May 19, 2019

Tenth Circuit: ERISA Plan Consultant Did Not Act as ERISA Fiduciary When Calculating Benefits

The Tenth Circuit Court of Appeals issued its opinion in Lebahn v. National Farmers Union Uniform Pension Plan on Monday, July 11, 2016.

Trent Lebahn contacted a consultant hired by his company’s employee pension plan for information regarding his monthly distribution amount. The consultant told Mr. Lebahn that he would receive $8,444.18 per month and verified the amount when Mr. Lebahn asked her to double-check. He retired and began receiving the monthly payments, only to be informed a few months later that he had been being overpayed by nearly $5,000 per month. The plan’s attorney told Mr. Lebahn that he would need to return over $43,000 in overpayments. Unable to retire on the plan’s true monthly distribution, Mr. Lebahn tried to go back to work, but could not find a job. Mr. Lebahn and his wife sued under ERISA, arguing that the plan, the pension committee, and the consultant’s employer incurred liability under theories of breach of fiduciary duty and equitable estoppel. The defendants moved for dismissal based on failure to state a claim, which the district court granted, and the Lebahns appealed.

On appeal, the Tenth Circuit first addressed the Lebahns’ claims for breach of fiduciary duty. The district court dismissed the claims because the consultant had not acted as an ERISA fiduciary when calculating the pension benefits. The Tenth Circuit agreed, finding that because the consultant lacked discretionary authority in administering the pension plan, she was not a plan fiduciary and therefore the district court properly dismissed the claims.

The Tenth Circuit found that the district court also correctly dismissed the Lebahns’ equitable estoppel claims. The district court found that the Lebahns had failed to plead facts to satisfy two of the five prongs of equitable estoppel: awareness of the true facts and justifiable reliance. The Lebahns failed to adequately address justifiable reliance on appeal and therefore forfeited their argument.

The Tenth Circuit affirmed the district court’s dismissal of the Lebahns’ claims.

Tenth Circuit: FTCA Claims Subject to Jurisdictional Time Limitations

The Tenth Circuit Court of Appeals issued its opinion in Barnes v. United States on Wednesday, January 21, 2015.

Larry Barnes was indicted in Oklahoma federal court for two crimes related to possession and distribution of methamphetamine. He was convicted and sentenced to two concurrent 66-month sentences. Barnes appealed. While his appeal was pending, the government acquired evidence that testimony of an ATF agent, a Tulsa police officer, and a confidential informant had been fabricated, and asked the court to vacate Barnes’ conviction and immediately release him from prison. The court granted that motion on July 2, 2009.

Seeking redress, Barnes filed administrative tort claims with the BATF on May 20, 2010. Receiving no response from the BATF, Barnes filed a civil lawsuit in Oklahoma state court on May 13, 2011, which the government removed to federal court. On September 23, 2011, the BATF filed a motion to dismiss for lack of subject matter jurisdiction, arguing that since the FTCA vests exclusive jurisdiction over federal tort claims in the federal district court, and removal jurisdiction requires a colorable state court claim, and plaintiffs had no jurisdiction in state court, the federal court therefore lacked jurisdiction as well. On October 25, 2011, while its motion to dismiss was pending, the BATF notified Barnes via certified mail of its formal denial of the administrative claims. The letter specifically advised that any appeal must be filed within six months of the date of  mailing of the letter, or by April 25, 2011.

On March 23, 2012, the federal district court granted the BATF’s motion to dismiss, and dismissed the case without prejudice. On August 22, 2012, Barnes filed a second lawsuit in federal district court. The BATF again moved to dismiss, this time for lack of jurisdiction under F.R.C.P. 12(b)(1) due to the lawsuit being time-barred. The district court granted the motion to dismiss and Barnes appealed.

The Tenth Circuit analyzed the provisions of 28 U.S.C. § 2675(a) and 28 U.S.C. § 2401(b), and found the two sections acted like “book-ends” for the time limit to file an FTCA claim. Barnes argued that his second lawsuit was timely because he was filing under § 2675(a)’s “deemed denial” provision, but the Tenth Circuit found that the BATF’s October 25, 2011 letter explicitly triggered § 2401(b)’s six-month limitations period. The Tenth Circuit found that the court lacked jurisdiction due to the time-bar.

The Tenth Circuit also analyzed Supreme Court precedent in Irwin v. Dep’t of Veterans Affairs, 498 U.S. 89 (1990), regarding jurisdictional bars and equitable estoppel. After a lengthy analysis, the Tenth Circuit concluded it was bound by previous circuit precedent to apply a jurisdictional bar to FTCA claims. Even analyzing Barnes’ claims under equitable estoppel principles, though, the Tenth Circuit still found no relief for Barnes, because he could not show “affirmative misconduct” by the BATF.

The Tenth Circuit found that the district court correctly dismissed the claims, but incorrectly did so with prejudice. Claims subject to a jurisdictional bar are properly dismissed without prejudice. The Tenth Circuit affirmed the judgment of the district court but remanded for correction of the dismissal as without prejudice.

