Krok et al v. The University of Chicago

Filing 50

MEMORANDUM OPINION AND ORDER Signed by the Honorable Sharon Johnson Coleman on 4/3/2012:Mailed notice(keg, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

ALAN J. KROK, CYNTHIA NICHOLS,
JAMES QUINN, and LONNIE VINSON,
on behalf of themselves and all similarly
situated persons,
Plaintiffs,
v.
THE UNIVERSITY OF CHICAGO,
Defendant.

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Case No. 11-cv-01092
Judge Sharon Johnson Coleman

MEMORANDUM OPINION AND ORDER

Plaintiffs, Alan J. Krok, Cynthia Nichols, James Quinn, and Lonnie Vinson, filed their
Second Amended Class Action Complaint after this Court granted defendant University of
Chicago’s first motion to dismiss for failure to state a claim. The University of Chicago again
moves to dismiss plaintiffs’ complaint for failure to state a claim upon which relief can be
granted. For the reasons stated herein, the motion is granted in part and denied in part.
The plaintiffs were all employed as part-time police officers at the University of Chicago.
The three Count, Second Amended Complaint seeks a declaratory judgment that they were
denied employee benefits in violation of ERISA; equitable relief based on discrimination in
violation of ERISA; and equitable relief based on a breach of fiduciary duty. The university
moves to dismiss on the basis that plaintiffs lack statutory standing under ERISA to pursue their
claim and that they fail to state a claim on which relief can be granted.

Legal Standard
Rule 8 sets forth the federal pleading requirement of a short and plain statement of the
claim upon which relief can be granted. Fed. R. Civ. P. 8(a). In order to survive dismissal, the
complaint must allege sufficient factual content to raise the right to relief above a speculative
level. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 569 n.14 (2007). When considering
dismissal of a complaint, the Court accepts as true all well-pleaded allegations and draws all
reasonable inferences in favor of the plaintiff. Pisciotta v. Old Nat. Bancorp, 499 F.3d 629, 633
(7th Cir. 2007).
Discussion
1. Statutory Standing1
In order to bring a civil action for relief under section 502(a)(1)(B) or 502(a)(3) of
ERISA, the plaintiffs must be participants or beneficiaries. 29 U.S.C §1132(a)(1). A participant
is defined under ERISA as “any employee or former employee of an employer… 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 USCS § 1002(7). Thus, in order to bring a claim under
ERISA, a plaintiff must show that he or she is eligible to receive benefits under the terms of the
employer’s own benefit plans. See Estate of Suskovich v. Anthem Health Plans of Virginia, Inc.,
553 F.3d 559, 571 (7th Cir. 2009).
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Plaintiffs requested this Court consider a recent opinion from the Ninth Circuit Court of Appeals as additional
authority on this issue. In Leeson v. Transamerica Disability Income Plan, the Ninth Circuit held that statutory
standing under ERISA should be treated by courts not as an issue of subject matter jurisdiction, but rather as an
“ingredient-of-claim-for-relief”. See Leeson v. Transamerica Disability Income Plan, 2012 U.S. App. LEXIS 1248,
*651 (9th Cir. Jan. 23, 2012). Here, defendants seek dismissal pursuant to both Rule 12(b)(1) and Rule 12(b)(6).
Whether this Court analyzes the issue of standing as a requirement for adequately pleading ERISA claims or as a
jurisdictional concern does not alter the outcome. Plaintiffs must allege sufficient facts for this Court to infer
standing under ERISA.

