517 U.S. 882 (1996), 95-809, Lockheed Corp. v. Spink

Docket Nº:Case No. 95-809
Citation:517 U.S. 882, 116 S.Ct. 1783, 135 L.Ed.2d 153, 64 U.S.L.W. 4430
Party Name:LOCKHEED CORP. et al. v. SPINK
Case Date:June 10, 1996
Court:United States Supreme Court

Page 882

517 U.S. 882 (1996)

116 S.Ct. 1783, 135 L.Ed.2d 153, 64 U.S.L.W. 4430

LOCKHEED CORP. et al.

v.

SPINK

Case No. 95-809

United States Supreme Court

June 10, 1996

Argued April 22, 1996

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Syllabus

Because respondent Spink was 61 when petitioner Lockheed Corporation reemployed him in 1979, he was excluded from participation in Lockheed's retirement plan (Plan), as was then permitted by the Employee Retirement Income Security Act of 1974 (ERISA). Section 9203(a)(1) of the Omnibus Budget Reconciliation Act of 1986 (OBRA) repealed ERISA's age-based exclusion provision, and §§ 9201 and 9202 amended ERISA and the Age Discrimination in Employment Act of 1967 (ADEA), respectively, to prohibit age-based benefit accrual rules. To comply with OBRA, Lockheed made Spink and other previously excluded employees Plan members, but made clear that they would not receive credit for their pre-1988 service years. Lockheed subsequently added to the Plan two programs offering increased pension benefits to employees who would retire early in exchange for their waiver of any employment claims against Lockheed. Not wishing to waive any ADEA or ERISA claims, Spink declined to participate and retired without earning the extra benefits. He then filed suit, alleging among other things that Lockheed and petitioner board of directors members violated ERISA by amending the Plan to create the retirement programs, that petitioner Retirement Committee members violated ERISA by implementing the amended Plan, and that the OBRA amendments to ERISA and the ADEA required that Spink's pre-1988 service years be counted toward his benefits. The District Court dismissed the complaint for failure to state a claim, but the Court of Appeals reversed in relevant part. In finding the Plan amendments unlawful under ERISA § 406(a)(1)(D)—which prohibits a fiduciary from causing a plan to engage in a transaction that transfers plan assets to, or involves the use of plan assets for the benefit of, a party in interest—the court decided that there was no need to address Lockheed's status as a fiduciary. It also found that Lockheed's refusal to credit Spink with his pre-1988 service years violated the OBRA amendments, which the court decided applied retroactively.

Held:

1. ERISA § 406 does not prevent an employer from conditioning the receipt of early retirement benefits upon plan participants' waiver of employment claims. Pp. 887-895.

Page 883

(a) Unless a plaintiff shows that a fiduciary caused the plan to engage in the allegedly unlawful transaction, there can be no § 406(a)(1) violation warranting relief.Cf. Peacock v. Thomas, 516 U.S. 349,353. Thus, the Court of Appeals erred by not asking whether fiduciary status existed in this case before finding a § 406(a)(1)(D) violation. Pp. 888-889.

(b) Lockheed and the board of directors, as plan sponsors, were not acting as fiduciaries when they amended the Plan. Given ERISA's definition of fiduciary and the applicability of the duties attending that status, the rule that this Court announced with respect to the amendment of welfare benefit plans in Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, applies equally to the amendment of pension plans. Thus, when employers or other plan sponsors adopt, modify, or terminate pension plans, they do not act as fiduciaries, id., at 78, but are analogous to settlors of a trust. Pp. 889-891.

(c) It is not necessary to decide whether the Retirement Committee members acted as fiduciaries, because their payment of benefits pursuant to the terms of an otherwise lawful plan was not a "transaction" prohibited by § 406(a)(1)(D). That section does not in direct terms include an employer's payment of benefits. And the "transactions" prohibited by other provisions of § 406(a) generally involve uses of plan assets that are potentially harmful to the plan. The payment of benefits conditioned on performance by plan participants cannot reasonably be said to share that characteristic. Pp. 892-895.

2. OBRA §§ 9201 and 9202(a) do not apply retroactively to require Lockheed to use pre-1988 service years in calculating Spink's benefits. Congress expressly provided, in OBRA § 9204(a)(1), that the amendments to ERISA and the ADEA would be effective with respect to plan years beginning on or after January 1, 1988. Since the amendments' temporal effect is manifest on the statute's face, "there is no need to resort to judicial default rules," Landgraf v. USI Film Products, 511U.S. 244, 280, and inquiry is at an end. Pp. 896-897.

60 F.3d 616, reversed and remanded.

Thomas, J., delivered the opinion of the Court, in which Rehnquist,C. J., and Stevens, O'Connor, Scalia, Kennedy, and Ginsburg, JJ., joined, and in which Souter and Breyer, JJ., joined as to all but Part III-B. Breyer, J., filed an opinion concurring in part and dissenting in part, in which Souter, J., joined, post, p. 898.

