Borst v. Chevron Corp.

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
__________________
No. 91-2747
__________________
DEAN BORST, ET AL.,
Plaintiffs-Appellees
Cross-Appellants,
versus
CHEVRON CORP., ET AL.,
Defendants-Appellants
Cross-Appellees.
______________________________________________
Appeals from the United States District Court for the
Southern District of Texas
______________________________________________
( October 21, 1994 )
Before POLITZ, Chief Judge, GARWOOD and DAVIS, Circuit Judges.
GARWOOD, Circuit Judge:
This class action, brought under the Employee Retirement
Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq. (ERISA),
arose out of the merger of Gulf Oil Corporation (Gulf) and Chevron
Corporation (Chevron) in 1984 and the subsequent merger of the
pension plans of the two companies in 1986. Plaintiffs,
approximately 40,000 former participants of the Pension Plan of
Gulf Oil Corporation (Gulf Plan), brought this action complaining
of various matters occurring in connection with the merger of the
two companies and their respective pension plans. Defendants
include Chevron, Gulf, the Gulf Plan, the Chevron Corporation
Retirement Plan (Chevron Plan), and the Benefits and Pension
Committees of the Gulf Plan, including the members of both
committees.
Both parties appeal portions of the district court's decision,
In re Gulf Pension Litigation, 764 F. Supp. 1149 (S.D. Tex. 1991).
Since oral argument before this court, the parties have settled
those portions of the district court's rulings which were the
subject of Chevron's appeal. Our primary concern is whether the
plaintiffs are entitled to the surplus assets in the Gulf Plan upon
a partial or full termination of the Plan.1 We conclude they are
not.
Factual Background
We begin with a brief excursion into the history of the Gulf
Plan, and the effect on it of Gulf's merger with Chevron. In 1944,
Gulf established the Annuities and Benefits Plan of Gulf Oil
Corporation (the A&B Plan). The A&B Plan was a defined benefit
plan, funded entirely with contributions made by Gulf.2 Gulf later
1
Surplus assets, or "residual assets" as termed in ERISA, are
"assets in excess of those necessary to satisfy defined benefit
obligations . . . ." Wilson v. Bluefield Supply Co., 819 F.2d
457, 464 (4th Cir. 1987). The parties concede that both the Gulf
and Chevron Plans are each, at this time, substantially
overfunded.
2
The district court explained the difference between defined
benefit plans and defined contribution plans:
"Unlike a defined contribution plan, under which the
benefits an employee receives are contingent upon the
funds contributed and the investment return on plan
assets, in a defined benefit plan the plan itself
defines the benefits to be paid. If the employer's
contribution and investment return are inadequate to
2
established two additional pension plans, each a defined
contribution plan: the Supplemental Annuity Plan of Mene Grande
Oil Company (SAP), established in 1957, and the Contributory
Retirement Plan (CRP), established in 1963 (a continuation of the
Employees' Savings Plan of Gulf Oil Corporation which had been
established in 1950).3 These latter two plansSQthe SAP and
CRPSQwere funded with contributions by Gulf as well as with
contributions by eligible employees. All three plans were designed
to satisfy the qualification requirements of the Internal Revenue
Code. 26 U.S.C. § 401(a).
In 1975, Gulf created the Gulf Plan by amending the three
former plans to provide for central administration of the plans.4
Although the Gulf Plan was governed by a single trust agreement
beginning in 1979, the trust funds for each plan remained separate,
and the benefits under each continued to be calculated
independently. The Gulf Plan continued under this arrangement
until July 1986, when it was amended to become part of the Chevron
Plan, an employer funded defined benefit plan.
In January 1984, Gulf learned that a group led by T. Boone
fund those benefits, normally the employer must make
additional contributions to the plan." In re Gulf
Pension Litigation, 764 F. Supp. at 1161-1162 n. 1.
In determining its taxable income for federal income tax
purposes, an employer generally may deduct its contributions to a
pension plan meeting federal qualifications.
3
Mene Grande Oil Company was a Venezuelan subsidiary of Gulf.
4
The 1975 amendments were also designed to ensure that the
Gulf Plan met the qualification requirements imposed by ERISA,
enacted in 1974.
3
Pickens planned a hostile takeover of the company. Gulf sought
protection from the takeover attempt by soliciting a friendly
merger with Chevron. The two companies signed a merger agreement
in March 1984. During a subsequent two-year interim period the two
companies operated independently under a standstill agreement while
the Federal Trade Commission and Chevron-Gulf integration teams
determined how to complete the merger.
On July 1, 1986, the assets of the Gulf Plan were commingled
with those of the 1933 Chevron Corporation Annuity Plan to create
the Chevron Plan. At the same time, defendants amended the Gulf
Plan to become a supplement to the Chevron Plan. As a result of
this amendment, the Gulf Plan became subject to section 18.d of the
Chevron Plan, which expressly provided for the reversion of surplus
assets to Chevron upon termination of the merged Plan.
In early 1986, participants in the Gulf Plan who had been
terminated due to the merger with Chevron, sought confirmation from
Chevron that a partial termination of the Plan had occurred,
entitling them to benefits under the Plan. These former Gulf
employees asked Chevron to allocate and distribute to them their
share of the Plan funds, including surplus assets, as though there
had been a full termination. Chevron refused both requests.
Proceedings Below
Plaintiffs, Dean Borst, et al., brought the present action in
November 1986 in the United States District Court for the Southern
District of Texas. Shortly thereafter, in April 1987, plaintiffs
Harry Back, et al., filed a similar suit in the United States
District Court for the Western District of Pennsylvania. On the
4
defendants' motion, the Back lawsuit was transferred to Texas and
consolidated with the Borst action. On February 26, 1990, the
district court certified the consolidated suit as a class action
pursuant to Federal Rule of Civil Procedure 23(b)(2).
In their lawsuit, plaintiffs sought reimbursement to the Gulf
Plan for claimed losses to the Plan as a result of alleged
violations of fiduciary duties by Gulf and Chevron.5 They also
alleged that Chevron, during merger negotiations, misrepresented
that it would, upon merger of the pension plans, set aside portions
of the Gulf Plan assets to establish a reserve for then-existing
retiree pensions. Furthermore, they asserted that a partial
termination of the Gulf Plan had occurred, entitling them to their
share of Plan funds as well as to a pro rata share of the surplus
assets of the Gulf Plan.
Following a bench trial, the district court determined that
Gulf and Chevron had breached certain fiduciary duties owed to
plaintiffs and ordered reimbursement to the Gulf Plan accordingly.
The court also agreed with the plaintiffs that a partial
termination of the Gulf Plan had occurred as a result of the merger
with Chevron. It found that those plaintiffs who were participants
in the CRP and SAP, the defined contribution portions of the Gulf
5
The alleged breaches of fiduciary duty concerned (i) the
effect, of assets transferred by the Gulf Plan to a pension plan
to be established by Cumberland Farms for certain former
employees of Gulf, on payments to be made to Chevron for the sale
of certain Gulf assets to Cumberland Farms, and (ii) the payment
of Gulf Plan management fees out of the assets of the Gulf Plan
rather than by Gulf. The parties have settled their claims
arising from these issues, removing them from our consideration
on this appeal.
