Court Opinion

ID: 2994787
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:16:38.85074+00
Date Added: 2024-06-11T12:22:15.701055
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 00-2618

PETER G. MEIN,

Plaintiff-Appellant,

v.

CARUS CORPORATION, a corporation,
M. BLOUKE CARUS, and CARUS CORPORATION
CAPITAL ACCUMULATION PLAN,

Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99-C-8269--Harry D. Leinenweber, Judge.

Argued January 12, 2001--Decided February 21, 2001

  Before RIPPLE, ROVNER, and EVANS, Circuit Judges.

  EVANS, Circuit Judge. Common sense takes a
beating in this suit, brought under the Employee
Retirement Income Security Act, 29 U.S.C. sec.
1001 et seq. What should have been a relatively
simple matter has been dragging on for a decade.
Peter G. Mein is attempting to force his former
employer, Carus Corporation, to make certain
contributions to his 401(k) plan, and whether he
can succeed or not would seem to be a relatively
easy question.

  In 1979 Carus Corporation adopted a pension
plan called the Carus Corporation Capital
Accumulation Plan. As part of the plan, Carus
contributed 4% of each employee’s compensation
into an account for employees. The plan defined
"compensation" as the total of all amounts
received for services rendered, includable in
gross income for income tax purposes.

  In 1985 Mein and Carus entered into an
employment agreement which provided for the
creation of a chemical department known as
Special Products Division, of which Mein was
appointed vice-president. He was to earn a
royalty on products sold and was provided with
what he calls a phantom equity interest in the
division.
  A difference of opinion arose about the meaning
of the agreement, and the parties went to
arbitration. A settlement was reached on November
9, 1988, under which Carus agreed to pay Mein
royalties through December 31, 1989, on the same
percentage basis as under the employment
agreement. So long as Mein was a Carus employee,
royalty payments were considered compensation. In
addition, Mein released any equity interest he
had in the Special Products Division, in exchange
for which Carus agreed to pay him $575,000 in
four installment payments, which accrued interest
from November 9, 1988. Ultimately, Mein received
payments totaling $643,335.98. Carus gave Mein W-
2 forms which included these payments in his
gross income.

  In 1991 the lengthy dispute with which we are
concerned began when Mein wrote to Carus asking
whether the equity payments he received under the
settlement agreement were treated as eligible
compensation for his 401(k) plan. Over the next
2 years Mein received letters and memos from
Carus officials telling why they were not
eligible compensation. One memo said that the
funds he received under the settlement agreement
were a "severance settlement" and not
compensation for purposes of the 401(k) plan.
Another said that the royalty payments were
eligible compensation but that the equity
payments were not. Another informed Mein that the
payments were for the release and settlement of
the equity portion of the employment agreement,
not for employee services; therefore, they were
not compensation under the 401(k) plan.

  In 1994 Mein filed a state court breach-of-
contract case seeking to compel Carus to make the
disputed payments into the 401(k). The court
dismissed the suit without prejudice on the basis
that the case presented an ERISA claim; for that
reason, the court concluded that it lacked
jurisdiction. The Illinois appellate court agreed
that it was an ERISA case but concluded that it
was the type of ERISA case over which there was
concurrent federal-state jurisdiction. The case
was remanded so that Mein could amend to properly
frame his claim as one arising under ERISA. After
the amendment to the complaint, Mein encountered
yet another problem: the trial court dismissed
the case based on Mein’s failure to exhaust
administrative remedies as required under ERISA.
The Illinois appellate court affirmed, saying
that Mein had not shown that administrative
remedies would have been "clearly useless." The
court rejected Mein’s contention that the plan
was not the proper forum for the relief he sought
and his view that his is a claim against the
company for not making the contributions and that
the plan’s role is merely to receive
contributions and pay benefits.

  Mein then undertook what he perceived to be a
rather fruitless administrative appeal, and, sure
enough, on August 3, 1999, James Wilkes, writing
as trustee for the plan, informed him that the
"Plan Administrator" had reviewed his claim and
denied it on the basis that the payments were
made under the settlement agreement, which
terminated his employment agreement and his
equity interest in the division; consequently
they were not in exchange for "services rendered"
and were not compensation under the plan.
Alternatively, Wilkes said, the payments were
closer to severance or post-employment pay and,
for that reason as well, were not compensation.

