Court Finds Plan Can Dictate Where Lawsuits Are Filed

A federal appellate court found that a clause in a retirement plan document restricting the venue of lawsuits filed against the plan is enforceable.

The 6th U.S. Circuit Court of Appeals ruled an amicus brief filed by the U.S. Secretary of Labor was not entitled to deference in determining whether a district court was correct in dismissing a plan participant’s lawsuit because it was not filed in the venue dictated by the plan document. The court found the venue selection clause is not in conflict with the Employee Retirement Income Security Act (ERISA).

Prior to his retirement in 2000, Roger L. Smith was an employee of Commonwealth General Corporation (CGC). When CGC agreed to merge with AEGON USA, Inc., CGC offered some employees, including Smith, enhanced compensation if they would remain with CGC until its merger with AEGON was completed.

In 2007, the AEGON Board of Directors amended the Plan to add a “venue provision,” which states a participant or beneficiary shall only bring an action in connection with the plan in federal district court in Cedar Rapids, Iowa. In August 2011, the plan committee told Smith they had been overpaying him by $1,122.97 per month for the previous eleven years. The plan reduced, and then eliminated, Smith’s entire monthly benefit payments, stating that it would continue to do so until either it had recouped the overpayment or Smith remitted $153,283.25 to the plan.

Smith brought suit in the U.S. District Court for the Western District of Kentucky, and the court dismissed Smith’s complaint without prejudice under Rule 12(b)(6) because of the plan’s venue selection clause. The Secretary of Labor expressed his position that venue selection clauses are incompatible with ERISA in two amicus briefs.

The 6th Circuit noted that the Supreme Court’s procedure for determining when controlling weight should be given an agency’s construction of a statute established in its decision in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. is triggered only when an agency is acting with the force of law. The appellate court said the Secretary’s interpretation of ERISA is not entitled to Chevron deference because the interpretation was not made with the force of law.

Considering deference based on Skidmore v. Swift & Co., the 6th Circuit determined deference may be given if the Department of Labor’s interpretation had been held consistently over the years as evidenced by enforcement actions, amicus briefs, and agency practice. The court first determined the Secretary is no more expert than the court is in determining whether a statute proscribes venue selection. Even if the Secretary were more an expert, the Secretary’s interpretation has been expressed only once previously, in one other circuit-court amicus brief, which does not “constitute a body of experience and informed judgment to which courts” should defer. “Unlike Skidmore…, the only indication here that the agency has adopted this particular interpretation of ERISA is the amicus briefs themselves,” the court wrote in its opinion.

The appellate court noted that ERISA’s statutory scheme is built around reliance on the face of written plan documents. In addition, it determined that given the discretion available to plan administrators, there is no reason why the venue selection clause is invalid.

Smith argued that the plan document under which he retired should control his case because his pension claims accrued in 2000, and thus the venue selection amendment adopted in 2007 is inapplicable. But, the court ruled Smith’s claims did not accrue until 2011—after the venue selection clause was added—when the AEGON pension plan committee informed him it was reducing his payments.

The Secretary and Smith point to a number of statutory provisions they think conflict with venue selection clauses. First, they argue ERISA’s policy is to provide “ready access to the Federal courts.” The court said neither Smith nor the Secretary explains how a venue provision inhibits ready access to federal courts when it provides for venue in a federal court.

Smith and the Secretary also pointed to ERISA’s venue provision, which provides: “Where an action under this subchapter is brought in a district court of the United States, it may be brought in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found, and process may be served in any other district where a defendant resides or may be found. The court pointed out that AEGON’s venue selection clause does provide that suit is to be brought in one of these statutorily designated places, namely, the district where the plan is administered—Cedar Rapids, Iowa.

The 6th Circuit affirmed the district court’s dismissal of the case.

The opinion in Smith v. AEGON Companies Pension Plan is here.