5
Plan, were entitled to the surplus assets of those plans.6 On the
issue of entitlement to the surplus assets of the A&B portion of
the Gulf Plan, however, the court ruled that the plaintiffs were
not entitled to surplus assets because the Plan provided for
reversion of surplus assets to the employer.
Chevron appealed, and plaintiffs cross-appealed. Of the
variety of issues raised before the district court, most were
settled during and after trial or during the pendency of this
appeal. We consider here, inter alia, whether the plaintiffs are
entitled to a pro rata share of the surplus assets of the A&B
Plan.7
Discussion
I. Partial Termination of Gulf Plan
Plaintiffs contend that a partial termination of the Gulf Plan
occurred during the interim period between March 1984, when Gulf
and Chevron signed the corporate merger agreement, and July 1986,
when the two pension plans were finally merged. Accordingly, they
argue, this partial termination entitled them to a pro rata share
6
The district court provided for immediate distribution of
the surplus assets of the CRP and SAP based on its determination
that those plans were wasting trusts, as membership in them had
been closed, and no employee contributions had been made, since
December 31, 1970, and they were so substantially overfunded that
current earnings on their assets would alone be sufficient to pay
all benefits and still add to the surplus. The parties have
settled their claims concerning the CRP and SAP; we confine our
discussion of these plans to comparison with the A&B Plan.
7
For purposes of our discussion, references to the A&B Plan
also denote the A&B portion of the Gulf Plan as it existed in
1986 at the time of the merger into the Chevron Plan.
6
of the surplus assets in that Plan.8
The district court agreed with the plaintiffs that a partial
termination had occurred. It concluded that both vertical and
horizontal partial terminations of the Gulf Plan occurred during
the interim period between March 1984 and July 1986.9 The court
8
In situations where a plan provides for reversion of surplus
assets to the employer, the Internal Revenue Code allows such
reversion only upon a complete plan termination. 26 U.S.C. §
401(a)(2) (only after satisfaction of all liabilities). See also
26 C.F.R. § 1.401-2(b)(1) ("The intent and purpose in section
401(a)(2) . . . is to permit the employer to reserve the right to
recover at the termination of the trust, and only at such
termination, any balance remaining in the trust which is due to
erroneous actuarial computations . . . .") (emphasis added).
Section 411(d)(3) of the Internal Revenue Code requires that
a plan, in order to be qualified, provide that "upon its
termination or partial termination . . . the rights of all
affected employees to benefits accrued to the date of such
termination, [or] partial termination . . . to the extent funded
as of such date . . . are nonforfeitable." 26 U.S.C. §
411(d)(3).
9
The determination of whether a partial termination has
occurred is made "with regard to all the facts and circumstances
in a particular case." 26 C.F.R. § 1.411(d)-2(b)(1). Such facts
and circumstances may include: "the exclusion, by reason of a
plan amendment or severance by the employer, of a group of
employees who have previously been covered by the plan; and plan
amendments which adversely affect the rights of employees to vest
in benefits under the plan." Id. In addition, a partial
termination may be deemed to occur if, as a result of a cessation
or decrease in future benefit accruals under the plan, "a
potential reversion to the employer, or employers, maintaining
the plan . . . is created or increased." Id. at § 1.411(d)-
2(b)(2).
In general, the term "vertical partial termination" refers
to a partial termination involving the exclusion of a group of
participants from continuing coverage under a plan. The
determination of whether a vertical partial termination has
occurred generally is based on a consideration of the entire
period in question: here, from March 1984 through June 1986.
Affected employees are those who ceased participation in the Gulf
Plan, by termination of employment, during that period, other
than those employees whose termination was not the result of the
merger and those employees who were transferred to another
company. If either the number or the percentage of such excluded
employees is "significant," a vertical partial termination has
7
determined, however, that the partial termination did not entitle
plaintiffs to any part of the A&B Plan surplus assets. As to
vesting of benefits, the district court noted regarding the
vertical partial termination that Chevron agreed to vest in their
then accrued A&B Plan benefits all participants terminated from
Gulf employment during that March 1984 to July 1986 period, and
regarding the horizontal partial termination the court decreed that
all former Gulf employees employed by Chevron on July 1, 1986 were
vested in their then accrued A&B Plan benefits. The issues
concerning vesting of accrued benefits have been settled between
the parties and are not at issue on this appeal, and as a part of
the settlement plaintiffs do not defend the district court's
finding that horizontal partial termination occurred. Plaintiffs
do contend, however, that the district court, having correctly
(according to plaintiffs) found a vertical partial termination,
erred by holding that those former Gulf employees affected thereby
were not entitled to their pro rata share of the A&B Plan's surplus
assets.
occurred.
The term "horizontal partial termination" refers to a
partial termination involving a decrease or cessation in future
benefit accruals. The decision of whether a horizontal partial
termination has occurred is generally made by determining whether
a cessation or decrease in future benefit accruals has occurred,
and, if so, whether and to what extent a potential reversion to
the employer maintaining the plan is thereby created or
increased.
In the present case, the district court based its conclusion
that a vertical partial termination had occurred on its finding
that both the number of employer-initiated terminations of non-
vested participants (6,427, by one method of calculation) and the
percentage by which those terminations reduced the number of non-
vested participants (45.2 percent) were significant. In re Gulf
Pension Litigation, 764 F. Supp. at 1170.
8
Chevron had urged us to vacate the district court's ruling
that the A&B Plan had partially terminated as unnecessary to the
portions of its judgment still in issue because neither ERISA nor
the language of the Gulf Plan required distribution of surplus
assets to the plaintiffs in the event of either a partial or full
termination of the Plan.10 As discussed below, we conclude that the
10
Chevron's concern with this portion of the district court's
ruling was the potential tax effect should the Internal Revenue
Service (IRS) retroactively disqualify the Chevron Plan as a
result of the thus found partial termination.
Following the merger of the Gulf and Chevron Plans, Chevron
submitted an Application for Determination for Defined Benefit
Plan to the IRS, seeking a determination as to whether a partial
termination of the Gulf Plan had occurred during the interim
period between March 1984 and June 30, 1986. On December 7,
1987, the IRS issued an opinion letter finding that no partial
termination had occurred and, therefore, that the Gulf Plan was
not subject to the full vesting requirements of 26 U.S.C. §
411(d)(3). The district court concluded that it owed no
deference to the IRS determination, In re Gulf Pension
Litigation, 764 F. Supp. at 1172, and subsequently ruled that the
Gulf Plan had suffered both vertical and horizontal partial
terminations.
In light of the district court's decision, the IRS
subsequently reconsidered its earlier letter in favor of Chevron.
