Second Circuit Speaks On When Ministerial Acts Can Breach a Fiduciary Duty

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The Second Circuit recently held that alleged misrepresentations by a “ministerial” plan representative about plan benefits will not support a claim for breach of fiduciary duty if the SPD clearly provides “complete and accurate” information, but might support a claim for breach of fiduciary duty if the SPD does not.  In re DeRogatis, 16-977-cv, 16-3549-cv (2d Cir. Sept. 14, 2018) (slip op.).

Petitioner’s Claim

Emily DeRogatis brought two lawsuits concerning benefits under her deceased husband’s pension and health plans. She claimed that two plan employees provided inaccurate information about her husband’s eligibility for, and the amount of, survivor benefits payable under the pension plan, and the impact of early retirement on health benefits under the welfare plan.

First, she sued the pension plan administrators and sought (1) full survivor benefits pursuant to ERISA section 502(a)(1)(B) and (2) equitable relief for an alleged breach of fiduciary duty pursuant to 502(a)(3). She filed a separate suit against the welfare plan administrators alleging a breach of fiduciary duty pursuant to (a)(3). The district court granted summary judgment to both plans, concluding that there was no breach of fiduciary duty by either plan as the alleged misrepresentations were made by individuals whose duties were “ministerial” in nature.  Slip op. at 19.

Second Circuit Decision

Reviewing the district court’s decision de novo, the Second Circuit rejected the plans’ argument that there could be no breach of fiduciary duty if the misstatement was made by “non-fiduciary, ‘ministerial’ employees.”  Slip op. at 27.

The Second Circuit affirmed summary judgment to the pension plan on the basis that the SPD clearly and unambiguously provided the DeRogatises with accurate information regarding eligibility requirements and amount of pension benefits. Slip op. at 35-36. Thus, summary judgment was properly granted to dismiss the petitioner’s ERISA § 502(a)(1)(B) claim for increased spousal benefits and her ERISA § 502(a)(3) claim for breach of fiduciary duty, notwithstanding inaccurate information that was provided by an office employee of the Welfare Fund.

In contrast, the Second Circuit vacated summary judgment for the welfare plan. Specifically, the court found the welfare plan SPD lacking in its organization, presentation, and substance: “Its length and structure alone raise a serious question about whether the Welfare Plan SPD fails to satisfy ERISA’s mandate that plan fiduciaries circulate a summary plan description ‘written in a manner calculated to be understood by the average plan participant.’” Slip op. at 38, n.28.  The Second Circuit concluded that the “almost impenetrabl[e]” language, coupled with the petitioner’s reasonable misunderstanding of a comment by a claim specialist concerning the availability of health benefits, presented a question of material fact sufficient to defeat summary judgment.

The Second Circuit also addressed the district court’s reliance on Tocker v. Kraft Foods North Am., Incorporated Retirement Plan, 494 F. App’x 129 (2d Cir. 2012) as the “most on-point application of ERISA’s definition of a fiduciary to plan employees.” Slip op. at 30 n.23. The Second Circuit distinguished its decision in Tocker, and clarified that while misstatements by ministerial plan agents may not constitute a breach of fiduciary duty by the individual plan agent, the ministerial activity “might contribute to a finding” that the plan’s administrator breached its fiduciary duty to plan participants.  Slip op. at 30 n.23.

The Second Circuit’s decision adds to our understanding of the circumstances in which a non-fiduciary employee may make the ERISA plan administrator vulnerable to an allegation that it breached its fiduciary duty to plan participants and beneficiaries.

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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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