                             In the
 United States Court of Appeals
               For the Seventh Circuit
                         ____________

No. 03-3907
RANDALL A. BEACH,
                                               Plaintiff-Appellee,
                                v.

COMMONWEALTH EDISON COMPANY,
                                           Defendant-Appellant.

                         ____________
         Appeal from the United States District Court for
        the Northern District of Illinois, Eastern Division.
        No. 00 C 3357—Joan Humphrey Lefkow, Judge.
                         ____________
    ARGUED APRIL 16, 2004—DECIDED AUGUST 24, 2004
                     ____________



 Before EASTERBROOK, RIPPLE, and DIANE P. WOOD, Circuit
Judges.
  EASTERBROOK, Circuit Judge. After 31 years on the job,
Randall Beach retired from Commonwealth Edison in June
1997 and moved to Idaho. He was 52 at the time. By leaving
before age 55, Beach gave up entitlement to future health
benefits, though he retained his vested pension. Before taking
this extra-early retirement, Beach asked his supervisor,
plus ComEd’s human resources staff, whether there was
any immediate prospect that the firm would offer a volun-
tary separation package in his department, the Transmission
2                                                No. 03-3907

and Distribution Organization. Beach knew that ComEd was
reorganizing department by department and that it some-
times offered sweeteners, such as severance pay and health
benefits, to those who agreed to depart. As Beach remembers
these conversations, “everybody said absolutely it’s not going
to happen. You’re not going to get the package. The company
is not going to offer your department a package. It just will
not happen. That was the essence of everything I got.” Six
weeks after Beach’s retirement, however, ComEd did offer
a separation package to 240 of the 4,700 employees in his
department. Had he been employed on August 7, 1997, Beach
would have been eligible for these benefits. When ComEd
declined to treat him as if he had departed in August or
September rather than May (when he gave notice and stopped
working) or June (when he left the payroll), Beach filed this
suit under the Employee Retirement Income Security Act.
After a bench trial on stipulated facts, the district judge
concluded that ComEd had violated its fiduciary duty to a
participant in an ERISA plan by giving incorrect advice.
Even though no one had intended to deceive Beach—ComEd’s
senior managers did not begin to consider separation bene-
fits for the Transmission and Distribution Organization
until after Beach’s retirement, and no one in the human re-
sources staff knew what was coming—the district judge
held that ComEd must treat Beach as if he had stayed
through August and qualified for all benefits then on offer.
2003 U.S. Dist. LEXIS 17675 (N.D. Ill. Oct. 2, 2003); see also
2002 U.S. Dist. LEXIS 14663 (N.D. Ill. Aug. 6, 2002).
  The district court’s major premise is that ComEd owed
Beach a fiduciary duty with respect to future fringe-benefit
plans, because he was a participant in the firm’s pension
plan. The court’s minor premise is that any material inac-
curacy, even an unintentional error, violates that fiduciary
duty. The minor premise is problematic given this court’s
decisions in Vallone v. CNA Financial Corp., No. 03-2090
(7th Cir. July 15, 2004), slip op. 29-33; Frahm v. Equitable
No. 03-3907                                                 3

Life Assurance Society, 137 F.3d 955 (7th Cir. 1998); and
Librizzi v. Children’s Memorial Medical Center, 134 F.3d
1302 (7th Cir. 1998), though it has some support elsewhere.
See Martinez v. Schlumberger, Ltd., 338 F.3d 407 (5th Cir.
2003); Bins v. Exxon Co., 220 F.3d 1042 (9th Cir. 2000) (en
banc). We need not consider the minor premise, however,
because the district court’s major premise is mistaken.
  Duties under ERISA are plan-specific. See Diak v. Dwyer,
Costello & Knox, P.C., 33 F.3d 809, 811 (7th Cir. 1994);
James v. National Business Systems, Inc., 924 F.2d 718, 720
(7th Cir. 1991). The statute defines a “fiduciary” as a person
who exercises authority or discretion over the administra-
tion of a plan, but only when performing those functions. 29
U.S.C. §1002(21)(A). Thus an employer is not a fiduciary
when considering whether to establish a plan in the first
place, or what specific benefits to offer when creating or
amending a plan. See Hughes Aircraft Co. v. Jacobson, 525
U.S. 432 (1999); Lockheed Corp. v. Spink, 517 U.S. 882
(1996); Johnson v. Georgia-Pacific Corp., 19 F.3d 1184 (7th
Cir. 1994). Otherwise by adopting a pension plan an employer
would become its employees’ fiduciary for all purposes and
would be obliged, for example, to maximize its workers’ sal-
aries or to design plans that maximize fringe benefits. As
Hughes Aircraft and similar decisions show, that is not
ERISA’s command. Beach was (and is) a participant in
ComEd’s pension plan but does not contend that he has
received less than his due under it. He also was a partici-
pant in some welfare-benefit plans, such as ComEd’s health-
care plan; once again, however, he does not complain that
ComEd wrongfully denied him any of those benefits or
misled him in any way about them. He knew that if he left
before age 55 those benefits would end; that decision was
made with eyes open. What he wants—and what the district
court gave him—is benefits under a separate plan that was
not established until after he quit.
  Throughout his briefs, Beach proceeds as if the separation
4                                                No. 03-3907

