Opinion ID: 6934825
Heading Depth: 3
Heading Rank: 3

Heading: Interference with plaintiffs’ attainment of pension rights

Text: In their fifth claim for relief, plaintiffs assert a cause of action under ERISA § 510, 29 U.S.C. § 1140. That section provides in pertinent part: “It shall be unlawful for any person to discharge ... or discriminate against a participant or beneficiary ... for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan... ,” 8 Plaintiffs allege that defendants “discharged (constructively, terminated) or discriminated against [them] as participants in the Pension Plan for the purpose of interfering with the attainment of rights to which plaintiffs might become entitled under the Pension Plan, including enhanced pension benefits or more favorable early retirement incentive plans.” Plaintiffs’ App. at 427-28, ¶ 50.
Plaintiffs allege that defendants “constructively terminated” them by directing a campaign of misrepresentations calculated to coerce acceptance of EMTP, including representations that EMTP would be better than any future force reduction offer and that future changes in company operations could result in lack of promotions, demotions, pay-cuts, transfers and even termination. Plaintiffs’ App. at 405-09, ¶¶ 11-12 and 16-17. Plaintiffs contend that these allegations are sufficient to support a claim of constructive discharge in violation of 29 U.S.C. § 1140. Judge Abram addressed plaintiffs’ constructive discharge claim in discussing plaintiffs’ second and fifth claims for relief. Judge Abram recommended that the claim be dismissed, finding as follows: The purpose of § 1140 is to prevent unscrupulous employers from discharging or harassing employees in order to prevent them from obtaining vested rights. Conkwright v. Westinghouse Electric Corp., 933 F.2d 231, 233 (4th Cir.1991); Varhola v. Doe, 820 F.2d 809, 816 (6th Cir.1987). In discussing the legislative history of § 1140, the courts have found that the section applies when the employee is terminated or is harassed causing the employee to quit before vesting in a pension. West v. Butler, 621 F.2d 240, 245-46 (6th Cir.1980); [United Auto Workers] v. Park-Ohio Industries, Inc., 661 F.Supp. 1281, 1304 (N.D.Ohio 1987); Rollo v. Maxicare of Louisiana, 698 F.Supp. 111, 113-14 (E.D.La.1988). None of the plaintiffs were terminated. There is no allegation that while they were employed, the defendants attempted to harass them to prevent them from receiving a pension. Where constructive discharge is claimed, the Court must establish whether the plaintiff has made a prima facie case based upon an objective, reasonable person test. Berger v. Edgewater Steel Co., 911 F.2d 911, 922 (3d Cir.l990)[, cert. denied, 499 U.S. 920, 111 S.Ct. 1310, 113 L.Ed.2d 244 (1991) ]. The plaintiffs must show that they would have been fired if they did not accept the early retirement offer. Id. at 923. The plaintiffs must show that the conditions were intolerable so as to cause the plaintiffs to give up ERISA rights. Lojek v. Thomas, 716 F.2d 675, 680-81 (9th Cir.1983). There are no factual allegations in the complaint that support a claim that US West in November, 1989 adopted the “5 + 5” plan with the intent to interfere with a welfare benefit plan to which the plaintiffs were entitled. Where a company has made a statement that it was going to eliminate special benefits sometime in the future, thereby causing an employee to retire in order to not lose a benefit, the Court has held that there is no constructive discharge of the employee. Berger, supra, at 922-23; Adams v. LTV Steel Mining Co., 936 F.2d 368, 370 (8th Cir.1991)[, ce rt. denied, 502 U.S. 1073, 112 S.Ct. 968, 117 L.Ed.2d 134 (1992) ]. Plaintiffs’ App. at 442, 450. Judge Abram essentially found that the conduct alleged by plaintiffs was simply insufficient to support a claim under section 510 of ERISA. Judge Abram’s analysis suggests that anything short of firing an employee, threatening to fire him, or harassing him until he’s forced to quit or otherwise cease employment cannot constitute a constructive discharge. We think this too narrowly construes the concept of constructive discharge. In this case, plaintiffs claim that defendants fraudulently induced or tricked them into quitting by deceiving them into thinking that EMTP was the best offer that would be made and that if they didn’t accept EMTP, they would risk being demoted, transferred, or terminated. Plaintiffs’ App. at 406, 409, ¶¶ 11(b) and 16(g). At what point, if any, does such trickery, if proved, amount to a constructive discharge? As of yet, this court has not had occasion to address that particular issue. 