BP Workers Lose Round in Cash Balance Plan Dispute

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By Carmen Castro-Pagan

Claims by workers accusing BP Corp. North America Inc. of violating ERISA by mishandling the 1989 conversion of its defined benefit pension plan to a cash balance plan were tossed out by a federal judge in Texas ( Guenther v. BP Retirement Accumulation Plan , S.D. Tex., No. 4:16-cv-00995, 2/21/17 ).

Judge Melinda Harmon Feb. 21 granted in part BP’s motion to dismiss, holding that the two participants who filed the lawsuit on behalf of others lacked standing because they didn’t allege they were injured by the conversion. Although they asserted generally that plan participants will receive reduced benefits, they didn’t allege that they themselves have received—or will receive—less than originally promised, Harmon said. She gave the participants 30 days to amend their complaint.

The decision is the most recent to address standing in actions under the Employee Retirement Income Security Act—an issue that may be decided soon by the U.S. Supreme Court.

Harmon declined to adopt the participants’ argument that statutory violations under ERISA are sufficient to demonstrate an injury in fact to provide constitutional standing. Instead, she followed a recent decision, Pundt v. Verizon Communications Inc., in which the U.S. Court of Appeals for the Fifth Circuit held that a bare allegation of improper defined benefit plan management, without more, doesn’t support constitutional standing. A petition for review in Pundt is pending in the high court.

Specific Allegations

Frederick A. Guenther and Walton Fujimoto, who worked for Standard Oil of Ohio prior to its acquisition by BP in 1987, seek to represent a class, comprising approximately 450 or more former Standard Oil employees. They claim that BP failed to provide them a timely and sufficient notice about the plan conversion. They also allege that BP violated ERISA fiduciary duties by using “artificially” high interest rates in calculating the opening balances for participants when it converted the plan.

In a defined benefit plan, as the one at issue in this case, a participant’s interest in the plan is “his nonforfeitable right only to the defined level benefits established under the plan,” Harmon said. Thus, to have standing, a participant must allege that his right to payment is at risk, she said. Because no specific allegations were made by the participants, there can’t be a sufficient injury in fact, Harmon concluded.

Harmon’s decision contrasts with the Labor Department’s position on standing in ERISA cases. Under the Obama administration, the DOL sought to make it easier for pension plan participants to sue over plan mismanagement and investment losses.

Earlier this month, the Second Circuit reversed a district court decision that dismissed a proposed class action against brokerage firm Convergex Group LLC on standing grounds. However, the Second Circuit ruling didn’t address specifically whether statutory violations alone are enough to confer constitutional standing to participants alleging plan mismanagement under ERISA. Instead, the Second Circuit held that allegations describing Convergex’s breach of fiduciary duty and the resulting financial loss sustained—an amount totaling $1,578—were sufficient to confer standing on a participant to bring the lawsuit as a representative of the plan.

Merrick Hofstedt Lindsey PS represents the proposed class. Seyfarth Shaw LLP represents BP.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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