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SCHULTZ v. STONER

March 8, 2004.

ALTON C. SCHULTZ, Jr., ELAINE B. JACKSON, GLADYS CRIDDLE, and HAROLD WEBER, Plaintiff(s), -v- JANET L. STONER, Defendant(s)


The opinion of the court was delivered by: LAURA TAYLOR SWAIN, District Judge Page 2

OPINION AND ORDER

In this putative class action, brought pursuant to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), individuals who provided services to Texaco, Inc. or one or more of its affiliates (collectively, "Texaco") while on the payrolls of certain third — party entities with which Texaco had contracted claim that they and others similarly situated*fn1 were the victims of breaches of fiduciary duty by Defendant, who was at all relevant times Texaco's Vice President of Human Resources and the Plan Administrator for Texaco's employee benefit plans. (Def.'s Local Rule 56.1 Statement ¶¶ 2-3 and evidence cited therein.) Asserting that they were wrongfully excluded from coverage under the Retirement Plan of Texaco, Inc. ("Retirement Plan") and the Employees Thrift Plan of Texaco, Inc. ("Thrift Plan" and, with the Retirement Plan, the "Plans"), and characterizing their cause of action as one pursuant to section 502(a)(3) of ERISA*fn2 for "other equitable relief" in respect of various alleged fiduciary breaches, they seek appointment of a new independent Plan Administrator, a declaration that the plaintiff class members are eligible for benefits under the Plans, and related relief. The individual plaintiffs also claim that they were denied plan documents in violation of relevant disclosure provisions of ERISA, and seek to recover statutory penalties pursuant to section 502(c) of ERISA.*fn3 The Court has jurisdiction of this action pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 1132(c). Page 3

  By Amended Opinion and Order dated January 3, 2001, this Court (Parker, J.), * dismissed Plaintiffs' Second Amended Complaint to the extent it asserted claims pursuant to ERISA section 502(a)(1)(B), ERISA section 510 and state law, dismissed Plaintiffs' claims against all defendants other than defendant Stoner, dismissed Plaintiff Griddle's ERISA section 502(c) claim, and denied the remainder of Defendants' motion, brought pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the complaint. See Schultz v. Texaco Inc., 127 F. Supp.2d 443 (S.D.N. Y. 2001) ("Schultz I"). The case now comes before the Court on the parties' cross — motions for summary judgment on Plaintiffs' section 502(a)(3) and 502(c) claims and Plaintiffs' motion for leave to file and serve a Third Amended Complaint. The Court has considered carefully all of the parties' initial and supplemental submissions and heard oral argument For the reasons that follow, Plaintiffs' summary judgment motion is denied in its entirety, Defendant's motion is granted in part, and Plaintiffs' motion to amend their complaint is granted in part.

  BACKGROUND

  The following facts are undisputed except as otherwise indicated.

  Plaintiff Alton C. Schultz, Jr. ("Schultz"), was initially employed by Texaco Exploration and Production, Inc. ("TEPI") in May 1991. From July 1991 through January 28, 1999, he continued to work at TEPI's facilities but was on the payroll of three third — party entities that were under contract with TEPI — MetroCareers, Inc., from approximately 1991 to 1995, Kelly Services from approximately 1995 to 1998, and Professional Temporaries of New Orleans from approximately 1998 though the termination of the employment. Schultz was not offered benefits under Texaco's employee plans, unlike co-workers who were classified as Texaco "employees" and were afforded access to such benefits. (Schultz Aff. dated April 18, 2001 (Pls.' Ex. 1).)