9 The three cases relied upon by Judge Abram in discussing plaintiffs’ constructive discharge claim, Berger, Lojek, and Adams, were decided on motions for summary judgment, not motions to dismiss, and did not involve the sort of “trickery” alleged to have occurred in the present case. Adams, 936 F.2d at 370 (affirming summary judgment on ERISA § 510 discrimination claim where plaintiffs alleged employer had discriminated between salary and hourly employees with respect to allowing early retirement); Berger, 911 F.2d at 922-23 (affirming summary judgment on plaintiffs claim that employer constructively discharged him by simply informing him of a proposed Pension Plan amendment that would eliminate his special benefits); Lojek, 716 F.2d at 680-83 (affirming summary judgment on plaintiffs’ claim that his former law firm constructively discharged him by changing its stock purchase and redemption agreements); see also Gray v. York Newspapers, Inc., 957 F.2d 1070, 1080-83 (3d Cir.1992) (affirming summary judgment because evidence was insufficient to support plaintiffs alleged belief that if she refused early retirement, she would be harassed and forced out of her job). In Devine v. Combustion Engineering, Inc., 760 F.Supp. 989 (D.Conn.1991), the plaintiffs claimed that their former employer had violated ERISA § 510 by “tricking them ‘into leaving their employment early in order to save money.’” Id. at 993 (quoting the plaintiffs’ complaint). The plaintiffs alleged that their employer had offered them a retirement incentive program including free lifetime medical and dental benefits and then, when plaintiffs accepted, broke their promise to provide such benefits. Id. at 990-91. With regard to the plaintiffs’ claim under section 510 of ERISA, the court found: “Assuming plaintiffs’ allegations to be true for purposes of the motion to dismiss, I believe that they have stated a cause of action for which relief may be granted. They are certainly entitled to offer evidence to support this claim.” Id. at 993. We believe that plaintiffs are equally entitled to develop and offer evidence of constructive discharge under ERISA § 510 in the present case. The alternative is to hold that an employer who (as alleged in this case) intentionally lies to his employees about the costs and benefits of accepting an early retirement offer in order to induce them to take the offer and prevent them from attaining additional pension rights does not violate ERISA § 510. That seems incongruous with both the letter and the spirit of section 510. We must accept as true and construe in plaintiffs’ favor plaintiffs’ allegations that defendants purposely deceived them. If proven, such deception could be found to vitiate the voluntariness of plaintiffs’ decision to accept termination under EMTP and could support an inference of constructive discharge. See Christopher v. Mobil Oil Corp., 950 F.2d 1209, 1223 (5th Cir.) (holding that alleged deceptive conduct by Mobil might be found to vitiate the voluntariness of plaintiffs’ decision to retire), cert. denied, — U.S. —, 113 S.Ct. 68, 121 L.Ed.2d 35 (1992); Henn v. National Geographic Soc., 819 F.2d 824, 828-29 (7th Cir.), (holding that “volun-tariness” question in constructive discharge case depends in part on whether plaintiffs choice was “free from fraud or other misconduct”), ce rt. denied, 484 U.S. 964, 108 S.Ct. 454, 98 L.Ed.2d 394 (1987); see also Mullins v. Pfizer, Inc., 828 F.Supp. 139, 148 (D.Conn.1993) (discussing but not deciding whether fraudulent inducements which go beyond mere failures to disclose constitute constructive discharges), aff'd in part and rev’d in part, 23 F.3d 663, 668-69 (2d Cir.1994). We emphasize that we make no evaluation of the factual or legal sufficiency of any evidence that plaintiffs may seek to present in the district court, such as the aforementioned management bulletin and the article in the MB Times. We simply hold that plaintiffs have stated a claim for constructive discharge by alleging that defendants purposely deceived them into accepting EMTP in order to prevent them from attaining greater pension rights. Whether plaintiffs can actually find and present evidence to this effect sufficient to establish a “prima facie case” under ERISA § 510 is another matter altogether. See Gavalik v. Continental Can Co., 812 F.2d 834, 852 (3d Cir.) (holding that in order to establish a “prima facie case” under section 510 of ERISA, a plaintiff must show “(1) prohibited employer conduct (2) taken for the purpose of interfering (3) with the attainment of any right to which the employee may become entitled”) cert. denied, 484 U.S. 979, 108 S.Ct. 495, 98 L.Ed.2d 492 (1987). 10
