IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 20, 2008
No. 06-61142 Charles R. Fulbruge III
Clerk
CAROLYN HARRIS, AND OTHER UNKNOWN PARTIES IN INTEREST
Plaintiff-Appellant
v.
TRUSTMARK NATIONAL BANK; TRUSTMARK NATIONAL BANK
PENSION PLAN; TRUSTMARK NATIONAL BANK PROFIT SHARING
PLAN; TRUSTMARK NATIONAL BANK 401(K) PLAN; TRUSTMARK
BANK AND/OR TRUSTMARK CORPORATION AND/OR AGENT(S);
TRUSTMARK CORPORATION
Defendants-Appellees
Appeal from the United States District Court
for the Northern District of Mississippi
4:01-CV-83
Before GARWOOD, GARZA, and BENAVIDES, Circuit Judges.
PER CURIAM:*
Plaintiffs-appellants, Carolyn Harris, et al., appeal the district court’s
grant of summary judgment in favor of defendants-appellants, Trustmark
National Bank, Trustmark National Bank Pension Plan, Trustmark National
Bank Profit Sharing Plan, Trustmark National Bank 401(k) Plan, Trustmark
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
No. 06-61142
Bank and/or Trustmark Corporation and/or agent(s), and Trustmark
Corporation (collectively, Trustmark). Plaintiffs are former employees of
Canton Exchange Bank (Canton) and Rankin County Bank (Rankin) who
became Trustmark employees when Trustmark acquired their former employers
in 1983 and 1987, respectively.1 They sued Trustmark asserting claims of fraud,
misrepresentation, and breach of contract in relation to their retirement plans.
The district court granted summary judgment in favor of Trustmark, and
dismissed the plaintiffs’ claims in their entirety. For the following reasons, we
affirm the judgment of the district court.
FACTS AND PROCEEDINGS BELOW
When Trustmark acquired Rankin and Canton in the 1980s, it retained
the Rankin and Canton employee benefit plans for the former employees of the
two banks. Thus, Trustmark did not include the former Rankin and Canton
employees in both its profit sharing plan and its 401(k) plan (the Trustmark
Plans) until the plans were merged in the late 1990s. Rankin employees were
excluded from the profit sharing plan from 1987 until 1998, while Canton
employees were excluded from both of the Trustmark Plans from 1983 through
1999.
The plaintiffs filed this case in the Circuit Court of Washington County,
Mississippi on March 9, 2001 alleging that Trustmark committed fraud,
1
Initially, plaintiffs also included former employees of two other banks, State Guaranty
Bank and Brookhaven Bank & Trust, who are currently employed by Trustmark. However,
on November 17, 2005, plaintiffs amended their complaint to omit claims of those employees.
Thus, the plaintiffs in this case only include former Rankin and Canton employees, and we will
not discuss the former employees of State Guaranty Bank and Brookhaven Bank & Trust. The
sixteen named plaintiffs in this case include twelve former Canton employees: Carolyn Harris,
Jimmy James, Evelyn M. Akins, the Estate of Robert Grant, Dorothy Furr, Henry Douglas
Rasberry, Betty Stewart, Debra S. Washington, Linder Fleming, Gloria Nichols, Betty
Robinson, Mary Joe Vance-Scott. They also include four former Rankin employees: Carolyn
Burnett, Dena A. Childress, Cynthia E. Ingram, and James F. Wright. Plaintiffs also indicate
in their brief that other putative class members (former employees of Canton and Rankin)who
remain unnamed are plaintiffs as well.
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No. 06-61142
misrepresentation, and breach of contract with regard to the plaintiffs’
retirement plans. Plaintiffs allege that Trustmark did not follow through on its
promises that it would provide plaintiffs with certain retirement benefits
comparable to those of existing Trustmark employees. They claim that before
1998, they should have been provided with the full benefits available from the
Trustmark Plans. Plaintiffs base a large portion of their arguments on this
appeal on a letter dated February 6, 1986 from Rankin to the Senior Vice
President and Personnel Director of Trustmark regarding the employee benefits
of the Rankin employees acquired by Trustmark (the Rankin Merger
Agreement). In pertinent part, the Rankin Merger Agreement states:
“Trustmark shall guarantee to the employees of Rankin County
Bank benefits under the same or a similar plan not less than those
enjoyed by such employees under the Rankin County Bank plan.
Trustmark agrees to make contributions to the Rankin County
Bank plan on a comparable basis to contributions made under the
Trustmark plan if they have not established a similar plan.”
On April 11, 2001, Trustmark removed this action to the federal district
court based on Employee Retirement Income Security Act (ERISA) preemption.
