COTTILLION et al v. UNITED REFINING COMPANY et al

Filing 186

MEMORANDUM OPINION AND ORDER granting in part and denying in part 138 Plaintiffs' Motion for Summary Judgment; denying 153 Defendant's Motion for Summary Judgment. AND NOW, this 8th day of April, 2013, for the reasons set forth in the a ccompanying MEMORANDOM OPINION, IT IS HEREBY ORDERED that Plaintiffs' Motion for Summary Judgment is GRANTED IN PART with respect to the anti-cutback claim set forth in Count IV of the Second Amended Complaint, and is otherwise DENIED WITHOUT PREJUDICE. Defendants' Motion for Summary Judgment is DENIED WITH PREJUDICE as to Count IV and is otherwise DENIED WITHOUT PREJUDICE.Signed by Judge Sean J. McLaughlin on 4/8/2013. (jdg)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
JOHN COTTILLION, et al., on behalf of
)
themselves and all others similarly situated, )
)
Plaintiffs,
)
v.
)
)
UNITED REFINING COMPANY, et al.,
)
)
Defendants.
)
)
)

C.A. No. 09-140 Erie
District Judge McLaughlin

MEMORANDUM OPINION
McLAUGHLIN, SEAN J., J.
On June 12, 2009, Plaintiffs John Cottillion and Beverly Eldridge filed this
putative class action under the Employee Retirement Income Security Act of
1974 (“ERISA”), 29 U.S.C. § 1001 et seq., against United Refining Company, the
United Refining Company Salaried Employees Pension Plan, and the Retirement
Committee responsible for administering the Plan.

On October 26, 2009,

Plaintiffs filed an amended complaint wherein they assert (1) a claim for benefits
pursuant to ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), (2) a claim for
declaratory relief pursuant to ERISA §§502(a)(1)(B), 502(a)(3), 29 U.S.C. §§
1132(a)(1)(B), 1132(a)(3), (3) breach of fiduciary duty pursuant to ERISA § 404,
29 U.S.C. § 1104, and (4) a violation of ERISA’s anti-cutback provision, §204(g),
29 U.S.C. §1054(g)(2). Now pending before the Court are Plaintiffs’ Motion for
1 

Summary Judgment on Counts I, II and IV [Dkt. 138], Defendants’ Motion for
Summary Judgment [Dkt. 153], and Plaintiffs’ Motion to Strike Expert Reports
and Testimony [Dkt. 167]. Each of these motions is fully briefed and ripe for
review.
I.

Background

The following facts are undisputed, unless otherwise noted. Plaintiff John
Cottillion (“Cottillion”) was employed by the United Refining Company (“United
Refining”) from December 27, 1960 to April 21, 1989. (Pl. Ex. 1, Answer, ¶ 32;
Pl. Ex. 2, Kaemmerer Decl., ¶ 4).1 Plaintiff Beverly Eldridge was employed by
United Refining from July 20, 1987 to December 6, 1996. (Pl. Ex. 1, Answer, ¶
51; Pl. Ex. 2, Kaemmerer Decl., ¶ 3; Defendant’s Response to Concise
Statement, ¶ 3). Both Cottillion and Eldridge participated in the United Refining
Pension Plan for Salaried Employees (“the Plan”), a pension plan sponsored and
funded exclusively by United Refining for its employees. (Pl. Ex. 1, Answer, ¶¶ 1,
32). Because Cottillion and Eldridge each ended their employment with United
Refining after satisfying the Plan’s vesting requirement, but prior to the “Early
Retirement Date” specified by the Plan, they fall into a category referred to as
“terminated vested participants.”

1

Citations to “Pl. Ex.” refer to the exhibits contained in Plaintiffs’ Appendix in Support of Summary Judgment.

Defendant’s exhibits are cited herein as “Def. Ex.”

2 

The “Named Fiduciary” and “Administrator” of the Plan is the United
Refining Company Retirement Committee (“Retirement Committee”). (Pl. Ex. 4,
1980 Plan Document § 13.01; Pl. Ex. 6, 1987 Plan Document § 14.01; Pl. Ex. 7,
1995 Plan Document § 7.1; Pl. Ex. 8, 2002 Plan Document § 7.1). From May 3,
1988 to January 1, 2009, the Retirement Committee consisted of Lawrence
Loughlin, Myron Turfitt, and John Catsimatidis, with Loughlin, the Secretary of
the Retirement Committee, serving as the Plan’s day-to-day administrator. (Pl.
Ex. 9; Pl. Ex. 10, Loughlin Decl., ¶ 2; Pl. Ex. 4, 1980 Plan § 13.01; Pl. Ex. 6, 1987
Plan, § 14.01; Pl. Ex. 7, 1995 Plan § 7.1).
At the time of Cottillion’s retirement, the Plan was governed by a
document styled “United Refining Company Pension Plan for Salaried
Employees as Amended and Restated Effective June 30, 1980 (the “1980 Plan
Document”). (Pl. Ex. 4, 1980 Plan Document). Section 4.01 of the 1980 Plan
Document defined a participant’s “Normal Retirement Date” as “the first day of
the month coincident with, or next following his 65th birthday.”

Section 4.02

defined a participant’s “Early Retirement Date” as “the first day of the month
coincident with or following his 60th birthday and his completion of 10 years of
Vesting Service, provided that he informs the Committee at least three months
prior to such Early Retirement Date of his intention to retire early.”
Article VII of the 1980 Plan Document addressed termination from
employment.

Specifically, Section 7.01 provided that “[i]f a participant’s
3 

employment shall terminate prior to his Normal Retirement Date or an Early
Retirement Date, for any reason other than death, he shall be entitled to a
deferred vested Retirement Income if he is credited with at least ten (10) years of
Vesting Service at the time of his employment termination.” (Pl. Ex. 4, 1980 Plan
Document, § 7.01).

Section 7.02 provided that “[t]he amount and time of

commencement of a deferred vested Retirement Income to a participant who
satisfies the requirements of Section 7.01 shall be determined in accordance with
the provisions of Section 5.03, based on the Participant’s Benefit Service and
Average Compensation at the time of employment termination.”