incentives were created by amendment of a plan in which
he was already a participant. That enables him to invoke
Varity Corp. v. Howe, 516 U.S. 489 (1996), which held that
ERISA prohibits a plan fiduciary from deceiving partici-
pants in an existing pension plan about the value of its
benefits compared with those under a successor or sub-
stitute plan. Yet the plan under which Beach wants (and
was awarded) benefits does not amend or modify any of
ComEd’s other plans—nor did Beach have to choose between
its benefits and those of the plans in which he was a par-
ticipant. The “Voluntary Separation Plan for Designated
Transmission and Distribution Management Employees of
Commonwealth Edison Company” dated August 7, 1997, is
in the record: it is a stand-alone welfare-benefit plan that
does not amend, supplement, or replace any other plan. As
it did not come into existence until after Beach’s retirement,
ComEd did not owe him any fiduciary duty concerning its
benefits.
  Doubtless federal common law prohibits fraud with re-
spect to pension and welfare benefits, apart from any need
to invoke ERISA’s fiduciary duty. ERISA preempts state
law relating to pension plans, and federal courts regularly
create federal common law (based on contract and trust law,
see Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101
(1989)) to fill the gap. As we have emphasized, however,
Beach does not contend that anyone defrauded him. Fraud
requires knowledge of the truth and an intent to conceal or
mislead. See, e.g., Ernst & Ernst v. Hochfelder, 425 U.S. 185
(1976). The people Beach consulted failed to foresee events,
which is understandable because no plan had been pro-
posed, let alone adopted, at the time. The district judge did
not find the advice to have been either malicious or reck-
less. Even in retrospect it does not look wildly inaccurate.
Beach worked in a division with 4,700 employees, only 240 of
whom received an offer of special voluntary-separation
benefits. By and large, employees in that division would
No. 03-3907                                                 5

have done well to make plans on the assumption that the
pension and welfare systems already in place were the only
ones they need consider. It turns out that Beach would have
been among the fortunate 5% in his division, but just as
there can be no fraud by hindsight (see Denny v. Barber,
576 F.2d 465, 470 (2d Cir. 1978) (Friendly, J.)) so a predic-
tion that pans out for 95% of the concerned employees is
hard to condemn just because it misses the mark for the
rest. See United States ex rel. Garst v. Lockheed-Martin
Corp., 328 F.3d 374, 378 (7th Cir. 2003); Murray v. Abt
Associates Inc., 18 F.3d 1376, 1379 (7th Cir. 1994); DiLeo v.
Ernst & Young, 901 F.2d 624, 627-28 (7th Cir. 1990). The
staff should have let Beach know the limits of their infor-
mation. (Perhaps they did so; it is hard to reconstruct oral
advice after the fact, especially when one side does not
remember anything. Only Beach recollects the conversa-
tions, and he got only the gist; he does not remember the
precise words anyone used.) Negligent failure to add dis-
claimers and cautions is some distance from fraud, however.
  A number of decisions address the question whether
ERISA requires plan sponsors to give accurate information
about potential amendments to existing plans. Varity shows
that candid and complete information is required if two
plans are in existence, and the sponsor tries to persuade
employees to give up benefits under one in exchange for ben-
efits under the other. These follow-on decisions conclude
that a similar approach governs when a single plan is in the
process of amendment. The majority view is that a duty of
accurate disclosure begins “when (1) a specific proposal (2)
is being discussed for purposes of implementation (3) by
senior management with the authority to implement the
change.” Fischer v. Philadelphia Electric Co., 96 F.3d 1533,
1539 (3d Cir. 1996). At that point details of the amendment
become material; until then there is only speculation.
Accord, Vartanian v. Monsanto Co., 131 F.3d 264, 272 (1st Cir.
1997); McAuley v. IBM Corp., 165 F.3d 1038, 1043 (6th Cir.
6                                                 No. 03-3907

1999); Wilson v. Southwestern Bell Telephone Co., 55 F.3d
399, 405 (8th Cir. 1995); Bins, supra, 220 F.3d at 1048;
Mathews v. Chevron Corp., 362 F.3d 1172, 1180-82 (9th Cir.
2004); Hockett v. Sun Co., 109 F.3d 1515, 1522-23 (10th Cir.
1997); Barnes v. Lacey, 927 F.2d 539, 544 (11th Cir. 1991).
Two circuits conclude that the duty of disclosure arises
sometime before the change is under “serious consider-
ation”—though just what must be disclosed, and when,
these circuits have struggled to pin down. See Ballone v.
Eastman Kodak Co., 109 F.3d 117 (2d Cir. 1997); Martinez,
supra.
  This debate mirrors (though the decisions do not ac-
knowledge) a controversy in corporate and securities law.
How soon must issuers of securities tell investors, or their
employees, that merger discussions or other potentially
substantial corporate transactions are afoot? We know from
Basic Inc. v. Levinson, 485 U.S. 224 (1988), that firms
cannot commit fraud about such transactions at any stage,
but the time at which the information becomes so important
that it must be disclosed accurately (if the issuer says
anything), even if there is no intent to deceive, has been
hard to determine. We have taken the view that accurate
disclosure is not required until the price and structure of
the deal have been resolved, see Flamm v. Eberstadt, 814
F.2d 1169 (7th Cir. 1987), though earlier disclosure may be
required in closely held corporations, see Jordan v. Duff &
Phelps, Inc., 815 F.2d 429 (7th Cir. 1987). No court has held,
however, that there is a duty in corporate or securities laws to
predict accurately events that lie ahead. There is no reason
why ERISA should require more.
  The majority rule, reflected in Fischer, has the better of
this debate. Giving firms a duty to forecast accurately, if the
benefits staff says anything at all, could not help plan
participants. It would just induce employers to tell the
human resources staff to say nothing at all—to make no
predictions and to refer employees to the printed plan de-
No. 03-3907                                                 7

