Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-95-05016/USCOURTS-ca10-95-05016-0/pdf.json

Nature of Suit Code: 430
Nature of Suit: Banks and Banking
Cause of Action: 

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PUBLISH 

FILED 

United States Court or Appeals 

Tenth Circuit 

DEC 2 8 1995 

UNITED STATES coURT OF APPEALsPATRICK FISHER 

Clerk 

FOR THE TENTH CIRCUIT 

RESOLUTION TRUST CORPORATION, 

as Receiver of Sooner Federal 

Savings Association, 

Plaintiff-Appellee, 

v. 

) 

) 

) 

) 

) 

) 

) 

) 

FINANCIAL INSTITUTIONS RETIRE- ) 

MENT FUND, in its capacities ) 

as a pension plan and trust ) 

and as plan sponsor of The ) 

Comprehensive Retirement ) 

Program; THE BANK OF NEW YORK, ) 

as Trustee of The Comprehen- ) 

sive Retirement Program, ) 

Defendants-Appellants. 

) 

) 

No. 95-5016 

Appeal from the United States District Court 

For the Northern District of Oklahoma 

D.C. No. 92-C-1042-E 

Thomas C. Morrison (Blair Axel, Patterson, Belknap, Webb & Tyler 

LLP, New York, New York; and Mark Edmondson, Crowe & Dunlevy, 

Tulsa, Oklahoma, with him on the briefs), Patterson, Belknap, Webb 

& Tyler LLP, New York, New York, for Defendants-Appellants. 

Richard B. Noulles (Richard H. Mounts and Jonathan B. Taylor, 

Resolution Trust Corporation, Washington, D.C., with him on the 

brief), Gable & Gotwals, Tulsa, Oklahoma, for Appellee-Plaintiff. 

Before MOORE, BRORBY, and EBEL, Circuit Judges. 

Appellate Case: 95-5016 Document: 01019280387 Date Filed: 12/28/1995 Page: 1 
MOORE, Circuit Judge. 

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The issue presented by this case is whether the Resolution 

Trust Corporation, as successor to a failed thrift institution, 

can recover an actuarially determined sum known as "Future 

Employer Contribution Offsets" (FECO) attributable to the failed 

thrift as an employer in a multiple-employer pension benefit plan 

under ERISA. The district court treated the FECO as discrete 

funds and awarded them to RTC under a common law unjust enrichment 

theory. We hold the award of the judgment to the RTC violated the 

exclusive benefit rule of ERISA and reverse. 

Defendant, Financial Institutions Retirement Fund (FIRF), is 

a multiple-employer pension benefit plan under ERISA. The fund is 

a single plan, meaning all of its 360 participating employers pay 

into, and all of its approximately 35,000 employees benefit from, 

one single fund. The plan was established in 1943, and its corpus 

is comprised of assets which fluctuate in value in accord with 

economic trends. Because of favorable market conditions, the 

capital value of those assets grew, and FIRF declared the plan had 

reached "full funding" in 1987. As a result, FIRF suspended 

further employer contributions and advised its over-funded 

employers, including Sooner 

that the FECO would be used 

Federal Savings & Loan Association, 

to offset the employers' future 

funding obligations to the plan. 

In 1989, Sooner became insolvent. The Resolution Trust 

Corporation, Sooner's receiver, sold some of its assets to a 

successor savings association, excepting any interest in, or 

claims against, FIRF. Because of its liquidation, Sooner was 

deemed to have withdrawn from FIRF. 

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Appellate Case: 95-5016 Document: 01019280387 Date Filed: 12/28/1995 Page: 3 
At the time of its insolvency, the value of Sooner's FECO 

credit was approximately $4.1 million. RTC brought this action 

against FIRF to obtain payment of the FECO credits, asserting a 

common law claim for unjust enrichment. In response, FIRF claimed 

it was prohibited by ERISA from distributing the FECO credits to 

RTC or any employer for non-pension related purposes. Both 

parties filed motions for summary judgment. The district court 

granted RTC's motion and denied that of FIRF. Judgment in the 

amount of $4.6 million was entered in favor of RTC, and this 

appeal ensued. 

On appeal, FIRF contends ERISA'S "exclusive benefit" rule 

prohibits the use of FECO balances for non-pension purposes.1 We 

agree. 

Citing Patterson v. Shumate, 504 U.S. 753 (1992) (denying the 

inclusion of pension benefits in a bankrupt estate), and Gui~ v. 

