ARROM et al v. THE BOARD OF TRUSTEES OF THE PEPCO HOLDINGS, INC. et al
Filing
23
OPINION. Signed by Judge Joseph E. Irenas on 9/30/2011. (TH, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
ROBERT J. ARROM, et al.,
HONORABLE JOSEPH E. IRENAS
Plaintiffs,
CIVIL ACTION NO. 11-1965
(JEI/JS)
v.
BOARD OF TRUSTEES OF THE PEPCO
HOLDINGS, INC., RETIREMENT
PLAN, et al.,
OPINION
Defendants.
APPEARANCES:
O’BRIEN, BELLAND & BUSHINSKY, LLC
By: Stephen J. Bushinsky, Esq.
Mark. E. Belland, Esq.
1526 Berlin Road
Cherry Hill, NJ 08003
Counsel for Plaintiffs
LITTLER MENDELSON, P.C.
By: Jacqueline K. Hall, Esq.
One Newark Center, 8th Floor
Newark, NJ 07102
Counsel for Defendants
IRENAS, Senior District Judge:
Plaintiffs initiated this action under the Employee
Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §
1001 et seq., to recover additional pension benefits they were
allegedly deprived of due to a failure to implement an updated
mortality table.1
Pending before the Court is Defendants’ Motion
1
The Court exercises subject matter jurisdiction pursuant
to 29 U.S.C. § 1331 and § 1367.
1
to Dismiss the Complaint.
I.
As employees of the Atlantic City Electric Company,
Plaintiffs were eligible to receive retirement benefits under the
Ace Sub-Plan (“the Plan”) sponsored by Pepco Holdings, Inc.,
(“PHI”).2
(Compl. ¶ 26.)
The Pension Protection Act of 2006 (“PPA”), 26 U.S.C. § 430,
mandated two changes to all pension plans including the Plan
effective January 1, 2008.
(Id. ¶ 31.)
First, the PPA required
the application of an updated mortality table resulting in a
higher base benefit amount for lump sum benefits.
430(h)(3); see also Compl. ¶¶ 31-32.
26 U.S.C. §
Second, the PPA added a
corporate bond rate as an option for the interest rate
assumption.
26 U.S.C. § 430(h)(2)(D); see also Compl. ¶¶ 31-32.
Plaintiffs were notified of these changes by electronic mail sent
on November 19, 2007.3
(Id. ¶ 34.)
The Complaint alleges that in October 2009, union officials
discovered that lump sum benefits after January 1, 2008 had been
calculated using an outdated mortality table.
(Id. ¶ 40.)
According to the Complaint, PHI failed to notify the “Plan
2
Provisions generally applicable to the Plan are also
contained in the Base Plan Document. (Compl. ¶ 26.)
3
According to the Complaint, the use of electronic mail
“was not a measure reasonably calculated to ensure actual receipt
by Plaintiffs of these material modifications.” (Compl. ¶ 36.)
2
Administrator” of the updated mortality table and the “Plan
Administrator” therefore had not implemented it.
does not define the term “Plan Administrator.”
The Complaint
Pursuant to
ERISA, Administrator is defined as “the person specifically so
designated by the terms of the instrument under which the plan is
operated.”
29 U.S.C. § 1002(16)(A)(i).
According to the Base
Plan Document, the “Plan Administrator” means “the Company,
acting through the Investment Committee and Administrative Board.
. . .”
(Sullivan Dec. Ex. A at 14, 16.)
Defendant PHI. (Id. at i.)
The Company is
Notwithstanding this definition, the
parties use “Plan Administrator” to refer to Vanguard, PHI’s
third-party pension administrator, which is not a Defendant in
this action and is not identified in any of the Plan documents
submitted with the instant Motion.
In this Opinion, the Court
will not use the term “Plan Administrator” to refer to Vanguard.
