Trust Without An Interest In Plan Benefits Has No Section 502(a)(1)(B) Claim
PONSETTI v. GE PENSION PLAN (July 30, 2010)
.jpg)
Ronald Lehn was employed at a General Electric Company facility in Ottawa, Illinois and participated in the company's retirement plan. For many years, his wife Lisa was the primary beneficiary under the plan. Lehn created a trust in 2002 which directed the trustee to distribute 25% shares to his wife, his son, his daughter, with a fourth 25% share going to other family members. He did not attempt to change the designated beneficiary with the Plan, however, until 2005. When he attempted to designate the Trustee as the primary beneficiary, he was told that he needed the signed and notarized consent of his spouse. He submitted a form that purported to contain Lisa's signature that had been notarized by one of his coworkers. The coworker did not witness Lisa's signature. Lehn died later that year. The company advised Lisa that it was aware of his death and that their records indicated that the Trust was the beneficiary of his retirement benefits. Lisa's representative submitted a claim for benefits and advised the company that Lisa had not been competent at the time of her supposed consent. Over the next several months, Lisa's representative submitted substantial additional information and support for her position, including a letter from Lehn himself describing his wife as "profoundly demented." The company advised the Trust of Lisa's claim. The Trust's investigation discovered the absence of a properly notarized consent form. In late 2006, the Plan granted Lisa's claim for benefits and denied the Trust's claim. Following some additional investigation, the Trust indicated its concurrence with the Plan's decision. The Trust nevertheless filed suit against the company and the Plan. Judge Mihm (C.D. Ill) dismissed the § 502(a)(3) and breach of fiduciary duty claims and other state law claims and granted summary judgment on the ERISA § 502(a)(1)(B) claim. The Trust appeals.
In their opinion, Chief Judge Easterbrook, Circuit Judge Flaum, and District Judge Hibbler affirmed. The Court noted that, although there was some confusion in the lower court and in the Trust's briefs, the narrow issue on review was whether the district court erred when it found that the Plan complied with the "full and fair review" ERISA requirement. In that regard, the Court cited the familiar "arbitrary and capricious" standard of review it applies in a situation where the Plan, as here, confers discretionary authority to an administrator. It rejected the Trustee's valiant attempts to convince it otherwise. On the merits of the failure to pay claim, the Court noted that ERISA requires the claimant be given a full and fair review and that reasons for denial of its claim are communicated. The inquiry is fact intensive. The Court had little difficulty in concluding that the evidence overwhelmingly supported the Plan administrator's decision -- a decision, by the way, that the Trust acknowledged being correct. The Court next addressed the "novel" breach of fiduciary duty theory under § 502(a)(1)(B). Section 502 is generally considered a contract claim for Plan benefits while § 510 is a claim to prevent interference with one's ability to collect benefits. In order to state a claim under § 502, a party must have a contractual entitlement under the Plan. Here, the Trust has no such entitlement. The Court affirmed without addressing the underlying merits of the fiduciary duty claim.