In connection with its subsequent review of the matter, the IRS
considered: whether a partial termination had occurred; whether
the Chevron Plan should be retroactively disqualified; and, if
so, whether Chevron was entitled to relief under 26 U.S.C. §
7805(b), which permits the Secretary of the Treasury to prescribe
the extent to which a ruling should be applied without
retroactive effect.
In a Technical Advice Memorandum issued in 1992, the IRS
concluded that a vertical partial termination of the Gulf Plan
had occurred when, as a consequence of a single corporate event
(the merger), both a significant number and a significant
percentage of participants in the Plan were terminated without
being vested in their accrued benefits. The IRS found that no
horizontal partial termination had occurred. Finally, the IRS
determined that, because Chevron had relied in good faith on its
earlier ruling that no partial termination of the Gulf Plan had
occurred, Chevron was entitled to section 7805(b) relief for the
period beginning January 1, 1984, and continuing through December
31, 1991, at which time Chevron had fully vested all employees
affected by the vertical partial termination.
9
plaintiffs were not entitled to surplus assets under the A&B Plan
whether or not a partial termination, vertical or horizontal,
occurred.11
II. Entitlement to Surplus
Plaintiffs assert that they are entitled to a pro rata share
of the surplus assets in the A&B portion of the Gulf Plan. They
argue that ERISA prohibits reversion of any plan assets unless the
plan language contains an explicit reversion provision. Plaintiffs
rely upon ERISA section 403(c)(1), a part of section 403 which is
entitled "Establishment of Trust." Section 403(c)(1) directs that
"the assets of a plan shall never inure to the benefit of any
employer and shall be held for the exclusive purposes of providing
benefits to participants in the plan and their beneficiaries and
defraying reasonable expenses of administering the plan." 29
U.S.C. § 1103(c)(1). This provision, however, is subject to, inter
alia, ERISA section 4044(d)(1), which specifically addresses
allocation of surplus assets upon the final termination of a plan.
Section 4044(d)(1) provides:
"(1) Subject to paragraph (3) [addressing distributions
of plans containing employee contributions], any residual
assets of a single-employer plan may be distributed to
the employer ifSQ
"(A) all liabilities of the plan to participants and
11
Because we do not consider whether or not a partial vertical
(or horizontal) termination occurred, the district court's ruling
on this issue is not conclusive between the parties. Dow
Chemical v. United States Envtl. Protection Agency, 832 F.2d 319,
323 (5th Cir. 1987) ("`The federal decisions agree that once an
appellate court has affirmed on one ground and passed over
another, preclusion does not attach to the ground omitted from
its decision.'") (quoting 18 C. WRIGHT, A. MILLER & E. COOPER, FEDERAL
PRACTICE AND PROCEDURE § 4421 (1981)); RESTATEMENT (SECOND) OF JUDGMENTS §
27 cmt. o (1982).
10
their beneficiaries have been satisfied,
"(B) the distribution does not contravene any
provision of law, and
"(C) the plan provides for such a distribution in
these circumstances." 29 U.S.C. § 1344(d)(1) (emphasis
added).12
In contrast, section 4044(d)(3)(A) provides that "[b]efore any
distribution from a plan pursuant to paragraph (1) [above quoted],
if any assets of the plan attributable to employee contributions
remain after satisfaction of all labilities . . . such remaining
assets shall be equitably distributed to the participants who made
such contributions or their beneficiaries . . . ." (emphasis
added).
Plaintiffs also seek support for their claim in the common law
of trusts. Their premise for this argument is that, because
pension benefits are a source of additional compensation for
employees, the pension trust is not a gratuitous trust. Ball v.
Victor Adding Machine Co., 236 F.2d 170, 173 (5th Cir. 1956).
Indeed, under common law, where surplus assets remained at
termination of a trust established for consideration, a resulting
trust of the surplus arose in favor of the person furnishing the
consideration. RESTATEMENT (SECOND) OF TRUSTS § 434 (1959). However,
although plaintiffs have rendered consideration to Gulf in the form
of their services, this is not the situation envisioned by section
434. A trust established for consideration, in the context of that
12
Similarly, the Pension Benefit Guaranty Corporation
regulations providing a formula for distribution of surplus
assets at plan final termination to plan beneficiaries, 29 C.F.R.
§ 2618.32(a), apply only where the plan does not "provide[], as
of the date of plan termination, for the return of residual
assets to the employer" or where a provided for distribution
"violate[s] any provision of law." 29 C.F.R. § 2618.30(a).
11
section, is one in which the owner of the property transfers it
upon a trust to certain beneficiaries and receives consideration
for the transfer from a third party, not from the beneficiaries
themselves.
Further, while specified pension benefits in an employer
funded defined benefit plan may be viewed as compensation for
services rendered, an employer is not required by law to provide
such benefits and if it undertakes to do so it is not required to
do more than pay, or provide for payment of, those particular
benefits. See Malia v. General Electric Co., 23 F.3d 828, 832 (3d
Cir. 1994) ("'A defined benefit plan gives current and former
employees property interests in their pension benefits but not in
the assets held by the trust.'"). An entirely employer funded
defined benefit plan pension trust is therefore more akin to a
gratuitous trust so far as concerns surplus assets, as to which
ERISA so markedly distinguishes between those attributable to
employee contributions and those attributable to employer
contributions (thus suggesting that employer contributions are not
a form of recontributed wages for such purpose). Where a
gratuitous trust is fully performed without exhausting the trust
estate, a resulting trust of the surplus is presumed to arise in
favor of the settlor. RESTATEMENT (SECOND) OF TRUSTS § 430. This
principle has been looked to in holding an employer entitled to
surplus assets on termination of an employer funded defined benefit
pension plan. See Wilson v. Bluefield Supply Co., 819 F.2d 457,
464 (4th Cir. 1987) ("`Surplus' is the term used in the common law
of trusts to describe any remaining assets in a trust after its
12
purpose has been fulfilled. Under such circumstances, a `resulting
trust' for the benefit of the creator of the original trust arises
by operation of law, unless he manifested a contrary intent")
(citing RESTATEMENT (SECOND) OF TRUSTS § 430); Washington-Baltimore
Newspaper Guild v. Washington Star Co., 555 F. Supp. 257, 260
(D.D.C. 1983), aff'd mem., 729 F.2d 863 (D.C. Cir. 1984) ("the
common law of trusts provides that an employer can retain such a
surplus").
Plaintiffs claim that the language of the A&B Plan did not
contain an explicit reversion provision as they assert is required
by section 4044(d)(1), 29 U.S.C. § 1344(d)(1). They rely on
Albedyll v. Wisconsin Procelain Co. Revised Retirement Plan, 947
F.2d 246, 256 (7th Cir. 1991) ("unless the plan specifically
provides for reversion to the employer, surplus assets go to
beneficiaries and participants"). However, we note that section
4044(d)(1) merely requires that a plan "provide[]" for distribution
of surplus assets to an employer, it does not say that the
provision must be specific, explicit or express. In any event,
Albedyll is a total termination case,13 and section 4044(d)(1) does
not address a partial termination.14 Internal Revenue Code section
401(a)(2) allows employer reversion only on complete termination.