scriptions. Yet chancy predictions may be better than
silence; think of the 95% of the employees in ComEd’s
Transmission and Distribution Organization who would
have received exactly the right advice, which could have
facilitated their retirement planning. The alternative to
enforced silence would be a declaration in the employee
handbook that no one should rely on any oral information
about the plans. That might or might not curtail legal
risks—some workers would be bound to ask why the firm
even had a benefits advisory staff, if it was insisting that
everything the staff said was worthless—but again would
do little to help people in Beach’s position. It does not take
familiarity with Bayes’s Theorem to see that even poten-
tially fallacious news may be better than no news. If the
benefits staff must clam up, then rumor and office scuttle-
butt come to the fore, and it is likely to be less accurate
than the staff’s educated guesses. So we are not persuaded
by Ballone or Martinez.
  ComEd did not amend any of its plans. We need not decide
whether Fischer’s approach would apply to the establish-
ment of a new plan, because none was under consideration
when Beach resigned. There was no proposal at all, let alone
a specific proposal under review by senior managers. It is
undisputed that ComEd did not begin internal discussion of
the details about the Transmission and Distribution Organi-
zation’s reorganization until mid-June 1997, a month after
Beach had given notice (and about the same time as his last
day on the payroll). ComEd concluded that a small net
reduction in staff would be required—about 30 of the 4,700
positions were to be eliminated. At a meeting on July 22 or
23, 1997, managers began to discuss whether it would make
sense to use separation incentives, as opposed to other
means, to achieve this reduction. Sometime late in July or
early in August, Howard Nelson, ComEd’s “Strategic
Staffing Director,” drafted a separation-incentives plan
covering only 5% of the division’s staff (240 employees, in
8                                                No. 03-3907

the hope that 30 would take the bait). This plan was
approved by Paul McCoy, Vice President for the Transmis-
sion and Distribution Organization, on August 6, and was
announced to employees the next day. None of the circuits
following the Fischer approach would conclude that this plan
was under “serious consideration” before Beach retired. So
even if we were to apply this approach to new plans—a
question that we do not resolve today—Beach could not
benefit.
  Beach was not the victim of fraud, and ComEd did not
have a duty of accurate disclosure in the period preceding
the plan’s adoption. The human relations staff might have
been careless, but it did not violate any duty of loyalty owed
to Beach. Accordingly, the judgment of the district court is
reversed.




  RIPPLE, Circuit Judge, dissenting. A single principle con-
trols this case. “[A] fiduciary may not materially mislead
those to whom the duties of loyalty and prudence described
in 29 U.S.C. § 1104 are owed.” Berlin v. Michigan Bell Tel.
Co., 858 F.2d 1154, 1163 (6th Cir. 1988). Mr. Beach was a
participant in ComEd’s retirement pension plan and its
health-care plan; ComEd and Mr. Beach were in a fiduciary
relationship with respect to these plans. See supra at 3. The
Voluntary Severance Plan (“VSP”), in essence, supplemented
the retirement pension plan and the health-care plan.
Therefore, when ComEd misrepresented the status of the
VSP and its future plan-related benefits, it was “admin-
ister[ing]” these plans under the rationale of Varity Corpo-
ration v. Howe, 516 U.S. 489 (1996). Because, in its adminis-
tration, ComEd made material misrepresentations in
No. 03-3907                                                 9

violation of its fiduciary duties, I would affirm the judgment
of the district court.


                             1.
   My colleagues hold that ComEd’s misrepresentations
were not made in a fiduciary capacity and thus are not
actionable. Their view rests on the conclusion that ERISA’s
fiduciary duties are plan-specific. That proposition is un-
assailable, as far as it goes. ERISA requires plan “fiduci-
ar[ies]” to “discharge [their] duties with respect to a plan
solely in the interest of the participants and beneficiaries”
and “with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in
a like capacity and familiar with such matters would use in
the conduct of an enterprise of a like character and with like
aims.” 29 U.S.C. § 1104(a)(1)(B). Section 1002(21)(A) of the
same title states that “a person is a fiduciary with respect
to a plan to the extent” he is involved in “management” or
“administration” of “such plan.” Sections 1002(1) and
1002(2)(A) define an applicable “plan” as one that is
“established or maintained.” Therefore, ERISA’s fiduciary
duties attach to an employer such as ComEd when it is a
“fiduciary” with respect to an “established” plan and “man-
age[s]” or “administ[ers]” that established plan. 29 U.S.C.
§§ 1002(1), (2)(A), (21)(A).
  ComEd submits that ERISA’s plan-specific nature means
that an employer-administrator speaks as a fiduciary only
when it speaks about new benefits that come in the form of
an amendment to an established plan under which the em-
ployer and employee have a preexisting fiduciary rela-
tionship, as opposed to when that employer-administrator
speaks about benefits in a new plan. At times, the majority
appears inclined to that view. See supra at 3. Such a limited
review, however, is at odds with Varity Corporation, 516
U.S. 489. In Varity, officials deliberately misled Varity
10                                                 No. 03-3907

