Williams v. Caterpillar, Inc.

• Decision Date: 05 September 1989
• Docket Number: No. C-88-1281 EFL.,C-88-1281 EFL.
• Citation: 720 F. Supp. 148
• Parties: Cecil L. WILLIAMS, et al., Plaintiffs, v. CATERPILLAR, INC., a Corporation, et al., Defendants.
• Court: U.S. District Court — Northern District of California

720 F. Supp. 148

Cecil L. WILLIAMS, et al., Plaintiffs, v. CATERPILLAR, INC., a Corporation, et al., Defendants.

No. C-88-1281 EFL.

United States District Court, N.D. California.

September 5, 1989.

Richard Grosboll, Neyhart, Anderson, Nussbaum, Reilly & Freitas, P.C., San Francisco, Cal., for plaintiffs.

Julie L. Bertelsman, Seyfarth, Shaw, Fairweather & Jeraldson, San Francisco, Cal., for defendants.

ORDER GRANTING SUMMARY JUDGMENT FOR DEFENDANT

LYNCH, District Judge.

I. INTRODUCTION

This matter comes before the Court on cross-motions for summary judgment. A hearing was held on July 21, 1988, at which time the Court issued a tentative ruling. For the reasons given from the bench and recapitulated below, the Court grants summary judgment to the defendants.

The following facts are not in controversy. The plaintiffs are all former employees of defendant Caterpillar, Inc. All were hired as hourly workers at the San Leandro, California plant. Each at some point was promoted to a salaried management position. Economic reverses led Caterpillar to institute a cost-reduction program. As part of this program, plaintiffs were demoted back to hourly positions covered by the local bargaining unit.

Plaintiffs allege they were promised that the demotions were temporary. Instead, each plaintiff was eventually terminated between September 1984 and April 1985.

Plaintiffs seek injunctive and declaratory relief and damages for the benefits due them under the Caterpillar pension and health plans. Both non-union and union employees are covered by plans (hereinafter "management plan" and "union plan") which provide pension and health benefits upon retirement. Plaintiffs allege that the defendants misrepresented their future at the company and the effect of demotion on their retirement benefits. This Court has jurisdiction over their action pursuant to the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. section 1104 et seq.¹

II. DISCUSSION

A. Vesting of pension benefits

On November 4, 1988, this Court granted partial summary judgment for the defendants on Counts 1 through 3, leaving open only the question of whether the benefits formula was correctly applied to each plaintiff. Defendants' motion for summary judgment on the remaining issue is unopposed.

B. Misrepresentations about pension benefits

In Count 4, plaintiffs maintain that defendants violated their fiduciary duties by misrepresenting the effect of the demotions on their retirement benefits. Because defendants urged them to see Caterpillar through its economic difficulties, plaintiffs allegedly did not pursue other employment in which they could have earned greater benefits. The Court awards summary judgment to the defendants as to Count 4 because beneficiaries have no right to extracontractual damages.

Section 502(a) sets forth the six civil actions by which the terms of a plan and ERISA may be enforced. Although plaintiffs do not identify the provisions on which they rely, sections 502(a)(2) and (3) are the only plausible sources for the relief they seek. The former allows a participant to sue to recover benefits due him under the plan. The Court has already concluded that the plaintiffs are being paid all benefits for which Caterpillar is contractually obligated.

Section 502(a)(2) also allows a participant to apply for "appropriate relief under section 409," which imposes liability for breach of fiduciary duty. However, the Supreme Court has ruled that a fiduciary cannot be personally liable to a participant for these breaches. Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985). In that case, the Court held that Congress did not provide for a cause of action for extracontractual damages caused by the untimely processing of benefit claims. "A fair contextual reading of the statute makes it abundantly clear that its draftsmen were primarily concerned with the possible misuse of plan assets, and with remedies that would protect the entire plan, rather than with the rights of an individual beneficiary." Id. 473 U.S. at 142, 105 S.Ct. at 3090.

The language of section 502(a)(3) arguably allows this type of recovery under the guise of "other appropriate equitable relief." However, the Ninth Circuit has extended the holding of Russell to section 502(a)(3):

There is considerable support in Russell for the proposition that no provision in ERISA authorizes the award of extracontractual damages. First, Russell held that the fiduciary duties set forth in section 409 run only to the plan, and not to individual beneficiaries. In so holding, the Russell Court used language implying that all of the statute's provisions relating to fiduciary duties run only to plans, and not to beneficiaries as individuals.... The opinion observes that the statute focuses not on the direct protection of a beneficiary's interests, but on the protection of the integrity of the plan in which the beneficiary is enrolled. Put another way, ERISA grants no private right of action by a beneficiary qua beneficiary.

