Labor & Employment – ERISA – Long Term Disability – Breach of Fiduciary Duty Claim – Social Security Set-Off

Breyan v. US Cotton, LLC Long Term Disability Plan (Lawyers Weekly No. 13-04-1004, 15 pp.) (Robert J. Conrad Jr., J.) 3:12-cv-00491; W.D.N.C.

Holding: Plaintiff alleges not only that defendants misled him into believing there would be no set-off deducted from his long-term disability benefits, but also that defendants never provided him with a written description of the plan; accordingly, plaintiff has stated a claim for breach of fiduciary duty.

Defendants’ motion to dismiss is granted as to plaintiff’s claim for denial of benefits under the Employee Retirement Income Security Act of 1974. The motion is denied as to plaintiff’s claims for breach of fiduciary duty and equitable relief.

The plan clearly provides for a set-off for Social Security disability benefits; therefore, defendants did not deny plaintiff any benefits due under the plan.

However, persons entrusted with conveying information about the likely future of plan benefits are acting as fiduciaries insofar as they exercise a power appropriate to carrying out an important plan purpose. A fiduciary has a duty to give beneficiaries upon request complete and accurate information as to the nature and amount of the trust property. Where it is apparent to an ERISA fiduciary that a beneficiary labors under a material misunderstanding of plan benefits that will inure to his detriment, the fiduciary cannot remain silent – especially when that misunderstanding was fostered by the fiduciary’s own material misrepresentations or omissions.

Plaintiff alleges that he considered whether to obtain additional insurance or make other financial preparations but declined to do so based upon erroneous information from defendants that the plan would provide 60 percent of his pay and that this amount would not be offset by any amount.

Plaintiff need not demonstrate that defendants acted knowingly or in bad faith. A fiduciary breaches its duties by materially misleading plan participants, regardless of whether the fiduciary’s statements or omissions were made negligently or intentionally.

Plaintiff has alleged that defendants failed to provide him with a summary plan description. Indeed, plaintiff alleges that defendants never informed him that there were any written documents to describe the terms and conditions of the plan. He has alleged that he had several communications with defendants in which they failed to inform him about a reduction in his benefits by any Social Security benefits. Plaintiff alleges that he relied on such information in canceling his private insurance and failing to purchase additional insurance.

The Fourth Circuit has not directly overruled pre-Amara cases that denied equitable relief based on oral misrepresentations. However, this fact does not address plaintiff’s claim that defendants failed to provide him with any written information regarding the plan.

Motion denied.