Deschamps v. Bridgestone Americas, No. 15-6112 (6th Cir. Oct. 19, 2016)

| Oct 20, 2016 | Daily Developments in EEO Law |

An employer that deliberately, or with gross negligence, misinforms employees about potential retirement benefits – inducing them to remain with the company – may find itself on the hook to compensate those employees for lost opportunities. In this case, the Sixth Circuit affirms an ERISA judgment against a manufacturer and its retirement plan for equitable estoppel, breach of fiduciary duty, and an anti-cutback violation of ERISA.

Deschamps v. Bridgestone Americas, No. 15-6112 (6th Cir. Oct. 19, 2016): “On August 8, 1983, [plaintiff] Deschamps began working for Firestone [later acquired by defendant Bridgestone] in Canadas a maintenance manager.” The company offered him an opportunity to work at a plant in the States in 1993 (in Wilson, North Carolina), but he felt uncertain about what would happen to his pension. He asked respectively the plant manager, the human resources manager, the director of manufacturing, and plant controller about what would happen to his start date. “A few weeks later, Deschamps testified, [the plant manager] contacted him to assure him that he would be given pension credit back to August 8, 1983.”

The plant and HR managers offered “‘specific representations’ that his service date would be preserved, and even “contacted Bridgestone’s corporate office to ensure that Deschamps would be given pension credit for his time in Canada.” And “[d]uring his employment at the Wilson plant, Continental Tire (Continental), a competitor, twice offered Deschamps a position at its facility, once in 2000 and again in 2003.” But he declined those offers because “the pension benefits at Bridgestone far exceeded those at Continental.”

Finally, all of the company paperwork Deschamps received over the years reflected the 1983 hire date.

But in 2010, the company changed the hire date to when he began working at the Wilson plant, thus taking ten years off of his length of service. It did so based on its reading of the plan definition of covered employees:

“(10) Covered Employee: An Employee who is described in paragraph (a) of this Subsection . . . .

“(a) An Employee is described in this paragraph if he is: (i) classified by the Employer as a United States salaried Employee not represented by a designated collective bargaining agent; or (ii) a foreman, supervisor, plant protection Employee, administrative or clerical Employee or confidential Employee of the Employer, whether or not paid on an hourly basis, who is not represented by a designated collective bargaining agent . . . .”

Deschamps, after exhausting all internal avenues for correcting the hire date, filed suit in federal district court in Nashville. The judge granted liability in favor of Deschamps on cross-motions for summary judgment.

The Sixth Circuit affirms on all grounds. The panel considers, and upholds, each of the three legal theories raised by Deschamps. 

1. Equitable Estoppel: Because the court holds that the plan definition of “Covered Employee” was ambiguous (the plan did not define “foreman” or “supervisor”), it determines that estoppel might apply to management’s repeated misstatements about his eligibility. It weighs in the plaintiff’s favor (a) that Bridgestone was aware of the “true facts” concerning plaintiff’s eligibility, and (b) that he detrimentally relied on the company’s promise about preserving his hire date.

Regarding the “true facts,” the record was uncontested that the plaintiff made acceptance of the Wilson position conditional on holding his 1983 date, that the company committed to do so, and “Bridgestone did not quickly attempt to correct the error, but let the misrepresentation stand for sixteen or seventeen years … Bridgestone’s actions constituted such gross negligence as to amount to constructive fraud.”

On the element of detrimental reliance, the panel rejects Bridgestone’s argument that the plaintiff would likely have been laid-off at Continental:

“Bridgestone’s insistence that Deschamps would have been economically worse off at Continental is problematic for several reasons. for one, we cannot definitively conclude that Deschamps would have been worse of at Continental; he very well could have been one of the few who were not laid off. Moreover, Bridgestone does not cite, nor have we found, any authority requiring the detriment suffered to be economic. To the contrary, our precedent requires a ‘loss of opportunity to improve one’s position.'”

2. Breach of Fiduciary Duty: The panel holds that Bridgestone was acting in a fiduciary capacity when it made representations about Deschamps’s eligibility:

“In response to a direct inquiry from Deschamps, Bridgestone, through its agents … , confirmed that Deschamps’s service date would be August 8, 1983, allowing him to receive pension credit for his years of employment at Bridgestone. This act was a discretionary one within the meaning of ERISA because it involved conveying information about the Plan’s terms and the likely benefits that Deschamps would receive in the future, thus purportedly allowing him to make an informed choice about his continued participation in the Plan. Thus, Bridgestone acted as a fiduciary.”

The panel also holds that the employer may be liable, on apparent authority grounds, for the representations made by management about Deschamps’s start-date. “Bridgestone clothed these … members of management with extensive authority over hiring, including the discussion of terms and conditions of employment. It was reasonable for Deschamps to believe they had authority to make these representations regarding his pension benefits as underscored by the fact that Deschamps was aware that the interviewers took the time to verify this information with corporate-level employees.”

3. Anti-Cutback: Finally, the panel holds that the change to plaintiff’s start-date violated the substantive requirement under ERISA, 29 U.S.C. § 1054(g), that a plan may not be amended to decrease a participant’s accrued benefits.

The amendment in this case was the plan’s reinterpretation of “Covered Employee” to discount foreign employment. Because the text of the Plan is deemed “at worst ambiguous, but at best, favors Deschamps’s argument that he was a covered employee in 1983,” it is thus “not untenable that Deschamps, in his capacity as a maintenance manager, was a supervisor under the language of the Plan.” The belated interpretation of the plan that excluded Deschamps thus reduced his accrued benefits.

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