A federal district court in the Northern District of California dismissed an equitable estoppel claim brought by a pension-plan participant seeking to prevent the plan from recouping an overpayment. See Groves v. Kaiser Found. Health Plan, Inc., No. 13-cv-2259, 2014 U.S. Dist. LEXIS 38755 (N.D. Cal. Mar. 24, 2014). Relying on defendants’ representations that participants contemplating retirement should do so before 2010 (to avert the effects of certain plan amendments), plaintiff decided to retire in 2009. Prior to making her decision, plaintiff exchanged numerous communications (both oral and written) with defendants to confirm that her lump-sum payout amount would be $766,889.54. However, almost two years after receiving the payout, defendants notified plaintiff that the payout calculation was incorrect, and that she had received an overpayment of approximately $250,000.00. Defendants sought to recoup the overpayment plus interest, and plaintiff commenced this action to bar defendants from doing so.

To state an estoppel claim under ERISA, a plaintiff must demonstrate (1) that the defendant made a material misrepresentation, (2) upon which he or she reasonably and detrimentally relied, and (3) “extraordinary circumstances.” Additionally, within the Ninth Circuit, an ERISA estoppel claim cannot be based on representations that would expand the plaintiff’s rights beyond those already provided by the plan’s unambiguous language. Thus, “where the equitable estoppel claim would result in a payment of benefits that would be inconsistent with the written plan . . . the claim must be denied . . . .”

In Groves, plaintiff’s estoppel claim was not predicated on the fact that the plan’s terms entitled her to the relief she sought. Rather, plaintiff argued that it would be unjust for defendants to recoup the overpayment. While noting the “harshness of the results,” the court explained that plaintiff’s estoppel claim would effectively enlarge plaintiff’s rights against the plan by allowing her to keep approximately $250,000.00 to which she was not entitled under the plan’s terms. This result, the court held, would be contrary to Ninth Circuit law. Accordingly, the court dismissed plaintiff’s estoppel claim without prejudice—in the event she could re-plead and demonstrate that the plan’s terms were consistent with the relief sought. The court also dismissed plaintiff’s state-law negligence claims as being preempted by ERISA.

M. Todd Mobely authored this article.