In the
United States Court of Appeals
For the Seventh Circuit

No. 98-4130

TAMYRA S. BOWERMAN,

Plaintiff-Appellee,

v.

WAL-MART STORES, INCORPORATED and
ASSOCIATES’ HEALTH AND WELFARE PLAN,

Defendants-Appellants.



Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 96 C 1380--Larry J. McKinney, Judge.


Argued September 24, 1999--Decided August 18, 2000



  Before BAUER, RIPPLE and DIANE P. WOOD, Circuit
Judges.

  RIPPLE, Circuit Judge. From October 1993 until
July 1995, and then from August 1995 until
September 1996, Tamyra Bowerman was employed by
Wal-Mart Stores, Inc. ("Wal-Mart"). As a full-
time employee of Wal-Mart, Ms. Bowerman was
entitled to participate in a Wal-Mart-sponsored
and -maintained employee welfare benefit plan
called the Wal-Mart Stores, Inc. Associates’
Health and Welfare Plan ("the Plan"). While she
was employed at Wal-Mart, Ms. Bowerman elected to
obtain her medical insurance coverage through the
Plan.

  The present lawsuit between Ms. Bowerman and
Wal-Mart stems from the Plan’s decision not to
pay nearly $12,000 in medical expenses related to
Ms. Bowerman’s pregnancy. Ms. Bowerman contends
that the Plan should have paid these expenses.
The Plan concedes that expenses incurred due to a
pregnancy ordinarily would be covered by the
Plan. Nevertheless, the Plan maintains that,
because of the one-month hiatus in her employment
at Wal-Mart in 1995, Ms. Bowerman’s pregnancy
must be treated as a pre-existing condition that
the terms of the Plan exclude from coverage.

  Ms. Bowerman brought this suit under the civil
enforcement provision of the Employment
Retirement Income Security Act of 1974 ("ERISA"),
29 U.S.C. sec. 1132. After a bench trial, the
district court rendered a decision for Ms.
Bowerman and ordered Wal-Mart to cover Ms.
Bowerman’s pregnancy-related claims. The court
further ordered Wal-Mart to improve its
explanations in its plan documents, and it
awarded Ms. Bowerman attorneys’ fees. For the
reasons set forth in the following opinion, we
affirm, as modified, the judgment of the district
court.

I
BACKGROUND
A. The Wal-Mart Plan

  The Wal-Mart Plan is a single-employer, unfunded
plan governed by ERISA. Eligible Wal-Mart
employees may participate in the Plan’s medical
benefit program. The Plan’s Administrative
Committee (the "Administrator") acts as its
administrator and fiduciary, and, according to
the terms of the Plan, the Administrator has
discretionary authority "to resolve all questions
concerning the administration, interpretation, or
application of the Plan." R.28, Ex.1 (1995 SPD)
at Q-2. Furthermore, the Administrator has the
sole power to amend the terms of the Plan, and
all amendments must be made in writing.

  These aspects of the Plan, along with other
important Plan provisions, are explained in the
annual Associate Benefit Book, also known as the
Summary Plan Description ("SPD"). Each newly-
hired employee receives a copy of the then-
current SPD, and, thereafter, Wal-Mart’s annual
distribution of new SPDs to each employee
coincides with the effective date for the SPDs.
The relevant SPD for this litigation is the 1995
SPD. The 1995 SPD directed Plan participants who
had questions regarding their benefits to contact
a Plan service representative at designated
telephone numbers.

  At all times relevant to this litigation, and as
explained in the 1995 SPD, the Wal-Mart Plan
subjected new full-time employees to a 90-day
waiting period before they were eligible for
benefits. Furthermore, newly-hired employees
could not obtain benefits for charges related to
"pre-existing conditions" until the new employees
had been covered by the Plan for 12 consecutive
months./1 When employees ended their employment
at Wal-Mart, they would lose their Plan benefits
on the last day they worked./2

  For those Plan participants who became
ineligible for benefits because their employment
had been terminated, the Plan’s 1995 SPD informed
them that they could obtain continuation of
coverage as provided under the Consolidated
Omnibus Budget Reconciliation Act ("COBRA"), 29
U.S.C. sec. 1161 et seq. According to the 1995
SPD, a participant had 60 days from the date the
COBRA notification form was mailed to the
employee to elect COBRA coverage. The 1995 SPD
explained to participants that, if they chose
COBRA coverage, they could continue that coverage
for up to 18 months. Additionally, the 1995 SPD
explained that COBRA coverage would terminate
upon the occurrence of certain events, one of
which was a participant’s failure to pay the
premium within 30 days of its due date.

  In addition to these rather standard plan
attributes, the Wal-Mart Plan had a distinctive
feature. When employees of Wal-Mart terminated
their employment but then returned to work for
the company within 12 months, the Administrator
had a policy of allowing the returning employees
to immediately "return" to the same medical
coverage that they had had before leaving the
company. The Plan’s 1995 SPD explained this
feature of the Plan to Wal-Mart employees in
these terms:

If you are rehired, reinstated to full-time
employment, or are cancelled for non-payment of
premiums, and you return to work in less than 12
months from the end of coverage, you will
automatically receive the same benefits you had
before. You will not have a 90-day wait for
benefits, but pre-existing condition limitations
will apply.

R.28, Ex.1 (1995 SPD) at C-3. Under this
provision, the Administrator would ignore the
interruption in employment, and the rehired
employees would not be subjected to the 90-day
waiting period for coverage to begin. For
purposes of the pre-existing condition
limitation, however, the Plan would not overlook
the interruption in employment; the Plan would
apply the year-long pre-existing condition
limitation against rehired employees who had a
break in their coverage under the Plan. Notably,
however, the 1995 SPD never informed the
employees that fully paid COBRA coverage would
constitute continuous coverage and thus obviate
the 12 month pre-existing condition limitation.

B.   Facts

  Ms. Bowerman enrolled in the Wal-Mart Plan when
she began working at the Wal-Mart Photo Lab in
Crawfordsville, Indiana, in October 1993. As a
newly-hired employee, Ms. Bowerman was subject to
the Plan’s 90-day waiting period for medical
benefits. Ms. Bowerman’s medical coverage under
the Plan became effective on January 11, 1994.
She was also subject to the Plan’s pre-existing
condition limitation.

  On July 20, 1995, Ms. Bowerman quit her job at
Wal-Mart in order to take another position with a
different company. During her exit interview, Ms.
Bowerman obtained information about continuing
her medical coverage by electing COBRA coverage,
and, either at the exit interview or shortly
thereafter, Ms. Bowerman also received a "NOTICE
OF RIGHT TO CONTINUE COVERAGE (COBRA)" and a
COBRA enrollment form from Wal-Mart. Dist. Ct. R.
Stipulated Ex.2 at 10. The COBRA notice was
written in a question and answer format, and
stated in part:

When do you pay for the coverage? PLEASE DO NOT
SEND A PAYMENT NOW!!
If you elect coverage, you will owe premiums back
to your qualifying event date. Once you have been
enrolled, we will mail you a payment book to
submit payments by. Your first payment will bill
you from your event date through the month in
which we enroll you for COBRA. IT COULD BE MORE
THAN ONE MONTHS PREMIUM! This payment will be due
45 days from the due date shown on your payment
book. Every month thereafter you will make your
normal monthly payment which is due on the first
of each month. . . .

