Opinion
8:02CV266.
March 21, 2005
MEMORANDUM AND ORDER
This matter is before the court on the defendants' motion to dismiss or, in the alternative, motion for summary judgment, Filing No. 60, and on the plaintiffs' motion for partial summary judgment, Filing No. 67. This is an action for damages and declaratory and injunctive relief for alleged violations of the Employees Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1000 et seq. Plaintiffs, present and former employees of St. Joseph's Hospital and its predecessor corporations, filed this action on June 6, 2002. The facts of the case are set out in this court's earlier order on defendants' first motion to dismiss. See Filing No. 18, Memorandum and Order at 2-4. In that order, the court found certain issues required further development; namely, the statute-of-limitations issue; the nature of plaintiffs' requested relief; the relationship between the AMI Pension Plan; the Acquisition Agreement and the amendment to the AMI Pension Plan; and the issue of fiduciary status. See id. at 9-13.
Plaintiffs are either: 1) employees who were employed at St. Joseph Hospital and St. Joseph Center for Mental Health on or before November 17, 1984, by Creighton Omaha Regional Healthcare Corporation ("CORHCC") and retired after December 31, 1995; 2) employees who were employed at St. Joseph Hospital and St. Joseph Center for Mental Health on or before November 17, 1984, by CORHCC and terminated employment after December 31, 1995; and 3) employees who were employed at St. Joseph Hospital and St. Joseph Center for Mental Health on or before November 17, 1984, by CORHCC and who are still employed by St. Joseph Hospital or Tenet. See Filing No. 18 at 1.
Plaintiffs were granted leave to file an amended complaint in order to address some of these issues. See Filing No. 54. In its amended complaint, plaintiffs realigned the AMI Pension Plan ("Pension Plan") as an additional plaintiff under 29 U.S.C. § 502(a)(2) and joined Creighton St. Joseph Regional HealthCare System, L.L.C. as a defendant alleging that it is a subsidiary and/or an alter ego of Tenet. See Filing No. 55. Plaintiffs also added allegations relating to Tenet's position as a fiduciary with respect to the Pension Plan and alleged that AMI was without authority to amend the Pension Plan without the consent of the acquired entities' governing boards. Id. Plaintiffs also allege that Tenet succeeded to the obligations of AMI and allege that the Acquisition Agreement is effectively a plan amendment. Id. Plaintiffs also added allegations that Tenet or its subsidiaries failed to follow the proper procedures and to give proper notice of the purported amendment that froze future benefit accruals under the Pension Plan as required by 29 U.S.C. § 1054(h). Id. They thus contend that Tenet's purported amendment of the Pension Plan is not valid because it violated the terms of the Pension Plan, was an ultra vires act, and did not comply with 29 U.S.C. § 1054(h). Id.
In their motion to dismiss, defendants first assert that all of plaintiffs' claims are barred by the applicable statutes of limitations. Defendants also move to dismiss Count I for failure to exhaust administrative remedies. Defendants next contend that Count II is subject to dismissal because amendment of a plan is a function of the settlor and not of a fiduciary. They further contend that all claims based on the Acquisition Amendment are subject to dismissal because the Acquisition Agreement is not a Plan Document and plaintiffs are not third-party beneficiaries of the agreement. Defendants also assert that plaintiffs have failed to state a claim for relief under 29 U.S.C. § 1140. Plaintiffs, on the other hand, contend that the uncontroverted evidence shows that they are partially entitled to judgment as a matter of law.
DISCUSSION
In considering a motion to dismiss a complaint under Rule 12(b)(6), the court must assume all the facts alleged in the complaint are true, and must liberally construe the complaint in the light most favorable to the plaintiff. Schmedding v. Tnemec Co., 187 F.3d 862, 864 (8th Cir. 1999). A Rule 12(b)(6) motion to dismiss a complaint should not be granted unless it appears beyond a doubt that the plaintiff can prove no set of facts which would entitle him to relief. Id. Thus, as a practical matter, a dismissal under Rule 12(b)(6) should be granted only in the unusual case in which a plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief. Id.
On a motion for summary judgment, the question before the court is whether the record, when viewed in the light most favorable to the nonmoving party, shows that 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); Mansker v. TMG Life Ins. Co., 54 F.3d 1322, 1326 (8th Cir. 1995). Where unresolved issues are primarily legal rather than factual, summary judgment is particularly appropriate. Id. The burden of establishing the nonexistence of any genuine issue of material fact is on the moving party. Fed.R.Civ.P. 56(c); Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970). Facts are viewed in the light most favorable to the nonmoving party and a court must not weigh evidence or make credibility determinations. Kenney v. Swift Transp. Co., 347 F.3d 1041, 1044 (8th Cir. 2003).
