Filed: Jun. 11, 1996
Latest Update: Mar. 02, 2020
Summary: IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT _ No. 95-30704 _ N. MARK ABRAHAM, RICHARD E. ELLIS, WILLIAM O. FLOWERS, ROBERT GIURINTANO AND BILLY J. WALKER, Plaintiffs-Appellants, VERSUS EXXON CORPORATION d/b/a EXXON COMPANY USA, BENEFIT PLAN OF EXXON CORPORATION AND PARTICIPATING AFFILIATES, Defendants-Appellees. _ Appeal from the United States District Court for the Eastern District of Louisiana _ June 10, 1996 Before POLITZ, Chief Judge, HIGGINBOTHAM and SMITH, Circuit Judges. J
Summary: IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT _ No. 95-30704 _ N. MARK ABRAHAM, RICHARD E. ELLIS, WILLIAM O. FLOWERS, ROBERT GIURINTANO AND BILLY J. WALKER, Plaintiffs-Appellants, VERSUS EXXON CORPORATION d/b/a EXXON COMPANY USA, BENEFIT PLAN OF EXXON CORPORATION AND PARTICIPATING AFFILIATES, Defendants-Appellees. _ Appeal from the United States District Court for the Eastern District of Louisiana _ June 10, 1996 Before POLITZ, Chief Judge, HIGGINBOTHAM and SMITH, Circuit Judges. JE..
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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
No. 95-30704
_______________
N. MARK ABRAHAM, RICHARD E. ELLIS,
WILLIAM O. FLOWERS, ROBERT GIURINTANO
AND BILLY J. WALKER,
Plaintiffs-Appellants,
VERSUS
EXXON CORPORATION d/b/a EXXON COMPANY USA,
BENEFIT PLAN OF EXXON CORPORATION
AND PARTICIPATING AFFILIATES,
Defendants-Appellees.
_________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
_________________________
June 10, 1996
Before POLITZ, Chief Judge, HIGGINBOTHAM and SMITH, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
Plaintiffs N. Mark Abraham and others (collectively "Abraham")
appeal a summary judgment in favor of Exxon Corporation and the
Benefit Plan of Exxon Corporation (collectively "Exxon") on their
ERISA1 claims. We affirm in part and vacate and remand in part.
1
Employee Retirement and Income Security Act of 1974.
I.
The plaintiffs are "leased" or "special agreement" employees
of Exxon who work at Exxon facilities. They are similar to
ordinary Exxon employees in many ways: They report to Exxon
supervisors, have Exxon business cards, and play on the Exxon
softball team. Exxon is not their direct employer, however.
Instead, the plaintiffs are nominally employed by unaffiliated
firms that lease their services to Exxon.
Exxon maintains an ERISA plan ("the plan" or "the Exxon
plan"), for the benefit of its own employees, that specifically
excludes leased and special agreement employees such as the
plaintiffs. The plan vests "discretionary and final authority" to
determine eligibility in the plan administrator, currently J.J.
Rouse.
The plaintiffs applied to Rouse for benefits and certain plan
information. He determined that the plan excluded the plaintiffs
from participation, denied them benefits, and failed to provide the
requested information. The plaintiffs filed this ERISA suit,
seeking both a determination that they were entitled to benefits
from the plan and statutory penalties for Rouse's failure to
provide them the requested information.
Exxon moved for summary judgment. It conceded for purposes of
summary judgment that the plaintiffs were "common law employees" of
Exxon under the criteria set forth in Nationwide Mut. Ins. Co. v.
Darden, 503 U.S. 318 (1992), but maintained that they were not
entitled to relief. The district court agreed and granted summary
2
judgment.
II.
As a threshold matter, we must determine whether Abraham has
standing.2 Only a "participant or beneficiary" of an ERISA plan
has standing to bring a civil action under ERISA. 29 U.S.C.
§ 1132(a)(1). Abraham claims only to be a "participant" in the
Exxon plan, so we need not consider whether he is a "beneficiary."
Whether an employee has standing as a "participant" depends,
not on whether he is actually entitled to benefits, but on whether
he has a colorable claim that he will prevail in a suit for
benefits. ERISA itself defines a "participant" as an employee "who
is or may become eligible to receive a benefit of any type from an
employee benefit plan." Id. at § 1002(7). Those who "may become
eligible" to receive benefits include anyone who "ha[s] a colorable
claim that . . . he or she will prevail in a suit for benefits."
