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After less than an hour of deliberation, a jury awarded damages to James Mullins, a 57 year old employee of Pfizer, Inc. who claimed that Pfizer representatives lied to him when he asked about the possibility of an early retirement incentive plan in the near future.

When asked, Pfizer representatives denied any intention to announce an early retirement incentive and Mullins, in purported reliance on these representations, took early retirement in 1990. Approximately six weeks later, Pfizer announced a voluntary separation incentive program which included enhanced medical, dental, and life insurance benefits, educational assistance, and a lump-sum payment based on length of service, pension status and unused vacation days.

Mullins brought suit claiming violations of the Age Discrimination in Employment Act, the Employee Retirement Income Security Act (“ERISA”), and Connecticut state law. The district court initially granted Pfizer’s motion for summary judgment, but the Second Circuit reversed and sent the case back for trial resulting in the recent verdict for Mullins.

The Employer’s Duty Not to Mislead
The Second Circuit found that Pfizer, a plan fiduciary, had an affirmative duty not to mislead plan participants, and that inherent in the duty not to mislead is a duty to disclose that a plan is under “serious consideration” if asked by a participant or beneficiary. The court applied a materiality test to the analysis, noting that “the more seriously a plan change is being considered, the more likely a misrepresentation” where a fiduciary denies that a change is under consideration. The court did not, however, go so far as to impose an affirmative duty to disclose proposed plan changes.

At trial, Pfizer argued that representations concerning the plan were made by a personnel representative who was unaware of contemplated changes. In finding in favor of Mullins, the jury sent a clear message that employers and their representatives who speak to employees concerning plan matters have an obligation to be both informed and truthful.

Non-Participants May Sue Under the Plan
The Mullins litigation is equally significant for the Second Circuit’s rejection of the Pfizer argument that Mullins lacked standing to assert a claim under ERISA because he was no longer a plan participant. The appeals court held that Mullins should be permitted to proceed under ERISA in order to show that “but for” the actions of Pfizer, he would still be a participant under the plan and thus would have standing to sue.

By granting Mullins standing under ERISA, the Second Circuit recognized non-participants as proper plaintiffs in an ERISA action, joining the growing debate among the circuit courts on this issue. That holding, combined with Mullins’ recent success at trial, clearly opens the door to a broader array of benefits related litigation.

Mullins v. Pfizer, Inc. is a warning to employers considering changes to their plans. A fiduciary under the Pfizer standard is not expected to be omniscient as to future plan changes, nor is the fiduciary expected to disclose internal company deliberation. However, under the Second Circuit’s holding, it is clear that simply denying all rumors regarding future plans will not suffice. Plan administrators and others responding to employees and their beneficiaries concerning plan matters should be given accurate information concerning changes when they are under serious consideration.