Appeal from the United States District Court for the Eastern District of Washington. D.C. No. CV-90-0135-JLQ. Justin L. Quackenbush, District Judge, Presiding. Original Opinion Reported at:,.
Before: Thomas Tang, Jerome Farris, and Pamela Ann Rymer, Circuit Judges. Opinion by Judge Rymer.
This is our second trip through the thicket of pension plans at the Hanford Nuclear Reservation (HNR). In Carver v. Westinghouse Hanford Co., 951 F.2d 1083 (9th Cir. 1991), cert. denied, 120 L. Ed. 2d 905, 112 S. Ct. 3036 (1992), we considered whether Westinghouse Hanford Company (WHC)'s Operating and Engineering Pension Plan (HOEP Plan), adopted after the consolidation of HNR's operations, improperly failed to recognize prior service for other contractors at HNC. We held that the operative plan was the formal plan adopted in December 1987, and that ERISA does not require WHC to tack the years of service accrued for predecessor employers onto its pension plan for purposes of calculating benefits. We also suggested that if WHC had made knowing false representations or concealments of material facts, it might be equitably estopped from interpreting the plan in a manner which does not give HNR employees credit for the time they believe they deserve. 951 F.2d at 1087-88. It is principally this issue - whether WHC can be equitably estopped on account of misrepresentations it made to plaintiff Jimmie Watkins about aggregating prior service and thereby be required to pay benefits promised but not paid - that we must resolve in this appeal.
Following a stipulated facts trial, the district court dismissed the Watkinses' claims under the Employee Retirement Income and Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461, but found that WHC had knowingly misrepresented that all of Watkins's HNR service would be included in the calculation of his benefits. It found that all other elements of estoppel had been established and that the Watkinses were entitled to recover from WHC a lump sum reflecting past benefits promised but not received, as well as the present value of unpaid future benefits promised by WHC but not being paid under the HOEP Plan.
Both parties appeal. As the Supreme Court has recently held, equitable relief in the form of the recovery of compensatory damages is not an available remedy under 29 U.S.C. § 1132(a)(3), which the district court cited as statutory authority for the Watkinses' equitable estoppel claim. Mertens v. Hewitt Assocs., 124 L. Ed. 2d 161, 113 S. Ct. 2063 (1993). We have also recently held that an estoppel claim cannot result in a payment of benefits that would be inconsistent with the written plan. Greany v. Western Farm Bureau Life Ins. Co., 973 F.2d 812, 822 (9th Cir. 1992). As this is the effect of the relief in this case, that part of the district court's judgment cannot stand. We have jurisdiction, 28 U.S.C. § 1291, and we accordingly reverse that part of the judgment which awards damages on the Watkinses' claim for equitable estoppel. We affirm the district court's judgment on the Watkinses' ERISA claims and deny their request for attorney's fees on appeal.
Since the end of World War II, the United States Department of Energy (DOE) and its predecessors have operated the Hanford Nuclear Reservation in Benton County, Washington. A series of private contractors have performed work on HNR. Because changes in job functions did not always coincide with changes in private contractors, the common practice at HNR was for successor contractors to employ individuals who had worked for a predecessor contractor. The employees would perform essentially the same work at HNR; they would, however, work for a different employer.
Almost all of the private contractors had their own pension plans. This was true of the two contractors that employed Jimmie Watkins during his time at HNR: WHC and Rockwell Hanford Operations (Rockwell). Watkins worked for WHC from July 1, 1974 until July 14, 1981; during that time, Watkins obtained vested rights to accrued pension benefits under the Westinghouse Hanford Company Pension Plan (Westinghouse Plan). From August 1, 1981 until June 28, 1987, Watkins was a Rockwell employee and a participant in the Rockwell Hanford Operations Plan (Rockwell Plan). The Rockwell Plan gave Watkins no credit for his time with WHC; consequently, Watkins obtained no vested rights in accrued pension benefits under the Rockwell Plan.
In 1986, DOE decided to consolidate the primary responsibility for HNR's daily operations with one private contractor, WHC, effective June 29, 1987. On that date, Watkins was "terminated by transfer" from Rockwell to WHC, and he again became a WHC employee.
Prior to the consolidation, WHC determined that the assets of the private contractors' pension plans should be merged into a single, site-wide pension plan, the HOEP Plan. The HOEP Plan was a "High Five" plan - one in which the benefits paid out would equal a percentage of the employee's compensation over her or his highest five compensation years times the number of years of "credited service." A major issue during the reorganization was whether an employee would receive recognition under the HOEP Plan for all of her or his years of service at HNR under all the various contractors. Because it took time to negotiate, the final HOEP Plan wasn't adopted until December 30, 1987. It was made retroactive to the June 29, 1987 consolidation date.
Soon after the consolidation, WHC announced a Voluntary Reduction in Force Program (VRF Program) for all eligible employees, including Watkins. Under the VRF Program, an employee who retired early would be entitled to receive pension benefits prior to the usual retirement age.
On October 28, 1987, Watkins wrote to WHC, requesting a calculation of his pension benefits in the event he chose to participate in the VRF Program. In particular, Watkins wanted to know whether his initial time with WHC and his time with Rockwell would be combined for purposes of computing his benefits.