  In 1999, nearly a decade after the dispute
began, Mein filed the present district court
complaint seeking relief under ERISA, naming as
defendants Carus Corporation and M. Blouke Carus,
a minority shareholder. Mein claimed that the
terms of the plan required the Carus Corporation
to contribute 4% of the $643,336 into his 401(k)
retirement account. He sought an order requiring
the company to make the contributions. The
defendants moved to dismiss the complaint on the
basis that they were not appropriate defendants
to a claim for ERISA benefits--that the plan,
which was not named as a defendant, was in fact
the only proper defendant. At a hearing, the
district judge granted the motion but gave Mein
leave to refile. Perhaps anticipating another
setback, at the hearing Mein was prepared with an
amended complaint naming the two previous
defendants and adding the Carus Corporation
Capital Accumulation Plan as a defendant.
District Judge Harry D. Leinenweber let him file
the amended complaint but said the original
defendants remained dismissed. In spite of that,
Mein insisted that he had no claim against the
plan but only against the employer which promised
to make contributions to the plan.

  Taking Mein at his word, the defendants filed a
motion to dismiss, saying that the plan was the
only appropriate defendant, that Mein was not
seeking relief against it, and that Mein failed
to allege that the terms of the plan entitled him
to relief or that the plan violated his rights
under ERISA. Mein, in turn, filed a motion for
summary judgment, in which he stated,

  It is true that Mein seeks no relief from the
Plan. Carus Corporation and its guarantor, Blouke
Carus, are the only entities from whom Mein seeks
relief. The Carus plan is merely the conduit
through which employer contributions to the
employee’s account are made and ultimately
distributed to the employee.

The defendants’ motion to dismiss was granted and
Mein appeals.

  Mein’s insistence that he seeks relief only
from the corporation itself and from Blouke Carus
might seem to complicate our analysis, as might
the defendants’ professedly firm belief that in
this circuit the plan can be the only defendant.
But the latter proposition is much less firmly
established than the defendants would have us
believe. And Mein’s problem is not that he has
not named the plan as a defendant, because,
reluctantly, he has; his problem is that he
insists that he does not seek any relief against
the plan./1 Mein’s belief that the plan cannot
offer him the relief he seeks overlooks the
fundamental fact that it is the plan
administrator that has the power to determine
what the plan provisions mean, including, we
note, what compensation, as defined in the plan,
means. What makes all of this doubly absurd as a
matter of common sense, if not of law, is that,
in this case, it is the corporation which is the
plan administrator--which, though it sounds a
little fishy, is legal. Unlike the common law of
trusts, ERISA allows the employer to be the plan
administrator. 29 U.S.C. sec. 1002(16). In fact,
in Varity Corp. v. Howe, 516 U.S. 489 (1996), the
Court allowed employees to bring a breach of
fiduciary suit against a company in its role as
plan administrator.

  As to the proper defendant against   whom to make
an ERISA claim, it may ordinarily be   true that,
especially in a suit for benefits, a   plaintiff
should name the plan as a defendant.   Title 29,
U.S.C. sec. 1132(d), provides that a   plan may sue
or be sued and provides that

[a]ny money judgment under this title against an
employee benefit plan shall be enforceable only
against the plan as an entity and shall not be
enforceable against any other person unless
liability against such person is established in
his individual capacity under this title.

In Jass v. Prudential Health Care Plan, Inc., 88
F.3d 1482 (1996), in which a plaintiff had sued
a nurse who worked for a health plan, we said
that any money judgment was enforceable only
against the plan and not against any individual
unless her liability was established in her
individual capacity. In that context, the only
proper defendant was the plan. However, in
Riordan v. Commonwealth Edison Co., 128 F.3d 549,
551 (1997), we considered whether the plaintiff
should be out of court because she sued the wrong
entity--the employer rather than the plan itself.
We said:

It is true that ERISA permits suits to recover
benefits only against the plan as an entity,
[citing Jass], but we are not inclined to make
this case known for that rule. ComEd [the
employer] did not pursue summary judgment on this
basis. While we can affirm the judgment of the
district court on any basis supported by the
record, [citation omitted], the exact
relationship between ComEd and the plan is not
clearly set out. The plan documents themselves
refer to ComEd and the plan nearly
interchangeably, and the company designated
itself as the plan’s agent for service of
process. So it is not surprising that Rosemary
sued ComEd instead of the plan.

We have allowed cases to proceed with the company
as the named defendant. See, e.g., Olander v.
Bucyrus-Erie Co., 187 F.3d 599 (7th Cir. 1999),
and Anstett v. Eagle-Picher Industries, Inc., 203
F.3d 501 (2000). While it is silly not to name
the plan as a defendant in an ERISA suit, we see
no more reason to have this case stand starkly
for the proposition that the plan is always the
only proper defendant any more firmly than did
Riordan.

