Becky A. Baldauf and Estate of Ronald Baldauf v. Vermont State Treasurer ( 2021 )

NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal
revision before publication in the Vermont Reports. Readers are requested to notify the Reporter
of Decisions by email at: JUD.Reporter@vermont.gov or by mail at: Vermont Supreme Court, 109
State Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections may be made
before this opinion goes to press.
2021 VT 29No. 2020-168
Becky A. Baldauf and Estate of Ronald Baldauf Supreme Court
On Appeal from
v. Superior Court, Caledonia Unit,
Civil Division
Vermont State Treasurer et al. October Term, 2020
Mary Miles Teachout, J.
Deborah T. Bucknam of Bucknam Law PC, Walden, for Plaintiffs-Appellants.
Thomas S. Donovan, Jr., Attorney General, and Timothy M. Duggan and Justin E. Kolber,
Assistant Attorneys General, Montpelier, for Defendant-Appellee.
PRESENT: Reiber, C.J., Robinson, Eaton, Carroll and Cohen, JJ.
¶ 1. CARROLL, J. Wife, in both her personal capacity and as administrator of her
deceased husband’s estate, appeals the superior court’s order dismissing her claims against the
Vermont State Treasurer and the Vermont State Employees’ Retirement System (VSERS)
(collectively, the State). Wife argues that she is entitled to receive a retirement allowance on
account of her husband’s death while in active service under 3 V.S.A. § 465. She also argues that
the State failed to adequately inform husband about his retirement allowance before his death, and
accordingly, husband’s estate is entitled to relief under breach of contract, breach of fiduciary duty,
and negligent misrepresentation theories. We conclude that wife failed to state claims for which
relief can be granted and affirm.
¶ 2. The following facts appear on the face of wife’s complaint, including external
documents incorporated therein. The State hired husband in 2001 and he became a VSERS Group
F member at that time. Shortly thereafter, he received a Certificate of Membership with an
enclosed beneficiary-designation form. The Certificate stated in part:
We urge you to read the enclosed general information handbook
carefully. It explains all the benefits and forms of protection
provided by the system.
A form is enclosed for you to designate the beneficiary of your
retirement account. Please do not neglect this as your growing
account could provide very substantial survivorship protection. If
you fail to designate a beneficiary, your retirement account would
become part of your estate. Please return the notarized form to the
address below.
Husband never designated a dependent beneficiary.
¶ 3. Each year, husband received an annual statement from VSERS. The statement
provided general information regarding certain benefits, summarized husband’s data in the system,
and estimated husband’s current benefits in the event of disability, retirement, or death. The
statement reflected that husband’s primary beneficiary was his estate. A notation to this data
explained that “[i]f no designation has been filed, ‘Estate’ is the default designation.” In the
paragraph discussing the monthly retirement allowance, the statement explained that “[n]o death
benefit is payable if your dependent beneficiary is not your named beneficiary.” Under “Death,”
the statement reflected that husband’s designated dependent beneficiary would receive “$0.00 a
month for life payable from the System.”
¶ 4. After seventeen years as a State employee, husband died unexpectedly of a heart
attack on his way to work. He was survived by wife and their four children. Wife opened a probate
estate and was appointed as the estate’s administrator. Because husband failed to designate a
dependent beneficiary to receive the retirement allowance, the Retirement Division of the
Treasurer’s Office directed husband’s accumulated contributions to VSERS to be paid to his estate
2
under 3 V.S.A. § 465(b). Wife sought to receive the retirement allowance instead and appealed to
the VSERS Board, which affirmed the Retirement Division’s decision.1
¶ 5. Wife then filed suit in Caledonia superior court. She asked for declaratory relief
establishing that either she or husband’s estate was entitled to the retirement allowance under 3
V.S.A. § 465. Additionally, she brought claims alleging breach of contract, breach of fiduciary
duty, and negligent misrepresentation on behalf of husband’s estate.2
¶ 6. The superior court granted the State’s motion to dismiss wife’s complaint. As to
the statutory claim, the court found that wife was not personally entitled to the retirement
allowance because husband never designated her as a beneficiary, and the estate was not entitled
to the benefit because an estate cannot be designated as a dependent beneficiary under 3 V.S.A.
§ 465. The court concluded that wife lacked standing and therefore dismissed the claim for lack
of subject matter jurisdiction. Alternatively, it found that she failed to state a claim for which relief
could be granted. As to the breach-of-contract claim, the court found no facts showing that the
State breached an employment contract with husband or acted in bad faith. As to the negligent
misrepresentation and breach-of-fiduciary-duty claims, the court found that sovereign immunity
barred these claims. Accordingly, the court dismissed all of wife’s claims.
¶ 7. On appeal, wife argues that 3 V.S.A. § 465 is ambiguous and we should construe
the statute to establish that either she or husband’s estate is entitled to receive the retirement
allowance. She also argues, under multiple common-law theories, that the State failed to
1
As the trial court noted, “[t]he Board described it as an appeal, although it appears that
there was no administrative procedure under the Administrative Procedures Act and the VSERS
Board simply reviewed the Retirement Division’s decision.”
2
Wife also brought claims alleging that the State’s interpretation of § 465 violated the
Common Benefits Clause of the Vermont Constitution, breach of contract as a third-party
beneficiary, and that the State denied husband’s property rights in violation of 42 U.S.C. § 1983.
Wife does not pursue those claims on appeal.
3
adequately inform husband that his benefits had vested and that he had not designated a
beneficiary.
