Summary
holding that documents such as investment guidelines, asset class lists stating investment portfolios and target percentages, risk and return characteristics of plan funds and the name of the investment manager are not "other instruments" within the contemplation of the statute
Summary of this case from MacKenzie v. Regional PrincipalsOpinion
Case No. 3:03cv7307.
May 20, 2004
ORDER
This is an Employee Retirement Income Security Act ("ERISA") case in which plaintiff Charles Hickey, a former employee of defendant Owens-Illinois, Inc., claims that defendants Dan Pennywitt, Owens-Illinois Benefits Committee ("Committee"), and Owens-Illinois, Inc. ("Owens-Illinois") denied his request to specify from which pension fund his retirement distributions would be drawn and instead applied a pro rata rule to his pension funds, in violation of numerous provisions of ERISA, 29 U.S.C. § 1001 et seq.
This court has jurisdiction pursuant to 28 U.S.C. § 1331. Pending are the parties' cross motions for summary judgment and defendants' motion to strike plaintiff's statement of material facts as to which there is no genuine issue. For the following reasons, defendants' motion for summary judgment shall be granted, plaintiff's motion shall be denied, and defendants' motion to strike shall be denied as moot.
BACKGROUND
Plaintiff worked for Owens-Illinois from 1974 until his retirement in 1989. Throughout his employment, he made contributions, which were matched by Owens-Illinois, to an ERISA-governed Stock Purchase and Savings Program ("SPASP"). Plaintiff had discretion to choose among several funds into which his contributions would be invested. After his retirement, plaintiff opted to leave his investments in the SPASP and became a vested retiree participant in the plan.At the time of his retirement until 2002, plaintiff's account was invested in a Harbor Trust Fund Account that derived its proceeds from a series of Guaranteed Investment Contracts ("GICs") with insurance companies. According to defendants, these contracts "bore a fixed rate of interest and matured over a period of four or five years." (Doc. 32, at 4). Contributions from a particular year were "invested in a separate `class year' fund." ( Id.). Plaintiff's account included numerous "class year" funds.
In 1993, plaintiff reached seventy and one-half years of age, the age at which he was required by ERISA and the terms of the SPASP to begin taking mandatory annual distributions from his account. From 1993 until 2002, plaintiff received distributions from his Harbor Trust Fund Account; the distributions were pro-rated from each of his "class year" accounts. He had no quarrel with these distributions. In July, 2002, however, the Committee, of which defendant Pennywitt is Chairman and which is the designated "Plan Administrator" for the SPASP, decided that beginning on January 1, 2003, the Harbor Trust Fund Account would no longer invest new participant contributions solely in GICs issued by insurance companies. The fund would instead begin investing in GICs issued by banks and other financial institutions as well as "enhanced short-term investment products." ( Id. at 5).
Defendants assert that the reason this change was made is that fewer insurance companies were offering the GICs upon which the fund had been based, and it was becoming increasingly difficult to diversify the fund, increasing the risk to investors. The new fund would thereafter be called the "Harbor Trust Stable Value Fund."
Plaintiff asserts that this change violated the various provisions of ERISA that require employers to issue notices to plan participants when they make a material modification to an ERISA plan. Plaintiff opted to remove some of his accounts from the new Stable Value Fund and move them to a "Harbor Money Market Fund." Thereafter, plaintiff asked the Owens-Illinois Benefits Administrator if he could specify that his next distribution be taken from his Money Market account only. Defendants contend that plaintiff wanted to do this because the portion of his investment that remained in the Stable Value "class year" funds was earning a higher interest rate than the funds invested in the Money Market account. The Benefits Administrator told plaintiff that his distributions could only be taken pro rata, from each of his investment accounts equally.
Plaintiff challenged this decision by submitting an appeal to the Committee on February 7, 2003. The Committee denied his appeal, claiming that it applied the pro rata rule to all plan participants regardless of the circumstances. Plaintiff claims that this decision, which the Committee affirmed after plaintiff submitted a request for reconsideration, violated his rights under the terms of the SPASP and the Summary Plan Description ("Summary"). Plaintiff also claims that he had inadequate information upon which to base his appeal because defendants failed to provide him with all of the documents he requested and had a right to see.
STANDARD OF REVIEW
Summary judgement must be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which demonstrate the absence of a genuine issue of material fact. Id. at 323. The burden then shifts to the nonmoving party who "must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (quoting Fed.R.Civ.P. 56(e)).Once the burden of production shifts, the party opposing summary judgment cannot rest on its pleadings or merely reassert its previous allegations. It is insufficient "simply [to] show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, Rule 56(e) "requires the nonmoving party to go beyond the [unverified] pleadings" and present some type of evidentiary material in support of its position. Celotex, 477 U.S. at 324.