On April 20, 2001, plaintiffs filed a motion to remand the case, which the district
court denied on March 7, 2002. On October 1, 2003, plaintiffs filed an Amended
Complaint in which they asserted that they were bringing a class action suit
involving approximately 600 class members. The proposed or “putative” class
consisted of former employees of various banks acquired by Trustmark since
1983. On April 22, 2004, the district court entered an order granting the
plaintiffs’ Motion to Substitute Class Representative, which made Carolyn
Harris the plaintiffs’ putative class representative. On July 1, 2004, the district
court entered a Memorandum Opinion and Order finding that plaintiffs did not
exhaust their administrative remedies as required by ERISA and staying the
case pending exhaustion of administrative remedies. At this time the district
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No. 06-61142
court also denied the plaintiffs’ request to designate them as representatives of
a class for exhaustion purposes.
On August 24, 2004, twenty-one Trustmark employees, including the four
former Rankin employees and twelve former Canton employees, submitted their
claims for benefits to James R.E. Brown, Assistant Vice President and Benefits
Manager for Trustmark (the Plan Administrator).2 Plaintiffs alleged that
Trustmark committed fraud and made misrepresentations in relation to the
Trustmark Plans. Their initial complaint to the Plan Administrator indicated
that this was “not a merger/acquisition case nor [was] this a case involving a
simple miscalculation of [the plaintiffs’] plan.” Plaintiffs asserted that
Trustmark misrepresented the value of their retirement plans for years, and
alleged that Trustmark violated ERISA by excluding them from the Trustmark
Plans. They sought compensation for lost profit sharing benefits that they would
have received had they participated in the Trustmark Plans.
The Plan Administrator issued a Notice of Denial of the plaintiffs’ claims
on January 14, 2005. He attached the Rankin Merger Agreement to his decision.
He explained that Canton and Rankin executives insisted, as a condition of
Trustmark’s acquisitions of the banks, that their employees keep their existing
retirement plans rather than being placed in the Trustmark Plans. Thus, he
explained that the former Canton and Rankin employees were not entitled to the
requested profit sharing benefits. The Plan Administrator emphasized that
there was no evidence of the alleged misrepresentations that formed the basis
of the plaintiffs’ claims. Furthermore, he found that the plaintiffs’ alleged
injuries had no causal connection to reasonable reliance on the alleged
misrepresentations. The plaintiffs appealed the Plan Administrator’s decision
2
The sixteen named plaintiffs listed in footnote 1, supra, exhausted their
administrative remedies (along with five others who are not a party to this action: four former
employees of State Guaranty Bank and one former employee of Brookhaven Bank & Trust).
4
No. 06-61142
on March 11, 2005. The Plan Administrator affirmed his previous denial of
benefits on June 17, 2005. Thus, the plaintiffs had exhausted their
administrative remedies, and the district court lifted the stay on the district
court proceedings on August 5, 2005.
On November 14, 2005, plaintiffs filed a Motion to Certify Class Action
requesting that the district court certify a class of plaintiffs consisting of those
who became Trustmark employees by virtue of Trustmark’s acquisition of
Rankin and Canton. In the alternative, the plaintiffs requested that the court
divide the plaintiffs into two classes consisting of only former Rankin and only
former Canton employees. The district court never addressed the plaintiffs’
request to certify a class, even in its order granting summary judgment in favor
of Trustmark; plaintiffs make no complaint in that respect on this appeal.
Trustmark filed a Motion for Summary Judgment in the district court on
February 10, 2006, and the plaintiffs filed a Cross-Motion for Summary
Judgment on June 2, 2006. On September 29, 2006, the district court entered
an order granting summary judgment in favor of Trustmark “as to the claims of
all plaintiffs,” and dismissed the case. It dismissed with prejudice the claims of
the sixteen named plaintiffs who exhausted their administrative remedies (those
named in the fourth and fifth sentences of note 1 supra), while dismissing
without prejudice the claims of any other plaintiffs who did not present their
claims before the Plan Administrator. On October 23, 2006, plaintiffs timely
filed a notice of appeal of the district court’s judgment.
DISCUSSION
We limit our discussion to the issues raised on appeal: whether the district
court erred by refusing to remand the case to the Plan Administrator to
determine whether Trustmark complied with the Rankin Merger Agreement;
whether the district court erred in determining that plaintiffs do not have
substantive rights under ERISA or applicable Treasury regulations, and in
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No. 06-61142
failing to remand the case to the Plan Administrator to determine whether
Trustmark violated these rights; whether the district court applied the proper
standard of review; and whether the district court erred in dismissing without
prejudice the claims of plaintiffs who did not present their claims before the Plan
Administrator. For the reasons stated below, we affirm the judgment of the
district court.
