Griggs v. Dupont De Nemours & Co.

• Decision Date: 28 September 2000
• Docket Number: No. 99-2508,No. 99-2607,99-2508,99-2607
• Citation: 237 F.3d 371
• Parties: (4th Cir. 2001) JOSEPH D. GRIGGS, Plaintiff-Appellant, v. E. I. DUPONT DE NEMOURS & COMPANY, Defendant-Appellee. JOSEPH D. GRIGGS, Plaintiff-Appellant, v. E. I. DUPONT DE NEMOURS & COMPANY, Defendant-Appellee. . Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 371

237 F.3d 371 (4th Cir. 2001)

JOSEPH D. GRIGGS, Plaintiff-Appellant, v. E. I. DUPONT DE NEMOURS & COMPANY, Defendant-Appellee.

JOSEPH D. GRIGGS, Plaintiff-Appellant, v. E. I. DUPONT DE NEMOURS & COMPANY, Defendant-Appellee.

No. 99-2508 No. 99-2607.

UNITED STATES COURT OF APPEALS, FOR THE FOURTH CIRCUIT.

Argued: September 28, 2000.

Decided: January 9, 2001.

Appeals from the United States District Court for the Eastern District of North Carolina, at Wilmington.

James C. Fox, District Judge. (CA-98-17-7-F)

[Copyrighted Material Omitted] COUNSEL ARGUED: Michael Murchison, MURCHISON, TAYLOR & GIB-SON, L.L.P., Wilmington, North Carolina, for Appellant.

Raymond Michael Ripple, E.I. DUPONT DE NEMOURS & COMPANY, Wil-mington, Delaware, for Appellee.

ON BRIEF: Donna L. Goodman, E.I. DUPONT DE NEMOURS & COMPANY, Wilmington, Dela-ware; Gardner G. Courson, MCGUIRE, WOODS, BATTLE & BOOTHE, L.L.P., Atlanta, Georgia, for Appellee.

Before WILKINS, WILLIAMS, and TRAXLER, Circuit Judges.

Affirmed in part, vacated in part, and remanded by published opinion. Judge Traxler wrote the opinion, in which Judge Wilkins and Judge Williams joined.

OPINION

TRAXLER, Circuit Judge:

Joseph Griggs brought an action against his former employer E.I. DuPont de Nemours & Company ("DuPont") under section 502(a)(3) of the Employee Retirement Income Security Act ("ERISA"), see 29 U.S.C.A. § 1132(a)(3) (West 1999). Griggs claimed that DuPont breached its fiduciary duty by leading Griggs to believe that he was eligible for a tax-deferred lump sum distribution of early retirement benefits under DuPont's Temporary Pension System and then failing to notify Griggs when DuPont learned that Griggs's election to receive such a distribution was not permitted by federal tax laws. Instead, DuPont made the distribution directly to Griggs which resulted in an immediate tax and defeated the reason that Griggs elected to retire early. The district court concluded that DuPont breached its fiduciary duty but held that ERISA does not provide the relief that Griggs seeks. We agree that, under these circumstances, DuPont breached its duty as an ERISA fiduciary. However, we conclude that Griggs is not necessarily without a remedy under ERISA, and we remand for the district court to explore the issue further.

I.

DuPont serves as the administrator for its Pension and Retirement Plan ("the pension plan"), a tax-qualified defined benefit pension plan under the Internal Revenue Code ("tax code"), see 26 U.S.C.A. § 401(a) (West Supp. 2000), and ERISA, see 29 U.S.C.A. § 1002(2), (35) (West 1999). DuPont also administers a qualified contribution plan known as the Savings and Investment Plan ("SIP"). The SIP is a retirement savings vehicle akin to a 401(k) plan through which an employee's benefits accumulate on a tax-deferred basis.

In 1993, DuPont amended the pension plan to create a program called the Temporary Pension System ("TPS"). According to DuPont, TPS was designed to assist DuPont employees who were leaving their jobs at DuPont, but not necessarily retiring. A participant in TPS was entitled to one month of pay for every two years of service, not to exceed one year's salary, in addition to any other benefits from the pension plan to which the participant might be entitled. The TPS benefit could be received as either a lump sum payment or as an additional amount added to the employee's regular monthly pension payment. Benefits under TPS, however, were not universally available to DuPont employees at all times. Instead, TPS benefits were offered to employees for a limited "window" period, and the decision to make TPS benefits available occurred on the regional level.

