Horan v. Kaiser Steel Retirement Plan
| Decision Date | 04 November 1991 |
| Docket Number | Nos. 89-56116,89-56120,89-56122,89-56119,s. 89-56116 |
| Citation | 947 F.2d 1412 |
| Parties | 14 Employee Benefits Cas. 1968 Robert Patrick HORAN, et al., Plaintiff, and Jonnie S. Koch, Plaintiff-Appellant, v. KAISER STEEL RETIREMENT PLAN; Perma Pacific, Inc.; Monte H. Rial; Charles H. Black, et al., Defendants-Appellees. Robert Patrick HORAN, et al., Plaintiff, and Ernest G. Dick, Plaintiff-Appellant, v. KAISER STEEL RETIREMENT PLAN; Perma Pacific, Inc.; Monte H. Rial; Charles H. Black, et al., Defendants-Appellees. Robert Patrick HORAN, et al., Plaintiff, and James Grady Butler, Plaintiff-Appellant, v. KAISER STEEL RETIREMENT PLAN; Perma Pacific, Inc.; Monte H. Rial; Charles H. Black, et al., Defendants-Appellees. Robert Patrick HORAN, et al., Plaintiff, and John Thomas Logue, Plaintiff-Appellant, v. KAISER STEEL RETIREMENT PLAN; Perma Pacific, Inc.; Monte H. Rial; Charles H. Black, et al., Defendants-Appellees. Robert Patrick HORAN, et al., Plaintiff, and George E. Johnson, Plaintiff-Appellant, v. KAISER STEEL RETIREMENT PLAN; Perma Pacific, Inc.; Monte H. Rial; Charles H. Black, et al., Defendants-Appellees. Robert Patrick HORAN, et al., Plaintiff, and Walter Saccani, Plaintiff-Appellant, v. KAISER STEEL RETIREMENT PLAN; Perma Pacific, Inc.; Monte H. Rial; Charles H. Black, et al., Defendants-Appellees. Robert Patrick HORAN, et al., Plaintiff, and Edwin D. Baumann, Plaintiff-Appellant, v. KAISER STEEL RETIREMENT PLAN; Perma Pacific, Inc.; Monte H. Rial; Charles H. Black, et al., Defendants-Appellees. Robert Patrick HORAN, et al., Plaintiff, and Donald W. Duffy, Plaintiff-Appellant, v. KAISER STEEL RETIREMENT PLAN; Perma Pacific, Inc.; Monte H. Rial; Charles H. Black, et al., Defendants-Appellees. Robert Patrick HORAN, et al., Plaintiff, and Finnis Arnold Epperson, Plaintiff-Appellant, v. KAISER STEEL RETIREMENT PLAN; Perma Pacific, Inc.; Monte H. Rial; Charles H. Black, et al., Defendants-Appellees. Robert Patrick HORAN, et al., Plaintiff, and Donald Joseph Odenbach, Plaintiff-Appellant, v. KAISER STEEL RETIREMENT PLAN; Perma Pacific, Inc.; Monte H. Rial |
| Court | U.S. Court of Appeals — Ninth Circuit |
Donald H. Dye, Dye, Thomas, Luebs & Mort, Riverside, Cal., for plaintiffs-appellants.
Julia A. Molander, Bronson, Bronson & McKinnon, San Francisco, Cal., for defendants-appellees Kaiser Steel Retirement Plan, Miles Yeagley, George Seplak, Richard Hoges, Monty H. Rial, Patrick J. Hunt, Charles Holmes and Robert Merrick.
Roy G. Weatherup, Haight, Brown & Bonsteel, Santa Monica, Cal., for defendant-appellee Charles H. Black.
Jean Marie Breen, Office of Gen. Counsel, Washington, D.C., for amicus curiae Pension Benefit Guar. Corp.
Appeal from the United States District Court for the Central District of California.
Before NORRIS and THOMPSON, Circuit Judges, and KING, District Judge. *
OVERVIEW
The plaintiffs are former employees of Kaiser Steel Corporation. They brought this suit under the Employee Retirement Income Security Act to recover annuities they contend they are entitled to under the terms of Kaiser's pension plan, and/or as a result of the individual defendants' breach of their fiduciary duties. The district court granted the defendants' summary judgment motion and dismissed the plaintiffs' claims. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.
Twenty-four former Kaiser Steel Corporation ("Kaiser") employees brought this action against the Kaiser Steel Retirement Plan ("Plan") and former members of the Plan's Investment Committee. The plaintiffs were beneficiaries of the Plan, which was a defined benefit plan under the Employee Retirement Income Security Act ("ERISA"). The Investment Committee was responsible for directing Plan investments.