A. The Rankin Merger Agreement.
Plaintiffs argue that the district court should have remanded this case to
the Plan Administrator to allow him to determine whether Trustmark complied
with the Rankin Merger Agreement. The Rankin Merger Agreement states that
Trustmark will “guarantee to the employees of Rankin County Bank benefits
under the same or a similar plan not less than those enjoyed by such employees
under the Rankin County Bank plan,” and that “Trustmark agrees to make
contributions to the Rankin County Bank plan on a comparable basis to
contributions made under the Trustmark plan if they have not established a
similar plan.” Plaintiffs argue that Trustmark did not comply with the
requirements of this agreement.
Trustmark suggests that a district court’s decision regarding whether to
remand a case for administrative proceedings is reviewed for abuse of discretion,
even when the remand decision is made in conjunction with a grant or denial of
summary judgment. See Bordelon v. Barnhart, 161 Fed. Appx. 348, 353 (5th Cir.
2005) (reviewing for abuse of discretion a district court’s decision to remand a
case to the Social Security Commission). However, this court reviews a district
court’s grant of summary judgment de novo. Plyant v. Hartford Life and
Accident Ins. Co., 497 F.3d 536, 538 (5th Cir. 2007). We cannot find and the
parties do not cite a published opinion indicating how this court reviews a
district court’s decision not to remand a case for administrative proceedings.
However, we need not decide this issue at this time because the record does not
6
No. 06-61142
reflect that plaintiffs requested the district court to remand for further
administrative proceedings.
A review of the record reveals that plaintiffs did not ask the district court
to remand their case for further administrative proceedings to determine
whether Trustmark complied with the Rankin Merger Agreement. None of the
documents filed by plaintiffs in the district court mention even the possibility of
remanding the case. Also, although the district court suggests that it may have
remanded the issue if the plaintiffs had not been provided with a copy of the
Rankin Merger Agreement in time to raise it before the Plan Administrator, the
district court opinion does not indicate that plaintiffs requested remand.
Because plaintiffs did not request that the district court remand the case, they
cannot now raise this argument on appeal absent “exceptional circumstances.”
Castillo v. Barnhart, 325 F.3d 550, 553 (5th Cir. 2003) (quoting Kinash v.
Callahan, 129 F.3d 736, 739 n.10 (5th Cir. 1997)) (indicating that in “exceptional
circumstances . . . the court ‘may, in the interests of justice, review an issue that
was not raised in the district court’”). As the plaintiffs do not establish any
“exceptional circumstances” that prevented them from arguing in the district
court that their case should be remanded on the Rankin Merger Agreement
issue, they cannot now successfully argue that their case should be remanded to
the Plan Administrator.
Furthermore, plaintiffs cannot return to administrative proceedings
because they did not raise their Rankin Merger Agreement argument before the
Plan Administrator. An ERISA plaintiff must exhaust his remedies before
pursuing a claim in federal court. Denton v. First Nat’l Bank of Waco, Texas, 765
F.2d 1295, 1303 (5th Cir. 1985) (“Congress, in enacting ERISA, clearly wanted
potential plaintiffs to first exhaust their administrative remedies before
resorting to the federal courts.”). One of the “primary purposes” of the
exhaustion requirement is to “assure that any judicial review of fiduciary action
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No. 06-61142
(or inaction) is made under the arbitrary and capricious standard, not de novo.”
Id. at 1300. A plaintiff has not exhausted his administrative remedies on an
issue if he fails to raise it before the plan administrator. Thus, a federal court
should not address the issue because it does not have the opportunity to review
the plan administrator’s resolution of the issue under an arbitrary and
capricious standard. See Pub. Citizen, Inc. v. United States Envtl. Prot. Agency,
343 F.3d 449, 461 (5th Cir. 2003) (holding that in the context of agency law,
“[a]bsent exceptional circumstances, a party cannot judicially challenge agency
action on grounds not presented to the agency at the appropriate time during the
administrative proceeding”); but see Jordan v. Fed. Express Corp., 914 F. Supp.
1180, 1189 (W.D. Pa. 1996) (holding that “ERISA requires only claim exhaustion
and not ‘issue’ or ‘theory’ exhaustion of administrative remedies”), aff’d in part,
rev’d in part on other grounds, 116 F.3d 1005 (3d. Cir. 1997).