Id. The notice also stated that COBRA coverage
would end "[t]he first day for which timely
payment is not made to the Plan." Id. The 1995
SPD provided that COBRA coverage would be
terminated if the COBRA premium was not paid
within 30 days of the due date.
  At the time she quit her job at Wal-Mart on July
20, Ms. Bowerman was unaware that she was nearly
one month pregnant. Later, on August 8, Ms.
Bowerman went to her physician’s office to have a
pregnancy test performed. A medical technician
administered a test similar to a home pregnancy
test, and, from the results of this test, Ms.
Bowerman learned that she was pregnant. Ms.
Bowerman never saw her physician during this
visit to his office, but the results of her
pregnancy test were placed in her medical file.
The district court specifically found that the
test administered to her could have been
conducted at home without the assistance of a
medical provider, and if the test had been self-
administered, the pregnancy would not have been
considered a pre-existing condition under the
Plan.

  A few days after having the pregnancy test
performed, Ms. Bowerman filled out her COBRA
enrollment form and later mailed it into the
Plan’s COBRA department. The Plan received the
form on August 23 and then generated a coupon
book for Ms. Bowerman’s payments.

  Because she found her new job to be more
strenuous than her job at Wal-Mart, Ms. Bowerman
returned to the Wal-Mart Photo Lab on August 14,
1995, and asked to be rehired. She also informed
the employees at the Photo Lab that she was
pregnant. Her former boss rehired her on the
spot, but, because Ms. Bowerman had been feeling
ill that week, they both decided she should wait
until the following Sunday to start work. On
August 20, 1995, Ms. Bowerman began working at
Wal-Mart again, and this date became her official
rehire date.

  When Ms. Bowerman returned to work at Wal-Mart
on August 20, her need for COBRA coverage ended
because, as an employee who returned to the
company within 12 months, Ms. Bowerman could take
advantage of the Administrator’s special rehire
policy. On August 20, the day Ms. Bowerman began
working again for Wal-Mart, the Plan immediately
restored her medical coverage and resumed
deducting medical benefit premiums from Ms.
Bowerman’s paycheck. Because there had been such
a short interval since her prior employment with
Wal-Mart, the payment for her COBRA coverage was
not yet due; indeed, Ms. Bowerman had not yet
received the coupon book by which she was to make
payments. Her first COBRA premium would have been
due on October 9, 1995. Although October 9 was
the due date, if the 1995 SPD’s 30-day grace
period for paying COBRA premiums is applied to
that due date, the very last date on which Ms.
Bowerman could have paid her premium and obtained
her COBRA coverage would have been November 8,
1995.

  A few days after returning to Wal-Mart, Ms.
Bowerman met with Chuck Spencer, who was an
administrative assistant at the Photo Lab and who
was responsible for administering benefit plan
enrollment for that department. Ms. Bowerman
recounts their conversation as follows:
And I [Bowerman] don’t know if I asked him
[Spencer] if I had to wait my 90 days until my
insurance was picked up. I am not sure. And he
told me because I returned to Wal-Mart within the
same calendar year that my regular insurance
would be picked back up the day I came back to
work on August 20th. And I asked him, so I don’t
need my COBRA, and he told me no. Because I
didn’t want to be making COBRA payments and
already have my regular insurance.
R.78 at 5-6. After her conversation with Spencer,
Ms. Bowerman apparently believed that she did not
need COBRA coverage. On or about September 17,
1995, Ms. Bowerman executed a "DISCONTINUE
COVERAGE(S) FORM" from her COBRA coupon book and
mailed that form to the Plan’s COBRA department.
Id. at 6. Ms. Bowerman indicated on the form that
her reason for discontinuing COBRA coverage was
that: "I went back to work at Wal-Mart so my
insurance is still in effect." Id. Ms. Bowerman
never made the COBRA premium payment that was due
on October 9. Nobody from the Plan contacted Ms.
Bowerman to follow up on her decision to decline
COBRA coverage./3 Nor is there any indication in
the record that she ever received a prorated bill
for the actual period during which she was not
employed by Wal-Mart and therefore dependent upon
COBRA for coverage. According to the district
court’s findings, Ms. Bowerman received no
response to the comment she placed on the form.
The district court also noted that Ms. Bowerman
assumed that any payments that she owed were
being deducted from her paycheck.

  Ms. Bowerman received pregnancy-related
treatment on several occasions after she had
returned to work at Wal-Mart on August 20.
Consequently, in September, Ms. Bowerman’s
medical providers began submitting claims for
medical services related to her pregnancy. The
Plan did not pay those claims. When Ms. Bowerman
was admitted to the hospital on October 9 for a
pregnancy-related incident, a hospital employee
called the Plan to verify coverage for Ms.
Bowerman. A Plan service representative told the
hospital employee that Ms. Bowerman had coverage
with an effective date of January 11, 1994 (the
date Ms. Bowerman’s coverage first became
effective after Wal-Mart initially had hired
her). Nevertheless, when the hospital later
submitted its claim, it went unpaid by the Plan.

  Over the course of the next several weeks and
months, Ms. Bowerman and her health providers
repeatedly contacted the Plan to determine why
claims were not being paid./4 They received
varying answers in their inquiries. First, as we
have already mentioned, the Plan explained to the
hospital employee that Ms. Bowerman had coverage
with an effective date of January 11, 1994. Then,
on October 24, 1995, an employee of Ms.
Bowerman’s physician called the Plan to obtain an
explanation for why the Plan had denied a claim
submitted by that office./5 The following is
part of the conversation between the doctor’s
employee and the Plan’s service representative:

REP:. . . You just wanted to know about what
happened with the claim?

CALLER:Well, it shows that, that uh, her coverage
or it says coverage has been terminated on 07-20
of 95 and I had went through your system, oh I
don’t know, (inaudible). But I gathered an
effective date of 08-20 of 95. Which is before
the date of service on my claim.
REP:O.K. Hold on one moment and let me check the
eligibility for you.

CALLER:O.K.

REP:O.K. I’m showing that regular medical
coverage ended as of 07-20 and they picked up
COBRA . . .

CALLER:Uh-huh.

REP:Or were going to pick it up as of 7-21, it
didn’t . . .

CALLER:O.K.

REP:So coverage actually ended on 07-21.
CALLER:O.K. So she does not have COBRA coverage?

REP:No m’aam [sic].

CALLER:O.K.

REP:Looks like she had signed up and was going .
. . and then it looks like she was gonna take it
and something happened and she didn’t.

Dist. Ct. R. Group Ex.1. The next day, October
25, 1995, Ms. Bowerman herself called the
appropriate Plan service center in an effort to
determine why her pregnancy-related claims were
not being paid by the Plan. The following is the
conversation that Ms. Bowerman had with one of
the Plan’s service representatives:

REP:How may I help you?

CALLER:Well, I, I just talked to someone and she
said the reason my bills aren’t being paid is
cause you guys don’t have me down as insurance,
but it’s not. Cause I quit and had the COBRA and
then I went back to work in like less than a
month so my insurance picked back up and she said
that she didn’t find that it, so when I, I picked
my insurance back up.

REP:OK, I shown you did on August 20th.

CALLER:Right, that’s when I, yeah, that’s when I
went back to work. So I want to know why all
these bills I’m getting are not being covered. If
I have insurance, why aren’t they being covered?

