Opinion and Order
Plaintiffs Ganton Technologies, Inc. ("Ganton") and three Ganton employees brought this action claiming that defendants National Industrial Group Pension Plan ("NIGPP"), a multiemployer defined-benefit pension plan, and its trustees violated the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461, and section 302(c)(5) of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 186(c)(5), by refusing to transfer to a new single-employer pension plan that portion of NIGPP's assets attributable to Ganton's contributions. (Compl. PP 31-44.) Plaintiffs requested a declaratory judgment that NIGPP's refusal was unlawful and an order directing NIGPP to transfer the assets in question to the Ganton Technologies Inc. Racine Hourly Employees Retirement Plan (the "Ganton Plan") (Compl. at 10, 14.)
Defendants counterclaimed and sought an order requiring Ganton to cooperate with NIGPP's efforts to determine the extent of Ganton's liability for delinquent contributions. (Answer, PP 56-61.) Plaintiffs now move for summary judgment on their ERISA claims;
defendants move for summary judgment dismissing plaintiffs' ERISA claims and granting the counterclaim.
A. Ganton's Participation in NIGPP
From 1967 to 1992, Ganton and its predecessor in interest, Racine Die Cast Company ("Racine") contributed to NIGPP on behalf of their employees pursuant to collective bargaining agreements with United Automobile Workers Local 627. (Compl. P 9.) Racine entered into a participation agreement dated August 14, 1967 (the "Participation Agreement") by which Racine agreed to be bound by the NIGPP Agreement and Declaration of Trust (the "Plan") and to contribute to NIGPP. (First Pante Aff., Exh. B.)
The Plan grants to NIGPP's Board of Trustees (the "Board") broad powers to administer the Plan and construe its terms. Article VIII, section 8.03 of the Plan contains its provisions concerning transfer of assets to another plan. (Compl. Exh. A.)
In the early 1980s, NIGPP granted a number of transfers pursuant to section 8.03. (First Pante Aff. P 4.) At a meeting in December 1984, the Plan's manager and actuary informed the Board that if it continued to approve such transfers, NIGPP could become underfunded. As a result, the Board suspended all such transfers pending further review, a decision it reaffirmed at each subsequent meeting through February 1986. At that time, the Board suspended all asset transfers indefinitely. (Id. P 5.)
Sometime before early 1992, Ganton began to question the wisdom of continued participation in NIGPP. Ganton believed that as a result of the changed demographics of its workforce its contributions far exceeded its employees' accrued benefits and thought it could provide the same benefits to its workers by contributing a lower amount to its own plan. (See Letter from Odessa Komer to Elmer Chatak and Ronald Borst dated February 14, 1992, Kutchin Aff., Exh. B.) Ganton made its last contribution to NIGPP on January 26, 1992. (Defendants' Statement Pursuant to Local Civil Rule 3(g), P 6.)
B. Ganton's Attempts to Obtain Resets and an Asset Transfer
Ganton and the UAW entered into a new collective bargaining agreement dated February 22, 1992 (Compl. Exh. B), which contemplated the establishment of the Ganton Plan. The agreement required Ganton to contribute to an escrow account instead of to NIGPP and to establish an "NIGPP mirror plan." (Id., Art. 14, PP 2-3.) It also provided that Ganton and the UAW would explore alternatives (specifically a benefit adjustment, or "reset") which would allow Ganton to remain in NIGPP. (Id. P 1.) The parties agreed that the UAW would not take a position on any effort by Ganton to "recover the excess funding" from NIGPP. (Id. P 5.)
During the spring of 1992, Ganton tried to persuade NIGPP to reset Ganton's benefit and contribution levels. Michael Kutchin, Vice President and Chief Financial Officer, requested that NIGPP decrease Ganton's contribution rate and increase the benefit level for Ganton's employees. (Letter from Michael Kutchin to NIGPP dated March 30, 1992, Kutchin Aff., Exh. D.) NIGPP denied the request, but informed Ganton that it was considering increasing the benefits paid to all plan participants. (Letter from Dennis Pante to Mike Kutchin dated April 13, 1992, First Pante Aff., Exh. C.)
Pante also warned Kutchin that NIGPP did not permit participating employers to withhold contributions and would take appropriate action to collect delinquent contributions. (Id.) After Ganton failed to make several additional contributions, NIGPP terminated the Participation Agreement as of January 26, 1992, the date of the last payment, and requested a listing of hours worked by NIGPP participants between January 26 and June 1, 1992. (Letter from NIGPP Administrative Agency to Ganton dated June 1, 1992, First Pante Aff., Exh. D.)