In deciding the motion for summary judgment, the evidence of the non-moving party will be accepted as true, all doubts will be resolved against the moving party, all evidence will be construed in the light most favorable to the non-moving party, and all reasonable inferences will be drawn in the non-moving party's favor. Eastman Kodak Co. v. Technical Servs., Inc., 504 U.S. 451, 456 (1992). Summary judgment shall be rendered only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).
DISCUSSION A. Standard of Review of Committee's Decision
Defendants claim that this court should evaluate the Committee's decision to deny plaintiff's request to specify the account from which his distribution would be drawn under an arbitrary and capricious standard of review. Plaintiff disagrees, arguing that, because the Summary does not grant the Committee discretion to review requests such as his, the proper standard of review is de novo.
In Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101 (1989), the Supreme Court held that "a denial of benefits claim brought under [29 U.S.C.] § 1132(a)(1)(B) "is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Id. at 115. If, according to the clear terms of the plan, the Plan Administrator has discretionary authority, courts apply the arbitrary and capricious standard of review. See Carr v. Reliance Standard Life Ins. Co., 363 F.3d 604, 606 (6th Cir. 2004) ("Under the terms of the plan at issue, [employer] serves as the claims review fiduciary . . . and has discretionary authority to interpret the plan. . . . We therefore review its decision to deny benefits using the highly deferential arbitrary and capricious standard of review.") (internal quotations omitted).
The Sixth Amended and Restated SPASP (the "Plan") states that:
The Committee shall have full discretionary power and authority . . . to make fair, equitable and nondiscriminatory rulings and decisions on any questions which may arise with respect to employees, Participants and their beneficiaries, payments and amounts of benefits, and on any question concerning the construction or interpretation of each Trust Agreement and the Plan. (Doc. 45 exh. P-2, at § 11.05, 39-40). As plaintiff points out, however, the Summary, which is the document given to all employees to simplify and explain the important terms of the Plan, does not specify that the Committee has discretionary authority. Plaintiff argues that because language granting the Committee discretionary authority does not appear in the Summary, a conflict exists between the Summary and the Plan; thus, the Committee may not exercise discretion and this court must exercise de novo review. See Edwards v. State Farm Mut. Auto. Ins. Co., 851 F.2d 134,136 (6th Cir. 1988) (statements in the summary that directly contradict statements in the plan itself are binding).
As the court understands it, the Plan is the full, official document setting forth the terms of the SPASP; the Summary is a document required by ERISA to be created for the convenience of plan participants because the Plan itself is typically rather lengthy and difficult to read. ERISA specifies which aspects of the employer's benefits program the Summary must explain. 29 U.S.C. § 1022.
Defendants do not dispute that if the Summary and the Plan were in direct conflict, the Summary would be binding. Defendants argue, however, that there is no conflict where, as here, the Summary simply does not address an issue that is addressed in the Plan.
Plaintiff argues that the Summary "is not silent about the authority of the Plan Administrator to render final decisions on legal interpretations of the Plan." (Doc. 43, at 6). He cites 29 U.S.C. § 1022(b)'s requirements that the Summary explain "the procedures to be followed in presenting claims for benefits under the plan" and "the remedies available for redress of claims which are denied in whole or part." Plaintiff argues that the fact that the Summary explains the process associated with appealing a claim and participants' rights under ERISA means that the Summary addresses the discretion of the Committee (by failing to say that the Committee has discretion) and is in conflict with § 11.05 of the Plan. Plaintiff, however, misreads the content of the Summary provisions he cites — neither of those provisions addresses the authority of the Committee to interpret and make rules regarding the administration of the Plan. The Summary provisions plaintiff cites merely explain that participants are entitled to a written explanation of the Committee's decision when they are denied benefits and that participants have rights to have the Committee review and reconsider a claim, that participants may review and make copies of Plan documents, and that participants may pursue a denied claim in federal or state court. I conclude, therefore, that the Summary is silent on the issue of whether the Committee has discretionary authority to construe and administer the Plan.
The Summary states:
If you . . . do not receive benefits from the Plan to which you feel entitled, you should contact the Owens-Illinois 401(k) Savings Plan Department. If your claim for benefits under the Plan is denied in whole or in part, you are entitled to a written explanation of the reason for denial of benefits. This explanation will list:
• the specific reason for the denial of the claim,
• a specific reference to pertinent Plan provisions on which the denial is based,
• a description of any additional information you could provide to support your claim (and the reasons that information is necessary), and
• the procedures available for further review of your claim.