As a result of Vanguard’s failure to implement the updated
mortality table in 2008, Plan participants who elected to retire
after January 1, 2008 received smaller lump sum benefits than
they were entitled to under the Plan.
(Id. ¶ 43.)
Defendants
retroactively recalculated the lump sum benefits and provided
additional payments to all participants who retired after January
1, 2008.
(Id.)
Plaintiffs allege that they “elected to retire on or about
December 2007 based on the projected calculations of the Plan
3
Administrator [Vanguard] that Plaintiffs’ 2008 lump sum pension
benefit would be less than the amount they would receive if they
elected to retire in 2007.”4
(Id. ¶ 48.)
The Complaint also
alleges that “[w]hether or not Plaintiffs contacted the Plan
Administrator [Vanguard] to ascertain their lump sum pension
benefit, any such contact for this purpose would have been an
exercise in futility since the Plan Administrator [Vanguard]
would not have been able to provide accurate information.”
(Compl. ¶ 51.)
The essence of Plaintiffs’ claims is that they
would have elected to retire after the PPA-mandated changes took
effect on January 1, 2008 had they been correctly advised that
they would receive a significantly larger lump sum pension
benefit at that time.
(Id. ¶ 50.)
After unsuccessfully pursuing administrative remedies under
the Plan, Plaintiffs initiated the instant action in this Court
on April 7, 2011.
On July 18, 2011, Defendants moved to dismiss
the Complaint pursuant to Fed. R. Civ. P. 12(b)(6).5
4
According to the April 21, 2010 claim denial letter,
Plaintiffs “requested pension estimates from Vanguard, either
orally or through the Pension Estimator on Vanguard’s website,
for both December 2007 and February 2008.” (Sullivan Dec. Ex.
D.) This fact is not included in the Complaint and it is not
referenced by Plaintiffs in their Opposition papers.
5
Defendants also bring their motion pursuant to Fed. R.
Civ. P. 12(b)(1) based on their argument that Plaintiffs lack
standing to assert claims under 29 U.S.C. § 1132(a)(1)(B).
District courts have exclusive jurisdiction over ERISA actions
commenced by the Secretary of Labor, participants, beneficiaries
or fiduciaries. 29 U.S.C. § 1132(e)(1). Defendants presumably
4
II.
Federal Rule of Civil Procedure 12(b)(6) provides that a
court may dismiss a complaint “for failure to state a claim upon
which relief can be granted.”
In order to survive a motion to
dismiss, a complaint must allege facts that raise a right to
relief above the speculative level.
Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007); see also Fed. R. Civ. P.
8(a)(2).
While a court must accept as true all allegations in the
plaintiff’s complaint, and view them in the light most favorable
to the plaintiff, Phillips v. County of Allegheny, 515 F.3d 224,
231 (3d Cir. 2008), a court is not required to accept sweeping
legal conclusions cast in the form of factual allegations,
unwarranted inferences, or unsupported conclusions.
Morse v.
Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997).
The
complaint must state sufficient facts to show that the legal
allegations are not simply possible, but plausible.
515 F.3d at 234.
Phillips,
“A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw
bring their motion pursuant to Fed. R. Civ. P. 12(b)(1) because
the Third Circuit has held that “[t]he requirement that the
plaintiff be a plan participant is both a standing and subject
matter jurisdictional requirement.” Miller v. Rite Aid Corp.,
334 F.3d 335, 340 (3d Cir. 2003). However, because the Court
finds that Plaintiffs have standing to assert their claims, and
that this Court has subject matter jurisdiction to consider them,
it will deny Defendants’ Motion pursuant to Fed. R. Civ. P.
12(b)(1).
5
the reasonable inference that the defendant is liable for the
misconduct alleged.”
Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949
(2009).
When evaluating a Rule 12(b)(6) motion to dismiss, the Court
considers “only the allegations in the complaint, exhibits
attached to the complaint, matters of public record, and
documents that form the basis of a claim.”
