Cogan v. Phoenix Life, (1st Cir. 2002)

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United States Court of Appeals

For the First Circuit



No. 02-1660

BOB COGAN; MITCH BEARDEN; SHAWN BRYAN; DAVID M. CONNELLY;

TREY CORISH; WADE CRAWFORD; JAMES CROVATO; THOMAS DAVIS;

MARC DURAND; JAMES GARRITY; JOHN GUCCIARDO; DINA HANAN; ANN

HARRIS; BOB HOLT; CHRIS HYBARGER; JEFF K. LAYMAN; PATRICK

MCCULLOM; TODD MCDONALD; DAVID M. MCLAUGHLIN; KEN MOORMAN;

MICHAEL MORONEY; TOM NAUTA; GARY NIELSEN; JOHN NOREN; PAUL

OLEYAR; DAVID O'SHEA; PATRICIA PURDY; BOB PYSKADLO; ROBERT

J. RUINEN; AMY STRAIGHT; BRIAN STUMM; MICHAEL WHALEN,

Plaintiffs, Appellants,

v.



PHOENIX LIFE INSURANCE COMPANY; PHOENIX HOME LIFE MUTUAL

INSURANCE COMPANY GROUP SALES REPRESENTATIVE DEFERRED

COMPENSATION PLAN; BENEFIT PLANS COMMITTEE OF PHOENIX HOME

LIFE MUTUAL INSURANCE COMPANY,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. Gene Carter, U.S. District Judge]

Before

Lynch, Circuit Judge,

Stahl, Senior Circuit Judge,

and Howard, Circuit Judge.

Chad A. Cloutier, with whom Joseph M. Cloutier and Joseph M.

Cloutier Associates, P.A., were on brief, for appellants.

Seth W. Brewster, with whom Valerie A. Wright and Verrill &

Dana, LLP, were on brief, for appellees.

November 8, 2002

STAHL, Senior Circuit Judge. Plaintiff-appellants Bob

Cogan et al. appeal from the district court's dismissal of their

complaint alleging violations of the Employee Retirement Income

Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., and contract law

in connection with a deferred compensation plan. We affirm.

I. BACKGROUND

Plaintiffs were formerly employed as sales

representatives of Phoenix Home Life Mutual Insurance Company

("Phoenix I"), now known as Phoenix Life Insurance Company, and are

participants in the Phoenix Home Life Mutual Insurance Company

Group Sales Representative Deferred Compensation Plan ("the Plan").

Defendant-appellees include Phoenix Life Insurance Company, Phoenix

Home Life Mutual Insurance Company, Phoenix Home Life Mutual

Insurance Company Group Sales Representatives Deferred Compensation

Plan, and the Benefit Plans Committee of Phoenix Home Life Mutual

Insurance Company. (1)

Plaintiffs alleged the following facts in their

complaint: The Plan was established in 1997 as a non-qualified

employee benefit plan subject to ERISA. Its purpose was to provide

supplemental retirement benefits for a select group of sales

employees. The Plan provided for retroactive benefits for the

years 1994-96. From 1997 through 1999, Phoenix I credited each

plaintiff's participant account in the Plan with a benefit amount

calculated in accordance with Article 4.2 of the Plan. No funds

were actually set aside, segregated or held in trust for any

plaintiff. Rather, the aggregate amount of the accounts was and

remains part of the general liabilities of Phoenix I.

Shortly before January 1, 2000, Phoenix I formed a

subsidiary called Phoenix American Life Insurance Company ("Phoenix

American"). Plaintiffs' employment was transferred to Phoenix

American, although this change was not disclosed to them at the

time. On or about December 13, 1999, GE Financial Assurance

Holdings, Inc. ("GEFA") announced that it had agreed to purchase

Phoenix American from Phoenix I. The sale closed on April 1, 2000.

Plaintiffs alleged in their complaint that since that date, they

have been employed by GEFA. (2)

In the original Plan, section 5.2 specified the

conditions under which a participant could receive a benefit

payment:

Payment of benefit amounts. . . shall be made

. . . solely upon the occurrence of the

following events and subject to the following

conditions:

a. attainment of normal, early or deferred

retirement age . . .;

b. upon the Participant's death if actively

employed by the Company at the date of death;

c. upon the fifth anniversary of the

Participant's having been determined as having

a permanent and total disability. . . .; or

d. upon elimination of the Participant's

position by the Company.

