RETIREMENT COMMITTEE OF DAK AMERICAS LLC, as Plan Administrator of the DAK Americas LLC Pension Plan; TRANSAMERICA RETIREMENT SOLUTIONS CORPORATION, Plaintiffs-Appellees,
MARK STEPHEN BREWER; WARREN ALBERT GARRISON; JAMES F HOLLAND; SIDNEY HUGH RHODES, Defendants-Appellants, and MENDELL W. SMITH; OTELLA IRENE WEBB; JEROME BRYANT; JOSEPH ALEXANDER BELLAMY; KELVIN L. GALLOWAY; DAVID W. ALLEN; MICHAEL LYNN BASS; HAROLD E. CORBETT; WILLIAM LACEY NELSON; JIMMIE RAY SELLERS; RODNEY B. SMITH, Defendants. RETIREMENT COMMITTEE OF DAK AMERICAS LLC, as Plan Administrator of the DAK Americas LLC Pension Plan; TRANSAMERICA RETIREMENT SOLUTIONS CORPORATION, Plaintiffs-Appellees,
RODNEY B. SMITH, Defendant-Appellant, and MARK STEPHEN BREWER; WARREN ALBERT GARRISON; HAROLD E. CORBETT; JAMES F. HOLLAND; WILLIAM LACEY NELSON; SIDNEY HUGH RHODES; JIMMIE RAY SELLERS; MENDELL W. SMITH; OTELLA IRENE WEBB; JEROME BRYANT; JOSEPH ALEXANDER BELLAMY; KELVIN L. GALLOWAY; DAVID W. ALLEN; MICHAEL LYNN BASS, Defendants.
Argued: May 10, 2017
from the United States District Court for the Eastern
District of North Carolina, at Wilmington. Louise W.
Flanagan, District Judge. (7:14-cv-00036-FL)
S. Babel, WARD & SMITH, PA, Wilmington, North Carolina;
William Cory Reiss, SHIPMAN & WRIGHT, LLP, Wilmington,
North Carolina, for Appellants.
William J. Delany, MORGAN, LEWIS & BOCKIUS, LLP,
Washington, D.C., for Appellees.
M. Wilson, Wilmington, North Carolina, Michael L. Miller,
WARD & SMITH, PA, Raleigh, North Carolina, for Appellants
Brewer, Garrison, Holland, and Rhodes. Marianne Hogan,
MORGAN, LEWIS & BOCKIUS, LLP, Washington, D.C., for
MOTZ, AGEE, and DIAZ, Circuit Judges.
complaint in this case, brought under the Employee Retirement
Income Security Act of 1974 ("ERISA"), 29 U.S.C.
§ 1001 et seq., relates to the DAK Americas LLC
Pension Plan (the "Plan"), a defined benefit
pension plan established by DAK Americas LLC
("DAK") and administered by the Retirement
Committee of DAK Americas LLC (the "Committee")
with administrative support services provided by Transamerica
Retirement Solutions Corporation ("Transamerica, "
collectively with the Committee, the "Plaintiffs").
The Plaintiffs initiated this lawsuit to recover alleged
overpayments of retirement benefits to certain employees of
DAK who were participants in the Plan, including Mark Stephen
Brewer, Warren Albert Garrison, James F. Holland, Sidney Hugh
Rhodes, and Rodney B. Smith (collectively, the
"Defendants"). The Defendants filed counterclaims
asserting they were entitled to retain the disputed funds. On
the parties' cross-motions for summary judgment, the
district court awarded summary judgment to the Plaintiffs and
concluded there was an overpayment of funds which must be
returned to the Plan. The Defendants' cross-motions for
summary judgment were denied. For the reasons that follow, we
affirm in part and vacate in part the judgment of the
district court, and remand for certain further proceedings
only as to Rodney B. Smith ("Smith").
contemplates two basic types of pension plans: defined
contribution plans and defined benefit plans. This case
involves a defined benefit plan, in which the retirement
benefit is calculated as a certain annual amount that the
plan pays during the employee's lifetime, beginning at
the employee's retirement. See ERISA §
3(35), 29 U.S.C. § 1002(35). Most defined benefit
pension plans offer normal retirement annuity benefits based
on a normal retirement age of 65, permitting a participant to
retire at that age and receive an unreduced accrued benefit
that is calculated based on the terms of the plan. Treas.
Reg.. § 1.417(e)-1; see also, e.g., Lyons v.
Georgia-Pac. Corp. Salaried Emps. Retirement Plan, 221
F.3d 1235, 1252 (11th Cir. 2000) ("The 'normal
retirement benefit' . . . is the amount a participant
would have received at age 65 under the Plan . . . .").
Many employers also offer plans, like the Plan in this case,
that provide early retirement annuity benefits. See
Barbara J. Coleman, Primer on Employee Retirement Income
Security Act 32-33 (4th ed. 1993).
addition to the traditional monthly annuity benefits,
employers may offer participants the option to elect a lump
sum. Under ERISA and the Internal Revenue Code, employers
that offer defined benefit pension plans providing early
retirement annuity benefits maintain latitude in determining
what kind of optional lump sum benefit they may choose to
provide. See Treas. Reg. § 1.411(a)-11. In industry
argot, lump sum benefits may be "subsidized" or
"unsubsidized." An "unsubsidized" lump
sum benefit is based on a participant's normal retirement
date. See Treas. Reg. § 1.411(d)-4. By
contrast, a "subsidized" lump sum is calculated
using a participant's early retirement date. Id.
announced plans to close its Cape Fear, North Carolina, plant
in June 2013. The following month, DAK voted to amend the
Plan by adding a new benefit option: an unsubsidized lump sum
early retirement benefit available to certain of the Plan
participants who were separating from service with DAK due to
the plant closure. The lump sum would be available in
addition to other payment options under the Plan. To
implement this additional benefit option, Plan Amendment
Number One (the "Amendment") was adopted, which
provides, in part:
4.15. Special Immediate Payment for Certain Participants:
Each Participant in the group of Participants at the
Employer's Cape Fear site who is severed from service
with the Employer as a result of closing the Employer's
plant at the Cape Fear site on or about September 1, 2013 (a
"Cape Fear Participant") shall, subject to the
spouse consent requirements of Section 4.10(c)(2), have the
option to elect to receive an immediate lump sum distribution
within 60 days following such severance from service.
