Opinion ID: 615296
Heading Depth: 3
Heading Rank: 2

Heading: Halliburton is Analogous and Controls

Text: Whether Section 5.05(f) of the APA constituted a valid amendment to the Sterling Plan turns on whether this court's analysis in Halliburton is controlling. In Halliburton, a merger agreement between Halliburton and Dresser Industries included a provision whereby Halliburton agreed to maintain Dresser's retiree plans, except to the extent that any modifications were consistent with changes in Halliburton's medical plans for its own similarly situated active employees. 463 F.3d at 362. The merger agreement provided in relevant part: [Halliburton] shall and shall cause the Surviving Corporation and each Subsidiary of the Surviving Corporation to take all corporate action necessary to: (i) maintain with respect to eligible participants (as of [September 29, 1998]) the [Dresser] retiree medical plan, except to the extent that any modifications thereto are consistent with changes in the medical plans provided by [Halliburton] and its subsidiaries for similarly situated active employees .... Id. at 365 (alterations in original). The merger agreement also provided that its provisions were solely for the benefit of Halliburton and Dresser and that it did not confer any right, benefit, or remedy to any other person except for members of Halliburton's board of directors, who were permitted to enforce the provisions for three years. Id. The stated reason Halliburton and Dresser included the retiree benefits provision in the merger agreement was to permit Dresser retirees to keep their benefits while also giving Halliburton the flexibility to change the Dresser retiree plans as long as it made similar changes for active Halliburton employees. Id. at 366. The merger agreement was executed on February 25, 1998, and became effective on September 29, 1998. Id. at 364. The respective boards of directors of Halliburton and Dresser approved the merger. Id. On July 16, 1999, Halliburton entered into a separate agreement to assume the sponsorship of, adopt, and continue the Dresser retiree plans. Id. at 366-67. The agreement expressly vested Halliburton's benefits committee with the power to administer the Dresser retiree plans, and vested the Halliburton chief executive officer with the power to amend or terminate the Dresser retiree plans. Id. at 367. Halliburton could have adopted and sponsored the Dresser retiree plans pursuant to the merger agreement, but instead elected to do so pursuant to the subsequent agreement. Id. at 367 n. 5. At the end of 2002, Halliburton combined all of the Halliburton and Dresser plans, including the Dresser retiree plans, and shortly thereafter made the Dresser retiree plans subparts of the combined plan. Id. at 367. At all times following the merger in 1998, the Dresser retiree plans and the Halliburton active employee plans remained unchanged. Id. In November 2003, over five years after the merger, Halliburton modified the Dresser retiree plans so that the Dresser retirees' benefits would be more closely aligned with the Halliburton retirees' benefits. Id. It did so by freezing Halliburton's contribution costs, thereby making Dresser retirees responsible for any future increase in premiums. Id. Halliburton did not make similar modifications to the combined plan for its own similarly situated active employees. Id. at 362, 367. One of the Dresser retirees complained, and the Halliburton benefits committee denied the retiree's request to withdraw the November 2003 amendments. Id. at 367-68. The committee concluded that the amendments were consistent with Halliburton's obligations under the merger agreement and that nothing in the merger agreement limited its right to modify the Dresser retirees' benefits. Id. Thereafter, Halliburton initiated a declaratory action in district court, and the Dresser retirees filed counter-claims and third-party claims. Id. at 368. The district court found that the retiree benefits-related provision in the merger agreement constituted a valid plan amendment, and held that Halliburton must maintain the [Dresser retiree plans] for eligible participants and may adjust benefits in that program only if it makes identical changes to benefits for similarly situated active employees. Id. at 369.
On appeal Halliburton argued that: (i) the retiree benefits provision in the merger agreement did not effect a plan amendment because it did not properly follow plan amendment procedures; (ii) the retirees could not enforce the provision because only Halliburton directors were permitted to enforce the terms of the merger agreement; and (iii) requiring Halliburton to maintain the Dresser retiree plans amounted to an impermissible vesting of benefits. Id. at 369-70. The court reviewed de novo the question of whether the retiree benefits provision of the merger agreement constituted a plan amendment. Id. at 370. The Halliburton court began by noting that the Dresser retiree plans reserved the right for the Company to amend or terminate the plan at any time. Id. at 371. Then, after determining that Halliburton succeeded to the rights and obligations under the Dresser retiree plans when it executed the July 1999 agreement, it returned to the question of whether the merger agreement effectively amended the Dresser [retiree plans] so that Halliburton may amend or terminate the program only to the extent it makes the same changes to the plans for its similarly situated active employees. Id. Its analysis proceeded as follows: In order to amend a welfare benefit plan governed by ERISA, the employer must provide a procedure for amending such plan, and for identifying the persons who have authority to amend the plan. ERISA imposes no additional formalities on plan amendments. In particular, there is no requirement that a document claimed to be an amendment to a welfare plan be labeled as such. Clearly then, a provision in a merger agreement could amend a welfare plan, even if it is not labeled as a plan amendment. However, only an amendment executed in accordance with the plan's procedures is effective. Id. at 371-72 (internal quotations and citations omitted). The court determined that the Dresser retiree plans' procedure for amendment provided that  [t]he Company may amend, modify, change, revise, discontinue or terminate the Plan ... at any time by written instrument signed by the Vice President, Human Resources. Id. at 372. It looked to