Crowell v. Shell Oil Co.

• Decision Date: 07 March 2007
• Docket Number: Civil Action No. H-05-03412.
• Citation: 481 F.Supp.2d 797
• Parties: David CROWELL, Plaintiff, v. SHELL OIL COMPANY f/k/a or d/b/a Pennzoil-Quaker State Company, Sopus Products, L.L.C. f/k/a or d/b/a Pennzoil-Quaker State Company a/k/a Sopus Products, Pennzoil-Quaker State Company, and Shell Pension Plan f/k/a Pennzoil-Quaker State Company Employees Retirement Plan, Defendants.<SMALL><SUP>1</SUP></SMALL>
• Court: U.S. District Court — Southern District of Texas

481 F.Supp.2d 797

David CROWELL, Plaintiff, v. SHELL OIL COMPANY f/k/a or d/b/a Pennzoil-Quaker State Company, Sopus Products, L.L.C. f/k/a or d/b/a Pennzoil-Quaker State Company a/k/a Sopus Products, Pennzoil-Quaker State Company, and Shell Pension Plan f/k/a Pennzoil-Quaker State Company Employees Retirement Plan, Defendants.¹

Civil Action No. H-05-03412.

United States District Court, S.D. Texas, Houston Division.

March 7, 2007.

COPYRIGHT MATERIAL OMITTED

W. Fulton Broemer, Jerry Warren Carlson, Jr., Broemer & Associates LLC, Houston, TX, for Plaintiff.

Sean Michael Becker, W. Carl Jordan, Vinson & Elkins LLP, Houston, TX, for Defendants.

MEMORANDUM OPINION AND ORDER

MILLER, District Judge.

Plaintiffs David Crowell and Paul Siegel bring these ERISA² actions against Shell Oil Company and numerous other defendants (collectively, "Shell"). Although the plaintiffs filed their suits separately, their cases were later consolidated, and they assert the same core claim. Plaintiffs contend that Shell misinterpreted a key provision of their retirement plans, causing a major reduction in benefits in violation of ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). In addition, plaintiff Crowell asserts a claim for a denial of documents to which he was allegedly entitled under ERISA's disclosure provisions. Shell responds that (1) plaintiffs' claims for benefits cannot succeed because the plan administrator correctly construed the Plan; and (2) Crowell's disclosure claim must fail because he did not name the proper defendant.

With regard to both of these claims, the court has carefully considered the parties' cross motions for summary judgment, the responses, the replies, and the applicable law. The court agrees with Shell that the plan administrator did not abuse her discretion and that Crowell cannot recover in his nondisclosure claim against any of the named defendants, none of whom is liable under the applicable ERISA provisions. Accordingly, Shell's motions for summary judgment (Dkt. 39; Siegel Dkt. 32) are GRANTED, Crowell's partial motion for summary judgment (Dkt. 35) is DENIED as moot, and Siegel's motion for summary judgment (Siegel Dkt. 34) is. DENIED as moot. Plaintiffs' requests for attorneys' fees and court costs under § 1132(g)(1) are also DENIED.

I. FACTUAL BACKGROUND

The court will first summarize the undisputed facts for both cases before analyzing plaintiffs' ERISA claims.

A. The Merger and the Excess Plan

On March 25, 2002, Shell Oil Company ("Shell Oil") and Pennzoil-Quaker State Company ("Pennzoil") entered into a preliminary merger agreement in which Shell Oil agreed to acquire Pennzoil. Dkt. 39, App. 1, Ex. G at PQS-003284-85. The merger was completed on October 1, 2002, and Pennzoil formally became a wholly-owned subsidiary of Shell Oil. Dkt. 18 at 3.

At the time the parties consummated the merger, Paul Siegel and David Crowell were longtime employees of Pennzoil. Siegel had worked for Pennzoil since 1979, and Crowell had been with the company since 1992. Siegel Dkt. 32 at 4; Dkt. 39 at 4. After the takeover, the employment of both employees was terminated. Siegel Dkt. 32 at 4; Dkt. 39 at 4. But, under letter agreements (the "Excess Plan") with Pennzoil consummated prior to the merger, both plaintiffs received substantial lump-sum payouts that supplemented the Pennzoil-Quaker State Company Employees Retirement Plan ("the Retirement Plan" or "the Plan"). Dkt. 39 at 4-5; Siegel Dkt. 18 at 4.

High-level employees received these additional payments to offset any benefit reductions under the Plan due to IRS limitations. Dkt. 39 at 4-5. Three primary forms of benefits were contemplated under the Excess Plan: (1) "a monthly pension for life" after retirement; (2) "a monthly pension for life" for spouses after the participants' deaths; and (3) the post-employment payment of sums that the participants would have received under Pennzoil's Savings and Investment Plan if not for certain tax code limitations. Notably for purposes of deciding the pending motions, plaintiffs' benefits due under the Excess Plan depend on what types of compensation were included within the following Retirement Plan terms: "1997 considered compensation" and "Considered Compensation." Thus, one cannot interpret the Excess Plan in a vacuum. For any determination of Excess Plan benefits, the language of the larger Plan provides the necessary interpretive context.

