Cottillion v. United Ref. Co.
| Decision Date | 18 March 2015 |
| Docket Number | 13–4743.,Nos. 13–4633,s. 13–4633 |
| Parties | John COTTILLION; Beverly Eldrige, on behalf of themselves and all others similarly situated, Cross–Appellants in No. 13–4743 v. UNITED REFINING COMPANY; United Refining Company Pension Plan for Salaried Employees; United Refining Company Retirement Committee; John And Mary Does 1 to 10 United Refining Company; United Refining Company Pension Plan for Salaried Employees; United Refining Company Retirement Committee, Appellants in No. 13–4633. |
| Court | U.S. Court of Appeals — Third Circuit |
Eugene D. Fowler, Esq., Christopher J. Rillo, Esq. (Argued), Diane M. Soubly, Esquire, Rillo Law Group, San Francisco, CA, for Appellants/Cross Appellees.
Tybe A. Brett, Esq. (Argued), Ellen M. Doyle, Esq., Joel R. Hurt, Esq., Feinstein, Doyle, Payne & Kravec, Pittsburgh, PA, for Appellees/Cross Appellants.
Jessica R. Amunson, Esq., Jenner & Block, Janet M. Jacobson, Esq., The American Benefits Council, Scott J. Macey, President and CEO, Debra Davis, Vice President, The ERISA Industry Committee, Kat Comerford Todd, Esq., Steven P. Lehotsky, Esq., Warren Postman, Esquire, National Chamber Litigation Center, Inc., Washington, DC, Craig C. Martin, Esq., Matthew J. Renaud, Esq., Amanda S. Amert, Esq., Jenner & Block, Chicago, IL, for Amicus Appellants/Cross–Appellees.
Mary E. Signorille, Esq., Anita Khushalani, Esq., AARP/AARP Foundation Litigation, Washington, DC, for Amicus Appellees/Cross–Appellants.
Before: AMBRO, CHAGARES, and VANASKIE, Circuit Judges.
The Employee Retirement Income Security Act of 1974 (“ERISA”), a law meant to guarantee that employees will receive the retirement benefits they are promised, governs pension plans. We determine whether the calculation of retirement benefits that the United Refining Company and co-defendants (who appeal and are collectively referred to throughout this opinion as “United”) provided in a pension plan to a specific class of former employees (collectively, “Employees”) varied, as United argues, depending on how old they were when they elected to receive the benefits. Because United's reading finds no support in the text of the plans, we affirm the rulings of the District Court.
John Cottillion worked at United for 29 years, from 1960 until 1989. He was 54 years old when he quit, and his benefits had vested under “the 1980 Plan,” which is the version of United's Pension Plan for Salaried Employees that applies to people whose benefits vested (i.e., became non-forfeitable under ERISA) after 1980 but before 1987. Because his employment at United was long enough to vest benefits and he was too young on leaving United to receive those benefits, Cottillion belongs to the subset of former United employees involved in this lawsuit: “terminated vested participants” or “TVPs” in United's pension plan. TVPs are distinct from Early Retirees, who are not a part of this litigation; the latter are people who retired directly from United at an age older than 59 ½ or 60 (depending on the applicable Plan) but younger than 65.
When Cotillion left the company, United wrote a letter informing him that “[a]s a terminated Pension Plan participant with a vested interest, you are eligible for a deferred retirement benefit from the United Refining Company Pension Plan for Salary [sic ] Employees.” The letter further stated that he “may elect to have [his] monthly retirement benefit begin at anytime [sic ] after October, 1995,” the month in which Cottillion would turn 60, and that his “monthly retirement benefit will be $573.70 at age 60.” The letter did not state that the amount of Cottillion's benefit depended on whether he elected to receive it at age 60 or later. TVPs under the 1987 Plan were likewise informed of their pension amounts and told they could receive them the month following their “59 ½ birthday ... without any reduction for early retirement.” E.g., Beverly Eldridge, Application for Commencement of Deferred Vested Benefits, Terminated Vested Participants (Jan. 9, 1997).
On January 30, 2002, United amended and restated the plan, backdated to January 1, 1995 (the “1995 Plan”), to comply with then-recent amendments to ERISA. The Internal Revenue Service informed United that certain changes needed to be made to the Plan before it could issue a letter confirming that the 1995 Plan would receive favorable tax treatment; in response, United amended the 1995 Plan, effective January 1, 2002 (the “2002 Plan”). Both the 1995 and 2002 Plans included a § 5.04(c), absent from the 1980 and 1987 Plans, stating that the benefits of TVPs who receive pensions before age 65 would be “actuarially reduced to reflect the earlier starting date thereof.” Neither the 1995 Plan nor the 2002 Plan applies to any employee-plaintiff in this case, but they are relevant because of what happened next.
