United States District Court, Eastern District of Pennsylvania
June 21, 1999
JOE E. SMITH, PLAINTIFFS,
THOMAS JEFFERSON UNIVERSITY, DEFENDANT.
The opinion of the court was delivered by: Katz, Senior District Judge.
MEMORANDUM and ORDER
Presently before the court is defendant's motion to dismiss
under Rule 12(b)(6). For the reasons discussed below, the motion
will be denied.*fn1
Plaintiff Joe Smith was employed at Thomas Jefferson University
(Jefferson) for over thirty years, rising to the position of
Director of the Department of Pharmacy. After being struck with
polio at age fourteen, Dr. Smith has continued to suffer from
post-polio syndrome throughout his life.
In 1996, Jefferson announced an early retirement program in
which Smith was eligible to participate. One option under the
plan was to receive a salary continuation for one year after
retirement. Smith was interested in the plan but because his
medical condition was worsening, he was hesitant to accept the
plan if it meant a loss of disability insurance. Throughout the
process of informing potential participants about the plan,
Jefferson represented that participants who elected the one-year
salary continuation option would continue to receive all their
employee benefits (except two not relevant here) throughout the
salary continuation period. In addition to the written materials
distributed, Smith specifically inquired of Jefferson's manager
of employee benefits whether he would be eligible for long-term
disability benefits while on salary continuation, and was told
that he would be. Based on these assurances, Dr. Smith elected to
participate in the early retirement plan under the salary
continuation option. His retirement was effective December 31,
In December 1997, while still in his one-year salary
continuation period, plaintiff was rendered disabled. He applied
for long-term disability benefits. Because the long-term program
had a six-month waiting period, Jefferson offered a self-insured
program that paid 100% short-term benefits in the meantime. From
December 1997 to June 1998, Jefferson paid Smith those benefits.
During his participation in the plan, Smith paid extra monthly
premiums that would entitled him to 70% long-term disability
benefits instead of the normal 50%.*fn2 On nearing the end of
the six-month waiting period, plaintiff applied to convert the
short-term benefits to long-term benefits at the proper time.
application was denied. Jefferson's long-term disability
insurance carrier notified him that he was not eligible for
benefits under the terms of the plan because he was not "actively
at work," but only receiving a salary through the continuation
plan, when his disability commenced. First with the help of
Jefferson's benefits manager, and then through his lawyer, Dr.
Smith appealed the denial, but the carrier continued to deny the
Plaintiff does not allege that the carrier is incorrect in its
application of the plan's "actively at work" requirement.
Instead, he contends that Jefferson was mistaken in its belief
that employees on the salary continuation plan would remain
eligible for long-term disability benefits. Smith alleges that as
a result of Jefferson's repeated misrepresentations on that
point, he has wrongfully been refused long term disability
benefits to which he is entitled. The complaint contains three
counts asserting claims under the Employee Retirement Income
Security Act (ERISA): Count I contains a claim for breach of
fiduciary duty under 29 U.S.C. § 1132(a)(3), Count II a claim for
benefits under 29 U.S.C. § 1132(a)(1)(B), and Count III an
alternative claim for breach of fiduciary duty. Defendant makes
three arguments for dismissal of the complaint, none of which is
First, defendant contends that plaintiff lacks standing to
bring this suit because he is not a "participant" in the plan as
required by ERISA. ERISA provides for civil enforcement of the
law in part by allowing individual benefit plan participants to
sue. See 29 U.S.C. § 1132(a). The statute elsewhere defines
"participant" as "any employee or former employee of an employer
. . . who is or may become eligible to receive a benefit of any
type from an employee benefit plan. . . ." 29 U.S.C. § 1002(7).
In interpreting § 1132(a)(1)'s language in light of the
statutory definition, the Supreme Court held that "participants"
who may sue under § 1132(a)(1) include "employees in, or
reasonably expected to be in, currently covered employment, . . .