Lum v. Bank of
America, 361 F.3d 217, 221 n.3 (3d Cir. 2004).
A document that
forms the basis of a claim is one that is “integral to or
explicitly relied upon in the complaint.”
Id. (quoting In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.
1997)).
III.
In their Complaint, Plaintiffs advance several theories of
recovery for the harm they allegedly suffered.
First, they
assert claims for unpaid pension benefits due under the terms of
the Plan.
(Compl. Counts 1, 6.)
Second, Plaintiffs assert
breach of fiduciary duty claims based on (1) Defendants’ failure
to disclose information about the updated mortality table to
Plaintiffs and to Vanguard, and (2) Vanguard’s failure to provide
correct information to Plaintiffs about the value of their
benefits in 2007 as compared to 2008. (Compl. Counts 2, 3, 4.)
Finally, Plaintiffs assert state law claims for negligence and
breach of the duty of good faith and fair dealing.
6
The Court will first consider each of these theories of
liability.
Then, the Court will examine Plaintiffs’ remaining
claims for improper notice of claim denial and for unpaid
vacation and holiday time under the Labor Management Relations
Act, 29 U.S.C. § 185.
A.
In Counts One and Six, Plaintiffs seek the amount of unpaid
benefits due to them under the terms of the Plan pursuant to 29
U.S.C. § 1132(a)(1)(B), as well as equitable relief under §
1132(a)(3)(B).
Pursuant to 29 U.S.C. § 1132(a), a participant or
beneficiary may bring a civil action “to recover benefits due to
him under the terms of his plan. . . .”
1132(a)(1)(B)(emphasis added).
29 U.S.C. §
However, Plaintiffs are not
seeking benefits under the Plan in effect at the time of their
retirement in December 2007.
Indeed, there is no dispute that
Plaintiffs received all the benefits to which they were entitled
under the Plan in effect in 2007.
(See Sullivan Dec. Ex. E at
5.)
Rather, the Complaint is clear that Plaintiffs’ argument is
that they would have chosen to retire in 2008 had they been
properly advised that their lump sum benefits would be
significantly larger.
Thus, Plaintiffs’ claims are not for
unpaid benefits under the Plan, but for breach of fiduciary duty.
7
Because Plaintiffs’ claims are not for benefits due under
the terms of the Plan in effect as of their retirement in 2007,
they cannot assert a cause of action under 29 U.S.C. §
1132(a)(1)(B).6
See Cigna Corp. v. Amara, 131 S.Ct. 1866, 1877
(2011)(a court is only authorized by this provision to enforce
the contract as written).
Accordingly, Defendants’ Motion to
Dismiss will be granted as to Counts One and Six.7
B.
A claim under ERISA for breach of a fiduciary duty requires
proof that “(1) the defendant was acting in a fiduciary capacity;
(2) the defendant made affirmative misrepresentations or failed
to adequately inform plan participants and beneficiaries; (3) the
misrepresentation or inadequate disclosure was material; and (4)
the plaintiff detrimentally relied on the misrepresentation or
6
While Defendants frame their argument for dismissal of
this claim in terms of standing, the essence of their argument is
that Plaintiffs cannot assert a colorable claim to benefits under
this particular provision. See supra note 5.
7
Defendants also argue that the claims pursuant to 29
U.S.C. § 1132(a) are time-barred because Plaintiffs failed to
file suit in this Court within the Plan’s contractual 90-day
limitations period as set forth in the Summary Plan Description
(“SPD”). (Defs’ Br. at 10.) However, the SPD submitted with
Defendants’ moving papers is not a summary of the Plan effective
January 1, 2005. It is a summary of a 1999 version of the Plan
sponsored by Conectiv, effective prior to the date Potomac
Electric Power Company and Conectiv merged and became
subsidiaries of the holding company, PHI. (See Sullivan Dec. Ex.