By letter dated November 12, 1987, WHC informed Watkins that if he chose early retirement, all of his prior service at HNR would be combined, both for vesting and benefits-computation purposes. At the time, however, no one at WHC and no one on the Plan's Administrative Committee (Committee), the Plan's administrator, knew whether the HOEP Plan would provide for the computation of benefits based on the aggregation of all preconsolidation and postconsolidation service at HNR. WHC did not inform Watkins of this uncertainty. The district court found that neither WHC nor any of its employees "in bad faith, deliberately tried to mislead" Watkins in connection with this letter. Rather, the district court found "that the misrepresentations were due to some type of misunderstanding, miscommunication, or misinterpretation of the pending" HOEP Plan's provisions.
After he received this letter, Watkins decided to retire early from his $52,000-per-year job and participate in the VRF Program, effective January 1, 1988. On that date, Watkins received $8,030.80 in separation pay and began to receive HOEP Plan monthly pension benefits of $657.14; the calculation of Watkins's monthly benefits included all of his preconsolidation service at HNR.
On May 10, 1988, WHC announced another round of workforce reduction programs, including the Special Voluntary Retirement Program (SVR Program). The SVR Program offered eligible employees an additional three years of age and three years of service for purposes of computing pension benefits, as well as an additional $250 monthly "bridge" payment until the age of Social Security eligibility. WHC made the SVR Program available to former employees, including Watkins, who participated in the VRF Program, provided those employees would refund to WHC the amount they received in separation pay.
On August 1, 1988, WHC informed Watkins that if he were to participate in the SVR Program, his new monthly benefits would total $1,023.93, exclusive of the $250 "bridge" payment. WHC continued to include Watkins's preconsolidation service with WHC and Rockwell in its calculation of monthly benefits. As of August 1, 1988, however, the Committee had determined that the HOEP Plan's express provisions recognized prior service only to the extent that prior service was recognized under the pension plan of the employer for which the employee worked immediately prior to the consolidation. As of the same date, at least one Committee member, Michael Byrd, WHC's Pensions & Savings Investments Manager, was aware that Watkins's monthly benefits were computed based on all of his preconsolidation HNR service, in contravention of the HOEP Plan. However, Byrd took no action at the time to correct the situation. The district court found this was a knowing misrepresentation.
On August 29, 1988, Watkins elected to participate in the SVR Program and refunded the $8,030.80 he had received in separation pay. He then began receiving enhanced monthly pension benefit payments.
On May 17, 1989, Byrd notified Watkins that his HOEP benefits had been calculated erroneously to include his preconsolidation years with WHC (1974 through 1981). Byrd informed Watkins that, although his monthly payments would include a $213.51 annuity payable under the Westinghouse Plan, Watkins's monthly payments under the HOEP Plan would be reduced to reflect the fact that his initial WHC years did not count as "credited service." Watkins never was asked to refund (and he never has refunded) any HOEP Plan benefits he received prior to May 17, 1989.
Watkins appealed the recalculation of his pension benefits to the Committee. On August 3, 1989, the Committee denied the appeal. The Watkinses then filed this lawsuit, alleging that WHC was estopped to change Watkins's original benefits calculation; WHC had failed to interpret the Plan in accordance with ERISA; and WHC had failed to interpret the Plan in accordance with its express provisions.
The district court ruled in the Watkinses' favor on their estoppel claim, but in WHC's favor on the remaining claims for relief. It held that the HOEP Plan, as it was finally adopted and amended, was the "sole document to be interpreted." Applying a heightened standard of review, the court concluded the Watkinses had failed to establish that WHC incorrectly denied paying Watkins's claim for benefits.
On their appeal, the Watkinses argue that WHC and the district court erred because WHC's November 12, 1987 letter established an ERISA plan. They also argue that the Westinghouse Plan and the Rockwell Plan were merged into and continued as a part of the HOEP Plan. As a result, they contend, WHC was obliged either as successor employer to Rockwell or under the old Westinghouse Plan to restore and aggregate Watkins's prior service with WHC for purposes of calculating his HOEP Plan benefits as well as for vesting, accrual, and other purposes. Further, assuming that the operative plan is comprised of the November 12, 1987 letter, the Westinghouse Plan document, the Rockwell Plan document, and the HOEP Plan document, the Watkinses contend that the Committee abused its discretion in two respects: first, by decreasing Watkins's pension in May, 1989 - and retroactively ending accrual of benefits under the Westinghouse and Rockwell Plans as of the date of consolidation - without the formal action which is required for plan amendments; and second, by changing its interpretation of the plan so as to disregard non-contiguous credited service prior to consolidation in the calculation of pension benefits. Alternatively, the Watkinses argue that the HOEP Plan itself requires calculation of early retirement allowances on the basis of "credited service," which in their view includes prior service for Westinghouse. Finally, they urge that to deny pre-break benefits as the Committee did contravenes ERISA because 29 U.S.C. § 1060 requires aggregation of pre-break and post-break service.
WHC responds that the district court correctly found that the HOEP Plan document is the only applicable plan. Under the HOEP Plan, benefits depend on the years of credited service determined in accordance with the plan of the employer for which the participant last worked - Rockwell, in Watkins's case. Because the Rockwell Plan gives no credit for Westinghouse service, Watkins's 1974-1981 Westinghouse service may not be included for purposes of applying the HOEP final pay formula. However, WHC notes, the old Westinghouse and Rockwell Plans remain in effect for purposes of paying benefits accrued under them. Thus, Watkins continues to receive vested benefits under the old Westinghouse Plan based on its "career average" formula; and he continues to receive benefits for ...