The Plan also contained a clause permitting amendment:

7.1. The Company shall have the right to amend

this Plan at any time and from time to time,

including a retroactive amendment. Any such

amendment shall become effective upon the date

stated therein, and shall be binding on all

Participants and Beneficiaries, except as

otherwise provided in such amendment;

provided, however that said amendment shall

not adversely affect benefits accrued, but not

yet payable as of the date of the amendment or

benefits payable to a Participant or

Beneficiary where the cause giving rise to

such benefit (e.g., retirement) has already

occurred.

On March 28, 2000, just before GEFA's purchase of Phoenix

American, the Benefits Plan Committee adopted the First Amendment

to the Plan. The First Amendment stated, in relevant part:

1. Anything in Article IV of the Plan to the

contrary notwithstanding, all benefit accruals

under the Plan shall cease accrual of Benefits

effective as of March 31, 2000.

* * * *

3. All other terms, provisions and conditions

of the Plan shall continue to apply except

that for purposes of Section 5.2 and 5.3

referenced [sic] to "Company", "Pension Plan"

and "Welfare Benefit Plan" shall be applied to

mean GE Financial Assurance Holdings, Inc. or

such subsidiary or affiliate thereof by which

a Participant is employed after the effective

date hereof . . . .

4. The effectiveness of this Amendment is

contingent upon the occurrence of the closing

for the purchase of Phoenix American Life

Insurance Company by GE Financial Assurance

Holdings, Inc., and this Amendment shall be

void and of no force or effect if such closing

does not occur.

On or around November 7, 2001, plaintiffs filed a

complaint in the United States District Court for the District of

Maine asserting claims of ERISA violations, breach of contract and

promissory estoppel. On April 4, 2002, the magistrate judge issued

a recommended decision allowing defendants' motion to dismiss for

failure to state a claim. He held that plaintiffs' contract claim

was preempted by ERISA, and that defendants did not violate ERISA

by failing to provide plaintiffs with immediate payment of their

accrued benefits upon the sale of Phoenix American Life to GEFA. (3)

The district court affirmed the recommended decision on May 6,

2002. (4)

II. DISCUSSION

The district court dismissed plaintiffs' claims pursuant

to Rule 12(b)(6) of the Federal Rules of Civil Procedure. We

review the dismissal de novo, "accepting as true all well-pleaded

factual averments and indulging all reasonable inferences in the

plaintiff's favor." SEC v. SG Ltd., 265 F.3d 42, 46 (1st Cir.

2001) (citation and internal quotation marks omitted). "If the

facts contained in the complaint, viewed in this favorable light,

justify recovery under any applicable legal theory, we must set

aside the order of dismissal." Id. (citing Conley v. Gibson, 355

U.S. 41, 45-46 (1957); Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir.

1996)).

Plaintiffs contend in Count I of the complaint that

defendants violated ERISA by failing to provide plaintiffs with

"immediate lump-sum payment of their accrued benefits" upon the

sale of Phoenix American to GEFA. Specifically, they argue that

the sale of Phoenix American eliminated their positions by making

them employees of GEFA, thus triggering their right to receive

benefits pursuant to section 5.2(d) of the Plan.

Such payment is precluded by the First Amendment to the

Plan, which was promulgated under Phoenix I's express reservation

of right in section 7.1. See Kemmerer v. ICI Americas Inc., 70

F.3d 281, 288 (3d Cir. 1995) ("[N]othing in ERISA prohibits the

parties from contracting to limit the employer's right to amend or

terminate a plan."). The First Amendment took effect at the time

of the closing and amended section 5.2(d) to provide, in relevant

part, that payment of benefits becomes due only when plaintiffs'

positions are eliminated by GEFA, not by Phoenix Home Life.

Plaintiffs do not allege that GEFA has eliminated their positions.

