Drutis v. Rand McNally & Co.

• Decision Date: 27 August 2007
• Docket Number: No. 06-6380.,06-6380.
• Parties: Larry DRUTIS; Harold E. Parker; Joe Tkacz; John Wayne Simpson, Individually and on behalf of all persons similarly situated, Plaintiffs-Appellants, v. RAND McNALLY & CO.; Quebecor World (USA), Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

499 F.3d 608

Larry DRUTIS; Harold E. Parker; Joe Tkacz; John Wayne Simpson, Individually and on behalf of all persons similarly situated, Plaintiffs-Appellants, v. RAND McNALLY & CO.; Quebecor World (USA), Inc., Defendants-Appellees.

No. 06-6380.

United States Court of Appeals, Sixth Circuit.

Submitted: July 20, 2007.

Decided and Filed: August 27, 2007.

ON BRIEF: Charles W. Arnold, Charles W. Arnold, PLC, Lexington, Kentucky, for Appellants. Carol Connor Cohen, Gretchen Ann Dixon, Arent Fox LLP, Washington, DC, for Appellees. Mary Ellen Signorille, American Association of Retired Persons, Washington, DC, Kent A. Mason, Davis & Harman, Washington, DC, for Amici Curiae.

Before: MARTIN and ROGERS, Circuit Judges; HOOD, District Judge.^*

OPINION

ROGERS, Circuit Judge.

The question in this case is whether so-called "cash balance" pension plans violate 29 U.S.C. § 1054(b)(1)(H)(i), an anti-age-discrimination provision of the Employee Retirement Income Security Act ("ERISA"). "Cash balance" plans are defined benefit plans that are structured like defined contribution plans. The district court in this case held, among other things, that the cash balance plan adopted by defendants did not violate the anti-age discrimination statute in question. We agree, and therefore affirm.

I.

The facts of this case are not disputed and the following summary is taken largely from the fact section of the district court opinion. See Drutis v. Quebecor World (USA), Inc., 459 F.Supp.2d 580 (E.D.Ky. 2006). The four plaintiffs—Larry Drutis, Harold Parker, John Wayne Simpson, and Joseph Tkacz—were all previously employed by Rand McNally Book & Media Services ("Rand McNally Book") and participated in the Rand McNally & Company Pension Plan ("Rand McNally Plan"), a traditional defined benefit plan. On January 17, 1997, World Color Press, Inc. ("World Color") purchased Rand McNally Book, and the plaintiffs became employees of World Color. The employees' pension benefits were transferred from the Rand McNally Plan, which was merged into the World Color Press Cash Balance Plan ("World Color Plan"). Each former Rand McNally Plan participant who participated in the World Color Plan was credited with a "transition balance" in the new plan that was equal to the amount that the participant would have been paid had the participant taken a lump sum distribution of his Rand McNally Plan benefit on January 16, 1997. This sum was the full actuarial value of the employee's existing accrued benefit. Each month the transition account was credited with interest at the rate payable on one-year U.S. Treasury bills as of December 31 of the preceding year. Additionally, each World Color Plan participant had a "future service account" in which he received monthly credits equal to 4 percent of his monthly compensation plus interest at the one-year Treasury bill rate, with a minimum of 3 percent interest.

The World Color Plan had a "grandfather" provision applicable to those employees who: (1) had an accrued benefit under the Rand McNally Plan on January 16, 1997; (2) were 55 years old on or before that date; and (3) had at least five years of vesting service as of that date. "Grandfathered" participants could choose as a retirement benefit either (a) the benefit they would have received under the Rand McNally Plan had they continued to participate in that plan until their retirement date, or (b) their cash balance under the World Color Plan. Plaintiffs Drutis and Tkacz retired from World Color on December 31, 1998, and took the distribution of their benefits from the World Color Plan at that time. They both met all of the "grandfather" requirements, and they both chose to receive their benefits calculated as if they had continued in the Rand McNally Plan until their retirement dates. They both were also younger than 65 when they retired.

In 1999, a subsidiary of Quebecor Printing, Inc. merged with World Color, creating the defendant in this case, Quebecor World (USA), Inc. ("Quebecor").¹ In December 2000, the World Color Plan was merged into the Quebecor World Pension Plan, which is not a cash balance plan. After that date, the World Color Plan, which is the subject of this suit, ceased to exist. Accordingly, this case concerns only the World Color Plan in effect from January 17, 1997, through December 31, 2000.

Plaintiff Parker became disabled on August 5, 1996, and retired on disability effective January 31, 1997. He is younger than 65, and has not yet elected to receive his retirement benefits. Plaintiff Simpson is currently an employee of Quebecor and has not received any distribution of his retirement benefits. He is also younger than 65.