26 U.S.C. § 401(a)(2) (only after satisfaction of all liabilities).
13
As also is Rinard v. Eastern Company, 978 F.2d 265 (6th Cir.
1992), cert. denied, 113 S. Ct. 1843 (1993), which followed
Albedyll, and which involved the total termination of the
"Pension Plan for Hourly-Rated Employees of the Patin
Manufacturing Company." See Id. 978 F.2d at 266-267.
14
Nor do 29 C.F.R. §§ 2618.30(a) and 2618.32(a), see note 12
supra.
13
See also 26 C.F.R. § 1.401-2(b)(1). Internal Revenue Code section
411(d)(3) requires that a plan, in order to be qualified, provide
that "upon its termination or partial termination . . . the rights
of all affected employees to benefits accrued to the date of such
termination, [or] partial termination . . . to the extent funded as
of such date, or the amounts credited to the employees' accounts,
are nonforfeitable." As previously noted, all participants in the
A&B Plan who were terminated from Gulf during the March 1984-July
1986 period, and all former Gulf employees employed by Chevron on
July 1, 1986, have been fully vested in their accrued A&B Plan
benefits. Nothing in ERISA or the Internal Revenue Code mandates
a distribution of any surplus assets on a partial termination or
requires any particular provision in a plan in order to avoid such
a result. See, e.g., Chait v. Bernstein, 835 F.2d 1017, 1021 (3d
Cir. 1987) (in a partial termination § 411(d)(3) "should not be
extended to apply to surplus assets . . . in a defined benefit
plan"); Van Orman v. American Insurance Co., 680 F.2d 301, 313 (3d
Cir. 1982) (only rights to surplus are at complete termination
under § 4044); Walsh v. Great Atlantic & Pacific Tea Co. Inc., 96
F.R.D. 632, 652 (D. N.J. 1983) ("partial termination[] . . . would
only result in those benefits defined in the 'Benefits' portion of
the plan becoming non-forfeitable . . . . The persons affected by
the partial termination would not become entitled then and there to
a pro rata share of any excess assets. As long as the remainder of
the plan remains ongoing, 'excess assets' is a meaningless concept,
since the amount of any surplus can only be calculated after a
complete termination of the plan"), aff'd, 726 F.2d 956 (3d Cir.
14
1983). Nor can we construe "benefits accrued" under § 411(d)(3) to
encompass a right, not specified in the plan itself, to a share of
surplus assets in a defined benefit employer funded plan. Treasury
Regulation 1.411(a)-7(a) provides that in the case of a defined
benefit plan "accrued benefit" for purposes of § 411 generally
"refers only to pension or retirement benefits" and does "not
include ancillary benefits not directly related to retirement
benefits." 26 C.F.R. 1.411(a)-7(a).15 This conclusion likewise
follows from Malia, where the Court held that "benefits" under §
1344 does not include a right to residual assets. Id. 23 F.3d at
830-831. And, Malia cited with approval the district court's
opinion in the present case. Malia, 23 F.2d at 832. Further, in
15
Section 1.411-7(a) provides in part as follows:
"(a) Accrued benefit. For purposes of section 411
and the regulations thereunder, the term 'accrued
benefit' meansSQ
(1) Defined benefit plan. In the case of a
defined benefit planSQ
(i) If the plan provides an accrued benefit in the
form of an annual benefit commencing at normal
retirement age, such accrued benefit, or
(ii) If the plan does not provide an accrued
benefit in the form described in subdivision (i) of
this subparagraph, an annual benefit commencing at
normal retirement age which is the actuarial equivalent
(determined under section 411(c)(3) and § 1.411(c)-(5)
of the accrued benefit determined under the plan. In
general, the term 'accrued benefits' refers only to
pension or retirement benefits. Consequently, accrued
benefits do not include ancillary benefits not directly
related to retirement benefits such as payment of
medical expenses (or insurance premiums for such
expenses), disability benefits not in excess of the
qualified disability benefit (see section 411(a)(9) and
paragraph (c)(3) of this section), life insurance
benefits payable as a lump sum, incidental death
benefits, current life insurance protection, or medical
benefits described in section 401(h)."
15
Mead Corp. v. Tilley, 109 S. Ct. 2156, 2162 (1989), the Court held
that the comparable section 4044(a) "in no way indicates an intent
to confer a right upon plan participants to recover unaccrued
benefits" and that "all other benefits under the plan" as used in
section 4044(a)(6) "can refer only to the allocation of benefits
provided by the terms of the terminated plan." Finally, to
construe "benefits accrued" in section 411(d)(3) as including a
share in surplus assets would necessarily preclude an employer from
ever reserving the right to receive any residual assets under §
4044(d)(1).
Consequently, we conclude that plaintiffs' rights to a pro
rata share of residual or surplus assets on partial termination
must rest on some provision of the plan itself, and not merely on
section 4044(d)(1) or section 411(d)(3). We likewise conclude that
unless the plan itself provided for such rights or precluded
amendment providing for reversion of surplus to the employer on
complete termination, then the partial termination did not of
itself prevent such a reversionary amendment thereafter. See
Chait, 835 F.2d at 1022 ("we find no authority that holds that a
partial termination . . . precludes further plan amendments which
do not interfere with the employees' anticipated and calculated
rights under a defined benefit plan"). It is settled that a plan
amendment may validly provide for reversion of surplus assets to
the employer on final termination of an employer funded defined
benefit pension plan. See Outzen v. FDIC, 948 F.2d 1184 (10 Cir.
1991); Wilson, 819 F.2d at 465; Chait. Accordingly, we turn now to
the Plan language.
16
A. Language of the A&B Plan
Plaintiffs base their argument on the language of section 10A-
2 of the Plan, which governs the distribution of assets on
termination of the Plan, viz:
"Distribution of assets. Upon termination of the
Plan the rights of members to the benefits accrued under
the Plan to the date of such termination, to the extent
then funded, shall be nonforfeitable. All of the assets
held in trust, after provision for any properly
chargeable expenses, shall be used solely for the
members, pensioners, spouses, beneficiaries and joint
pensioners until all liabilities under the Plan shall
have been satisfied in full. The Benefits Committee
shall determine on the basis of an actuarial valuation
the share of the funds of the Plan allocable to each
member, pensioner, spouse, and joint pensioner in the
following order:
[there follows a six-tiered schedule of distribution
directives]
. . . .
In the event of a partial termination of the Plan
the provisions of this Section 10A-2 shall be applicable
to the members affected by such partial termination.16
In no event shall any part of the Plan assets held
in trust or any income on it, prior to the satisfaction
of all liabilities under the Plan, revert to the Company
or be used other than for the members, pensioners,
spouses, beneficiaries and joint pensioners." (emphasis
added)
The six-tiered schedule of distribution set forth in section
10A-2 as above indicated does not contain any direction for
distribution or allocation of surplus assets. Its allocations are
only up to the amount of accrued benefits.
