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Parties Involved:
Federal Deposit Insurance Corporation
Appellant
Gordon Outzen
Appellee

Document Text:

PUBLISH 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

GORDON OUTZEN, on behalf of himself) 

and as a representative party and ) 

member of a class consisting of ) 

employees of the former, but now ) 

insolvent, STOCKMENS BANK AND TRUST) 

COMPANY, a Wyoming Banking Corpor-) 

ation, who also are participants ) 

in the pension plan of the said ) 

STOCKMENS BANK AND TRUST COMPANY ) 

and that certain pension plan ) 

trust fund thereunder maintained, ) 

Plaintiff-Appellee, 

v. 

FEDERAL DEPOSIT INSURANCE CORPORATION, acting Ex Rel. THE STATE 

EXAMINER OF BANKS OF THE STATE OF 

WYOMING, as the receiver of the 

now insolvent Stockmens Bank and 

Trust Company, a Wyoming Banking 

Corporation, and as such, also the 

successor to the said Stockmens 

Bank and Trust Company as sponsor 

and administrator of the pension 

plan of the Stockmens Bank and 

Trust Company and successor corporate trustee of that certain 

pension plan trust fund thereunder 

maintained, 

Defendant-Appellant. 

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·o D F l L £J ~ Ap..v,i:-;\ll 'ted States Court<?t ,.,_. Um Tenth CitC\11" 

MOV O 8 1991 

ROBERT L. HOECKER 

Clerk 

No. 90-8077 

Appeal from the United States District Court 

For the District of Wyoming 

(D.C. No. 89-0284B) 

Appellate Case: 90-8077 Document: 010110096861 Date Filed: 11/08/1991 Page: 1 
Robert James Wyatt, of Burgess, Davis, Carmichael & Cannon, 

Sheridan, Wyoming, for Plaintiff-Appellee. 

John F. Zabriskie (Thomas M. Hogan with him on the brief) of 

Hopkins & Sutter, Chicago, Illinois, for Defendant-Appellant. 

Before MOORE and EBEL, Circuit Judges, and ANDERSON,** District 

Judge. 

MOORE, Circuit Judge. 

**Honorable Aldon J. Anderson, Senior United States District Judge 

for the District of Utah, sitting by designation. 

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Appellate Case: 90-8077 Document: 010110096861 Date Filed: 11/08/1991 Page: 2 
The FDIC, as receiver of the Stockmens Bank and Trust Co. of 

Gillette, Wyoming (Stockmens), appeals from the district court's 

grant of summary judgment in favor of Gordon Outzen, the class 

representative for former employees of Stockmens who were 

participants in Stockmens' pension benefit plan (the Plan). 

Plaintiffs sued the FDIC for possession of certain assets of the 

Plan which the FDIC, as receiver, had moved into a separate 

account. Specifically, the district court ruled (1) the FDIC, as 

receiver, did not have a reversionary interest in the Stockmens 

employee pension fund after all liabilities were paid to all 

claimants, and that the surplus assets belonged to former 

employees who had participated in the retirement plan; (2) the 

FDIC breached its fiduciary duties to plaintiffs by placing the 

assets in a separate account; and ( 3) counsel for plaintiffs 

should be awarded attorney's fees out of the excess assets. The 

issue now before us involves the interpretation of Stockmens' 

pension benefit plan and implementing trust agreement (the Trust 

Agreement) in light of the requirements of the Employment 

Retirement Income Security Act (ERISA) of 1974. 29 u.s.c. §§ 1001 

et~ 

We review the issue as a question of law de novo,

1 and 

reverse, with directions to the district court to vacate the 

judgment and enter judgment in favor of the FDIC. We therefore do 

not reach the second holding of the district court, and we award 

costs on appeal to the defendant. 

1FDIC v. Bank of Boulder, 911 F.2d 

cert. denied, 111 S. Ct. 1103, 

1991) (No. 90-853). 

-3-

1466 (10th Cir. 1990) (en bane) 

59 u.s.L.W. 3594 (U.S. Mar. 4, 

Appellate Case: 90-8077 Document: 010110096861 Date Filed: 11/08/1991 Page: 3 
Stockmens established the Plan in 1963, and created the Trust 

Agreement contemporaneously to administer its terms. The Plan was 

substantially amended in 1976 to conform to the then newly passed 

ERISA. The Plan was a "defined benefit plan" from the start, with 

all contributions being made by Stockmens according to a fixed 

schedule of benefits for the participants set out in section 5 of 

the Plan. 2 Stockmens' intent to fund the Plan in 1976 was 

explained in section 4.2, "to make contributions ... which, over 

a period of years, will meet the cost of the retirement benefits 

herein specified •• in such amounts and at such times as the 

Employer, through its actuary, shall from time to time determine." 