employees, who were participants in an existing ERISA
plan and in a fiduciary relationship with Varity regarding
that plan (Plan 1), to transfer out of Plan 1 and into a new
plan (Plan 2); this new plan was established in an under-
capitalized subsidiary, which eventually went into receiver-
ship. Id. at 499-501. The Supreme Court held that Varity
was acting in a fiduciary status—specifically, it was “ad-
minister[ing]” Plan 1—when it made material misrepresen-
tations regarding the future of plan benefits, which were
found in Plan 2. Id. at 502-03. Turning to the common law
of trusts to inform ERISA’s plain language, the Court
explained:
     The ordinary trust law understanding of fiduciary
     “administration” of a trust is that to act as an ad-
     ministrator is to perform the duties imposed, or
     exercise the powers conferred, by the trust documents.
     The law of trusts also understands a trust document
     to implicitly confer “such powers as are necessary or
     appropriate for the carrying out of the purposes” of
     the trust. Conveying information about the likely
     future of plan benefits, thereby permitting benefi-
     ciaries to make an informed choice about continued
     participation, would seem to be an exercise of a power
     “appropriate” to carrying out an important plan pur-
     pose. After all, ERISA itself specifically requires ad-
     ministrators to give beneficiaries certain information
     about the plan. And administrators, as part of their
     administrative responsibilities, frequently offer
     beneficiaries more than the minimum information
     that the statute requires—for example, answering
     beneficiaries’ questions about the meaning of the
     terms of a plan so that those beneficiaries can more
     easily obtain the plan’s benefits. To offer beneficia-
     ries detailed plan information in order to help them
     decide whether to remain with the plan is essen-
     tially the same kind of plan-related activity.
No. 03-3907                                                 11

Id. at 502-03 (citations omitted). At the least, Varity stands
for the proposition that, when a company such as ComEd
becomes a fiduciary to an employee as to an ERISA “plan”
(e.g., Plan 1), then its fiduciary duties of loyalty and care
can attach to representations made regarding new plans
under which the employer and employee do not have a pre-
existing fiduciary relationship (e.g., Plan 2). Varity gave no
hint, and neither have subsequent cases, that the critical
distinction a court must draw in determining whether an
employer-administrator spoke in a fiduciary status is
whether the employer spoke about an “amendment” to an
existing plan or to a “new” plan.
  This interpretation also makes good sense. It would be
intolerable to allow an employer-administrator to avoid the
ramifications of its fiduciary status by simply attaching the
label “new plan”—as opposed to “plan amendment”—to the
subject of its misrepresentations. Furthermore, at least in
the situation in which an employer-administrator is offering
enhanced, sweetened benefits to induce early retirement or
separation, the line between a plan “amendment” and a
“new” plan is indeed blurry and easily distracts from the
critical issue. The enhanced benefits can form the basis of
a totally “new” plan; they can be added as “amendments” to
an existing plan; or they can be part of a plan that “supple-
ments” an existing plan. Regardless of the label, under Varity’s
reasoning, the critical factor is that there is a nexus be-
tween the new benefits about which the employer speaks
and the existing plan under which an employer-employee
fiduciary relationship already exists. When an employer
speaks about new benefits that are related to benefits in a
plan under which the employer and employee already have
a fiduciary relationship, under Varity and a slew of other
cases, the employer speaks about the future of plan-related
benefits and thus is speaking in a fiduciary capacity. See,
e.g., id. at 502 (intentional deceit regarding replacement
plan made in fiduciary capacity); Bins v. Exxon Co. U.S.A.,
12                                               No. 03-3907

220 F.3d 1042, 1046, 1048 (9th Cir. 2000) (en banc) (repre-
sentations about “a lump-sum retirement incentive under
the Special Program of Severance Allowances,” an “ERISA
welfare benefit plan” that was “in addition to regular re-
tirement benefits,” can be violation of ERISA fiduciary duty);
Berlin, 858 F.2d at 1157, 1163 (representations about a new
severance plan, under which employees “generally could
receive, in addition to any pension or other unrelated ben-
efit, a separation pay allowance” and “additional medical
insurance coverage” can be violation of ERISA fiduciary duty).
  At times, my colleagues appear to agree that representa-
tions about new benefits that have a nexus to benefits in an
existing plan in which the employer and employee are in a
fiduciary relationship constitute fiduciary acts under Varity,
regardless of how one labels the form in which the new
benefits are found (e.g., amendments, new plan, supplement
plan). See supra at 5 (“Varity shows that candid and
complete information is required if two plans are in exis-
tence, and the sponsor tries to persuade employees to give
up benefits under one in exchange for benefits of the
other.”). However, they appear to envision an artificially
tight nexus between those new, future benefits and the
benefits in the existing plan. See supra at 3-4 (rejecting that
ComEd was operating as a fiduciary when it made misrep-
resentations to Mr. Beach because “the plan under which
Beach wants (and was awarded) benefits does not amend or
modify any of ComEd’s other plans—nor did Beach have to
choose between its benefits and those of the plans in which
he was a participant. . . . [The VSP] does not amend,
supplement, or replace any other plan.”). I cannot subscribe to
that limited view because it elevates form over substance.
It may produce a conceptual bright-line, but it does so at
the expense of limiting, as a practical matter, the effective-
ness of the Congressional policy choices embodied in the
statute. The facts of this case make the point starkly. At the
time of ComEd’s misstatements about the VSP, Mr. Beach
No. 03-3907                                                         13

was a participant in ComEd’s retirement pension plan and
its health-care plan, although he was not eligible for
benefits under ComEd’s retirement medical plan. See supra
at 3. The benefits in the retirement plan and the health-
care plan cannot be untied from the VSP, which offered,
inter alia, severance pay that would supplement his pension
benefits and health benefits that would replace, upon
retirement, his benefits under the health-care plan. In this
circumstance, Varity fully supports the conclusion that
ComEd was “administer[ing]” the retirement pension plan
and health-care plan, and thus acting in a fiduciary capac-
ity, when it furnished Mr. Beach with misinformation about
the new VSP, which, in essence, supplemented or amended
his existing plans with further retirement benefits.1 See
Varity, 516 U.S. at 503 (“[T]he factual context in which the
statements were made, combined with the plan-related
nature of the activity, engaged in by those who had plan-
related authority to do so, together provide sufficient
support for the District Court’s legal conclusion that [the
employer-administrator] was acting as a fiduciary.”).
    Before this court, ComEd also advances a temporal argu-


