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Eisenrich v. Mpls. Retail Meat Cutters and Food Handlers Pension Plan: US District Court : ARBITRATION | ERISA - plan's arbitration provision was void; can't be enforcedUNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civ. No. 07-1845 (RHK/JSM)
MEMORANDUM OPINION AND
Minneapolis Retail Meat Cutters and Food
Handlers Pension Plan,
Robert J. Hajek, Donald L. Beauclaire, Hajek, Meyer & Beauclaire, PLLC, Minneapolis,
Minnesota, for Plaintiff.
Carl S. Wosmek, David S. Anderson, Amy L. Court, McGrann Shea Anderson Carnival
Straughn & Lamb, Chartered, Minneapolis, Minnesota, for Defendant.
In this action, Plaintiff Thomas Eisenrich has sued his former pension plan, the
Minneapolis Retail Meat Cutters and Food Handlers Pension Plan (the APlan@), alleging
that the Plan improperly terminated his pension benefits. Eisenrich appealed the
termination in accordance with procedures set forth in the Plan Document, but his appeal
was denied. He then sought to arbitrate the dispute, but the Plan refused to arbitrate with
him. He now moves for summary judgment on Count 1 of his Complaint, in which he
asserts that the Plan wrongfully denied his Aright@ to arbitrate. For the reasons set forth
below, the Court will deny Eisenrich=s Motion.
1 Exhibit A to the Gerdes Affidavit is the Plan Document effective March 1, 2002.
Exhibit B to the Gerdes Affidavit is the Plan Document effective November 1, 2006.
ADisqualifying employment@ is defined in both versions of the Plan Document as work in the
wholesale and retail food, sausage and meat industries, in a vocation previously practiced by the
participant, in a geographic area covered by the Plan. (See 3/1/02 Plan Doc. ' 1.13(A)(1)(a)-(c);
11/1/06 Plan Doc. ' 1.13(A)(1)(a)-(c).) See also 29 U.S.C. ' 1053(a)(3)(B)(ii).
2 The Board considered the appeal at a meeting on October 20, 2006, and approved its
written Memorandum of Decision denying the appeal at its January 31, 2007 meeting. (See
Hajek Aff. Ex. E.) A copy of the Board=s written decision was sent to Eisenrich=s counsel on
February 15, 2007. (Id.)
The relevant facts in this case are not in dispute. Eisenrich retired after working
for thirty years as a meat cutter. He was a participant in the Plan and began receiving
pension benefits on June 1, 2001.
Under the terms of the Plan, any retired Plan participant who engages in 64 hours
(or more) of Adisqualifying employment@ in a given month is not entitled to receive Plan
benefits for that month and would have his benefits Asuspended.@ (Gerdes Aff. Exs. A-B,
' 1.13.)1 By letter dated January 26, 2006, the Plan informed Eisenrich that his pension
benefits were being suspended, retroactive to June 1, 2005, because of his ownership and
operation of a Pepperidge-Farm distributorship. On August 15, 2006, Eisenrich appealed
the suspension of his benefits to the Plan=s Board of Trustees (the ABoard@), pursuant to
appeal procedures set forth in the Plan Document. The Board denied Eisenrich=s appeal
on January 31, 2007.2
Eisenrich then sought to invoke an arbitration provision in the Plan Document and
arbitrate his dispute over his pension benefits. In support of his demand for arbitration,
3 The November 1, 2006 version of the Plan Document states that an appeal to the Board
is the Asole remedy@ available to Plan participants dissatisfied with adverse claim determinations.
(11/1/06 Plan Doc. ' 1.15(E)(5).)
Eisenrich relied on the March 1, 2002 version of the Plan Document, which provided that
a Plan participant aggrieved by a decision of the Board Ashall have the right to appeal the
matter to arbitration in accordance with the Uniform Arbitration Act.@ (3/1/02 Plan Doc.