  Plaintiff Elaine B. Jackson ("Jackson") was initially employed by TEPI in or about Page 4 October 1990 and was moved to the MetroCareers Inc. payroll in or about July 1991. Jackson asserts that she was told at the time that she "could no longer be an independent contractor' if [she] wanted to continue working for Texaco." (Jackson Aff. dated April 23, 2001 (Pls.' Ex. 2).) She thereafter worked in the "New Orleans Texaco Office" through sometime in early 1995. She was re-hired through Kelly Services in July 1996; Texaco changed the third — party payroll contract to Professional Temporaries of New Orleans in 1998. Jackson was "`laid off'" by Texaco in February 1999. She was not afforded Texaco employee benefits while she was on the third — party payrolls. (Id.) Plaintiffs Gladys Criddle ("Criddle") and Harold J. Weber, Jr. ("Weber"), also worked at Texaco's New Orleans office under third — party contractor arrangements and were not afforded Texaco benefits. (Pls.' Exs. 3, 4). Weber had previously been employed by Texaco from 1966 to 1984. (Weber Aff. dated May l, 2001 (Pls.' Ex. 4).) Weber is eligible for benefits under the Retirement Plan in connection with the 1966-1984 Texaco employment. (Id.; Pls.' Ex. 10.)

  Plaintiffs assert that they were not aware of any potentially viable claim that they could make for Texaco benefits until after they read of litigation relating to coverage under the benefit plans of another company, ARCO, in 1999. In the fall of 1999, Schultz initiated correspondence with Texaco, requesting information regarding his "rights" under various Texaco plans. (Ex. P to Aff. of Elise Bloom, dated April 30, 2001, in Supp. of Def.'s Mot. ("4/30/01 Bloom Aff.").) The ensuing series of letters culminated in a December 6, 1999 letter from defendant Stoner, as Plan Administrator, to Schultz, denying his claim for Texaco benefits and reading in pertinent part as follows:

  From the facts available to me, I have confirmed you were employed by MetroCareers, Inc., Kelley Services, Inc., and Professional Temporaries USA, and provided your services to Texaco through these third parties pursuant to an agreement between the company and the third party. The eligibility provisions in all of Texaco's benefit plans include the following language, which explicitly excludes leased or third — party contract employees from coverage or participation: Page 5

 
The Plan Administrator has sole discretionary authority to determine whether you are an employee of the company or a participating company, based only on the plan's eligibility criteria, without regard to whether you are considered a common law employee of the company or a participating company for any other purpose.
You are not eligible to join this plan if you are, in the sole discretion of the Plan Administrator, characterized or under a contract as an independent contractor or rendering services to the company pursuant to an agreement between the company or a participating company and a third party.
Therefore, in response to your inquiry, this will inform you that you are not entitled to any benefits under Texaco's benefit plans . . .
(Ex. T to Bloom 4/30/01 Aff. (emph. original); see also Stoner Dep at 105-106, 108-110.) Stoner responded in substantially identical fashion to an appeal by plaintiff Weber. (Ex. CC to 4/30/01 Bloom Aff.)

  Plaintiff Jackson's initial inquiry was met with a letter from a Texaco Human Resources Manager that asserted that Jackson was not eligible for Texaco benefits because she was never an employee of Texaco or its subsidiaries but was, rather, employed by MetroCareers, Inc., Kelley Services, Inc., and Professional Temporaries USA. (Ex. DD to 4/30/01 Bloom Aff.) There is no evidence in the record indicating that plaintiff Jackson appealed this determination to the Plan Administrator. There is no evidence in the record indicating that plaintiff Criddle made any application for benefits.

