Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

Plaintiffs are retirees who received benefits under Commonwealth Industries’ pension plan. They allege that the Plan underpaid them, in violation of the Employee Retirement Income Security Act, 29 U.S.C. 1132(a)(1)(B), when it did not include a subsidy for early retirement in its benefit calculations when it switched from a defined-benefit to a cash-balance plan in 1998. The district court dismissed all but one plaintiff (Corley) on limitations grounds and granted summary judgment to the defendants on the merits of Corley’s claims. The court reasoned that, as of 1998, Corley was not yet entitled to his early-retirement subsidy because he was then not yet 55, so the early-retirement benefit had not accrued yet, and the amendment did not reduce any accrued benefit. The Sixth Circuit affirmed with respect to the time-barred plaintiffs, but vacated as to Corley. On remand, the district court should consider whether the benefits payable to Corley under the relevant versions of the Plan constituted “an early retirement benefit” or “a retirement-type subsidy” which would be protected from elimination or reduction, or “an optional form of benefit” which would only be protected from elimination, 29 U.S.C. 1054(g)(2)(A), (B).View "Fallin v. Commonwealth Indus., Inc." on Justia Law

Plaintiffs are retired unionized employees of defendant and were covered by collective bargaining agreements that addressed healthcare benefits. The parties contest whether the CBAs guaranteed employees and their spouses lifetime healthcare benefits after retirement. After retiring, the employees and spouses continued to receive healthcare insurance from defendant. Between ages 62 to 65, defendant paid 80% of the premium costs. When the retirees turned 65, defendant assumed 100% of premium costs. In 2006, defendant informed plaintiffs that the company was instituting a new healthcare plan that would no longer cover 100% of the premiums. Plaintiffs claimed violations of the Labor Management Relations Act, 29 U.S.C. 185, and the Employee Retirement Income Security Act, 29 U.S.C. 1132. The district court ruled in plaintiffs’ favor as to employee coverage, but in favor of defendant as to spouses. The Sixth Circuit reversed in part, in favor of plaintiffs. Although healthcare is a “welfare benefit,” not entitled to the same ERISA protection as pension benefits, employers are free to waive their power to alter welfare benefits. Defendant did so by offering vested healthcare coverage to retired employees and spouses, and by agreeing that CBAs could only be modified with signed, mutual consent of the parties. View "Moore v. Menasha Corp." on Justia Law

Four plaintiffs each established an employee benefit plan under the Employee Retirement Income Security Act funded by a combination of employer contributions and covered employee payroll deductions; each entered into a Benefit Management Service Agreement with PBA, which specified that PBA would provide services, such as paying medical providers for claims incurred under the Plans. Each Agreement required PBA to establish a segregated bank account for each Plan into which it would deposit the funds that it received from the corresponding plaintiff for paying the medical claims and authorized PBA to pay medical claims by writing checks from this account. PBA not only failed to use funds supplied by plaintiffs to pay the claims incurred under the corresponding Plan, but commingled and misappropriated Plan funds. PBA did not pay all claims, despite receiving money for payment of those claims from the respective plaintiffs. The amounts unpaid for the plaintiffs are: $501,380.75, $409,943.88, $384,574.17, and $44,290.12. The district court found that PBA was a fiduciary under ERISA (29 U.S.C. 1002(21)(A)), had breached its fiduciary duties, and that ERISA preempted Permco’s breach-of-contract claims. The Sixth Circuit affirmed. View "Guyan Int'l, Inc. v. Prof'l Benefits Adm'rs, Inc." on Justia Law

Plaintiffs participated in UMC’s self-administered retirement contribution plans. UMC provided participants with a variety of investment choices. Plaintiffs elected to locate 100 percent of their investments in the default investment for participants who failed to elect preferred investments. The 2007 Pension Protection Act created “safe harbor relief from fiduciary liability” for plan administrators that directed automatic-enrollment investments into Qualified Default Investment, “capable of meeting a worker’s long-term retirement savings needs.” The regulation grandfathered in stable-value funds that employers used as default investments prior to PPA’s enactment. In 2008, UMC sought to harmonize its practices with new DOL regulation by transferring investments in the prior default fund, the Lincoln Stable Value Fund, into the Lincoln LifeSpan Fund. Because UMC did not have records of which participants chose the fund and which were investors by default, UMC sent notice to all participants with 100 percent in the Fund. Plaintiffs claim that they never received the notice. They suffered financial losses. After exhausting administrative procedures, they sued for breach of fiduciary duty under ERISA. The district court ruled that Lincoln was not a fiduciary under the plan and that UMC was immune from liability under the DOL Safe Harbor regulation. The Sixth Circuit affirmed. View "Bidwell v. Univ. Med. Ctr., Inc." on Justia Law