' 1.15(E)(5).) The Plan refused to arbitrate, however, informing Eisenrich that it had
amended the Plan Document in November 2006 and that the amended Plan Document did
not provide for arbitration of benefit disputes.3
Eisenrich then commenced the instant action. He asserts three claims: (1) the Plan
violated the Employee Retirement Income Security Act of 1974 (AERISA@), 29 U.S.C.
' 1001 et seq., by wrongfully denying him the Aright@ to arbitrate his dispute (Count 1);
(2) the Plan violated ERISA by suspending his pension payments (Count 2); and (3) the
Plan is equitably estopped from denying benefits because it implicitly conceded that
Eisenrich=s Pepperidge-Farms job was outside the scope of Adisqualifying employment@
under the Plan by paying benefits for more than a year despite knowing of this
Adisqualifying@ job (Count 3). Eisenrich now moves for summary judgment Ato require
Defendant to submit this matter to binding arbitration@ B in other words, he seeks partial
summary judgment limited to Count 1 of his Complaint.
STANDARD OF REVIEW
Summary judgment is proper if, drawing all reasonable inferences in favor of the
nonmoving party, there is no genuine issue as to any material fact and the moving party is
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986). The moving party bears the burden of showing that the
material facts in the case are undisputed. Celotex, 477 U.S. at 322; Mems v. City of St.
Paul, Dep=t of Fire & Safety Servs., 224 F.3d 735, 738 (8th Cir. 2000). The Court must
view the evidence, and the inferences that may be reasonably drawn from it, in the light
most favorable to the nonmoving party. Graves v. Ark. Dep=t of Fin. & Admin., 229 F.3d
721, 723 (8th Cir. 2000); Calvit v. Minneapolis Pub. Schs., 122 F.3d 1112, 1116 (8th Cir.
1997). The nonmoving party may not rest on mere allegations or denials, but must show
through the presentation of admissible evidence that specific facts exist creating a genuine
issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Krenik v.
County of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).
Distilled to its essence, Eisenrich=s Motion presents a relatively simple question:
did the Plan enjoy the authority to amend the March 1, 2002 Plan Document and
Aremove@ a participant=s right to arbitration? The Court concludes that this question must
be answered in the affirmative.
In its Opposition to Eisenrich=s Motion, the Plan argues at length that ERISA
pension plans may be amended to decrease participants= benefits or to remove those
4 An Aaccrued benefit@ is defined under ERISA as a plan participant=s Aannual benefit
commencing at normal retirement age.@ 29 U.S.C. 1002(23) (emphasis added). In the Court=s
view, this definition can only logically refer to pension payments or other compensation to
which a plan participant is entitled, and not arbitration of a dispute concerning pension
benefits in their entirety, as long as the benefits are not Aaccrued@ or Avested@ in
accordance with the terms of the plan. Because arbitration purportedly was not an
accrued benefit under the March 1, 2002 Plan Document, the Plan argues that the
November 1, 2006 amendment removing the arbitration provision was not improper.
(See Mem. in Opp=n at 9-11, 15-17.)
The Plan is correct that arbitration was not an Aaccrued benefit@ under the March 1,
2002 Plan Document.4 The fact that arbitration was not an Aaccrued benefit,@ however, is
beside the point. In Count 1, Eisenrich is not suing to recover an Aaccrued benefit,@ or, in
fact, any type Abenefit@ at all. Rather, he is seeking to enforce a right arising under the
terms of the Plan: the right to arbitration. There clearly is a difference between Arights@
and Abenefits@ under both ERISA and the terms of the Plan. Indeed, ERISA Section
1132(a)(1)(B) authorizes civil actions Ato recover benefits due . . . under the terms of [a]
plan,@ and separately authorizes actions Ato enforce . . . rights under the terms of [a] plan.@
Similarly, the Plan itself draws a distinction between Arights@ and Abenefits@ B it expressly
states that amendments Ashall not deprive any participant . . . of any right or benefits@
acquired prior to an amendment.