Furthermore, after a plaintiff has exhausted his remedies, this court
generally should not remand a case to a plan administrator absent “special
circumstances.” Vega v. Nat’l Life Ins. Servs., Inc., 188 F.3d 287, 302 n.13 (5th
Cir. 1999) (en banc). Each party should make its record with the Plan
Administrator before the case comes to federal court; allowing parties a second
opportunity to develop the record dilutes their incentive to develop the record at
the first opportunity. Id.; see also Bourgeois v. Pension Plan for Employees of
Santa Fe Int’l Corps., 215 F.3d 475, 479 n.4 (5th Cir. 2000) (indicating that one
of the purposes of the exhaustion requirement under ERISA is “providing a clear
record of administrative action if litigation ensues”). Furthermore, allowing a
case to “oscillate” between courts and administrative proceedings prolongs the
case. Vega, 188 F.3d at 302 n.13. For these reasons, absent special or unusual
circumstances, a district court need not remand an issue to a plan administrator
if the plaintiff did not take the opportunity to raise the issue in administrative
proceedings. See id. As an ERISA “claimant only has an opportunity to make
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No. 06-61142
his record before he files suit in federal court,” plaintiffs were required to present
their argument that Trustmark violated the Rankin Merger Agreement to the
Plan Administrator during the administrative proceedings. Id.
Plaintiffs did not raise the Rankin Merger Agreement argument before the
Plan Administrator and have not established any special circumstances that
would warrant the district court remanding the issue. Id. A review of the
plaintiffs’ original complaint and their Appeal of Notice of Denial before the Plan
Administrator reveals that plaintiffs did not make any arguments regarding the
Rankin Merger Agreement to the Plan Administrator. In their appeal to the
Plan Administrator, they argued that “Trustmark agreed to make and/or keep
the retirement benefits of Plaintiff and the plaintiff class equal to those of its
other employees,” and noted that “Trustmark totally ignored the issues relating
to the promise of equality of the respective plans.” They also noted Trustmark’s
alleged intention to keep the retirement plans “equal” in a few other instances.
However, the plaintiffs never mentioned the Rankin Merger Agreement. They
even explicitly denied that the case involved a breach of any merger agreement
by stating that “[t]he question presented is not whether Trustmark breached any
of the merger agreements, but rather the question is whether Trustmark
complied with its fiduciary duty owed to claimants and whether Trustmark has
complied with applicable [Internal Revenue Service] and ERISA rules.” Thus,
despite their vague references to Trustmark’s alleged promise to keep the
retirement plans of its employees equal, plaintiffs did not raise the Rankin
Merger Agreement issue before the Plan Administrator.
Furthermore, plaintiffs cite no special circumstances that prevented them
from making this argument to the Plan Administrator. They had ample
opportunity to complain about this issue because the Plan Administrator
attached a copy of the Rankin Merger Agreement to his Notice of Denial on
January 14, 2005, and plaintiffs had the opportunity to file an appeal of this
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No. 06-61142
decision with the Plan Administrator, which they did on March 11, 2005.
Therefore, they should not be able to argue at this point that their case should
be remanded.
Because plaintiffs did not request that the district court remand their case,
did not argue to the Plan Administrator that Trustmark violated the Rankin
Merger Agreement, and did not cite any special circumstances for why the case
should be remanded now, under either the de novo or abuse of discretion
standard of review, the district court did not err in failing to remand the case to
the Plan Administrator on the Rankin Merger Agreement issue.
B. ERISA and Treasury Regulation Claims
The plaintiffs’ second argument on appeal appears to be that the district
court erred in holding that the Trustmark profit sharing plan did not violate
ERISA or applicableTreasury regulations and that it should have remanded this
issue for administrative proceedings instead of granting summary judgment for
Trustmark. This court reviews a district court’s grant of summary judgment de
novo. Plyant, 497 F.3d at 538.
Plaintiffs first argue that this case should be remanded to administrative
proceedings to determine whether the exclusion of the plaintiffs from the profit
sharing plan constituted discrimination by Trustmark in favor of highly
compensated employees. As with the previous issue, the plaintiffs did not ask
the district court to remand this issue to administrative proceedings, and do not
cite “exceptional circumstances” that would warrant remanding the issue. See
Castillo, 325 F.3d at 553. Therefore, plaintiffs cannot now successfully seek
remand on appeal.
It appears that plaintiffs also dispute the district court’s holdings that the
Trustmark Plans did not violate ERISA or Treasury regulations and that
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No. 06-61142
plaintiffs do not have substantive rights under these rules.3 First, plaintiffs
suggest that under certain Treasury regulations, all employees must be provided
with the opportunity to participate in the Trustmark Plans. Plaintiffs also
contend that the Trustmark Plans discriminate against highly compensated
employees, which violates Treasury regulations that relate to tax-exempt
entities. They suggest that because the plans indicate that they should meet the
requirements of ERISA, plaintiffs should be permitted to pursue a private cause
of action against Trustmark based on their allegations.