As support for their discrimination claim under ERISA § 510, plaintiffs allege that defendants discriminated between managers and directors at Mountain Bell by making the “active employee” eligibility requirement to the 5 + 5 amendment applicable only to managers. Plaintiffs’ App. at 409-12, ¶¶ 18-21. Plaintiffs contend that this “discrimination” violates ERISA § 510. Judge Abram addressed plaintiffs’ discrimination claim in discussing plaintiffs’ second and third claims for relief. He found that the allegations of discrimination did not set forth a claim cognizable under 29 U.S.C. § 1140. Plaintiffs’ App. at 442, 448. Judge Abram cited Judge Sparr’s decision in Sabell, 1992 WL 469776 at , finding that “there were legitimate reasons for the Defendant to differentiate between the Directors’ Program group and the Plaintiffs [managers] for purposes of eligibility for 5 + 5 benefits.” This court has since affirmed that decision, noting that “ ‘ERISA does not mandate that employers provide any particular benefits, and does not itself proscribe discrimination in the provision of employee benefits.’ ” Averhart, 46 F.3d at 1488 (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91, 103 S.Ct. 2890, 2897, 77 L.Ed.2d 490 (1983) and citing Owens v. Storehouse, Inc., 984 F.2d 394, 398 (11th Cir.1993) and McGann v. H & H Music Co., 946 F.2d 401, 408 (5th Cir.1991), cert. denied sub nom., Greenberg v. H & H Music Co., — U.S. —, 113 S.Ct. 482, 121 L.Ed.2d 387 (1992)). For the same reasons noted in Averhart, we affirm the dismissal of plaintiffs’ cause of action for discrimination under ERISA § 510, 29 U.S.C. § 1140, in the present case. 4. Void and/or arbitrary and capricious denial of 5 + 5 benefits to those who had accepted early retirement under EMTP option 2 As discussed supra, plaintiff Cowdrey accepted termination under EMTP option 2. Under option 2, Cowdrey was to take a three year leave of absence, get credit for three more years of service, and receive one-half of his annual salary as severance pay at the end of those three years. During the three year leave of absence, Cowdrey was to continue to receive employee benefits and participate in the US WEST Employee Stock Ownership Plan. In the eighth claim for relief, plaintiff Cowdrey alleges that the EBC and John G. Shea’s decision to deny 5 + 5 benefits to those employees who were on leave of absence under EMTP option 2 is “void and/or arbitrary and capricious.” Plaintiffs’ App. at 432, ¶ 64; see also ¶ 50(e). Judges Abram and Sparr found this claim subject to dismissal, and ‘we agree. Plaintiff Cowdrey alleges that the EBC’s decision to deny 5 + 5 benefits to EMTP option 2 retirees is void because “the EBC has not acted in accordance with § 11 of the Pension Plan.” Id. at ¶ 64(a). This court considered the same claim in reviewing Sa-bell and affirmed summary judgment, stating as follows: The Sabell plaintiffs contend that the “active employee[s] on the payroll” requirement in the 5 + 5 amendment was invalid and should not have been applied to them because the requirement was not contained in the November 29,1989, Board of Directors’ resolution authorizing the EBC to adopt the proposed amendment. Plaintiffs’ argument assumes that only the Board of Directors, not the EBC, had the authority to amend the Pension Plan. We disagree. • The Pension Plan expressly provides for amendments by the EBC itself “subject to the approval of the Board of Direetors[.]” Averhart App. at 306. In this case, plaintiffs do not dispute that the EBC had Board approval to adopt the 5 + 5 amendment, albeit without specific reference to the “active employee[s] on the payroll” requirement. Because plaintiffs have thus failed to show that the adoption of the 5 + 5 amendment was procedurally flawed, we must reject their claim that the EBC was precluded from relying thereon in denying their benefit claims. Averhart, 46 F.3d at 1489. Given this finding in Sabell and the fact that plaintiffs in the present case also concede that the EBC had Board approval to adopt the 5 + 5 amendment, we must affirm the dismissal of plaintiff Cowdrey’s claim that the “active employee” eligibility requirement is void. Cowdrey also alleges that the EBC’s denial of 5 + 5 benefits is arbitrary and capricious because it “impair[ed] the rights of participants granted