Must a Fiduciary Disclose Helpful Information to Participants?

Victor Washington played in the NFL for five years before a string of injuries ended his career. The NFL's disability plan agreed that he was disabled. However, the plan asserted Washington had a "non-football" disability, entitling him to a lower monthly benefit than a football-related injury. The plan limited football-related disabilities to those caused by a single football injury. The plan asserted Washington's disabilities were cased by multiple injuries, none of which were disabling by themselves.

Washington disputed this interpretation but eventually settled his claim. Later, the plan lost a case with another player involving the same issue. The court hearing the matter held the plan's position regarding the single/multiple injury distinction was unreasonable.

Upon learning of that decision, Washington sued to rescind his settlement. He argued the plan should have told him that the reason for denying his claim was unreasonable. The Ninth Circuit in a divided decision held that the decision was not “material” information and therefore the fiduciaries did not have to disclose it.

The Ninth Circuit’s decision includes a helpful summary of the duties of loyalty and disclosure imposed on fiduciaries. Although the judges disagreed about the materiality of the other player's lawsuit, they agreed, “a misrepresentation is material if there is a substantial likelihood that it would mislead a reasonable employee in making an adequately informed decision in pursuing disability benefits to which she may be entitled.”