The district court indicated that it was “highly likely” that the Fifth
Circuit would find that Trustmark did not violate ERISA by distinguishing
between Trustmark employees and former employees of Canton and Rankin in
establishing their ERISA plan. It also held that plaintiffs did not have a private
cause of action based upon allegations that Trustmark’s plan discriminated in
favor of highly compensated employees.
Plaintiffs’ argument that they have substantive rights under ERISA is
without merit. Under Seventh Circuit precedent, participation requirements in
an ERISA plan only affect the plan’s income tax treatment under the Internal
Revenue Code (IRC). Reklau v. Merchants Nat. Corp., 808 F.2d 628, 631 (7th
Cir. 1986) (holding that IRC § 401 did not create any substantive rights that
could be enforced by an individual as a participant or beneficiary of a tax
qualified pension plan). Furthermore, this court has cited Reklau for the
proposition that ERISA does not create a private cause of action for violations
of Treasury regulations. Tulley v. Ethyl Corp., 861 F.2d 120, 125 (5th Cir. 1988)
(indicating that the Fifth Circuit “do[es] not incorporate the Treasury
regulations into ERISA to create substantive rights”); see also Abraham v. Exxon
Corp., 85 F.3d 1126, 1131 (5th Cir. 1996) (indicating that “the Treasury
3
Although plaintiffs assert that Trustmark has violated ERISA and Treasury
regulations, they do not specify or cite the statutes or regulations that have allegedly been
violated.
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No. 06-61142
regulations do not create substantive rights under ERISA that would permit the
relief [the plaintiff] requests”). Thus, the Treasury regulations do not create
substantive rights as plaintiffs suggest.
In Abraham, this court addressed an argument similar to that raised by
the plaintiffs. In that case, the plaintiffs were “leased” or “special agreement”
employees of Exxon who worked at Exxon facilities but were employed by
unaffiliated firms that leased services to Exxon. Abraham, 85 F.3d at 1128.
Plaintiffs were excluded from Exxon’s ERISA plan, and sued Exxon seeking,
inter alia, a determination that they were entitled to benefits from the plan. Id.
Plaintiffs contended that the exclusion of the leased employees from the plan
was discriminatory and violated the minimum participation and coverage
requirements of ERISA and certain Treasury regulations. Id. at 1130. This
court indicated that the Treasury regulations “purport to do no more than
determine whether a plan is a qualified tax plan.” Id. at 1131. Thus, it held that
“[f]ailure to meet the requirements of those regulations results in the loss of a
beneficial tax status; it does not permit a court to rewrite the plan to include
additional employees.” Id. It also held that the Treasury regulations do not
create substantive rights under ERISA that would allow the court to award the
plaintiffs their requested relief. Id.
Like the plaintiffs in Abraham, the plaintiffs in this case suggest that they
have substantive rights to force Trustmark to compensate them for their
exclusion from the Trustmark Plans based on Treasury regulations and ERISA
provisions. However, Abraham clearly indicates that the Treasury regulations
do not create substantive rights, and that failure of the Trustmark Plans to
conform to Treasury regulations would simply result in the loss of a beneficial
tax status, not mandatory inclusion of plaintiffs in the Trustmark Plans. Id.
Plaintiffs argue that Crouch v. Mo-Kan Iron Workers Welfare Fund, 740
F.2d 805 (10th Cir. 1984) supports their position that they should have a private
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No. 06-61142
cause of action for damages due to their exclusion from the Trustmark Plans and
Trustmark’s discrimination in favor of highly compensated employees. At issue
in Crouch was an ERISA plan stating:
“The Plan adopted by the Trustees shall be such as will qualify for
approval by the U.S. Treasury Department, Internal Revenue
Service and Department of Labor, and as will continue as a qualified
plan. The Trustees are authorized to make whatever applications
are necessary with the said Internal Revenue Service and
Department of Labor to receive and maintain approval of the plan.”
Id. at 808.
The Tenth Circuit held that because the employer’s plan stated that it should be
construed to meet ERISA requirements, an employee could force her employer
to include her as a participant in the plan. Id. at 808-09. If she could not
maintain a private cause of action under ERISA to do this, the plan would not
meet the qualification requirements of ERISA. Id. at 809.