The plaintiff-employees and Quebecor filed cross motions for summary judgment in district court. The district court denied the plaintiffs' motion and granted Quebecor summary judgment. The district court held that two of the plaintiffs, Drutis and Tkacz, lacked constitutional standing because they were "grandfathered" into the Rand McNally Plan and therefore suffered no injury as a result of the provisions of the newer plan. Drutis, 459 F.Supp.2d at 585. The district court also held that none of the plaintiffs could assert a claim of age discrimination under ERISA because each is under the age of 65. Id. at 586. In the alternative, the district court held that the World Color cash balance plan did not violate ERISA's anti-age-discrimination provision. Id. at 591. Finally, the district court held that the relief sought by the plaintiffs was unavailable under ERISA. Id. at 592.

II.

The district court correctly held that two of the four plaintiffs lacked standing to bring this action because they suffered no injury as a result of the challenged plan. The World Color Plan included a "grandfathering" provision that allowed some employees to have their pension benefits determined under the previous Rand McNally Plan. Plaintiffs Drutis and Tkacz were covered by the grandfathering provision and elected to receive the same retirement benefit they would have received under the Rand McNally Plan. As a result of this election, the benefit received by each of these plaintiffs was unaffected by the conversion of the Rand McNally Plan to the World Color Plan. Because their benefits were not determined by the challenged plan, they suffered no injury as a result of the provisions of that plan.

On appeal, plaintiffs argue that, even though Drutis and Tkacz were not actually subject to the World Color Plan, they still suffered a cognizable injury because "each of them has been damaged by the loss of the difference between what they received [under the Rand McNally Plan] and what they would have received if the [World Color] plan were re-formed to meet the requirements of ERISA." Appellants' Br. at 27. Thus, the plaintiffs' argument is that, instead of choosing between the Rand McNally Plan and the allegedly discriminatory World Color Plan, they should have been able to choose a third option, namely a version of the World Color Plan absent the allegedly age discriminatory aspects.

The benefit to Drutis and Tkacz of this theoretical third plan, however, is entirely speculative. An alternative World Color plan without the allegedly age discriminatory aspects could offer a lower benefit to all employees. As the Seventh Circuit explained in Cooper v. IBM Personal Pension Plan, 457 F.3d 636, 642 (7th Cir. 2006), "employers can achieve equality more cheaply by reducing the highest benefits than by increasing the lower ones." Thus, any harm to Drutis and Tkacz is hypothetical at best, and it is well established that part of the "irreducible constitutional minimum of standing" is an injury in fact that is "an invasion of a legally protected interest which is ... actual or imminent, not `conjectural' or `hypothetical.'" Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).

The district court also held that plaintiffs Parker and Simpson did not have "standing to assert a claim of age discrimination" because they were both under age 65, and the district court determined that "ERISA's anti-age discrimination provision does not apply to persons who are not already over the normal retirement age of 65 and continuing to work." Drutis, 459 F.Supp.2d at 585.² Regardless of whether the district court's determination as to the scope of § 204(b)(1)(H)(i) is or is not correct, this is not a constitutional standing issue, but rather a question of statutory interpretation. Article III standing ultimately turns on whether a plaintiff gets something (other than moral satisfaction) if the plaintiff wins. It does not depend on whether or not there is a disputed statutory impediment to winning. Such an issue goes to the merits. In light of our resolution below of the legality of cash balance plans, we need not decide whether the protection of § 204(b)(1)(H)(i) is limited to persons over 65. We assume, without deciding, that ERISA § 204(b)(1)(H)(i) does apply to plaintiffs Parker and Simpson despite the fact that both are under the age of 65, and proceed to the question of whether the World Color Plan discriminated against Parker and Simpson.

III.

Contrary to the plaintiffs' assertions, cash balance plans do not discriminate based on age in violation of ERISA § 204(b)(1)(H)(i). That statute does not allow a plan provision that reduces "the rate of an employee's benefit accrual ... because of the attainment of any age." 29 U.S.C. § 1054(b)(1)(H)(i). The plaintiffs' argument is that "cash balance plans per se violate the provisions of ERISA." Appellants' Br. at 7. Accordingly, plaintiffs' claim turns on the nature of cash balance plans in general, and not upon any particular or unique provision of the World Color Plan. The contention that cash balance plans are necessarily age discriminatory under the terms of § 204(b)(1)(H)(i) fails, however, because that provision of ERISA addresses only the employer's contributions...