Tomlinson v. El Paso Corp..
| Decision Date | 11 August 2011 |
| Docket Number | No. 10–1385.,10–1385. |
| Citation | 112 Fair Empl.Prac.Cas. (BNA) 1687,653 F.3d 1281,51 Employee Benefits Cas. 2740 |
| Parties | Wayne TOMLINSON, individually and on behalf of all others similarly situated; Alice Ballesteros, individually and on behalf of all others similarly situated; Gary Muckelroy, individually and on behalf of all others similarly situated, Plaintiffs–Appellants,v.EL PASO CORPORATION; El Paso Pension Plan, Defendants–Appellees.Equal Employment Advisory Council; Chamber of Commerce of the United States of America, Amici Curiae. |
| Court | U.S. Court of Appeals — Tenth Circuit |
OPINION TEXT STARTS HERE
Stephen R. Bruce, Stephen R. Bruce Law Offices, Washington D.C. (Allison C. Pienta, Stephen R. Bruce Law Offices, Washington, D.C., and Barry D. Roseman, McNamara, Roseman, Martinez & Kazmierski, LLP, Denver, Colorado, with him on the briefs), for the Plaintiffs–Appellants.Darren E. Nadel, Littler Mendelson, P.C., Denver, Colorado (Stephanie L. Hankin, Littler Mendelson, P.C., Denver, Colorado, and Chistopher J. Rillo, Schiff Hardin LLP, San Francisco, California, with him on the briefs), for the Defendants–Appellees.Robin S. Conrad and Shane B. Kawka, National Chamber Litigation Center, Inc., Washington, D.C., and Rae T. Vann, Norris Tysse, Lampley & Lakis, LLP, Washington, D.C., filed an Amici Curiae brief for Equal Employment Advisory Council and Chamber of Commerce of the United States of America, on behalf of Defendants–Appellees.Before KELLY, BALDOCK, and LUCERO, Circuit Judges.LUCERO, Circuit Judge.
In this putative class action, Wayne Tomlinson, Alice Ballesteros, and Gary Muckelroy appeal the dismissal of their claims against El Paso Corporation and the El Paso Pension Plan (collectively “El Paso”) brought under the Age Discrimination in Employment Act (“ADEA”) and the Employee Retirement Income Security Act (“ERISA”).1
Plaintiffs' claims concern “wear-away periods” that occurred during El Paso's transition to a new pension plan. They contend that the wear-away periods violate the ADEA's prohibition on age discrimination and the anti-backloading and notice provisions of ERISA. But El Paso's transition favored, rather than discriminated against, older employees; and the plan was frontloaded, rather than backloaded. We hold that ERISA does not require notification of wear-away periods so long as employees are informed and forewarned of plan changes. El Paso provided sufficient notice and warning. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we therefore affirm.
In 1996, El Paso ended its traditional pension plan and switched to a “cash balance plan.” The old plan was a typical defined-benefit pension plan; employees received retirement benefits equal to a percentage of their final average monthly earnings multiplied by their years of service. Under the new cash balance plan, a percentage of each employee's pay was deposited into a hypothetical cash balance “account.” 2 The percentage of these “pay credits” increased with an employee's age and years of service. In addition, quarterly “interest credits” were added to the hypothetical account based on a specified interest rate. This interest rate was the same for all El Paso employees. The cash balance plan adopted by El Paso was, as the company informed its employees, less generous than its previous traditional pension plan.
Beginning January 1, 1997, eligible employees of El Paso entered a five year “transition period.” At the beginning of the transition period, employees were credited with a cash balance account actuarially equivalent to their accrued benefit—the amount payable upon retirement—under the old plan. The cash balance account would then increase with pay and interest credits. During the transition period, plan participants would also accrue benefits under the terms of the old plan. At the conclusion of the transition period, participants ceased accruing benefits under the traditional formula, but their cash balance accounts continued to grow. A participant's accrued benefit under the traditional plan at the end of the transition period is referred to as the “minimum benefit.” Upon retirement, plan participants were entitled to choose the greater of the minimum benefit or the cash balance account benefit.
At the conclusion of the transition period, many participants had a minimum benefit that was higher than the value of their cash balance account. For some of them, the value of their cash balance account would not eclipse the value of their minimum benefit under the old plan for several years. This period, during which the new cash balance plan catches up to the minimum benefit, is called a “wear-away period.” 3 Because the plan adopts a “greater of” formulation (allowing employees to collect under whichever formula provided higher benefits) and because benefits under the old plan are frozen at the end of the transition period, the accrued benefit payable at normal retirement age is effectively frozen while a plan participant is in a wear-away period. Older employees were particularly likely to experience wear-aways, and their wear-aways tended to be longer than younger employees' wear-aways.