Griggs was a long-time employee of DuPont. He began his employment in 1962 and eventually became operations manager for DuPont's nylon fibers division. Griggs was serving in this capacity when he elected early retirement in 1994. During the year or so preceding Griggs's retirement, DuPont was closing one of its nylon plants and, as a result, decided that a workforce reduction was necessary. It was Griggs's understanding that because of the decreased need for employees, DuPont decided to make TPS benefits available to employees in the nylon division as an incentive to retire early. DuPont, however, disputes that the purpose of TPS was to encourage early retirement; rather, the essential aim of TPS was "to provide transition assistance as employees move from a career with DuPont to a career elsewhere." J.A. 175.

Whatever the primary aim of TPS, everyone agrees that TPS benefits were made available in 1994 to a group of DuPont employees that included Griggs. And, given his long-term service, Griggs was among those employees who would be entitled, in addition to his regular pension, to a TPS benefit equivalent to a full year's salary.

Initially, Griggs was reluctant to consider leaving his position with DuPont and retiring early. Griggs was not being forced out of DuPont, and there is nothing before us that suggests Griggs was being pressured to accept the TPS offer. In May 1994, however, Griggs received a written communication from DuPont providing details about TPS that caused him to reevaluate whether he should retire early. For Griggs, what really made the TPS offer attractive was the option to receive his full TPS benefit in a lump sum that could be "rolled over" from the pension plan into his SIP account with DuPont or another qualified vehicle where it would grow on a tax-deferred basis. In its description of the TPS program, DuPont explained that

TPS provides a benefit from the Pension and Retirement Plan [ ] in addition [to the] other pension benefit[s] that you are currently eligible to receive. The additional benefit is as follows:

One month of pay for every two years of service. Pay to include base pay, Shift Differential pay, Sunday Premium, scheduled overtime pay and any incentive compensation award made in the previous twelve months. The minimum benefit is equal to two months' pay, the maximum is twelve months' pay.

This additional TPS benefit may be taken as a lump sum, or may be added to the monthly payments under an immedi ate or deferred pension. If taken as a lump sum, all or part of the lump sum can be rolled into the DuPont Savings and Investment Plan (SIP), or any qualified IRA, within 60 days.

Because this benefit is paid from the Pension Trust, in some cases taking the lump sum without rolling it over will cause you to incur an early payment excise tax. If that applies to you, a tax gross up allowance will be paid to off set any overall addition to your taxes.

J.A. 186. This was general, form language that was provided to all potential participants in TPS. Other than this May 1994 communication, DuPont did not make any representations to Griggs concerning the tax implications of his decision to take a lump sum distribution, nor did Griggs request any information from DuPont regarding the potential tax impact on him individually.

After receiving DuPont's written description of TPS benefits, Griggs opted for early retirement and elected to receive his TPS benefit in a lump sum, believing that he could roll it over into the DuPont SIP without incurring immediate tax liability. In July 1994, Griggs received a written statement indicating that, if he were to apply for TPS benefits, the amount of his lump sum distribution would be $132,900, which is about what he expected.

On August 1, 1994, Griggs applied for TPS benefits and filled out an application form for a lump sum payment of his TPS benefit. On the form, Griggs elected to receive "a lump sum payment of the additional pension benefit amount payable under Section XII of the Pension and Retirement Plan." Griggs was presented with various options for the form his lump sum payment would take; he selected the "ROLLOVER SETTLEMENT" which indicated Griggs's desire to "rollover [his] total lump sum benefit in accordance with the deposit information in Section 5." In turn, Griggs indicated in Section 5 of the application that the "[d]eposit is to be made to: SIP (fixed income)."

The reverse side of the application form contained instructions for completing the lump sum payment application. With respect to the lump sum election, the form instructed that "[y]ou have elected a lump sum payment pursuant to Section XII of the Pension and Retirement Plan. In making this election, you understand that it is YOUR responsibility to obtain independent financial and tax advice." Griggs concedes that he sought no such independent tax advice.

Griggs officially retired in late September 1994, and in October DuPont sent Griggs a notice indicating that DuPont was preparing to process his pension payments "in accordance with[his] election." J.A. 207. DuPont, however, did not honor Griggs's election to roll over his lump sum payment into the SIP plan, even though DuPont had said in its description of the TPS program that this could be done. In fact, as early as July 1994 -before Griggs even submitted his TPS lump sum payment application -calculations performed by DuPont showed that section 415 of the tax code would not permit Griggs to roll over his entire TPS benefit into the tax-deferred SIP account. These calculations were apparently performed during the process of providing Griggs with an estimate of the lump sum amount he could expect to receive if he participated in TPS. No one informed Griggs, however, that there was a possibility that the tax code would not permit the entire lump sum to be paid from a qualified plan (like DuPont's pension plan) and that any portion not paid from a qualified plan could not be rolled over and would be taxed immediately.¹

After Griggs submitted his lump sum payment application in August 1994, DuPont performed additional calculations required by section 415 of the tax code and determined that various limits imposed by section 415 barred Griggs from electing to roll over his entire TPS...