Kirkendall et al v. Halliburton, Inc. et al
Filing
27
DECISION AND ORDER granting Defendants' 11 Motion for Judgment on the Pleadings with respect to Count I of the Complaint seeking declaratory judgment, and Count II seeking relief pursuant to ERISA sections 204 and 208. Defendants' Motion is converted to a summary judgment motion with respect to Counts III and IV, and that Motion is granted for failure to exhaust the administrative claims procedures established by the relevant Plan. Plaintiffs' Complaint is dismissed in its entirety and with prejudice. The parties' joint 25 Motion for a status conference is denied as moot. The Clerk is directed to enter judgment in favor of Defendants and to close this case. Signed by Hon. John T. Curtin on 6/8/2011. (JEC)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
KATHY JOY KIRKENDALL, WESLEY
SNYDER, BARBARA CAYA, and BONNIE SETH,
on behalf of themselves and others
similarly situated,
Plaintiffs,
-vs-
07-CV-289-JTC
HALLIBURTON, INC., HALLIBURTON
RETIREMENT PLAN, and DRESSER
INDUSTRIES, INC. CONSOLIDATED
RETIREMENT PLAN,
Defendants.
By order of Chief United States District Judge William M. Skretny dated June 8,
2011 (Item 26), this matter has been reassigned to the undersigned for all further
proceedings.
In this putative class action brought against the Halliburton Company, the
Halliburton Retirement Plan (the “Halliburton Plan”), and the Dresser Industries, Inc.
Consolidated Retirement Plan (the “DICON Plan” or the “Dresser Plan”), four employees
of the Dresser-Rand Company (“Dresser-Rand”) seek redetermination of pension benefits,
compensatory damages, and declaratory relief on behalf of themselves and others similarly
situated pursuant to various provisions of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”), 29 U.S.C. § 1001, et seq. Defendants move pursuant to
Rule 12(c) of the Federal Rules of Civil Procedure for judgment on the pleadings
dismissing the complaint, in its entirety and with prejudice, based on plaintiffs’ failure to
exhaust the administrative procedures for processing pension benefit claims under the
Plans. For the reasons that follow, defendants’ motion is granted.
BACKGROUND
As alleged in the complaint (filed on May 1, 2007), Dresser-Rand was formed on or
about January 1, 1987, pursuant to a partnership agreement between Dresser Industries
and the Ingersoll Rand Company. The four named plaintiffs are participants in the DICON
Plan, an employer-sponsored pension benefit plan as defined in ERISA (Item 1, ¶¶ 11-13,
16).
On September 29, 1998, the Halliburton Company acquired Dresser Industries, and
Halliburton became the sponsor of the DICON Plan (id. at ¶ 14). In February 2000,
Halliburton sold its interest in Dresser-Rand to Ingersoll-Rand, leaving Ingersoll Rand as
the sole partner of Dresser-Rand (id. at ¶ 18). Plaintiffs allege that, “[f]ollowing the sale,
the parties did not wind up the affairs of Dresser-Rand. Rather, Dresser-Rand continued
to operate the same business, under the same name, at the same locations, with the same
employees performing the same jobs.” (Id. at ¶ 19).
On November 30, 2001, Halliburton’s Chairman of the Board, President and Chief
Executive Officer David Lesar executed a “Merger Document” merging the DICON Plan
into the Halliburton Plan (Item 12, Exh. C). The Merger Document expressly provided that:
Contrary provisions of the [Halliburton] Plan notwithstanding, all of the
provisions of the DICON Plan, as in effect on the Merger Date [December
31, 2001], shall remain in effect (unless and until amended) as a part of, and
shall be incorporated into, the [Halliburton] Plan for the benefit of the
“participants” in the DICON Plan as of the Merger Date . . . , who shall
continue to be covered by such provisions to the exclusion of any other
provisions of the [Halliburton] Plan.
2
(Id., Exh. C, ¶ 3).
Plaintiffs allege that, “[c]ommencing in or about July, 2002, Halliburton has taken
the position that sale of its interest in Dresser-Rand to Ingersoll had the effect of
terminating the existence of Dresser-Rand, and thereby terminating the employment of all
Dresser-Rand employees . . . , as of March 1, 2000” (Item 1, ¶ 21). Plaintiffs claim that as
a result, the administrators of the Plan have been calculating pension benefits for retiring
Dresser-Rand employees by using March 1, 2000 as the date of termination of
employment, rather than the later actual termination dates, causing decreased benefits
payable to putative class members (id. at ¶¶ 22-25).