¶ 8. “We review motions to dismiss de novo.” Deutsche Bank v. Pinette, 2016 VT 71,
¶ 9, 202 Vt. 328, 149 A.3d 479. Under Vermont Rule of Civil Procedure 12(b)(6), we “assume
that the facts pleaded in the complaint are true and make all reasonable inferences in the plaintiff’s
favor,” and will conclude that a party fails to state a claim “only when it is beyond doubt that there
exist no facts or circumstances that would entitle the plaintiff to relief.” Montague v. Hundred
Acre Homestead, LLC, 2019 VT 16, ¶ 10, 209 Vt. 514, 208 A.3d 609 (quotation omitted)
(alteration omitted). As discussed below, we conclude that dismissal was appropriate here.3
I. Statutory Interpretation of 3 V.S.A. § 465
¶ 9. We begin with a brief overview of the state retirement plan. VSERS provides
retirement benefits for State employees and their beneficiaries. Both employees and the State
contribute to the system, and qualifying members receive certain retirement benefits. VSERS is
overseen by a Board of Trustees, and the plan is administered under Chapter 16 of Title 3 of the
Vermont Statutes Annotated. VSERS holds all funds in trust and is required to manage the plan
for the exclusive benefit of members and their beneficiaries in accordance with federal law. 3
V.S.A. §§ 456, 472a.
¶ 10. Chapter 16 divides State employees into membership groups based on their
employment and the date at which they became a member of the system. See id. § 455(a)(11)
(defining group membership). Group F is the largest membership group and includes any
3
The trial court dismissed wife’s statutory claims on two alternative bases: lack of
standing—and therefore lack of subject matter jurisdiction—and failure to state a claim upon
which relief can be granted. Because we agree that wife failed to state a claim under 3 V.S.A.
§ 465, we do not address standing except to note that she had a colorable claim to establish
standing. See Wool v. Office of Prof’l Regulation, 2020 VT 44, ¶ 11, __ Vt. __, 236 A.3d 1250(explaining that standing may exist even when a claim has no merit).
4
employee who became a member of the system on or after January 1, 1991.4 Id. § 455(a)(11)(E).
Once a Group F member completes a certain number of years of service and retires, the member
is eligible to receive a retirement allowance. Id. § 459. Group F members may select a dependent
beneficiary to receive the retirement allowance if the member dies prior to retirement. Id. § 465(c).
¶ 11. This case asks us to decide whether a spouse of a Group F member is entitled to
receive a retirement allowance under § 465 if the member did not designate a dependent
beneficiary or, alternatively, if the member’s estate can receive the allowance as a beneficiary by
default. In construing a statute, our goal is to effectuate the intent of the Legislature, and we look
first to the plain meaning of the language used. Northfield Sch. Bd. v. Wash. S. Educ. Ass’n, 2019
VT 26, ¶ 13, 210 Vt. 15, 210 A.3d 460.
¶ 12. The statute provides, in relevant part:
(b)(1) Upon the death of a member in service who has not reached
his or her normal retirement date and who has not completed 10
years of creditable service . . . the member’s accumulated
contributions shall be paid to such person as he or she shall have
designated for such purpose in a writing duly acknowledged and
filed with the Board. In the absence of a written designation of
beneficiary or in the event the designated beneficiary is deceased,
the return of accumulated contributions with interest payable as a
result of the death of the member prior to retirement shall be payable
[to the member’s estate or certain other parties, depending on
whether there is an open estate and the value of the account.]
....
(c) If a Group A, Group D, or Group F member dies in service after
becoming eligible for early retirement or after completing 10 years
of creditable service, a retirement allowance will be payable to the
member’s designated dependent beneficiary during his or her life. If
the designated dependent beneficiary so elects, however, the return
of the member’s accumulated contributions shall be made in lieu
thereof.
(d) If a Group C member dies in service after reaching his or her
normal retirement date or after completing 10 years of creditable
service, a retirement allowance will be payable to . . . [listing
4
Groups A, B, and E are closed groups. Group C includes law enforcement officers and
firefighters. Id. § 455(a)(11)(C). Group D includes judges. Id. § 455(a)(11)(D).
5
individuals who receive retirement allowance by default, beginning
with dependent spouse].
(e) Unless the designated dependent beneficiary elects to receive
payment of a deceased member’s accumulated contributions as
provided under subsection (c) of this section, the retirement
allowance payable to the designated dependent beneficiary of a
deceased Group A, Group D, or Group F member under this section
shall be equal to . . . [calculating benefit]. If the deceased member
has no eligible dependent beneficiary, the member’s accumulated
contributions shall be payable in accordance with the provisions of
subsection (b) of this section.
3 V.S.A. § 465(b)-(e).
¶ 13. Wife argues that § 465 is ambiguous because the statute does not define the terms
“designated,” “dependent,” or “eligible.” She urges us to construe § 465(e) to mean that a Group
F member’s accumulated contributions are paid out in place of the retirement allowance only if
the member has no dependent beneficiaries at all, without regard to whether the member
designated a dependent beneficiary to receive the retirement allowance. Under this proposed
construction, she contends that she is eligible and should receive the retirement allowance.
¶ 14. Alternatively, wife argues that husband’s estate was his designated beneficiary and
is entitled to the retirement allowance. She acknowledges that husband’s estate was his beneficiary
by default but argues that the statute is ambiguous because it does not define the term “designated.”
She asks us to construe the statute to mean that husband’s estate could be, and was in this case, his
designated dependent beneficiary by default.