Sheet Metal Workers Nat'l Pension FUnd, 493 U.S. 365 (1990) 

(reversing the imposition of a constructive trust on an convicted 

union official's pension benefits), FIRF _argues the exclusive 

benefit rule reflects a congressional policy choice to protect a 

1 The "exclusive benefit" rule states: 

Except as provided in paragraph (2), (3), or (4) or 

subsection (d) of this section, or under sections 

1342 and 1344 of this title (relating to 

termination of insured plans), or under section 420 

of Title 26 as in effect on January 1, 1995, the 

assets of a plan shall never inure to the benefit 

of any employer and shall be held for the exclusive 

purposes of providing benefits to participants in 

the plan and their beneficiaries and defraying 

reasonable expenses of administering the plan. 

ERISA§ 403(c) (1), 29 U.S.C. § 1103(c) (1). 

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Appellate Case: 95-5016 Document: 01019280387 Date Filed: 12/28/1995 Page: 4 
stream of income for pensioners and their dependents.2 Because 

RTC will remove the FECO credits from the pension fund and place 

them in the U.S. Treasury, FIRF asserts the exclusive benefit rule 

is violated. 

The district court held Guidry and Patterson were 

distinguishable because they involved the anti-alienation rule, 

not the exclusive benefit rule. The anti-alienation rule states: 

"[e]ach pension plan shall provide that benefits provided under 

the plan may not be assigned or alienated." ERISA§ 206(d) (1), 29 

U.S.C. 1056(d) (1). FIRF argues this distinction is irrelevant, 

contending both the anti-alienation rule and the exclusive benefit 

rule are designed to effectuate the congressional policy of 

assuring pension assets are used only for the benefit of employees 

and their families. 

In response, RTC cites several cases in which courts have 

held that federal common law allows equitable actions in ERISA 

cases. RTC also asserts these equitable actions are not limited 

to merely enforcing a right expressly provided in ERISA. Instead, 

2 Discussing the underpinning of ERISA, the Supreme Court has 

stated: 

One of Congress' central purposes in enacting this 

complex legislation was to prevent the "great 

personal tragedy" suffered by employees whose 

vested benefits are not paid when pension plans are 

terminated. Congress found "that owing to the 

inadequacy of current m1n1mum standards, the 

soundness and stability of plans with respect to 

adequate funds to pay promised benefits may be 

endangered; that owing to the termination of plans 

before requisite funds have been accumulated, 

employees and their beneficiaries have been 

deprived of anticipated benefits. 

Nachman Corp. v. Pension Benefit Guar. Corp., 446 u.s. 359, 

374-75 (1980) (quoting ERISA§ 2(a), 29 U.S.C. § 1001(a)). 

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RTC claims unjust enrichment remedies may be fashioned where there 

is a "particularly strong indication that the unjust enrichment 

doctrine will vindicate an important statutory policy." Van Orman 

v. American Ins. Co., 680 F.2d 301, 312 (3d Cir. 1982). RTC avers 

because the FECO credits will go into the U.S. Treasury and thus 

help reduce the loss to taxpayers, the creation of federal common 

law in this case implements RTC's mandate under FIRREA and thus 

vindicates an important statutory policy. 

RTC also argues the equitable principles of restitution and 

unjust enrichment developed under federal common law favor RTC's 

recovery of the FECO credits. Citing Chait v. Bernstein, 835 F.2d 

1017 (3d Cir. 1987), RTC declares equity favors reversion to 

employers of any surplus funds not needed to satisfy employee 

benefits. Thus, RTC continues, FIRF's retention of the FECO 

credits is inequitable and contrary to ERISA policy. 

Citing several cases in which courts held recovery by a 

receiver of an insolvent employer distinguishable from recovery by 

an employer, RTC urges the exclusive benefit rule does not bar its 

recovery here. Basic to this position is the assumption the 

exclusive benefit rule is inapplicable to receivers of defunct 

employers. 

Thus postured, the issues are clearly drawn. We must decide 

which of two significant public policies is to govern this 

dispute. Is the ERISA objective of protecting plan participants 

and their beneficiaries more important than RTC's objective of 

recovering "assets" of a failed thrift for the benefit of the 

public at large? 

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Our review leads us to believe the primary concern here must 

be for the preservation of the fund assets in consonance with the 

basic tenet of ERISA. While we do not denigrate the importance of 

RTC's responsibility for marshalling assets of failed financial 

institutions for the benefit of the federal fisk, we think 

Congress has called for special concern for the beneficiaries of 

employee funds that mandates giving this fund precedence here. In 

short, then, we believe the district court erred in creating a 

federal common law remedy of unjust enrichment and restitution in 

this case. Furthermore, we believe the district court's holding 

is contrary to the Supreme Court's enforcement of the ERISA'S 

policy of ensuring the security of employees' pension benefits. 