5 The parties spend a significant amount of time arguing about whether the terms of a
Summary Plan Description (ASPD@) issued by the Plan control or, rather, whether the terms of
the March 1, 2002 Plan Document control. However, neither party has identified any difference
between the SPD and the March 1, 2002 Plan Document. Indeed, both the SPD and the March 1,
2002 Plan Document state that participants shall have a Aright@ to arbitration (compare SPD
' 1.15(E)(5) with 3/1/02 Plan Doc. ' 1.15(E)(5)), and both also state that the Plan Document
may be amended, as long as the amendment does not deprive a participant of a Aright@ under the
Plan (compare SPD ' 1.14(A)(1) with 3/1/02 Plan Doc. ' 1.14(A)(1)).
Focused through this lens, Eisenrich=s complaints become clearer: he contends
that the Plan violated the express language of the March 1, 2002 Plan Document when, in
the November 1, 2006 amendment, it removed the Aright@ to arbitrate adverse claim
decisions. Eisenrich points to Section 1.15(E)(2) of the March 1, 2002 Plan Document,
which provided that participants whose appeals were denied by the Board Ashall have the
right to appeal the matter in arbitration,@ as well as Section 1.14(A), which provided that
a Plan amendment Ashall not deprive any Participant . . . of any right . . . acquired prior to
such amendment.@ (emphases added). In its simplest form, then, Eisenrich=s argument is
as follows: he had the right to arbitration under the March 1, 2002 Plan Document; the
Plan removed this right by the November 1, 2006 amendment; by its own express terms,
the Plan had no authority to do so; hence, the Plan violated ERISA.5
There is some superficial appeal to Eisenrich=s argument. Upon closer scrutiny,
however, his argument fails because it does not take into account a critical fact: the
changed legal landscape under which the Plan Document was amended and the arbitration
Under ERISA, a pension plan is required only to provide participants with Aa
reasonable opportunity for full and fair review@ of adverse benefit decisions. 29 U.S.C.
' 1133. Pursuant to pre-2001 Department of Labor regulations, a pension plan=s review
procedure violated ERISA if it A>unduly inhibit[ed] or hamper[ed] the initiation or
processing of plan claims.=@ Bond v. Twin Cities Carpenters Pension Fund, 307 F.3d 704,
706 (8th Cir. 2002) (quoting 29 C.F.R. ' 2560.503-1(b)(1)(iii) (1999).) The purpose of
these regulations was to ensure that ERISA plans did not impede participants from
seeking expeditious federal-court review of adverse claim decisions. For example, a
pension plan might include several levels of review for appealing adverse decisions by
the plan, and at each level require the participant to pay significant costs. Allowing a plan
to include such an expensive appeal procedure would significantly hamper a participant=s
ability to exhaust the review process and then challenge the denial of his claim in federal
court; accordingly, it would undermine ERISA=s goals by unduly inhibiting claim
processing. See Bond, 307 F.3d at 707.
Under the pre-2001 regulations, however, it was unclear whether an ERISA plan
could require participants to arbitrate claim appeals and, as part of the process, be forced
to pay at least some of the costs of arbitration. In late 2000, the Department of Labor
promulgated new regulations to address this issue. See Employee Retirement Income
Security Act of 1974; Rules and Regulations for Administration and Enforcement; Claims
Procedure, 65 Fed. Reg. 70246-01 (Nov. 21, 2000), codified at 29 C.F.R. ' 2560.503-1
6 The Plan waited until November 2006 to remove the arbitration provision because,
when the regulations were first amended, it was unclear whether they applied to pension plans
(as opposed to health and welfare plans). The Department of Labor later clarified that the
regulations applied to all ERISA plans, including pension plans.
7 At oral argument, Eisenrich pointed out that the Plan arbitrated a different dispute with
him in 2004. That the Plan acceded to arbitration in 2004, however, does not mean that a Plan
provision requiring arbitration is valid or enforceable. Simply put, nothing in the amended
regulations precludes an ERISA pension plan and a participant from mutually agreeing to
arbitrate a dispute.
(2001). Under these new regulations, which took effect on January 20, 2001, the
Department of Labor made clear that Aa provision or practice that requires payment of a
fee or costs as a condition to . . . appealing an adverse benefit determination would be
considered to unduly inhibit the initiation and processing of claims for benefits.@ 29
C.F.R. ' 2560.503-1(b)(3) (2001); accord Bond, 307 F.3d at 706-07.