Firestone Tire & Rubber Co. v. Bruch,
489 U.S. 101, 117-18 (1989).
Thus, Abraham may have ERISA standing even if he is ultimately not
entitled to receive benefits under the plan. See Kennedy v.
Connecticut Gen. Life Ins. Co.,
924 F.2d 698 (7th Cir. 1991) ("[A]s
Firestone held, jurisdiction depends on an arguable claim, not on
success.").
We believe that Abraham did have standing because, ex ante, he
2
It is not evident whether the district court meant to address the
standing issue. The court did determine that Abraham lacked a colorable claim
to benefits, which should have been enough to deprive him of standing. It did
not, however, dismiss his claim for lack of standing, but granted summary
judgment instead. We therefore treat the judgment as one on the merits.
3
had a colorable claim that he would prevail in this suit.
Firestone made standing turn on a claimant’s likelihood of success
in a lawsuit.3 Abraham had a colorable chance of success because
his argument rested squarely on Renda v. Adam Meldrum & Anderson
Co., 806 F. Supp. 1071 (W.D.N.Y. 1992). No other court has
addressed the issues raised by Renda; Abraham could argue that the
only federal court to address his argument had bought it. And
Renda is not bizarre or unreasoned. Although we ultimately reject
Renda, we do so only after devoting a considerable amount of time
to explaining why it is wrong. We recognize that a claim is not
colorable merely because a federal court has approved it, but we
believe Abraham’s reliance on Renda in this instance gave him a
colorable claim that he would prevail in this lawsuit. That is
enough for ERISA standing. Cf. Panaras v. Liquid Carbonic Indus.
Corp.,
74 F.3d 786, 790 (7th Cir. 1996) ("The requirement of a
colorable claim is not a stringent one.").
III.
Abraham argues that the district court erred by refusing to
apply structural defect analysis to the plan. Structural defect
analysis originated in the Ninth Circuit's Taft-Hartley Act
3
Firestone does not distinguish between a plaintiff who claims he has been
wrongly excluded under the terms of the plan as written and a plaintiff who
claims the plan was improperly written to exclude him. Firestone itself involved
palintiffs of the former sortSSplaintiffs who claimed they were wrongly denied
benefits under the plan as writtenSSwhile Abraham is of the latter typeSShe
argues that the plan as written wrongly excludes him. But Firestone gives us no
basis for distinguishing between the two. The test is whether the plaintiff has
a “colorable claim that . . . he or she will prevail in a suit for benefits,”
regardless of the type of claim he presents.
4
jurisprudence. Under the Act, money paid by an employer to a trust
fund established by an employee representative must be used "for
the sole and exclusive benefit of the employees of such employer."
29 U.S.C. § 186(c)(5). The Ninth Circuit has enforced this
provision through structural defect analysis: “A pension plan is
structurally deficient when it arbitrarily and unreasonably
excludes a large number of participants from receiving benefits,
thus failing to satisfy the ‘sole and exclusive benefit’ of all
employees.” Phillips v. Alaska Hotel & Restaurant Employees
Benefit Fund, 944 F.2d 509, 515 (9th Cir. 1991), cert. denied,
504
U.S. 911 (1992).
Similarly to Taft-Hartley, ERISA mandates that "a fiduciary
shall discharge his duties with respect to a plan solely in the
interest of the participants and beneficiaries and (A) for the
exclusive purpose of: (i) providing benefits to participants and
their beneficiaries . . . ." 29 U.S.C. § 1104(a)(1)(A)(i).
Borrowing from its Taft-Hartley jurisprudence, the Ninth Circuit
has enforced § 1104 through structural defect analysis. See Siles
v. ILGWU Nat’l Retirement Fund, 783 F.2d 923, 929 (9th Cir. 1986);
Harm v. Bay Area Pipe Trades Pension Plan Trust Fund,
701 F.2d 1301
(9th Cir. 1983). Although we have never applied structural defect
analysis to either Taft-Hartley or ERISA, Abraham would have us
apply such analysis to ERISA now.
