Opinion
CASE NO. 2:10-CV-2299-JST (RZx).
August 29, 2011
ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
Defendant The Fred S. Soeprono M.D., Inc., Defined Benefit Pension Plan filed this Motion for Summary Judgment against Plaintiff Deanna L. Brower. (Doc. 42.) Plaintiff's Complaint alleged breach of the pension plan and seeks recovery of plan benefits, injunctive relief, declaratory relief, attorneys' fees, and statutory penalties. Defendant Plan argues that Plaintiff is not a participant in the plan and therefore has no standing to make her claims. For the reasons set forth below, the Court DENIES the Motion. (Doc. 42.)
I. Standard of Review
II. Factual and Procedural History
Anderson v. Liberty Lobby, Inc.,477 U.S. 24225556Anderson,477 U.S. at 2485656Celotex Corp. v. Catrett,477 U.S. 317323Id.
The Plan was formed in December 2001 with an effective date of January 1, 2001. (UF 6.) As initially adopted, an employee may participate in the Plan if he is at least 21 years of age and completes one Year of Service. (UF 7.) The Plan requires participants to complete at least 1,000 hours of work in a plan year to accrue benefits. (UF 19.) Although not mentioned in the Motion, UF 16 states that under Article I(G) of the Plan, an employee "enter[s] the Plan on the first day of the plan year nearest the date she [becomes] an Eligible Employee." (UF 16.) Although not mentioned in the Motion for Summary Judgment, the Plan was terminated on August 31, 2010. (Decl. of Garrett H. Suemori ¶ 11.)
Plaintiff was hired on August 8, 2000, and she worked over 1,000 hours between August 2000 and August 2001. (UF 15.) Plaintiff was eligible to participate in the Plan as of August 9, 2001. (Id.) Therefore, under the terms of the Plan, Plaintiff became a Plan participant on January 1, 2002. As of May 5, 2002, Plaintiff had worked 889.59 hours, therefore, she had not yet accrued any benefits. (UF 20.) On May 5, 2002, Soeprono amended the Plan to exclude two employees by name: Soeprono's wife and Plaintiff. (UF 10, 18.) The amendment was retroactive to be effective January 1, 2002. (UF 10.)
III. Analysis
"Congress expressly declared that a central policy goal in creating ERISA was to protect participants' interests `by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto . . . and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.'" Chuck v. Hewlett Packard Co., 455 F.3d 1026, 1035 (9th Cir. 2006) (quoting 29 U.S.C. § 1001(b)). "In keeping with Congress' goal of providing `ready access to the Federal courts,' we must remain mindful that `ERISA is remedial legislation which should be liberally construed in favor of protecting participants in employee benefit plans.'" Id. (quoting Batchelor v. Oak Hill Med. Grp., 870 F.2d 1446, 1449 (9th Cir. 1989)); see also Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983) (determining that ERISA is "designed to promote the interests of employees and their beneficiaries in employee benefit plans").
The term `participant' means any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit.29 U.S.C. § 1002(7). The Supreme Court has held that former employees may be "participants" under section 1002(7) if they "`have . . . a reasonable expectation of returning to covered employment' or . . . have `a colorable claim' to vested benefits." Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 117 (1989) (quoting Kuntz v. Reese, 785 F.2d 1410, 1411 (9th Cir. 1986) (per curiam), cert. denied, 479 U.S. 916 (1986)). "Whether a plaintiff is a plan participant is determined as of the time he files the lawsuit." Curtis v. Nevada Bonding Corp., 53 F.3d 1023, 1027 (9th Cir. 1995).
"A former employee who has neither a reasonable expectation of returning to covered employment nor a colorable claim to vested benefits, however, simply does not fit within the [phrase] `may become eligible.'" Firestone Tire, 489 U.S. at 118 (quoting Saladino v. I.L.G.W.U. National Retirement Fund, 754 F.2d 473, 476 (2d Cir. 1985)). Here, because the Plan ended on August 31, 2010, Plaintiff cannot establish that she has a reasonable expectation of returning to covered employment. Therefore, the Court must determine if Plaintiff has "a colorable claim to vested benefits."
Defendant makes what appears to be a fairly straightforward argument. Plaintiff was never a "participant" in the Plan, because the Plan was amended retroactively to make Plaintiff ineligible to join the Plan. Moreover, even if Plaintiff could have been considered a participant of the Plan while working at Employer, she never accrued any benefits. Having never accrued any benefits, Plaintiff can have no "colorable claim to vested benefits." Defendant argues that Plaintiff therefore lacks standing to bring her claims.
When Soeprono amended the Plan on May 5, 2002, ERISA stated: "(1) An applicable pension plan may not be amended so as to provide for a significant reduction in the rate of future benefit accrual unless the plan administrator provides the notice described in paragraph (2) to each applicable individual. . . ." 29 U.S.C. § 1054(h)(1) (2000). "The term `applicable pension plan' means . . . any defined benefit plan;" therefore, based on the undisputed facts submitted by Defendant, the Court finds that Defendant Plan was an "applicable plan" under the statute. See § 1054(h)(8)(B).