¶ 15. We conclude that the plain language of § 465 is unambiguous. If a Group F
member dies in service, § 465 provides a method for distributing either the member’s retirement
allowance or the member’s accumulated contributions. Under § 465(c), if the retirement
allowance has vested, meaning that the member has completed ten years of creditable service, the
allowance becomes payable to the member’s designated dependent beneficiary for his or her
lifetime, unless the beneficiary chooses to receive the member’s accumulated contributions
instead. Section 465(e) calculates the amount of this benefit and provides that if the member has
6
“no eligible dependent beneficiary,” VSERS must pay the member’s accumulated contributions in
accordance with § 465(b). That section provides a default distribution scheme for the accumulated
contributions “in the absence of a written designation of beneficiary,” beginning with the
member’s estate. Id. § 465(b)(1).
¶ 16. Thus, to receive a deceased member’s retirement allowance under § 465(c), a
beneficiary must be both designated and dependent. The statute does not define either term, so we
look to dictionary definitions. State v. Blake, 2017 VT 68, ¶ 11, 205 Vt. 265, 174 A.3d 126.
“Designate” means “[t]o choose (someone or something) for a particular job or purpose” and is
commonly understood to require an affirmative act of selection. Designate, Black’s Law
Dictionary (11th ed. 2019). A “dependent” is “[s]omeone who relies on another for support” or
“one not able to exist or sustain oneself without the power or aid of someone else.” Dependent,
Black’s Law Dictionary (11th ed. 2019). Accordingly, the plain meaning of § 465(c) requires
Group F members to affirmatively select a beneficiary, and the only persons who may be selected
are those whom the member supports.
¶ 17. Under the plain language of the statute, neither wife nor husband’s estate is entitled
to receive a retirement allowance. It is undisputed that husband did not designate wife as his
beneficiary during his life. The plain language also precludes a Group F member from designating
an estate as a dependent beneficiary.5 An estate is not a person who relies on another’s support
5
Wife argues that the State created ambiguity on the retirement website by stating that
“[y]ou may choose any person or your estate as your beneficiary.” Vt. Office of State Treasurer,
VSERS Group F Plan Description, Beneficiary Designation, https://www.vermonttreasurer.gov
/content/retirement/vsers-plans/group-f#Beneficiary%20Designation [https://perma.cc/3UZW-
W23G]. However, the website does not create ambiguity in an otherwise clear statute. To the
extent that she argues that the Treasurer has interpreted the statute to mean that an estate may be
designated as a dependent beneficiary by default and we must defer to that interpretation, other
language on the website belies this conclusion. Immediately preceding the allegedly ambiguous
language, the website explains that “[a] beneficiary(ies) is the person(s) to whom you want your
accumulated contributions plus interest to be refunded and/or any available death benefits to be
paid if you die before retirement. However, a death-in-service benefit is only payable to your
designated dependent beneficiary.” Id. Read in accordance with 3 V.S.A. § 465, the website
7
for a living, so an estate cannot qualify as a “dependent” under the statute. This conclusion is
reinforced by other language in § 465(c), which provides that a designated dependent beneficiary
will receive the retirement allowance “during his or her life.” As the trial court acknowledged,
“[s]uch language is inapplicable to an estate, which is not a person with a lifespan.” Because
neither wife nor the estate was a designated dependent beneficiary, the statute does not entitle
either to receive the retirement allowance.
¶ 18. Wife maintains that the statute is ambiguous because it uses the phrase “designated
dependent beneficiary” except in the last sentence of § 465(e), where it uses the phrase “eligible
dependent beneficiary.” She argues that this case is like Duhaime v. Treasurer, where we held that
a term in the retirement statute was vague and construed the statute “liberally in favor of the
beneficiaries.” 161 Vt. 157, 160, 636 A.2d 754, 756 (1993). She asks us to construe § 465(e) to
mean that the retirement allowance is lost only if the member dies without an “eligible dependent
beneficiary,” which she defines as a person whom the member could have designated as a
dependent beneficiary. Under this proposed construction, she contends that she should receive the
retirement allowance because husband could have designated her as his dependent beneficiary.
Although their children were also “eligible” under this definition, she argues that her claim to the
benefit is superior because of the unique legal status afforded to a married couple.
¶ 19. Even if we were to find this language ambiguous for the reasons suggested by wife,
we disagree with her proposed construction of § 465(e) because it conflicts with the statute as a
whole. In general, we presume that the Legislature chooses statutory language intentionally, so
different words carry different meanings. See Vt. Nat’l Telephone Co. v. Dep’t of Taxes, 2020
VT 83, ¶¶ 26-27, __ Vt. __, __ A.3d __. However, “[w]e will not interpret a single word or phrase
in isolation from the entire statutory scheme.” Blake, 2017 VT 68, ¶ 9. Instead, we read and
instructions require a Group F member to select a dependent beneficiary for that person to receive
the retirement allowance.
8
construe together subsections of a statute that were “drafted as part of an overall statutory scheme.”
T. Copeland & Sons, Inc. v. Kansa Gen. Ins. Co., 171 Vt. 189, 193-94, 762 A.2d 471, 473-74
(2000) (holding that Legislature intended broader use of certain language based on context of entire
statute). If the plain language of a statute is ambiguous, “we look to the general context of the
statutory language, the subject matter, and the effects and consequences of our interpretation.”
Shea v. Metcalf, 167 Vt. 494, 498, 712 A.2d 887, 889 (1998). “We consider the whole and every
part of the statute and avoid a construction that would render part of the statutory language
superfluous.” In re Mountain Top Inn & Resort, 2020 VT 57, ¶ 37,__ Vt. __, 238 A.3d 637(citation omitted) (quotations omitted).