As a result, the arbitration provision in the March 1, 2002 Plan Document B which
required the parties to split the costs of arbitration (see 3/1/02 Plan Doc. ' 1.15(E)(7)) B
was flatly prohibited by the Department of Labor=s new regulations. Accordingly, the
Plan had little choice but to remove the mandatory arbitration provision from the Plan
Document.6 By seeking to invoke the arbitration provision now, Eisenrich asks the Court
to enforce an illegal contract term, which it cannot (and will not) do. See, e.g., Kaiser
Steel Corp. v. Mullins, 455 U.S. 72, 77 (1982) (AThe authorities from the earliest times to
the present unanimously hold that no court will lend its assistance in any way towards
carrying out the terms of an illegal contract.@) (citation omitted).7
8 As set forth above, the Aright@ to arbitration arose out of the March 1, 2002 Plan
Document, but the revised Department of Labor regulations barring fee splitting took effect over
a year earlier, on January 20, 2001.
9 Eisenrich=s counsel claimed at oral argument that he did not understand the Plan to be
asserting that the arbitration provision was rendered nugatory by the amended regulations. That
claim is puzzling, given that the Plan expressly argued in its Opposition brief that the Anew
regulations prohibited the Plan from requiring that denied claims be submitted to binding
arbitration after January 1, 2002.@ (Mem. in Opp=n at 7.)
For these reasons, Eisenrich cannot claim that the amendment removing his Aright@
to arbitration violated the Plan=s terms, because that Aright@ arose under a Plan provision
that was illegal ab initio.8 In essence, it is as if the right to arbitration, by operation of
law, never existed. The Court notes that Eisenrich likely recognizes this fact, because he
nowhere mentions the revised Department of Labor regulations in his Reply, despite the
Plan having discussed the regulations in its Opposition.9
Notwithstanding the foregoing, Eisenrich argues that, by eliminating arbitration
from the review process, Plan participants have been Aunduly burdened@ because they
must bear the cost Aof proceeding with a district court action@ in order to challenge the
denial of benefits, rather than proceeding with arbitration on a shared-cost basis. (Pl.
Mem. at 11.) Yet, a Plan participant was required to bear that cost even under the former
appeal process, assuming that the denial of the participant=s claim was upheld in
arbitration. Moreover, the Aundue burden@ language seized upon by Eisenrich comes
from 29 C.F.R. ' 2560.503-1(b)(3). But, as discussed above, that regulation is concerned
with Aunduly burdening@ plan participants from appealing the denial of their claims into
federal court. It is difficult for the Court to comprehend how removing a layer of
administrative review B namely, arbitration B would somehow Aunduly inhibit or hamper@
a plan participant=s opportunity to seek federal-court review of an adverse claim decision.
At the end of the day, taking Eisenrich=s argument to its logical conclusion would
mean that all ERISA plans would be required to include arbitration, with costs shared
between the plan and the participant (or borne entirely by the plan), as part of the appeals
process before a participant could file suit in federal court. Such a suggestion clearly
lacks merit. See Bond, 307 F.3d at 706 (AERISA does not require . . . a covered plan to
use arbitration as part of the plan=s appellate process.@).
Eisenrich further argues that he has been Aprejudiced greatly by [the Plan=s] failure
to allow binding arbitration.@ (Reply at 13.) He asserts that, had he known that he would
be unable to seek arbitration, he would have presented additional evidence in support of
his appeal to the Board. (Id.; see also Pl. Mem. at 9-10.) If Eisenrich possessed such
evidence, however, it was unreasonable for him to withhold it in purported reliance on his
Aright@ to seek arbitration in the event his appeal were denied. Indeed, the very purpose
of the appeal procedure is to permit the Board, in the first instance, to make a claim
determination on a complete record; withholding beneficial evidence from the Board
would undermine this purpose. Equity cannot aid Eisenrich=s cause under such
circumstances. See, e.g., Weathers v. Bean Dredging Corp., 26 F.3d 70, 72 (8th Cir.
