Whitaker v. Texaco, Inc.

• Citation: 566 F. Supp. 745
• Decision Date: 27 June 1983
• Docket Number: Civ. A. No. C83-0174A.
• Parties: William L. WHITAKER, Jr., et al., Plaintiffs, v. TEXACO, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Georgia

566 F. Supp. 745

William L. WHITAKER, Jr., et al., Plaintiffs, v. TEXACO, INC., et al., Defendants.

Civ. A. No. C83-0174A.

United States District Court, N.D. Georgia, Atlanta Division.

June 27, 1983.

John A. Chandler, Sutherland, Asbill & Brennan, Atlanta, Ga., for plaintiffs.

Frank C. Jones, King & Spalding, Atlanta, Ga., J.M. Mitchell and James D. Garrison

and Susannah B. Wilshire, Houston, Tex., for defendants.

ORDER

ROBERT H. HALL, District Judge.

Plaintiffs brought this suit against defendants for breach of a group pension plan provided by defendants, (Counts One and Three), for breach of fiduciary duties owed to plaintiffs (Counts Two and Four) and for making false and misleading representations to plaintiffs concerning the pension plan (Count Five). Presently pending before this court is defendants' motion to dismiss Counts Three, Four and Five and plaintiffs' claim for punitive damages.¹

FACTS

Defendant Group Pension Plan of Texaco, Inc. ("the Plan") is a pension plan established by defendant Texaco, Inc. to provide retirement benefits for employees of Texaco, Inc., and certain of its subsidiaries and affiliated companies. As an alternative to the "Normal Retirement Income" (monthly pension) provided by the Plan, members may opt to receive a single cash amount upon retirement, or "lump sum cash settlement," which is the "Actuarial Equivalent of the Normal Retirement Income Payments."²

The current dispute arose over the discount rate used by defendants to determine the lump sum cash settlement amount. From 1962 through February, 1976, the discount rate was 4%. Effective March 1, 1976, the rate was increased to 5.5% and was increased periodically thereafter, reaching a high of 11% on July 1, 1982. Each of these increases was unilaterally performed by defendants. At the time plaintiffs retired and elected the lump sum cash option, the discount rate used to determine their settlement amounts ranged from 8 to 10.5%.

The effect of using a discount rate greater than 4% was to lower the dollar amounts received by those who elected the lump sum cash option below what they would have received had the rate remained at 4%. The essence of plaintiffs' allegations is that the increases in the discount rate and the manner in which the defendants employed the discount rate were arbitrary and capricious and "constituted modifications or amendments of the Plan which reduced the amount of retirement income and/or accrued benefits to plaintiffs" in violation of a Plan provision relating to modification, suspension or amendment of the Plan.³ (Counts One and Three). Plaintiffs also allege that by making these changes in the discount rate, defendants breached their respective fiduciary duties to plaintiffs. (Counts Two and Four) In addition, plaintiffs claim that defendants made misrepresentations to plaintiffs as to the discount rate to be used in computing the lump sum cash settlement and as to the manner in which the discount rate was to be employed. (Count Five)

The motion before the court concerns the vitality of three of plaintiffs' Counts and plaintiffs' claim for punitive damages. Defendants submit that the causes of action alleged in Counts Three, Four and Five are claims under state law which are preempted by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq. (1974), or are fatally redundant. Additionally they challenge the misrepresentation claim (Count Five) on the ground that it is not sufficiently particularized as required by Rule 9(b) of the Fed.R.Civ.P. or, alternatively, that it is barred by the statute of limitations. Defendants also seek a dismissal of plaintiffs' claim for punitive damages, arguing that punitive damages are inappropriate relief under ERISA.

DISCUSSION

A. Preemption

Plaintiffs' complaint contains the following Five Counts:

Count One: Defendants breached the terms of the Plan and thereby violated ERISA;

Count Two: Defendants breached their fiduciary duties to plaintiffs and thereby violated ERISA;

Count Three: Defendants breached the terms of the plan as an "enforceable agreement" between defendants and plaintiffs;

Count Four: Defendants breached state and common law fiduciary duties owed to plaintiffs;

Count Five: Defendants made intentionally false and misleading representations to plaintiffs.

Thus, two counts expressly allege ERISA violations, while Counts Three through Five do not. Defendants argue that the last three Counts present state law claims which are preempted by ERISA, 29 U.S.C. § 1144, and should be dismissed. Plaintiffs answer that these Counts state claims under the federal common law which supplements the express provisions of ERISA and invoke state law only by incorporation into the federal common law.

