Teagardener v. Republic-Franklin Inc. Pension Plan

• Decision Date: 06 August 1990
• Docket Number: No. 89-3865,REPUBLIC-FRANKLIN,89-3865
• Parties: , 12 Employee Benefits Ca 2145 Donna TEAGARDENER, et al., Plaintiffs-Appellants, v.INCORPORATED PENSION PLAN, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 947

909 F.2d 947

59 USLW 2167, 12 Employee Benefits Ca 2145

Donna TEAGARDENER, et al., Plaintiffs-Appellants, v. REPUBLIC-FRANKLIN INCORPORATED PENSION PLAN, et al Defendants-Appellees.

No. 89-3865.

United States Court of Appeals Sixth Circuit.

Argued May 8, 1990.

Decided Aug. 6, 1990.

Michael J. Johrendt (argued), Robert A. Cunningham, Johrendt & Cook, Carl Genberg, Columbus, Ohio, for plaintiffs-appellants.

Russell A. Kelm, Juan Jose Perez (argued), Schwartz, Kelm, Warren & Rubenstein, Columbus, Ohio, for defendants-appellees.

Before WELLFORD and BOGGS, Circuit Judges, and GILMORE, District Judge. ^*

BOGGS, Circuit Judge.

Plaintiffs, formerly members of the Republic-Franklin Incorporated Pension Plan (the Plan), sued the Plan and its administrators, William C. Cook, William W. Matchneer, and John F. Heller, Jr. (collectively, the Plan Administrators), to recover their proportionate shares of certain residual assets in the Plan. The district court dismissed the complaint for lack of standing, finding that the plaintiffs were no longer "participants" or "beneficiaries" in the Plan, as those terms are defined in the Employee Retirement Income Security Act (ERISA), at the time the residual assets vested in the participants in the Plan. We affirm.

I

On January 1, 1983, Republic-Franklin Incorporated, sponsor of the Plan, sold Republic-Franklin Insurance Company to Utica National Insurance Group (Utica). Republic-Franklin Incorporated then changed its name to Franklin Capital Corporation (Franklin Capital). Immediately prior to the sale, 115 employees of Republic-Franklin Incorporated were participants in the Plan.

Before and after the sale, the Plan was managed by the Plan Administrators. The Plan Administrators were also members of the Executive Committee of the Board of Directors of Republic-Franklin Incorporated, and then Franklin Capital. As a result of this sale, 102 employees of Republic-Franklin Insurance became employees of Utica. 13 management employees remained with Republic-Franklin Incorporated, now Franklin Capital.

After January 1, 1983, the former Republic-Franklin Insurance employees were enrolled in Utica's pension plan. On January 14, 1983, the Plan Administrators effected a partial termination of the Plan by purchasing annuities for the 102 former employees of Republic-Franklin Insurance in the amount of their vested benefits. The majority of the annuities were actually paid for by January 27, 1983, but a few were not actually paid for until as late as December 5, 1983.

After the partial termination of the Plan, Franklin Capital said that it found the expenses for maintaining the Plan for 13 participants prohibitive, and thus decided to terminate the Plan. On July 20, 1983, Franklin Capital amended the Plan, so that assets remaining in the Plan after the distribution of vested benefits and termination of the Plan would not revert to Franklin Capital. Instead, these assets would be distributed to participants and beneficiaries in the Plan. This amendment was approved by the Pension Benefit Guaranty Corporation.

On July 31, 1983, the Plan was dissolved. On August 8, 1984, the remaining 13 employees received their vested benefits. The Plan, as amended, provided in relevant part:

Upon the direction of the Administrator at any time, the Trustee shall liquidate the Trust Fund and shall distribute to each Participant, Former Participant and Beneficiary an amount equal to the value of his allocation as of the date such liquidation is directed ....

(emphasis added). The right to residual assets in the Plan thus vested in Plan participants at the time of the Plan termination. After the distribution of vested benefits to the 13 management employees, residual assets of about $1,400,000 remained in the Plan and these residual assets were also divided among the 13 remaining management employees.

On August 28, 1987, some of the 102 employees terminated from the Plan brought suit under 29 U.S.C. Sec. 1132 as a class action on behalf of all 102 employees against the Plan and the Plan Administrators. In an amended complaint filed December 16, 1988, the plaintiffs sought their proportionate shares of the residual assets remaining in the Plan after distribution of the vested benefits on August 8, 1984. The plaintiffs also sought relief against the Plan Administrators for their failure to administer the Plan in a non-discriminatory manner.