corporate law principles to determine that officers generally have authority to take action on behalf of the company when that action is approved by the board of directors, and it concluded that the merger agreement effectively amended the Dresser retiree plans. Id. at 372-73. With respect to the question of who was permitted to amend the Dresser retiree plans, Halliburton argued that the merger agreement could not effect a plan amendment because Dresser's Vice President of Human Resources did not sign the merger agreement. Id. at 373. The court, again citing corporate law principles, stated that while the amendment procedure making reference to the Vice President of Human Resources constitute[d] a delegation of authority for one way in which the Company may amend the plan[, it did] not, however, constitute the only way in which `[t]he company' may amend the plan. Id. It noted that, [u]nder corporate law principles, Dresser could revoke its delegation of authority and act to amend the plan in some other manner. Id. It held that, because Dresser's board of directors approved the merger and its chairman signed the agreement, such actions were more than sufficient to constitute an action by the company to amend the plan. Id. at 374. It then held that the benefits provision in the merger agreement constituted a valid amendment to the Dresser retiree plans. Id. In the alternative, the court noted that because Halliburton administered its obligations under the [Dresser retiree plans] consistent with the merger agreement's benefits provision, to the extent it [was] necessary, Halliburton's ex post actions ratified [such provision] as a valid plan amendment. Id. at 375. Finally, the court addressed Halliburton's two other arguments: that the Dresser retirees could not enforce the provision, and that the provision was an impermissible grant of permanent benefits. Id. at 376-78. The court succinctly rejected both arguments. First, it pointed out that enforcement of a plan's provision, including any amendments thereto, falls exclusively in ERISA's remedial scheme, noting that while the retirees could not sue for breach of contract, they could seek clarification of their rights under the terms of the Dresser retiree plans. Id. at 375-76. And second, it explained that instead of vesting an unalterable and irrevocable benefit on the Dresser retirees, the merger agreement provision simply required that, if Halliburton wanted to amend or terminate the Dresser retiree plans, it could do so as long as it did the same for its own similarly situated active employees. Id. at 377. The Halliburton court noted that, [e]mployers generally are free under ERISA to modify or terminate plans, but if the plan sponsor cedes its right to do so, it will be bound by that contract. Id. at 378. It ultimately held that: Halliburton [could not] unilaterally take away the `bargained-for rights' that Dresser and Halliburton negotiated and made on the retiree program as part of their merger agreement. The parties were free to impose contractual obligations on the right to amend or terminate the Dresser [plans], and they did. Because of these limitations, Halliburton cannot alter the retiree program, except as consistent with the plan as amended by [the merger agreement provision]. Id. (internal citations omitted).
This appeal turns on whether, under Halliburton, Section 5.05(f) of the APA constituted a valid amendment to the Sterling Plan. Halliburton established that a corporate agreement can amend an ERISA plan, whether or not the agreement was expressly intended to effect an amendment. Id. at 372 (citing JOHN F. BUCKLEY, ERISA LAW ANSWER BOOK 7 (5th ed. 2006) ([A]ny act that is directed to a provision of an ERISA plan may be deemed to constitute a plan amendment even though it does not recite that it is intended to amend the plan and it is not included in a plan document.)); see also Horn v. Berdon, Inc. Defined Benefit Pension Plan, 938 F.2d 125, 127 (9th Cir.1991) (finding all that is needed to effect an amendment is a properly authorized written instrument directed at plan provisions). Therefore, as long as an agreement is in writing, it contains a provision directed to an ERISA plan, and the plan amendment formalities are satisfied, such agreement or other document will constitute a valid plan amendment. Halliburton, 463 F.3d at 370-74. The APA is a written corporate agreement, and Section 5.05(f) is directed to provisions of both Cytec's and Sterling's ERISA plans (i.e., directing the maintenance of benefits and premiums). Thus, the first two requirements are satisfied. With respect to the two other amendment formalitieshaving a procedure for amendment and having a procedure for identifying the persons with authority to amendthe formal documents constituting the terms of the Sterling Plan permit amendments or modifications at any time and from time to time by the Committee. Various SPDs that describe the terms of the Sterling Plan but which are not themselves part of the Sterling Plan, see CIGNA, 131 S.Ct. at 1878, also state that the Sterling Plan may be amended at any time by [the Committee] or the Board of Directors. Both formalities were satisfied in this case. The APA required and was granted approval by each of the three Sterling companies' boards of directors, and it was signed by the chairman of each of the three Sterling companies. This approval satisfies the first formality, as Halliburton made it clear that, at least pursuant to Delaware law which applied there and which also applies here, a corporation's board of directors retains ultimate control over delegating authority and authorizing corporate actions. See Halliburton, 463 F.3d at 372-73. Thus, even if the Committee was the only entity expressly authorized to modify or amend the Sterling Plan under the formal plan documents, the board of directors was empowered to revoke such delegation and authorize the chairman to amend the Sterling Plan by signing the APA. See Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 80, 115 S.Ct. 1223, 131 L.Ed.2d 94 (1995); Halliburton, 463 F.3d at 372-74. The SPDs describing the plan amendment process acknowledge as much. The approval of the APA by Sterling's boards of directors and the execution of the APA by Sterling's chairman on December 23, 1996, satisfied both plan amendment formalities. Under Halliburton, at that moment, Section 5.05(f) of the APA became a valid amendment to the Sterling Plan.