Opinion
Case No. 1:98-CV-286
Dated September 28, 1999
MEMORANDUM OPINION
Plaintiff Edward L. Redmond seeks damages for violations of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. Plaintiff originally set forth two counts in his complaint, one of which was subsequently dismissed by the Court following a stipulation by the parties. In the remaining count, plaintiff contends defendant ANR Pipeline Company's management misled him by denying knowledge of plans to adopt a retirement plan providing enhanced benefits shortly after plaintiff's announced early retirement. As a result, plaintiff submits he retired early and lost eligibility for significantly increased retirement benefits. Defendants, the Pension Plan for Employees of the Coastal Corporation ("Coastal Plan"), the Coastal Corporation ("Coastal"), American Natural Resources System Retirement Plan and ANR Pipeline Company ("ANR") move for summary judgment.
For the reasons set forth below, the Court will grant defendants' motion for summary judgment. A review of the record confirms that no group with authority to adopt and implement changes to the Coastal Plan gave "serious consideration" to an early retirement incentive program ("ERIP") prior to the effective date of plaintiff's retirement. Consequently, as a matter of law, the Court finds plaintiff is not entitled to relief.
I
When considering this motion, the Court views the facts in the light most favorable to plaintiff and draws all reasonable inferences in his favor. Although the parties dispute some facts, particularly the extent and significance of discussions of early retirement incentives between ANR and Coastal management in mid-July and August of 1995, little dispute exists with regard to those events necessary to decide this motion.
Plaintiff began his employment with defendant ANR in March of 1973 and participated in the ANR Pension Plan. In 1985, Coastal acquired ANR as a wholly-owned subsidiary; four years later, the ANR Pension Plan was merged into the Coastal Plan, with the Coastal Plan as the surviving entity.
In October 1994 plaintiff gave notice of his intention to retire on March 17, 1995, with an effective date of April 1, 1995. Under the prevalent practice and policy in place at ANR, however, plaintiff could have revoked his retirement at any time prior to his chosen effective date.,
In January 1995, Jeff Connelly, ANR's president, directed Mike Maslyn, ANR's vice president of administration, to investigate an ERIP option in order to cut costs. Maslyn then contacted the Wyatt Company and requested that it develop early retirement window designs. In February of 1995, the Wyatt Company outlined five potential options for an ERIP for Maslyn's review. Afterward, Maslyn drafted pro forma assumptions of an ERIP in early February 1995, and contacted several senior ANR executives to assist him.
In January of 1995, plaintiff had a conversation with Maslyn and inquired whether early retirement incentives were being considered; Maslyn answered that no such incentives were being considered. Also in January 1995, plaintiff contacted Pete Demgen, a benefits administrator at ANR. Demgen also told plaintiff that early retirement incentives were not being considered. Lastly, in March 1995, prior to his last day of work, plaintiff again contacted Demgen and inquired about the possibility of any early retirement incentives; he was again informed no such benefits were being considered.
On March 27, 1995 Maslyn submitted a one-page memorandum with the cost estimates and other related information to Connelly describing the options outlined by the Wyatt Company. According to the record, no further action was taken until sometime in July of 1995. At that time, Connelly asked Maslyn to approach Brownlee, Coastal's vice president of human resources, with the work done to date and propose the possibility of an ERIP. Maslyn did so, and following some amount of further internal discussions at both ANR and Coastal, sometime in mid or late July a meeting was held at Coastal's headquarters in Houston to discuss the proposal.
The ERIP was adopted by unanimous consent by Coastal on August 28, 1995, and immediately announced and implemented on September 1, 1995.
II
A party seeking summary judgment must demonstrate that "there is no genuine issue as to any material fact." Fed.R.Civ.P. 56(c). Southeastern Oakland County Resource Recovery Auth. v. Madison Heights, 5 F.3d 166 (6th Cir. 1993); see Celotex Corp. v. Catrett, 477 U.S. 317 (1986). "When the moving party has carried its burden under rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electrical Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 (1986). It must establish that there is a "genuine issue for trial." Id. at 587. The inquiry under a motion for summary judgment is thus the same as that under a motion for judgment as a matter of law: "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-2 (1986).