Defendants' assertion that plaintiffs' claims under ERISA are untimely has already been addressed by the court in its earlier motion. See Filing No. 18 at 6. The court's previous findings on the statutes of limitation issue are law of the case and will remain binding. See id. Accordingly, the statute of limitations for the ERISA claim asserted in Count I of plaintiffs' amended complaint is five years. Id. at 6 (applying Nebraska statute of limitations for contract actions). In its previous order, the court found the limitation period accrues from the date of the alleged injury, which the court found was the repudiation by the fiduciary. Id. at 6. The court found "the date the AMI Pension Plan was amended (September 26, 1996), thereby retroactively freezing the benefits," is the date of the violation. Id. The ERISA limitation period thus began accruing "on the date that the plaintiffs clearly knew or should have known that the AMI Pension Plan was amended so as to freeze benefits." Id. at 8-9. The court found there were factual disputes on the issue of when plaintiffs knew or should have known of the amendment. Id. With respect to plaintiffs' breach of fiduciary duty claims, the court determined that the applicable statute of limitations is found in 29 U.S.C. § 1113. Id. at 9. The court found an issue of fact as to whether the six-year period set out in subsection (1) of that section or the three-year period set out in subsection (2) of that statute applied. Id. In connection with the exhaustion issue, the court found that ERISA itself did not require exhaustion and that there was an issue of fact with respect to whether the Plan required exhaustion. Id. at 11. The court finds the evidence presented by the defendants does not obviate those factual issues.
In opposition to the motion, plaintiffs have shown that the Pension Committee of the Board of Directors of Tenet Healthcare Corporation (the "Pension Committee") is responsible for the operation of the Plan and has the authority to amend or terminate the Plan and to appoint the committee responsible for administering the Plan. With respect to the statute of limitations issue, plaintiffs have presented evidence that creates genuine issues of material fact with respect to whether there was a continuous and unequivocal repudiation by Tenet and with respect to whether Tenet's or its predecessor's communications, representations or assurances served to toll the statute.
Plaintiffs have also shown that there is a genuine issue of material fact with respect to the claims and/or claims-review procedures applicable to plaintiffs and the dates on which those procedures became effective. There are also genuine issues of material fact with respect to whether the 1984 Acquisition Agreement amended the Pension Plan so as to eliminate the employer's right to alter the Plan and reduce benefits. Defendants have not established that they were entitled to amend the Plan because of IRS or Treasury regulations.
Defendants have not established that they are entitled to judgment because amendment of a plan is not generally a fiduciary function. The principal object of ERISA is "to protect plan participants and beneficiaries." Boggs v. Boggs, 520 U.S. 833, 845 (1997). Although nothing in ERISA requires an employer to establish an employee benefits plan, or mandates the kind of benefits an employer must provide, ERISA does seek to ensure that employees will not be left empty-handed once employers have guaranteed them certain benefits. Lockheed Corp. v. Spink, 517 U.S. 882, 887 (1996). Plan sponsors who alter the terms of a plan do not fall into the category of fiduciaries. Id. at 890 (noting that employers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans). It is only when fulfilling certain defined functions, including the exercise of discretionary authority or control over plan management or administration, that a person becomes a fiduciary under ERISA. Pegram v. Herdrich, 530 U.S. 211, 226 (2000) (invoking the "two hats" doctrine). Employers can be ERISA fiduciaries and take actions that disadvantage beneficiaries when they act as employers or a plan sponsors. Pregrem, 530 U.S. at 225. However, ERISA does require that the fiduciary with two hats wear only one at a time and wear the fiduciary hat when making fiduciary decisions. Id.
Therefore, in suits charging breach of fiduciary duty under ERISA, "the threshold question is not whether the actions of some person employed to provide services under a plan adversely affected a plan beneficiary's interest, but whether that person was acting as a fiduciary (that is, was performing a fiduciary function) when taking the action subject to complaint." Id. Defendants have not presented evidence sufficient to establish that its actions involved a purely business decision rather than fiduciary acts. See Varity Corp. v. Howe, 516 U.S. 489, 506 (1996) (expressing the view that even if disclosure of a plan's future is discretionary, once an employer chooses to exercise its discretionary authority by informing the employees of the future status of a benefit plan, it acts as a fiduciary and thus has a duty not to misrepresent the truth, which would be inconsistent with the duty to act "solely in the interests of the participants and beneficiaries."). The evidence establishes that defendants wore several hats in connection with the conduct that forms the basis of plaintiffs' claim.
