Guenther v. BP Retr Accumulation

Citation: Not availableDocket: 21-20617

Court: Court of Appeals for the Fifth Circuit; October 7, 2022; Federal Appellate Court

Original Court Document: View Document

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In the case before the United States Court of Appeals for the Fifth Circuit (No. 21-20617), Fredric A. Guenther and Walton Fujimoto, former employees of Standard Oil of Ohio (Sohio), initiated a class action against BP Corporation North America and the BP Retirement Accumulation Plan (RAP), alleging violations of the Employee Retirement Income Security Act (ERISA). The plaintiffs contend that during BP's conversion of the Sohio Plan into the RAP, Sohio Legacy Employees were denied proper credit for their accrued benefits. Specifically, they argue that BP did not appropriately calculate the opening account balances for the RAP by using earlier dates rather than the official Conversion Date of January 1, 1989, and applied an unreasonably high interest rate of eight percent to determine the present value of the benefits, leading to a perpetual undervaluation of their retirement accounts. The Appellant, Michael Press, sought to intervene in the class action after nearly five years of litigation, but both the plaintiffs and defendants opposed this motion. The district court denied the intervention, and the appellate court affirmed this denial, maintaining that the plaintiffs continue to oppose the Appellant's involvement.

The complaint alleges that BP misrepresented to Sohio Legacy Employees that their benefits under the Retirement Accumulation Plan (RAP) would be equal to or better than those under the Alternate Retirement Plan (ARP). The Guenther Plaintiffs sought reformation of the RAP to ensure affected employees' retirement benefits matched what they would have received under the ARP. After amending their complaint while preserving its core allegations, BP moved to dismiss, resulting in the district court dismissing all claims except the one for RAP reformation, which the court ordered to be repleaded with a recognized cause of action. Subsequently, the Guenther Plaintiffs filed a second amended complaint alleging BP breached its fiduciary duties under ERISA, seeking equitable relief including reformation and remedies such as surcharge and equitable estoppel.

After extensive discovery, the Guenther Plaintiffs moved to certify their class, which was referred to a magistrate judge. BP opposed this motion and sought summary judgment. The magistrate judge recommended certifying a general class and subclass under Rule 23(b)(2), defining the general class as individuals under age 50 as of January 1, 1989, who were active participants in the RAP on that date and had retirement benefits under the ARP exceeding those offered by the RAP. The subclass consisted of general class members who signed a release upon separation from employment.

Separately, on September 14, 2020, Michael Press and 276 others (the Press Plaintiffs) filed a two-count complaint against BP America and BP p.l.c., alleging similar breaches of fiduciary duty regarding disclosures about the Conversion, seeking equitable relief and claiming unjust enrichment against BP p.l.c. BP America moved to transfer the Press Action to the Southern District of Texas, which the district court granted, citing the similarity of parties and claims between the two actions and the advanced stage of the Guenther Action.

The Press Action was stayed upon its transfer to the Texas district court while awaiting the outcome of the class certification motion in the Guenther Action. On March 26, 2021, the Press Plaintiffs sought to intervene in the Guenther Action to challenge the magistrate judge’s recommendation for class certification, asserting a right to intervene and requesting permissive intervention if the former claim was not accepted. On March 31, 2021, the district court fully adopted the magistrate’s recommendation without addressing the Press Plaintiffs’ motion. Following this, the Press Plaintiffs aimed to intervene to opt out of the certified class or to join as named plaintiffs. However, on December 7, 2021, the district court denied their motion. 

The court first analyzed the intervention as of right under a four-factor test. It assumed the first three factors were satisfied but focused on the fourth: whether the Press Plaintiffs' interests were adequately represented by existing parties. The court concluded that since both the Guenther and Press Plaintiffs shared the same goal of addressing a pension shortfall due to alleged fiduciary breaches and ERISA violations, there was a presumption of adequate representation, leading to the denial of the motion for intervention as of right. Regarding permissive intervention, the court determined that permitting the Press Plaintiffs to intervene would unnecessarily delay the Guenther Action and that their interests were sufficiently represented by the existing class.

