Opinion
Civil Case No. 02-4339 (MJD/JGL)
January 8, 2004
Ruth S. Marcott, Marnie E. Polhamus, Felhaber, Larson, Fenlon Vogt, P.A., for Plaintiffs
Stephen P. Lucke, Matthew E. Klien, Dorsey Whitney LLP, for Defendants
MEMORANDUM AND ORDER
I. INTRODUCTION
This matter is before the Court on Defendants' Motion to Dismiss, pursuant to Fed.R.Civ.P. 12(b)(6), and Plaintiffs' Motion for Partial Summary Judgment, pursuant to Fed.R.Civ.P. 56(c). For the reasons that follow, the Court grants Defendants' Motion to Dismiss in part, and denies Plaintiffs' Motion for Partial Summary Judgment.
II. BACKGROUND
A. The Parties
The nine named plaintiffs in this action were mechanics for Defendant Northwest Airlines ("NWA"). They all retired from NWA after April 30, 1992, after having completed 10 years of vesting service. All named Plaintiffs receive pensions from Defendant Northwest Retirement Plan for Contract Employees (the "Plan"). They all retired from NWA before reaching the age of 62, but are all currently older than 62 years old.
The Plan is a defined benefit pension plan for the benefit of certain union-represented employees. NWA is the plan administrator and the employer plan sponsor of the Plan.
B. The Escalator Clause
In 1993, Northwest Airlines and its mechanics union agreed to an "escalator clause" within its retirement plan. An escalator clause allows qualified participants to receive pension benefit payments at any higher rate that is negotiated as part of the next new retirement plan. The clause stated:
A Participant who, after April 30, 1992, retires on a Normal Retirement Pension, Early Retirement Pension or Disability Retirement Pension [or] Special Early Retirement Pension after attainment of age 62 and completion of 10 Years of Vesting Service will have his monthly dollar amount per year of Benefit Accrual Service increased for payments commencing after April 30, 1992, in accordance with any higher rate(s) that, under the next new Retirement Plan Agreement, become effective for the Participant's Schedule for Accrued Benefits determined after such date.
According to NWA, the clause only provides increased benefits to plan participants who have reached the age of 62 at the time that they retire. NWA claims that the clause does not provide additional benefits to participants who reach age 62 after they have retired.
Plaintiffs claim that when they retired, they did so with the understanding that when they reached the age of 62, if there was an increase in benefits in a subsequent retirement plan agreement, those increased benefits would be passed on to them under the escalator clause. In 2001, the retirement plan agreement was amended and pension benefits substantially increased. Plaintiffs are now over the age of 62 and seek the additional 2001 benefits under the escalator clause. Defendants have refused to increase Plaintiffs' payments.
Plaintiffs filed the underlying Complaint against Defendants NWA and the Plan. Plaintiffs allege that by failing to pay increased benefits to Plaintiffs under the escalator clause Defendants have violated the Age Discrimination in Employment Act, 29 U.S.C. § 623, ("ADEA") (Count One); the Minnesota Human Rights Act § 363.03 (Count Two); and the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132(a)(1)-(3), 1140 ("ERISA"). Defendants responded with a Rule 12(b)(6) motion to dismiss the entire Complaint, except for Plaintiffs' claim under 29 U.S.C. § 1132(a)(1). Plaintiffs have also filed a motion for partial summary judgment on Count One.
III. DISCUSSION
A. Standard
For the purposes of the Defendant's Motion to Dismiss, the Court takes all facts alleged in Plaintiffs' Complaint as true. Westcott v. Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). Further, the Court must construe the allegations in the Complaint and reasonable inferences arising from the Complaint favorably to Plaintiff. Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986). A motion to dismiss will be granted only if "it appears beyond doubt that the plaintiff can prove no set of facts which would entitle him to relief." Id. The Court applies those standards in the following discussion.
B. Count One: ADEA Claims
Plaintiffs claim that NWA has violated the ADEA by interpreting the escalator provision to only allow increased pension benefits to employees who were 62 years old or older when they retired. Under its interpretation of the clause, NWA treats different classes of employees differently, based solely on their age. Plaintiffs allege that this differential treatment is prohibited by the ADEA.