The complaint sets forth the following four counts as legal basis for the relief sought
in this action:
I.
Declaratory judgment with respect to the pension rights of plaintiffs (and the
putative class), and the corresponding duties of defendants, based upon resolution of the
“actual controversy” regarding “whether the sale of Halliburton’s interest in Dresser-Rand
had the effect of terminating the existence of Dresser-Rand and the employment of its
employees” (id. at ¶¶ 34-35);
II.
Re-determination
of
class
members’
“past,
present
and
future
benefits . . . using the actual date of their termination from employment by Dresser- Rand,
and [payment of] the difference between the correctly determined benefit and any benefit
they have received from the Plan, together with interest” (id. at ¶ 37);
III.
Breach of ERISA’s “anti-cutback” provisions, §§ 204(g), 204(h), and 208,
which prohibit amendments to pension plans having the effect of diminishing the accrued
benefits of plan participants (id. at ¶¶ 39-40);
3
IV.
Breach of fiduciary duty (id. at ¶¶ 42-44).
Defendants filed an answer on July 23, 2007, asserting 28 affirmative defenses,
including failure to exhaust the administrative claims procedures available under the
Halliburton or DICON Plans (Item 11, ¶ 47). As set forth in the “Factual Averments”
section of the answer:
Defendants’ records reflect that none of the Plaintiffs have asserted
claims for benefits pursuant to either the Halliburton or DICON Plans’
remedies for redress of claims that are denied in whole or part and, as a
result, Defendants do not know what Plaintiffs mean by their allegation in
Paragraph 21 of the Complaint that Halliburton has taken the position that
sale of its interest in Dresser-Rand to Ingersoll had the effect of terminating
the existence of Dresser-Rand, and thereby terminating the employment of
all Dresser-Rand employees as of March 1, 2000.
(Id. at ¶ 21). Attached to the answer as exhibits are the Halliburton Plan (Item 11, Exh. A);
the DICON Plan (id., Exh. B); the November 30, 2001 Merger Document (Item 12, Exh. C);
and a copy of the “Claims Procedures” for the Halliburton Plan (id., Exh. D).
On the same day the answer was filed, defendants filed the instant motion for
judgment on the pleadings seeking dismissal of the complaint in its entirety, based on the
following grounds:
1.
Plaintiffs’ claim asserted in Count II for “redetermination” of benefits must be
dismissed because plaintiffs have failed to allege or show that they pursued the claims
procedures provided in the applicable Plan, or that they otherwise exhausted available
administrative remedies, as they are required to do before bringing suit in federal court
seeking a determination of benefits under an ERISA-regulated pension plan;
2.
Plaintiffs’ breach of fiduciary duty claim is merely a “repackaging” of the claim
for redetermination of pension benefits so as to circumvent the exhaustion requirement;
4
3.
Plaintiffs’ claims under ERISA sections 204 and 208 fail because there was
no actual amendment to the Plan, and because no benefits were reduced as a result of the
merger;
4.
Plaintiffs’ declaratory judgment claim cannot stand alone as a cause of
action.
(See Item 13-2).
Each of these grounds is discussed in turn below.
DISCUSSION
A.
Judgment on the Pleadings
Defendants’ motion was filed pursuant to Rule 12(c), which provides simply that
“[a]fter the pleadings are closed–but early enough not to delay trial–a party may move for
judgment on the pleadings.” Fed R. Civ. P. 12(c). In deciding a Rule 12(c) motion, courts
apply the same standard utilized to determine a motion under Rule 12(b)(6) to dismiss the
complaint for failure to state a claim upon which relief can be granted, “accepting the
allegations contained in the complaint as true and drawing all reasonable inferences in
favor of the nonmoving party.” Burnette v. Carothers, 192 F.3d 52, 56 (2d Cir. 1999), cert.
denied, 531 U.S. 1052 (2000); see also Harrison v. Harlem Hosp., 364 Fed. Appx. 686,
688 (2d Cir. 2010), cert. denied, ___U.S.___, 131 S.Ct. 1018 (2011). To survive a motion
for judgment on the pleadings under this standard, the complaint must plead “enough facts
to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007). A claim is considered to have “facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the
5
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, ___U.S.___, 129 S.Ct.
1937, 1949 (2009).
In deciding a motion for judgment on the pleadings, the court may consider
the pleadings and exhibits attached thereto, statements or documents
incorporated by reference in the pleadings, matters subject to judicial notice,
and documents submitted by the moving party, so long as such documents
either are in the possession of the party opposing the motion or were relied
upon by that party in its pleadings.
