E.D. Michigan Notes Split Re Burden of Proof for Imposition of Daily Penalties Under ERISA

Per Hamilton v. Publicis Groupe Short Term Disability Plan, No. 04-74993, 2006 WL 2771742, (E.D. Mich. Sept. 25, 2006):

ERISA requires plan administrators to provide certain plan information upon written request:

(4) The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated. The administrator may make a reasonable charge to cover the cost of furnishing such complete copies. The Secretary may by regulation prescribe the maximum amount which will constitute a reasonable charge under the preceding sentence. 29 U.S.C.A. § 1024(b)(4).

A court has the discretion to impose a penalty of $110 per day for an administrator's failure to comply within 30 days of such a request. 29 U.S.C. § 1132(c)(1) (authorizing $100 fine which was raised to $110 for violations after July 29, 1997, see 62 Fed.Reg. 40,696). The Sixth Circuit has held that mere violations of procedural requirements of ERISA, such as incomplete summary plan descriptions, do not give rise to substantive remedies, the only remedy available being the $110 maximum per day per violation penalty. Brown v. Ampco-Pittsburgh Corp., 876 F.2d 546, 550 (6th Cir.1989); Lewandowski v. Occidental Chemical Corp., 986 F.2d 1006, 1008 (6th Cir.1993). Circuits have split on whether actual detrimental reliance on a SPD [Summary Plan Description] or simply prejudice (i.e., the beneficiary was likely to be harmed by the error) or neither is required in order to impose the penalty. See Burke, 336 F.3d at 112, 113 (holding after reviewing the positions of the various Circuits that a prejudice standard served "ERISA's objective to protect employees against inadequate SPDs").

The Sixth Circuit, in dicta, has stated that neither detrimental reliance nor prejudice is required, Edwards, 851 F.2d at 137 (6th Cir.1988).

[FN10] Yet, imposition of the penalty remains discretionary. Bartling v. Fruehauf Corp., 29 F.3d 1062, 1068-1069 (6th Cir.1994).FN10. A later Southern District of Ohio opinion indicates that plaintiffs must show: "a substantial lack of compliance with ERISA's reporting and disclosure requirements, with resulting substantial harm to the employees, before a nondisclosure violation of § 1021(a) is subject to redress as arbitrary and capricious behavior. See Blau v. Del Monte Corp., 748 F.2d 1348 (9th Cir.1984). Mere technical noncompliance with no showing of substantial harm or egregious behavior on the part of the employer does not entitle plaintiffs to relief. Simmons v. Diamond Shamrock Corp., 844 F.2d 517 (8th Cir.1988)." Rinard v. Eastern Co. 769 F.Supp. 1416, 1429 (S.D.Ohio 1991) rev on other grounds, 978 F.2d 265 (6th Cir.1992).


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