The ADEA states
It shall be unlawful for an employer . . . to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age.29 U.S.C. § 623(a)(1). Individuals are defined under the statute as those "who are at least 40 years of age." 29 U.S.C. § 631(a). The ADEA protects persons who are over 40 years of age and does not protect those persons under age 40. E.E.O.C. v. Liberal R-II Sch. Dist. 314 F.3d 920, 922 (8th Cir. 2002). The ADEA clearly protects older members of the protected class from being discriminated against in favor of younger individuals, even if the younger individuals are also over the age of 40. Rinehart v. City of Independence, Mo., 35 F.3d 1263, 1265 (8th Cir. 1994). Plaintiffs claim that the ADEA also protects younger class members from discrimination against them in favor of older class members.
Plaintiffs' claim for reverse age discrimination is a matter of first impression in the Eighth Circuit. The majority of courts that have addressed this issue have held that such a claim is not cognizable under the ADEA. See, e.g., Hamilton v. Caterpillar Inc., 966 F.2d 1226, 1228 (7th Cir. 1992) (holding that the "ADEA does not provide a remedy for reverse age discrimination"); Schuler v. Polaroid Corp., 848 F.2d 276, 278 (1st Cir. 1988) (holding that the ADEA "does not forbid treating older personsmore generously than others"). In Hamilton, the Seventh Circuit noted that there was no indication that "Congress believed age to be the equal of youth in the sense that the races and sexes are deemed to be equal." Hamilton, 966 F.2d at 1227. The court further reasoned, "If the Act were really meant to prevent reverse age discrimination, limiting the protected class to those 40 and above would make little sense." Id. Although the Supreme Court has not yet decided whether the ADEA gives rise to claims for reverse age discrimination, the Court appears to have assumed as much. See O'Connor v. Consol. Coin Caterers Corp., 517 U.S. 308, 313 (1996) ("[T]he fact that a replacement is substantially younger than the plaintiff is a far more reliable indicator of age discrimination than is the fact that the plaintiff was replaced by someone outside the protected class.") (emphasis added).
On the other hand, the Sixth Circuit recently held that the ADEA generally does allow claims for reverse age discrimination. Cline v. Gen. Dynamics Land Sys., Inc., 296 F.3d 466, 472 (6th Cir. 2002),cert. granted 123 S.Ct. 1786 (Apr. 21, 2003). TheCline court reasoned that "by the law's plain language, an employer may not discriminate against any worker age 40 or older on the basis of age." Id. at 469. In order to find that the ADEA permits reverse discrimination, the court would have to go beyond the plain language of the statute and hold that "any individual" actually means "older workers." Id.
The Supreme Court has granted certiorari to resolve the split of authority among the courts regarding whether the ADEA recognizes a claim for "reverse discrimination." Cline v. Gen. Dynamics Land Sys. Inc., 123 S.Ct. 1786 (Apr. 21, 2003). This Court need not decide whether the ADEA generally bars "reverse discrimination," because, even assuming that such a claim is generally permitted under the ADEA, the statute explicitly allows the type of pension plan at issue in this lawsuit.
The ADEA specifically states:
It shall not be a violation of [the ADEA] solely because an employee pension benefit plan . . . provides for the attainment of a minimum age as a condition of eligibility for normal or early retirement benefits.29 U.S.C. § 623(1)(1)(A).
Thus, the ADEA explicitly allows for a pension plan to only grant increased benefits to employees who retire after reaching a particular age. In this case the Plan sets a minimum age, 62, for eligibility for an early retirement benefit: the escalator clause. This case is similar to the facts presented in Greer v. Pension Benefit Guaranty Corporation, No. 00 CIV 1272, 2001 WL 137330 (S.D.N.Y. Feb. 15, 2001). In Greer, two versions of the defendant's early retirement plans based the amount of benefits that the employee received on the employee's age at the time of retirement. Id. *2. Generally, the older the employee was at the time of retirement, the higher the percentage of benefits the employee would receive.Id. The Greer court held that "[e]ven if the ADEA does allow for reverse age discrimination claims," under section 623(1)(1)(A, the pension plan at issue was "perfectly legal."Id. at *5.
Plaintiffs argue that section 623(1)(1)(A) should be interpreted as allowing a minimum age for distribution of benefits, but that a plan may not use age to establish the right to the benefit itself. Under Plaintiffs' reading, once an employee reaches that minimum age, even if that occurs long after the employee has retired, the employee begins to receive the benefits.