We begin our analysis first by consideration of whether 

ERISA'S provisions may be affected by common law. Unlike an 

action under the statute itself, the weight of authority supports 

the application of federal common law to ERISA disputes. See, 

e.g., Franchise Tax Bd. of Cal. v. Construction Laborers Vacation 

Trust for S. Cal., 463 U.S. 1, 24 n.26 (1983); Rodrigue v. Western 

& Southern Life Ins. Co., 948 F.2d 969, 971 (5th Cir. 1991); 

Kwa.tcher v. Massachusetts Serv. Employees Pension Fund, 879 F.2d 

957, 966 (1st Cir. 1989); Whitworth Bros. Storage Co. v. Central 

States Southeast and Southwest Areas Pension Fund, 794 F.2d 221, 

234 (6th Cir. 1986). However, the "power [of the federal courts] 

to develop common law pursuant to ERISA does not give carte 

blanche power to rewrite the legislation to satisfy [the courts'] 

proclivities." Jamail, Inc. v. Cazpenters Dist. Council of 

Houston Pension & Welfare Trusts, 954 F.2d 299, 303-04 (5th Cir. 

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Appellate Case: 95-5016 Document: 01019280387 Date Filed: 12/28/1995 Page: 7 
1992) . Instead, the courts must continue to implement the 

policies of ERISA. Outzen v. Federal Deposit Ins. Corp ex rel 

State EXandner of Banks of ~omdng, 948 F.2d 1184, 1188 (lOth Cir. 

1991) . 

The district court relied upon several cases in which courts 

have fashioned federal common law to allow employers to recapture 

contributions to a pension plan. See, e.g., Kwatcher, Whitworth, 

and Award Service, Inc. v. Northern California Retail Clerks Union 

and Food ~layers Joint Pension Trust FUnd, 763 F.2d 1066 (9th 

Cir. 1985). However, most of those cases involved mistaken 

contributions where recapture is specifically permitted under 

ERISA§ 403(c) (2). This case, however is patently distinguishable 

because it involves an actuarial surplus, not mistaken 

contributions in finite sums. The difference between money 

actually paid in error and an actuarial credit potentially 

recoverable at some future date is patent. Even more 

significantly, however, RTC simply does not fit into any of the 

exceptions under§ 403(c) (2) of ERISA.3 

The district court also held its use of federal common law is 

consistent with Outzen and Chait. However, both of those cas.es 

involved single employer plans. This court and the Third Circuit 

invoked federal common law to permit the employers to recover 

surplus from a terminated plan after all benefits were provided to 

the pensioners and their beneficiaries. Under those 

circumstances, the plan beneficiaries made full recovery of all 

3 That provision allows employers to seek return of 

contributions under three specific conditions not present here. 

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Appellate Case: 95-5016 Document: 01019280387 Date Filed: 12/28/1995 Page: 8 
their benefits, and no purpose remained for holding the funds 

inviolate. Again, ERISA specifically provides for such a remedy. 

See ERISA§ 4044(d)(1), 29 U.S.C. § 1344(d)(1). 

Unlike the plans in Outzen and Chait, FIRF is a multipleemployer plan that continues to carry on business. ERISA provides 

several ways for an employer to withdraw surplus from a multipleemployer plan. In particular, a successor-employer can obtain the 

FECO credits of a defunct employer by setting up a "qualified 

successor plan," (QSP) and withdrawing from the pension plan. 

Under a QSP, the successor employer assumes sole sponsorship of a 

single-employer plan and assumes sole liability for the payment of 

all obligations owed to the old employer's employees. However, 

RTC did not choose this option. 

The district court also held RTC's recovery of FECO balances 

would not endanger the employees in the plan because FIRF will be 

over-funded even after RTC removes Sooner's FECO balance. 

However, the court's decision appears to have been based upon its 

misconceptions regarding the nature of the FECO credits. 

The district court seems to have presumed the FECO was a 

discrete and identifiable sum of money. We do not believe that 

presumption is justified. In the context of an ongoing multipleemployer plan, the FECO surplus is "not a pile of assets stacked 

in the corner. It is instead an accounting construct." Johnson 

v. Georgia-Pacific Co~., 19 F.3d 1184, 1189 (7th Cir. 1994). In 

fact, the parties do not seriously contest that the FECO was an 

actuarially determined surplus. Thus the FECO exist merely as 

book entries applicable to employer's future contributions and, as 

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such, are not subject to withdrawal by any participating employer. 

Financial Inst. Retirement Fund v. Office of Thrift Supervision, 

766 F. Supp. 1302, 1308 (S.D.N.Y. 1991), aff'd, 964 F.2d 142 (2d 

Cir. 1992). Indeed, RTC admits Sooner would not have been 

entitled to the funds. 

