Seales v. Amoco Corp.
| Decision Date | 28 January 2000 |
| Docket Number | No. Civ.A. 97-C-1197-N.,Civ.A. 97-C-1197-N. |
| Parties | Kenneth SEALES, et al., Plaintiffs, v. The AMOCO CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Middle District of Alabama |
George C. Longshore, Birmingham, AL, for plaintiffs.
David J. Middlebrooks, Lehr, Middlebrooks, Price & Proctor, P.C., Birmingham, AL, Wilber H. Boies, Michael Glackin, Judith A. Kelley, McDermott, Will & Emery, Chicago, IL, for defendants.
Plaintiffs, Kenneth Seales, Maxine Mills, Robert Hilson and Robby Harrelson, former employees of Amoco Fabrics and Fibers Company, proceed by class action alleging that defendants have violated the terms of the Amoco Fabrics Cash Balance Retirement Plan, formerly the Employee Retirement Plan of Amoco Fabrics, and the summary Plan description, the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., ("ERISA"), the defendants' fiduciary duty to the plaintiffs and Amoco Fabric's contract with the plaintiffs.
This matter is before the court on the plaintiffs' motion for partial summary judgment. The defendants have responded with a cross motion for summary judgment. For the reasons which follow, the court finds that plaintiffs' motion for partial summary judgment is due to be denied and that the defendants' motion for summary judgment is due to be granted.
Amoco Fabrics acquired the Employee Retirement Plan of Amoco Fabrics Company ("ERP") on June 1, 1970 for the benefit of its employees and participating affiliates. Amoco Fabrics made all contributions to the Plan which qualified as an employee pension benefit Plan under ERISA. All of the plaintiffs, former employees of Amoco Fabrics, were participants in the Plan. In September 1992, Amoco Fabrics was sold and the plaintiffs were terminated. The version of the Plan in effect during the plaintiffs' tenure and at the time they separated from employment was the (ERP) Plan1. The plaintiffs' participation in the Plan ended upon their termination. At the time of their termination, the plaintiffs' interests in the Plan were vested because they had at least five years either of employment with Amoco Fabric or by virtue of the sale.
Following the sale of Amoco Fabrics, the Plan Administrator made cash distributions to some of the Plan participants, including the plaintiffs, which underestimated the present value of the participant's accrued benefits. According to the Plan, no cash distributions were permitted to be made to participants if the present value of accrued benefits exceeded $3,500.2 If the present value of accrued benefits was less than $3,500, the ERP Plan permitted a single lump sum distribution of benefits without the employee's consent. Because the present values of the plaintiffs' benefits were underestimated, the plaintiffs erroneously received lump sum cash distributions of their pension benefits. Each of the plaintiffs received a cash distribution of less than $3,500, because of the error, even though they were not eligible to receive any cash distributions. The plaintiffs were not offered the option of retaining their pension annuity. If the present value of plaintiffs' accrued benefits had not been underestimated, their pension benefits would not have been cashed out because the value of those benefits, properly calculated, exceeded $3,500. But for the improper calculations, the plaintiffs would have been entitled to receive a full annuity at retirement age. Amoco concedes that it made an error in calculating the plaintiffs' benefits and that the error occurred because Amoco used an incorrect interest rate factor. Amoco contends that the error was discovered after some routine review of Plan operations in 1995. After it discovered the error, Amoco voluntarily reevaluated the benefits of the affected participants.
Amoco then submitted a Voluntary Resolution (VCR) filing to the Internal Revenue Service detailing its Plan to redress the erroneous cash distributions. The Internal Revenue Service accepted the Amoco proposal for corrective measures which consisted of three alternatives. First, participants who received a cash distribution could choose to receive an annuity at retirement age in the amount to which they would have been entitled prior to the cash distribution if they repaid the entire cash distribution to the Plan, and interest. Second, if the participant chose not to repay the cash distribution with interest to the Plan, the participant could choose to receive an additional annuity under the Plan, based on the participant's accrued benefit at termination, less the amount of the benefit received from the cash distribution. Third, a participant could choose to retain the cash distribution and receive the value of the additional annuity in the form of a second cash distribution from the Plan.