The cross-

referenced section, Section 5.03, stated:
A Participant who retires on an Early Retirement Date may
elect to receive one of the following:
(a) His Accrued Retirement Income computed
as of his Early Retirement Date commencing
at the end of the month in which his Normal
Retirement Date would have occurred.
(b) A reduced amount of Retirement Income to
begin at the end of the month in which his
Early Retirement Date occurs, computed so
as to be a percentage of the benefit provided
for him under paragraph (a) of this Section
5.03, in accordance with the following table. . .
(Section 5.03).

The table accompanying Section 5.03 specified a “100.0%”

benefit for retirees who started collecting benefits zero, one, two or three years
prior to their Normal Retirement Date, a “93.3%” benefit for participants four
years prior to Normal Retirement Date, and an “86.7%” benefit for participants
4 

five years prior to Normal Retirement Date. (Id.) Consistent with this language,
letters sent from United Refining to terminated vested participants during this
time period informed them that any reduction in expected benefits prior to the
participant’s Normal Retirement Date “appl[y] to ages 60 and 61 only.”
Effective July 1, 1987, United Refining adopted “Amendment No. 5” which
amended the 1980 Plan Document by, inter alia, reducing the Vesting Service
requirement for a terminated vested participant to five years and amended
Section 5.03 to read: “A participant who retires on an Early Retirement Date will
receive his Accrued Retirement Income computed as of his Early Retirement
Date commencing at the end of the month in which his Early Retirement Date
occurs.” (Pl. Ex. 5, Amendment No. 5 to 1980 Plan Document, ¶ 4). Following
the adoption of Amendment No. 5, United Refining communicated with
terminated vested participants to inform them that they could elect to have their
full retirement benefit begin without reduction at any time after their Early
Retirement Date. (Pl. Ex. 24, 5/13/88 Letter to Frederick Hane). Consequently,
when Cottillion terminated his employment with United Refining in 1989, the
company sent him a letter informing him that he could elect to receive his full
retirement benefit - $573.70 – following his Early Retirement Date in October,
1995, “at age 60.” (Pl. Ex. 25, 8/7/89 Letter to Cottillion; Pl. Ex. 26, Cottillion
Application for Benefits). From November, 1995 through June, 2006, Cottillion
received his full monthly benefit each month without any actuarial reduction for
5 

early retirement. (Pl. Ex. 14, Cottillion Depo., pp. 117-118; Pl. Ex. 46, 6/15/06
Letter to Cottillion).
On December 28, 1994, United Refining adopted a restated plan
document, effective January 1, 1987, entitled “United Refining Company Pension
Plan for Salaried Employees as Amended and Restated Effective January 1,
1987” (the “1987 Plan Document”). (Pl. Ex. 6, 1987 Plan Document). The 1987
Plan Document provided that, “[i]f a Participant’s employment shall terminate
prior to his Normal Retirement Date for any reason other than death, he shall be
entitled to a deferred vested Retirement Income if he is credited with at least five
(5) years of Vesting Service at the time of his employment termination.” (Pl. Ex.
6, 1987 Plan Document, § 7.01).

Section 7.02 of the 1987 Plan Document

stated:
The amount of a deferred vested Retirement Income to a
Participant who satisfies the requirements of Section 7.01
shall be determined in accordance with Section 5.03, based
on the Participant’s Benefit Service and Average
Compensation at the time of employment termination. The
form and payment of a Participant’s deferred vested
retirement income shall be determined and made in
accordance with the provisions of Article VI as though such
terminated Participant had remained in the employment of
the Company until reaching his Normal Retirement Date.
(Pl. Ex. 6, 1987 Plan Document, § 7.02). Section 5.03 of the 1987 Plan
Document continued to provide that “A Participant who retires on an Early
Retirement Date will receive his Accrued Retirement Income computed as of his
6 

Early Retirement Date commencing at the end of the month in which his Early
Retirement Date occurs.”

Consequently, when Eldridge terminated her

employment with United Refining on December 6, 1996, she was informed that
she could elect to have her “vested benefits . . . paid monthly commencing on the
first of the month following [her] 59 1/2 birthday December 2009, without any
reduction for early retirement.” (Pl. Ex. 37, Eldridge Application for Benefits; Pl.
Ex. 38, 1/8/97 Letter to Eldridge).2
On January 30, 2002, United Refining resolved to amend and restate the
Plan in order to comply with the requirements of various recent legislative
enactments. (Pl. Ex. 39, Consent of Directors). An amended and restated plan
document, referred to as the “1995 Plan Document,” was executed on January
30, 2002. (Pl. Ex. 7, 1995 Plan Document). Following notification from the IRS
that several amendments to the Plan Document were required before a favorable
determination letter could be issued, another amended and restated plan
document, the “2002 Plan Document,” was adopted on March 18, 2003. (Pl. Ex.
8, 2002 Plan Document; Pl. Ex. 20, IRS Submission).
Both the 1995 and 2002 Plan Documents added the following language in
Section 5.4(c) requiring benefits that commence prior to a Normal Retirement
Date to be actuarially reduced:

2

Amendment No. 2 to the 1987 Plan, adopted in 1996, lowered the Plan’s Early Retirement Date from age 60 to

age 59 ½. (Pl. Ex. 6, 1987 Plan Document, Amendment No. 2).

7 

The Retirement Income of a terminated Participant
determined pursuant to this Section shall be payable
commencing as of his Normal Retirement Date, as set forth
in Article VI of the Plan, in an amount equal to the
nonforfeitable percentage of his Accrued Benefit.
A
terminated Participant may elect, by giving at least 120 days’
prior written notice to the Committee, to have his Retirement
Income commence prior to his Normal Retirement Date on
the first day of any month coincident with or following his age
fifty-nine and one-half birthday. In that event he shall be
entitled to receive a Retirement Income for life in an amount
equal to his Retirement Income on his Normal Retirement
Date, actuarially reduced to reflect the earlier starting date
thereof.