Moreover, it is also evident that the exact amount of the 

FECO constantly varies in concert with the values of the 

investments comprising the corpus of the fund. Yet, the district 

court found the FECO are neither hypothetical nor theoretical 

because FIRF itself has stated FECO assets are calculated by 

computing each employer's share of the overall fund assets. For 

this reason, RTC contends the FECO are tangible assets of the 

fund. RTC further argues FIRF is a defined benefit plan and the 

benefits payable to its employee members and their beneficiaries 

are 11 determinable at any given point in time based on a specific 

formula. 11 According to RTC, the plan formula indicates the FECO 

balances are not needed to satisfy the defined benefits. 

RTC's argument misses the mark. The question of whether the 

FECO credits are needed for the payment of benefits can only be 

determined once the plan as a whole has been terminated. Until 

then, FIRF must anticipate that there could be dramatic changes on 

either side of the balance sheet. In simple terms, today's 

surplus could be tomorrow's deficit. The possibility of a 

shortfall will remain as long as FIRF continues to exist. 

A cardinal principle of ERISA is that the assets of a pension 

plan shall be held for the exclusive purpose of providing benefits 

to participants and their beneficiaries. This court has held the 

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exclusive benefit rule is "violated if there has been a removal of 

plan assets for the benefit of the plan sponsor or anyone other 

than the plan participants." Maez v. Mountain States Tel. & Tel., 

Inc., 54 F.3d 1488, 1506 (lOth Cir. 1995) (quoting Aldridge v. 

Lily-Tulip, Inc. Salary Retirement Plan Benefits Comm., 953 F.2d 

587, 592 n.6 (11th Cir. 1992)), cert. denied, 1995 WL 588287 (Dec. 

4, 1995). 

Here, whether RTC or FIRF is awarded the FECO credits, the 

employees themselves do not benefit directly. Thus, the "letter" 

of the exclusive benefit rule is violated in either event. 

Indeed, RTC strongly argues awarding the FECO to FIRF benefits the 

employers and not the employees. However, awarding the FECO 

credits to FIRF ultimately implements the policy behind the 

exclusive benefit rule by protecting the stability of the plan. 

Disallowing cash withdrawal of the FECO by employers will 

prevent diminution of the corpus of the fund in the event of an 

economic reversal sufficient to reduce the present asset value of 

that corpus. Remembering any value employers may now perceive 

from not having to make further cash contributions to the fund is 

grounded upon an actuarial calculation and is not represented by 

hard cash on deposit, it becomes clear the value of any employers' 

FECO is ephemeral. That value can and will diminish with 

diminution of the value of the fund corpus. Thus, allowing 

employers to withdraw their FECO in a sum based on today's market 

conditions fails to take into account the consequences of future 

economic downturns. 

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If a significant devaluation of the fund's assets diminishes 

its value, today's FECO will turn into tomorrow's demand for 

contributions. Allowing employers to withdraw their FECO portends 

exacerbation of the diminution because more money will be needed 

to bring the fund to the condition of full funding that exists 

today. Thus, withdrawal of the FECO represents a risk not 

tolerable under the exclusive benefit rule. 

Furthermore, because of the nature of the FECO and the 

imponderability of future economics, we are unable to accept RTC's 

argument that FIRF's retention of the FECO credits would create an 

inequitable result. Moreover, redistribution of the credits among 

FIRF's remaining contributing employers is part of the nature of a 

multiple-employer plan. See, e.g., Ganton Technologies, Inc. v. 

National Indus. Group Pension Plan, 865 F. Supp. 201, 207 

(S.D.N.Y. 1994). Just as any shortfall due to a terminated 

employer is the responsib1lity of· the remaining employers, so too 

should any surplus be distributed to the remaining participating 

employers. In fact, as FIRF points out, Sooner's FECO includes 

its pro rata share of FECO from employers who left the plan before 

Sooner. 

We cannot help but conclude RTC's removal of the FECO credits 

could potentially destabilize FIRF. Furthermore, the district 

court's decision leads to the prospect of further diminution of 

the corpus of the plan because other employers may be encouraged 

to leave the plan and remove their FECO credits. We are mindful 

that in fashioning federal common law remedies under ERISA, we 

have instructed "the ultimate consideration [is] whether allowance 

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or disallowance of particular relief would best effectuate the 

underlying purposes of ERISA -- enforcement of strict fiduciary 

standards of care in the administration of all aspects of pension 

plans and promotion of the best interests of participants and 

beneficiaries." Outzen, 948 F.2d at 1188 (quoting Massachusetts 

Mut. Life Ins. Co. v. Russe~~. 473 U.S. 134 (1985)). Because 

awarding the FECO credits to RTC violates ERISA policy, the 

district court erred in creating new rights for RTC under federal 

common law. The judgment of the district court is REVERSED. 

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