Pedersen v. Kinder Morgan Inc.

622 F.Supp.3d 520

Curtis T PEDERSEN, et al., Plaintiffs, v. KINDER MORGAN INC, et al., Defendants.

Civil Action No. 4:21-CV-03590

United States District Court, S.D. Texas, Houston Division

Signed August 18, 2022

Joel R. Hurt, Pro Hac Vice, Joseph N. Kravec, Jr., Pro Hac Vice, Tybe Ann Brett, Pro Hac Vice, Feinstein Doyle Payne & Kravec, LLC, Pittsburgh, PA, Scott David Newar, Attorney at Law, Houston, TX, Robert B. June, Ann Arbor, MI, Stephen Robert Bruce, Stephen R. Bruce, Attorney, Washington, DC, for Plaintiffs.

Travis James Sales, Matthew Gerald Sheridan, Baker Botts LLP, Houston, TX, Lars C. Golumbic, Nathaniel W. Ingraham, William J. Delany, Groom Law Group, Chartered, Washington, DC, William B. Forrest, Kienbaum Hardy Viviano Pelton & Forrest, P.L.C., Birmingham, MI, for Defendants.

AMENDED MEMORANDUM & ORDER

KEITH P. ELLISON, UNITED STATES DISTRICT JUDGE

The Court releases a corrected Memorandum & Order. No substantive changes have been made.

The Court held a hearing on Defendants' Motion for Judgment on the Pleadings (Doc. 56) on Thursday, July 21, 2022. At that hearing, the Court took the Motion under advisement. The Court now GRANTS IN PART and DENIES IN PART Defendants' Motion for Judgment on the Pleadings and provides this Memorandum & Order to document its rulings and reasoning.

I. FACTUAL BACKGROUND

This matter concerns a retirement benefit plan controversy that came about because a series of corporate mergers resulted in now-contested changes to Plaintiffs' retirement benefits. Named plaintiffs Curtis T. Pedersen and Beverly Leutloff are both participants in the Kinder Morgan Retirement Plan A ("Plan A") who worked for the ANR Company starting in 1979 and 1978, respectively. (Doc. 1 at ¶¶1-2.) The ANR Company is a natural gas pipeline owner and operator, founded in the 19^th century. Mr. Pedersen retired from ANR Company in November 2019 and commenced his retirement benefits under Plan A on December 1, 2019. (Id. at ¶1). Ms. Leutloff still works for ANR Company and has not commenced her retirement benefits under Plan A even though she has reached the retirement age of 62 because Kinder Morgan's Claims Administrator denied that she was eligible for "unreduced" retirement benefits at age 62. (Id. at ¶2).

A. The Mergers

1. ANR Company ? Coastal Corporation

In March of 1985, the Coastal Corporation acquired the ANR Company. ANR Company continued to exist as a separate corporate subsidiary owned by the Coastal Corporation. (Id. at ¶17). When the Coastal Corporation acquired ANR in 1985, it amended the Coastal pension plan to provide for a "grandfather" of the ANR benefit formula and for participants to earn benefits under the Coastal Plan's benefit formula and receive the higher of the two. (Id. at ¶27).

2. Coastal Corporation ? El Paso Corporation

In January 2001, the El Paso Corporation acquired the Coastal Corporation, including its ANR subsidiary, and merged them both into the El Paso Corporation. (Id. at ¶18). After El Paso acquired Coastal, the Coastal Pension Plan and the El Paso Pension Plan were merged effective March 31, 2001. (Id. at 24). Section 6.10 of the sales agreement between El Paso and Coastal provided that El Paso "shall assume and honor the obligations of the Company [Coastal] and its Subsidiaries [which included ANR Pipeline] under all existing Company Employee Plans and shall perform the obligations of the Company and its Subsidiaries in the same manner and to the same extent that the Company and its Subsidiaries would have been required thereunder." (Id.)

3. El Paso Corporation ? (TransCanada Corporation)

In February 2007, the El Paso Corporation sold the ANR Company subsidiary to TransCanada American Investments LTD which is a wholly-owned subsidiary of the TransCanada Corporation. (Id. at ¶19). After TransCanada acquired the ANR subsidiary from El Paso in 2007, TransCanada did not move the benefits that the ANR employees had previously accrued under the El Paso Plan to its own Retirement Plan, but instead provided that its Plan would provide future retirement income for "credited service earned on and after January 1, 2008, with "any benefit that you earned under the former El Paso Corporation Pension Plan" being paid in addition to the post-January 1, 2008 benefit. (Id. at ¶32). So the benefits that ANR employees had previously accrued under the El Paso Plan continued to be governed by El Paso's Pension Plan even after the ANR Company subsidiary was acquired by TransCanada Corporation.