(Pl. Ex. 7, 1995 Plan Document, § 5.4(c); Pl. Ex. 8, 2002 Plan Document, §
5.4(c)). However, the 1995 Plan Document explicitly stated that “[e]mployees
who retire on a Retirement Date or who terminated employment with the
Company prior to January 1, 1995 shall have all of their benefits determined in
accordance with the applicable provisions of the Prior Plan . . .” (Pl. Ex. 7, 1995
Plan Document). Similarly, the 1987 Plan Document provided that “[i]n the event
an amendment, including any change in actuarial assumptions, causes a
Participant’s Accrued Benefit to decrease, either directly or indirectly, then such
Participant’s Accrued Benefit shall be computed without consideration of the
amendment or changed actuarial assumption.” (Pl. Ex. 6, 1987 Plan Document).
From 2002 through 2005, United Refining continued to pay unreduced benefits to
terminated vested participants. (Pl. Ex. 20, IRS Submission; Pl. Ex. 21, IRS
Submission).
8 

On August 17, 2005, United Refining sent a letter to Eldridge purporting
to “clarify when you can receive your pension from United Refining Company and
under what terms . . .”. (Pl. Ex. 43, 8/17/05 Eldridge Letter). That letter informed
her that: “If you elect to receive your pension benefit before age 65, the amount
you receive will be adjusted to reflect the earlier starting date.” (Pl. Ex. 43,
8/17/05 Eldridge Letter).

Substantively identical letters were sent to other

terminated vested participants who, like Eldridge, had accrued a vested benefit
but had not yet commenced benefit payments. (Pl. Ex. 44). The letters each
contained a chart outlining the actuarial factors by which each terminated vested
participants’ benefits would be reduced. (Id.) Attached to each letter was a copy
of Section 5.4 from the 2002 Plan Document. (Id.)
Shortly thereafter, on November 28, 2005, United Refining applied for a
compliance statement under the IRS’s Voluntary Correction Program (“VCP”).
(Pl. Ex. 20, IRS Submission). In its application, United Refining represented that
it was voluntarily entering the VCP “for the purpose of correcting plan operational
failures that have been discovered as a result of a review of the operation of the
Plan.” (Id.) United Refining described the purported operational failure to the
IRS as follows:
Under the terms of the Plan, a Participant is entitled to a
pension benefit beginning at his or her Normal Retirement
Date at age sixty-five years (see Plan sections 1.15 and 5.1).
A Participant who terminates his or her employment for any
reason other than death, prior to reaching his or her Normal
9 

Retirement Date or Early Retirement Date (at age 59- 1/2
years) and who has five (5) or more Years of Service shall be
entitled to a deferred vested pension benefit beginning at his
or her Normal Retirement Date (see Plan section 5.4). If the
Participant elects to begin payment of his or her pension
benefit on or after attaining age 59-1/2 years but prior to the
Normal Retirement Date, then the pension benefit will be
actuarially reduced for the earlier payment date (see Plan
Section 5.4(c), last sentence)
Beginning with Plan Year 1995 (one participant) and
continuing to the current year 2005, 16 Participants who
elected to receive their deferred vested benefit prior to
attaining their Normal Retirement Date were overpaid a
monthly pension benefit that should have been actuarially
reduced (as required by the Plan document) to reflect the
earlier payment date.
As a result, “excess amounts” were paid to terminated
vested participants. This error was discovered in the current
year by the Plan’s actuaries, Towers Perrin.

(Pl. Ex. 20, IRS Submission).

In support of its application, United Refining

referenced and attached sections of the 2002 Plan Document, including Section
5.4(c), which did not appear in previous Plan Documents.
Submission).

(Pl. Ex. 20, IRS

Based on these submissions, the IRS issued a compliance

statement on March 16, 2006, which authorized United Refining to recoup past
payments from, and reduce or halt future payments to, the sixteen plan
participants identified in the IRS submission, including Cottillion. (Pl. Ex. 21, IRS
Submission, Ex. C; Pl. Ex. 45, Compliance Statement).

10 

After receiving the March 16, 2006 Compliance Statement from the IRS,
United Refining sent a letter to those terminated vested participants who were
then receiving benefits payments from the Plan informing them that their
pensions had been incorrectly calculated. (Pl. Ex. 46, 6/15/06 Letter to Cottillion;
Pl. Ex. 48, Letters to Participants). Specifically, the letters advised participants
that “the Retirement Committee of the Plan [recently] discovered that the
calculation of your monthly pension benefit was incorrect and was in excess of
the amount permitted under the terms of the Plan.” (Pl. Ex. 46, 6/15/06 Letter to
Cottillion; Pl. Ex. 48, Letters to Participants). The letters further stated that:
The Plan document requires that all pension benefits paid to
terminated vested participants PRIOR to their Normal
Retirement Age of 65 years MUST be actuarially reduced to
the earlier payment date. As your monthly pension benefit
began before your 65th birthday, your monthly pension
benefit should have been reduced to reflect the earlier
payment date.
The Employee Retirement Income Security Act (“ERISA”)
requires the Retirement Committee to strictly follow the terms
of the Plan document in order for the Plan to maintain its
favorable qualification issued by the Internal Revenue
Service. As your current monthly pension benefit would be
reduced under the requirements of the Plan document, the
Plan Retirement Committee requested that the Internal
Revenue Service review your retirement benefit payments
and issue a Compliance Statement permitting correction to
your future monthly pension payments.
On March 16, 2006, the Internal Revenue Service issued
their Compliance Statement that will permit the Plan to
maintain its favorable Plan qualification provided the
Retirement Committee corrects your monthly pension benefit
11 

payments (see Attached Internal Revenue
Compliance Statement and Submission).

