Abraham v. Exxon Corp.

• Decision Date: 10 June 1996
• Docket Number: No. 95-30704,95-30704
• Parties: , 20 Employee Benefits Cas. 1353, Pens. Plan Guide P 23921N N. Mark ABRAHAM, Richard E. Ellis, William O. Flowers, Robert Giurintano and Billy J. Walker, Plaintiffs-Appellants, v. EXXON CORPORATION d/b/a Exxon Company USA, Benefit Plan of Exxon Corporation and Participating Affiliates, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1126

85 F.3d 1126

64 USLW 2811, 20 Employee Benefits Cas. 1353,

Pens. Plan Guide P 23921N

N. Mark ABRAHAM, Richard E. Ellis, William O. Flowers, Robert Giurintano and Billy J. Walker, Plaintiffs-Appellants, v. EXXON CORPORATION d/b/a Exxon Company USA, Benefit Plan of

Exxon Corporation and Participating Affiliates,

Defendants-Appellees.

No. 95-30704.

United States Court of Appeals, Fifth Circuit.

June 10, 1996.

Michael Thomas Tusa, Jr., David E. Walker, Metairie, LA, Philip Bohrer, Ramsey, Koederitz & Bohrer, Baton Rouge, LA, for plaintiffs-appellants.

Howard Shapiro, Heather G. Magier, Taryn S. Southon, McCalla, Thompson, Pyburn, Hymowitz & Shapiro, New Orleans, LA, for defendants-appellees.

Douglas Bernard Neagli, Exxon Company USA, Houston, TX, for Exxon Corp.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before POLITZ, Chief Judge, and HIGGINBOTHAM and SMITH, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Plaintiffs N. Mark Abraham and others (collectively "Abraham") appeal a summary judgment in favor of Exxon Corporation and the Benefit Plan of Exxon Corporation (collectively "Exxon") on their ERISA ¹ claims. We affirm in part and vacate and remand in part.

I.

The plaintiffs are "leased" or "special agreement" employees of Exxon who work at Exxon facilities. They are similar to ordinary Exxon employees in many ways: They report to Exxon supervisors, have Exxon business cards, and play on the Exxon softball team. Exxon is not their direct employer, however. Instead, the plaintiffs are nominally employed by unaffiliated firms that lease their services to Exxon.

Exxon maintains an ERISA plan ("the plan" or "the Exxon plan"), for the benefit of its own employees, that specifically excludes leased and special agreement employees such as the plaintiffs. The plan vests "discretionary and final authority" to determine eligibility in the plan administrator, currently J.J. Rouse.

The plaintiffs applied to Rouse for benefits and certain plan information. He determined that the plan excluded the plaintiffs from participation, denied them benefits, and failed to provide the requested information. The plaintiffs filed this ERISA suit, seeking both a determination that they were entitled to benefits from the plan and statutory penalties for Rouse's failure to provide them the requested information.

Exxon moved for summary judgment. It conceded for purposes of summary judgment that the plaintiffs were "common law employees" of Exxon under the criteria set forth in Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992), but maintained that they were not entitled to relief. The district court agreed and granted summary judgment.

II.

As a threshold matter, we must determine whether Abraham has standing. ² Only a "participant or beneficiary" of an ERISA plan has standing to bring a civil action under ERISA. 29 U.S.C. § 1132(a)(1). Abraham claims only to be a "participant" in the Exxon plan, so we need not consider whether he is a "beneficiary."

Whether an employee has standing as a "participant" depends, not on whether he is actually entitled to benefits, but on whether he has a colorable claim that he will prevail in a suit for benefits. ERISA itself defines a "participant" as an employee "who is or may become eligible to receive a benefit of any type from an employee benefit plan." Id. at § 1002(7). Those who "may become eligible" to receive benefits include anyone who "ha[s] a colorable claim that ... he or she will prevail in a suit for benefits." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117, 109 S.Ct. 948, 958, 103 L.Ed.2d 80 (1989). Thus, Abraham may have ERISA standing even if he is ultimately not entitled to receive benefits under the plan. See Kennedy v. Connecticut Gen. Life Ins. Co., 924 F.2d 698 (7th Cir.1991) ("[A]s Firestone held, jurisdiction depends on an arguable claim, not on success.").

We believe that Abraham did have standing because, ex ante, he had a colorable claim that he would prevail in this suit. Firestone made standing turn on a claimant's likelihood of success in a lawsuit. ³ Abraham had a colorable chance of success because his argument rested squarely on Renda v. Adam Meldrum & Anderson Co., 806 F.Supp. 1071 (W.D.N.Y.1992). No other court has addressed the issues raised by Renda; Abraham could argue that the only federal court to address his argument had bought it. And Renda is not bizarre or unreasoned. Although we ultimately reject Renda, we do so only after devoting a considerable amount of time to explaining why it is wrong. We recognize that a claim is not colorable merely because a federal court has approved it, but we believe Abraham's reliance on Renda in this instance gave him a colorable claim that he would prevail in this lawsuit. That is enough for ERISA standing. Cf. Panaras v. Liquid Carbonic Indus. Corp., 74 F.3d 786, 790 (7th Cir.1996) ("The requirement of a colorable claim is not a stringent one.").