  The italicized language in Ms. Stoner's letters to Schultz and Weber was not drawn from the official or formal. text of the relevant Plan documents. Rather, Ms. of the 1999 Summary Plan Description ("SPD") for the Retirement Plan. Compare Ex. G to 4/30/01 Bloom with Exs. T and DD to 4/30/01 Bloom Aff. The "Formal Text" for the Retirement Plan, as restated effective January 1, 1989 ("1989 Retirement Plan Text") defined "Employee" as "[a]ny individual employed an Employer [. . . including] leased employees within the meaning of section Page 6 414(n) of the [Internal Revenue] Code",*fn4 defined "Employer" as "[t]he Company [Texaco, Inc.]or any Subsidiary or Affiliated Company to which the Plan from time lo lime may be applied,"*fn5 and included an "Eligible Employee" definition that read in pertinent part as follows:
The Board of Directors of the Employer may, from time to time, designate as eligible Employees one or more classifications of its Employees.
Employees whose services are received by an Employer pursuant to a leasing agreement between the Employer and a third party shall not be deemed within a classification of eligible Employees.
(1989 Retirement Plan Text Art. II, ¶ l(a), Ex. H to 4/30/01 Bloom Aff.) The 1989 Formal Text of the Employees Thrift Plan ("1989 Thrift Plan Text") read in pertinent part as follows:
The Board of Directors of any Participating Employer may, from time to time, designate as eligible employees one or more classifications of its employees. Employees whose services are received by a Participating Employer pursuant to a leasing agreement between the Participating Employer and a third party shall not be deemed within a classification of eligible employees.
(1989 Thrift Plan Text, Section II ¶ 1, Ex. N to 4/30/01 Bloom Aff.) Neither the 1989 Retirement Plan Text nor the 1989 Thrift Plan Text defined the term "leasing agreement."
  The Retirement Plan was further amended and restated as of December 31, 1994 ("1994 Retirement Plan Text"). The 1994 document, which is the most recent formal iteration of the Plan's eligibility provisions that was proffered by the parties in connection with the instant motion practice, includes the following relevant definitional and participation provisions:
Eligible Employee. Any Empoyee who meets or can be expected to meet all the Plan's eligibility requirements . . . before becoming a Member of the Plan.
  Employee. Any individual who is employed by the Employer, including a Leased Page 7 Employee, but excluding any individual characterized by or under contract with the Employer as an independent contractor.
 
Employer. The Company or any Subsidiary or Affiliated Company which adopts this Plan with the consent of the Company.
Leased Employee. Any individual defined in Section 414(n) of the [Internal Revenue] Code. Leased Employees do not include independent contractors or individuals who are not required to be treated as Employees under Section 414(n) of the Code and any applicable Regulations.
(1994 Retirement Plan Text, §§ 1.25, 1.30. 1.31, 1.46. (Pls.' Ex. 7.)) The plan text does not define the term "individual characterized by or under contract with the Employer as an independent contractor." The section titled "The Plan Administrator" provides in pertinent part as follows:
The Plan Administrator will have complete responsibility for the administration of the Plan, for the exclusive benefit of the Members . . . subject to (he specific terms of the Plan. The Plan Administrator will have the power and discretion to interpret and construe the terms of the Plan, to resolve any ambiguities and omissions in the Plan, and to determine all questions arising in connection with the administration, interpretation, and application of the Plan. All actions or determinations of the Plan Administrator will be final, conclusive and binding on all persons. In addition, the Plan Administrator is authorized to control the operation and administration of the Plan, including, but not limited to, the following: . . .
(3) the discretion to determine all questions relating to the eligibility of Employees to become Members or remain Members and to receive benefits under the Plan;
(4) the final determination concerning claims for benefits; . . . [and]
(5) compliance with all disclosure requirements imposed by state or federal law
(Id. 20.04(B).) The Retirement Plan further allocates "responsibility to manage and control the assets of the Plan." including responsibility "to implement and monitor the funding policy set forth in the Plan." to the Plan's Financial Manager. (Id., § 20.04 (A).) Responsibility for "the approval of the Plan, including amendments to the Plan," is reserved to Texaco, acting through its Board. (Id. § 2004 "Plan" is defined, in pertinent pan, as "The Retirement Plan of Texaco, Inc., as amended Page 8 from time to time." (Id. § 1.62.)
 
