Tibble v. Edison Int'l

729 F.3d 1110

Glenn TIBBLE; William Bauer; William Izral; Henry Runowiecki; Frederick Suhadolc; Hugh Tinman, Jr., as representatives of a class of similarly situated persons, and on behalf of the Plan, Plaintiffs–Appellants,

v.EDISON INTERNATIONAL; The Edison International Benefits Committee, fka The Southern California Edison Benefits Committee; Edison International Trust Investment Committee; Secretary of the Edison International Benefits Committee; Southern California Edison's Vice President of Human Resources; Manager of Southern California Edison's HR Service Center, Defendants–Appellees.

Glenn Tibble; William Bauer; William Izral; Henry Runowiecki; Frederick Suhadolc; Hugh Tinman, Jr., as representatives of a class of similarly situated persons, and on behalf of the Plan, Plaintiffs–Appellees,

v.Edison International; The Southern California Edison Benefits Committee, incorrectly named The Edison International Benefits Committee; Edison International Trust Investment Committee; Secretary of the Southern California Edison Company Benefits Committee, incorrectly named Secretary of the Edison International Benefits Committee; Southern California Edison's Vice President of Human Resources; Manager of Southern California Edison's HR Service Center, Defendants–Appellants.

Nos. 10–56406, 10–56415.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 6, 2012.

Filed March 21, 2013.

Amended Aug. 1, 2013.

Michael A. Wolff, Schlichter, Bogard & Denton, LLP, St. Louis, MO, argued the cause and filed the briefs for the plaintiffs-appellants. With him on the briefs were Jerome J. Schlichter, Nelson G. Wolff, and Jason P. Kelly, Schlichter, Bogard & Denton, LLP, St. Louis, MO.

Jonathan D. Hacker, O'Melveny & Myers LLP, Washington, DC, argued the cause and filed the briefs for the defendants-appellees/cross-appellants. With him on the briefs were Walter Dellinger, Robert N. Eccles, Gary S. Tell, O'Melveny & Myers LLP, Washington, D.C., as well as Matthew Eastus, and China Rosas, O'Melveny & Myers LLP, Los Angeles, CA.

Elizabeth Hopkins, U.S. Department of Labor, Washington, DC, argued the cause and filed the brief for the Secretary of Labor as amicus curiae in support of plaintiffs-appellants. With her on the brief were Stacey E. Elias, M. Patricia Smith, and Timothy D. Hauser.

Jay E. Sushelsky, AARP Foundation Litigation, Washington, DC, filed the brief for the AARP as amicus curiae in support of plaintiffs-appellants. With him on the brief was Melvin Radowitz, AARP, Washington, D.C.

Nicole A. Diller, Alison B. Willard, and Abbey M. Glenn, Morgan, Lewis & Bockius LLP, San Francisco, CA, filed the brief for the California Employment Law Council as amicus curiae in support of defendants-appellees/cross-appellants.

Thomas L. Cubbage III, Covington & Burling LLP, Washington, DC, filed the brief for the Investment Company Institute as amicus curiae in support of defendants-appellees/ cross-appellants. With him on the brief was S. Michael Chittenden, Covington & Burling LLP, Washington, DC.

Appeal from the United States District Court for the Central District of California, Stephen V. Wilson, District Judge, Presiding. D.C. No. 2:07–cv–05359–SVW–AGR.

Before: ALFRED T. GOODWIN, and DIARMUID F. O'SCANNLAIN, Circuit Judges, and JACK ZOUHARY, District Judge.^*

ORDER AND AMENDED OPINIONORDER

I

The opinion filed March 21, 2013, and published at 711 F.3d 1061, is amended as follows:

Beginning on slip opinion page 28 delete the text from court has held that in cases implicating ERISA § 404 fiduciary duties,> through slip opinion 31 John Blair impel us to apply Firestone, and so we do.>. In place of the deletion substitute the following:

Firestone outside of the benefits context. See John Blair Commc'ns, Inc. Profit Sharing Plan v. Telemundo Grp., Inc. Profit Sharing Plan, 26 F.3d 360, 369–70 (2d Cir.1994). Other circuits have read Firestone more broadly, stating that its deference can reach beyond ERISA actions that arise under section 1132(a)(1). See, e.g., Hunter v. Caliber Sys., Inc., 220 F.3d 702, 711 (6th Cir.2000) (“[W]e find no barrier to application of the arbitrary and capricious standard in a case such as this not involving a typical review of denial of benefits.”); Moench v. Robertson, 62 F.3d 553, 565 (3d Cir.1995) (“[W]e believe that after Firestone, trust law should guide the standard of review over claims, such as those here, not only under section 1132(a)(1)(B) but also over claims filed pursuant to 29 U.S.C. § 1132(a)(2) based on violations of the fiduciary duties set forth in [ERISA § 404].”).

