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Andersen v. Chrysler Corp.

November 1, 1996






Appeal from the United States District Court for the Eastern District of Wisconsin.

No. 90 C 1182 Rudolph T. Randa, Judge.

Before BAUER, RIPPLE and EVANS, Circuit Judges.

RIPPLE, Circuit Judge.



This putative class action is the third in a series of three lawsuits brought by six named plaintiffs against Chrysler Corporation ("Chrysler"). They challenge various benefits they received following the closing of the plants in which they worked. The district court believed this lawsuit was foreclosed on the ground of res judicata because of the previous two suits. It therefore granted summary judgment for the defendants. Although we cannot accept the district court's holding that the plaintiffs' prosecution of the previous two suits bars this action as res judicata, we agree with the alternate grounds that the defendants offer for affirming the judgment.


A. Facts

The six named plaintiffs in this suit are former American Motors Corporation ("AMC") employees who worked at plants in Kenosha and Milwaukee, Wisconsin. AMC merged with Chrysler in 1987. Prior to the merger, AMC anticipated that Chrysler would close the Kenosha and Milwaukee plants after the merger. To encourage employees at those plants to continue their employment until the actual closings, AMC implemented the Salaried Employees Retention Program ("SERP"). The SERP did not directly pay any benefits; rather, it modified AMC's existing benefit plans, including AMC's Salaried Employees Pension Plan ("pension plan") and Separation Pay Plan ("severance plan"). Among other modifications, the SERP enhanced the severance pay of those employees who remained through the plant closings. Following the merger of AMC into Chrysler, the latter became the administrator for all AMC benefit plans.

In 1989, the six plaintiffs in this case filed the first of their suits--Hestetune v. Chrysler Corporation/AMC, No. 89 C 1211 (E.D. Wis. September 8, 1992)--against Chrysler in its capacity as the AMC severance plan administrator. Although Hestetune was purportedly brought as a class action, it appears that the plaintiffs never moved for class certification. Hestetune challenged certain SERP modifications to AMC's severance plan. In particular, although the SERP increased the severance pay for those employees who remained through the plant closings, it reduced those benefits by the amount of the pension benefits received by those employees who retired following the plant closings. Because this reduction in SERP benefits applied only to retirement-aged employees, the plaintiffs in Hestetune alleged that the SERP violated the Age Discrimination in Employment Act, 29 U.S.C. secs. 621-34 ("ADEA"). On September 8, 1992, the district court dismissed Hestetune because it was filed outside the applicable statute of limitations, and because the severance plan, as a bona fide employee benefit plan, was therefore exempt from the ADEA. The plaintiffs did not appeal that dismissal.

In 1991, the six plaintiffs in this suit filed the second of their lawsuits--Chriske v. Chrysler Corporation, No. 91 C 1063 (E.D. Wis. March 26, 1993). *fn1 As in Hestetune, Chriske was brought as a class action, though it is unclear from the record whether the plaintiffs ever moved for class certification. *fn2 In Chriske, the plaintiffs again challenged various provisions of the SERP, this time alleging that the reduction of their SERP-enhanced severance pay by their monthly pension benefits violated the Employee Retirement Income Security Act, 29 U.S.C. sec. 1001 et seq. ("ERISA"). Specifically, the plaintiffs alleged that: (1) the SERP modified the severance plan even though that plan contained no procedures for incorporating such a modification, in violation of ERISA sec. 402(b)(3), 29 U.S.C. sec. 1102(b)(3); (2) the summary of the severance plan Chrysler published--the "White Book"--did not contain an accurate summary of the SERP modifications, nor did the defendants file a copy of the SERP-modified severance plan with the Department of Labor, both in violation of ERISA sec. 102, 29 U.S.C. sec. 1022; and (3) the defendants violated various fiduciary duties under ERISA sec. 404, 29 U.S.C. sec. 1104. On March 26, 1993, the district court, on its own motion, dismissed Chriske, ruling that the final judgment in Hestetune barred the action as res judicata. Again, the plaintiffs did not appeal.

B. The Present Suit

The plaintiffs filed the present suit on December 11, 1990. This suit, although raising ERISA challenges similar to those raised in Chriske, pertains not to AMC's severance plan but to its pension plan. The plaintiffs filed the present suit against Chrysler and two Chrysler officers who are fiduciaries of the pension plan (collectively, "Chrysler"). Although this case was brought purportedly as a class action, the six named plaintiffs have never moved for class certification.

