Arrom v. Bd. of Trs. of the Pepco Holdings, Inc.

• Decision Date: 30 September 2011
• Docket Number: Civil Action No. 11–1965 (JEI/JS).
• Parties: Robert J. ARROM, et al., Plaintiffs, v. BOARD OF TRUSTEES OF the PEPCO HOLDINGS, INC., Retirement Plan, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

52 Employee Benefits Cas. 2308

814 F.Supp.2d 466

Robert J. ARROM, et al., Plaintiffs,

v.BOARD OF TRUSTEES OF the PEPCO HOLDINGS, INC., Retirement Plan, et al., Defendants.

Civil Action No. 11–1965 (JEI/JS).

United States District Court, D. New Jersey.

Sept. 30, 2011.

O'Brien, Belland & Bushinsky, LLC, by: Stephen J. Bushinsky, Esq., Mark. E. Belland, Esq., Cherry Hill, NJ, for Plaintiffs.

Littler Mendelson, P.C., by: Jacqueline K. Hall, Esq., Newark, NJ, for Defendants.

OPINION

IRENAS, Senior District Judge:

Plaintiffs initiated this action under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., to recover additional pension benefits they were allegedly deprived of due to a failure to implement an updated mortality table.¹ Pending before the Court is Defendants' Motion to Dismiss the Complaint.

I.

As employees of the Atlantic City Electric Company, Plaintiffs were eligible to receive retirement benefits under the Ace Sub–Plan (“the Plan”) sponsored by Pepco Holdings, Inc., (“PHI”).² (Compl. ¶ 26.)

The Pension Protection Act of 2006 (“PPA”), 26 U.S.C. § 430, mandated two changes to all pension plans including the Plan effective January 1, 2008. ( Id. ¶ 31.) First, the PPA required the application of an updated mortality table resulting in a higher base benefit amount for lump sum benefits. 26 U.S.C. § 430(h)(3); see also Compl. ¶¶ 31–32. Second, the PPA added a corporate bond rate as an option for the interest rate assumption. 26 U.S.C. § 430(h)(2)(D); see also Compl. ¶¶ 31–32. Plaintiffs were notified of these changes by electronic mail sent on November 19, 2007.³ ( Id. ¶ 34.)

The Complaint alleges that in October 2009, union officials discovered that lump sum benefits after January 1, 2008 had been calculated using an outdated mortality table. ( Id. ¶ 40.) According to the Complaint, PHI failed to notify the “Plan Administrator” of the updated mortality table and the “Plan Administrator” therefore had not implemented it. The Complaint does not define the term “Plan Administrator.” Pursuant to ERISA, Administrator is defined as “the person specifically so designated by the terms of the instrument under which the plan is operated.” 29 U.S.C. § 1002(16)(A)(i). According to the Base Plan Document, the “Plan Administrator” means “the Company, acting through the Investment Committee and Administrative Board....” (Sullivan Dec. Ex. A at 14, 16.) The Company is Defendant PHI. ( Id. at i.) Notwithstanding this definition, the parties use “Plan Administrator” to refer to Vanguard, PHI's third-party pension administrator, which is not a Defendant in this action and is not identified in any of the Plan documents submitted with the instant Motion. In this Opinion, the Court will not use the term “Plan Administrator” to refer to Vanguard.

As a result of Vanguard's failure to implement the updated mortality table in 2008, Plan participants who elected to retire after January 1, 2008 received smaller lump sum benefits than they were entitled to under the Plan. ( Id. ¶ 43.) Defendants retroactively recalculated the lump sum benefits and provided additional payments to all participants who retired after January 1, 2008. ( Id.)

Plaintiffs allege that they “elected to retire on or about December 2007 based on the projected calculations of the Plan Administrator [Vanguard] that Plaintiffs' 2008 lump sum pension benefit would be less than the amount they would receive if they elected to retire in 2007.” ⁴ ( Id. ¶ 48.) The Complaint also alleges that “[w]hether or not Plaintiffs contacted the Plan Administrator [Vanguard] to ascertain their lump sum pension benefit, any such contact for this purpose would have been an exercise in futility since the Plan Administrator [Vanguard] would not have been able to provide accurate information.” (Compl. ¶ 51.) The essence of Plaintiffs' claims is that they would have elected to retire after the PPA-mandated changes took effect on January 1, 2008 had they been correctly advised that they would receive a significantly larger lump sum pension benefit at that time. ( Id. ¶ 50.)

After unsuccessfully pursuing administrative remedies under the Plan, Plaintiffs initiated the instant action in this Court on April 7, 2011. On July 18, 2011, Defendants moved to dismiss the Complaint pursuant to Fed.R.Civ.P. 12(b)(6).⁵

II.

