Kuntz v. Reese

• Decision Date: 13 May 1985
• Docket Number: No. 83-2151,83-2151
• Parties: 6 Employee Benefits Ca 1780 Richard P. KUNTZ, et al., Plaintiffs-Appellants, v. Nat J. REESE, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 926

760 F.2d 926

6 Employee Benefits Ca 1780

Richard P. KUNTZ, et al., Plaintiffs-Appellants, v. Nat J. REESE, et al., Defendants-Appellees.

No. 83-2151.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 15, 1984.

Decided May 13, 1985.

R. Bradford Huss, Hall, Henry, Oliver & McReavy, San Francisco, Cal., for plaintiffs-appellants.

Donn Dimichele, Brian C. Cuff, Ball, Hunt, Hart, Brown & Baerwitz, Los Angeles, Cal., Richard B. Glickman, Rosenman, Colin, Freund, Lewis & Cohen, San Francisco, Cal., for defendants-appellees.

On Appeal from the United States District Court for the Northern District of California.

Before TANG and PREGERSON, Circuit Judges, and REAL, ^* District Judge.

PREGERSON, Circuit Judge:

INTRODUCTION

This case presents four important questions regarding the scope and application of the Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. Secs. 1001-1381 (1982). ¹ Plaintiffs-appellants, who are retired former employees of defendants-appellees, filed suit in the United States District Court for the Northern District of California and sought recovery for their employers' alleged violations of ERISA and various California laws. The district court dismissed each claim for failure to state a claim upon which relief could be granted. For the reasons expressed below, we reverse these rulings and remand for further proceedings.

FACTS

Richard Kuntz, Dan Caccavo, Jimmy Humes, John McCord, Gursewak Singh, and Duane White (the Kuntz plaintiffs) worked for the Capitol Metals Companies In short, the Kuntz plaintiffs contend that the Reese defendants lied about the amount of benefits that plaintiffs would get under the plan and failed to comply with ERISA requirements for disclosing pension plan documents.

(the Companies) ² during various periods between 1970 and 1981. In 1982, the Kuntz plaintiffs filed suit against the Companies, which had employed them and sponsored their pension plan and trust fund, and against the successors-in-interest to Capitol Metals' assets (the Reese defendants), ³ who administer the pension plan.

In the district court, the Kuntz plaintiffs alleged that the Companies and the Reese defendants misrepresented to each Kuntz plaintiff, both at the time he interviewed for his job and afterward, that the Companies would immediately enroll each Kuntz plaintiff in the pension plan. The Reese defendants described the plan as "standard" and "good." Plaintiffs further alleged that, in response to employees' requests for information about the plan, the Companies and the Reese defendants promised to send pertinent documents soon and advised the Kuntz plaintiffs not to worry. According to the original complaint, the pension plan was neither standard nor good; instead, the plan discriminated in favor of the highest-paid workers and failed to provide any coverage to other workers.

The original complaint also alleged that the Companies and the Reese defendants falsely represented that, when a firm called Estell Corp. purchased Capitol Metals Co., the employees would be covered by a new, retroactive pension plan.

The Reese defendants moved to dismiss for lack of subject matter jurisdiction. The court dismissed the second through seventh claims for relief in the original complaint, apparently on the ground that these claims were state law causes of action over which the court could decline to exercise its pendent jurisdiction.

Next, defendants moved to dismiss for failure to state a claim under ERISA, to strike parts of the complaint, and to require plaintiffs to make a more definite statement of the case. The district court granted this motion in part. After striking the Kuntz plaintiffs' prayer for punitive damages and their allegations of misrepresentation, the district court gave plaintiffs 30 days to amend to allege that Kuntz and the others had made written requests for pension plan documents, to specify the dates of purported ERISA disclosure violations, and to identify the plan administrators involved in the misconduct.

Later, the Kuntz plaintiffs filed their first amended complaint. This complaint stated only federal claims under ERISA. The Reese defendants again moved to dismiss each count for failure to state a claim. They argued that the statute of limitations barred the claim and moved to strike as immaterial plaintiffs' fraud and misrepresentation allegations. The court granted the motions in their entirety without leave to amend. The Kuntz plaintiffs then took the appeal now before us.

Finally, after the parties had briefed the substantive issues we outlined above, the Reese defendants moved this court to dismiss for lack of subject matter jurisdiction because the Kuntz plaintiffs did not have standing.

We now take up each disputed matter.