under the initial 5 + 5 Amendment” and “violated the ERISA provisions as set forth in the Second, Third, Fourth and Fifth Claims for Relief.” Plaintiffs’ App. at 432, ¶ 64(b) and (c). The “arbitrary and capricious” standard is applicable whenever an administrator or fiduciary has been given “discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989); see, e.g., Rademacher v. Colorado Ass’n of Soil Conservation Districts Medical Benefit Plan, 11 F.3d 1567, 1569 (10th Cir.1993); Sandoval v. Aetna Life and Casualty Ins. Co., 967 F.2d 377, 379-80 (10th Cir.1992). “An administrator’s action is arbitrary and capricious if it is based on a ‘lack of substantial evidence, mistake of law, bad faith, [or] conflict of interest.’” Counts v. Kissack Water and Oil Serv., Inc., 986 F.2d 1322, 1324 (10th Cir.1993) (quoting Winchester v. Prudential Life Ins. Co., 975 F.2d 1479, 1483 (10th Cir.1992)). Here, there is no allegation that the denial was based on a lack of substantial evidence, mistake of law, bad faith, and/or conflict of interest, or anything arguably akin to the above. The denial was simply based on the “active employee on the payroll” eligibility requirement. Accordingly, we affirm the dismissal of the eighth claim for relief. See Sandquist/Averhart, 1992 WL 469739 at -4 (granting summary judgment for defendants on “arbitrary and capricious” issue); Sabell, 1992 WL 469776 at -7 (same); Averhart, 46 F.3d at 1486-89 (affirming summary judgment on “arbitrary and capricious” issues in Sandquist, Averhart, and Sabell). 5. Using Pension Plan assets to benefit plan sponsor In their fourth claim for relief, plaintiffs allege that defendants “used surplus assets of the Pension Plan in a manner which inured to the benefit of the Plaintiffs’ employer, [Mountain Bell] and [US WEST,] and failed to hold the Pension Plan assets for the exclusive purposes of providing benefits to participants in the Pension Plan and their beneficiaries, in violation' of ERISA § [4]03(c).” Plaintiffs’ App. at 427, ¶49. Section 403(c) of ERISA provides in pertinent part that “the assets of a plan shall never inure to the benefit of any employer and shall be held for the exclusive purpose of providing benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of administering the plan.” 29 U.S.C. § 1103(c). Judge Abram recommended dismissal of plaintiffs’ fourth claim for relief, and Judge Sparr agreed. Judge Abram found that the plaintiffs had merely made a “conclusory allegation” and had failed to set forth any facts or law that supported their section 403(c) claim. Plaintiffs’ App. at 448-49. Judge Abram also relied on Holliday v. Xerox Corp., 732 F.2d 548, 551 (6th Cir.), cert. denied, 469 U.S. 917, 105 S.Ct. 294, 83 L.Ed.2d 229 (1984), in which the Sixth Circuit stated: The language of ERISA stating that “the assets of a plan shall never inure to the benefit of any employer” cannot be read as a prohibition against any decisions of an employer with respect to a pension plan which have the obvious primary purpose and effect of benefitting the employees, and in addition the incidental side effect of being prudent from the employer’s economic perspective. We agree with Judge Abram’s analysis and affirm the dismissal of plaintiffs’ fourth claim for relief. The anti-inurement or “exclusive benefit” policy of section 403(c) of ERISA is intended to “protect participants’ expected payments” by preventing employers from diverting funds to themselves. Outzen v. FDIC ex rel. State Examiner of Banks, 948 F.2d 1184, 1188 (10th Cir.1991). An alleged violation of section 403(e) might, for example, involve a reversion of surplus assets to an employer at a plan’s termination pursuant to a plan provision. See, e.g., Borst v. Chevron Corp., 36 F.3d 1308, 1320-21 (5th Cir.1994); Holland v. Valhi Inc., 22 F.3d 968 (10th Cir.1994); Outzen, 948 F.2d at 1185-88. In the present case, no such reversion, diversion, or any other sort of payment of surplus assets to Mountain Bell or US WEST is alleged. Plaintiffs simply claim that defendants should have used the surplus plan assets to benefit plaintiffs instead of using them to fund a second early retirement offer which furthered defendants’ desired reductions in force. It is undisputed that the surplus funds which plaintiffs wish had passed to them under EMTP remained with the Pension Plan and were still held in trust for participants in the plan and their beneficiaries. There is no allegation that the assets were used in any way other than to pay benefits to participants and beneficiaries and to pay reasonable administrative expenses. Hence, there are no allegations which would support the return of any assets to the Pension Plan under section 403(c) of ERISA. See Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan Benefits Committee, 953 F.2d 587, 592 n. 6 (11th Cir.1992) (“The exclusive benefit rule can only be violated if there has been a removal of plan assets for the benefit of the plan sponsor or anyone other than the plan participants.”) (citing Holliday, 732 F.2d at 551-52). 