Matassarin v. Lynch , 174 F.3d 549 ( 1999 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
__________________
No. 97-51081
__________________
PATRICIA J. MATASSARIN, Individually, for and on behalf
of The Great Empire Broadcasting Employee Stock
Ownership Plan and its Beneficiaries; for and on behalf
of that class of persons, participants and/or
Beneficiaries of The Great Empire Broadcasting
Employees Stock Ownership Plan, Past or Present,
Defrauded,
Plaintiff-Appellant,
versus
F.F. MIKE LYNCH, Individually and as Trustee for The
Great Empire Broadcasting Employees Stock Ownership
Plan (ESOP); MICHAEL C. OATMAN, Individually and as
Trustee for The Great Empire Broadcasting Employees
Stock Ownership Plan (ESOP); DANNY E. JENKINS,
Individually and as former Trustee of the ESOP and
Agent of the Trustees and Agent of the Administrator of
The Great Empire Broadcasting Employees Stock Ownership
Plan; Great Empire Broadcasting, Inc., Individually and
as a Plan Administrator for The Great Empire
Broadcasting Employees Stock Ownership Plan, and The
Great Empire Broadcasting Employees Stock Ownership
Plan “Administrative Committee”; GREAT EMPIRE
BROADCASTING INC., Individually and as Plan
Administrator for the Great Empire Broadcasting
Employees Stock Ownership Plan; KAREN K. WARNER, CPA,
Individually and as a member of the Great Empire
Broadcasting Employees Stock Ownership Plan
“Administrative Committee”; UNKNOWN MEMBERS OF THE
“BOARD OF DIRECTORS”, of the Great Empire Broadcasting
Employees Stock Ownership Plan; MENKE & ASSOCIATES,
INC.; DON T. BUFORD; CURTIS W. BROWN,
Defendants-Appellees.
______________________________________________
Appeals from the United States District Court for the
Western District of Texas
______________________________________________
April 27, 1999
Before EMILIO M. GARZA, BENAVIDES, and DENNIS, Circuit Judges.
BENAVIDES, Circuit Judge:
Plaintiff Patricia Matassarin appeals the district court’s
grants of summary judgment dismissing her ERISA and securities
claims. We affirm.
I
In this unusual employee benefits matter, Patricia
Matassarin, who is the plaintiff/appellant and the current
plaintiff’s attorney of record, brought suit against the Great
Empire Broadcasting, Inc. (“Great Empire”) employee stock
ownership plan (“ESOP” or “Plan”) and its fiduciaries and author.
The Great Empire ESOP is subject to the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq.
Until 1988, appellees Mike Lynch and Michael Oatman owned 75
and 25 percent of Great Empire, respectively. Great Empire
established the ESOP effective January 1, 1988, by document
executed on October 21, 1988, in order to distribute Lynch’s and
Oatman’s shares more widely among Great Empire employees. The
Plan was restated on November 15, 1994. The restatement, which
brought the Plan into compliance with certain tax code
provisions, was deemed retroactive to January 1, 1989. Appellee
Menke & Associates, Inc. drafted the original documents
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establishing the ESOP and continues to provide ministerial
services to Great Empire but does not serve as the Plan
administrator. Every Great Empire employee who satisfies the
ESOP’s service requirements and who is not subject to a
collective bargaining agreement automatically becomes a Plan
participant. As Great Empire makes all contributions to the Plan,
employee participants do not contribute directly.
Appellant Matassarin was married to appellee Danny Jenkins,
Great Empire’s chief financial officer and a participant in the
Great Empire ESOP, until the couple divorced on October 15, 1991.
Upon their divorce, Jenkins and Matassarin entered into a
qualified domestic relations order (“QDRO”), which was approved
by a Kansas state court. Menke & Associates suggested the terms
of the QDRO. Under the QDRO, Jenkins agreed to assign Matassarin
one-half of his interest in the Great Empire ESOP. Great Empire
would hold Matassarin’s interest in a segregated account, where
it would accrue interest at the rate of a one-year certificate of
deposit.1 The QDRO did not specify how long Great Empire would
1. Paragraphs 4 and 5 of Matassarin and Jenkins’s QDRO
state:
4. The Husband assigns to the Wife as Alternate
Payee one-half of his interest of the assets accredited
to Participant’s ESOP Accounts as of October 15, 1991.
This assignment of benefits will require that the
Administrator of the Great Empire Broadcasting, Inc.
ESOP segregate the Alternate Payee’s interest, and that
said segregated account will continue to accumulate
interest at a rate equivalent to a one-year Certificate
of Deposit.
5. This assignment of benefits does not require
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retain Matassarin’s interest or when it would pay any
distribution directly to her. Matassarin was represented by
counsel when she agreed to the QDRO.
On the day of Jenkins’s divorce from Matassarin, his Great
Empire ESOP account held 1040.171 total shares. The Plan
administrator segregated 520.086 of those shares into an account
for Matassarin. The Plan administrator valued Matassarin’s
520.086 shares at $22 per share, their market value at the end of
1990, the Plan’s last determination date for value. Matassarin’s
interest in the Plan, thus calculated, totaled approximately
$11,442. The Plan administrator then allowed Matassarin’s account
to accumulate interest at the rate of a one-year certificate of
deposit.
When Great Empire restated its Plan on December 15, 1994,
Michael Oatman sent a letter to everyone who had a segregated
account under the original Plan. Most of the segregated-account
holders, approximately sixty-seven people, were Plan participants
who had left Great Empire’s employment and had accounts
established pursuant to Plan § 14(h).2 The letter stated that the
that the Plan provide any type or form of benefit, or
any option, not otherwise provided under the Plan
. . . .
Paragraph 5 reflects the language of 29 U.S.C. § 1056(d)(3)(D).
2. Section 14(h) of the original Plan provided, in part,
that a Plan participant’s segregated account would earn interest
equivalent to that paid on a one-year certificate of deposit
(“CD”):
Any part of a Participant’s Plan Benefit which is
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ESOP administrative committee3 had authorized lump-sum
distributions to segregated-account holders. The letter offered
distributions either in cash or in shares of Great Empire stock.
Matassarin contends that she never received this letter, and in
any event she did not respond to it. Oatman sent follow-up
correspondence to Matassarin and other segregated-account holders
in May 1995,4 which reiterated the distribution offer but failed
to mention that segregated-account holders could select shares of
company stock as their form of distribution. The appellees now
contend that Matassarin, unlike other segregated-account holders,
was not entitled to any distribution and was sent Oatman’s
retained in the Trust after the Anniversary Date
coinciding with or immediately following the date on
which he terminates employment will be credited to a
separate account in the name of the Participant, and
such account shall be credited with interest on the
unpaid principal balance at the rate paid on one-year
certificates of deposit (as of the beginning of each
Plan Year) by any bank or savings and loan association
designated, in its sole discretion, by the Committee.
. . . The balance in a Participant’s undistributed
account shall represent his interest in the Company
Stock Account and the Other Investments Account.
However, except in the case of reemployment (as
provided for in Section 4), none of his Accounts will
be credited with any further Employer Contributions or
Forfeitures.
Section 14(g) of the amended Plan provides essentially similar
language.
3. The administrative committee oversees the trustees’
actions. Lynch and Oatman, along with appellees Karen Warner, Don
Burford, and Curtis Brown, comprise the committee.
