McCall v. Burlington Northern/Santa Fe Co. , 237 F.3d 506 ( 2000 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-11147
JAMES D McCALL; ET AL,
Plaintiffs,
JAMES D McCALL; STANLEY R. COLLINS; E E BOWMAN; J WILLIAM HUFF;
MICHAEL N DANA; O J NORMAN; MURL C LINKE; JOSEPH R ROBERTS;
LAWRENCE S KISER; NORMAN D BREHM; WILLIAM S BRANCH; JEROME P
O’CONNOR; WILLIAM T DAVIDSON; BART A WIESLEY; W H TICEN; BETTY
TITCHENER, executrix of Gerald Titchener’s estate; and GEORGE D
STARIHA,
Plaintiffs/Appellants,
VERSUS
BURLINGTON NORTHERN/SANTA FE COMPANY f/k/a Burlington Northern
Railroad Co.; BURLINGTON NORTHERN RAILROAD COMPANY 1991 SEPARATION
PAY PLAN; TRUSTEES OF THE BURLINGTON NORTHERN RAILROAD COMPANY 1991
SEPARATION PAY PLAN; TRUSTEES OF THE BURLINGTON NORTHERN RAILROAD
COMPANY 1995 VOLUNTARY SEPARATION PLAN; BURLINGTON NORTHERN, INC.
PENSION PLAN; BURLINGTON NORTHERN THRIFT AND PROFIT SHARING PLAN;
TRUSTEES OF THE BURLINGTON NORTHERN THRIFT AND PROFIT SHARING PLAN;
ALAN W. SPEAKER; JEANNE MICHALSKI; and DONALD SCOTT,
Defendants/Appellees.
Appeal from the United States District Court
for the Northern District of Texas
December 26, 2000
1
Before KING, Chief Judge, PARKER, Circuit Judge, and KAZEN*,
District Judge.
ROBERT M. PARKER, Circuit Judge:
Plaintiffs James D. McCall, Stanley R. Collins, E. E. Bowman,
J. William Huff, Michael N. Dana, O. J. Norman, Murl C. Linke,
Joseph R. Roberts, Lawrence S. Kiser, Norman D. Brehm, William S.
Branch, Jerome P. O’Connor, William T. Davidson, Bart A. Wiesley,
W. H. Ticen, Betty Titchener, and George D. Stariha appeal the
summary judgment entered for defendants (collectively referred to
“Burlington Northern”) on claims brought pursuant to the Employee
Retirement Income Security Act of 1974 (“ERISA”), as amended, 29
U.S.C. § 1001, et seq. We affirm.
I. FACTS AND PROCEDURAL HISTORY
In 1991, Burlington Northern determined that it was necessary
to reduce its workforce by 500 individuals. Burlington Northern
first attempted to reach its targeted workforce level through a
voluntary separation pay plan. Donald W. Scott, Burlington
Northern’s Senior Vice President of Human Resources, was charged
with designing and implementing the 1991 Burlington Northern
Railroad Separation Pay Plan (“1991 Plan”). Burlington Northern
employees with more than ten years of service and who were 55 years
of age or older, were eligible to participate in the 1991 plan.
The primary benefit offered by the 1991 Plan was a lump sum payment
*
District Judge of the Southern District of Texas, sitting by
designation.
2
computed pursuant to the following formula: “2 weeks base salary
times years of service to a maximum of two times annual base
salary.”
In Scott’s prior experience with voluntary separation pay
plans at Burlington Northern, employees seemed unwilling to take
advantage of the plans because they assumed that there might be
another, more generous pay plan adopted in the near future. Scott
recommended adopting a plan that would be as generous as possible,
in order to accomplish the targeted voluntary workforce reduction
without resorting to involuntary layoffs. Other Burlington
Northern managers concurred.