There is no dispute that Tenet is presently the employer. Under ERISA, the employer is presumptively a plan sponsor. 29 U.S.C. § 1002(16)(B). The term "plan administrator" means "the person specifically so designated by the terms of the instrument under which the plan is operated or if an administrator is not so designated, the plan sponsor." 29 U.S.C. § 1002(16)(A). Thus, ERISA provides that if an employer has no plan document designating a plan administrator, the employer is the plan administrator. See 29 U.S.C. § 1002 (16)(A)(ii) (B)(I). An entity is also "a fiduciary with respect to a Plan" if it exercises any discretionary authority or discretionary control respecting management or disposition of assets, or has any discretionary authority or discretionary responsibility in the administration of such plan. 29 U.S.C. § 1105. ERISA further provides that fiduciaries can allocate fiduciary responsibilities and designate persons to carry out fiduciary responsibilities. See id., § 1105(c)(1). Thus, any entity with discretionary authority over benefit determinations is a fiduciary. See Aetna Health Inc. v. Davila, ___ U.S. ___, 124 S. Ct. 2488, 2502 (2004). The evidence shows that the Pension Committee is the entity identified in the Plan as the Plan's Administrator and that it has discretion to administer the Plan. Filing No. 69, Plaintiff's Ex. 1, Summary Plan Description at 5.
Moreover, actions under ERISA are governed by the federal common law of agency. See Moriarty v. Glueckert Funeral Home, Ltd., 155 F.3d 859, 866 n. 15 (7th Cir. 1998); Anderson v. International Union, United Plant Guard Workers of Am., 150 F.3d 590, 592-93 (6th Cir. 1998); Cilecek v. Inova Health Sys. Servs., 115 F.3d 256, 259-60 (4th Cir. 1997); Taylor v. Peoples Natural Gas Co., 49 F.3d 982, 988 (3d Cir. 1995); see also Union Pacific R.R. v. Beckham, 138 F.3d at 330 (applying federal common law to ERISA statute of limitations issue). Under federal common law agency principles, the Pension Committee is Tenet's agent. See, e.g., Lerohl v. Friends of Minnesota Sinfonia, 322 F.2d 486, 489 (8th Cir. 2003) (applying a nonexhaustive list of factors derived primarily from the Restatement (Second) of Agency as federal common law of agency).
The Pension Plan grants the Pension Committee powers, duties, and discretion to administer the Plan. Accordingly, there are genuine issues of material fact with respect to whether Tenet acted as either an ERISA fiduciary or its agent in exercising discretionary duties for the employer. See 29 U.S.C. § 1002(21)(A); Kerns v. Benefit Trust Life Ins. Co., 992 F.2d 214, 216-17 (8th Cir. 1993). The employee benefit plan itself is ordinarily liable for benefits payable under the terms of the plan and is thus the primary defendant in an action to enforce ERISA rights. See 29 U.S.C. § 1132(d)(1) (identifying employee benefit plan as entity subject to suit); Ross v. Rail Car Amer. Group. Disab. Income Plan, 285 F.3d 735, 740 (8th Cir. 2002). However, a claimant may also bring an ERISA action to recover benefits against plan administrators. Hall v. Lhaco, Inc., 140 F.3d 1190, 1194-95 (8th Cir. 1998); Layes v. Mead Corp., 132 F.3d 1246, 1249 (8th Cir. 1998). The proper party defendant in an action concerning ERISA benefits is the party that controls administration of the plan. Hall, 140 F.3d at 1194. As discussed infra, the party that controls the administration of the Plan is the Pension Committee. Relief can be granted against the Pension Committee as named administrator and then imputed to Tenet. See 29 U.S.C. § 1002(21)(A); Kerns, 992 F.2d at 216-17 (8th Cir. 1993).
Also, plaintiffs invoke alter-ego theories in their amended complaint. There is evidence suggesting that defendant entities may be alter egos of each other or of other entities owned by the parent company. Courts evaluating alter ego claims under ERISA should use corporate law principles. Greater Kansas City Laborers Pension Fund v. Superior General Contractors, Inc., 104 F.3d 1050, 1055 (8th Cir. 1997). Those principles provide that the legal fiction of the separate corporate entity may be rejected in the case of a corporation that: (1) is controlled by another to the extent that it has independent existence in form only; and (2) is used as a subterfuge to defeat public convenience, to justify wrong, or to perpetuate a fraud. Id. The essence of the alter-ego test is whether, under all the circumstances, the transaction carries the earmarks of an arm's length bargain — if it does not, equity will set it aside. In re B.J. Madams, Inc., 66 F.3d 931, 937 (8th Cir. 1995). In this case, the court finds disputed issues of material fact as to whether each defendant entity has an existence independent from the other, and whether the transactions between the companies were carried out at arm's length. Because numerous factual disputes exist, the court finds summary judgment is not appropriate.
IT IS ORDERED:
1. Defendants' motion to dismiss or, in the alternative, motion for summary judgment (Filing No. 60) is denied;
2. Plaintiffs' motion for partial summary judgment (Filing No. 67) is denied.