal his retirement benefits calculation and thus set forth a concrete injury. Id.

Similarly, in Limbach v. Weil Pump Company, Inc., plaintiff alleged her plan had failed to provide her with a summary plan description (aka SPD) in a timely way. 2017 WL 1379360 (E.D. Wis. Apr. 14, 2017). The court held that “[b]ecause the inability to obtain information is itself an injury in fact . . . the allegations of the complaint imply that the plaintiff would have found the information contained in the automatic disclosures valuable or useful, had [the plan timely] made the disclosures. The plaintiff’s not receiving the information in the prescribed times thus qualifies as a concrete informational injury.” Id. at *3-4.

Both Brooks and Limbach show the difficulty in defining Spokeo’s “injury-in-fact” requirement. Further, although Spokeo makes establishing a concrete injury for purposes of a claim for statutory injury more difficult, Brooks and Limbach demonstrate it is not impossible. At least for these two courts, what was commonly viewed as intangible (frustration) is a sufficient concrete harm.

Conclusion

In the wake of Spokeo, while a mere “procedural” violation of a federal statute, absent more, does not confer federal standing to sue, courts have made clear that plans will not be able to escape claims for violations of ERISA’s timely disclosure requirements and, presumably, other ERISA protections through reliance on Spokeo’s concrete injury requirement. Brooks and Limbach make it quite clear that, despite Spokeo, not all procedural ERISA violation claims will be dismissed for lack of standing.

In contemplating or assessing claims of ERISA violations, it will be critical for both plaintiffs and defendants to closely examine the alleged harm resulting from the alleged breach.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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