Included with the Summary Plan Description (“SPD”) was a
series of questions and answers designed to answer anticipated
employee questions about the 1991 Plan. One of the questions and
answers (referred to as the “No Better Benefits Q&A”) was the
following:
Q: Will there be another opportunity to participate in
a separation pay plan after this one?
A: The company is offering this plan in an effort to
reduce its expenses due to business conditions. At
this time, the company’s management has not decided
whether there will be any additional voluntary
separation plans. However, management has decided
that if there are any additional plans, the
benefits would not be as good as those contained in
this plan.
Plaintiffs are former employees of Burlington Northern who
accepted the 1991 Plan’s offer of compensation in return for
voluntarily ending their employment. In 1995, Burlington Northern
3
adopted an additional voluntary separation plan (“1995 Plan”) that
provided better benefits than those in the 1991 Plan. In
particular, the 1995 Plan offered separation pay for eligible
employees equal to two years’ base salary. Plaintiffs requested
benefits under the 1995 Plan based upon the No Better Benefits Q&A.
Burlington Northern denied the requests. Plaintiffs brought suit
asserting claims for breach of fiduciary duty under ERISA, denial
of benefits in violation of ERISA, estoppel, and interference with
plan benefits under § 510 of ERISA, 29 U.S.C. § 1140. The district
court entered summary judgment for Defendants and Plaintiffs timely
appealed.
II. ANALYSIS
We review the district court’s grant of summary judgment de
novo, viewing all facts in the light most favorable to Plaintiffs.
Merritt-Campbell, Inc. v. RxP Prods., Inc., 164 F.3d 957, 961 (5th
Cir. 1999).
A. Breach of Fiduciary Duty
A plan participant may bring suit for breach of fiduciary duty
to obtain “appropriate equitable relief” to redress violations of
ERISA. Varity Corp. v. Howe, 516 U.S. 489 (1996). Plaintiffs
alleged that three acts by Burlington Northern give rise to their
causes of action which the district court characterized as breach
4
of fiduciary duty claims:1 (1) drafting and distributing the 1991
Plan Q&A section, (2) enacting the 1995 Plan, and (3) denying their
claims for benefits under the 1995 Plan.
1. Drafting the 1991 Plan
Providing information to beneficiaries about likely future
plan benefits falls within ERISA’s statutory definition of a
fiduciary act. Varity, 516 U.S. at 502-503. When an ERISA plan
administrator speaks in its fiduciary capacity concerning a
material aspect of the plan, it must speak truthfully. Fischer v.
Philadelphia Elec. Co., 96 F.3d 1533, 1538 (3d Cir. 1996).2
1
On appeal, Plaintiffs do not identify the statutory basis for
some of their arguments. They assert that defendants are “bound”
by the No Better Benefits Q&A, but do not articulate that claim in
terms of ERISA’s protections. We will analyze plaintiffs’
contentions within the framework of specific ERISA civil
enforcement provisions invoked by their pleadings and ruled on by
the district court.
2
The Fifth Circuit has not yet set out the boundaries of a
fiduciary’s legal obligation to truthfully inform employees about
possible future employee benefit plans. Seven of our sister
circuits have held that there is no breach of fiduciary duty in
failing to inform beneficiaries about a future plan until and
unless that plan is under “serious consideration.” Bins v. Exxon
Co., 189 F.3d 929, 934-37 (9th Cir. 1999); Vartanian v. Monsanto
Co., 131 F.3d 264 (1st Cir. 1997); Hockett v. Sun Co., Inc., 109
F.3d 1515, 1522 (10th Cir. 1997); Muse v. IBM Corp., 103 F.3d 490,
493 (6th Cir. 1996); Fischer v. Philadelphia Elec. Co., 96 F.3d
1533 (3d Cir. 1996); Wilson v. Southwestern Bell Tel. Co., 55 F.3d
399, 405 (8th Cir. 1995); Barnes v. Lacy, 927 F.2d 539, 544 (11th
Cir. 1991). The Second Circuit, on the other hand, declined to
treat serious consideration as a “talismanic” indicator, but listed
it as one factor in the materiality inquiry. Ballone v. Eastman
Kodak Co., 109 F.3d 117, 122-23 (2d Cir. 1997). It is undisputed,
in this record, that the 1995 Plan was not conceived until several
years after Plaintiffs made their decision to retire. Finding the
question not properly presented, we decline the parties’ invitation
5
The district court determined that there was no genuine issue
of fact in the summary judgment record concerning whether the
statements contained in the No Better Benefit Q&A were truthful
when made. Plaintiffs contend that the evidence raises a genuine
issue of material fact concerning the truthfulness of the statement
that management had made a decision regarding future benefits.
