Charles Skinner, et al v. Northrop Grumman Retirement Pl, et al

Filing

FILED OPINION (ALFRED T. GOODWIN, DIARMUID F. O'SCANNLAIN and SUSAN P. GRABER) AFFIRMED. Judge: ATG Authoring,. FILED AND ENTERED JUDGMENT. [8106414]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHARLES D. SKINNER and GREGORY
A. STRATTON, on behalf of
themselves and all others similarly
situated,
Plaintiffs-Appellants,
v.
NORTHROP GRUMMAN RETIREMENT
PLAN B and ADMINISTRATIVE
COMMITTEE OF NORTHROP GRUMMAN
RETIREMENT PLAN B,
Defendants-Appellees.




No. 10-55161
D.C. No.
2:07-cv-03923JFW-AGR
OPINION



Appeal from the United States District Court
for the Central District of California
John F. Walter, District Judge, Presiding
Argued and Submitted
February 9, 2012—Pasadena, California
Filed March 16, 2012
Before: Alfred T. Goodwin, Diarmuid F. O’Scannlain, and
Susan P. Graber, Circuit Judges.
Opinion by Judge Goodwin

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COUNSEL
Ellen M. Doyle and William T. Payne, Stember Feinstein
Doyle & Payne LLC, Pittsburgh, Pennsylvania, for the
plaintiffs-appellants.
Chris C. Scheithauer, McDermott Will & Emery LLP, Irvine,
California; and Nancy G. Ross, McDermott, Will & Emery
LLP, Chicago, Illinois, for the defendants-appellees.

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Mary Ellen Signorille, AARP Foundation Litigation, Washington, D.C., for the amicus curiae.

OPINION
GOODWIN, Circuit Judge:
Appellants Charles Skinner and Gregory Stratton appeal
summary judgment rejecting their claims under the Employee
Retirement Income Security Act of 1974 (“ERISA”). We
have jurisdiction under 28 U.S.C. § 1291, and we affirm.
I.

Facts and procedural history

Appellants were employees of Litton Industries, Inc., and
participated in its retirement plan, which was called Litton
Industries, Inc., Retirement Plan B (“Litton Plan B”). Following corporate mergers and plan modifications, Appellants
sued the successor corporation, Northrop Grumman, and Northrop Grumman Retirement Plan B (“Northrop Plan B”), the
plan that replaced Litton Plan B, under ERISA § 502(a)(1)(B)
to enforce their understanding of their rights under Northrop
Plan B.
By June 2004, Appellant Skinner was anticipating retirement, and he received a pension calculation packet. That
packet’s formulas illustrated how Skinner’s transition benefit
would be calculated based on his salary, contributions, and
age at retirement. The formulas included an “annuity equivalent offset.” In December 2004 and April 2005, Skinner
received additional pension calculation packets, both of which
also included the annuity equivalent offset. Skinner testified
at his deposition that, after he received the packet in December 2004, he understood how his benefits would be calculated,
including the annuity equivalent offset. In May 2005, Skinner
retired.

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By February 2005, Appellant Stratton was anticipating
retirement, and he received a pension calculation packet. That
packet’s formulas included an “annuity equivalent offset.” In
December 2005, the plan administrators provided a summary
of material modifications (“SMM”), which included the annuity equivalent offset. Stratton testified at his deposition that he
received the SMM, that it clearly explained the annuity equivalent offset, and that he understood how that offset would
affect his pension. In May 2006, Stratton received another
pension calculation packet, which also contained the annuity
equivalent offset. In July 2006, Stratton retired.
The district court granted summary judgment for the defendants after concluding that Appellants had not raised a genuine issue of material fact. We reversed and remanded the case
upon our conclusion that an ambiguity existed between summary plan descriptions (“SPDs”) issued to employees in earlier years and the plan master documents that were actually
being enforced by the plan administrators. That ambiguity
was related to the controversial “annuity equivalent offset”
that plan administrators used to reduce annual benefit
amounts based on the age of the participant at retirement. We
held, pursuant to this court’s earlier decisions in Bergt v.
Retirement Plan for Pilots Employed by MarkAir, Inc., 293
F.3d 1139, 1143 (9th Cir. 2002), and Banuelos v. Construction Laborers’ Trust Funds for Southern California, 382 F.3d
897, 904 (9th Cir. 2004), that the ambiguity created a triable
issue.
The district court again granted summary judgment, and
Appellants again appealed. We deferred argument and submission of the second appeal until the Supreme Court’s resolution of CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011). In
that case, the Supreme Court overruled, in relevant parts, our
two prior decisions that had treated SPD language as if it were
an enforceable part of the retirement plan. In holding that the
SPD language was not part of the plan, the Court made it
clear that “summary documents, important as they are, pro-