....

... It appears that Congress used the word "equitable" to mean what it usually means — injunctive or declaratory relief.... For us to add an extracontractual remedy to a list of remedies so strongly contractual in nature would be to step beyond the province of the judiciary and into that of the legislature.

Sokol v. Bernstein, 803 F.2d 532, 534, 538 (9th Cir.1986) (citations and footnotes omitted) (damages for beneficiary's emotional distress not available).

In Drinkwater v. Metropolitan Life Insurance Co., 846 F.2d 821 (1988), the First Circuit Court of Appeals reached the same conclusion under circumstances identical to those here, holding that 502(a)(3)(B) did not authorize a beneficiary to sue for damages because of a fiduciary's misrepresentation of the benefits to which he was entitled. "`Other appropriate relief' should be interpreted to mean what it says — declaratory or injunctive relief, not compensatory and punitive damages." Id. at 824. Every other court which has considered misrepresentations has treated it like any other breach of fiduciary duty and reached the same conclusion: ERISA does not provide for extracontractual damages for participants. See Farrell v. Automobile Club of Michigan, 870 F.2d 1129, 1133 (6th Cir.1989) (plaintiffs relied on misrepresentation that early retirement plan more generous than regular retirement plan); Straub v. Western Union Telegraph Co., 851 F.2d 1262, 1265 (10th Cir.1988) (plaintiff relied on misrepresentation that job transfer would not affect pension benefits).

Plaintiffs are clearly claiming for relief which they are not due under the contractual terms of their plan, relief which ERISA will therefore not supply. They ask for what was promised orally, not that which was bargained for collectively. Plaintiffs themselves refer to these promises as "misrepresentations" of what the plan provided.

Plaintiffs cite cases which indicate that a fiduciary breaches his duty by misrepresenting a plan's benefits. Even if this is true, this does not mean that a beneficiary gets damages for those representations.

Plaintiffs hope to circumvent Russell by invoking the doctrine of equitable estoppel against the defendants, arguing that the plan fiduciaries may not now repudiate promises made earlier even if those promises exceeded their actual entitlement under the terms of the plan. This Court cannot estop the defendants if permitting recovery would be inconsistent with the exclusive remedies of the statute and the intent of Congress. Cf. Davidian v. Southern California Meat Cutters Union and Food Employees Benefit Fund, 859 F.2d 134 (9th Cir.1988) (fund may not be estopped from denying benefits not owed under written plan); Moran v. Aetna Life Insurance Co., 872 F.2d 296 (9th Cir.1989) (defendant may not be estopped from denying it is plan administrator with obligations under ERISA, citing Russell).

The Tenth Circuit has taken the same position, noting that "ERISA's express requirement that the written terms of a benefit plan shall govern forecloses the argument that Congress intended for ERISA to incorporate state law notions of promissory estoppel." Straub, 851 F.2d at 1265. The Straub court followed the lead of the Eleventh Circuit in refusing to allow oral modifications of employee benefit plans:

A central policy goal of ERISA is to protect the interests of employees and their beneficiaries in employee benefit plans. This goal would be undermined if we permitted oral modifications of ERISA plans because employees would be unable to rely on these plans if their expected retirement benefits could be radically affected by funds dispersed to other employees pursuant to oral agreements. This problem would be exacerbated by the fact that these oral agreements often would be made many years before any attempt to enforce them.

Nachwalter v. Christie, 805 F.2d 956, 960 (11th Cir.1986) (citations omitted).

Plaintiffs and employees similarly situated receive the many protections of ERISA in exchange for certain rights to sue under previous federal and state law. Congress has decided that they are better off for the bargain. Whatever injustices this scheme may tolerate in isolated instances are more than compensated by the general security provided to pension rights under ERISA — plaintiffs themselves are now enjoying the fruits of rights which Caterpillar could not and cannot divest. If workers deserve further protection, it will be up to Congress to provide it.

C. Health benefits

In Count 5, plaintiffs claim for defendants' failure to provide the health benefits allegedly due them at retirement age. There are three possible arguments against summary judgment on Count 5. The first treats liability for this failure as a breach of fiduciary duty for which plaintiffs should receive extracontractual relief. This argument was rejected above.

The second attacks the plan...