Reynolds v. Stahr

• Decision Date: 21 March 1991
• Docket Number: No. 91-C-6-S.,91-C-6-S.
• Citation: 758 F. Supp. 1276
• Parties: David W. REYNOLDS, Great Northern Nekoosa Corporation, and Georgia-Pacific Corporation, Petitioners, v. Charles W. STAHR and Edwin Nyberg, individually and as representatives of a class, Respondents.
• Court: U.S. District Court — Western District of Wisconsin

758 F. Supp. 1276

David W. REYNOLDS, Great Northern Nekoosa Corporation, and Georgia-Pacific Corporation, Petitioners, v. Charles W. STAHR and Edwin Nyberg, individually and as representatives of a class, Respondents.

No. 91-C-6-S.

United States District Court, W.D. Wisconsin.

March 21, 1991.

England, Weaver & Kytle by George M. Weaver, Alston & Bird by Peter Q. Bassett, Atlanta, Ga., DeWitt, Porter, Huggett, Schumacher & Morgan, Madison, Wis. by John Koeppl, Verona, Wis., for petitioners.

Stafford, Rosenbaum, Rieser & Hansen by Richard A. Hollern, Madison, Wis., for respondents.

MEMORANDUM AND ORDER

SHABAZ, District Judge.

Petitioners David W. Reynolds and Great Northern Nekoosa Corporation are the fiduciary and sponsor, respectively, of an employee welfare benefit plan known as the GNN Employee Protection Plan, which is governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132, et seq. Petitioner Georgia-Pacific Corporation is the parent corporation of Great Northern Nekoosa and has contractually agreed to guarantee obligations under the plan. Petitioners commenced this action for a declaratory determination that the plan is not liable to pay certain claims to employee participants. Petitioners have named Charles W. Stahr and Edwin Nyberg, employees and participants under the Plan, as respondents and also seek certification of a class of similarly situated employee participants.

The action is presently before the Court on respondents' motion to dismiss for lack of subject matter jurisdiction, or alternatively, to abstain from exercising jurisdiction.

The following is a summary of facts which are undisputed for purposes of this motion.

FACTS

On November 12, 1989, Great Northern Nekoosa adopted the GNN Employee Protection Plan, which applies to certain employees of Great Northern Nekoosa and its subsidiaries. Section A of the plan provides:

Purpose

To provide reasonable financial protection to all full-time salaried employees who are employed by the Company at the time of a Change of Control (as defined in Article J) and are not covered by collective bargaining agreements or an individual employment agreement providing for severance or salary continuation payments following termination of employment after a Change of Control (such employee hereinafter referred to as a "Covered Employee").

Section D of the plan provides:

The Employee Protection Plan shall provide benefits only if there is a Change of Control and shall apply to a Covered Employee whose employment is terminated within two years of such Change of Control under the following circumstances:

* * * * * *

3. The employee experiences an involuntary termination of employment for other than just cause. Just cause is defined as an act or acts of dishonesty that constitutes a felony and results in personal enrichment at the expense of Great Northern Nekoosa Corporation and its business units.

Section F of the plan provides:

... If a Covered Employee in good faith institutes any legal action in seeking to obtain or enforce, or is required to defend in any legal action, the validity or enforceability of any right or benefit provided by this Plan, the Company will pay for all reasonable legal fees and expenses actually incurred by such employee.

The plan further provides for payment of a severance benefit in a lump sum in cash no later than ten days after termination of employment. The Plan provides that the Vice-President, Employee Relations, GNN, (petitioner Reynolds) is responsible for interpretations of the Plan.

On or about March 6, 1990, petitioner Georgia-Pacific, through a wholly-owned subsidiary, acquired approximately 96.5 percent of the outstanding shares of Great Northern Nekoosa common stock. This acquisition constituted a "Change of Control" under the terms of the Plan.

Nekoosa Packaging, NP Woodlands, and Nekoosa Papers are wholly-owned subsidiaries of Great Northern Nekoosa. These subsidiaries own paper mills, corrugated paper converting operations, and timberlands. On September 26, 1990, these corporations and Georgia-Pacific contracted to sell certain assets to Tenneco, Inc., Packaging Corporation of America, and certain other parties. The asset sale included two paper mills, one at Tomahawk, Wisconsin, and one at Valdosta, Georgia, as well as various corrugated paper converting operations and timberland located in the States of Wisconsin, Pennsylvania, Indiana, North Carolina, South Carolina, Georgia, Florida and California.

