ERISA Class Action Failed to Establish Violation of Anti-Cutback Rule or Breach of Contract or Fiduciary Duties because Industry-Related Disability Pension was a Welfare Benefit Plan and an Ancillary Benefit Second Circuit Holds
Plaintiffs, as recipients of an Industry-Related Disability Pension (IRD), filed a putative class action against the Sheet Metal Workers’ National Pension Fund alleging breach of contract and breach of fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA). Robinson v. Sheet Metal Workers’ Nat’l Pension Fund, Plan A, ___ F. 3d ___, 2008 WL 302610, *1 (2d Cir. February 5, 2008). After the district court certified the litigation as a class action, plaintiff and defense attorneys presented the matter to the federal court for resolution on a stipulated record. Id. We do not here discuss the facts underlying the litigation, see id., at *1-*3; we note only that the Plan expressly provided that the Trustees had “‘the sole and absolute power, authority and discretion’ to interpret and apply the Plan,” id., at *1, and that the district court expressly found “that the IRD is a welfare benefit plan, not a pension plan, as those terms are used in ERISA” and “that the IRD is an ancillary benefit, not an accrued benefit,” id., at *3. The district court entered judgment in favor of the defense, and plaintiffs appealed, id. The Circuit Court affirmed.
The Second Circuit addressed three issues: (1) that the Plan’s earnings limitations violate ERISA’s “anti-cutback” rule; (2) that the earnings limitations constitute a breach of contract; and (3) that the earnings limitations constitute a breach of fiduciary duties. Robinson, at *3. The Circuit Court disagreed. As to the first issue, the Circuit Court “concur[red] completely” with the district court’s conclusion that the IRD is a welfare benefit plan and that it is an ancillary benefit, and noted that “[e]ither of these findings would suffice to exempt the IRD from ERISA’s anti-cutback rule.” Id. As to the breach of contract claim, which focused on whether the Plan required “lifetime” benefits be provided, the Circuit Court conducted a detailed analysis of the various definitions in the Plan and the discretion afforded the Trustees to modify the Plan, and concluded that the district court did not err in concluding that the Trustees did not breach the contract. Id., at *3-*5. Specifically, the Second Circuit held at page *5, “Read in context, then, the ‘lifetime’ language does not give [plaintiffs] a contractual and absolute right to continue receiving the IRD for their lives.” Finally, as to the breach of fiduciary duty claim, the Second Circuit observed that it is “derive[d] from the contract claim, the ERISA claim, or both,” and so “its survival [depends] on the validity of these latter claims.” Robinson, at *3. Because the district court properly rejected the anti-cutback and breach of contract claims, the breach of fiduciary duty claim could not stand. Id., at *5. (The appeal was dismissed as to one of the named plaintiffs and “those class members over the age of fifty-five” for reasons we do not here discuss. See id., at *5 and n.4.)