Evans v. Sterling Chemicals, Inc.
2011 U.S. App. LEXIS 20746
| 5th Cir. | 2011Background
- Acquisition of Cytec’s assets by Sterling under the December 23, 1996 APA, which included Section 5.05(f) guaranteeing postretirement benefits with Cytec consent for reductions and Cytec consent for premium increases.
- Plaintiffs, Acquired Employee retirees, joined Sterling’s retiree medical and prescription drug plans but Sterling’s formal plan documents and SPDs did not expressly reference Section 5.05(f).
- Sterling later filed for Chapter 11 in 2001; the APA was rejected in bankruptcy while the Sterling Plan was expressly assumed under the Plan of Reorganization and Confirmation Order.
- Post-bankruptcy, Sterling raised Plaintiffs’ premiums in 2003 and again in 2004–2005 without Cytec’s prior written consent, despite Section 5.05(f)’s consent requirement.
- District court held Section 5.05(f) did not amend the Sterling Plan and that the premium increases were permissible; on appeal, the Fifth Circuit held it was a valid plan amendment and was assumed in bankruptcy, reversing and remanding.
- The court relied on Halliburton precedent that a corporate agreement can amend an ERISA plan if the amendment formalities are satisfied, and that a plan amendment can survive bankruptcy when incorporated into the plan.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Section 5.05(f) is a valid ERISA plan amendment | Plaintiffs argue Section 5.05(f) did amend the Sterling Plan; Halliburton supports this. | Sterling argues Section 5.05(f) was not a plan amendment and only a contract term. | Yes, Section 5.05(f) is a valid ERISA plan amendment. |
| Whether Section 5.05(f) was assumed or rejected in bankruptcy | Section 5.05(f) was rejected with the APA. | Section 5.05(f) was assumed under the Plan of Reorganization. | It was assumed, not rejected. |
| Whether Section 5.05(f) remained enforceable post-bankruptcy despite APA rejection | Rejection of the APA terminated related obligations including Section 5.05(f). | Section 5.05(f) stayed as part of the Sterling Plan independent of APA. | Section 5.05(f) remained a valid and enforceable plan amendment post-bankruptcy. |
Key Cases Cited
- Halliburton Co. Benefits Comm. v. Graves, 463 F.3d 360 (5th Cir. 2006) (ERISA plan amendment via merger agreement controls when formalities are met)
- Halliburton Co. Benefits Comm. v. Graves (Halliburton II), 479 F.3d 360 (5th Cir. 2007) (limits of intention language and extension to enforceability of amendments)
- Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73 (Supreme Court 1995) (delegation and authority to amend plans under ERISA)
- Masonite Corp., 122 F.3d 228 (5th Cir. 1997) (cites CBA retiree provisions as contractual; not controlling for ERISA amendment)