Jensen v. Moore-Wallace North , 249 F. App'x 391 ( 2007 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 07a0607n.06
Filed: August 21, 2007
No. 06-4388
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
CARROLL L. JENSEN, et al., )
)
Plaintiffs-Appellants, )
)
v. ) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR THE
MOORE WALLACE NORTH AMERICA, ) NORTHERN DISTRICT OF OHIO
INC., et al., )
)
Defendants-Appellees. )
Before: CLAY and SUTTON, Circuit Judges; and GREER, District Judge.*
SUTTON, Circuit Judge. Seeking to recover a $200 million surplus from a pension plan that
the defendants sponsor, the plaintiffs—present and former plan participants—filed this class-action
lawsuit. The district court dismissed the complaint under Civil Rule 12(b)(6). Because the
defendants have not yet terminated or discontinued the pension plan and because the wasting-trust
doctrine does not apply, we affirm.
I.
In 1947, Moore Wallace North America, Inc., currently a subsidiary of R.R. Donnelley &
Sons Company, established the Retirement Benefit Plan of Moore North America, a defined-benefit
*
The Honorable J. Ronnie Greer, United States District Judge for the Eastern District of
Tennessee, sitting by designation.
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Jensen v. Moore Wallace N. Am. Inc.
pension plan, which Moore Wallace and its employees funded through their contributions. See
Comm’r v. Keystone Consol. Indus. Inc., 508 U.S. 152, 154 (1993) (a defined benefit plan is “one
where the employee, upon retirement, is entitled to a fixed periodic payment,” the size of which is
usually determined by “prior salary and years of service”). JA 8. Article 23 of the 1947 plan,
entitled “Finality of Contribution,” said:
It shall be impossible by operation of the plan, or of the trust agreement, by
termination, by power of revocation or amendment, by collateral agreement, by the
happening of any contingency, or by any other means, for any part of the corpus or
income of the trust fund to be used for or diverted to purposes other than the
exclusive benefit of active participants, inactive participants and retired participants,
or their respective beneficiaries, at any time prior to the satisfaction of all liabilities
with respect to such participants or their beneficiaries and it shall be impossible for
the Company to recover any amounts other than such amounts as remain in the trust
because of erroneous actuarial computations after the satisfaction of all fixed and
contingent obligations to participants or their beneficiaries under the plan.
1947 Plan, art. 23.1. Although Moore Wallace “reserv[ed] the right to amend or modify any of the
provisions of [the] plan,” the plan provided that “no such amendment or modification shall reduce
any benefit which may have accrued to any participant and which shall have been funded prior to
the date of such amendment . . . nor shall any such amendment have the effect of revesting in the
Company any part of the trust fund or of diverting it to purposes other than the exclusive benefit of
active participants, inactive participants and retired participants or their respective beneficiaries.”
Id., art. 21.4.
“In the event of discontinuance or termination,” the plan mandated that any remaining trust
funds be liquidated and distributed to participants on a pro rata basis. Id., art. 21.3. “Discontinuance
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Jensen v. Moore Wallace N. Am. Inc.
or termination,” the plan said, “shall not revert in the Company any right to any part of the sums
theretofore contributed by it.” Id., art. 21.2. The employee handbooks that Moore Wallace provided
to its employees reiterated that in the “event of termination of the Plan, all funds and Insurance-
Annuity Contracts then held by the Trustee will be distributed to the participants and their
beneficiaries.” JA 100; see also JA 101 (handbook stating that “[i]t will be impossible under any
circumstances for any part of the funds or Insurance-Annuity Contracts held by the Trustee to revert
to or become the property of the Company”).
This anti-reversion language remained part of the plan until 1972, when Moore Wallace
removed the provisions preventing it from recapturing surplus funds and replaced them with a
provision granting the company the right to any surplus. See 1972 Plan, § 15.2 (“If any of the funds
of the Plan remain after the satisfaction of all liabilities of the Plan, the said remaining funds shall
be paid by the Trustee to the Employer.”). The company also eliminated the pro-rata distribution
procedure contained in the original (1947) plan, providing instead that plan participants would
receive only the amount allocated specifically for them, id., and it amended the plan to permit
contributions only by the employer, not employees, id., § 5.1 (“No contributions are to be made by
Participants under the Plan.”).
In July 1997, Moore Wallace restructured the plan, changing it from a defined-benefit plan
to a cash-balance plan. See West v. AK Steel Corp., 484 F.3d 395, 399 (6th Cir. 2007) (“Like defined
contribution plans, . . . a cash balance plan creates an account for each participant. But unlike
traditional defined contribution plans, the account is hypothetical and created only for recordkeeping
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purposes.”). Under the 1997 plan, “Grandfathered Participant[s]” could continue accruing benefits
under the 1947 plan’s defined-benefit framework, or they could freeze the benefits they already
accrued under the 1947 framework and accrue future benefits under the amended plan’s cash-balance
framework. 1997 Plan, § 19.5. Grandfathered participants included (1) employees age 65 or older,
(2) employees age 50 or older with 10 or more years of experience with the company and (3)
individuals age 45 or older with 20 or more years of experience with the company who were
employees on December 31, 1997. Id. § 19.1(c). Employees who did not fit into any of these
categories could obtain benefits only under the 1997 amended cash-benefit plan. Moore Wallace
made no contributions to the plan after 1996.
