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RAMSEY v. AMFAC

March 12, 1997

KIM RAMSEY AND ADAM KOLLAR, individually and on behalf of all others similarly situated, Plaintiffs,
v.
AMFAC, INC., NORTHBROOK CORPORATION, et al., Defendants.



The opinion of the court was delivered by: LEGGE

 This class action concerns competing claims to money held in a single-employer, defined-benefit, employee pension plan that defendants terminated on December 31, 1994. The dispute arises from conflicting interpretations of the effect of the Retirement Protection Act of 1994 ("RPA"), Pub. L. No. 103-465, 108 Stat. 5012 (1994), on the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. This court has subject matter jurisdiction over this dispute under 29 U.S.C. section 1132(e)(1) and 28 U.S.C. section 1331. Plaintiffs move for judgment on the pleadings on Count I, and defendant Northbrook cross-moves for summary judgment on Count I.

 I.

 The record of the motions and the pleadings establish the following facts without dispute:

 Defendant Amfac created an employee benefit plan in 1989 by merging twelve previously established subplans into one. Since December 1992, defendant Northbrook has administered the plan. *fn1" At all relevant times, the plan has provided that Northbrook would receive 100% of any reversion and that Northbrook retained full authority to amend or terminate the plan at any time. (Retirement Plan for Employees, Ex. A to Walich Dec., P 14.01.) In October 1994, Northbrook notified the plan participants that the plan would terminate on December 31, 1994.

 On December 8, 1994, President Clinton signed the RPA as part of the General Agreement on Tariffs and Trade ("GATT") legislation. The RPA authorizes pension plan administrators to calculate the present value of vested benefits according to the interest rate on 30-year U.S. Treasury securities rather than the rates set monthly by the Pension Benefit Guaranty Corporation ("PBGC"). *fn2" The rate set by the RPA is higher than the rates previously used.

 Before terminating the plan, Northbrook amended the plan to use the interest rate authorized by the RPA when calculating the present value of benefits. Because Northbrook had previously used a lower interest rate, the amendment reduced the present value of plaintiffs' vested future benefits and increased the portion of the plan's assets that reverted to Northbrook following termination. According to plaintiffs, approximately $ 5 million of Northbrook's total reversion would have been distributed to the plan beneficiaries if not for the amendment.

 II.

 Plaintiffs filed this action on December 1, 1995 and filed their first amended complaint on April 12, 1996. Plaintiffs allege that Northbrook breached its fiduciary duties under ERISA sections 403(c)(1) and 404(a)(1) and 29 U.S.C. sections 1103(c)(1) and 1104(a)(1) by adopting and implementing the RPA amendment. There are two classes of plaintiffs involved in this action. Count I of the complaint affects only those people who received a lump sum payment or distribution following termination of the plan (the "GATT class"), and alleges violations of sections 4044(d)(2)(A) and 401(c)(1) of ERISA. Count II, alleging violation of section 404(a)(1) of ERISA, is not at issue in these motions. It affects those people who participated and were vested in a cash balance subplan of the plan (the "Cash Balance Class"). The court refers to the GATT class as the "plaintiffs" for the purpose of these motions and this order.

 In these motions on Count I, plaintiffs claim that Northbrook violated ERISA section 4044(d)(2)(A), 29 U.S.C. § 1344(d)(2)(A), by treating the December 1994 amendment on interest rates as effective before the end of the fifth calendar year following the date Northbrook adopted the amendment. Northbrook asserts that the immediate adoption of the RPA interest rates was consistent with the RPA and section 4044(d)(2)(A), and that Northbrook therefore distributed the plan's assets in accordance with the terms of a lawfully amended plan. Northbrook argues that Congress specifically authorized it to employ the RPA actuarial assumptions immediately.

 Rule 12(c) of the Federal Rules of Civil Procedure provides that "after the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings." Fed.R.Civ.P. 12(c). A plaintiff as well as a defendant may bring a motion under 12(c). Moran v. Peralta Community College Dist., 825 F. Supp. 891, 893 (N.D.Cal. 1993). Judgment under Rule 12(c) is proper "when the moving party clearly establishes on the face of the pleadings that no material issue of fact remains to be resolved and that it is entitled to judgment as a matter of law." Hal Roach Studios v. Richard Feiner and Co., 896 F.2d 1542, 1550 (9th Cir. 1990).

 Summary judgment should be granted if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the burden of "informing the district court of the basis for its motion and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).

 No material facts are in dispute in these motions. The motions present issues of law appropriate for decision on the present record.

 III.

 Plaintiffs make two arguments: First, they argue that Northbrook adopted and implemented the RPA amendment in violation of ERISA section 4044(d)(2)(A) because it did not wait five years before making the amendment effective. Second, plaintiffs argue that Northbrook's distributions of plan assets upon termination contravened various provisions of law and therefore violated ERISA section 403(c)(1). Northbrook disagrees with both arguments and contends that its contrary interpretations are correct as a matter of law.

 A. ERISA's Five Year Rule

 1. Statutory Language

 In 1987, Congress enacted the Pension Protection Act ("PPA"), Pub. L. No. 100-203, 101 Stat. 1330-333 (1987), amending various sections of ERISA. The PPA added a new subparagraph (2) to ERISA ...


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