Even if structural defect analysis is the appropriate way to
enforce § 1104, however, § 1104 explicitly creates a duty only for
fiduciaries, and we have held that an employer does not act as a
5
fiduciary when designing an ERISA plan. See Izzarelli v. Rexene
Prods. Co., 24 F.3d 1506, 1524 (5th Cir. 1994) ("[A]n employer that
decides to terminate, amend, or renegotiate a plan does not act as
a fiduciary, and thus cannot violate its fiduciary duty . . . .");
see also Hines v. Massachusetts Mut. Life Ins. Co., 43 F.3d 207,
210 (5th Cir. 1995). In contrast, the Ninth Circuit cases Abraham
cites as applying structural defect analysis under § 1104 have
involved suits against plan administrators acting in a fiduciary
capacity. See
Siles, 783 F.2d at 929;
Harm, 701 F.2d at 1305.
Because Abraham complains only that Exxon designed the plan
improperly, structural defect analysis is inappropriate.
IV.
Abraham contends that the exclusion of leased employees from
the plan is discriminatory and contrary to the minimum participa-
tion and minimum coverage requirements of ERISA and various
Treasury regulations. He relies entirely on Renda v. Adam Meldrum
& Anderson Co., 806 F. Supp. 1071 (W.D.N.Y. 1992). We find Renda
unpersuasive and reject Abraham's argument.
Renda held that 29 U.S.C. § 1052(a)(1)(A) forbids employers to
discriminate against leased employees when designing an ERISA plan.
That provision reads as follows:
No pension plan may require, as a condition of participa-
tion in the plan, that an employee complete a period of
service with the employer or employers maintaining the
plan extending beyond the later of the following dates—
(i) the date on which the employee attains
the age of 21; or
6
(ii) the date on which he completes 1 year of
service.
Although the plain language of § 1052(a) makes no mention of leased
employees, Renda asserts that "[s]ection 1052(a) effectively
prohibits participation requirements which discriminate against
certain employees such as leased employees." 806 F. Supp. at 1081.
We disagree. Section 1052(a) does nothing more than forbid
employers to deny participation in an ERISA plan to an employee on
the basis of age or length of service if he is at least twenty-one
years of age and has completed at least one year of service.
Section 1052(a) does not prevent employers from denying participa-
tion in an ERISA plan if the employer does so on a basis other than
age or length of service.
Renda incorrectly relies on Fernandez v. Brock, 840 F.2d 622
(9th Cir. 1988). Fernandez does state in dicta that "ERISA
requires that an employee must be eligible to participate in a plan
after 'he completes 1 year of service . . . .’ Similarly, ERISA
requires that an employee accrue benefits after a 'year of
participation' . . . ." This statement appears in the portion of
the opinion setting forth the facts of the case, however, and plays
no role in the holding. The statement is best read to mean that an
employee is eligible to participate in a plan after completing a
year of service and attaining the age of twenty-one only if he is
not otherwise disqualified for a reason other than age or length of
service. To the extent that Fernandez's dicta does support Renda,
we reject it.
Renda also relied on Treasury regulations in finding improper
7
the discrimination against leased employees. Title 26 C.F.R.
§ 1.410(b)-(4)(c)(3) sets forth factors the Secretary must consider
when determining whether a plan is nondiscriminatory, and Renda
found these factors "useful for extracting subtler shades of
meaning necessary to paint a more detailed portrait of an individ-
ual's substantive rights under ERISA." 806 F. Supp. at 1083.
Looking to those factors, Renda found the exclusion of a leased
employee to be improper under ERISA.
We read the function of Treasury regulations more narrowly.
The regulations purport to do no more than determine whether a plan
is a qualified tax plan. Failure to meet the requirements of those
regulations results in the loss of a beneficial tax status; it does
not permit a court to rewrite the plan to include additional
employees. The Treasury regulations do not create substantive
rights under ERISA that would permit the relief Abraham requests.
It is true that ERISA does incorporate portions of the Internal
Revenue Code and Treasury regulations, in some instances, but on
those occasions it does so explicitly. See 29 U.S.C. § 1202(c)
(expressly incorporating Treasury regulations promulgated under
26 U.S.C. §§ 410(a), 411, & 412).
Nor do we find persuasive Renda's reliance on Crouch v. Mo-Kan
Iron Workers Welfare Fund, 740 F.2d 805 (10th Cir. 1984). Crouch
did find that an employee was entitled to participate in an ERISA
plan because her exclusion would cause the plan to fail Treasury
regulations. Unlike the Exxon plan or the Renda plan, however, the
ERISA plan in Crouch contained an explicit provision declaring that
8
it was to be construed to meet the requirements of an ERISA plan.