On December 11, 2000, Moore Wallace amended the plan again, providing that “[n]o further
retirement benefits . . . shall accrue under the Plan on behalf of any Participant after December 31,
2000.” JA 239. Shortly thereafter, the company sent a letter to retirees to inform them that the
company was “changing the structure and delivery of [its] total benefit offering” from a pension plan
to a savings plan and that the pension plan would terminate on December 31. JA 241. In January
2001, Moore Wallace informed participants that it instead expected to terminate the plan on March
31 of that year. The company also supplied participants with a written question and answer
statement regarding the plan’s termination. The statement explained that the company “expected
that there [would] be surplus assets when the termination of the Retirement Plan is complete,” but
noted that the “precise amount of the surplus [could not] be determined at this time because it
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depend[ed] on several factors” and that the surplus would “be used for the successor plan (401K),
income and excise taxes” with “the balance reverting to Moore.” JA 248.
On February 7, Moore Wallace amended the plan to authorize the company to buy annuities
for participants. The following day, the company’s vice president of human resources sent a letter
to participants, telling them that the termination would not occur as scheduled. “The new
management team,” the letter said, was “reassessing [the termination] as part of [its] overall plan to
reposition the organization in the best interests of [its] shareholders, customers and employees.” JA
256.
During March, Moore Wallace purchased annuities “representing approximately 70% of all
defined benefit liabilities under the Plan.” Complaint ¶ 57. On April 2, the company notified
participants whose benefits had not been fully annuitized that it intended to terminate the plan on
June 4, 2001 and confirmed the termination date in a “commonly asked questions” document
provided to participants. On April 12, Moore Wallace formalized its intent to terminate the plan on
June 4 through an amendment. The next day, the company asked the IRS, in connection with the
proposed termination, for a tax determination to the effect that the plan was an ERISA-qualified
plan. See 29 C.F.R. § 4041.25(c). On November 30 of that year, Moore Wallace also filed a
standard termination notice with the Pension Benefit Guaranty Corporation (PBGC). See 29
U.S.C. § 1341(b)(2)(A); 29 C.F.R. § 4041.21(a)(3).
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When, after several years, the IRS failed to provide a “favorable determination letter,”
Moore Wallace changed course. JA 274. On May 14, 2004, it notified retirees with annuitized
benefits that the company would not terminate the plan. The company assured the former
participants with annuitized benefits that “the decision to withdraw [the] request to terminate the
Plan [would] have no effect” on them. JA 274.
On December 22, 2004, the plaintiffs—former and current plan participants—filed a class-
action lawsuit in federal district court against Moore Wallace, R.R. Donnelley & Sons Company and
the Retirement Income Plan of Moore North America, Inc., seeking a declaration that Moore
Wallace’s actions terminated the pension plan, entitling them to the surplus assets of roughly $200
million. See 29 U.S.C. § 1132. They also asked for a declaration that they, not the company, were
“entitled to all residual assets remaining in the Plan fund following the termination.” Complaint
¶ 67. The plaintiffs also sought to enjoin Moore Wallace from “taking any actions” that would
rescind the plan’s termination or would liquidate the pension-plan trust, insisting that the company
had “created a wasting trust,” thus rendering “termination or discontinuance of the Plan . . .
irrevocable.” Id. ¶¶ 62, 65.
Moore Wallace filed a motion to dismiss the plaintiffs’ complaint. See Fed. R. Civ. P.
12(b)(6). Concluding that the factual allegations in the complaint did not show that the plan had
terminated and determining that the wasting-trust doctrine could not save the plaintiffs’ claims, the
district court granted the motion.
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II.
In giving fresh review to the district court’s dismissal of a complaint under Civil Rule
12(b)(6), Morrison v. Marsh & McLennan Cos., Inc., 439 F.3d 295, 300 (6th Cir. 2006), we accept
the plaintiffs’ allegations as true and may affirm the dismissal “only if it is clear that no relief could
be granted under any set of facts that could be proved consistent with the allegations,” Hishon v.
King & Spalding, 467 U.S. 69, 73 (1984).
A.
Relying on the terms of the 1947 plan, plaintiffs argue that Moore Wallace’s actions starting
in 2000 “terminat[ed]” or “discontinu[ed]” the pension plan, triggering the company’s obligation to
liquidate the trust and to distribute the proceeds to participants on a pro-rata basis. See 1947 Plan,
art. 21.3. On appeal, plaintiffs do not press the first theory of liability, and there is a good reason
why. Not only did Moore Wallace never finally “terminat[e]” the plan under any conventional
meaning of the term—30 percent of the pre-2000 participants still receive benefits under the
plan—but, since 1974, the Employee Retirement Income Security Act (ERISA) has governed the
procedure for “terminat[ing]” a pension plan and preempted contrary methods for doing so. See 29
U.S.C. § 1341(a)(1) (ERISA is the “[e]xclusive means of plan termination.”); 29 C.F.R. § 4041.1;
see also Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 446 (1999) (explaining that ERISA supplies
the “sole avenues for voluntary termination” of a plan).