III
In general, an ERISA fiduciary need not disclose prospective changes to a benefit plan. See Muse v. IBM, 103 F.3d 490, 494 (6th Cir. 1996). If, however, an employer-fiduciary gives "serious consideration" to implementing a change in plan benefits, a fiduciary duty not to make either intentional or negligent misrepresentations to potential plan participants arises. Id. at 493. According to Muse, "[t]he exception of serious consideration does not apply until a company focuses on a particular plan for a particular purpose." Muse, 103 F.3d at 494.
In its most recent decision on this subject, McAuley v. IBM, 165 F.3d 1038 (6th Cir. 1999), the Sixth Circuit provided further guidance on whether a company has given "serious consideration" to a change in Plan benefits. In McAuley, the Sixth Circuit analyzed the facts under both the Muse standard and the three-factor test adopted by the Third Circuit in Fischer v. Philadelphia Elec. Co. ("Fischer II"), 96 F.3d 1533 (3rd Cir. 1996), cert. denied, 520 U.S. 1116 (1997), and concluded that "serious consideration" occurred when senior management with the authority to adopt and implement changes reviewed proposed changes. Following McAuley's lead, the Court will review the record under both Muse and Fischer II.
To resolve the instant motion, it is first necessary to ascertain which of defendant entities' management possessed the authority necessary to give "serious consideration" to amend the Coastal Plan. The Court must then determine when the relevant entity actually gave "serious consideration," as defined by Muse, to the ERIP adopted by Coastal on August 28, 1995. Like the Sixth Circuit in McAuley, the Court finds both the Muse and Fischer II standards result in the same conclusion when applied to the facts of record.
A.
Muse provides that "[t]he exception of serious consideration does not apply until a company focuses on a particular plan for a particular purpose." Muse, 103 F.3d at 494. McAuley augments Muse by setting forth circumstances signaling when a company "focuses" upon a "particular plan for a particular purpose." The Sixth Circuit explained that such focusing occurs:
[W]hen . . . a group with the authority to approve the changes for implementation, considered plan options and directed personnel staff to proceed to a final design. Such consideration by a group with significant powers constitutes the company's `focus' on a plan as required by Muse.
McAuley, 165 F.3d at 1044. Hence, to satisfy the "serious consideration" test as enunciated in Muse and expanded upon in McAuley, plaintiff must demonstrate when a particular ERIP option was considered by management possessing the authority to adopt and implement changes to the Coastal Plan.
Defendant maintains that ANR was not the plan administrator, trustee, or other named fiduciary under section 402 of ERISA, and had no discretionary authority or control so as to be a general fiduciary under section 3(21) of ERISA. Therefore, ANR's management could not have given "serious consideration," as defined by the case law, to an ERIP's adoption because it lacked the requisite authority.
Plaintiff makes four arguments in response. Initially, plaintiff submits ANR qualifies as a fiduciary for purposes of this matter. Plaintiff cites case law defining the establishment of the terms of a benefits plan as a settlor function, not a fiduciary function. Plaintiff then concludes that serious consideration can be given by an entity that is not a plan fiduciary. Although plaintiff correctly states that the business decisions made by an employer are not made in its fiduciary capacity, his conclusion that a non-fiduciary can give "serious consideration" to an ERIP's adoption, as defined by Muse and McAuley, is unwarranted. Although ANR may have seriously considered the adoption of an ERIP as that term is commonly understood, for the "serious consideration" exception to apply and require disclosure on the part of defendants, McAuley requires that a group with the authority to adopt and implement changes to the Coastal Plan consider plan options and directed staff to proceed to a final design.