(Doc. 45 exh. P-1, at 18).
The Summary states:
In addition to creating rights for plan participants, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate your plan are called `fiduciaries' of the plan. . . . You have the right to have the plan administrator review and reconsider your claim. Under ERISA, there are steps you can take to enforce the above rights. . . . If you have a claim for benefits that is denied or ignored, in whole or in part, you may file suit in a state or federal court.
(Doc. 45 exh. P-1, at 20-21).
The Northern District of Ohio has explained that a conflict exists between the Summary and the Plan when there is language in each that contradicts the other; mere silence in the Summary, however, is not a conflict. Cairns v. Bridgestone/Firestone, Inc., 802 F. Supp. 152, 164-65 (N.D. Ohio 1992), aff'd, 995 F.2d 1066 (6th Cir. 1993). Thus, there is no conflict in the instant case, and there is a clear grant of discretionary authority to the Committee in § 11.05 of the Plan.
The Committee's decision, therefore, must be reviewed under the arbitrary and capricious standard. Hunter v. Caliber Sys., Inc., 220 F.3d 702, 710 (6th Cir. 2000) ("where the plan clearly confers discretion upon the administrator to determine eligibility or construe the plan's provisions, the determination is reviewed under the `arbitrary and capricious' standard") (citing Wells v. United States Steel Carnegie Pension Fund, Inc., 950 F.2d 1244, 1248 (6th Cir. 1991).
The arbitrary and capricious standard "is the least demanding form of judicial review of administrative action." Id. "When it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, that outcome is not arbitrary or capricious." Id. (quoting Davis v. Kentucky Fin. Cos. Retirement Plan, 887 F.2d 689, 693 (6th Cir. 1989)).
B. Whether the Committee's Decision was Arbitrary and Capricious
Plaintiff claims that the Committee's decision on his request violated four of its fiduciary duties to plaintiff and other plan participants: 1) the Committee acted out of self interest rather than the interests of the participants when it stated that it had to apply distributions pro rata to all Plan participants because "to do otherwise . . . would add to the costs and complexities of administration of the SPASP" (Doc. 45 exh. P-8, at 1); 2) the Committee "traded off" the right of retiree participants to designate the investment fund from which to take withdrawals (Doc. 44, at 5); 3) the Committee has repeatedly violated ERISA by failing to inform participants of material changes in the Summary; and 4) Committee Chairman (and defendant) Pennywitt has a conflict of interest because he is both Chairman of the Committee and an Officer of Owens-Illinois. Because it violated its fiduciary duties, plaintiff argues, the Committee's decision regarding plaintiff's request is arbitrary and capricious and should be overturned.
Even if a jury were to believe plaintiff that each of the "breaches" he alleges occurred (i.e., that the Committee acted to reduce administrative costs, that it "traded off" the right of participants to choose the account from which their distributions were drawn, that the Committee did not inform participants of the pro rata rule, and that Chairman Pennywitt serves on both the Committee and as an officer of Owens-Illinois), it does not follow that the Committee's decision was arbitrary and capricious. A plain reading of plaintiff's allegations suggests that the Committee implemented a blanket pro rata rule to reduce costs, made a deal ostensibly to benefit the participants (regardless of whether the deal actually benefits plaintiff), and failed to communicate effectively with plaintiff and others about whether retiree participants were required to take distributions pro rata. Although some of these facts may indicate conduct that is less than ideal, they do not indicate arbitrary and capricious action.
Defendants claim that the pro rata rule has been applied consistently and without exception to every plan participant, and that the Committee determined that making an exception for plaintiff was unwarranted and potentially harmful to the Plan as a whole. ( See doc. 45 exh. P-8, P-10). The Committee, as a fiduciary, has a duty under ERISA to act with respect to the plan "solely in the interests of the participants and beneficiaries and — (A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan." 29 U.S.C. § 1104. The Committee believed that denying plaintiff's request was in the interests of all of the plan participants and beneficiaries and would help defray costs of administering the program; thus, it has not violated its fiduciary duties under § 1104.
Defendant Pennywitt, writing on behalf of the Committee, sent a letter to plaintiff on Feb. 12, 2003, explaining why the Committee denied plaintiff's request to take his distribution from one specific SPASP account only. (Doc. 45 exh. P-8). Pennywitt explained:
[W]ithdrawals from the plan are made pro rata from the various funds which hold participant investments. Administratively, these same procedures are followed by the plan for in-service withdrawals, hardship withdrawals, loans and partial distributions, including mandatory post age-70½ distributions which are the subject of your appeal. To do otherwise, that being to let participants pick and choose from which fund withdrawals and partial distributions would come from, would add to the administrative complexities and cost of the plan. It was also pointed out to the Committee that in order to receive the guaranteed rates under the GIC contracts, the contracts have a proviso that any withdrawal and/or partial distribution from the plan would be taken pro rata from participant accounts. Accordingly the Committee's hands were also tied in this regard.
