Sutter v. BASF Corp.

• Decision Date: 18 May 1992
• Docket Number: Nos. 91-1419,91-1420,s. 91-1419
• Citation: 964 F.2d 556
• Parties: 15 Employee Benefits Cas. 1564 Lester SUTTER (91-1419); Anna Karbosky, Michael Manyak, Jr., and Stephen G. Panson (91-1420), Plaintiffs-Appellants, v. BASF CORPORATION, a Delaware corporation, formerly known as BASF Wyandotte Corporation, and Wyandotte Chemicals Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 556

964 F.2d 556

15 Employee Benefits Cas. 1564

Lester SUTTER (91-1419); Anna Karbosky, Michael Manyak Jr., and Stephen G. Panson (91-1420), Plaintiffs-Appellants, v. BASF CORPORATION, a Delaware corporation, formerly known as BASF Wyandotte Corporation, and Wyandotte Chemicals Corporation, Defendant-Appellee.

Nos. 91-1419, 91-1420.

United States Court of Appeals Sixth Circuit.

Argued March 30, 1992.

Decided May 18, 1992.

John A. Lygizos (argued and briefed), Detroit, Mich., for plaintiffs-appellants.

Robert A. Marsac (argued and briefed), Eric H. Lipsitt, Karen E. Bridges, Wise & Marsac, Detroit, Mich., for defendant-appellee.

Before: MARTIN, Circuit Judge; and LIVELY and BROWN, Senior Circuit Judges.

LIVELY, Senior Circuit Judge.

These consolidated appeals concern rights of retirees under the Employment Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. All of the plaintiff-retirees worked for the employer prior to the enactment of ERISA, and their claims also implicate the requirements of a pre-ERISA federal law, the Welfare and Pension Plan Disclosure Act (WPPDA), 29 U.S.C. §§ 301-309 (1958) (repealed effective January 1, 1975).

I.

A.

The plaintiffs are former salaried employees of BASF ¹ who were covered under the company's "Basic Retirement Income Plan," adopted in January 1950. All salaried employees with 180 months of credited service were automatically enrolled in this plan and only BASF made contributions. Later in 1950 BASF adopted a "Supplemental Retirement Income Plan." This was a separate plan under which eligible salaried employees could voluntarily contribute a prescribed percentage of their salaries; BASF would then make a contribution for the benefit of each participant. Three plaintiffs seek compensation for service time lost in calculation of their retirement benefits based on their failure to contribute voluntarily to the Supplemental Plan. The other plaintiff seeks compensation for service time lost because he withdrew his contributions to the Supplemental Plan. All claim that BASF breached its duty to disclose to them the effect noncontribution and withdrawal of contributions would have on the final computation of their retirement benefits.

The first literature prepared by BASF about the Supplemental Plan did not address the effect of employees withdrawing their voluntary contributions before retirement. However, by 1960, the information booklets periodically published by BASF regarding the Supplemental Plan did explain:

What if I do not join the plan when I am first eligible?

You can join at a later date, but, of course, you will not be allowed credited service for the period during which you were eligible but did not participate.

The 1960 Supplemental Plan summary described "credited service" as:

1) The total number of years you were continuously employed prior to June 1, 1950, after the month in which you attained age 30, and

2) Each month after June 1, 1950 during which you received compensation from the company provided you joined the Plan immediately upon becoming eligible and made the contributions required under the Plan. (emphasis added)

BASF merged the Basic and Supplemental Plans in 1961, and the consolidated Retirement Income Plan for Salaried Employees (The Plan) contained the components of both earlier plans. In 1961 The Plan set forth three formulae that could be used to calculate an employee's benefits upon retirement, with the assurance that an employee's final benefits calculation would be made under the formula yielding the highest monthly payment to the employee. Formulae A and C took into account all of an employee's years of credited service as defined by the earlier Basic Plan, plus a variety of other factors; Formula B did not count the years of credited service during which an eligible employee did not contribute to the Supplemental Plan.

In 1965 BASF eliminated the voluntary contributions feature of The Plan. Employee benefits could then be calculated under two formulae: Formula I counted, among other things, only those years of credited service between 1950 and 1965 during which an eligible employee made voluntary contributions; and Formula II counted, among other things, all of an employee's credited service. A draft of a Memorandum explaining the change to BASF's employees stated:

Those employees who have been eligible to make contributions, but elected not to do so, will receive full benefits on our final pay formula (Formula A as described in booklet dated August 1, 1961) if that formula is to their advantage, for service after May 1, 1965, only.