McCrary v. County of Nassau, 493 F. Supp. 2d 581, 587 (E.D.N.Y. 2007) (citing Brass v.
American Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir. 1993)); see also Chambers
v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002) (even if document is not
incorporated by reference, court may consider it if it is “integral” to the complaint, i.e., the
complaint relies heavily upon its terms and effect); Faulkner v. Beer, 463 F.3d 130, 134 (2d
Cir. 2006) (even if document is “integral” to the complaint, it must be clear on the record
that no dispute exists regarding authenticity, accuracy, or relevance of the document).
Beyond this, when “matters outside the pleadings are presented to and not excluded by
the court, the motion must be treated as one for summary judgment under Rule 56 [and]
[a]ll parties must be given a reasonable opportunity to present all the material that is
pertinent to the motion.” Fed. R. Civ. P. 12(d).
As discussed at further length immediately below, defendants’ primary argument for
judgment on the pleadings is that none of the named plaintiffs has filed a claim for pension
benefits in accordance with the Halliburton Plan’s claims procedures, as a prerequisite to
bringing a court action for judicial determination of benefits under an ERISA-regulated
employee benefit plan. In response to this argument, plaintiffs have submitted a rather
6
lengthy “Declaration” of named plaintiff Kathy Joy Kirkendall (Item 22-2), along with several
documents attached as exhibits. Based upon the court’s review, it is evident that a
substantial amount of this material is directed at the exhaustion issue, and was neither
incorporated by reference in the pleadings nor relied upon by plaintiffs in such a manner
as to be deemed integral to the claims alleged in the complaint.
Accordingly, to the extent such materials are considered by this court in its
determination of the issues presented by defendants’ motion, the motion will be treated as
a motion for summary judgment pursuant to Rule 56, which the court must grant “if the
movant shows that there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see Kennedy v. Empire Blue
Cross and Blue Shield, 796 F. Supp. 764, 765 (S.D.N.Y. 1992) (Rule 12(b)(6) motion
converted to Rule 56 motion upon consideration of materials outside the pleadings on the
issue of failure to exhaust), aff’d, 989 F.2d 588 (2d Cir. 1993). In addition, the court’s
review of the submissions on file indicates that the parties have been provided a
reasonable opportunity to present all the material that is pertinent to a motion for summary
judgment, as required by Rule 12(d).
B.
Exhaustion of Administrative Remedies
ERISA section 502 provides a private cause of action for a participant in a covered
employee benefit plan “to recover benefits due to him under the terms of his plan, to
enforce his rights under the terms of the plan, or to clarify his rights to future benefits under
the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B); see Chapman v. ChoiceCare Long
Island Term Disability Plan, 288 F.3d 506, 509 (2d Cir. 2002). The statute also requires
7
every employee benefit plan to establish internal claims procedures in order to provide plan
participants with adequate and understandable written notice of the reasons for denial of
benefits, and to afford reasonable opportunity for full and fair review of the denial. See 29
U.S.C. § 1133; Bernikow v. Xerox Corp. Long-Term Disability Income Plan, 517 F. Supp.
2d 646, 650 (W.D.N.Y. 2007).
Courts within the Second Circuit have long recognized “the firmly established federal
policy” requiring plaintiffs seeking relief under section 502(a)(1)(B) to demonstrate that they
have fully pursued the claims procedures prescribed by the relevant employee benefit plan
prior to bringing suit. Alfarone v. Bernie Wolff Const. Corp., 788 F.2d 76, 79 (2d Cir.), cert.
denied, 479 U.S. 915 (1986); see also Kennedy, 989 F.2d at 594. The primary purposes
of this policy are to: “‘(1) uphold Congress’ desire that ERISA trustees be responsible for
their actions, not the federal courts; (2) provide a sufficiently clear record of administrative
action if litigation should ensue; and (3) assure that any judicial review of fiduciary action
(or inaction) is made under the arbitrary and capricious standard, not de novo.’” Kennedy,
989 F.2d at 594 (quoting Denton v. First Nat'l Bank of Waco, Texas, 765 F.2d 1295, 1300
(5th Cir.), reh'g denied, 772 F.2d 904 (5th Cir. 1985)). Adherence to the exhaustion
requirement “helps to reduce the number of frivolous lawsuits under ERISA, promotes the
consistent treatment of claims for benefits, provides a non-adversarial method of claims
settlement, and minimizes the costs of claims settlement.” McNinch v. Goodyear Tire and
Rubber Co., Inc., 2005 WL 735963, at *3 (W.D.N.Y. Mar. 30, 2005) (citing Kennedy, 989
F.2d at 594; Amato v. Bernard, 618 F.2d 559, 567 (9th Cir. 1980)).
