Pikas v. Williams Companies, Inc. et al
Filing
123
OPINION AND ORDER by Chief Judge Gregory K Frizzell ; granting 111 Motion for Judgment; denying 113 Motion for Summary Judgment (cds, Dpty Clk)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
JOSEPH L. PIKAS, on behalf of himself
and all other persons similarly situated,
Plaintiffs,
v.
WILLIAMS COMPANIES, INC., and its
Benefits Committee and Administrative
Committee and Administrator of the Williams
Pension Plan, and
WILLIAMS PENSION PLAN,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
Case No. 8-cv-101-GKF-PJC
OPINION AND ORDER
This matter comes before the court upon plaintiff class’s Motion for Judgment on
Liability [Dkt. #111] and defendant’s Motion for Summary Judgment on Liability [Dkt. #113].
Both motions address whether defendants Williams Companies Inc. and Williams Pension Plan
(“Williams”) are liable to plaintiff class (“Class”) under ERISA, 29 U.S.C. § 1002 et seq., for
providing cost of living adjustments (“COLAs”) to annuitants but not for those who took a lump
sum payment in lieu of their annuity. Because the COLAs are part of the accrued benefit,
Williams must provide the actuarial equivalent to lump sum recipients. For the reasons set forth
below, this court concludes Williams is liable to Pikas and the Class for failing to provide the
actuarial equivalent of the normal retirement benefit.
I.
Background
Previously, the court certified a class and defined the starting date of the class period.
[Dkt. #46 at 43-44]. The class includes all lump sum beneficiaries who took their distribution
within the three years prior to the filing of the complaint. The court held that Oklahoma’s three
year limitation for claims based on statutorily liability was the most analogous to the Class’s
ERISA-based claim, rejecting the Class’s argument that Oklahoma’s five year limitation for
contract-based claims was more analogous. [Id.] The court denied the Class’s motion to
reconsider and held that the class representative’s claim was timely. Mot. To Reconsider [Dkt.
#54]; Order [Dkt. #74].
The parties each filed motions for judgment on liability, and agreed to the following
undisputed facts:
The Class consists of vested participants in the Williams Plan whose lump-sum
payments were made on or after November 15, 2003. [Id. ¶6].
The Williams Pension Plan is governed by ERISA. [Id. ¶2].
The Williams Pension Plan is the successor-in-interest to the Transco Plan. [Id.
¶1]
The Transco Plan provided pension benefits in annuity form commencing at age
65. [Id. ¶8].
The 24th Amendment to the Transco Plan offered an optional form of benefit in a
lump sum distribution, effective November 15, 1991, but “excluded from the
calculation of the lump sum’s amount the Plan’s provisions that provided a
COLA.” [Id. ¶¶8, 9].
The Class claims “turn on a single fact–that the lump-sum distributions of their
‘grandfathered’ pension benefits did not take into account COLA increases which
were applicable to the same pension benefits when distributed in the annuity form
of payment.” [Id. ¶3].
II.
This class action is on behalf of retirees who took lump sum distributions under
the Williams Pension Plan. The court certified that Class. [Dkt. #110 ¶1].
The Class alleges the difference in treatment violates ERISA. [Id.]
Discussion
A. Standard of Review
The court reviews the plan administrator’s decision as an appellate court “under a de
novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority
to determine eligibility for benefits or to construe the terms of the plan.” Firestone Tire &
-2-
Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). The Williams Plan grants such authority to the
Administrative Committee, ensuring deferential review. 2002 Plan, art. X, § 10.4(b) (AR 960)
[Dkt. #119-6 at 152] (“All interpretations of this Plan, and questions concerning its
administration and application, shall be determined by the Administrative Committee in its sole
discretion and such determination shall be binding on at persons for all purposes.”); see also
Owens v. Prudential Ins. Co. of Am., 06-CV-24-GKF-PJC, 2009 WL 279108 (N.D. Okla. Feb. 3,
2009) (“the court in this case has conducted its review of the record functioning as an appellate
court rather than applying the summary judgment procedure”).