4. It appears from the record that all segregated-account
holders who failed to respond to the December received such
follow-up correspondence.
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correspondence only in error. According to the appellees,
§ 18(e)(4) in both the original and the restated Plan provides
that the Plan need not offer Matassarin any distribution until
Jenkins is eligible for retirement. Section 18(e)(4) states: “In
the case of any payment to an Alternate Payee before a
Participant has separated from service, the Plan shall not be
required to make any payment to an Alternate Payee prior to the
date Participant attains (or would have attained) the Earliest
Retirement Age.” It is not clear from the record how many of the
segregated-account holders received payment. For those who did,
the Plan administrator converted the “suspended” stock, i.e.,
that in the segregated accounts, to cash value for distribution,
then reallocated the stock among active Plan participants. For
distribution purposes, the Plan apparently valued the suspended
stock by the fair market value for whichever year-end preceded
the relevant employee’s termination from Great Empire employment.
The Great Empire ESOP defines the “valuation date” as the
December 31 “coinciding with or immediately preceding the date of
actual distribution of Plan Benefits.”
On May 9, 1996, Matassarin brought suit in the United States
District Court for the Western District of Texas against Lynch,
Oatman, Jenkins, Great Empire, Warner, Menke & Associates, and
unknown members of Great Empire’s Board of Directors. She alleged
that the defendants committed common-law fraud and violated
ERISA, federal securities laws, and state securities laws.
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Matassarin filed a motion for class certification, with
herself as the representative plaintiff, which the district court
denied. She then filed a motion to have her suit treated as a
shareholder’s derivative action, or alternatively for joinder, or
alternatively for reconsideration of the district court’s
decision denying class certification. The district court denied
the motion in toto.
The district court then granted partial summary judgment
against Matassarin on her federal securities claims against
Lynch, Oatman, Jenkins, Warner, Great Empire, and Menke &
Associates. Matassarin amended her complaint, adding Burford and
Brown, members of the ESOP administrative committee, as
defendants. The court granted partial summary judgment on
Matassarin’s federal securities claims against Burford and Brown,
as well.
The court next granted partial summary judgment for all of
the defendants on Matassarin’s fraud, conversion, and state
securities claims.
The defendants filed a motion for partial summary judgment
on Matassarin’s claim for attorneys’ fees. The district court
granted summary judgment with regard to any legal work done or
supervised by Matassarin but denied the motion as to work done by
other attorneys.5
5. The law firm of Brin & Brin, P.C., where Matassarin
worked as an attorney, originally represented Matassarin in this
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The district court then ordered Matassarin to file an
amended complaint including only claims that still remained after
the summary judgment grants. Matassarin did so, alleging only
ERISA violations. The court thereafter struck Matassarin’s jury
demand and, in two separate orders, granted summary judgment for
the defendants on Matassarin’s ERISA claims, effectively ending
her suit.
Matassarin also filed a motion requesting that Judge Prado,
the presiding judge, recuse himself from the case on the basis of
alleged bias. The judge denied the motion, prompting Matassarin
to petition this Court for a writ of mandamus directing Judge
Prado to recuse himself. A three-judge panel of this Court denied
the petition and Matassarin’s subsequent motion for rehearing on
the issue.
Both Matassarin and the defendants filed motions seeking to
recover attorneys’ fees. The district court denied Matassarin’s
motion but, finding Matassarin’s ERISA suit “frivolous,” awarded
more than $24,000 in attorneys’ fees to Menke & Associates and
more than $88,000 to the other defendants.
Matassarin now appeals the district court’s refusal to
matter. Matassarin signed many of the Brin & Brin pleadings
herself. At some time during these proceedings, Matassarin’s
employment with Brin & Brin ended and Brin & Brin ceased
representing her. Matassarin, unable to find counsel who would
take the case on a contingent-fee basis, began to handle the case
alone.
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certify her proposed classes;6 the grants of summary judgment on
her ERISA and securities claims; the striking of her jury demand;
Judge Prado’s refusal to recuse himself; and the denial of her
motion for attorneys’ fees. The district court awarded attorneys’
fees to the defendants after Matassarin filed her first notice of
appeal. As such, Matassarin contests that award as part of a
separate appeal, No. 98-50473, which is not now before this
Court.
II
Matassarin requested certification of three classes. First,
she asked the district court to certify a class of all Great
Empire ESOP participants, on whose behalf she sought to resolve
“ambiguity between the Plan Documents, specifically, which Plan
Document governs ‘distribution’ and ‘valuation’ decisions”; and
“to unseat the [Plan] Trustees for fraudulent misrepresentations,
conflict of interest, failure to comply with the Plan Document,
and/or incompetence.” Second, Matassarin sought to certify a
class of all Plan beneficiaries who were offered lump sums for
their segregated accounts. She contended that these beneficiaries
were denied the fair value of their interests and “have been the
6. Matassarin raises the following issue on appeal: “The
District Court erred in finding that Matassarin was not a
‘suitable’ representative for Class Action and/or Joinder and/or
a Shareholder’s Derivative Action and in denying Motions
pertaining to each.” Within her brief, however, Matassarin
addresses only the issue of class certification. We therefore
deem the issues of joinder and shareholder’s derivative abandoned
on appeal by Matassarin and do not consider them further.
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victim[s] of misrepresentations concerning the fair value of
their benefits and/or their ability to elect distribution in the
form of stock.” Finally, Matassarin sought certification for
“QDRO beneficiaries whose valuations were frozen at the time of
their divorce[s].”
A district court has wide discretion in deciding whether to
certify a proposed class. See Applewhite v. Reichhold Chemicals,
Inc., 67 F.3d 571, 573 (5th Cir. 1995). So long as the district
court considers the four Rule 23 criteria,7 this Court will
reverse the decision only if the district court abused its
discretion. See Lightbourn v. City of El Paso, 118 F.3d 421, 426
(5th Cir. 1997).
The district court in this case did not abuse its
discretion. The court mentioned and considered the Rule 23
prerequisites. Accurately considering Fifth Circuit precedent,
the court found that Matassarin’s “continuing and virulent
antagonism” against defendant Jenkins, her prior litigation
against Jenkins, her admission that she might bring another claim
7. Federal Rule of Civil Procedure 23 lists four
prerequisites to a class action:
(1) the class is so numerous that joinder of all
members is impracticable, (2) there are questions of
law or fact common to the class, (3) the claims or
defenses of the representative parties are typical of
the claims or defenses of the class, and (4) the
representative parties will fairly and adequately
protect the interests of the class.
Fed. R. Civ. P. 23(A).
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against the defendants, and her probable unwillingness to settle
made her an inappropriate representative. Cf. Fed. R. Civ. P.
23(A). We see no abuse of discretion in this decision.
Matassarin’s pleadings make specific reference to information,
presumably passed in confidence from spouse to spouse before the
divorce, regarding Jenkins’s motivation in helping establish the
ESOP and his desire to benefit himself. Based on such pleadings
and on the nature of this case, the district court reasonably
found that Matassarin might be more interested in hurting her ex-
husband than in ensuring adequate representation for a class. In
addition, the district court rightly found that Matassarin could
not serve as both the representative plaintiff and the class
attorney; her duty to represent class interests would
impermissibly conflict with her chance to gain financially from
an award of attorneys’ fees. The Fifth Circuit frowns upon a
named plaintiff’s partner or spouse serving as counsel for a
class. See, e.g., Phillips v. Joint Legislative Committee on
Performance and Expenditure Review, 637 F.2d 1014, 1023 (5th Cir.
