Source: https://casetext.com/case/paris-v-profit-sharing-plan-etc
Timestamp: 2019-05-21 13:50:54
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Matched Legal Cases: ['§ 1132', '§ 502', '§ 1132', '§ 1132', '§ 1132', '§ 1144', '§ 1144', '§ 2', '§ 1144', '§ 1132', '§ 1144', '§ 1144', '§ 1132', '§ 6', '§ 1024', '§ 1132', '§ 1002']

PARIS v. PROFIT SHARING PLAN, ETC, 637 F.2d 357 | Casetext
PARIS v. PROFIT SHARING PLAN, ETC
637 F.2d 357 (5th Cir. 1981)
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PARISv.PROFIT SHARING PLAN, ETC
United States Court of Appeals, Fifth CircuitMar 24, 1981
No. 79-2286.
February 17, 1981. Rehearing Denied March 24, 1981.
Tobolowsky Schlinger, N. Henry Simpson, III, Dallas, Tex., for defendants-appellees.
In 1960 Howard B. Wolf, Inc. (hereinafter referred to as "the employer") established a "Trusteed Retirement Plan for Employees of Howard B. Wolf, Inc." (hereinafter referred to as "the Retirement Plan"). The employer created the defendant "Profit Sharing Plan for Employees of Howard B. Wolf, Inc." (hereinafter referred to as "the Profit Sharing Plan") on February 21, 1974. The Profit Sharing Plan had a retroactive effective date of June 1, 1973, and the Retirement Plan was retroactively terminated as of that time. "The terms of the Profit-Sharing Plan provided, inter alia, that benefits which had been held under the . . . Retirement Plan for Participants under the . . . Retirement Plan would be transferred on a fully vested basis to the Profit-Sharing Plan in individual `former retirement plan accounts' which would be established under the Profit-Sharing Plan." Stipulated Facts ¶ 4.
The plaintiffs are the class of those who were employed by Howard B. Wolf, Inc. and its subsidiary on June 1, 1973, whose employment had been terminated before the adoption date of February 21, 1974. They sued the Profit Sharing Plan and its trustee to recover benefits they claimed under the Profit Sharing Plan. They also allege that during the summer of 1975 certain named plaintiffs requested information about the Profit Sharing Plan, and that the defendant trustee failed to respond within thirty days, in violation of 29 U.S.C.A. § 1132(c). Jurisdiction is predicated on § 502(e) of the Employee Retirement Income Security Act of 1974 (hereinafter referred to as "ERISA"), 29 U.S.C.A. § 1132(e)(1).
Hereafter reference is made only to the U.S.C.A.
All parties filed motions for summary judgment, pursuant to stipulated facts. After the district court notified the parties that the plaintiffs' motion would be granted, the defendants moved the court to reconsider. The plaintiffs failed to respond and, on April 3, 1978, the district court granted summary judgment to the defendants without stating reasons for its decision.
Subsequently Stella Hodkinson sought to intervene as a plaintiff. The defendants opposed, but conceded that she was a "bona fide participant in the profit sharing plan." R. 240. Hodkinson insisted that "[a] ruling with respect to the entitlement of the class members to benefits under the defendant plan could affect as a practical matter the amount of benefits available to [Hodkinson] by proportionately reducing those funds available for profit sharing distributions." R. 235. The court allowed the intervention, then dismissed her action without prejudice.
A participant in a benefit plan may bring a civil action to recover benefits. 29 U.S.C.A. § 1132(a)(1)(B). State and federal trial courts have concurrent jurisdiction over such suits. 29 U.S.C.A. § 1132(e)(1). ERISA supersedes "all state laws" relating to covered benefit plans, effective January 1, 1975. 29 U.S.C.A. § 1144(a). It further provides that this "section shall not apply with respect to any cause of action which arose, or any act or omission which occurred, before January 1, 1975." 29 U.S.C.A. § 1144(b)(1).
A congressional grant of jurisdiction to the federal courts not based on the citizenship of a party can only encompass "Cases, in Law and Equity, arising under [the] constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority." U.S. Const. art. III, § 2, cl. 1. In Association of Westinghouse Salaried Employees v. Westinghouse Electric Corp., 348 U.S. 437, 75 S.Ct. 489, 99 L.Ed. 510, (1955), Justice Frankfurter, speaking for a plurality, said "[i]f . . . Congress merely furnished a federal forum for enforcing the body of contract law which the States provide, a serious constitutional problem would lie at the threshold of jurisdiction," 348 U.S. at 442, 75 S.Ct. at 491, 99 L.Ed. at 515; that is, the case would not be one "arising under" federal law.