However, here, the only issue to be decided is a legal one: whether ERISA requires the
COLAs to be accounted for in the lump sum distribution. See infra § II.C. Thus, while the court
still reviews the administrator’s decision, that review is de novo. See Penn v. Howe-Baker
Eng’rs, Inc., 898 F.2d 1096, 1100 (5th Cir. 1990) (“we accord no deference to the Committee’s
conclusions as to the controlling law, which involve statutory interpretation”).
B. The Class Claims Arose Directly Under ERISA, Not Under The Terms Of the
Plan
The Class, until recently, agreed that the Williams Plan denied COLAs to lump sum
beneficiaries, and argued denying the COLAs to lump sum beneficiaries while providing them to
annuitants statutorily violated ERISA. [See, e.g., Dkt. #46 at 33:10-12 (“the plan language says
that the computation of the lump sum amount, should you elect to receive one, is made without
reference to the COLA benefits”); 34:5-8 (“You cannot have a plan that says we will pay you the
normal retirement benefit unless you want it earlier, in which case you’ve got to give up some of
it. That’s what this plan says.”)]. Recently, the Class shifted its argument to belatedly state that
the Plan itself provided COLAs to lump sum beneficiaries. The court will not entertain that
untimely argument for the following reasons.
-3-
Pikas pled the right to COLAs both “to recover benefits due [the Class] under the terms
of the plan” and as “to redress violations of ERISA.” [Dkt. #2 at 1; see also id. ¶¶ 10, 49]. At
the administrative level, Pikas did not clearly raise the argument that the Plan itself required the
COLA be provided to lump sum beneficiaries. Claim Letter [Dkt. #119 at 3] (“In computing the
lump sum of the Transco amount, the Plan neglected to include the value of the Cost of Living
Adjustment, which is part of his accrued benefit.”); Appeal Letter [Dkt. #119 at 8] (same). Thus,
Pikas may have failed to exhaust his administrative remedies on an “under the plan” claim.
The court first determined the nature of the Class’s claim when defining the class period
starting date. [Dkt. ##39, 40, 43, 45, 46]. The starting date depended on which Oklahoma
statute of limitation was most analogous to the federal claim being pursued: a three year
limitation for liabilities created by statute, 12 O.S. § 95(A)(2), or a five year limitation for breach
of contract, 12 O.S. § 95(A)(1). The Class argued “ERISA is not the source of Plaintiffs’ claims,
but rather is the mechanism for the enforcement of those claims.” [Dkt. #43 at 4]. Williams
argued that “but for the overlay of ERISA you would not have a violation of the plan.” [Dkt.
#46 at 16:1-2]. At the July 6, 2009 hearing on the issue, Class counsel described the claim
repeatedly as violating ERISA’s requirements, not the Plan’s terms:
THEADO: “Simply put, Your Honor, that’s what the plan offers, that normal
retirement benefit. That is what we want the actuarial equivalent of when we get a
lump sum benefit.” [Id. at 29:5-7].
THEADO: “I think we would agree, [Williams’s counsel] and I, that the plan
language says that the computation of the lump sum amount, should you elect to
receive one, is made without reference to the COLA benefits, yes.” COURT: “So
in that sense [Williams’s counsel] is right. You’re not seeking to enforce the terms of
the contract, you’re seeking for a declaration or a determination of this Court that that
term is violative of ERISA.” [Id. at 33:9-16 (emphasis added)].
THEADO: “Under the plan, the normal retirement benefit this plan pays is an annuity
with a COLA. That is the normal retirement benefit, that’s what we want. Now we
want the actuarial equivalent of that because ERISA says that you are entitled to the
actuarial equivalent if you take an optional form of benefit. If I may. I’m sorry, I
-4-
interrupted myself. You cannot have a plan that says we will pay you the normal
retirement benefit unless you want it earlier, in which case you’ve got to give up
some of it. That’s what this plan says. That’s it.” [Id. at 33:24-34:8 (emphasis
added)].
At the hearing, Class counsel cited no Plan provision providing COLAs to lump sum
beneficiaries, rather arguing ERISA requires it do so if annuitants received a COLA.1 Based on
the briefs and oral arguments, the court held:
…that plaintiffs’ claims are best characterized as statutory claims under ERISA.