In a February 1997 letter, Amoco offered each of the plaintiffs the opportunity to select one of the three alternatives. The letter did not inform the affected participants that the 1992 cash distribution was erroneous, that the present value of their accrued benefits had been improperly calculated or that they were not entitled, under the version of the ERP Plan which existed in 1992, to receive the 1992 cash distribution in lieu of their retirement annuities. Rather, the letter falsely informed the affected participants that at the time of their termination, they had been paid a sum "equaling the total value" of their Plan benefits. Each plaintiff chose the third option and kept the cash distribution received in 1992 and accepted a second cash distribution from the Plan. The plaintiffs' acceptance of a second lump sum distribution ended the Plan's obligation to the plaintiffs.
Amoco Corporation, acting through its board of directors, was designated as Plan administrator. The Plan provides for a delegation of authority and a series of Amoco executives have acted as Plan administrator. At the time that plaintiffs' claim for reinstatement of their annuity the Senior Vice President of Human Resources had delegated certain administrative responsibilities under the Plan to the Manager of Benefits Plans of Amoco Corporation. Plaintiffs subsequently made claims for additional benefits under the Plan by demanding that Amoco reinstate their retirement annuity benefits. Pursuant to the Plan's two level claims procedure, Amoco denied the plaintiffs' claim for benefits in addition to the 1992 and 1997 cash distributions and refused to reinstate the plaintiffs' retirement annuities.
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment is appropriate where "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." This standard can be met by the movant, in a case in which the ultimate burden of persuasion at trial rests on the nonmovant, either by submitting affirmative evidence negating an essential element of the nonmovant's claim, or by demonstrating that the nonmovant's evidence itself is insufficient to establish an essential element of his or her claim. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
The burden then shifts to the nonmovant to make a showing sufficient to establish the existence of an essential element to his claims, and on which he bears the burden of proof at trial. Id. To satisfy this burden, the nonmovant cannot rest on the pleadings, but must, by affidavit or other means, set forth specific facts showing that there is a genuine issue for trial. Fed. R.Civ.P. 56(e).
The court's function in deciding a motion for summary judgment is to determine whether there exists genuine, material issues of fact to be tried; and if not, whether the movant is entitled to judgment as a matter of law. See Dominick v. Dixie Nat'l Life Ins. Co., 809 F.2d 1559 (11th Cir.1987). It is substantive law that identifies those facts which are material on motions for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 258, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); see also DeLong Equip. Co. v. Washington Mills Abrasive Co., 887 F.2d 1499 (11th Cir.1989), cert. denied, 494 U.S. 1081, 110 S.Ct. 1813, 108 L.Ed.2d 943 (1990).
When the court considers a motion for summary judgment, it must refrain from deciding any material factual issues. All the evidence and the inferences drawn from the underlying facts must be viewed in the light most favorable to the nonmovant. Earley v. Champion Int'l Corp., 907 F.2d 1077, 1080 (11th Cir.1990); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The movant bears "the exacting burden of demonstrating that there is no dispute as to any material fact in the case." Warrior Tombigbee Transp. Co. v. M/V Nan Fung, 695 F.2d 1294, 1296 (11th Cir.1983); see also Adickes v. S. H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).
In the instant case, both parties have filed motions for summary judgment. On cross-motions for summary judgment, the mere filing of cross motions for summary judgment does not warrant the entry of such judgment, however, unless there is no genuine issue as to any material fact. Volunteer State Life Insurance Co. v. Henson, 234 F.2d 535 (5th Cir.1956).3
The defendants argue that an arbitrary and capricious standard should be applied to determine whether Amoco's corrective measures with respect to the 1992 benefit calculation error were reasonable because the Plan Administrator had the discretion to make benefits determinations and to take corrective actions under the ERP Plan and 1993 and 1994 Restatements. In opposition, the plaintiffs argue that a de novo standard is applicable because the Plan Administrator did not have...
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