Service

(Pl. Ex. 46, 6/15/06 Letter to Cottillion; Pl. Ex. 48, Letters to Participants). Each
letter further advised the participant as to the new amount of his or her future
monthly benefits payments. Cottillion’s letter, for example, stated that:
Beginning on July 31, 2006 your monthly pension benefit
payment will stop and you will not receive any future
payments.
Additionally, in order to recover excess
payments, you should repay the Plan $14,475.55. This
amount will fully satisfy the amount owed to the Plan for past
overpayments and has been reduced to account for any
future payments you would have received if excess
payments were not paid to you.
(Pl. Ex. 46, 6/15/06 Letter to Cottillion). Each letter concluded by cautioning that
“[t]his determination is based on the Internal Revenue Service’s published
revenue procedures and Compliance Statement which the Plan Retirement
Committee must follow.”

(Pl. Ex. 46, 6/15/06 Letter to Cottillion; Pl. Ex. 48,

Letters to Participants).

II.

Summary Judgment Standard

Federal Rule of Civil Procedure 56(c)(2) provides that summary judgment
shall be granted if the Apleadings, the discovery and disclosure materials on file,
and any affidavits show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law.@ Rule 56(e) further
provides that when a motion for summary judgment is made and supported, Aan
12 

opposing party may not rely merely on allegations or denials in its own pleading;
rather, its response must B by affidavits or as otherwise provided in this rule B set
out specific facts showing a genuine issue for trial. If the opposing party does not
so respond, summary judgment should, if appropriate, be entered against that
party.@
A material fact is a fact whose resolution will affect the outcome of the
case under applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). The moving party has the initial burden of proving to the district court the
absence of evidence supporting the non-moving party's claims. Celotex Corp. v.
Catrett, 477 U.S. 317 (1986); Country Floors, Inc. v. Partnership Composed of
Gepner and Ford, 930 F.2d 1056, 1061 (3rd Cir. 1990).

Further, A[R]ule 56

enables a party contending that there is no genuine dispute as to a specific,
essential fact >to demand at least one sworn averment of that fact before the
lengthy process of litigation continues.=@ Schoch v. First Fidelity Bancorporation,
912 F.2d 654, 657 (3rd Cir. 1990) (quoting Lujan v. National Wildlife Federation,
497 U.S. 871 (1990)). The burden then shifts to the non-movant to come forward
with specific facts showing a genuine issue for trial. Matsushita Elec. Indus.
Company v. Zenith Radio Corp., 475 U.S. 574 (1986); Williams v. Borough of
West Chester, Pa., 891 F.2d 458, 460-461 (3rd Cir. 1989) (the non-movant must
present affirmative evidence - more than a scintilla but less than a

13 

preponderance - which supports each element of his claim to defeat a properly
presented motion for summary judgment).

III. Analysis

Although Plaintiffs raise multiple claims for relief in their Amended
Complaint, the heart of this action is Plaintiffs’ contention that United Refining
violated ERISA’s anti-cutback provisions by attempting to retroactively reduce the
amount of accrued early retirement benefits earned and/or paid to plan
participants under the 1980 and 1987 Plan Documents. Defendants contend that
the payment of unreduced benefits from 1988 through 2006 was the result of a
mistake made by the plan administrator which has now been properly corrected.
Although ERISA “neither mandates the creation of pension plans nor in
general dictates the benefits a plan must afford,” Bellas v. CBS, Inc., 221 F.3d
517, 522 (3rd Cir. 2000), ERISA does “seek to ensure that employees will not be
left emptyhanded once employers have guaranteed them certain benefits.”
Lockheed Corp. v. Spink, 517 U.S. 882, 887 (1996) (quoting Nachman Corp. v.
Pension Benefit Guaranty Corp., 446 U.S. 359, 375 (1980)). Indeed, “[t]here is
no doubt about the centrality of ERISA’s object of protecting employees’ justified
expectations of receiving the benefits their employers promise them.” Central
Laborers’ Pension Fund v. Heinz, 541 U.S. 739, 743 (2004).

A “crucial”

component of this objective is ERISA’s anti-cutback rule, which provides that
14 

“[t]he accrued benefit of a participant under a plan may not be decreased by an
amendment of the plan . . .”.

Heinz, 541 U.S. at 743-44 (quoting ERISA §

204(g), 29 U.S.C. § 1054(g)(1)). ERISA Section 204(g)(2) adds that “a plan
amendment which has the effect of . . . eliminating or reducing an early
retirement benefit . . . with respect to benefits attributable to service before the
amendment shall be treated as reducing accrued benefits.”

29 U.S.C. §

1054(g)(2). Thus, in order to state a claim for a violation of ERISA’s anti-cutback
rule, a plaintiff must show “(1) that a plan was amended and (2) that the
amendment decreased an accrued benefit.” Battoni v. IBEW Local Union No.
102 Employee Pension Plan, 594 F.3d 230, 233 (3rd Cir. 2010).
In the Third Circuit, “what constitutes an ‘amendment’ to a pension plan
has been construed broadly to protect pension benefits.” Battoni, 594 F.3d at
234 (citing Hein v. FDIC, 88 F.3d 210, 216) (3rd Cir. 1996). This construction
extends both to explicit amendments, such as a formal adoption of a new
provision, and to implicit amendments, such as when “[a]n erroneous
interpretation of a plan provision . . . results in the improper denial of benefits to a
plan participant.”

Hein, 88 F.3d at 216.

Thus, a pension committee’s

reinterpretation of a plan term to deny previously accrued benefits represents an
“amendment” of the plan to the same extent as a formal amendment. Id. at 21617 (“[I]f McNeil improperly denied Hein unreduced early retirement benefits,
McNeil’s action could be construed as a Plan amendment, and ERISA § 204(g)
15 