Section One of the 1944 Agreement of Trust of the A&B Plan
echoes the language of section 10A.2:
16
This sentence was added to the Plan by a 1982 Plan
amendment.
17
"The Corporation hereby establishes with the Trustee
a trust, effective as of January 1, 1944, which shall
comprise such payments as shall from time to time be made
to the Trustee by or on behalf of the Corporation for the
purposes of the Plan . . . . Any and all contributions
made by the Corporation shall be irrevocable and no part
of the corpus of the Fund nor any income therefrom shall
at any time prior to the satisfaction of all liabilities
under the Plan revert to the Corporation or be used for
or diverted to purposes other than for the exclusive
benefit of participants, retired participants or their
beneficiaries under the Plan." (emphasis added)
In particular, plaintiffs rely on the language providing that
Gulf's contributions to the Plan were to be "irrevocable" and that
the funds were to be used "solely for" or "for the exclusive
benefit of" the plan participants. Defendants contend that these
phrases, and the rights created thereby, are qualified by the
phrases "until all liabilities under the Plan shall have been
satisfied in full" and "prior to the satisfaction of all
liabilities under the Plan." This language, defendants argue,
implies that reversion to the employer is contemplated once all
liabilities are satisfied.17
1. Prior to the satisfaction of liabilities
Although section 10A.2 does declare that Plan assets are not
to revert to the employer, that language is qualified by the phrase
"prior to the satisfaction of all liabilities under the Plan."
17
The A&B Plan contains no explicit statement prohibiting
employer reversion of surplus assets. In addition, as noted, the
formula set forth in section 10A.2 of the A&B Plan for
distribution of Plan assets does not contain any direction for
the allocation of surplus assets to participants.
In contrast, the CRP, for example, contained no language
impliedly reserving a right of reversion by Gulf, barred any
amendment that would permit such a reversion, and allocated
surplus assets to participants upon full termination of the plan.
In re Gulf Pension Litigation, 764 F. Supp. at 1192.
18
Plaintiffs maintain that this phrase creates, at best, an implied
reversion; they contend that ERISA section 4044(d)(1) requires an
explicit reversion provision, citing Albedyll. However, as noted,
section 4044(d)(1) does not apply to partial terminations, and
Albedyll was a final, not a partial, termination case. Further,
the Albedyll plan contained a section which the court interpreted
"to provide for pro rata distribution of plan assets to the
participants upon termination." In addition, an early outline of
the plan "clearly indicated that the company could recover none of
the contributed assets."
Other cases, dealing with plans having language more similar
to that now before us, but without an express employer reversion
provision, have allowed an employer to recapture surplus assets
upon termination of the plan. See Outzen v. Fed. Deposit Ins. Corp
ex rel. State Examiner of Banks, 948 F.2d 1184, 1186-87 (10th Cir.
1991) (where plan provided funds could not be used other than for
the exclusive benefit of participant prior to the satisfaction of
all liabilities, court held later amendment adding express
reversion provision was valid).
Plaintiffs mount a second attack on the "prior to" phrase of
section 10A.2, claiming that it is mere "boilerplate" language
required by tax law. The phrase in question was part of section
165(2) of the Revenue Act of 1938, and became section 165(2) of the
Internal Revenue Code of 1939. 53 Stat. § 165(2) (1939). It has
been carried over into the present Internal Revenue Code.18
18
26 U.S.C. § 401(a)(2) establishes that a trust may be
qualified
19
Plaintiffs contend that Gulf's use of the language in the A&B Plan
was mere repetition of the 1938 statute.
In response, Chevron argues that the legislative history of
section 165 supports reading the A&B Plan to allow employer
reversion. The "prior to" phrase was added to the Revenue Act of
1938 to allow employers to recapture surplus assets without losing
their exempt status under the tax laws.19 S. REP. No. 1567, 75th
Cong., 3d Sess. 24 (1938), reproduced in 1939-1 C.B. 779, 796.
Thus, the "prior to" language of section 165 of the 1938 Revenue
"if under the trust instrument it is impossible, at any
time prior to the satisfaction of all liabilities with
respect to employees and their beneficiaries under the
trust, for any part of the corpus or income to be . . .
used for, or diverted to, purposes other than for the
exclusive benefit of his employees or their
beneficiaries . . . ."
19
The 1942 Treasury Regulations discussing section 165 of the
1938 Revenue Act explain:
"The intent and purpose in section 165(a)(2) of the
phrase `prior to the satisfaction of all liabilities
with respect to employees and their beneficiaries under
the trust' is to permit the employer to reserve the
right to recover at the termination of the trust, and
only at such termination, such balance in the trust as
is due to erroneous actuarial computations during the
previous life of the trust. A balance due to an
`erroneous actuarial computation' is the surplus
arising because actual requirements differ from the
expected requirements based upon previous actuarial
valuations of liabilities or determinations of costs of
providing pension benefits under the plan in accordance
with reasonable assumptions as to mortality, interest,
etc., and correct procedures relating to the method of
funding, all as made by a careful person skilled in
calculating the amounts necessary to satisfy pecuniary
obligations of such a nature." Treasury Regulation §
29.165-2(b) (1942); 26 C.F.R. § 29.165-2(b) (1944
Cumulative Supplement at 6368) (emphasis added).
This regulation continues in effect today, without presently
relevant substantive change. 26 C.F.R. § 1.401-2(b)(1).
20
Act did not require a rote phrase, without meaning or implication.
Instead, it offered employers the ability, if desired, to establish
a qualified pension plan in which the employer, upon final
termination, received the surplus assets.
Based on the foregoing, we hold that in the context of section
10A-2 of the Plan, with its distribution allocation provisions not
reaching surplus assets, the phrases "until all liabilities under
the Plan shall have been satisfied in full" and "prior to the
satisfaction of all liabilities under the Plan" at least implied
the right to reversion in Gulf. We consider now whether any other
language in the Plan limited or prohibited that right.
2. Irrevocability provision
Plaintiffs assert that the "prior to" language discussed above
is inconsistent with the provision that Gulf's contributions to the
A&B Plan be irrevocable. The Plan has contained the "irrevocable"
language since its inception in 1944.20 Chevron claims that the
drafters of the Plan were merely parroting references in the tax
law as it existed in 1944 when the Plan was created. While the
1939 Internal Revenue Code did not specifically use the term
"irrevocable," it decreed that a trust forming part of a pension
plan would not be taxable under the Code
20
Section 10 of the 1944 Plan provided:
"In order further to implement the Plan the Corporation
has entered into an Agreement of Trust to the end that
such funds, as may be irrevocably contributed from time
to time for the payment of all or any part of the
annuities under the Plan, shall be segregated from the
Corporation's own assets and held in trust for the
exclusive benefit of the participants[.]"
21
"if under the trust instrument it is impossible, at any
time prior to the satisfaction of all liabilities with
respect to employees under the trust, for any part of the
corpus or income to be . . . used for, or diverted to,
purposes other than for the exclusive benefit of his
employees." Internal Revenue Code, 53 Stat. § 165(2)
(1939).