With Westinghouse in mind, the First Circuit Court of Appeals reads § 1144 as limiting § 1132 jurisdiction to causes of action originating after January 1, 1975. Cowan v. Keystone Employee Profit Sharing Fund, 586 F.2d 888 (1st Cir. 1978). See also Martin v. Bankers Trust Co., 565 F.2d 1276, 1278 (4th Cir. 1977). Contra, Reiherzer v. Shannon, 581 F.2d 1266 (7th Cir. 1978) (criticized in Cowan, 586 F.2d at 894 n. 13). In post argument briefs the defendants strongly urge that Cowan and Martin require a dismissal of this case for lack of jurisdiction.
In their answer the defendants challenge ERISA jurisdiction as well as the existence of a cause of action.
Because of the difficult constitutional problem that would accompany a conclusion contrary to that reached in Cowan, and because ERISA sets a certain date on which federal law supersedes that of the states, see 29 U.S.C.A. § 1144(b)(1), it falls our lot to determine precisely when the cause of action arose and what acts of the defendants furnished the basis for suit. Assuming Cowan correctly blazed what the court acknowledged was a "tortuous path" leading to the conclusion that ERISA jurisdiction is restricted to cases arising after January 1, 1975, we find that the district court had jurisdiction in this case.
Bayles v. Central States, Southeast and Southwest Areas Pension Fund, 602 F.2d 97 (5th Cir. 1979), may foreclose inquiry by us. Bayles applied for benefits in June, 1974, and "soon thereafter" took another job. On the basis of his reemployment the trustees denied him a pension. The court repeatedly noted ERISA jurisdiction but never determined the date the cause accrued. The case was decided on the summary calendar, and it is not clear that the panel dealt with this problem.
Although Cowan thoroughly and convincingly covers the issue, we emphasize that we do not decide whether the federal courts have jurisdiction over causes of action arising before January 1, 1975. Even if there is federal subject matter jurisdiction in such instances, we must establish when the action matured and when the trustee acted to the detriment of the plaintiff in order to ascertain whether state or federal law controls.
The defendants assert that the governing date is February 21, 1974, when the defendant plan was adopted. They say that any acts or omissions for which they are responsible occurred before the beginning of 1975. They also insist that a cause of action for denial of pension benefits accrues not upon denial of benefits, but rather when the claimant becomes entitled to those benefits. If either position is correct we would face the "serious constitutional problem" noted in Westinghouse. Consequently, we consider these two issues separately.
Section 1144(a) ( i. e. federal law) does not apply to causes of action arising before January 1, 1975, nor to a review of acts occurring before that date.
The dilemma stems from the Profit Sharing Plan's retroactive effective date. Section 2.1 of the Profit Sharing Plan provides that "[e]ach employee who is a participant in the trusteed retirement plan will become a participant in the [profit sharing] plan as of the effective date of the plan." In their trial court stipulation, the parties agreed that the controlling issue is whether the plaintiffs were participants "by virtue of the retroactive provisions" of the Profit Sharing Plan. Whatever its meaning may be, no one can, and no one does, seriously deny that the adoption of the Profit Sharing Plan resulted in substantial confusion or that the status of the plaintiffs was fraught with uncertainty.
The plaintiffs do not rest their case on acts or omissions occurring in 1974 ( viz. the suit does not challenge the adoption of the Profit Sharing Plan). The action the plaintiffs protest, and the one we must review, is the trustee's 1975 interpretation of the Profit Sharing Plan. Only with that decision did it become clear that the plaintiffs would be denied benefits. This determination took place in 1975, and, thus, was governed by 29 U.S.C.A. § 1144, and it follows that the federal courts have § 1132 jurisdiction to examine its validity.
It may be that a claim based on denial of benefits under the Retirement Plan would predate ERISA. That question is not before us. The plaintiffs sued for benefits allegedly due them under the Profit Sharing Plan, not the superseded Retirement Plan.
