The Trouble With Estoppel in ERISA Cases


 Hard cases really do make bad law.

Every now and then an estoppel case pops up under ERISA, and the law is twisted and mangled to make it fit. See, e.g., Livick v. The Gillette Co., U.S. App. Lexis 8261, 43 E.B.C. 2025 (1st Cir. 2008) (dictum), citing Hooven v. Exxon Mobil Corp., 465 F.3d 566, 578 (3d Cir. 2006); Mello v. Sara Lee Corp., 431 F.3d 440, 444 (5th Cir. 2005); Devlin v. Empire Blue Cross & Blue Shield, 274 F.3d 76, 85-86 (2d Cir.2001); Sprague v. General Motors Corp., 133 F.3d 388, 403 & n.13 (6th Cir. 1998) (en banc); Greany v. W. Farm Bureau Life Ins. Co., 973 F.2d 812, 821 (9th Cir. 1992); Kane v. Aetna Life Ins., 893 F.2d 1283, 1285 (11th Cir. 1990).

Behold: the good old fashioned set of estoppel requirements is hauled out, and plaintiffs are told that, to prevail, they must show (at least) a misrepresentation of fact made expecting the other person to rely, and then reasonable and detrimental reliance. It is a state law doctrine and should be routinely preempted by ERISA unless it is somehow incorporated into ERISA under § 502.

Why not incorporate it into federal employee benefits law? How shall I reject thee? – let me count the ways. First, it is basically a contract doctrine, and a benefit plan is not inherently a contract in the first place. You don’t need offer, acceptance, consideration, mutuality and so forth. All you need is a plan. You don’t need reliance. You don’t need to show that the participant even knew the plan existed, much less relied upon it. Why not? Because you would end up with people similarly situatated bu getting different benefits depending solely upon their awareness and understanding of the plan, which is exactly the wrong result under an employee benefits law. Instead, one looks to the plan, the whole plan, and nothing but the plan. And the plan that must be in writing. (Described in an SPD that must be in writing).

What about ambiguity? Can’t you use estoppel to resolve an ambiguity in the plan? Well, not estoppel, but parole evidence. Note the difference: Parole evidence doesn’t require adverse reliance. And if the parole evidence resolves the ambiguity, then the ambiguity is resolved for all beneficiaries, not just those who relied (or even knew about) the parole.

Are you persuaded? Well, there are judges in almost every circuit who have heard these arguments, acknowledge them, and then wring their hands and think they are doing justice by knocking holes in the structure of ERISA. Hard cases. (Sigh).