Paulsen v. Cnf Inc.
| Decision Date | 20 March 2009 |
| Docket Number | No. 07-15389.,No. 07-15142.,07-15142.,07-15389. |
| Citation | 559 F.3d 1061 |
| Parties | Thomas A. PAULSEN, Plaintiff, Edward L. Frazee; Chester Madison, Plaintiffs, Lloyd Michael O'Connell, III, individually and on behalf of a class of all other persons similarly situated, Plaintiff, and Robert M. Bowden, Plaintiff-Appellant, Robert J. Newell, Plaintiff-Appellant, v. CNF INC.; CNF Service Company Inc.; Administrative Committee of the Consolidated Freightways Corporation Pension Plan; Stephen D. Richards; James R. Tener; Robert E. Wrightson; Towers, Perrin, Forster & Crosby, Inc.; Pension Benefit Guaranty Corporation, Defendants-Appellees. Thomas A. Paulsen; Robert M. Bowden; Edward L. Frazee; Robert J. Newell; Lloyd Michael O'Connell, III, individually and on behalf of a class of all other persons similarly situated; Chester Madison, Plaintiffs-Appellants, v. CNF Inc.; CNF Service Company Inc.; Administrative Committee of the Consolidated Freightways Corporation Pension Plan; Stephen D. Richards; James R. Tener; Robert E. Wrightson; Towers, Perrin, Forster & Crosby, Inc.; Pension Benefit Guaranty Corporation, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Teresa S. Renaker, Lewis, Feinberg, Lee, Renaker & Jackson, P.C., on behalf of plaintiffs-appellants Thomas A. Paulsen, Robert M. Bowden, Edward L. Frazee, Chester Madison, Robert Newell, and Lloyd Michael O'Connell III.
David L. Bacon, Thelen Reid Brown Raysman & Steiner LLP, on behalf of defendants-appellees CNF Inc. and CNF Service Co., Inc.
Gary S. Tell, O'Melveny & Meyers LLP, on behalf of defendants-appellees Stephen D. Richards, James R. Tener, Robert E. Wrightson, and the Administrative Committee of the Consolidated Freightways Corporation Pension Plan.
Robert E. Mangels and Susan Allison, Jeffer, Mangels, Butler & Marmano, LLP, on behalf of defendant-appellee Towers, Perrin, Forster & Crosby, Inc.
Charles L. Finke and Vicente Matias Murrell, Pension Benefit Guaranty Corporation, and Charles S. Birenbaum and Robert Spagat, Winston & Strawn, LLP, on behalf of defendant-appellee Pension Benefit Guaranty Corporation.
Appeal from the United States District Court for the Northern District of California, James Ware, District Judge, Presiding. D.C. No. CV-03-03960-JW.
Before EUGENE E. SILER, JR.*, M. MARGARET McKEOWN, and CONSUELO M. CALLAHAN, Circuit Judges.
Plaintiffs-Appellants are former employees () of CNF Inc. ("CNF"), a supply chain management company that underwent a substantial reorganization starting in 1996.1 The Employees allege that as a result of CNF's reorganization, which included a "spinoff" of an underperforming division of CNF in which the Employees worked, their retirement benefits were substantially reduced. The spinoff created a new company, Consolidated Freightways Corporation ("CFC"). Concurrent with the division spinoff, CNF also spun off part of the defined benefit pension plan in which the Employees were participants, and the Employees became members in a new plan sponsored by CFC. These plans are governed by the Employee Retirement Income Security Act of 1974 ("ERISA"). In connection with the plan spinoff, CNF engaged the actuarial services of Towers, Perrin, Forster & Crosby, Inc. ("Towers Perrin") to value the benefit liabilities to be transferred to the CFC-sponsored plan and associated assets to be transferred to cover those liabilities. This was done to certify compliance with the requirement of ERISA § 208, 29 U.S.C. § 1058, that each participant in the spun-off plan would (if the plan then terminated) receive a benefit immediately after the spinoff equal to or greater than the benefit she would have been entitled to receive immediately before the spinoff (if the plan had then terminated). Towers Perrin also provided actuarial services to the new CFC-sponsored plan and certified for several years after the spinoff that the new plan was adequately funded.
After the spinoff, CFC declared bankruptcy and "distress terminated" its pension plan, which was then determined to be under-funded by roughly $216 million. The termination resulted in a government corporation, the Pension Benefit Guaranty Corporation ("PBGC"), becoming trustee over the defunct plan. PBGC pays reduced benefits to participants of distress-terminated plans from assets pooled from all terminated plans.