Plaintiff further suggests, however, that the Muse test merely requires that a "company" focus on a particular plan for a particular purpose, and that in this action, ANR is the relevant company. The Court finds that plaintiff's interpretation does not comport with the case law. In both Muse and McAuley, the defendants were simultaneously plan fiduciaries and the plaintiff's employers. Here, plaintiff's argument would require the extension of the duty to disclose potential plan changes to include both consideration by an entity with the power to approve plan changes, as in Muse, and consideration by a subsidiary that neither qualifies as a named fiduciary nor exercises discretionary control over its parent's benefits plan and has no power to implement any plan changes. Plaintiff's broad interpretation of the Muse test conflicts with the language in McAuley that holds "serious consideration" occurs when senior management with authority to implement changes focuses on a particular amendment to a plan.
Secondly, plaintiff claims that ANR qualifies as a plan administrator based on definitions used by Coastal in its summary plan description ("SPD") provided to Coastal Plan participants. Coastal's January 1995 ("SPD") defines the terms "Coastal" and "Company." Because page 21 of the SPD identifies the plan administrator as "The Coastal Corporation," Plaintiff argues that ANR, a subsidiary of Coastal, thus qualifies as a plan administrator. Accordingly, plaintiff reasons ANR possesses discretionary authority over the Coastal Plan and qualifies as an ERISA fiduciary under 29 U.S.C. § 1102(21)(A). Plaintiff's argument, however, would require the Court to rewrite and expand the definitions set forth in the SPD, which the Court declines to do. The SPD's language quoted above simply provides that references to "Coastal" include the parent and its subsidiaries and references to "Company" refer to a particular subsidiary. The SPD does not define "The Coastal Corporation" as including any subsidiaries, and the SPD offers no support for plaintiff's argument.
Plaintiff cites the SPD definition section that reads as follows:
Reference to "Coastal" or "Company"
Reference in this handbook to "Coastal" includes The Coastal Corporation and its subsidiaries. Reference to the "Company" refers to an individual subsidiary which has adopted a Plan.
Furthermore, the Court finds no support for plaintiff's position in either the law or the facts. Under ERISA, two types of plan fiduciaries exist: "the named fiduciaries in the written instrument creating the plan, who control and manage the administration of the plan, 29 U.S.C. § 1102 (a)(1); and the `discretionary' fiduciaries, who have some discretionary authority over the administration of the plan, 29 U.S.C. § 1102 (21) (A)." Drennan v. Gen. Motors Corp., 977 F.2d 246, 250-251 (6th Cir. 1992). ANR was neither a named fiduciary in the Coastal Plan's documentation, nor was it named in Coastal's SPD. Moreover, no evidence exists from which a jury could reasonably infer that ANR possessed or exercised discretionary authority necessary to be classified as a discretionary fiduciary. ANR's management could not have adopted any changes or amendments to the Coastal Plan. Consequently, the Court finds no evidence in the record supporting the contention that ANR qualifies as either a named or discretionary fiduciary of the Coastal Plan.
Thirdly, plaintiff cites the Pension Benefit Guaranty Corporation ("PBGC") rules stating, "all employees of trades or businesses . . . which are under common control shall be treated as employed by a single employer," and argues defendants cannot differentiate between employers.
While the above statement of ("PBGC") rules may be correct, it does not confer authority over an ERISA benefits plan administered by a parent corporation to its subsidiary. The issue before the Court is whether defendant ANR qualifies as a "group with the authority" over the Coastal Plan. Because the Court finds no evidence in the record to support that contention, it is irrelevant whether employees over multi-layered enterprises are treated as employed by a single employer under ("PBGC") rules.
Lastly, plaintiff contends an implicit fiduciary duty to answer questions truthfully on the part of ANR exists because the SPD reserves the right of ANR to terminate its participation in the Coastal Plan. Even if plaintiff has correctly characterized defendant ANR's right of termination, his argument does not comport with the case law. McAuley states clearly that Muse's fiduciary duty arises only after a group with the authority "to approve the changes" to a benefits plan focuses upon a particular change to the plan. Consequently, because ANR lacked the power to amend the Coastal plan, it could not have satisfied the McAuley threshold requiring serious consideration by management with authority to implement changes.