¶ 20. The phrase “eligible dependent beneficiary” in the last sentence of § 465(e) appears
to be ambiguous in isolation because that phrase is not used elsewhere in § 465. However, when
viewed in context, the phrase “eligible dependent beneficiary” clearly refers to “designated”
beneficiaries of Group A, D, and F members in this instance and statutorily identified surviving
dependents for Group C members. Section 465(b) explains that if a member dies in service and
the retirement allowance has not vested, the member’s accumulated contributions are paid to the
member’s “designated beneficiary.” “In the absence of a written designation of beneficiary or in
the event the designated beneficiary is deceased,” the contributions are paid out under a default
distribution scheme. 3 V.S.A. § 465(b)(1). Section 465(c) provides that once a Group A, D, or F
member has completed ten years of service and the retirement allowance vests, the benefit becomes
payable to the member’s “designated dependent beneficiary.” Section 465(d) applies only to
Group C members and establishes the dependent beneficiaries by statute. Section 465(e) calculates
the amount of the benefit for members in Groups A, D, and F, and provides generically, without
limitation to any particular group, that if the member dies without an “eligible dependent
beneficiary,” the member’s accumulated contributions are payable in accordance with § 465(b).
Because this provision is not limited to Groups A, D, and F, but applies also to Group C, in which
9
entitlement to the retirement allowance is established by statute rather than by a member’s
designation, the term “eligible dependent beneficiary” is broad enough to encompass designated
dependent beneficiaries for Groups A, D, and F, as well as statutory dependent beneficiaries for
Group C. Thus, the statutory scheme supports the conclusion that an “eligible dependent
beneficiary” of a Group F member under § 465(e) is one who is designated by the member. Any
other construction would be inconsistent with the rest of the statute.
¶ 21. Wife’s proposed construction fails because it would essentially remove the term
“designated” from the statute. This would contradict the Legislature’s clear intent to require Group
A, D, and F members to affirmatively select a beneficiary, which is evidenced by its decision to
amend the statute in 2003 to add the word “designated” before “dependent beneficiary” throughout
§ 465(c) and (e). 2003, No. 122 (Adj. Sess.), § 297b-c. If § 465(e) provided a default retirement
allowance to any eligible dependent beneficiary, it would render the designation requirement
superfluous.
¶ 22. Wife’s proposed construction would also render the term “dependent” superfluous
in § 465(e). If, as in her view, “eligible” means a person whom the member could have selected
as a beneficiary, dependent would be unnecessary. The modifier “dependent” already explains
which persons are eligible to be designated as a beneficiary. We will not construe the statute in a
manner that makes this language superfluous. See Mountain Top Inn & Resort, 2020 VT 57, ¶ 37.
¶ 23. Additionally, if we construed the statute the way wife proposes, the statute would
provide no guidance as to how, absent a designated beneficiary, the Retirement Division should
allocate the retirement allowance for Group A, D, and F members when multiple dependent
beneficiaries exist, as in this case. The Legislature provided a statutory distribution structure for
the retirement allowance for Group C members, who are not required (or allowed) to designate a
dependent beneficiary. See 3 V.S.A. § 465(d). The statute does not contain a scheme for allocating
the retirement allowance among dependents of Group A, D, and F members who fail to designate
10
a beneficiary. Instead, “[i]n the absence of a written designation of beneficiary,” the statute
provides an alternative to a retirement allowance, which is the return of a member’s accumulated
contributions with interest. 3 V.S.A. § 465(b). Since the Legislature did not provide for a
retirement allowance for Group A, D, and F members in the absence of a designation, we decline
to imply one. See Town of Milton Bd. of Health v. Brisson, 2016 VT 56, ¶ 24, 202 Vt. 121, 147
A.3d 990 (“Where the Legislature has demonstrated that it knows how to provide explicitly for the
requested action, we are reluctant to imply such an action without legislative authority.” (quotation
omitted)).
¶ 24. Finally, Duhaime v. Treasurer does not convince us to adopt wife’s proposed
construction. That case involved a member’s entitlement to retirement benefits, and we construed
an ambiguous term in the retirement statute “liberally in favor of the beneficiaries.” 161 Vt. at
160, 636 A.2d at 756. Here, by contrast, the statute is not ambiguous, and wife is neither a member
nor a beneficiary of the system. Duhaime does not support the proposition that we should liberally
construe an unambiguous statute to divert funds to a non-member or non-beneficiary. VSERS is
required to administer the retirement plan for the exclusive benefit of members and their
beneficiaries. 3 V.S.A. §§ 456, 472a. In carrying out this duty, VSERS must follow its members’
instructions without substituting its own judgment. This means it must honor a member’s decision
not to designate a beneficiary. Because husband failed to designate a dependent beneficiary, we
affirm the trial court’s dismissal of wife’s claims under 3 V.S.A. § 465.
II. Common-law Claims
¶ 25. We next address wife’s common-law claims, made in her representative capacity
as administrator of husband’s estate. She asserts claims for breach of contract, breach of fiduciary
duty, and negligent misrepresentation, which the trial court dismissed for failure to state a claim
under Rule 12(b)(6). As explained above, when reviewing the court’s decision, we assume all
facts pleaded in the complaint are true and make all reasonable inferences in wife’s favor.