1981); Zylstra v. Safeway Stores, Inc., 578 F.2d 102, 104 (5th
Cir. 1978). It follows that the same reasoning should prevent a
named plaintiff herself from serving as counsel. See Zylstra, 578
F.2d at 104 (“We are persuaded . . . that attorneys . . . who
themselves are members of the class of plaintiffs should be
subject to a per se rule of disqualification under Canon 9 [of
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the Code of Professional Responsibility] and should not be
permitted to serve as counsel for the class.”). Finally, even
apart from those grounds upon which the district court explicitly
relied, several other considerations support the denial of class
certification. These include Matassarin’s atypical position as a
QDRO beneficiary to the ESOP--Matassarin herself spends pages of
her reply brief to this Court arguing that she was in fact
discriminated against and treated differently than other ESOP
participants, including other segregated-account holders--and the
likely failure of at least one of her proposed classes to meet
Rule 23’s numerosity requirement.
Accordingly, the district court’s decision to deny class
certification did not constitute an abuse of discretion.
III
We affirm the district court’s grant of summary judgment for
the defendants as to Matassarin’s state and federal securities
claims.
A. Federal Securities Claims
A cause of action falls under the 1933 Securities Act and
the 1934 Securities Exchange Act only if the interest involved
constitutes a “security” under § 2(1) of the ’33 Act, 15 U.S.C.
§ 77b(a)(1),8 or § 3(a)(10) of the ’34 Act, 15 U.S.C.
8. Section 77b(a)(1) provides:
The term “security” means any note, stock,
treasury stock, bond, debenture, evidence of
indebtedness, certificate of interest or participation
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§ 78c(a)(10).9 Neither Act specifically includes any sort of
ERISA-type plan in its definition. The few courts addressing
whether such plans are securities have focused on whether the
plans constitute “investment contracts” under the Acts. See,
e.g., International Brotherhood of Teamsters v. Daniel, 439 U.S.
551, 99 S. Ct. 790 (1979); Uselton v. Commercial Lovelace Motor
Freight, 940 F.2d 564 (10th Cir. 1991). An investment contract
has three components: It (1) involves an investment of money (2)
in a common enterprise (3) with profits to come solely from the
efforts of others. See SEC v. W.J. Howey Co., 328 U.S. 293, 301,
66 S. Ct. 1100, 1104 (1946). Matassarin contends that language in
the Great Empire ESOP document--such as “stock” and “security”--
establishes that an interest in the ESOP is a security. This
in any profit-sharing agreement, collateral-trust
certificate, preorganization certificate or
subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a
security, fractional undivided interest in oil, gas, or
other mineral rights, any put, call, straddle, option,
or privilege on any security, certificate of deposit,
or group or index of securities (including any interest
therein based on the value thereof), or any put, call,
straddle, option, or privilege entered into on a
national securities exchange relating to foreign
currency, or, in general, any interest or instrument
commonly known as a “security”, or any certificate of
interest or participation in, temporary or interim
certificate for, receipt for, guarantee of, or warrant
or right to subscribe to or purchase, any of the
foregoing.
9. Section 78c(a)(10)’s definition of “security” is similar
to that of § 77b(a)(1).
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argument is without merit. The Howey test “is to be applied in
light of ‘the substance--the economic realities of the
transaction--rather than the names that may have been employed by
the parties.’” Daniel, 439 U.S. at 558, 99 S. Ct. at 796 (quoting
United Housing Foundation, Inc. v. Forman, 421 U.S. 837, 851-52,
95 S. Ct. 2051, 2060 (1975)). Matassarin also argues that the
Tenth Circuit’s reasoning in Uselton, the only case since Daniel
in which a circuit court discussed at length whether an ESOP
constitutes a security, should control in this case. We agree
that Uselton’s reasoning is persuasive, but we find that the
Great Empire ESOP, considered under Daniel and Uselton together,
is not subject to ’33 or ’34 Act protection.
Daniel involved a union-established pension plan to which
employers contributed. Every union member had to belong to the
plan and could not have the employer contributions paid directly
to him instead of to the plan. Every plan participant who served
20 continuous years with the union received identical “defined”
pension benefits after retirement. The employers made uniform
contributions for each week an employee worked. An employee did
not have an individual account tied to employer contributions
attributable to his period of service. When the union denied
benefits to member John Daniel after he retired, Daniel sued
under the ’33 and ’34 Acts. The Court found that the union
pension plan did not constitute an “investment contract” under
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Howey. First, the Court found that the plan did not include an
“investment of money”: The plan collected a small part of each
employee’s compensation package, but the employee did not pay any
“tangible and definable consideration in return for an interest.”
Daniel, 439 U.S. at 560, 99 S. Ct. at 797. Furthermore, no fixed
relationship existed between employer contributions to the fund
and an employee’s potential benefit. “Looking at the economic
realities,” the Court wrote, “it seems clear that an employee is
selling his labor primarily to obtain a livelihood, not making an
investment.” Id. at 560, 99 S. Ct. at 797. Second, the Court
reiterated that, as it had stated in Forman, “the ‘touchstone’ of
the Howey test ‘is the presence of an investment in a common
venture premised on a reasonable expectation of profits to be
derived from the entrepreneurial or managerial efforts of
others.’” Id. (quoting Forman, 421 U.S. at 852, 95 S. Ct. at
2060). Although the union pension fund in Daniel depended some on
earnings from its assets, “a far larger portion of its income
[came] from employer contributions, a source in no way dependent
on the efforts of the [plan’s] managers.” Id. at 562, 99 S. Ct.
at 797. An employee’s receipt of benefits was not tied to the
financial health of the plan but instead to the employee’s
meeting eligibility requirements. Therefore, “viewed in light of
the total compensation package an employee must receive in order
to be eligible for pension benefits, it [became] clear that the
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possibility of participating in a plan’s asset earnings ‘[was]
far too speculative and insubstantial to bring the entire
transaction within the Securities Acts.’” Id. at 563, 99 S. Ct.
at 798 (quoting Forman, 421 U.S. at 856, 95 S. Ct. at 2062).
Uselton concerned an entirely different type of plan, an
ESOP. In 1984, Pepsico, Inc. sold Lee Way Motor Freight (“Lee
Way”), a wholly owned subsidiary, to Commercial Lovelace (“CL”).
Almost immediately, CL began encouraging Lee Way’s union
employees to participate in CL’s year-old wage-reduction program.
The program allowed an employee to take a voluntary 17.35-percent
reduction in wages in exchange for profit sharing and an interest
in CL’s existing ERISA-governed ESOP. The ESOP established
individual accounts for participants, allocating shares of CL
stock according to the employee’s compensation. Within a year, CL
merged with Lee Way and filed for bankruptcy. Pepsico thereafter
allegedly reacquired Lee Way’s former assets. Union employees who
had chosen to participate in the wage-reduction program charged
that Pepsico’s sale of Lee Way and CL’s rapid demise were a sham
transaction to facilitate and disguise Pepsico’s liquidation of
Lee Way. They brought suit to recover their contributed wages,
relying in part on federal securities laws.
