Opinion ID: 6492
Heading Depth: 6
Heading Rank: 2

Heading: defraying reasonable expenses of

Text: administering the plan[.] 29 U.S.C. § 1104(a)(1) (1988) (emphasis added). They contend that, by amending the Plan in such a way that 1986 participants received less than 100% of the 1986 contribution, Rexene and the corporation violated their duty to administer the Plan for the exclusive purpose of ... providing benefits to participants. Id. In support, plaintiffs make much of Rexene's selling all of its stock in April 1988 -- shortly after the Fourth Amendment to the Plan was approved in February 1988 by the IRS -- and negotiating in preparation for the sale since the fall of 1987. According to plaintiffs, the Plan amendments were motivated primarily by the impending sale: because the shares in the suspense account were included in Rexene's value, the greater their 30 Because we hold that Rexene was not acting as a plan fiduciary when it amended the Plan, and therefore that it cannot have violated § 1104, we need not consider §§ 1104(a)(1)(B) (failure to manage the plan with the requisite care, skill and prudence), 1104(a)(1)(D) (failure to follow plan documents). - 37 - value, the greater the company's value, and the larger the deduction a buyer could take for the shares. Thus, plaintiffs contend, Rexene had an incentive to re-value the shares at as high a value as possible, and to ensure that as few shares as possible were allocated to participants in advance of the sale. The district court agreed, finding that the decisions with regard to the Plan were made because of the Company's concern for the Savings Plan contributions [i.e., for the heavy savers] and the imminent sale. This motivation is the cornerstone of the district court's conclusion that the Rexene defendants were acting in Rexene's self-interest, rather than as fiduciaries of the Plan for its benefit and that of the participants. Rexene's witnesses testified that Rexene acted only to ensure that the contribution was allocated in a fashion that did not cause the Plan to be disqualified, and did not penalize the heavy savers. But, we give special deference to the district court's assessment of the witnesses' credibility, and must defer to its assessment of the evidence, if it is plausible in light of the record viewed in its entirety ... even though convinced that had [we] been sitting as the trier of fact, [we] would have weighed the evidence differently. Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous. Anderson v. City of Bessemer City, 470 U.S. at 574. Accordingly, we accept the district court's findings with regard to the motivation of Rexene and the Administrative Committee. With this in mind, we turn to § 1104(a)(1). - 38 -
Section 1104 mandates that a plan be administered solely in the interest of the participants and beneficiaries. 29 U.S.C. § 1104(a)(1) (emphasis added). Plaintiffs read this to require Rexene to manage the Plan solely in the interest of 1986 Plan participants and their beneficiaries. But, a fiduciary's duty runs to the plan as a whole, not to any individual beneficiary or group of beneficiaries. Williams v. Caterpillar, Inc., 944 F.2d 658, 665 (9th Cir. 1991). Plaintiffs' concern, at bottom, is that the entire 101,794-share 1986 contribution was not allocated to them; and while it is true that 1986 participants received only the equivalent of 82,248 shares, this does not mean, ipso facto, that the Rexene defendants failed to administer the Plan for the benefit of all its participants and their beneficiaries.31 Indeed, as in Williams, plaintiffs do not assert that the challenged actions were detrimental to all claimants under ... the plan[] in question; they have sued only on their own behalf. Id. In sum, the record supports a conclusion that, in addition to the motivation found by the district court, the Rexene defendants acted out of concern for the long-term viability of the Plan, including its continued status as an ERISA-qualified plan. 31 But see Deak v. Masters, Mates & Pilots Pension Plan, 821 F.2d 572, 578-79, 581 (11th Cir. 1987) (finding amendment to Plan that benefitted certain participants at expense of others, to be arbitrary and capricious, and breach of fiduciary duty under ERISA, even though, if adopted absent from or insulated from any conflicts of interest, same amendment might not violate ERISA), cert. denied, 484 U.S. 1005 (1988). - 39 -
Moreover, even if Rexene's decisions with regard to the Plan were made with the primary motive of benefitting Rexene, those decisions had the secondary purpose of benefitting (or at least, not harming) the Plan as a whole. In this situation, we are faced with two lines of authority. The first counsels that such an incidental benefit cannot legitimize a fiduciary's improper (self-interested) motives. Deak v. Masters, Mates & Pilots Pension Plan, 821 F.2d 572, 579-81 & n.12 (11th Cir. 1987), cert. denied, 484 U.S. 1005 (1988). In Deak, the plaintiff was a participant in an ERISA plan administered by employees of the Union that had created it. Id. at 597-98. The administrators' decision to amend the plan was, at least in part, motivated by a desire to benefit the Union, rather than, as ERISA commands, solely the plan participants and beneficiaries. In analyzing the decision, the court stated: It is difficult to conceive of a situation where a benefit to the Union would not have incidental benefit to the Plan.... However, the statute requires the Trustees to act for the sole benefit of the Plan beneficiaries. The District Court was entitled to find from the evidence at trial that the actions of the Trustees were for the benefit of the Union. The benefit to the Plan cannot legitimize their motives, especially in light of the findings of fact that the Plan was underfinanced at the