would apply.”); Hammond v. Alcoa, Inc., 2008 WL 5135671, *8 (W.D. Pa. 2008)
(“[A]n amendment can take the form of a change in the actual text of the plan
itself, or an erroneous interpretation of a plan provision, resulting in the improper
denial of benefits.”); Zebrowski v. Evonik Degussa Corp. Admin. Committee,
2012 WL 3962670, *12 (E.D. Pa. 2012) (holding that a “Committee’s
interpretation had the same effect as a formal amendment” for purposes of an
anti-cutback claim); Pieseski v. Northrop Grumman Corp., 2002 WL 97749, *6-7
(citing Hein and holding that the defendants’ misinterpretation of a plan provision
was “sufficient to constitute an ‘amendment’ of the Northrop Plan for purposes of
a Section 204(g) violation of ERISA . . .”); Hunter v. Caliber System, Inc., 220
F.3d 702, 712 (6th Cir. 2000) (accord).
As previously noted, Cottillion’s employment terminated in 1989 under the
1980 Plan Document, and Eldridge’s employment terminated in 1996, under the
1987 Plan Document. Plaintiffs’ anti-cutback claim is premised on the contention
that United Refining retroactively applied Section 5.4(c) of the 1995 and 2002
Plan Documents to reduce Plaintiffs’ vested benefits which accrued under the
1980 and 1987 Plan Documents. Defendants counter that Section 5.4(c) did not
alter or change the benefits provided under the 1980 and 1987 Plan Documents,
but merely stated in explicit terms what already should have been clear under
each of the previous documents, to wit, that Plaintiffs’ early retirement benefits
must be actuarially reduced.

Consequently, the company contends that the
16 

Retirement Committee’s decision to retroactively reduce pension benefits which
had previously been paid at unreduced amounts was not occasioned by the
addition of Section 5.4(c), but rather, was an overdue correction of a longstanding mistake. See, e.g., Defendants’ Memorandum in Support of Summary
Judgment, pp. 13-15.
We first observe, consistent with Hein, Hammond, Zebrowski and
Pieseski, discussed above, that whether by virtue of the addition of Section 5.4(c)
to the 2002 Plan Document or in light of the Retirement Committee’s
reinterpretation of the 1980 and 1987 Plan Documents to preclude unreduced
early retirement benefits, there has clearly been a “plan amendment” within the
meaning of the anti-cutback rule. Having reached that conclusion, our inquiry
shifts to whether the benefit claimed by the plan participants and reduced by the
amendment was an “accrued benefit.”
This analysis is governed by several well-established principles. First,
ERISA defines an “accrued benefit” as “the individual’s accrued benefit
determined under the plan . . .”. 29 U.S.C. § 1002(23)(A). In other words, a
determination as to an entitlement to benefits must be “based on a permissible
reading of the terms of the Plan” before it can be considered an “accrued benefit”
within the meaning of ERISA. Redd v. Brotherhood of the Maintenance of Way
Employes Division Pension Plan, 2010 WL 1286653, *9 (E.D. Mich. 2010) (“It
surely is not enough . . . to merely claim that a pension benefit was ‘determined
17 

under the plan’ . . . without any effort to show that this benefit determination
rested upon some tenable reading of the controlling plan documents.”); Hein, 88
F.3d 210, 217 (observing that “ERISA § 204(g) can protect an entitlement to
benefits, but it cannot create an entitlement to benefits when no entitlement
exists under the terms of the Plan.”).
Secondly, it is well-settled that “the proper standard of review” of a plan
administrator’s interpretation of plan language “depends on the language of the
instrument.” Conkright v. Frommert, 559 U.S. 506, 130 S.Ct. 1640, 1646 (2010)
(citing Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 111-12 (1989)). If
the plan documents “give the trustee ‘power to construe disputed or doubtful
terms, . . . the trustee’s interpretation will not be disturbed if reasonable.’” Id. at
1646 (quoting Firestone, 489 U.S. at 111). Consequently, a plan administrator’s
interpretation of a plan “is to be reviewed 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” in which
case it is subject to “arbitrary and capricious” review. Id. (quoting Firestone, 489
U.S. at 115); see also Hunter, 220 F.3d at 709-12.
Finally, the parties agree that the calculation and payment of monthly
benefits by a plan administrator represents an interpretation of the relevant Plan
language.

See Transcript, Oral Hearing, 11/16/12, p.9; Morales v. Reliance

Standard Ins. Co., 2006 WL 2709376, *3 (E.D. Pa. 2006) (“When Reliance
18 

calculated the long term disability monthly benefit it was interpreting relevant
portions of the plan.”).
Here, each of the Plan Documents at issue explicitly invested the
Retirement Committee with the power to “[c]onstrue and interpret the Plan,
decide all questions of eligibility and determine the amount, time and manner of
payment of any benefits hereunder . . .”.
Document, § 13.10(a)(4).

See, e.g., Pl. Ex. 4, 1980 Plan

From approximately 1995 through 2002, the

Retirement Committee and the plan administrator consistently interpreted the
relevant language of the 1980 and 1987 Plan Documents to provide unreduced
early retirement benefits to terminated vested participants.

In resolving the

question as to whether the provision of unreduced early retirement benefits to
terminated vested participants represented an “accrued benefit” for purposes of
Plaintiffs’ anti-cutback claim, we find the analytical approach utilized by the court
in Redd to be persuasive and sound.
In Redd, the defendant pension plan had previously included “final
vacation pay” in calculating the pension benefits of plan participants. From 2001
through roughly 2007, the company paid benefits to plan participants in
accordance with this interpretation of the Plan. On June 20, 2007, however,
participants began receiving letters informing them that “errors had been made in
the calculation of their pension benefits, and that the Plan was required under
federal law to recoup any past overpayments as a result of these errors.” Id. at
19 

*4.

