On September 27, 2011, the US Court of Appeals for the Fifth Circuit issued an opinion in Kujanek v. Houston Poly Bag I, Ltd., holding a profit-sharing plan administrator and employer Houston Poly Bag I, Ltd. (Houston Poly) liable for improperly withholding plan documents from its former employee Kenneth Kujanek. The key issue in the case was whether Houston Poly was required to give Kujanek plan documents even though Kujanek did not follow the plan's procedures for requesting those documents.

Kujanek resigned from Houston Poly in September 2007, and at the end of that year he had accrued vested benefits in his profit-sharing account totalling $490,198.78. Houston Poly's company policy required plan participants to wait at least one year from their date of termination before obtaining a distribution of their plan benefits. Two months after he resigned, Houston Poly sued Kujanek in state court in an unrelated litigation proceeding regarding his employment with the company. In discovery, Kujanek requested all documents describing the:

Houston Poly objected and failed to produce the documents. The jury entered a take-nothing judgment in Kujanek's favor.

One year after his termination, Kujanek asked Houston Poly's plan broker to request a distribution of his plan account on his behalf. The broker contacted a plan trustee, who responded that Kujanek needed to request a distribution directly from the plan instead of through the broker. There were no further communications between Kujanek and the plan.

Kujanek sued Houston Poly in February 2009, claiming the company:

While litigation was pending in 2009, Kujanek requested and received from Houston Poly:

Kujanek claimed that if Houston Poly had given him the necessary documents and forms in a timely manner, he would have submitted his distribution request in 2008 and received the amount vested at the end of 2007. He sought damages of the difference between the 2008 and 2007 balances plus statutory penalties and attorneys' fees.

The district court judge granted Kujanek's motion for summary judgment, finding Houston Poly had:

The district court awarded Kujanek $183,881.88 in damages for the loss and depreciation in his profit-sharing account, $25,025 in statutory penalties under ERISA and $60,030 in attorneys' fees. Houston Poly appealed.

The Fifth Circuit upheld the district court's award of damages for the loss and depreciation in Kujanek's profit-sharing account, holding that Houston Poly breached its fiduciary duty of loyalty under ERISA by failing to provide plan documents and rollover information to Kujanek.

Houston Poly claimed its duty to provide this information was not triggered until litigation because Kujanek failed to submit a written request for the plan documents as required in the plan's Summary Plan Description (SPD). Despite Kujanek's failure to follow the SPD's requirements, the court held that Houston Poly's fiduciary duty to act exclusively in the interests of the participant required the company to give Kujanek plan documents and rollover information. The court reasoned that:

The court held that the loss and depreciation in Kujanek's profit-sharing account from 2007 to 2008 was the appropriate measure of relief.

However, the court reversed and remanded the district court's award of statutory penalties under ERISA. The district court found that Kujanek's state court discovery request functioned as a written request for plan documents under Section 104(b)(4) of ERISA, rendering Houston Poly liable for statutory penalties for failing to timely produce the documents. The Fifth Circuit disagreed, instead following the US Court of Appeals for the Seventh Circuit's approach in Verkuilen v. South Shore Building and Mortgage Co. In Verkuilen, the Seventh Circuit held that the plaintiff was not entitled to statutory penalties under ERISA where she filed an interrogatory requesting plan information instead of submitting a written request directly to the plan, reasoning that discovery requests between lawyers during litigation and requests for ERISA plan information to a plan administrator are materially different. (112 F.3d 410 (7th Cir. 1997).)

The Fifth Circuit declined to adopt a brightline rule that discovery requests in unrelated litigation constitute written requests under ERISA. However, it remanded the case to determine whether statutory penalties were appropriate since there was no evidence that Houston Poly had ever provided Kujanek with the plan information required to be provided to participants under ERISA.

The court also upheld the district court's award of attorneys' fees.

The Fifth Circuit's opinion puts plan fiduciaries on notice that their duty of loyalty under ERISA may require them to communicate plan documents and information to participants even if the participants do not properly follow the procedures to request plan information. The decision also serves as a reminder to plan administrators to ensure participants receive all required documents within the time frames specified by ERISA.

For more information on ERISA's fiduciary duties, see Practice Note, ERISA Fiduciary Duties: Overview. To review the requirements for a valid SPD under ERISA, see SPD Compliance Chart for ERISA Plans.