The Employees sued CNF, CNF Service Co., the Administrative Committee of the CFC Pension Plan and its individual members ("Committee Defendants") for breaches of their ERISA-based fiduciary duties in connection with the spinoff.2 The Employees also sued Towers Perrin for professional negligence under state law in valuing the plan liabilities to be transferred at spinoff and in repeatedly certifying post-spinoff that the new plan was adequately funded. Finally, the Employees sued PBGC, as trustee, for not pursuing claims against the other defendants in connection with the spinoff. The district court dismissed all of the Employees' claims on various grounds, and this appeal followed.
We affirm the district court in part, reverse it in part, and remand. We affirm the district court's dismissal of the Employees' ERISA-based claims because the Employees lack Article III standing to pursue several of those claims, and lack standing under ERISA to pursue others. We also affirm the dismissal of the claim against PBGC because PBGC's non-enforcement decisions are presumptively immune from judicial review, and the Employees cannot rebut that presumption. Finally, however, we hold that the Employees might be able to state a claim for professional negligence against Towers Perrin under California law and remand for further proceedings on a more developed factual record.
CNF is a supply chain management company that provides services including trucking and air freight transportation. CNF operated two trucking units that, over time, began directly competing with one another: the unionized CF MotorFreight and non-unionized Con-Way Transportation Services, Inc. ("Con-Way"). In 1994 and 1995, CF MotorFreight posted operating income losses in the range of $34.4 to $46.6 million dollars, while Con-Way posted operating income gains in the range of $96.5 to $111.2 million dollars. In December 1996, CNF spun off CF MotorFreight, and created a stand-alone, unionized trucking company called Consolidated Freightways Corporation, or CFC.
Before the spinoff, the Employees were in essence participants in a defined benefit plan sponsored by CNF called the CNF Inc. Retirement Plan ("CNF Plan"). In connection with the spinoff, CNF created the Consolidated Freightways Corporation Pension Plan ("CFC Plan"). CNF and CFC entered into an Employee Benefit Matters Agreement ("EBMA"), which "provided that CNF employees who became CFC employees as a result of the corporate spinoff also would become participants in the CFC Plan and that the CNF Plan would transfer to the CFC Plan all its obligations owing to those participants." Five of the six Employees who were active CNF employees at the time of the spinoff were transferred to CFC. The EBMA also transferred the benefits obligations of certain named retirees receiving pension benefits under the CNF Plan, including plaintiff Frazee, to the CFC Plan.
The EBMA provided that the CNF would transfer a portion of the CNF Plan's liabilities to the CFC Plan; these transferred portions would be the initial liabilities of the CFC Plan. It also required CNF to transfer assets to the CFC Plan "equal to the present value of the CNF Plan accrued benefit liability for the transferred participants and retirees as of the date of the plan spinoff."3
Post-spinoff, the Committee Defendants administered the CFC Plan. The Committee Defendants consist of the Administrative Committee of the CFC Plan and CFC's officers who served on the committee. The committee's duties included retention of an enrolled actuary for the CFC Plan and establishment of a funding policy for the CFC Plan in consultation with the actuary.
The Employees allege that Towers Perrin, a consulting firm, provided actuarial services to the CNF Plan and the CFC Plan for the benefit of plan participants starting in at least November 1996.4 On November 1, 1996, CNF filed an IRS Form 5310-A (Notice of Plan Merger or Consolidation, Spinoff, or Transfer of Plan Assets or Liabilities), which it was required to file 30 days before the spinoff. As part of the filing, "Towers Perrin certified that participants in and beneficiaries of the new CFC Plan would be as well off on a termination basis in the CFC Plan as in the CNF Plan."5 In January 1997, Towers Perrin filed an amended Form 5310-A certifying the transfer based on more optimistic assumptions about interest rates and expected retirement age, which would result in a lower amount of assets being transferred at spinoff.
Towers Perrin also provided actuarial services to the CFC Plan post-spinoff, "including valuing the Plan on an annual basis." The Employees allege "that in each year from 1997 through 2001, Towers Perrin determined that the CFC Plan was fully funded and that CFC had no obligation to contribute to the Plan."6 This resulted in CFC making no contributions to the CFC Plan in these years.
In September 2002, CFC filed petitions for Chapter 11 bankruptcy. In January 2003, CFC informed the CFC Plan participants that the plan administrator would terminate the CFC plan in a "distress termination," effective March 2003, due to under-funding, and that the plan "would not have sufficient funds to pay all vested accrued benefits to all participants and beneficiaries" upon termination.7 Specifically, CFC estimated that "approximately 8% of current retirees would have their benefit amounts reduced under PBGC's maximum monthly benefit limits."8
PBGC assumed trustee responsibility for the CFC Plan in June 2003, and "estimated that the [CFC]...
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