or former employees who have a reasonable expectation of
returning to covered employment or who have a colorable claim to
vested benefits." Firestone Tire & Rubber Co. v. Bruch,
489 U.S. 101, 117, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) (internal
quotes and cites omitted). The Bruch Court further instructed,
"In order to establish that he or she `may become eligible' for
benefits, a claimant must have a colorable claim that (1) he or
she will prevail in a suit for benefits, or that (2) eligibility
requirements will be fulfilled in the future." Id. at 117-18,
109 S.Ct. 948.
This interpretation of "participant" does not, however, deprive
plaintiff of standing as to Count I's breach of fiduciary duty
claim under 29 U.S.C. § 1132(a)(3), because the Supreme Court has
acknowledged that the requirement does not apply to such
claims.*fn3 Like subsection (a)(1) at issue in Bruch,
subsection (a)(3) also provides for suit by a "participant":
A civil action may be brought . . . by a participant,
beneficiary, or fiduciary (A) to enjoin any act or
practice which violates any provision of this
subchapter or the terms of the plan, or (B) to obtain
other appropriate equitable relief (i) to redress
such violation or (ii) to enforce any provision of
29 U.S.C. § 1132(a)(3). The Supreme Court in Varity Corp. v.
Howe, 516 U.S. 489, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996),
however, indicated that a plaintiff in a suit for breach of
fiduciary duty under subsection (a)(3) need not meet the Bruch
definition of "participant." As the Court explained, the Varity
plaintiffs "could not proceed under the first subsection because
they were no longer members of the . . . plan and, therefore, had
no `benefits due [them] under the plan.'" Id. at 515, 116 S.Ct.
1065. The Court further recognized that they could not proceed
under the second subsection because that provision does not
provide a remedy for individual beneficiaries. See id. Thus,
the Court concluded,
They must rely on the third subsection or they have
no remedy at all. We are not aware of any
ERISA-related purpose that denial of a remedy would
serve. Rather, we believe that granting a remedy is
consistent with the literal language of the statute,
the Act's purposes, and pre-existing trust law.
Even before the Supreme Court decided Varity, the Third
Circuit decided similarly in Bixler v. Central Pennsylvania
Teamsters Health & Welfare Fund, 12 F.3d 1292 (3d Cir. 1993),
that an individual could bring a breach of fiduciary duty claim
under subsection (a)(3). See id. at 1298-1300. The plaintiff in
Bixler was a woman who claimed that the plan's trustee's
failure to provide her with complete and accurate information had
caused her not to elect coverage under the plan. She was, then,
not a participant in the plan, but the court held that her breach
of fiduciary duty claim was proper nonetheless. See id. In this
case, Dr. Smith is in the same boat as the plaintiffs in Varity
and Bixler. As both the Third Circuit and the Supreme Court
have acknowledged, he is allowed to bring suit under § 1132(a)(3)
for breach of fiduciary duty.
As to the claim for benefits under 29 U.S.C. § 1132(a)(1)(B) in
Count II, plaintiff claims that he "may become eligible" for
benefits because he has a colorable claim that he will prevail in
this suit for benefits, proceeding on an equitable estoppel
theory. Plaintiff claims that because Jefferson assured him that
he was a participant, in that it told him that his benefits
continued and accepted his extra premium payments, Jefferson is
now estopped from denying that he is a participant and eligible
for long-term disability payments under the plan.
This equitable estoppel argument, whatever its merits, does not
give plaintiff standing for a claim under subsection (a)(1)(B).
The cases cited by plaintiff clearly state that an equitable
estoppel claim is properly brought under subsection (a)(3). See,
e.g., Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226,
235 (3d Cir. 1994) ("[plaintiff] presents an equitable estoppel
claim, which is authorized under ERISA pursuant to §
1132(a)(3)(B)"). Count I, then, is properly brought under
subsection (a)(3), and such a claim will be allowed to go
Defendant next argues that plaintiff signed a release that bars
him from bringing this suit. This argument can be quickly
disposed of, because the contract says, "Nothing in this
Agreement, however, shall preclude me from seeking legal redress
to compel Jefferson to fully comply with its obligations under
this Agreement." Def. Mot. Ex. A ¶ 6.*fn5 That is exactly the
situation in this case: Plaintiff is seeking legal redress to
compel Jefferson to comply with its obligation under paragraph
(4) of the contract to "[c]ontinue all employee benefits
currently in effect for the duration of my salary continuation
time period." Thus, by its very terms, the release is no bar to
the claims asserted here.
Last, defendant argues that Count III must be dismissed because
plaintiff purports to bring the count "on behalf of himself and
all other participants in the VERIP who paid premiums toward
supplemental long-term disability benefits," Compl. ¶ 60, but he
has not pleaded the requisite elements of a Rule 23 class action.
Indeed plaintiff has not pleaded those elements, but plaintiff
responds that he did not intend to assert a class action.
Instead, he seeks equitable relief under 29 U.S.C. § 1132(a)(3),
which he asserts can include granting relief to other people
similarly situated. Plaintiff's explanation essentially says that
Count III is not a separate substantive count, but a request for
additional or alternative relief for the violations alleged in
Counts I and II. The court will treat it as such.
For the reasons discussed above, defendant's motion will be
denied. An appropriate Order follows.
AND NOW, this 21st day of June, 1999, upon consideration of
Defendant Thomas Jefferson University's Motion to Dismiss
Complaint, and the plaintiff's response thereto, it is ORDERED
that said motion is DENIED for the reasons stated in the