Gordon E. Kirscher argued the cause for petitioners. With him on the briefs were David E. Gordon, Kenneth E. Johnson, Kenneth S. Geller, and Ralph A. Hurvitz.

Page 884

Richard P. Bress argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Days, Assistant Attorney General Argrett, Edwin S. Kneedler, Kenneth L. Greene, J. Davitt McAteer, Allen H. Feldman, and Edward D. Sieger.

Theresa M. Traber argued the cause for respondent. With her on the brief was Bert Voorhees. [*]

Justice Thomas delivered the opinion of the Court.

In this case, we decide whether the payment of benefits pursuant to an early retirement program conditioned on the participants' release of employment-related claims constitutes a prohibited transaction under the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq. We also determine whether the 1986 amendments to ERISA and the Age Discrimination in Employment Act of 1967 (ADEA), 81 Stat. 602, as amended, 29 U.S.C. § 621 et seq., forbidding age-based discrimination in pension plans apply retroactively.

I

Respondent Paul Spink was employed by petitioner Lockheed Corporation from 1939 until 1950, when he left to work

Page 885

for one of Lockheed's competitors. In 1979, Lockheed persuaded Spink to return. Spink was 61 years old when he resumed employment with Lockheed. At that time, the terms of the Lockheed Retirement Plan for Certain Salaried Individuals (Plan), a defined benefit plan, excluded from participation employees who were over the age of 60 when hired. This was expressly permitted by ERISA. See 29 U.S.C. § 1052(a)(2)(B) (1982 ed.).

Congress subsequently passed the Omnibus Budget Reconciliation Act of 1986 (OBRA), Pub. L. 99-509, 100 Stat.1874. Section 9203(a)(1) of OBRA, 100 Stat. 1979, repealed the age-based exclusion provision of ERISA, and 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). Sections 9201 and 9202 of OBRA, 100 Stat. 1973-1978, amended ERISA and the ADEA to prohibit age-based cessations of benefit accruals and age-based reductions in benefit accrual rates. See 29 U.S.C. §§ 1054(b)(1)(H)(i), 623(i)(1).

In an effort to comply with these new laws, Lockheed ceased its prior practice of age-based exclusion from the Plan, effective December 25, 1988. As of that date, all employees, including Spink, who had previously been ineligible to participate in the Plan due to their age at the time of hiring became members of the Plan. Lockheed made clear, however, that it would not credit those employees for years of service rendered before they became members.

When later faced with the need to streamline its operations, Lockheed amended the Plan to provide financial incentives for certain employees to retire early. Lockheed established two programs, both of which offered increased pension benefits to employees who would retire early, payable out of the Plan's surplus assets. Both programs required as a condition of the receipt of benefits that participants release any employment-related claims they might have against Lockheed. Though Spink was eligible for one of the programs,

Page 886

he declined to participate because he did not wish to waive any ADEA or ERISA claims. He then retired, without earning any extra benefits for doing so.

Spink brought this suit, in his individual capacity and on behalf of others similarly situated, against Lockheed and several of its directors and officers. Among other things, the complaint alleged that Lockheed and the members of the board of directors violated ERISA's duty of care and prohibited transaction provisions, 29 U.S.C. §§ 1104(a), 1106(a), by amending the Plan to create the retirement programs. Relatedly, the complaint alleged that the members of Lockheed's Retirement Committee, who implemented the Plan as amended by the board, violated those same parts of ERISA. The complaint also asserted that the OBRA amendments to ERISA and the ADEA required Lockheed to count Spink's pre-1988 service years toward his accrued pension benefits. For these alleged ERISA violations, Spink sought monetary, declaratory, and injunctive relief pursuant to §§ 502(a)(2) and(3) of ERISA's civil enforcement provisions, 29 U.S.C. §§ 1132(a)(2), (3). Lockheed moved to dismiss the complaint for failure to state a claim, and the District Court granted the motion.

The Court of Appeals for the Ninth Circuit reversed in relevant part. 60 F.3d 616 (1995). The Court of Appeals 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...

