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Alan J. Krok, Cynthia Nichols, James Quinn, and Lonnie Vinson, On v. the University of Chicago

April 3, 2012

ALAN J. KROK, CYNTHIA NICHOLS, JAMES QUINN, AND LONNIE VINSON, ON BEHALF OF THEMSELVES AND ALL SIMILARLY SITUATED PERSONS, PLAINTIFFS,
v.
THE UNIVERSITY OF CHICAGO, DEFENDANT.



The opinion of the court was delivered by: Judge Sharon Johnson Coleman

MEMORANDUM OPINION AND ORDER

Plaintiffs, Alan J. Krok, Cynthia Nichols, James Quinn, and Lonnie Vinson, filed their Second Amended Class Action Complaint after this Court granted defendant University of Chicago's first motion to dismiss for failure to state a claim. The University of Chicago again moves to dismiss plaintiffs' complaint for failure to state a claim upon which relief can be granted. For the reasons stated herein, the motion is granted in part and denied in part.

The plaintiffs were all employed as part-time police officers at the University of Chicago. The three Count, Second Amended Complaint seeks a declaratory judgment that they were denied employee benefits in violation of ERISA; equitable relief based on discrimination in violation of ERISA; and equitable relief based on a breach of fiduciary duty. The university moves to dismiss on the basis that plaintiffs lack statutory standing under ERISA to pursue their claim and that they fail to state a claim on which relief can be granted.

Legal Standard

Rule 8 sets forth the federal pleading requirement of a short and plain statement of the claim upon which relief can be granted. Fed. R. Civ. P. 8(a). In order to survive dismissal, the complaint must allege sufficient factual content to raise the right to relief above a speculative level. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 569 n.14 (2007). When considering dismissal of a complaint, the Court accepts as true all well-pleaded allegations and draws all reasonable inferences in favor of the plaintiff. Pisciotta v. Old Nat. Bancorp, 499 F.3d 629, 633 (7th Cir. 2007).

Discussion

1. Statutory Standing*fn1

In order to bring a civil action for relief under section 502(a)(1)(B) or 502(a)(3) of ERISA, the plaintiffs must be participants or beneficiaries. 29 U.S.C §1132(a)(1). A participant is defined under ERISA as "any employee or former employee of an employer. who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit." 29 USCS § 1002(7). Thus, in order to bring a claim under ERISA, a plaintiff must show that he or she is eligible to receive benefits under the terms of the employer's own benefit plans. See Estate of Suskovich v. Anthem Health Plans of Virginia, Inc., 553 F.3d 559, 571 (7th Cir. 2009).

Here, the Second Amended Complaint alleges that plaintiffs are eligible under "The University of Chicago Pension Plan for Staff Employees" ("SEPP") effective January 1, 2009, or the "Retirement Income Plan for Employees" ("ERIP"), in effect prior to January 1, 2009, and versions of those plans. (Second Amended Complaint, ¶ 16). Plaintiffs allege that they were eligible to participate in the University's benefit plans because they worked over 1,000 hours a year. The university employed Alan Krok from April 1994 to October 31, 2009; Lonnie Vinson from November 1996 to January 2010; and Cynthia Nichols from January 2007 to January 2010. Plaintiff James Quinn was employed full-time from May 1972 until 1977 at which time he transitioned to part-time status until his termination on January 11, 2010. In order to determine whether plaintiffs have adequately pleaded their eligibility to participate, this Court must examine the eligibility requirements of each plan.

The first version of the plan that may cover the plaintiffs was in effect from January 1, 1976, through January 1, 1989 ("1976 Plan"). The 1976 Plan provides that an employee "shall become a Participant as of the first day of the first month after January 1, 1976, following the later of (a) his thirtieth (30th) birthday and (b) the earliest anniversary of his employment date which is the end of two consecutive 12-month periods during each of which he completed 1,000 hours of service for the University." See Pl.Resp., Ex. B, at 3, 2. Krok, Nichols and Vinson cannot claim to be participants under the terms of the 1976 Plan because they were not employees of the University while it was in effect. Only James Quinn was employed by the university while this plan was in effect. Quinn also alleges that he worked over 1,000 hours a year and completed three vesting years of employment. Although Quinn does not specifically allege that he worked over 1,000 hours a year for two consecutive years, the allegations in the complaint are sufficient for Quinn to survive dismissal based on statutory standing.

