Haberern v. Kaupp Vascular Surgeons Ltd. Defined Benefit Pension Plan

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit

5-25-1994

Haberern v. Kaupp Vascular Surgeons Ltd. Def.
Ben. Plan
Precedential or Non-Precedential:

Docket 93-1892

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Recommended Citation
"Haberern v. Kaupp Vascular Surgeons Ltd. Def. Ben. Plan" (1994). 1994 Decisions. Paper 26.
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 UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 93-1892

RUTH HABERERN

v.

KAUPP VASCULAR SURGEONS LTD. DEFINED BENEFIT PENSION PLAN;
LEHIGH VALLEY VASCULAR SURGEONS LTD. RETIREMENT PLAN;
LEHIGH VALLEY VASCULAR SURGEONS LTD.;
KENNETH M. MCDONALD, M.D., TRUSTEE

Kaupp Vascular Surgeons Ltd. Defined Benefit Pension
Plan and Trust Agreement, Lehigh Valley Vascular
Surgeons Ltd. Retirement Plan, Lehigh Valley Vascular
Surgeons Ltd. and Kenneth M. McDonald, Trustee,

Appellants

On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 88-01853)

Argued March 28, 1994

BEFORE: GREENBERG, COWEN, and NYGAARD, Circuit Judges

(Filed: May 25, 1994)

Lawrence J. Fox (argued)
Paul R. Fitzmaurice
Drinker Biddle & Reath
Philadelphia National Bank
Building
1345 Chestnut Street
Philadelphia, PA 19107-3496

Attorneys for Appellee

Susan Katz Hoffman (argued)
Richard S. Schlegel
Andrew R. Rogoff
Thomas J. Momjian
Pepper, Hamilton & Scheetz
3000 Two Logan Square

1
 Eighteenth and Arch Streets
Philadelphia, PA 19107-2799

Attorneys for Appellants
Steven S. Zaleznick
Cathy Ventrell-Monsees
Mary Ellen Signorille
Warren Gorlick
American Association of
Retired Persons
601 E Street, N.W.
Washington, D.C. 20049

Attorneys for Amicus Curiae
American Association of
Retired Persons

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. OVERVIEW

The four appellants, Lehigh Valley Vascular Surgeons,

Ltd. ("Lehigh Valley"), two employee pension plans established by

Lehigh Valley, Kaupp Vascular Surgeons Ltd. Defined Benefit

Pension Plan and Trust Agreement and Lehigh Valley Vascular

Surgeons Ltd. Retirement Plan, a defined contribution plan, and

the plans' trustee, Kenneth M. McDonald, M.D., appeal from a

final judgment entered by the district court in favor of the

appellee, Ruth Haberern, a retired employee of Lehigh Valley.0

The district court entered the judgment in accordance with its

opinion reported as Haberern v. Kaupp Vascular Benefits Plan and

0
We recently have explained the distinction between defined
benefit and defined contribution plans. See Malia v. General
Elec. Co., No. 92-7487, slip op. at 5 n.2 (3d Cir. May 13,
1994).

2
Trust Agreement, 822 F. Supp. 247 (E.D. Pa. 1993). The total

judgment was for $614,165.99, but the court broke it down into

segments. Haberern brought this action under section

502(a)(1)(B) of the Employee Retirement Income Security Act of

1974 ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), to recover

compensation allegedly due from Lehigh Valley and benefits she

claimed under the plans, and to enforce her rights under the

plans.

The appellants make five challenges to the district

court's opinion and judgment. They contend that the district

court erred when it concluded that Lehigh Valley acted as an

ERISA fiduciary when it reduced Haberern's salary by eliminating

her compensation based on Lehigh Valley's gross receipts and it

contemporaneously created the defined benefit plan. They also

contend that the district court erred in concluding that Lehigh

Valley breached its fiduciary duty in paying a portion of

Haberern's compensation as a bonus and in making assurances to

Haberern regarding her benefits under the defined benefit plan,

without explaining that the designation of part of her

compensation as a bonus would adversely affect her benefits.

While these assurances were inconsistent with the terms of the

plan, the appellants contend that the court nevertheless erred,

as the terms were in the plan and also were described in the

summary plan description which the appellants provided to

Haberern. In the appellants' view, these disclosures relieved

them of any duty to explain the plan further. Alternatively, the

appellants argue that recovery on this claim is barred because

3
damages for a breach of fiduciary duty cannot be awarded to a

plan beneficiary under section 502(a)(1)(B) of ERISA, 29 U.S.C.

§1132(a)(1)(B).

The appellants also challenge the district court's

conclusion that Lehigh Valley violated section 510 of ERISA, 29

U.S.C. § 1140, by amending its defined benefit plan to eliminate

Haberern's life insurance coverage while simultaneously

increasing the life insurance for other beneficiaries. Finally,

the appellants challenge the district court's conclusion that

Haberern requested information about her benefits under the

defined benefit plan which appellants, in violation of section

105(a) of ERISA, 29 U.S.C. § 1025(a), did not provide and the

court's consequent assessment of $191,300 in penalties for the

appellants' failure to provide that information.0 The district

court also concluded that the appellants breached a fiduciary

duty under ERISA by requiring Haberern to sign a release before

they distributed her accrued benefits under the defined

contribution plan, but the appellants do not challenge that

ruling.

We agree with the appellants on all issues they raise.

In particular, we find that the reduction in Haberern's salary

was a management decision for which they cannot be liable under

0
The district court also found that the appellants violated
section 101(a)(1), 29 U.S.C. § 1021(a)(1), by failing to furnish
Haberern a complete summary plan description of the defined
benefit plan, but we need not consider this point as the court
imposed the penalty only for the appellants' failure pursuant to
section 105(a)(1) to provide a statement showing how they
computed Haberern's defined benefit plan distribution.

4
ERISA. Additionally, we conclude that Haberern cannot recover

under section 502(a)(1)(B) of ERISA for the appellants' alleged

breach of fiduciary duty in designating part of her compensation

as a bonus and in not informing her of the consequences of that

designation with respect to her retirement benefits. We also

hold that the appellants did not violate section 510 of ERISA, 29

U.S.C. § 1140, when they amended the defined benefit plan to

eliminate life insurance coverage for plan beneficiaries over age

56. Finally, we determine that the district court's conclusion

that a letter Haberern's attorney sent to the appellants'

attorney was a request for information within the meaning of

section 105(a), 29 U.S.C. § 1025(a), is erroneous as a matter of

law. For these reasons, we will reverse the district court's

judgment awarding damages on all these grounds.

We make one further preliminary observation. In our

review of this case, we have noted a comment in the appellants'

brief that the district court barely distinguished among the

appellants in reaching its conclusions. Furthermore, we

recognize that the district court may have entered judgment on

certain claims against particular appellants not liable on those

claims. Nevertheless, in view of our conclusion that we must

reverse on all issues they raise, for the most part we do not

find it necessary to distinguish among the appellants.

