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1st Circuit: Benefits Plan Participant's Negligence Claims Pre-empted

By Lawrence Peikes and Gregory A. Brown   8/24/2007

Examining the bounds of Employee Retirement Income Security Act (ERISA) pre-emption, the 1st U.S. Circuit Court of Appeals rejected a pension plan participant’s attempt to advance state law tort claims based on the employer’s alleged negligence in administering an employee benefits plan.

In 1973, Emory Zipperer began participating in the retirement plan of his employer, United Engineers & Constructors Inc. (UEC), a subsidiary of Raytheon Co. In 1990, Raytheon transferred Zipperer to another subsidiary, Raytheon Services, Nevada (RSN), a Department of Energy contractor, and he began participating in RSN’s pension plan. The funds Zipperer accumulated in UEC’s retirement plan were not transferred into RSN’s plan, but the Raytheon Benefit Center, the administrator of both plans, changed Zipperer’s RSN service date to account for Zipperer’s time at UEC.

In October1993, Zipperer transferred to Raytheon Engineers & Constructors (REC), a successor to UEC, and began participating in REC’s plan. Again, no funds were transferred by the Raytheon Benefit Center, which also administered REC’s pension plan, but Zipperer’s years of service with UEC were credited toward his REC pension benefit.

On Dec. 30, 2005, the Raytheon Benefit Center transferred RSN’s pension trust funds to the Bechtel Nevada Employee Retirement Plan in connection with Bechtel Nevada’s assumption of RSN’s contract with the Department of Energy. None of Raytheon’s benefits plans were amended to reflect this transfer. REC was never informed that the RSN trust funds attributable to Zipperer’s vested RSN benefit, which also reflected Zipperer’s service with UEC, had been transferred to Bechtel.

Thus, when Washington Group International (WGI) purchased REC in July 2000, Raytheon overstated the benefits allocated to Zipperer, mistakenly including funds attributable to his UEC service. In short, both Bechtel and Raytheon included Zipperer’s UEC service time in their pension calculations.

In 1999, Zipperer requested an estimate of his pension benefit from REC. Based on the estimate, Zipperer and his wife elected to retire shortly after WGI acquired REC. Subsequently, Zipperer began receiving monthly benefits approximately $140 lower than the estimate. In June 2001, the Raytheon Benefit Center informed Zipperer that his benefit had been overstated and his actual monthly benefit was approximately $540 below the estimate. Zipperer was, however, eligible for, and received, pension benefits from Bechtel.

Zipperer appealed the Raytheon Benefit Center’s final benefits determination. After unsuccessfully exhausting Raytheon’s internal appeals process, he filed several state law causes of action against Raytheon in Massachusetts Superior Court, alleging that Raytheon had negligently failed to maintain accurate records of its employee benefits plans. Raytheon removed the case to federal district court and asserted that ERISA pre-empted Zipperer’s state law claims. The magistrate judge agreed, and Zipperer appealed.

On appeal, the 1st Circuit noted that Raytheon’s pension plan was an employee benefit plan subject to ERISA’s strictures. ERISA pre-empted all state laws that “related to” any employee benefit plan, even where the state law did not specifically target employee benefit plans and its effect was indirect.

Because Zipperer’s claims could be evaluated only in the context of Raytheon’s recordkeeping responsibilities under the plan and such responsibilities were an integral aspect of plan administration, Zipperer’s state law claims were necessarily pre-empted.

Moreover, the 1st Circuit reasoned, allowing Zipperer to seek damages under state law for alleged negligent recordkeeping would create an improper alternative enforcement scheme applicable to ERISA’s recordkeeping requirements.

Zipperer v. Raytheon Co., 1st Cir., No. 06-2493 (July 12, 2007).

Professional Pointer: Zipperer stands for the narrow proposition that ERISA’s broad pre-emption provision funnels plan participants’ claims into a single legal framework with nationwide applicability, thus providing a boon for multistate employers who must administer large-scale plans. ERISA, however, does not provide a shield for employers that negligently administer these plans. Such employers may be immune from liability under state law but will still face exposure under ERISA’s own enforcement mechanisms.

Lawrence Peikes and Gregory A. Brown are attorneys with the firm of Wiggin and Dana LLP in Connecticut.

Editor’s Note: This article should not be construed as legal advice.

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