Federal Rule of Civil Procedure 12(b)(6) provides that a court may dismiss a complaint “for failure to state a claim upon which relief can be granted.” In order to survive a motion to dismiss, a complaint must allege facts that raise a right to relief above the speculative level. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); see also Fed.R.Civ.P. 8(a)(2).

While a court must accept as true all allegations in the plaintiff's complaint, and view them in the light most favorable to the plaintiff, Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir.2008), a court is not required to accept sweeping legal conclusions cast in the form of factual allegations, unwarranted inferences, or unsupported conclusions. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir.1997). The complaint must state sufficient facts to show that the legal allegations are not simply possible, but plausible. Phillips, 515 F.3d at 234. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009).

When evaluating a Rule 12(b)(6) motion to dismiss, the Court considers “only the allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a claim.” Lum v. Bank of America, 361 F.3d 217, 221 n. 3 (3d Cir.2004). A document that forms the basis of a claim is one that is “integral to or explicitly relied upon in the complaint.” Id. (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.1997)).

III.

In their Complaint, Plaintiffs advance several theories of recovery for the harm they allegedly suffered. First, they assert claims for unpaid pension benefits due under the terms of the Plan. (Compl. Counts 1, 6.) Second, Plaintiffs assert breach of fiduciary duty claims based on (1) Defendants' failure to disclose information about the updated mortality table to Plaintiffs and to Vanguard, and (2) Vanguard's failure to provide correct information to Plaintiffs about the value of their benefits in 2007 as compared to 2008. (Compl. Counts 2, 3, 4.) Finally, Plaintiffs assert state law claims for negligence and breach of the duty of good faith and fair dealing.

The Court will first consider each of these theories of liability. Then, the Court will examine Plaintiffs' remaining claims for improper notice of claim denial and for unpaid vacation and holiday time under the Labor Management Relations Act, 29 U.S.C. § 185.

A.

In Counts One and Six, Plaintiffs seek the amount of unpaid benefits due to them under the terms of the Plan pursuant to 29 U.S.C. § 1132(a)(1)(B), as well as equitable relief under § 1132(a)(3)(B).

Pursuant to 29 U.S.C. § 1132(a), a participant or beneficiary may bring a civil action “to recover benefits due to him under the terms of his plan....” 29 U.S.C. § 1132(a)(1)(B)(emphasis added). However, Plaintiffs are not seeking benefits under the Plan in effect at the time of their retirement in December 2007. Indeed, there is no dispute that Plaintiffs received all the benefits to which they were entitled under the Plan in effect in 2007. ( See Sullivan Dec. Ex. E at 5.)

Rather, the Complaint is clear that Plaintiffs' argument is that they would have chosen to retire in 2008 had they been properly advised that their lump sum benefits would be significantly larger. Thus, Plaintiffs' claims are not for unpaid benefits under the Plan, but for breach of fiduciary duty.

Because Plaintiffs' claims are not for benefits due under the terms of the Plan in effect as of their retirement in 2007, they cannot assert a cause of action under 29 U.S.C. § 1132(a)(1)(B).⁶ See CIGNA Corp. v. Amara, ––– U.S. ––––, ––––, 131 S.Ct. 1866, 1877, 179 L.Ed.2d 843 (2011) (a court is only authorized by this provision to enforce the contract as written). Accordingly, Defendants' Motion to Dismiss will be granted as to Counts One and Six.⁷

B.

A claim under ERISA for breach of a fiduciary duty requires proof that “(1) the defendant was acting in a fiduciary capacity; (2) the defendant made affirmative misrepresentations or failed to adequately inform plan participants and beneficiaries; (3) the misrepresentation or inadequate disclosure was material; and (4) the plaintiff detrimentally relied on the misrepresentation or inadequate disclosure.” Shook v. Avaya, Inc., 625 F.3d 69, 73 (3d Cir.2010) (internal quotations and citation omitted).

1.

In Counts Two and Three of the Complaint, Plaintiffs assert breach of fiduciary duty claims for Defendants' failure to disclose information about the updated mortality table to Plaintiffs and to Vanguard.⁸ Defendants move to dismiss these claims arguing that Defendants had no duty to affirmatively disclose information about the PPA-mandated changes to either Plaintiffs or Vanguard.

First, with respect to Defendants' alleged failure to notify Vanguard of the PPA-mandated changes, the Court finds no theory under which such a duty could be imposed. Vanguard was selected by PHI as a third-party administrator presumably pursuant to the Plan Administrator's right to delegate its responsibilities as set out in sections 4.4 and 4.5 of the Base Plan Document.⁹ There is no basis on which this Court could find that PHI acted in a fiduciary capacity with respect to Vanguard, which is plainly an agent delegated responsibilities by its principal, PHI. See infra note 11.

With respect to Defendants' alleged failure to...