Rehearing and Rehearing In Banc Denied January 9, 1989.
OPINION OF THE COURT
GIBBONS, Chief Judge.
Joseph W. Hlinka appeals from a summary judgment in favor of the defendants, Bethlehem Steel Corporation (BSC), the Bethlehem Pension Board, and the Bethlehem Plan Administrator in Hlinka's suit under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. (1982). When reviewing grants of summary judgment, our scope of review is plenary. Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir.1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977). We will affirm.
Hlinka was hired by BSC on April 2, 1962. He is presently a salaried senior research fellow, and is a participant in the BSC pension plan.
Hlinka then brought this action. He alleges violations of sections 403, 404, and 503 of the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1103, 1104, and 1133 (1982).
Hlinka contends that there are genuine issues of material fact which precluded the issuance of summary judgment in favor of the defendants. Summary judgment is merited when the moving party is entitled to a judgment as a matter of law because there is no genuine issue of material fact. Small v. Seldows Stationery, 617 F.2d 992, 994 (3d Cir.1980). The Supreme Court in Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986), defined a material fact as one which "might affect the outcome of the suit under governing law...." A determination of materiality is contingent upon the substantive law as it determines the factual disputes crucial to the establishment of the legal elements of the claim at issue. Id.
The first "factual dispute" identified by Hlinka is the district court's description of the 70/80 pension provision as an "early" retirement plan. The statutory language of ERISA and BSC's pension plan stipulate that the age of "normal retirement" is sixty-five.
Secondly, Hlinka challenges the district court's finding that BSC had only twice previously used the 70/80 retirement provision. He refers to his affidavit where in paragraph six he states: "I believe and therefore aver that hundreds of persons like me, eligible for a 70/80 Retirement, were granted such benefits and that the
Satisfaction of the first criteria fails because Hlinka did not establish that his affidavit was based on personal knowledge. He merely used the word "believe." Hlinka asserts that the word "believe" was needlessly and unfairly underscored because the defendants frustrated and impeded his discovery efforts. He maintains that under the circumstances all he could do was to aver what he believed to be correct.
In response to his interrogatories, Hlinka was provided with facts concerning 70/80 retirements of all non-represented salaried employees from 1983 through 1986. He requested information including the retirement circumstances of various individuals as well as the salaries of certain former and present employees. The defendants sought an order pursuant to Federal Rule of Civil Procedure 26(c) that the circumstances of retirement and salaries of these individuals be kept confidential. It was felt that disclosure of such information would be an invasion of privacy. The Supreme Court in Seattle Times Co. v. Rhinehart, 467 U.S. 20, 104 S.Ct. 2199, 81 L.Ed.2d 17 (1984), noted that:
467 U.S. at 34-35, 104 S.Ct. at 2208-09. The district court in an order denying plaintiff's motion for reconsideration of the order of confidentiality found that the defendants had satisfied Rule 26(c) by demonstrating a "particular need for protection" from harm that was "significant, [and] not a mere trifle."
Hlinka's affidavit also fails the second and third criteria of Rule 56(e). Hlinka never established that he was competent to testify about other employees' BSC pensions. Furthermore, many of the statements within the affidavit were hearsay and would be inadmissible unless they qualified as hearsay exceptions. Because the affidavit did not meet the requirements of
Hlinka begins with the premise that paragraph 2.6(d) of the BSC plan is invalid as a matter of law because it violates section 403(c)(1) of ERISA, 29 U.S.C. § 1103(c)(1) (1982). That paragraph allows employees who meet the age and service requirements, to retire under the 70/80 pension provision so long as the company deems such retirement to be in "its interest." Hlinka contends that paragraph 2.6(d) directly conflicts with the requirement 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) (1982).
The broad grant of discretion provided by paragraph 2.6(d) of BSC's plan is not prohibited by ERISA.
The 70/80 retirement provision in this case was promulgated by BSC to help BSC and its employees during periods of labor reduction caused by BSC's distressed economic conditions. Thus, retirement under the 70/80 provision provides immediate pension benefits to those who retire before the normal retirement age of sixty-five because of a plant shutdown, layoffs or disability. Since Hlinka was not eligible for benefits based solely on age and continuous years of service, he applied under paragraph
Hlinka also contends that the denial of his request for early retirement and hence the denial of at least a portion of his nonforfeitable
ERISA does not obligate a plan to pay employee benefits before normal retirement age. ERISA specifically refers to normal, rather than early retirement in the context of accrued benefits. This court noted ERISA's legislative history
Hlinka urges that the district court's conclusion that early retirement benefits are not accrued benefits, was a backdoor method of rationalizing that the defendants did not act arbitrarily and capriciously in violation of their fiduciary duty to act solely in the interests of plan participants and their beneficiaries.
