Lindahl v. American Tel. & Tel. Co.

• Decision Date: 22 May 1985
• Docket Number: No. 82 C 480.,82 C 480.
• Citation: 609 F. Supp. 267
• Court: U.S. District Court — Northern District of Illinois
• Parties: George W. LINDAHL, on behalf of himself and all others similarly situated, Plaintiff, v. AMERICAN TELEPHONE & TELEGRAPH CO., E.H. Crabb, Dr. J. McCahan, S.J. Huse, E. Mayfield, and R.E. Sageman, individually and in their official capacities as members of the Employee Benefits Committee of American Telephone's Plan for Employees' Pensions & Disability Benefits, Defendants.

609 F. Supp. 267

George W. LINDAHL, on behalf of himself and all others similarly situated, Plaintiff, v. AMERICAN TELEPHONE & TELEGRAPH CO., E.H. Crabb, Dr. J. McCahan, S.J. Huse, E. Mayfield, and R.E. Sageman, individually and in their official capacities as members of the Employee Benefits Committee of American Telephone's Plan for Employees' Pensions & Disability Benefits, Defendants.

No. 82 C 480.

United States District Court, N.D. Illinois, E.D.

May 22, 1985.

Stanley Eisenstein, Katz, Friedman, Schur & Eagle, Chicago, Ill., for plaintiff.

William McKittrick, Michael G. Cleveland, Vedder, Price, Kaufman & Kammholz, Chicago, Ill., for defendants.

MEMORANDUM OPINION AND ORDER

GETZENDANNER, District Judge:

This action under Sections 404, 405 and 406 of the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1104, 1105, and 1106, is before the court on the parties' cross-motions for summary judgment. Plaintiff George W. Lindahl alleges that defendant American Telephone and Telegraph Co., Long Lines Division, and individual members of Long Lines' Employee Benefits Committee ("EBC"), violated their fiduciary duties under ERISA by forcing the plaintiff into involuntary retirement. Defendants contend that plaintiff's claims are barred by ERISA's statute of limitations, that plaintiff is estopped from litigating the issue of fiduciary breach by virtue of a prior arbitration award in the defendant's favor, and that plaintiff can put forth no evidence to support his allegation that defendants acted arbitrarily and capriciously so as to violate their fiduciary duty. Defendants also seek to strike plaintiff's claim for punitive damages and to dismiss defendant Jermyn McCahan on the ground that he is not a fiduciary. Plaintiff, in turn, argues that the standard governing defendants' actions was whether they looked after his best interests as a pension plan beneficiary, and that he is entitled to partial summary judgment due to the committee's siding with the employer against him in a job disability dispute. Because the court finds for defendants on the limitations issue, it does not reach the other issues raised by the parties.

FACTS

Plaintiff George W. Lindahl was hired by AT & T Long Lines Division on or about October 7, 1948, until his involuntary retirement on January 22, 1977. Throughout this period, Lindahl was a participant in AT & T's Plan for Employees' Pensions & Disability Benefits. The responsibility for administering the plan was and is vested in the Employee Benefits Committee (EBC). Defendants Sylvester J. Huse, Ernest H. Crabb, and Edgar Mayfield, officers of Long Lines, were all members of the EBC at the time of plaintiff's forced retirement. Defendant Jermyn McCahan, Corporate Medical Director of Long Lines, was the medical advisor to the EBC and attended all their meetings.

In January 1976, plaintiff experienced a recurrence of ulcerated varicose veins from which he had suffered for several years, and which had necessitated several prolonged absences from work in the past. He was hospitalized from February 2 through February 17, 1976, under the care of Dr. Tom R. DeMeester. On March 11, 1976, DeMeester released plaintiff to return to work on March 22, 1976.

On March 19, 1976, Dr. Daniel E. Conrad, Medical Director for Long Lines' Central Region, examined plaintiff. Dr. Conrad had examined plaintiff previously in connection with his leg problems and concluded that plaintiff was medically unable to return to work. Conrad discussed this assessment with DeMeester and reexamined plaintiff on April 15, 1976, but reconfirmed his opinion and refused to allow plaintiff to return to work.

On September 2, 1976, DeMeester again examined Lindahl and reported to Conrad that Lindahl should be able to work. DeMeester reiterated this opinion by letter dated November 16, 1976. Conrad nonetheless continued to feel that plaintiff was unable to work, and discussed his opinion with McCahan. Together they arranged for plaintiff to be seen by Dr. Peter Nennhaus, a cardiovascular surgeon. Nennhaus indicated that Lindahl's disability was not at all serious and could easily be controlled by use of Kenalog ointment and a knee-high Kendrick stocking. Nennhaus regarded the Kendrick stocking as vastly superior to the Jobst brand Lindahl had been using and as equivalent to bed rest for curing ulcerated venous problems.