A at i; Ex. G.) Because the Plan does not include a 90-day
limitations period and because the SPD is not a summary of the
Plan at issue in this case, the Court concludes that any argument
based on its provisions is inapplicable here.
8
inadequate disclosure.”
Shook v. Avaya, Inc., 625 F.3d 69, 73
(3d Cir. 2010)(internal quotations and citation omitted).
1.
In Counts Two and Three of the Complaint, Plaintiffs assert
breach of fiduciary duty claims for Defendants’ failure to
disclose information about the updated mortality table to
Plaintiffs and to Vanguard.8
Defendants move to dismiss these
claims arguing that Defendants had no duty to affirmatively
disclose information about the PPA-mandated changes to either
Plaintiffs or Vanguard.
First, with respect to Defendants’ alleged failure to notify
Vanguard of the PPA-mandated changes, the Court finds no theory
under which such a duty could be imposed.
Vanguard was selected
by PHI as a third-party administrator presumably pursuant to the
Plan Administrator’s right to delegate its responsibilities as
8
According to Plaintiffs’ Opposition Brief, “the gravamen
of Counts Two and Three are that Defendants may be estopped from
denying Plaintiffs the additional sums of pension benefits as a
result of their failure to properly notice Plaintiffs and
properly notice and implement the revised mortality tables with
the third party Plan administrator.” (Pls’ Opp. at 24.)
However, an estoppel theory of recovery, which “operates to place
the person entitled to its benefit in the same position he would
have been in had the representations been true,” is inapplicable
to the facts of this case. Cigna Corp. v. Amara, 131 S.Ct. 1866,
1880 (2011). Plaintiffs are plainly not seeking to hold Vanguard
to its representations that lump sum pension benefits in 2008
were smaller than in 2007, but instead seek the higher benefits
Vanguard did not tell them they would be entitled to if they
retired in 2008.
9
set out in sections 4.4 and 4.5 of the Base Plan Document.9
There is no basis on which this Court could find that PHI acted
in a fiduciary capacity with respect to Vanguard, which is
plainly an agent delegated responsibilities by its principal,
PHI.
See infra note 11.
With respect to Defendants’ alleged failure to notify
Plaintiffs, the Court begins with the rule that a “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 [required] notice. . . .”
1054(h)(1); see also 26 U.S.C. § 4980F(e)(1).
29 U.S.C. §
In this case, the
PPA-mandated changes significantly increased the base amount of
Plaintiffs’ lump sum pension benefits.
Therefore, no notice was
required for Plan changes made pursuant to the PPA.
See also 26
C.F.R. § 54.4980F-1 Q&A-8(d)(“[N]o notice is required to be
provided” for a plan that is “amended to reflect the changes to
the applicable interest rate and applicable mortality table . . .
made by the Pension Protection Act of 2006. . . .”).
Despite this, Defendants did send notice via email on
9
Section 4.4 provides: “Any powers and duties of the named
fiduciaries allocated above may be further delegated by a written
resolution of the Investment Committee or the Administrative
Board, as the case may be.” (Sullivan Dec. Ex. A at 19.)
Section 4.5 provides: “The Investment Committee or the
Administrative Board, or any person delegated duties by them may
employ such counsel, accountants or other specialists as it deems
necessary or desirable in connection with the administration of
the Plan.” (Id.)
10
November 19, 2007 to PHI employees advising them of the PPAmandated changes.10 (See Sullivan Dec. Ex. C.)
The email
provides:
The Pension Protection Act of 2006 (PPA)
requires plan sponsors such as PHI to make
certain amendments to its retirement plans.
One of the required amendments affects
participants who are eligible for a lump sum
payout from their plan. Specifically, the PPA
requires the lump sum payment to be calculated
using a new mortality table and an interest
rate based on corporate bond rates.
Although the Internal Revenue Service has not
yet issued final guidance on this provision of
the PPA, PHI recognizes that this is very
important to many PHI employees who need the
information to make necessary decisions about
their future retirement plans.
