Ninth Circuit Revives ERISA Breach of Fiduciary Duty Claim for Company’s Misrepresentation of Lifetime Health Benefits

In Warmenhoven v. NetApp, Inc., No. 19-16960, __F.4th__, 2021 WL 4143107 (9th Cir. Sept. 13, 2021), Defendant-Appellee NetApp promised Plaintiff-Appellant Daniel Warmenhoven and other executives lifetime medical benefits under the NetApp Executive Medical Retirement Plan (“the Plan”). After Warmenhoven retired, NetApp instituted a phased termination of the Plan. Warmenhoven and six other retired executives (who have since settled their dispute with NetApp), filed suit under ERISA § 502(a)(1)(B) seeking benefits under the Plan and an alternate claim for equitable relief under ERISA § 502(a)(3) to redress NetApp’s misrepresentations that the Plan would provide lifetime health benefits. The district court granted summary judgment to NetApp on both claims. The Ninth Circuit affirmed the judgment as to the ERISA § 502(a)(1)(B) claim, vacated the judgment as to the ERISA § 502(a)(3) claim and remanded for further proceedings on this claim.

On the ERISA § 502(a)(1)(B) claim, the court noted the default rule that ERISA health and welfare benefit plans do not vest and can be amended at any time. An exception to this rule is if a plan document expressly provides for the vesting of benefits. Here, the court determined that the Plan document, or the formal written instrument of the Plan, did no such thing. To qualify as a written instrument, under 29 U.S.C. § 1102(b), a document must satisfy four elements: (1) provide a policy and method for plan funding; (2) describe procedures for plan operation and administration; (3) provide a procedure for amending the plan; and (4) specify the basis for payments to and from the plan. Warmenhoven argued that benefits were vested because in PowerPoint presentations delivered by NetApp they stated that the Plan would provide medical coverage “to a defined group of retirement executives as a fully-insured plan,” that any company acquiring NetApp would be required to provide for an equivalent plan “for the lives of the eligible employees,” and that the “Plan provides medical benefits for the retiree’s lifetime” requiring no retiree contributions. The court found that the PowerPoint presentations were not plan documents that could vest lifetime healthcare benefits. The court rejected Warmenhoven’s argument that the promises contained in the PowerPoints created an ERISA plan. Informal commitments to provide benefits could create an ERISA plan where there are no written instruments but that is not the case here. Warmenhoven did not argue and has waived any argument that the PowerPoints met the requirements for a plan document under § 1102(b). The certificates of coverage for the Plan stated that the company has the right to amend or terminate the Plan at any time. For these reasons, Warmenhoven did not meet his burden that a specific written instrument vested lifetime benefits for him.

On the ERISA § 502(a)(3) claim, the court found that Warmenhoven did allege a remediable wrong where he alleges “that NetApp, a plan fiduciary, misrepresented the Plan’s terms by promising in the PowerPoints that the Plan provided lifetime benefits even though the written instrument included no such guarantee.” Under Ninth Circuit precedent, Warmenhoven’s claim survives summary judgment because “there is a genuine dispute of material fact as to whether NetApp incorrectly represented to Plan participants that the Plan provided lifetime health insurance benefits. A reasonable factfinder easily could read the PowerPoints to convey a promise of lifetime benefits. Yet NetApp had not memorialized that promise in any plan document, and in fact the certificates of coverage said the opposite.” Notably, the court found that NetApp is not immune from liability for false promises if it did not intend to deceive at the time the promises were made. NetApp had a duty to convey complete and accurate information material to the executives’ circumstances. Warmenhoven’s claim does not fail because he could have examined the certificates of coverage himself. An employer cannot escape liability for providing false or inaccurate information about the future benefits of a plan simply because of a “reservation of rights” provision in the plan. The district court declined to address whether Warmenhoven would be entitled to appropriate equitable relief and Warmenhoven was not required to address that argument on appeal. The court remanded the matter to the district court to consider in the first instance NetApp’s argument regarding whether Warmenhoven is entitled to equitable relief.