The Tenth Circuit acknowledged that “an employee benefit
plan that is either noncontributory or compulsory is not an
investment contract because it does not allow a participant to
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make the ‘investment’ required by the first prong of the Howey
test.” Uselton, 940 F.2d at 573-74. The court noted, however,
that in the CL ESOP, each union employee who chose to join gave
up specific consideration--a portion of his wages--and thus made
an investment. See id. at 575-76. The court also held that the CL
ESOP satisfied the third Howey prong, as it would produce
capital-appreciation profits and/or allow participation in
earnings resulting from the investment: “[A]ny profit on
plaintiffs’ ESOP interest would occur through dividend
distributions and appreciation in the value of the stock
allocated to their accounts, which in both cases would result
primarily from the efforts [of] CL’s managers and its employees.”
Id. at 576-77.
Under the Tenth Circuit’s reasoning, the Great Empire ESOP
meets Howey’s third prong. Nonetheless, under both Uselton and
Daniel, the Great Empire ESOP fails Howey’s first prong; it is
not a voluntary investment choice, but instead a mandatory,
employer-funded program.10 Matassarin therefore cannot maintain a
federal securities action, and the district court’s grant of
summary judgment is affirmed as to that claim.
10. Matassarin seeks to defeat this point by arguing that
“an individual may use cash to purchase shares of stock.” This
argument misrepresents the Plan provision she cites, § 17(b),
which provides only that a participant may leave a portion of his
distributions, if any, in the Plan for reinvestment. This is not
equivalent to using cash from any source to buy stock.
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B. State Securities Claims
Matassarin also brought claims under Texas Business and
Commerce Code Section 27.01 and under Texas Civil Statutes
article 581 (Blue Sky Law). The district court dismissed
Matassarin’s state securities claims, stating, “Texas law uses
the same basic standards as federal law for determining what
constitutes a security. . . . Because this Court has previously
ruled that the transaction in the present case do[es] not satisfy
the Howey test for what constitutes a security, the Court
concludes that Texas state law would arrive at the same result.”
The district court cited Wilson v. Lee, 601 S.W.2d 483, 485 (Tex.
Civ. App.—Dallas 1980, n.w.h.), for the proposition that federal
precedent defining a “security” also applies to the definition of
a security under Texas state law. But neither Wilson nor other
cases that state this proposition11 deal with an ESOP interest.
In fact, Texas law may differ from federal law as to whether an
ESOP interest is a security. Texas Civil Statutes article 581
provides, in part:
The term “security” or “securities” shall include
. . . any certificate or instrument representing or
11. See, e.g., Callejo v. Bancomer, 764 F.2d 1101, 1125
n.33 (5th Cir. 1985); Campbell v. C.D. Payne & Geldermann Sec.,
Inc., 894 S.W.2d 411, 417 (Tex. App.—Amarillo 1995, writ denied);
First Municipal Leasing Corp. v. Blankenship, Potts, Aikman,
Hagin & Stewart, 648 S.W.2d 410, 414 (Tex. App.—Dallas 1983, writ
ref’d n.r.e.).
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secured by an interest in any or all of the capital,
property, assets, profits or earnings of any company,
investment contract, or any other instrument commonly
known as a security, whether similar to those herein
referenced or not.
Tex. Rev. Civ. Stat. art. 581—4(A). Unlike the federal securities
law definitions of a “security” found in 15 U.S.C. §§ 77b(a)(1)
and 78c(a)(10), the Texas statute may well be broad enough to
include a nonvoluntary ESOP interest. We need not reach the
issue, however, because even if the Great Empire ESOP constitutes
a security under Texas law, Matassarin cannot maintain her state
securities action.
Matassarin bases her action upon Texas Revised Civil
Statutes article 581—33(B) and upon Texas Business and Commerce
Code § 27.01(a)(1). The former provision states in part:
A person who offers to buy or who buys a security
. . . by means of an untrue statement of a material
fact or an omission to state a material fact necessary
in order to make the statements made, in light of the
circumstances under which they are made, not
misleading, is liable to the person selling the
security to him, who may sue either at law or in equity
for recision or for damages if the buyer no longer owns
the security.
Tex. Rev. Civ. Stat. art. 581—33(B). Texas Business and Commerce
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Code section 27.01 applies to fraud in stock transactions. That
section provides in part:
Fraud in a transaction involving . . . stock in a
corporation or joint stock company consists of a . . .
false representation of a past or existing material
fact, when the false representation is (A) made to a
person for the purpose of inducing that person to enter
into a contract; and (B) relied on by that person
entering into the contract . . . .
Tex. Bus. & Com. Code § 27.01(a)(1). Requisite to an action under
these statutes is an “untrue statement of a material fact or an
omission to state a material fact” or a “false representation.”
Matassarin’s state securities claim rests upon an issue central
to her ERISA argument, namely, that the defendants made
misrepresentations concerning her ESOP rights or the value of her
benefit. As set forth hereafter in our discussion of Matassarin’s
ERISA claims, we find that the defendants made no untrue
statements of material fact or false representations to her. On
that ground, we affirm the district court’s grant of summary
judgment on Matassarin’s state securities claims. See Chevron
U.S.A., Inc. v. Traillour Oil Co., 987 F.2d 1138, 1146 (5th Cir.
1993) (noting that an appellate court may affirm a grant of
summary judgment on grounds other than those relied on by the
district court).
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IV
Matassarin seeks recovery under the Employee Retirement
Income Security Act of 1974 for benefits due her under the Plan
and relief for various ERISA violations. We find that the
district court properly granted summary judgment to the
defendants on Matassarin’s ERISA claims.12
A. Denial of Benefits Due
Great Empire interpreted the Plan and Matassarin’s QDRO to
require segregation of Matassarin’s Plan benefits into an account
that will accrue minimal interest until Danny Jenkins reaches
retirement age. Matassarin contends that her benefit due should
continue to be 520.086 shares of Great Empire shares at current
share value, or alternatively that she, along with other
segregated-account holders, should have the opportunity to
receive a cash distribution equal to the current fair market
value of her shares. ERISA § 502(a)(1)(B) states: “A civil action
may be brought . . . by a participant or beneficiary . . . to
recover benefits due to him under the terms of his plan, to
enforce his rights under the terms of the plan, or to clarify his
rights to future benefits under the terms of the plan . . . .” 29
U.S.C. § 1132(a)(1)(B). As a QDRO recipient, Matassarin has
12. Because we affirm the grants of summary judgment, we do
not consider whether appellee Menke & Associates could face
liability as a Plan fiduciary within 29 U.S.C. § 1002(21)(A)’s
definition of a fiduciary.
