Pender v. Bank of Am. Corp.
| Decision Date | 05 June 2018 |
| Docket Number | No. 17-1485,17-1485 |
| Court | U.S. Court of Appeals — Fourth Circuit |
| Parties | WILLIAM L. PENDER; DAVID L. MCCORKLE, Plaintiffs - Appellants, and ANITA POTHIER; KATHY L. JIMENEZ; MARIELA ARIAS; RONALD R. WRIGHT; JAMES C. FABER, JR., On behalf of themselves and on behalf of all others similarly situated, Plaintiffs, v. BANK OF AMERICA CORPORATION; BANK OF AMERICA, NA; BANK OF AMERICAN PENSION PLAN; BANK OF AMERICA 401(K) PLAN; BANK OF AMERICA CORPORATION CORPORATE BENEFITS COMMITTEE; BANK OF AMERICA TRANSFERRED SAVINGS ACCOUNT PLAN, Defendants - Appellees, and UNKNOWN PARTY, John and Jane Does #1-50, Former Directors of NationsBank Corporation and Current and Former Directors of Bank of America Corporation & John & Jane Does #51-100, Current/Former Members of the Bank of America Corporation Corporate Benefit; PRICEWATERHOUSE COOPERS, LLP; CHARLES K. GIFFORD; JAMES H. HANCE, JR.; KENNETH D. LEWIS; CHARLES W. COKER; PAUL FULTON; DONALD E. GUINN; WILLIAM BARNETT, III; JOHN T. COLLINS; GARY L. COUNTRYMAN; WALTER E. MASSEY; THOMAS J. MAY; C. STEVEN MCMILLAN; EUGENE M. MCQUADE; PATRICIA E. MITCHELL; EDWARD L. ROMERO; THOMAS M. RYAN; O. TEMPLE SLOAN, JR.; MEREDITH R. SPANGLER; HUGH L. MCCOLL; ALAN T. DICKSON; FRANK DOWD, IV; KATHLEEN F. FELDSTEIN; C. RAY HOLMAN; W. W. JOHNSON; RONALD TOWNSEND; SOLOMON D. TRUJILLO; VIRGIL R. WILLIAMS; CHARLES E. RICE; RAY C. ANDERSON; RITA BORNSTEIN; B. A. BRIDGEWATER, JR.; THOMAS E. CAPPS; ALVIN R. CARPENTER; DAVID COULTER; THOMAS G. COUSINS; ANDREW G. CRAIG; RUSSELL W. MEYER-, JR.; RICHARD B. PRIORY; JOHN C. SLANE; ALBERT E. SUTER; JOHN A. WILLIAMS; JOHN R. BELK; TIM F. CRULL; RICHARD M. ROSENBERG; PETER V. UEBERROTH; SHIRLEY YOUNG; J. STEELE ALPHIN; AMY WOODS BRINKLEY; EDWARD J. BROWN, III; CHARLES J. COOLEY; ALVARO G. DE MOLINA; RICHARD M. DEMARTINI; BARBARA J. DESOER; LIAM E. MCGEE; MICHAEL E. O'NEILL; OWEN G. SHELL, JR.; A. MICHAEL SPENCE; R. EUGENE TAYLOR; F. WILLIAM VANDIVER, JR.; JACKIE M. WARD; BRADFORD H. WARNER, Defendants. |
UNPUBLISHED
Appeal from the United States District Court for the Western District of North Carolina, at Charlotte. Graham C. Mullen, Senior District Judge. (3:05-cv-00238-GCM)
Before KEENAN, WYNN, and FLOYD, Circuit Judges.
ARGUED: Julia Penny Clark, BREDHOFF & KAISER, PLLC, Washington, D.C., for Appellants. Carter Glasgow Phillips, SIDLEY AUSTIN LLP, Washington, D.C., for Appellees. ON BRIEF: Eli Gottesdiener, GOTTESDIENER LAW FIRM, PLLC, Brooklyn, New York; Thomas D. Garlitz, THOMAS D. GARLITZ, PLLC, Charlotte, North Carolina, for Appellants. Irving M. Brenner, MCGUIREWOODS LLP, Charlotte, North Carolina; Anne E. Rea, David F. Graham, Tacy F. Flint, Steven J. Horowitz, SIDLEY AUSTIN LLP, Chicago, Illinois, for Appellees.
Unpublished opinions are not binding precedent in this circuit.
This Employment Retirement Income Security Act of 1974 ("ERISA") case returns to the Court for a third time. See Pender v. Bank of Am. Corp., 788 F.3d 354 (4th Cir. 2015); McCorkle v. Bank of Am. Corp., 688 F.3d 164 (4th Cir. 2012). Plaintiffs, a class of current and former employees of Bank of America and certain of its predecessors (collectively, with the Bank's Pension Plan, the "Bank"), seek an equitable accounting for any profits accruing to the Bank resulting from its unlawful transfer of the balances of Plaintiffs' 401(k) Plan accounts into the general account of the Bank's Pension Plan. Pender, 788 F.3d at 358. In 2015, this Court ruled that the district court erred in dismissing Plaintiffs' accounting action, and remanded the case to the district court to determine whether the Bank retained any profit as a result of the unlawful transfers and its use of the transferred funds. Id. at 368, 370.