1
   This is not to say that, once an employer becomes a fiduciary
with respect to one plan, it becomes a “fiduciary for all purposes.”
Supra at 3. Compare the situation in this case to the following
hypothetical. Imagine that an employer-administrator with re-
spect to a “pension plan,” 29 U.S.C. § 1002(2)(A), gathered employees,
who were also beneficiaries of that retirement plan, to discuss a
new “prepaid legal services” plan, id. § 1002(1). Imagine further
that, in that meeting, the employer-administrator made material
misrepresentations about the legal services plan. It would be dif-
ficult to say in that circumstance, that the employer’s fiduciary status
with respect to the retirement plan means that its statements re-
garding the unconnected legal services plan were made in a fiduciary
capacity. Again turning back to Varity, it would be quite difficult
to say that the employer was “administering” the “pension plan”
when it made the misrepresentations.
14                                                 No. 03-3907

ment to cabin its fiduciary status. ComEd argues that, “as
a matter of law,” no fiduciary obligations should arise until
a new plan such as the VSP is under “serious consideration.”
Appellant’s Br. at 34. My colleagues appear to be inclined to
that argument, albeit in dicta. See supra at 6-7.
  The “serious consideration” threshold arises from a group of
cases from other circuits that have held that “material mis-
representations about a future plan offering do not constitute
a breach of fiduciary duty unless the misrepresentations are
made after the employer has ‘seriously considered’ the
future offering.” Hockett v. Sun Co., 109 F.3d 1515, 1522 (10th
Cir. 1997). A plan is under “serious consideration” when “(1)
a specific proposal (2) is being discussed for purposes of im-
plementation (3) by senior management with the authority
to implement the change.” Fischer v. Philadelphia Elec. Co.,
96 F.3d 1533, 1539 (3d Cir. 1996) (“Fischer II”). If the “serious
consideration” litmus test were the appropriate one, Mr.
Beach’s claim would fail because at the time the relevant
misinformation was communicated ComEd did not have a
“specific proposal” for a severance package before senior
management.
  The “serious consideration” test is simply a line drawn in
an attempt to balance “Congress’ competing desires, in
enacting ERISA, to safeguard employee benefit plans, and
yet not make such plans so burdensome or threatening that
employers would shy away from offering them.” Hockett,
109 F.3d at 1522. The Tenth Circuit has elaborated:
     In our view, the [serious consideration test] appro-
     priately narrows the range of instances in which an
     employer must disclose, in response to employees’
     inquiries, its tentative intentions regarding an
     ERISA plan. Employers frequently review retirement
     and benefit plans as part of ongoing efforts to succeed
     in a competitive and volatile marketplace. If any dis-
     cussion by management regarding possible change
No. 03-3907                                                 15

   to an ERISA plan triggered disclosure duties, the
   employer could be burdened with providing a con-
   stant, ever-changing stream of information to inquisi-
   tive plan participants. And, most of such informa-
   tion actually would be useless, if not misleading, to
   employees, considering that many corporate ideas
   and strategies never reach maturity, or else meta-
   morphose so dramatically along the way, that early
   disclosure would be of little value. Furthermore,
   requiring employers to reveal too soon their internal
   deliberations to inquiring beneficiaries could ser-
   iously “impair the achievement of legitimate bus-
   iness goals” by allowing competitors to know that the
   employer is considering a labor reduction, a site-
   change, a merger, or some other strategic move.
      Even more importantly, we believe the [serious
   consideration] standard protects employees’ access
   to material information without discouraging em-
   ployers from improving their ERISA plans in the
   first place. As recognized by the Sixth Circuit,
   “[c]hanging circumstances, such as the need to reduce
   labor costs, might require an employer to sweeten
   its severance package, and an employer should not
   be forever deterred from giving its employees a better
   deal merely because it did not clearly indicate to a
   previous employee that a better deal might one day
   be proposed.” Moreover, employers often decide to
   “sweeten” an early retirement plan only after the
   employer has determined that not enough employ-
   ees are opting to retire under the existing one. “If
   fiduciaries were required to disclose such a busi-
   ness strategy, it would necessarily fail. Employees
   simply would not leave if they were informed that
   improved benefits were planned if workforce reduc-
   tions were insufficient.” Thus, precipitous liability
   could push employers in the direction of involuntary
16                                               No. 03-3907