Plaintiff’s claims are based on ERISA’s statutory provisions, and the essential
nature of the claims are alleged statutory violations of ERISA. But for the ERISA
provisions, the claims would not exist. Accordingly, this court concludes that
Oklahoma’s three-year statute for actions upon liability created by statute is the
most analogous.
[Dkt. #45 at 1; see also Dkt. #46 at 43:16-24].
The Class then moved to amend the class certification and reconsider the statute of
limitation decision by introducing a new argument that the ERISA “statutory requirements
constitute terms of a pension plan implied by law” and relying heavily on Hakim v. Accenture
United States Pension Plan, 656 F. Supp.2d 801 (N.D. Ill. 2009). [Dkt. #54 at 4, 9]. The court
denied reconsideration because the new arguments did not address Oklahoma’s statutes of
limitation, from which the court had to choose the most closely analogous. [Dkt. #74 at 2
(“There was no mention of an Illinois counterpart to Oklahoma’s statute of limitations for actions
brought for liabilities created under statute.”)]. At that point in the litigation, the Class did not
1
Williams’s counsel repeatedly stated that the Plan specifically excluded COLAs from lump
sum payments. [Dkt. #46 at 14:5-6 (“[The Plan] says it will be calculated without regard to
Section 212 which is the COLA section”), 14:10-11 (“The plan specifically said without the
COLA calculation.”), 17:6-9 (“…they cannot point to anywhere in the plan where it says the
COLAs will be calculated. As a matter of fact, it expressly says otherwise.”). Pikas’s counsel
did not contest these assertions. The parties had not provided the full administrative record to
the court at that time. [See Dkt. #119]. The Class now asserts the operative Plan does not
explicitly exclude a COLA for lump sum beneficiaries. See, e.g., Transco Energy Plan (28th
Amendment) § 14.6 (AR 247-248) [Dkt. #119-1 at 75-76].
-5-
have a theory under which they could recover under the Plan terms and their arguments to the
contrary were predicated on securing a longer statute of limitations.
On September 7, 2011 – two years after the July 6, 2009 hearing – the Class first asserted
in an unrelated reply brief that “Defendants’ Plan does not exclude the COLA.” [Dkt. #95 at 5,
6]. The Class now argues the 1991 Plan expressly excluded a COLA, but all subsequent Plan
restatements are silent about a COLA. Id. at 5-6. The Class believes that a change from
exclusion to silence requires a COLA be included, and thus their claims are contractual in nature.
To their credit, plaintiffs acknowledge that this new theory was not presented in previous
briefing or at the July 6, 2009 hearing. Id. at 7 (stating “Plaintiffs’ counsel recognize that they
were not previously as particular in referring to the Plan’s provisions…. leading the Court to
conclude that ‘the essential nature of plaintiff’s claims are statutory violations of ERISA’” and
describing plaintiffs’ counsel’s previous argument as “mistaken”).
The court required both parties to file motions for judgment on liability issues. [Dkt.
#102; Dkt. #105 at 17:12-18]. The Class’s Motion for Judgment [Dkt. ##111, 112] included the
first detailed argument that the operative Plan required COLA payments to lump sum
beneficiaries. [Dkt. #112 at 4-9]. More than five years after filing suit and three years after the
court held the Class’s claims were not for benefits under the Plan’s terms, the Class
fundamentally changed their argument to contend that the Plan itself promised lump sum
beneficiaries a COLA.
If the Class had raised this argument earlier in the litigation, the
applicable statute of limitations and class certification decisions could possibly have been
decided differently. A hearing scheduled to cover liability issues was then “sidetracked” by the
Class’s new argument. [Dkt. #120 at 7:7-10].
-6-
After permitting the parties to discuss whether to revisit the court’s past decision, the
court decided:
This court simply cannot permit this new argument made nearly six years into this
litigation and four years before this particular federal court. Though the specifics
were raised in a reply brief last September on an unrelated issue relative to the
filing of supplemental authority on a different issue, it was not raised before this
court until recently and the court ordered briefing on the issue of liability, and it
was not raised before the committee. It seems to the court that if the court were to
allow it, the court might well be required to dismiss the case and remand to the
committee to consider the new argument. So, with due respect, this court is not
going to consider it.