However, in Abraham, the Fifth Circuit declined to apply Crouch. 85 F.3d
at 1131. This court held that absent an “explicit provision declaring that [a plan]
was to be construed to meet the requirements of an ERISA plan . . . a court is not
entitled to look to Treasury regulations to determine employee eligibility for
participation in an ERISA plan.” Id. See also Bronk v. Mountain States
Telephone and Telegraph, Inc., 140 F.3d 1335, 1338-39 (10th Cir. 1998) (citing
Abraham, and limiting Crouch to its facts, when a plan explicitly states that it
must comply with ERISA, the Internal Revenue Code, and Treasury
regulations). Under Abraham, when the plan in question does not explicitly
state that it should comply with ERISA like the plan in Crouch did, the plan
does not create substantive rights. 85 F.3d at 1131.
Crouch does not apply to this case as plaintiffs cite no language from the
Trustmark Plans indicating that the plans must comply with ERISA. Unlike the
language from the plan at issue in Crouch, the provisions that plaintiffs quote
from the Trustmark profit sharing plan and a resolution by the Trustmark board
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No. 06-61142
of directors do not qualify as “explicit provision[s] declaring that [the plans are]
to be construed to meet the requirements of an ERISA plan.” Abraham, 85 F.3d
at 1131. The Trustmark profit sharing plan that became effective January 1,
1984 indicates that “in order to comply with the Employee Retirement Income
Security Act of 1974, and to effect certain changes in the Plan, the Sponsor
amended, restated and continued the Plan effective January 1, 1976.”
Furthermore, a Resolution by the Board of Directors of Trustmark National
Bank, from December 13, 1988 stated in its introduction:
“WHEREAS, such [of Trustmark’s retirement plans and trusts
for the benefit of its employees] are intended to be qualified plans
and trusts under the Internal Revenue Code; and
WHEREAS, Trustmark now finds it advisable to amend said
plans and trusts in order to comply with changes in the law caused
by the Tax Reform Act of 1986 and other changes to the Internal
Revenue Code and regulations.”
Unlike the plan at issue in Crouch, neither of these provisions explicitly declare
that the Trustmark Plans must continue as qualified ERISA plans. They state
that the plans are intended to qualify as ERISA plans, but do not indicate that
the plans must always satisfy ERISA. Thus, the Trustmark Plans do not fall
into the limited category of retirements plans that create substantive rights
under Crouch.
Moreover, as the Plan Administrator discussed in his denial of the
plaintiffs’ claims on January 14, 2005, it was determined as part of the merger
agreements that Canton and Rankin employees would keep the plans that they
held with their former employers, and would not take part in the Trustmark
Plans.4 Thus, the plaintiffs also do not qualify for relief as they were excluded
from the Trustmark plans under previous agreements negotiated at arm’s
length, and cannot now insist that they should have been included in certain
4
Neither party addresses this fact, but plaintiffs do not deny its validity.
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No. 06-61142
Trustmark Plans despite the fact that their former employers specifically
negotiated to exclude them from the plans.
For the reasons stated above, we hold that the district court did not err in
granting summary judgment for Trustmark because plaintiffs are not entitled
to any relief under ERISA or Treasury regulations, and they do not have
substantive rights to enforce the Trustmark Plans.
C. Standard of Review
The plaintiffs also appear to argue that the district court applied an
improper standard of review when analyzing the Plan Administrator’s decision.
First, they argue that the district court should have applied a de novo standard
of review instead of abuse of discretion to determine whether plaintiffs failed to
raise their argument regarding the Rankin Merger Agreement before the Plan
Administrator. They also contend that whether the Plan Administrator was
required to include the former Rankin and Canton employees in the Trustmark
profit sharing plan is a question of law, which should be reviewed de novo
instead of under an arbitrary and capricious standard. The district court’s
choice of which standard of review should apply when it reviews the conclusions
of a Plan Administrator is a legal issue. This court reviews legal issues de novo.
Carbajal-Gonzalez v. I.N.S., 78 F.3d 194, 197 (5th Cir. 1996).
The district court concluded that in their administrative proceedings,
plaintiffs did not allege that Trustmark breached the Rankin Merger Agreement.
As Trustmark notes, the district court did not apply an abuse of discretion
standard in so determining because it did not rely on any conclusions of the Plan
Administrator in reaching that decision. Thus, it applied a de novo standard of
review as it based this decision on a review of the plaintiffs’ administrative
complaint and their administrative appeal.
The district court does not appear to have applied an abuse of discretion
standard when determining whether Trustmark was required to include the
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No. 06-61142
former Rankin and Canton employees working for Trustmark in its profit
sharing plan.