III.

Abraham argues that the district court erred by refusing to apply structural defect analysis to the plan. Structural defect analysis originated in the Ninth Circuit's Taft-Hartley Act jurisprudence. Under the Act, money paid by an employer to a trust fund established by an employee representative must be used "for the sole and exclusive benefit of the employees of such employer." 29 U.S.C. § 186(c)(5). The Ninth Circuit has enforced this provision through structural defect analysis: "A pension plan is structurally deficient when it arbitrarily and unreasonably excludes a large number of participants from receiving benefits, thus failing to satisfy the 'sole and exclusive benefit' of all employees." Phillips v. Alaska Hotel & Restaurant Employees Pension Fund, 944 F.2d 509, 515 (9th Cir.1991), cert. denied, 504 U.S. 911, 112 S.Ct. 1942, 118 L.Ed.2d 548 (1992).

Similarly to Taft-Hartley, ERISA mandates that "a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and (A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries...." 29 U.S.C. § 1104(a)(1)(A)(i). Borrowing from its Taft-Hartley jurisprudence, the Ninth Circuit has enforced § 1104 through structural defect analysis. See Siles v. ILGWU Nat'l Retirement Fund, 783 F.2d 923, 929 (9th Cir.1986); Harm v. Bay Area Pipe Trades Pension Plan Trust Fund, 701 F.2d 1301 (9th Cir.1983). Although we have never applied structural defect analysis to either Taft-Hartley or ERISA, Abraham would have us apply such analysis to ERISA now.

Even if structural defect analysis is the appropriate way to enforce § 1104, however, § 1104 explicitly creates a duty only for fiduciaries, and we have held that an employer does not act as a fiduciary when designing an ERISA plan. See Izzarelli v. Rexene Prods. Co., 24 F.3d 1506, 1524 (5th Cir.1994) ("[A]n employer that decides to terminate, amend, or renegotiate a plan does not act as a fiduciary, and thus cannot violate its fiduciary duty...."); see also Hines v. Massachusetts Mut. Life Ins. Co., 43 F.3d 207, 210 (5th Cir.1995). In contrast, the Ninth Circuit cases Abraham cites as applying structural defect analysis under § 1104 have involved suits against plan administrators acting in a fiduciary capacity. See Siles, 783 F.2d at 929; Harm, 701 F.2d at 1305. Because Abraham complains only that Exxon designed the plan improperly, structural defect analysis is inappropriate.

IV.

Abraham contends that the exclusion of leased employees from the plan is discriminatory and contrary to the minimum participation and minimum coverage requirements of ERISA and various Treasury regulations. He relies entirely on Renda v. Adam Meldrum & Anderson Co., 806 F.Supp. 1071 (W.D.N.Y.1992). We find Renda unpersuasive and reject Abraham's argument.

Renda held that 29 U.S.C. § 1052(a)(1)(A) forbids employers to discriminate against leased employees when designing an ERISA plan. That provision reads as follows:

No pension plan may require, as a condition of participation in the plan, that an employee complete a period of service with the employer or employers maintaining the plan extending beyond the later of the following dates--

(i) the date on which the employee attains the age of 21; or

(ii) the date on which he completes 1 year of service.

Although the plain language of § 1052(a) makes no mention of leased employees, Renda asserts that "[s]ection 1052(a) effectively prohibits participation requirements which discriminate against certain employees such as leased employees." 806 F.Supp. at 1081.

We disagree. Section 1052(a) does nothing more than forbid employers to deny participation in an ERISA plan to an employee on the basis of age or length of service if he is at least twenty-one years of age and has completed at least one year of service. Section 1052(a) does not prevent employers from denying participation in an ERISA plan if the employer does so on a basis other than age or length of service.

Renda incorrectly relies on Fernandez v. Brock, 840 F.2d 622 (9th Cir.1988). Fernandez does state in dicta that "ERISA requires that an employee must be eligible to participate in a plan after 'he completes 1 year of service....' Similarly, ERISA requires that an employee accrue benefits after a 'year of participation'...." This statement appears in the portion of the opinion setting forth the facts of the case, however, and plays no role in the holding. The statement is best read to mean that an employee is eligible to participate in a plan after completing a year of service and attaining the age of twenty-one only if he is not otherwise disqualified for a reason other than age or length of service. To the extent that Fernandez 's dicta does support Renda, we reject it.

Renda also relied on Treasury regulations in finding improper the discrimination against leased employees. Title 26 C.F.R. § 1.410(...