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To satisfy ERISA’s requirements for terminating a pension plan, the plan administrator must
(1) issue to “affected part[ies]” a “written notice of intent to terminate,” which includes the
“proposed termination date,” 29 U.S.C. § 1341(a)(2); see also 29 C.F.R. § 4041.21(a)(1); (2) issue
“notice to each person who is a participant or beneficiary under the plan . . . specifying the amount
of the benefit[s]” to which the individual is entitled, 29 U.S.C. § 1341(b)(2)(B); see also 29 C.F.R.
§ 4041.21(a)(2); (3) file a standard termination notice with the PBGC, 29 U.S.C. § 1341(b)(2)(A);
see also 29 C.F.R. § 4041.21(a)(3); and (4) distribute the plan assets, 29 U.S.C. § 1341(b)(2)(D); see
also 29 C.F.R. § 4041.21(a)(4). The administrator has 180 days from the expiration of the PBGC’s
60-day review period, see 29 C.F.R. § 4041.26(a), to distribute the assets, see id. § 4041.28(a)(1).
But if, prior to filing the termination notice with the PBGC, the administrator seeks a request from
the IRS for a determination of the plan’s tax-qualification status upon termination, ERISA extends
the asset-distribution deadline to 120 days after the IRS provides a favorable determination. Id.
Moore Wallace did not satisfy all of these requirements. The plan administrator requested
a determination letter from the IRS on April 13, 2001. But it never received a favorable
determination from the IRS, abandoned its termination plans after waiting fruitlessly for a response
from the IRS for several years and thus never completed the fourth step of an ERISA-authorized
termination—the distribution of plan assets. Because Moore Wallace failed to complete all of the
steps that ERISA requires for plan termination, that eliminates as a matter of law any possible claim
plaintiffs might have stemming from a termination.
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Apparently recognizing this defect in their cause of action, plaintiffs on appeal no longer
press their claim that a “termination” occurred but instead contend that Moore Wallace
“discontinu[ed]” the plan, triggering the same pro-rata distribution of plan assets that follows a
“termination.” See 1947 Plan, art. 21.3. This theory, however, faces some of the same problems as
their “termination” theory of liability—and at least one more. Just as there is no linguistic basis for
saying that a company has terminated a plan—when it still provides participants with benefits under
the plan and, for the time being, has abandoned plans to wind up the plan—so there is no
conventional basis for saying that the company has discontinued the same plan. The 1947 plan
document on which plaintiffs rely did not refer to a partial discontinuance (or partial termination)
or an intended discontinuance (or intended termination), but to a discontinuance (or termination),
plain and simple. Under any recognizable definition of that term, a company does not discontinue
a plan when it continues to provide benefits under it.
Under the 1947 plan, moreover, either a discontinuance or a termination requires the
company to distribute its plan assets, see id., which also happens to be the last defining event of an
ERISA plan termination, 29 U.S.C. § 1341(b)(2)(D); see also 29 C.F.R. § 4041.21(a)(4). Plaintiffs
offer no reason why Congress would wish to establish an “[e]xclusive means of plan termination,”
29 U.S.C. § 1341(a)(1), that could be circumvented by the simple expedient of labeling the winding
up of the plan a “discontinuance.” Nor can we think of one.
Nothing we have said, it bears adding, precludes plaintiffs from pursuing any surplus-asset
claim they may have arising from a “termination” of the plan once that indeed occurs. Until then,
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however, they have no more right to insist on the termination of the plan and the distribution of its
assets than the company would have before it followed ERISA’s plan-termination prescriptions.
B.
The plaintiffs also urge us to apply the wasting-trust doctrine to Moore Wallace’s plan and
order plan administrators to terminate the trust. A wasting trust is one “whose purposes have been
accomplished, such that the continuation of the trust would frustrate the settlor’s intent.” Hughes
Aircraft Co. v. Jacobson, 525 U.S. 432, 447 (1999). An initial stumbling block to plaintiffs’ claim
is that the Supreme Court has shown little inclination to apply the doctrine in the context of pension-
plan terminations, reasoning that the “[a]pplication of the wasting trust doctrine . . . would appear
to be inconsistent with the language of ERISA’s termination provisions.” Id. That admonition
makes considerable sense: Why would Congress establish a highly reticulated, national and
“exclusive” set of rules for terminating pension plans if state and federal courts could terminate those
same plans whenever it appeared that the “continuation” of the plan “would frustrate the settlor’s
intent”?
Even by its own terms, at any rate, the wasting-trust doctrine does not apply here. As
plaintiffs acknowledge, Moore Wallace has annuitized just 70 percent of the plan participants,
meaning that 30 percent of the plan participants still actively draw benefits under the plan. For these
remaining plan participants still drawing pension benefits, the plan assuredly has not accomplished
all of its purposes.
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III.
For these reasons, we affirm.
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