Consequently, the Plan advised participants that “their monthly pension

payments were being reduced to reflect the purportedly correct calculation of
their benefits under the Plan, and that additional amounts were being withheld
from their monthly payments to recoup the alleged overpayments they had
received in the past.” Id. The participants filed suit alleging that this “correction”
violated ERISA’s anti-cutback rules. Id.
The court began its analysis as to whether the benefits at issue were
“accrued benefits” by observing:
It surely is not enough, after all, to merely claim that pension
benefit was “determined under the plan,” 29 U.S.C. §
1002(23)(A), without any effort to show that this benefit
determination rested upon some tenable reading of the
controlling plan documents. . . . [A] wholly mistaken benefit
determination presumably would not produce an “accrued
benefit determined under the plan,” 29 U.S.C. § 1002(23)(A),
and thus might not be entitled to protection under ERISA’s
anti-cutback provision. [Courts have] recognized precisely
this principle, rejecting anti-cutback claims where the plaintiff
plan participants could not establish an entitlement to
benefits under the pertinent pre-retirement plan provisions to
a level or type of pension benefits that subsequently was
reduced or eliminated.
Id. at *9 (collecting cases). The court further explained:
Consequently, to secure an award of summary judgment in
their favor on their anti-cutback claim, Plaintiffs must
establish that the benefit amounts they were receiving prior
to the Defendant Brotherhood’s June 2007 recalculation and
reduction of those benefits were based on a permissible
reading of the terms of the Plan. Under the Sixth Circuit’s
decision in Hunter, 220 F.3d at 709-12, the Brotherhood’s
interpretation of the Plan at the time of Plaintiffs’ retirement
20 

(from 2001 until 2006) is subject to “arbitrary and capricious”
review, provided that the Plan confers upon the Brotherhood
the discretion to construe its terms. The Plan clearly does
so[.] . . .
In order to determine, then, whether Plaintiffs’ initial
retirement benefits, before their recalculation and reduction,
were “accrued benefits” that were permissibly “determined
under the plan,” 29 U.S.C. § 1002(23)(A), the Court must
consider whether the interpretation of the Plan that
generated these initial benefit awards passes muster under
the “arbitrary and capricious” standard of review. This is the
“least demanding form of judicial review,” under which this
Court must uphold a denial of benefits if it is “rational in light
of the plan’s provisions.” “When it is possible to offer a
reasoned explanation, based on the evidence, for a particular
outcome, that outcome is not arbitrary or capricious.”
Id. at *10 (internal citations omitted).
Applying the aforementioned principles, the court rejected the defendant’s
contention that their prior, long-standing interpretation of the plan to include final
vacation pay as “compensation” was based on a “loophole” that was never “the
intent of the Plan.” Id.

Rather, after reviewing the plain language of the plan

and “the Brotherhood’s construction of other Plan terms at the time”, the court
concluded that the prior interpretation of the plan “readily passe[d] muster under
the ‘arbitrary and capricious’ standard of review.” Id. at **11-12. Consequently,
the court awarded summary judgment in favor of the plaintiffs on their anticutback claim. Id. at *12.
A similar argument was addressed in DiCioccio v. Duquesne Light Co.,
911 F.Supp. 880 (W.D. Pa. 1995). Under the facts in DiCioccio, prior to 1990,
21 

the defendant company had consistently included income from the plaintiffs’
exercise of stock options when calculating plaintiffs’ benefits under the
company’s retirement plan. In June of 1990, however, the plan administrator for
the company’s retirement plan issued a memorandum opining that this income
did not qualify as “compensation” under the plan and would no longer be used in
future benefits calculations.

Id. at 887, 890-91.

Plaintiffs argued that this

reinterpretation of the plan reduced their accrued benefits in violation of ERISA’s
anti-cutback rule, with Defendants countering that the plan administrator’s
decision “constituted an exercise of appropriate discretionary authority under the
Plans and simply was intended to correct a mistake in practice which had
inadvertently developed.” Id. at 895. The district court framed its analysis by
noting:
ERISA defines an accrued benefit in the case of a defined
benefit plan 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)(A). ERISA further provides that “the accrued
benefit of a participant under a plan may not be decreased
by an amendment of the plan, other than an amendment
described in section 1082(c)(8) or 1441 of this Title.” 29
U.S.C. § 1054(g)(1). It follows a fortiorari that an accrued
benefit may not be retroactively decreased through the
purported exercise of an administrator's discretion.
Id. at 897. After reviewing the plan documents, the court determined that the
plan administrator’s prior interpretation of the plan to include proceeds from the
22 

exercise of stock options as “income” was based on a reasonable construction of
the plan and, as such, had produced an accrued benefit. Id. at 897. Accordingly,
the court concluded that the plan administrator’s attempt to reinterpret the plan to
exclude that income ran afoul of the anti-cutback rule and awarded summary
judgment in favor of the plaintiffs. Id.
Based on Redd and DiCioccio, we conclude that it is the Plaintiffs’ burden
to establish that the interpretation of the Plan Documents which had resulted in
the provision of unreduced early retirement benefits for terminated vested
participants was tenable and rational such that it passes muster under the
arbitrary and capricious standard.3

Here, Plaintiffs contend that the Plan

Administrator’s interpretation of the 1980 and 1987 Plan Documents was correct
or, at the very least, was not arbitrary and capricious.

In support of their

contention, Plaintiffs primarily rely upon the cross-reference to Section 5.03
contained in Section 7.02 of each of the applicable Plan Documents. As noted
above, Section 7.02 of the 1980 Plan Document provided that “[t]he amount and
time of commencement of a deferred vested Retirement Income to a participant
who satisfies the requirements of Section 7.01 shall be determined in accordance

3

Contrary to Defendants’ assertions, the focus of our inquiry in the anti-cutback context is not whether the amendment

itself was an appropriate exercise of discretion, but whether the amendment has the effect of reducing or eliminating an accrued
benefit. Consequently, Defendants’ argument that the Court should apply a deferential standard to the Plan Administrator’s “reinterpretation” of the Plan Documents is simply inapposite. If the prior, long-standing interpretation by the Plan Administrator was
sufficiently reasonable to produce an accrued benefit, then the anti-cutback rule prevents the subsequent amendment of the Plan
Documents to eliminate that benefit.

23 

with the provisions of Section 5.03, based on the Participant’s Benefit Service
and Average Compensation at the time of employment termination.” (Pl. Ex. 4,
1980 Plan Document, § 7.02). Section 7.02 of the 1987 Plan Document similarly
stated that “[t]he amount of a deferred vested Retirement Income to a Participant
who satisfies the requirements of Section 7.01 shall be determined in accordance
with Section 5.03, based on the Participant’s Benefit Service and Average
Compensation at the time of employment termination . . . as though such
terminated Participant had remained in the employment of the Company until
reaching his Normal Retirement Date.” (Pl. Ex. 6, 1987 Plan Document, § 7.02).
Following the adoption of Amendment No. 5 to the 1980 Plan Document, Section
5.03 of both the 1980 and 1987 Plan Documents stated that “A Participant who
retires on an Early Retirement Date will receive his Accrued Retirement Income
computed as of his Early Retirement Date commencing at the end of the month
in which his Early Retirement Date occurs.”

