Ruth HABERERN, v. KAUPP VASCULAR SURGEONS LTD. DEFINED BENEFIT PENSION PLAN; Lehigh Valley Vascular Surgeons Ltd. Retirement Plan; Lehigh Valley Vascular Surgeons Ltd.; Kenneth M. McDonald, M.D., Trustee, Kaupp Vascular Surgeons Ltd. Defined Benefit Pension Plan and Trust Agreement, Lehigh Valley Vascular Surgeons Ltd. Retirement Plan, Lehigh Valley Vascular Surgeons Ltd. and Kenneth M. McDonald, Trustee, Appellants.
No. 93-1892.
United States Court of Appeals, Third Circuit.
Argued March 28, 1994. Decided May 25, 1994.
Rehearing and Rehearing In Banc Denied June 20, 1994.
24 F.3d 1491
Susan Katz Hoffman (argued), Richard S. Schlegel, Andrew R. Rogoff, Thomas J. Momjian, Pepper, Hamilton & Scheetz, Philadelphia, PA, for appellants.
Steven S. Zaleznick, Cathy Ventrell-Monsees, Mary Ellen Signorille, Warren Gorlick, American Ass‘n of Retired Persons, Washington, DC, for amicus curiae American Ass‘n of Retired Persons.
Before: GREENBERG, COWEN, and NYGAARD, Circuit Judges.
OPINION OF THE COURT
GREENBERG, Circuit Judge.
I. OVERVIEW
The four appellants, Lehigh Valley Vascular Surgeons, Ltd. (“Lehigh Valley“), two employee pension plans established by Lehigh Valley, Kaupp Vascular Surgeons Ltd. Defined Benefit Pension Plan and Trust Agreement and Lehigh Valley Vascular Surgeons Ltd. Retirement Plan, a defined contribution plan, and the plans’ trustee, Kenneth M. McDonald, M.D., appeal from a final judgment entered by the district court in favor of the appellee, Ruth Haberern, a retired employee of Lehigh Valley.1 The district court entered the judgment in accordance with its opinion reported as Haberern v. Kaupp Vascular Benefits Plan and Trust Agreement, 822 F.Supp. 247 (E.D.Pa.1993). The total judgment was for $614,165.99, but the court broke it down into segments.
The appellants make five challenges to the district court‘s opinion and judgment. They contend that the district court erred when it concluded that Lehigh Valley acted as an ERISA fiduciary when it reduced Haberern‘s salary by eliminating her compensation based on Lehigh Valley‘s gross receipts and it contemporaneously created the defined benefit plan. They also contend that the district court erred in concluding that Lehigh Valley breached its fiduciary duty in paying a portion of Haberern‘s compensation as a bonus and in making assurances to Haberern regarding her benefits under the defined benefit plan, without explaining that the designation of part of her compensation as a bonus would adversely affect her benefits. While these assurances were inconsistent with the terms of the plan, the appellants contend that the court nevertheless erred, as the terms were in the plan and also were described in the summary plan description which the appellants provided to Haberern. In the appellants’ view, these disclosures relieved them of any duty to explain the plan further. Alternatively, the appellants argue that recovery on this claim is barred because damages for a breach of fiduciary duty cannot be awarded to a plan beneficiary under section
The appellants also challenge the district court‘s conclusion that Lehigh Valley violated section
We agree with the appellants on all issues they raise. In particular, we find that the reduction in Haberern‘s salary was a management decision for which they cannot be liable under ERISA. Additionally, we conclude that Haberern cannot recover under section
We make one further preliminary observation. In our review of this case, we have noted a comment in the appellants’ brief that the district court barely distinguished among the appellants in reaching its conclusions. Furthermore, we recognize that the district court may have entered judgment on certain claims against particular appellants not liable on those claims. Nevertheless, in view of our conclusion that we must reverse on all issues
II. BACKGROUND
The historical facts of this case are not in dispute and, as the district court discussed them at length in its opinion, we need not repeat them in detail. We will, however, set forth matters of particular significance to this opinion. Haberern began working for Kaupp Vascular Surgeons Ltd. on July 1, 1974, as a secretary-bookkeeper. Kaupp‘s principals, Harry A. Kaupp, M.D., and McDonald, changed its corporate name to Lehigh Valley Vascular Surgeons Ltd. in 1984, and as a matter of convenience, we refer to Kaupp Vascular Surgeons and Lehigh Valley Vascular Surgeons as “Lehigh Valley.” Haberern worked full-time for Lehigh Valley until her retirement on January 2, 1985, and from January 3, 1985 to December 16, 1986, she continued working part-time. During her employment, she never had a written employment contract.