The statute states that employers may set a minimum age foreligibility for the benefits. Given its logical reading, the statute allows employers to set a minimum age that an employee must reach by the time of retirement in order to retire under a particular early retirement plan. This reading is not only the logical interpretation of section 623(1)(1)(A), it is only interpretation that has been adopted by other federal courts. See Stone v. Travelers Corp. 58 F.3d 434, 437 (9th Cir. 1995) (holding that under section 623(1)(1)(A), an employer may legally offer severance benefits in the form of a pension plan to employees who are over the age of 55 when they retire and not offer a pension plan to employees who are under 55 when they retire); Greer v. Pension Ben. Guar. Corp., 2001 WL 137330, at *5 (discussed above); Dittman v. Gen. Motors Corp.-Delco Chassis Div., 941 F. Supp. 284, 286-87 (D. Conn. 1996) (holding that the ADEA section 623(1)(1)(A) "specifically permits" a pension plan that made "generous early retirement plans available to employees who were over age fifty, but not to employees between ages forty and fifty").
Finally, Cline, the case relied on by Plaintiffs, did not address setting a minimum age for eligibility for pension plans. In holding that the ADEA generally allowed reverse discrimination claims, the Cline court clearly distinguished, as permissible, the scenario in which the employer set a minimum age for participation in a pension plan. See Cline, 296 F.3d at 473 (Cole, J., concurring) (noting that "[s]ection 623(1)(1)(A) allows an employer to set a minimum age as a condition for eligibility in a pension plan").
Plaintiffs also argue that section 623(1)(1)(A) is subject to the ADEA provision governing benefit accruals under a defined benefit plan: section 623(i)(1)(A). Section 623(i)(1)(A) states:
Except as otherwise provided in this subsection, it shall be unlawful for an employer . . . to establish or maintain an employee pension benefit plan which requires or permits — in the case of a defined benefit plan, the cessation of an employee's benefit accrual, or the reduction of the rate of an employee's benefit accrual, because of age . . .
Plaintiffs maintain that the escalator clause is an accrued benefit and that by not providing these benefits to them because they were younger than 62 at retirement, NWA is ceasing or reducing their accrued benefits based on their age.
Congress enacted section 623(i)(1) in order "to require employers to credit employees on their pensions for employment that continued after normal retirement age." Atkins v. Northwest Airlines. Inc., 967 F.2d 1197, 1199 (8th Cir. 1992). Section 623(i) generally targets retirement plans that refuse to credit participants for their years of service worked after normal retirement age, see EEQC Compliance Manual § 3 (ADEA Issues Part V.A), or create a step-down system for benefits. In this case, Plaintiffs fail to allege that their benefit accrual was ever reduced or ceased during their benefit accrual period. Plaintiffs' benefit accrual was ever ceased or reduced at any point — it simply was not increased. Additionally, Plaintiffs fail to cite to a single authority for the proposition that a pension plan violates the ADEA by providing enhanced benefits to employees who retire after reaching a particular age.
For the foregoing reasons, the Court grants Defendants' Motion to Dismiss at to Count One of the Complaint.
C. Count Two: MHRA Claim
Plaintiffs also claim age discrimination under the MHRA. Minn. Stat. § 363.03. The Minnesota courts have not decided the issue of whether the MHRA permits a claim for reverse age discrimination. The Court need to decide this issue, however. To the extent that the MHRA does not recognize such a claim, Count Two fails to state a claim. To the extent that the MHRA does recognize reverse age discrimination claims, the MHRA is preempted by ERISA.
ERISA is a comprehensive federal statute that regulates plans providing employees with fringe benefits. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983). ER1SA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" regulated by ER1SA. 29 U.S.C. § 1144(a); Shaw, 463 U.S. at 91. ERISA's "pre-emption clause is conspicuous for its breadth." FMC Corp. v. Hollidav, 498 U.S. 52, 58 (1990); Shaw, 463 U.S. at 96. "A law `relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." Shaw, 463 U.S. at 96-97. A state law may be preempted even though it was not designed to affect benefit plans and its effect on such plans is only incidental. Kuhl v. Lincoln Nat. Health Plan of Kansas City. Inc., 999 F.2d 298, 302 (8th Cir. 1993). For example, a state anti-discrimination law that "prohibits employers from structuring their employee benefit plans in a manner that discriminates on the basis of pregnancy . . . clearly `relate[s] to' benefit plans." Shaw, 463 U.S. at 97.