From 1977 to 1984, the Plan purchased annuities for each retiree. To purchase an annuity, the Plan would pay between $150,000 to $200,000 per retiree to an insurance company. The insurance company would then assume responsibility for the monthly pension payments.
In the late 1970s, Kaiser began facing economic difficulties. In 1983, Kaiser decided to close its Fontana mill. All the plaintiffs were employed at the Fontana mill at this time. As a result of the closure, an unusually large number of employees became eligible for retirement. In 1984, 199 employees retired, and the Plan spent $15.1 million to purchase an annuity for each of these retirees. By 1985, the Plan was facing a financial crisis. A memo directed to the Investment Committee stated that the Plan assets totaled only $1.1 million and that the continued purchases of annuities would completely exhaust the Plan by February 1985.
In February 1985, the Investment Committee responded by adopting a resolution ("1985 resolution") to discontinue the purchase of annuities. The Investment Committee decided to begin paying pension benefits directly from the Plan trust. The 1985 resolution stated that annuities would not be purchased for employees retiring after January 1985, or for those employees who had retired prior to January 1985 but had not had annuities purchased for them.
The amount received in monthly payments directly from the trust was the same amount the retirees would have received had an annuity been purchased for them. The Plan's assets were sufficient to continue these monthly payments until February 1987, when Kaiser filed for Chapter 11 bankruptcy. The Plan then terminated under Title IV of ERISA, and the Pension Benefit Guaranty Corporation ("PBGC") became the statutory trustee of the Plan and began making the payments to the beneficiaries. The retirees who were receiving monthly benefits directly from the trust suffered a reduction in monthly benefits when the PBGC took control. In contrast, the amount of monthly payments remained the same for those employees for whom an annuity had been purchased.
The plaintiffs brought suit in an attempt to gain an annuity for each individual plaintiff. The district court granted the defendants' motion for summary judgment and dismissed the case. This appeal followed.
The plaintiffs first contend the district court erred by requiring the plaintiffs to exhaust their administrative remedies pursuant to the Plan. We conclude a waiver of the exhaustion requirement is appropriate in this case.
A beneficiary seeking a determination of rights or benefits under a plan must first exhaust the administrative remedies provided by the plan. 1 Amato v. Bernard, 618 F.2d 559, 567 (9th Cir.1980). A district court has discretion to waive the exhaustion requirement, Southeast Alaska Conservation Council v. Watson, 697 F.2d 1305, 1309 (9th Cir.1983), and should do so when exhaustion would be futile. Amato, 618 F.2d at 568.
We believe it would be unnecessary to require the plaintiffs to exhaust their administrative remedies. The PBGC is now administering the Plan and unequivocally states in its amicus brief that the plaintiffs are not entitled to an annuity under the terms of the Plan. Thus, we are fully apprised of the administrator's expertise and its decision as to the merits of the plaintiffs' claim. Therefore, we will waive the exhaustion requirement and address the merits of the plaintiffs' benefits claim.
The plaintiffs contend they are entitled to an annuity under the terms of the Plan. The plaintiffs argue the Investment Committee did not have discretion to terminate the practice of purchasing annuities. In the alternative, if we conclude the Investment Committee did possess discretion over whether to purchase annuities, the plaintiffs argue the decision to terminate the purchase of annuities was arbitrary and capricious. We reject both arguments.
Section F(3)(b) of the Plan gives the Investment Committee the option of purchasing annuities:
The Investment Committee may elect to have any pension under this Plan paid by purchase of an annuity from an insurance company. The purchase of such an annuity shall discharge all payment obligations under the Plan.
(emphasis added). By using the word "may," the Plan does not obligate the Investment Committee to purchase an annuity for each retiree. The plaintiffs, however, rely on two arguments to contend the Investment Committee was deprived of its discretion and obligated to purchase annuities for the plaintiffs: (1) the past practice of purchasing annuities obligated the Investment Committee to continue to purchase annuities, and (2) the Investment Committee is equitably estopped from refusing to purchase annuities based on their alleged promises to purchase annuities.
Until 1985, the Investment Committee purchased annuities for each retiree. This past practice does not deprive the Investment Committee of its discretion and obligate it to purchase annuities for all future retirees. See Oster v. Barco, 869 F.2d 1215, 1219 (9th Cir.1988). To hold...
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