In 1974, Haberern and Kaupp were Lehigh Valley‘s only employees. Haberern‘s initial compensation included an annual salary of $11,500, a percentage of Lehigh Valley‘s gross receipts, status as a beneficiary of the defined contribution pension plan, and health insurance. At that time, the defined contribution plan was known as the Kaupp Vascular Surgeons Ltd. Employee Pension Plan, but Lehigh Valley later changed the plan‘s name to Lehigh Valley Vascular Surgeons Ltd. Retirement Plan. Originally Kaupp and his wife were the trustees of the defined contribution plan, but McDonald later became the trustee. Lehigh Valley paid Haberern‘s salary bi-weekly, and it paid her percentage of gross receipts at the end of each fiscal year.
In 1976, McDonald joined Lehigh Valley and, effective September 1, 1979, McDonald and Kaupp established the defined benefit plan. When they established the defined benefit plan, McDonald and Kaupp calculated the amount necessary to fund it, and concluded that based on Haberern‘s salary of $19,000, Lehigh Valley would have to contribute approximately $10,000 annually on her behalf. They regarded this contribution as excessive, so in 1980 they eliminated the portion of Haberern‘s compensation calculated on Lehigh Valley‘s gross receipts. This change reduced Haberern‘s overall compensation for the fiscal year ending June 30, 1979, from $18,358 to $14,428, and required Lehigh Valley to contribute $5,500 to the plan on her behalf.
The appellants did not tell Haberern that the defined benefit plan required Lehigh Valley to make the contributions to the plan on her behalf. Though the appellants provided Haberern with a copy of the summary plan description, the pages regarding contributions to the plan and the provisions for insurance, as well as the table of contents were omitted, and the appellants did not provide her with a complete copy of the summary plan description until 1987. Beginning in 1980, Lehigh Valley designated part of Haberern‘s compensation as “salary” and part as “bonus,” and it gave the same designations to Kaupp‘s and McDonald‘s compensation. This allocation was significant because benefits under the defined benefit plan were predicated on salary excluding any bonus. Accordingly, this allocation reduced the benefits which otherwise would have been due to Haberern, and it also reduced Lehigh Valley‘s contributions to the plan. Haberern, 822 F.Supp. at 254.
The defined benefit plan provided for life insurance equivalent to 30.58 times the participant‘s monthly retirement benefit. On October 21, 1980, Lehigh Valley amended the plan to eliminate life insurance for employees over age 56, a category which included only Haberern. However, the life insurance for the other beneficiaries was tripled. The appellants claim that they made these life insurance changes to save money, but the district court rejected this claim.
In 1984, Haberern informed the appellants that she intended to retire. Although she did retire on January 2, 1985, the plans did not pay her pension benefits immediately. Instead, on July 18, 1986, the appellants requested that Haberern sign releases as a
Haberern filed the complaint in this action on March 3, 1988, pursuant to
We have jurisdiction pursuant to
III. DISCUSSION
A. Elimination of Haberern‘s Gross Receipts Percentage and the Funding of the Defined Benefit Plan
The appellants first challenge the district court‘s finding that Lehigh Valley breached its fiduciary duty under ERISA when it eliminated the gross receipts percentage component of Haberern‘s compensation. This alleged breach focused on the appellants’ establishment in 1979 of the defined benefit plan which provided benefits calculated on certain factors such as age, compensation, and years of employment. Prior to the creation of the defined benefit plan, Lehigh Valley paid Haberern her salary bi-weekly and her percentage of its gross receipts annually. Haberern claims that ERISA compelled the appellants to include her in the plan, and asserts that to include her, but to keep down its contributions to the plan, the appellants eliminated Haberern‘s percentage of gross receipts. The district court concluded:
In 1980 Lehigh Valley eliminated the portion of [Haberern‘s] compensation that was calculated on the basis of Lehigh Valley‘s gross receipts thus reducing [Haberern‘s] compensation from $18,358 for the fiscal year ending June 30, 1979 to $14,429 for the fiscal year ending August 31, 1980. (Lehigh Valley had changed its fiscal year from July to June to September to August.) Based upon a salary of $19,000, Lehigh Valley would have to contribute approximately $10,000 on behalf of [Haberern] into the newly formed Defined Benefit Plan. The doctors felt this was too much. Therefore, they reduced her salary to $14,400, thus requiring Lehigh Valley to contribute only $5,500 to the Defined Benefit Plan. By virtue of the elimination of her receivables percentage, [Haberern] was taking her salary and funding her Defined Benefit Plan.