Colorado Court of Appeals: In Breach of Contract Case, Three-Part Test to Determine Equitable Estoppel Was Satisfied

The Colorado Court of Appeals issued its opinion in Extreme Construction Co. v. RCG Glenwood, LLC  on Thursday, December 27, 2012.

Construction Contract—Equitable Estoppel in a Contract Action.

In this action concerning the interpretation of a payment provision in a construction contract, plaintiff Extreme Construction Co. (Extreme) appealed the amount of the monetary judgment that it obtained against defendant RCG Glenwood, LLC (RCG) and the judgment entered in favor of defendant Mike Spradlin. RCG cross-appealed the trial court’s award of attorney fees, costs, and certain prejudgment interest to Extreme, as well as the court’s denial of RCG’s request for fees and costs. The judgment was affirmed in part and vacated in part, and the case was remanded with directions.

RCG, through Spradlin, its owner, negotiated for Extreme to remodel a portion of a building. Extreme provided a budget that estimated the total price and included amounts for superintendence and labor, which were calculated at $68.50 per hour and $38.50 per hour, respectively. The contract that was entered into did not include these hourly rates. Instead, it was a Guaranteed Maximum Price contract that provided for payment of wages of construction workers employed by Extreme, as well as “Builder’s overhead and construction management fee of 5.5%, and Builder’s profit of 5.5%, for a total of 11%.”

Extreme mailed monthly bills reflecting the hourly wage charges noted above. These invoices were paid without objection, but some of RCG’s checks bounced. Each time Extreme discussed the bounced checks with Spradlin, no issues regarding the hourly rates were raised. Notwithstanding the failure of RCG to pay its bills, Extreme completed the project on time, to Spradlin’s satisfaction, and for about $45,000 less than the Guaranteed Maximum Price.

RCG failed to pay in full, and Spradlin proposed a payment schedule and “a promissory note, personally guaranteed.” Based on his request, Extreme did not file a lien and prepared a promissory note, which was never signed.

Extreme sued, claiming breach of contract against RCG and that Spradlin had breached his personal guarantee. RCG and Spradlin asserted Extreme had overbilled RCG, claiming Extreme was not permitted to bill for superintendence and labor on an hourly basis. Extreme replied that the contract was ambiguous and that extrinsic evidence, including the pre-contractual budget, favored its interpretation. In addition, Extreme claimed RCG was estopped from contesting Extreme’s interpretation of the contract.

The trial court found that the contract was ambiguous but that the extrinsic evidence supported RCG and Spradlin’s argument. It rejected the estoppel argument. The court entered judgment in favor of Extreme and against RCG in the amount of $18,523.65. Because this was significantly less than the amount Extreme had sought at trial, RCG argued it was the prevailing party under a fee-shifting provision in the contract. Also, because the amount of the judgment was less than the offer of settlement made under CRS § 13-17-202, any interest awarded to Extreme had to be abated as of the date of the offer, and RCG was entitled to an award of costs. The trial court rejected all of these arguments. Both parties appealed.

Extreme contended that RCG was equitably estopped from contesting Extreme’s interpretation of the contract, and the Court of Appeals agreed. The Court held, as a matter of first impression, that the equitable estoppel doctrine applies to disputes over contract interpretation, at least in cases involving the construction of an ambiguous contractual provision unrelated to insurance coverage.

The Court also agreed with the trial court that the contractual provision regarding wages was ambiguous. For equitable estoppel to apply, the party asserting the doctrine must establish that (1) the other party had full knowledge of the facts, (2) the other party unreasonably delayed in asserting an available remedy, and (3) the party asserting the doctrine relied on the other party’s delay to its detriment.

The trial court found, and the record supported, that the first element was satisfied. The trial court found the second element was not met because if RCG had sought redress, it would have halted the project. The Court found this was error. It is unreasonable for a contracting party who knows of, but secretly disagrees with, the other side’s contract interpretation to delay challenging the interpretation until the other side has completed its performance. This is even more the case where, as here, RCG’s silence induced Extreme’s continued performance. The trial court also erred in finding the third element wasn’t met, because the facts clearly demonstrated that Extreme relied on RCG’s failure to contest its invoices to its detriment. The award of damages was vacated and the case was remanded to the trial court to recalculate the damages.

Extreme argued it was error for the trial court to determine that Extreme never accepted Spradlin’s offer of a personal guarantee. The Court was not persuaded. It agreed with the trial court that although an offer was made by Spradlin, no action was taken that indicated an acceptance by Extreme.

RCG argued it was error to find that under the fee-shifting provision in the contract, Extreme, and not RCG, was the prevailing party. The Court disagreed. RCG was held liable for breach of the contract; therefore, it was the prevailing party for purposes of awarding attorney fees.

RCG also contended it was error for the trial court to reject its assertion that under CRS § 13-17-202, the interest awarded to Extreme should have abated as of the time of the offer of settlement. The Court disagreed, finding that RCG did not address in its briefs the trial court’s finding that RCG did not make a qualifying offer of settlement.

Summary and full case available here.