The discovery cut-off date was set for July 31, 1989. On May 25, 1989, the defendants filed a motion to dismiss the amended complaint, under Rule 12(b)(1), Fed.R.Civ.P. The plaintiffs filed a memorandum in opposition to this motion, and the defendants replied. On August 14, 1989, the district court considered the defendants' motion under Rule 12(b)(6), Fed.R.Civ.P., and granted the defendants' motion to dismiss, on the ground that the plaintiffs lacked standing to bring their claim under ERISA. The district court found that the plaintiffs were not "participants" or "beneficiaries" in the Plan, as those terms are defined in ERISA, at the time the right to residual assets vested in the Plan participants and beneficiaries, and thus the plaintiffs were not authorized by statute to maintain an action for benefits. In particular, the court found that plaintiffs had received all the benefits due them under the Plan by way of the purchased annuities, and thus ceased to be participants in the Plan. The plaintiffs appealed.

II

The plaintiffs argue that the district court, without notice, looked beyond the allegations in the pleadings, namely to the Plan itself, to dismiss their case. Thus, the plaintiffs contend that the district court should have considered the defendants' motion to dismiss as a motion for summary judgment under Rule 56, and provided the plaintiffs with an opportunity to produce evidence outside the pleadings. The plaintiffs claim that they were prejudiced by the district court's failure to notify them to submit additional evidence, since they would have submitted evidence that not all the annuities were funded by the date of the Plan amendment.

We find that the district court did not look outside the pleadings, and thus properly considered the motion to dismiss under Rule 12(b)(6). The plaintiffs therefore had no right to submit additional material. In any event, the plaintiffs bore the responsibility of amending their pleadings on the basis of their belief as to the funding dates, based on the defendants' answers to interrogatories obtained late in discovery, and had sufficient time to do so. The district court did not err in failing to consider this evidence since it was not in the pleadings before the court. On the basis of those pleadings, which did not dispute that all annuities were funded by the date of the Plan amendment, the plaintiffs could have proven no set of facts that would have entitled them to judgment.

Rule 12(b) provides, in relevant part:

If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.

The plaintiffs contend that the district court looked outside the complaint, but did not give them a reasonable opportunity to present outside material. We disagree.

We agree with the defendants that the plaintiffs incorporated the Plan into their amended complaint by quoting extensively from it. Thus, the language of the Plan, and the arguable meanings of its terms, were central to the plaintiffs' complaint, and were part of the pleadings before the district court. See Fudge v. Penthouse International, Ltd., 840 F.2d 1012 (1st Cir.), cert. denied, 488 U.S. 821, 109 S.Ct. 65, 102 L.Ed.2d 42 (1988).

Although factual allegations must be taken as true, the court was not required to accept the plaintiffs' legal allegation that they were "participants" or "beneficiaries" in the Plan as true. Blackburn v. Fisk University, 443 F.2d 121, 124 (6th Cir.1971). The court properly examined the terms of the Plan in regard to these allegations, and properly dismissed the plaintiffs' complaint under Rule 12(b)(6), Fed.R.Civ.P.

The plaintiffs also argue that they have been prejudiced by not having the district court consider that all the annuities may not have been funded by the July 31 Plan termination, and that thus some of the plaintiffs may have been "participants" in the Plan at the time the residual assets vested in Plan participants.

The plaintiffs served interrogatories on the defendants, and the defendants answered these interrogatories on July 27, 1989. The defendants' answer to Interrogatory No. 21 indicated that some of the annuities may not have been funded until December 5, 1983, which was after the date of the Plan termination. The discovery cut-off date was July 31, 1989, and the district court issued its opinion on August 14, 1989.

The plaintiffs, despite opportunities to do so, never put this information before the district court in their pleadings. The plaintiffs were certainly on notice that the district court was going to rule on the defendants' motion to dismiss on the basis of the pleadings, and they further knew that the pleadings before the court did not dispute that all the annuities were funded by the date of the Plan amendment. Indeed, the plaintiffs' first amended complaint suggested that all annuities were funded by the date of the Plan termination:

10. On July 20, 1983, Defendants Cook, Matchneer and Heller, acting in their capacity as members of the Executive Committee of the Board of Directors of Franklin Capital Corporation, adopted an amendment to [the Plan] that provided that any assets remaining in the Plan after termination would...