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Carter v. Pension Plan of A. Finkl 7 Sons Co.

May 12, 2010


The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer


Plaintiffs are active employees of Defendant A. Finkl & Sons Co. ("Finkl") and participants in that company's Pension Plan For Eligible Office Employees ("the Plan"). In late 2006, the company, as Plan administrator, decided to voluntarily terminate the Plan in accordance with the procedures set forth in the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1341. In January 2008, the company amended the Plan and informed Plaintiffs that they were eligible to receive immediate annuity benefits as a term of the termination, even though Plaintiffs had not yet actually retired from the company's employ. In May 2008, days after receiving Plaintiffs' claim forms, the company changed course, announcing that the Plan would not terminate after all and that Plaintiffs would receive no immediate distribution of their benefits. Instead, the company told Plaintiffs, participants would have to wait to receive benefits until the time of their actual retirements. Plaintiffs charge that this change violated the anti-cutback provisions of the ERISA statute and the Plan itself. Plaintiffs also contend that the company, the Plan, and the individual members of the Plan's Pension Committee violated ERISA by ignoring Plaintiffs' attempts to obtain their benefits and by miscalculating the value of those benefits. Defendants now move for summary judgment on all claims. For the reasons set forth herein, Defendants' motions are granted. Plaintiffs have moved for summary judgment on Count II of the complaint, which seeks attorneys' fees in connection with the Pension Committee's alleged failure to comply with the Plan's claims procedure. That motion is denied.


On a motion for summary judgment, the court views all facts and draws all reasonable inferences in the light most favorable to the nonmoving party. Ziliak v. AstraZeneca LP, 324 F.3d 518, 520 (7th Cir. 2003). When parties file cross motions for summary judgment, the court is required to adopt a "Janus-like perspective," construing the facts and inferences in favor of the party opposing the motion. See Miller v. Midland Credit Management, Inc., 621 F.Supp.2d 621, 626-27 (N.D.Ill. 2009) (quoting F.T.C. v. Cleverlink Trading Ltd., 519 F.Supp.2d 784, 792 (N.D.Ill 2007)). In this case, the material facts are essentially undisputed.

Finkl is a manufacturer and supplier of industrial steel products with its base of operations in Chicago, Illinois. For many years, Finkl has also been the sponsor and administrator of a tax-qualified defined benefits Plan that is intended to provide income for Finkl's retired former employees. (Pl.'s 56.1 Resp. ¶ 1; Declaration of Finkl's Director of Human Resources, Steven Denten, ¶ 3.) Plaintiffs are all active employees of Finkl and participants in the Plan.*fn1 (Pl.'s 56.1 Resp. ¶ 32; Denten Decl. ¶ 22.) At the time of the events described below, Plaintiffs had each completed more than 30 years of service in Finkl's employ, and were, thus, qualified for the Plan's "30-and-out" early retirement benefit, which entitled each Plaintiff to begin receiving a pension annuity upon the date of actual retirement regardless of whether he had actually reached the Plan's designated retirement age of 65. (Ex. 1 to Denten Decl., Bates No. 00050-52.)*fn2

In late 2006, Finkl elected to begin the process of voluntarily terminating the Plan, in accordance with the procedure prescribed by ERISA, 29 U.S.C. § 1341. (Pl.'s 56.1 Resp. ¶ 2, Denten Decl. ¶ 4.)*fn3 On December 22, 2006, the company provided participants, including Plaintiffs, with a written "Notice of Intent to Terminate the Plan," as required by 29 U.S.C. § 1341(a)(2). (Pl.'s 56.1 Resp. ¶ 3; Denten Decl., ¶ 4.) The Notice informed the participants that Finkl "intend[ed] to terminate the Plan in a standard termination in accordance with [ERISA]." (Ex. 1 to Denten Decl., Bates No. 00001-02.) The Notice further identified the "proposed termination date" as February 28, 2007, and stated: "In order for the Plan to terminate, Plan assets must be sufficient to provide all Plan benefits. If the proposed termination does not occur, the Company will notify you in writing." (Id.)*fn4

