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Precedential or Non-Precedential: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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"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
37
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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