Accordingly, usually we will refer to the appellants collectively

rather than individually.

5
 II. BACKGROUND

The historical facts of this case are not in dispute

and, as the district court discussed them at length in its

opinion, we need not repeat them in detail. We will, however,

set forth matters of particular significance to this opinion.

Haberern began working for Kaupp Vascular Surgeons Ltd. on July

1, 1974, as a secretary-bookkeeper. Kaupp's principals, Harry A.

Kaupp, M.D., and McDonald, changed its corporate name to Lehigh

Valley Vascular Surgeons Ltd. in 1984, and as a matter of

convenience, we refer to Kaupp Vascular Surgeons and Lehigh

Valley Vascular Surgeons as "Lehigh Valley." Haberern worked

full-time for Lehigh Valley until her retirement on January 2,

1985, and from January 3, 1985 to December 16, 1986, she

continued working part-time. During her employment, she never

had a written employment contract.

In 1974, Haberern and Kaupp were Lehigh Valley's only

employees. Haberern's initial compensation included an annual

salary of $11,500, a percentage of Lehigh Valley's gross

receipts, status as a beneficiary of the defined contribution

pension plan, and health insurance. At that time, the defined

contribution plan was known as the Kaupp Vascular Surgeons Ltd.

Employee Pension Plan, but Lehigh Valley later changed the plan's

name to Lehigh Valley Vascular Surgeons Ltd. Retirement Plan.

Originally Kaupp and his wife were the trustees of the defined

contribution plan, but McDonald later became the trustee. Lehigh

6
Valley paid Haberern's salary bi-weekly, and it paid her

percentage of gross receipts at the end of each fiscal year.

In 1976, McDonald joined Lehigh Valley and, effective

September 1, 1979, McDonald and Kaupp established the defined

benefit plan. When they established the defined benefit plan,

McDonald and Kaupp calculated the amount necessary to fund it,

and concluded that based on Haberern's salary of $19,000, Lehigh

Valley would have to contribute approximately $10,000 annually on

her behalf. They regarded this contribution as excessive, so in

1980 they eliminated the portion of Haberern's compensation

calculated on Lehigh Valley's gross receipts. This change

reduced Haberern's overall compensation for the fiscal year

ending June 30, 1979, from $18,358 to $14,429, and required

Lehigh Valley to contribute $5,500 to the plan on her behalf.

The appellants did not tell Haberern that the defined

benefit plan required Lehigh Valley to make the contributions to

the plan on her behalf. Though the appellants provided Haberern

with a copy of the summary plan description, the pages regarding

contributions to the plan and the provisions for insurance, as

well as the table of contents were omitted, and the appellants

did not provide her with a complete copy of the summary plan

description until 1987. Beginning in 1980, Lehigh Valley

designated part of Haberern's compensation as "salary" and part

as "bonus," and it gave the same designations to Kaupp's and

McDonald's compensation. This allocation was significant because

benefits under the defined benefit plan were predicated on salary

excluding any bonus. Accordingly, this allocation reduced the

7
benefits which otherwise would have been due to Haberern, and it

also reduced Lehigh Valley's contributions to the plan. Haberern,

822 F. Supp. at 254.

The defined benefit plan provided for life insurance

equivalent to 30.58 times the participant's monthly retirement

benefit. On October 21, 1980, Lehigh Valley amended the plan to

eliminate life insurance for employees over age 56, a category

which included only Haberern. However, the life insurance for

the other beneficiaries was tripled. The appellants claim that

they made these life insurance changes to save money, but the

district court rejected this claim.

In 1984, Haberern informed the appellants that she

intended to retire. Although she did retire on January 2, 1985,

the plans did not pay her pension benefits immediately. Instead,

on July 18, 1986, the appellants requested that Haberern sign

releases as a condition for receiving distributions from both

plans. Haberern refused to sign the releases, and consequently

the appellants refused to pay her any benefits. Then in July

1987, the appellants sent Haberern a check for $42,986.24, which

they stated represented her full benefits under the defined

benefit plan. But they still refused to pay Haberern her

benefits under the defined contribution plan as she did not

provide the release.

Haberern filed the complaint in this action on March 3,

1988, pursuant to § 502(a)(1)(B) of ERISA, 29 U.S.C.

§1132(a)(1)(B). She alleged that the appellants breached their

fiduciary duties and discriminated against her by withholding her

8
pension benefits, eliminating her percentage of gross receipts,

dividing her compensation between salary and bonus, amending the

defined benefit plan to eliminate her life insurance coverage,

and failing to respond to her request for information. After a

three-day bench trial, the district court found the appellants

liable for life insurance coverage, benefits under both the

defined benefit and defined contribution plans, lost salary, and

penalties for failure to provide information concerning her

benefits under the defined benefit plan. Haberern, 827 F. Supp.

at 267-68. As we have indicated, the appellants appeal from all

aspects of the district court's final judgment except the finding

that they breached a fiduciary duty under ERISA by requiring

Haberern to sign a release before they distributed her accrued

benefits under the defined contribution plan.

We have jurisdiction pursuant to 28 U.S.C. § 1291. We

are exercising plenary review, as we are deciding this case

through the application of legal precepts on the facts as found

by the district court. While the district court's assessment of

penalties for the appellants' failure to comply with section

105(a), 29 U.S.C. § 1025(a), in some circumstances might be

reviewed under an abuse of discretion standard, we are exercising

plenary review on the point because we conclude that the letter

from Haberern's attorney cannot be construed as a request under

that section. Cf. Sheet Metal Workers, Local 19 v. 2300 Group,
Inc., 949 F.2d 1274, 1279 (3d Cir. 1991) (construction of

collective bargaining agreement reviewed de novo).

9
 III. DISCUSSION

A. Elimination of Haberern's Gross Receipts
Percentage and the Funding of the Defined Benefit
Plan

The appellants first challenge the district court's

finding that Lehigh Valley breached its fiduciary duty under

ERISA when it eliminated the gross receipts percentage component

of Haberern's compensation. This alleged breach focused on the

appellants' establishment in 1979 of the defined benefit plan

which provided benefits calculated on certain factors such as

age, compensation, and years of employment. Prior to the

creation of the defined benefit plan, Lehigh Valley paid Haberern

her salary bi-weekly and her percentage of its gross receipts

annually. Haberern claims that ERISA compelled the appellants to

include her in the plan, and asserts that to include her, but to

keep down its contributions to the plan, the appellants

eliminated Haberern's percentage of gross receipts. The district

court concluded:
In 1980 Lehigh Valley eliminated the portion of
[Haberern's] compensation that was calculated on the
basis of Lehigh Valley's gross receipts thus reducing
[Haberern's] compensation from $18,358 for the fiscal
year ending June 30, 1979 to $14,429 for the fiscal
year ending August 31, 1980. (Lehigh Valley had
changed its fiscal year from July to June to September
to August.) Based upon a salary of $19,000, Lehigh
Valley would have to contribute approximately $10,000
on behalf of [Haberern] into the newly formed Defined
Benefit Plan. The doctors felt this was too much.
Therefore, they reduced her salary to $14,400, thus
requiring Lehigh Valley to contribute only $5,500 to
the Defined Benefit Plan. By virtue of the elimination
of her receivables percentage, [Haberern] was taking
her salary and funding her Defined Benefit Plan.