ERISA also contains a savings clause: ER1SA shall not be "construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States." 29 U.S.C. § 1144(d); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91 (1983). This savings clause should not be read expansively and should create "only very limited exceptions to pre-emption." Shaw, 463 U.S. at 104. This clause has been interpreted to save state employment discrimination laws that aid in the enforcement of federal anti-discrimination laws, such as the ADEA. The Supreme Court has noted that, "[g]iven the importance of state fair employment laws to the federal enforcement scheme, pre-emption of [state law] would impair Title VII to the extent that the [state law] provides a means of enforcing Title VII's commands." Shaw, at 102. However, if a state law prohibits an employment practice that is lawful under the ADEA, then preemption would not impair the enforcement of the ADEA, and the state law does not fall within the savings clause.Shaw, 463 U.S. at 103-04.
In this case, to the extent that the MHRA permits a claim for reverse age discrimination based on the pension plan at issue in the lawsuit, the MHRA clearly relates to an employee benefit plan regulated by ER1SA. Like the state anti-discrimination law at issue in Shaw, Plaintiffs' reading of the MHRA "prohibits employers from structuring their employee benefit plans in a manner that discriminates." Shaw, 463 U.S. at 97. As explained above in Part Ill(B), however, the ADEA does not recognize a claim for age discrimination based on the pension plan at issue in this lawsuit. Thus, to the extent that the MHRA does recognize such a claim, it is preempted by ER1SA. For the foregoing reasons, the Court grants Defendants' Motion to Dismiss as to Count Two of the Complaint.
D. Count Three: ERISA Claims
1. ERISA § 502(a)(2)
Plaintiffs allege that NWA violated ERISA section 502(a)(2) by, among other things, failing to follow the terms of the Plan by not awarding Plaintiffs increased benefits under the escalator clause. Section 502(a)(2) states that a "civil action may be brought . . . by a participant . . . for appropriate relief for breach of fiduciary duty. 29 U.S.C. § 1132(a)(2). Plaintiffs claim that they are seeking appropriate relief on behalf of all plan participants in the form of an injunction or specific performance requiring NWA to follow the terms of the Plan. Defendants argue that Plaintiffs' claim should be dismissed because section 502(a)(2) claims may only be brought on behalf of an ERISA plan to obtain relief for that plan.See, e.g., Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142-44 (1985).
To the extent that Plaintiffs' are seeking payment of past and future pension benefits, Plaintiffs do not state a claim for relief under section 502(a)(2). See Conley v. Pitney Bowes, 176 F.3d 1044, 1047 (8th Cir. 1999) (affirming the dismissal of a beneficiary's section 502(a)(2) claim for past and future benefits on the grounds that section 502(a)(2) "provides relief only to a plan and not to individual beneficiaries"). However, section 502(a)(2) "does authorize a participant or beneficiary to seek relief for a plan" where the beneficiary produces "evidence of a pattern or practice of fiduciary violations that require reform." Id. Plaintiffs allege that NWA has systematically failed to follow the Plan's terms and has mishandled accrued benefits. Thus, Plaintiffs do allege the type of pattern or practice that may require plan-wide reform.
The Court may not dismiss a claim unless "it appears beyond doubt that the plaintiff can prove no set of facts which would entitle him to relief." Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986). Although Plaintiffs may not seek payment of past and future benefits under section 502(a)(2), because Plaintiffs may be able to prove some set of facts that would entitle them to equitable relief on behalf of the Plan, Defendants' motion to dismiss Plaintiffs' section 502(a)(2) claim is denied.
2. ERISA § 502(a)(3)
Plaintiffs claim that Defendants violated ERISA section 502(a)(3) by failing to advise Plaintiffs that if they retired before reaching age 62, they would not receive the escalator benefit. ER1SA § 502(a)(3) authorizes suits by a participant "(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief." 29 U.S.C. § 1132.
Defendants argue that Plaintiffs are merely seeking payment of past benefits, which is legal, not equitable relief, and, therefore, their claims must be dismissed. See, e.g., Great-West Life Annuity Ins. Co. v. Knudson, 534 U.S. 204, 210-11 (2002) (holding that "an injunction to compel the payment of money past due under a contract, or specific performance of a past due monetary obligation" is not equitable relief).
In their section 502(a)(3) claim, Plaintiffs allege that the Defendants failed to disclose material facts as required by ER1SA and to comply with plan terms. An employer's "communications to the plan participants about pension benefits . . . are subject to ERISA's fiduciary standards."Anderson v. Resolution Trust Corp., 66 F.3d 956, 960 (8th Cir. 1995). For these violations, Plaintiffs seek compliance with plan terms, appropriate disclosure of material facts, and future compliance with the plan provisions, particularly when the next retirement plan agreement is negotiated.