Haberern, 822 F.Supp. at 254 (citations omitted) (emphasis added).
The district court also found that the appellants did not inform Haberern that Lehigh Valley was required to make the contri-
Based on these facts, the district court held that the appellants breached their fiduciary duty. In computing damages, the court concluded that the appellants were liable not only for the lost compensation predicated on the 1980 salary reduction, but also for the reduction of benefits under the defined benefit plan, which, but for the wrongdoing, would have been calculated on a higher salary, and the reduction of benefits under the defined contribution plan, which, but for the wrongdoing, would have reflected contributions based on a higher salary. Id. at 257.
However, the court also concluded that the reduction in salary did not violate ERISA‘s anti-discrimination provisions.
In this case, the reduction in [Haberern‘s] salary ... [was] consistent with the treatment of all other plan participants, including the physician plan participants. The payroll records furnished by defendants established that the salaries of all plan participants were substantially reduced in 1980.
App. at 136 (citations omitted).
The appellants raise two challenges to the district court‘s conclusion that in eliminating Haberern‘s percentage of gross receipts and creating the defined benefit plan they violated their fiduciary duties under ERISA. First, they argue that they took these steps as employers, and not as fiduciaries, and thus they did not owe a fiduciary duty to Haberern. Second, they argue that Haberern‘s status as an at-will employee allowed them to change her compensation at any time.3 Accordingly, they contend that by continuing to work after 1980 she accepted the modified terms of her employment. The district court responded to these points by indicating that “simply because [Haberern‘s] employment was at will does not entitle Lehigh Valley to violate ERISA.” 822 F.Supp. at 260.
The appellants rely on section
Haberern‘s reliance on ERISA preemption is misguided. She cites Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111
The United States Supreme Court granted certiorari and reversed. The Court noted that Congress expressly included a broad preemption provision in ERISA, section
Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.
The Court noted “[a] law ‘relates to’ an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan.” Ingersoll-Rand, 498 U.S. at 139, 111 S.Ct. at 483 (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983)).
In the Texas case, the plaintiff was required to prove that the principal reason for his termination was to interfere with a plan. This required him to plead, and the court to find, that there was an ERISA plan and that the employer had a pension-defeating motive in discharging him. Because this inquiry was directed to the existence of a plan, the “judicially created cause of action ‘relate[s] to’ an ERISA plan.” Ingersoll-Rand, 498 U.S. at 140, 111 S.Ct. at 483. Thus, it was preempted.
The Court noted, however, that ERISA‘s preemptive force has limits. Thus, in Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987), the Court had held that ERISA did not preempt a Maine law which required the payment of severance benefits because the state law did not require the establishment or maintenance of an ongoing plan. Ingersoll-Rand, 498 U.S. at 139, 111 S.Ct. at 483. In the Texas case, this limitation did not apply because the case did not involve “a generally applicable statute that makes no reference to, or indeed functions irrespective of, the existence of an ERISA plan.” Id.
The limitation on the preemptive force of ERISA recognized in Fort Halifax and Ingersoll-Rand is applicable in this case. In Pennsylvania, absent a statutory or contractual provision to the contrary, employment relationships presumptively are at-will. Schoch v. First Fidelity Bancorporation, 912 F.2d 654, 658 (3d Cir.1990). This presumption is unrelated to the existence vel non of any pension plan. Of course, it follows that if an employer may terminate an employee without cause, it has the right to decrease her compensation, as this constitutes a more modest change in the employment relationship. Clearly, this right to decrease compensation “functions irrespective of ... the existence of ERISA,” and therefore is beyond the scope of ERISA preemption. Ingersoll-Rand, 498 U.S. at 139, 111 S.Ct. at 483.