10
Haberern, 822 F. Supp. at 254 (citations omitted)

(emphasis added).

The district court also found that the appellants did

not inform Haberern that Lehigh Valley was required to make the

contributions to the plan. Id. In fact, the district court

found that in 1980 the appellants provided Haberern with a

summary plan description but omitted the pages stating Lehigh

Valley was required to make the full contribution required to

fund the plan on her behalf.

Based on these facts, the district court held that the

appellants breached their fiduciary duty. In computing damages,

the court concluded that the appellants were liable not only for

the lost compensation predicated on the 1980 salary reduction,

but also for the reduction of benefits under the defined benefit

plan, which, but for the wrongdoing, would have been calculated

on a higher salary, and the reduction of benefits under the

defined contribution plan, which, but for the wrongdoing, would

have reflected contributions based on a higher salary. Id. at

257.

However, the court also concluded that the reduction in

salary did not violate ERISA's anti-discrimination provisions. 29

U.S.C. § 1140. In this regard, in a pretrial opinion granting

the appellants summary judgment on Haberern's discrimination

claim relating to the reduction in salary, the court noted:
In this case, the reduction in [Haberern's]
salary . . . [was] consistent with the
treatment of all other plan participants,
including the physician plan participants.
The payroll records furnished by defendants

11
 established that the salaries of all plan
participants were substantially reduced in
1980.

App. at 136 (citations omitted).

The appellants raise two challenges to the district

court's conclusion that in eliminating Haberern's percentage of

gross receipts and creating the defined benefit plan they

violated their fiduciary duties under ERISA. First, they argue

that they took these steps as employers, and not as fiduciaries,

and thus they did not owe a fiduciary duty to Haberern. Second,

they argue that Haberern's status as an at will employee allowed

them to change her compensation at any time.0 Accordingly, they

contend that by continuing to work after 1980 she accepted the

modified terms of her employment. The district court responded

to these points by indicating that "simply because [Haberern's]

employment was at will does not entitle Lehigh Valley to violate

ERISA." 822 F. Supp. at 260.

The appellants rely on section 404(a)(1)(D) of ERISA,

29 U.S.C. § 1104(a)(1)(D), and on several of our opinions for the

proposition that when an employer acts in a management capacity,

its business decisions are not regulated by ERISA. See Nazay v.

0
In our discussion of appellants' division of Haberern's
compensation into salary and bonus, we consider whether a plan
beneficiary may bring an action under section 501(a)(1)(B) of
ERISA for breach of fiduciary duty. We do not address that point
in this section of our opinion, as the appellants do not contend
that Haberern could not bring an action for breach of fiduciary
duty predicated on the appellants' elimination of Haberern's
compensation based on gross receipts, if the elimination was
wrongful. Of course, we are holding that the elimination of the
compensation based on gross receipts does not implicate any
fiduciary obligation under ERISA which the appellants might have
owed Haberern.

12
Miller, 949 F.2d 1323, 1329 (3d Cir. 1991); Hozier v. Midwest

Fasteners, Inc., 908 F.2d 1155, 1158 (3d Cir. 1990). See also,

e.g., Malia v. General Elec. Co., No. 92-7487, slip op. at 9-10

(3d Cir. May 13, 1994). Section 404(a)(1)(D) imposes a fiduciary

duty on a trustee when administering an ERISA plan to act in

accordance with the documents and interests governing the plan,

but it does not impose fiduciary duties on an employer making a

management decision. The appellants contend that because of

Haberern's at will status, their business decision affecting her

compensation and establishing the defined benefit plan was not

subject to ERISA's fiduciary provisions, "notwithstanding [its]

collateral effect on prospective, contingent employee benefits."

Brief at 15 (quoting Bell v. Allstate Ins. Co., 822 F. Supp.

1222, 1224 (D.S.C. 1992)). Haberern responds that the

appellants' contentions are without merit because ERISA preempts

state laws relating to the protection of employee pension

benefits and, accordingly, regardless of the appellants' rights

under state law, their conduct violated their ERISA fiduciary

duties.

Haberern's reliance on ERISA preemption is misguided.

She cites Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111
S.Ct. 478 (1990), in support of her position. In Ingersoll-Rand,

the plaintiff brought a state common law claim for unlawful

discharge in a Texas state court. Id. at 136, 111 S.Ct. at 481.

He claimed that his employer discharged him to avoid making

contributions on his behalf to a pension plan. The trial court

granted the employer summary judgment, and the state court of

13
appeals affirmed, holding that the plaintiff's employment was

terminable at will. The Texas Supreme Court reversed and

remanded for trial. That court held that under Texas law, an at

will employee could sue for wrongful discharge if he could

establish that the employer's principal reason for the discharge

was to avoid paying pension benefits or to avoid contributing to

a plan.

The United States Supreme Court granted certiorari and

reversed. The Court noted that Congress expressly included a

broad preemption provision in ERISA, section 514(a), 29 U.S.C.

§1144(a), which provides:
Except as provided in subsection (b) of this
section, the provisions of this subchapter and
subchapter III shall supersede any and all State laws
insofar as they may now or hereafter relate to any
employee benefit plan described in section 1003(a) of
this title and not exempt under section 1003(b) of this
title.

The Court noted "'[a] law "relates to" an employee benefit plan,

in the normal sense of the phrase, if it has a connection with or

reference to such a plan.'" Ingersoll-Rand, 498 U.S. at 139, 111
S.Ct. at 483 (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85,

96-97, 103 S.Ct. 2890, 2900 (1983)).

In the Texas case, the plaintiff was required to prove

that the principal reason for his termination was to interfere

with a plan. This required him to plead, and the court to find,

that there was an ERISA plan and that the employer had a pension-

defeating motive in discharging him. Because this inquiry was

directed to the existence of a plan, the "judicially created

14
cause of action 'relate[s] to' an ERISA plan." Ingersoll-Rand,

498 U.S. at 140, 111 S.Ct. at 483. Thus, it was preempted.

The Court noted, however, that ERISA's preemptive force

has limits. Thus, in Fort Halifax Packing Co. v. Coyne, 482 U.S.

1, 107 S.Ct. 2211 (1987), the Court had held that ERISA did not

preempt a Maine law which required the payment of severance

benefits because the state law did not require the establishment

or maintenance of an ongoing plan. Ingersoll-Rand, 498 U.S. at

139, 111 S.Ct. at 483. In the Texas case, this limitation did

not apply because the case did not involve "a generally

applicable statute that makes no reference to, or indeed

functions irrespective of, the existence of an ERISA plan." Id.

