Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan Benefits Committee
| Citation | 40 F.3d 1202 |
| Decision Date | 27 December 1994 |
| Docket Number | LILY-TULI,INC,No. 93-9235,93-9235 |
| Parties | Pens. Plan Guide P 23905I Allan C. ALDRIDGE; Dennis W. Peterson and Henry A. Sieron, Plaintiffs-Appellees, v.SALARY RETIREMENT PLAN BENEFITS COMMITTEE and Fort Howard Cup Corporation, Defendants-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (11th Circuit) |
Clark E. Walter, New York City, Ted Hamby Clarkson, Knox & Zacks, Jack A. Gordon, Augusta, GA, for appellants.
William F. Hammond, Hull, Towill, Norman & Barrett, David E. Hudson, Augusta, GA, for appellees.
Appeal from the United States District Court for the Southern District of Georgia.
Before COX, Circuit Judge, MORGAN, Senior Circuit Judge, and VOLLMER *, District Judge.
INTRODUCTION
Plaintiffs, individuals and a class composed of employees and former employees ("employees") of Lily-Tulip, Inc., filed this civil action against the Lily-Tulip, Inc. Salary Retirement Plan Benefits Committee and the Fort Howard Cup Corporation, challenging the validity of the amendment and termination of Lily's retirement plan. 1 Aldridge v. Lily Tulip, Inc. Salary Retirement Plan Benefits Comm., 953 F.2d 587, 588 (11th Cir.1992). The district court granted summary judgment in favor of the employees, finding that the termination of and amendments to Lily's retirement plan were void. The court held that the termination was void because Lily had not adopted a written procedure for amending the plan, in violation of the Employee Retirement Income Security Act ("ERISA") Sec. 402(b), 29 U.S.C. Sec. 1102(b). The court also held that the termination of and amendments to the plan were void because they retroactively reduced the accrued benefits of the employees, in violation of ERISA Secs. 204(g), 302(c)(8), 29 U.S.C. Secs. 1054(g), 1082(c)(8), and because Lily did not give proper notice to the employees of the termination and amendments, in violation of ERISA Sec. 204(h), 29 U.S.C. Sec. 1054(h). Lily appeals the district court's judgment. We reverse.
In October 1986 Lily's Board of Directors (the "Board") voted to amend and then terminate the Lily-Tulip, Inc. Salary Retirement Plan (the "Plan"). On October 30, 1986 the Board adopted several resolutions by unanimous written consent. One of these On the same date that the Board adopted the resolution to terminate the Plan, the Board also adopted a resolution calling for the amendment of the Plan. The amendment, Amendment No. 2, effectively reduced accrued benefits. 3 For Plan participants under age 55, benefits were reduced by changing the calculation of the social security offset in the Plan's benefit formula for active employees. 4 The employees also contend that the amendment reduced optional lump-sum benefits by changing the actuarial interest rate and mortality assumptions used in calculating benefits. 5
resolutions, Resolution II, stated that the Plan would terminate on December 31, 1986. 2 The employees allege that the Plan termination eliminated the employees' contingent subsidized early retirement benefits. At the time Lily undertook to terminate the Plan, the Plan was underfunded
Lily notified the employees of the proposed termination on October 24, 1986, more than sixty days before the proposed termination date of December 31, 1986. On October 31, 1986, sixty-one days prior to the proposed termination date, Lily sent the employees another letter to bring the employees up to date on the status of the Plan termination and to provide the employees with additional information about their benefits. In addition, on October 31, 1986, Lily sent the employees a notice detailing the definitions and assumptions that would be used in determining each employee's benefits under the terminated Plan. The notice incorporated the changes mandated by Amendment No. 2, but did not inform the employees that an amendment to the Plan had been either proposed or adopted. Along with the letter and notice, each employee received a benefit election form which described the benefits the employee was to receive and allowed the employee to choose the annuity or lump sum form of payment.