Accordingly, inasmuch as ERISA does not preempt the appellants’ state-law management rights to determine Haberern‘s salary, the critical question is whether they were acting in their management capacity when they reduced Haberern‘s salary by eliminating the portion of her compensation based on gross receipts and contemporaneously created the defined benefit plan. If they were, then they breached no duty under ERISA for, as they contend, ERISA does not impose fiduciary duties on employers acting in their management capacity.
Nazay v. Miller, 949 F.2d 1323, is instructive. In Nazay, a retired employee brought suit against his former employer under ERISA to recover the balance due for his
The certification process enabled the administrator to consider whether hospitalization was necessary and to consider alternatives to hospitalization. Additionally, it allowed the patient and hospital to ascertain how much of the proposed hospitalization would be reimbursed. The plan included a penalty amounting to 30% of the otherwise covered expenses if the employee failed to obtain preadmission certification. Id. at 1326.
The district court held that the penalty provision was arbitrary and capricious. Id. at 1325. Further, the court held it would not enforce any provision in a benefit plan that denied benefits, unless the employer could establish that the participant‘s failure to comply with the provision prejudiced the plan. Id.
We reversed, concluding an employer is free to develop an employee benefit plan as it wishes because when it does so it makes a corporate management decision, unrestricted by ERISA‘s fiduciary duties. Id. at 1328-31. In discussing the nature of an employer‘s fiduciary duties under ERISA, we noted “[i]n the words of the Supreme Court, ERISA was ‘designed to promote the interests of employees and their beneficiaries in employee benefit plans.’ However, as we have observed on several occasions, ERISA‘s concern is with the administration of benefit plans and not with the precise design of the plan.” Id. at 1329 (emphasis in original) (citations omitted). Therefore, if an employer also acts as a plan administrator, “ERISA permits [it] to wear two hats, and ... [it] assume[s] fiduciary status only when and to the extent that [it] function[s] in [its] capacity as plan administrator[], not when [it] conduct[s] business that is not regulated by ERISA.” Id. (citations and internal quotation marks omitted). Although we recognized that the determination of whether an employer acts as a business manager or plan administrator involves a sensitive analysis, we concluded that an employer‘s inclusion of a penalty provision in a benefits plan is a management decision. Id.
Earlier, in Trenton v. Scott Paper Co., 832 F.2d 806 (3d Cir.1987), cert. denied, 485 U.S. 1022, 108 S.Ct. 1576, 99 L.Ed.2d 891 (1988), we endorsed the design/administration distinction. In that case, Scott Paper Company had created a Salaried Employee Retirement Plan (“SERP“) as well as a Scott Highly Accelerated Retirement Program (“SHARP“). Id. Scott created SHARP to provide an incentive to salaried employees at certain of its overstaffed facilities to retire early. Id. But some of the salaried employees eligible for retirement under SERP were not eligible for the more favorable treatment under SHARP. The plaintiffs, a class of employees covered by SERP but not by SHARP, brought suit alleging that their exclusion violated ERISA. The district court granted the defendants’ motion for summary judgment and we affirmed.
The plaintiffs argued that the amending of SERP to include SHARP was an ERISA administration decision. After considering who had the authority to design and implement SHARP, we disagreed. In reaching our conclusion, we indicated that “[i]f SHARP had been a part of SERP when SERP was implemented, SHARP would clearly be part of the design of the plan.” Id. at 809 (emphasis in original). We then stated that, “[w]e think it clear in this action that Scott, not the Retirement Board, had the sole authority to determine who would be eligible for SHARP. The design of the SHARP plan was purely a corporate management decision.” Id. Accord Bell v. Allstate Ins. Co., 822 F.Supp. 1222 (D.S.C.1992) (Allstate‘s decision not to include commissions from state auto reinsurance mechanism was design decision outside the scope of ERISA).