B.
Having concluded that ANR's management lacked authority to adopt and implement changes to the Coastal Plan, and therefore its consideration of the ERIP could not require disclosure under Muse and McAuley, the Court turns to examine the record in light of Fischer II. Under the Fischer II test, "serious consideration" of a change in plan benefits occurs when "(1) a specific proposal (2) is being discussed for purposes of implementation (3) by senior management with the authority to implement the change. . . ." McAuley (citing Fischer II), 165 F.3d at 1043. Expounding upon the third prong of the Fischer II test, the Third Circuit stated:
Consideration by senior management is also limited to those executives who possess the authority to implement the proposed change. This focus on authority can be used to identify the proper cadre of senior management, but it should not limit serious consideration to deliberations by a quorum of the Board of Directors, typically the only corporate body that in a literal sense has the power to implement changes in benefits packages. It is sufficient for this factor that the plan be considered by those members of senior management with responsibility for the benefits area of the business, and who ultimately will make recommendations to the Board regarding benefits operations.
Id. at 1044. To satisfy Fischer II's third prong, plaintiff must demonstrate that executives who possessed the authority to implement the proposed change to the Coastal Plan gave it "serious consideration." The relevant language in Fischer II points to those executives, "members of senior management with responsibility for the benefits area of the business," who could reasonably be said to possess the authority necessary to take action on a proposed change to a benefits plan. A jury might reasonably find that ANR's senior management had focused upon an ERIP at some point prior to plaintiff's retirement. As discussed in part A, however, the record unambiguously reflects that ANR's management lacked the authority necessary to implement changes to the Coastal Plan. Hence, under the Fischer II standard, only Coastal's management could give "serious consideration" to a change in the Coastal Plan.
Plaintiff argues in his response brief that the record indicates that Coastal gave a "rubber stamp" approval to an ERIP seriously considered by ANR. Even if this contention is correct, ANR still lacked authority to adopt changes to the Coastal Plan. Thus, "serious consideration" could only have occurred when Coastal's management, rather than ANR management, learned of the ERIP.
IV
Having concluded that ANR's management's development of an ERIP option fails to qualify as "serious consideration" under Muse and McAuley the Court turns to evaluate when a group within Coastal's management gave "serious consideration" to an ERIP's adoption. A careful review of the record indicates that Coastal's management was first contacted regarding the possibility of an ERIP in July of 1995, when Mike Maslyn approached Coastal's vice-president of human resources. Accordingly, the Court does not find it necessary to determine exactly when Coastal's management undertook "serious consideration" of the ERIP it adopted on August 28, 1995. Under either the Muse or Fischer II standard for "serious consideration," the earliest possible date for review of an ERIP by Coastal's management began in July of 1995, some three months after the effective date of plaintiff's retirement. As a result, defendants were under no fiduciary duty to disclose the possibility of an ERIP to plaintiff.
V
Under McAuley, the "serious consideration" exception requiring disclosure of prospective changes to a benefits plan applies only when management with authority to adopt and implement changes considers plan options and directs personnel to proceed to a final design. From the record, it is clear that Coastal management alone possessed the authority to adopt and implement changes to the Coastal plan. Because Coastal management was first contacted about the possibility of an ERIP approximately three months following the effective date of plaintiff's retirement, no duty of disclosure arose before plaintiff retired from ANR.
Accordingly, defendants' motion for summary judgment will be granted. An order consistent with this opinion shall issue forthwith.
JUDGMENT ORDER
In accordance with the Court's written opinion of even date,
IT IS HEREBY ORDERED that defendants' motion for summary judgment is GRANTED.
IT IS FURTHER ORDERED that JUDGMENT IS AWARDED to defendants on all counts of plaintiff's complaint.