8
Consistent with these purposes, the federal courts regularly dismiss claims for
judicial determination of benefits under an ERISA-regulated plan where the plaintiff has
failed to plead and prove exhaustion of the plan’s administrative remedies. See Chapman,
288 F.3d at 511 (citing Kennedy, 989 F.2d at 594); Bernikow, 517 F. Supp. 2d at 650.
Only where the plaintiff can “make a ‘clear and positive showing’ that pursuing available
administrative remedies would be futile” will a court release the plaintiff from the exhaustion
requirement. Kennedy, 989 F.2d at 594 (quoting Fizer v. Safeway Stores, 586 F.2d 182,
183 (10th Cir. 1978)); see also Davenport v. Harry N. Abrams, Inc., 249 F.3d 130, 133 (2d
Cir. 2001).
In this case, plaintiffs allege in Count II of the complaint (under the heading “Benefit
Claim”) that they “are entitled to have their past, present and future benefits redetermined
using the actual date of their termination from employment by Dresser-Rand, and to be
paid the difference between the correctly determined benefit and any benefit they have
received from the Plan . . .” (Item 1, ¶ 37). Although no statutory provision is cited, this
claim falls squarely within the scope of relief available in a civil action authorized by ERISA
section 502(a)(1)(B). As such, the claim asserted in Count II is clearly subject to the
exhaustion requirement.
However, the complaint contains no factual allegations to indicate, or give rise to a
reasonable inference, that any of the named plaintiffs have ever submitted a claim for
benefits under the claims procedures established by the Halliburton Plan. Indeed, there
is no dispute of material fact in this regard. Rather, plaintiffs contend that Ms. Kirkendall
did exhaust plan remedies by making a specific inquiry in March 2003 about her eligibility
9
for subsidized early retirement.1 In support of this contention, Ms. Kirkendall states in her
“Declaration” that, in March 2003, she directed her counsel, Norman Stein, to file a benefit
claim on her behalf “to determine [her] rights under the Plan, to see if [she] would get the
age 55 early retirement subsidy when [she] retired.” (Item 22-2, ¶ 43). Attached to
plaintiff’s Declaration is a letter from Mr. Stein dated March 14, 2003, requesting
“clarification of [plaintiff’s] benefit rights” with respect to the issues of subsidized early
retirement benefits and the timing and calculation of lump sum payments (id., Exh. F).
However, the court’s review of this letter reveals no factual information from which the
reasonable inference can be drawn that Ms. Kirkendall (or Mr. Stein acting on her behalf)
actually submitted a claim for pension benefits that was processed by the Benefits
Administrator or the Plan’s Administration Committee in accordance with the Plan’s Claims
Procedures (see Item 12, Exh. D, §§ III, IV); received an adverse determination of her
claim (see id. at §§ V, VI); or requested review of the administrator’s determination (see
id. at §§ VII, VIII).
Plaintiffs further contend that Ms. Kirkendall exhausted her administrative remedies
by calling the Halliburton Pension Center in January 2006 and requesting a “retirement
quote” (Item 22-2, ¶ 49). In response, Halliburton sent her a “retirement package” under
cover of a letter dated January 20, 2006, which included a summary and explanation of her
pension benefit options, along with application forms and instructions for submitting a claim
for benefits (id., Exh. H). Ms. Kirkendall did not submit the application. Instead, she
1
Plaintiffs apparently concede that nam ed plaintiffs W esley Snyder, Barbara Caya, and Bonnie
Seth did not pursue the Plan’s Claim s Procedures, or otherwise exhaust their adm inistrative rem edies,
prior to com m encem ent of this action.
10
contends that Halliburton’s response amounted to an adverse determination of her benefits
claim, since it was obvious from the benefit summary that she was not entitled to an early
retirement subsidy.
This contention must be rejected. Ms. Kirkendall’s January 2006 contact with the
Halliburton Pension Center was nothing more than a request for retirement information, to
which the Fund adequately responded. Instead of following through with an application for
pension benefits in accordance with the Fund’s Claims Procedures, she “gave up” (Item
22-2, ¶ 55) and filed this lawsuit seeking judicial “redetermination” of her pension benefit
rights. As the courts within the Second Circuit have repeatedly held, if this manner of
informal inquiry and “denial” of a benefits claim “that was never filed or formally presented
is reviewable in federal courts, then, in such situations, the courts and not ERISA trustees
will be primarily responsible for deciding claims for benefits.” Barnett v. IBM Corp., 885 F.