-21-
standing to bring these claims. See Boggs v. Boggs, 520 U.S. 833,
---, 117 S. Ct. 1754, 1763 (1997) (“In creating the QDRO
mechanism Congress was careful to provide that the alternate
payee . . . is to be considered a plan beneficiary.”); see also
29 U.S.C. § 1056 (d)(3)(J).
The Great Empire ESOP gives its administrator discretionary
authority to construe the Plan terms.13 When a plan gives such
discretion, a district court will overrule the plan
administrator’s interpretation of plan terms only if the
interpretation is “arbitrary and capricious.” See Firestone Tire
& Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S. Ct. 948, 955
(1989); Wildbur v. ARCO Chemical Co., 974 F.2d 631, 637-39 (5th
Cir. 1992). The “arbitrary and capricious” review amounts to an
abuse-of-discretion standard. See McDonald v. Provident Indemnity
Life Insurance. Co., 60 F.3d 234, 236 (5th Cir. 1995). Applying
the same standards as the district court, this Court reviews the
Great Empire ESOP administrator’s interpretation of Plan terms
for abuse of discretion.
We do not afford such deference to the Plan administrator’s
interpretation of Matassarin’s QDRO. A court reviews de novo a
13. Plan § 18(a)(2)(A), in both the original and the
amended version, provides, in part, “All decisions required to be
made by the [Plan administrative] Committee involving the
interpretation, application and administration of the Plan shall
be resolved by majority vote either at a meeting or in writing
without a meeting.”
-22-
plan administrator’s legal conclusions regarding the meaning of a
contract or statute. Cf. Penn v. Howe-Baker Engineers, Inc., 898
F.2d 1096, 1100 (5th Cir. 1990) (reviewing de novo a plan
administrator’s determination as to whether an employee was an
independent contractor for coverage purposes). The QDRO, unlike
the Plan, is a separate, judicially approved contract between
Jenkins and Matassarin, which the Plan administrator has no
special discretion to interpret. Although we allow a plan
administrator discretion to determine whether an agreement
constitutes a QDRO under the plan, we otherwise review de novo a
plan administrator’s interpretation of the meaning of a QDRO. See
Hullett v. Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107,
114 (3d Cir. 1994) (finding that a district court “did not err in
holding that it should review de novo the plan administrator’s
construction of the [divorce agreement], which invoked issues of
contract interpretation under the Agreement and not the plan”).
1. The Nature of Matassarin’s Interest
Congress created the QDRO structure in the Retirement Equity
Act (“REA”) of 1984, which amended ERISA. Through the REA,
Congress enhanced ERISA’s protection of divorced spouses and
their interest in retirement funds earned during marriage. See
Boggs, 520 U.S. at ---, 117 S. Ct. at 1763. “The QDRO provisions
protect those persons who, often as a result of divorce, might
not receive the benefits they otherwise would have had available
-23-
during their retirement as a means of income.” Id. at ---, 117 S.
Ct. at 1767. In order to accomplish this, the REA amendments
require that “[e]ach pension plan shall provide for the payment
of benefits in accordance with the applicable requirements of any
qualified domestic relations order.” 29 U.S.C. § 1056(d)(3)(A).
Furthermore, “[e]ach plan shall establish reasonable procedures
to determine the qualified status of domestic relations orders
and to administer distributions under such qualified orders.” 29
U.S.C. § 1056(d)(3)(G)(ii).
The QDRO in this case assigned Matassarin one-half of
Jenkins’s “[i]nterest [in] the assets accredited to [his] ESOP
Accounts as of October 15, 1991.” It also “require[d] that the
Administrator of the Great Empire Broadcasting, Inc. ESOP
segregate [Matassarin’s assigned] Interest, and that said
segregated account . . . continue to accumulate Interest at a
rate equivalent to a one-year Certificate of Deposit.” These two
requirements’ opaqueness makes it understandable that Matassarin
might question the treatment of her account. We seek here to
provide clarification.
Matassarin contends that she is entitled to more than the
simple interest that will accumulate on her segregated shares’
cash value as of the last valuation date before the segregation.
She contends that she should receive the cash value of 520.086
shares at whatever time the Plan passes the benefits to her. We
-24-
disagree. The ESOP defines the “valuation date” as the December
31 “coinciding with or immediately preceding the date of actual
distribution of Plan Benefits.” Matassarin states that because
the Plan has not made a distribution to her, the administrator
erred by valuing her shares as of the divorce date. The QDRO,
however, contravenes the interpretation that Matassarin urges.
Necessarily reducing Matassarin’s interest to cash value is
implicit in the QDRO, because cash principal can accumulate
interest, whereas shares, owing to their fluctuating value,
cannot. To read the QDRO as requiring Matassarin to receive the
total of 520.086 shares valued at the date of payment to
Matassarin would render meaningless the QDRO provision pertaining
to interest. The Plan administrator instead valued Matassarin’s
interest at the date of segregation--that is, distribution to her
interest-accumulating segregated account. In light of the QDRO
provisions, the Plan administrator’s interpretation was legally
correct.
Matassarin also argues that the Great Empire ESOP--
specifically, restated § 18(e)(1)--supports her position. Under
that provision, the Plan administrator must segregate a QDRO
beneficiary’s account and “continue to [treat it] in the same
manner as the affected Accounts of the Participant,” albeit
absent further contributions or forfeitures from Great Empire.
The appellees argue that the restated Plan, although retroactive
to 1989, should not apply to Matassarin’s QDRO, because at the
-25-
time that the QDRO was entered, the original Plan provisions were
effective. The appellees’ reasoning is not self-evident, and one
might plausibly argue that the 1994 restatement should indeed
apply to Matassarin’s QDRO.14 That issue, however, is a matter of
Plan interpretation, which we review under the abuse-of-
discretion standard. No matter which interpretation this Court
might prefer, the Plan administrator did not act arbitrarily and
capriciously in finding that the provisions added to § 18(e)(1)
in 1994 do not govern Matassarin’s QDRO.
2. Distribution of Benefits
Matassarin argues that she is currently entitled to
distribution of her benefit, that beneficiaries under the ESOP
may select distribution of benefits “in the form of employer
securities,” and that beneficiaries have an option to “put” those
securities back for fair market value. Matassarin argues that two
tax code provisions--26 U.S.C. § 409(h)15 and 26 U.S.C.
14. In the original Plan § 19(a), Great Empire “reserve[d]
the right to amend the Plan at any time and from time to time, in
whole or in part, including without limitation, retroactive
amendments . . . .” Matassarin became a Plan beneficiary on
October 15, 1991, and remained so in 1994, when the Plan was
restated. Section 1(b) of the 1994 restatement rendered the
restatement’s provisions retroactive to January 1, 1989. The
restatement does not except segregated accounts from retroactive
application of its terms. Thus, at the time that Plan fiduciaries
offered Matassarin a distribution in December 1994 or May 1995,
they might have been able to treat Matassarin’s account--a
“segregated account” as established under the Plan--as subject to
the restated Plan.
15. That statute provides, in part:
A plan meets the requirements of this subsection
-26-
§ 4975(e)(7)16--mandate these beneficiary options in a tax-exempt
plan such as the Great Empire ESOP. Matassarin is correct that,
under those provisions, ESOP participants who are entitled to
distribution must be able to demand employer securities as the
form of distribution. She is, however, mistaken to contend that
she is now entitled to a distribution. Although the QDRO fails to
specify the date of distribution, § 18(e)(4) in both the original
and the restated Plan provides that no distributions need be made
to Matassarin before Jenkins reaches retirement eligibility. The
Retirement Equity Act recognizes that a QDRO may delay
distribution until the Plan participant could retire. See 29
U.S.C. § 1056(d)(3)(E)(i). We see no reason why an ERISA-
qualified plan may not do the same.