The defendants next urge that even if an "essential act" occurred in 1975, the cause of action (if there is one) arose on the adoption date. They reason that a cause of action arises not when an employee is denied benefits, but when he becomes eligible for them. Knauss v. Gorman, 433 F. Supp. 1040, 1042 (W.D.Pa. 1977), vacated 583 F.2d 82 (3d Cir. 1978); Keller v. Graphic Systems, 422 F. Supp. 1005, 1008 (N.D.Ohio 1976).
The initial distribution date of a participant who terminates his employment or has his employment terminated by the Employer for any reason other than those specified in [the previous sections, which cover terminations by reasons of retirement, disability or death], shall be the date of termination of his employment even though distribution may be made as of a later date.
Section 6.1(B). The defendants use this provision to further support their assertion that the termination date is controlling. Admittedly, if this argument is correct there would be no jurisdiction.
Although benefits are computed in conformity with the date of employment termination, the Profit Sharing Plan contemplates a delay before eventual payment. § 6.3(A) ("distribution . . . as soon [thereafter] . . . as administratively feasible").
A cause of action accrues when the events upon which it is based occur. See, e. g., Atkins v. Crosland, 417 S.W.2d 150 (Tex. 1967). The distinction between eligibility date and the date of denial of benefits was not relevant in any of the cases cited by the defendants. The most thorough discussion of the matter is contained in Morgan v. Laborers Pension Trust Fund, 433 F. Supp. 518, 522 n. 5 (N.D.Cal. 1977). We agree that a cause of action does not become a presently enforceable demand until a claim is denied. To hold otherwise
would put an almost intolerable burden on employees covered by pension plans. It would require individuals who are unversed in the law to be constantly vigilant. . . . Moreover, claims filed before a pension actually has been denied might be challenged for lack of ripeness. Cf. United Public Workers v. Mitchell, 330 U.S. 75, 86-91, 67 S.Ct. 556 [562-565], 91 L.Ed. 754 (1947).
Id. We hold that for purposes of ERISA a cause of action does not accrue until an application is denied. See quotation from Cowan in note 8. Cf. Kosty v. Lewis, 319 F.2d 744, 750 (D.C. Cir. 1963), cert. denied, 375 U.S. 964, 84 S.Ct. 482, 11 L.Ed.2d 414 (1964) (Statute of limitations does not commence to run until there has been "a clear and continuing repudiation.").
Although the determination of eligibility for pension benefits seems to be a matter of contract law, "the clear weight of federal authority" mandates that the trustee's determinations of eligibility are to be upheld unless arbitrary or capricious. Bayles v. Central States, Southeast and Southwest Areas Pension Fund, 602 F.2d 97, 99 and 100 n. 3 (5th Cir. 1979); Bueneman v. Central States, Southeast and Southwest Areas Pension Fund, 572 F.2d 1208, 1209 n. 3 (8th Cir. 1978). But cf. Ramirez v. Lowe, 504 F. Supp. 21 (S.D.Tex. 1979), aff'd mem., 639 F.2d 306 (5th Cir. 1980) (vesting).
The trustee's decision withstands scrutiny under this standard. Contra, Tucci v. Edgewood Country Club, 459 F. Supp. 940, 941-42 (W.D.Pa. 1978) (similar facts, suspect termination; no enunciated standard of review). He treated all similarly situated persons the same. See Bayles, 602 F.2d at 100; Bueneman, 572 F.2d at 1210. The Profit Sharing Plan's resources are still dedicated to the participants; the trustee's policy will direct money to those who were employed on the adoption date. See note 2. "The trustees of [a] pension fund may properly enforce pension plan rules limiting pension benefits if an alternative would require inappropriate or unanticipated costs to the fund so as to potentially limit resources available to the proper beneficiaries of a trust." Id.; accord, Sparta v. Lawrence Warehouse Co., 368 F.2d 227, 228 (3d Cir. 1966) (diversity action apparently applying general principles of law).
ERISA's civil enforcement section authorizes the courts to enforce 29 U.S.C.A. § 1024(b)(4), which requires the administrator to furnish certain information upon the written request of a participant. Specifically, 29 U.S.C.A. § 1132(c) provides that "[a]ny administrator who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish to a participant . . . may in the court's discretion be personally liable to such participant . . . in the amount of up to $100 a day from the date of such failure or refusal . . . ."
"Administrator" is defined at 29 U.S.C.A. § 1002(16)(A).