Haberern also argues that the appellants did not inform her that her participation in the plan was voluntary. But this point is immaterial. While we will assume without deciding that Haberern could have refused to participate in the defined benefits plan, and we further will assume without deciding, as she contends, that the plan could not have become effective without her participation, it does not follow that the appellants could not have reduced her salary without regard for whether she participated in the defined benefit plan. Quite to the contrary, under Pennsylvania law they had the right to decrease her compensation whether or not they had established a benefits plan. Therefore, Haberern‘s only remedy if she had been unwilling to continue her employment for the compensation offered was to resign. Of course, she did not do so. Thus, it is clear that Haberern should not have recovered a judgment against the appellants by reason of their elimination of her gross receipts percentage and their method of the funding of the defined benefit plan.4
B. The Designation of Haberern‘s Compensation as Salary and Bonus
The district court imposed substantial liability on the appellants due to Lehigh Valley‘s division of Haberern‘s compensation into salary and bonus. It found that Haberern‘s salary throughout the period during which the defined benefits plan was in effect, September 1, 1979 to August 31, 1984, remained at $14,428, and that the appellants paid her bonuses during that time. Lehigh Valley first divided her compensation into salary and bonus in 1980, but it did this for Kaupp and McDonald as well. Haberern, 822 F.Supp. at 254. The division was significant because pension benefits were based on salary but not bonuses. Id. But on a pretrial motion for summary judgment, the district court determined that this designation was not discriminatory in violation of
Further, all plan participants took a portion of their compensation as ‘bonus.’ Indeed, the bonuses paid to physician plan participants were a greater portion of their total compensation than the bonuses paid to plaintiff.
App. at 137 (citations omitted).
Furthermore, the district court acknowledged that an employer may define compensation for purposes of calculation of pension benefits to include certain items and to exclude others. Haberern, 822 F.Supp. at 261. However, if an employer amends a plan to alter the definition of compensation, it must provide adequate notice to the beneficiaries. See
Nonetheless, the district court effectively imposed a notice requirement, concluding that:
when Lehigh Valley established the Plan, they assured [Haberern] that she would receive a pension benefit equal to her salary upon retirement. Because Defendants Lehigh Valley and McDonald failed to inform [Haberern] that characterizing a portion of her compensation as a bonus would reduce significantly her pension benefits, they breached their fiduciary duties under ERISA.
Haberern, 822 F.Supp. at 261 (emphasis added). Based on its conclusion that the appellants breached their fiduciary duties, the district court ultimately awarded damages under section
Haberern supports the district court‘s conclusions by relying on a line of cases for the proposition that fiduciaries breach their duties of loyalty and care if they mislead plan participants or misrepresent the terms or administration of a plan. See Berlin v. Michigan Bell Tel. Co., 858 F.2d 1154, 1163 (6th Cir.1988); Rosen v. Hotel & Restaurant Employees & Bartenders Union, 637 F.2d 592, 599-600 (3d Cir.1981), cert. denied, 454 U.S. 898, 102 S.Ct. 398, 70 L.Ed.2d 213 (1981); Eddy v. Colonial Life Ins. Co., 919 F.2d 747, 750 (D.C.Cir.1990). The appellants respond that these cases are inapplicable because the district court never made an explicit finding of misrepresentation, and thus they argue that Haberern‘s only possible cause of action under ERISA is promissory estoppel. Reply Brief at 8 n. 8. (citing Smith v. Hartford Ins. Group, 6 F.3d 131, 141 (3d Cir.1993)). We disagree with the appellants’ contention that the only cause of action upon which Haberern could recover is promissory estoppel. We note that in Smith, we cited Fischer v. Philadelphia Elect. Co., 994 F.2d 130, 133-34 (3d Cir.), cert. denied, 510 U.S. 1020, 114 S.Ct. 622, 126 L.Ed.2d 586 (1993), in which we held an employer can be liable under ERISA in its fiduciary capacity both on breach of fiduciary duty and equitable estoppel theories for affirmative material misrepresentations. See Smith, 6 F.3d at 141 n. 13.
However, we need not remand the matter to the district court for clarification because we agree with the appellants that Haberern may not recover damages for a breach of fiduciary duty under section
Section 502(a) of ERISA provides in relevant part that a civil action may be brought:
(1) by a participant or beneficiary—
(B) 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;
(2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 1109 of this title;
(3) by a participant, beneficiary ... to obtain other appropriate equitable relief ...
Section 409(a) of ERISA establishes liability for a fiduciary. The section provides:
Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each
such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary. A fiduciary may also be removed for a violation of section 1111 of this title.
In McMahon v. McDowell, 794 F.2d 100 (3d Cir.), cert. denied, 479 U.S. 971, 107 S.Ct. 473, 93 L.Ed.2d 417 (1986), we interpreted section 409(a) in the context of section 502(a)(1)(B). In McMahon, the plaintiffs brought suit under section 502(a)(1)(B) and section 502(a)(2) to recover damages individually from plan fiduciaries for their failure to collect delinquent pension plan contributions, which failure the plaintiffs alleged was a breach of fiduciary duty. McMahon, 794 F.2d at 108.5 We found the cause of action inappropriate under section 502(a)(1)(B), but allowed the suit to proceed under section 502(a)(2) so that the plaintiffs could recover damages “... for the benefit of the plan....” Id. at 109.
