If Star Trek's Spoc was ever a lawyer he would say something like “Plead Well, Live Long, and Prosper.” If you have handled cases in federal court for a while, you know that simply notice pleading may not be enough to avoid a motion to dismiss. You are also likely familiar with complaints of people requesting information about their pension, and then retiring relying on that information.

Many times, individuals will have pension benefits suddenly suspended or stopped altogether like in Sandlin v. Iron Workers Dist. Co. Pen., 716 F. Supp. 571, 572 (N.D. Ala. 1988). Sometimes pensioners may have been receiving their benefits for 10 years and then out of the blue, a letter comes decreasing the benefit. We all know that ERISA is hard on people and there is unfairness with it. A recent case, however, demonstrates that with careful pleading, there can be some success in pension benefits litigation even though the landscape looks daunting.

In Wallace v. Int'l Paper Co., No. 2:20-CV-02478-SHL, __F.Supp.3d__, 2020 WL 7643134 (W.D. Tenn. Dec. 23, 2020), the case covered an interesting issue that arises in many pension cases. Put in layman's terms, the issue was whether a pension plan could misrepresent to a participant about the amount of the pension benefit when it was material to the participant as to whether he wished to accept the severance package offered. Many workers make such an inquiry in deciding when to stop working. And some are disappointed when they find out the “truth” was a mistake, and the plan has a right to fix mistakes.

Facts of the Case:

• Wallace worked many years with his company when it was acquired by International Paper (IP). IP's first order of business was to downsize and make the newly acquired company more profitable. Often problems arise with pensions and severance agreements after such acquisitions. The acquiring company is more interested in conserving assets than in honoring the commitments they took on from former companies.
• Wallace was asked to take a severance to end his employment with IP. He was willing to consider that, but he specifically asked for a pension calculation to know the amount he was due to receive before he gave up his position. He made it clear that he was relying on that calculation information in ascertaining whether he would take the severance agreement or not. He received his calculation, and relying on that, he accepted the severance agreement terminating his employment.
• When it came time to receive the pension benefit, he received the amount promised for two months; however, he was told afterward that the amount was wrong and would instead receive an amount that was $2800 less.
• Wallace sued IP, the pension plan committee, the pension plan administrator, and Alight (the company providing the calculation) for fiduciary breaches under ERISA and, alternatively, violations of state law. The companies aggressively filed two motions to dismiss.
• The court seriously considered both motions but, in the end, ruled that the clear reliance by Wallace on the representations made in ending his employment, allowed him to proceed with litigation. But there were quite a few hurdles to cross to get to that result.
• Defendants moved to dismiss on several theories. IP argued the claims were barred by the severance agreement, claimed they did not breach any fiduciary duty under ERISA, that the court should not award damages for ERISA reporting requirements, that they were not fiduciaries, and that Wallace did not state a claim for equitable estoppel. Alight's motion to dismiss argued it is not an ERISA fiduciary because it performed purely ministerial functions and had no discretion with regard to preparing pension statements. It further argued the state law claims are preempted by ERISA.
• IP lost as the court concluded that the severance agreement did not bar claims relating to misrepresentation.

Why did Wallace win?

• First, the complaint was pled well to allege that the agreement was obtained based on the misrepresentations made in the pension benefit statements. He made it clear to all that he wanted an accurate pension statement to decide whether to accept the severance agreement.
• Second, IP breached its fiduciary duty by making material misrepresentations in the pension benefit statements. Wallace was counting on a certain amount and he would have waited to retire if the pension benefit was too low. See, James v. Pirelli Armstrong Tire Corp. 305 F.3d 439, 449 (6th Cir. 2002). Alight's motion was denied, as Wallace had properly alleged that Alight was given discretion and used it to interpret the plan in order to prepare the benefit statements. It was also too soon to dismiss state law claims.

Defendant pension plans and administrators like to see such claims dismissed fast without concern over the unfairness of the circumstances. The court here wisely said “not so fast” and could see the unfairness that had taken place as the complaint was well-pled. As Spoc would say, “insufficient facts always invite danger.” This is a good reminder to plead well. If you or your client has an ERISA claim, it is crucial that they hire an experienced ERISA attorney.