Claims for payment of past benefits are adequately addressed under a claim for benefits under section 502(a)(1)(B), and thus a claim for equitable relief under section 502(a)(2) is inappropriate. Wald v. Southwestern Bell Corp. Customcare Med. Plan, 83 F.3d 1002, 1006 (8th Cir. 1996). To the extent that Plaintiffs are seeking payment of past benefits under 502(a)(2), this claim cannot survive. However, to the extent that Plaintiffs are seeking injunctive relief under 502(a)(3),Hall v. LHACO, Inc., 140 F.3d 1190, 1197 (8th Cir. 1998), or reform of a system-wide error in enforcement of the plan provisions,Conley v. Pitney Bowes, 176 F.3d 1044, 1047 (8th Cir. 1999), their claims survive. At this early point in the proceedings, the Court cannot say that as a matter of law Plaintiffs will not be able to prove some set of facts that will entitle them to some form of equitable relief. Thus, Defendants' motion to dismiss Plaintiffs section 502(a)(3) claim must be denied.
3. ERISA § 510
ERISA § 510 makes it unlawful to "discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under [a Plan] or for the purpose of interfering with the attainment of any right to which such participant may become entitled under [a Plan]." 29 U.S.C. § 1140. Plaintiffs allege that NWA has violated ERISA § 510 by discriminating in its provision of benefits to retirees. Plaintiffs assert that they would have timed their retirement differently if NWA had disclosed and discussed their interpretation of the escalator clause to them.
Defendants claim that to state a claim under ERISA § 510, Plaintiffs must allege "an adverse employment action." Kinkead v. Southwestern Bell Tel. Co., 49 F.3d 454, 456 (8th Cir. 1995). Because Plaintiffs do not allege adverse employment action, Defendants reason, Plaintiffs' § 510 claim should be dismissed.
Plaintiffs rely on Vartanian v. Monsanto Co., 14 F.3d 697 (1st Cir. 1994), for the proposition that their assertion is sufficient to form the basis of a § 510 claim. In Vartanian, the First Circuit allowed a section 510 claim where a retiree claimed that he would not have retired when he did, but for his employer's misleading statement that it was not considering a more generous retirement package.Id. at 703. Plaintiffs assert NWA's failure to disclose its interpretation of the escalator clause caused them to time their retirement differently.
Defendants are correct that Plaintiffs' section 510 claim may not survive based merely on the allegation that Defendants provided more substantial benefits to employees who retired after reaching age 62 than it did to those who retired before reaching age 62. A section 510 claim requires a negative change in the employment relationship, not merely a change in the pension plan itself. See, e.g., McGath v. Auto Body North Shore Inc., 7 F.3d 665, 668 (7th Cir. 1993) ("[A] fundamental prerequisite to a § 510 action is an allegation that the employer-employee relationship, and not merely the pension plan, was changed in some discriminatory or wrongful way."). In this case, Plaintiffs argue that they would have timed their retirement differently if NWA had disclosed its interpretation of the escalator clause to them.
As noted above, the Court may only grant a motion to dismiss if "it appears beyond doubt that the plaintiff can prove no set of facts which would entitle him to relief." Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986). A complaint should not be dismissed merely because it "does not state with precision all elements that give rise to a legal basis for recovery" or "because the court doubts that a plaintiff will prevail in the action." Thomas W. Garland, Inc. v. City of St. Louis, 596 F.2d 784, 787 (8th Cir. 1979). At this point in the litigation, the Court is not in a position to determine whether Plaintiffs can prove a set of facts that would place them under theVartanian scenario. Accordingly, Defendants' motion to dismiss Plaintiffs' section 510 claim is denied.
IV. CONCLUSION
Therefore, the Court grants Defendant's motion to dismiss with regard to Count One of the Complaint, Plaintiffs' ADEA claim, and with regard to Count Two of the Complaint, Plaintiffs' MHRA claims. The Court denies Defendant's motion to dismiss with regard to Count Three of the Complaint, Plaintiffs' ER1SA claims. Because the Court grants Defendant's motion to dismiss as to Count One, the Court denies Plaintiffs' motion for summary judgment on that claim as moot.
IT IS HEREBY ORDERED that
(1) Defendants' motion to dismiss [Docket No. 6] is GRANTED as to Counts One and Two and DENIED as to Count Three; and
(2) Plaintiffs' motion to for summary judgment [Docket No. 10] is DENIED.