With respect to the cause of action under section 502(a)(1)(B), we noted that the plaintiffs characterized the claim as one brought to “recover benefits due to [them] under the terms of [their] plan, to enforce [their] rights under the terms of the plan, or to clarify [their] rights to future benefits under the terms of the plan.” 794 F.2d at 109 (quoting section
Additionally, we noted that in Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 140-42, 105 S.Ct. 3085, 3089-90, 87 L.Ed.2d 96 (1985), the Supreme Court held that section 409 of ERISA does not authorize a private right of action for compensatory relief. McMahon, 794 F.2d at 109. Noting the conflict between section 409, which establishes liability for an ERISA fiduciary but does not authorize a private right of action for compensatory damages, and section 502(a)(1)(B), which authorizes a private right of action for a beneficiary to enforce her own rights, we concluded that the plaintiffs could not proceed under section 502(a)(1)(B) in a suit to recover damages for a breach of fiduciary duty. Id.
This analysis applies here. The district court concluded that the appellants breached a fiduciary duty by making assurances to Haberern and then failing to inform her that those assurances were incorrect. Haberern, 822 F.Supp. at 261, 267. Although in this case the wrongdoing affected Haberern more directly than the wrongdoing affected the plaintiffs in McMahon, we are unpersuaded that we should depart from McMahon‘s holding that section 502(a)(1)(B) is unavailable in actions for breach of fiduciary duty.6
We also point out that insofar as we can ascertain the record does not support a find-
Similarly, Haberern does not explain what damages she suffered by reason of appellants’ alleged misrepresentation in not explaining the significance of the division of her compensation into salary and bonus. Brief at 28-30. Rather, she contends that the “bonus’ designation reduced [her] pension benefit.” That observation, though undoubtedly correct, does not explain how Haberern suffered damages from the misrepresentation as distinguished from the design of the plan.
C. The Elimination of Haberern‘s Life Insurance Benefit and the Simultaneous Increase of the Doctors’ Life Insurance Benefit
The district court found that the appellants’ elimination of life insurance benefits in the defined benefit plan for beneficiaries over age 56, a change which affected only Haberern, and the simultaneous tripling of the face amount of the life insurance policies for Kaupp and McDonald, constituted a violation of section 510 of ERISA. The district court reached this conclusion after finding that the appellants’ stated reason for the changes, that they wished to reduce costs, was “beyond belief” in light of the increase in coverage for the doctors. Haberern, 822 F.Supp. at 262.
The appellants argue that section 510 does not apply because, while it prohibits discrimination against a plan participant for the purpose of interfering with the attainment of plan rights, it does not prohibit plan amendments which affect only one person. We agree. Section 510 of ERISA provides:
It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan ... or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan.
We have stated that Congress enacted section 510 primarily to prevent “unscrupulous
McGath v. Auto-Body North Shore, Inc., 7 F.3d 665 (7th Cir.1993), is helpful. In McGath, the employer hired the plaintiff, McGath, in July 1983. At that time it maintained an ERISA-qualified pension plan for its eligible employees. One of the requirements to qualify for the plan was the completion of one year of service. After completing one year of service, an employee would be admitted into the plan on the next entry date, either October 1 or April 1.
After McGath had completed one year of service, but before the next entry date into the plan, the employer became concerned that it would not survive financially subsequent to McGath‘s entry into the plan. To solve this problem, on September 30, 1984, the employer amended the plan to require three years of completed service. McGath continued to work for the employer. Two years later, on September 30, 1986, when McGath was one day short of becoming eligible under the plan, the employer amended it to limit eligibility to those eligible on September 30, 1986.
