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Schultz v. Stoner

February 24, 2009


The opinion of the court was delivered by: Laura Taylor Swain, United States District Judge


This putative class action, in which individuals formerly employed at Texaco facilities in New Orleans seek benefits under retirement and savings plans formerly sponsored by Texaco (and now, following a corporate merger, sponsored by ChevronTexaco, Inc.), comes before the Court on the parties' cross-motions for summary judgment on certain claims asserted pursuant to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). In a 2001 decision, the Court dismissed as time barred Plaintiffs' benefit entitlement and discriminatory misclassification claims asserted, respectively, pursuant to ERISA § 502(a)(1)(B) (29 U.S.C. § 1132(a)(1)(B)) and ERISA § 510 (29 U.S.C. § 1140). The Court also dismissed Plaintiff Gladys Criddle's ERISA § 502(c) claims relating to the alleged denial of plan documents as well as Plaintiffs' claims against all named defendants other than Defendant Stoner, who was then the Plan Administrator. See Schultz v. Texaco, 127 F. Supp. 2d 443 (S.D.N.Y. 2001) ("Schultz I"). In 2004, the Court held that Plaintiffs' ERISA § 502(a)(3) (29 U.S.C. § 1132(a)(3)) claims for relief in connection with alleged breaches of fiduciary duty were timely, granted partial summary judgment in defendant Stoner's favor with respect to certain aspects of those claims, and granted partial summary judgment dismissing the ERISA section 502(c) claims of Plaintiffs Schultz and Jackson. See Schultz v. Stoner, 308 F. Supp. 2d 289 (S.D.N.Y. 2004) ("Schultz II").

In Schultz II, the Court also denied defendant Stoner's motion for summary judgment dismissing the remaining aspects Plaintiffs' claim for relief pursuant to ERISA § 502(a)(3) in respect of alleged breaches of fiduciary duties, finding that Stoner, the former administrator of the plans in question, had failed to consider the relevant plan language in making her determinations that Plaintiffs were ineligible for benefits and that it was thus impossible to determine whether Stoner's actions had been factually or legally inconsistent with plan documents -- a critical element of the fiduciary breach claim. Schultz II at 307. The Court remanded the benefit determination issue to the then Plan Administrator, and also invited an application for reconsideration of the Schultz I dismissal of certain of Plaintiffs' benefit claims in light of the further factual development of the record. Id. at 308. Plaintiffs thereafter filed a Third Supplemental and Amended Complaint. In its answer to that pleading, Defendants asserted that ChevronTexaco Corp. is the current Administrator of the relevant employee benefit plans, and ChevronTexaco has been added as a party defendant in its capacity as Plan Administrator.

The Court has reviewed thoroughly the parties' extensive briefing on these cross-motions for summary judgment and heard two rounds of oral argument. For the reasons explained below, Plaintiffs' application to reconsider their ERISA § 502(a)(1)(B) claims for benefits under the provisions of the Retirement Plan of Texaco Inc. ("Retirement Plan") and the Employees Thrift Plan of Texaco Inc. ("Thrift Plan") is granted, and their claims are reinstated insofar as they relate to claims of entitlement to benefits under those plans as in effect on and after January 1, 1995; Plaintiffs' motion for summary judgment is granted with respect to the restored aspects of their ERISA § 502(a)(1)(B) claims and their claims are remanded to the Plan Administrator for benefit determinations; ChevronTexaco must retain and compensate an independent legal advisor for the Review Panel that will make the benefit determinations upon remand; the Court awards Plaintiff Weber $1400 against Defendant Stoner in respect of his claim under ERISA § 502(c); Defendant Stoner's summary judgment motion is granted as to Plaintiffs' ERISA § 502(a)(3) claims relating to the 1989 versions of the Retirement and Thrift Plans; and the parties' summary judgment motions are denied in all other respects. The parties are to confer with each other, prepare certain position statements and appear for a conference before the Court to discuss the class action aspects of this litigation.