Furthermore, the Excess Plan also provided that in the event of a corporate "change in control," Pennzoil would provide a "cash payment equal to the present value of" the above-listed benefits, "determined as of the date prior to the Effective Date of the change in control ...." See Dkt. 18, Ex. D at 4; Siegel Dkt. 18, Ex. D at 5. All parties agree that Shell Oil's buyout of Pennzoil, effective October 1, 2002, constitutes a "change in control" event as defined by the Excess Plan. The parties dispute, however, the proper interpretation of "Considered Compensation" after Pennzoil enacted the Fifth Amendment to the Plan. To understand this term, the court will briefly review the relevant Plan provisions and Plan amendments leading up to the instant case.

B. Background of the Plan

Article IX (entitled "Pension Amounts") of the original Plan, effective January 1, 1999, provides the starting point for the calculation of benefits after a member's termination of employment. Section 9.1(I)(a) states that retirement benefits depend, in part, on "the Member's monthly 1997 Considered Compensation," which was defined as "the lesser of (i) 1997 Considered Compensation or (ii) if the Member terminates service prior to January 1, 2003, the Member's average monthly Considered Compensation received during the 60 months immediately preceding his retirement or other termination of Service." See Siegel Dkt. 18, Ex. A at 23. In turn, "Considered Compensation," includes compensation paid to members for personal services, including wages, overtime pay, commissions, etc. Id. at 4-5, § 1.11. Importantly, under the original Plan, the term Considered Compensation specifically excluded "income arising from the exercise of a stock option" from its umbrella of compensation. Id. (emphasis added).

On September 20, 2001, Pennzoil adopted the Second Amendment to the Plan, effective January 1, 2001. See Siegel Dkt. 18, Ex. B. That amendment enacted certain changes to the term Considered Compensation, but left undisturbed the exclusion of income from the exercise of a stock option. See id at 1. On March 25, 2002, the same day that the Pennzoil-Shell Oil merger was approved, the Pennzoil Board of Directors approved the amending of the Plan once again. That resolution led to the adoption of the Fifth Amendment to the Plan. See id, Ex. C.

The Fifth Amendment, eventually executed on May 13, 2002, was given an effective date of March 1, 2002. Id., Ex. C at 5. After the amendment, the definition of Considered Compensation read, in pertinent part, as follows:

1.11 Considered Compensation: The compensation actually paid to a Member ... by his Employer for personal services, including normal salary, wages, commissions, overtime pay, severance pay (but only if paid in normal bi-weekly installments), vacation pay, pay in lieu of vacation, bonuses (including amounts paid or cashed-out under the Company's Annual Incentive Plan and the Company's long-term incentive plans, but excluding sign-on bonuses), amounts distributed under any unfunded plan of deferred compensation maintained by the Employer (including conditional and restricted stock and dividend equivalents), and income arising from the exercise or cash-out of a stock option .... The Considered Compensation of a Member as determined by the Retirement Board from the books and records of the Member's Employer shall be conclusive ....

Id., Ex. C at 3-4 (emphasis added). As is apparent in the preceding definition, the Fifth Amendment added one new form of compensation, namely "income arising from the exercise or cash-out of a stock option." Siegel Dkt. 32 at 6. Hence, Pennzoil's Board enlarged the term Considered Compensation to include income from option exercises as of March 1, 2002, the effective date of that amendment.

C. Pennzoil Reacts to the Fifth Amendment

After the Fifth Amendment's enactment, Pennzoil made certain operational decisions reflecting the addition of option exercises to the definition of Considered Compensation. In. May 2002, Pennzoil reprogrammed its computerized payroll system that tabulated earnings and other pensionable sums for Plan purposes. Id., App. 4 at 3. The Director of Payroll adjusted the system so that Considered Compensation picked up sums from stock options exercised on or after March 1, 2002. Pennzoil also commissioned its Plan actuary, Mercer Human Resources Consulting ("Mercer"), to analyze the cost impact of the Fifth Amendment. Mercer "assumed that the inclusion of ... stock options in Considered Compensation is a one-time transaction for 2002 due to special circumstances surrounding the [anticipated] Shell/Pennzoil-Quaker State buyout" Siegel Dkt. 32, App. 9 at 2-3; id., Ex. B at 4. Thus, consistent with the earlier computer program adjustments, Mercer only factored exercises of stock options on or after March 1, 2002 into its overall analysis. Based on this limited inclusion of extra income, Mercer reasoned that "the effects of the change in the definition of Considered Compensation are kept to a minimum due to the nature of the benefit formula." Id., Ex. B at 5.

On May 22, 2002, James Postl, Pennzoil's CEO, sent a letter to Pennzoil employees with stock options that explained the impact of the Fifth Amendment on their pensions. Although Postl's letter does not explicitly delineate the limited effect of the Fifth Amendment, he conveys to the optionees that the amendment only picks up stock option exercises on or after March 1, 2002. See Siegel Dkt. 32, App. 11, Ex. D at 1 ("[I]f you have exercised...