Beginning in 1950 BASF periodically published summaries of the Basic Plan, the Supplemental Plan and The (consolidated) Plan. The summaries all set forth eligibility requirements, options for the payment of benefits, and interaction of pensions with Social Security benefits. In addition, many of the summaries included examples to help employees calculate their own benefits under the various formulae.

BASF presented undisputed testimony that the summary booklets were placed on file in the company's Benefits Department at the principal office in Wyandotte, Michigan. The director of employee benefits also testified that, to his knowledge, the booklets were distributed to employees, but the plaintiffs in this case contend they did not see or receive any benefits summaries until the 1970s. After the enactment of ERISA, in addition to making numerous changes in the structure of The Plan to bring it into compliance with federal law, BASF complied with ERISA's requirement that each participant and beneficiary affected by a plan be furnished with a Summary Plan Description (SPD). Some of the plaintiffs recalled receiving SPDs regularly from the mid-1970s until their retirement.

B.

The four plaintiffs in this case all retired subject to the provisions of either the 1984 or 1987 version of The Plan. For purposes of this litigation, the two versions had the same structure--both contained two formulae for calculating benefits. Formula I was an actuarial device that did not take into account the years of service between 1950 and 1965 in which an eligible employee elected not to make voluntary contributions to the pension fund, and Formula II counted, among other things, all of an employee's years of service. The 1987 Plan guaranteed:

In no event shall the Participant's benefit ... be less than the accrued benefit (if any) of the Participant under any Predecessor Plan calculated as of the day before he became a Participant of this Plan.

Both plans (1984 and 1987) granted the Benefits or Pension Committee a high degree of discretionary power. For example, the 1987 Plan provided:

[T]he Benefits Committee has been delegated certain administrative functions relating to the Plan with all powers necessary to enable it to properly carry out such duties. The Benefits Committee shall have powers to construe the Plan and ... determine all questions that may arise thereunder relating to (a) the eligibility of individuals to participate in the Plan, and (b) the amount of benefits to which any Participant or Beneficiary may become entitled hereunder.

As BASF employees began to retire in the late 1970s and early 1980s, many eligible persons who had not voluntarily contributed to the Supplemental Plan or had withdrawn their contributions complained about how much less they were scheduled to receive in benefits than their counterparts who did contribute voluntarily between 1950 and 1965. The Pension Committee undertook a study to consider possibilities for crediting lost service, including arbitrarily restoring one-half of all lost service and allowing employees to purchase the lost service. BASF concluded that any such change in The Plan was not feasible because of significant administrative complexity and costs. Among other factors, the Pension Committee considered the fact that any amendments would require I.R.S. approval and would involve large additional employer contributions. In a confidential memorandum dated November 19, 1984, a BASF vice-president advised all site managers of the decision not to change the plan. A BASF employee testified that the decision was not motivated solely by cost, but also by considerations of equity to employees who had made contributions voluntarily between 1950 and 1965 and therefore deserved larger pension payments upon retirement.

II.

The plaintiffs filed two actions under ERISA claiming breach of contract and fiduciary duty, misrepresentation, and discrimination in the awarding of retirement benefits. The district court consolidated the cases for discovery purposes.

The claims of all four plaintiffs relate to the Supplemental Plan. Three of them never contributed to that plan, and the fourth contributed to it until the 1965 elimination of contributions by employees to the merged plan. At that time, allegedly in reliance upon advice by a supervisor that withdrawal of his contributions would have a minimal impact on his ultimate pension, he withdrew all that he had contributed.

Basically, the plaintiffs argued in the district court and in this court that if they had known the impact on their retirement benefits of voluntarily contributing to the Supplemental Plan from their dates of eligibility to 1965 (and of withdrawing contributions in the case of one), they would have made such contributions (and not withdrawn those already made).

At the conclusion of extensive discovery, BASF moved for summary judgment on all claims. After a hearing, the district court granted BASF's motion for summary judgment, 757 F.Supp. 813, finding that there were no disputed material facts in issue. In addressing the plaintiffs' claims that they were not given credit for all their years of service, the court found that every version of BASF's pension plan contained at least one formula under which all of an employee's years of service were credited and that a retiree...