REP:OK, just a moment. Let me go to the claims
screen. Just a second. So you agree that your
effective date should be 8-20.

CALLER:Yeah.
REP:OK.

CALLER:That’s when I went back, yeah.

REP:Great.

CALLER:I was just gone for like a month or so . .
.

REP:OK, what I can do, what they need to do is we
need to update the system.

CALLER:Um-hum.

REP:And, reconsider the three charges that we
have, that was for August.

CALLER:What do you mean reconsider?

REP:Well, I’ll send them back over.

CALLER:Oh, OK.

REP:To be processed.

CALLER:Oh.

REP:OK?

CALLER:OK. Well I was just wondering cause my
doctor’s been calling and . . . .

REP:I, I show that the provider has called this
morning already.

CALLER:OK.

REP:So I will, I will get this fixed for you. OK?

CALLER:OK, I appreciate it.

REP:OK. Have a nice day.

CALLER:OK, you too.

Id.

  Also in October 1995, the Plan generated
statements called "Explanations of Benefits"
("EOBs"), which were sent to Ms. Bowerman in
response to the claims submitted by her health
care providers. The EOBs generated in October
1995--one generated on October 10 and two
generated on October 16--stated that the claims
had been denied because the Plan’s records
"indicate[d] that no coverage was selected." R.78
at 10. One of the October 16 EOBs also indicated
that the claim had been denied because Ms.
Bowerman’s "coverage ha[d] been terminated." Id.
  Over the course of the next few months, Ms.
Bowerman contacted the Plan on a number of other
occasions in an effort to determine why the Plan
was not covering her claims. It was not until a
January 22, 1996, telephone call, however, that
Ms. Bowerman first became aware that her claims
might be denied because they related to her
pregnancy. During this telephone call, a Plan
representative revealed that the Plan was
reviewing whether Ms. Bowerman’s pregnancy was a
pre-existing condition that would not be covered.


  In the next few months, the Plan conducted its
pre-existing condition investigation, which
lasted until March 1996. On March 18, Ms.
Bowerman learned for certain from a Plan
representative that her pregnancy-related claims
would not be paid and that the Plan considered
her pregnancy to be a pre-existing condition. Her
pregnancy was a pre-existing condition, Ms.
Bowerman was told, because the original pregnancy
test performed on August 8, 1995, had been
documented in her medical file. Ms. Bowerman’s
failure to pay for COBRA coverage for the time
between July 20 and August 20, the representative
explained, meant that her coverage had lapsed and
that she was subject to a new pre-existing
condition limitation.

  When Ms. Bowerman tried to explain that she had
elected COBRA but then had returned to work so
that her "insurance was never dropped," the
representative explained to Ms. Bowerman that she
still would have had to "pick up" COBRA coverage
for the interim period in order to avoid the pre-
existing condition limitation. R.78 at 9. At no
time before this did a Plan representative
explain to Ms. Bowerman that she would be without
insurance coverage for the period between July 20
and August 20 if she did not pay her COBRA
premium. Also, until this conversation in March
1996, no one from the Plan had explained to her
that the failure to pay her COBRA premium would
cause a "break" in coverage and that the break
would cause her to be subject to a new pre-
existing condition limitation period.

  Unable to obtain from the Plan the medical costs
of her pregnancy, Ms. Bowerman filed this ERISA
lawsuit against Wal-Mart on September 25, 1996.
In her complaint, Ms. Bowerman alleged that Wal-
Mart, through its Plan, wrongfully denied her
coverage in violation of 29 U.S.C. sec. 1133 and
that she was therefore entitled to recover those
benefits pursuant to 29 U.S.C. sec.
1132(a)(1)(B). Ms. Bowerman alternatively alleged
that Wal-Mart breached its fiduciary duties under
ERISA by not timely informing her of the
consequences of failing to elect COBRA coverage
for the time she was not working at Wal-Mart. Ms.
Bowerman sought damages in the amount of her
pregnancy-related expenses that would have
otherwise been covered by the Plan. She also
sought attorneys’ fees, costs, punitive damages,
and all other necessary and appropriate relief.

C.   Decision of the District Court

  The district court conducted a bench trial, and
the court later issued its findings of fact and
memorandum of law.

1.   Claim for Personal Benefits

  The district court first addressed Ms.
Bowerman’s contention that she was entitled to
have the Plan cover her pregnancy-related
expenses.

  The district court concluded that the Plan
documents adequately alerted Ms. Bowerman to the
possibility that a pre-existing condition
limitation might apply to her when she returned
to work at Wal-Mart. The court noted that the
relevant SPD provided that returning employees
would not have a 90-day wait for benefits, "but
pre-existing condition limitations will apply."
R.78 at 19. Moreover, the district court
explained, Ms. Bowerman’s pregnancy undoubtedly
qualified as a pre-existing condition under the
Plan’s terms.

  Nevertheless, the district court explained, it
was not dispositive that the Plan had warned
participants that the pre-existing condition
limitation might apply to them. Rather, the
Plan’s explanation was not sufficient, according
to the district court, because the Plan’s
documents contained no description of how COBRA
coverage would "bridge the gap" and thereby
prevent the pre-existing condition limitation
from applying to a returning employee. In
"ordinary circumstances," continued the court,
Ms. Bowerman would be responsible for the gap in
her coverage because she failed to pay the COBRA
premium. Id. at 21. The circumstances here,
however, were not ordinary. The Plan’s special
re-hire policy for those who had left Wal-Mart’s
employ within the past year created an acute need
for the Plan to provide additional information to
employees about how COBRA coverage would "bridge
the gap" between their regular coverage and would
allow the returning employee to avoid a new pre-
existing condition limitation. When employees
returned after a short time away from the
company, as Ms. Bowerman did, the court explained
that those employees especially needed timely and
accurate information about their status under the
plan.
  The Plan’s failure to provide the needed
information to Ms. Bowerman, however, did not end
with its SPD, according to the district court.
Rather, "the combination of an SPD that says
nothing about bridging a gap in coverage with
COBRA to avoid pre-existing condition
limitations, the advice given by Spencer, and all
of the other circumstances taken together,
[including the advice of the Plan’s employees who
answered telephonic inquiries,] constituted
materially misleading information, on which [Ms.]
Bowerman reasonably relied." Id. at 28. These
circumstances, according to the district court,
"lulled" Ms. Bowerman into a false impression
about her medical coverage for that one-month
period she did not work at Wal-Mart. Id. at 29.
As the district court explained, "[u]nder these
circumstances, Spencer’s representation misled
[Ms.] Bowerman to the point where she could not
be expected to ask the customer service
representatives the right questions about her
coverage." Id. at 28. At the time, continued the
court, it was not clear to Ms. Bowerman that the
COBRA premium was a separate matter from her
renewed coverage. Nor was it clear to her that
her return to work would not prevent a break in
coverage if she failed to elect and to pay for
COBRA coverage for the time between July 20 and
August 20. Therefore, the district court
reasoned, Ms. Bowerman was entitled to rely on an
estoppel theory to recover her benefits from the
Plan.