The district court did indicate that it was “limited to a determination of
whether the [Plan] Administrator abused his discretion” because the Trustmark
Plans indicate that deference should be given to the Plan Administrator. It also
stated in relation to plaintiffs’ Rankin Merger Agreement argument that “the
crucial point in this case is that the decisions made by the Plan Administrator
regarding benefits were consistent with one arguable interpretation of a rather
complex plan.” It concluded that the Plan Administrator was entitled to
“considerable deference” and that plaintiffs failed to demonstrate that he abused
his discretion by concluding that they were not entitled to relief.
However, after making these findings, the district court moved on to the
other issues raised by the plaintiffs, including whether ERISA bars the exclusion
of Rankin and Canton employees from the Trustmark profit sharing plan. In
discussing this issue, the district court did not refer to any standard of review.
Unlike in its discussion of the previous issues, it also did not mention the Plan
Administrator’s decision or reasoning. It simply analyzed the case law. Thus,
the district court did not review whether ERISA barred exclusion of plaintiffs
from the Trustmark profitsharing plan for abuse of discretion, and seems to have
applied de novo review to that question.
For the foregoing reasons, we hold that the district court did not apply
improper standards of review in determining whether plaintiffs argued to the
district court that Trustmark breached the Rankin Merger Agreement, and
whether ERISA bars them from being excluded from the Trustmark profit
sharing plan.
D. Plaintiffs Who Did Not Exhaust Their Administrative
Remedies
Plaintiffs claim that the district court erred in dismissing without
prejudice the claims of plaintiffs who did not exhaust their administrative
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No. 06-61142
remedies. First, they suggest that exhaustion of administrative remedies by a
class representative constitutes exhaustion for all proposed class members. In
the alternative, they suggest that it would be futile for the plaintiffs who did not
exhaust their remedies to attempt to exhaust them as Trustmark has already
determined that the former employees of Rankin and Canton were properly
excluded from its profit sharing plan. They also contend that the proposed class
of plaintiffs has exhausted its administrative remedies because some former
Canton employees submitted a questionnaire to Trustmark asking why they
could not participate in the profit sharing plan. Finally, they suggest that the
proposed class was denied meaningful access to administrative procedures
because Trustmark denied their request to participate in the profit sharing plan,
but did not provide any instructions as to how to appeal this denial. This court
reviews for abuse of discretion a district court’s decision regarding whether
plaintiffs have exhausted their administrative remedies under ERISA and can
proceed with a lawsuit. Hall v. Nat’l Gypsum Co., 105 F.3d 225, 231 (5th Cir.
1997).
Plaintiffs argue that exhaustion of remedies by a class representative
constitutes exhaustion by all of the proposed class members. However, the cases
that plaintiffs cite do not support their argument as they do not indicate that a
class representative in an ERISA case can exhaust the remedies of all class
members. See Gates v. Cook, 376 F.3d 323, 329-30 (5th Cir. 2004) (holding that
under the Prison Litigation Reform Act, the exhaustion of administrative
remedies requirement is satisfied for the class if the class representative
exhausts his remedies); Oatis v. Crown Zellerbach Corp., 398 F.2d 496, 498 (5th
Cir. 1968) (holding that “once an aggrieved person raises a particular issue with
the [Equal Employment Opportunity Commission] which he has standing to
raise, he may bring an action for himself and the class of persons similarly
situated” under the Civil Rights Act of 1964). These cases involve civil rights
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No. 06-61142
actions, so they do not indicate that exhaustion of remedies by class
representatives constitutes exhaustion for all class members in an ERISA action
such as this one. We could not find and plaintiffs do not cite any Fifth Circuit
case holding that this policy applies in ERISA cases. However, the Third Circuit
has suggested that the opposite is true, that each purported class member in an
ERISA case must exhaust his or her own administrative remedies. Harrow v.
Prudential Ins. Co., 279 F.3d 244, 247 n.5 (3d. Cir. 2002) (“We see no merit to
plaintiff’s argument that exhaustion of administrative remedies should be
waived when plaintiff seeks class-wide declaratory relief.”).
However, we need not decide this issue at this time as representative
exhaustion of administrative remedies was not available to plaintiffs because the
district court did not certify a class. The district court granted the plaintiffs’
motion to substitute Carolyn Harris as class representative on April 22, 2004,
which suggests that it acknowledged plaintiffs as a class. However, the district
court denied plaintiffs’ request to designate class representatives for exhaustion
purposes in a July 2004 order, and did not address plaintiffs’ later requests for
class certification after they exhausted their administrative remedies. It never
defined or specified the parameters of a class. Furthermore, plaintiffs do not
claim that a class was certified, do not appeal the district court’s failure to
certify, and refer to the class as “putative.” Thus, plaintiffs’ argument that
exhaustion of remedies by the class representative constituted exhaustion for the
purposes of all class members must fail because the court did not acknowledge
or certify a class.