PHI will implement the new mortality table as
required on January 1, 2008.
Further, PHI
will implement the new corporate bond rate
required by the PPA, but the corporate bond
rate will only be a “floor,” that is, lump
sums will be calculated using the interest
rates currently in the plans and also
calculated using the corporate bond rate. The
employee will receive the higher lump sum
benefit.
In the event further changes are found to be
warranted, PHI will, as always, provide as
much advance notice as possible.
(Id.)
What this email does not include is the information that
would be meaningful to Plaintiffs considering retirement in 2007,
namely, that the new mortality table would result in a staggering
10
There is no dispute that Defendants acted in a fiduciary
capacity with respect to Plaintiffs.
11
increase in value for plan participants electing lump sum pay
outs.
At oral argument, the change in value from the 2007 lump
sum calculated with the old mortality table to the 2008 lump sum
based on the new mortality table was estimated to be $1.8 million
for the sixteen Plaintiffs in this case.
The Third Circuit has “firmly establish[ed] that when a plan
administrator affirmatively misrepresents the terms of a plan or
fails to provide information when it knows that its failure to do
so might cause harm, the plan administrator has breached its
fiduciary duty to individual plan participants and
beneficiaries.”
In re Unisys Corp. Retiree Medical Benefit ERISA
Litig., 57 F.3d 1255, 1265 (3d Cir. 1995); see also Bixler v.
Central Pa. Teamsters Health and Welfare Fund, 12 F.3d 1292, 1300
(3d Cir. 1994)(a fiduciary’s duty to inform “entails not only a
negative duty not to misinform, but also an affirmative duty to
inform when the trustee knows that silence might be harmful”).
While Defendants were not required to disclose plan changes
pursuant to the PPA, they elected to provide notice to plan
participants and therefore had a fiduciary obligation “not to
misinform employees through material misrepresentations and
incomplete, inconsistent or contradictory disclosures.”
1264.
Id. at
A reasonable fact-finder might conclude that Defendants’
email misled Plan participants by omitting material information
about the effect the updated mortality table would have on lump
12
sum pension benefits.
Without knowledge that the updated
mortality table would substantially increase lump sum pay outs,
Plaintiffs who were considering retirement elected to do so in
December 2007 to their detriment.
However, had the email
informed Plan participants that by working one additional month,
they would be entitled to over $100,000 dollars more in their
lump sum distribution, it would be implausible that any
participant would choose retirement in December 2007.
Based on the allegations in the Complaint, Plaintiffs have
stated a plausible claim that Defendants had an affirmative duty
to inform Plan participants who might be considering retirement
in 2007 that the updated mortality table would significantly
increase their lump sum pension benefits in 2008.
Therefore, at
this stage of the litigation, the Court finds that Plaintiffs
have stated a colorable breach of fiduciary duty claim based on
Defendants’ incomplete and misleading email regarding the PPAmandated changes.
Accordingly, Defendants’ Motion to Dismiss will be granted
as to Count Three and denied as to Count Two.
2.
Count Four of the Complaint alleges a breach of fiduciary
duty stemming from Vanguard’s incorrect advice to Plaintiffs in
response to their inquiries regarding the value of their lump sum
benefits in 2007 as compared to 2008.
13
Defendants move to dismiss
Plaintiffs’ breach of fiduciary duty claim in Count Four arguing
that Plaintiffs cannot establish a material misrepresentation or
detrimental reliance.11
(Defs’ Br. at 14-16.)
11
The Court notes that the alleged misrepresentations were
made by Vanguard, which is not named as a Defendant in this
action. In their Moving Brief, Defendants “reserve the right to
argue that, to the extent any misrepresentations were made by
Vanguard, they are not fiduciary representations that can be
attributable to them.” (Defs’ Br. at 14 n.5.)