The limitation on the preemptive force of ERISA

recognized in Fort Halifax and Ingersoll-Rand is applicable in

this case. In Pennsylvania, absent a statutory or contractual

provision to the contrary, employment relationships presumptively

are at will. Schoch v. First Fidelity Bancorporation, 912 F.2d

654, 658 (3d Cir. 1990). This presumption is unrelated to the

existence vel non of any pension plan. Of course, it follows

that if an employer may terminate an employee without cause, it

has the right to decrease her compensation, as this constitutes a

more modest change in the employment relationship. Clearly, this

right to decrease compensation "functions irrespective of . . .

the existence of ERISA," and therefore is beyond the scope of

ERISA preemption. Ingersoll-Rand, 498 U.S. at 139, 111 S.Ct. at
483.

15
 Accordingly, inasmuch as ERISA does not preempt the

appellants' state law management rights to determine Haberern's

salary, the critical question is whether they were acting in

their management capacity when they reduced Haberern's salary by

eliminating the portion of her compensation based on gross

receipts and contemporaneously created the defined benefit plan.

If they were, then they breached no duty under ERISA for, as they

contend, ERISA does not impose fiduciary duties on employers

acting in their management capacity. 29 U.S.C. § 1104(a)(1).

Nazay v. Miller, 949 F.2d 1323, is instructive. In

Nazay, a retired employee brought suit against his former

employer under ERISA to recover the balance due for his

hospitalization after the employer's health plan only partially

paid a hospital bill he had incurred. Id. at 1325-27. The

employee had admitted himself to a hospital after his physicians

agreed that it was imperative that he be treated for a heart

condition. Though the employee was aware that the plan required

certification by the plan administrator prior to a hospital

admission, he nonetheless did not notify the administrator before

he entered the hospital. Furthermore, neither his doctors nor

anyone else notified the administrator of the admission during

his stay.

The certification process enabled the administrator to

consider whether hospitalization was necessary and to consider

alternatives to hospitalization. Additionally, it allowed the

patient and hospital to ascertain how much of the proposed

hospitalization would be reimbursed. The plan included a penalty

16
amounting to 30% of the otherwise covered expenses if the

employee failed to obtain preadmission certification. Id. at

1326.

The district court held that the penalty provision was

arbitrary and capricious. Id. at 1325. Further, the court held

it would not enforce any provision in a benefit plan that denied

benefits, unless the employer could establish that the

participant's failure to comply with the provision prejudiced the

plan. Id.

We reversed, concluding an employer is free to develop

an employee benefit plan as it wishes because when it does so it

makes a corporate management decision, unrestricted by ERISA's

fiduciary duties. Id. at 1328-31. In discussing the nature of

an employer's fiduciary duties under ERISA, we noted "[i]n the

words of the Supreme Court, ERISA was 'designed to promote the

interests of employees and their beneficiaries in employee

benefit plans.' However, as we have observed on several

occasions, ERISA's concern is with the administration of benefit

plans and not with the precise design of the plan." Id. at 1329

(emphasis in original) (citations omitted). Therefore, if an

employer also acts as a plan administrator, "ERISA permits [it]

to wear two hats, and . . . [it] assume[s] fiduciary status only

when and to the extent that [it] function[s] in [its] capacity as

plan administrator[], not when [it] conduct[s] business that is

not regulated by ERISA." Id. (citations and internal quotation
marks omitted). Although we recognized that the determination of

whether an employer acts as a business manager or plan

17
administrator involves a sensitive analysis, we concluded that an

employer's inclusion of a penalty provision in a benefits plan is

a management decision. Id.

Earlier, in Trenton v. Scott Paper Co., 832 F.2d. 806

(3d Cir. 1987), cert. denied, 485 U.S. 1022, 108 S.Ct. 1576

(1988), we endorsed the design/administration distinction. In

that case, Scott Paper Company had created a Salaried Employee

Retirement Plan ("SERP") as well as a Scott Highly Accelerated

Retirement Program ("SHARP"). Id. Scott created SHARP to

provide an incentive to salaried employees at certain of its

overstaffed facilities to retire early. Id. But some of the

salaried employees eligible for retirement under SERP were not

eligible for the more favorable treatment under SHARP. The

plaintiffs, a class of employees covered by SERP but not by

SHARP, brought suit alleging that their exclusion violated ERISA.

The district court granted the defendants' motion for summary

judgment and we affirmed.

The plaintiffs argued that the amending of SERP to

include SHARP was an ERISA administration decision. After

considering who had the authority to design and implement SHARP,

we disagreed. In reaching our conclusion, we indicated that

"[i]f SHARP had been a part of SERP when SERP was implemented,

SHARP would clearly be part of the design of the plan." Id. at

809 (emphasis in original). We then stated that, "[w]e think it

clear in this action that Scott, not the Retirement Board, had

the sole authority to determine who would be eligible for SHARP.

The design of the SHARP plan was purely a corporate management

18
decision." Id. Accord Bell v. Allstate Ins. Co., 822 F. Supp.

1222 (D.S.C. 1992) (Allstate's decision not to include

commissions from state auto reinsurance mechanism was design

decision outside the scope of ERISA).

It is quite plain from our opinions that the

appellants' decision to reduce Haberern's compensation by

eliminating her percentage of gross receipts and to establish the

defined benefit plan was managerial in character. The fact that

this decision may not have been in Haberern's interest makes no

difference. Furthermore, the district court's statement that,

contrary to the terms of the defined benefit plan, the appellants

required Haberern to fund her own benefits is nothing more than

the court's pejorative characterization of the undisputed facts.

Accordingly, we cannot sustain the court's determination by

treating it as a factual finding subject to deferential review.0

Thus, the appellants are not liable for their decision to reduce

0
The fallacy in the argument that Haberern funded the defined
benefit plan may be demonstrated by considering the collective
bargaining process. In contract negotiations, the employees'
representative might obtain a pension plan fully funded by the
employer and in return might agree to accept a less favorable
wage structure than it could have obtained if the employer had
not created a pension plan. In that situation, it hardly could
be argued fairly that by paying the negotiated wage scale the
employer has required the employees to fund the pension plan. In
principle, the situation here is no different because the
appellants' decision to set Haberern's compensation in light of
their expenses for a pension plan is identical to an employer's
decision to accept a collective bargaining agreement that adds to
its pension costs but moderates wages. On the other hand, this
case would have been different if the appellants had withheld
money from Haberern's established salary for payment into the
defined benefit plan.

19
Haberern's compensation and contemporaneously to establish the

defined benefits plan.

