Friday, August 10, 2012

Mars, Inc. Lands Victory in Pension Benefits Misrepresentation Suit, Guest blog by Emily Hootkins.

August 9, 2012 | Posted by Emily Catherine Hootkins |  Alston & Bird

In a recent pension benefits misrepresentation decision, the Southern District of Ohio granted summary judgment for the defense on Plaintiff Virginia Stark’s claims for estoppel and breach of fiduciary duty. Stark v. Mars, Inc., et al., No. 2:10-cv-642, 2012 WL 2918410 (S.D. Ohio July 17, 2012).  At the time of the Court’s order, the sole Defendants in this action were Plaintiff’s former employer, Mars, Inc. (“Mars”), and the Mars Inc. U.S. Benefit Plans Committee (the “Committee”). The Court’s 40-page opinion contains a detailed recital of the precise misrepresentations at issue in this case. In short, Plaintiff was misinformed on multiple occasions on the amount of her pension benefits. Further, she was overpaid (in line with the misrepresentations) by approximately $15,000.

At the time that Plaintiff elected to begin receipt of her pension benefits, Hewitt Associates (“Hewitt”) was under contract with Mars to operate and maintain the computer database records for the Mars retirement plan involved in this lawsuit. Apparently due to a computer programming error, a web page and call center employees misinformed Plaintiff regarding the amount of her pension benefits. Once the error was discovered and Plaintiff’s benefits were properly reduced, Plaintiff brought suit alleging multiple claims, of which only estoppel and breach of fiduciary duty remained at the time of the Court’s decision.

Estoppel Claim
The Court in this case easily found that the Defendants were entitled to summary judgment on Plaintiff’s estoppel claim. First, the Court noted that “[b]ecause the Committee, not Mars, is charged with paying benefits. . . the Committee is the only proper defendant to the estoppel claims.” Id. at *7. Second, the Court found that several of the elements of estoppel were not met. Most significantly, Plaintiff lacked justifiable and detrimental reliance.

This case presents many lessons for plan sponsors and administrators. First, one of the main reasons Plaintiff’s claims failed was that the incorrect statements regarding the amount of Plaintiff’s pension benefits were consistently underscored as “estimates” and subject to various disclaimers. Thus, Plaintiff was on notice that the pension benefit figures were not guaranteed to be accurate. As a result, Plaintiff could not prove justifiable reliance. Another smart choice by Mars was to permit Plaintiff to keep the $15,307.25 overpayment. Instead of demanding repayment from Plaintiff, Mars took it upon itself to reimburse the plan for the overpayment plus interest. In doing so, Mars nearly eliminated Plaintiff’s claim of detrimental reliance because even assuming that Plaintiff increased her discretionary spending during the overpayment period (which was not proven), those increases were more than covered by the inflated pension benefits which Plaintiff was allowed to keep. Of note, Plaintiff did not incur any major debt in reliance on the erroneous pension amounts.

Breach of Fiduciary Duty Claim
Plaintiff was also unable to establish a claim for breach of fiduciary duty based on the alleged misrepresentations. Under Sixth Circuit case law, the elements for this claim are: (1) that the defendant was acting in a fiduciary capacity when it made the challenged representations; (2) that these representations constituted material misrepresentations; and (3) that the plaintiff relied on those misrepresentations to her detriment. Similar to its decision on the estoppel claims, the Court determined “the evidence is insufficient to show that plaintiff’s reliance on the representations was reasonable, particularly in light of the disclaimers.” Id. at *21. Thus, the third element for this claim was not met.  Further, Plaintiff’s breach of fiduciary duty claim failed because the misrepresentations were made by non-fiduciaries – Hewitt and employees at the call center. There was no evidence that Hewitt or any of the employees at the call center exercised the discretionary authority or control necessary for fiduciary status. The Court also determined that Mars and the Committee could not be faulted for relying on the information provided by Hewitt. There was no evidence that Hewitt had provided inaccurate information prior to this instance. Further, Mars audits ten percent of retirements on a monthly basis at random to ensure accuracy and Hewitt sent Mars audit reports. Thus, adequate steps were taken to insulate against a breach of fiduciary claim based on reliance on Hewitt.