  In reaching this conclusion, the district court
indicated that it was aware of the rule
forbidding oral modifications of substantive plan
provisions. Rather, it characterized the oral
representations made to Ms. Bowerman by Spencer
and by the Plan’s service representatives as the
Plan Administrator’s "discretionary application"
of the Plan. Id. at 25. Moreover, although
Spencer did not work for the Administrator and
was not mentioned in the SPD as a source of
authoritative information about the Plan, the
district court concluded that the Administrator
had clothed Spencer with sufficient apparent
authority to make the Plan accountable for his
representation.

  To prevail on an estoppel theory, the district
court explained, Ms. Bowerman had to show that
the Plan had made a misleading representation,
that she had reasonably relied on that
misrepresentation, and that her reliance was
detrimental. As to the first element, it was
clear to the district court that the Plan had
made misleading representations to Ms. Bowerman.
The 1995 SPD, along with Spencer’s answers and
the service representatives’ explanations, all
amounted to a misleading representation,
according to the district court, because none of
them explained to Ms. Bowerman the relationship
between COBRA and the pre-existing condition
limitation in the context of the Plan’s special
rehire policy.

  The court also found that Ms. Bowerman’s
reliance on those misleading representations was
reasonable. Specifically, the district court
explained that Ms. Bowerman reasonably had relied
on Spencer’s statement that she did not need
COBRA coverage. Her reliance was justified,
according to the district court, because Ms.
Bowerman had no reason to doubt Spencer’s
authority to explain the provisions of the Plan.

  Finally, the district court found that Ms.
Bowerman had been adversely affected by her
reliance: She did not make her COBRA premium
payment because she believed that she did not
need it once she returned to work at the Photo
Lab. By not making the COBRA payment, Ms.
Bowerman incurred thousands of dollars in medical
expenses related to her pregnancy, which the Plan
refused to pay.

  Because the requisites for applying estoppel
were present in this case, the district court
held that the Plan should be estopped from
denying coverage for Ms. Bowerman’s pregnancy-
related expenses. The court ordered Wal-Mart to
accept from Ms. Bowerman the COBRA premium
payment she should have paid in October 1995. The
court ordered that, once that payment had been
made, the Plan had to pay Ms. Bowerman the
benefits that she would have received had there
been no gap in her coverage.

2.   Breach of Fiduciary Duty

  Even though the court held that Ms. Bowerman was
entitled to estop the Plan from denying her
benefits, the district court also addressed Ms.
Bowerman’s claim that the Plan breached its
fiduciary duty to her. Because an ERISA claim for
breach of fiduciary duty can be brought only
against an individual or entity that acts as a
plan fiduciary, the district court first
determined which parties might exercise
discretion over the Plan so as to qualify as
fiduciaries of the Wal-Mart Plan. According to
the district court, Spencer and the service
representatives did not exercise the necessary
degree of discretion to expose them to fiduciary
liability under ERISA. The district court did
conclude, however, that the Administrator
qualified as a fiduciary. Moreover, the district
court concluded that the Administrator had
breached its fiduciary duty to Ms. Bowerman
because of the Plan’s failure to explain fully
how paid-up coverage under COBRA would affect the
pre-existing condition limitation for individuals
rehired with only a short break in service. The
district court further reasoned that the
combination of the inadequate explanation of the
policy in the Plan documents along with the
misinformation provided by Spencer and the
service representatives amounted to a breach of
fiduciary duty by the Administrator.

  Finally, the district court concluded that this
breach of fiduciary duty entitled Ms. Bowerman to
Plan-wide equitable relief. The court held that
Ms. Bowerman was entitled to an injunction
requiring Wal-Mart to provide a more accurate and
comprehensive explanation of the relationship
between the Plan’s pre-existing condition
limitation and continuing coverage under COBRA.
Additionally, the court’s injunction required
Wal-Mart to provide an explanation of how COBRA
coverage could "bridge the gap" for employees
rehired by Wal-Mart within one year.

3.   Attorneys’ Fees

  In light of its holding entitling Ms. Bowerman
to her benefits and to injunctive relief, the
district court also considered Ms. Bowerman’s
request for attorneys’ fees under ERISA. The
district court concluded that it could employ one
of two tests for determining whether attorneys’
fees were appropriate in this case. According to
the district court, under one test it would ask
whether Wal-Mart’s position had been
"substantially justified." R.78 at 38. Under the
other test, the court explained, it would weigh
five factors: "1) the degree of [Wal-Mart’s]
culpability or bad faith; 2) the ability of [Wal-
Mart] to satisfy personally an award of
attorneys’ fees; 3) whether or not an award of
attorneys’ fees would deter other persons acting
under similar circumstances; 4) the amount of
benefit conferred on participants of the plan as
a whole by the litigation; and 5) the relative
merits of the parties’ positions." Id. The
district court also noted that there was a
"modest presumption" for awarding fees in favor
of the prevailing party, especially in cases
where that party is a plan beneficiary or
participant. Id.

  Although the district court rejected Ms.
Bowerman’s assertion that Wal-Mart had acted in
bad faith, the court held that a fee award
nevertheless was appropriate in this case. The
district court came to this conclusion in part
because of the modest presumption in favor of
awarding fees to prevailing parties when the
prevailing party is the plan participant or
beneficiary and because, despite this
presumption, Wal-Mart had not made an argument or
presented evidence to oppose a fee award.

  The district court noted that, regardless of the
test employed, "the bottom-line question is
essentially the same: was the losing party’s
position substantially justified and taken in
good faith, or was that party simply out to
harass its opponent?" Id. at 39. In this case,
the district court explained, Wal-Mart’s position
was not substantially justified. Thus, after
taking into consideration the modest presumption
favoring an award to Ms. Bowerman, Wal-Mart’s
response to her request, and Wal-Mart’s
unjustified position, along with the remedial
purpose of ERISA, the district court ruled that
Ms. Bowerman was entitled to reasonable
attorneys’ fees and costs./6

II
DISCUSSION

  Because this case comes to us after the district
court conducted a bench trial, we review the
district court’s factual findings for clear
error, see Petrilli v. Drechsel, 94 F.3d 325, 329
(7th Cir. 1996), and the court’s legal
conclusions de novo, see Ross v. Indiana State
Teacher’s Ass’n Ins. Trust, 159 F.3d 1001, 1008
(7th Cir. 1998), cert. denied, 525 U.S. 1177
(1999); Petrilli, 94 F.3d at 329./7

A.   Equitable Estoppel
1.

  The district court correctly held that Wal-Mart
should be estopped from denying coverage for Ms.
Bowerman’s pregnancy-related expenses. We have
held that "estoppel principles are applicable to
claims for benefits under unfunded single-
employer welfare benefit plans under ERISA."
Black v. TIC Inv. Corp., 900 F.2d 112, 115 (7th
Cir. 1990); see also Miller v. Taylor Insulation
Co., 39 F.3d 755, 758 (7th Cir. 1994). We have
emphasized on several occasions, however, that
the availability of estoppel in the ERISA context
is constrained by other important considerations
animating ERISA. Most notably, we have stressed
repeatedly that equitable estoppel cannot dilute
the rule forbidding oral modifications to an
ERISA plan. See Coker v. Trans World Airlines,
Inc., 165 F.3d 579, 585 (7th Cir. 1999); Frahm v.
Equitable Life Assurance Soc’y of the U.S., 137
F.3d 955, 961 (7th Cir. 1998), cert. denied, 525
U.S. 817 (1998); Schmidt v. Sheet Metal Workers’
Nat’l Pension Fund, 128 F.3d 541, 546 (7th Cir.
1997), cert. denied, 523 U.S. 1073 (1998)./8 We
simply have rejected the claim that "bad advice
delivered verbally entitles plan participants to
whatever the oral statement promised, when
written documents provide accurate information."
Frahm, 137 F.3d at 961.