[Dkt. #120 at 58]. To revisit the statute of limitations and class certification decisions would add
costs to all parties, waste judicial resources and unfairly change the nature of this six-year-old
litigation to the prejudice of defendants. See Evans v. McDonald’s Corp., 936 F.2d 1087, 1091
(10th Cir. 1991) (“We do not believe, however, that the liberalized pleading rules permit
plaintiffs to wait until the last minute to ascertain and refine the theories on which they intend to
build their case. This practice, if permitted, would waste the parties’ resources, as well as
judicial resources, on discovery aimed at ultimately unavailing legal theories and would unfairly
surprise defendants, requiring the court to grant further time for discovery or continuances.”).
Finally, addressing again whether the Plan itself guarantees COLAs to lump sum beneficiaries
would require remanding the case to the Administrative Committee who has discretion to
interpret the Plan’s provisions. See 2002 Plan, art. X, § 10.4(b) (AR 960) [Dkt. #119-6 at 152].
Such remand would further delay resolution in this six-year-old case, again prejudicing
defendants.
C. ERISA Requires Williams to Provide Lump Sum Recipients the Actuarial
Equivalent of the COLAs Provided to Annuitants
Any lump sum plan must be actuarially equivalent to the accrued benefit, which includes
the COLA here. See Williams v. Rohm and Haas Pension Plan, 497 F.3d 710, 714 (7th Cir.
-7-
2007) (“If a defined benefit pension plan entitles an annuitant to a COLA, it must also provide
the COLA’s actuarial equivalent to a participant who chooses instead to receive his pension in
the form of a one-time lump sum distribution.”), cert denied 552 U.S. 1276 (2008); Laurenzano
v. Blue Cross and Blue Shield of Mass., Inc. Ret. Income Trust, 134 F. Supp. 2d 189 (D. Mass.
2001).
1) Accrued Benefit
Whether the COLA is part of the accrued benefit is dispositive in this case. Under
ERISA, an accrued benefit in a defined benefit plan is defined as “the individual’s accrued
benefit determined under the plan and, except as provided in section 1054(c)(3) of this title,
expressed in the form of an annual benefit commencing at normal retirement age.” 29 U.S.C. §
1002(23) (emphasis added). While courts look to the terms of the plan to determine the scope of
the accrued benefit, the statutory definition of an “accrued benefit” cannot be changed by the
contracting parties to a pension agreement. Rohm, 497 F.3d at 713; Hickey v. Chicago Truck
Drivers, 980 F.2d 465, 468 (7th Cir. 1992); Laurenzano, 134 F. Supp. 2d at 200.
Here, any annuitant at normal retirement age will receive a set payment that will increase
according to a COLA throughout the annuitant’s lifetime. That is the accrued benefit. See
Rohm, 497 F.3d at 713 (“What would [plaintiff] get if he chose to receive his pension in annuity
payments? The annuity, calculated based upon his years of service and compensation, plus the
yearly COLA. That is the accrued benefit.”).
“ERISA protects the benefits described in the
Plan by ensuring that, if a pensioner is promised a benefit and fulfills the conditions required to
receive it, the pensioner will actually receive the described and promised benefit.” Hickey, 980
F.2d at 468. Williams argues that the condition required to receive the COLA was choosing the
annuity rather than the lump sum payment. [Dkt. #113 at 6]. That is incorrect. The condition is
years of service required to vest, not choosing the appropriate form of benefit. Once a retiree’s
-8-
pension vests, he has accrued the promised COLA. Williams may not require him to forgo that
COLA to take an optional form of payment. See 29 U.S.C. § 1054(c)(3) (requiring optional
forms be actuarially equivalent to the accrued benefit).
The COLA is not an ancillary benefit. ERISA differentiates between protected accrued
benefits and unprotected ancillary benefits. 26 C.F.R. § 1.411(d)–3(g)(2) & 1.411(d)–3(b)(3).
Neither party suggests the COLA is an ancillary benefit. Because the COLA provides additional
retirement income necessary to maintain the real value of retirement benefits, the “participant’s
entitlement to his or her normal retirement benefit include[s], as one component, the right to
have the benefits adjusted pursuant to the COLA provision.” Hickey, 980 F.2d at 468-69. The
COLA is not an ancillary benefit.
