Spink v. Lockheed Corp., 92-56094

• Decision Date: 10 September 1997
• Docket Number: No. 92-56094,92-56094
• Citation: 125 F.3d 1257
• Parties: 21 Employee Benefits Cas. 1593, 97 Cal. Daily Op. Serv. 7291, 97 Daily Journal D.A.R. 11,736, Pens. Plan Guide (CCH) P 23937K Paul L. SPINK, Plaintiff-Appellant, v. LOCKHEED CORPORATION, Daniel M. Tellep, Robert A. Furman, Vincent N. Marafino, K.H. Anderson, L. Bernard, R.W. Berry, P.N. Braun-Agel, D.L. Bronco, R.H. Northcutt, W.E. Skowronski, A.G. Van Shaick, W.T. Vincent, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1257

125 F.3d 1257

21 Employee Benefits Cas. 1593, 97 Cal. Daily

Op. Serv. 7291,

97 Daily Journal D.A.R. 11,736,

Pens. Plan Guide (CCH) P 23937K

Paul L. SPINK, Plaintiff-Appellant, v. LOCKHEED CORPORATION, Daniel M. Tellep, Robert A. Furman Vincent N. Marafino, K.H. Anderson, L. Bernard, R.W. Berry P.N. Braun-Agel, D.L. Bronco, R.H. Northcutt, W.E Skowronski, A.G. Van Shaick, W.T. Vincent, Defendants-Appellees.

No. 92-56094.

United States Court of Appeals Ninth Circuit.

Sept. 10, 1997.

Theresa M. Traber, Bert Voorhees, Traber & Voorhees, Pasadena, California, for appellants.

Gordon E. Krischer, David E. Gordon, Paul Borden, O'Melveny & Myers, Los Angeles, California, for appellees.

On remand from the United States Supreme Court. D.C. No. CV-92-0800-SWV.

Before: D.W. NELSON, REINHARDT, and BRUNETTI, Circuit Judges.

BRUNETTI, Circuit Judge:

Paul Spink filed a five-count complaint on behalf of himself and similarly situated individuals against Lockheed Corporation and certain individual defendants (collectively "Lockheed"). Spink alleged that Lockheed's retirement plan violated the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001 et seq., and the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 621, et seq., as amended by the Omnibus Budget Reconciliation Act of 1986 (OBRA 1986), Pub.L. No. 99-509, 100 Stat. 1874 (1986). Counts I and II of the complaint alleged that the OBRA 1986 amendments to ERISA and ADEA entitled Spink and similarly situated employees to benefits under the Lockheed Corporation Retirement Plan for Certain Salaried Employees ("the Plan") calculated on the basis of periods worked both before and after the effective date of the statute. Count III alleged that amendments made by Lockheed to the Plan constituted a breach of fiduciary duty and a prohibited transaction under ERISA §§ 403, 404 & 406. Count V alleged that because Spink relied on representations made by Lockheed that he would receive benefits under the Plan, Lockheed was estopped from denying him benefits. Spink withdrew Count IV. Lockheed moved to dismiss the complaint under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted and the district court granted Lockheed's motion and dismissed the complaint with prejudice.

Spink appealed the district court's dismissal of his claims. In an opinion issued on July 18, 1995, this court affirmed in part and reversed in part the district court's dismissal. Spink v. Lockheed, 60 F.3d 616 (9th Cir.1995). We held that the amendments to the Plan were unlawful under ERISA § 406(a)(1)(D), 29 U.S.C. § 1106(a)(1)(D), which prohibits a fiduciary from causing a plan to engage in a transaction that transfers plan assets to a party in interest or involves the use of plan assets for the benefit of a party in interest and that the OBRA amendments applied retroactively, requiring Lockheed to include Spink's service years prior to 1988 in determining his benefits. Id. at 620 n. 1. Because our previous opinion concluded that OBRA 1986 required Lockheed to credit Spink for his pre-1988 service, we did not address Spink's claims under ERISA §§ 403, 404 and 405, or his claim of equitable estoppel. Id. at 622 nn. 4-5.

The Supreme Court granted a writ of certiorari and reversed. Lockheed Corp. v. Spink, 517 U.S. 882, ----, 116 S.Ct. 1783, 1788, 135 L.Ed.2d 153 (1996). The Supreme Court held that the OBRA 1986 amendments did not prohibit Lockheed from excluding Spink's pre-1988 years of service when calculating accrued benefits under an ERISA plan and concluded that Lockheed's actions were not prohibited by § 406(a)(1)(D) of ERISA. Id. The Court did not address whether Spink could state a cause of action under ERISA §§ 403, 404 or 405 or under equitable estoppel principles.

We address these remaining claims on remand.