11
Montague, 2019 VT 16, ¶ 10. We will affirm the court’s dismissal for failure to state a claim only
if “it is beyond doubt that there exist no facts or circumstances” that entitle wife to relief. Id.(quotation omitted). We address each claim in turn and conclude that wife failed to state a claim
under any theory asserted.6
A. Breach of Contract
¶ 26. Wife argues that the State breached the covenant of good faith and fair dealing by
not adequately disclosing to husband after his retirement allowance vested that he would forfeit
his benefit if he did not designate a dependent beneficiary. She premises this claim on husband’s
employment contract with the State, which incorporates the VSERS retirement plan.
¶ 27. The covenant of good faith and fair dealing is implied in every contract and “serves
to ensure that parties to a contract act with faithfulness to an agreed common purpose and
consistency with the justified expectations of the other party.” Sutton v. Vt. Reg’l Ctr., 2019 VT
71A, ¶ 62, __ Vt. __, 238 A.2d 608 (quotation omitted). “An underlying principle implied in every
contract is that each party promises not to do anything to undermine or destroy the other’s rights
to receive the benefits of the agreement.” Carmichael v. Adirondack Bottled Gas Corp. of Vt.,
161 Vt. 200, 208, 635 A.3d 121, 1216 (1993).
¶ 28. There are no facts here tending to show that the State breached any agreement or
acted in bad faith. The record reflects that husband received sufficient notice regarding his
benefits. When he was first hired, he received a form to designate a beneficiary with the following
instructions: “Please do not neglect this as your growing account could provide a very substantial
survivorship protection. If you fail to designate a beneficiary, your retirement account would
become part of your estate.” Husband also received annual statements from VSERS reflecting
that he was “fully vested” but had not designated a beneficiary and could expect $0.00 per month
6
The State argues that sovereign immunity bars these claims. We do not address whether
sovereign immunity applies in this instance because even if it did, wife’s claims fail as a matter of
law.
12
in a retirement allowance.7 The statements explained that in place of this benefit, his estate would
receive a lump-sum payment of his accumulated contributions. Through these communications,
husband received clear notice of his available retirement allowance, the actions required to use it,
and the consequences for failing to do so.
¶ 29. Wife alleges no facts tending to show that the State interfered with husband’s power
to designate a beneficiary in any manner that might support a breach of the covenant of good faith
and fair dealing. Husband simply failed to designate a beneficiary, and the State acted in
accordance with § 465 by returning his accumulated contributions plus interest to his estate.
Accordingly, we affirm the trial court’s dismissal of wife’s breach-of-contract claim.
B. Breach of Fiduciary Duty
¶ 30. Wife next argues that the State, acting through VSERS, breached its fiduciary duty
by failing to inform husband after his retirement allowance vested that he would forfeit the benefit
if he did not designate a dependent beneficiary. She derives this claim from the Restatement
7
Wife alleges that the trial court erred by relying on this annual statement. She asserts
that it was an external document filed by the State with its motion to dismiss, and thus was
improperly considered on a motion to dismiss. See V.R.C.P. 12(b) (providing that if the court
considers matters outside the pleadings on a motion to dismiss for failure to state a claim under
Rule 12(b)(6), the motion must be treated as one for summary judgment under Rule 56).
However, wife referenced the statement in her complaint and included a portion of the
statement in Exhibit 1 to the Amended Complaint. Vermont Rule of Civil Procedure 10(c)
instructs courts to treat an exhibit to a pleading as “a part thereof for all purposes.” The State
attached the statement in its entirety to its motion “to allow the court to see the statements relied
on by appellants in the Amended Complaint in their original form.” Further, wife conceded at oral
argument that the complaint and its attached exhibits comprised all of the representations that the
State made and that there was no additional evidence that she planned to present to support her
claims. Accordingly, it was proper for the trial court to rely on this statement in a motion to dismiss
on the pleadings. See Kaplan v. Morgan Stanley & Co., Inc., 2009 VT 78, ¶ 10 n.4, 186 Vt. 605,
987 A.2d 258 (mem.) (explaining that trial court could properly rely on summary plan description
even though full text was not attached to complaint because “when the complaint relies upon a
document, [it] merges into the pleadings and the court may properly consider it under a Rule
12(b)(6) motion to dismiss” without converting the motion into one for summary judgment
(quotation omitted) (alteration omitted)).
13
(Third) of Trusts § 82, which provides that trustees must “inform beneficiaries of significant
changes in their beneficiary status.”
¶ 31. The trial court determined that § 82 does not apply to wife or husband’s estate in
this instance because it “relates to obligations to beneficiaries after their status as beneficiaries has
been established, and neither [wife] nor the Estate can claim status as a beneficiary.” The
retirement statute defines “beneficiary” as “any person in receipt of a pension, an annuity, a
retirement allowance, or other benefit as provided by this subchapter.” 3 V.S.A. § 455(a)(5).
Neither wife nor husband’s estate was a beneficiary of VSERS during husband’s life, so we agree
with the trial court that wife has not established a claim for breach of fiduciary duty. However,
because wife’s claim is premised on actions or omissions that occurred during husband’s life, we
consider whether wife has stated a claim that VSERS owed a duty to husband and that its conduct
breached that duty.
¶ 32. Chapter 16 of Title 3 establishes VSERS as a trust that owes a fiduciary duty to its
members and their beneficiaries. See 3 V.S.A. § 456 (providing that all VSERS property is “held
in trust for the purpose for which received”); id. § 471(a) (vesting responsibility for administration
and operation of VSERS “in a board of eight trustees, known as the Retirement Board”); id.
§ 472a(b) (prohibiting use of fund for any “purposes other than the exclusive benefit of members
and their beneficiaries”). The VSERS Standards of Conduct also outlines this trust relationship:
The Boards of Trustees of [VSERS is] entrusted with the investment
of public pension funds of the retirement System[] and [is] obligated
to safeguard the funds for the benefit of members and beneficiaries.
