297 F.3d 287 (3rd Cir. 2002), 01-3956, D'Amico v. CBS Corp.

Docket Nº:01-3956
Citation:297 F.3d 287
Party Name:D'Amico v. CBS Corp.
Case Date:July 18, 2002
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

Page 287

297 F.3d 287 (3rd Cir. 2002)

Nick J. D'AMICO; Cliff Hollihan; Joseph G. Muto; Kevin Beam, Appellants,


CBS CORPORATION, f/k/a Westinghouse, Inc; The Westinghouse Electric Company Pension Plan.

No. 01-3956.

United States Court of Appeals, Third Circuit

July 18, 2002

Argued May 3, 2002.

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[Copyrighted Material Omitted]

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Colleen E. Ramage, Ramage & Valles, Pittsburgh, PA, Gary F. Lynch, New Castle, PA, Theodore Goldberg, David B. Rodes, (argued), John T. Tierney, III, Goldberg, Persky, Jennings & White, P.C., Pittsburgh, PA, for appellants.

Glen D. Nager, Jack W. Campbell, IV, (argued), Jones, Day, Reavis & Pogue, Washington, D.C., Amy E. Dias, Jones, Day, Reavis & Pogue, Pittsburgh, PA, for appellees.

BEFORE: ROTH and STAPLETON, Circuit Judges, POLLAK[*], District Judge.

ROTH, Circuit Judge.

This ERISA case requires us to apply our recent decision in Harrow v. Prudential Ins. Co., 279 F.3d 244 (3d Cir. 2002), to determine whether plaintiffs, the D'Amico claimants, must exhaust plan remedies before proceeding with breach of fiduciary duty claims against their former employer, defendant CBS, Inc. See § 404 of ERISA, 29 U.S.C. § 1104(a).

The District Court granted summary judgment dismissing plaintiffs' unexhausted claims. We will affirm that decision. We find that plaintiffs are required to exhaust Plan remedies because their fiduciary allegations, which are based on CBS's failure to comply with a vesting and partial termination 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

Plaintiffs are a class of former employees of CBS (formerly known as Westinghouse) and participants in the Westinghouse Pension Plan. Section 18.B. of the Westinghouse Pension Plan contains the following provision for termination or partial termination of the Plan:

If the Plan is terminated, or partially terminated, the rights of affected participants to benefits accrued under the Plan shall be nonforfeitable to the extent funded.

This language tracks 26 U.S.C. § 411(d)(3),1 which, in order for employers to obtain favorable tax treatment for pension plans, requires the employers to include in their plans provisions for vesting upon partial termination.

From 1994 through 2000, Westinghouse implemented a systematic planned reduction of its entire workforce. As part of this downsizing effort, and a concurrent effort to reduce a four billion dollar under-funding of the Plan, the company also amended its Plan in 1994 to eliminate a lump-sum option formerly available to retiring employees.

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II. Procedural History

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.

CBS filed a motion to dismiss under Fed.R.Civ.P. 12(b)(1), based on plaintiffs' 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.

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.

III. Jurisdiction and Standard of Review

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.

We exercise plenary review over an appeal from a grant of summary judgment; we review de novo the applicability of exhaustion principles to plaintiffs' claims. Harrow v. Prudential Ins. Co., 279 F.3d 244, 248 (3d Cir. 2002). We review for abuse of discretion both the District Court's decision to deny a futility exception to exhaustion principles, see id., and its decision to grant summary judgment rather than entering a stay to allow exhaustion of administrative remedies. St. Surin v. Virgin Islands Daily News, Inc., 21 F.3d 1309, 1313 (3d Cir. 1994) (abuse of discretion standard applies when "an order entering summary judgment is attacked as premature"); Lindemann v. Mobil Oil Corp., 79 F.3d 647, 651 (7th Cir. 1996)...

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