Source: http://openjurist.org/300/f3d/391/russell-mushalla-v-teamsters-local-no-863
Timestamp: 2013-05-25 22:44:01
Document Index: 592979939

Matched Legal Cases: ['§ 1001', '§ 1132', '§ 1291', '§ 1001', '§ 1002', '§ 1060']

300 F3d 391 Russell Mushalla v. Teamsters Local No. 863 | OpenJurist
300 F. 3d 391 - Russell Mushalla v. Teamsters Local No. 863	Home300 f3d 391 russell mushalla v. teamsters local no. 863
300 F3d 391 Russell Mushalla v. Teamsters Local No. 863 300 F.3d 391
Russell MUSHALLA;*Stella Szwast, individually and in her capacity as the Executrix of the Estate of Edward Szwast; Paul Fritzinger; Luis Garcia; Charles Fritz; Francisco Corral; Walter Boris, Jr., Appellants,v.TEAMSTERS LOCAL NO. 863 PENSION FUND.
No. 01-2879.
The appellants (hereafter "Employees"), members of the Teamsters Union, filed suit against Teamsters Local No. 863 Pension Fund, under the Employee Retirement Income Security Act (ERISA) of 1974, Pub.L. No. 93-406, 88 Stat. 829, 29 U.S.C. § 1001 et seq. (2002), claiming the Pension Fund violated its fiduciary duty to them by failing to disclose a proposed change in benefits prior to their retirement. After determining that the Pension Fund was not "seriously considering" the change in plan benefits when the Employees inquired about that possibility, the District Court entered summary judgment for the Pension Fund. Mushalla v. Teamsters Local No. 863 Pension Fund, 152 F.Supp.2d 613, 630-31 (D.N.J.2001).
In this appeal, the Employees argue that the District Court erred as a matter of law in its application and interpretation of the "serious consideration" test we enunciated in Fischer v. Philadelphia Electric Co., 96 F.3d 1533 (3d Cir.1996) (Fischer II), and that genuine issues of material fact are still in dispute. In addition, the Employees assert that because the Pension Fund was a multiemployer fund, it had a greater duty to disclose proposed changes than a fund administered by a single employer.
The District Court had jurisdiction pursuant to 29 U.S.C. § 1132(e)-(f), and this court enjoys jurisdiction under 28 U.S.C. § 1291. The parties agree that this court exercises plenary review over the District Court's grant of summary judgment and that we should "affirm summary judgment `if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.'" Walling v. Brady, 125 F.3d 114, 116 (3d Cir.1997) (quoting Smith v. Hartford Ins. Group, 6 F.3d 131, 135 (3d Cir.1993)); see also Fed.R.Civ.P. 56(c).4 We review the facts in the light most favorable to the Employees, the party against whom judgment was entered. Beers-Capitol v. Whetzel, 256 F.3d 120, 130 n. 6 (3d Cir.2001).
In enacting ERISA, Congress sought "to protect ... the interests of participants in employee benefit plans and their beneficiaries ... by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts." 29 U.S.C. § 1001(b). In this appeal, the Employees contend that the Fund violated its fiduciary duty to them by failing to advise them of the proposed increase in the cap on years of service in response to their inquiries. A plan administrator breaches its fiduciary duty under ERISA if it materially misleads employees who inquire regarding possible changes in a plan. Fischer v. Phila. Elec. Co., 96 F.3d 1533, 1538 (3d Cir.1996) (Fischer II). A plan administrator makes a material misrepresentation when it responds to employee inquiries by representing it is not considering a change to its pension plan, if it is in fact giving "serious consideration" to a change. Id.
The Employees maintain that this court created the "serious consideration" test in Fischer II to "strike a balance between an employee's right to information and an employer's need to operate a business." Br. of Appellants at 17. Although the Employees accept that Fischer II is good law, they assert that the "underlying tension [noted in Fischer II] ... is simply inapposite" to a multiemployer plan, because "[t]he corporate profit motive simply does not exist herein." Id. Thus, the Employees contend the Fischer II "serious consideration" test should not apply to multiemployer pension plans because for multiemployer pension plans "there is no need to strike a balance between an employee's right to information and an employer's need to operate a business, given that companies must develop strategies and evaluate options as they prepare for decisions." Id.
