Hunter v. Berkshire Hathaway, Inc., 829 F.3d 357, 358 (5th Cir. 2016), involved the interpretation of parties’ rights and obligations regarding a pension plan following a corporate acquisition. Its discussion of the extent to which an employer can obligate itself not to change a plan, even when benefits are not vested, is noteworthy.
Berkshire Hathaway acquired Justin Industries in 2000, at a time when Justin’s subsidiary, Acme, had a pension plan that supposedly was overfunded by approximately $60 million. As part of the acquisition, the parties entered into a Merger Agreement that provided that Berkshire would not cause Acme to reduce pension benefits for 12 months, or reduce the employer contributions pursuant to the plan. There was no time limit on the later obligation. After various failed attempts to require Acme to reduce benefits, in 2014 Berkshire gave Acme an ultimatum that the Plan had to be amended (either to reduce employer contributions or to allow for such changes in the future), or Berskshire would divest itself of Acme. Acme made the change Berkshire requested.
Various employees sued Acme and Berkshire for violation of the Merger Agreement, for breach of fiduciary duty by Acme; and for Berkshire’s knowing participation in Acme’s breach of duty. The district court dismissed all claims, and the Fifth Circuit affirmed in part and reversed in part.
First, the court agreed that dismissal against Acme was proper, because the Merger Agreement did not restrict Acme’s ability to modify the Plan – it merely restricted Berkshire’s ability to cause Acme to do so. Thus, Acme had the right to amend the plan, and because plan amendment was a settlor function, it could not breach its fiduciary duty in doing so.
But the court found that plaintiff’s claims against Berkshire should not have been dismissed. Berkshire’s primary argument was that plaintiffs were seeking vested benefits for life, and that the Merger Agreement did not unambiguously reflect an intent to vest lifetime benefits, which is required under M & G Polymers USA, LLC v. Tackett, 135 S.Ct. 926 (2015). The Fifth Circuit disagreed. The court observed that its ruling that its interpretation of the Merger Agreement as not restricting Acme’s right to amend the Plan necessarily meant that future benefits were not vested. However, the plaintiffs sought to enforce Berkshire’s contractual commitment, which was not governed by Tackett.
The court noted: “[a]n employer can impose extra-ERISA contractual obligations upon itself, and when it does so, these extra-ERISA obligations are rendered enforceable by contract law. … Extra-ERISA commitments must be found in the plan documents and must be stated in clear and express language.” Here, the court found that Berkshire bound itself, through the Merger Agreement, not to cause Acme to reduce employer contributions. Therefore, “we view plaintiffs’ allegations as seeking to enforce a provision of the merger agreement that limits the scope of future ERISA plan amendments.” The court thus found that plaintiffs had stated a claim against Berkshire. It is a little unclear what claim(s) it permitted to proceed, but it appears to be, at the very least, a claim for declaratory judgment and injunctive relief under 1132(a)(3).