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).

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.

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.”

The unanimity jury instruction in criminal cases.

In a criminal case, a jury’s verdict must be unanimous. MCR 6.410(B). “In order to protect a defendant’s right to a unanimous verdict, it is the duty of the trial court to properly instruct the jury regarding the unanimity requirement.” People v Cooks, 446 Mich 503, 511 (1994). Generally, a trial court may meet this requirement through a general instruction on unanimity, but where multiple acts are presented as evidence of the actus reus of a single offense, the court may be required to issue a specific unanimity instruction. Id. at 510- 512. The Court in Cooks concluded that: [A] specific unanimity instruction is not required in all cases in which more than one act is presented as evidence of the actus reus of a single criminal offense.

The critical inquiry is whether either party has presented any evidence that materially distinguishes any of the alleged multiple acts from the others. In other words, where materially identical evidence is presented with respect to each act, and there is no juror confusion, a general unanimity instruction will suffice. [Id. at 512-513 (emphasis in original).]  Defendant argues that a specific unanimity instruction should have been given based on People v Yarger, 193 Mich App 532; (1992), overruled in part Cooks, 446 Mich at 530. Yarger is factually distinguishable from this case. In Yarger, the defendant faced a single charge of third-degree criminal sexual conduct, but the complainant testified to two separate sexual encounters with the defendant that occurred about a month apart and were factually distinct. Id. at 533-534. This Court held that the trial court erred in failing to give a specific unanimity instruction, and that as a result, it was possible that the jury did not unanimously agree as to which alleged act of sexual penetration formed the basis of the conviction. Id. at 536-537.

Sample Instructions:

In this case it is alleged that __________________________.  If you all agree that __________________________ or ________________________, it is not necessary that you agree on which of these two occurrences took place.  However, in order to return a verdict of guilty you must all agree that one of the two alternatives did occur.

In this case it is alleged that the defendant has committed the offense of <insert name of offense> in two different ways, <identify the two way of committing the offense>. You may find the defendant guilty of the offense only if you all unanimously agree on which of the two ways the defendant committed the offense. This means you may not find the defendant guilty unless you all agree that the People have proved beyond a reasonable doubt that the defendant <insert first theory of culpability> or you all agree that the state has proved beyond a reasonable doubt that the defendant <insert second theory of culpability>.

Established custodial environment--explained

In Goble v Goble, Unpub per curiam opinion, (#307614, 7/19/2012) the Court of Appeals reiterated that “[W]hen considering an important decision affecting the welfare of the child, the trial court must first determine whether the proposed change would modify the established custodial environment of that child. In making this determination, it is the child’s standpoint, rather than that of the parents, that is controlling.” Pierron v Pierron, 486 Mich 81, 92 (2010). “[W]hether a custodial environment has been established is an intense factual inquiry.” Foskett v Foskett, 247 Mich App 1, 6 (2001). An established custodial environment exists if “over an appreciable time the child naturally looks to the custodian in that environment for guidance, discipline, the necessities of life, and parental comfort.” MCL 722.27(1)(c). “It is both a physical and a psychological environment that fosters a relationship between custodian and child and is marked by security, stability, and permanence.” Berger v Berger, 277 Mich App 700, 706 (2008). “An established custodial environment may exist with both parents where a child looks to both the mother and the father for guidance, discipline, the necessities of life, and parental comfort.” Id. at 707. 

“If an established custodial environment exists with one parent and not the other, then the noncustodial parent bears the burden of persuasion and must show by clear and convincing evidence that a change in the custodial environment is in the child’s best interests.” In re AP, 283 Mich App 574, 601 (2009). However, where “the record supports an established custodial environment with both parents . . . neither plaintiff’s nor defendant’s established custodial environment may be disrupted except on a showing, by clear and convincing evidence, that such a disruption is in the children’s best interests.” Foskett, 247 Mich App at 8 (emphasis in original).

