Mein, Peter G. v. Carus Corporation

Citation: Not availableDocket: 00-2618

Court: Court of Appeals for the Seventh Circuit; February 20, 2001; Federal Appellate Court

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Peter G. Mein filed a lawsuit against Carus Corporation and related parties under the Employee Retirement Income Security Act (ERISA) after a prolonged dispute regarding contributions to his 401(k) plan. Carus Corporation adopted a pension plan in 1979, contributing 4% of employee compensation, defined as gross income for tax purposes. Mein's conflict arose from a 1985 employment agreement that included royalties and a phantom equity interest. After arbitration, a settlement in 1988 led to Carus paying Mein $575,000 in installments, which were included in his gross income per W-2 forms.

The dispute began in 1991 when Mein inquired whether his settlement payments were eligible as compensation for his 401(k). Carus responded with various memos stating that these payments were classified as severance settlements and not eligible compensation. In 1994, Mein filed a breach-of-contract case in state court, which was dismissed for lack of jurisdiction, as it was deemed an ERISA claim. The appellate court agreed but allowed Mein to amend his case to properly frame it under ERISA. However, the trial court later dismissed the amended case due to Mein's failure to exhaust administrative remedies, a decision affirmed by the appellate court, which noted that he had not demonstrated that such remedies would have been clearly useless.

The court dismissed Mein's argument that the plan was not the appropriate venue for his claims regarding unpaid contributions. He had previously appealed an administrative decision, where the trustee informed him that payments made were part of a settlement agreement, thus not qualifying as compensation under the plan. In 1999, nearly ten years into the dispute, Mein filed a complaint under ERISA against Carus Corporation and minority shareholder M. Blouke Carus, claiming the company was obligated to contribute 4% of a specified amount to his 401(k) plan. The defendants moved to dismiss, arguing they were not the correct parties for an ERISA claim, and the plan itself, not named as a defendant, was the only proper party. The district judge allowed Mein to amend his complaint to include the plan but maintained the dismissal of the original defendants. Mein insisted his claim was solely against Carus Corporation and Blouke Carus, leading the defendants to file another dismissal motion, asserting that Mein failed to seek relief from the plan and did not allege any entitlement under its terms. Mein countered with a motion for summary judgment, reiterating that he sought relief only from the corporation and its guarantor. The court granted the defendants' motion to dismiss, and Mein appealed. The analysis indicated a complexity due to Mein's insistence on excluding the plan from his claims, while also recognizing that the corporation served as the plan administrator, which is permitted under ERISA. The court highlighted that, contrary to Mein's belief, the plan administrator has the authority to interpret plan provisions and determine compensation.

In ERISA claims, the proper defendant is typically the employee benefit plan itself, as established by Title 29, U.S.C. sec. 1132(d), which states that any money judgment against a plan is enforceable only against the plan and not against individuals unless their individual liability is proven. In Jass v. Prudential Health Care Plan, it was clarified that judgments are enforceable solely against the plan. However, in Riordan v. Commonwealth Edison Co., the court allowed a case to proceed against the employer rather than the plan, noting that the relationship between the employer and the plan was not clearly defined. Despite the general rule, the employer’s failure to seek summary judgment based on the incorrect entity claim and the intertwined nature of the employer and plan in this case supported the plaintiff's choice to sue the employer. The plan documents used interchangeable terms for the employer and plan, and the employer acted as the plan's agent for service of process. The close relationship is further evidenced by the plan administrator being the employer itself, which has complete control over plan administration. Consequently, the court declined to dismiss the plaintiff's claim against the employer for contributions, affirming that the employer could be a proper party given the circumstances, while also recognizing that plan interpretation is ultimately the responsibility of the plan administrator.

Mein has named the Carus Corporation Capital Accumulation Plan as a defendant while simultaneously claiming he does not have a claim against it. However, the plan administrator, which is the Carus Corporation, determines the requirements and definitions of the plan. Despite Mein's assertion, he effectively acknowledged the plan's role in his amended complaint, stating that the plan is a party defendant to ensure complete relief. The plan stipulates that the company must contribute 4% of an employee's compensation, defined as all amounts received during the Plan Year that are includible in gross income and any elective contributions not currently includible under Code Section 401(k). The plan administrator has the authority to interpret the plan and make final determinations regarding employee eligibility and compensation definitions.

In this case, the plan administrator concluded that a payment of $575,000, plus interest, was not compensation for services rendered but was instead for the release of Mein’s equity interest in the Special Products Division. This payment was characterized as severance pay, which is excluded from compensation under the plan. The administrator's interpretation was deemed reasonable and therefore upheld. Consequently, the court affirmed the dismissal of Mein's complaint. Notably, the defendants' argument for dismissal based on Mein's lack of a claim against the plan involved extraneous matters outside the pleadings, and the resolution of the case will consider the entire record.