Foster v. PPG Indus., Inc.

• Decision Date: 05 September 2012
• Docket Number: No. 10–5123.,10–5123.
• Citation: 693 F.3d 1226
• Parties: William FOSTER, Plaintiff–Appellant, v. PPG INDUSTRIES, INC., a corporation; PPG Industries Employee Savings Plan, an Erisa plan, Defendants–Third–Party–Plaintiffs–Appellees, and Patricia Foster, Third–Party–Defendant.
• Court: U.S. Court of Appeals — Tenth Circuit

693 F.3d 1226

William FOSTER, Plaintiff–Appellant,

v. PPG INDUSTRIES, INC., a corporation; PPG Industries Employee Savings Plan, an Erisa plan, Defendants–Third–Party–Plaintiffs–Appellees,andPatricia Foster, Third–Party–Defendant.

No. 10–5123.

United States Court of Appeals, Tenth Circuit.

Sept. 5, 2012.

Steven R. Hickman, Frasier, Frasier & Hickman, LLP, Tulsa, OK, for Plaintiff–Appellant.

John H. Tucker (Randall E. Long, with him on the brief), Rhodes, Hieronymus, Jones, Tucker & Gable, Tulsa, OK, for Defendant–Third–Party–Plaintiff–Appellees.

Before HARTZ, EBEL, and HOLMES, Circuit Judges.

EBEL, Circuit Judge.

Plaintiff–Appellant William Foster (“Foster”) sued his former employer, Defendant–Appellee PPG Industries, Inc. (“PPG”), and Defendant–Appellee the PPG Industries Employee Savings Plan (the “Plan”) (collectively, “Defendants”) under the Employee Retirement Income Security Act (“ERISA”) to recover Plan benefits allegedly due him after Foster's ex-wife fraudulently withdrew Foster's entire Plan account balance. The district court upheld the decision of the Plan Administrator, who had determined that the Plan was not liable to reimburse Foster for the fraudulently withdrawn benefits. Foster appeals. Exercising jurisdiction under 28 U.S.C. § 1291, we AFFIRM.

I. BACKGROUND

A. Foster's employment, marital, and residential history

Foster was employed by PPG from October 1988 to October 20, 1999. While employed by PPG, Foster participated in the Plan. The Plan is a 401(k) employee stock ownership plan, governed by ERISA, consisting of employee contributions matched in part by employer contributions. When Foster separated from PPG employment, his rights in his Plan account balance were fully vested. Foster did not elect to withdraw his money from his Plan account when his employment terminated, but rather deferred receipt of his benefits, thereby remaining a Plan participant.

Foster was married to Patricia Foster ¹ from 1993 until July 27, 2004, when the couple divorced. During their marriage, the Fosters lived together at 12401 East 33rd Place, in Tulsa (“the marital residence”). When Foster left his employment with PPG in 1999, he still resided at the marital residence, and this address remained on file with PPG as Foster's permanent address. In early July 2004, prior to the finalization of the divorce, Foster moved out of the marital residence, but Foster did not change his permanent address on file with PPG and the Plan until September 21, 2005. Ms. Foster continued to live at the marital residence. At no time between July 2004 and September 2005 did Foster file an official change of address form with the U.S. Postal Service or otherwise notify PPG or the Plan of his change of address.

B. Activity on Foster's Plan account

Even before Foster had moved out of the marital residence, PPG had implemented automated systems for Plan participants to access their accounts, and notified Plan participants of how to use these systems. These systems used a combination of Social Security numbers and Personal Identification Numbers (“PINs”) to protect participants' accounts. PPG had also notified participants that it would soon be introducing enhanced security measures to “address the increasing concern around possible identity theft and data privacy.” Aplt. App. at 314. These new measures included the use of unique User IDs rather than Social Security numbers and more complex password requirements.

In March 2005, PPG mailed information on how to establish a new User ID and password, marked “To Be Opened By Addressee Only,” to the marital residence. Id. at 288, 538. Ms. Foster received the document and used the information it contained, along with Foster's Social Security number, to attempt to gain access to Foster's account online. In accordance with its procedures, PPG processed the password reset request and sent it to the “permanent address on file,” i.e., the marital residence. Id. at 32. On May 8, 2005, armed with the new password and Foster's Social Security number, Ms. Foster created a User ID, password, answers to security questions, and beneficiary designation on Foster's account, changed the mailing address on the account to her P.O. box, and requested a withdrawal of $4,000, to be directly deposited to a numbered account at the Bank of Oklahoma. PPG processed the request on May 9, 2005. By September 13, 2005, Ms. Foster had emptied the account, $42,126.38 in all.