The Trustees are obligated to administer the System[] efficiently and
effectively in the interest of the plans’ members and beneficiaries so
as to avoid waste, mismanagement, abuse, and misuse of influence.
The Trustees of [this] public pension System[] have a duty to
administer and provide benefits in a responsible manner without
causing an undue burden on their members or Vermont taxpayers.
Standards of Conduct § 1(A), Code of Vt. Rules 03 030 004, http://www.lexisnexis.com/
hottopics/codeofvtrules.
14
¶ 33. Accordingly, during his life, VSERS owed a fiduciary duty to husband as a member
of the system. Vermont’s survival statute includes claims for breach of fiduciary duty. Estate of
Kuhling v. Glaze, 2018 VT 75, ¶ 15, 208 Vt. 273, 196 A.3d 1125. Wife, as executor of husband’s
estate, can assert husband’s claim against the State for breach of fiduciary duty. See id.
¶ 34. The next question is whether wife has stated a claim for breach of fiduciary duty
by alleging that VSERS failed to tell husband that his retirement allowance had vested and that he
would forfeit the benefit if he did not designate a beneficiary. Other states have held that state
retirement boards have the duty to “provide retirees sufficient information to make an informed
decision in electing a retirement option.” Honda v. Bd. of Trs. of the Emps.’ Ret. Sys. of the State,
118 P.3d 1155, 1164 (Haw. 2005); Ricks v. Mo. Local Gov’t Emps.’ Ret. Sys., 981 S.W.2d 585,
592 (Mo. Ct. App. 1998). Courts have found a breach of this duty when the retirement board
provided “insufficient and seemingly inconsistent information” containing “technical terms that
were not defined or explained” regarding benefit options. Honda, 118 P.3d at 1165. If the
retirement board provided clear information, however, the board “is not required to give advice on
which option to choose.” Ricks, 981 S.W.2d at 592.
¶ 35. We find the analysis in Honda and Ricks persuasive in concluding that wife has
failed to state a claim for breach of fiduciary duty here. Wife has failed to allege facts
demonstrating that VSERS did not provide clear and comprehensive information to husband
regarding his retirement allowance. Upon husband’s hiring, VSERS provided him a form to
designate a beneficiary and warned him that if he neglected to fill out the form, “your growing
account could provide a very substantial survivorship protection. If you fail to designate a
beneficiary, your retirement account would become part of your estate.” More importantly,
husband received statements each year explaining that his estate was listed as a beneficiary by
default because he had not named one, that his beneficiary could expect “$0.00 a month for life
payable from the System” in a retirement allowance, and that, in the place of this benefit, his
15
beneficiary “would receive a lump-sum payment of your accumulated contributions.” Wife alleges
no facts suggesting that the information provided by VSERS misled or confused husband. Because
husband never selected a dependent beneficiary, VSERS properly administered his benefits based
on the information in the system. It was not required to advise him further about the wisdom of
failing to make a beneficiary designation.8 Accordingly, we affirm the trial court’s decision
dismissing wife’s claim for breach of fiduciary duty.
C. Negligent Misrepresentation
¶ 36. Wife argues that the State negligently mispresented to husband the consequences
of his failure to designate a dependent beneficiary. She contends that the State provided misleading
information regarding beneficiaries. Because we hold that wife has failed to allege facts
demonstrating that the State did not provide sufficient information to husband regarding his
benefits and the consequence of his failure to select a beneficiary, this claim likewise fails.
¶ 37. The Restatement of Torts explains liability for negligent misrepresentation as
follows:
One who, in the course of his business, profession, or
employment . . . supplies false information for the guidance of
others in their business transactions, is subject to liability for
pecuniary loss caused to them by their justifiable reliance upon the
information, if he fails to exercise reasonable care or competence in
obtaining or communicating the information.
8
This conclusion is consistent with cases analyzing fiduciary duties under the Employment
Retirement Income Security Act (ERISA). ERISA applies to private retirement plans and does
not govern VSERS, but ERISA codifies common-law trust principles. See Firestone Tire &
Rubber Co v. Bruch, 489 U.S. 101, 110 (1989) (“ERISA’s legislative history confirms that the
Act’s fiduciary responsibility provisions . . . codify and make applicable to ERISA fiduciaries
certain principles developed in the evolution of the law of trusts.” (quotation omitted) (alterations
omitted)). ERISA creates a right of action for breach-of-fiduciary-duty claims, 29 U.S.C. § 1109,
and “the duties of plan administrators go beyond those specified in the statute, and include duties
derived from common law trust principles,” Stahl v. Tony’s Bldg. Materials, Inc., 875 F.2d 1404,
1409 (9th Cir. 1989). Thus, we find it instructive that “[t]he great majority of courts . . . have not
imposed upon an ERISA plan fiduciary the duty individually to notify participants and/or
beneficiaries of the specific impact of the general terms of the plan upon them.” Maxa v. John
Alden Life Ins. Co., 972 F.2d 980, 985 (8th Cir. 1992).
16
Glassford v. Dufresne & Assocs., P.C., 2015 VT 77, ¶ 13, 199 Vt. 422, 124 A.3d 822 (adopting
§ 522 of the Restatement (Second) of Torts). Here, there are no facts showing that the State
provided any false or misleading information. The information provided to husband explained
that he needed to designate a beneficiary to receive a retirement allowance. His annual statements
reflected that he had not designated any beneficiary, and accordingly would receive $0.00 in
retirement allowance. These communications are neither false nor misleading and cannot support
a claim for negligent misrepresentation. For this reason, we affirm the trial court’s dismissal of
wife’s claim.