Conclusion
This is a good opinion for plan sponsors and administrators. Plan sponsors and administrators should consider periodic auditing of retirement plan accounts in order to catch and fix any errors promptly (this will also help fend off a fiduciary breach claim). Further, disclaimers and limiting language should accompany any benefit representations. If an error is discovered, remedial measures should be promptly taken. Making some concessions to affected participants may be a wise choice to curb potential liability, for example waiving overpayments and allowing participants to suspend pension payments to resume at a later date and/or elect another form of payment.

The case is Virginia Stark v. Mars, Inc., et al., No. 2:10-cv-642, 2012 WL 2918410 (S.D. Ohio July 17, 2012).

Thursday, August 2, 2012

MSC holds that impeachment evidence may be grounds for a new trial.

In People v Grissom, __ Mich __ (#140147, 7/31/2012) the Michigan Supreme Court held that impeachment evidence may be grounds for a new trial if it satisfies the four-part test set forth in People v Cress, 468 Mich 678 (2003).    In Cress, supra, the court held that a defendant must show that (1) the evidence itself, not merely its materiality, was newly discovered; (2) the newly discovered evidence was not cumulative; (3) the party could not, using reasonable diligence, have discovered and produced the evidence at trial; and (4) the new evidence makes a different result probable on retrial.

A material, exculpatory connection must exist between the newly discovered evidence and significantly important evidence presented at trial, but it may be of a general character and need not contradict specific testimony at trial. Also, the evidence must make a different result probable on retrial.   Not every instance will justify a new trial, but when it is established that  (1) the necessary exculpatory connection exists between the heart of the witness’s testimony at trial and the new impeachment evidence and (2) a different result is probable on retrial, a court should not refuse to grant a new trial solely on the ground that the newly discovered evidence is impeachment evidence. It should not refuse even if the new evidence is not directly contradictory to specific trial testimony.

At a motion for a new trial, the defendant is entitled to have the trial court carefully consider the newly discovered evidence in light of the evidence presented at trial. The trial court must evaluate the new evidence and determine whether there exists an exculpatory connection between it and the heart of the complainant’s testimony. With the caveat that the only facts that the trial court should consider in deciding whether to grant a new trial are those in the newly discovered evidence and those in the record.  Newly discovered impeachment evidence concerning immaterial or collateral matters cannot satisfy Cress. But if it has an exculpatory connection to testimony concerning a material matter and a different result is probable, a new trial is warranted.

Wednesday, August 1, 2012

MSC allows expert witness testimony regarding interrogation techniques and psychological factors claimed to generate false confessions.

In People v Kowalski, __ Mich __ (#141932, 7/30/2012) the Michigan Supreme Court indicated it would allow expert witness testimony regarding interrogation techniques and psychological factors claimed to generate false confessions under MRE 702 and MRE 403.

MRE 702 establishes prerequisites for the admission of expert witness testimony. Gilbert v DaimlerChrysler Corp, 470 Mich 749, 782, 789 (2004): If the court determines that scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the form of an opinion or otherwise if (1) the testimony is based on sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

A court thereby evaluating proposed expert testimony must ensure that the testimony (1) will assist the trier of fact to understand a fact in issue, (2) is provided by an expert qualified in the relevant field of knowledge, and (3) is based on reliable data, principles, and methodologies that are applied reliably to the facts of the case.  An expert who lacks ‘knowledge’ in the field at issue cannot ‘assist the trier of fact.  Likewise, expert testimony without a credible foundation of scientific data, principles, and methodologies is unreliable and, thus, unhelpful to the trier of fact.

First, the trial court must determine whether the proposed expert testimony will “assist the trier of fact to understand the evidence or to determine a fact in issue”—If the proffered testimony is not relevant or does not involve a matter that is beyond the common understanding of the average juror, the same is not allowable as opinion testimony.  If answered in the affirmative, the court must then consider the other requirements of MRE 702 before determining whether to exclude the proposed testimony.  Second, the proposed testimony is admissible under MRE 702 if it meets the other requirements of the evidentiary rule: the “witness [is] qualified as an expert by knowledge, skill, experience, training, or education,” the “testimony is based on sufficient facts or data,” the “testimony is the product of reliable principles and methods,” and the “witness has applied the principles and methods reliably to the facts of the case.” When evaluating the reliability of a scientific theory or technique, courts should consider certain factors, including but not limited to whether the theory has been or can be tested, whether it has been published and peer-reviewed, its level of general acceptance, and its rate of error if known. This analysis requires courts to ensure that “each aspect of an expert witness’s proffered testimony—including the data underlying the expert’s theories and the methodology by which the expert draws conclusions from that data—is reliable.”