Arnold v. Arrow Transp. Co. of Delaware

• Decision Date: 19 February 1991
• Docket Number: No. 89-35280,89-35280
• Citation: 926 F.2d 782
• Parties: , 13 Employee Benefits Ca 1633 Calvin R. ARNOLD, Plaintiff-Appellant, v. ARROW TRANSPORTATION CO. OF DELAWARE; Arrow Transportation Co. Employees Retirement Plan, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 782

926 F.2d 782

59 USLW 2576, 13 Employee Benefits Ca 1633

Calvin R. ARNOLD, Plaintiff-Appellant, v. ARROW TRANSPORTATION CO. OF DELAWARE; Arrow Transportation Co. Employees Retirement Plan, Defendants-Appellees.

No. 89-35280.

United States Court of Appeals Ninth Circuit.

Argued and Submitted March 8, 1990.

Memorandum Oct. 3, 1990.

Order and Opinion Feb. 19, 1991.

Leigh D. Stephenson, Spears, Lubersky, Bledsoe, Anderson, Young & Hilliard, Portland, Or., for plaintiff-appellant.

Ronald H. Hoevet, Hoevet, Snyder & Miller, P.C., and Leslie L. Wellman, Portland, Or., for defendants-appellees.

Appeal from the United States District Court for the District of Oregon.

Before WALLACE, Chief Judge, FERGUSON and BRUNETTI, Circuit Judges.

ORDER

The memorandum disposition filed October 3, 1990, is redesignated as an authored opinion by Judge Brunetti.

OPINION

BRUNETTI, Circuit Judge:

Plaintiff-appellant Calvin Arnold ("Arnold") sued his employer, defendant-appellee Arrow Transportation Co. ("Arrow"), and its retirement plan, defendant-appellee Retirement Plan for Employees of Arrow Transportation Co. (the "Retirement Plan"), alleging the improper denial of his pension benefits due under the Retirement Plan in violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Sec. 1132(a)(1)(B). After a bench trial the district court ruled that appellees did not violate ERISA in reducing Arnold's retirement benefits. We affirm.

A. Facts and Procedural Background

The facts of this case are undisputed. Arnold was an employee of Arrow, whose principal place of business is in Portland, for thirty-seven years. Arnold was elected to Arrow's executive committee in 1970, made Vice President in 1976, and was covered under the Retirement Plan from 1963 until his voluntary retirement on March 1, 1985, one month short of his sixtieth birthday. The Retirement Plan was a qualified defined benefit plan, as defined by ERISA, 29 U.S.C. Secs. 1001 et seq., that provided benefits based on a formula using the employee's years of service and final average salary.

At the end of 1983 Arrow amended the Retirement Plan, ceasing all benefit accruals and freezing already accrued benefits of all participants. On March 29, 1984 Arrow filed a Notice of Intent to Terminate the Retirement Plan with the Pension Benefit Guaranty Corp. ("PBGC"). ¹ Arrow terminated the Retirement Plan on April 9, 1984. At that time, as in prior years, the actuarial present value of benefits exceeded the amount of assets in the fund. In other words, the Retirement Plan had unfunded liabilities and did not have enough assets to pay full accrued benefits as determined under its benefit formula. However, the Retirement Plan did satisfy minimum funding standards for each Retirement Plan year, and there was no accumulated funding deficiency with respect to any year.

In April 1984 Arnold requested a statement of what his benefits would be at age 60. On March 4, 1985 and again on March 11, he received letters from the Retirement Plan actuaries stating that "benefits may be adjusted or recaptured if plan assets are insufficient to satisfy guaranteed benefits, after assets are allocated according to ERISA." (emphasis added). On March 14, 1985, two weeks after his retirement, he received a corrected estimate of a monthly benefit of $1,443.12 with an initial death benefit of $177,676.87.

On June 23, 1985 he was first notified that he would receive monthly benefits of only $996.74, with an initial death benefit of $99,160, and not the previous estimate. On October 30, 1987 he was notified that he would receive monthly the PBGC-guaranteed single life annuity of $1,041.48. Arnold currently receives a full cash refund annuity of $975.15; the $1,041.48 amount is the actuarial equivalent to this full cash refund annuity. ² While other employees have also received less than their full accrued benefits, it is undisputed that the funds in the Retirement Plan, to the extent they were distributed to participants, were correctly allocated as required by the Retirement Plan and ERISA.