Affirmed.
FOR THE COURT:
Associate Justice
¶ 38. REIBER, C.J., dissenting. I agree that wife’s claims under 3 V.S.A. § 465 and
for breach of contract and negligent misrepresentation were appropriately dismissed. Taking the
allegations in the complaint in the light most favorable to wife and drawing all reasonable
inferences from those allegations, however, I conclude that she has stated a claim for breach of
fiduciary duty. I would reverse the trial court’s order dismissing wife’s claim under this theory
and remand the matter for further proceedings; therefore, I respectfully dissent.
¶ 39. The majority should reach this conclusion on the procedural posture of this case.
Vermont has an “extremely liberal notice-pleading standard.” Mahoney v. Tara, LLC, 2014 VT
90, ¶ 15, 197 Vt. 412, 107 A.3d 887. To state a claim, a plaintiff need only provide “a bare bones
statement that merely provides the defendant with notice of the claims against it.” Colby v.
Umbrella, Inc., 2008 VT 20, ¶ 13, 184 Vt. 1, 955 A.2d 1082; see also V.R.C.P. 8 (requiring that
claims contain “a short and plain statement of the claim showing” entitlement to relief and “a
demand for judgment”). A court should dismiss a claim only when “it appears beyond doubt that
17
there exist no facts or circumstances that would entitle the plaintiff to relief.” Colby, 2008 VT 20,
¶ 5 (quotation omitted). As such, “[m]otions to dismiss for failure to state a claim are disfavored
and are rarely granted.” Id.
¶ 40. In upholding the State’s motion to dismiss, the majority concludes that wife failed
to state a claim for breach of fiduciary duty because she failed to allege facts showing that VSERS
did not provide clear and comprehensive information to husband regarding his retirement
allowance. I disagree. One of the cases relied upon by the majority in articulating VSERS’ duty
supports my position. There the Hawaii Supreme Court concluded that the state Employees’
Retirement System failed to provide sufficient information to allow employees to make an
informed choice regarding their retirement options. Honda v. Bd. of Trs. of the Emps.’ Ret. Sys.
of the State, 118 P.3d 1155, 1164-65 (Haw. 2005). The court explained that to provide sufficient
information and meet its fiduciary duty, the Employees’ Retirement System Board must provide
retirement materials that convey “a lucid description of the retirement options and the
consequences of each choice,” written in “ ‘user-friendly,’ everyday language” such that it is
“comprehensible to the ordinary person.” Id. at 1165. Based on two communications from VSERS
to husband attached to wife’s complaint, wife has sufficiently pled, for purposes of Rule 8, that
VSERS failed to meet the Honda standard here as a matter of law.
¶ 41. On their face, the communications from the State were disputably not lucid, clear,
or written in user-friendly language comprehensible to the ordinary person. First, husband’s
certificate of membership provides: “A form is enclosed for you to designate the beneficiary of
your retirement account. Please do not neglect this as your growing account could provide a very
substantial survivorship protection. If you fail to designate a beneficiary, your retirement account
would become part of your estate.” The majority concludes that this language is clear. However,
the certificate does not explain what it means for a member’s retirement account to become part
of the member’s estate, or how that outcome relates to the “substantial survivorship protection”
18
that it referenced. As such, this language arguably fails to communicate the consequence of the
choice not to designate a beneficiary: the member forfeits—that is, waives and loses—the
retirement allowance, and the member’s estate receives only his or her accumulated contributions
instead. Without this understanding of the difference, how could a member make an informed
choice about the benefit? See Honda, 118 P.3d at 1164-65 (recognizing fiduciary duty of
retirement board to “provide retirees sufficient information to make an informed decision in
electing a retirement option”).
¶ 42. Next, husband’s annual statement, under the “Retirement” section, says that
husband is “fully vested in this pension.” In the section briefly explaining the benefits, the
statement explains that “[v]esting occurs after you have earned five (5) years of creditable service
in the System.” However, there is no comparable information regarding vesting of the retirement
allowance. The retirement statute provides that this benefit vests after ten years of service for
Group F members, 3 V.S.A. § 465(c), but the statement makes no mention of this vesting period
and does not say whether the member’s retirement allowance has vested, as it does for the pension
benefit. Even though husband’s statement reflected that his designated beneficiary would receive
$0.00 per month for this benefit, this information lacks context without corresponding vesting
information and an explanation of how that affects the benefit that will be paid out.
¶ 43. Based on this record attached to the complaint supporting her claims, wife has
sufficiently alleged that VSERS failed to provide husband sufficient information to allow him to
make an informed decision. See Colby, 2008 VT 20, ¶ 5 (explaining that dismissal is only
appropriate when “it appears beyond doubt that there exist no circumstances or facts that would
entitle the plaintiff to relief” (quotation omitted)).
¶ 44. The ambiguous language in 3 V.S.A. § 465(e) reinforces this conclusion. The
Legislature amended § 465 in 2004 and added “designated” before “dependent beneficiary”
throughout § 465(c) and (e)—except in the last sentence of § 465(e), where the statute references
19
an “eligible dependent beneficiary.” 2003, No. 122 (Adj. Sess.), § 297(b)-(c). To determine the
intent of the Legislature, we look first to the plain meaning of the statutory language. Northfield
Sch. Bd. v. Wash. S. Educ. Ass’n, 2019 VT 26, ¶ 13, 210 Vt. 15, 210 A.3d 460. As the majority
acknowledges, we presume that the Legislature chooses statutory language advisedly; therefore,
we assume different words generally carry different meanings. Vt. Nat’l Telephone Co. v. Dep’t
of Taxes, 2020 VT 83, ¶¶ 26-27, __ Vt. __, __ A.3d __. Accordingly, the plain language of § 465
suggests that the phrases “designated dependent beneficiary” and “eligible dependent beneficiary”
convey different meanings.