Respondents Stahr and Nyberg were managers at the Tomahawk Paper Mill at the time of the asset sale and are Covered Employees under the Plan. Respondents were employees of Great Northern Nekoosa through January 30, 1991. On January 31, 1991, respondents, after filing written applications for employment, became employees of Packaging Corporation of America.

Prior to the consummation of the asset sale, petitioner Reynolds received in excess of 100 written claims from members of the proposed class to recover severance benefits under the Plan, including benefits under § D.3 of the Plan, for alleged involuntary termination of employment.

On January 3, 1991, petitioner Reynolds issued a decision to all Plan participants determining that the asset sale and subsequent change of employer by the participants did not constitute an involuntary termination of employment entitling them to severance benefits within the meaning of the Plan. On the same day petitioners commenced this action.

On March 1, 1991, respondents Stahr and Nyberg, together with other employees from facilities sold in the asset sale, commenced an action against the petitioners in the United States District Court for the Middle District of Georgia, seeking a recovery of benefits under the Plan pursuant to ERISA, 29 U.S.C. § 1001, et seq. The Georgia action mirrors the action presently pending here.

MEMORANDUM

Respondents seek dismissal of petitioners' action for lack of subject matter jurisdiction. Petitioners allege jurisdiction based upon the existence of a federal question under 28 U.S.C. § 1331. Petitioners allege that jurisdiction is appropriate under the Declaratory Judgment Act, 28 U.S.C. § 2201, because the underlying issue raised by the petition is resolved under federal statutory and common law under ERISA. Alternatively, petitioners assert that jurisdiction is directly authorized as an action pursuant to § 502(a)(2) or (3) of ERISA, 29 U.S.C. § 1132(a)(2) and (3). Respondents urge that the present action falls outside the statutorily prescribed actions in § 502 of ERISA and the Declaratory Judgment Act does not extend jurisdiction beyond that prescribed by the statute.

The issue of whether a fiduciary may properly seek a determination under § 502(a) of the right of a claimant to benefits has not been addressed by the Seventh Circuit Court of Appeals. However, the question has been addressed by the Ninth and Eleventh Circuits, both of which have determined that a fiduciary may not maintain such an action. Transamerica Occidental Life Ins. Co. v. Digregorio, 811 F.2d 1249 (9th Cir.1987), Gulf Life Ins. Co. v. Arnold, 809 F.2d 1520 (11th Cir.1987). The court in Transamerica also addressed the availability of a declaratory judgment action under these circumstances, concluding that such an action was available. 811 F.2d at 1253. The Court finds the reasoning of Gulf Life and Transamerica to be persuasive, and adopts their conclusions.

A. Section 502

Petitioners base jurisdiction on § 502(a) of ERISA, 29 U.S.C. § 1132(a). That section provides in relevant part:

(a) A civil action may be brought —

(1) By a participant or beneficiary — (A) For the relief provided for in subsection (c) of this section, or (B) To recover benefits due him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan;

(2) By the Secretary, or by a participant, beneficiary, or fiduciary for appropriate relief under § 409;

(3) By a participant, beneficiary, or fiduciary (A) To enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) To obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan ...

It is apparent that petitioners cannot assert an action under § 502(a)(1) since they are neither participants nor beneficiaries. It is equally apparent that they cannot successfully assert an action pursuant to § 502(a)(2), which refers to a suit for appropriate relief under § 409. Section 409 provides for liability of fiduciaries in a suit for breach of fiduciary duty. There is no suggestion that petitioners' suit in any way seeks liability for breach of fiduciary duty; consequently, that section is inapplicable.

Similarly, § 502(a)(3)(A) is inapplicable since the petition does not seek to enjoin any act or practice which violates any provision of this title or the terms of the plan. If the action seeks to enjoin anything, it is the filing of claims by the petitioners which is surely not in violation of ERISA or the Plan. Accordingly, the sole issue is whether petitioners' claim falls within § 502(a)(3)(B)(ii) which permits an action "to obtain other appropriate equitable relief to enforce any provisions of this title or the terms of the Plan." Gulf Life and Transamerica concluded that an action by a fiduciary to determine the eligibility of a claimant for benefits under circumstances of this case is neither an action for "equitable relief" nor an action to "enforce any provisions of this title or the terms of the Plan."

1. Equitable Relief

The petitioners' claim in this case is one for declaratory relief. "Declaratory judgments are neither `legal' nor `equitable.'... To tell how to classify these beasts, we must evaluate the underlying claim." Employers Ins. of Wausau v. Shell Oil Co., 820 F.2d 898, 900-901 (7th...