Matassarin’s domestic relations order met the Plan’s § 18(e)
qualifications. The Plan administrator interpreted the QDRO
requirements and harmonized them with the Plan provisions. We
find no error in the Plan administrator’s interpretation of the
if a participant who is entitled to a distribution from
the plan—(A) has a right to demand that his benefits be
distributed in the form of employer securities, and (B)
if the employer securities are not readily tradable on
an established market, has a right to require that the
employer repurchase employer securities under a fair
valuation formula.
26 U.S.C. § 409(h)(1).
16. “A plan shall not be treated as an employee stock
ownership plan unless it meets the requirements of section 409(h)
. . . .” 26 U.S.C. § 4975(e)(7).
-27-
QDRO and no abuse of discretion in its interpretation of the Plan
provisions. Accordingly, we affirm the district court’s grant of
summary judgment to the defendants on Matassarin’s ERISA claim
for denial of benefits.
B. ERISA Violations and Breach of Fiduciary Duty
Matassarin next contends that the Great Empire ESOP
fiduciaries failed to satisfy ERISA requirements and violated
their fiduciary duty to her and to the Plan generally. She relies
upon ERISA §§ 502(a)(2) and (a)(3).
1. Section 502(a)(2)
Section 502(a)(2) provides a cause of action for injuries
caused by violations of ERISA § 509. Section 509 focuses on
fiduciary breaches that cause harm to a plan as a whole:
Any person who is a fiduciary with respect to a
plan who breaches any of the responsibilities,
obligations, or duties imposed upon fiduciaries by this
subchapter shall be personally liable to make good to
such plan any losses to the plan resulting from each
such breach, and to restore to such plan any profits of
such fiduciary which have been made through use of
assets of the plan by the fiduciary, and shall be
subject to such other equitable or remedial relief as
the court may deem appropriate, including removal of
such fiduciary.
-28-
29 U.S.C. § 1109(a). The Supreme Court, noting ERISA’s primary
concern with the possible misuse or poor management of plan
assets, has stated that the “loss to the plan” language in § 1109
limits claims to those that inure to the benefit of the plan as a
whole and not to the benefit only of individual plan
beneficiaries. See McDonald, 60 F.3d at 237 (citing Massachusetts
Mutual Life Insurance Co. v. Russell, 473 U.S. 134, 140-42 & nn.
8-9, 105 S. Ct. 3085, 3089-90 & nn. 8-9 (1985)). Based upon this
statutory purpose, we find that the district court properly
granted summary judgment on Matassarin’s § 502(a)(2) claim.
Most of the ERISA breaches that Matassarin alleges concern
only her individual account or, at most, those of the sixty-seven
Plan participants who were offered lump-sum distributions. The
exception to this is Matassarin’s claim that the defendants
failed to conform the Great Empire ESOP to 26 U.S.C. § 409(h) and
26 U.S.C. § 4975(e)(7) and thereby jeopardized the Plan’s tax-
exempt status. It appears that the original Plan document did
fail to allow segregated-account holders to purchase company
stock. The amended Plan document remedied that error in order to
bring the Plan into compliance with the tax code provisions. The
defendants have admitted to omitting mistakenly from the May 1995
follow-up correspondence the fact that participants could select
Great Empire securities as the form of distribution. But this
omission seems to have been a simple oversight. Nothing in the
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record or pleadings indicates that participants who were entitled
to distribution were in fact denied the right to demand employer
securities, such as would disqualify the Plan under those tax
code provisions. Matassarin has failed to allege any way in which
the defendants’ actions caused a loss to the Plan as a whole as
envisioned in § 502(a)(2). We therefore affirm the district
court’s grant of summary judgment on Matassarin’s § 502(a)(2)
claim.
2. Section 502(a)(3)
Summary judgment on Matassarin’s § 502(a)(3) claim was
appropriate only if Matassarin provided no evidence of any ERISA
violation. Under § 502(a)(3), a plan participant may bring an
action
(A) to enjoin any act or practice which violates any
provision of [ERISA’s protection of employee benefit
rights] or the terms of the plan, or (B) to obtain
other appropriate equitable relief (i) to redress such
violations or (ii) to enforce any provisions of
[ERISA’s protection of employee benefit rights] or the
terms of the plan.
29 U.S.C. § 1132(a)(3). A plan beneficiary may bring a
§ 502(a)(3) action against an ERISA fiduciary based on loss to
the individual beneficiary as well as based on loss to the plan
as a whole. See Varity Corp. v. Howe, 516 U.S. 489, 496, 116 S.
-30-
Ct. 1065, 1075-76 (1996) (contrasting § 1132(a)(2) with
§ 1132(a)(3), which does not require loss to the plan as a
whole). Matassarin alleges four types of ERISA violations: (1)
fiduciary self-dealing, (2) failure to invest prudently, (3)
interference with her exercise of protected rights, and (4)
failure to provide information.
a. Fiduciary Self-Dealing
The Great Empire ESOP in early 1995 reabsorbed suspended
shares in § 14(h) accounts, paying each account holder the value
of his shares as of the December 31 preceding his separation from
the Plan. According to Matassarin, the Plan effectively
repurchased shares for less than the fair market value on the
date of repurchase. Those who benefitted most from this
repurchase, she continues, were (1) the Plan fiduciaries, who
held the largest share accounts in the Plan; and (2) Lynch and
Oatman, whose company, Great Empire, was able to avoid paying
fair market value for the shares. Matassarin argues that these
actions violated ERISA § 406(b), which prohibits fiduciary self-
dealing.17
17. A fiduciary with respect to a plan shall not--
(1) deal with the assets of the plan in his own
interest or for his own account,
(2) in his individual or in any other capacity act in
any transaction involving the plan on behalf of a party (or
represent a party) whose interests are adverse to the
interests of the plan or the interests of its participants
or beneficiaries, or
(3) receive any consideration for his own personal
account from any party dealing with such plan in connection
-31-
We need not consider the claim in depth. Under § 502(a)(3),
a beneficiary may bring an action to enjoin an ERISA violation or
for equitable relief. In this case, Matassarin has nothing to
enjoin and no equitable relief available to her on behalf of the
Plan as a whole. The “repurchase” took place in 1995. The Plan as
a whole did not suffer, and Matassarin’s individual segregated
account was unaffected. Even if Matassarin’s § 406(b) allegations
are meritorious, the only beneficiaries possibly entitled to
relief would be the Plan participants who were allegedly offered
less than fair value for the interests in their § 14(h)
accounts.18 As we have stated, the district court did not abuse
its discretion in finding Matassarin an inappropriate
representative for a class that would include those Plan
participants. Whereas Matassarin individually has no § 502(a)(3)
relief available to her for § 406(b) violations, the district
court properly denied her claim for breach of fiduciary duty.19
with a transaction involving the assets of the plan.
29 U.S.C. § 1106(b).
18. We make no finding here as to whether any separated
Plan participant with a § 14(h) account would have a claim
against the Plan fiduciaries.
19. We have not considered whether the duties set forth in
§ 406(b) necessarily apply in this ESOP situation. ERISA § 408(e)
generally exempts ESOP fiduciaries from § 406 requirements when
the questioned transaction involves the acquisition or sale of
“qualifying employer securities,” which include stock. 29 U.S.C.