Specifically, the evidence shows that Don Scott, Burlington
Northern’s Senior Vice President of Human Resources, made the
decision that Burlington Northern would not offer a future plan
with better benefits based on his understanding of the management
group’s intention that the 1991 Plan should be the last time a
voluntary separation plan would have to be offered for the purpose
of a voluntary workforce reduction. Plaintiffs point to evidence
that Burlington Northern’s Executive Committee did not specifically
discuss or decide whether there were to be any future voluntary
separation plans and if so, whether or not the benefits would be
better than those offered in the 1991 Plan. Plaintiffs take the
position that Scott’s decision was inaccurately characterized as
the management’s decision. Because it is undisputed that Scott was
the member of senior management charged with responsibility for
making decisions in the benefits area of the business and for
implementing them, we find no genuine issue of material fact
regarding the truth of the statement that management had made the
to adopt or reject the “serious consideration” test for the Fifth
Circuit.
6
decision. Cf. Fischer v. Philadelphia Elec. Co., 96 F.3d 1533,
1540 (3d Cir. 1996)(reciting the test for determining whether a
change has received “serious consideration,” and limiting “senior
management” to those individuals who have responsibility for the
benefits area of the business, and who will ultimately make
recommendations to the board regarding benefits operation).
Because we conclude that the No Better Benefit Q&A was
truthful when made, it cannot support a cause of action against
Burlington Northern for breach of fiduciary duty based on a
material misrepresentation.
2. Adopting the 1995 Plan
Plaintiffs next contend that Burlington Northern breached its
fiduciary duty by adopting the 1995 Plan with significantly better
benefits than those contained in the 1991 Plan, relying on the rule
that “clear and unambiguous statements in the summary plan
description are binding.” Wise v. El Paso Natural Gas Co., 986
F.2d 929, 938 (5th Cir. 1993). An employer who adopts, amends or
terminates an employee benefit plan is not acting as a fiduciary.
Lockheed Corp. v. Spink, 517 U.S. 882, 889-90 (1996). Therefore,
Plaintiff has not stated a cause of action for breach of fiduciary
duty concerning the adoption of the 1995 plan.
3. Denial of Benefits Under the 1995 Plan
Plaintiffs argue that Burlington Northern breached a fiduciary
duty owed to them by denying their claims for benefits under the
7
1995 Plan. When a beneficiary wants what was supposed to have been
distributed under a plan, the appropriate remedy is a claim for
denial of benefits under § 502(a)(1)(B) of ERISA rather than a
fiduciary duty claim brought pursuant to § 502(a)(3). Corcoran v.
United HealthCare, Inc., 965 F.2d 1321, 1335 (5th Cir. 1992). We
therefore reject Plaintiffs’ breach of fiduciary duty claim based
on denial of benefits.
B. Denial of Benefits Under § 502(a)(1)(B).
ERISA authorizes a civil action by a participant “to recover
benefits due to him under the terms of his plan.” 29 U.S.C. §
1132(a)(1)(B). We review Burlington Northern’s plan
administrator’s interpretation of the plan for abuse of discretion,
based on language in both the 1991 and 1995 plans giving the plan
administrator discretion to review plan terms and decide claims for
benefits.3 Pierre v. Connecticut Gen. Life Ins. Co., 932 F.2d
1552, 1555-62 (5th Cir. 1991). The plan administrator’s factual
determinations are likewise reviewable for abuse of discretion.
