Haberern v. Kaupp Vascular Surgeons Ltd. Defined Ben. Pension Plan
| Decision Date | 20 June 1994 |
| Docket Number | No. 93-1892,93-1892 |
| Citation | 24 F.3d 1491 |
| Parties | , 18 Employee Benefits Cas. 1097 Ruth HABERERN, v. KAUPP VASCULAR SURGEONS LTD. DEFINED BENEFIT PENSION PLAN; Lehigh Valley Vascular Surgeons Ltd. Retirement Plan; Lehigh Valley Vascular Surgeons Ltd.; Kenneth M. McDonald, M.D., Trustee, Kaupp Vascular Surgeons Ltd. Defined Benefit Pension Plan and Trust Agreement, Lehigh Valley Vascular Surgeons Ltd. Retirement Plan, Lehigh Valley Vascular Surgeons Ltd. and Kenneth M. McDonald, Trustee, Appellants. |
| Court | U.S. Court of Appeals — Third Circuit |
Lawrence J. Fox (argued), Paul R. Fitzmaurice, Drinker Biddle & Reath, Philadelphia, PA, for appellee.
Susan Katz Hoffman (argued), Richard S. Schlegel, Andrew R. Rogoff, Thomas J. Momjian, Pepper, Hamilton & Scheetz, Philadelphia, PA, for appellants.
Steven S. Zaleznick, Cathy Ventrell-Monsees, Mary Ellen Signorille, Warren Gorlick, American Ass'n of Retired Persons, Washington, DC, for amicus curiae American Ass'n of Retired Persons.
Before: GREENBERG, COWEN, and NYGAARD, Circuit Judges.
The four appellants, Lehigh Valley Vascular Surgeons, Ltd. ("Lehigh Valley"), two employee pension plans established by Lehigh Valley, Kaupp Vascular Surgeons Ltd. Defined Benefit Pension Plan and Trust Agreement and Lehigh Valley Vascular Surgeons Ltd. Retirement Plan, a defined contribution plan, and the plans' trustee, Kenneth M. McDonald, M.D., appeal from a final judgment entered by the district court in favor of the appellee, Ruth Haberern, a retired employee of Lehigh Valley. 1 The district court entered the judgment in accordance with its opinion reported as Haberern v. Kaupp Vascular Benefits Plan and Trust Agreement, 822 F.Supp. 247 (E.D.Pa.1993). The total judgment was for $614,165.99, but the court broke it down into segments. Haberern brought this action under section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Sec. 1132(a)(1)(B), to recover compensation allegedly due from Lehigh Valley and benefits she claimed under the plans, and to enforce her rights under the plans.
The appellants make five challenges to the district court's opinion and judgment. They contend that the district court erred when it concluded that Lehigh Valley acted as an ERISA fiduciary when it reduced Haberern's salary by eliminating her compensation based on Lehigh Valley's gross receipts and it contemporaneously created the defined benefit plan. They also contend that the district court erred in concluding that Lehigh Valley breached its fiduciary duty in paying a portion of Haberern's compensation as a bonus and in making assurances to Haberern regarding her benefits under the defined benefit plan, without explaining that the designation of part of her compensation as a bonus would adversely affect her benefits. While these assurances were inconsistent with the terms of the plan, the appellants contend that the court nevertheless erred, as the terms were in the plan and also were described in the summary plan description which the appellants provided to Haberern. In the appellants' view, these disclosures relieved them of any duty to explain the plan further. Alternatively, the appellants argue that recovery on this claim is barred because damages for a breach of fiduciary duty cannot be awarded to a plan beneficiary under section 502(a)(1)(B) of ERISA, 29 U.S.C. Sec. 1132(a)(1)(B).
The appellants also challenge the district court's conclusion that Lehigh Valley violated section 510 of ERISA, 29 U.S.C. Sec. 1140, by amending its defined benefit plan to eliminate Haberern's life insurance coverage while simultaneously increasing the life insurance for other beneficiaries. Finally, the appellants challenge the district court's conclusion that Haberern requested information about her benefits under the defined benefit plan which appellants, in violation of section 105(a) of ERISA, 29 U.S.C. Sec. 1025(a), did not provide and the court's consequent assessment of $191,300 in penalties for the appellants' failure to provide that information. 2 The district court also concluded that the appellants breached a fiduciary duty under ERISA by requiring Haberern to sign a release before they distributed her accrued benefits under the defined contribution plan, but the appellants do not challenge that ruling.
