Court Opinion

ID: 9469342
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:38:04.787893+00
Date Added: 2024-06-11T17:41:20.515720
License: Public Domain

MANSFIELD, Circuit Judge
(dissenting):
I respectfully dissent. In my view the Schiavone pension plan violated ERISA in several significant respects, most notable of which is its representation that a single lump sum payment was available to all retirees with Committee approval when in fact Schiavone had a firm undisclosed rule prohibiting such payments to long-term retirees, of whom the plaintiff was one. The Act specifically authorizes a person in plaintiff’s position to bring an action for relief against these violations, regardless whether benefits have been denied, as a means of ensuring compliance with the Act’s full disclosure requirements.
The majority starts out on the erroneous premise that “[a]t issue is the Committee’s range of discretion in the awarding of pension benefits [and] the procedures used ... in exercising that discretion,” p. 913, supra. It then proceeds to defend at length the denial of the lump sum payment as an exercise of discretion not based on bad faith or arbitrariness but grounded on sound economic considerations. The issue before us, however, is not the soundness of the Committee’s exercise of discretion.1 Nor is the economic basis or wisdom of a policy against lump sum payments being challenged. The issue is whether the Schiavone plan summary complied with ERISA’s express requirement that it be materially accurate. The answer is that the summary, by failing to disclose an “unwritten general rule” against lump sum payments to long-term retirees, which was found by the district court to exist and is not disputed by the majority, was misleading and therefore violated the Act.
Section 502 of the Act, 29 U.S.C. § 1132, entitled “Civil enforcement,” empowers any participant or beneficiary to enforce rights created by ERISA, whether or not a loss or denial of benefits is involved. Subsection (a)(1)(B) authorizes a suit by a participant
“to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.”
In addition, subsection (a)(3) permits private actions to enforce a plan’s compliance with its own terms or with the requirements of the Act, authorizing suits
“by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this sub-chapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.”
Subsection (c) further provides that a participant may sue an administrator for $100 per day for failing to provide “any information” he is required to furnish, except when excused by “reasons beyond the control of the administrator.” 29 C.F.R. § 2520.102-3(t)(2). These compliance suits are expressly not conditioned on a loss or denial of benefits; indeed, they may proceed even where the plaintiff is not claiming any benefits.2 In addition, participants may also *918sue an administrator for violation of his fiduciary duties under §§ 401 to 414 of the Act, 29 U.S.C. §§ 1101 to 1114, without showing any denial or loss or claim of benefits.3 These provisions effectuate Congress’ clear intention that ERISA’s requirements be applicable and enforceable by private suits independent of any claim for benefits, in order to provide participants with broad and expansive rights and remedies for redressing or preventing violations of the Act.4
The Schiavone plan summary stated that the lump sum payment option was available to all participants subject to the Committee’s approval. In reality, however, under the “unwritten general rule” long-termers and retirees were ineligible for the option. Thip ineligibility appears nowhere in the plan summary. The plan therefore violates § 102(b) of the Act which requires a plan summary to describe all the
“circumstances which may result in disqualification, ineligibility, or denial of benefits .. .. ” 29 U.S.C. § 1022(b).
The majority, focusing on the’ phrase “of benefits,” suggests that the disclosure requirements does not apply to a plan’s mode of payment. Such a narrow reading cannot be squared with other provisions of the Act, regulations promulgated thereunder, and Congress’ intent. Section 2(b) of the Act declares that the “policy of this Act” is to require “the disclosure and reporting to participants and beneficiaries of financial and other information with respect to the plans,” 29 U.S.C. § 1001 (emphasis added), and § 102(a)(1) of the Act requires the summary to be “sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan.” 29 U.S.C. § 1022(a). These unqualified statements of a broad disclosure requirement reflect Congress’ desire to ensure “that the individual participant knows exactly where he stands with respect to the plan.” H.R.Rep.No.93-533, 93d Cong., 1st Sess., reprinted in [1974] U.S.Code Cong. & Ad.News 4639, 4649 (emphasis added).
The full scope of the disclosure policy is further reflected in the regulations. Regulation § 2520.102-2(b) provides in part that
“the summary plan description must not have the effect to [sic] misleading, misinforming or failing to inform participants and beneficiaries. [Any] exceptions, limitations, reductions, or restrictions of plan benefits shall be described or summarized ... 29 C.F.R. § 2520.102-2(b). See also 29 C.F.R. § 2520.102-3(t)(l).”
The summary must “clearly identify circumstances which may result in disqualification, ineligibility, or denial, loss, forfeiture or suspension of any benefits,” 29 C.F.R. § 2520.102-3(1), which encompasses “claims which are denied in whole or in part.” Id. at subsection (s). See also id. at subsection (t)(2); 29 C.F.R. § 2560.503-1(e)(1)-.
Schiavone’s unwritten rule, which renders certain participants ineligible for a form of payment that is particularly valuable in times of high interest rates, surely constitutes an exception, limitation, reduction, or restriction of plan benefits which any “accurate and comprehensive” summary must include if a retiring employee is to know “exactly where he stands with respect to the plan.” The plan gave the impression that the Committee would exercise discretion with respect to all retirees, including *919long-termers, whereas in fact it would exercise none in the case of the latter. I would hold, therefore, that Schiavone violated § 102(b) of the Act by failing to disclose in the plan summary the rule that participants with accrued benefits over $3,000 would not be eligible for the lump sum option. See, e.g., Corley v. Hecht Co., 530 F.Supp. 1155, 1163-64 (D.D.C.1982). A simple statement of the rule would have sufficed; thus the majority’s objection to a lengthy enumeration of factors is misplaced. Maj.Op. p. 914, supra.
The Schiavone plan also violated the procedural protections provided in § 503 of the Act, 29 U.S.C. § 1133, by failing to give Pompano written notice of his denial and an opportunity for a full and fair review.5 The majority limits § 503 to a denial of benefits, and holds that written notice and an opportunity for review are not required for the denial of a requested mode of payment. The rationale for such a distinction escapes me, since the regulations mandate § 503’s procedural safeguards whenever “a claim for a (pension, welfare) benefit is denied in whole or in part.” 29 C.F.R. § 2520.102-3(t)(2) (emphasis added). The denial of the requested lump sum payment, which clearly reduced the value to Pompano of his pension, certainly constitutes a partial denial of his claim. Moreover, the legislative history of § 503 reveals that Congress was concerned with procedures for resolving and reviewing “disputes between the plan administrator and participants or beneficiaries,” H.R.Rep.No.93-1280, 93d Cong., 2d Sess., reprinted in [1974] U.S.Code Cong. & Ad.News 5038, 5108 (emphasis added), which would encompass more than the outright denial of all benefits. Finally, § 503 must be interpreted in light of ERI-SA’s strong concern with ensuring strict plan compliance with the Act. Accordingly, I would hold that Schiavone violated § 503 of the Act. See Frary v. Shorr Paper Products, Inc., 494 F.Supp. 565 (N.D.Ill.1980), where the court held that the wrongful denial of a participant’s request for a lump sum payment of benefits violated “his rights under the terms of the plan” (29 U.S.C. § 1132(a)(1)(B)) and ordered the lump sum payment be made.
Finally, I would also hold that Schia-vone’s failure to maintain written records, expressly required by the terms of the plan, is a violation of the Act that is actionable under § 502(a)(3), 29 U.S.C. § 1132(a)(3). The majority concedes implicitly that the district court erred in characterizing § 502(a)(3) as merely conferring standing by stating, in an attempt to sidestep this clear violation, that “there is no causal relationship between the conceded failure of the Committee to keep written records of their proceedings and the decision it made to deny appellant a lump sum benefit.” Maj.Op. p. 916, supra. With all due respect, this explanation, offered without any authority and devoid of any basis in the statute, is unsupportable. As noted earlier, ERISA expressly authorizes compliance suits independent of any claim for benefits, and such suits have been brought, for example, to prevent possible future violations, to challenge various aspects of a new plan, and to object to an amendment to a plan that may affect the future eligibility of unspecified participants. See note 2, supra. The majority’s holding engrafts onto § 502 a requirement that the alleged violation of ERISA must be “causally related” to some denial of benefits. Because this can be done only by disregarding the clear terms of the Act, its legislative history and existing case law, I decline to follow that course.
In sum, I would hold that the plan summary (1) was deficient in violation of § 102(b) by reason of its failure to disclose the unwritten rule against lump sum pay*920ments to long-term retirees, (2) failed in violation of § 503 to provide a written notice of the denial of such payments and an opportunity for review, and (3) failed in violation of § 502 to maintain written records as required by that section.
As a remedy I would award Pompano his requested lump sum payment, since such an award would further the purposes of the Act to ensure that administrators comply strictly with its provisions. See Frary v. Shorr Paper Products, Inc., supra, 494 F.Supp. at 471 (ordering lump sum payment as remedy). In addition, I would award attorney’s fees to Pompano’s counsel pursuant to 29 U.S.C. § 1132(g)(1) for his services in clarifying and enforcing rights under the Act. See Landro v. Glendenning Motorways, 625 F.2d 1344, 1356 (8th Cir. 1980).