     lay-offs, a common alternative to early retirement
     inducements. The [serious consideration] standard
     minimizes this possibility.
Id. at 1522 (citations omitted).
   The opposite view originated in the Second Circuit and
has come to be known as the “materiality test.” In Ballone
v. Eastman Kodak Co., 109 F.3d 117 (2d Cir. 1997), the
Second Circuit rejected that “serious consideration of a
future plan is a prerequisite to liability for misstatements
regarding the availability of future pension benefits.” Id. at
123-24. The key inquiry, that court explained, is whether
misrepresentations are “material,” and they are “material
if they would induce reasonable reliance”; “serious consider-
ation” is but one factor in that inquiry. Id. at 124-25. Courts
that have rejected the “serious consideration” prerequisite
for misrepresentations, and instead have adopted the “ma-
teriality” test, reflect the concern that the serious consider-
ation prerequisite would give an employer-administrator “a
free zone for lying” and misleading employees about the
availability of a future plan that is just around the corner
but not yet on senior management’s desk for approval.
Martinez v. Schlumberger, Ltd., 338 F.3d 407, 428 (5th Cir.
2003). Further, the courts note that this position is con-
sistent with common-law trust principles as interpreted
by Varity. Id. at 425 (“Varity does not suggest that the
obligation not to misrepresent materializes near the end of
a progression [of deliberations on a new plan], but rather
implies that whenever an employer exercises a fiduciary
function, it must speak truthfully.”).
  In my view, cases that have adopted this latter view
reflect a far more profound appreciation of Congressional
concerns in this area and a more realistic understanding of
the practicalities of the situation. The circuits that have
subscribed to this materiality test have held that an em-
ployer-administrator does not have a duty affirmatively to
No. 03-3907                                                  17

disclose deliberations regarding a new plan absent “serious
consideration” of that plan, but it cannot make material
affirmative misrepresentations regarding a plan in forma-
tion but not yet under “serious consideration.” See id. at
429-31; Wayne v. Pacific Bell, 238 F.3d 1048, 1055 (9th Cir.
2001). In short, these circuits hold that the employer-ad-
ministrator can choose not to speak until a plan is under
“serious consideration,” but if it does speak, it cannot mislead.
  The Fifth Circuit’s opinion in Martinez convincingly ex-
plains that, among other reasons for this distinction, the
business practicalities arguments underlying the “serious
consideration” test have more force in the disclosure context
than they do in the affirmative misrepresentation context.
See Martinez, 338 F.3d at 429 (“Insisting on voluntary dis-
closure during the formulation of a plan and prior to its
adoption would . . . increase the likelihood of confusion on
the part of beneficiaries,” who would be bombarded with
notices, “and, at the same time, unduly burden management,
which would be faced with continuing uncertainty as to
what to disclose and when to disclose it.” (quoting Pocchia
v. NYNEX Corp., 81 F.3d 275, 278-79 (2d Cir. 1996))). How-
ever, this view also protects the employee by not giving the
employer “a free zone for lying” before a specific proposal is
presented for senior management’s approval. Id. at 428.
Finally, under this “materiality approach,” it is important
to remember that only material misrepresentations are
actionable, and whether a plan is under “serious consider-
ation” is a factor in the materiality inquiry. Thus, the sug-
gestion that every minor discussion of a new plan would
constitute a breach of a fiduciary duty and thus discourage
plan amendments is not convincing.
  In sum, I
    take the view that the proper course for an employer
    to follow is not to affect the employee’s decision
    whether to retire in any way—not by lying to them
18                                                 No. 03-3907

     to induce them to retire before implementation of
     an enhanced early retirement program, nor by be-
     ing forced to tip off the employees to its business
     strategies to aid them in taking best advantage of
     the company’s future plans. This middle road will
     allow the company to make its business decisions
     without hindrance while prohibiting it from tricking
     its employees into retirement by making guaran-
     tees it knows to be false.
        We believe the two views we have promulgated—
     that an employer has no affirmative duty to disclose
     the status of its internal deliberations on future plan
     changes even if it is seriously considering such
     changes, but if it chooses in its discretion to speak
     it must do so truthfully—coalesce to form a scheme
     that accomplishes Congress’s dual purposes in
     enacting ERISA of protecting employees’ rights to
     their benefits and encouraging employers to create
     benefit plans. As one commentator has explained:
         [A] limited duty can reasonably be imposed on
         fiduciaries to refrain from making, either in re-
         sponse to participant inquiries or at fiduciaries’
         own initiative, material misrepresentations. . . .
         Under such a standard, a fiduciary would not
         be prohibited from declining to comment on the
         prospect of future changes, or from making
         generalized statements to the effect that the
         plan sponsor always retains the right to amend
         a plan. [In this way,] businesses will not be un-
         duly discouraged from adopting or amending
         early retirement, severance or other types of
         plans, and participants’ interests can be ade-
         quately protected from material misrepresenta-
         tions that are intended to induce conduct that
         is contrary to their interests.
No. 03-3907                                                  19

Id. at 430-31 (quoting Edward E. Bintz, Fiduciary
Responsibility Under ERISA: Is There Ever a Fiduciary
Duty to Disclose?, 54 U. Pitt. L. Rev. 979, 998 (1993)).


                             2.
  ComEd made affirmative representations to Mr. Beach.
Employing the materiality test, I would uphold the district
court’s determination that the misrepresentations made to
Mr. Beach were material. “Where an ERISA fiduciary
makes guarantees regarding future benefits that misrepre-
sent present facts, the misrepresentations are material if
they would induce a reasonable person to rely upon them.”
Ballone, 109 F.3d at 122. In addition to considering the
“serious consideration” given to a plan, the following factors
are utilized in deciding materiality:
    [1] how significantly the statement misrepresents
    the present status of internal deliberations regarding
    future plan changes, [2] the special relationship of
    trust and confidence between the plan fiduciary and
    beneficiary, [3] whether the employee was aware of
    other information or statements from the company
    tending to minimize the importance of the misrepre-
    sentation or should have been so aware . . ., and [4]
    the specificity of the assurance.
Id. at 125 (citations omitted).
  Mr. Beach was repeatedly told that “absolutely” the com-
pany was not going to offer his department (Transmission
& Distribution or T&D) a package and even if ComEd were
considering a package, T&D would not be included. State-
ment of Uncontested Facts ¶ 70. Contrary to ComEd’s
assertions, these representations significantly “misrepre-
sent[ed] the [then-]present status of internal deliberations.”
Ballone, 109 F.3d at 125. There is no evidence in the record
that ComEd definitively had decided it would not, after
20                                              No. 03-3907