Stokes owned 1Point, which managed employee-benefits plans and 401(k) retirement plans as a third-party administrator (TPA). Most were governed by the Employee Retirement Income Security Act, 29 U.S.C. 1002. TPAs generally provide record-keeping and assist in transferring money, but do not handle money or securities. Stokes directed clients to send funds to accounts he had opened in 1Point’s name. Cafeteria plan clients deposited $45 million and 401(k) clients deposited $5.7 million in accounts at Regions. Because the accounts bore 1Point’s name, Stokes was able to transfer money. Between 2002 and 2006, Stokes stole large sums. Regions failed to comply with the Bank Secrecy Act, 31 U.S.C. 3513, requirements to report large currency transactions, file suspicious-activity reports, verify identities for accounts, and maintain automated computer monitoring. In 2004, the U.S. Financial Crimes Enforcement Network assessed a $10 million fine against Regions. In 2006, Stokes and 1Point filed for bankruptcy. The Trustee filed suit against Regions in bankruptcy court on behalf of victimized plans for which he assumed fiduciary status. The suit was consolidated with plaintiffs’ suit. The district court withdrew the Trustee’s case from bankruptcy court, dismissed ERISA claims, and found that ERISA preempted state law claims. The Sixth Circuit affirmed. View "McLemore v. Regions Bank" on Justia Law

A class of retirees who had worked under a collective bargaining agreement and their survivors and dependents obtained monetary damages and declaratory and injunctive relief requiring that defendants provide vested lifetime healthcare benefits to the class members depending on the relevant date of retirement (Employee Retirement Income Security Act of 1974, 29 U.S.C. 1132(a)(1)(B); Labor-Management Relations Act, 29 U.S.C. 185). The Sixth Circuit affirmed, holding that defendant Newell Window is bound as a successor liable under earlier collective bargaining agreements to which it was not a party; that members of the plaintiff class had vested rights to company-paid health insurance and/or Medicare Part B premium reimbursements; and that the claims were not barred by the applicable six-year statute of limitations.

Plaintiffs are 225 current or former employees of steel mills that have changed ownership many times. Calculation of retirement benefits changed with the changes in ownership. The employees claim that their union, employer, and plan administrator violated the Employee Retirement Income Security Act, 29 U.S.C. 1001-1461, and Ohio common law by intentionally misleading them regarding how pension benefits would be calculated, inducing some to retire early. The district court dismissed, concluding that certain ERISA claims were time-barred, that the others failed to state a claim for relief, and that the common-law claims were preempted by federal law. The Sixth Circuit affirmed. The district court properly applied a three-year limitations period to promises allegedly made in 2003. Plaintiffs did not adequately allege fraud underlying breach of fiduciary duty, nor did they establish that the union was a fiduciary. The court rejected a variety of equitable theories.

The collective bargaining agreement was scheduled to expire. During negotiations, the union disclaimed representation of the company's employees and terminated the collective bargaining process. The company then withdrew from the multiemployer pension plan. The pension fund imposed withdrawal liability and assessed $57,291.50, 29 U.S.C. 1399. The company demanded indemnification from the union pursuant to the collective bargaining agreement, which stated: "The Union shall indemnify the Company for any contingent liability which may be imposed under the Multiemployer Pension Plan Amendments Act of 1980." The district court concluded that an arbitration provision was enforceable. The arbitrator ordered the union to pay. The district court upheld the award. The Sixth Circuit affirmed, rejecting an argument that it would violate public policy for a union to indemnify an employer for any contingent liability to a pension plan established under the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1381-1461.

GM offered separate defined-contribution 401(k) plans. Benefits were based on the amount of contributions and investment performance of an individual's separate account. The plans offered several investment options, including mutual funds, non-mutual fund investments, and the General Motors Common Stock Fund. Participants could change the allocation in any investment on any business day. The plans invested, by default, in the Pyramis Fund, not the GM Fund. In 2008, the fiduciary suspended purchases of GM and began selling the stock. Plaintiffs filed suit under the Employee Retirement Income Security Act, 29 U.S.C. 1109(a), alleging breach of fiduciary duty in allowing investment in GM after its financial trouble was the subject of reliable public information. The district court dismissed. The Sixth Circuit reversed, holding that plaintiffs sufficiently pleaded that "a prudent fiduciary acting under similar circumstances would have made a different investment decision." The fiduciary cannot escape its duty simply by asserting that the plaintiffs caused the losses by choosing to invest in the GM Fund. Such a rule would improperly shift the duty of prudence to monitor the menu of investments to participants. The fact that a participant exercises control over assets does not automatically trigger section 404(c) safe harbor.

Debtors were eligible to participate in their employers' ERISA 401(k) qualified retirement plans, but were not making contributions to those plans when they filed Chapter 13 petitions, but were repaying 401(k) loans to the plans. Proposed Chapter 13 plans called for a five-year commitment period under 11 U.S.C. 1325 and for repayment of 401(k) loans before completion of the commitment periods. Rather than calling for an increase in plan payments to the Chapter 13 trustee for the benefit of unsecured creditors once that repayment was complete, the plans proposed that debtors begin making contributions to their 401(k) retirement plans. The trustee filed objections. The bankruptcy court held that because 11 U.S.C. 541(b)(7) excludes contributions to a 401(k) plan from property of the estate and disposable income, debtors were allowed to exclude proposed 401(k) contributions from disposable income. The Bankruptcy Appellate Panel ruled in favor of the Trustee. The Sixth Circuit affirmed. Post-petition income, available to debtors after 401(k) loans are fully repaid, is "projected disposable income" that must be turned over to the trustee for distribution to unsecured creditors under 11 U.S.C. 1325(b)(1)(B) and may not be used to fund voluntary 401(k) plans.