Stockmens made periodic contributions to the Plan to ensure 

sufficient assets existed. No contributions were ever made by 

individual participants. 

In 1983 the Plan was again amended. The change provided for 

the reversion of any surplus funds to the employer in the event of 

the Plan's termination. In 1987 Stockmens was declared insolvent. 

The FDIC was appointed receiver and charged with assembling the 

bank's assets and paying off creditors. After satisfying the 

administrative costs of the pension plan and the defined benefits 

of the participants in full, the FDIC determined that the Plan was 

211 Defined benefit plans," under section 3(35) of ERISA, 29 U.S.C. 

§ 1002(35), differ from "defined contribution plans" in which 

employees accrue benefits in individual accounts established by 

the employer solely according to "the amount contributed to the 

participant's account, and any income, expenses, gains and losses, 

and any forfeitures of accounts of other participants which may be 

allocated to such participant's account." Section 3(34) of ERISA, 

29 u.s.c. § 1002(34). 

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Appellate Case: 90-8077 Document: 010110096861 Date Filed: 11/08/1991 Page: 4 
"overfunded" in excess of $600,000.00, and moved the funds into a 

separate account. 

The determinative issue before us is whether the provisions 

of the Plan, construed with the Trust Agreement and in light of 

the policies of ERISA, allow for a reversion of surplus pension 

funds to the sponsor, and therefore to the FDIC as receiver. 

Sections 404(a)(l)(A) and 403(c)(l) of ERISA require the fiduciary 

of a plan to discharge its duties solely for the benefit of the 

participants and their beneficiaries, and state the assets of the 

plan should not inure to the benefit of the employer. 29 u.s.c. 

§§ 1104(a)(l)(A), 1103(c)(l). Stockmens' 1976 Plan added this 

"exclusive benefit rule" in two provisions. 

1) Article Third of the Trust Agreement states: 

Notwithstanding anything to the contrary contained in 

this agreement, or in any amendment thereto, it shall be 

impossible, at any time prior to the satisfaction of all 

liabilities with respect to the members under the Plan 

or their beneficiaries, for any ·part of the Trust Fund, 

other than such part as is required to pay taxes and 

administrative expenses, to be used for, or diverted to, 

purposes other than for the exclusive benefit of the 

members under the Plan or their beneficiaries (emphasis 

added). 

2) Section 11.4 of the 1976 Plan states: 

Nondiversion of Funds. This Plan is created for the 

exclusive benefit of the Participants and their 

beneficiaries. Under no circumstances shall any funds 

be contributed under the Plan or the net earnings 

thereon ever be used for, or diverted for purposes other 

than for the exclusive benefit of such Participants, or 

their beneficiaries. 

ERISA's exclusive benefit rule contains a statutory 

exception, however, which provides three conditions under which 

residual assets of a defined benefit pension plan funded solely by 

the employer may be distributed to the employer upon plan 

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Appellate Case: 90-8077 Document: 010110096861 Date Filed: 11/08/1991 Page: 5 
termination. Section 4044(d)(l) of ERISA provides for reversion 

of assets to the employer if "[l] all liabilities of the plan to 

participants and their beneficiaries have been satisfied, [2] the 

distribution does not contravene any-provision of law, and [3] the 

plan provides for such a distribution in these circumstances." 29 

U.S.C. § 1344(d)(l). 

The Stoclanens' Plan did provide in 1983 for a reversion of 

residual assets at plan termination. 

include section 14.6 which states: 

The Plan was amended to 

Amounts Returnable to the Employer: In no event shall 

the employer receive any amounts from the Trust, except 

such amounts, if any, as set forth below: 

(1) Upon termination of the Plan and not 

withstanding any other provision of the Plan, the 

Employer shall receive such amounts, if any, as may 

remain after the satisfaction of all liabilities of the 

Plan to Employees and their beneficiaries, and arising 

out of any variations between actual requirements and 

expected actuarial requirements. 