The COLA also is not a retirement-type subsidy. ERISA affords some protection to
certain benefits that are not accrued benefits, including early retirement benefits and retirementtype subsidies, by treating them as accrued benefits for anti-cutback purposes. 26 U.S.C. §
411(d)(6)(B). If the COLA were a retirement-type subsidy, it would not be a protected accrued
benefit but it would be safe from plan amendments cutting back the benefit. Because the
Williams Plan lump sum option does not provide a COLA, the COLA could not be cutback by a
plan amendment. See infra § II.C.4). Thus, if the COLA were a retirement-type subsidy,
Williams would not be required to provide it to lump sum recipients.
Retirement-type subsidies are defined in conjunction with retirement-type benefits:
(iii) Retirement-type benefit. The term retirement-type benefit means-(A) The payment of a distribution alternative with respect to an accrued benefit;
or
(B) The payment of any other benefit under a defined benefit plan (including a
QSUPP as defined in § 1.401(a)(4)–12) that is permitted to be in a qualified
pension plan, continues after retirement, and is not an ancillary benefit.
-9-
(iv) Retirement-type subsidy. The term retirement-type subsidy means the
excess, if any, of the actuarial present value of a retirement-type benefit over the
actuarial present value of the accrued benefit commencing at normal retirement
age or at actual commencement date, if later, with both such actuarial present
values determined as of the date the retirement-type benefit commences.
Examples of retirement-type subsidies include a subsidized early retirement
benefit and a subsidized qualified joint and survivor annuity.
26 C.F.R. § 1.411(d)–3(g)(6). A retirement benefit is a retirement-type subsidy “if the sum of
monthly payments for the participant’s life exceeds what the participant would have received as
normal retirement benefits.” Richardson v. Pension Plan of Bethlehem Steel Corp. & Subsidiary
Cos., 67 F.3d 1462, 1468 (9th Cir. 1995), opinion withdrawn by 91 F.3d 1312 (9th Cir. 1996),
and different results reached in Richardson v. Pension Plan of Bethlehem Steel Corp., 112 F.3d
982 (9th Cir. 1997). For example, plant shutdown benefits – payable if the beneficiary’s plant
closes – are retirement-type subsidies if they continue beyond normal retirement age and exceed
the amount payable under an actuarially reduced normal retirement benefit. See Bellas v. CBS,
Inc., 221 F.3d 517, 532 (3d Cir. 2000) (“[U]npredictable contingent event benefits that provide a
benefit greater than the actuarially reduced normal retirement benefit are retirement-type
subsidies, and therefore are accrued benefits under section 204(g), if the benefit continues
beyond normal retirement age”); Richardson, 67 F.3d at 1468-69 (holding shutdown benefits
were retirement-type subsidies where they continued past normal retirement age and “exceed[]
what the Bethlehem employees would have received as normal retirement benefits”); see also
Kerber v. Qwest Pension Plan, 572 F.3d 1135, 1147 (10th Cir. 2009) (holding “‘subsidy’ was
intended to refer to benefits that continue over a period of time following retirement”).
Williams incorrectly characterizes the COLA as a retirement-type subsidy. The COLA is
not a supplemental benefit to some retirees based on contingent circumstances that may occur
before normal retirement age, but continue after normal retirement age. The COLA affects all
annuitants based on contingent circumstances and only occurs after normal retirement age. The
- 10 -
contingent nature of the COLA amount is not enough to transform this accrued benefit into a
retirement-type subsidy. Additionally, the COLA commences at normal retirement age even
though it does not change the annuity amount until the year after retirement.
While ERISA permits each plan to select the benefit amount provided, “it remains a
paternalistic regulation designed to restrict the freedom of contract,” including the definition of
accrued benefits. Rohm, 497 F.3d at 714. Like the two courts that previously addressed this
question, this court holds that a COLA given to annuity recipients is part of the accrued benefit
under ERISA. See id. at 713; Laurenzano, 134 F. Supp. 2d at 201.
2) Actuarial Equivalence Rule
Because the COLA is part of the statutorily-defined accrued benefit – and not a
retirement-type subsidy – ERISA requires the COLA be accounted for in the lump sum payment.