The essence of this Code provision is that an employer may not
revoke, or use for his own purposes, any part of corpus or income
of the pension trust. Our reading of this provision, to require an
employer's contributions to be "irrevocable," is supported by the
immediately succeeding section of the 1939 Code, which governs
"Revocable Trusts."21 Thus, Gulf's use of the term "irrevocable"
in the A&B Plan is not extraordinary, as plaintiffs contend, but
merely a rephrasing of the then-current tax code provision
governing pension trusts.
Furthermore, we agree with Chevron that "revocation" and
"reversion" are not synonymous terms.
"A power to revest or revoke may in economic fact be the
equivalent of a reversion. But at least in the law of
estates they are by no means synonymous. For, generally
speaking, the power to revest or to revoke an existing
estate is discretionary with the donor; a reversion is
the residue left in the grantor on determination of a
particular estate." Helvering v. Wood, 60 S. Ct. 551, 553
(1940).
The full termination of the A&B Plan and the fulfillment of its
purpose by payment of accrued benefits to participants do not
constitute a revocation of the Plan or of any of Gulf's
21
This section, entitled "Revocable Trusts," provides:
"Where at any time the power to revest in the
grantor title to any part of the corpus of the trust is
vested . . . in the grantor . . . then the income of
such part of the trust shall be included in computing
the net income of the grantor." 53 Stat. § 166 (1939).
22
contributions to the Plan. When all liabilities are satisfied, the
Plan may terminate, and surplus assets revert to Chevron, without
causing a revocation of the Plan.
Because defendants, through the merger, have not caused a
revocation of the A&B Plan, the "irrevocable" provision does not
determine whether the Plan allowed employer reversion of surplus
assets.
3. Exclusive benefit clause
Plaintiffs claim that the A&B Plan could not provide for
employer reversion of surplus assets because Gulf's contributions
to the plan were to be used for the "exclusive benefit" of the plan
participants and their beneficiaries. Their argument fails to
recognize, however, that the "exclusive benefit" requirements of
tax law and ERISA are counterbalanced by provisions allowing
employer recapture of surplus assets.
Both tax law and ERISA require the funds of a pension plan be
used "for the exclusive benefit of" the plan participants. 26
U.S.C. § 401(a)(2); 29 U.S.C. § 1103(c)(1) ("for the exclusive
purposes of providing benefits . . . and defraying . . .
expenses"). Plaintiffs ignore the fact that both ERISA and the
Internal Revenue Code also contemplate employer reversion. The
ERISA "exclusive benefit" provision is expressly made subject to
the exception that when the plan finally terminates, surplus assets
may revert to the employer if three conditions are then met,
including that the plan provide for such a distribution. 29 U.S.C.
§ 1344(d)(1). The "exclusive benefit" provision of Section 165 of
the 1939 Revenue Code, quoted above, the law in effect in 1944 when
23
the A&B Plan was established, provided that a plan would be tax
exempt if under the trust instrument it is impossible, at any time
prior to the satisfaction of all liabilities with respect to
employees and their beneficiaries under the trust, for any part of
the corpus or income to be used for purposes other than for the
exclusive benefit of the participants or their beneficiaries.22
Internal Revenue Code, 53 Stat. § 165(2) (1939). The Treasury
Regulations originally promulgated for section 165(a), which
continue in effect without presently relevant substantive change,
make clear that, notwithstanding the "exclusive benefit" phrase,
the "prior to" language of that section permits the employer to
recover surplus assets upon termination of the plan if those assets
22
Treasury Regulations in force when the A&B Plan was adopted
explain the "exclusive benefit" requirement of section 165 of the
1939 Code:
"Under section 165(a)(2) a trust is not exempt unless
under the trust instrument it is impossible . . . for
any part of the trust corpus or income to be used for,
or diverted to, purposes other than for the exclusive
benefit of such employees or their beneficiaries. As
used in section 165(a)(2), the phrase `if under the
trust instrument it is impossible' means that the trust
instrument must definitely and affirmatively make it
impossible for the nonexempt diversion or use to occur,
whether by operation or natural termination of the
trust, by power of revocation or amendment, by the
happening of a contingency, by collateral arrangement,
or by any other means. It is not essential that the
employer relinquish all power to modify or terminate
the rights of certain employees covered by the trust,
but it must be impossible for the trust funds to be
used or diverted for purposes other than for the
exclusive benefit of his employees or their
beneficiaries." Treasury Regulation § 29.165-2(a)
(1942); 26 C.F.R. § 29.165-2(a) (1944 Cumulative
Supplement at 6368) (emphasis added).
This regulation continues in effect today without presently
relevant substantive change. 26 C.F.R. § 1.401-2(a)(1) & (2).
24
stem from actuarial error. See notes 19 & 22, supra.
Because both the Tax Code and ERISA require exclusive benefit
language and contemplate that an employer may recover surplus
assets after all plan liabilities are satisfied, the mere existence
of the exclusive benefit provision in the A&B Plan cannot prohibit
reversion to an employer.
Courts construing pension plans containing this "exclusive
benefit" language follow the rule that the phrase does not prohibit
reversion of surplus assets to the employer upon termination of the
plan. See, e.g., Chait v. Bernstein, 835 F.2d 1017, 1023 (3rd Cir.
1987) ("Thus, the text of ERISA itself demonstrates that the
`exclusive benefit' language of ERISA § 403 is not at odds with
reversion of the surplus of a single employer plan under §
4044(d)(1)(C)"); Washington-Baltimore Newspaper Guild Local 35 v.
Washington Star Co., 555 F. Supp. 257, 261 (D.D.C. 1983) ("section
4044(d)(1) of [ERISA] provides that an employer may retain a plan's
surplus without running afoul of the exclusive benefit rule"),
aff'd mem., 729 F.2d 863 (D.C. Cir. 1984); In re C. D. Moyer Co.
Trust Fund, 441 F. Supp. 1128, 1132 (E.D. Pa. 1977), aff'd without
published opinion, 582 F.2d 1273 (3d Cir. 1978).
The use of the "exclusive benefit" language in the A&B Plan
does not preclude reversion of surplus assets to Gulf.
B. Prohibition of Amendments Decreasing Employee Rights
Plaintiffs extend their argument that the A&B Plan did not
allow reversion of surplus assets to the employer, claiming that
the language of the Plan also prohibited amendments creating a
25
right of reversion in the employer.23
The amendment provision of the A&B Plan stated as follows:
"The Board of Directors reserves the right at any time
and from time to time to modify or to amend, in whole or
in part, any or all of the provisions of the Plan,
provided that:
"(a) No modification or amendment may be made which
will deprive any person of any benefit under
the Plan which has accrued on or prior to the
time of such modification or amendment, and
"(b) No such modification or amendment shall make
it possible for any part of the Trust Fund to
be used for, or diverted to, purposes other
than for the exclusive benefit of participants
and retired participants, or their
beneficiaries under the Plan." (Emphasis
added.)