There appears to be no dispute that Vanguard, as a thirdparty plan administrator, and PHI, as Plan Administrator, both
acted as fiduciaries with respect to Plaintiffs. A person is a
fiduciary with respect to an ERISA plan “to the extent (i) he
exercises any discretionary authority or discretional control
respecting management of such plan or exercises any authority or
control respecting management or disposition of its assets, . . .
or (iii) he has any discretionary authority or discretionary
responsibility in the administration of such plan.” 29 U.S.C. §
1002(21)(A).
Pursuant to 29 U.S.C. § 1105(a), “a fiduciary with respect
to a plan shall be liable for breach of fiduciary responsibility
of another fiduciary with respect to the same plan”
(1) if he participates knowingly in, or
knowingly undertakes to conceal, an act or
omission or such other fiduciary, knowing such
act or omission is a breach;
(2) if, by his failure to comply with section
1104(a)(1) of this title in the administration
of his specific responsibilities which give
rise to his status as a fiduciary, he has
enabled such other fiduciary to commit a
breach; or
(3) if he has knowledge of a breach by such
other fiduciary, unless he makes reasonable
efforts under the circumstances to remedy the
breach.
29 U.S.C. § 1105(a).
It is also not clear that 29 U.S.C. § 1105(a)is the
exclusive basis for imposing liability on PHI for a breach of
fiduciary duty by Vanguard. As Plan Administrator, PHI chose to
contract some of its duties to Vanguard pursuant to sections 4.4
and 4.5 of the Base Plan Document. It is not clear that PHI can
escape its fiduciary duty to participants by electing to contract
with a third party to perform some of those duties. This issue
14
In the Complaint, Plaintiffs allege:
When eligible Plan participants sought to
retire in 2008 they contacted the Plan
Administrator [Vanguard] to ascertain the
anticipated amount of Plaintiffs’ lump sum
pension benefit, the result received from the
Plan Administrator [Vanguard] was incorrect
because of the use of the outdated mortality
table and an incorrect interest assumption. .
. . .
Plaintiffs elected to retire on or
about December 2007 based on the projected
calculations
of
the
Plan
Administrator
[Vanguard] that Plaintiffs’ 2008 lump sum
pension benefit would be less than the amount
they would receive if they elected to retire
in 2007.
(Compl. ¶¶ 42, 48.)
Viewed in the light most favorable to
Plaintiff, these allegations are sufficient to survive a motion
to dismiss.
Plaintiffs have alleged that they contacted Vanguard
to determine the value of their pension benefits in December 2007
as compared to January 2008 and elected retirement in December
2007 in reliance on the erroneous advice they received.
At this stage of the litigation, the Court finds that
Plaintiffs sufficiently alleged a material misrepresentation and
detrimental reliance, and have stated a plausible claim for
breach of fiduciary duty.
Accordingly, Defendants’ Motion to
was not briefed by either party. Indeed, neither party even
referred to 29 U.S.C. § 1105(a). Nor do the parties refer to 29
U.S.C. § 1105(c), though at first blush the Court doubts that
this section applies to sections 4.4 and 4.5 of the Base Plan
Document. At this stage of the litigation, the Court will assume
without deciding that PHI would be liable for the alleged breach
by Vanguard.
15
Dismiss Count Four will be denied.
C.
Defendants move to dismiss Plaintiffs’ state law claims for
negligence and breach of good faith and fair dealing arguing that
they are preempted by ERISA.
29 U.S.C. § 1144 provides that “the provisions of this
subchapter . . . shall supersede any and all State laws insofar
as they may now or hereafter relate to any employee benefit plan
. . . .”
29 U.S.C. § 1144(a).
ERISA’s preemption provision is
“deliberately expansive, and designed to establish pension plan
regulation as exclusively a federal concern.”
Co. v. Dedeaux, 481 U.S. 41, 45-46 (1987).
Pilot Life Ins.
“As such, a cause of
action asserted under state law is pre-empted if it can be said
to ‘relate to’ an employee benefits plan.”