Supp. 581, 588 (S.D.N.Y. 1995), quoted in Park v. Trustees of 1199 Seiu Health Care
Employees Pension Fund, 418 F. Supp. 2d 343, 355 (S.D.N.Y. Sept. 15, 2005).
In such situations, there is not a sufficiently clear record of administrative
action to support effective judicial review and it is difficult, if not impossible,
for a court to apply an arbitrary and capricious standard of review rather than
engaging in review de novo. Additionally, allowing judicial review in such
situations would encourage frivolous lawsuits by allowing plaintiffs to sue
upon the mere pleading of a de facto denial of an unfiled claim, would
discourage settlement of claims, and would likely increase the costs of
claims settlement.
Barnett, 885 F. Supp. at 588.
The court also rejects plaintiffs’ contention that any further exhaustion of Plan
remedies would be futile in light of Halliburton’s policy of treating Dresser-Rand employees
as terminated as of March 1, 2000 (see Item 22, pp. 7-8). Futility in the ERISA context is
11
“perhaps best understood as a term of art that considers whether, in light of both the
claimant’s and the plan administrator’s actions, it is fair to require the dismissal of the
claimant’s suit pending her reapplication for benefits in accordance with procedures set
forth in the summary plan description.” Ludwig v. NYNEX Serv. Co., 838 F. Supp. 769,
781 (S.D.N.Y. 1993). In Ludwig, the court surveyed the applicable case law reported at
the time and found that courts will invoke the futility doctrine, and waive the exhaustion
requirement, in the following circumstances: (1) “where, for summary judgment purposes,
there is a material issue of fact as to whether the claimant has properly appealed a denial
of benefits through the specified administrative channels”; (2) “where the plan has failed
to respond to the claimant’s, or the claimant’s representative’s, written request for a review
of the plan’s benefit eligibility determination”; and (3) “where there is a material issue of fact
as to whether the plaintiff was informed of the appeals process.” Ludwig, 838 F. Supp. at
781-82 (citations omitted).
In this case, as discussed above, there is no genuine issue regarding whether Ms.
Kirkendall, or any of the named plaintiffs, followed the Claims Procedures specified in the
Plan–including the requirement that a claimant’s request for review of an adverse
determination be submitted in writing (see Item 12, Exh. D, § VII). In addition, based on
the materials submitted, it is clear to the court that Ms. Kirkendall was fully aware of the
Plan’s formal application and appeals process (see Item 22-2, ¶ 22, & Exh. A-1 (Summary
Plan Description), p. 29 (“Claims and Appeals Procedures”)). Under these circumstances,
the court finds that plaintiffs have failed to make a “clear and positive showing” that
pursuing available administrative remedies would be futile. Kennedy, 989 F.2d at 594-95
12
(rejecting plaintiffs’ contention of futility where there was “no evidence in the record that
any ERISA plaintiff even notified [the plan administrator] of any disputed claim.”) (emphasis
in original).
Based on this analysis, plaintiffs’ “Benefits Claim” set forth in Count II of the
complaint must be dismissed for failure to exhaust administrative remedies.2
C.
Breach of Fiduciary Duty
In Count IV of the complaint, plaintiffs claim that Halliburton breached its fiduciary
duties of loyalty and prudence when it caused the Plan to determine eligibility for pension
benefits based on the wrong date of termination (Item 1, ¶¶ 42-44).3 Defendants seek
dismissal of Count IV on the ground that this claim is simply an attempt to avoid the
exhaustion requirement by recasting the benefits claim as a claim for violation of the
substantive statutory provisions establishing the appropriate standard of care for plan
fiduciaries to discharge their duties, as to which the exhaustion requirement does not
apply.
2
Defendants also contend that, to the extent Count II survives the m otion to dism iss, Halliburton
should be dism issed from the case because it is not a proper party to a claim for recovery of benefits
under an ERISA plan. Having granted defendants’ m otion to dism iss Count II, the court declines to
address this argum ent.
3
Although no specific statutory provision is cited by plaintiffs, ERISA section 404 provides the
following “prudent m an standard of care” central to a claim for breach of fiduciary duty under ERISA:
. . . a fiduciary shall discharge his duties with respect to a plan solely in the interest of the
participants and beneficiaries and . . . for the exclusive purpose of providing benefits to
participants and their beneficiaries; and defraying reasonable expenses of adm inistering
the plan . . . with the care, skill, prudence, and diligence under the circum stances then
prevailing that a prudent m an acting in a like capacity and fam iliar with such m atters
would use in the conduct of an enterprise of a like character and with like aim s . . . .