Whether an established custodial environment exists is a question of fact. Mogle v Scriver, 241 Mich App 192, 197 (2000). The great weight of the evidence standard applies to all findings of fact, and a trial court’s findings regarding the existence of an established custodial environment should be affirmed unless the evidence clearly preponderates in the opposite direction. Phillips v Jordan, 241 Mich App 17, 20 (2000).

In Goble, the trial court did not make findings of fact to support its conclusion that an established custodial environment existed solely with plaintiff other than to point out that, while commendable, during the marriage defendant worked outside the home while plaintiff stayed at home to care for the child. However, the trial court also found that both parties loved the minor child equally and that defendant displayed an equal capacity and disposition to give her love, affection, and guidance. The trial court described both parties as “hands-on parents” and specifically noted that after the parties’ separation defendant and the child spent one-on-one time together doing household chores, going to the park, and reading together. The trial court also found that defendant was the primary provider of the minor child’s material necessities. Thus, we find on this record that the great weight of the evidence establishes that the minor child (who was too young to weigh in on the matter) looked to both plaintiff and defendant “for guidance, discipline, the necessities of life, and parental comfort[,]” MCL 722.27(1)(c), and that her relationship with both parents was “marked by qualities of security, stability, and permanence.” Mogle, 241 Mich App at 197. As such, the trial court’s contrary finding was against the great weight of the evidence.

Because the minor child had an established custodial environment with both parties, neither party could disrupt the other’s established custodial environment without showing by clear and convincing evidence that such a disruption was in the minor child’s best interests. See Foskett, 247 Mich App at 8. The record before us indicates that plaintiff has been the minor child’s primary caregiver since birth and that the minor child has spent the majority of her time, both before and after the parties’ separation, with plaintiff. The minor child has lived in the marital residence her entire life, which is approximately one hour away from defendant’s residence. Thus, we find that the trial court’s finding that granting defendant sole physical custody of the minor child would disrupt her established custodial environment with plaintiff was not against the great weight of the evidence. See Pierron, 486 Mich at 86-87, 89. In reaching this conclusion, the trial court properly required defendant to prove by clear and convincing evidence that granting him sole physical custody was in the minor child’s best interests. See Foskett, 247 Mich App at 8. However, because an established custodial environment existed with defendant as well, in seeking sole physical custody of the minor child, plaintiff likewise bore the burden of showing by clear and convincing evidence that granting her sole physical custody was in the minor child’s best interests. See id.; see also In re AP, 283 Mich App at 601-602. The trial court committed clear legal error by failing to require plaintiff to meet this burden.

A DOS certificate of mailing is not testimonial.

In People v Nunley, __ Mich __ (#144036, 7/12/2012) the Michigan Supreme Court held that a DOS certificate of mailing is not testimonial because the circumstances under which it is generated would not lead an objective witness reasonably to believe that the statement would be available for use at a later trial. Instead, the circumstances reflect that the creation of a certificate of mailing, which is necessarily generated before the commission of any crime, is a function of the legislatively authorized administrative role of the DOS independent from any investigatory or prosecutorial purpose. Therefore, the DOS certificate of mailing may be admitted into evidence absent accompanying witness testimony without violating the Confrontation Clause.

In Nunley the issue was whether a Secretary of State certificate of mailing is testimonial in nature such that its admission, without accompanying witness testimony, violates the Confrontation Clause of the state and federal constitutions. The DOS generated the certificate of mailing to certify that it had mailed a notice of driver suspension to a group of suspended drivers. The prosecution sought to introduce this certificate to prove the notice element of the charged crime, driving while license revoked or suspended (DWLS), second offense, MCL 257.904(1) and (3)(b).

Post-Amara Fourth Circuit Approves Equitable Remedies under ERISA § 502(a)(3), guest blog by Emily Hootkins

July 12, 2012 | Posted by Emily Catherine Hootkins | Alston & Bird

In light of the Supreme Court’s decision in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), a panel of the Fourth Circuit has allowed the pursuit of equitable remedies – including surcharge and equitable estoppel – under ERISA § 502(a)(3).