Plaintiffs contend, and the district court held, the 1983 

amendment permitting reversion to the employer of any Plan 

overfunding violates the exclusive benefit provisions of the Plan 

and is void. The court reasoned that the language of section 11.4 

of the 1976 Plan, "[u]nder no circumstances shall any funds be 

contributed under the Plan or the net earnings thereon ever be 

used for, or diverted for purposes other than for the exclusive 

benefit of such Participants, or their beneficiaries," evidenced 

an intent to go beyond the standard exclusive benefit language of 

ERISA to prohibit any future amendment allowing reversion of 

surplus funds on termination of the Plan. 

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Appellate Case: 90-8077 Document: 010110096861 Date Filed: 11/08/1991 Page: 6 
Such a reading does not follow the case law and would be 

contrary to the policies of ERISA. Although the district court 

correctly perceived the case law in this area dictates careful 

scrutiny of the language of the documents creating the particular 

plan involved, citing Bryant v. International Fruit Products, 

Inc., 793 F.2d 118, 123 (6th Cir. 1986), cert. denied, 479 U.S. 

986 (1986), we do not believe the StocJanens' Plan falls within the 

Bryant line of cases relied on by the district court. The 

language of the StocJanens documents does not suggest an intent to 

go beyond ERISA's exclusive benefits requirements. The Plan 

therefore allows the statutory exception of reversion of assets to 

the sponsor. 

The Bryant court held participants in a defined benefit plan 

had a right to surplus funds at plan termination. The court found 

the plan "unequivocal" in prohibiting recapture of funds by the 

employer, rendering the amendment a·llowing reversion unlawful. 

Id. at 123. In that case, the exclusive benefit clause stipulated 

that "(i]n no event and under no circumstances shall any 

contributions to this Trust by the Employer, nor any of the Trust 

Estate or the income therefrom revert to or be repaid to the 

Employer." Id. at 122 (emphasis added by Bryant court). The 

court considered the explicit mention of "contributions by the 

Employer" significant, noting that employees were assured no money 

contributed by the company could ever be reclaimed. 3 The 

3 See also Delgrosso v. Spang & Co., 769 F.2d 928, 935-36, (3d Cir. 

1985), cert. denied, 476 U.S. 1140 (1986) (defined contribution 

plan denied reversion on basis of language stating "contributions 

made by Company hereunder may not, under any circumstances, revert 

to the Company"). 

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Appellate Case: 90-8077 Document: 010110096861 Date Filed: 11/08/1991 Page: 7 
Stockmens' 1976 documents, in contrast, speak of neither reversion 

nor repayment, nor contributions. The cases which allow reversion 

as well as those which preclude it all dictate that strong, 

express prohibitory language is necessary to block employer 

recapture of surplus pension funds in a defined benefit plan. 

The prohibitory language of the exclusive benefit clause in 

In re C.D. Moyer Co. Trust Fund, 441 F. Supp. 1128, 1131-33 (E.D. 

Penn. 1977), aff'd. without opinion, 582 F.2d 1273 (3d Cir. 1978), 

for example, is stronger than that contained in the Stockmens 

Plan. The court in that case permitted a reversion of assets in a 

defined benefit plan where it was: 

at all times . . impossible, if any amendment or 

revocation be made pursuant to this provision, for any 

of the trust corpus or income to be diverted or to 

revert to the employers or to be used for any 

purpose other than the exclusive benefit of the 

participants or their beneficiaries. 

The court reasoned that "trust corpus or income" referred only to 

the amounts needed to satisfy the participants' claims, and not 

the excess.

4 

In Washington-Baltimore Newspaper Guild Local 35 v. 

Washington Star Co., 555 F. Supp. 257 (D.D.C. 1983), aff'd without 

opinion, 729 F.2d 863 (D.C. Cir. 1984), where former employees 

sought to enjoin the Washington Star Company from appropriating 

surplus pension assets, the court held in the absence of an 

agreement to the contrary, participants in a defined benefit plan 

had no right to a windfall resulting from the employer's overly 

generous contributions to the plan. Id. at 261. The trust 

4 See also In re Gulf Pension Litigation, 764 F. Supp. 1149, 1184-

85 (S.D. Tex. 1991). 

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Appellate Case: 90-8077 Document: 010110096861 Date Filed: 11/08/1991 Page: 8 
prohibited reversion "prior to satisfaction of all liabilities," 

and stated no funds could be "returned to the Employer or be used 

for, or diverted to, purposes other than for the exclusive benefit 

of employees covered by the Plan ...•. " Id. at 258-259. The 

court found the trust language ambiguous in its intent to address 

a plan surplus, and held the exclusive benefit clause prohibiting 

"diversion" permitted the employer to retain any surplus funds. 