Id.
This Circuit employs a two-step analysis for determining
whether a plan administrator abused its discretion in denying a
participant plan benefits. Rhorer v. Raytheon Eng’rs and Const’rs,
3
The 1991 and 1995 plan SPDs both provide that the plan
administrator is “[r]esponsible for the general administration of
the plan, including interpretation and communication of the plan,
[and] the determination and right of any person to benefits and the
payment of benefits.”
8
Inc., 181 F.3d 634, 639 (5th Cir. 1999). First we must determine
the legally correct interpretation of the plan and whether the
administrator’s interpretation accords with the proper legal
interpretation. Id. If the administrator’s construction is
legally sound, then no abuse of discretion occurred and the inquiry
ends. Id. But if the court concludes that the administrator has
not given the plan the legally correct interpretation, the court
must then determine whether the administrator’s interpretation
constitutes an abuse of discretion. Id. A decision is not an
abuse of discretion if a reasonable person could have reached a
similar decision, given the evidence before him. Cash v. Wal-Mart
Group Health Plan, 107 F.3d 637, 641 (8th Cir. 1997).
In examining the proper interpretation of the 1991 Plan, we
are guided by three rules. First, the SPD is binding and if there
is conflict between the SPD and the terms of the plan itself, the
SPD controls. Rhorer, 181 F.3d at 640. Second, any ambiguities in
the SPD must be resolved in the employee’s favor. Id. at 641.
Third, the SPD must be read as a whole. Hansen v. Continental Ins.
Co., 940 F.2d 971, 981 (5th Cir. 1991). It would be error to
attend only to one paragraph, page, or portion of the summary. Id.
The Burlington Northern plan administrator determined that
Plaintiffs were not due the enhanced benefits under the terms of
the 1991 and 1995 plans. Plaintiffs were not active employees in
1995 and do not argue that they were eligible under the plain terms
9
of the 1995 Plan for benefits arising from voluntary separation
from Burlington Northern employment in 1995. Instead, they argue
that the Plan Administrator abused its discretion in failing to
interpret the statement “management has decided that if there are
any additional plans, the benefits would not be as good as those
contained in this plan” to mean “if there are ever any plans with
benefits better than the current plan, you will be entitled to
benefits under that plan.”
While Burlington Northern is bound by statements in the Plan
documents, they are not bound by silence. Wise, 986 F.2d at 938.
Contractual vesting is a narrow doctrine. Id. To prevail,
Plaintiff must assert strong prohibitory or granting language. Id.
The 1991 Plan is silent as to any potential remedy for the
violation of the alleged promise never to offer a better plan.
Therefore, there is no binding obligation to pay 1995 Plan benefits
to Plaintiffs.
Moreover, Plaintiffs’ proposed reading relies on the
assumption that management has committed itself never to change the
decision announced in the Q&A. That interpretation is belied by
the statement, appearing two pages earlier in the same SPD, that
“[t]he Company reserves the right to amend and/or terminate this
plan at any time for any purpose.” It is clear that ERISA allows
an employer to amend its beneficiary plan without explicitly
reserving that right in its SPD. Id. at 936. The combined force
10
of ERISA’s statutory allowance of plan amendments and Burlington
Northern’s reservation of that right in the 1991 Plan forces us to
conclude that the plan administrator’s interpretation of the 1991
Plan was legally correct. Therefore, we find no abuse of
discretion in the denial of Plaintiffs’ claims for benefits under
the 1995 Plan.