To continue reading

FREE SIGN UP
499 practice notes
  • 172 F.Supp.2d 880 (S.D.Tex. 2001), Civ. A.H-00-1465, Mitchell Energy & Development Corp. v. Fain
    • United States
    • Federal Cases United States District Courts 5th Circuit Southern District of Texas
    • November 15, 2001
    ...of an ERISA Plan, or with respect to the management or disposition of ERISA Plan assets. Id. § 1002(21)(A); Lockheed Corp. v. Spink, 517 U.S. 882, 890, 116 S.Ct. 1783, 135 L.Ed.2d 153 MEDC has exercised, and continues to exercise, discretionary authority and control with respect to manageme......
  • 365 B.R. 91 (Bkrtcy.S.D.Ohio 2007), 04-40504, In re Amcast Indus. Corp.
    • United States
    • Federal Cases United States Bankruptcy Courts Sixth Circuit
    • March 12, 2007
    ...and plan participants. Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 443, 119 S.Ct. 755, 142 L.Ed.2d 881 (1999); Lockheed Corp. v. Spink, 517 U.S. 882, 890, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996) (holding that employers and other plan sponsors are generally free under ERISA to adopt, modif......
  • 534 F.Supp.2d 288 (D.Conn. 2008), 3 01CV2361, Amara v. Cigna Corp.
    • United States
    • Federal Cases United States District Courts 2nd Circuit District of Connecticut
    • February 15, 2008
    ...outset that employees can release claims of statutory ERISA violations in return for severance benefits. "In Lockheed Corp. v. Spink, 517 U.S. 882, 894, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996), the Supreme Court sanctioned the use of early retirement incentives conditioned upon the rele......
  • 886 F.Supp.2d 1007 (W.D.Wis. 2012), 09-cv-413-wmc, Chesemore v. Alliance Holdings, Inc.
    • United States
    • Federal Cases United States District Courts 7th Circuit Western District of Wisconsin
    • July 24, 2012
    ...that affect the value of its stock and thus the benefits that the ESOP participants will ultimately receive. Lockheed Corp. v. Spink, 517 U.S. 882, 890, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996). Companies will often also alter the design of their Page 1052 in the process of a sale, and such b......
  • Free signup to view additional results
478 cases
  • 172 F.Supp.2d 880 (S.D.Tex. 2001), Civ. A.H-00-1465, Mitchell Energy & Development Corp. v. Fain
    • United States
    • Federal Cases United States District Courts 5th Circuit Southern District of Texas
    • November 15, 2001
    ...of an ERISA Plan, or with respect to the management or disposition of ERISA Plan assets. Id. § 1002(21)(A); Lockheed Corp. v. Spink, 517 U.S. 882, 890, 116 S.Ct. 1783, 135 L.Ed.2d 153 MEDC has exercised, and continues to exercise, discretionary authority and control with respect to manageme......
  • 365 B.R. 91 (Bkrtcy.S.D.Ohio 2007), 04-40504, In re Amcast Indus. Corp.
    • United States
    • Federal Cases United States Bankruptcy Courts Sixth Circuit
    • March 12, 2007
    ...and plan participants. Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 443, 119 S.Ct. 755, 142 L.Ed.2d 881 (1999); Lockheed Corp. v. Spink, 517 U.S. 882, 890, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996) (holding that employers and other plan sponsors are generally free under ERISA to adopt, modif......
  • 534 F.Supp.2d 288 (D.Conn. 2008), 3 01CV2361, Amara v. Cigna Corp.
    • United States
    • Federal Cases United States District Courts 2nd Circuit District of Connecticut
    • February 15, 2008
    ...outset that employees can release claims of statutory ERISA violations in return for severance benefits. "In Lockheed Corp. v. Spink, 517 U.S. 882, 894, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996), the Supreme Court sanctioned the use of early retirement incentives conditioned upon the rele......
  • 886 F.Supp.2d 1007 (W.D.Wis. 2012), 09-cv-413-wmc, Chesemore v. Alliance Holdings, Inc.
    • United States
    • Federal Cases United States District Courts 7th Circuit Western District of Wisconsin
    • July 24, 2012
    ...that affect the value of its stock and thus the benefits that the ESOP participants will ultimately receive. Lockheed Corp. v. Spink, 517 U.S. 882, 890, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996). Companies will often also alter the design of their Page 1052 in the process of a sale, and such b......
  • Free signup to view additional results
8 firm's commentaries
  • The ERISA Litigation Newsletter - November 2012
    • United States
    • Mondaq United States
    • November 14, 2012
    ...are "generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans"; Lockheed v. Spink, 517 U.S. 882 (1999), which extended the ruling of Curtiss-Wright to include pension plans and found that plan sponsors amending the terms of a plan "......
  • The ERISA Litigation Newsletter - November 2012
    • United States
    • JD Supra United States
    • November 11, 2012
