The Court stated that, in communicating with employees about the likely future of plan benefits, the employer was exercising a power appropriate to carrying out an important plan purpose. Varity, 116 S. Ct. at 1073. The nature of the communications at issue in Varity and in the present case would appear to go beyond the disclosure requirements that the statute imposes specifically on plan administrators. 29 U.S.C. § 1021. To the extent to which they are related to plan administration, such communications trigger fiduciary duties on the part of the communicator, regardless of his or her identity. Even where an independent plan administrator has been appointed, it is entirely possible that it will be the employer that engages in such communications with the employees. Neither the statute nor the Supreme Court's holding in Varity precludes the possibility that the employer acts as a fiduciary in such a case.
In Varity, certain factors pointed to the conclusion that the employer was wearing its fiduciary hat when it made the statements in question: the employer furnished the employees with detailed plan information, the information was conveyed by persons having authority to communicate as fiduciaries, and reasonable employees could have perceived that the employer was communicating as a fiduciary. Varity, 116 S. Ct. at 1073-74; see also Nilles, 1997 U.S. Dist. LEXIS 15254, 1997 WL 610339, *28-29.
From the allegations in the present case, it may reasonably be inferred that defendant communicated with each of the plaintiffs to varying degrees on the subject of plan benefits and, specifically, defendant's intentions regarding the implementation of the VTP. These communications were made by several of defendant's corporate officers, principally members of the defendant's Human Resources Department. See Exhibit E attached to Plaintiffs' Reply. Each plaintiff reasonably relied on such communications in reaching his decision to retire. Whether defendant acted as a fiduciary in this case is a question of fact that must await further development of the factual record. At the stage of a motion to dismiss, a plaintiff's allegations must be taken as true and all doubts resolved in favor of the claim. Applying the liberal pleading requirements of Fed. R. Civ. P. 12(b)(6), plaintiffs have stated sufficient facts to support their claims that defendant acted as a fiduciary. Accordingly, defendant's motion to dismiss does not succeed on this ground.
The Merits of the Claim
Defendant also contends that the amended complaint is insufficient as a matter of law as it does not allege actionable breaches of fiduciary duty. Specifically, defendant argues: (1) negligent misrepresentations are not actionable under ERISA; (2) plaintiffs failed to plead fraud with particularity in accordance with Fed. R. Civ. P. 9(b); and (3) ERISA imposes no duty to disclose information regarding the future availability of plan benefits.
(1) Negligent Misrepresentations
Defendant contends that negligent misrepresentations are not actionable under ERISA. It relies in part on the holding in Varity that an employer breaches its fiduciary duties where it knowingly deceives participants regarding their future entitlements. Varity, 116 S. Ct. at 1074. But Varity concerned intentional misrepresentation; the Supreme Court was not required to decide whether negligent misrepresentations fell within the scope of the statute. Defendant also cites three decisions from this district in support of this argument. However, none of these decisions speaks directly to the issue. Two of these cases concerned claims based on estoppel. See Jandek v. A.T. & T. Corp., 1995 U.S. Dist. LEXIS 11415, 1995 WL 476608 (N.D. Ill. Aug. 10, 1995); Foster McGaw Hospital v. Bell Industries, Inc., 1995 U.S. Dist. LEXIS 19369, 1996 WL 3964 (N.D. Ill. Jan. 2, 1996). The third case did not raise an ERISA claim. Benditz v. Local 1540, United Food & Commercial Workers Union, 1992 U.S. Dist. LEXIS 13277, 1992 WL 220671 (N.D. Ill. Sept. 3, 1992).
ERISA provides in relevant part that a fiduciary shall discharge his or her duties with respect to a plan "solely in the interest of the participants and beneficiaries," 29 U.S.C. § 1104(a)(1), and "with the skill care, prudence, and diligence" of a "prudent man." 29 U.S.C. § 1104(a)(1)(B). The scope of a fiduciary's duties is broadly defined. Varity, 116 S. Ct. at 1073-75. The Seventh Circuit has recently confirmed that negligent misrepresentation may support a claim for breach of fiduciary duties. Schmidt v. Sheet Metal Workers' National Pension Fund, 128 F.3d 541, 1997 U.S. App. LEXIS 28701, 1997 WL 641312 (7th Cir. 1997). In Schmidt, the Court held that defendant plan trustees had not breached their fiduciary duties in respect of a negligent misrepresentation by a ministerial employee. This finding was based not on the negligent character of the misrepresentation but rather on the fact that the misrepresentation could not be attributed to the trustees themselves. Id., at *4.
A fiduciary breaches its duties of loyalty and care by affirmatively misleading plan participants about the operation of a plan or by remaining silent in circumstances when silence could be considered misleading. Anweiler v. American Elec. Power Serv. Corp., 3 F.3d 986, 991 (7th Cir. 1993). Case law recognizes that this principle applies in respect of negligent as well as intentional misrepresentations. Berlin, 858 F.2d at 1163-64 (plan fiduciary had a fiduciary duty not to make misrepresentations, either negligently or intentionally, to potential plan participants concerning a second offering of severance benefits). Brentwood Nursing & Rehabilitation Center, Inc. v. Janes, 1989 U.S. Dist. LEXIS 13879, 1989 WL 153395, *2 (N.D. Ill. Nov. 14, 1989) ("The fact of the matter is that negligent misrepresentations of plan coverage by fiduciaries have consistently been held to state viable ERISA claims").