Congress mandated that ERISA, with four exceptions, "shall supercede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of ERISA and not exempt under section 1003(b) of ERISA." 29 U.S.C. § 1144(a). "State Law" is broadly defined to include "all laws, decisions, rules, regulations or other state action having the effect of law." 29 U.S.C. § 1144(c)(1).

The four exceptions to the preemption provision are for (1) state law with respect to causes of action which arose, or acts or omissions which occurred, before January 1, 1975; (2) state regulation of insurance, banking or securities; (3) use of services or facilities of state agencies and departments as permitted under section 1136; and (4) generally applicable state criminal law. 29 U.S.C. § 1144(b)(1)-(b)(4).

There is no dispute that the Plan is covered by ERISA under 29 U.S.C. § 1003(a) and is not exempt under 29 U.S.C. § 1003(b). The question before the court, then, is whether Counts Three through Five allege state law claims which do not fit within an exception to 29 U.S.C. § 1144 so as to be preempted by ERISA.

Although Counts Three and Four (for breach of contract and breach of fiduciary duties, respectively) present traditional state law causes of action, and as such are preempted by ERISA, they also state causes of action under ERISA if they are read liberally as this court must do for the purposes of the motion to dismiss: Count Three can be considered an action to recover benefits owed or to enforce employee rights under 29 U.S.C. § 1132(a)(1)(B); Count Four can be considered an action for breach of fiduciary duty under 29 U.S.C. § 1104(a)(1)(B)⁴. Because plaintiffs have pleaded, albeit implicitly, ERISA causes of action in Counts Three and Four, the motion to dismiss these Counts for preemption is DENIED.

Count Five alleges misrepresentation by defendants concerning the discount rate to be used. With respect to the misrepresentation allegedly occurring before January 1, 1975, plaintiffs have asserted a cause of action which can be based on state law without being preempted by ERISA. 29 U.S.C. § 1144(b)(1). With respect to the misrepresentation allegedly occurring after January 1, 1975, plaintiffs have asserted an ERISA claim under 29 U.S.C. 1104(a)(1)(B), the fiduciary duty provision. See Fulk v. Bagley, 88 F.R.D. 153, 166 (M.D.N.C.1980). Accordingly, the motion to dismiss Count Five for preemption is DENIED.

B. Redundancy

Defendants argue that if Counts Three, Four and Five state causes of action under ERISA, they should be dismissed as redundant and immaterial in view of Counts One and Two. This argument is not supported with citation to any authority, but it is apparently based on Fed.R.Civ.P. Rule 8(e) which requires pleadings to be concise and direct. The court agrees that the complaint is unnecessarily repetitious; however, it will allow Counts Three, Four and Five to remain.

C. Statute of Limitation

Defendants submit that the state law misrepresentation claim (Count Five) is barred by the statute of limitations. In Georgia, the time limitation for bringing a suit for injury to personalty based on misrepresentation is four years from when plaintiff could have first maintained his action. O.C.G.A. § 9-3-31 (1982); Worrill v. Pitney Bowes, Inc., 128 Ga.App. 741, 197 S.E.2d 848 (1973).

In this case, the earliest any of the plaintiffs could have brought the suit was sometime in 1979 when Plaintiff Davis, the first of the plaintiffs to retire, received his lump sum settlement. It was only then that he learned that the defendants used a higher discount rate than 4% to determine his settlement. This plaintiff retired January 1, 1979, and it is most likely that he did not receive his settlement amount until at least a month later. Thus, plaintiff Davis had until at least January 31, 1983, to bring his action; since he filed his complaint on that date, he met the deadline. All other plaintiffs retired on or after February 1, 1981, and thus received their lump sum settlements sometime after February 1, 1981, which created a 1985, or later, deadline. Obviously their claims are not time barred. In sum, the statute of limitations does not bar the state law misrepresentation claim.

D. Particularity Requirement

Defendants argue, alternatively, that the misrepresentation claim (Count Five) is not pleaded with sufficient "particularity" for purposes of Fed.R.Civ.P. Rule 9(b).⁵ Judge Moye, in National Egg Co. v. Bank Leumi Le-Israel B.M., 504 F.Supp. 305 (N.D.Ga.1980), has said that:

The competing policies underlying Rules 9(b) and 8(a) are best resolved by requiring averments of fraud to state such matters as the time, place and content of the alleged misrepresentations as well as who made the alleged misrepresentations to whom.

Id. at 308.

Although plaintiffs have not alleged specific details of the misrepresentations, they have identified sufficient facts to meet the pleading requirement. The complaint contains allegations indicating the time of the misrepresentations (between 1962 and 1976), the place (where each plaintiff was employed), the nature of the misrepresentation (the use of...