29 U.S.C. § 1104(a)(1)(A), (B).
13
As noted by the Third Circuit in Harrow v. Prudential Ins. Co. of America, 279 F.3d
244 (3rd Cir. 2002), there is “sharp disagreement” between the circuits as to whether
plaintiffs must exhaust administrative remedies before bringing suit in federal court to
assert a violation of substantive statutory provisions, like breach of fiduciary duty in
violation of ERISA section 404. Id. at 253 n. 10. Although the Second Circuit has not
directly addressed this question, see Nechis v. Oxford Health Plans, Inc., 421 F.3d 96, 102
(2d Cir. 2005) (recognizing the circuit split, but declining to “here decide whether
administrative exhaustion is a prerequisite to a statutory ERISA claim”), district courts
within this circuit have drawn a distinction between claims relating to violations of the terms
of a benefit plan and claims relating to statutory violations of ERISA. See Role v. Johns
Hopkins Bayview Medical Center, 2008 WL 465574, at *3-4 (E.D.N.Y. Feb. 15, 2008)
(citing cases).
In one such case, American Medical Ass'n v. United Healthcare Corp., 2007 WL
1771498 (S.D.N.Y. June 18, 2007), upon surveying the case law developments in this
regard, the district court stated “[t]he prevailing rule . . . that bona fide breach of fiduciary
duty claims–that is, those that are based on an interpretation of the ERISA statute rather
than of a plan and are not claims for benefits artfully pled as claims for breach of fiduciary
duty–are statutory and not subject to the administrative exhaustion requirement.” Id. at *15
(citing cases from the First, Third, Fourth, Fifth, Sixth, Ninth, and Tenth Circuits). As
summarized in Harrow:
Plaintiffs cannot circumvent the exhaustion requirement by artfully pleading
benefit claims as breach of fiduciary duty claims. When the facts alleged do
not present a breach of fiduciary duty claim that is independent of a claim for
benefits, the exhaustion doctrine still applies. A claim for breach of fiduciary
14
duty is “actually a claim for benefits where the resolution of the claim rests
upon an interpretation and application of an ERISA-regulated plan rather
than upon an interpretation and application of ERISA.”
Harrow, 279 F.3d at 253-54 (quoting Smith v. Sydnor, 184 F.3d 356, 362 (4th Cir. 1999),
cert. denied, 528 U.S. 1116 (2000); other citations omitted).
Finding this rationale persuasive, and applying it to the circumstances presented in
this case, the conclusion must be drawn that the facts alleged in Count IV of the complaint
do not present a breach of fiduciary duty claim that is independent of plaintiffs’ claim for
benefits asserted in Count II. Plaintiffs’ breach of fiduciary duty claim is based upon
allegations regarding the plan administrator’s determination of participants’ eligibility for
pension benefits under the Halliburton Plan. Clearly, resolution of this claim necessarily
rests upon an interpretation of the Plan’s eligibility requirements, rather than upon any
interpretation or application of the ERISA statute itself. Accordingly, the court finds that the
exhaustion requirement applies to the claims asserted in Count IV, and this claim must also
be dismissed because–as explained above–none of the named plaintiffs pursued the
administrative procedures specified in the Plan.
D.
ERISA Sections 204 and 208
In Count II, plaintiffs allege that defendants’ “systematic denial of vesting service
after March 1, 2000 with respect to qualification for previously-accrued early retirement
benefits and/or retirement-type subsidies amounts to an amendment of the Plan to
eliminate or reduce such accrued benefits,” in violation of ERISA sections 204(g) and 208,
and that defendants implemented the amendment without notice, in violation of ERISA
sections 204(h) (Item 1, ¶¶ 39-40). Defendants seek dismissal of this claim on the ground
15
that there was no actual amendment of the Halliburton Plan, which is necessary to trigger
the protections of these provisions.
1.
Section 204
ERISA section 204, entitled “Benefit accrual requirements,” was adopted by
Congress to safeguard pension benefits that have been promised to employees. See
Frommert v. Conkright, 433 F.3d 254, 263 (2d Cir. 2006). Section 204(g) is referred to as
the “anti-cutback rule,” which “protects employees’ expectations in their accrued benefits.”