§ 1108(e); see 29 U.S.C. § 1107(d)(5)(A). Section 408(e) has been
interpreted to allow “[a]n ESOP [to] acquire employer securities
in circumstances that would otherwise violate Section 406 if the
purchase is made for ‘adequate consideration.’” Donovan v.
-32-
b. Failure To Invest Prudently
Matassarin next argues that the defendants’ allowing her
segregated account to accrue only minimal interest violates the
prudent-person investment standard’s diversification requirement
under ERISA § 404. ERISA § 404 requires a plan fiduciary to
“discharge his duty with respect to a Plan solely in the interest
of the participants and beneficiaries and . . . by diversifying
the investments of the plan so as to minimize the risk of large
losses, unless under the circumstances it is clearly prudent not
to do so.” 29 U.S.C. § 1104(a)(1)(C); see Metzler v. Graham, 112
F.3d 207, 209 (5th Cir. 1997) (addressing the diversification
requirement). The defendants’ failure to diversify Matassarin’s
account did not in any way expose it to the risk of large losses
and therefore did not breach an explicit § 404 diversification
duty. We are mindful, however, that implicit within § 404(a) is
the desirability of increasing a plan’s value--preferably
ensuring more than passbook interest--through sound investment.20
Cunningham, 716 F.2d 1455, 1465 (5th Cir. 1983). The more likely
challenge involving this exemption would question whether an ESOP
paid too much for employer securities. We know of none in which a
claimant alleged that an ESOP cheated its former participants by
paying too little for employer securities. Whereas Matassarin
would not be entitled to relief even if § 406(b) does apply, we
need not decide the issue here.
20. Section 404(a)(1)(B), for example, requires an ERISA
fiduciary to discharge his duties as would “a prudent man acting
in like capacity and familiar with such matters,” which would
contemplate increasing the plan’s value. 29 U.S.C.
§ 1104(a)(1)(B).
-33-
Nonetheless, Matassarin’s QDRO, the terms of which the defendants
were bound to apply, requires just passbook interest, rendering
it clearly prudent under §404(a)(1)(C) for Great Empire not to
diversify in this case.
We recognize the aberrancy and difficulty of Matassarin’s
situation. In enacting ERISA, Congress sought to ensure that
workers who have been promised certain retirement benefits
actually receive those benefits. See Pension Benefit Guaranty
Corp. v. R.A. Gray & Co., 467 U.S. 717, 720, 104 S. Ct. 2709,
2713 (1984). Although the primary purpose of an ESOP differs from
that of a pension plan, ESOPs remain subject to ERISA’s general
protective restrictions and requirements. See Cunningham, 716
F.2d at 1463-68. From Matassarin’s point of view, the QDRO
structure has hurt her retirement prospects. While married to
Jenkins, Matassarin no doubt looked forward to enjoying with him
ERISA sound-investment requirements do not generally apply
to an ESOP, which is “designed to invest primarily in securities
issued by its sponsoring company.” Cunningham, 716 F.2d at 1458;
see 29 U.S.C. § 1104(a)(2) (exempting ESOPs from diversification
requirements); 29 U.S.C. § 1107(b), (d) (same); see also Moench
v. Robertson, 62 F.3d 553, 568 (3d Cir. 1995) (“ESOPs, unlike
pension plans, are not intended to guarantee retirement benefits,
and indeed, by its very nature, ‘an ESOP places employee
retirement assets at much greater risk than does the typical
diversified ERISA plan.’” (quoting Martin v. Feilen, 965 F.2d
660, 664 (8th Cir. 1992)). If Matassarin were an ordinary ESOP
participant, the nature of the Plan would probably exempt her
account from standard ERISA diversification requirements. But
Matassarin is of course not an ordinary ESOP participant, insofar
as her account, per the terms of her QDRO, no longer depends upon
employer securities. As such, any ESOP exception seems
inapplicable.
-34-
the retirement benefits of his Great Empire ESOP shares.
Presumably, she and Jenkins expected that the shares’ value would
increase in the years before Jenkins became eligible for
retirement. Because the QDRO requires valuation of Matassarin’s
shares as of the date of her divorce, she lost the prospect of
significant increase in the shares’ value to fund her retirement.
In short, Matassarin’s QDRO removed her savings from the ambit of
a more traditional ERISA-qualified ESOP or pension plan, which
would focus on increasing savings.
This case raises the question, then, of how a plan
administrator is to treat a beneficiary whose QDRO appears out of
line from the greater goals of ERISA. We believe that both ERISA
and case law require a plan administrator to follow the dictates
of the QDRO. Once a plan administrator determines that a domestic
relations order meets the criteria set forth in 29 U.S.C.
§ 1056(d)(3) and thus is “qualified,” he is required to act in
accordance with the QDRO. See, e.g., In re Gendreau, 122 F.3d
815, 817-18 (9th Cir. 1997); Metropolitan Life Insurance Co. v.
Wheaton, 42 F.3d 1080, 1085 (7th Cir. 1994). “ERISA does not
require, or even permit, a pension fund to look beneath the
surface of the order. Compliance with a QDRO is obligatory. . . .
This directive would be empty if pension plans could add to the
statutory list of requirements for ‘qualified’ status.” Blue v.
UAL Corp., 160 F.3d 383, 385 (7th Cir. 1998). Through its QDRO
-35-
amendments, federal ERISA law defers to domestic relations orders
approved in state court proceedings. We do not find the deference
to be affected by whether the QDRO may slow the growth of the
subject retirement savings.
Matassarin makes several arguments as to why her QDRO should
not be enforced. She contends, for example, that Jenkins insisted
on the QDRO format as necessary to recognition under the Great
Empire ESOP, that Menke & Associates unfairly drafted the order,
and that she did not realize the implications of the order for
her retirement benefits. A United States district court is not
the proper forum in which to raise such arguments. We acknowledge
that ERISA supersedes state law insofar as the state law
“relate[s] to” an ERISA-qualified employee benefit plan. 29
U.S.C. § 1144(a). Federal courts may be called upon to determine
the proper beneficiary under a QDRO or to review a plan
administrator’s interpretation of a QDRO, as we have done here.
But although we read § 1144(a)’s “relates to” language broadly,
see Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 103 S. Ct.
2890, 2900 (1983), we cannot say that a federal court’s role
extends as far as examining the circumstances under which a
potential beneficiary entered and a state court approved a QDRO.
Such a claim affects domestic relations, which is not an area of
exclusive federal concern. See Memorial Hospital System v.
Northbrook Life Insurance Co., 904 F.2d 236, 245 (5th Cir. 1990)
-36-
(stating that cases in which ERISA preempts state-law claims, the
claims address areas of exclusive federal concern). If Matassarin
believes that she mistakenly entered the QDRO or was fraudulently
induced to do so, then the Kansas state court that approved that
order is the entity to hear her complaints. Cf. Perkins v. Time
Insurance Co., 898 F.2d 470, 473 (5th Cir. 1990) (holding that a
claim that an insurance agent fraudulently induced an insured to
surrender his current insurance and participate in an ERISA plan
“related to” the ERISA plan only indirectly, so that ERISA would
not preempt the state claim). The REA amendments preserve ERISA
anti-alienation provisions while leaving domestic relations in
the states’ hands. We will not disturb that structure.
c. Interference with Protected Rights
ERISA § 510, titled “Interference with Protected Rights,”
makes it unlawful to discriminate against an ERISA plan
beneficiary for exercising his rights or in order to interfere
with his attainment of any right. See 29 U.S.C. § 1140. A
violation of § 510 requires specific intent to discriminate. See
Unida v. Levi Strauss & Co., 986 F.2d 970, 979-80 (5th Cir.
