Second Circuit: Amending a Plan is Not a Fiduciary Act

On August 27, 2012, in Janese, et al. v. Fay, et al., the Second Circuit held that trustees of a multi-employer pension fund do not act as fiduciaries when they amend the pension plan. Although it may not be a controversial decision, this holding is still significant because it expressly overruled contrary Second Circuit authority, specifically Chambless v. Masters, Mates & Pilots Pension Plan, 772 F.2d 1032 (2d Cir. 1985) and Siskind v. Sperry Ret. Program, Unisys, 47 F.3d 498 (2d Cir. 1995).

This lawsuit was brought on behalf of participants and beneficiaries of the former Niagara-Genesee & Vicinity Carpenters Local 280 Pension and Welfare Funds. The defendants were present and former trustees or plan managers of the Funds. Counts I-V of the Complaint alleged various plan amendments breached the trustees’ fiduciary duties.

The Western District of New York granted defendants’ motion to dismiss, specifically finding that plaintiffs’ claims were time-barred under ERISA § 413. On appeal to the Second Circuit, the defendants-appellees sought to affirm the dismissal of Counts I-V, but on the basis that the challenged actions were pension plan amendments, which are not fiduciary actions and therefore do not violate ERISA § 404(a)(1). In analyzing this issue, the Second Circuit considered three Supreme Court decisions.

In Curtiss-Wright Corp. v. Schoonejongen, the Supreme Court declared, “Employers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans.” 514 U.S. 73, 78 (1995). In Lockheed Corp. v. Spink, the Supreme Court extended the rule of Curtiss-Wright to pension benefit plans. 517 U.S. 882, 890 (1996). In Hughes Aircraft Co. v. Jacobson, the Supreme Court again extended its conclusions in Curtiss-Wright and Lockheed Corp., finding that the decisions applied “with equal force to persons exercising authority over a contributory plan, a noncontributory plan, or any other type of plan.” 525 U.S. 432, 443-44 (1999).

While neglecting to resolve whether the above Supreme Court language could be considered “holdings or only highly persuasive dicta,” the Second Circuit found “ample justification” to abrogate Chambless and Siskind with respect to multi-employer plans; thus holding that the Supreme Court’s language analyzing fiduciary duties under ERISA was equally applicable to multi-employer plans. Janese, 2012 WL 3642315 at *5. In so holding, the Second Circuit joined the Third, Sixth and District of Columbia Circuits in finding that employers and plan sponsors do not act in a fiduciary capacity when they amend multi-employer plans. Thus, the Second Circuit concluded, “Counts I through V were subject to dismissal because the Defendants were not acting as fiduciaries when they amended the plans.” Id.

This case is a good reminder that adopting a plan amendment is not a fiduciary act. An early motion to dismiss is thus a good strategy to deal with allegations that trustees breached their fiduciary duties when adopting amendments to a plan. As always, plan sponsors and employers concerned about the legal consequences of any plan amendments should seek legal counsel for specific, fact-based advice.

The case is Janese, et al. v. Fay, et al., Nos. 11-5369-cv(L), 12-80-cv(XAP), 2012 WL 3642315 (2d Cir. Aug. 27, 2012)