Id. As pertinent here, section 204(g) provides:
(g) Decrease of accrued benefits through amendment of plan
(1) The accrued benefit of a participant under a plan may not be decreased
by an amendment of the plan . . . .
(2) For purposes of paragraph (1), a plan amendment which has the effect
of-(A) eliminating or reducing an early retirement benefit or a
retirement-type subsidy . . .
with respect to benefits attributable to service before the amendment shall
be treated as reducing accrued benefits.
29 U.S.C. § 1054(g). Section 204(h) provides that a pension plan may not be amended
in a way that reduces future benefit accrual without proper written notice to plan
participants. See 29 U.S.C. § 1054(h).
Defendants seek dismissal of plaintiffs’ claim for violation of these provisions on the
ground that there was no actual amendment of the Halliburton Plan to trigger the
protections of the anti-cutback rule. Defendants rely on the preponderance of circuit court
authority adhering to the general rule that the protections of section 204(g) and (h) apply
16
only to actual amendments to the terms of a Plan, not to an interpretation of terms which
amounts to a constructive amendment of the Plan. See Richardson v. The Pension Plan
of Bethlehem Steel Corp., 112 F.3d 982, 987 (9th Cir. 1997); Stewart v. National Shopmen
Pension Fund, 730 F.2d 1552 (D.C.Cir.), cert. denied, 469 U.S. 834 (1984); Dade v. N. Am.
Phillips Corp., 68 F.3d 1558, 1562 (3d Cir. 1995); Dooley v. Am. Airlines, Inc., 797 F.2d
1447, 1451 (7th Cir. 1986), cert. denied, 479 U.S. 1032 (1987); Hunger v. AB, 12 F.3d
118,121 (8th Cir. 1993), cert. denied, 512 U.S. 1206 (1994).
The rule is perhaps best explained in the D.C. Circuit’s Stewart opinion:
[T]he word “amendment” [in section 204(g)] is used as a word of limitation.
Congress did not state that any change would trigger the . . . provision[ ]; it
stated that any change by amendment would do so. . . .
The plaintiffs’ construction would stretch the term “amendment” nearly
to the breaking point. Under their construction, reducing any benefits,
authorized by the plan, of persons whose rights are vested, would constitute
an “amendment.” While speculation regarding why Congress chooses
specific language is not always fruitful, it should be noted that had Congress
meant [section 204(g)] to apply to “any reduction in benefits to vested
participants,” it could easily have said so.
Stewart, 730 F.2d at 1561; see also Dooley, 797 F.2d at 1451-52 (applying Stewart’s
“commonsensical rule of law” to find that plan fiduciaries’ “valid exercise of a provision
which was already firmly ensconced in the pension document” did not amount to
amendment of the plan in violation of section 204(g)); Oster v. Barco of California
Employees’ Retirement Plan, 869 F.2d 1215, 1220-21 (9th Cir. 1988) (expressly adopting
the reasoning of Stewart and Dooley); Lechleiter v. Proctor & Gamble Distributing Co.,
2002 U.S. Dist. LEXIS 8054, at *5-8 (D.Conn. Mar. 27, 2002) (citing with approval Stewart,
Dooley, and Richardson; holding that sale of subsidiary resulting in employees’ inability to
17
accrue creditable service beyond sale date did not amount to “actual amendment”
protected by section 204(g)) (not published in WL).
In this case, plaintiffs do not allege that defendants eliminated or reduced plan
participants’ accrued early retirement benefits or subsidies by actual amendment of the
Plan, but rather, that defendants’ “systematic denial of vesting service after March 1, 2000”
with respect to such benefits “amounts to” an amendment sufficient to trigger the
protections of ERISA section 204(g). Plaintiffs cite Hein v. Federal Deposit Insurance
Corp., 88 F.3d 210 (3d Cir. 1996), cert. denied, 519 U.S. 1056 (1997), for the proposition
that “[a]n erroneous interpretation of a plan provision that results in the improper denial of
benefits to a plan participant may be construed as an ‘amendment’ for the purposes of
ERISA § 204(g).” Hein, 88 F.3d at 216. However, the Third Circuit ultimately determined
in Hein that ERISA § 204(g) did not apply to the facts of that case, finding that the plan
administrator’s “accurate interpretation of the Plan provisions . . . cannot be considered an
amendment of the Plan.” Hein, 88 F.3d at 219.