The District Court rejected the Employees' argument that Fischer II should apply differently to multiemployer plans than to single employer plans. The District Court concluded that this court's decision in Walling v. Brady, 125 F.3d 114 (3d Cir.1997), controlled. Mushalla, 152 F.Supp.2d at 625. The District Court stated that the trial court in Walling had "based its decision largely on the same distinction between multi- and single-employer plans that plaintiffs ask this Court to make here. The Court of Appeals reversed, finding no `material difference in the administration of single- and multi-employer plans.'" Id. (alteration in original) (quoting Walling, 125 F.3d at 118).
Nonetheless, the conclusion in Walling that absent some material difference in administration there is no distinction between single employer and multiemployer plans is directly pertinent. Congress clearly contemplated that an employer could choose between administering its own pension plan and conjoining its efforts with other employers. See, e.g., 29 U.S.C. § 1002(16)(B) (using the term "plan sponsor" rather than "employer," and thereby encompassing "a plan established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations"); 29 U.S.C. § 1060(a)(1) (directing that other ERISA sections "be applied as if all employees of each of the employers were employed by a single employer"). As we held in Walling, where there is no material difference between the way a multiemployer plan and a single employer plan are administered, "the simple fact that the plan at issue is a multiemployer plan is insufficient" to alter the fiduciary duties of the administrator. Walling, 125 F.3d at 118.
Even if Walling did not persuade us to reject the proffered distinction between the fiduciary duties of administrators of multiemployer and single employer plans for this purpose, our decision in Fischer II compels the application of the "serious consideration" test to multiemployer funds. The District Court determined that "the trustees of a multiemployer pension fund have the same need to be able to freely consider changes to the pension plan [as individual employers]." Mushalla, 152 F.Supp.2d at 628. The court noted that "[t]he `serious consideration' test ... protects ... beneficiaries by ensuring that they are not deluged with information," while a contrary rule "requiring earlier disclosure[,] could ... discourag[e] employers from considering ... proposals [to amend plans]." Id. The District Court concluded, "the policy reasons undergirding Fis[c]her II are equally applicable in this case." Id.
We agree with the District Court. Although Fischer II came to us in the posture of an early retirement plan offered by a single employer, the policies we noted in that case apply with equal force to a jointly-administered, multiemployer fund. Most importantly, we noted in Fischer II that "`ERISA does not impose a duty of clairvoyance on fiduciaries. An ERISA fiduciary is under no obligation to offer precise predictions about future changes to its plan. Rather, its obligation is to answer participants' questions forthrightly, a duty that does not require the fiduciary to disclose its internal deliberations.'" 96 F.3d at 1539 (citations and quotations omitted in original) (quoting Fischer v. Phila. Elec. Co., 994 F.2d 130, 135 (3d Cir.1993) (Fischer I)). This is in keeping with "[o]ther courts of appeals[, which] have likewise emphasized the absence of any `duty of clairvoyance,' as well as the fact that disclosure does not extend to internal deliberations." Id. (citing Swinney v. Gen. Motors Corp. 46 F.3d 512, 520 (6th Cir.1995); Mullins v. Pfizer, Inc., 23 F.3d 663, 669 (2d Cir.1994); Drennan v. Gen. Motors Corp., 977 F.2d 246, 251 (6th Cir.1992); Barnes v. Lacy, 927 F.2d 539, 544 (11th Cir.1991); Berlin v. Mich. Bell Tel. Co., 858 F.2d 1154, 1164 (6th Cir.1988)).
Further, we recognized in Fischer II that "[e]very business must develop strategies, gather information, evaluate options, and make decisions. Full disclosure of each step in this process is a practical impossibility." 96 F.3d at 1539. The administrators of a jointly-managed, multiemployer plan are in no better position than an individual employer in overcoming the practical difficulties referred to in Fischer II. We know of no authority that suggests that plan administrators, whether of a single employer plan or a multiemployer plan, must inform plan participants of the content of every brainstorming session.
We dispense quickly with the Employees' suggestion that the Fund had an affirmative duty to communicate the potential amendment of the Plan to them regardless of whether they made inquiries. The District Court rejected this contention by noting that Bixler v. Central Pennsylvania Teamsters Health & Welfare Fund, 12 F.3d 1292 (3d Cir.1993), and the other cases on which the Employees relied in discerning an affirmative duty to disclose plan benefits concern existing plan benefits, not proposed plan benefits. See, e.g., Bixler, 12 F.3d at 1300; see also Joyce v. RJR Nabisco Holdings Corp., 126 F.3d 166, 174 (3d Cir.1997); Jordan v. Fed. Express Corp., 116 F.3d 1005, 1014 (3d Cir.1997). We agree.