ANALYSIS

I. Standing to Sue

According to the Reese defendants, ERISA does not confer standing to sue for breach of fiduciary duty and nondisclosure of pension plan documents on former employees Because both the case law and ERISA's legislative history undermine these arguments, we reject defendants' novel interpretation of Sec. 1002(7).

whose vested pension plan benefits have already been distributed. Defendants reason that the Kuntz plaintiffs, as persons who have already received a distribution, are no longer "participant[s]" under 29 U.S.C. Sec. 1002(7) who may sue to collect their fair share of the trust fund.

A. Requirements of Sec. 1002(7)

Determining whether plaintiffs have standing is a "threshold question in every federal case [that] determin[es] the power of the court to entertain the suit." Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 2204, 45 L.Ed.2d 343 (1975). Therefore, we must decide whether ERISA authorizes the Kuntz plaintiffs to bring suit before we may exercise subject matter jurisdiction over their claims. See Freeman v. Jacques Orthopaedic & Joint Implant Surgery Medical Group, Inc., 721 F.2d 654, 655 (9th Cir.1983).

The Kuntz plaintiffs bring their ERISA action pursuant to 29 U.S.C. Secs. 1132(a)(1)(A) & 1132(a)(2). Section 1132(a)(1)(A) authorizes a "participant or beneficiary" to bring a civil action against the plan administrator to recover statutory damages for violating the duty to disclose plan documents under Sec. 1132(c). Section 1132(a)(2) authorizes either the Secretary of Labor or a "participant, beneficiary or fiduciary" to bring a civil action for relief from breaches of fiduciary duty that the plan administrator has committed in violation of Sec. 1109(a). The Reese defendants argue that these parts of Sec. 1132 do not permit the Kuntz plaintiffs to bring suit, and therefore, that we lack jurisdiction to hear this case.

The crux of the dispute is whether the Kuntz plaintiffs qualify as "participant[s]" within the meaning of ERISA. As defined in Sec. 1002(7),

[t]he term "participant" means any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit.

29 U.S.C. Sec. 1002(7) (emphasis added). The Reese defendants contend that the Kuntz plaintiffs are not participants because, as former employees whose vested benefits under the plan have already been distributed in a lump sum, the Kuntz plaintiffs were not "eligible to receive a benefit," or likely to become eligible, at the time they filed suit. ⁴

B. The Meaning of Freeman

Relying primarily on Freeman v. Jacques Orthopaedic & Joint Implant Surgery Medical Group, Inc., 721 F.2d 654 (9th Cir.1983), the Reese defendants argue that, as to former employees, only those with presently vested benefits are "participants" within the meaning of ERISA. They also contend that the Kuntz plaintiffs' action to recover damages for misrepresentation concerning a pension plan does not make them "eligible for a benefit" under the plan.

To support their interpretation of Freeman, the Reese defendants offer two arguments.

First, the Reese defendants read Freeman as holding that only current employees with presently vested benefits are participants. They rely on the fact that our court in Freeman cited Nugent v. Jesuit High School of New Orleans, 625 F.2d 1285 (5th Cir.1980), which held that some of the language defining participants--specifically, the phrase "may become eligible to receive a benefit"--applies solely to current employees. See Freeman, 721 F.2d at 655 (citing Nugent, 625 F.2d at 1287).

But Freeman 's citation of Nugent does not dispose of the standing issue in the case before us. In Freeman, we merely stated the fact that the Fifth Circuit "has held that ERISA's 'may become eligible' language defining who is a participant applies only to current employees." Freeman, 721 F.2d at 655. We did not rely on this statement to support our holding in Freeman, nor did we express any agreement or disagreement with it. Therefore, the Reese defendants' first argument regarding Freeman is inapposite.

Moreover, Freeman is factually distinguishable from the present case. Plaintiff in Freeman had not at any time possessed vested benefits or maintained a fiduciary relationship with the employer and plan administrator. By contrast, the Kuntz plaintiffs allege that they accrued vested benefits under the pension plan, and thereby enjoyed a fiduciary relationship with the employer and plan administrator. In Freeman, a former employee, Freeman, brought an action pursuant to Sec. 1132(a)(1)(B) for "an accounting and distribution of benefits claimed owing under [his] pension and profit sharing plan." Freeman, 721 F.2d at 655. Unlike the Kuntz plaintiffs, Freeman had waived participation in the plan, but then changed his mind and sued for benefits. Freeman claimed that the employer had misled him about the cost of participation. We held that...