Id. at 261. 5 

Similarly, in Chait v. Bernstein, 835 F.2d 1017 (3d Cir. 

1987), the court stated to preclude reversion there must be 

additional language limiting reversion which goes further than the 

exclusive benefit clause, id. at 1018, 1027, noting reversion has 

been precluded when there was a "direct relationship between 

surplus and expected employee benefits." Id. at 1025. Neither 

condition is met in this case. 

First, the language of section 11.4 of the 1976 Plan does not 

speak specifically of reversion or repayment to the employer, but 

only of use or diversion of funds. Insofar as the 1976 Stockmens 

documents evidence intent regarding funding of the Plan, it is 

that the employer will "make contributions • which, over a 

period of years, will meet the cost of the retirement benefits 

herein specified ... in such amounts as the Employer, through 

its actuary, shall from time to time determine." 6 We do not 

5

see also Lynch v. J.P. Stevens & Co., 758 F. Supp. 976, 993-94 

(D.N .J. 1991). 

6section 

Restated 

added). 

4.2 of Stockmens Employee Pension Plan, as Amended and 

Jan. 1, 1976, Plaintiffs' Complaint, Exhibit B (emphasis 

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Appellate Case: 90-8077 Document: 010110096861 Date Filed: 11/08/1991 Page: 9 
accept plaintiffs' argument that the "satisfaction of all 

liabilities" clause, on which construction of Article Third of the 

Trust Agreement depends, was intended to comprise both assets and 

liabilities. There is thus no employee expectation of benefits 

beyond those defined by the Plan and can be no "direct 

relationship" between expectations and the surplus. Chait, 835 

F.2d at 1025. 

In addition to our belief that the language of the Stockmens 

documents does not establish an unequivocal prohibition on 

reversion, concerns with both equity and the policy goals of ERISA 

favor the FDIC in this case. The most important policy guideline 

for us is set out in Massachusetts Mutual Life Insurance Co. v. 

Russell, 473 U.S. 134 (1985), that "courts • . always bear in 

mind the ultimate consideration whether allowance 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. 117 In 

Chait, the court believed penalizing employers for overfunding 

defined benefit plans would lead to the counterproductive result 

of an "overabundance of caution," and the underfunding of 

employees' pension benefits. Chait, 835 F.2d at 1027, citing 

Wright v. Nimmons, 641 F. Supp. 1391, 1407 (S.D. Tex. 1986). We 

think the same concern applies here. 

7

Massachusetts Mutual Life Ins. Co., 473 U.S. 134 at 158 (Brennan, 

J., concurring), as cited in Chait, 835 F.2d at 1027. 

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Appellate Case: 90-8077 Document: 010110096861 Date Filed: 11/08/1991 Page: 10 
The overall policy of ERISA is to protect participants' 

expected payments. This policy is mandated through the exclusive 

benefit clause. We are persuaded in this case, however, that the 

statutory exception allowing reversion of excess funds to the 

sponsor governs. 29 u.s.c. §§ 1104(a)(l)(A), 1103(c)(l), 1344(d). 

There is a further equitable consideration. Allowing the 

FDIC to recover the surplus assets will accomplish another 

important purpose without compromising ERISA's goal of protecting 

employees' expected benefits. The participants have been paid 

100% of their claims based on their defined benefit, and their 

logical expectations have been realized. Stockmens' creditors, 

however, have received payment of only approximately one-third of 

their claims. An award of the Plan's surplus to the FDIC would 

increase, though not satisfy fully, the return on these claims. 

The equity of this result is self-evident. 

Our reading of the case law, ERISA policy, and equitable 

concerns persuade us to hold that the pension fund surplus assets 

should be distributed to the FDIC as receiver for Stockmens Bank 

and Trust Company. Consequently, we do not consider the district 

court's second holding that the FDIC violated its fiduciary duties 

to the plaintiffs. 

under ERISA to 

Because attorney's fees can only be awarded 

8 the prevailing party, 29 u.s.c. § 1451(e), the 

third holding of the district court awarding attorney's fees to 

the plaintiffs is also reversed. The judgment is REVERSED AND 

829 u.s.c. § 1451(e) provides: "In any action under this section, 

the court may award all or a portion of the costs and expenses 

incurred in connection with such action, including reasonable 

attorney's fees, to the prevailing party." 

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Appellate Case: 90-8077 Document: 010110096861 Date Filed: 11/08/1991 Page: 11 
REMANDED to the district court with directions to enter judgment 

in favor of the defendant. 

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