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HERMAN v. CENTRAL STATES S.E. & S.W. AREAS PENSION FUND

June 5, 2003

RICHARD HERMAN, ET AL., PLAINTIFFS,
v.
CENTRAL STATES SOUTHEAST & SOUTHWEST AREAS PENSION FUND, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Suzanne Conlon, District Judge

MEMORANDUM OPINION AND ORDER

Richard Herman, Daniel Paule, Larry Arwood, Dennis Helvey, William Rose, Michael Krucker, Larry Whitmyer, and William Bohan (collectively, "plaintiffs") bring this purported class action against Central States Southeast & Southwest Areas Pension Fund ("Central States" or the "fund") and Fund Trustees/Plan Administrators Fred Gegare, Jerry Younger, Charles Whobrey, Ray Cash, George Westley, Howard McDougall, Arthur Bunte, Jr., Tome Ventura, Gary Caldwell, and Daniel Brutto (collectively, "trustees") (Central States and trustees, collectively, "defendants"). Plaintiffs claim violations of the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. Specifically, plaintiffs sue trustees for breach of fiduciary duty (Count I), violation of the Anti-Cut Back Rule (Count III), violation of offset rules (Count IV), and interference with protected rights (Count VII). Plaintiffs sue Central States to enjoin unlawful practices, recover benefits, and clarify rights (Count II); for violation of ERISA notice provisions (Count V), and for violation of ERISA claims procedures (Count VI). Defendants move to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) and Fed.R.Civ.P. 12(b)(1).

BACKGROUND

I. Facts

For purposes of a motion to dismiss, the court accepts all well-pleaded allegations in the complaint as true and draws all reasonable inferences in favor of the nonmovant. Stachon v. United Consumers Club, Inc., 229 F.3d 673, 675 (7th Cir. 2000). Plaintiffs are current or former employees covered by the defendant retirement fund. The fund is a multi-employer pension created under an agreement and declaration of trust established in 1955. Pursuant to collective bargaining agreements between plaintiffs' employers, all plaintiffs are members and participants in the fund, under which they accrue vested retirement benefits.

In 1985, the fund began offering enhanced early retirement benefits. All plaintiffs accrued substantial early retirement benefits under the fund. In March 2002, the trustees implemented amendments to the trust agreement, effective June 30, 2002. The amendments retracted applications to retire and declined to authorize jobs that were previously permissible. In addition, the trustees amended the fund to include more restrictive definitions and interpretations of language in the preexisting prohibited reemployment rules. The meaning of the terms "industry," "trade," "craft," and "classification" became increasingly subjective.

The amendments required beneficiaries wishing to work after retirement to obtain job approval in advance. The complaint alleges the approval procedure is unduly lengthy and responses are not received in time to accept job offers. Further, the amendments offer no guidelines by which participants or retirees can identify jobs that are acceptable under the plan. This creates a default assumption that all jobs are prohibited, even though the plan does not actually prohibit all post-retirement employment.

Under the prior rules, a retiree who was engaged in prohibited reemployment, according to the fund, could avoid over payments and suspension of pension and continue employment while seeking a review of the reemployment determination. The amendments in issue eliminated this safe harbor. Further, the amendments subjected the reemployment rules to the fund's claims procedures. The claims procedures may take a year or more to exhaust and fail to provide reemployment advice and consent within a reasonable time.

On January 28, 2003, the trustees announced that the amendments would be suspended pending further study. The suspension was limited to changes relating to the definition of "prohibited reemployment." Trustees have continued to enforce all other amendments.

DISCUSSION

I. Legal Standard

A motion to dismiss tests the sufficiency of the complaint, not its merits. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In ruling on a motion to dismiss, the court considers "whether relief is possible under any set of facts that could be established consistent with the allegations." Pokuta v. Trans World Airlines, Inc., 191 F.3d 834, 839 (7th Cir. 1999), citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957). A motion under Rule 12(b)(6) should not be granted "unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief" Gibson, 355 U.S. at 45-46.

II. Breach of Fiduciary Duties (Count I)

Under ERISA, trustees have fiduciary duty to conduct the affairs of the fund for the exclusive benefit of fund participants and their beneficiaries. 29 U.S.C. § 104 (a)(1)(A)(i). The amended complaint alleges that the trustees required plan participants to forego post-retirement employment not adverse to legitimate interests of the fund. In so doing, plaintiffs allege that the trustees breached their fiduciary duties and unreasonably interpreted the fund's language prohibiting reemployment rules in order to cure unrelated fund problems. Defendants argue these claims are conclusory and without factual basis. See Cushing v. City of Chicago, 3 ...


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