( Id. at 1).
After plaintiff asked the Committee to reconsider its decision, he received a letter on March 19, 2003 from W. Miles McKee, an attorney for defendants, informing plaintiff that the Committee's decision would stand (Doc. 45 exh. P-10). McKee explained:
Charlie, please keep in mind that you are being treated no differently than any other SPASP participants who receive in-service withdrawals, loans, partial distributions, installment distributions or post-age 70½ required mandatory distributions from their SPASP accounts. That being, all such withdrawals, loans and distributions are distributed pro rata from participants' accounts. Administratively to do differently would add costs and complexities to the administration of the SPASP.
More importantly, to do differently would cause Harbor Capital Advisors, Inc. to breach its trust agreement with State Street Bank and Trust Company. The provisions of the Harbor Capital/State Street Trust Agreement were subscribed to by Owens-Illinois, Inc. as Plan Sponsor and Plan Fiduciary in a Subscription Agreement.
* * *
Again as Dan stated in his letter, the Committee's hands are tied in this regard. Furthermore, the Committee is not about to take any action that would be detrimental to other SPASP participants.
( Id. at 1-2).
Defendants also point out that the Committee has no obligation to provide a Summary of Material Modification or other notice to plan participants to implement the pro rata rule. The Plan, as the court has already established, grants the Committee discretionary authority to interpret and administer the SPASP; it does not require a Plan amendment every time the Committee adopts a ruling interpreting a Plan provision. See, e.g., Leahy v. Trans Jones, Inc., 835 F. Supp. 391, 393 (N.D. Ohio 1992) ("a policy adopted pursuant to an existing Plan provision" was not an amendment) (citing Oster v. Barco of Cal. Employees' Retirement Plan, 869 F.2d 1215, 1220-21 (9th Cir. 1988); Dooley v. Am. Airlines, Inc., 797 F.2d 1447, 1452 (7th Cir. 1986)). It appears to the court, based on the evidence submitted by plaintiff, that the Committee had discretionary authority to interpret the Plan and to implement and consistently enforce the pro rata rule. Regardless, it is clear that, at the very least, the Committee believed it had such discretionary authority.
Defendant Pennywitt claims that the pro rata rule had been in place and applied to every retiree and employee participant and beneficiary of the SPASP since at least 1987, when defendant Pennywitt began his service on the Committee. (Doc. 42, Affidavit of Dan W. Pennywitt, at 2 ¶¶ 2, 4).
"[W]hen it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, that outcome is not arbitrary or capricious." Davis, 887 F.2d at 693. In the instant case, plaintiff has not has not presented any evidence of "internal inconsistency or bad faith or some other ground for calling the [Committee's] determination into question." Id. at 695. The Committee's action with regard to plaintiff's request conformed with the procedure set forth in the Summary — it is undisputed that plaintiff received a written response explaining the Committee's reasons for denying plaintiff's request and referencing the specific rule under which the Committee's decision was based. ( See doc. 45 exh. P-1, at 18). Moreover, the evidence is clear that the Committee made its decision in good faith, relying on its discretionary authority to implement rules interpreting SPASP provisions for the benefit of all participants. The Committee's decision was "rational in light of the plan's provisions." Yeager v. Reliance Standard Life Ins. Co., 88 F.3d 376, 381 (6th Cir. 1996). Thus, this court will defer to the Committee's decision and grant summary judgment to defendants on this issue.
C. Whether the Committee Failed to Provide Documents to Plaintiff in Violation of 29 U.S.C. § 1024(b)(4)
Plaintiff also claims that defendants were under an obligation to provide him with documents containing financial data for the Stable Value Fund pursuant to 29 U.S.C. § 1024(b)(4). Because they have not done so, plaintiff contends that, pursuant to 29 U.S.C. § 1132(c)(1)(B), defendants should be assessed a civil penalty of five hundred dollars per day for each of five documents they failed to provide to plaintiff.
29 U.S.C. § 1024(b)(4) states:
The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.
Plaintiff claims that the Stable Value Fund financial data documents he seeks are "other instruments under which the plan is established or operated." Defendants point out that they provided to plaintiff "a copy of the Plan and Trust Agreement under which the Plan was established and operated, along with the [Summary] benefit updates and certain subordinate Trust and Subscription Agreements." (Doc. 32, at 15). Defendants argue that "[t]he Committee was not required to create or provide additional documents relating solely to specific funds in which participants could invest." ( Id.).