Other courts have held that "exclusive benefit" language in a
plan does not, by itself, prevent an employer from amending a plan
to allow reversion of surplus assets. In Chait, although the plan
contained a provision similar to that in the Gulf Plan, the Third
Circuit determined that the language of the plan did not prohibit
a reversionary amendment. Chait, 835 F.2d at 1022-26.24 The court
held that "a vested employee who has fully received his vested
benefits cannot rely on the `exclusive benefit' language, standing
23
Plaintiffs further assert, in the alternative, that even if
the terms of the Plan did allow a reversionary amendment, the
amendment of the Gulf Plan at the time of the merger resulting in
the Chevron Plan (with its express reversion provision) was
ineffective because it occurred after the partial termination of
the A&B Plan. We reject this contention for the reasons
previously stated.
24
The plan involved in Chait stated:
"no [amendment to the plan by the employer] shall
authorize or permit any part of the funds held under
the Plan to be used for or diverted to, purposes other
than for the exclusive benefit of the Employees."
Chait, 835 F.2d at 1022 (footnote omitted).
26
alone, to prevent an amendment reverting surplus plan assets" to
the employer. Id. at 1018. See also Outzen v. Federal Deposit
Ins. Corp., 948 F.2d at 1186, 1187 (allowing reversion amendment
despite exclusive benefit language, stating "[t]he cases which
allow reversion as well as those which preclude it all dictate that
strong, express prohibitory language is necessary to block employer
recapture of surplus pension funds in a defined benefit plan");
Wilson v. Bluefield Supply Co., 819 F.2d at 461-465 (allowing
reversion of surplus assets despite "exclusive benefit" language in
plan); Washington-Baltimore Newspaper Guild Local 35, 555 F. Supp.
at 260-262; In re C. D. Moyer Co. Trust Fund, 441 F. Supp. at 1131-
32.
Thus, a defined benefit plan must generally contain language
other than the "exclusive benefit" phrase in order to preclude an
amendment providing for employer reversion. For example, in Bryant
v. Int'l Fruit Products Co., Inc., 793 F.2d 118, 123 (6th Cir.),
cert. denied, 107 S. Ct. 576 (1986), the Sixth Circuit held that an
amendment to a defined benefit plan purporting to allow employer
reversion was ineffective in light of strong plan language
expressly prohibiting such an amendment. The plan contained, in
addition to the standard "exclusive benefit" phrase limiting
amendment, the phrase "[i]n no event and under no circumstances
shall any contributions to this Trust by the Employer, nor any of
the Trust Estate or the income therefrom, revert to or be repaid to
the Employer." Bryant, 793 F.2d at 120 (quoting agreement)
(emphasis added). The court found this language to be a unique,
"unequivocal" prohibition against employer recapture of any
27
contributions to the plan. Id. at 123. Language in the handbook
distributed to plan participants supported the Bryant court's
conclusion:
"Funds paid into the trust can never be refunded to the
Company and are for the exclusive benefit of the
employees under the Trust. . . . It is definitely
provided that the funds paid into the Trust are for your
exclusive benefit and can never, under any circumstances,
revert to the Company." Id. (quoting handbook) (emphasis
added).
We conclude that the language of the A&B Plan prohibiting
amendments other than for the exclusive benefit of the participants
does not, by itself, preclude an amendment expressly allowing
reversion to the employer. Furthermore, as discussed above, the
language of the Plan impliedly allowed such a reversion.25
The policies underlying ERISA support our conclusion.
"Employers will continue to fund their plans under ERISA
guidelines, but will not be penalized for overfunding in
`an abundance of caution' or as a result of a
miscalculation on the part of an actuary. Thus,
employees will continue to be protected to the extent of
their specific benefits, but will not receive any
25
Plaintiffs also rely on the summary plan description of the
A&B Plan, required by ERISA section 102(a), 29 U.S.C. § 1022(a),
for support of their claim that the plan did not allow employer
reversion and could not be amended to provide therefor. Our
court has ruled that the summary plan description controls if a
pension plan is ambiguous. Hansen v. Continental Ins. Co., 940
F.2d 971, 982 (5th Cir. 1991) ("hold[ing] that the summary plan
description is binding, and that if there is a conflict between
the summary plan description and the terms of the [plan], the
summary plan description shall govern").
We do not consider the language of the A&B Plan to be
ambiguous, nor do we find any conflict between its terms and
those of the summary plan descriptions. Indeed, the summary
descriptions of the A&B Plan, in the portions concerning changes
to the plan, track the language of the Plan itself, providing
that Gulf had the right to change the plan, but that it could not
"make any change that would allow the assets of the Plan to be
used for anything but the exclusive benefit of members or their
beneficiaries . . . ."
28
windfalls due to the employer's mistake in predicting the
amount necessary to keep the Plan on a sound financial
basis." In re C. D. Moyer Co. Trust Fund, 441 F. Supp. at
1132-33.26
Plaintiffs have received their expected benefits. An award of
surplus assets, in light of Plan provisions inferentially and now
expressly allowing employer reversion, would result in a windfall
to the plaintiffs and would encourage defendants to fund the
Chevron Plan more cautiously, to the potential detriment of present
and future participants and their beneficiaries.
III. Alleged Chevron Misrepresentations Concerning Reserve for Gulf
Plan
During the merger negotiations, Chevron's chairman stated in
a letter to Gulf's chairman that, if Chevron decided to combine the
pension plans upon merger of the companies, Chevron would set aside
assets of the Gulf Plan to provide sufficient reserves for then-
existing retiree pensions. Chevron repeated that statement orally
and in writing in response to inquiries from persons concerned
about the effects of the merger. In their complaint, plaintiffs
alleged that Chevron failed to set aside the promised reserves and
thus had breached its duty of loyalty under ERISA § 404(a).27 29
U.S.C. § 1104(a). The district court held that this claim was not
actionable under ERISA because plaintiffs' claims did not arise out
26
This language from In re C. D. Moyer Co. Trust Fund was also
quoted with approval in Washington-Baltimore Newspaper Guild
Local 35, 555 F. Supp. at 260.
27
According to the district court's opinion, no specific
reserves were established. Plaintiffs' own expert testified,
however, that the merged Chevron Plan had surplus assets in
excess of accrued benefits of more than $800 million which would
not be depleted below the full funding limit for a considerable
time. In re Gulf Pension Litigation, 764 F. Supp. at 1213.
29
of an ERISA plan. In addition, the court ruled that plaintiffs
stated no claim under common law.
The district court determined, and plaintiffs concede, that
Chevron's promises were not contained in a written plan document as
required by section 402(a)(1) of ERISA. 29 U.S.C. § 1102(a)(1).
That Chevron's statements were made in writing is irrelevant as
they do not profess to be plan amendments. ERISA requires that a
plan under its auspices "provide a procedure for amending such
plan, and for identifying the persons who have authority to amend
the plan." 29 U.S.C. § 1102(b)(3).