  Nevertheless, despite these important
restrictions, we have applied estoppel principles
when countervailing ERISA principles would not be
impeded and "one party has made a misleading
representation to another party and the other has
reasonably relied to his detriment on that
representation." Gallegos v. Mount Sinai Med.
Ctr., 210 F.3d 803, 811 (7th Cir. 2000), petition
for cert. filed, 69 U.S.L.W. 3003 (U.S. June 27,
2000) (No. 99-2083). As the court recently
explained in Gallegos, the "basic policy
consideration arguing in favor of applying
estoppel is the principle of contract law that ’a
party who prevents the occurrence of a condition
precedent may not stand on that condition’s non-
occurrence to refuse to perform his part of the contract.’"
Id. at 809 (quoting Swaback v. American Info.
Techs. Corp., 103 F.3d 535, 542 (7th Cir. 1996)).
In Gallegos, the court noted that we have applied
estoppel principles to ERISA claims "where the
claimant was misled by written representations of
the insurer or plan administrator into failing to
take an action that would have enabled the
claimant to receive benefits under the Plan." Id.
We further noted that estoppel is appropriate in
an ERISA action "where the defendant insurer
misrepresented the contractual limitations period
in the plan summary" because "’a defendant whose
own activities made the plaintiff miss the
deadline should not be allowed to litigate over
whether the plaintiff could have sued earlier.’"
Id. at 809 (quoting Doe v. Blue Cross & Blue
Shield United of Wisc., 112 F.3d 869, 876 (7th
Cir. 1997))./9 Furthermore, in Swaback we held
that when an employer has provided "repeated
misinformation" to an ERISA claimant, and that
misinformation prevented the claimant from making
an election of benefits, estoppel should be
applied to prevent the employer from denying
those benefits to the claimant. 103 F.3d at 542-
43.

2.

  We now turn to an examination of the Plan
documents to ascertain whether the record will
support the conclusion that Ms. Bowerman was
misled into believing that she need not pay her
COBRA premium for the time she was not employed
by Wal-Mart in order to avoid the pre-existing
condition limitation. We think that the district
court was on solid ground in deciding that the
1995 SPD and the other Plan documents
insufficiently explained the need for employees
like Ms. Bowerman, who were rehired by Wal-Mart
after a brief hiatus, to obtain COBRA coverage
through the Plan.

  An ERISA plan’s SPDs must be written "in a
manner calculated to be understood by the average
plan participant, and [be] sufficiently accurate
and comprehensive to reasonably apprise such
participants and beneficiaries of their rights
and obligations under the plan." 29 U.S.C. sec.
1022(a). The SPD must include, among other
things, information about "the plan’s
requirements respecting eligibility for
participation and benefits" as well as
information regarding the "circumstances which
may result in disqualification, ineligibility, or
denial or loss of benefits." Id. sec. 1022(b).
When we interpret ERISA plan SPDs, we interpret
them according to their plain meaning as
understood by an average person. See Gallegos,
210 F.3d at 810.

  The district court believed that the Plan’s 1995
SPD adequately disclosed that, upon rehire,
employees would be subject to a pre-existing
condition limitation. Nevertheless, we agree with
the district court that the Plan documents never
explain adequately that this pre-existing
condition limitation period is not applicable to
individuals who leave Wal-Mart’s employ for a
short period, elect COBRA coverage, and pay the
premium due for that period. Given Wal-Mart’s
policy of immediately reinstating the health
benefits of individuals who rejoin the company
after a short interval, the absence of this
information gives those employees an inaccurate
view of their coverage. We believe that the
explanations provided in the SPD, as well as the
COBRA-specific information provided to Ms.
Bowerman after she left Wal-Mart’s employ, did
not provide the critical information needed by
employees in her circumstances--circumstances, it
must be remembered, that were created by Wal-
Mart’s policy on the reinstatement of medical
benefits for rehired employees. Merely informing
Ms. Bowerman that she might be subject to that
pre-existing condition limitation did not
sufficiently inform her of the importance of
maintaining COBRA coverage after her separation
from Wal-Mart in order to avoid a new pre-
existing condition limitation when she was
rehired.

  We must conclude that, as applied to employees
in Ms. Bowerman’s circumstances, the 1995 SPD
lacked the clarity and completeness required by
sec. 1022. Having failed to provide Ms. Bowerman
with an adequate explanation in its Plan
documents, we believe that the Plan cannot now
rely on its interpretation of those documents to
deny coverage to Ms. Bowerman.
3.

  The appropriateness of applying estoppel in this
case becomes even more clear when we take into
consideration, as did the district court, that
the Plan, through its own actions, reinforced the
confusion created by its own documents and
consequently prevented Ms. Bowerman from paying
the COBRA premium that would have "bridged the
gap" between July 20 and August 20.

  We have made clear in our earlier cases that the
oral representations of an ERISA plan may not be
relied upon by a plan participant when the
representation is contrary to the written terms
of the plan and those terms are set forth
clearly. See Plumb v. Fluid Pump Serv., Inc., 124
F.3d 849, 856 (7th Cir. 1997); Vershaw v.
Northwestern Nat’l Life Ins. Co., 979 F.2d 557,
559 (7th Cir. 1992); Pohl, 956 F.2d at 128. Here,
that rule is not applicable because the Wal-Mart
Plan documents are not free from ambiguity;
indeed, they leave the employee in Ms. Bowerman’s
situation guessing as to the appropriate course
of action. Faced with similar circumstances, our
colleagues in other circuits have held that
estoppel is permissible when the ERISA plan has
supplied ambiguous documentation and the
participant is further misled by the statements
of the Plan’s agents. In its en banc opinion in
Sprague v. General Motors Corp., 133 F.3d 388
(6th Cir.) (en banc), cert. denied, 524 U.S. 923
(1998), the Court of Appeals for the Sixth
Circuit held that, although principles of
estoppel can never be applied to vary the terms
of an unambiguous plan document, estoppel may be
invoked in the case of ambiguous plan provisions.
Id. at 404. Estoppel, reasoned the court,
requires reasonable or justifiable reliance by
the party asserting estoppel. That party’s
reliance, continued the court, can seldom, if
ever, be justifiable when it is inconsistent with
plan documents that are unambiguous and clear.
Allowing estoppel when the documents are clear,
moreover, would be inconsistent with the purpose
of ERISA. See id.; Fink v. Union Cent. Life Ins.
Co., 94 F.3d 489, 492 (8th Cir. 1996) (holding
that written and oral misrepresentations could
not serve as a basis of estoppel when the plan
documents were clear); see also Frahm, 137 F.3d
at 961 ("In federal law, a person cannot rely on
an oral statement, when he has in hand written
materials disclosing the truth."). By contrast,
in Kane v. Aetna Life Insurance, 893 F.2d 1283
(11th Cir. 1990), the Court of Appeals for the
Eleventh Circuit explicitly held that, when the
plan documents are ambiguous, the oral
interpretations of authorized plan employees may
be the basis for an estoppel because allowing
estoppel under such circumstances does not
undermine the policies of ERISA. See 893 F.2d at
1285-86; see also Alday v. Container Corp. of
Am., 906 F.2d 660, 666 (11th Cir. 1990)
(reaffirming the holding in Kane). The Ninth
Circuit has adopted explicitly the rationale of
the Eleventh Circuit. See Greany v. Western Farm
Bureau Life Ins. Co., 973 F.2d 812, 821-22 (9th
Cir. 1992)./10


