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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 COURTDISTRICT OF MINNESOTA Thomas Eisenrich, Plaintiff, Civ. No. 07-1845 (RHK/JSM) MEMORANDUM OPINION AND ORDER v. Minneapolis Retail Meat Cutters and Food Handlers Pension Plan, Defendant. 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. BACKGROUND 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.) -2- 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).) -3- 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 -4- 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). ANALYSIS 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 payments. -5- 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)). -6- 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 provision removed. -7- 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. -8- (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.) -9- 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 -10- 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). -11- 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. -12- 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 -13- CONCLUSION 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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