On July 23, 1987 Arnold filed suit, alleging four claims. The district court dismissed on summary judgment three of his claims; this dismissal is not challenged on appeal. The final claim, tried to the court, alleged the improper denial of benefits because any Retirement Plan language purporting to limit Arnold's right to payment of full accrued benefits or permit termination of the Retirement Plan at Arrow's will, without consideration of Arrow's ability to continue funding the Retirement Plan, was included by mistake and contrary to the intent and subsequent interpretation of Arrow's management. Moreover, Arnold alleged that the inclusion of any such language was not made known to him or other participants. Arnold sought the payment or issuance of an annuity from Arrow covering the difference between his entitled benefits under the Retirement Plan and his actual received benefits.

The district court found that Arnold "received notice of Arrow's right to terminate the plan and the possibility of loss of benefits which could result from a termination of the plan." The court held that Arrow's termination of the Retirement Plan and its monthly payments of $975.15 to Arnold did not violate the provisions of the Retirement Plan or ERISA, 29 U.S.C. Sec. 1132(a)(1)(B).

Arnold appeals this ruling, contending that Arrow did not adequately disclose its limited liability, as the limited liability provisions of the Retirement Plan's Summary Plan Description did not satisfy the legal requirements of ERISA, 29 U.S.C. Sec. 1022, and that because Arrow allegedly promised full payment of accrued benefits, it is directly liable for the difference between his entitled benefits under the Retirement Plan and his actual received benefits. ³

B. Standard of Review

Arnold contends that whether the limited liability provisions of the Retirement Plan's Summary Plan Description satisfy the legal requirements of ERISA is a legal question reviewed de novo. Arrow maintains that the district court's determinations as to the findings of fact are to be upheld unless clearly erroneous, and that its own interpretation and construction of the Retirement Plan's provisions should be reviewed under an arbitrary and capricious standard of review.

We review the district court's findings of fact under the clearly erroneous standard. Fed.R.Civ.P. 52(a); Rozay's Transfer v. Local Freight Drivers, 850 F.2d 1321, 1326 (9th Cir.1988), cert. denied, 490 U.S. 1030, 109 S.Ct. 1768, 104 L.Ed.2d 203 (1989). We review its findings of law de novo. Id. The interpretation of a federal statute, such as ERISA, is a question of law, and we review it de novo. Saratoga Sav. & Loan Ass'n v. Federal Home Loan Bank Bd., 879 F.2d 689, 691 (9th Cir.1989).

C. Limited Liability Provisions

Arnold first contends that Arrow did not adequately disclose its limited liability, as the limited liability provisions of the Retirement Plan's Summary Plan Description did not satisfy the legal requirements of ERISA, 29 U.S.C. Sec. 1022. Whether these provisions satisfy ERISA is a legal question, which we review de novo. See Rozay's Transfer, 850 F.2d at 1326.

Under ERISA an employer must provide a summary plan description to participants which must describe "circumstances which may result in disqualification, ineligibility, or denial or loss of benefits" and shall "be written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan." 29 U.S.C. Sec. 1022. ⁴ See Stahl v. Tony's Bldg. Materials, Inc., 875 F.2d 1404, 1406-09 (9th Cir.1989).

In Stahl we evaluated a "Service Credits" limiting provision, described and referenced in two "Service Credits" sections, one of which was highlighted "IMPORTANT," of a multi-employer summary plan description that exceeded fifty pages. Id. at 1406-07. We held that the provisions met the legal requirements of ERISA, 29 U.S.C. Sec. 1022, and ruled:

A plan summary description, therefore, cannot violate ERISA merely because it could have included language more specifically discussing the precise situation of a particular beneficiary. The description, instead, should provide information about the general circumstances in which benefits could be lost. The plan's rules should be explained to permit the ordinary employee to recognize that certain events or actions could trigger a loss of benefits. It need not discuss every imaginable situation in which such events or actions might occur, but it must be specific enough to enable the ordinary employee to sense when there is a danger that benefits could be lost or diminished.

Stahl, 875 F.2d at 1408.

In 1979 Arrow distributed a Summary Plan Description of the Retirement Plan's 1976 Restatement ⁵ to Arnold. The Summary Plan Description, entitled "Your Retirement Program," provided in part:

LOSS OF BENEFITS

Conditions which could disqualify you or your beneficiary from receiving anticipated benefits under the plan are as follows:

... If the plan terminates and there is not enough money in the fund to provide full benefits (benefits may be provided by the Pension Benefit Guaranty Corporation, subject to its limitations on maximum benefits).

. . . . .

TERMINATION OF THE PLAN

In the event the plan is terminated, any benefits you may have accumulated up to that time will become nonforfeitable, and plan funds accumulated up to the date of termination will be used to provide you with benefits to the extent permitted by the amount then available in the pension fund.

At plan termination, benefits under this plan are insured by the Pension Benefit Guaranty Corporation (PBGC). Generally, the PBGC guarantees most vested normal, early and late retirement benefits (and certain disability and spouse's benefits)....