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Here, the Second Amended Complaint alleges that plaintiffs are eligible under “The
University of Chicago Pension Plan for Staff Employees” (“SEPP”) effective January 1, 2009, or
the “Retirement Income Plan for Employees” (“ERIP”), in effect prior to January 1, 2009, and
versions of those plans. (Second Amended Complaint, ¶ 16). Plaintiffs allege that they were
eligible to participate in the University’s benefit plans because they worked over 1,000 hours a
year. The university employed Alan Krok from April 1994 to October 31, 2009; Lonnie Vinson
from November 1996 to January 2010; and Cynthia Nichols from January 2007 to January 2010.
Plaintiff James Quinn was employed full-time from May 1972 until 1977 at which time he
transitioned to part-time status until his termination on January 11, 2010. In order to determine
whether plaintiffs have adequately pleaded their eligibility to participate, this Court must
examine the eligibility requirements of each plan.
The first version of the plan that may cover the plaintiffs was in effect from January 1,
1976, through January 1, 1989 (“1976 Plan”). The 1976 Plan provides that an employee “shall
become a Participant as of the first day of the first month after January 1, 1976, following the
later of (a) his thirtieth (30th) birthday and (b) the earliest anniversary of his employment date
which is the end of two consecutive 12-month periods during each of which he completed 1,000
hours of service for the University.” See Pl.Resp., Ex. B, at 3, 2. Krok, Nichols and Vinson
cannot claim to be participants under the terms of the 1976 Plan because they were not
employees of the University while it was in effect. Only James Quinn was employed by the
university while this plan was in effect. Quinn also alleges that he worked over 1,000 hours a
year and completed three vesting years of employment. Although Quinn does not specifically
allege that he worked over 1,000 hours a year for two consecutive years, the allegations in the
complaint are sufficient for Quinn to survive dismissal based on statutory standing.
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The remaining versions of the Plan effective in 1989, 2005, and 2009, contain the same
basic requirement for participation: “A nonacademic employee of the University will be eligible
to become a Participant in the Plan if he or she is employed as a Benefits Eligible Employee for
one year; provided that a nonacademic employee shall not be denied eligibility if he or she
completes 1,000 hours of service during a Plan Year.” Pl. Resp., Ex. C, at II.1. Throughout the
Second Amended Complaint, the plaintiffs allege that they were not classified as Benefits
Eligible Employees. See Second Amended Complaint, ¶¶ 44, 55, 61. Accordingly, Krok, Nichols
and Vinson are not eligible to participate under the 1989, 2005, or 2009, versions of the Plan.
Accordingly, plaintiffs Krok, Nichols, and Vinson have not adequately pleaded eligibility to
participate in a benefit plan in order to establish statutory standing to sue under ERISA.
Plaintiffs argue that the University’s benefit plans eligibility requirements are contrary to
ERISA’s minimum participation standards. Section 202(a) of ERISA provides that: “No pension
plan may require, as a condition of participation in the plan, that an employee complete a period
of service with the employer or employers maintaining the plan extending beyond the later of the
following dates-- (i) the date on which the employee attains the age of 21; or (ii) the date on
which he completes 1 year of service [defined as 1,000 hours of work in a year].” 29 U.S.C.
§1052(a). Plaintiffs interpret this provision as prohibiting an employer from denying benefits to
any employee who works more than 1,000 hours in a year. This interpretation has been rejected
by the Seventh Circuit, as well as other circuits. See Central States, Southeast and Southwest
Areas Pension Fund v. Hartlage Truck Services, Inc., 991 F.2d 1357, 1363 (7th Cir.
1993)(upholding a pension plan that excluded employees classified as “casual employees”
because the exclusion was not based on their age or length of service, but on their status as
casual employees); see also Bauer v. Summit Bancorp, 325 F.3d 155, 166 (3d Cir.
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2003)(concluding that an employer can “limit plan participation to certain groups or
classifications of employees, as long as that limitation was not based upon age or length of
service.”); Abraham v. Exxon Corp., 85 F.3d 1126, 1130 (5th Cir. 1996)(holding that Section
1052(a) does nothing more than forbid employers to deny participation in an ERISA plan on the
basis of age or length of service). “Nothing in ERISA requires employers to establish employee
benefits plans.” Bauer, 325 F.3d at 159 (citing Lockheed Corp. v. Spink, 517 U.S. 882, 887
(1996)). ERISA also does not mandate that every employee is entitled to participate in a plan
that an employer decides to offer. Id. Here, the University limits plan participation to employees
classified as Benefits Eligible since that limitation is not based on age or the length of time that
they have been employed by the University, the limitation does not violate ERISA.
In cases where the plaintiff alleges that but for the employer’s breach of fiduciary duty,
the plaintiff is eligible for benefits, the Sixth Circuit has recognized an exception to the ERISA
standing requirements. The Seventh Circuit has not addressed the viability of this exception.
Regardless, plaintiffs here do not allege that they are eligible for benefits but for the University’s
breach of fiduciary duty. Plaintiffs claim that the University breached its fiduciary duty by
classifying them as ineligible when they worked more than 1,000 hours in a year. However,
ERISA’s minimum participation standards do not mandate that an employee who works 1,000
hours a year must be classified as eligible to participate in a plan. Thus, plaintiffs do not have
standing under this exception.
2. Adequacy of Pleading Counts II and III
Count II of plaintiffs’ Second Amended Complaint alleges discrimination in violation of
ERISA because the University classified plaintiffs and potential class members as non-ERIP

