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Nick J. D'Amico Cliff Hollihan Joseph G. Muto Kevin Beam v. CBS Corporation, F/k/a Westinghouse, Inc The Westinghouse Electric Company Pension Plan, 297 F.3d 287, 3rd Cir. (2002)
Nick J. D'Amico Cliff Hollihan Joseph G. Muto Kevin Beam v. CBS Corporation, F/k/a Westinghouse, Inc The Westinghouse Electric Company Pension Plan, 297 F.3d 287, 3rd Cir. (2002)
3d 287
provision in its Plan, amount to a claim for plan benefits under Harrow. We
also find that plaintiffs have failed to meet their burden of establishing that Plan
remedies are futile. Finally, we see no reason to upset the District Court's grant
of summary judgment in favor of CBS.
I. Facts
3
Although the Plan provides a procedure for presenting claims for benefits, none
of the plaintiffs attempted to exhaust this Plan remedy before bringing suit.
Plaintiffs filed their initial complaint on December 22, 2000, and an amended
complaint on July 26, 2001. They allege, inter alia, that the workforce
reduction and elimination of future benefit accruals through the 1994
amendment constituted a partial termination that entitled all non-vested
participants to become vested. Plaintiffs claim that CBS's failure to provide
vesting after these partial terminations constituted a breach of its fiduciary
duties under section 404 of ERISA, 29 U.S.C. 1104(a)(1)(A) & (a)(1)(D).
The complaint requests damages and declaratory relief to remedy these
violations. It also alleges that exhaustion would be futile.
failure to exhaust Plan remedies. The District Court determined that it was
more appropriate to address CBS's motion under Fed.R.Civ.P. 12(b)(6) and
converted the motion to dismiss into a motion for summary judgment under
Fed.R.Civ.P. 56.
9
Plaintiffs opposed CBS's motion on the ground that they are not required to
exhaust Plan remedies before bringing their suit. The District Court disagreed
and granted summary judgment for CBS on the unexhausted claims. It entered
an order dismissing the case with prejudice on October 1, 2001. Plaintiffs filed
a timely notice of appeal.
This case arises under ERISA, 29 U.S.C. 1001 et seq.; thus the District Court
had federal question jurisdiction under 28 U.S.C. 1331 and 29 U.S.C.
1132(e). We have appellate jurisdiction under 28 U.S.C. 1291, as the District
Court entered a final and appealable order granting CBS's motion for summary
judgment with prejudice.
11
IV. Discussion
12
Plaintiffs raise three arguments in their appeal. First, they assert that they are
not required to exhaust plan remedies before bringing suit; second, they assert
that exhaustion would be futile; and, finally, they argue that the District Court
erred when it granted summary judgment rather than staying their case and
ordering expedited administrative review. We will explain, below, why none of
these arguments merit reversal.
13
14
This Circuit requires the exhaustion of Plan remedies in some, but not all,
ERISA cases.2 In Zipf v. AT & T, 799 F.2d 889 (3d Cir.1986), we drew a
distinction between claims to enforce the terms of a benefit plan and claims to
assert rights established by the ERISA statute. Id. at 891. Exhaustion of Plan
remedies is required in the former, but not the latter, category of cases. Id.3
Since Zipf, a vast majority of cases waiving the exhaustion requirement have
fallen in two categories: (1) discrimination claims under section 510 of ERISA,
or (2) failure to provide plaintiffs with Summary Plan Descriptions, as required
by ERISA. Harrow v. Prudential Ins. Co., 279 F.3d 244, 253 (3d Cir. 2002).
15
16
17
Here, plaintiffs allege section 404 fiduciary breaches based on CBS's failure to
vest after (1) the elimination of a significant number of Plan participants, which
allegedly created a partial termination and required vesting under the Plan and
under 26 U.S.C. 411(d)(3); and (2) a partial termination based on elimination
of future benefit accruals under the 1994 amendments to the Plan.5 See, e.g.,
Gluck v. Unisys Corp., 960 F.2d 1168, 1178 (3d Cir.1992) (noting that breach
of fiduciary duty theory may apply based on "failure to vest fully the accrued
benefits upon partial termination of a plan"). The vesting obligations that form
the basis of plaintiffs' fiduciary duty claims arise from 18.B of the Plan.