El Paso informed employees of its planned transition in a “Business Update” circulated in January 1996. It stated that the company would move from its traditional plan to a cash balance plan and noted that “employees will earn future benefits at a lower rate than under” the prior plan. El Paso provided more details in a letter in October 1996, which warned that the new plan was “no longer at the top of the range,” that “[t]he hard truth is that those who are not prepared may have to postpone retirement,” and that after a transition period “the current pension plan formula will be frozen for [some] participants and they will not earn any additional benefits under the current plan.” In the same month, El Paso distributed a brochure which summarized the cash balance plan and explained the transition in rosier terms. The brochure contained prominent statements such as “[y]ou can't lose,” “[t]here's no risk,” and “your account can only go up.” El Paso also gave employees individualized account statements in 1999, which illustrated the status of their cash balance accounts and minimum benefits.
In 2002, El Paso provided employees a Summary Plan Description (“SPD”) which explained in detail the calculation of benefits, the transition period, and the “greater of” alternative between the cash balance plan and the minimum benefit. Although some of the plaintiffs did not read the SPD, Tomlinson consulted the SPD to find certain information. Neither the SPD nor the 1996 notifications contained any explicit reference or warning regarding wear-away periods described as such.
Tomlinson filed a claim with the Equal Employment Opportunity Commission on July 21, 2004, alleging that the transition unlawfully discriminated against older employees. Several participants in El Paso's retirement plan, including Tomlinson, later filed this class action suit alleging various causes of action under the ADEA and ERISA. Among the claims alleged were the four now before us: (1) whether the relatively longer wear-away periods for many older El Paso employees violated § 4 of the ADEA, 29 U.S.C. § 623, (“ADEA claim”); (2) whether the wear-away periods violated ERISA § 204(b)(1)(B), 29 U.S.C. § 1054(b)(1), (“anti-backloading claim”); (3) whether El Paso gave inadequate notice of plan changes in violation of ERISA § 204(h), 29 U.S.C. § 1054(h), (“notice claim”); and (4) whether El Paso's SPD failed to comply with ERISA § 102, 29 U.S.C. § 1022, and its implementing regulations (“SPD claim”). 4
The district court dismissed the anti-backloading and notice claims under Fed.R.Civ.P. 12(c) for failure to state a claim. It later granted El Paso's motion for summary judgment, dismissing the SPD claim on the merits and the ADEA claim as untimely. However, the court subsequently granted plaintiffs' motion to alter or amend judgment, reviving the ADEA claim based on the Lilly Ledbetter Fair Pay Act of 2009, Pub. L. 111–2, 123 Stat. 5. Plaintiffs' success on that score was short-lived, however. The ADEA claim was soon dismissed again, this time on the merits. Plaintiffs timely appealed the dismissal of the four claims listed above.
Two of plaintiffs' claims were dismissed pursuant to Rule 12(c), and two were dismissed at summary judgment. “We review a dismissal granted under Rule 12(c) under the standard of review applicable to a Rule 12(b)(6) motion to dismiss.” Nelson v. State Farm Mut. Auto. Ins. Co., 419 F.3d 1117, 1119 (10th Cir.2005) (quotation omitted). Under that standard, we review the motion de novo, accepting factual allegations as true and considering them in the light most favorable to the plaintiff. Smith v. United States, 561 F.3d 1090, 1098 (10th Cir.2009).
We review a grant of summary judgment de novo, applying the same legal standard as the district court. Simms v. Oklahoma ex rel. Dep't of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326 (10th Cir.1999). Summary judgment is proper when there is “no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The evidence should be viewed in the light most favorable to the non-moving party. Simms, 165 F.3d at 1326.
Plaintiffs argue that El Paso “designed its transition to produce extremely lengthy periods of ‘wear-away’ ” in violation of ADEA § 4, 29 U.S.C. § 623. As an initial matter, we must decide whether plaintiffs' ADEA claim should be considered under ADEA § 4(a) or § 4(i). Section 4(a) broadly prohibits age discrimination against an employee with respect to “compensation, terms, conditions, or privileges of employment.” 29 U.S.C. § 623(a). Section 4(i) provides:
Except as otherwise provided in this subsection, it shall be unlawful for an employer ... to establish or maintain an employee pension benefit plan which requires or permits—
(A) in...
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