. Even if the Committee’s exercise of discretion were an issue, there is no evidence that the denial of lump sum benefits to plaintiff in this case involved a particularized determination by the Committee not to grant his request.

. See, e.g., Lechner v. National Benefit Fund for Hospital and Health Care Employees, 512 F.Supp. 1220 (S.D.N.Y.1981) (suit by nonclaimant to prevent possible future violations); International Ass’n of Bridge, Etc. v. Douglas, 646 F.2d 1211 (7th Cir. 1981) (suit under 29 U.S.C. § 1132(a)(1)(B) challenging plan amendment that might affect unspecified future participants); Corley v. Hecht Co., 530 F.Supp. 1155 (D.D.C.1982) (misleading plan summary *918violates disclosure requirements of 29 U.S.C. § 1022(a)(1); Janowski v. International Brotherhood of Teamsters Local No. 710, 500 F.Supp. 21 (N.D.Ill. 1980) (challenging various aspects of new plan).

. See, e.g., International Ass’n of Bridge, Etc. v. Douglas, supra; Morrisey v. Curran, 567 F.2d 546 (2d Cir. 1977) (seeking liquidation of unsound investment); Corley v. Hecht Co., supra (prohibiting financial transactions between fiduciary and plan).

. See H.R.Rep.No.93-533, 93d Cong., 1st Sess., reprinted in [1974] U.S.Code Cong. & Ad.News 4639, 4655; S.Rep.No.93-127, 93d Cong., 2d Sess., .reprinted in [1974] U.S.Code Cong. & Ad.News 4838, 4871. See also Lechner v. National Benefit Fund for Hospital and Health Care Employees, supra, 512 F.Supp. at 1221-22 & n.6; Kulchin v. Spear Box Co. Retirement Plan, 451 F.Supp. 306, 311 (S.D.N.Y.1978); Lewis v. Merrill Lynch, Pierce, Fenner & Smith, 431 F.Supp. 271, 274 (E.D.Pa.1977).

. Section 503 provides:
“In accordance with regulations of the Secretary, every employee benefit plan shall—
(1) provide adequate notice in writing to any participant whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and
(2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.” 29 U.S.C. § 1133.