Haberern also argues that the appellants did not inform

her that her participation in the plan was voluntary. But this

point is immaterial. While we will assume without deciding that

Haberern could have refused to participate in the defined

benefits plan, and we further will assume without deciding, as

she contends, that the plan could not have become effective

without her participation, it does not follow that the appellants

could not have reduced her salary without regard for whether she

participated in the defined benefit plan. Quite to the contrary,

under Pennsylvania law they had the right to decrease her

compensation whether or not they had established a benefits plan.

Therefore, Haberern's only remedy if she had been unwilling to

continue her employment for the compensation offered was to

resign. Of course, she did not do so. Thus, it is clear that

Haberern should not have recovered a judgment against the

appellants by reason of their elimination of her gross receipts

percentage and their method of the funding of the defined benefit

plan.
B. The Designation of Haberern's Compensation as
Salary and Bonus

The district court imposed substantial liability on the

appellants due to Lehigh Valley's division of Haberern's

compensation into salary and bonus. It found that Haberern's

salary throughout the period during which the defined benefits

plan was in effect, September 1, 1979 to August 31, 1984,

20
remained at $14,428, and that the appellants paid her bonuses

during that time. Lehigh Valley first divided her compensation

into salary and bonus in 1980, but it did this for Kaupp and

McDonald as well. Haberern, 822 F. Supp. at 254. The division

was significant because pension benefits were based on salary but

not bonuses. Id. But on a pretrial motion for summary judgment,

the district court determined that this designation was not

discriminatory in violation of 29 U.S.C. § 1140. In this regard,

the court explained:
Further, all plan participants took a portion of their
compensation as 'bonus.' Indeed, the bonuses paid to
physician plan participants were a greater portion of
their total compensation than the bonuses paid to
plaintiff.

App. at 137 (citations omitted).

Furthermore, the district court acknowledged that an

employer may define compensation for purposes of calculation of

pension benefits to include certain items and to exclude others.

Haberern, 822 F. Supp. at 261. However, if an employer amends a

plan to alter the definition of compensation, it must provide

adequate notice to the beneficiaries. See section 204(h) of

ERISA, 29 U.S.C. § 1054(h). In this case, there was no

amendment, as the original plan excluded bonuses from the

definition of compensation. Thus, the district court recognized

that the notice requirements of section 204(h) did not apply.

Nonetheless, the district court effectively imposed a

notice requirement, concluding that:
when Lehigh Valley established the Plan, they assured
[Haberern] that she would receive a pension benefit
equal to her salary upon retirement. Because

21
 Defendants Lehigh Valley and McDonald failed to inform
[Haberern] that characterizing a portion of her
compensation as a bonus would reduce significantly her
pension benefits, they breached their fiduciary duties
under ERISA.

Haberern, 822 F. Supp. at 261 (emphasis added).

Based on its conclusion that the appellants breached their

fiduciary duties, the district court ultimately awarded damages

under section 502(a)(1)(B) for the decreased benefits for which

Haberern was eligible under the defined benefit plan and the

defined contribution plan. Thus, the court seems to have

concluded that the appellants misrepresented the method of

computing Haberern's retirement benefits and it further concluded

that their failure to inform her of the significance of the

division of her compensation into salary and bonus was a breach

of fiduciary duty.

Haberern supports the district court's conclusions by

relying on a line of cases for the proposition that fiduciaries

breach their duties of loyalty and care if they mislead plan

participants or misrepresent the terms or administration of a

plan. See Berlin v. Michigan Bell Tel. Co., 858 F.2d 1154, 1163
(6th Cir. 1988); Rosen v. Hotel & Restaurant Employees &

Bartenders Union, 637 F.2d 592, 599-600 (3d Cir. 1981), cert.

denied, 454 U.S. 898, 102 S.Ct. 398 (1981); Eddy v. Colonial Life

Ins. Co., 919 F.2d 747, 750 (D.C. Cir. 1990). The appellants

respond that these cases are inapplicable because the district

court never made an explicit finding of misrepresentation, and

thus they argue that Haberern's only possible cause of action

22
under ERISA is promissory estoppel. Reply Brief at 8 n.8.

(citing Smith v. Hartford Ins. Group, 6 F.3d 131, 141 (3d Cir.

1993)). We disagree with the appellants' contention that the

only cause of action upon which Haberern could recover is

promissory estoppel. We note that in Smith, we cited Fischer v.

Philadelphia Elect. Co., 994 F.2d 130, 133-34 (3d Cir.), cert.

denied, 114 S.Ct. 622 (1993), in which we held an employer can be

liable under ERISA in its fiduciary capacity both on breach of

fiduciary duty and equitable estoppel theories for affirmative

material misrepresentations. See Smith, 6 F.3d at 141 n.13.

However, we need not remand the matter to the district

court for clarification because we agree with the appellants that

Haberern may not recover damages for a breach of fiduciary duty

under section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B).

The district court made it clear that section 502(a)(1)(B) is

implicated because it noted that Haberern "brings this action

pursuant to ERISA, 29 U.S.C.A. § 1132(a)(1)(B) (West 1985) to

recover lost salary and benefits owed to her under the terms of

the Plans and to enforce her rights under terms of the Plans."

Haberern, 822 F. Supp. at 257.
Section 502(a) of ERISA provides in relevant part that

a civil action may be brought:
(1) by a participant or beneficiary -
...
(B) 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;
(2) by the Secretary, or by a participant, beneficiary
or fiduciary for appropriate relief under section 1109
of this title;

23
 (3) by a participant, beneficiary ... to obtain other
appropriate equitable relief...

29 U.S.C. § 1132(a).

Section 409(a) of ERISA establishes liability for a

fiduciary. The section provides:
Any person who is a fiduciary with respect to a plan
who breaches any of the responsibilities, obligations,
or duties imposed upon fiduciaries by this subchapter
shall be personally liable to make good to such plan
any losses to the plan resulting from each such breach,
and to restore to such plan any profits of such
fiduciary which have been made through use of assets of
the plan by the fiduciary, and shall be subject to such
other equitable or remedial relief as the court may
deem appropriate, including removal of such fiduciary.
A fiduciary may also be removed for a violation of
section 1111 of this title.

29 U.S.C. § 1109(a).

In McMahon v. McDowell, 794 F.2d 100 (3d Cir.), cert.

denied, 479 U.S. 971, 107 S.Ct. 473 (1986), we interpreted

section 409(a) in the context of section 502(a)(1)(B). In

McMahon, the plaintiffs brought suit under section 502(a)(1)(B)

and section 502(a)(2) to recover damages individually from plan

fiduciaries for their failure to collect delinquent pension plan

contributions, which failure the plaintiffs alleged was a breach

of fiduciary duty. McMahon, 794 F.2d at 108.0 We found the

cause of action inappropriate under section 502(a)(1)(B), but

allowed the suit to proceed under section 502(a)(2) so that the

plaintiffs could recover damages ". . . for the benefit of the

plan. . . ." 794 F.2d at 109.