The remaining versions of the Plan effective in 1989, 2005, and 2009, contain the same basic requirement for participation: "A nonacademic employee of the University will be eligible to become a Participant in the Plan if he or she is employed as a Benefits Eligible Employee for one year; provided that a nonacademic employee shall not be denied eligibility if he or she completes 1,000 hours of service during a Plan Year." Pl. Resp., Ex. C, at II.1. Throughout the Second Amended Complaint, the plaintiffs allege that they were not classified as Benefits Eligible Employees. See Second Amended Complaint, ¶¶ 44, 55, 61. Accordingly, Krok, Nichols and Vinson are not eligible to participate under the 1989, 2005, or 2009, versions of the Plan. Accordingly, plaintiffs Krok, Nichols, and Vinson have not adequately pleaded eligibility to participate in a benefit plan in order to establish statutory standing to sue under ERISA.

Plaintiffs argue that the University's benefit plans eligibility requirements are contrary to ERISA's minimum participation standards. Section 202(a) of ERISA provides that: "No pension plan may require, as a condition of participation in the plan, that an employee complete a period of service with the employer or employers maintaining the plan extending beyond the later of the following dates-- (i) the date on which the employee attains the age of 21; or (ii) the date on which he completes 1 year of service [defined as 1,000 hours of work in a year]." 29 U.S.C. §1052(a). Plaintiffs interpret this provision as prohibiting an employer from denying benefits to any employee who works more than 1,000 hours in a year. This interpretation has been rejected by the Seventh Circuit, as well as other circuits. See Central States, Southeast and Southwest Areas Pension Fund v. Hartlage Truck Services, Inc., 991 F.2d 1357, 1363 (7th Cir. 1993)(upholding a pension plan that excluded employees classified as "casual employees" because the exclusion was not based on their age or length of service, but on their status as casual employees); see also Bauer v. Summit Bancorp, 325 F.3d 155, 166 (3d Cir. 2003)(concluding that an employer can "limit plan participation to certain groups or classifications of employees, as long as that limitation was not based upon age or length of service."); Abraham v. Exxon Corp., 85 F.3d 1126, 1130 (5th Cir. 1996)(holding that Section 1052(a) does nothing more than forbid employers to deny participation in an ERISA plan on the basis of age or length of service). "Nothing in ERISA requires employers to establish employee benefits plans." Bauer, 325 F.3d at 159 (citing Lockheed Corp. v. Spink, 517 U.S. 882, 887 (1996)). ERISA also does not mandate that every employee is entitled to participate in a plan that an employer decides to offer. Id. Here, the University limits plan participation to employees classified as Benefits Eligible since that limitation is not based on age or the length of time that they have been employed by the University, the limitation does not violate ERISA.

In cases where the plaintiff alleges that but for the employer's breach of fiduciary duty, the plaintiff is eligible for benefits, the Sixth Circuit has recognized an exception to the ERISA standing requirements. The Seventh Circuit has not addressed the viability of this exception. Regardless, plaintiffs here do not allege that they are eligible for benefits but for the University's breach of fiduciary duty. Plaintiffs claim that the University breached its fiduciary duty by classifying them as ineligible when they worked more than 1,000 hours in a year. However, ERISA's minimum participation standards do not mandate that an employee who works 1,000 hours a year must be classified as eligible to participate in a plan. Thus, plaintiffs do not have standing under this exception.

2. Adequacy of Pleading Counts II and III Count II of plaintiffs' Second Amended Complaint alleges discrimination in violation of ERISA because the University classified plaintiffs and potential class members as non-ERIP eligible to prevent them from participating in the plan and receiving benefits based solely ...


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