1993). Matassarin alleges that Lynch, Oatman, Jenkins, and Great
Empire discriminated against her for seeking her entitlement
under her QDRO. Although her claims are not entirely clear,
Matassarin apparently argues that because Great Empire sent her
the May 1995 letters--which it claims were sent in error--and
-37-
later denied that she was entitled to any distribution, Great
Empire was in fact discriminating against her for seeking what
she was due. We find that summary judgment on this claim was
appropriate because Matassarin produced no evidence that her
inquiries prompted the defendants’ actions or Plan
interpretation. Matassarin also claims more general
discrimination based on the appellees’ contention that she was
the only segregated account holder who was not entitled to a
distribution in May 1995. This claim is likewise without merit.
Unlike the sixty-seven separated Plan participants, Matassarin
had a QDRO, a separate contract that required different treatment
for Matassarin than for the sixty-seven holders of § 14(h)
accounts offered distributions. Summary judgment was appropriate
as to Matassarin’s claims for interference with her protected
rights.
d. Failure To Provide Information
Matassarin argues that the defendants violated ERISA
§ 105(a), 29 U.S.C. § 1025(a), which concerns statements
furnished by an administrator to participants and beneficiaries:
Each administrator of an employee pension benefit
plan shall furnish to any plan participant or
beneficiary who so requests in writing, a statement
indicating, on the basis of the latest available
information--(1) the total benefits accrued, and (2)
-38-
the nonforfeitable pension benefits, if any, which have
accrued, or the earliest date on which benefits will
become nonforfeitable.
29 U.S.C. § 1025(a). As the provision states, the plan
participant must request the statement in writing in order to
trigger the administrator’s § 1025 duty. Matassarin seeks
penalties of $100 per day under ERISA § 502(c)(1) against the
trustees and other fiduciary defendants for Great Empire’s
alleged failure to provide information regarding the value of her
stock. Section 502(c)(1), similar to § 1025(a), requires the
participant to request information before an administrator may be
sanctioned for failing to provide it.21 Matassarin does not state
what, if any, material she specifically requested and the
defendants failed to provide, such as would allow for penalties
under § 502(c)(1). This Court reviews only for abuse of
discretion a district court’s decision whether to assess
21. ERISA § 502(c)(1) states, in part:
Any administrator . . . who fails or refuses to
comply with a request for any information which such
administrator is required by this subchapter to furnish
to a participant or beneficiary (unless such failure or
refusal results from matters reasonably beyond the
control of the administrator) by mailing the material
requested to the last known address of the requesting
participant or beneficiary within 30 days after such
request may in the court’s discretion be personally
liable to such participant or beneficiary in the amount
of up to $100 a day from the date of such failure or
refusal, and the court may in its discretion order such
other relief as it deems proper.
29 U.S.C. § 1132(c)(1).
-39-
penalties under § 502(c)(1). See, e.g., Godwin v. Sun Life
Assurance Co., 980 F.2d 323, 327 (5th Cir. 1992) (reviewing only
for abuse of discretion the district court’s refusal to award
penalties under § 502); Fisher v. Metropolitan Life Insurance
Co., 895 F.2d 1073, 1077 (5th Cir. 1990) (same). Given that the
defendants do not appear to have denied any request that
Matassarin made, the district court did not abuse its discretion
in refusing to asses penalties.
In her Third Amended Complaint and other pleadings,
Matassarin argued that the defendants violated ERISA when they
failed to provide her with a summary plan description or with
annual reports. She also provided the district court with an
affidavit stating that she had not received a summary plan
description. We need not examine whether the district court
improperly granted summary judgment on this issue,22 insofar as
Matassarin fails to brief adequately or otherwise pursue it on
appeal and thus has waived it.
Accordingly, we affirm the grant of summary judgment as to
Matassarin’s ERISA § 502(a)(3) claim.
C. Jury Trial Demand
Because we have concluded that Matassarin did not present
any viable ERISA claim, we do not consider the district court’s
22. ERISA § 104(b), 29 U.S.C. § 1024(b), requires that plan
participants and beneficiaries be furnished with a summary plan
description, as set forth in § 1022(a), and with annual reports.
-40-
denial of her motion for a jury trial.
D. Attorneys’ Fees
ERISA § 502(g)(1), 29 U.S.C. § 1132(g)(1), allows the court,
in its discretion, to award reasonable attorneys’ fees to either
party. Given that Matassarin herself performed most of the legal
work and pursued unviable claims, the district court did not
abuse its discretion in refusing to award attorneys’ fees to
Matassarin.
V
Matassarin next appeals Judge Prado’s refusal to recuse
himself. In her earlier petition to this Court for a mandamus
directing the judge to recuse himself, Matassarin complained that
a footnote in one of the judge’s orders evinced a bias against
her. She stated that the footnote, which reminded all parties to
the action to treat court personnel with courtesy and civility,
resulted from a briefing attorney incorrectly reporting to Judge
Prado the tenor of a conversation he had with Matassarin. On the
basis of this alleged bias, Matassarin claims, Judge Prado should
have recused himself. See 28 U.S.C. §§ 144 and 455(a)-(b).
We review Judge Prado’s denial of the motion to recuse for
abuse of discretion. See In re Billedeaux, 972 F.2d 104, 106 (5th
Cir. 1992) (citing Chitimacha Tribe v. Harry L. Laws Co., 690
F.2d 1157, 1166 (5th Cir. 1982)). “The standard for judicial
disqualification under 28 U.S.C. § 455 is whether a reasonable
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person, with full knowledge of all the circumstances, would
harbor doubts about the judge’s impartiality.” Vieux Carre
Property Owners, Residents, and Associates, Inc. v. Brown, 948
F.2d 1436, 1448 (5th Cir. 1991). We note that
remarks during the course of a trial that are critical
or disapproving of, or even hostile to, counsel, the
parties, or their cases, ordinarily do not support a
bias or partiality challenge. . . . Not establishing
bias or partiality . . . are expressions of impatience,
dissatisfaction, annoyance, and even anger that are
within the bounds of what imperfect men and women, even
after having been confirmed as federal judges,
sometimes display. A judge’s ordinary efforts at
courtroom administration--even a stern and short-
tempered judge’s ordinary efforts at courtroom
administration--remain immune.
Liteky v. United States, 510 U.S. 540, 555-56, 114 S. Ct. 1147,
1157 (1994); see also Hollywood Fantasy Corp. v. Gabor, 151 F.3d
203, 216 n.6 (5th Cir. 1998). Judge Prado’s footnote, even if it
did result from a false report about Matassarin’s interaction
with court personnel, falls far, far short of “such a high degree
of favoritism or antagonism as to make fair judgment impossible.”
Liteky, 510 U.S. at 555, 114 S. Ct. at 1157. We therefore hold
that the district court did not abuse its discretion in denying
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the motion to recuse.
VI
The judgment of the district court is AFFIRMED in all
respects.
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