0
McMahon also involved other claims not germane here.

24
 With respect to the cause of action under section

502(a)(1)(B), we noted that the plaintiffs characterized the

claim as one brought to "recover benefits due to [them] under the

terms of [their] plan, to enforce [their] rights under the terms

of the plan, or to clarify [their] rights to future benefits

under the terms of the plan." 794 F.2d at 109 (quoting section

502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B)). We noted that "actions

brought under Section 502(a)(1)(B) are personal in nature and

'seek to declare the plaintiff beneficiary's rights under the

plan, to recover benefits personally due him, or to enforce his

personal rights.'" 794 F.2d at 109 (quoting Livolsi v. R.A.M.

Construction Company, 728 F.2d 600, 602 (3d Cir. 1984)).

Additionally, we noted that in Massachusetts Mutual

Life Ins. Co. v. Russell, 473 U.S. 134, 140-42, 105 S.Ct. 3085,

3089-90 (1985), the Supreme Court held that section 409 of ERISA

does not authorize a private right of action for compensatory

relief. McMahon, 794 F.2d at 109. Noting the conflict between

section 409, which establishes liability for an ERISA fiduciary

but does not authorize a private right of action for compensatory

damages, and section 502(a)(1)(B), which authorizes a private

right of action for a beneficiary to enforce her own rights, we

concluded that the plaintiffs could not proceed under section

502(a)(1)(B) in a suit to recover damages for a breach of

fiduciary duty. Id.
This analysis applies here. The district court

concluded that the appellants breached a fiduciary duty by making

assurances to Haberern and then failing to inform her that those

25
assurances were incorrect. Haberern, 822 F. Supp. at 261, 267.

Although in this case the wrongdoing affected Haberern more

directly than the wrongdoing affected the plaintiffs in McMahon,

we are unpersuaded that we should depart from McMahon's holding

that section 502(a)(1)(B) is unavailable in actions for breach of

fiduciary duty.0
0
In an opinion dated June 26, 1989, on a motion for summary
judgment made by the appellants, the district court pointed out
that Haberern stated that her claim with respect to the bonus was
brought under section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B).
App. at 140. The court made the same observation in its reported
opinion. See Haberern, 822 F. Supp. at 257. Thus, we do not
reach the question whether Haberern's misrepresentation argument
could be upheld under section 502(a)(3), 29 U.S.C. § 1132(a)(3).
See Smith v. Hartford Ins. Group, 6 F.3d at 137. We do note,
however, that Haberern's misrepresentation argument has troubling
implications because the summary plan description pages given to
her made it clear that the retirement benefit was based on
compensation and that compensation did not include bonuses. See
app. at 167 (Haberern's testimony that she received her trial
exhibit 1, the summary plan description, when the plan was put in
place); app. at 279 (exhibit 1 includes a page indicating
compensation means "salary or wages excluding bonuses") (emphasis
in original document); app. at 281 (exhibit 1 includes a page
indicating the retirement benefit is based on "compensation"
subject to a cap). Of course, the summary plan description
mirrored the plan itself. Thus, Haberern effectively is relying
on parol evidence to contradict clearly defined terms of a plan
revealed to her in writing. Accordingly, if we adopt her
approach we will create a precedent for any beneficiary to make
claims for benefits beyond those provided in a plan. It would be
difficult to reconcile that result with our cases holding that
oral or informal amendments to ERISA benefit plans are precluded.
See Confer v. Custom Eng'g Co., 952 F.2d 41, 43 (3d Cir. 1991);
Frank v. Colt Indus., Inc., 910 F.2d 90, 98 (3d Cir. 1990). See
also Schoonejongen v. Curtiss-Wright Corp., 18 F.3d 1034, 1040
(3d Cir. 1994) ("Unless and until the written plan is altered in
a manner, and by a person or persons authorized in the plan,
neither the plan administrator nor a court is free to deviate
from the terms of the original plan.").
In this regard, we deem it significant that the
district court found that Haberern's "duties as a secretary-
bookkeeper involved handling the telephone, scheduling
appointments, processing insurance claims forms, typing letters,

26
 We also point out that insofar as we can ascertain the

record does not support a finding that Haberern suffered damages

by reason of the breach of fiduciary duty predicated on the

alleged misrepresentation. In its opinion, the district court

concluded that the appellants did not notify Haberern "that

designating a portion of her compensation as a bonus would have

the effect of reducing her pension benefits." Haberern, 822 F.

Supp. at 254. The court later explained that because the

appellants "failed to inform [Haberern] that characterizing a

portion of her compensation as a bonus would reduce significantly

her pension benefits, they breached their fiduciary duties under

ERISA." Id. at 261. But the court never explained what damages

Haberern suffered by reason of the appellants' failure to give

her this information. It did not suggest, for example, that

Haberern had a veto power over the appellants' decision to divide

her compensation between salary and bonus and, of course, she had

no such power. Nor does it indicate that the evidence

demonstrated that if Haberern had been aware of the significance

of the designation of a portion of her compensation as a bonus,

receiving payments, bookkeeping, taking care of checkbooks, and
paying all the bills." Furthermore, she kept an accounting of
the contributions to the defined contribution plan. Haberern,
822 F. Supp. at 252. Surely it would be extraordinary to hold
that a person with such responsibilities who had possession of a
summary plan description expressly indicating that her benefits
would be based on her compensation excluding bonuses, contrary to
the terms of the plan effectively could obtain a modification of
the plan so that her benefits would be predicated on compensation
including bonuses. However, in view of our disposition, we need
not discuss this point further.

27
she would have resigned and obtained a different position paying

higher compensation elsewhere.

Similarly, Haberern does not explain what damages she

suffered by reason of appellants' alleged misrepresentation in

not explaining the significance of the division of her

compensation into salary and bonus. Brief at 28-30. Rather, she

contends that the "'bonus' designation reduced [her] pension

benefit." That observation, though undoubtedly correct, does not

explain how Haberern suffered damages from the misrepresentation

as distinguished from the design of the plan.

C. The Elimination of Haberern's Life Insurance
Benefit and the Simultaneous Increase of the
Doctors' Life Insurance Benefit

The district court found that the appellants'

elimination of life insurance benefits in the defined benefit

plan for beneficiaries over age 56, a change which affected only

Haberern, and the simultaneous tripling of the face amount of the

life insurance policies for Kaupp and McDonald, constituted a
violation of section 510 of ERISA. The district court reached

this conclusion after finding that the appellants' stated reason

for the changes, that they wished to reduce costs, was "beyond

belief" in light of the increase in coverage for the doctors.

Haberern, 822 F. Supp. at 262.

The appellants argue that section 510 does not apply

because, while it prohibits discrimination against a plan

participant for the purpose of interfering with the attainment of

28
plan rights, it does not prohibit plan amendments which affect

only one person. We agree. Section 510 of ERISA provides:
It shall be unlawful for any person to discharge, fine,
suspend, expel, discipline, or discriminate against a
participant or beneficiary for exercising any right to
which he is entitled under the provisions of an
employee benefit plan . . . or for the purpose of
interfering with the attainment of any right to which
such participant may become entitled under the plan.
. . .

