Bass v. Retirement Plan of Conoco, Inc.

• Decision Date: 04 January 1988
• Docket Number: Civ. A. No. 86-1704-LC.
• Citation: 676 F. Supp. 735
• Parties: Benjamin E. BASS, Jr., et al. v. RETIREMENT PLAN OF CONOCO, INC., et al.
• Court: U.S. District Court — Western District of Louisiana

676 F. Supp. 735

Benjamin E. BASS, Jr., et al. v. RETIREMENT PLAN OF CONOCO, INC., et al.

Civ. A. No. 86-1704-LC.

United States District Court, W.D. Louisiana, Lake Charles Division.

January 4, 1988.

COPYRIGHT MATERIAL OMITTED

Louis L. Robein, Jr., Gardner, Robein & Healey, Metairie, La., for plaintiffs.

Keith M. Pyburn, Jr. and Howard Shapiro, McCalla, Thompson, Pyburn & Ridley, Walter C. Thompson, Jr., Sessions, Fishman, Rosenson, Boifontaine, Nathan & Winn, New Orleans, La., for defendants.

OPINION

VERON, District Judge.

Benjamin E. Bass and one hundred and twenty-six other plaintiffs brought this action under the Employee Retirement Income Security Act (ERISA) 29 U.S.C. § 1001 et seq., seeking injunctive relief, along with attorneys' fees and costs, for alleged violations of fiduciary duties and other provisions thereof. The original complaint filed on August 4, 1986 named as defendants Conoco, Inc., Vista Chemical Company, their respective retirement plans and retirement boards and the individual members thereof. The complaint was amended three times and the number of plaintiffs is now one hundred forty-two. The matter is now before the court on Motion for Summary Judgment, the court having converted a 12(b) motion of the Conoco defendants to permit the parties to submit additional materials. After a thorough examination of the record and the applicable law the court finds that there is no genuine issue of material fact and that the Conoco defendants are entitled to judgment as a matter of law.

I. FACTS

In their complaint the plaintiffs seek declaratory and injunctive relief, along with attorneys' fees and costs, against defendants for alleged violations of fiduciary duties in ERISA arising out of the failure to offer (to the Group I plaintiffs) an Early Retirement Opportunity Benefit (ERO) and (to the Group II plaintiffs) a Separation Benefit from the defendant Retirement Plan of Conoco, Inc., to which the plaintiffs claim they would have been entitled but for certain alleged actions of the defendants. The two types of benefits at issue shall be referred to herein collectively as ERO.

The material facts are not in dispute. The plaintiffs are employees of Vista Chemical Company (Vista) who work at the Westlake, Louisiana chemical plant. Prior to July 20, 1984 they were employed by Conoco, Inc. (Conoco) at the same facility. Their change in employment status resulted from the July 20, 1984 sale by Conoco to Vista, which was established by active and retired senior managerial employees of Conoco, of certain Conoco assets, including the Westlake Chemical plant. Conoco, Inc., a wholly owned subsidiary of E.I. DuPont de Nemours and Company (DuPont) retained its refinery operation in Lake Charles and continues to employ workers there. The plaintiff chemical plant employees began to receive Vista paychecks in July, 1984. Vista is a nonaffiliated company with respect to both Conoco and DuPont, that is, neither the predecessor Conoco nor its parent corporation DuPont own an interest in Vista.

Prior to July 20, 1984, chemical plant management, all of whom were committed to transfer to Vista at Closing (July 20, 1984), met with officials of Oil, Chemical and Atomic Workers Union (OCAW) Local 4-555 (of which not all plaintiffs are members) to negotiate a collective bargaining agreement which would become effective for Vista employees at Closing. Two agreements, one for the production and maintenance unit and one for the office and clerical unit, were reached between Vista and OCAW. These agreements contained virtually identical provisions regarding the pension and benefit plans of the new Vista Chemical Company.^*

Pursuant to those agreements and consistent with notices of intent which had previously been furnished by Conoco to each proposed Vista employee, at Closing the Vista Plan was identical to the Conoco Plan. All credits toward benefits as defined under the Conoco Plan at Closing were to be applicable in the same values to benefits under the newly created Vista Plan. The Vista employees were to be participants in the Vista Plan from the date they were transferred from Conoco's payroll to that of Vista.