In August 2007, the company notified the Pension Benefit Guaranty Corporation ("PBGC") and the Internal Revenue Service ("IRS") that it intended to terminate the Plan. The PBGC responded by letter, dated October 22, 2007, confirming that the agency had received Finkl's notice and stating: "If PBGC does not issue a Notice of Noncompliance within the 60-day period after the PBGC receipt date [August 27, 2007], you must begin distributing plan assets to close out the plan." (Ex. 1 to Denten Decl., Bates No. 00387.) The letter also directed that Finkl complete the "distribution of plan assets to close out the plan within 180 days after the expiration of the PBGC's 60-day review period," unless the agency granted a deadline extension. (Id.) (emphasis in original). Thus, absent a Notice of Noncompliance from the PBGC, Finkl was expected to begin the distribution of assets on October 26, 2007. In fact, however, as explained below, Finkl never actually initiated any distribution, and the PBGC found no violation of the company's ERISA obligations.

On January 28, 2008, Finkl formally amended the Plan, retroactively adopting the proposed termination date. The amendment, hereafter referred to as Amendment 1, contains the following language:

The Plan shall terminate effective February 28, 2007 and the following special provisions shall apply in connection with distribution of benefits in accordance with such termination . . . . If a Participant has not begun to receive a benefit under the Plan at the time benefits are to be distributed on account of termination of the Plan, he may elect to receive his benefit . . . under the Plan in the form of an immediate annuity or a deferred annuity . . . regardless of whether he remains employed by the Employer. . ."*fn5

(Ex. 1 to Denten Decl., Bates No. 00541-00542.) On February 21, 2008, Finkl's counsel sent a letter on behalf of the company to the PBGC, seeking to extend the final deadline for distributing the Plan's assets, then set for April 23, 2008. (Ex. 1 to Denten Decl., Bates No. 00391-00393.) The letter acknowledged that the agency's 60-day review period had expired on October 26, 2007 without issuance of a Notice of Noncompliance, but explained that the company required more time to achieve the distribution of Plan assets because it had "taken considerably longer than anticipated to complete benefit election forms with final calculations" for the Plan's participants. The PBGC granted the extension by letter dated February 27, 2008 and announced that the Plan would have until June 9, 2008 to fully distribute its assets. (Ex. 1 to Denten Decl., Bates No. 00394.) Finkl subsequently sought and received an additional extension, pushing the deadline for final distribution back to August 11, 2008. (Ex. 1 to Denten Decl., Bates No. 00404.)

In the spring of 2008, the Plan provided Plaintiffs and other participants with a statement of benefits and an "election form," which permitted participants to check a box expressing their desire to receive an immediate distribution of benefits. (Pl.'s 56.1 Resp. ¶ 24, Ex.1 to Denten Decl., Bates No. 00254-00341.) The letter accompanying the form stated: "The termination of the Pension Plan of A. Finkl & Sons Co. for Eligible Office Employees has been approved by the Pension Benefit Guaranty Corporation. It is time to pay benefits to the participants." (Ex. J to Def. 56.1 Stat.) On May 19, 2008, each of the Plaintiffs returned forms denoting that they had elected to receive immediate life annuities. (Pl.'s 56.1 Resp. ¶ 24, Ex.1 to Denten Decl., Bates No. 00254-00341.) The Plaintiffs had also altered the forms by marking out some of the estimated benefit values and inserting benefit calculations of their own. (Id.) Each Plaintiff had also appended a letter, which carried the heading "RE: CLAIM" and referenced the provision of the Plan that addressed the administrative claims procedure. (Pl.'s 56.1 Resp. ¶24; Ex. 1 to Denten Decl., Bates No. 00263, 0276, 00290, 00301, 00314, 00327, 00340.) These "claim" letters asserted that each Plaintiff had a right under Amendment 1 to obtain his full early retirement benefits "regardless of whether [I] remain employed by the Employer." (Id.) In this lawsuit, Plaintiffs continue to rely on the language of Amendment 1 and insist that they are entitled to receive their retirement pensions under the Plan's "30-and-out" provision immediately even though they remain actively employed by Finkl.