4. El Paso Corporation ? Kinder Morgan

In May 2012, the El Paso Corporation was acquired by Kinder Morgan, Inc. As a result of that acquisition, El Paso was merged into Kinder Morgan. (Id. at ¶20). When the El Paso Corporation was acquired by Kinder Morgan in 2012, Kinder Morgan merged El Paso's Pension Plan into Kinder Morgan's with Appendix X (also referred to as the "Coastal Appendix") to reflect special rules for employees of the Coastal Corporation and its subsidiaries, including the ANR employees. (Id. at ¶35).

B. The Evolution of the Pension Plan

The ANR Company had a pension plan which was established in 1960 and merged into the Coastal Corporation Pension Plan in December 1986. The ANR Plan's benefit formula was based on 2% of final average pay for credited service up to 30 years. The plan offered early retirement benefits for employees who attained age 55 with ten years of service with no reduction for retirement at age 62. (Id. at ¶21).

Then the Coastal Corporation acquired ANR Company. The Coastal Corporation had a pension plan which was established in 1967. (Id. at ¶22). The Coastal Corporation's benefit formula was 2% of final pay times years of credited service up to a maximum of 30 years, with a Social Security offset. (Id.) The plan offered early retirement benefits for employees who attained age 55 with five years of service. (Id.) As explained above, when ANR was acquired by Coastal Corporation, Coastal amended its pension plan to provide for a "grandfather" of the ANR benefit formula so that ANR employees could earn benefits under the Coastal Plan's benefit formula and receive the higher of the two pension benefits when all was said and done.

Then the El Paso Corporation acquired the Coastal Corporation. The El Paso Corporation had a pension plan which was established in 1992. (Id. at ¶23). The El Paso Corporation plan's benefit formula was also a 2% of final pay formula. (Id.) The plan also offered early retirement benefits for employees who attained age 55 with five years of service. (Id.) El Paso converted its defined benefit plan to a cash balance formula in 1997, but provided a multi-year transition benefit (from January 1, 1997 to December 31, 2001) under its defined benefit formula that continued to provide the operative benefit for many participants. (Id.). And when El Paso acquired Coastal (and the ANR subsidiary) in 2001, it merged the Coastal Corporation Pension Plan with its own Plan and moved the Coastal Plan participants, including the ANR employees, under the El Paso Plan's formula with their transition period running from April 1, 2001 to March 31, 2006. (Id. at ¶29).

1. The 2007 Notice of the Ninth Amendment

The first significant change to the ANR pension plan occurred in February 2007, when El Paso sold the ANR subsidiary to TransCanada Corporation. (Id. at ¶33). Before the sale of ANR, section 3.2(b) of the El Paso Plan provided that a participant was eligible for an early retirement benefit if he or she "terminates employment after attaining age 55 and completing ten (10) Years of Credited Service." (Id. at ¶33).

But on February 14, 2007, El Paso sent out a notice to all ANR employees alerting them that as of the February 28, 2022 closing date of the sale of the ANR subsidiary to TransCanada Corporation, things would be different:

"Notwithstanding any other Plan term to the contrary, a Participant who . . . is an Employee of ANR Pipeline Company or any other Affiliated Company, on the date on which ANR Pipeline Company ceases to be an Affiliated Company . . . shall be deemed to have terminated employment after attaining age 55 for purposes of determining whether the Participant is entitled to an Early Retirement Benefit in lieu of a Vested Termination Benefit, but not for determining the Participant's earliest Early Retirement Date . . . provided that the Participant is at least age 53 and has not yet attained age 55 on the Closing Date."

(Id. at ¶33). That is to say, El Paso was ending its general policy of granting early retirement eligibility to employees who had turned 55 and completed ten years of service, but was allowing employees who were already 53 at the time of the Notice to keep their early retirement benefits. The 2007 Notice about the Ninth Amendment said nothing about the Pension Plan provision under which benefits were unreduced at age 62. (Id.)

2. The Kinder Morgan Merger

After Kinder Morgan acquired the El Paso Corporation in 2012, the El Paso Pension Plan was merged into the Kinder Morgan Retirement Plan effective December 31, 2012. (Id. at ¶3). On December 4, 2017 Kinder Morgan Retirement Plan A and Plan B replaced the previous Kinder Morgan Retirement Plan. (Id. at 4). Both Plan A and Plan B cover vested participants who were no longer employed by Kinder Morgan on January 1, 2017; the only difference between the two plans is that Plan B covers participants whose accrued benefits had an estimated present value of less than $150,000 while Plan A covers participants whose benefits are valued at more than $150,000. (Id.) Kinder Morgan is the plan sponsor for Kinder Morgan Retirement Plan A and Kinder Morgan Retirement Plan B, and it is responsible for maintaining Kinder Morgan Retirement Plans A and Plan B in compliance with ERISA and for appointing and removing all of the fiduciaries with discretionary responsibilities related to the retirement plan. (Id. at ¶3).

The Kinder Morgan Merger resulted in another controversial change to the...