   Here, the district court made an explicit
finding of fact that the Plan had clothed
Spencer, the administrative employee who handled
employee enrollments for Ms. Bowerman’s
department, with sufficient indicia of "apparent
authority" to make it reasonable for her to rely
on his pointed statement that she did not need
COBRA coverage. R.78 at 31-32. Although we must
accept this finding of fact from the district
court unless the finding is clearly erroneous, we
approach this particular finding with great
circumspection. The Plan documents state
unequivocally that inquiries concerning the Plan
are to be addressed to a representative of the
Plan at a stated toll-free number. There is
considerable force to the argument that, given
the clarity of this particular direction, it was
not reasonable for Ms. Bowerman to seek advice
elsewhere. On the other hand, the Plan documents
do not state that this toll- free number ought to
be the sole source of information and, in the
context of a single-employer welfare benefit plan
administered by the employer, we cannot say that
the district court erred by taking into account
Spencer’s misstatements./11

  In any event, the district court’s finding
cannot be, on this record, reversible error
because it is clear that Ms. Bowerman did indeed
inquire of the Plan service representative
available through the toll-free number. Indeed,
it was the representation of this service
representative that caused Ms. Bowerman to have
the fatal break in her coverage. Not
understanding why her claims were being denied by
the Plan, Ms. Bowerman telephoned the Plan
service representative, as instructed by the 1995
SPD, to obtain answers related to her medical
benefits. Ms. Bowerman explained her situation to
the Plan’s service representative, and she was
told that the representative would "get this
fixed" for her. Dist. Ct. R. Group Ex.1. The Plan
now asserts that Ms. Bowerman’s pregnancy should
be treated as a pre-existing condition because
she failed to pay her COBRA premium. But Ms.
Bowerman could have paid her premium at the time
she called the Plan on October 25--or even as
late as November 8--and still made a timely
payment for her COBRA coverage.
  As the district court found, "[t]he reason she
did not make that COBRA premium payment was that
she did not want to be making double premium
payments after she returned to work, and she
understood from talking with Spencer that she
would not need COBRA coverage." R.78 at 7. The
Plan documents failed to address Ms. Bowerman’s
need to pay her COBRA premium in order to avoid
the pre-existing condition limitation. "Had [Ms.
Bowerman] known that payment of that premium
would have enabled her to avoid any pre-existing
condition problems with her pregnancy," the
district court found, "she would have paid it."
Id. at 29. Not only did the Plan documents fail
to address Ms. Bowerman’s situation, a situation
faced by all individuals who are re-employed
after a short break in service, but the Plan’s
representative frustrated any possibility that
Ms. Bowerman would pay that COBRA premium. When
Ms. Bowerman squarely presented her situtation to
the Plan’s service representative, that
representative, rather than providing the crucial
information she needed, essentially told Ms.
Bowerman that nothing more needed to be done. But
for the Plan’s misleading and incomplete
information, Ms. Bowerman would have paid her
COBRA premium on time.

  Accordingly, we affirm the district court’s
determination that Ms. Bowerman is entitled to
assert equitable estoppel in these circumstances.
We also approve of the remedy fashioned by the
district court.

B.   Breach of Fiduciary Duty
1.

  The district court also ruled that the Plan had
breached its fiduciary duty to Ms. Bowerman. The
district court held that the Plan’s
Administrator, as the Plan’s fiduciary, had
breached its fiduciary duty to Ms. Bowerman
because of its failure to explain fully in the
Plan documents the operation of the rehire policy
vis-a-vis COBRA coverage and the pre-existing
condition limitation. Noting that neither Spencer
nor the Plan’s service representatives could be
considered fiduciaries, the district court
nevertheless observed that the misstatements of
these individuals had harmed Ms. Bowerman because
the Plan documents afforded her no accurate
information on the issues upon which these
individuals had given her erroneous information.
We agree with the district court’s assessment.
  To be a fiduciary of an ERISA plan, an
individual or entity "must exercise a degree of
discretion over the management of the plan or its
assets, or over the administration of the plan
itself." Schmidt, 128 F.3d at 547. Here, the
Plan’s Administrator undoubtedly is a fiduciary
of the Plan. Under ERISA, a fiduciary must
"discharge his duties with respect to a plan
solely in the interest of the participants and
beneficiaries." 29 U.S.C. sec. 1104(a)(1).
Fiduciaries breach this duty "if they mislead
plan participants or misrepresent the terms or
administration of a plan." Anweiler v. American
Elec. Power Serv. Corp., 3 F.3d 986, 991 (7th
Cir. 1993); accord Harte v. Bethlehem Steel
Corp., 214 F.3d 446, 452-53 (3d Cir. 2000); Krohn
v. Huron Mem’l Hosp., 173 F.3d 542, 547-48 (6th
Cir. 1999); Eddy v. Colonial Life Ins. Co. of
Am., 919 F.2d 747, 750 (D.C. Cir. 1990). Although
not every error in communicating information
regarding a plan will be found to violate a
fiduciary’s duty under ERISA, see Frahm, 137 F.3d
at 958-59; Chojnacki v. Georgia-Pacific Corp.,
108 F.3d 810, 817-18 (7th Cir. 1997), we have
made clear that fiduciaries must communicate
material facts affecting the interests of plan
participants or beneficiaries and that this duty
to communicate exists when a participant or
beneficiary "asks fiduciaries for information,
and even when he or she does not," Anweiler, 3
F.3d at 991.

  As we already have noted, an ERISA plan’s SPD
must be "written in a manner calculated to be
understood by the average plan participant" and
must be "sufficiently accurate and comprehensive
to reasonably apprise such participants and
beneficiaries of their rights and obligations
under the plan." 29 U.S.C. sec. 1022(a).
Moreover, the SPD must contain, among other
items, information regarding "the plan’s
requirements respecting eligibility for
participation and benefits" and also a
description of the "circumstances which may
result in disqualification, ineligibility, or
denial or loss of benefits." 29 U.S.C. sec.
1022(b).

  We agree with the district court that the 1995
SPD as well as the Plan’s COBRA documents failed
to provide material information that affected Ms.
Bowerman’s interests under the Plan.
Specifically, the Plan documents failed to
explain how maintaining paid-up COBRA coverage
rendered inapplicable a new pre-existing
condition limitation period when an employee was
rehired and eligible for immediate medical
coverage. The Plan documents failed to explain
adequately the relationship between COBRA
coverage and regular coverage for employees who
left Wal-Mart’s employ but then returned shortly
thereafter.