  In fact, in this case there may be less reason.
The corporation and the plan are, if anything,
even more closely intertwined in this case than
in Riordan. When the advantages of the plan are
set out in the summary plan description, the
pronouns we and our are used and seem clearly to
refer to the company, not the plan: e.g., "Our
matching contributions give you an immediate
return on the amount you save. We will make a
matching contribution equal to 25% of your
savings contributions." Throughout the
description, as in Riordan, the close
relationship between the corporation and the plan
is evident. Also as in Riordan, the designated
agent for legal process is the corporation.
Service of process, the description says, can
also be made on the plan administrator or a
trustee. As we have said, the plan administrator
in this instance is the Carus Corporation itself.
A section of the actual plan document at Section
12.01 gives the plan administrator "complete
control of the administration of the Plan." Also,
the plan trustee, with whom Mein most often
communicated, was James C. Wilkes, who, although
at least on some occasions, signed letters as
trustee for the plan, also used Carus Corporation
stationary which indicated that he was vice-
president of human resources for the corporation.
Under these circumstances, given Riordan, and
given the fact that Mein actually does name the
plan as a defendant, we decline to toss out his
claim for contributions from the corporation on
the basis that he thought he was not making a
claim against the plan itself. After all, it has
some logical appeal to say that requiring an
employer to make a contribution should be a claim
against the employer, somewhat in the manner of
claims brought by unions to enforce contributions
to multi-employer plans, under 29 U.S.C. sec.
1145.

  We recognize, however, that the problem with
that contention is that the issue before us
involves a matter of plan interpretation, and
plan interpretation is a matter for the plan
administrator, making the plan a proper party.
Here the problem is that although Mein has named
the plan as a defendant, he insists, we repeat,
on maintaining that he does not have a claim
against the plan.

  It hardly matters. Under the Carus plan, the
plan administrator is the corporation. We fail to
see how the plan or the corporation is harmed by
Mein’s insistence that he is not making a claim
against the plan. It is the plan administrator,
i.e., the corporation, that gets to decide what
the plan requires. More importantly, in spite of
himself, Mein got it right in his amended
complaint when he alleged that the "Carus
Corporation Capital Accumulation Plan is hereby
made a party defendant to assure that the court
may grant complete relief to the parties."
Because of this allegation and the close
relationship between the plan and the
corporation, we find that Mein avoided pleading
himself out of court.

  On the merits of his claim, we note that the
plan provides that the company will contribute 4%
of compensation. Compensation is defined at
Section 1.09 of the plan as

[t]he total of all amounts received during the
Plan Year by the Employee from the Employer for
services rendered to the Employer which is
currently includible in gross income for income
tax purposes. In addition, Compensation shall
include all elective contributions made by the
Employer on behalf of an Employee which are not
currently includible in gross income of an
Employee under Code Section 401(k).

Carus Corporation is required to make the
contribution only if the payment is determined to
be compensation. The entity which gets to decide
what compensation means is the plan
administrator, which, as we have said several
times already, is the Carus Corporation:

Not in limitation, but in amplification of the
foregoing, the Plan Administrator has the power
to construe the Plan and to determine all
questions that may arise under the Plan,
including all questions relating to the
eligibility of Employees to participate in the
Plan . . . . The Plan Administrator’s decisions
upon all matters within the scope of its
authority shall be final.

When a plan gives the administrator discretion to
interpret the plan, his interpretation is
entitled to great deference and the determination
will be sustained if it is reasonable. Firestone
Tire and Rubber Co. v. Bruch, 489 U.S. 101
(1989).

  The plan administrator determined that the
payment of the $575,000, plus interest, was not
compensation for services rendered, as required
under Section 1.09 of the plan, but rather was
for the release of Mein’s equity interest in the
Special Products Division. The administrator also
determined that the "lump sum settlement payments
you received from Carus Corporation during 1989
to 1991 were made pursuant to the Release and
Settlement of Employment Agreement, which
provided that your prior employment agreement
with Carus Corporation was ’terminated.’" It also
provided that Mein surrender "any equity
interest, actual or ’phantom,’ which he may have
in the Special Products Division." In addition,
the administrator determined that because the
payment was in the nature of severance pay, it
was specifically excluded from compensation. This
interpretation cannot be labeled as unreasonable.
For this reason, the judgment dismissing the
complaint is AFFIRMED.

/1 Ironically, the defendants’ argument that the
amended complaint must be dismissed because Mein
is not making a claim against the plan relies on
matters outside the pleadings: Mein’s oft-
repeated insistence that his claim is not against
the Plan. Because both parties rely on matters
outside the pleadings, and because Mein moved for
summary judgment in the district court, our
attempt to sort out the issues in this case will
be based on the entire record before us.