Plaintiffs attempt to evade the effect of the First

Amendment to the Plan by contending that it violates ERISA's anti-cutback provision, 29 U.S.C. § 1054(g)(1). Section 1054(g)

provides, in relevant part:

Decrease of accrued benefits through amendment

of plan

(1) The accrued benefit of a participant under

a plan may not be decreased by an amendment of

the plan, other than an amendment described in

section 1082(c)(8) or 1441 of this title.



(2) For purposes of paragraph (1), a plan

amendment which has the effect of--

(A) eliminating or reducing an early

retirement benefit or a retirement-type

subsidy (as defined in regulations), or

(B) eliminating an optional form of benefit,

with respect to benefits attributable to

service before the amendment shall be treated

as reducing accrued benefits.

The anti-cutback provision does not apply here, however,

as the Plan is unquestionably a "top hat" employee benefit plan.

ERISA describes such a plan as "unfunded" and "maintained by an

employer primarily for the purpose of providing deferred

compensation for a select group of management or highly compensated

employees." Id. § 1101(a)(1). The Plan itself echoes this

statutory definition, stating that "[t]his Plan is an unfunded plan

for a select group of highly compensated Participants." Thus,

plaintiffs cannot dispute (and did not dispute below) that the Plan

is a top hat plan within the meaning of ERISA.

Top hat plans are expressly exempted from ERISA's anti-cutback provision. Demery v. Extebank Deferred Comp. Plan (B), 216

F.3d 283, 287 (2d Cir. 2000). Section 1054(g) is contained in Part

2 (Participation and Vesting) of ERISA. The first section of Part

2, "Coverage," provides, in relevant part:

This part shall apply to any employee benefit

plan . . . other than --

* * * *

(2) a plan which is unfunded and is maintained

by an employer primarily for the purpose of

providing deferred compensation for a select

group of management or highly compensated

employees . . . .

29 U.S.C. 1051(2) (emphasis added). Accordingly, we conclude

that the First Amendment did not violate ERISA's anti-cutback

provision, and affirm the dismissal of that claim.

Finally, plaintiffs argue that the district court erred

in dismissing Count II of their complaint, which purports to set

forth a breach of contract claim under federal common law,

apparently apart from ERISA. We are unaware of any such

independent cause of action. "[A] suit by a beneficiary to recover

benefits from a covered plan . . . falls directly under §

502(a)(1)(B) of ERISA, which provides an exclusive federal cause of

action for resolution of such disputes." Metropolitan Life Ins.

Co. v. Taylor, 481 U.S. 58, 62-63 (1987); see also Pilot Life Ins.

Co. v. Dedeaux, 481 U.S. 41, 54 (1987). If the breach of contract

claim for these top hat benefits arose under state law, it would be

preempted. The plaintiffs contend that top hat plans are a "rare

species" of ERISA plan and must be interpreted in keeping with

common law contract principles, citing Kemmerer, 70 F.3d at 288.

Kemmerer makes clear, however, that this contract interpretation is

to be applied within the context of ERISA; it does not provide for

a separate common law contract claim. Id. Accordingly, we agree

with the district court that a separate cause of action for breach

of contract cannot lie. (5)

Affirmed.

1. Defendant Benefit Plans Committee of Phoenix Home Life Mutual

Insurance Company is the administrator of the Plan.

2. At oral argument, however, there was some suggestion that

plaintiffs were employed by Phoenix American, as a wholly-owned

subsidiary of GEFA.

3. The district court also dismissed Count III of the complaint,

holding that it failed to allege the necessary elements of a claim

of promissory estoppel. Plaintiffs do not revisit that issue on

appeal.

4. Copies of the Plan and the First Amendment were attached to

the complaint, and were properly considered by the district court

on the motion to dismiss. See Shaw v. Digital Equip. Corp., 82

F.3d 1194, 1220 (1st Cir. 1996) (court "may properly consider the

relevant entirety of a document integral to or explicitly relied

upon in the complaint . . . without converting the motion into one

for summary judgment").

5. We have considered plaintiffs' other arguments -- that the

court wrongly decided facts and failed to weigh the plan

administrator's conflict of interest -- and conclude that they do

not warrant reversal.

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