reorganization, offer a severance plan; indeed, there are not
even any facts that would suggest that conclusion. See id.
at 126 (explaining that misrepresentations are “statements
that the employer knows to be false, or that have no reason-
able basis in fact”). On the other hand, evidence supports
that there was a possibility that the reorganization study in
T&D would ultimately result in the offering of a severance
plan to some employees in T&D. For example, it is un-
disputed that documents in the record indicate that, as of
June 1997, the reorganization plan called for excess em-
ployees in T&D, and that between 1994 and 1997, ComEd
dealt with excess employees through involuntary and vol-
untary severance packages on twenty to thirty occasions. Of
course, the record supports that, at the time of the misrep-
resentations, there was a possibility that no severance plan
would be offered in T&D, but as Mr. Beach explained: “ComEd
does not explain how the possibility that a package might
not be offered could render a specific assurance that a pack-
age for his department was an impossibility a truthful and
complete statement of then existing fact.” Appellee’s Br. at
41.
  Moreover, these misstatements were more than co-employee
“mispredictions.” Ballone, 109 F.3d at 125 (“Whereas mere
mispredictions are not actionable, false statements about
future benefits may be material if couched as a guarantee,
especially where, as alleged here, the guarantee is sup-
ported by specific statements of fact.” (citations omitted)).
Mr. Beach was not given mere unadorned speculation re-
garding the company and its future benefits; rather, he was
told specifically that his department would not, under any
circumstances, be receiving a severance plan. Cf. Martinez,
338 F.3d at 431-32 (holding personnel employee’s statement
that “ ‘he had not heard anything at this time’ ” about a new
package and “that ‘Schlumberger was doing too good right
now and they would not be offering any packages because
they’d lose too many good people’ ” not actionable misrepre-
No. 03-3907                                                 21

sentation, reasoning that “any reasonable listener would
understand the statement to [the plaintiff] to have been no
more than the unsupported speculation of a fellow em-
ployee”). Given the numerous, concrete assurances from
several human resources staff, Mr. Beach understandably
believed that the staff had not given him their personal
opinions on the future, but that they had relayed to him the
fact that ComEd had made a corporate decision that T&D
would not be considered for a package. Further, the misrep-
resentations did not contain any indication of a lack of
finality or that the decision was subject to change, cf.
Mathews v. Chevron Corp., 362 F.3d 1172, 1183 (9th Cir. 2004)
(explaining that language such as “at this time” indicates a
lack of finality that cannot support materiality and indi-
cating the situation would be different if the employer-
administrator told the employees it had “ruled out plan
changes for the immediate future, when in fact it had not”
(citations omitted)), and the record is without any indication
that ComEd released “other information or statements” that
rebutted or “tend[ed] to minimize the importance of the mis-
representation[s].” Ballone, 109 F.3d at 125.
  At the end of the day, in a case such as this, materiality
ultimately turns on whether the misrepresentations would
induce a reasonable person in Mr. Beach’s situation to rely
or, in the words of the Third Circuit, the likelihood that the
misrepresentations would mislead a reasonable employee
in Mr. Beach’s situation “in making an adequately informed
decision about if and when to retire.” Fischer v. Philadel-
phia Elec. Co., 994 F.2d 130, 135 (3d Cir. 1993) (“Fischer I”).
Although only a small percentage of T&D employees were
ultimately offered the VSP, the undisputed evidence is that
Mr. Beach left “his final commitment to retire open until the
last possible day, June 19, 1997, in case there [sic] the chance
for a possible VSP arose.” Statement of Uncontested Facts
¶ 74 (emphasis added). Moreover, it is important to remem-
ber that, due to his wife’s ailment, Mr. Beach had a special
22                                              No. 03-3907

need for the health benefits offered in the VSP. Finally, the
probability of a severance plan being offered in T&D—like
the twenty to thirty severance plans offered before by
ComEd—was not so small that it reasonably could not have
affected Mr. Beach’s retirement calculation. Given the
record in this case, the district court’s determination of
materiality should remain undisturbed. As the Second
Circuit said in language that speaks directly to this case:
     Regardless of whether the employer is seriously
     considering altering its retirement plan, the em-
     ployer’s false assurance that future enhancements
     have been ruled out for some specific period can be
     decisive in inducing an employee to hasten retire-
     ment, rather than delay in the hope of receiving
     enhanced future benefits. This aspect of the assur-
     ance can render it material regardless of whether
     future changes are under consideration at the time
     the misstatement is made.
Ballone, 109 F.3d at 124.
  One final issue remains to be addressed. It is undisputed
that ComEd’s employees did not intend to deceive Mr.
Beach when they told him that no severance plan in T&D
would be offered. ComEd argued to this court that this lack
of scienter by ComEd’s human resources representatives
demands judgments in its favor, and the majority hints, in
dicta, ComEd is correct. See supra at 2. However, importing
the intent to deceive requirement—synonymous in tort law
with fraud or deceit—into this type of ERISA fiduciary duty
case lacks any grounding.