The District Court concluded that the Fund did not seriously consider raising the cap on years of service until the January 20, 1998 meeting. Mushalla, 152 F.Supp.2d at 630. An ERISA fiduciary gives "serious consideration" to changing its plan 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 II, 96 F.3d at 1539. These three factors are not isolated, but instead "the three interact and coalesce to form a composite picture of serious consideration." Id. We dispense quickly with the third factor, consideration by officers with the authority to implement the change, which the Fund concedes was met for the December 9 meeting.
As to the first factor, a specific proposal follows the preliminary steps of "gathering information, developing strategies, and analyzing options." Id. at 1539-40. It must be "sufficiently concrete to support consideration by senior management for the purpose of implementation." Id. at 1540. The District Court noted that there was no specific proposal prior to January 20, 1998 because "the proposal was ... not supported by any actuarial analysis" and "the change in years of creditable service was not discussed in any detail." Mushalla, 152 F.Supp.2d at 629-30.
The Employees point to a phrase from the Tenth Circuit's decision in Hockett v. Sun Co., 109 F.3d 1515 (10th Cir.1997), to suggest that "cost-analysis or actuarial work is not a necessary prerequisite to serious consideration." Id. at 1525. Taken in context, Hockett is not of much help to the position of the Employees. As the Hockett court observed, "[w]hile cost-analysis or actuarial work is not a necessary prerequisite to serious consideration, it is unlikely that a specific proposal would be `sufficiently concrete' without some such information." Id. (emphasis added) (citing Fischer II, 96 F.3d at 1542). We agree with the Tenth Circuit and the Employees that cost-analysis and actuarial work are not always necessary prerequisites to serious consideration. However, we also agree that "it is unlikely that a specific proposal would be `sufficiently concrete' without some such information," id., particularly when, as here, the decision was based on the proposal's financial viability.
When the Trustees conditionally approved the increase to the cap on years of service, Weisleder had not yet performed a study confirming that the Fund could afford it. Thus, information crucial to the proposal's viability was still to be gathered. As we noted in Fischer II, "[s]erious consideration can only begin after information is gathered and options developed." Fischer II, 96 F.3d at 1542. Without an investigation into what was arguably the single most important factor in the Trustees' decision, the financial viability of the increase, there could be no specific proposal, no matter how precisely the proposal was drafted.
The absence of "serious consideration" is definitively established by the second factor of the test. In Fischer II, we explained that the discussion for implementation element "distinguishes serious consideration from the preliminary steps of gathering data and formulating strategy." We continued, "It also protects the ability of senior management to take a role in the early phases of the process without automatically triggering a duty of disclosure." Id. at 1540. As we noted, "[c]onsideration becomes serious when the subject turns to the practicalities of implementation." Id. There is no suggestion that the Trustees discussed the proposal for the purposes of implementation at the December 9 meeting. The Trustees did not discuss implementing the cap increase until they were assured by Weisleder on January 20 that it was a financially viable option. It was not until then that the Trustees addressed obtaining IRS approval, the type of notice needed, and the date of notice of the forthcoming change.
Edward Szwast died on October 28, 2001. His widow, Stella Szwast, who receives an actuarially reduced pension, is a surviving beneficiary, and was substituted as a party in this proceeding individually and as executrix of her husband's estate, pursuant to Fed.R.App.P. 43(a)(1), by order of the clerk of this court on January 3, 2002
This court has previously reserved the question of the appropriate standard of review of a district court's determination of "serious consideration."See Kurz v. Phila. Elec. Co., 96 F.3d 1544, 1549 n. 4 (3d Cir.1996); Fischer II, 96 F.3d at 1541 n. 3. In Fischer I, we noted that the standard for materiality "is a `mixed question of law and fact.'" Fischer v. Phila. Elec. Co., 994 F.2d 130, 135 (3d Cir.1993) (Fisher I). However, as we noted in Fischer II, our discussion in Fischer I "linked serious consideration to materiality, indicating that it would be a question of law, subject to plenary review." Fischer II, 96 F.3d at 1541 n. 3. Because the procedural posture requires us to decide this case as a matter of law, we do not reach the question of the appropriate standard of review.
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