C. Estoppel
Plaintiffs allege that Burlington Northern is estopped from
denying their claims for benefits under the 1995 Plan. The
district court held that Plaintiffs’ estoppel cause of action is
not cognizable because when a party seeks to recover benefits owed
under an ERISA plan, state law estoppel claims are preempted by
ERISA. Transitional Hosps. Corp. v. Blue Cross and Blue Shield of
Texas, Inc., 164 F.3d 952, 954 (5th Cir. 1999). On appeal,
Plaintiffs contend that they are asserting “ERISA estoppel,” citing
Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226, 235-38 (3d
Cir. 1994). The Fifth Circuit has never adopted “ERISA estoppel,”
and has in fact expressed doubt as to whether a cause of action for
estoppel is cognizable under ERISA based upon written statements.
Weir v. Federal Asset Disposition Ass’n, 123 F.3d 281, 290 (5th
Cir. 1997).
We need not consider the availability of ERISA estoppel
because, even if we assume the cause of action is available to
Plaintiffs, they cannot establish the elements necessary to
11
prevail: (1) a material misrepresentation, (2) reasonable and
detrimental reliance upon the representation, and (3) extraordinary
circumstances. Id. Having already concluded that Burlington
Northern’s representations, which were true when made are not
material misrepresentations, we affirm the district court’s grant
of summary judgment on Plaintiffs’ estoppel claim.
D. Interference with Attainment of Benefits
Plaintiffs alleged a claim for interference with the receipt
of plan benefits in violation of ERISA § 510, 29 U.S.C. § 1140.
The claim is premised on the allegation that the 1991 Plan SPD
contained misrepresentations intentionally calculated to cause
Plaintiffs to leave their employment, thus giving up compensation
and benefits they otherwise would have earned had they continued
working. Section 510 of ERISA prohibits employers from discharging
employees for the purpose of interfering with their attainment of
any right to which they are entitled under an employee benefit
plan. Id.; Perdue v. Burger King Corp., 7 F.3d 1251, 1255 (5th
Cir. 1993). Plaintiffs contend that Burlington Northern’s
statement in the No Better Benefits Q&A caused them to resign when
they would not have otherwise done so and therefore their
resignations should not be considered voluntary. The success of
this claim depends upon a finding that Burlington Northern
misrepresented the truth in the No Better Benefit Q&A. The
district court held that there is no genuine issue of material fact
12
concerning whether Burlington Northern misrepresented present facts
when they made the statements in question. We agree and therefore
affirm the district court’s grant of summary judgment.
III. CONCLUSION
Based on the foregoing, we affirm the summary judgment in
favor of Burlington Northern.
AFFIRMED.
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KAZEN, District Judge, dissenting:
As the majority opinion reflects, Burlington Northern designed
the 1991 Separation Pay Plan (“the Plan”) to entice as many
employees as possible to accept voluntary separation. To that end,
the Summary Plan Description (“SPD”) explicitly stated that:
“The company is offering this Plan in an effort to reduce its
expenses due to business conditions. At this time, the company’s
management has not decided whether there will be any additional
voluntary separation plans. However, management has decided that
if there are any additional plans, the benefits would not be as
good as those contained in this plan.”
The majority concludes that in making this representation,
Burlington Northern did not breach its fiduciary duty as an ERISA
plan administrator because the statements were true when made.
That holding initially was made by the district court as a matter
of law in a summary judgment proceeding. I believe that there is
a genuine fact dispute on this issue. The evidence is that Don
Scott alone made the quoted decision that there would be no better
benefits in the future. There is also evidence that all important
decisions were to be reviewed by other members of senior
management. In deposition testimony, Scott recalled a presentation
about the Plan to senior management in which he explained “that
what we were trying to do was to offer a comfort to employees that
if they took this benefit, that it was going to be the best
available, that there wasn’t going to be another plan immediately
behind it of a higher value.” On the other hand, the district
14
court acknowledged testimony of other members of the management
team “that they did not discuss, review, or approve the verbiage”
included in the 1991 Plan. Nevertheless, the district court held,
and the majority apparently agrees, that Scott’s unilateral
decision can truthfully be labeled as a decision by “management”
under the test that a plan need be considered only by “those
members of senior management with responsibility for the benefits
area of the business, and who would ultimately make recommendations
to the board regarding benefits operations.”