In Trenton v. Scott Paper Co., 832 F.2d 806 (3d Cir.1987), Scott Paper Company had amended its retirement plan to add a provision designed to encourage early retirement of employees at various Scott plants to reduce the workforce at those sites. The plaintiffs were the class of employees who were ineligible for early retirement. They alleged that the company and the pension board were not acting for the "exclusive benefit" of the participants and their beneficiaries because the program was initiated for the enhanced efficiency of the company. This court found that the "design" of the early retirement plan was an appropriate management decision by Scott, and the pension board had no authority to change the plan or refuse to adopt it. 832 F.2d at 809. The BSC plan is analogous to the Scott plan in that BSC designed the 70/80 provision to encourage employees with the requisite combination of age and years of service to retire early if such retirement was in the best interest of the company. The design of this plan was unquestionably not violative of ERISA because BSC in drafting the plan was acting as an employer and not a fiduciary. The question then becomes whether BSC was acting as a fiduciary when it made the decision that Hlinka's early retirement was not in its best interests.
The Eighth Circuit Court of Appeals in Hickman v. Tosco Corp., 840 F.2d 564 (8th Cir.1988), stated that "the ERISA scheme envisions that employers will act in a dual capacity as both fiduciary to the plan and as employer. ERISA does not prohibit an employer from acting in accordance with its interests as an employer when not administering the plan or investing its assets." 840 F.2d at 566. At first blush, it could be argued that BSC was acting as a fiduciary because it was exercising discretionary
Hlinka argues that the pension administrator and the pension board acted arbitrarily and capriciously in their refusal to grant him a 70/80 retirement. This argument is without merit. A plan administrator and a pension board must administer the pension plan promulgated by the employer in accordance with their fiduciary duties pursuant to section 404 of ERISA, 29 U.S.C. § 1104. An award inconsistent with the plan's valid provisions would be a breach of those duties. Neither the plan administrator nor the pension board had the authority to override BSC's business decision concerning Hlinka's early retirement. The only recourse of the plan administrator and the pension board was to deny Hlinka's request for an early retirement under the 70/80 provision. "Benefit determinations cannot be arbitrary and capricious as a matter of law if those decisions contain no element of discretion. An administrator who strictly adheres to the lawful terms of an employee benefit plan may not be found to have acted arbitrarily and capriciously." Foltz v. U.S. News and World Report, 613 F.Supp. 634, 639 (D.D.C.1985). Thus, the district court properly found that neither the plan administrator nor the pension board violated their fiduciary duties as stipulated in section 404 of ERISA, 29 U.S.C. § 1104.
Contrary to the findings of the district court in the case at bar, the District Court for the District of Delaware in Shaw v. NVF Co., supra, found that the company and the pension committee failed to discharge their fiduciary duties in accordance with ERISA provisions. The Shaw case was remarkably similar to the case before us. The court in Shaw analyzed a plan provision almost identical to subparagraph 2.6(d) in the case at bar. The plaintiff in Shaw also applied for and was denied by NVF and the pension committee retirement under the company's 70/80 retirement plan. While the facts of both cases are quite similar, the Shaw record, which is not before us, may suggest differences warranting different conclusions. To the extent that Shaw suggests a different interpretation of 29 U.S.C. § 1104, than we have made, however, we find the case unpersuasive.
Finally, Hlinka contends that he was not afforded a full and fair review by the pension board in violation of section 503 of ERISA, 29 U.S.C. § 1133 (1982). He takes this position for two reasons. Firstly, he maintains that the composition of the pension board being company employees, did not satisfy the requirement of "appropriate named fiduciar[ies]" as required by 29 C.F.R. § 2560.503-1.
Secondly, relying on Grossmuller v. International Union, United Auto Aerospace and Agricultural Implement Workers of America, UAW, Local 813, 715 F.2d 853 (3d Cir.1983), Hlinka alleges a denial of a full and fair hearing because neither he nor his attorney was permitted to appear before the pension board when his case was reviewed. The employee in Grossmuller alleged that he did not receive a full and fair review of the pension board's decision to terminate his disability benefits. His benefits were terminated because he had accepted employment as a bartender at a country club and therefore he was not disabled. The board's decision was based on evidence presented by a private investigator at one of the meetings. The board did not apprise the employee of what evidence was considered pertinent to his case. The employee appealed the board's decision and requested that he be permitted to appear before the board, but his request was denied. This court affirmed the district court's holding that the employee had been denied a full and fair review of the denial of his benefits stating that "[i]f the fiduciary allows third parties to appear personally, the same privilege must be extended to the participant." 715 F.2d at 858. Grossmuller is distinguishable from the case at bar, because in the instant case there were no third parties at the board's meeting. Additionally, the Grossmuller case lacked a written claims procedure, and did not permit the employee to examine the materials submitted against him or to submit comments or rebuttal evidence. Hlinka had the opportunity to submit comments and rebuttal evidence. Grossmuller's holding pertained only to the situation wherein a third party is permitted to appear at a meeting and provide factual information which the absent claimant cannot refute. Disputed facts, however, were presented to the board in this case. As the district court noted, a blanket requirement that a petitioner or his attorney be permitted to attend a pension review committee cannot be found in case law or ERISA.