    ...are "generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans"; Lockheed v. Spink, 517 U.S. 882 (1999), which extended the ruling of Curtiss-Wright to include pension plans and found that plan sponsors amending the terms of a plan "......
  • The ERISA Litigation Newsletter - June 2013
    • United States
    • JD Supra United States
    • June 7, 2013
    ...(guidance on updated COBRA notice). * Originally published by Law 360. Reprinted with permission. [1] Lockheed Corp. v. Spink, 517 U.S. 882 [2] Subsidized coverage may be available to those making less than 400% of the federal poverty level ($45,960 for an individual or $94,200 for a family......
  • The ERISA Litigation Newsletter - June 2013
    • United States
    • Mondaq United States
    • June 10, 2013
    ...on updated COBRA notice). Footnotes * Originally published by Law 360. ** Originally published by Bloomberg, BNA. Lockheed Corp. v. Spink, 517 U.S. 882 (1996). Subsidized coverage may be available to those making less than 400% of the federal poverty level ($45,960 for an individual or $94,......
  • Free signup to view additional results
7 books & journal articles
  • Regulating ERISA Fiduciary Outsourcing
    • United States
    • Iowa Law Review Nbr. 102-2, January 2017
    • January 1, 2017
    ...fiduciary, 90. See 29 U.S.C. § 1002(21)(A) (2012); Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 444–45 (1999); Lockheed Corp. v. Spink, 517 U.S. 882, 890 (1996). 91. See 29 U.S.C. § 1110(a). 92. Compare id., with RESTATEMENT (SECOND) OF TRUSTS § 222(1) (1959). Under the common law of trus......
  • UNTRUSTWORTHY: ERISA'S ERODED FIDUCIARY LAW.
    • United States
    • William and Mary Law Review Vol. 59 Nbr. 3, February 2018
    • February 1, 2018
    ...note 44, at 462-64. (53.) Id. at 459. (54.) ERISA [section] 3(21)(A), 29 U.S.C. [section] 1002(21)(A). (55.) Lockheed Corp. v. Spink, 517 U.S. 882, 890 (1996). (56.) See WIEDENBECK, supra note 21, at 110-20. (57.) See Lockheed Corp., 517 U.S. at 890. (58.) WIEDENBECK, supra note 21, at 114.......
  • Managing Identity: Buying Into the Brand at Work
    • United States
    • Iowa Law Review Nbr. 95-4, May 2010
    • May 1, 2010
    ...06-CV-6297, 2008 WL 5234281, at *9 (W.D.N.Y. Dec. 12, 2008). [396] 29 U.S.C. § 1104(a)(1)(A)–(B) (2006). [397] Lockheed Corp. v. Spink, 517 U.S. 882, 893–94 (1996). [398] See Muir, supra note 36, at 31 (raising this question). [399] See Stabile, supra note 213, at 397–401 (discussing reform......
  • Sword or shield: due process and the fugitive disentitlement doctrine.
    • United States
    • Journal of Criminal Law and Criminology Vol. 87 Nbr. 3, March 1997
    • March 22, 1997
    ...Court stated, "[These] interests are substantial, but disentitlement is too blunt an instrument for advancing them." Degen 116 S. Ct. at 1783. (228) See discussion infra Part V.B. 1-4. (229) "Under these circumstances ... there could be no assurance that any judgment [the cou......
  • Free signup to view additional results
5 provisions
  • Financial Factors in Selecting Plan Investments
    • United States
    • Employee Benefits Security Administration
    • Invalid date
    ...with RULES3 72857 Federal Register / Vol. 85, No. 220 / Friday, November 13, 2020 / Rules and Regulations 34See Lockheed Corp. v. Spink, 517 U.S. 882 (1996); Hughes Aircraft Co. v. Jacobsen, 525 U.S. 432 (1999). See also Advisory Opinion 2011–05A (noting that a fiduciary decision to use pla......
  • Employee benefit plans; class exemptions: Litigation settlement-related plan transactions,
    • United States
    • Federal Register December 31, 2003
    • December 31, 2003
    ...as the payment of a plan benefit that would not trigger the need for an exemption. As the Supreme Court noted in Lockheed Corp. v. Spink, 517 U.S. 882, 892- 893 (1996), the payment of benefits is not a prohibited transaction. The plan must obtain advice from an attorney representing the pla......
  • Income taxes: testing rules application,
    • United States
    • Federal Register December 11, 2002
    • December 11, 2002
    ...States Supreme Court subsequently issued an opinion addressing the effective date of section 411(b)(1)(H) in Lockheed Corp. v. Spink, 517 U.S. 882 (1996), which is discussed below. On October 20, 1999, the IRS and Treasury published a solicitation for comments in the Federal Register (64 FR......
  • Adoption of Amendment to Class Exemption: Release of Claims and Extensions of Credit in Connection with Litigation (PTE 2003-39)
    • United States
    • Federal Register June 15, 2010
    • June 15, 2009
    ...that, in general, no exemption is needed to settle benefits disputes,\8\ including subrogation cases. \8\ See Lockheed v. Spink, 517 U.S. 882, 892-893 (1996) (the payment of benefits is not a prohibited Description of Amendments New Transactions The proposed amendment expanded the transacti......
  • Free signup to view additional results