In relevant part, John Blair involved a challenge under ERISA § 404 to how assets had been allocated. 26 F.3d at 370. The plaintiffs argued that the defendant had breached its fiduciary duty by retaining surplus income generated by virtue of a lag between when plan members elected to move assets and the actual transfer of the funds. Id. at 362, 368. As a defense, the fiduciary argued that the terms of the Plan authorized it to allocate the assets as it had, and that because the Plan “gave the plan committee discretion to interpret the provisions of the [P]lan” the court was bound to approve of its allocation unless it determined that the decision to do so had been “arbitrary and capricious” under Firestone.Id. at 369.

Rejecting that framework, the Second Circuit instead decided to evaluate the claim under the “prudent person standard articulated in § 404 of ERISA.” Id. As support for this approach, the court cited a pre-Firestone authority from the Third Circuit and a pair of district court decisions from within the Second Circuit. See Struble v. N.J. Brewery Emps.' Welfare Trust Fund, 732 F.2d 325, 333–34 (3d Cir.1984); Ches v. Archer, 827 F.Supp. 159, 165–66 (W.D.N.Y.1993); Trapani v. Consol. Edison Emps.' Mut. Aid Soc'y, Inc., 693 F.Supp. 1509, 1515 (S.D.N.Y.1988). Relying on John Blair and Struble, beneficiaries argue that their claim is similarly exempt from Firestone. We disagree.

As noted above, this specific challenge by beneficiaries has been brought under 29 U.S.C. § 1104(a)(1)(D), which is part of ERISA § 404. See Tibble, 639 F.Supp.2d at 1096 (explaining that beneficiaries “move[d] for summary judgment on the basis that [Edison] violated the terms of the Plan by failing to pay the full extent of Hewitt's recordkeeping costs”). While subsection (a)(1)(B) codifies the statutory prudent-person standard, subsection (a)(1)(D) simply requires that actions be in line with the plan documents. See29 U.S.C. § 1104(a)(1). John Blair was an attempt by a fiduciary to escape from otherwise applicable duties on the basis of a plan interpretation. The Second Circuit declined to apply Firestone deference because of a concern about bootstrapping. See John Blair, 26 F.3d at 369. Similarly, the district court decisions it favorably cited were examples of fiduciaries trying to weaken or evade the statutory standard of prudence. See Ches, 827 F.Supp. at 165 (rejecting defendants' argument that “they cannot be found to have breached their fiduciary duties in the absence of an allegation and a showing that their determinations had been arbitrary and capricious”); Trapani, 693 F.Supp. at 1514 (“Defendants argue that the court must apply an arbitrary and capricious standard, rather than the prudent man standard specifically set forth in the statute.”).¹

Edison is not making any such argument here, as beneficiaries have not pursued this challenge as a violation of the prudent person standard; instead, their contention rises or falls exclusively on what Plan section 19.02 allows. ² As to issues of plan interpretation that do not implicate ERISA's statutory duties, they are subject to Firestone.

At least three considerations prompt us to hold that the Firestone framework can govern issues of plan interpretation even when they arise outside the benefits context. First, while the Firestone case did not announce a holding beyond benefits, its rationale did not stem from an interpretive gloss on the welfare-benefits provision of ERISA. See489 U.S. at 108, 109, 109 S.Ct. 948 (“ERISA does not set out the appropriate standard of review for actions under § 1132(a)(1)(B) challenging benefit eligibility determinations.”). Instead, because “ERISA abounds with the language and terminology of trust law” and because of legislative history to that effect, that body of law—not a discrete provision—dictated “the appropriate standard of review.” Id. at 110–11, 109 S.Ct. 948 (“Trust principles make a deferential standard of review appropriate when a trustee exercises discretionary powers.”). The law of trusts was the basis for the dual-track standard whereby, absent a contrary designation, de novo review applies. See id. at 111, 109 S.Ct. 948. The Supreme Court's most recent analysis of Firestone reenforces that the deference underlying that case is a product of what trust law has to say about matters of interpretation. See Conkright, 130 S.Ct. at 1646 (“[U]nder trust law, the proper standard of review of a trustee's decision depends on the language of the instrument creating the trust. If the trust documents give the trustee power to construe disputed or doubtful terms, ... the trustee's interpretation will not be disturbed if reasonable.” (alterations in original) (internal citation and quotation marks omitted)).

Second, one reason the Court in Conkright rejected an exception the Second Circuit had carved out from Firestone deference was its potential to create “uniformity problems.” 130 S.Ct. at 1650. The concern was that if de novo review sometimes applied, fiduciaries would be in the “impossible situation” of being subject to different plan interpretations by courts depending on the particular facts of the cases where the interpretive issue had arisen. Id. Not applying Firestone deference in this case would risk similar difficulties, as parts of a plan could be assigned one meaning when litigated under section 1132(a)(1)(B)...