On appeal, as it did before the district court, the Bank advances a simple, if somewhat surprising, argument—that the Pension Plan's investment strategy for the unlawfully transferred funds, which was developed and implemented by the Bank's trained asset managers, performed far worse than Plaintiffs' investment strategies, as reflected in their 401(k) account investment allocations. Because Plaintiffs' investment allocations outperformed the Bank's investment strategy—and the Pension Plan was responsible for making up any shortfall between the performances of the Bank's investment strategy and Plaintiffs' allocations—the Bank maintains that it did not profit from the transfers. After conducting a four-day bench trial, during which the parties presented fact and expert testimony and evidence, the district court agreed with the Bank and, therefore, dismissedPlaintiffs' action as moot. Pender v. Bank of Am. Corp., No. 3:05-CV-00238, 2017 WL 1536234, at *23 (W.D.N.C. Apr. 27, 2017). For the reasons that follow, we affirm.
In 1998, the Bank amended its 401(k) Plan to provide eligible participants with the opportunity to transfer their account balances to the Bank's defined-benefit Pension Plan. Pender, 788 F.3d at 358. Once transferred to the Pension Plan, beneficiaries could continue to allocate their account balances among various investment options. Id. at 358. However, unlike with balances held in the 401(k) Plan, which were actually invested in the selected investment options, beneficiaries who elected to transfer their accounts to the Pension Plan would have only notional (or hypothetical) accounts—the Bank could invest the beneficiaries' account balances however it saw fit. Id. In return for beneficiaries' agreement to transfer their balances to the Pension Plan and the use of the beneficiaries' funds, the Bank guaranteed that such beneficiaries' account balances would not fall below the amount in their account at the time of the transfer. Id. The Bank offered the transfer option because it believed it could obtain a higher return with the beneficiaries' money than the beneficiaries were obtaining. Many beneficiaries elected to transfer their 401(k) Plan account balances to the Pension Plan, with beneficiaries in aggregate transferring nearly $2 billion in their 401(k) Plan balances to the Pension Plan for the Bank's use.
In 2005, the Internal Revenue Service (the "IRS") concluded that the transfers violated ERISA's "anti-cutback provision," 29 U.S.C. § 1054(g)(1), which bars plan amendments from decreasing a participant's "accrued benefit." Id. at 363. The IRS found,and this Court later agreed, that stripping beneficiaries of the 401(k) Plan's "separate account feature" deprived beneficiaries of a meaningful benefit because it subjected plan participants to the risk that the Bank would invest the transferred assets poorly, and therefore lack sufficient funds to satisfy all of the returns a beneficiary obtained in his notional investment account. Id. at 363-64 ().
In 2008, the IRS reached a closing agreement1 with the Bank, pursuant to which the Bank "(1) paid a $10 million fine to the U.S. Treasury, (2) set up a special purpose 401(k) plan, (3) . . . transferred Pension Plan assets that were initially transferred from the 401(k) Plan to the special-purpose 401(k) plan," and (4) made additional payments to certain plan participants whose hypothetical return in their notional account was less than a defined amount. Id. at 360. The Bank completed those transfers in 2009. Id. Importantly, as a result of the transfers to the special-purpose 401(k) plan and the additional payments to certain plan participants, all Plaintiffs' current account balances are at least as large as they would have been had the funds in Plaintiffs' accounts actually been invested in accordance with their notional allocations. Pender v. Bank of Am. Corp., No. 3:05-CV-238, 2013 WL 4495153, at *10 (W.D.N.C. Aug. 19, 2013), rev'd on other grounds, 788 F.3d 354.
Around the same time that the IRS began to take action, Plaintiffs filed a variety of equitable and statutory claims related to the transfers. Pender, 788 F.3d at 360. All but one of those claims were dismissed and are not at issue in this appeal. McCorkle, 688 F.3d at 169 n.4, 177. Plaintiffs' lone remaining claim is premised on the Bank's violation of the anti-cutback provision. In 2013, the district court dismissed that claim on grounds that the remedial provisions in the IRS closing agreement rendered such claims moot because it restored the 401(k) Plan's separate account feature. Pender, 2013 WL 4495153, at *5-9.
This Court reversed, explaining that Plaintiffs suffered a legally cognizable ongoing injury if the Bank retained a profit as a result of its unlawful transfer of the 401(k) Plan balances to the Pension Plan, and its investment of those balances. Pender, 788 F.3d at 364-65. In reaching that conclusion, this Court held that Plaintiffs could pursue relief under ERISA Section 502(a)(3), which authorizes a plan beneficiary to obtain any "appropriate equitable relief" to redress "any act or practice which violates" certain ERISA provisions, including the anti-cutback provision. Id. at 363. This Court further concluded that the "accounting for profits" sought by Plaintiffs is one form of "equitable relief" available under Section 502(a)(3). Id. at 364-65.
On remand, the district court conducted a four-day bench trial to determine "whether, after it restored the separate account feature and paid a $10 million fine to the IRS, the Bank nevertheless profited from its transfer strategy." Pender, 2017 WL 1536234, at *4. At trial, as they do on appeal, Plaintiffs and the Bank offered distinct approaches to determining whether the Bank retained a profit as a result of the transfer of the beneficiaries' 401(k) Plan account balances to the Pension Plan.
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