The following material summary of undisputed facts assumes the reader's familiarity with Schultz I and Schultz II. Plaintiffs Schultz, Jackson, Weber and Criddle worked at Louisiana facilities of Texaco Exploration and Production, Inc. ("TEPI") at various times between 1991 and 1999. Each was moved from direct TEPI employment onto, or hired directly into, an arrangement in which, although they worked at the TEPI facility under TEPI supervision, they were on the payroll of one or more separate, non-Texaco companies: MetroCareers, Inc. ("Metro"), Kelly Services, Inc. ("Kelly"), and/or Professional Temporaries of New Orleans ("Professional Temporaries") (collectively, "Third-Party Contractors"). Plaintiffs had no written agreements with TEPI or Texaco. The Third-Party Contractors had entered into written agreements with TEPI to provide "contract personnel" (Metro) or "extra labor personnel services" (Kelly and Professional Temporaries).*fn1 Metro's agreement with TEPI recited that Metro was an "independent contractor"; the other two agreements recited that "the relationship of the parties hereto is that of independent contracting parties."*fn2 Notwithstanding their nominal employment relationships with the Third-Party Contractors, Plaintiffs were supervised on a day- to-day basis by Texaco and/or TEPI, which had the right to hire and fire them; they were paid fixed salaries; and Texaco and/or TEPI furnished them with their offices and office furniture, computers, telephones, and all other supplies and resources needed to complete their work assignments.*fn3 Plaintiffs' time sheets were approved by Texaco. Their holiday schedules, vacation times, hourly work weeks and salary increases were also approved by Texaco and/or TEPI, and they received training classes and programs from those companies. Plaintiffs performed the relevant services only for Texaco and/or TEPI. The work that they performed was part of the ordinary trade, business, and occupation of Texaco, TEPI and their employees, and they worked side by side with, performing the same or substantially similar job duties and under the same or substantially similar circumstances as, persons classified as full time employees of Texaco and/or TEPI.*fn4 None of the Plaintiffs was provided with benefits under any of Texaco's employee benefit plans while they were on the payrolls of the Third-Party Contractors.

The Formal Text of the Retirement Plan of Texaco Inc., as amended in 1994 ("1994 Retirement Plan Text"), defines "Eligible Employee" as "[a]ny Employee who meets or can be expected to meet all of the Plan's eligibility requirements, described in Section 2.01 [of the Plan], before becoming a Member of the Plan."*fn5 Section 1.30 of the 1994 Retirement Plan Text defines "Employee" in pertinent part as follows:

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.

The term "Employer" is used in the plan to refer to "[Texaco, Inc.] or any Subsidiary or Affiliated Company which adopts this Plan with the consent of [Texaco, Inc.]." (1994 Retirement Plan Text §§ 1.18 and 1.31.) The Plan defines "Leased Employee" as follows:

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. (Id. § 1.46.)*fn6 "Member" is defined as

An Employee or former Employee who (A) was an Employee on the first day of the month on or after the date he or she satisfied all of the eligibility requirements for membership in the Plan; (B) is either entitled to or may become entitled to an Accrued Benefit under the terms of the Plan; and (C) has not died or received all of the retirement Income to which he or she is entitled under the Plan. (Id.§1.49.)

The Eligibility and exclusion provisions of the Plan read in pertinent part as follows:

Section 2.01 Eligibility. Membership in this Plan is available to any Employee who meets the criteria specified in Sections 2.01(A), 2.01(B) and 2.01(C), below:

(A) Eligible Employee Classification. To be eligible for membership in this Plan, the Employee must be within an eligible classification of Employees, designated as eligible for this Plan by the board of Directors of an Employer from time to time, and

(B) Eligible Service Assignment. The Employee must be assigned to service:

(1) in the United States and not represented by a labor organization . . . ; and

(C) Eligibility Service. The Employee must be credited with one year of Eligibility Service.