  ERISA does not require "plan administrators to
investigate each participant’s circumstances and
prepare advisory opinions for literally thousands
of employees," Chojnacki, 108 F.3d at 817-18, but
it does require plans to provide material
information to participants and beneficiaries. In
this case, the information the Plan should have
provided to Ms. Bowerman would not have been
information unique to her situation; rather, the
information she needed would have been
information relevant to all Plan participants who
were rehired by Wal-Mart within a few weeks or
months after leaving the company. The Plan’s
explanation of its policy in the 1995 SPD simply
failed to fully and fairly communicate how the
policy would work to the benefit of any of the
Plan’s participants who found themselves in such
circumstances.

  As the district court explained, Ms. Bowerman
not only received inadequate explanations in the
Plan’s documents, she also received inaccurate
and misleading information from those she thought
would answer the questions created by the Plan’s
inadequate documents. Both Spencer and the
service representative failed to provide accurate
and forthright answers to Ms. Bowerman’s queries
about her coverage in general and about her need
to obtain COBRA coverage. In analogous
circumstances, the Court of Appeals for the
Second Circuit has held an ERISA plan’s fiduciary
liable for a breach of fiduciary duty when the
plan’s documents provided inaccurate disclosures
and therefore provided the participant with no
recourse to verify the accuracy of the
information given by the non-fiduciary agent. See
Estate of Becker v. Eastman Kodak Co., 120 F.3d
5, 9-10 (2d Cir. 1997). Similarly, in Schmidt, we
warned that "[i]f the written materials [are]
inadequate, then the fiduciaries themselves must
be held responsible for the failure to provide
complete and correct material information in the
event that a nonfiduciary agent provides
misleading information." Schmidt, 128 F.3d at
548. Ms. Bowerman’s situation presents us with
this very scenario.

  In contrast to the situation in Schmidt, in
which we held that the plan documents were
adequate, the Wal-Mart Plan provided Ms. Bowerman
with documents that failed to explain adequately
the relationship between COBRA coverage, the pre-
existing condition limitation, and the Plan’s
rehire policy. This problem with the Plan
documents themselves was then exacerbated by the
incorrect and misleading answers provided by
Spencer and the service representatives when Ms.
Bowerman inquired about her coverage under the
Wal-Mart Plan. In these circumstances, we hold
that Wal-Mart breached its fiduciary duty by
failing to provide complete and accurate
information to Ms. Bowerman regarding the terms
of the Plan.
2.

  We now turn to the appropriate remedy for this
violation of fiduciary duty. The district court
believed that Ms. Bowerman could not obtain
individual relief because 29 U.S.C. sec.
1132(a)(3) precluded such individual relief.
Instead, the court explained, the most Ms.
Bowerman could obtain for the Administrator’s
breach of its fiduciary duty was "an injunction
against Wal-Mart, ordering it to cease
administering the Plan in a way that is not
supported by, or apparent in, the written
provisions." R.78 at 37. Thus, the district court
ordered Wal-Mart "to fully disclose the
relationship between COBRA and the pre-existing
condition limitation upon rehire in less than one
year, so that the average person can understand
his or her rights and obligations under the
Plan." Id. In our view, however, this remedy is
not appropriate in this case.

  Section 1132(a)(3) allows a participant to bring
a civil action "to enjoin any act or practice
which violates any provision of this subchapter
or the terms of the plan, or . . . to obtain
appropriate equitable relief . . . to redress
such violations." 29 U.S.C. sec. 1132(a)(3). A
fiduciary’s breach of fiduciary duties violates
ERISA. In Varity v. Howe, 516 U.S. 489 (1996),
the Supreme Court held that individuals could
obtain individual relief under sec. 1132 (a)(3).
See id. at 509-15. Therefore, we cannot agree
with the district court that Ms. Bowerman could
not obtain individual equitable relief for the
breach of fiduciary duty under sec. 1132(a)(3).

  In Mertens v. Hewitt Associates, 508 U.S. 248
(1993), the Supreme Court held that "appropriate
equitable relief" under sec. 1132(a)(3) is
limited to traditional equitable remedies such as
awarding an injunction or restitution. See id. at
255. The district court therefore correctly
decided that "legal" remedies, such as money
damages, are not "appropriate equitable relief"
under sec. 1132(a)(3). However, "when sought as a
remedy for breach of fiduciary duty[,]
restitution is properly regarded as an equitable
remedy because the fiduciary concept is
equitable." Health Cost Controls of Ill., Inc. v.
Washington, 187 F.3d 703, 710 (7th Cir. 1999),
cert. denied, 120 S. Ct. 979 (2000); accord Strom
v. Goldman, Sachs & Co., 202 F.3d 138, 144-45 (2d
Cir. 1999) (holding that, for a breach of
fiduciary duty, restitution would be "equitable
relief" within the meaning of sec. 1132 (a)(3)).
Because the Plan’s Administrator has breached its
fiduciary duty to Ms. Bowerman, she is entitled
to the equitable remedy of restitution. In this
case, we see no reason why that remedy cannot
take the same form as the remedy fashioned by the
district court with respect to the equitable
estoppel claim. Ms. Bowerman ought to have an
opportunity to tender the COBRA payment that
would have been paid if the Plan had lived up to
its obligation to inform her fully of the
operation of the Plan. If she makes that payment,
the Plan then must pay the maternity-related
medical expenses that it has refused to pay in
reliance on the pre-existing condition
limitation.

  The district court’s misreading of the statute
and of the Supreme Court’s decision in Varity
caused it to enter an injunction for Plan-wide
relief. Such relief was not requested by Ms.
Bowerman. Accordingly, we modify the court’s
judgment to eliminate this relief from its
equitable remedy.

C.   Attorneys’ Fees and Costs

  Wal-Mart also appeals the district court’s award
of attorneys’ fees to Ms. Bowerman. ERISA
provides that, in an action brought by a
participant, beneficiary or fiduciary, "the court
in its discretion may allow a reasonable
attorney’s fee and costs of action to either
party." 29 U.S.C. sec. 1132(g)(1). We have said
that district courts entertain a "modest
presumption" that prevailing parties are entitled
to a reasonable attorneys’ fee. Little v. Cox’s
Supermarkets, 71 F.3d 637, 644 (7th Cir. 1995).
This modest presumption, however, is rebuttable.
See Harris Trust & Savs. Bank v. Provident Life &
Accident Ins. Co., 57 F.3d 608, 617 (7th Cir.
1995). We review a district court’s award of
attorneys’ fees for an abuse of discretion. See
Trustmark Life Ins. Co. v. University of Chicago
Hosps., 207 F.3d 876, 884 (7th Cir. 2000). "’A
district court’s determination will not be
disturbed if it has a basis in reason.’" Id.
(quoting Little, 71 F.3d at 644).