Such lump sum shall be Actuarially Equivalent to the Cape
Fear Participant's Accrued Benefit and shall not be
available if the Cape Fear Participant does not elect it
within such time period. Any such Cape Fear Participant who
has not yet reached his Early Retirement Age also shall have
the option to receive an actuarially equivalent . . .
immediate annuity payable in the form of a Qualified Joint
and Survivor Annuity or a Joint and Survivor Annuity . . . .
J.A. 54 (emphasis added). In voting to adopt the Amendment,
the only item considered was a calculation offering a
one-time unsubsidized lump sum based on a participant's
Accrued Benefit at Normal Retirement Date.
otherwise specifically stated in the Amendment, the terms
defined in the Plan govern the Amendment. See United
McGill Corp. v. Stinnett, 154 F.3d 168, 173 (4th Cir.
1998) ("[W]e are bound to enforce the contractual
provisions as drafted."). For instance, the Plan defines
"Accrued Benefit" as "[t]hat portion, at any
given date, of a Participant's Normal Retirement
Benefit that has accrued at such
date." J.A. 63 (emphasis added).
And a participant's "Normal Retirement Benefit"
is "[t]he benefit payable at the Normal Retirement Date,
as described in Section 4.1." J.A. 77. In turn, Section
4.1 describes the Normal Retirement Benefit available under
the Plan, including who is eligible for the Normal Retirement
Benefit, how that benefit is calculated, and the form in
which it is to be paid (a monthly life annuity). A Plan
participant's Normal Retirement Date corresponds with
"[t]he first day of the month coinciding with or next
following a Participant's Normal Retirement Age."
Plan also offers an Early Retirement Benefit option,
described in Section 4.3 of the Plan as "payable at a
participant's Early Retirement Date." J.A. 68.
"Early Retirement Date" is defined as "[t]he
first day of any calendar month after a Participant's
Early Retirement Age and before his Normal Retirement Age on
which the Participant elects to begin receiving Early
Retirement Benefits." J.A. 68. Participants who meet
certain age and years of service requirements may elect an
Early Retirement Benefit (in lieu of waiting for the Normal
Retirement Benefit) in the form of a monthly annuity
"reduced based on the Participant's age when
benefits begin and Years of Service" under the Plan.
September 30, 2013, the Plaintiffs sent a letter
("September 30 Letter") to eligible Plan
participants informing them of the Amendment's lump sum
benefit option in addition to the existing Early Retirement
and Normal Retirement annuities. That letter summarized the
lump sum amount available under the Amendment, but the amount
stated was incorrectly calculated. Transamerica had
calculated the lump sum payment based on the actuarial
equivalent at the Early Retirement Date for the Plan
participants, not the Normal Retirement Date. Acting on this
information in the September 30 letter, some plan
participants made an election to receive the lump sum in lieu
of either the Early Retirement or Normal Retirement
annuities. Due to the calculation error, the Defendants
received more generous lump sum payments than those to which
they were entitled.
Defendants were notified of the error two months after the
initial, incorrect lump sum calculations and less than a
month and a half after receiving the incorrect lump sum
distributions. In a letter dated December 5, 2013 (the
"December 5 Letter"), the Plaintiffs notified the
Defendants there had been a calculation error and provided
the correct amount for the lump sum that should have been
paid under the Amendment. The December 5 Letter also included
a revised election package so that Plan participants could
elect the correct alternative lump sum benefit option if they
did not wish to receive payments under the Plan's annuity
provisions. In addition, the December 5 Letter informed
Defendants that failure to promptly return the overpayment
amount to the Plan could result in "significant negative
tax consequences" and described those potential tax
liabilities. J.A. 188.
Defendants were again advised of their individual corrected
lump sum benefit amounts and given a second election
opportunity in a letter dated December 16, 2013 (the
"December 16 Letter"). This letter provided a
60-day window to make anew their retirement benefits
election. Attached to that letter was a Calculation Worksheet
that explained in detail the two lump sum calculations and
the reason for the erroneous initial calculation.
the Defendants received lump sums totaling $2.6 million,
which included $928, 000 in alleged overpayments. Most of the
Plan participants affected by the lump sum calculation error
either returned the entire lump sum payment and elected an
annuity option benefit during the second 60-day election
window or simply returned the amount of the stated
overpayment. Although each of the Defendants had the second
election opportunity while possessing the correct information
regarding the lump sum amount and the adverse tax
consequences of failing to return the funds promptly, the
Defendants did not remit the disputed funds or make an
view of the Defendants' failure to timely remit the
disputed payments, the Plaintiffs filed suit in the United
States District Court for the Eastern District of North
Carolina, asserting an equitable restitution claim under
ERISA's civil enforcement provision, 29 U.S.C. §
1132(a)(3). The Defendants asserted counterclaims for breach
of fiduciary duty and constructive fraud, seeking surcharge
as a remedy. They also asserted an equitable estoppel
defense. In particular, the Plaintiffs sought an order
requiring the Defendants to return the claimed pension
benefit overpayments. The district court entered a
preliminary injunction on March 24, 2014, pending final
resolution of the ...