time and that the Trustees made no actuarial investigation of [the amendment]. Id. at 580 n.12 (emphasis added). Quoting Donovan v. Bierwirth, 680 F.2d 263, 271 (2d Cir.), cert. denied, 459 U.S. 1069 (1982), the Deak court noted that `officers of a corporation who are Trustees of its pension plan ... must [act] with an eye single to - 40 - the interest of the participants and beneficiaries.' Id. at 580 (citation omitted). As noted, the district court found that Rexene acted, at best, with a dual motivation: to avoid the Plan being disqualified and heavy savers being penalized on the one hand, and on the other, to facilitate the impending sale. Under the reasoning in Deak, 821 F.2d at 578-81, then, Rexene's decision to amend the Plan would be a breach of fiduciary duty under § 1104(a)(1)(A), because -- in the view of the district court -- it was not enacted primarily, or solely, for the benefit of the participants. Another line of cases weighs in favor of the opposite result. It provides that, when an employer is also a fiduciary for its ERISA plans, it acts as a fiduciary only when and to the extent that [it] function[s] in [its] capacity as plan administrator[], not when [it] conduct[s] business that is not regulated by ERISA. Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1158 (3d Cir. 1990) (internal quotation marks and citations omitted); accord, McGath v. Auto-Body North Shore, Inc., 7 F.3d 665, 670 (7th Cir. 1993) (citing Hozier). Business not regulated by ERISA has been widely held to include decisions to amend or terminate ERISA plans; as part of a balance between the employer's need to manage its business and Congress's desire to regulate ERISA plans, an employer is given broader discretion to act with regard to a plan when it does so as employer, instead of as fiduciary. See Hozier, 908 F.2d at 1159-60 (discussing policy rationale for distinction between actions available to employer-as-employer and employer-as- - 41 - fiduciary); cf. McGann v. H&H Music Co., 946 F.2d 401, 407 (5th Cir. 1991) (non-fiduciary issue; Congress intended that employers remain free to create, modify and terminate the terms and conditions of employee benefit plans without governmental interference.), cert. denied, ___ U.S. ___, 113 S. Ct. 482 (1992); Wise v. El Paso Natural Gas, 986 F.2d at 937 (employer generally may modify or discontinue non-vested benefits without violating ERISA). An employer can wear two hats: one as a fiduciary administering a pension plan and the other as the drafter of a plan's terms.... [A]n employer does not act as a fiduciary when it amends or otherwise sets the terms of a plan. McGath, 7 F.3d at 670-71 (citing cases, including Jos. Schlitz Brewing Co. v. Milwaukee Brewery Workers' Pension Plan, 3 F.3d 994 at 1001, 1002 (7th Cir. 1993), petition for cert. filed, 62 U.S.L.W. 3378 (U.S. Nov. 12, 1993) (No. 93-768)). Of course, an employer does not have unfettered discretion to amend or terminate plans at will, Hozier, 908 F.2d at 1162; ERISA's detailed accrual and vesting provisions substantially limit this power, as do the terms of the plan documents, collective bargaining agreements, and other ERISA provisions relating to the form of amendments. Id. But, in general, an employer that decides to terminate, amend, or renegotiate a plan does not act as a fiduciary, and thus cannot violate its fiduciary duty, provided that the benefits reduced or eliminated are not accrued or vested at the time, and that the amendment does not - 42 - otherwise violate ERISA or the express terms of the plan.32 See id. at 1160-61. A majority of the circuits have followed this approach; we consider it the sound one, as did the Third Circuit in Hozier. Id. (citing cases); see also McGann, 946 F.2d at 407 & n.9 (citing language from Musto, 861 F.2d at 911, which notes that a company acts as fiduciary when administering plan, but not when deciding plan's terms).33 Accordingly, we bring our circuit into line with the majority, adopting the reasoning that, in amending the Plan as it did, Rexene was not acting as fiduciary, but as employer. Accordingly, it did not breach a § 1104 fiduciary duty.34 32 As discussed, plaintiffs had no accrued or vested interest in the 1986 contribution when the Plan was amended; and, as stated, ERISA simply does not prevent a company from eliminating previously offered benefits that are neither vested nor accrued. Phillips, 799 F.2d at 1471. 33 Hozier's list of decisions in accord includes Musto, 861 F.2d at 912 (6th Cir. 1988); Young v. Standard Oil (Indiana), 849 F.2d 1039, 1045 (7th Cir. 1988), cert. denied, 488 U.S. 981 (1989); Anderson v. John Morrell & Co., 830 F.2d 872, 876 (8th Cir. 1987); Cunha v. Ward Foods, Inc., 804 F.2d 1418, 1432-33 (9th Cir. 1986) (employer not acting as fiduciary when it made business decision to terminate plan); Phillips v. Amoco, 799 F.2d at 1471 (11th Cir. 1986); Amato v. Western Union Int'l, 773 F.2d 1402, 1417 (2d Cir. 1985) (officers acted on behalf of corporation, rather than as fiduciaries, when amending corporate pension plan), cert. dismissed, 474 U.S. 1113 (1986); and Sutton v. Weirton Steel Div. of Nat'l Steel Corp., 724 F.2d 406, 411 (4th Cir. 1983), cert. denied, 467 U.S. 1205 (1984) (employer's decision to renegotiate or amend unfunded benefits was not fiduciary action). Further, Hozier states that [w]e know of no decision by any court of appeals to the contrary. 908 F.2d at 1161. 34 Because we reverse the district court on the §§ 1054(g) and 1104 claims, we need not reach the following issues: (1) the Rexene defendants' assertion that most of the plaintiffs are barred from pursuing claims against them, because of a settlement in a prior state action against Rexene's predecessor; (2) plaintiffs' challenge to the credit granted the Rexene defendants for the - 43 -