  Although this court has cases that might be read to sup-
port such an intent requirement, see Frahm v. Equitable
Life Assurance Society, 137 F.3d 955, 961 (7th Cir. 1998),
and cases to refute it, see Bowerman v. Wal-Mart Stores,
Inc., 226 F.3d 574, 590-91 (7th Cir. 2000), none of them are
No. 03-3907                                                   23

compelling in this case because they did not consider
specifically and definitively if and when an employee’s state
of mind is relevant to oral misrepresentations. See Frahm,
137 F.3d at 960. The courts that have considered the
question with any specificity have rejected the invitation to
graft onto ERISA’s fiduciary duty provision fraud’s scienter
requirement. See, e.g., Mathews, 362 F.3d at 1183; James v.
Pirelli Armstrong Tire Corp., 305 F.3d 439, 449 (6th Cir.
2002); Fischer I, 994 F.2d at 135. The plain language of
ERISA’s fiduciary duty provision points in the opposite
direction. 29 U.S.C. § 1104(a) is entitled “Prudent man
standard of care,” and its duty of care portion,
§ 1104(a)(1)(B), requires that the fiduciary discharge its
duties “with the care, skill, prudence, and diligence under
the circumstances then prevailing that a prudent man act-
ing in a like capacity and familiar with such matters . . . .”
  Turning to the common law of trusts to inform that plain
language further weakens the suggestion that intent to
deceive is necessary in a breach of fiduciary duty action
under ERISA. See Varity, 516 U.S. at 496 (noting that
ERISA’s fiduciary duties “draw much of their content from
the common law of trusts”). As the Ninth Circuit recently
explained in rejecting a similar argument:
    Trust law imposes a duty, when dealing with the
    beneficiary on the trustee’s own account, “to com-
    municate to the beneficiary all material facts in
    connection with the transaction which the trustee
    knows or should know.” RESTATEMENT (SECOND)
    OF TRUSTS § 173 cmt. d (1959) (emphasis added);
    see also Bixler v. Cent. Pa. Teamsters Health &
    Welfare Fund, 12 F.3d 1292, 1300 (3rd Cir. 1993)
    (looking to comment d of section 173 in stating that
    ERISA section 404’s “duty to inform . . . entails . . .
    a negative duty not to misinform”). Thus, by hold-
    ing Steelman and Chevron liable for the “reason-
    ably foreseeable consequences of their misinforma-
24                                                  No. 03-3907

     tion,” the district court accords with the common law
     of trusts that attaches liability for information the
     trustee “should have known.”
Mathews, 362 F.3d at 1183. Finally, the requirement of sub-
jective intent to deceive would effectively mean that
employers-administrators have a mere duty to avoid commit-
ting fraud. “As the Supreme Court noted in Varity, such
conduct can create liability even among strangers,” and
“ERISA requires more of a fiduciary in discharging such duties
that he or she simply refrain from outright lying.” Hudson v.
Gen. Dynamics Corp., 118 F. Supp. 2d 226, 246 (D. Conn.
2000).
   To the extent ComEd’s argument for requiring intent focuses
only on the fiduciary plan administrator’s non-fiduciary agents
(i.e., the benefits representatives) and not the fiduciary itself,
that too is unconvincing. First, this and other courts have held
that an ERISA fiduciary can be liable for the misrepresenta-
tions of its non-fiduciary agents under the apparent authority
doctrine. See Bowerman, 226 F.3d at 589 & n.11. The apparent
authority doctrine focuses on the reasonable reliance of the
employee; it is irrelevant to the subjective intent of the agent.
See Restatement (Third) of Agency § 2.03 (T.D. No. 2 2001).
Moreover, shielding fiduciary/principals from liability because
their non-fiduciary agents were without knowledge or intent
would allow an employer-administrator to keep benefits repre-
sentatives “out of the loop” and then avoid liability by saying
their agents responded “ignorantly but truthfully.” Bins v.
Exxon Co. U.S.A., 220 F.3d 1042, 1049 n.6 (9th Cir. 2000) (en
banc) (“[I]t would not be a defense that supervisors were una-
ware of the status and thus responded ignorantly but truth-
fully to the employee’s inquiry.”); Fischer I, 994 F.2d at 135
(“These obligations cannot be circumvented by building a
‘Chinese wall’ around those employees on whom plan partici-
pants reasonably rely for important information and guidance
about retirement.”). Furthermore, in this circumstance, it is
not unreasonable to place the burden on the employer-admin-
No. 03-3907                                                   25

istrator, the party with the information, to provide correct in-
formation to its front-line staff so that they do not mislead and
injure employee beneficiaries.
   For these reasons, I would hold that when an employer-
administrator speaks—either directly or through its benefits
representatives—it violates its fiduciary duties when it af-
firmatively misinforms a beneficiary knowing its statement is
false, when it recklessly misinforms not knowing whether its
statement “is true or not,” and when it misinforms under cir-
cumstances indicating it should have known the falsity of its
statement. Wayne v. Pacific Bell, 238 F.3d 1048, 1055 (9th Cir.
2001). This is not a “duty of prevision” or a “standard of abso-
lute liability,” Frahm, 137 F.3d at 960; rather, it is a standard
which is consistent with the common law of trusts, consistent
with our fellow circuits, and, in my opinion, appropriately
balances the relative interests ERISA was intended to oblige.
In this case, this standard is easily satisfied: ComEd’s human
resources personnel had absolutely no basis for their misrepre-
sentations; at the least, they should have known better.
  For all of these reasons, I would uphold the district court’s
conclusion that ComEd violated its fiduciary obligations to Mr.
Beach through its material misrepresentations. I respectfully
dissent.
26                                         No. 03-3907

A true Copy:
      Teste:

                     ________________________________
                     Clerk of the United States Court of
                       Appeals for the Seventh Circuit




               USCA-02-C-0072—8-24-04