The 1994 restatement of the Thrift Plan defines "Employee" as:
Any individual who is employed by the Employer, including a Leased Employee, but excluding any individual characterized by or under contract with the Employer as an independent contractor.
(Formal Text of the Employees Thrift Plan of Texaco, Inc., Restated as of December 31, 1994 ("1994 Thrift Plan Text") § 1.29, Pls.' Ex. 6.) The 1994 Thrift Plan Text's definition of "Leased Employee" is identical to that in the 1994 Retirement Plan text, and its provisions regarding the responsibilities of the Financial Manager and the Plan Administrator, and regarding plan amendments, are substantially identical to the 1994 Retirement Plan Text provisions quoted above. See 1994 Thrift Plan Text §§ 1.46, 17.04.

  Neither party contends that the plaintiffs here were "Leased Employees" at any relevant time within the meaning of the above — quoted plan provisions.

  Other SPDs issued by Texaco during the relevant period included the following eligibility provisions:
Employees who provide their services under a leasing agreement between the Company or a Participating Company and a third party are not eligible for membership in the Plan.
(1986 Retirement Plan SPD at l, Ex. D to 4/30/01 Bloom Aff.)
 
You are not eligible to join this plan if you provide your services under a leasing agreement between Texaco or a participating company and a third party.
(1991 Retirement Plan SPD at 1, Ex. E to 4/30/01 Bloom Aff.)
 
You are not eligible to join this plan if you provide your services under an independent contract or a leasing agreement between Texaco or a participating company and a third party.
(1994 Retirement Plan SPD at l, Ex. F to 4/301'01 Bloom Aff.)

  Plaintiff Weber's November 9, 1999. letter to the Plan representative who Page 9 communicated the initial denial of Weber's benefit claim included a request for a copy of the "Texaco Pension Plan." (Ex. X to 4/30/01 Bloom Aff.) On or about November 22, 1999, Weber was provided with a copy of a "Summary of the [Texaco] Retirement Plan." (Ex. Y to 4/30/01 Bloom Aff.) That summary, which appears to date from July 1983, does not appear to include any language relating to exclusion of employees working under third party contracts or leasing agreements. It generally recites that one is eligible to participate in the plan if "you are . . . an employee of the Company or of a subsidiary or affiliated company which has adopted this Plan, called `participating companies,' . . . [and] within a classification of employees designated as eligible for membership in this Plan by a participating company." (Id. at 1.) In a November 28, 1999 letter to Ms. Stoner, Mr. Weber requested "complete copies of all Retirement Plans and amendments that were in effect for the period 7/83 through 3/99." (Ex. AA to 4/30/01 Bloom Aff.) Defendant Stoner's January 11, 2000, letter denying his benefit claim was accompanied by a copy of the 1994 Retirement Plan Text and subsequent formal amendments. (Ex. CC to 4/30/01 Bloom Aff.) There is no evidence that any of the other plaintiffs requested plan documentation from the Plan Administrator

  In determining that Plaintiffs Schultz and Weber were not entitled to Texaco plan benefits, Stoner considered the 1994 official plan texts and 1999 SPDs, spoke with in — house Texaco counsel, and generally considered the third — party arrangements pursuant to which Plaintiffs were employed She reached the conclusion that the two were ineligible for benefits because they were "characterized as., independent contractors" within the meaning of the Plan provisions quoted above (Tr. of Stoner Dep. at 52-53, 58, 86 (Pls.' Ex. 5).) The record, which includes a transcript of Stoner deposition testimony, provides no further elucidation of her reasoning or any detailed account of the nature or basis of her interpretation of the language of the Plans. It is not clear Page 10 whether the particular language Stoner indicates she construed was language from a formal plan text or from an SPD. There is no indication in the record that Stoner considered or construed the 1989 formal plan language, or any of the pre-1999 versions of the SPDs, in reaching her conclusions.

  Stoner asserts that she did not construe or rely on the "leased employee" language used in the plan texts and SPDs in connection with her eligibility determinations. (Stoner Tr. at 53.) Nor did she consider various factors, such as the location, supervision and direction of the Plaintiffs' work for Texaco, that Plaintiffs contend are relevant to "common law employee" status, in making her eligibility determinations. (Stoner Tr. at 112-15.)

  ...


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