We agree with the appellants on all issues they raise. In particular, we find that the reduction in Haberern's salary was a management decision for which they cannot be liable under ERISA. Additionally, we conclude that Haberern cannot recover under section 502(a)(1)(B) of ERISA for the appellants' alleged breach of fiduciary duty in designating part of her compensation as a bonus and in not informing her of the consequences of that designation with respect to her retirement benefits. We also hold that the appellants did not violate section 510 of ERISA, 29 U.S.C. Sec. 1140, when they amended the defined benefit plan to eliminate life insurance coverage for plan beneficiaries over age 56. Finally, we determine that the district court's conclusion that a letter Haberern's attorney sent to the appellants' attorney was a request for information within the meaning of section 105(a), 29 U.S.C. Sec. 1025(a), is erroneous as a matter of law. For these reasons, we will reverse the district court's judgment awarding damages on all these grounds.
We make one further preliminary observation. In our review of this case, we have noted a comment in the appellants' brief that the district court barely distinguished among the appellants in reaching its conclusions. Furthermore, we recognize that the district court may have entered judgment on certain claims against particular appellants not liable on those claims. Nevertheless, in view of our conclusion that we must reverse on all issues they raise, for the most part we do not find it necessary to distinguish among the appellants. Accordingly, usually we will refer to the appellants collectively rather than individually.
The historical facts of this case are not in dispute and, as the district court discussed them at length in its opinion, we need not repeat them in detail. We will, however, set forth matters of particular significance to this opinion. Haberern began working for Kaupp Vascular Surgeons Ltd. on July 1, 1974, as a secretary-bookkeeper. Kaupp's principals, Harry A. Kaupp, M.D., and McDonald, changed its corporate name to Lehigh Valley Vascular Surgeons Ltd. in 1984, and as a matter of convenience, we refer to Kaupp Vascular Surgeons and Lehigh Valley Vascular Surgeons as "Lehigh Valley." Haberern worked full-time for Lehigh Valley until her retirement on January 2, 1985, and from January 3, 1985 to December 16, 1986, she continued working part-time. During her employment, she never had a written employment contract.
In 1974, Haberern and Kaupp were Lehigh Valley's only employees. Haberern's initial compensation included an annual salary of $11,500, a percentage of Lehigh Valley's gross receipts, status as a beneficiary of the defined contribution pension plan, and health insurance. At that time, the defined contribution plan was known as the Kaupp Vascular Surgeons Ltd. Employee Pension Plan, but Lehigh Valley later changed the plan's name to Lehigh Valley Vascular Surgeons Ltd. Retirement Plan. Originally Kaupp and his wife were the trustees of the defined contribution plan, but McDonald later became the trustee. Lehigh Valley paid Haberern's salary bi-weekly, and it paid her percentage of gross receipts at the end of each fiscal year.
In 1976, McDonald joined Lehigh Valley and, effective September 1, 1979, McDonald and Kaupp established the defined benefit plan. When they established the defined benefit plan, McDonald and Kaupp calculated the amount necessary to fund it, and concluded that based on Haberern's salary of $19,000, Lehigh Valley would have to contribute approximately $10,000 annually on her behalf. They regarded this contribution as excessive, so in 1980 they eliminated the portion of Haberern's compensation calculated on Lehigh Valley's gross receipts. This change reduced Haberern's overall compensation for the fiscal year ending June 30, 1979, from $18,358 to $14,429, and required Lehigh Valley to contribute $5,500 to the plan on her behalf.
The appellants did not tell Haberern that the defined benefit plan required Lehigh Valley to make the contributions to the plan on her behalf. Though the appellants provided Haberern with a copy of the summary plan description, the pages regarding contributions to the plan and the provisions for insurance, as well as the table of contents were omitted, and the appellants did not provide her with a complete copy of the summary plan description until 1987. Beginning in 1980, Lehigh Valley designated part of Haberern's compensation as "salary" and part as "bonus," and it gave the same designations to Kaupp's and McDonald's compensation. This allocation was significant because benefits under the defined benefit plan were predicated on salary excluding any bonus. Accordingly, this allocation reduced the benefits which otherwise would have been due to Haberern, and it also reduced Lehigh Valley's contributions to the plan. Haberern, 822 F.Supp. at 254.
The defined benefit plan provided for life insurance equivalent to 30.58 times the participant's monthly retirement benefit. On October 21, 1980, Lehigh Valley amended the plan to eliminate life insurance for employees over age 56, a category which included only Haberern. However, the life insurance for the other beneficiaries was tripled. The appellants claim that they made these life insurance changes to save money, but the district court rejected this claim.
In 1984, Haberern informed the appellants that she intended to...
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