Ogden v. Michigan Bell Telephone Co.

• Citation: 657 F. Supp. 328
• Decision Date: 31 March 1987
• Docket Number: Civ. A. No. 83CV0482DT.
• Parties: Norbert A. OGDEN, Milton A. Hartman, James K. Husk, M. Jean Kazlauskaus, Theodore J. Reuther, Charles G. Cook, William Reno, Oscar L. Cox, Henry Harrower, David R. Henderson, Shirley A. Hunt, Geraldine Rivard, Fred Schmekel, John Dunstone, Theresa Orjada, Chester Schuster, Kenneth Young, Roman S. Grucz, Andrew Lutenski, Herman Stuedemann, Robert Barnes, George Cappell, Ralph J. Banner, Alena Higgins and Carolyn P. Thiede, on behalf of themselves and all others similarly situated, Plaintiffs, v. MICHIGAN BELL TELEPHONE COMPANY, a Michigan corporation and Dan Grady, Defendants.
• Court: U.S. District Court — Western District of Michigan

657 F. Supp. 328

Norbert A. OGDEN, Milton A. Hartman, James K. Husk, M. Jean Kazlauskaus, Theodore J. Reuther, Charles G. Cook, William Reno, Oscar L. Cox, Henry Harrower, David R. Henderson, Shirley A. Hunt, Geraldine Rivard, Fred Schmekel, John Dunstone, Theresa Orjada, Chester Schuster, Kenneth Young, Roman S. Grucz, Andrew Lutenski, Herman Stuedemann, Robert Barnes, George Cappell, Ralph J. Banner, Alena Higgins and Carolyn P. Thiede, on behalf of themselves and all others similarly situated, Plaintiffs, v. MICHIGAN BELL TELEPHONE COMPANY, a Michigan corporation and Dan Grady, Defendants.

Civ. A. No. 83CV0482DT.

United States District Court, E.D. Michigan, S.D.

March 31, 1987.

COPYRIGHT MATERIAL OMITTED

Hill, Lewis, Adams, Goodrich & Tait, W. Merritt Jones, Jr., Robert B. Stevenson, Michael Kubacki, and Bradley A. Carl, Detroit, Mich., Francis M. Fitzgerald, Mt. Clemens, Mich., Theresa Smith Loyd, Detroit, Mich., John F. O'Grady, Saginaw, Mich., for plaintiffs.

Butzel, Long, Gust, Klein, & Van Zile, Robert M. Vercruysse, Barbara M. Kendzierski, Constance M. Ettinger, Detroit, Mich., for defendants.

AMENDED MEMORANDUM OPINION AND ORDER¹

PHILIP PRATT, Chief Judge.

Members of the plaintiff class claim they were wrongfully denied retirement benefits in violation of the Employee Retirement Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 et seq. The defendants are the plaintiffs' former employer, Michigan Bell Telephone Company (Michigan Bell), and Dan Grady, Michigan Bell's vice president of personnel. Grady was the plan administrator of an early retirement program known as the Management Income Protection Plan (MIPP). The plaintiffs are several hundred former management employees of Michigan Bell who retired between March 1, 1982 and June 1, 1982 and did not receive MIPP benefits.

Michigan Bell, believing a reduction in force was necessary, adopted MIPP on October 1, 1980 to encourage management employees to take early retirement voluntarily. The plan document reveals MIPP's purpose:

The Management Income Protection Plan (MIPP) is designed for management employees who are designated as affected by a resizing opportunity and are terminating employment with the Bell System for that reason. MIPP is aimed at easing the transition for these employees by providing separation payments and medical insurance coverage.

Among other benefits, MIPP provides up to one year's salary in addition to pension benefits normally provided. MIPP benefits are available only to those management employees who are designated as surplus by the vice president of personnel. A group of employees so designated may receive MIPP benefits if they retire during the defined period. After this "window" closes, MIPP benefits are unavailable until another group of employees is designated as surplus.

MIPP benefits were first offered between October 1 and December 1 of 1980. After this offering, Grady and other Michigan Bell officers informed remaining employees that the surplus problem had been solved, and that MIPP would not be implemented in the foreseeable future. Employees were told that they should not delay retirement plans in anticipation of being "MIPPed." Plaintiffs allege that representations were made throughout 1981 and 1982 regarding the unavailability of MIPP benefits in the future, both through unsolicited comments from Michigan Bell and in response to questions from employees. Claiming to have acted in reliance on these representations, the plaintiffs retired between March 1 and June 1 of 1982 without the added benefits offered by MIPP. On June 17, 1982 Michigan Bell announced that MIPP benefits would be available to employees who retired between June 1 and July 31, 1982. Having retired prior to June 1, the plaintiffs did not qualify for this MIPP offering.