29 U.S.C. § 1140.

We have stated that Congress enacted section 510

primarily to prevent "unscrupulous employers from discharging or

harassing their employees in order to keep them from obtaining

vested pension benefits." Gavalik v. Continental Can Co., 812

F.2d 834, 851 (3d Cir.) (quoting West v. Butler, 621 F.2d 240,

245 (6th Cir. 1980)), cert. denied, 484 U.S. 979, 108 S.Ct. 495

(1987). See also Ingersoll-Rand, 498 U.S. at 143, 111 S.Ct. at

485 ("[b]y its terms § 510 protects plan participants from

termination motivated by an employer's desire to prevent a

pension from vesting. . . . We have no doubt that his claim is
prototypical of the kind Congress intended to cover under §510.")

(citations omitted). Section 510 makes it unlawful to

"discharge, fine, suspend, expel, discipline, or discriminate. .

. ." 29 U.S.C. § 1140. The only one of these terms capable of

broad interpretation is "discriminate." But courts construing

"discriminate" have concluded, consistently with our approach in

Gavalik, that the term should be limited to actions affecting the

employer-employee relationship, and we adhere to this

construction.

29
 McGath v. Auto-Body North Shore, Inc., 7 F.3d 665 (7th

Cir. 1993), is helpful. In McGath, the employer hired the

plaintiff, McGath, in July 1983. At that time it maintained an

ERISA-qualified pension plan for its eligible employees. One of

the requirements to qualify for the plan was the completion of

one year of service. After completing one year of service, an

employee would be admitted into the plan on the next entry date,

either October 1 or April 1.

After McGath had completed one year of service, but

before the next entry date into the plan, the employer became

concerned that it would not survive financially subsequent to

McGath's entry into the plan. To solve this problem, on

September 30, 1984, the employer amended the plan to require

three years of completed service. McGath continued to work for

the employer. Two years later, on September 30, 1986, when

McGath was one day short of becoming eligible under the plan, the

employer amended it to limit eligibility to those eligible on

September 30, 1986.

When McGath retired three years later, he

unsuccessfully claimed benefits under the original plan. McGath

filed suit alleging that the defendants had interfered with his

attainment of pension benefits by deliberately discriminating

against him in violation of ERISA section 510, 29 U.S.C. § 1140.

The district court granted the defendants summary judgment. It

concluded that section 510 protects only against actions intended

to deny plan rights that affect the employment relationship.

30
Because the amendments affected only the terms of the plan, and

did not affect McGath's employment, there was no violation.

The court of appeals affirmed. It noted that it had

previously determined that:
the focus of § 510 is not on amendments to the plan
itself. Rather we held that '[i]t is clear from the
text of the statute . . . that § 510 was designed to
protect the employment relationship against actions
designed to interfere with, or discriminate against,
the attainment of a pension right. . . . Simply put,
§510 was designed to protect the employment
relationship which gives rise to an individual's
pension rights.
. . . This means that a fundamental prerequisite to a
§ 510 action is an allegation that the employer-
employee relationship, and not merely the pension plan,
was changed in some discriminatory or wrongful way.'

McGath, 7 F.3d at 668 (quoting Deeming v. American Standard,

Inc., 905 F.2d 1124, 1127 (7th Cir. 1990) (emphasis in

original)). The court then concluded McGath did not have a

cognizable section 510 claim. The court noted that McGath also

alleged that the employer discriminated against him by bending

the eligibility requirements for others. The court rejected the
argument that there was a genuine issue of triable fact as to

whether such discrimination took place, concluding:
We need not address, however, this nettlesome issue
because, even if Mr. McGath were able to show such
disparate treatment, we do not believe that § 510
provides him any relief. Because the employer, as the
settlor of the plan, had the right to change the plan's
terms, Mr. McGath cannot claim that the alleged
discriminatory injury flows from the plan amendments.
. . . ERISA § 510 affords protection from
discrimination that interferes 'with the attainment of
any right to which such participant may become entitled
under the plan.' Mr. McGath does not have a right to
treatment that is contrary to the terms of the
plan, even if those terms are breached for others.

31
McGath, 7 F.3d at 670 (emphasis in original).

Other courts have reached similar results. See West v.
Butler, 621 F.2d at 245-46 ("we conclude that discrimination, to

violate § 510, must affect the individual's employment

relationship in some substantial way."); Deeming v. American

Standard, Inc., 905 F.2d at 1128 ("[s]ection 510 of ERISA is

simply not the appropriate vehicle for redressing the unilateral

elimination of severance benefits accomplished independently of

employee termination or harassment."); Owens v. Storehouse, Inc.,
984 F.2d 394, 398 (11th Cir. 1993) ("[i]t is insufficient merely

to allege discrimination in the apportionment of benefits under

the terms of the plan"); McGann v. H & H Music, 946 F.2d 401, 408

(5th Cir. 1991), cert. denied, 113 S.Ct. 482 (1992) (section 510

does not apply to a plan limit on AIDS-related claims for all

employees even if AIDS benefits singled out for discriminatory

purpose) But see Newton v. Van Otterloo, 756 F. Supp. 1121, 1136

(N.D. Ind. 1991) ("[r]etaliatory curtailment of benefits under an

ERISA plan may trigger § 1140"); Vogel v. Independence Fed. Sav.

Bank, 728 F. Supp. 1210, 1226 (D. Md. 1990).

Our analysis compels us to hold that the appellants'

action in adopting the life insurance amendment is not actionable

under section 510. If we held otherwise, our ruling would

contradict the plain language of that section. Additionally, we

would overlook the structure of ERISA which sets forth separate

provisions for the protection of the employment relationship in

section 510 and the protection of beneficiaries from

32
discriminatory modifications of pension plans in section 240(g),

29 U.S.C. § 1054(g).0

D. The July 28, 1987 Letter
Lehigh Valley asserts that the district court erred in
penalizing it for its alleged failure to provide Haberern with an
explanation and accompanying calculations to demonstrate how it
computed her benefits under the defined benefit plan. Section
105(a) of ERISA imposes an obligation on a plan administrator to:
furnish to any plan participant or beneficiary who so
requests in writing, a statement indicating, on the basis of the
latest available information --(1) the total benefits accrued,
and (2) the nonforfeitable pension benefits, if any, which have
accrued, or the earliest date on which benefits will become
nonforfeitable.

29 U.S.C. § 1025(a). An administrator who fails or refuses to

comply with such a request within the court's discretion may be

held personally liable to the requesting party for up to $100 for

each day after the refusal. Thus, section 502(c)(1), 29 U.S.C.