ERISA’s actuarial equivalence provision mandates that for any benefit taken other than in a
single life annuity, the accrued benefit must be actuarially equivalent:
For purposes of this section, in the case of any defined benefit plan, if an
employee’s accrued benefit is to be determined as an amount other than an annual
benefit commencing at normal retirement age, or if the accrued benefit derived
from contributions made by an employee is to be determined with respect to a
benefit other than an annual benefit in the form of a single life annuity (without
ancillary benefits) commencing at normal retirement age, the employee’s accrued
benefit, or the accrued benefits derived from contributions made by an employee,
as the case may be, shall be the actuarial equivalent of such benefit or amount
determined under paragraph (1) or (2).
29 U.S.C. § 1054(c)(3).
3) Anti-Forfeiture Rule
The anti-forfeiture rule provides that “[e]ach pension plan shall provide that an
employee’s right to his normal retirement benefit is nonforfeitable upon the attainment of normal
retirement age.” 29 U.S.C. § 1053(a). ERISA’s non-forfeiture requirement ensures that an
employee’s own contributions are “immediately nonforfeitable” and an employer’s contributions
- 11 -
are “nonforfeitable after a minimum vesting period.” Foster v. PPG Indus., Inc., 2012 WL
3834722, at *5 (10th Cir. Sept. 5, 2012). Forfeiture generally occurs when an employee loses
benefits based on “some prohibited action on the part of the employee.” Id. Pikas alleges
nothing of the sort. The plan, as written, did not provide a COLA for lump sum recipients, and
thus it could not be forfeited. The anti-forfeiture rule does not apply here.
4) Anti-Cutback Rule
The anti-cutback rule provides that “[t]he accrued benefit of a participant under a plan
may not be decreased by an amendment of the plan.” 29 U.S.C. § 1054(g). The anti-cutback
rule is inapplicable in the absence of a plan amendment. Here, the plan did not include a COLA
for lump sum recipients, but did include a COLA for annuitants. No plan amendment cutback a
previously granted COLA. The anti-cutback rule is inapplicable here.
D. The Appropriate Remedy Will Be Addressed Separately
The Class raises whether the equitable remedy of surcharge should be available. [Dkt.
#111 at 3]. The court will not entertain this argument now. The court repeatedly cabined the
current proceedings to liability questions only. [See Dkt. #105 at 17:14-18 (MS. POE: “Your
Honor, would you be wanting then at that point summary judgment motions on both liability and
damages, or just the liability?” THE COURT: “Just liability.” MR. PERRIN: “Just Liability.”)];
[Dkt. #120 at 60:5-10 (“I think back in February we all agreed that we would segregate remedy.
I think the briefing on liability kind of inched over into remedy somewhat and I’m not interested
in going there. I think that’s an issue after liability.”)]. The parties will be given an opportunity
to brief remedy issues fully.
To that end, the following briefing deadlines are established to address the proper remedy
in light of this court’s liability determination. The Class will submit a motion on the proper
- 12 -
remedy by November 13, 2012. Williams will respond by November 27, 2012. And Pikas may
reply by December 4, 2012.
III.
Conclusion
Because COLAs are part of the accrued benefit that commences at normal retirement age,
ERISA requires any lump sum payment to be actuarially equivalent. The Williams Plan did not
provide the actuarial equivalent, and is liable to Pikas and the Class. The anti-forfeiture and anticutback provisions do not apply because the Class did not timely argue that the terms of the Plan
itself required a COLA to be paid to lump sum beneficiaries. Remedies need be established in a
separate proceeding, as discussed above.
WHEREFORE, the Class’s Motion for Judgment on Liability [Dkt. #111] is granted, and
Williams’s Motion for Summary Judgment on Liability [Dkt. #113] is denied. The parties are
directed to consult for the purposes of determining how much time will be necessary, if any, for
a hearing on remedies, and to determine at least two alternative dates on which counsel will be
available for such a hearing.
Counsel shall then inform the Court’s deputy clerk of the
alternative dates in order that the hearing may be set.
DATED this 19th day of October, 2012.
- 13 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?