Count One of the plaintiffs' third amended complaint alleges that the defendants breached their fiduciary duties as set forth in ERISA by misrepresenting the future availability of MIPP benefits and thereby not acting in the best interests of the plan participants. Count Two alleges that the representations regarding the unavailability of future MIPP offerings acted to amend MIPP so that employees who relied upon those comments and retired early qualify for MIPP benefits. These claims are for benefits under the plan itself. Several other claims, including some arising under state law, have previously been dismissed by this court. See Ogden v. Michigan Bell Tel. Co., 595 F.Supp. 961 (E.D. Mich.1984) and 571 F.Supp. 520 (E.D.Mich. 1983). Before the court are cross motions for summary judgment.

I. Standing

The threshold question in every federal case is whether the plaintiffs have standing. Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 2204, 45 L.Ed.2d 343 (1975). Standing does not depend on the merits of the case, and the court must accept as true all material allegations of the complaint and construe them in favor of the plaintiffs. Warth, 422 U.S. at 500-501, 95 S.Ct. at 2206. Count One alleges breaches of fiduciary duties set forth in 29 U.S.C. § 1104. Count Two is a claim for benefits pursuant to 29 U.S.C. § 1132(a)(1)(B). These plaintiffs have standing only if they are participants in Michigan Bell's MIPP plan.

A participant is "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." 29 U.S.C. § 1002(7). There is no doubt that the plaintiffs have standing to bring their claim for benefits in Count Two. If the plaintiffs are successful in their claim that the representations made between 1980 and 1982 amended the plan to include them, they would become eligible to receive benefits from MIPP.²

Count One seeks the recovery of plan benefits on the grounds that the plaintiffs would not have retired before June 1, 1982 but for the defendants' misrepresentations concerning the availability of MIPP. Standing appears clear in this case as well, for if the plaintiffs are successful, they would recover a plan benefit. However, some courts have held that former employees seeking benefits made available for the first time after their retirement have no standing under ERISA. Stanton v. Gulf Oil Corp., 792 F.2d 432 (4th Cir.1986); Joseph v. New Orleans Elec. Pension, 754 F.2d 628 (5th Cir.1985), reh. denied, 761 F.2d 695, cert. denied ___ U.S. ___, 106 S.Ct. 526, 88 L.Ed.2d 458. These cases are not relevant here, as MIPP existed as a plan in 1980, well before the plaintiffs retired in 1982.³

The Ninth Circuit has held that former employees who have received their vested benefits in a lump sum do not have standing to sue for breach of fiduciary duty. Kuntz v. Reese, 785 F.2d 1410 (9th Cir. 1986), cert. denied, ___ U.S. ___, 107 S.Ct. 318, 93 L.Ed.2d 291. The Kuntz court reasoned that if successful, the claim would result in damages, not in an increase of vested benefits payable by the plan, and therefore the plaintiffs could not "become eligible" for benefits. This reasoning is not readily applicable to this case, where the damages sought are the benefits allegedly lost, dissolving any meaningful distinction between the two.

To apply Kuntz here would also eviscerate some of the enforcement tools provided by ERISA. 29 U.S.C. § 1109 holds a fiduciary personally liable for any losses to a plan arising out of a breach of fiduciary duty. The damages sought in such cases inure in large measure to the plan itself, not just to the plaintiffs. The Supreme Court recently said:

A fair contextual reading of the statute makes it abundantly clear that its draftsmen were primarily concerned with the possible misuse of plan assets and with remedies that would protect the entire plan, rather than with the rights of an individual beneficiary.

Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 105 S.Ct. 3085, 3090, 87 L.Ed.2d 96 (1985). The Court cited extensive legislative history emphasizing that a critical area of Congressional concern when ERISA was drafted was the elimination of plan mismanagement. Id., 105 S.Ct. at 3090 n. 8. To interpret the standing requirements of ERISA narrowly would frustrate this goal, for a fiduciary could insulate itself from charges of mismanagement from former employees by "buying them off" with lump sum payments upon retirement.

For these reasons, the court finds that the plaintiffs have standing to bring this action.⁴

II. Count One: Violation of Fiduciary Duty

Section 1104(a) of ERISA establishes a "reasonable person" standard of care for fiduciaries:

(a) Prudent man standard of care.

(1) Subject to section 1103(c) and (d), 1342 and 1344 of this title, a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and—

(A) for the exclusive benefit of:

(i) providing benefits to participants and their beneficiaries; and

(ii) defraying reasonable expenses of administering the plan;

(B) With the care, skill prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;

29 U.S.C. § 1104(a). Section 1104 "imposes an unwavering duty to make decisions with single-minded devotion to a plan's participants...." Morse v. Stanley, 732 F.2d 1139, 1145 (2d Cir.1984). Representations made in a fiduciary capacity must not have the effect of misleading or misinforming plan participants, nor can necessary information be withheld. Genter v. Acme Scale and Supply Co., 776 F.2d 1180, 1185 (3rd Cir.1985); Morse v. Stanley, 732 F.2d 1139, 1147 (2d Cir.1984); Peoria Union Stock Yards Co. v. Penn Mut. Life Ins., 698 F.2d 320, 326 (7th Cir.1983).

Before the court can determine whether a fiduciary violated his duties, the court must determine if he was acting as a fiduciary when he engaged in the disputed...