Varity Corp. v. Howe

Background

A group of Massey-Ferguson employees and some retirees say their employer, Varity, ran a reorganization called “Project Sunshine” that moved about 1,500 workers into a newly formed subsidiary, Massey Combines. Varity held a meeting, distributed documents and a videotape assuring workers their pay and benefits would remain unchanged. The District Court found Massey Combines was insolvent from its start, employees lost nonpension benefits, and Varity had deliberately deceived workers; lower courts awarded relief including possible reinstatement into the original plan.

Reasoning

The Court addressed three questions: whether Varity acted as a plan fiduciary when it made the misleading statements; whether those statements violated ERISA §404’s duty to act solely in beneficiaries’ interest; and whether ERISA §502(a)(3) allows injured individuals to obtain equitable relief. The Court answered yes to each. It explained that plan administrators who communicate plan-related information may be acting as fiduciaries, that intentional deception breaches the duty of loyalty, and that the §502(a)(3) catchall can authorize appropriate equitable relief when other provisions leave harmed individuals without a remedy.

Real world impact

The decision permits employees harmed by an administrator’s deliberate deception to seek individualized equitable remedies, such as orders restoring plan participation. It makes clear that employers who both run and sponsor plans can be treated as fiduciaries when they give plan-related assurances. The Court emphasized that equitable remedies must be “appropriate” and fact-specific, so courts will tailor relief while respecting ERISA’s structure.

Dissents or concurrances

Justice Thomas, joined by Justices O’Connor and Scalia, dissented, arguing ERISA’s text and structure limit fiduciary-breach suits to representative actions on behalf of the plan and that ordinary employer business statements should not trigger fiduciary duties.