When McGath retired three years later, he unsuccessfully claimed benefits under the original plan. McGath filed suit alleging that the defendants had interfered with his attainment of pension benefits by deliberately discriminating against him in violation of ERISA section 510,
The court of appeals affirmed. It noted that it had previously determined that:
the focus of § 510 is not on amendments to the plan itself. Rather we held that “[i]t is clear from the text of the statute ... that § 510 was designed to protect the employment relationship against actions designed to interfere with, or discriminate against, the attainment of a pension right.... Simply put, § 510 was designed to protect the employment relationship which gives rise to an individual‘s pension rights.... This means that a fundamental prerequisite to a § 510 action is an allegation that the employer-employee relationship, and not merely the pension plan, was changed in some discriminatory or wrongful way.”
McGath, 7 F.3d at 668 (quoting Deeming v. American Standard, Inc., 905 F.2d 1124, 1127 (7th Cir.1990) (emphasis in original)). The court then concluded McGath did not have a cognizable section 510 claim. The court noted that McGath also alleged that the employer discriminated against him by bending the eligibility requirements for others. The court rejected the argument that there was a genuine issue of triable fact as to whether such discrimination took place, concluding:
We need not address, however, this nettlesome issue because, even if Mr. McGath were able to show such disparate treatment, we do not believe that § 510 provides him any relief. Because the employer, as the settlor of the plan, had the right to change the plan‘s terms, Mr. McGath cannot claim that the alleged discriminatory injury flows from the plan amendments.... ERISA § 510 affords protection from discrimination that interferes
with the attainment of any right to which such participant may become entitled under the plan. Mr. McGath does not have a right to treatment that is contrary to the terms of the plan, even if those terms are breached for others.
McGath, 7 F.3d at 670 (emphasis in original).
Other courts have reached similar results. See West v. Butler, 621 F.2d 240, 245-46 (6th Cir.1980) (“we conclude that discrimination, to violate § 510, must affect the individual‘s employment relationship in some substantial way.“); Deeming v. American Standard, Inc., 905 F.2d at 1128 (“[s]ection 510 of ERISA is simply not the appropriate vehicle for redressing the unilateral elimination of severance benefits accomplished independently of employee termination or harassment.“); Owens v. Storehouse, Inc., 984 F.2d 394, 398 (11th Cir.1993) (“[i]t is insufficient merely to allege discrimination in the apportionment of benefits under the terms of the plan“); McGann v. H & H Music, 946 F.2d 401, 408 (5th Cir.1991), cert. denied, 506 U.S. 981, 113 S.Ct. 482, 121 L.Ed.2d 387 (1992) (section 510 does not apply to a plan limit on AIDS-related claims for all employees even if AIDS benefits singled out for discriminatory purpose). But see Newton v. Van Otterloo, 756 F.Supp. 1121, 1136 (N.D.Ind.1991) (“[r]etaliatory curtailment of benefits under an ERISA plan may trigger § 1140“); Vogel v. Independence Fed. Sav. Bank, 728 F.Supp. 1210, 1226 (D.Md.1990).
Our analysis compels us to hold that the appellants’ action in adopting the life insurance amendment is not actionable under section 510. If we held otherwise, our ruling would contradict the plain language of that section. Additionally, we would overlook the structure of ERISA which sets forth separate provisions for the protection of the employment relationship in section 510 and the protection of beneficiaries from discriminatory modifications of pension plans in section 204(g),
D. The July 28, 1987 Letter
Lehigh Valley asserts that the district court erred in penalizing it for its alleged failure to provide Haberern with an explanation and accompanying calculations to demonstrate how it computed her benefits under the defined benefit plan. Section 105(a) of ERISA imposes an obligation on a plan administrator to:
furnish to any plan participant or beneficiary who so requests in writing, a statement indicating, on the basis of the latest available information (1) the total benefits accrued, and (2) the nonforfeitable pension benefits, if any, which have accrued, or the earliest date on which benefits will become nonforfeitable.
Any administrator ... who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish to a participant or beneficiary ... by mailing the material requested to the last known address of the requesting participant or beneficiary within 30 days after such request may in the court‘s discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure or refusal....
The district court, relying on a letter Haberern‘s attorney sent to the appellants’ attorney, applied the foregoing two sections, found a violation, and awarded damages in the amount of $100 a day for a total of $191,300.
We set forth the two-page letter in full:
Our firm has been retained by Mrs. Ruth Haberern. She is a Plan Participant in both the Defined Benefit Pension Plan
and the Defined Contribution Plan. We understand your firm is counsel to Dr. McDonald, Trustee of these two plans.
