Opinion ID: 615296
Heading Depth: 4
Heading Rank: 2

Heading: The Halliburton Court's Analysis

Text: 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).