Defendants never initiated payment of Plaintiffs' claimed annuity benefits. Nor did the Plan ultimately distribute any of its assets to participants. Instead, on May 23, 2008, Finkl sent a letter to all participants informing them that the company had chosen not to terminate the Plan and, therefore, there would be no immediate distribution of assets. (Pl.'s 56.1 Resp. ¶ 25.) The letter makes clear that the company's decision to withdraw the termination was a direct response to Plaintiffs' claims. It states, in part:

Unfortunately, as we have entered into this termination process, a small group of employees has asserted that they are entitled to more than the benefits that have been earned. They have claimed that once they have completed 30 years of credited service, they should be able to collect their full pensions immediately, while at the same time remaining full-time employees. Obviously such a result is not appropriate and was never intended, either under the Pension Plan prior to its termination or as a consequence of the termination process . . . . The group has threatened litigation if their demands are not met. The Company is not interested in a dispute with any of its employees over this issue. As a consequence thereof, the Company has notified the Pension Benefit Guaranty Corporation that it has withdrawn its termination of the Pension Plan. As a result, benefits will be paid as in the past, as they come due under the terms of the Pension Plan.

(Ex. 1 to Denten Decl., Bates No. 00345-46.) Defendants have not explained how it is that Plaintiffs' reading of Amendment 1 was "not appropriate and never intended." If Finkl's initial "intent" was to exclude Plaintiffs from the group of employees who would receive immediate distributions "regardless of whether [they] remain[ed] employed by the Employer," Defendants have not explained this, either. Nor have Defendants offered an alternative construction of Amendment 1 that contradicts Plaintiffs' reading. Instead, the court surmises that Finkl simply failed to anticipate the nature of Plaintiffs' claims and, thus, did not accurately predict the Plan's potential liability upon termination. According to Finkl's Human Resources Director Steven Denten, Finkl ultimately realized it had underestimated the Plan's outstanding obligations and "became concerned that the additional contribution Finkl would be required to make could be more than originally estimated." (Denten Decl., ¶ 6.) Absent that additional contribution, Denten stated, the Plan's assets were insufficient to meet its anticipated liabilities upon termination. (Id.) Four days after it received Plaintiffs' claim letters, Finkl announced its intention to abandon the termination process.

Plaintiffs insist that the Plan's assets were, in fact, sufficient to fund its obligations, but they have not demonstrated that there is a genuine dispute on this issue. Plaintiffs point to an earlier filing with the PBGC in which Defendants certified the Plan's anticipated ability to provide for all benefits upon termination--a document that reflects Defendants' expectations at the time it was prepared, but does not rebut the assertion that Plan administrators ultimately concluded that Plan would be incapable of meeting its full obligations absent further contributions from Finkl. (Certificate of Sufficiency, Ex. A to Pl.'s 56.1 Resp.)*fn6

On May 27, 2008, Finkl amended the Plan a second time. The new amendment, hereafter referred to as Amendment 2, purported to negate Amendment 1 in its entirety. (Ex. 1 to Denten Decl., Bates No. 00360). In Defendants' view, Amendment 2 aborted the termination process and eliminated Finkl's obligation to immediately pay benefits or distribute Plan assets. Plaintiffs contend that Amendment 2 was ineffective to repeal the Plan's termination or to extinguish their right to receive immediate annuities pursuant to Amendment 1. On June 6, 2008, Plaintiffs' attorney wrote to Finkl's outside counsel, Larry Goldstein, asserting that Amendment 2 was invalid and that the purported change of course violated the anti-cutback provisions of ERISA. (Ex. 1 to Denten Decl., Bates No. 00351.) Plaintiff's counsel also asserted that Plaintiffs' claims for an immediate distribution of their benefits required resolution by the Plan's Pension Committee. (Id.) On June 18, 2008, Goldstein wrote back, stating, "[a]s a result of the withdrawal of the Plan's termination, none of [the Plaintiffs are] entitled to benefits currently and therefore each such claim for benefits is moot." (Ex. 1 to Denten Decl., Bates No. 00356-00363.)