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eligible to prevent them from participating in the plan and receiving benefits based solely on
their part-time status even though they worked more than 1,000 hours a year.
ERISA section 510 provides that “it shall be unlawful for any person to discharge, fine,
suspend, expel, discipline, or discriminate against a participant or beneficiary… for the purpose
of interfering with the attainment of any right to which participant may become entitled under
the plan.” 29 U.S.C. §1140. In Deeming v. American Standard, Inc., the Seventh Circuit
recognized that section 510 “was designed to protect the employment relationship which gives
rise to an individual’s pension rights.” (Emphasis in original) 905 F.2d 1124, 1127 (7th Cir.
1990). The court noted that section 510 “speaks specifically to discharge, fine, expulsion,
suspension or discrimination… This means that a fundamental prerequisite to a §510 action is an
allegation that the employer-employee relationship, and not merely the pension plan, was
changed in some discriminatory or wrongful way.” Id.
Here, plaintiffs have not alleged that the University terminated them as full-time
university police officers or otherwise altered their employment relationship in order to deny
them plan benefits. Plaintiffs allege that the University discriminated against them by
misclassifying them as non-ERIP eligible based on their status as part-time. However, cases
interpreting ERISA section 510 have concluded that there is no cause of action for
misclassification of an employee. See Oplechenski v. Parfums Givenchy, Inc., 2007 U.S. Dist.
LEXIS 10113 (N.D. Ill. Feb. 12, 2007); see also Downes v. J.P. Morgan Chase & Co., 2004 U.S.
Dist. LEXIS 10510 (S.D.N.Y. June 8, 2004); Schwartz v. Independence Blue Cross, 299 F. Supp.
2d 441, 450 (E.D. Pa. 2003). Therefore, Count II is dismissed for failure to state a claim upon
which relief can be granted.

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Count III of the Second Amended Complaint alleges that the University breached its
fiduciary duty by failing to reasonably apprize plaintiffs of the terms of and changes to the
benefits plans. The University moves to dismiss Count III brought pursuant to section 502(a)(3)
on the basis that plaintiffs are seeking the same relief in Count I brought pursuant to section
502(a)(1)(B).
Section 502(a)(3) authorizes suits for equitable relief for breach of fiduciary obligations.
See 29 U.S.C. §1132(a)(3). The Supreme Court has interpreted section 502(a)(3) as a catchall
provision that acts “as a safety net, offering appropriate equitable relief for injuries caused by
violations that section 502 does not elsewhere adequately remedy.” Varity v. Howe, 516 U.S.
489, 512 (1996). Claims under Section 502(a)(3) are not generally cognizable when relief is
available under Section 502(a)(1)(B) because Section 502(a)(3) provides for equitable relief
where there would otherwise be no relief. See DeGroot v. Suburban Bank & Trust Co., 2008
U.S. Dist. LEXIS 59959, *8-9 (N.D. Ill. Aug. 6, 2008); Moffat v. Unicare Midwest Plan Group,
2005 U.S. Dist. LEXIS 14849 (N.D. Ill. July 25, 2005); Schluter v. Principal Life Ins. Co., 2001
U.S. Dist. LEXIS 5613 (N.D. Ill. May 2, 2001). The relief plaintiffs seek in Count I and Count
III is effectively the same. In each instance, plaintiffs are seeking equitable relief in the form of a
declaration of participation and enforcement of the benefits plans. Under each claim, plaintiffs
are essentially seeking what they would have had if they had been participating in the plans for
the duration of their employment. Since relief in the form of clarification and enforcement for
the plaintiffs’ alleged harm is available under section 502(a)(1)(B), this Court dismisses Count
III for seeking the same relief.

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Conclusion
Based on the foregoing, defendant’s motion to dismiss on the basis of lack of statutory
standing is denied as to plaintiff Quinn and granted as to plaintiffs Krok, Nichols, and Vinson.
Additionally, defendant’s motion to dismiss Count II and Count III for failure to state a claim are
granted. Plaintiff has until 4/17/2012 to amend the complaint.
IT IS SO ORDERED.

Date: April 3, 2012

Entered:________________________________

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