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vide communication with beneficiaries about the plan, but
that their statements do not themselves constitute the terms of
the plan for purposes of § 502(a)(1)(B).” Id. at 1878. We called for supplemental briefing and argument. We now hold that
summary judgment was appropriate on Appellants’ claims
under § 502(a)(1)(B) and § 502(a)(3).
II.

Discussion

[1] Recognizing that Amara has foreclosed their principal
theory of relief, Appellants have focused this appeal on equitable remedies under ERISA § 502(a)(3), which allows a participant “to obtain other appropriate equitable relief” to
redress ERISA violations. 29 U.S.C. § 1132(a)(3)(B).
Appellants have alleged an ERISA violation. Viewing the
facts in the light most favorable to Appellants, the administrative committee failed to ensure that plan participants were furnished with an SPD that was “sufficiently accurate and
comprehensive” and that included “a statement clearly identifying circumstances which may result in . . . offset [or] reduction . . . of any benefits” that the participants would
reasonably expect. 29 U.S.C. §§ 1021(a), 1022(a) (quoted),
1024(b); 29 C.F.R. § 2520.102-3(l) (quoted). The remaining
issue is whether summary judgment was appropriate on
Appellants’ claims for equitable relief.
[2] In dictum, the Amara Court stated that, under appropriate circumstances, § 502(a)(3) may authorize three possible
equitable remedies: estoppel, reformation, and surcharge. 131
S. Ct. at 1878-80. Appellants have conceded, both in their
brief and at oral argument, that they presented no evidence of
reliance on the inaccurate SPD and that they do not claim
estoppel. Appellants do, however, seek reformation and surcharge.
A.

Reformation

[3] Appellants argue that we should reform the terms of
Northrop Plan B’s master documents to be consistent with the

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terms of the 2003 SPD. It is unclear whether we should analyze reformation in the context of trust law or contract law
because retirement plan documents are similar to both trusts
and contracts. See Amara, 131 S. Ct. at 1877. Under both theories, however, reformation is proper only in cases of fraud
and mistake. See, e.g., Cont’l Ins. Co. of N.Y. v. Cotten, 427
F.2d 48, 53 (9th Cir. 1970) (“Since fraud and mutual mistake
are absent in this case, reformation was improper.”). The difference lies in whose fraud and mistake are material.
1.

Mistake theory

In the law of trust, a court may reform a trust instrument
to accord with the settlor’s intent if there is evidence that a
mistake of fact or law affected the terms of the instrument and
if there is evidence of the settlor’s true intent. RESTATEMENT
(THIRD) OF Tcrusts §§ 12, 62 (2003); RESTATEMENT (THIRD)
PROP. (WILLS & OTHER DONATIVE TRANSFERS) § 12.1 (2003);
see also RESTATEMENT (SECOND) OF AGENCY § 8D & cmt. a
(1958).
In the law of contract, a court may reform a contract to
reflect the true intent of the parties if both parties were mistaken about the content or effect of the contract. RESTATEMENT
(SECOND) OF CONTRACTS § 155 (1981). The court may reform
the contract to capture the terms upon which the parties had
a meeting of the minds. See Am. President Lines, Ltd. v.
United States, 821 F.2d 1571, 1582 (Fed. Cir. 1987); Schongalla v. Hickey, 149 F.2d 687, 690 (2d Cir. 1945).
[4] Whether we view the drafter of Northrop Plan B as a
settlor or as a party to a contract, Appellants have presented
no evidence that Northrop Plan B contains terms that fail to
reflect that drafter’s true intent. Appellants argue that the
2003 SPD is evidence of the drafter’s true intent and that the
master document contains a mistake. That argument fails.
Appellants have provided no evidence of authorship of the
2003 SPD or of the 2003 SPD’s capturing any intent at all,

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other than the intent to create an “accurate and comprehensive” summary of Northrop Plan B. It would be unreasonable
for us to infer otherwise.
2.