  To determine whether a prevailing party is
entitled to attorneys’ fees, we have employed two
formulas in ERISA actions. See Quinn v. Blue
Cross and Blue Shield Ass’n, 161 F.3d 472, 478
(7th Cir. 1998); Little, 71 F.3d at 644; Harris
Trust, 57 F.3d at 616-17 & n.5; Meredith v.
Navistar Int’l Transp. Corp., 935 F.2d 124, 128
(7th Cir. 1991). Under the first test used in
this circuit, we look to five factors:
1) [T]he degree of the offending parties’
culpability or bad faith; 2) the degree of the
ability of the offending parties to satisfy
personally an award of attorney’s fees; 3)
whether or not an award of attorney’s fees
against the offending parties would deter other
persons acting under similar circumstances; 4)
the amount of benefit conferred on members of the
plan as a whole; and 5) the relative merits of
the parties’ positions.
Quinn, 161 F.3d 478 (citing Filipowicz v.
American Stores Benefit Plans Comm., 56 F.3d 807,
816 (7th Cir. 1995)). Under the second test, we
look to whether or not the losing party’s
position was "’substantially justified.’" Id.
(quoting Bittner v. Sadoff & Rudoy Indus., 728
F.2d 820, 830 (7th Cir. 1984)). Regardless of
which test is used, however, the question asked
is essentially the same: "[W]as the losing
party’s position substantially justified and
taken in good faith, or was that party simply out
to harass its opponent?" Id. (quotation marks and
citations omitted); see also Trustmark, 207 F.3d
at 884 (stating that this question is the
"general test" for analyzing whether a party is
entitled to attorneys’ fees in an ERISA case);
Little, 71 F.3d at 644 (calling this question the
"bottom-line" question); Meredith, 935 F.3d at
128 (same).

  The district court articulated both of the
standards employed in this circuit and then
awarded Ms. Bowerman attorneys’ fees and costs in
this action. The district court provided several
reasons for its decision to award attorneys’ fees
to Ms. Bowerman. First, the district court noted
the modest presumption favoring an award to Ms.
Bowerman as the prevailing party. Moreover, the
court explained that Wal-Mart had provided "no
argument or evidence" to oppose an award. R.78 at
39. Finally, the court found that Wal-Mart’s
position had not been substantially justified
because Wal-Mart had "admitted that the way it
applied the Plan was not disclosed in the Plan
documents, it conceded that [Ms.] Bowerman would
have been entitled to benefits for her pregnancy
had she only paid a one-month premium for COBRA,
it did not and could not deny that Spencer told
[Ms.] Bowerman she did not need COBRA, and it
acknowledged that its customer service department
inexplicably delayed, and made mistakes with
respect to, ascertaining [Ms.] Bowerman’s status
under the Plan." Id. In these circumstances, we
cannot say that the district court abused its
discretion in awarding attorneys’ fees and costs
to Ms. Bowerman, and we therefore uphold its
determination.

Conclusion

  We hold that the Plan should be estopped from
denying benefits for Ms. Bowerman’s pregnancy.
Ms. Bowerman should make the COBRA premium
payment that was due on October 9. Thereafter,
the Plan must cover those pregnancy-related
expenses that would have been covered under the
Plan had there been no gap in coverage. The
district court’s imposition of Plan-wide relief,
however, is inappropriate and, upon receipt of
our mandate, the district court shall amend its
judgment to eliminate that requirement. We
therefore modify the judgment of the district
court in this one regard but otherwise affirm
that judgment. Within 15 days of the issuance of
our mandate, Ms. Bowerman may make application in
the district court for her attorneys’ fees on
this appeal. Ms. Bowerman may recover her costs
in this court.

AFFIRMED AS MODIFIED




/1 The 1995 SPD defined the pre-existing condition
limitation in this manner:

Any charge with respect to any participant for
any illness, injury, or symptom (including
secondary conditions and complications) which was
medically documented as existing, or for which
medical treatment, medical service,
prescriptions, or other medical expense was
incurred within 12 months preceding the effective
date of these benefits as to that participant,
shall be considered pre-existing and shall not be
eligible for benefits under this [Plan], until
the participant has been continuously covered
under this [Plan] 12 consecutive months. (Pre-
existing conditions include any diagnosed or
undiagnosed condition.)

R.28, Ex.1 (1995 SPD) at D-5.

/2 The 1995 SPD stated, in relevant part:

Your coverage and/or the coverage of your
dependent will terminate . . . [upon the]
[t]ermination of your employment (i.e., last day
worked--clocked in) . . . .

R.28, Ex.1 (1995 SPD) at C-3.

/3 It appears that the Plan’s COBRA department
routinely ignored the stated reasons for
discontinuing coverage, and by Wal-Mart’s
records, the first date that a Plan
representative handled Ms. Bowerman’s form was on
January 15, 1996. By this time, though, Ms.
Bowerman’s COBRA coverage had been terminated
because she had not paid her premium.

/4 The Plan recorded nearly all of the telephone
calls to its service representatives, and
transcripts of these recorded calls have been
made part of the record in this case.
/5 The employee had accessed the Plan’s system
electronically and had discovered that Ms.
Bowerman’s coverage was terminated as of July 20
and that she had a new effective date of August
20.

/6 We also note that, because punitive damages are
not available in an ERISA action, the district
court held that Ms. Bowerman could not recover
punitive damages from Wal-Mart.

/7 Although Ms. Bowerman’s complaint set forth
claims under sec. 1132(a)(1)(B) and sec.
1132(a)(3), we note that the district court
appropriately characterized the gravamen of Ms.
Bowerman’s allegations as falling within the
ambit of sec. 1132(a)(3).

/8 See also Russo v. Health, Welfare & Pension Fund,
Local 705, Int’l Bhd. of Teamsters, 984 F.2d 762,
767 (7th Cir. 1993); Pohl v. National Benefits
Consultants, Inc., 956 F.2d 126, 128 (7th Cir.
1992); Bartholet v. Reishauer A.G. (Zurich), 953
F.2d 1073, 1078 (7th Cir. 1992).

/9 Indeed, in Gallegos, we held that a party may be
precluded from asserting the defense of
exhaustion of administrative remedies when "that
failure results from the claimant’s reliance on
the written misrepresentations of the insurer or
plan administrator." 210 F.3d at 810. We also
have applied estoppel in the context of an
employer’s written assurance that a particular
employee would be a participant in the ERISA
benefit plan. See Miller, 39 F.3d at 758-59.

\10 Although we have discussed in passing the
Eleventh Circuit’s approach, we have not had
occasion to adopt it definitively. See Thomason
v. Aetna Life Ins. Co., 9 F.3d 645, 650 (7th Cir.
1993); Schoonmaker v. Employee Savs. Plan of
Amoco Corp. & Participating Cos., 987 F.2d 410,
413-14 (7th Cir. 1993); Russo, 984 F.2d at
767-68.

/11 The district court is not alone in its reliance
on the concept of apparent authority in this
context. In Taylor v. Peoples Natural Gas, Co.,
49 F.3d 982 (3d Cir. 1995), the Court of Appeals
for the Third Circuit considered whether an ERISA
plan fiduciary could be held liable for a breach
of fiduciary duty precipitated by misstatements
made by a non-fiduciary agent acting with
apparent authority. The non-fiduciary in Taylor
was an employee of the plan’s sponsor, not the
fiduciary, and was a supervisor of employee
benefits. The non-fiduciary had provided advice
to a plan participant regarding possible changes
in the plan. The court looked to the federal
common law of agency and, in particular, the
common law requirements for apparent authority.
Apparent authority arises, the court explained,
"in those situations where the principal causes
persons with whom the agent deals to reasonably
believe that the agent has authority." Id. at 989
(quotation marks and citation omitted). According
to the court, under the circumstances present in
that case, the plan’s participants reasonably
believed that the fiduciary had given the
supervisor of employee benefits the authority to
counsel them regarding possible changes in the
plan. Thus, the court held that the fiduciary
would be liable "for any affirmative material
misrepresentations" made by the supervisor
regarding the possible changes in the plan. Id.
