Mein v. Carus Corp., 00-2618

• Decision Date: 21 February 2001
• Docket Number: No. 00-2618,00-2618
• Citation: 241 F.3d 581
• Parties: (7th Cir. 2001) PETER G. MEIN, Plaintiff-Appellant, v. CARUS CORPORATION, a corporation, M. BLOUKE CARUS, and CARUS CORPORATION CAPITAL ACCUMULATION PLAN, Defendants-Appellees
• Court: U.S. Court of Appeals — Seventh Circuit

Page 581

241 F.3d 581 (7th Cir. 2001)

PETER G. MEIN, Plaintiff-Appellant, v. CARUS CORPORATION, a corporation, M. BLOUKE CARUS, and CARUS CORPORATION CAPITAL ACCUMULATION PLAN, Defendants-Appellees.

No. 00-2618

In the United States Court of Appeals For the Seventh Circuit

Argued January 12, 2001

Decided February 21, 2001

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 99-C-8269--Harry D. Leinenweber, Judge.

Before RIPPLE, ROVNER, and EVANS, Circuit Judges.

EVANS, Circuit Judge.

Common sense takes a beating in this suit, brought under the Employee Retirement Income Security Act, 29 U.S.C. sec. 1001 et seq. What should have been a relatively simple matter has been dragging on for a decade. Peter G. Mein is attempting to force his former employer, Carus Corporation, to make certain contributions to his 401(k) plan, and whether he can succeed or not would seem to be a relatively easy question.

In 1979 Carus Corporation adopted a pension plan called the Carus Corporation Capital Accumulation Plan. As part of the plan, Carus contributed 4% of each employee's compensation into an account for employees. The plan defined "compensation" as the total of all amounts received for services rendered, includable in gross income for income tax purposes.

In 1985 Mein and Carus entered into an employment agreement which provided for the creation of a chemical department known as Special Products Division, of which Mein was appointed vice-president. He was to earn a royalty on products sold and was provided with what he calls a phantom equity interest in the division.

A difference of opinion arose about the meaning of the agreement, and the parties went to arbitration. A settlement was reached on November 9, 1988, under which Carus agreed to pay Mein royalties through December 31, 1989, on the same percentage basis as under the employment agreement. So long as Mein was a Carus employee, royalty payments were considered compensation. In addition, Mein released any equity interest he had in the Special Products Division, in exchange for which Carus agreed to pay him $575,000 in four installment payments, which accrued interest from November 9, 1988. Ultimately, Mein received payments totaling $643,335.98. Carus gave Mein W- 2 forms which included these payments in his gross income.

In 1991 the lengthy dispute with which we are concerned began when Mein wrote to Carus asking whether the equity payments he received under the settlement agreement were treated as eligible compensation for his 401(k) plan. Over the next 2 years Mein received letters and memos from Carus officials telling why they were not eligible compensation. One memo said that the funds he received under the settlement agreement were a "severance settlement" and not compensation for purposes of the 401(k) plan. Another said that the royalty payments were eligible compensation but that the equity payments were not. Another informed Mein that the payments were for the release and settlement of the equity portion of the employment agreement, not for employee services; therefore, they were not compensation under the 401(k) plan.

In 1994 Mein filed a state court breach-of- contract case seeking to compel Carus to make the disputed payments into the 401(k). The court dismissed the suit without prejudice on the basis that the case presented an ERISA claim; for that reason, the court concluded that it lacked jurisdiction. The Illinois appellate court agreed that it was an ERISA case but concluded that it was the type of ERISA case over which there was concurrent federal-state jurisdiction. The case was remanded so that Mein could amend to properly frame his claim as one arising under ERISA. After the amendment to the complaint, Mein encountered yet another problem: the trial court dismissed the case based on Mein's failure to exhaust administrative remedies as required under ERISA. The Illinois appellate court affirmed, saying that Mein had not shown that administrative remedies would have been "clearly useless." The court rejected Mein's contention that the plan was not the proper forum for the relief he sought and his view that his is a claim against the company for not making the contributions and that the plan's role is merely to receive contributions and pay benefits.

Mein then undertook what he perceived to be a rather fruitless administrative appeal, and, sure enough, on August 3, 1999, James Wilkes, writing as trustee for the plan, informed him that the "Plan Administrator" had reviewed his claim and denied it on the basis that the payments were made under the settlement agreement, which terminated his employment agreement and his equity interest in the division; consequently they were not in exchange for "services rendered" and were not compensation under the plan. Alternatively, Wilkes said, the payments were closer to severance or post-employment pay and, for that reason as well, were not compensation.

In 1999, nearly a decade after the dispute began, Mein filed the present district court complaint seeking relief under ERISA, naming as defendants Carus Corporation and M. Blouke Carus, a minority shareholder. Mein claimed that the terms of the plan required the Carus Corporation to contribute 4% of the $643,336 into his 401(k) retirement account. He sought an order requiring the company to make the contributions. The defendants moved to dismiss the complaint on the basis that they were not appropriate defendants to a claim for ERISA benefits--that the plan, which was not named as a defendant, was in fact the only proper defendant. At a hearing, the district judge granted the motion but gave Mein leave to refile. Perhaps anticipating another setback, at the hearing Mein was prepared with an amended complaint naming the two previous defendants and adding the Carus Corporation Capital Accumulation Plan as a defendant. District Judge Harry D. Leinenweber let him file the amended complaint but said the original defendants remained dismissed. In spite of that, Mein insisted that he had no claim against the plan but only against the employer which promised to make contributions to the plan.

Taking Mein at his word, the defendants filed a motion to dismiss, saying that the plan was the only appropriate defendant, that Mein was not seeking relief against it, and that Mein failed to allege that the terms of the plan entitled him to relief or that the plan violated his rights under ERISA. Mein, in turn, filed a motion for summary judgment, in which he stated,

It is true that Mein seeks no relief from the Plan. Carus Corporation and its guarantor, Blouke Carus, are the only entities from whom Mein seeks relief. The Carus plan is merely the conduit through which employer contributions to the employee's account are made and ultimately distributed to the employee.

The defendants' motion to dismiss was granted and Mein appeals.

Mein's insistence that he seeks relief only from the corporation itself and from Blouke Carus might seem to complicate our analysis, as might the defendants' professedly firm belief that in this circuit the plan can be the only defendant. But the latter proposition is much less firmly established than the defendants would have us believe. And Mein's problem is not that he has not named the plan as a defendant, because, reluctantly, he has; his problem is that he insists that he does not seek any relief against the plan.¹ Mein's belief that the plan cannot offer him the relief he seeks overlooks the fundamental fact that it is the plan administrator that has the power to determine what the plan provisions mean, including, we note, what compensation, as defined in the plan, means. What makes all of this doubly absurd as a matter of common sense, if not of law, is that, in this case, it is the corporation which is the plan administrator--which, though it sounds a little fishy, is legal. Unlike the common law of trusts, ERISA allows the employer to be the plan administrator. 29 U.S.C. sec. 1002(16). In fact, in Varity Corp. v. Howe, 516 U.S. 489 (1996), the Court allowed employees to bring a breach of fiduciary suit against a company in its role as plan administrator.

As to the proper defendant against whom to make an ERISA claim, it may ordinarily be true that, especially in a suit for benefits, a plaintiff should name the plan as a defendant. Title 29, U.S.C. sec. 1132(d), provides that a plan...