The grievance of the plaintiffs' complaint is that the defendants wrongfully reduced pension benefits for early retirees. AMC's pension plan grants "Regular Early Retirement Benefits" to employees who retire before the age of 55 after completing 30 years of employment. (Other classes of employees are also eligible for Regular Early Retirement Benefits, but those situations are not relevant to this case.) The pension plan provides an "Early Retirement Supplement" for all employees who retire prior to the age of 65 with 30 or more years of service; early retirees receive the Early Retirement Supplement until they reach age 62. *fn3

However, the pension plan places an upper limit or "cap" on the additional income a retiree may earn while receiving a "temporary Supplement." The plan establishes income caps for each year (for example, $10,000 in 1990) and, if a retiree's additional income exceeds the cap in a given year, the plan provides that:

a penalty equal to the amount by which such earnings exceeds [sic] the amount permitted, but not to exceed the amount of the temporary Supplement otherwise payable in the calendar year in which he has such excess earnings, shall be charged against each succeeding monthly temporary Supplement which the [retiree] would otherwise be entitled to receive until the full amount of such penalty is satisfied.

The plan thus imposes a penalty of $1--up to a maximum equal to the amount of the employee's "temporary Supplement"--for each $1 of additional income above the cap that an early retiree earns in a given calendar year (which we will refer to as "excess additional income").

It appears from the record that, while AMC administered the pension plan, it never enforced this cap on additional earnings. When Chrysler took over the administration of AMC's pension plan, however, it indicated that it would enforce the cap. Moreover, in January 1988, Chrysler published the "White Book"--a summary of the benefits employees were to receive--in which Chrysler stated that it would impose a penalty of $2 for each $1 of excess additional income early retirees earned. Chrysler also stated that, if it could not recoup the entire amount of the penalty within a single calendar year, it would carry the balance of the penalty over into ensuing years until it had recovered the full penalty.

The plaintiffs take three exceptions to Chrysler's stated plans. First, they argue that their Early Retirement Supplements are not "temporary Supplements," and that the pension plan authorizes Chrysler to reduce only "temporary Supplements" for excess additional income. Second, they maintain that the pension plan provides no authority for Chrysler to offset any supplement by $2 for each $1 of excess additional income. Third, they contend that the pension plan permits Chrysler to reduce "temporary Supplements" only within the calendar year in which a recipient exceeds the additional income cap, and that Chrysler therefore has no authority under the pension plan to carry the balance of the penalty over into ensuing years. Thus, the plaintiffs submit that Chrysler exceeded the authority it possessed under the pension plan and, in so doing, violated its fiduciary duty under ERISA.

The plaintiffs therefore brought this suit pursuant to ERISA's civil enforcement provision, ERISA sec. 502, 29 U.S.C. sec. 1132, asserting five ERISA violations. The first count of their complaint alleges that Chrysler failed to administer the pension plan according to the documents and instruments governing the plan, thereby violating ERISA sec. 404, 29 U.S.C. sec. 1104. Their second count accuses Chrysler of publishing a false and misleading summary of the pension plan--the White Book--in violation of ERISA sec. 102, 29 U.S.C. sec. 1022. Their third count claims that Chrysler engaged in "prohibited transactions," in violation of ERISA sec. 406, 29 U.S.C. sec. 1106, by denying benefits to plan participants, thereby decreasing the amount of money Chrysler was required to pay under the plan. In their fourth count, the plaintiffs assert that the defendants interfered with rights protected under ERISA, in violation of ERISA sec. 510, 29 U.S.C. sec. 1140. Finally, the plaintiffs bring a claim for "deceit and misrepresentation," based upon the allegedly erroneous statements in the White Book.

C. Proceedings in the District Court

As noted previously, see supra, at note 1, this case was filed after Hestetune but before Chriske. None of the parties moved to consolidate this case with Hestetune or Chriske, which were simultaneously pending before different judges in the same court.

In its answer to the plaintiffs' complaint, Chrysler initially admitted that it had erroneously penalized a "limited" number of early retirees on a $2-for-$1 basis for excess additional income, but claimed that it had reimbursed those retirees for the over-penalty, and that it would not enforce the $2-for-$1 penalty in the future. Upon further investigation, however, Chrysler determined that it had never actually enforced the $2-for-$1 penalty against any retiree, and that it had applied the $1-for-$1 penalty to only six retirees. (The record does not indicate whether any of the named plaintiffs were among these six.) Chrysler submitted an affidavit to this effect, and the parties stipulated to a corresponding ...

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