In light of the foregoing discussion, the judgment of the district court will be affirmed.
BECKER, Circuit Judge, concurring:
I agree with the bottom line of the majority's opinion — that Hlinka is not entitled to relief — hence I join in the judgment. I write separately because I disagree with the majority's approach to the applicability to this case of ERISA's "full and fair review" provision, 29 U.S.C. § 1133 (1982). The majority has determined that there has been no violation of that provision without any discussion of the applicability of
At oral argument, counsel for appellees argued that the denial of benefits by the employer cannot be covered by the full and fair review provisions because these provisions only apply to accrued benefits. This argument, which the majority does not address, is incorrect. First, ERISA, in its definition section, defines "employee pension benefit plan" and "employee welfare benefit plan" very broadly. These definitions are clearly not limited to accrued benefit plans. See 29 U.S.C. §§ 1002(1), (2), (23). Second, § 1133 provides that "every employee benefit plan shall" provide "full and fair review" (emphasis added). I believe that the breadth of the language in the definition and full and fair review sections demonstrates that early retirement benefits are covered by the full and fair review provisions. This conclusion is buttressed by the 1984 amendment to 29 U.S.C. § 1054(g) (Supp. II 1984), see Maj. Op. at n. 10, which explicitly provides protection for early retirement benefits in certain circumstances and therefore strongly implies that early retirement benefits fall within the general ambit of ERISA. Third, 29 C.F.R. § 2560.503-1(a) (1987) provides that the full and fair review provisions apply to all plans described in 29 U.S.C. § 1003, which broadly states that ERISA shall "apply to any employee benefit plan if it is established or maintained — (1) by any employer engaged in commerce or in any industry or activity affecting commerce."
Most relevant to the facts of this case is the full and fair review provision's requirement of a written articulation of "specific reasons" for the plan administrator's denial of benefits. 29 U.S.C. § 1133(1). Applying these principles to this case, I believe that Hlinka was deprived of a full and fair review of the denial of benefits, because the administrator failed to inform him of the specific reasons for the denial. In BSC's letter to Hlinka notifying him of the denial of benefits, it merely stated that "accommodation under the 70/80 pension provision requires mutual conditions which do not exist in your case and, therefore, I regret that your request is denied." The General Pension Board stated in its May 19, 1986, letter only that Hlinka was not "eligible" for 70/80 benefits, providing no further explanation, and in its July 15, 1986, letter only that "Bethlehem Steel has not indicated that it considers that your retirement would be in its interest nor has it approved an application for retirement under mutually satisfactory conditions as would be required for eligibility."
At no time was Hlinka informed of the specific reason for the denial of benefits. If it were not for the subsequent expression of reasons provided by BSC in pretrial discovery, see discussion infra, I would remand this case to the General Pension Board for explanation of the specific reason for denial of Hlinka's request for benefits. See also Groves v. Modified Retirement Plan for Hourly Paid Employees of Johns Mansville Corp., 803 F.2d 109, 114 (3d Cir.1986) (district court's holding that statement that disability was "insufficient to qualify" for benefits under the plan did not satisfy § 1133 specificity requirement upheld on appeal).
As the majority points out in footnote 7, BSC's reason for denying Hlinka's request for 70/80 benefits came to light during pretrial discovery. BSC denied Hlinka's request for 70/80 benefits "because of his extensive and unique technological expertise related to the project to which he was assigned." This statement clearly satisfies the specificity requirement of § 1133 (and
The requirement of an expression of specific reasons does not of itself inhibit the employer's business judgment, although the plan may restrain the employer's range of decisionmaking options, depending on the proper contract construction of the term "in its interest."
The BSC plan does not expressly stipulate 65 as a normal retirement age, but absent an express provision as to age in a pension plan the normal retirement age is 65 pursuant to ERISA. Geib v. New York State Teamsters Conference Pension and Retirement Fund, 758 F.2d 973, 977 (3d Cir.1985).
Hlinka v. Bethlehem Steel Corp., No. 87-0005 (E.D.Pa. Order filed Oct. 13, 1987).
732 F.2d at 551-52.
29 U.S.C. § 1002(19) (1982).
H.R.Rep. No. 807, 93d Cong., 2d Sess. 57, reprinted in 1974 U.S.Code Cong. & Ad. News 4639, 4670, 4726.
(A) eliminating or reducing an early retirement benefit ... with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits." 29 U.S.C. § 1054(g)(1), (2) (Supp. II 1984) (amending 29 U.S.C. § 1054(g) (1982)).
The legislative history explains that this amendment:
S.Rep. No. 575, 98th Cong., 2d Sess. 28, reprinted in 1984 U.S. Code Cong. & Admin. News 2547, 2574.
This amendment has no effect on the case before us because the company did not attempt to amend the early retirement provisions. Whatever effect the amendment might have with respect to "accrued benefits" in other circumstances does not change the outcome here.
29 C.F.R. § 2560.503-1(g) (1987).