On appeal, the Press Plaintiffs contested only the denial of their intervention as of right, arguing that the certified class in the Guenther Action did not adequately represent their interests. The criteria for intervention as of right require a timely application, a relevant interest in the action, a situation where the action's disposition could impair the ability to protect that interest, and inadequate representation by existing parties, as outlined by Federal Rule of Civil Procedure 24(a)(2). The ruling on intervention denials is reviewed de novo, with the burden on the movant to demonstrate their entitlement to intervene, although Rule 24 is to be interpreted broadly.

The court accepts the movant's factual allegations as true at this stage, requiring only a minimal showing of inadequate representation under Rule 24(a)(2). A movant must demonstrate that existing representation may be inadequate without needing to prove certainty. However, two presumptions must be overcome: one concerning legal representation of an absentee (not applicable here) and another relating to shared objectives between the movant and existing parties. To counter the latter presumption, the movant must show adversity of interest, collusion, or nonfeasance.

Adversity of interest requires demonstrating that the movant's interests diverge from those of the existing party in a relevant manner. Mere differences in litigation strategy or a desire to present additional arguments do not satisfy this requirement. The possibility of future settlements does not, by itself, indicate inadequate representation. 

The district court denied the Press Plaintiffs’ motion to intervene, asserting they did not overcome the presumption of shared objectives with the Guenther Plaintiffs. On appeal, the Press Plaintiffs argue their interests are distinct, citing differences in the pension shortfall theory and the remedies sought. However, the court found that these arguments misinterpret the nature of the Guenther Action, which shares similar factual allegations and the same primary harm regarding insufficient disclosures related to the Conversion under ERISA. Both groups ultimately seek to rectify alleged inaccuracies in their retirement plans, thus sharing the same ultimate objective. Disagreement over trial strategy does not constitute inadequate representation, as plaintiffs have opportunities to amend pleadings throughout the litigation process.

The absence of a specific theory from the Guenther Plaintiffs’ second amended complaint does not imply its abandonment; they may still pursue it if the case goes to trial. This theory is one of various strategies to demonstrate BP's breach of fiduciary duties. The Press Plaintiffs fail to identify any unique interest that conflicts with the Guenther Plaintiffs, as their claims do not establish a distinct risk of adverse representation. While the Press Plaintiffs argue for distinct remedies—such as surcharge, disgorgement, and restitution—these are already encompassed within the Guenther Plaintiffs' request for "all equitable relief" related to BP's breach. The certification of the Guenther Action as seeking reformation does not preclude the pursuit of alternative remedies. Additionally, the Press Plaintiffs' concern over inadequate representation due to the absence of BP p.l.c. from the Guenther Action lacks substance, as both groups seek identical remedies based on the same breach of fiduciary duty. Lastly, the Press Plaintiffs reference a case (La Union del Pueblo Entero) to support their position on intervention, but the relevance of this precedent is not clearly established in the context of the current actions.

Several Republican Party committees sought to intervene in a legal case under Rule 24(a)(2), but their motion was initially denied. Upon appeal, the court reversed this decision, allowing the committees to intervene as of right due to potential divergent interests from the governmental defendants, despite a shared goal of upholding election law. The governmental defendants preferred to dismiss the case based on sovereign immunity and standing, while the committees aimed for a definitive ruling on the statute’s constitutionality, as their resources and the rights of their members were at stake.

In contrast, the Press Plaintiffs failed to demonstrate unique interests distinct from those of the Guenther Plaintiffs, undermining their claim for intervention. They argued that denial of intervention deprived them of due process as they risked having their interests overlooked without the ability to opt out of the Guenther Action. The court cited precedent (Woolen v. Surtran Taxicabs, Inc.) emphasizing the importance of intervention for individuals whose interests might be ignored in a class action without opt-out rights. However, since the Press Plaintiffs could not articulate a unique interest that would be jeopardized by the Guenther Plaintiffs' defense strategy, the court concluded that their interests were adequately represented despite their absence. Consequently, the court affirmed the denial of their intervention request.