C. Foster's Dealings with PPG

In September 2005, Foster contacted the Plan service center by phone and updatedhis mailing address. During the call, Foster apparently did not inquire as to the balance of his account, nor was he told his account was empty. Foster first became aware of the withdrawals from his account in January 2006, when he received at his new home address a 2005 Form 1099–R from Fidelity Investments reporting a distribution of $42,126.38. On January 30, 2006, Foster sent a letter to the “PPG Plan Administrator,” reporting that he had received a 1099–R and “claiming potential fraud, as I did not request withdrawal from my plan and I did not authorize any disbursement from this plan.” Id. at 24.

The Plan Administrator's designate, Adrianne Scott, responded on March 6, 2006. She told Foster that PPG was reviewing his account activity and “seeking guidance from PPG's outside legal counsel as to what steps need to be taken next to investigate your claims.” Id. at 25. She promised to keep Foster “abreast of the results of our review.” Id. In subsequent communications between Foster and Scott, Foster “did admit that his ex-wife had admitted to withdrawing the funds from his account.” Id. at 380. Nevertheless, Foster wrote a second letter on May 30, 2006, stating “I did not request or authorize the above referenced disbursement in 2005 and demand that the full amount of $42,126.38 be put back into my plan, and the 1099R for same be rescinded.” Id. at 26.

On May 31, 2006, Scott wrote to Foster to tell him that “outside legal counsel has determined that the Plan is not liable for the events that took place, as proper security measures were in place to ensure the safety of participants' assets in the Plan.” Id. at 27. Scott stated that the Plan would “make a reasonable attempt to recover the distributed amount from your ex-wife,” and that if it could not recover the amount, it would re-issue the 1099–R in Ms. Foster's name. Id. The letter acknowledged Foster's “very unfortunate situation,” and advised him that he might pursue legal action against Ms. Foster.²Id. Finally, the letter encouraged Foster to write to the Plan Administrator if he wished to discuss the matter further, and in the meantime to call Scott with any questions. Scott reiterated the Plan's position in a letter of July 28, 2006.

D. Procedural Background

Foster filed suit against PPG and the Plan in the Northern District of Oklahoma on August 15, 2006. In his amended complaint he asserted two distinct ERISA violations, albeit without reference to specific statutory provisions. First, Foster alleged that he had demanded, but Defendants had refused to pay, “distribution of his share of the [P]lan,” id. at 12, which we construe as a claim under 29 U.S.C. § 1132(a)(1)(B).³ Second, Foster alleged that he had “sought information from Defendantsregarding the plan, to which he is entitled under ERISA, and which has not been furnished to him,” Aplt. App. at 12, which we construe as a claim under 29 U.S.C. § 1132(a)(1)(A).⁴ Defendants impleaded Ms. Foster as a third-party defendant on December 19, 2006. Following amendment of Foster's complaint, discovery, the parties' joint submission of an Administrative Record, and a hearing before a magistrate judge developing the Administrative Record, the district court remanded the case to the Plan Administrator on Defendants' motion.

On May 9, 2008, Plan Administrator G. Thomas Welsh, PPG's Director of HR Services and Benefits, issued a formal determination to Foster, “in light of the Court's order [and] considering [Foster's] claim as a request for payment of benefits for the full amount in controversy.” Id. at 537. The Administrator denied Foster's request for “additional benefits” on the grounds that “[1] the Plan had in place all the necessary and proper security measures, [2] the benefits were paid in accordance with all Plan terms and requirements, and [3] [Foster's] loss of benefits was due to [Foster's] own failure to comply with [the Plan's address change requirements] and the fraudulent conduct of Ms. Foster.” Id.

Foster challenged this determination in the district court. As pertinent to this appeal, Foster argued below (1) that the Plan Administrator's decision should be reviewed de novo, and (2) that because Foster had not personally requested or received his money, and because the money had instead been paid to another, the money had been “forfeited” in violation of 29 U.S.C. § 1053(a). The district court, applying a deferential arbitrary-and-capricious standard of review, upheld the Administrator's decision. It further determined that “nonforfeitable” as defined in 29 U.S.C. § 1002(19) had no application to a situation in which the loss of benefits was due to the wrongful action of third parties. Foster now appeals.

II. DISCUSSION

A. Standard of Review

This Court reviews the “plan administrator's decision to deny benefits to a claimant, as opposed to reviewing the district court's ruling.” Holcomb v. Unum Life Ins. Co. of Am., 578 F.3d 1187, 1192 (10th Cir.2009). In reviewing the administrator's actions, we are “limited to the administrative record—the materials compiled by the administrator in the course of making his decision.” Id. (internal quotation marks omitted).

We will “review a denial of plan benefits ‘under a de novo standard’ unless the plan provides to the contrary.” Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008) (quoting Firestone Tire & Rubber Co. v. Bruch, 489...