Plaintiffs contend that the Plan

Administrator reasonably interpreted this language to mean that the amount of a
terminated vested participant’s deferred vested retirement income would be the
unreduced amount specified in Section 5.03, precisely as the plain language of
those provisions would seem to suggest.
Defendants’ respond that the Plan Administrator’s original interpretation
of the 1980 and 1987 Plan Documents was the result of a mistake and its
decision to rectify it must be accorded deference. Consequently, Defendants
24 

contend, for purposes of Plaintiffs’ anti-cutback claim, that Plaintiffs’ entitlement
to unreduced early retirement benefits never accrued.

Defendants dismiss

Section 7.02’s explicit cross-reference to Section 5.03 as “a vestigial reference”
that “makes no sense,” see Transcript, Oral Hearing, 11/16/12, at 42, and offer
the following interpretation of the Plan Documents as pertaining to the calculation
of benefits for terminated vested participants:
Section 7.02’s cross-reference to § 5.03, which referred to
the computation of “Accrued Retirement Income” as of the
date at the end of the first month in which a participant could
commence pay status, confined payment of a full DVT
benefit to age 65. The term “Accrued Retirement Income”
used in Section 5.03 also appeared in Section 5.02 of the
Plan, which directed that the amount of a Participant’s
“Accrued Retirement Income” would be computed, “as of any
particular date,” in accordance with the formula for Normal
Retirement in Section 5.01 and “based upon his Benefit
Service and Average Compensation determined on that
date.” Reading the three sections together with Section 7.02,
the Accrued Retirement Income of a DVT was to be
computed under Section 5.01 only at the normal retirement
age of 65 as of the last day of the first month in which a DVT
could commence pay status by means of the formula in
Section 5.01.
(Defendants’ Memorandum in Support of Summary Judgment, p. 11).
We find that the Defendants’ construction of the Plan Documents
unreasonably minimizes the explicit reference to Section 5.03 contained in
Section 7.02 in favor of a series of implicit cross-references, the cumulative effect
of which would render Section 7.02 meaningless. Moreover, to the extent that
the language of the Plan Documents is ambiguous or susceptible to multiple
25 

interpretations,4

including

that

offered

by

the

Defendants,

the

Plan

Administrator’s long-standing interpretation of those provisions (which provided
for unreduced benefits) is entitled to deference, as previously discussed. Reed,
2010 WL 1286653, *10; Hunter, 220 F.3d at 709-12.
In sum, after carefully reviewing the language of the 1980 and 1987 Plan
Documents, we conclude that the construction urged by the Plaintiffs is, at a
minimum, tenable and rational so as to withstand scrutiny under the arbitrary and
capricious standard.

Consequently, Defendants’ attempt to reduce Plaintiffs’

accrued retirement benefits runs afoul of ERISA’s anti-cutback rules.
Before summary judgment can be entered in favor of Plaintiffs on their
anti-cutback claim, however, two additional hurdles must be cleared.
Specifically, Defendants contend that Plaintiffs’ claims are barred because they
failed to exhaust their administrative remedies and because their claims are
untimely. Each of these arguments will be addressed in turn.
As an initial matter, we conclude that Plaintiffs’ anti-cutback claim is
timely.

The parties agree that the appropriate limitations period for an anti-

cutback claim is Pennsylvania’s six-year “catch-all” limitations period as set forth
in 42 Pa.C.S.A. § 5527. See, e.g., Romero v. Allstate Corp., 404 F.3d 212, 220
(3rd Cir. 2005). Such a claim accrues at “such time as the employee knew or

4

At oral argument, defense counsel conceded that the 1980 and 1987 Plan Documents “were not models of clarity.”

(Transcript, Oral Hearing, 11/16/12, p. 11).

26 

should have known that the amendment has brought about a clear repudiation of
certain rights that the employee believed he or she had under the plan.” Id. at
223.
Defendants contend that Plaintiffs’ anti-cutback claim accrued, at the
latest, on January 30, 2002, when United Refining adopted the 1995 Plan
Document which first contained Section 5.4(c).

Defendants suggest that

Plaintiffs should have known as of that date that their benefits were going to be
actuarially reduced. However, in Romero, the Third Circuit rejected a rule which
would necessarily “tie the date of accrual to the date of amendment.” Romero,
404 F.3d at 223. As explained by the Court:
A rule that unwaveringly ties the date of accrual to the date of
amendment would have the undesirable effect of requiring
plan participants and beneficiaries “likely unfamiliar with the
intricacies of pension plan formulas and the technical
requirements of ERISA, to become watchdogs over potential
[p]lan errors and abuses.” It would also tend to preclude
claims by those who commenced employment after the
limitations period applicable to the particular ERISA claim
has elapsed. Additionally, it would impose an unfair duty of
clairvoyance on employees, such as those in this case, who
allege that an amendment’s detrimental effect on them was
triggered not at the time of its adoption, but rather at some
later time by a subsequent event. We eschew such a rule in
light of the underlying purposes of ERISA and its disclosure
requirements.
Id. at 224 (citing DeVito v. Pension Plan of Local 819 I.B.T. Pension Fund, 975
F.Supp. 258, 265 (S.D.N.Y. 1997); In re Unisys Corp. Retiree Med. Ben. ERISA
Litigation, 58 F.3d 896, 901 (3rd Cir.1995)).
27 

In the instant case, no “clear repudiation” of Plaintiffs’ accrued right to
benefits occurred until Plaintiffs received letters from Loughlin informing them
that their vested benefits would be actuarially reduced from that point forward.
For Eldridge, that date was August 17, 2005; for Cottillion, June 15, 2006. In
light of the communications that Cottillion and Eldridge had previously received
from United Refining consistently informing them of their eligibility for an
unreduced early retirement benefit (and, in the case of Cottillion, the unreduced
payments that he had been receiving for several years), it would likewise impose
“an unfair duty of clairvoyance” on Plaintiffs to require them to have predicted
that Defendants would someday attempt to retroactively apply Section 5.4(c) to
reduce those benefits.