Our court has held that an oral agreement cannot sustain a
cause of action under ERISA. Cefalu v. B.F. Goodrich Co., 871 F.2d
1290, 1297 (5th Cir. 1989). See also Rodrigue v. Western and
Southern Life Ins. Co., 948 F.2d 969, 971-72 (5th Cir. 1991)
(holding plaintiff precluded from arguing that employer was
estopped from denying coverage based on oral modifications to
plan); Degan v. Ford Motor Co., 869 F.2d 889, 895 (5th Cir. 1989)
(ERISA precludes oral modifications to plan and as well as claims
of promissory estoppel in suit seeking to enforce rights to pension
benefits). This reasoning extends to written modifications or
promises which are not, and do not purport to be, formal amendments
of a plan following the procedures required by section 1102(b)(3).
See Alday v. Container Corp. of America, 906 F.2d 660, 665-666
(11th Cir. 1990) (holding that booklet summarizing benefits and
pre-retirement letters were insufficiently formal writings and did
not amend ERISA plan; interpreting 29 U.S.C. § 1102(b)(3) to
prohibit modification of plan by informal written agreement), cert.
30
denied, 111 S. Ct. 675 (1991). Chevron's statements did not purport
to be part of, or an amendment to, either company's pension plan,
nor is there any evidence that either Chevron or Gulf attempted to
amend either plan to include the promises. Chevron's statements,
therefore, are not part of any ERISA plan.28
In any event, the district court determined, and plaintiffs do
not here challenge, that plaintiffs did not establish that they
relied to their detriment on Chevron's promises and, even if they
had so relied, that they suffered any injury as a result of any
such reliance. Indeed, it is undisputed that the current reserves
of the Chevron Plan are more than sufficient, without any
additional contributions, to cover the benefits of both existing
and future Gulf retirees for a significant time to come.
The district court did not err in holding that plaintiffs'
claims for misrepresentation and breach of ERISA's duty of loyalty
were not actionable under ERISA or the common law.
IV. Seventh Amendment Right to Jury
Finally, plaintiffs challenge the district court's order
granting Chevron's motion to strike their jury demand. They argue
that several of their claims, particularly the claim for
distribution of surplus assets, seek a money judgment and thus are
legal in nature so as to entitle them to a jury trial.
28
Moreover, Chevron's statements were not shown to be made in
its fiduciary capacity, as to opposed to being statements of
intended action in its corporate nonfiduciary capacity as plan
sponsor or settlor. See, e.g., Malia, 23 F.3d at 833; Johnson v.
Georgia-Pacific Corp, 19 F.3d 1184, 1188 (7th Cir. 1994);
Phillips v. Amoco Oil Co., 799 F.2d 1464, 1470-71 (11th Cir.
1986).
31
"To determine whether a particular action will resolve legal
rights, we examine both the nature of the issues involved and the
remedy sought." Chauffeurs, Teamsters, and Helpers, Local No. 391
v. Terry, 110 S. Ct. 1339, 1345 (1990). This analysis consists of
two inquiries: (1) a comparison of the present statutory action to
18th-century actions in the courts of England before the merger of
the courts of law and equity; and (2) an examination of the relief
sought to determine whether it is legal or equitable in nature.
Id. Of the two, the latter inquiry bears more weight. Id.
Here, the first inquiry is relatively simple, as ERISA law is
closely analogous to the law of trusts, an area within the
exclusive jurisdiction of the courts of equity. Firestone Tire and
Rubber Co. v. Bruch, 109 S. Ct. 948, 954 (1989) ("ERISA abounds with
the language and terminology of trust law. ERISA's legislative
history confirms that the Act's fiduciary responsibility provisions
`codif[y] and make[] applicable to [ERISA] fiduciaries certain
principles developed in the evolution of the law of trusts'")
(internal citations omitted; brackets in original). We have held,
as have the majority of the other circuits, that ERISA claims do
not entitle a plaintiff to a jury trial. Calamia v. Spivey, 632
F.2d 1235, 1237 (5th Cir. 1980) (inquiry into whether plan
administrators acted arbitrarily and capriciously is action usually
performed by judges). See also Kirk v. Provident Life and Accident
Ins. Co., 942 F.2d 504, 506 (8th Cir. 1991) (summarily rejecting
jury trial argument); Blake v. Unionmutual Stock Life Ins. Co., 906
F.2d 1525, 1526 (11th Cir. 1990) (claim for money damages was in
effect claim for benefits plaintiffs were allegedly entitled to
32
under the plan, which is "traditionally equitable relief").
The second inquiry, although not as clear cut, also persuades
us that plaintiffs' claims sound in equity. Some relief sought by
plaintiffs is clearly equitable: they sought specific performance
as a remedy to cure the alleged breaches of the duty of loyalty
stemming from Chevron's promises to set aside reserves for Gulf
Plan participants.
Plaintiffs' requests for monetary recovery on other claims,
traditionally the form of relief offered in courts of law, do not
mandate a conclusion that their action is legal in nature.
Calamia, 632 F.2d at 1236-1237 ("The mere fact that the appellant
would receive a monetary award if he prevailed does not compel the
conclusion that he is entitled to a jury trial"). The Supreme
Court has recognized two exceptions to the general rule that a
claim seeking monetary recovery is legal in nature. In Terry, the
Court made clear that a request for monetary recovery sounds in
equity, and thus does not guarantee a jury trial, when it is
restitutionary in nature or is intertwined with claims for
injunctive relief. Terry, 110 S. Ct. at 1348. The first exception
is particularly relevant in this case. Plaintiffs' request for
distribution of surplus assets is analogous to an action for
disgorgement of improper profits. In this claim, as well as in the
now settled claims for breach of fiduciary duty, plaintiffs seek
restitution of money allegedly wrongly held by the defendants.
We hold that plaintiffs' claim is equitable in nature. The
district court did not err in striking plaintiffs' demand for a
33
jury.29
Conclusion
We conclude that under the circumstances here the partial
termination found by the district court of the A&B Plan, an
entirely employer funded defined benefit pension plan, neither
bestowed on plaintiffs any right to plan assets which were then
surplus (after providing for all accrued benefits as required by §
411(d)(3)) nor precluded subsequent plan amendment to expressly
provide that at final plan termination then surplus plan assets
would revert to the employer. We further hold that the A&B Plan
prior to the 1986 merger at least implied that at final plan
termination surplus assets would revert to the employer, and that
the plan amendment on merger expressly providing for such reversion
was authorized by, and not contrary to, the terms of the plan and
was consistent with law. Accordingly, we AFFIRM the district
court's determination that the plaintiffs are not entitled to
surplus assets of the A&B Plan. In addition, we AFFIRM the
district court's rulings that plaintiffs' misrepresentation claims
against Chevron were not actionable and that plaintiffs were not
entitled to a jury trial. Accordingly, the judgment of the
district court is
AFFIRMED.
29
Our conclusion is supported by the posture the case is now
in, following the settlement of most issues. Further, no issues
of fact remain to be decided by a jury.
34