Applying Equitable Estoppel to ERISA Pension Benefit Claims
McGonigle, Adam S., William and Mary Law Review
TABLE OF CONTENTS INTRODUCTION I. BACKGROUND A. Pension Benefit Disputes Under American Common Law B. Pension Benefit Disputes After the Taft-Hartley Act II. EMPLOYEE RETIREMENT INCOME SECURITY ACT (ERISA) OF 1974 A. Build Up to ERISA B. Overview of ERISA 1. ERISA's Employee Pension Protections 2. Employee Remedies Under ERISA III. CRITIQUE OF PRE-CIGNA CIRCUIT COURT ERISA ESTOPPEL FORMULAS A. "Ambiguous" Provision Limitation B. "Extraordinary Circumstances" Limitation 1. "Extraordinary Circumstances" Limitation Not Consistent with Traditional Notions of Equitable Estoppel 2. "Extraordinary Circumstances" Limitation Not Consistent with Congress 's Purpose in Enacting ERISA IV. CRITIQUE OF THE SIXTH CIRCUIT'S PRE-CIGNA ERISA EQUITABLE ESTOPPEL FORMULA A. Sixth Circuit's "Reasonableness" Definition Is Not Reasonable B. Sixth Circuit's Formula Leaves "Gross Negligence" Undefined V. PROPOSED ERISA EQUITABLE ESTOPPEL FORMULA CONCLUSION
"[H]e who by his language or conduct leads another to do what he would not otherwise have done, shall not subject such person to loss or injury by disappointing the expectations upon which he acted." (1)
Consider the following situation: A longtime employee at a nearby manufacturing plant receives a written pension benefit statement from his longtime employer. (2) The statement clearly provides that after his many years of loyal service to the company, the employee is eligible for early retirement when he turns sixty and, upon his early retirement, will receive a monthly pension benefit of $3,000.
The employee, unable to verify the $3,000 figure on his own due to the complexity of the benefits calculation, (3) contacts his employer to confirm the figure. On multiple occasions over the course of several months, the employer confirms the $3,000 figure to the employee in both written statements and in telephone conversations.
On his sixtieth birthday, the employee, tired after decades of work, anxious to enter a new phase of life, and confident that his pension will be sufficient to care for him and his wife in their remaining years, finally accepts early retirement. This scenario is common in the United States, where the pension has long been considered the final reward of the American Dream. (4) But what happens next is a nightmare.
Just a few short months after the employee and his wife retire, the employee receives a letter in the mail from his former employer. The letter states that the employer miscalculated the employee's monthly pension benefit. Although the employee would have been eligible to receive a $3,000 monthly benefit if he had retired at age sixty-five, because he retired at age sixty, his actual monthly benefit is a mere $900 per month. The letter then informs the employee that he will no longer receive the $3,000 check every month and demands that the employee repay the employer for the previous months' overpayments. (5)
The letter closes with a brief apology from the employer for "any inconvenience this may have caused" the employee, but the apology offers little consolation. The employee and his wife are out of work, and the $900 monthly pension benefit is not nearly enough to cover the car payment, groceries, and utilities, let alone their medications. Even worse, neither can find a new job because no employer wants to hire a sixty-year-old disgruntled worker. Because the pension is not enough to live on, however, they have no choice but to look for new work.
One might think that the employee and his wife a beneficiary to the pension--could bring suit in state court under any number of contract or tort causes of action, but the employee's remedies are actually much more limited. The employee's claims are governed by the Employee Retirement Income Security Act (ERISA), (6) which preempts all state law causes of action, including all tort and contract claims, (7) and severely limits the legal remedies available to the employee. …