Having failed to achieve a reset of its contribution or benefit levels, Ganton requested NIGPP to transfer Ganton's share of assets and liabilities to the Ganton Plan. (Letter from Michael Kutchin to Dennis Pante dated June 29, 1992, Compl. Exh. F.) At meetings held on June 29 and 30, 1992, the Board heard a review of the history of the asset transfer moratorium and a presentation by NIGPP's actuary, John Slowata, of the potential adverse effects of allowing asset transfers. The Board reaffirmed its no-transfer policy and denied Ganton's request, stating that "such transfers are not in the best interest of the Plan or its participants." (Letter from Dennis Pante to Michael Kutchin dated July 7, 1992, Compl. Exh. G.)
C. The Ganton Plan
The Ganton Plan was established in the spring of 1993. The pension agreement between Ganton and the UAW (the "Ganton Plan Agreement") provides that Ganton will assume liability for service credits earned by Ganton Plan participants prior to January 26, 1992 if NIGPP transfers to the Ganton Plan the assets and liabilities relating to the Ganton participants. (Compl. Exh. D, Art. II, section 2.1.) If NIGPP does not transfer those assets and liabilities, the Ganton Plan is liable to pay benefits earned after January 26, 1992 under the Ganton Plan plus an amount representing the difference between the NIGPP and Ganton Plan benefit levels. (Id.) Absent a transfer, NIGPP will pay the Ganton participants the full amount of their accrued benefits, regardless of whether their right to those benefits had vested as of Ganton's termination date. (First Slowata Aff. P 12.)
D. The NIGPP Benefit Increase
In April 1993 the Board notified participating employer and union representatives that the Plan had more assets than liabilities for accrued vested benefits. (Memorandum from NIGPP Board to Participating Employer and Union Representatives dated April 1993, Compl. Exh. I., at 1.) As a result, the Board amended the Plan to provide that no withdrawal liability would be imposed on employers withdrawing in a year immediately following a year in which the Plan was fully funded. (Id. at 2.) The Board also voted to increase benefit levels, effective January 1, 1993, for all employers who had not terminated as of that date. (Id. at 1; First Slowata Aff. P 8.)
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). An issue is "genuine" if there is sufficient evidence from which a reasonable jury could find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). A material factual dispute is one which affects the outcome of the suit. Id.
There are no material factual disputes.
A. Fiduciary Duty Claims
Plaintiffs claim that defendant trustees breached their fiduciary duties under section 404 of ERISA
by the manner in which they interpreted and applied section 8.03 of the Plan. Defendants argue that plaintiffs lack standing to sue for breach of fiduciary duty, (Defendants' Memorandum in Support of Their Motion for Summary Judgment, at 26-30) (hereinafter "Defendants' Principal Brief") and that the trustees acted in the best interest of the Plan and its participants in suspending transfers and denying Ganton's request. (Id. at 23-26.)
1. Standard of Review
When the plan documents give a fiduciary discretion to construe plan terms, court review is limited to determining whether the fiduciary's interpretation and application of plan terms is arbitrary and capricious. Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 111, 109 S. Ct. 948, 954, 103 L. Ed. 2d 80 (1989). Article IX, section 9.01 of the Plan allows the Board to "make such rules and prescribe such procedures for the administration of the Plan as it deems necessary and reasonable." That section also provides, "The Board shall have the power to resolve all disputes and ambiguities relating to the interpretation of the Plan, and the application of the terms of the Plan to any circumstances and the decisions of the Board in all such matters shall be final." (Plan, Compl. Exh. A.) The trustees, deciding whether to promulgate and adhere to a no-transfer rule and to apply that rule to Ganton's request, had to weigh the competing interests of the fund, departing participants and remaining participants. Thus, the "arbitrary and capricious" standard is appropriate. See Caterino v. Barry, 8 F.3d 878, 883 (1st Cir. 1993) (applying "arbitrary and capricious" standard of review to trustees' decision to maintain rule prohibiting asset transfers)
2. Merits of Fiduciary Duty Claims
Plaintiffs' claims for breach of fiduciary duty can be divided into plan violations and ERISA violations. Plaintiffs argue that the trustees interpreted and applied section 8.03 in a manner inconsistent with its language. That conduct, they urge, violates section 404(a)(1)(D) of ERISA, which requires plan fiduciaries to administer plans in accordance with the plan documents. Plaintiffs also contend that the trustees' formulation and maintenance of a no-transfer policy and its denial of Ganton's request violated section 404(a)(1)'s requirement that fiduciaries administer the plan "solely in the interest of the participants and beneficiaries."
a. Violation of the Plan
Section 8.03 of the Plan provides:
In lieu of the procedures described in sections 8.02, 8.04, 8.05 and 8.06, the Board may, subsequent to the termination of a Participation Agreement, if so requested by the Participating Employer and Union, approve the transfer to another qualified plan of:
(1) the obligation to provide pensions, and
(2) a portion of the Plan Assets (subject to adjustment, as determined by the Board, to reflect market value fluctuations) equal to the net amount determined under subsection 8.04(a), minus any pension payments made after the termination date,