Lily submitted the termination and amendment documents to the Pension Benefit Guaranty Corporation ("PBGC") for review pursuant to 29 U.S.C. Sec. 1341. Lily also submitted the documents to the Internal Revenue Service ("IRS"), requesting a determination from the IRS that the Plan would continue to retain its tax-qualified status. The PBGC had no problem with the Plan termination and granted Lily an extension for the distribution of Plan assets pending the IRS's issuance of a letter of determination. The IRS expressed several concerns with the termination and amendment of the Plan, including the amendment of the mortality assumptions and the social security offset. On July 28, 1989, in response to IRS concerns, Lily proposed to adopt Amendment No. 3, which would alleviate IRS concerns regarding Amendment No. 2. The IRS issued a favorable determination ruling subject to the adoption of Amendment No. 3. Amendment
No. 3 was adopted and made retroactive to December 31, 1986. 6
The employees filed this civil action against the Lily-Tulip, Inc. Salary Benefits Retirement Committee, seeking damages under the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. Sec. 1961 et seq., seeking relief for the deprivation of accrued vacation benefits in violation of Georgia law, for constructive discharge in employment in violation of the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. Sec. 621 et seq., and for the reduction in benefits accompanied by procedural and notice deficiencies in violation of ERISA.
In 1990 Lily moved to dismiss the complaint. The court dismissed some of the ERISA claims entirely, dismissed some in part, and certified two ERISA issues for interlocutory appeal pursuant to 28 U.S.C. Sec. 1292(b). Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan Benefits Comm., 741 F.Supp. 906, 921 (S.D.Ga.1990), aff'd in part and rev'd in part, 953 F.2d 587 (11th Cir.1992). However, the court declined to dismiss some ERISA claims.
The district court dismissed the claims regarding the amendment of the actuarial assumptions and the social security offset, holding that these claims were moot because Amendment No. 3, which superseded Amendment No. 2, addressed the problems raised by the employees in these claims. See Aldridge, 741 F.Supp. at 917. The court denied the defendants' request to dismiss the employees' claim that Lily failed to give proper notice to the Plan participants upon the amendment and termination of the Plan. Id. at 920-21.
Another ERISA claim asserted that, upon termination of the Plan, Lily had failed to pay a contingent early retirement subsidy that the employees contended was an accrued benefit. The employees argued that under ERISA Sec. 204(g), 29 U.S.C. Sec. 1054(g), early retirement benefits were considered accrued, and could not be decreased except under limited circumstances. The district court held that ERISA Sec. 204(g), which treats early retirement subsidies as accrued benefits, only applies to amendments of ongoing plans, not terminations. Because the case involved a plan termination, the district court dismissed the claims seeking to recover early retirement benefits. Id. at 918. However, the court noted that the authority on this subject was in conflict and certified for interlocutory appeal the issue of whether the employees were entitled to early retirement subsidy benefits upon termination of the Plan. Id. at 919.
On interlocutory appeal, we held that ERISA Sec. 204(g) applies both to plan amendments and terminations. 7 However, we affirmed the dismissal of this claim because the Plan was underfunded. Under the version of 26 U.S.C. Sec. 401(a) in force prior to October 16, 1987, accrued rights were nonforfeitable only to the extent they were funded. We affirmed the dismissal of the employees' claim because the employees' "right to subsidized early retirement benefits [upon Plan termination] was limited to the extent to which they were funded, and in Lily's case, they were not funded at all." Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan Benefits Comm., 953 F.2d 587, 592 (11th Cir.1992) (footnotes omitted).
Lily presents three issues on appeal: (1) whether our previous decision on interlocutory appeal, Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan Benefits Comm., 953 F.2d 587 (11th Cir.1992), resolved the question whether the Plan was terminated effective December 31, 1986; (2) whether a plan sponsor must terminate a plan by formal amendment, or whether it is legally sufficient to terminate by board resolution coupled with timely notice to the PBGC and the plan participants; and (3) whether a plan provision that reserves to the employer the right to amend a plan pursuant to applicable law satisfies ERISA's plan amendment provisions. 8
We apply plenary review to the district court's grant of summary judgment. Dyce v. Salaried Employees' Pension Plan of Allied Corp., 15 F.3d 163, 164 (11th Cir.1994). In reviewing the case, we take the facts in the light most favorable to Lily, the nonmoving party. Meyers v. Ramada Hotel Operating Co., 833 F.2d 1521, 1523 (11th Cir.1987).
The first issue presented is...
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