On January 20, 1977, Conrad reexamined plaintiff, and found that plaintiff still had unhealed ulcers. Since a year off of work with supposed bed rest and leg elevation had not fully healed Lindahl's condition, Conrad concluded that plaintiff's condition could not be expected to improve by use of the Kendrick stocking. Conrad therefore recommended to plaintiff's supervisor, Stanley Bushhouse, that plaintiff be involuntarily retired due to the likelihood of a recurrence in the near future. Bushhouse and his superiors furthered this recommendation to the EBC with the notice that both plaintiff and his personal physician disagreed with Conrad's opinion. The EBC, on February 8, 1977, voted to place plaintiff on involuntary retirement, notwithstanding his opposition.

Plaintiff was informed by Conrad of the involuntary retirement in late January. On January 28, 1977, the Union filed a grievance on plaintiff's behalf alleging that the company terminated him in violation of its collective bargaining agreement. After April 25, 1979, when the parties failed to reach agreement in informal grievance meetings, the Union demanded arbitration. Long Lines refused on the ground that the arbitration clause covered only dismissals and not retirements. In 1980, the Union filed suit to compel arbitration in federal district court. On September 9, 1980, Judge Hubert L. Will ordered the parties to arbitrate the issue of arbitrability. The parties proceeded to arbitration that summer, and this suit was filed the following January. On March 31, 1982, Arbitrator Zel S. Rice II determined that the dispute was not arbitrable, and rejected the Union's arguments that the EBC had violated ERISA through its actions.

Statute of Limitations

In Count I of plaintiff's complaint, which is the sole remaining count in this lawsuit¹, plaintiff seeks damages for the defendants' breach of fiduciary duty under ERISA. This claim is governed by the limitations period under section 413 of ERISA, 29 U.S.C. § 1113(a)(2):

No action may be commenced under this subchapter with respect to a fiduciary breach of any responsibility, duty or obligation under this part ... after the earlier of

(1) six years after (A) the date of the last action which constituted a part of the breach or violation, ... or (2) three years after the earliest date (A) on which the plaintiff had actual knowledge of the breach or violation....

The present lawsuit was filed on January 26, 1982. Plaintiff testified at his deposition that he knew in January 1977 that the EBC would have final say over any company recommendation for involuntary retirement. Since the EBC's decision was rendered on February 8, 1977, it is obvious that more than three years passed from the date plaintiff actually learned of the facts comprising the alleged ERISA violation and the present suit. Defendants therefore move that judgment be entered on limitations grounds.

In his opposition brief, plaintiff makes no argument that section 413(a)(2)'s three-year period is inapplicable to this action, nor does he argue that any factual disputes exist with regard to his knowledge of the ERISA breach back in 1977. Plaintiff's sole contention is that the limitations period should be tolled throughout the period that he exhausted his grievance and arbitration remedies. Defendants concede that exhaustion, if required as a prerequisite to this suit, would properly toll the running of the limitations period. Defendants nonetheless contend that exhaustion of plaintiff's collective bargaining remedies is not required for maintaining a statutory ERISA claim, and that resort to such remedies therefore does not toll the time for filing a claim.

In Kross v. Western Electric Co., 534 F.Supp. 251, 253 (N.D.Ill.1982), aff'd in part, 701 F.2d 1238 (7th Cir.1983), this court dismissed an ERISA suit under section 502(a)(3) for failure to exhaust a pension plan's internal claims procedures. The court noted that exhaustion of claims procedures was uniformly required in actions to recover benefits under section 502(a)(1)(B) of ERISA but not in civil actions for breach of fiduciary duty under section 502(a)(2). The court concluded that the plaintiff's claim, which alleged that the company forced him into early retirement to avoid the vesting of his pension benefits, was more like a 502(a)(1)(B) claim for benefits than like a 502(a)(2) claim for breach of fiduciary duty, and required exhaustion.

On appeal, the Seventh Circuit did not address the distinction among ERISA claims drawn by this court, but instead held that application of the exhaustion doctrine in ERISA cases is a matter generally left to the discretion of the district courts. 701 F.2d at 1244. The Kross panel nonetheless stressed a "strong federal policy expressed in case law, encouraging private resolution of ERISA-related disputes." 701 F.2d at 1244.

Both Kross and the cases on which it relied concerned exhaustion of claim-resolution procedures set up under the pension plan itself, and not grievance arbitration procedures pursuant to a separate collective bargaining agreement. Defendants argue that the policies requiring exhaustion in Kross do not apply to the present situation. Defendants further argue, by analogy to case law concerning Title VII and the Fair Labor Standards Act, that exhaustion of arbitral remedies for unfair termination under a collective bargaining agreement is not a statutory prerequisite for an ERISA claim alleging breach of fiduciary duty. The court will address these arguments in turn.

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