Background

Plaintiff Debbie McCravy participated in an ERISA governed life insurance and accidental death and dismemberment plan sponsored by her employer. The plan allowed participants to purchase coverage for “eligible dependent children.” This term was defined as children of the insured who are unmarried, dependent upon the insured for financial support, and either under the age of 19 or under the age of 24 if enrolled full-time in school. Under this provision, Plaintiff purchased coverage for her daughter, Leslie, and paid premiums from before Leslie’s nineteenth birthday until she was murdered in 2007 at the age of 25.

Following Leslie’s death, Plaintiff, as the beneficiary of Leslie’s policy, filed a claim for benefits. Plaintiff’s claim was denied because Leslie was 25 at the time of her death, thus no longer qualifying as an “eligible dependent child” for whom coverage could be purchased. Upon denying Plaintiff’s claim, the insurer attempted to refund the premiums Plaintiff paid for Leslie’s coverage. However, Plaintiff refused to accept the refund check and instead brought suit.

Plaintiff’s complaint sought various forms of relief, including equitable remedies under ERISA § 502(a)(3). In June 2009, the district court ruled that Plaintiff could recover under this section, but that her recovery was limited to the cost of the premiums. In January 2010, the district court entered a final order and judgment awarding Plaintiff the improperly withheld premiums. Appeals followed, and on May 16, 2011, the Fourth Circuit entered an opinion affirming the district court’s order. That same day, the Supreme Court issued its opinion in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011). On the basis of Amara, the Fourth Circuit granted a petition for panel re-hearing.

The Fourth Circuit’s Published Opinion on Re-hearing

On appeal, Plaintiff challenged the district court’s limitation of remedies under ERISA, arguing that § 502(a)(3) allows for surcharge and equitable estoppel. On the re-hearing, the Fourth Circuit agreed and summarized Amara’s consideration of § 502(a)(3) as “stand[ing] for the proposition that remedies traditionally available in courts of equity, expressly including estoppel and surcharge, are indeed available to plaintiffs suing fiduciaries under Section 1132(a)(3).”

Thus, the Fourth Circuit held that Plaintiff’s potential recovery was not limited to a premium refund. Instead, a remand to the district court was warranted to allow her to seek surcharge and equitable estoppel under § 502(a)(3). The Fourth Circuit’s recognition of equitable estoppel as a remedy is particularly significant due to the Court’s previous indication that equitable estoppel “is of limited applicability in ERISA cases.” See Coleman v. Nationwide Life Ins. Co., 969 F.2d 54 (4th Cir. 1992).

Ultimately, the Fourth Circuit’s opinion offers little guidance on the circumstances warranting either surcharge or equitable estoppel under § 502(a)(3). For example, the Fourth Circuit fails to discuss whether “actual harm” is required and, if so, whether either Justice Scalia’s or Justice Breyer’s definition of “actual harm” applies. In Amara, Justice Scalia opined that the “actual harm” required for surcharge is “harm stemming from reliance on the SPD or the lost opportunity to contest or react to the switch.” In contrast, Justice Breyer’s majority opinion suggested “actual harm” could encompass “the loss of a right protected by ERISA.” Instead of considering this conflict, the Fourth Circuit simply remanded to allow the district court to determine the appropriateness of equitable remedies based on the facts of the case.

Conclusion

The Fourth Circuit has now joined the Ninth Circuit in analyzing the availability of equitable remedies under § 502(a)(3) post-Amara. See Skinner v. Northrop Grumman Ret. Plan B et al., No. 10-55161, 2012 WL 887600 (9th Cir. Mar. 16, 2012). In Skinner, a three-judge panel of the Ninth Circuit held that inaccuracies in a summary plan description did not warrant reformation or equitable surcharge under ERISA § 502(a)(3). However, our blog post on Skinner noted that the case was not a strong one for the plaintiffs, and that a more sympathetic case may have a different result. Our predictions appear to have come true in this Fourth Circuit case, involving the heartwrenching murder of a young adult.

The case is McCravy v. Metro. Life Ins. Co., Nos. 10-1074, 10-1131 (4th Cir. July 5, 2012).