Accordingly, defendant's motion to dismiss does not succeed on this ground.
(2) Pleading Alleged Misrepresentations with Particularity
Defendant contends that the amended complaint should be dismissed for failure to plead alleged misrepresentations constituting breach of fiduciary duty with particularity in accordance with Fed. R. Civ. P. 9(b). Plaintiffs do not dispute that they have failed to meet the pleading requirements of Rule 9(b). However, they argue that since negligence is sufficient grounds for recovery under the statute, Rule 9(b) does not apply. Plaintiffs are correct only in so far as they base their claim on negligence. The amended complaint alleges that defendant "knowingly or negligently" misled plaintiffs in breach of defendant's fiduciary duties. To the extent to which plaintiffs allege knowing conduct, plaintiffs have failed to plead facts with particularity as required by Rule 9(b).
Accordingly, defendant's motion to dismiss the amended complaint is granted with respect to plaintiffs' claims of intentional or knowing misrepresentation, without prejudice to plaintiffs seeking leave to amend their complaint further.
(3) Duty to Disclose Information
Plaintiffs' claim that defendant breached its fiduciary duties are based not merely on defendant's alleged affirmative misrepresentations, but also on defendant's failure to disclose its intentions regarding the VTP in response to plaintiffs' questions. Defendant contends that this aspect of the claim is not actionable since no such duty to disclose exists under the statute.
The Seventh Circuit has held that a failure to disclose material information will trigger a breach of fiduciary duties where the fiduciary's silence is misleading. Anweiler, 3 F.3d at 991-92 (employer who asked employee to sign agreement changing beneficiary on his life insurance policy breached a fiduciary duty by not explaining that the agreement was optional and that the beneficiary could be changed back at any time); Eddy v. Colonial Life Ins. Co., 287 U.S. App. D.C. 76, 919 F.2d 747, 750-51 (D.C. Cir. 1990) (fiduciary's statement that insurance could not be continued was misleading since fiduciary knew, but did not inform beneficiary, that insurance could be converted into the type of policy beneficiary desired).
Defendant correctly points out that the Seventh Circuit has also stated that a fiduciary does not have a duty to investigate and advise as to the circumstances of each individual employee. Chojnacki v. Georgia Pacific Corp., 108 F.3d 810, 817-18 (7th Cir. 1997). However, defendant is incorrect when it argues that Chojnacki somehow casts doubt on the employer's duty to refrain from misleading its employees, whether by affirmative misrepresentation or by silence. The Seventh Circuit considered that Chojnacki was "easily distinguishable" from Anweiler and Eddy, on the ground that there was no misrepresentation in that case, since the statements made to the employees regarding future benefits were accurate. Id at 817. See also Swinney v. General Motors Corp., 46 F.3d 512, 520-21 (6th Cir. 1995) (employer did not breach its fiduciary duty where it stated truthfully that employees were not eligible for a voluntary termination package and subsequently changed its mind); Barnes v. Lacy, 927 F.2d 539, 544 (11th Cir. 1991), cert. denied, 502 U.S. 938, 116 L. Ed. 2d 324, 112 S. Ct. 372 (1991). While a fiduciary may not be required to volunteer information, Pocchia v. Nynex Corp., 81 F.3d 275, 278 (2d Cir. 1996), he or she must give complete and accurate information in response to participants' questions. Drennan, 977 F.2d at 251. In this respect, the duty to disclose is the flip side of the duty to refrain from affirmative misrepresentations.
The case law has recognized limits as to the kind of information that a fiduciary must disclose. A fiduciary is not required to disclose its internal deliberations nor the state of its business, as opposed to fiduciary, activities. Payonk v. HMW Industries, Inc., 883 F.2d 221, 226 (3d Cir. 1989). There are further limits with regard to when the duty arises. Defendant seeks to distinguish Anweiler on the basis that it concerned the disclosure of information regarding an existing plan. Yet, as noted, fiduciary duties may arise in respect of future offerings. An employer is not required to be perfectly prescient as to all future changes in employee benefits. Berlin, 858 F.2d at 1164. But where an employer is seriously considering the implementation of a new plan, he or she has a fiduciary duty not to make misrepresentations. Mullins, 23 F.3d at 668-69; Fischer, 994 F.2d at 135.
Defendant concedes that a duty to disclose arises where an employer's silence is materially misleading. Plaintiffs allege that this is such a case. By failing to disclose its intentions in response to plaintiffs' questions, defendant would mislead plaintiffs into believing not only that there would be no enhanced benefits but that no such benefits were being considered. It was these beliefs, plaintiffs claim, that prompted plaintiffs to retire before the implementation of the VTP. Thus, the complaint sets out sufficient facts to support a cognizable claim for breach of a fiduciary duty to disclose information regarding future benefits.
IT IS THEREFORE ORDERED that defendant's motion to dismiss [10-1] is granted in part and denied in part. All plaintiffs' claims based on intentional or knowing misrepresentations are dismissed. Defendant shall answer the remaining allegations of the amended complaint within two weeks of the date of this order. All discovery is to be completed by December 31, 1997. Status hearing set for January 6, 1998 at 9:15 a.m.
William T. Hart
UNITED STATES DISTRICT JUDGE
DATED: NOVEMBER 14, 1997