The Pension Benefit Guaranty Corporation appears to have endorsed the company's position. In a letter dated June 6, 2008, the PBGC told Finkl, "we have withdrawn the termination. Accordingly, the Plan is an on-going Plan. Please note, you must notify participants, beneficiaries and any employee organization representing participants in writing that the Plan did not (or will not) terminate as of the proposed termination date stated in the notice of intent to terminate . . . . " (Ex. 1 to Denten Decl., Bates No. 00359.) The Plan resumed its normal operation, paying benefits to participants as they came due.*fn7

On November 24, 2008, Plaintiffs sent Goldstein a second letter, demanding that the Pension Committee review their May 19, 2008 claim forms in accordance with the Plan's claims procedure. (Pl.'s 56.1 Resp., ¶ 29.) Plaintiffs filed their first complaint in this lawsuit on December 15, 2008, before Goldstein or the Committee had the opportunity to respond to the November request for administrative review. (Complaint, D.E. 1.) The Pension Committee did ultimately consider Plaintiffs' claims and denied them in writing on December 22, 2008. (Pl.'s 56.1 Resp., ¶ 29; Ex. 1 to Denten Decl., Bates No. 00410-00412.) The Committee also considered Plaintiffs' administrative appeal, which it denied on March 26, 2009. (Pl.'s 56.1 Resp., ¶ 30.)

One further occurrence since the initiation of this litigation is important. On October 29, 2009, the IRS issued a favorable determination letter regarding the Plan's continued operation. The letter stated that the IRS had reviewed the Plan document, including Amendment 2's deletion of Amendment 1, and had determined that "the terms of the plan conform to the requirements" of the Internal Revenue Code, Section 401(a). (IRS Letter, Ex. 3 to Def.'s 56.1 Stat.) In other words, in the opinion of the IRS, the Plan continues to be an operational pension plan that is entitled to beneficial tax status under ERISA. The letter explicitly cautions that it relates "only to the status of [the Plan] under the Internal Revenue Code. It is not a determination regarding the effect of other federal or local statutes." (Id.) On February 1, 2010, Plaintiffs filed a Petition with the Clerk of the United States Tax Court, challenging the IRS's determination and the qualified tax status of the Plan on the ground that Amendment 2 violates the anti-cutback provision of the Revenue Code. (Pl.'s Supp. Mem. ¶ A.) As far as this court is aware, the Tax Court has, thus far, made no determination on Plaintiffs' challenge.

Defendants now move for summary judgment on all claims before this court, contending that Plaintiffs have failed to show that the Plan, Finkl, or any member of the Pension Committee has committed a violation of ERISA or a breach of the Plan's terms. For the reasons explained below, the court grants Defendants' motions.


I. Standard of Review

Summary judgment shall be granted where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Zehrung v. United Auto Workers Local 663, 269 Fed.Appx. 585, 588 (7th Cir. 2008) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)). "In ERISA cases, denials of benefits are reviewed de novo unless the plan at issue gives the plan administrator discretion to construe the policy terms." Wetzler v. Illinois CPA Soc. & Foundation Retirement Income Plan, 586 F.3d 1053, 1057 (7th Cir. 2009) (citing Hess v. Reg-Ellen Mach. Tool Corp., 423 F.3d 653, 658 (7th Cir. 2005)). When a plan administrator is given discretion to interpret the provisions of the plan, the administrator's decisions are reviewed using the arbitrary and capricious standard. See Wetzler, 586 F.3d at 1057; James v. General Motors Corp., 230 F.3d 315, 317 (7th Cir. 2000). Under that standard, the court accords the plan administrator "great deference" and will generally not disturb an administrator's decision if it is based on any "reasonable interpretation of the plan's language." Wetzler, 586 F.3d at 1057.

In this case, the Plan grants the Pension Committee "the exclusive right" and "complete discretion" to "interpret the terms and provisions of the Plan [and to] decide such questions as may arise in connection with the operation of the Plan, including . . . possible ambiguities, inequities, inconsistencies or omissions in the Plan or Trust by general rule or particular decision." Thus, the Pension Committee's interpretation of the Plan is entitled to deferential review. The issue of whether any particular term of the Plan violates ERISA is a question of law, however, and is therefore reviewed de novo by the court, without comparable deference to the plan administrator. See Silvernail v. Ameritech Pension Plan, 439 F.3d 355, 357 (7th Cir. 2006). When deferential review of the plan administrator's benefit decision is called for under ERISA, the reviewing ...

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