Section 2.02. Excluded Employees. Membership in this Plan is not available to any Employee who does not meet the criteria listed in Section 2.01 or who is a Leased Employee. (Id.)*fn7 The corresponding provisions of the Formal Text of the Employees Thrift Plan of Texaco Inc., as amended in 1994 (the "1994 Thrift Plan Text") are substantively identical. (Ex. M to 10/2004 Bloom Aff.)

Employees who were on TEPI's payroll participated in the Retirement Plan and the Thrift Plan at all relevant times. The record does not include evidence of any specific TEPI board resolution or other corporate action specifying particular eligible classes of TEPI employees, and the plans themselves do not include specifications as to the payroll arrangements through which eligible members are compensated.

All four of the named Plaintiffs were on Third Party Contractor payrolls, and had been denied Texaco benefits, prior to the adoption of the 1994 Retirement and Thrift Plan amendments. They were not provided with information about any of the Texaco plans until after they requested information in 1999. Defendant Stoner denied claims for Retirement Plan and Thrift Plan benefits by Plaintiffs Schultz and Weber in that year;*fn8 her letters denying appeals by Plaintiffs Schultz and Weber asserted that the official plan documents provided that "[y]ou 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." Schultz II at 294. The cited phrase did not, however, appear in any of the relevant plan documents. Stoner was, instead, quoting from a summary plan description. See id. In her deposition taken in connection with this litigation, Stoner testified that she had consulted with Texaco's Legal Department before issuing her decision, and that she had denied the claims because she "interpreted [Plaintiffs'] employment relationship with MetroCareers and other various parties as being characterized by [sic], in the language of the Plan, and therefore concluded they were not employees." (Dep. of Janet L. Stoner at 59, 67; see also, e.g., id. at 52-53 ("The individuals . . . were employed by agencies that had a relationship with Texaco and it's my interpretation that those individuals were thus characterized by, and therefore excluded from the Plans, as they were employees of the agencies.").) Stoner did not examine TEPI's agreements with the Third-Party Contractors and did not have any idea as to how the law defined someone as an employee, a leased employee or an independent contractor. (Id. at 55, 59, 61, 62.) During Stoner's tenure as Plan Administrator, Texaco's Human Resources department provided benefit plan enrollment information to persons hired or classified as regular full time employees of Texaco. (Id. at 47-48.)

Texaco, Inc., was acquired by Chevron Corporation in 2001, whereupon Chevron Corporation was renamed ChevronTexaco Corporation. The Texaco Retirement Plan was merged into the ChevronTexaco Retirement Plan, and the Texaco Thrift Plan was merged into the ChevronTexaco Corporation Employee Savings Investment Plan, effective July 1, 2002. (Def. 56.1 Stmt. ¶¶ 3,4 and evidence cited therein.) According to an affidavit proffered by Defendants, the eligibility language of the merged plans differs from that of the pre-merger Texaco plans, as do the merged plans' provisions regarding administration and benefit claims. ChevronTexaco is the Plan Administrator for the merged Retirement and Thrift Plans. (Aff. of Richard Remley, Esq. ¶ 10.) The affidavit does not quote the particular administration language of the merged plans, nor has the text of those plans been provided to the Court, but the affidavit represents that the claims fiduciary for the merged Retirement and Thrift Plans is "a 'Review Panel' appointed by the Plan Administrator." (Id.) The affidavit goes on to describe the Review Panel appointment process that ChevronTexaco implemented following the Schultz II remand for consideration of Plaintiffs' claims, characterizing that process as consistent with "long-standing past practice." (Id. ¶¶ 11-13.) The affidavit describes the following claims determination process as one historically used by Chevron and implemented in connection with the remand in this case. ChevronTexaco designated a Review Panel made up of three ChevronTexaco Human Resources Department employees who were not then employed in the employee benefits function, to perform the determination required by the remand aspect of Schultz II. Although the affidavit does not assert specifically that the merged plans include provisions granting the Review Panel discretionary authority to interpret and apply the provisions of the plans, the parties' legal arguments on this motion practice are premised on the existence of such provisions and the Court therefore assumes for purposes of this motion practice that it is undisputed that the merged plans include such provisions.