Throughout the Order, the Court refers to the versions of the United States Code and Federal Regulations that were in effect on May 5, 2002, the date of the amendment at issue in this case.
"The term `applicable individual' means, with respect to any plan amendment . . . each participant in the plan. . . ." § 1054(h)(8)(A). Under the regulations issued by the Secretary of the Treasury that were in effect on May 5, 2002, "[w]hether a participant or alternate payee [is required to receive notice under section 1054(h)] is determined based on all relevant facts and circumstances at the time the amendment is adopted." 63 Fed. Reg. 68,678, 68,682 (Dec. 14, 1998) (emphasis added). Defendant admits that Plaintiff was eligible to participate in the Plan starting on August 9, 2001. More importantly, from January 1, 2002, until May 5, 2002, Plaintiff was a "participant" in the Plan; until Defendant retroactively amended the Plan, Plaintiff had no reason to believe that she was not a participant in the Plan. Therefore, the Court concludes that on May 5, 2002, the date on which the amendment was made by Soeprono, Plaintiff was a "participant" as defined by the regulations in place at the time of the amendment.
"For purposes of [§ 1054(h)], a plan amendment which eliminates or reduces any early retirement benefit or retirement-type subsidy (within the meaning of subsection (g)(2)(A)) shall be treated as having the effect of reducing the rate of future benefit accrual." § 1054(h)(9). Under the regulations in effect on May 5, 2002, "an amendment providing for the cessation of benefit accruals on a specified date and for the termination of a plan is subject to section [1054](h)." 63 Fed. Reg. at 68,683. Here, it is undisputed that the amendment made by Soeprono eliminated Plaintiff's benefit accruals on a specified date; therefore, the Court concludes that the amendment at issue had the effect of "reducing the rate of future benefit accrual" as set forth by the statute. See § 1054(h)(1). In short, the Court concludes that the amendment Soeprono made to the Plan to exclude Plaintiff from the Plan was subject to ERISA's notice requirements set forth in section 1054(h).
ERISA requires that the section 1054(h) notice "be written in a manner calculated to be understood by the average plan participant" and "be provided within a reasonable time before the effective date of the plan amendment." § 1054(h)(2)-(3) (emphasis added). Under the regulations in effect in 2002, section 1054(h) "generally requires written notice of an amendment to certain plans that provides for a significant reduction in the rate of future benefit accrual. . . . The plan administrator must provide the notice after adoption of the plan amendment and not less than 15 days before the effective date of the plan amendment." 63 Fed. Reg. at 68,680 (emphasis added). Here, Defendant has not established that Soeprono gave Plaintiff written notice of the amendment at any point in time. Moreover, Defendant has admitted that the adoption of the plan amendment took place after the date the amendment purported to become effective, as it was an amendment intended to make changes retroactively to the Plan. Therefore, the Court concludes that Defendant has failed to show that Soeprono complied with the notice requirements in place in 2002. See § 1054(h).
Finally, because Defendant has failed to establish that Soeprono complied with the notice requirements in place in 2002, the Court concludes that the facts currently before the Court do not show that Plaintiff's exclusion was valid:
In the case of any egregious failure to meet any requirement of [1054(h)] with respect to any plan amendment, the provisions of the applicable pension plan shall be applied as if such plan amendment entitled all applicable individuals to the greater of (i) the benefits to which they would have been entitled without regard to such amendment, or (ii) the benefits under the plan with regard to such amendment.
§ 1054(h)(6)(A). An "egregious failure to meet the requirements" of section 1054(h) may be found "if such failure is within the control of the plan sponsor and is . . . (i) an intentional failure" or "(ii) a failure to provide most of the individuals with most of the information they are entitled to receive under [§ 1054(h)]," among other things. § 1054(h)(6)(B). The Court concludes that Soeprono, as both the plan sponsor and administrator, had the ability to notify Plaintiff of the amendment. Defendant has failed to show that Plaintiff received such notice, or that such failure to notify was unintentional. Therefore, the Court concludes that Defendant has not shown in its Motion that there was not an "egregious failure to meet the requirements." See § 1054(h)(6)(B). Having reviewed the terms of the plan, the Court concludes that if notice was not properly provided to Plaintiff, Plaintiff would be entitled to benefits under the Plan as if no amendment had been made. See § 1054(h)(6)(A).
Defendant's counsel admitted at oral argument that Defendant's argument relies on the theory that the amendment to the Plan that excluded Plaintiff was valid and became retroactively effective on January 1, 2002. The Court concludes, however, that for the amendment to be effective, Defendant needed to give proper notice to Plaintiff of the amendment. Because the Court concludes that Defendant has failed to establish that Plaintiff did, in fact, receive notice of the amendment which excluded her from the Plan, Defendant has not established that Plaintiff does not have a "colorable claim to vested benefits." See Hurlic v. S. Cal. Gas Co., 539 F.3d 1024, 1039 (9th Cir. 2008).
IV. Conclusion
For the foregoing reasons, the Court DENIES Defendant's Motion for Summary Judgment.