Bicknell v. Lockheed
Martin Grp. Benefits Plan, 410 Fed. Appx. 570, 576 (3d Cir.
2011)(citing Pilot Life Ins. Co., 481 U.S. at 47).
Here, Plaintiffs’ state law claims are based on Defendants’
failure to utilize the updated mortality table when calculating
lump sum pension benefits under the Plan in effect as of January
1, 2008.
These state law claims plainly relate to an ERISA-
governed plan and therefore are preempted.
Accordingly,
Defendants’ Motion to Dismiss the state law claims in Count Eight
will be granted.
16
D.
In Count Five, Plaintiffs assert that the notice of claim
denial they were sent following Defendants’ denial of their claim
for additional pension benefits did not include required
information.12
Plaintiffs seek monetary sanctions against
Defendants in the amount of $100/day pursuant to 29 U.S.C. §
1132(c)(1) for the improper notice of claim denial.13
67.)
(Compl. ¶
In addition, Plaintiffs seek attorneys’ fees and costs
pursuant to 29 U.S.C. § 1132(g)(1), and the additional lump sum
benefits they would have obtained if they retired in 2008.
(Id.)
29 U.S.C. § 1133 provides that “every employee benefit plan”
must:
12
In their Opposition Brief, Plaintiffs appear to be
making an additional claim that Defendants did not comply with
their request for additional information necessary to supplement
Plaintiffs’ appeal. (See Pls’ Opp. at 30.) Plaintiffs cite to
29 C.F.R. § 2560.503-1(h), which requires “every plan” to
establish a procedure by which claimants can obtain a “full and
fair review” of claim denials. (Id. at 29-30.) That procedure
must include a provision “that a claimant shall be provided, upon
request and free of charge, reasonable access to, and copies of,
all documents, records, and other information relevant to the
claimant’s claim for benefits.” 29 C.F.R. § 2560.5031(h)(2)(iii). In a letter dated June 16, 2010 from Plaintiffs’
attorney to PHI’s Manager of Compensation & Benefits, Plaintiffs
requested e-mails, document drafts, and internal correspondence
regarding the review of Plaintiffs’ claims and the decision to
implement the updated mortality table. However, no such claim is
pled in the Complaint and the Court therefore will not consider
it.
13
For violations occurring after July 29, 1997, the
maximum amount of the monetary penalty was increased to $110 a
day. See 29 C.F.R. § 2575.502c-1.
17
(1) provide adequate notice in writing to any
participant or beneficiary whose claim for
benefits under the plan has been denied,
setting forth the specific reasons for such
denial, written in a manner calculated to be
understood by the participant, and (2) afford
a reasonable opportunity to any participant
whose claim for benefits has been denied for a
full and fair review by the appropriate named
fiduciary of the decision denying the claim.
29 U.S.C. § 1133.
29 C.F.R. § 2560.503-1(g) sets forth the required content of
a notice of benefit determination by plan administrators.
A plan
administrator is to provide claimants with written notice that
must include:
(i) The specific reason or reasons for the
adverse determination; (ii) Reference to the
specific
plan
provisions
on
which
the
determination is based; (iii) A description of
any
additional
material
or
information
necessary for the claimant to perfect the
claim and an explanation of why such material
or
information
is
necessary;
(iv)
A
description of the plan’s review procedures
and the time limits applicable to such
procedures, including a statement of the
claimant’s right to bring a civil action under
section 502(a) of the Act following an adverse
benefit determination on review.
29 C.F.R. § 2560.503-1(g)(1)(i)-(iv).
Pursuant to 29 U.S.C. § 1132(c)(1), “[a]ny administrator who
fails or refuses to comply with a request for any information
which such administrator is required by this subchapter to
furnish to a participant or beneficiary . . . may in the court’s
discretion be personally liable to such participant or
18
beneficiary in the amount of up to $100 a day.”
29 U.S.C. §
1132(c)(1).