In 2005, plan actuaries (professionals who perform a variety of services relating to implementing and maintaining ERISA plans) at the firm Towers Perrin informed Lawrence A. Loughlin, the plan administrator, that United had erroneously paid to TVPs vested under the 1980 and 1987 Plans pensions that were not “actuarially reduced,” i.e., calculated in light of the TVP's age. (The younger a beneficiary is, the longer she will receive benefits, and thus retirement plans often lower benefits for people who take them early so that the benefits are worth the same regardless when they begin to be paid.) Because operational deviations from the terms of ERISA-governed plans can jeopardize their favorable tax treatment, John Owsen, United's (now deceased) longtime outside counsel for benefits matters, sent a letter to the IRS in November 2005 proposing to recoup the excess funds paid. Owsen's letter followed the IRS's voluntary correction program through which employers may notify the Service of proposals to fix mistakes in administering ERISA plans and receive assurance that the IRS will not disqualify a plan from favorable tax treatment. The letter cited and attached the 2002 version of § 5.04(c), but it did not call attention to the absence of this language in the 1980 and 1987 Plans. In March 2006 the IRS issued a “Compliance Statement,” which affirmed that the IRS “will not pursue the sanction of Plan disqualification on account of the qualification failure described in the Submission,” but cautioned that it “does not express an opinion as to the accuracy or acceptability of any ... material submitted with the application” and “should not be construed as affecting the rights of any party under any other law, including” ERISA.
In July and August 2005, after notification from Towers Perrin but before the IRS correspondence, United sent letters to TVPs who had not yet begun to receive benefits “to clarify when you can receive your pension from United Refining Company and under what terms.” This letter stated that if a TVP elected to receive retirement benefits before turning 65, the benefit would be reduced to reflect the early election date in accord with the following table:
| Age | Factor | ||
| 64 | 89% | ||
| 63 | 80% | ||
| 62 | 72% | ||
| 61 | 65% | ||
| 60 | 59% | ||
| 59 ½ | 56% |
About a year later, United sent letters to TVPs who were already receiving pensions. These letters stated, “The Plan document requires that all pension benefits paid to terminated vested participants PRIOR to their Normal Retirement Age of 65 years MUST be actuarially reduced to the earlier payment date” (emphasis in original). Indeed, some retirees were told that in two weeks from the date of the letter their monthly pension would be lowered “until the excess payments have been recovered, after which you will begin receiving the amount that should have been provided to you based on the correct calculation.” Others were told that in two weeks the amount of money already paid that exceeded the actuarially reduced benefit. In Cottillion's case, his pension of $506.58 per month was eliminated, and he was told he should pay the Plan $14,475. The letters represented that the reductions were necessary for the Plan to retain its favorable tax treatment under the Internal Revenue Code and that the statements in the letter were “based on the [IRS]'s published revenue procedures and Compliance Statement which the Plan Retirement Committee must follow.”
After receiving this letter, the Employees represent that Cottillion had a telephone conversation with Loughlin, the plan administrator and author of the letter, during which Cottillion complained about the reduction in pension benefits. Loughlin told him that the reduction corrected a mistake that had resulted in excessive payments. Several other aggrieved TVPs wrote to Loughlin, who replied by letter that the plan documents required the correction to maintain the plan's favorable tax treatment. Some, but not all, who complained were informed that they could file a written appeal of Loughlin's decision.
The Employees sued in the Western District of Pennsylvania alleging, as relevant here, that United's actions deprived them of a benefit to which they were entitled under the Plan, in violation of 29 U.S.C. § 1132(a)(1)(B), and that they violated ERISA's “anti-cutback” rule, 29 U.S.C. § 1054(g), which prohibits employers from amending a plan in a way that reduces benefits accrued under a defined benefit plan (such as the Plans at issue here). Judge Sean McLaughlin denied United's Motion to Dismiss and later granted the Employees' Motion for Summary Judgment in part and denied United's Motion for Summary Judgment, holding that United's actions violated the anti-cutback rule. When Judge McLaughlin resigned to enter the business world, the case was assigned to Judge Cathy Bissoon. She granted the Employees' Motion for Class Certification, granted in part their Motion for Final...
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