Fraud theory

In the law of trust, a court may reform a trust to the extent
that it was procured by wrongful conduct, such as undue
influence, duress, or fraud. RESTATEMENT (THIRD) OF TRUSTS
§§ 12, 62 cmt. a (2003); RESTATEMENT (THIRD) OF PROP.
(WILLS & OTHER DONATIVE TRANSFERS) § 8.3 (2003). A trust
is procured by wrongful conduct if that conduct caused the
settlor to act in a way that he or she would not have otherwise
acted. RESTATEMENT (THIRD)OF PROP. (WILLS & OTHER
DONATIVE TRANSFERS) § 8.3 (2003).
In the law of contract, a court may reform a contract when
(1) one party seeks reformation, (2) that party’s assent was
induced by the other party’s misrepresentations as to the
terms or effect of the contract, and (3) the party seeking reformation was justified in relying on the other party’s misrepresentations. RESTATEMENT (SECOND) CONTRACTS § 166 (1981).
[5] Appellants have presented no evidence that Northrop
Plan B contains terms that were induced by fraud, duress, or
undue influence. The inconsistency between the 2003 SPD
and the plan master document is not evidence of fraudulent
inducement. The SPD summarizes the plan, so it appears to
have been created after the plan, and Appellants have provided no evidence to allow us to infer otherwise.
Appellants argue that we should adopt the reasoning in
Amara’s dictum discussing reformation, but we decline to do
so because the facts in Amara are materially distinguishable.
In Amara, the Court suggested that reformation might be
appropriate on remand because the district court had already
found that the employer had “intentionally misled its employees.” 131 S. Ct. at 1874. In this case, by contrast, Appellants

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have provided no evidence that Northrop Grumman materially misled its employees and, even if it had misled its
employees, Appellants have conceded that they did not rely
on any of the misleading information.
B.

Surcharge

[6] In the district court, Appellants argued that the administrative committee breached its fiduciary duty by failing to
enforce the terms of the 2003 SPD instead of the terms of the
plan master document. We find no such duty. The committee
may have a duty to enforce the terms of the plan, see 29
U.S.C. § 1132(a)(1)(B), (3), but the terms of an SPD are not
the terms of the plan, Amara, 131 S. Ct. at 1878.
The committee may have breached a different duty. It had
a statutory duty to provide participants with an SPD that was
“sufficiently accurate and comprehensive to reasonably
apprise” Appellants of their rights and obligations under the
plan, 29 U.S.C. §§ 1022(a), 1024, and to clearly identify offsets and reductions, 29 C.F.R. § 2520.102-3(l).
Under that second theory of breach, the remedy of surcharge could hold the committee liable for benefits it gained
through unjust enrichment or for harm caused as the result of
its breach.
1.

Unjust enrichment

[7] A trustee (or a fiduciary) who gains a benefit by
breaching his or her duty must return that benefit to the beneficiary. RESTATEMENT (THIRD) TRUSTS § 100(b) (2012);
RESTATEMENT (SECOND) TRUSTS § 205 (1959); RESTATEMENT
(THIRD) RESTITUTION & UNJUST ENRICHMENT § 43 (2011);
RESTATEMENT (FIRST) RESTITUTION § 138 (1937). In this case,
Appellants have presented no evidence that the committee
gained a benefit by failing to ensure that participants received
an accurate SPD.

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2.

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Compensatory damages for actual harm

A trustee who breaches his or her duty could be liable for
loss of value to the trust or for any profits that the trust would
have accrued in the absence of the breach. RESTATEMENT
(THIRD) TRUSTS § 100(a) (2012); RESTATEMENT (SECOND)
TRUSTS § 205 (1959). The beneficiary can pursue the remedy
that will put the beneficiary in the position he or she would
have attained but for the trustee’s breach.
[8] Appellants seek compensatory relief. But considering
that Appellants did not rely on the inaccurate SPD, they establish no harm for which they should be compensated.
[9] Appellants argue that the “harm” of being deprived of
their statutory right to an accurate SPD is a compensable
harm, but we disagree. Appellants’ interpretation would render the advisory committee strictly liable for every mistake in
summary documents. In sum, Appellants have not shown that
their current positions are any different than they would have
been without the inaccurate SPD. The judgment is
AFFIRMED.