Judy Hunter v. Berkshire Hathaway, Inc., et
829 F.3d 357
5th Cir.2016Background
- Berkshire Hathaway acquired Justin Industries (and subsidiary Acme) in 2000; the merger agreement §5.7 addressed treatment of Acme’s employee benefit plans (Pension Plan = defined benefit; 401(k) = defined contribution).
- §5.7 generally required honoring Company Plans, allowed amendment "in accordance with their terms and applicable law," and included provisos that Berkshire "will not cause the Company [Acme] to" (i) reduce benefits for 12 months, (ii) reduce defined‑benefit accruals, or (iii) reduce defined‑contribution employer contributions.
- Between 2010–2013 Acme’s 401(k) employer match was mistakenly reduced from 50% to 25%; Berkshire allegedly instructed no correction and pushed for plan changes in 2012, 2013, and 2014, including implementation of a Pension Plan freeze and limits on matching.
- Acme’s plan committees (plan administrators) advised the company that §5.7 barred Berkshire‑caused reductions; Berkshire allegedly presented ultimatums forcing Acme to amend the plans in 2014 (soft/hard freeze and match decisions).
- Plaintiffs (plan participants and committee members) sued Acme and Berkshire under ERISA (declaratory, injunctive, breach of fiduciary duty, aiding/abetting participation, and alternative breach of contract against Berkshire). District court dismissed all claims with prejudice; plaintiffs appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Acme violated the plans/merger agreement by amending plans and not restoring 401(k) match | §5.7 amended the plans to maintain accruals and 50% match; Acme’s amendments violated that duty | §5.7 expressly permits Acme to amend plans "in accordance with their terms and applicable law," so Acme could lawfully amend | Dismissal affirmed — Acme had authority to amend; plaintiffs failed to plead a plausible inconsistency with plan/§5.7 |
| Whether Acme breached ERISA fiduciary duties by adopting the 2014 amendment | Plaintiffs: violating plan terms is a breach of fiduciary duty | Defendants: Amending plan is a settlor act (non‑fiduciary); no breach because Acme acted within amendment rights | Dismissal affirmed — Acme acted as settlor; no plausible fiduciary‑duty claim pleaded |
| Whether Berkshire can be enjoined under §5.7 ("will not cause" clause) from causing reductions | Plaintiffs: §5.7 limits Berkshire from causing reductions; they seek enforcement of that contractual restriction (not necessarily lifetime vesting) | Berkshire/district court: §5.7 is silent on duration; cannot be read to vest lifetime benefits; clause should be limited to a reasonable time (and 14 years was reasonable as alleged) | Reversed in part — plaintiffs plausibly pleaded a contractual, extra‑ERISA restriction on Berkshire (claims against Berkshire may proceed, except the unappealed breach‑of‑contract count and derivative fiduciary participation claim) |
| Whether Berkshire is liable for participating in Acme’s alleged fiduciary breaches | Plaintiffs: Berkshire knowingly participated in breaches and is liable | Defendants: No underlying fiduciary breach by Acme; derivative claim fails | Affirmed — derivative participation claim dismissed because Acme’s fiduciary‑duty claims failed |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for 12(b)(6) pleadings)
- Lockheed Corp. v. Spink, 517 U.S. 882 (plan sponsor amendments are settlor functions, not fiduciary acts)
- Halliburton Co. Benefits Comm. v. Graves, 463 F.3d 360 (5th Cir. 2006) (enforcing merger‑agreement limits on future plan amendments)
- Spacek v. Mar. Ass’n, 134 F.3d 283 (5th Cir. 1998) (extra‑ERISA contractual obligations enforceable if clear and express)
- M & G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015) (clarifying vesting inference principles in employer plan documents)
- Habets v. Waste Mgmt., Inc., 363 F.3d 378 (5th Cir. 2004) (contract interpretation — unambiguous language given ordinary meaning)