I. Facts and Previous Proceedings

Spink was employed by Lockheed Corporation from 1939 until 1950. Prior to rejoining Lockheed, Spink worked for Hughes Helicopters, where he expected to receive pension benefits if he continued to work through October 31, 1982. In 1979, Lockheed persuaded Spink to return. Spink was 61 years old when he resumed employment with Lockheed. In an effort to recruit Spink from Hughes, Lockheed represented that if he accepted its offer of employment, Spink would participate in the Lockheed Retirement Plan for Certain Salaried Employees ("the Plan") and would accrue credited service toward retirement benefits under the Plan during his subsequent employment with Lockheed. Lockheed personnel provided him with documents describing the benefits to which he would be entitled, and for the next four years sent him written year-end statements from the Plan notifying him of the amount of credited service he had accumulated as a Plan participant. Sometime in 1984, Lockheed notified Spink that he was not eligible to participate in the Plan because he was over sixty when hired. At that time, the terms of the Plan excluded from participation employees who were over the age of 60 when hired. This was expressly permitted by ERISA. 29 U.S.C. § 1052(a)(2)(B).

In 1986, Congress passed OBRA 1986. OBRA 1986 amended ERISA, ADEA, and the Internal Revenue Code (IRC), 26 U.S.C. §§ 1 et seq., to bar age-based discrimination in participation and benefit accrual standards applied by employee benefit plans. The statute now flatly mandates that "[n]o pension plan may exclude from participation (on the basis of age) employees who have attained a specified age." 29 U.S.C. § 1052(a)(2). As a consequence of these amendments, for plan years beginning after January 1, 1988, the effective date of the amendments, Lockheed was required to allow employees hired after age sixty to participate in the Plan. Spink became a participant on December 25, 1988 (the first day of the Plan's 1988 plan year). In 1989, Lockheed informed him that it did not intend to credit him with accrued benefits based on his years of service with Lockheed prior to December 25, 1988. The Plan specifies that an employee who was previously excluded from the Plan would "not receive Credited Service for his pre-Member service[ ]" under the terms of the Plan. Plan § 2.01(C).

On May 8, 1990, Lockheed amended the Plan, establishing a "1990 Special Retirement Opportunity" (SRO) and a "1990 Voluntary Retirement Program" (VRP), which were available to certain employees until June 30, 1990 (collectively the "1990 Plan amendments"). These programs offered increased retirement benefits to eligible employees as an incentive to terminate their employment. The increased benefits were paid out of the Plan's surplus assets. To partake in the increased pension benefits, Lockheed required employees to release all potential employment-related claims they might have against Lockheed. Spink retired in June 1990. Although he was eligible for the SRO option, Spink did not elect it because he did not wish to waive any ADEA and ERISA claims he may have against Lockheed.

Spink alleges that Lockheed and the members of the board of directors violated ERISA's duty of care and prohibited transaction provisions, 29 U.S.C. §§ 1103(c)(1), 1104(a), 1105, by amending the Plan to create the retirement programs. Further, Spink alleged that Lockheed was estopped from denying him benefits for his pre-1988 service based upon the doctrine of equitable estoppel. Because these claims were not addressed on appeal before this court or the Supreme Court, we address them on remand.

II. Standard of Review

We review de novo a grant of a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). Carpenters Health & Welfare Trust Fund v. Tri Capital Corp., 25 F.3d 849, 852 (9th Cir.1994). In addition, "[t]he interpretation of ERISA, a federal statute, is a question of law subject to de novo review." Spain v. Aetna Life Ins. Co., 13 F.3d 310, 312 (9th Cir.1993).

III. ERISA § 403

Spink contends that Lockheed's Plan amendments violated section 403(c)(1)'s admonition that "the assets of the plan shall never inure to the benefit of any employer and shall be held for the exclusive purpose of providing benefits to participants in the plan and their beneficiaries." ERISA § 403(c)(1), 29 U.S.C. § 1103(c)(1). We affirm the district court's dismissal of Spink's cause of action under ERISA § 403(c)(1).

In Spink, the Supreme Court analogized the benefit received by Lockheed through the Plan amendments to other "incidental benefits" which an employer permissibly receives under ERISA. The Court stated that:

Spink concedes ... that among the "incidental" and thus legitimate benefits that a plan sponsor may receive from the operation of a pension plan are attracting and retaining employees, paying deferred compensation, settling or avoiding strikes, providing increased compensation without increasing wages, increasing employee turnover, and reducing the likelihood of lawsuits by encouraging employees who would otherwise have been laid off to depart voluntarily.... We do not see how obtaining waivers of employment-related claims can meaningfully be distinguished from these admittedly permissible objectives.

517 U.S. at ----, 116 S.Ct. at 1791. The Supreme Court overruled our previous decision in part, because it determined that Lockheed's use of plan assets to purchase waivers for Lockheed's liability did not constitute the type of "transaction" that was "potentially harmful to the plan." Spink, 517 U.S. at ---- - ----, 116 S.Ct. at 1790-91. Thus, any benefit received by Lockheed through the amendment of the Plan was permissible under ERISA and may not form the basis of a cause of action under § 403(c)(1).

Indeed, this conclusion is consistent with opinions from other circuits that have held that an employer does not receive "inurement" under § 403 where plan assets were paid only to plan participants and the plan only advances the employer's business interests. See Aldridge v. Lily-Tulip, Inc., 953 F.2d 587, 592 n. 6 (11th Cir.1...