1994) (Aequity is not intended for those who sleep on their rights@). Eisenrich also asserts
10 With the exception of removing his Aright@ to arbitration, Eisenrich nowhere challenges
the extent or completeness of the Plan=s review procedures, which (as noted above) are only
required to offer Plan participants a Areasonable opportunity . . . for a full and fair review@ of
their claims. 29 U.S.C. ' 1133(2); see also 29 C.F.R. ' 2560.503-1(h).
that he would have been able to cross-examine the Plan=s witnesses and more fully
develop the record in arbitration, but he cites no authority indicating that would have been
the case. Indeed, he has proffered no evidence suggesting that an arbitration panel would
have considered anything other than the very same evidence that was before the Board
when reviewing his claim.
And, the removal of the arbitration provision does not prejudice Eisenrich by
leaving him without any avenue to seek relief. As before, he can still challenge the
termination of his pension benefits in federal court. In fact, Eisenrich has already done
so, in Count 2 of his Complaint (which is pleaded in the alternative to Count 1).10
Finally, Eisenrich asserts that, even if it had been proper to amend the March 1,
2002 Plan Document to remove the arbitration provision, that amendment cannot have
been Aretroactively@ applied to his claim. (Pl. Mem. at 11.) There are two flaws in this
argument. First, because the right to arbitration never existed, there was no Aremoval@ of
that right that could have been Aretroactive.@ Second, Eisenrich=s appeal was not finally
denied by the Board until January 31, 2007; only then did his so-called Aright@ to seek
arbitration accrue under the Plan=s (former) appeal procedures. The version of the Plan
Document in effect on January 31, 2007, however, did not provide for arbitration. Hence,
11 At the tail end of his Memorandum, Eisenrich asserts that he is entitled to attorney=s
fees and costs Aincurred in filing this action and pursuing arbitration by way of his summary
judgment motion.@ (Pl. Mem. at 14.) Eisenrich is correct that a court may allow fees and costs
in an action under 29 U.S.C. ' 1132. Because Eisenrich=s Motion lacks merit, however, there
exists no basis for an award of fees or costs at this juncture. However, this does not mean that
Eisenrich cannot later seek an award of fees and costs if he is successful on his alternative claim
that his benefits were wrongfully terminated by the Plan. See id.
there cannot have been any retroactive application of the revised appeal procedures to
Eisenrich=s claim. Eisenrich argues that the date the appeal was filed, rather than the date
the appeal was decided, controls the appellate procedures to which he should have been
entitled. Yet again, however, he cites no authority for that proposition.
For these reasons, Eisenrich=s Motion for Summary Judgment on Count 1 of his
Complaint must be denied. Moreover, the foregoing analysis makes clear that the Plan is
entitled to summary judgment on Count 1, because there was no ERISA violation in the
Plan=s refusal to arbitrate. Although the Plan did not cross-move for summary judgment
in response to Eisenrich=s Motion, the Court enjoys the power to grant summary judgment
sua sponte in these circumstances. See, e.g., Madewell v. Downs, 68 F.3d 1030, 1048
(8th Cir. 1995) (district court may enter summary judgment sua sponte where party had
adequate opportunity to address issues and was on notice that right to judgment as a
matter of law was at issue). Since Eisenrich was not Aentitled to appeal the denial of his
written appeal through binding arbitration@ as a matter of law (Compl. & 44), the Court
perceives no reason to deny judgment to the Plan on Count 1 simply because it did not
move for such relief.11
Based on the foregoing, and all the files, records, and proceedings herein, it is
ORDERED as follows:
1. Plaintiff=s Motion for Summary Judgment (Doc. No. 9) is DENIED; and
2. Summary judgment is GRANTED to the Plan sua sponte on Count 1 of
Eisenrich=s Complaint, and Count 1 is DISMISSED WITH PREJUDICE.
Dated: October 25, 2007 s/ Richard H. Kyle _
RICHARD H. KYLE
United States District Judge
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