Two recent decisions from federal courts in West Virginia illustrate some procedural and substantive pitfalls that can arise in ERISA cases.

In Conner v. Elkem Metals Co., 2008 WL 5122197 (S. D. W. Va. 2008), which originated in the Southern District, Conner retired in 2000 and was told by an employee in the benefits department that his pension would be $300 per month, but that if he waited four years to receive his pension, his benefits would be substantially larger.

Conner later learned that his actual pension when he retired would have been $917 per month, and that the benefits department employee misrepresented the amount to him.  Conner filed suit and alleged that his employer negligently or intentionally misrepresented the amount of his benefits.  The defendants’ motion for summary judgment asserted that Conner had "failed to invoke any of the remedial schemes afforded by Section 502(a) of ERISA." 

The district court discussed Conner’s requirement to exhaust his administrative remedies and whether his causes of action were preempted, and concluded that even if Conner had exhausted his administrative remedies, the defendants’ motion for summary judgment should be granted because Conner had failed to state a valid cause of action under ERISA. 

But here’s the interesting issue with the court’s decision.  As Rob Hoskins observed at ERISABoard, there is no requirement in the Fourth Circuit that a plaintiff has to exhaust administrative remedies in a breach of fiduciary claim.  But apparently, neither party informed the court of the law.

Further, in Griggs v. E. I. DuPont de Nemours and Co., 237 F.3d 371 (4th Cir. 2001), the Fourth Circuit held that the proper remedy for breach of fiduciary duty is reinstatement, i.e., returning the parties to the positions they would have been in but for the misrepresentation.  The district court refers to Griggs throughout its opinion, but does not discuss reinstatement, which may be an example of the court choosing not to grant relief that was not requested by the plaintiff.

The decision from the Northern District, Henry v. UBC Product Support Center, Inc., 2008 WL 5378321 (N. D. W. Va. 2008), deals with a procedural problem created by the plaintiff’s inadvertent pleading.

Henry alleged that her employer wrongfully terminated her based on her age and disability.  She also alleged that she and her husband were disabled and covered by her employer’s health insurance, and that her employer harassed and constructively discharged her based on their disabilities and status of their coverage, a claim intended to bolster her allegations of her employer’s discrimination against her.

The defendants removed the action on the grounds that Section 510 of ERISA prohibits discrimination against a plan participant for exercising any right to which he or she is entitled, and that jurisdiction of such a claim is exclusively federal.  Even though Henry did not explicitly state a claim under ERISA, “complete preemption” made removal appropriate. 

And if that wasn’t bad enough for the plaintiff, the defendants asserted that the court also had jurisdiction of the remaining counts, which alleged state law claims, because the court could assert supplemental jurisdiction over them.  

Faced with this situation, Henry moved to amend the complaint in order to withdraw the count asserting discrimination under ERISA and to remand the case.

The court determined that Henry’s claim of discrimination was preempted by ERISA, which gave the court sole and exclusive jurisdiction.  The more difficult issue was Henry’s motion to amend, which was filed solely to deprive the court of jurisdiction, a fact not lost on the court:

This Court does not doubt that, as were the motions filed by the plaintiffs in CSX Hotel and Savilla, Henry’s motion to amend is motivated in no small part by a desire to eliminate any basis for federal jurisdiction from her case.  Nevertheless, the Court cannot find that her motion is made in bad faith.  As she admits, Count Three is inartfully drafted; it does not directly state a claim that would fall under ERISA, but rather implies such.  Although the Court has already found that the count, as drafted, is sufficient to invoke ERISA preemption, it is not unreasonable to conclude that Henry never intended to state such a claim.  Moreover, it is understandable that her attorney, perhaps unfamiliar with how ERISA cases are litigated, would want to limit the scope of the case to avoid the claim.  Accordingly, the Court GRANTS Henry’s motion to amend, finds that it was made in good faith, and ORDERS the Amended Complaint to be deemed filed.

Because the court granted the motion to amend, it declined to assert supplemental jurisdiction over the other counts on the grounds that “the principles of economy, convenience, fairness and comity favor remand. Indeed, should novel questions of state law under the WVHRA [West Virginia Human Rights Act] arise in this case, West Virginia courts certainly will be better positioned to answer them."

I don’t doubt that Henry and her lawyer never intended to assert a claim under ERISA, but  they dodged a bullet by being allowed to amend their complaint and being remanded to state court.