Section 1024(b)(4)'s "other instruments" phrase has a limited meaning. The Sixth Circuit has explained that the rule of ejusdem generis governs the interpretation of the phrase: "when general words follow the enumeration of specific words in a statute, courts are to construe the general words in a manner that limits them to the same class of things enumerated by the preceding specific words." Allinder v. Inter-City Products Corp., 152 F.3d 544, 549 (6th Cir. 1998).
"From the statute's enumeration of the specific terms `summary plan description,' `plan description,' `bargaining agreement,' and `contract,' it is apparent that `other instruments' was meant to refer to documents that provide or contain information concerning the terms and conditions of the participant's policy." Id. (emphasis in original). Thus, § 1024(b)(4)'s "reference to `other instruments' is . . . properly limited to those class of documents which provide a plan participant with information concerning how the plan is operated." Id. (emphasis in original). See also Bartling v. Fruehauf Corp., 29 F.3d 1062, 1069-70 (6th Cir. 1994) (explaining that defendants had to disclose actuarial valuation reports because they were required for every third plan year and were indispensable to the operation of the plan, whereas defendants did not have to disclose a purchase agreement because it was not an instrument under which the Plan was established or operated).
Other courts have also applied this limiting interpretation of § 1024(b)(4)'s "other instruments" provision. The Ninth Circuit, for example, explained that "[b]arring indicia to the contrary, the broad term, `other instruments,' should be limited to the class of objects that specifically precedes it." Shaver v. Operating Engineers Local 428 Pension Trust Fund, 332 F.3d 1198, 1202 (9th Cir. 2003) (citing Allinder, 152 F.3d at 549). "We . . . believe that "`instruments' refers to `. . . documents that provide individual participants with information about the plan and benefits.'" Id. (quoting Hughes Salaried Retirees Action Committee v. Administrator of the Hughes Non-Bargaining Retirement Plan, 72 F.3d 686, 690 (9th Cir. 1995)). See also Ames v. Am. Nat'l Can Co., 170 F.3d 751, 758-59 (7th Cir. 1999) (agreeing with other Circuit courts that the "other instruments" provision should be limited to "all documents that provide information about a plan and its benefits" and explaining that "[i]f it had meant to require production of all documents relevant to a plan, Congress could have said so"); Faircloth v. Lundy Packing Co., 91 F.3d 648, 653 (4th Cir. 1996) (holding that the "other instruments" provision "encompasses formal or legal documents under which a plan is set up or managed").
The documents plaintiff seeks include: 1) the Stable Value Fund investment guidelines; 2) "the classes of assets that may comprise the investment portfolio and the target percentages for each of such classes of assets to be held by the Fund"; 3) "insurance coverage to be obtained, if any"; 4) "the risk and return characteristics of such Fund"; and 5) "the name of the investment manager." (Doc. 44, at 22). These documents, however important they may be to helping plaintiff determine the propriety of investing in the Stable Value Fund, do not appear to be the types of documents to which § 1024(b)(4) refers. Plaintiff suggests that he is entitled to see these documents because he cannot make an informed decision about whether to invest in the Stable Value Fund without them. Regardless of the accuracy of plaintiff's assertion, however, he has not shown that these documents are "documents that provide or contain information concerning the terms and conditions of the participant's policy" or "documents which provide a plan participant with information concerning how the plan is operated." Allinder, 152 F.3d at 549 (original emphasis omitted).
I find, therefore, that defendants complied with the strictures of § 1024(b)(4) when they provided plaintiff with "a copy of the Plan and Trust Agreement under which the Plan was established and operated, along with the [Summary] benefit updates and certain subordinate Trust and Subscription Agreements." (Doc. 32, at 15). No reasonable jury could find that the additional documents plaintiff requested were within the limited scope of § 1024(b)(4)'s "other instruments" provision; therefore, there is no genuine issue of material fact as to whether defendants are subject to penalties pursuant to § 1132(c). Thus, defendants are entitled to summary judgment on this claim.
D. Defendants' Motion to Strike
In light of the fact that defendants' motion for summary judgment will be granted as to each of plaintiff's claims, their motion to strike plaintiff's Statement of Material Facts as to which There Is No Genuine Issue will be overruled as moot.
CONCLUSION
It is, therefore,
ORDERED THAT
1) Plaintiff's Motion for Summary Judgment be, and hereby is, denied;
2) Defendants' Motion for Summary Judgment be, and hereby is, granted; and
3) Defendants' Motion to Strike be, and hereby is, denied.
So ordered.