The quoted language is taken from the opinion in Fischer v.
Philadelphia Electric Company, 96 F.3d 1533, 1540 (3rd Cir. 1996).
That case dealt with the common scenario of complaints by employees
that their employer was actually giving “serious consideration” to
a retirement plan while either denying or failing to disclose that
circumstance to the employees. The Fischer court was concerned
with when a future plan is under “serious consideration.” Fischer
recognized that typically only the Board of Directors can actually
implement changes in a benefit package, but concluded that for the
“serious consideration” test, it is only necessary that the plan is
being considered by those members of senior management responsible
for making recommendations to the Board.
In my view, there is a qualitative distinction between
determining whether someone in high management is “seriously
considering” a future plan and determining whether a company
actually has made an important unequivocal decision about a feature
15
of an already promulgated plan. In the face of deposition
testimony by senior management members that they never even saw,
much less discussed, the SPD language quoted above, it cannot be
said as a matter of law that “management has decided” that no
future plan would have better benefits. The truth of that
representation should be decided by the fact finder.
I also disagree that the plaintiffs cannot sue to recover
benefits due under the 1991 Plan. As stated in the majority
opinion, the SPD is binding and controls over any conflict with the
Plan itself. Further, any ambiguities in the SPD must be resolved
in the employees’ favor. The majority holds that although
Burlington Northern is bound by statements in the Plan documents,
it is “not bound by silence,” citing Wise v. El Paso
Natural Gas Co., 986 F.2d 929 (5th Cir. 1993). The precise
language from the Wise opinion is: “While clear and unambiguous
statements in the summary plan description are binding, the same is
not true of silence.” Id. at 938. The instant case does not
involve silence but rather a clear and unambiguous statement,
namely that no future plan would have better benefits. The
majority states that because the Plan is silent as to a potential
remedy, it is somehow unenforceable. The remedy is provided by
statute itself, 29 U.S.C. §1132(a). The majority also
characterizes the plaintiffs’ argument as being that management had
committed “never to change the decision announced in the Q & A” and
that this assumption was belied by other language giving the
16
Company the right to amend and/or terminate the Plan at any time
for any purpose. Plaintiffs do not dispute Burlington Northern’s
right to amend the 1991 Plan, but Burlington Northern never
attempted to exercise that right. Moreover, the plaintiffs do not
contend that Burlington Northern could never again design a
voluntary separation plan. Indeed, the disputed language in the
SPD specifically left open the option of future plans. What is at
issue is a positive, unequivocal statement that “management has
decided that if there are any additional plans, the benefits would
not be as good as those contained in this plan.” The majority
again relies on Wise for the proposition that “contractual vesting
is a narrow doctrine.” 986 F.2d at 938. In Wise, the company had
issued SPDs as early as 1977 but in 1985 issued new SPDs which, for
the first time, explicitly stated that the company had the right to
alter, amend, or otherwise change the plan. In October 1985, the
company announced that it would continue previous benefits only for
employees who retired before March 1, 1986, and anyone retiring
after that day would forfeit company-paid coverage. Id. at 933.
The litigation was brought by employees who retired after the
cutoff date of March 1, 1986, contending that their rights in
previous plans had somehow vested earlier. Wise was specifically
concerned only with “employees who had not retired as of the date
of the disputed change.” Id. at 936. Under the instant plan,
employees could elect to participate between June 17 and August 1,
1991. If these plaintiffs had attempted to participate after that
17
time, or if the company had attempted to amend the Plan sometime
before the plaintiffs made their election, there might be a
legitimate issue of vesting rights. As it is, however, there was
no amendment to the Plan at any time, and there is no doubt that
the plaintiffs voluntarily left their employment while the language
at issue was in effect.
For the foregoing reasons, I respectfully dissent.
18