18
19
20
B. Is Exhaustion Futile?
21
Plaintiffs also argue that they are not required to exhaust Plan remedies because
it would be futile to do so. A party invoking this exception must provide a clear
and positive showing of futility before the District Court. Harrow, 279 F.3d at
249-50. Here, plaintiffs concede that they "never presented their partial
termination claims to the Plan Administrator either formally or informally."8
They assert that no attempts to request benefits are required in light of CBS's
longstanding policy of denying that partial termination ever occurred. Our
precedent makes clear, however, that Plaintiffs who fail to make known their
desire for benefits to a responsible company official are precluded from seeking
judicial relief. Berger v. Edgewater Steel Co., 911 F.2d 911, 917 (3d Cir.1990)
(agreeing that futility argument lacked merit where employee "never even
asked for 70/80 retirement"). Thus, we find that the District Court properly
exercised its discretion when it declined to apply the futility exception here.
22
C. Summary Judgment.
23
Plaintiffs conclude by arguing that the District Court erred in granting summary
judgment rather than staying their case and ordering expedited administrative
review. The decision of whether to grant a stay is entirely within the District
Court's discretion. Lindemann v. Mobil Oil Corp., 79 F.3d 647, 651 (7th
Cir.1996) (affirming decision to grant summary judgment and deny stay for
unexhausted ERISA claims). Here, the District Court refused to grant a stay
where the only justification offered by plaintiffs was an appeal to justice and
judicial economy, and where none of the plaintiffs had ever attempted to
convince Westinghouse administrators that he or she was entitled to vesting. As
explained below, we see no reason to interfere with this decision.
24
25
Finally, we see no reason to alter our analysis out of concern that the District
Court's order will foreclose future consideration on the merits of their claims.
Although we may not "dictate the preclusion consequences" of our decision to
future courts, Wright, Miller & Cooper, 18 Federal Practice and Procedure
4405 (2002), we do have authority to make clear the limited scope of the
District Court's decision. Id. at 4413; Venuto v. Witco Corp., 117 F.3d 754,
759 n. 8 (3d Cir.1997). Here, the District Court issued an order granting
summary judgment because of the failure to exhaust. That order is not,
however, in any way a ruling on the merits. It is, instead, limited to resolving
the threshold question of whether administrative remedies must be exhausted
before plaintiffs may bring these claims in federal court. Such orders do not
Notes:
*
Honorable Louis H. Pollak, District Court Judge for the Eastern District of
Pennsylvania, sitting by designation
In general, plaintiffs bring claims to enforce the terms of a benefits plan under
29 U.S.C. 1132(a)(1)(B) and claims to enforce rights established by ERISA
under 29 U.S.C. 1132(a)(3). Section 1132(a)(3) claims to enforce statutory
rights are not automatically excused from exhaustion, however. We still require
exhaustion where the statutory claim "merely recasts [a] benefits claim in
statutory terms."Harrow, 279 F.3d at 252. Thus, while the District Court
assumed that plaintiffs wished to proceed under 1132(a)(3), and plaintiffs rely
on 1132(a)(3) for purposes of appeal, our exhaustion analysis turns on
whether plaintiffs' statutory allegations amount to a claim for benefits under the
terms of the Westinghouse Plan.
4
Vornado, Inc. v. Trustees of the Retail Store Employees Union Local 1262, 829
F.2d 416, 418 n. 2 (3d Cir.1987) (section 411 "does not give plan participants
an interest in the employer's tax status").
Bruch does suggest that one part of this inquiry whether there has been a
partial termination is subject to independent determination by the court. 828
F.2d at 149. But that does not alter the fact that plaintiffs' ultimate right to vest
is based on application of the Plan a question which should be addressed by
the Plan administrator in the first instance. See, e.g., Diaz v. United Agric.
Employee Welfare Benefit Plan & Trust, 50 F.3d 1478, 1484 (9th Cir.1995)
(prospect of judicial review for compliance with federal statutory provisions
does not give claimant license to evade internal appeal to plan administrator).
Although we note that some of the named plaintiffs made a written request for
Job Separation Pension Benefits under 19 of the Plan, we do not construe this
as a request for partial termination benefits under 18.B. of the Plan
This is not, of course, the only possible outcomeSee Makar v. Health Care
Corp., 872 F.2d 80, 83 (4th Cir.1989) (vacating order entering judgment for
defendants and ordering dismissal without prejudice to allow plaintiffs to
exhaust plan remedies.) Under the authority discussed in the text, however, we
do not find the District Court's decision here to be an abuse of discretion.