Absent such a requirement in the plan itself, a court is not
entitled to look to Treasury regulations to determine employee
eligibility for participation in an ERISA plan. We therefore
reject Renda and Abraham's argument.
V.
Abraham next claims that the district court erred by deferring
to the administrator's interpretation of the plan. The plan vests
the administrator with "discretionary and final authority to
determine eligibility . . . [and] to interpret this . . . Plan."
When a plan vests such discretionary authority in an administrator,
we review his decisions for abuse of discretion. Pickrom v. Belger
Cartage Serv., 57 F.3d 468, 471 (5th Cir. 1995); see also
Firestone, 489 U.S. at 115.
Our inquiry proceeds in two parts. First, we must determine
whether the administrator's interpretation is legally correct. If
it is not, we determine whether the decision constituted an abuse
of discretion. Pickrom, 57 F.3d at 571. In deciding whether an
interpretation is legally correct, we look to (1) whether the
administrator has given the plan a uniform construction,
(2) whether the interpretation is consistent with a fair reading of
the plan, and (3) any unanticipated costs resulting from different
interpretations of the plan. Wildbur v. ARCO Chem. Co.,
974 F.2d
631, 638 (5th Cir.), clarified,
979 F.2d 1013 (5th Cir. 1992).
The district court properly applied the law in this instance.
9
Looking to the Wildbur factors, it is apparent that the
administrator construed the plan uniformly in a manner consistent
with a fair reading of the plan. Furthermore, Abraham's
interpretation of the plan will create unanticipated costs, as
Exxon would have to provide benefits to 16,000 additional persons.
Having determined that the administrator's interpretation was
legally correct, the district court did not need to look further.
VI.
Abraham contends that the plan is either ambiguous or includes
him. We find no merits to his arguments, which rest on tortured
constructions of the plan, defying rules of grammar and logic.
VII.
Besides a claim for benefits, a plaintiff may also file suit
under ERISA for penalties when a plan administrator "refuses to
comply with a request for any information which such administrator
is required . . . to furnish to a participant or beneficiary."
29 U.S.C. § 1132(c)(1)(B). ERISA provides that an administrator
who fails to provide such information "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." Id. at § 1132(c)(1). In his complaint, Abraham alleges
that the plan administrator, Rouse, refused to comply with his
request for information.
The district court did not specifically address the claim for
10
statutory penalties. The only portion of the opinion that seems to
address that claim is the portion concluding that Abraham is not a
"participant or beneficiary" because he lacks a colorable claim to
benefits. We must therefore assume that the district court granted
summary judgment on this claim because it believed the Abraham was
not a "participant" within the meaning of ERISA and was therefore
not entitled to the information he requested.
This was not a proper basis for summary judgment. Abraham was
a "participant" under ERISA because he had a colorable claim that
he would prevail in this suit. In Firestone, the Court held that
ERISA's definition of "participant," 29 U.S.C. § 1002(7), includes
anyone with a colorable claim that he will prevail in a suit for
benefits, and it explained that the definition applied to claims
for statutory penalties under § 1132(c)(1). 489 U.S. at 117-18.
For the reasons we discussed in part
II, supra, Abraham was a
participant under this standard and had standing to seek penalties
under ERISA because the administrator failed to provide him with
information. We therefore vacate summary judgment on Abraham's
claim for statutory penalties and remand so that the district
court, in its discretion, may determine whether to award penalties.
We recognize that this result may appear harsh: We conclude
that the Exxon plan unambiguously excludes Abraham, yet we find
that the administrator may be liable for failing to provide Abraham
with plan information. We note, however, that a claimant is not
entitled to penalties merely because he is a “participant.”
Status as a participant is simply a threshold requiremnet a
11
plaintiff must meet before he can request penalties. The district
court has the discretion to grant or deny such a request. In
making its decision, the district court maySSand often shouldSStake
into consideration the administrator’s reasons for refusing to
provide information.
In this case, for example, the district court might note that
the terms of the plan excluded Abraham, that Abraham has standing
because he relies on Renda, and that the administrator was probably
unaware of Renda, a district court decision from a distant
district. From all this, the district court could conclude that
the administrator acted in good faith when he refused to provide
information and could decline to award penalties. Of course, we
note this only by way of example; we express no opinion as to what
the district court should actually do in this case.
VIII.
Summary judgment on all claims except the claim for statutory
penalties is AFFIRMED. Summary judgment on statutory penalties is
VACATED and REMANDED.
12