¶ 45. The majority explains that the terms differ because the overall structure of § 465
indicates that the last sentence of § 465(e) applies to Group C members. However, neither the
plain language nor the structure of the statute compels this conclusion. The majority notes that
§ 465(e) “provides generically, without limitation to any particular group, that if the member dies
without an ‘eligible dependent beneficiary,’ the member’s accumulated contributions are payable
in accordance with § 465(b).” Ante, ¶ 20. But the first sentence of § 465(e) appears to limit this
subsection to members of Groups A, D, and F. There is no indication, aside from the lack of
reference to any particular group, that the following sentences in § 465(e) apply to Group C
members. Indeed, the structure of the statute appears to separate provisions applying to Group A,
D, and F members from provisions applying to Group C members. Generally, § 465(c) and (e)
provide and calculate the retirement allowance for the designated dependent beneficiary of a Group
A, D, or F member, and § 465(d) and (f) provide and calculate the retirement allowance for the
statutorily designated beneficiaries of a Group C member.
¶ 46. The Legislature could have intended the generic reference to a “member” in the last
sentence of § 465(e) to refer to the same Group A, D, or F member specified in the preceding
sentence of the subsection, or it could have intended “a member” to include Group C members as
the majority concludes. In fact, I agree with the majority that wife’s proposed interpretation would
20
be inconsistent with the rest of the statute. See ante, ¶¶ 21-23. But this conclusion is not obvious
from the plain language of the statute; members and beneficiaries of the retirement system would
benefit from greater clarity in this regard. As either interpretation is plausible, the statute is, at
best, ambiguous. See Shires Hous., Inc. v. Brown, 2017 VT 60, ¶ 14, 205 Vt. 186, 172 A.3d 1215(concluding that statute is ambiguous when it is “susceptible to more than one interpretation”).
This ambiguity, coupled with the alleged deficiencies in VSERS’ communications, is sufficient to
create confusion and lead husband to mistakenly believe that either wife or his estate would receive
the retirement allowance.
¶ 47. The majority contends that wife alleged no facts suggesting that husband was
actually confused or misled by the materials from VSERS. But wife alleged in her complaint that
husband was devoted to his family members and concerned with their welfare and intended that
they receive this benefit. The State points to no facts tending to show otherwise. Moreover, a
member receives no financial benefit by not designating a beneficiary; the result is that the
member’s accumulated contributions are returned to their estate and the retirement allowance is
forfeited. 3 V.S.A. § 465(e). There was certainly no advantage here, where wife inherits
husband’s estate as the surviving spouse, because if husband had designated her as his beneficiary
and she received the monthly retirement allowance, the financial benefit to her would have been
much greater. Wife’s complaint thus supports the inference that husband intended to designate
wife as his dependent beneficiary but was misled or confused by the information provided by
VSERS. See Montague v. Hundred Acre Homestead, LLC, 2019 VT 16, ¶ 10, 209 Vt. 514, 208
A.3d 609 (“On a motion to dismiss, the court must assume that the facts pleaded in the complaint
are true and make all reasonable inferences in the plaintiff’s favor.”). Under our pleading standard,
these allegations plausibly show that VSERS failed to convey this information in a clear and
understandable way, and thus this claim should survive the State’s motion to dismiss. See Boynton
v. ClearChoiceMD, MSO, LLC, 2019 VT 49, ¶ 14, 210 Vt. 454, 216 A.3d 1243 (Robinson, J.,
21
dissenting) (“The requirement that a complaint provide ‘fair notice of what the plaintiff’s claim is
and the grounds on which it rests’ does not require plaintiffs to produce evidence supporting their
claims, or even to provide a detailed description of the evidence that would support those claims.”
(quoting Reporter’s Notes, V.R.C.P. 8)).
¶ 48. This Court has never before considered VSERS’ fiduciary duties to its members,
and the novelty of this issue underscores my conclusion that wife has sufficiently stated a claim
for relief. Our precedent instructs us to be “particularly wary of dismissing novel legal claims
because the legal theory of a case should be explored in light of the facts as developed by the
evidence.” Montague, 2019 VT 16, ¶ 11. But an analysis of the facts and the law cannot occur
under the limited purpose of a motion to dismiss, which is “to test the law of the claim, not the
facts which support it.” Powers v. Office of Child Support, 173 Vt. 390, 395, 795 A.2d 1259, 1263
(2002). The majority’s holding here hinges not on the existence of VSERS’ duty to its members,
but on whether the facts alleged support a claim for breach of that duty. As such, I would hold
that wife’s pleading suffices to allow her to develop her proof.9
¶ 49. I therefore respectfully dissent.
Chief Justice
9
At oral argument, wife agreed that her complaint included the “universe of
representations” made by the State. Regardless, the record suggests that additional evidence may
be pertinent to this claim. For example, husband’s certificate of membership references an
“enclosed general information handbook” that “explains all the benefits and forms of protection
provided by the System.” Likewise, the only statement from VSERS attached to the complaint
was husband’s most recent statement in 2017. When describing the annual statements that husband
received from VSERS, wife’s complaint mentions that the forms changed at some point. This
suggests that other evidence exists to support or refute this claim.
22