This Review Panel was provided with Plaintiffs' position statement and exhibits (including affidavits of the four named Plaintiffs detailing aspects of their work histories and relationships with TEPI and with the Third-Party Contractors) as well as a supplemental submission by Plaintiffs' counsel. The panel was also given an unsigned "Position statement of the Plan Administrator of the ChevronTexaco Corporation Retirement Plan and the ChevronTexaco Corporation Employee Savings and Investment Plan Regarding Administrative Review Remand to a Review Panel Regarding Alton C. Schultz, Jr., Elaine B Jackson, Gladys Criddle, and Harold J. Weber, Jr.," including voluminous exhibits, that had apparently been prepared within the ChevronTexaco Legal Department (the Court will refer to this document, which is annexed to the 10/2004 Bloom Affidavit as Ex. LL, as the "CVX PA Pos. Stmt."). The CVX PA Position Statement included extensive arguments as to why Plaintiffs' claims for benefits under the plans should be denied, advised the Review Panel that "common law" employee status was irrelevant to their determination and that "what [Defendant] Stoner concluded in her original consideration or what she may have said in her deposition are in no way binding on this Review Panel and have minimal (if any relevance) [sic] remaining relevance."

(Ex. LL to 10/2004 Bloom Aff.) Among the exhibits submitted to the Review Panel with the Plan Administrator's Position Statement were an affidavit by an individual named Glenn Phillips, who asserted that he had been employed in Texaco's Human Resources Department from 1984 until the merger with Chevron, and that,

Based on [his] personal experience and knowledge as a Texaco Human Resources employee, a worker who was not a formal Texaco employee but whose services were obtained by Texaco either through a direct contract with the individual or through a third party contracting agency were both [sic] commonly referred and characterized within Texaco as independent contractors. In terms of such common referral and characterization as independent contractors, no distinction was made between an individual retained directly by contract and an individual retained by contract through a third-party agency. Rather, if workers were not denominated and characterized as formal Texaco employees, they were commonly referred to and characterized within Texaco by the term 'independent contractor.' (Aff. of Glenn Phillips at ¶ 6, Ex. OO to Plan Administrator's Position Stmt.). The Plan Adminsitrator's Position Statement was also accompanied by affidavits from Texaco Legal Department personnel who asserted that they had participated in the preparation of the 1994 plan amendments and that the "characterized by or under contract with the Employer as an independent contractor" language in the 1994 versions of the Retirement and Thrift Plans was "intended to exclude from eligibility individuals who provided services to Texaco or one of its subsidiaries or affiliated companies through a third-party staffing agency even if, for some reason, those individuals were able to satisfy the eligibility criteria specified [in the plan] or if they did not satisfy the criteria for 'Excluded Employees' set forth in [the plan]." (Aff. of Rex Iacurci at ¶ 14, Ex. FF to CVX PA Pos. Stmt; see also Aff. of Peter Stathis, Ex. GG to CVX PA Pos. Stmt.)

The Plan Administrator's Position Statement did not proffer any advice to the Review Panel as to the fiduciary nature of its assignment or the requirements of the fiduciary duty provisions of ERISA, but it did encourage the Panel to reject "purported highly technical legalisms" in considering Plaintiffs' arguments as to the meaning of the 1994 Plans' phrase "characterized [by TEPI] as an independent contractor." (See Ex LL at 11-12.) The Review Panel did not seek out or receive any other legal advice and, when asked at deposition about such a provision, the panel member designated by ChevronTexaco to testify gave the following responses to questions relating to ERISA's exclusive benefit requirement:*fn9

Q: And [the panel's decision] was for the exclusive benefit of plan participants and plan beneficiaries?

A: I don't know. I'm not sure I understand what you mean by that question.

Q: Well, when you're reviewing the facts and the plans, you're doing that for the exclusive benefit of plan ...

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