Furthermore, plaintiffs argue that forcing all plaintiffs to exhaust their
remedies would be futile. The Fifth Circuit has indicated that under certain
circumstances, plaintiffs in an ERISA case are not required to exhaust their
remedies if doing so would be futile. Coop. Benefit Adm'rs, Inc. v. Ogden, 367
F.3d 323, 336 n.61 (5th Cir. 2004). However, this court has held that “[a] failure
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No. 06-61142
to show hostility or bias on the part of the administrative review committee is
fatal to a claim of futility.” McGowin v. Manpower Int’l, Inc., 363 F.3d 556, 559
(5th Cir. 2004). Plaintiffs do not allege that the Plan Administrator or his staff
are hostile or biased toward them, so their futility argument must fail.
Plaintiffs argue that under McCarthy v. Madigan, 112 S. Ct. 1081, 1088
(1992), an administrative remedy may be futile if the administrative body has
already determined the issue before it. McCarthy involves a Bivens action of a
federal prisoner, and does not apply to ERISA.5 Moreover, many Fifth Circuit
cases since McCarthy have discussed the administrative exhaustion requirement
under ERISA, and none have found that McCarthy analysis applies. See, e.g.,
Bourgeois, 215 F.3d at 479. Thus, McCarthy does not appear to apply to
exhaustion of administrative remedies in ERISA actions, and this court will not
apply the test set forth in that case to determine whether exhaustion is futile in
this case.6
Plaintiffs also argue that they exhausted their administrative remedies
when some former Canton employees submitted a written questionnaire to
Trustmark asking why they could not participate in Trustmark’s profit sharing
plan and requesting that Trustmark allow them to participate. This court has
noted in ERISA proceedings that “allowing informal attempts to substitute for
the formal claims procedure would frustrate the primary purposes of the
exhaustion requirement.” Id. at 480 n.14. Thus, by submitting a questionnaire
to Trustmark, plaintiffs did not exhaust their remedies. To exhaust their
5
Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 91 S. Ct. 1999
(1972).
6
Trustmark also argues that plaintiffs’ futility argument must fail because they did not
raise the futility exception in response to Trustmark’s motion for summary judgment. Because
plaintiffs’ futility argument fails for other reasons, we will not address this argument at this
time.
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No. 06-61142
remedies, they needed to follow the formal claims procedure as the Rankin and
Canton employees did when they filed their claims with the Plan Administrator.
Finally, plaintiffs argue that they were denied meaningful access to the
administrative procedure because Trustmark denied their request to participate
in the profit sharing plan after they submitted their written questionnaire and
did not provide them with instructions as to how to appeal the denial. This court
has indicated that a company need not voluntarily provide information on how
to appeal this sort of denial, and that it is a plaintiff’s responsibility to seek it.
Meza v. Gen. Battery Corp., 908 F.2d 1262, 1279 (5th Cir. 1990) (holding that in
passing ERISA, Congress did not intend to excuse claimants from exhausting
their administrative remedies when they are not informed of the proper
administrative procedures); see also McGowin, 363 F.3d at 559 (holding that
because a plaintiff in an ERISA case did not request benefit plan documents and
was not prevented from obtaining them, she could not assert a successful
argument that she was denied meaningful access to the administrative process
in defense of her failure to exhaust administrative remedies); Bourgeois, 215
F.3d 475, 480 (5th Cir. 2000) (holding that Meza imposes a duty to seek the
information regarding exhaustion of administrative remedies in an ERISA plan
even if it has not been made readily available to the plaintiff). As plaintiffs do
not argue that they attempted to discover how they could appeal Trustmark’s
decision regarding their questionnaire, they cannot now assert that they were
denied access to administrative proceedings.
Even more, as we determine that the district court did not err in granting
summary judgment for Trustmark, it would not be beneficial to potential
plaintiffs who did not exhaust their administrative remedies to have their claims
dismissed with prejudice as plaintiffs argue should be the case. If we held that
exhaustion was not necessary for these plaintiffs, a judgment against them
would be rendered on the merits. They could only obtain relief if certiorari in
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No. 06-61142
this case was sought and granted by the Supreme Court and our decision on the
merits herein was reversed. Furthermore, it does not prejudice the plaintiffs
who did exhaust their administrative remedies that they cannot exhaust the
remedies of other potential plaintiffs.
For the reasons stated above, we hold that the district court did not abuse
its discretion in dismissing without prejudice the claims of plaintiffs who did not
exhaust their administrative remedies.
CONCLUSION
For the foregoing reasons, the judgment of the district court is
AFFIRMED.
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