In any event, the reasoning in Hein suggesting that a plan administrator’s erroneous
denial of benefits can amount to an amendment of the plan sufficient to trigger the
protections of ERISA’s anti-cutback rule is called into question by the substantial weight
of authority cited above holding that section 204(g) “means . . . what it says,” Stewart, 730
F.2d at 1561, i.e., that the prohibition against a plan amendment which has the effect
of eliminating or reducing an early retirement benefit or a retirement-type subsidy applies
only to actual amendments to the terms of the plan, not to a plan administrator’s
interpretation of plan provisions which results in a reduction of benefits. Applying this
18
“commonsensical rule of law” in this case, the court finds that plaintiffs have failed to allege
facts sufficient to invoke the protections of ERISA section 204.
2.
Section 208
ERISA section 208 provides, in pertinent part:
A pension plan may not merge with . . . any other plan . . . unless
each participant in the plan would (if the plan then terminated) receive a
benefit immediately after the merger, consolidation, or transfer which is equal
to or greater than the benefit he would have been entitled to receive
immediately before the merger . . . (if the plan had then terminated).
29 U.S.C. § 1058.
As outlined above, the clear and unambiguous language of the Merger Document
effecting the merger of the DICON Plan into the Halliburton Plan expressly states that all
of the provisions of the DICON Plan in effect on the December 31, 2001 merger date “shall
remain in effect . . . as a part of, and shall be incorporated into, the [Halliburton] Plan for
the benefit of the ‘participants’ in the DICON Plan . . . , who shall continue to be covered
by such provisions to the exclusion of any other provisions of the [Halliburton] Plan.” (Item
12, Exh. C, ¶ 3). This language closely tracks the statutory language, and Plaintiffs have
failed to allege or come forward with evidence to show that the merger of the Plans had
any effect on whatever early retirement credits or subsidies they were entitled to
immediately before the merger.
Based on this analysis, the court finds that plaintiffs have failed to state a plausible
claim for relief under ERISA sections 204 and 208, and defendants are entitled to
judgment on the pleadings dismissing Count II of the complaint.
19
E.
Declaratory Judgment
Finally, in Count I of the complaint plaintiffs seek declaratory judgment “with respect
to whether the sale of Halliburton’s interest in Dresser-Rand had the effect of terminating
the existence of Dresser-Rand and the employment of its employees.” (Item 1, ¶ 34).
However, the law is clear that declaratory relief, whether sought under the Declaratory
Judgment Act (28 U.S.C. § 2201), Rule 57 of the Federal Rules of Civil Procedure, or
“added to claims for relief brought under other auspices . . . ,” Nat’l Union Fire Ins. Co. of
Pittsburgh v. Karp, 108 F.3d 17, 21(2d Cir. 1997), is not a separate cause of action but
instead “merely offers an additional remedy to litigants.” Id. Accordingly, in the absence
of a viable claim under ERISA for redetermination of pension benefits, breach of fiduciary
duty, or denial of accrued early retirement benefits by actual amendment of the Plan, the
complaint likewise fails to support a claim for declaratory relief.
CONCLUSION
For the foregoing reasons, defendants’ motion for judgment on the pleadings
(Item 11) is granted with respect to Count I of the complaint seeking declaratory judgment,
and Count II seeking relief pursuant to ERISA sections 204 and 208. Defendants’ motion
is converted to a motion for summary judgment with respect to Count III seeking
redetermination of pension benefits, and Count IV seeking relief for breach of the fiduciary
duties imposed by ERISA, and that motion is granted for failure to exhaust the
20
administrative claims procedures established by the relevant Plan. Plaintiffs’ complaint is
dismissed, in its entirety, and with prejudice.4
The parties’ joint motion for a status conference (Item 25) is denied as moot.
The Clerk of the Court is directed to enter judgment in favor of defendants, and to
close the case.
So ordered.
\s\ John T. Curtin
JOHN T. CURTIN
United States District Judge
Dated:
June 8, 2011
Buffalo, New York
4
Plaintiffs subm it that if the court grants defendants’ m otion, it should also grant plaintiffs leave to
am end the com plaint in order to correct any identified pleading deficiencies. Although leave to am end
should be granted “freely . . . when justice so requires . . . ,” Fed. R. Civ. P. 15(a)(2), it is with the district
court’s “sound discretion . . . to deny leave for good reason, including futility, bad faith, undue delay, or
undue prejudice to the opposing party.” McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir.
2007). W here, as here, “[t]he problem with [the plaintiff's] causes of action is substantive[,] better
pleading will not cure it.” Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d Cir. 2000). Accordingly, leave to
am end would be futile, and the com plaint is dism issed with prejudice.
21
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