Opinion ID: 1203285
Heading Depth: 2
Heading Rank: 3

Heading: Salaried and Hourly Plaintiff Retirees' ERISA Breach of Fiduciary Duty Claim

Text: Hourly and salaried plaintiffs allege Philips failed to properly exclude plaintiffs from its retiree health benefit plans and that, as a result, defendants' subsequent refusal to provide plaintiffs with retiree health benefits is a breach of fiduciary duty. Because a retiree health benefits plan is a welfare benefit plan under ERISA, numerous federal statutes regulate such plans. Yolton, 435 F.3d at 578. These statutes, among other things, establish: 1) the requisite features of a welfare benefit plan (29 U.S.C. § 1102); 2) the responsibilities and duties of a welfare plan fiduciary (29 U.S.C. § 1104(a)); and 3) the responsibilities of a welfare plan administrator with regard to providing and amending summary plan descriptions (29 U.S.C. § 1022; 29 U.S.C. § 1024(b)(1)). According to ERISA, specific fiduciary duties include an obligation to discharge ... duties with respect to a plan solely in the interest of the participants and beneficiaries. 29 U.S.C. § 1104. Further, the fiduciary must undertake these duties for the exclusive purpose of providing benefits to participants and their beneficiaries... with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. Id. ; see also 29 U.S.C. § 1002(21) (defining a plan fiduciary). Despite this broad language, however, a corporation's fiduciary duties under ERISA do not encompass all of its activities. United Steelworkers of Am. v. Cyclops Corp., 860 F.2d 189, 198 (6th Cir. 1988). This is because [a]n employer that also acts as a plan administrator is said to wear `two hats' and [o]nly when the employer acts in its fiduciary capacity must it comply with ERISA's fiduciary duties. Sengpiel v. B.F. Goodrich Co., 156 F.3d 660, 665 (6th Cir. 1998). As this court explained in Sengpiel v. B.F. Goodrich Co ., ... courts have typically distinguished between employer actions that constitute managing or administering a plan and those that are said to constitute merely business decisions that have an effect on an ERISA plan; the former are deemed fiduciary acts while the latter are not. It is firmly established, for example, that a company does not act in a fiduciary capacity when deciding to amend or terminate a welfare benefits plan. Sutter v. BASF Corp., 964 F.2d 556, 562 (6th Cir.1992) (quoting Adams v. Avondale Indus., Inc., 905 F.2d 943, 947 (6th Cir.1990)); see also Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78, 115 S.Ct. 1223, 131 L.Ed.2d 94 (1995) (Employers or other plan sponsors are generally free under ERISA for any reason at any time, to adopt, modify, or terminate welfare plans.). Id. Based on this analysis, Sengpiel held that an employer's transfer of the retirees' welfare benefits is more analogous to amending, modifying, or terminating the then-existing welfare plans than to administering or managing them. Id. As a result, defendant-employer's transfer of benefits to another entity, and that entity's later termination of benefits, could not amount to a breach of fiduciary duty. Id. Plaintiffs concede that Philips would not act in a fiduciary capacity if it amended, transferred, or terminated the retiree health benefits plans. Adams v. Avondale Indus., Inc., 905 F.2d 943, 947 (6th Cir. 1990); see also Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78, 115 S.Ct. 1223, 131 L.Ed.2d 94 (1995) (Employers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare benefit plans.). Further, plaintiffs do not dispute that the reservation of rights clauses in all four relevant plans set forth an appropriate procedure for amending such plan[s]. [18] 29 U.S.C. § 1102(b)(3); Schoonejongen, 514 U.S. at 77-79, 115 S.Ct. 1223 (1995) (holding that a clause reserving the company's right at any time to amend the plan meets the requirements of 29 U.S.C. § 1102(b)(3)). The retirees argue that: 1) because non-party retirees who retired before July 1, 2001 still receive benefits, the plans are not terminated; [19] 2) this means Philips had to amend or modify the plans to exclude plaintiff retirees; 3) defendants failed to comply with the ERISA procedures for amending or modifying the plans; 4) defendants failed to comply with their own procedures for amending the 1999 Plan for salaried employees; and 5) defendants' failure to properly exclude plaintiffs from its plans before refusing to provide health benefits makes its refusal a breach of fiduciary duty. See 29 U.S.C. § 1022 (Summary plan description); 29 U.S.C. § 1024 (Filing and furnishing of information); 29 U.S.C. § 1104 (Fiduciary duties). [20] In this manner, plaintiffs do not attack the non-fiduciary decision to transfer or terminate benefits; rather, plaintiffs base their claims on Philips' failure to properly amend the plan according to its own stated procedures and furnish to each participant, and each beneficiary receiving benefits under the plan, a copy of the summary plan description, and all modifications and changes. 29 U.S.C. § 1024(b); see also 29 U.S.C. § 1022(a) (A summary of any material modification in the terms of the plan and any change in the information required under subsection (b) of this section shall be written in a manner calculated to be understood by the average plan participant and shall be furnished in accordance with section 1024(b)(1) of this title.). [21] Defendants respond to this allegation by pointing out that: 1) Philips no longer employed plaintiffs when they elected to receive benefits and 2) immediately prior to retirement, plaintiffs were not covered by a PENAC-sponsored plan as required in the Philips SPDs' eligibility sections. Rather, plaintiffs were covered by an LGP plan, and LGP, not PENAC, failed in its obligation to timely publish an updated SPD. (Final Br. of Defs.-Appellees at 39.) Further, even if LGP's continued use of PENAC and PDC documents misled plaintiffs, LGP's eventual issuance of new SPDsidentifying itself as plan administrator and sponsorshould have eliminated any confusion. [22] The district court disposed of this claim by noting that any breach of fiduciary duty by Defendants must come from the decision, by Defendants' parent company, to transfer the assets and liabilities of PDC to LGP. Schreiber, 2007 WL 3036743, at . Because this act was part of a business decision implemented by their parent company, the district court held that Defendants did not breach an ERISA fiduciary duty when Plaintiffs [sic] retiree health care benefits were terminated. Id. However, the fact that Philips' decision to transfer assets was not a fiduciary one under ERISA does not mean that it did not trigger ERISA obligations. While it is firmly established ... that `a company does not act in a fiduciary capacity when deciding to amend or terminate a welfare benefits plan,' ERISA still provides instructions as to how an employer should properly amend or terminate a plan. 29 U.S.C. §§ 1022, 1024(b); see Sengpiel, 156 F.3d at 665-66; Schoonejongen, 514 U.S. at 84, 115 S.Ct. 1223 ([W]e do not mean to imply that there is anything wrong with plan beneficiaries trying to prove that unfavorable plan amendments were not properly adopted and are thus invalid. This is exactly what respondents are trying to do here, and nothing in ERISA is designed to obstruct such efforts.) Thus, even if Philips' transfer of assets in this case was not a fiduciary act, it must still comply with ERISA procedures. Because the district court did not address the issue below and the facts are insufficiently clear to permit us to do so here, we remand for further proceedings.