§1132(c)(1), provides:
Any administrator . . . who fails or refuses to comply
with a request for any information which such
administrator is required by this subchapter to furnish
to a participant or beneficiary . . . by mailing the
material requested to the last known address of the
requesting participant or beneficiary within 30 days
after such request may in the court's discretion be
personally liable to such participant or beneficiary in
the amount of up to $100 a day from the date of such
failure or refusal. . . .

0
The appellants also contend that Haberern suffered no loss from
the elimination of her life insurance coverage, because if not
eliminated "her life insurance policy simply would have been
cashed out upon retirement, and that amount would have been used
to fund [Haberern's] monthly retirement benefit (or lump-sum
equivalent) provided by the plan." Brief at 24. In view of our
conclusion, we need not consider this argument.

33
The district court, relying on a letter Haberern's attorney sent

to the appellants' attorney, applied the foregoing two sections,

found a violation, and awarded damages in the amount of $100 a

day for a total of $191,300.

We set forth the two-page letter in full:
Our firm has been retained by Mrs. Ruth
Haberern. She is a Plan Participant in both
the Defined Benefit Pension Plan and the
Defined Contribution Plan. We understand
your firm is counsel to Dr. McDonald, Trustee
of these two plans.

Several aspects of the administration of
the two Plans, as pertinent to our client are
troublesome. For example, Mrs. Haberern
officially retired on January 2, 1985. Yet,
more than thirty (30) months transpired
before Mrs. Haberern received a $42,986.24
check. This July 9 check, according to Dr.
McDonald's accompanying letter, represented
the 'total vested benefit due to you under
the Kaupp Vascular Surgeons Defined Benefit
Pension Plan'. However, there was no
explanation, accompanying calculations, to
support the amount of this July 9, 1987,
check.

By letter dated April 27, 1987, Mrs.
Haberern was advised by Dr. McDonald that the
Defined Benefit Pension Plan was terminated
effective August 31, 1984; yet, it took
nearly three years for a disbursement to be
made to Mrs. Haberern, a Plan Participant.

Mrs. Haberern has yet to receive her
defined contribution pension plan check! She
did receive annual reports concerning the
plans.

Mrs. Haberern does not have, nor has she
ever received, the full text of the defined
contribution pension plan.

There are additional questions with
regard to the administration of the two
pension plans. We need to discuss these

34
 questions with you and the Administrator of
the two plans.

I shall call your office on Friday, July
31, to secure a mutually convenient date for
the requested meeting.

App. at 405-06 (emphasis in original). The district court

concluded this letter was a request for an explanation of the

calculation of Haberern's benefits which was not then provided to

Haberern.0

We start our discussion on this issue by pointing out

that statutory penalty provisions are construed strictly. See

Ivan Allen Co. v. United States, 422 U.S. 617, 626, 95 S.Ct.

2501, 2506 (1975) (tax provision aimed at accumulated taxable

income strictly construed). As might be expected, courts have

taken this approach in applying penalty provisions of ERISA.

Tracey v. Heublein, Inc., 772 F. Supp. 726 (D. Conn. 1991)

(requirements that request requirement of section 105(a) be in

writing may not be waived); Chambers v. Kaleidoscope, Inc. Profit

Sharing Plan, 650 F. Supp. 359, 370 (N.D. Ga. 1986) (corporation

0
Haberern served a motion in this court after oral argument which
she described as a "motion to correct the record." In
particular, Haberern asked that we "correct the factual
misstatement made by Appellants' counsel during oral argument"
that Haberern never had made a written request for information in
conformity with section 502(c). In her motion, Haberern
contended that the statement was incorrect because a demand for
an accounting, a document request, pleadings, and briefs,
documents which she served within this litigation, constituted
section 502(c) requests. We denied this motion, as the district
court did not assess penalties by reason of the appellants'
alleged failure to comply with these litigation documents. Thus,
we have no reason to consider whether a demand within the context
of litigation can be a request within sections 105(a) and
502(c)(1).

35
cannot be liable when request for information was never sent to

it).

When the foregoing strict construction precept is

recognized and the specific language of section 105(a) and

502(c), 29 U.S.C. §§ 1025(a) and 1132(c), is considered, it

becomes evident that Haberern's attorney's letter cannot be

regarded as a statutory request for an explanation of Haberern's

benefits within those sections.0 Haberern's attorney's letter

requested only that a meeting be scheduled. While the letter

complained that certain materials had not been supplied, it never

requested that they be supplied. In these circumstances, we

cannot understand how this letter could be construed as a written

request under section 105(a), 29 U.S.C. § 1025(a).

We find support for our conclusion in Fisher v.

Metropolitan Life Ins. Co., 895 F.2d 1073 (5th Cir. 1990). In

Fisher, the plaintiff had sent a handwritten scribbled note at

the bottom of a social security award to the insurance company

designated to administer the plan. The note requested, "a copy

0
We note that in light of the requirement that a request in
writing be sent to the plan "administrator" as used in section
105(a), 29 U.S.C. § 1025(a), and as defined in section 3(16), 29
U.S.C. § 1002(16), it is questionable whether a request addressed
to Lehigh Valley's attorney could have been an effective
statutory request regardless of its form. In this case, the
letter implicitly acknowledges that the recipient is not the
administrator when it suggests discussing "these questions with
you and the Administrator of the two plans." App. at 406. See
Fisher v. Metropolitan Life Ins. Co., 895 F.2d 1073, 1077 (5th
Cir. 1990) (discussing whether life insurance company as agent to
administer the plan should be regarded as de facto plan
administrator). But because we find the letter was not a
"request" within the meaning of section 1025(a), it is
unnecessary to reach this issue.

36
of the policies covering my contract for salary continuation."

Id. at 1077. The court concluded this note was insufficient to

constitute a request for plan documents. Id. See also Chas.

Kurz & Co. v. United States, 698 F. Supp. 268 (Ct. Int'l Trade

1988) (petition for remission of excise duties was not a

"request" for retroactive application of amended tariff statute).

Further, the court in Fisher noted that the defendant responded

to the scribbled note by suggesting that a copy of the policies

"covering your contract" could be obtained from the plaintiff's

previous employer. Fisher, 895 F.2d at 1077. This response led

the court to believe that the defendant's understanding of the

note was consistent with it not being a request for plan

documents. Consequently, the court concluded it could not find

the district court had abused its discretion in refusing to award

penalties under section 502(c), 29 U.S.C. § 1132(c). We

therefore will reverse the judgment of the district court

imposing penalties on the appellants for failing to respond to

the letter by supplying information regarding the calculation of

Haberern's benefits.

IV. CONCLUSION

In view of our aforesaid discussion, we will reverse

the judgment of May 13, 1993, in all respects, except that we

will not reverse the district court's conclusion that the

appellants breached their fiduciary duty by requiring Haberern to

sign a release to obtain her benefits under the defined

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contribution plan. We will remand the matter to the district

court for entry of a judgment in conformity with this opinion.

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