See Romero, 404 F.3d at 223-24.

Consequently,

Plaintiffs’ anti-cutback claim, filed on June 12, 2009, is timely.
Finally, with respect to exhaustion, it is undisputed that neither Eldridge
nor Cottillion invoked or exhausted Plan appellate procedures following their
reductions in benefits.

Plaintiffs nonetheless contend that the exhaustion

requirement should be excused in this case on the grounds of futility. “A plaintiff
is excused from exhausting administrative procedures under ERISA if it would be
futile to do so.” See Harrow, 279 F.3d at 250 (citing Berger v. Edgewater Steel
Co., 911 F.2d 911, 916 (3rd Cir. 1990)).

In determining whether to excuse

exhaustion on futility grounds, courts consider several factors including: “(1)
whether plaintiff diligently pursued administrative relief; (2) whether plaintiff acted
28 

reasonably in seeking immediate judicial review under the circumstances; (3)
existence of a fixed policy denying benefits; (4) failure of the insurance company
to comply with its own internal administrative procedures; and (5) testimony of
plan administrators that any administrative appeal was futile.” Harrow, 279 F.3d
at 250.
Here, Plaintiffs primarily rely upon the third factor, contending that United
Refining responded to each inquiry from a terminated vested participant
concerning the reduction in benefits by informing them that the matter was out of
their hands and that nothing could be done. For example, the notification letters
sent by Loughlin indicated that the proposed reduction in benefits was required
by a third party, the IRS, to whom no appeal or administrative exhaustion was
available.

See Pl. Ex. 46, 6/15/06 Letter to Cottillion; Pl. Ex. 48, Letters to

Participants (“[T]he Internal Revenue Service . . . will permit the Plan to maintain
its favorable Plan qualification provided the Retirement Committee corrects your
monthly pension benefit payments.”).

Letters sent in response to prompt

inquiries from numerous affected plan participants similarly indicated that
Defendants had reached a fixed and intractable position with respect to the
benefits in question. See, e.g., Pl. Ex. 62, 11/14/06 Letter from Loughlin (“The
error and correction was submitted to the IRS to remove any decision authority
from the Plan Administrator and the Company.”); Pl. Ex. 67, 9/13/06 Letter from
Loughlin (“This correction was mandated by the Internal Revenue Service and
29 

not by the Plan Administrator or the Company.”). By portraying the reduction in
benefits as a fait accompli driven by the IRS, Defendants represented that their
own hands were tied and that no grounds for reconsideration were available.
See, e.g., Berger, 911 F.2d at 916-17 (excusing exhaustion where evidence
showed “that the company had adopted a policy of denying all applications” for
benefits); Falcone v. Teamsters Health and Welfare Fund, 489 F.Supp.2d 490,
496 (E.D. Pa. 2007) (excusing exhaustion where evidence indicated that the
defendant had taken a “clear and unwavering” stance with regards to the denial
of benefits); Olay v. Hearne, 2007 WL 1520094, *12-13 (W.D. Pa. 2007)
(excusing exhaustion as the result of a fixed policy).
For the reasons set forth above, we conclude that Plaintiff has
demonstrated a “clear and positive showing of futility.” Harrow, 279 F.3d at 249
(quoting Brown v. Cont’l Baking Co., 891 F.Supp. 238, 241 (E.D. Pa. 1995)).
In conclusion, we find that summary judgment in favor of Plaintiff on the
anti-cutback claim presented in Count IV of the Amended Complaint is
appropriate. At oral argument, Plaintiffs’ counsel acknowledged that Plaintiffs’
anti-cutback claim provides a full and complete remedy for the violations alleged
in the Amended Complaint:
The Court:

Isn’t this really an anti-cutback case?

Ms. Brett:

Yes.

30 

The Court:

Don’t you get, if you’re right, I’m not
suggesting you are, but just to try to get the
underbrush cleared out here, you get
everything that you want under an anticutback theory, don’t you?

Ms. Brett:

Yes.

(Transcript, Oral Hearing, 11/16/12, p. 55). Consequently, it is unnecessary to
address the alternate theories of recovery advanced in the Amended Complaint
at this time.5 See, e.g., Redd, 2010 WL 1286653, *14 (“[I]n light of the Court’s
conclusion that Plaintiffs are entitled to summary judgment in their favor on their
anti-cutback claim, the Court need not address the other theories of recovery
advanced in Plaintiff’s complaint.”).

5

Similarly, in light of their successful advancement of their anti-cutback claim, Plaintiffs’ Motion to Strike Expert Reports

and Testimony is denied as moot.

31 

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
JOHN COTTILLION, et al., on behalf of
)
themselves and all others similarly situated, )
)
Plaintiffs,
)
v.
)
)
UNITED REFINING COMPANY, et al.,
)
)
Defendants.
)
)
)

C.A. No. 09-140 Erie
District Judge McLaughlin

ORDER
AND NOW, this 8th day of April, 2013, for the reasons set forth in the
accompanying MEMORANDOM OPINION,
IT IS HEREBY ORDERED that Plaintiffs’ Motion for Summary Judgment
is GRANTED IN PART with respect to the anti-cutback claim set forth in Count IV
of the Second Amended Complaint, and is otherwise DENIED WITHOUT
PREJUDICE.

Defendants’ Motion for Summary Judgment is DENIED WITH

PREJUDICE as to Count IV and is otherwise DENIED WITHOUT PREJUDICE.
JUDGMENT is accordingly entered in favor of Plaintiffs as to Count IV of
the Second Amended Complaint.

/s/ Sean J. McLaughlin
United States District Judge

cm:

All parties of record. ___

32