Defendants move to dismiss Count Five arguing that the Third
Circuit’s decision in Groves v. Modified Ret. Plan for Hourly
Paid Emps. of the Johns Manville Corp. & Subsidiaries, 803 F.2d
109 (1986), forecloses Plaintiffs’ claim for sanctions.
Court agrees.
The
The Third Circuit’s decision in Groves makes clear
monetary sanctions may not be imposed on a plan administrator for
violations of 29 U.S.C. § 1133 because it “imposes duties
expressly and exclusively on the plan and not the plan
administrator.”
803 F.2d at 116 (internal quotations omitted).
In addition, the Third Circuit held that personal liability
against a plan administrator as provided for in 29 U.S.C. §
1132(c)(1) may not be imposed for violations of 29 C.F.R. §
2560.503-1(g).14
Id. at 116, 118.
The Third Circuit reasoned
that penalties are authorized only for statutory violations and
not for agency regulations.
Id.
Moreover, Plaintiffs are not entitled to a substantive
remedy for the alleged failure to comply with the disclosure
obligations set forth in 29 U.S.C. § 1133 and 29 C.F.R. §
14
Plaintiffs cite this regulation in their Opposition
Brief, but make no reference to it in their Complaint. Moreover,
the Complaint omits any facts that would indicate that this
provision is relevant.
19
2560.503-1(g)(1).
The appropriate remedy for such a violation is
“remand to the plan administrator so that the claimant gets the
benefit of a full and fair review.”
Syed v. Hercules Inc., 214
F.3d 155, 162 (3d Cir. 2000); see also Parker v. BankAmerica
Corp., 50 F3d 757, 768 (9th Cir. 1995)(“a claimant who suffers
because of a fiduciary’s failure to comply with ERISA’s
procedural requirements is entitled to no substantive remedy.”).
The Court will not dismiss Plaintiffs’ claim for improper notice
of claim denial and to the extent that Defendants are found to
have violated 29 U.S.C. § 1133 and 29 C.F.R. § 2560.503-1(g)(1),
Plaintiffs may obtain remand to the Plan Administrator for a full
and fair review.
Accordingly, Defendants’ Motion is granted with respect to
Plaintiffs’ claims for sanctions and for additional lump sum
benefits only.
E.
In Count Seven, Plaintiffs claim that “if they continued
employment in 2008, they would be immediately eligible for up to
six (6) weeks of paid vacation and five (5) paid floating
holidays pursuant to the Collective Bargaining Agreement between
Atlantic City Electric Company and Local 210 international
Brotherhood of Electrical Workers.”
(Compl. ¶ 70.)
According to
Plaintiffs, with this Count they “seek to be made whole for
benefits that they would have been eligible to receive if they
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had elected to remain employed in 2008.”
(Pls’ Opp. at 32.)
The Complaint seeks these damages pursuant to 29 U.S.C. §
185, the Labor-Management Relations Act.
However, there are no
allegations to support an inference that PHI breached the
collective bargaining agreement or that Plaintiffs exhausted
their administrative remedies by pursuing this claim through the
procedures set forth in the collective bargaining agreement.
Because the Complaint does not set forth sufficient allegations
supporting a claim for damages pursuant to 29 U.S.C. § 185,
Defendants’ Motion to Dismiss Count Seven will be granted.
IV.
For the reasons stated above, Defendants’ Motion to Dismiss
will be granted as to Counts One, Three, Six, Seven, and Eight,
and denied as to the fiduciary duty claim in Counts Two and Four.
Defendants’ Motion is also granted as to Plaintiffs’ claims for
sanctions and additional lump sum benefits in Count Five, but
denied as to Plaintiffs’ claim for improper notice of claim
denial.
An appropriate Order accompanies this Opinion.
Dated: September
30
, 2011
s/Joseph E. Irenas
JOSEPH E. IRENAS, S.U.S.D.J.
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