Friedman v. Lippman

Background

Steven Friedman worked for Chiat/Day from 1985 until 1993 and participated in the Chiat/Day Holdings Inc. Employee Profit Sharing and 401(k) Plan. Chiat/Day’s assets were later purchased by TBWA Worldwide Inc. under an Asset Purchase Agreement. That agreement stated that TBWA did not assume Chiat/Day’s obligations relating to employee-benefit plans. A separate agreement stated that the plan would be terminated and its assets distributed.

The plan’s 1995 filing with the Internal Revenue Service stated that the plan had been terminated but that its assets had not yet been distributed. A 1996 filing stated that all plan assets had been distributed, transferred to another plan, or brought under the control of the Pension Benefit Guaranty Corporation. In 2016, the Social Security Administration notified Friedman that he might be entitled to retirement benefits valued at $164,920. Friedman alleged that he had never received a distribution, but the evidence submitted on summary judgment did not establish whether he had or had not received plan funds.

The plan no longer existed: the parties agreed that it had been liquidated and dissolved. Friedman initially sued several defendants, but TBWA was the only remaining defendant when it moved for summary judgment under Rule 56 of the Federal Rules of Civil Procedure.

Claim and Parties’ Arguments

Friedman asserted one claim under section 502(a)(1) of the Employee Retirement Income Security Act, which allows a plan beneficiary to sue for benefits due under the plan. He sued TBWA only in its alleged capacity as the plan administrator. He did not assert a claim for breach of fiduciary duty, successor liability, alter-ego liability, or failure to fund the plan.

TBWA did not rely on an argument that it was improperly named as the plan administrator. For purposes of its motion, it accepted Friedman’s allegation that it could be sued in that capacity. Instead, TBWA argued that any liability under Friedman’s claim could reach only the plan’s assets, and that the plan had no assets.

Friedman argued that the transaction was a de facto merger and that TBWA continued Chiat/Day’s business. He also argued that the question of enforcement was premature and suggested that assets traceable to the plan might be controlled by TBWA in its individual capacity. The court found that this suggestion was unsupported by evidence.

Court’s Analysis

The court relied on section 502(d)(2) of ERISA, which provides that a money judgment against an employee-benefit plan is enforceable only against the plan as an entity unless liability against another person is established in that person’s individual capacity under ERISA. The court explained that a claim for unpaid plan benefits may be brought against the plan or against an administrator or trustee in that person’s capacity as such, but the administrator is not personally required to pay the plan’s benefits from its own corporate assets.

The court distinguished a benefits claim from a fiduciary-duty claim. An administrator or other person might be personally liable under ERISA for losses caused by a breach of fiduciary duty, but Friedman had not brought such a claim and had expressly stated that he was not asserting one. The court also stated that successor-liability or alter-ego theories could not be introduced later through post-judgment enforcement proceedings; those theories would have to be pursued directly under ERISA.

The court additionally addressed redressability, a requirement for federal standing. Redressability asks whether it is likely—not merely speculative—that a favorable court decision would remedy the plaintiff’s injury. Because the plan had been liquidated and dissolved, and because Friedman had not produced evidence showing that a judgment could be collected from TBWA or other assets, the court concluded that his claim was not redressable in this action.

Disposition

The court concluded that, because Friedman sued TBWA only as plan administrator under section 502(a)(1), TBWA could not be required to pay the claimed benefits from its own assets. The court also concluded that Friedman’s claim was not redressable because the plan had no assets and no supported evidence showed another available source of payment. The court granted TBWA’s motion for summary judgment, directed the Clerk to enter final judgment and close the case, and terminated the motion.