6. Partial termination of Pension Plan In their seventh claim for relief, plaintiffs claim that the initial force reduction in which they and approximately 6,000 other US WEST employees accepted termination under EMTP “constituted a partial termination of the Pension Plan under 29 U.S.C. § 1344.” Plaintffs’ App. at 429, ¶ 54. Plaintiffs allege that the force reduction was connected with “a major corporate event” and “involved a significant number of employees.” 11 Id. at ¶¶ 54-55. Plaintiffs claim that they are entitled to a “distribution of Pension Plan assets, particularly surplus assets,” as a result of this partial termination. Id. at ¶ 57. Judge Abram recommended that plaintiffs’ seventh claim for relief be dismissed, and Judge Sparr agreed. Judge Abram based his recommendation on Sage v. Automation, Inc. Pension Plan and Trust, 845 F.2d 885, 891 (10th Cir.1988) and Anderson v. Emergency Medicine Assocs., 860 F.2d 987, 990-91 (10th Cir.1988), in which this court held that voluntary employee decisions to leave the employer do not constitute employee terminations which can trigger a partial termination. Plaintiffs’ App. at 451. As discussed supra in connection with the claims for constructive discharge under section 510 of ERISA, plaintiffs have alleged that their decision to accept termination under EMTP was fraudulently induced and therefore not voluntary. Given this allegation, neither Sage nor Anderson would appear to be applicable. The court must accordingly reverse the dismissal of plaintiffs’ partial termination claim. 12 7. Civil penalties for failure to supply requested information In their ninth claim for relief, plaintiffs sought the imposition of civil penalties against “the Defendant administrators” under 29 U.S.C. § 1132(e), which provides in pertinent part: (1) Any administrator ... (B) who fails or refuses to comply with a request for any information which such administrator is required by this subehapter to furnish to a participant or beneficiary ... may in the court’s discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper. Plaintiffs alleged that they “requested certain information” from “the Defendant administrators,” but “the Defendant administrators” failed or refused to comply with that request. Plaintiffs’ App. at 432-33, ¶¶ 65-67. Plaintiffs did not specify what the “certain information” was nor identify the particular “Defendant administrators” to whom their requests were addressed. Judge Abram, noting that “thousands of documents ha[d] been produced” and that the assessment of civil penalties under section 1132(c) was “for the court’s discretion,” recommended dismissal of plaintiffs’ ninth claim for relief because it simply “fail[ed] to state a claim.” Plaintiffs’ App. at 453. Judge Abram found that plaintiffs had not alleged what documents were requested, what documents were received, and how plaintiffs had been harmed. Judge Sparr agreed with Judge Abram’s findings. We too agree with Judge Abram’s analysis and affirm the dismissal of plaintiffs’ ninth claim for relief. 13 8. Other “claims for relief’ Plaintiffs’ remaining claims, the first and sixth “claims for relief,” are actually not claims at all. The first claim for relief is a laundry list of declarations plaintiffs wish the court to make with respect to “the rights and the legal relationships between the parties.” Plaintiffs’ App. at 422-24. All of the declarations sought are, in one way or another, subsumed into the other claims for relief. We therefore affirm the dismissal of plaintiffs’ first claim for relief. In the sixth claim for relief, plaintiffs seek to invoke the contractual remedy of rescission. Plaintiffs claim that they accepted EMTP “through mistake, undue influence, coercion or fraud” and state that they now wish to rescind their acceptance and receive instead the benefits of the 5 + 5 amendment. Id. at 428. Plaintiffs fail, however, to cite any ERISA provision that authorizes the use of rescission as a remedy. We therefore affirm the dismissal of plaintiffs’ sixth claim for relief.