Several aspects of the administration of the two Plans, as pertinent to our client, are troublesome. For example, Mrs. Haberern officially retired on January 2, 1985. Yet, more than thirty (30) months transpired before Mrs. Haberern received a $42,986.24 check. This July 9 check, according to Dr. McDonald‘s accompanying letter, represented the ‘total vested benefit due to you under the Kaupp Vascular Surgeons Defined Benefit Pension Plan‘. However, there was no explanation, accompanying calculations, to support the amount of this July 9, 1987, check.
By letter dated April 27, 1987, Mrs. Haberern was advised by Dr. McDonald that the Defined Benefit Pension Plan was terminated effective August 31, 1984; yet, it took nearly three years for a disbursement to be made to Mrs. Haberern, a Plan Participant.
Mrs. Haberern has yet to receive her defined contribution pension plan check! She did receive annual reports concerning the plans.
Mrs. Haberern does not have, nor has she ever received, the full text of the defined contribution pension plan.
There are additional questions with regard to the administration of the two pension plans. We need to discuss these questions with you and the Administrator of the two plans.
I shall call your office on Friday, July 31, to secure a mutually convenient date for the requested meeting.
App. at 405-06 (emphasis in original). The district court concluded this letter was a request for an explanation of the calculation of Haberern‘s benefits which was not then provided to Haberern.8
We start our discussion on this issue by pointing out that statutory penalty provisions are construed strictly. See Ivan Allen Co. v. United States, 422 U.S. 617, 626, 95 S.Ct. 2501, 2506, 45 L.Ed.2d 435 (1975) (tax provision aimed at accumulated taxable income strictly construed). As might be expected, courts have taken this approach in applying penalty provisions of ERISA. Tracey v. Heublein, Inc., 772 F.Supp. 726 (D.Conn.1991) (requirements that request requirement of section 105(a) be in writing may not be waived); Chambers v. Kaleidoscope, Inc. Profit Sharing Plan, 650 F.Supp. 359, 370 (N.D.Ga.1986) (corporation cannot be liable when request for information was never sent to it).
When the foregoing strict construction precept is recognized and the specific language of section 105(a) and 502(c),
We find support for our conclusion in Fisher v. Metropolitan Life Ins. Co., 895 F.2d 1073 (5th Cir.1990). In Fisher, the plaintiff had sent a handwritten scribbled note at the bottom of a social security award to the insurance company designated to administer the plan. The note requested, “a copy of the policies covering my contract for salary continuation.” Id. at 1077. The court concluded this note was insufficient to constitute a request for plan documents. Id. See also Chas. Kurz & Co. v. United States, 698 F.Supp. 268 (Ct. Int‘l Trade 1988) (petition for remission of excise duties was not a “request” for retroactive application of amended tariff statute). Further, the court in Fisher noted that the defendant responded to the scribbled note by suggesting that a copy of the policies “covering your contract” could be obtained from the plaintiff‘s previous employer. Fisher, 895 F.2d at 1077. This response led the court to believe that the defendant‘s understanding of the note was consistent with it not being a request for plan documents. Consequently, the court concluded it could not find the district court had abused its discretion in refusing to award penalties under section
IV. CONCLUSION
In view of our aforesaid discussion, we will reverse the judgment of May 13, 1993, in all respects, except that we will not reverse the district court‘s conclusion that the appellants breached their fiduciary duty by requiring Haberern to sign a release to obtain her benefits under the defined contribution plan. We will remand the matter to the district court for entry of a judgment in conformity with this opinion.
Leonard N. IZZARELLI, on Behalf of Themselves and All 1986 Participants in the El Paso Products Company Stock Bonus Plan who are similarly situated, et al., Plaintiffs-Appellees Cross-Appellants,
v.
REXENE PRODUCTS COMPANY, A Delaware Corporation, Rexene Corporation, a Delaware Corporation and El Paso Products Company Stock Bonus Plan, Defendants-Appellants Cross-Appellees,
and
Texas Commerce Bank-Odessa, Defendant-Cross Appellee.
Leonard N. IZZARELLI, etc., et al., Plaintiffs-Appellees,
v.
REXENE PRODUCTS COMPANY, a Delaware Corporation, et al., Defendants,
Texas Commerce Bank-Odessa, Defendant-Appellant.
Nos. 92-8458, 92-8694.
United States Court of Appeals, Fifth Circuit.
June 22, 1994.