Fifth Circuit Denies Intervenors in ERISA Class Action Lawsuit Seeking Reformation of Cash Balance Plan

Guenther v. BP Ret. Accumulation Plan, No. 21-20617, __F.4th__, 2022 WL 5350106 (5th Cir. Oct. 7, 2022) involves two separately filed lawsuits on behalf of Standard Oil of Ohio (“Sohio”) employees who were members of the Sohio sponsored defined benefit retirement plan prior to Sohio’s acquisition by BP Corporation North America Inc. (“BP America”). The actions allege breaches of fiduciary duty related to BP America’s conversion of the Sohio Plan into the BP America Retirement Plan (the “ARP”), also a defined benefit plan, and then BP America’s later conversion of the ARP into the BP Retirement Accumulation Plan (the “RAP”), which is a cash balance plan. The Guenther Action was filed on April 13, 2016 in the Southern District of Texas. The operative complaint alleges a single count claiming that BP breached its fiduciary duties relating to the RAP conversion in violation of ERISA § 404(a) and seeks all equitable relief to redress the breach of fiduciary duty, including reformation under ERISA § 502(a)(3). The Press Action was filed on September 14, 2020 in the Northern District of Ohio. The Press Plaintiffs also alleged that BP America breached its fiduciary duty regarding its disclosures concerning the conversion in violation of § 404(a), and also sought equitable relief under § 502(a)(3). However, the Press complaint also alleges that BP p.l.c. (BP America’s parent company) knowingly participated in BP America’s alleged breach of fiduciary duty and was unjustly enriched. The Press Plaintiffs sought restitution and disgorgement of profits.

BP America successfully moved to transfer the Press Action to the Southern District of Texas based on the first-to-file rule since the parties and claims in both cases were nearly identical and the relatively advanced stage of litigation in the Guenther Action. The Press Action was stayed upon the transfer pending resolution of the class certification motion in Guenther. The Magistrate Judge issued a recommendation for class certification under Rule 23(b)(2) of a general class consisting of:

All persons under age 50 as of January 1, 1989 who were active participants in the [RAP] as of January 1, 1989, and whose retirement benefit under the [ARP] exceeds the retirement benefit offered (or that will be offered) by the [RAP], as amended on the benefit commencement date, and the beneficiaries and estates of such persons and alternate payees under a Qualified Domestic Relations Order.

The Magistrate Judge also recommended a subclass of all members of the general class who “signed a release upon separation of employment.” After this recommendation, the Press Plaintiffs moved to intervene in the Guenther Action. Meanwhile, the district court adopted the Magistrate Judge’s class certification recommendation. The Press Plaintiffs then sought to intervene to opt out of the newly certified class, or alternatively, enter the Guenther Action as named plaintiffs. The district court denied the Press Plaintiff’s motion to intervene as a matter of right after applying a four-factor test. Focusing on the fourth factor—whether the Press Plaintiffs’ interests were adequately represented by the existing parties—the district court found that the Guenther and Press Plaintiffs had the same ultimate objective and there was a presumption of adequate representation. The court also denied permissive intervention since such intervention would unduly delay the resolution of the Guenther Action and the action’s certified class would adequately represent their interests.

On appeal, the Fifth Circuit considered only whether the district court erred in denying the Press Plaintiffs’ intervention as of right. The court explained that to demonstrate inadequate representation under Rule 24(a)(2), a movant’s burden is “minimal,” but a movant must overcome the presumption that the would-be intervenor has the same ultimate objective as a party to the lawsuit. To do so, the movant must establish adversity of interest, collusion, or nonfeasance on the part of the existing party. The Fifth Circuit rejected the Press Plaintiffs’ arguments that their interests are considerably distinct from those of the Guenther Plaintiffs. Even though the pension shortfall theory underlying the Press Action is not in the operative complaint in Guenther, that is a function of litigation strategy, not a reflection of the scope of the Guenther Plaintiffs’ interests. The first two complaints in Guenther did allege the pension shortfall theory and the plaintiffs may pursue the theory if the case proceeds to trial. The court also found that the additional remedies sought by the Press Plaintiffs is subsumed within “all equitable relief” sought by the Guenther Plaintiffs. The court also explained how the Press Plaintiffs’ other arguments lack a distinct interest that is at risk of being adversely represented in the Guenther Action. The court, being satisfied that the Press Plaintiffs will be adequately represented despite their absence from the Guenther Action, affirmed the decision of the district court.