In their preparations for Closing, Vista and Conoco anticipated that Vista would not have sufficient time to develop and file its retirement plan with the Internal Revenue Service (IRS) or receive IRS tax qualification for the Vista Plan prior to Closing. A transfer of the Vista Plan funds out of the Conoco Plan trust account into a separate trust account for the Vista Plan before the latter was tax qualified could have resulted in serious adverse tax consequences. In order to accommodate these tax considerations, Vista and Conoco structured an agreement under which the Conoco Plan would hold the Vista Plan assets until the Vista Plan received its IRS qualification. Under the agreement, the chemical plant employees stopped accruing benefits under the Conoco Plan and began accruing benefits under the Vista Plan on July 20, 1984. Actuarial calculations as of that same date were made by Buck Consultants, Inc. in New York of the actuarial accrued liability (whether or not vested) to be transferred to the Vista Plan. The Vista Plan assets thus designated and held in trust in the Conoco account began to accrue interest from July 20, 1984 at the annual compound rate of 13.42%. This arrangement was consistent with prior disclosures to prospective Vista personnel by Conoco in the Vista Benefits Booklet, and with the Letter of Agreement with OCAW.

The Vista Plan received IRS qualification on July 30, 1985. On October 1, 1985 the Vista Plan funds held in trust by the Conoco Plan were "physically" or officially, so far as the IRS was concerned, moved from the Conoco Plan account to Vista's qualified plan. The amount of the transfer was $17,476,649.66. This figure was arrived at based on the calculation as of July 20, 1984 when 1,337 Conoco employees transferred to Vista.

The transferred total of October 1, 1985 reflects additional accrued liability and interest due to one employee who transferred on September 1, 1984 and six employees who transferred on November 1, 1984. The transferred total also reflects a deduction for certain Vista employees who exercised their retirement rights during the intervening period when they could not be paid benefits under the auspices of the yet-to-be-qualified Vista Plan. These retirees received, at least nominally, Conoco retirements for which the accrued liability was not transferred to the Vista Plan.

On the July 20, 1984 Closing date the Conoco Plan did not have the ERO feature to which the plaintiffs seek a declaration of entitlement. There had been high-level discussion at DuPont of a "permanent excess personnel problem" both at DuPont and at Conoco before or during July 1984. A DuPont task force formed in late November or early December 1984 ultimately recommended offering enhanced benefits from DuPont's Retirement Plan to DuPont Plan participants who voluntarily elected to retire and then did so during designated window periods. This program was called the Early Retirement Opportunity or ERO. Actuarial studies for the DuPont ERO were undertaken in December, 1984. The finished DuPont ERO proposal was approved by the Executive Committee of DuPont on January 11, 1985 and announced to DuPont employees on January 29, 1985. The first actuarial study for a Conoco ERO was begun on January 25, 1985. On February 18, 1985 the Management Committee of the Board of Directors of Conoco directed the Trustees of the Retirement Plan of Conoco to implement ERO.

The Conoco ERO was made available only to "qualified employees" who on or after March 1, 1985 but prior to April 9, 1985, voluntarily elected to retire or terminate their employment. The window period for the election was on or after March 1, 1985 but prior to April 9, 1985. The window period for the termination required that such qualified employees making the election terminate employment with at least one hour of service after February 28, 1985 and before May 1, 1985. The consent action of the Conoco Retirement Board announcing the Conoco ERO on March 11, 1985 defines "qualified employee" to exclude those Conoco employees above a certain salary grade and those who have accepted severance pay. Under the program such qualified employees so electing would be deemed to have an additional five years of service for determining ERO eligibility, five years of creditable service for determining the amount of retirement benefits, and five years of age for determining eligibility for a Normal and Early Retirement benefit and for determining the reduction factors used to calculate an ERO benefit.

After the Conoco ERO was announced, most of the plaintiffs contacted Vista's personnel department about applying for it. They were informed that Vista would not be offering ERO and were referred to Conoco. On March 28, 1985 these plaintiffs wrote to Trenton Buell, Conoco's Manager of Employee Benefits and applied for ERO. He responded by letter of April 23, 1985 that ERO was for Conoco and affiliated company employees only. Citing specific sections of the Conoco Plan document, he explained that the word "employee" was defined therein so as to include only persons employed by Conoco, DuPont or companies in which Conoco or DuPont owned at least twenty-five percent of the voting stock, and that an "hour of service" refers to service to "the Company", i.e. Conoco. He concluded in the letter that since the Vista applicants were not Company employees and had earned no Conoco service after February 28, 1985, they were ineligible for ERO. The letter also notified the applicants of their right under the Conoco administrative review procedure to appeal the denial in writing within sixty days to the Plan Administrator of the Retirement Board of Conoco, Inc.

All of the plaintiffs appealed, including some who had not submitted initial requests to...