In a lengthy opinion last week, the Sixth Circuit resolved an intra-Girl Scouts retirement plan dispute that began in 2005. In so doing, the appellate panel demonstrated the broad preemption powers of ERISA and clarified the law’s application to multiple-employer plans.
The problems began when the Girl Scouts of the United States of America (GSUSA) consolidated councils, made almost 2,000 employees eligible for a lifetime pension “without having previously contributed to the [retirement] Plan,” and added a Voluntary Early Retirement Incentive to the plan. The plan then hemorrhaged money: it went from a $150 million surplus in 2007 to a $340 million deficit in 2011. The Girl Scouts of Middle Tennessee, Inc. (GSMT) sued GSUSA, the Sponsor and Administrator of the Girl Scout Councils Retirement Plan, on the grounds that GSUSA increased the liabilities of the Plan “unilaterally and without authorization,” and sought a judgment allowing GSMT to withdraw or spinoff from the Plan.
In affirming the district court’s complete dismissal of all of GSMT’s claims, the Sixth Circuit first pointed out that ERISA did not provide a direct cause of action for GSMT because GSUSA is not a “plan fiduciary” under ERISA, and went on to hold that ERISA preempted GSMT’s state law claims because those claims would “duplicate, supplement, or supplant” ERISA remedies. Next, in rejecting GSMT’s request to create federal common law to clarify or fill the gaps of ERISA, the court emphasized that ERISA’s powers are broad and clear. Because GSMT did not fit into ERISA’s specific list of parties authorized to bring a civil enforcement action, GSMT was without power to bring such an action, and the court refused to expand ERISA beyond its statutory limits by adding “employers in multiple-employer plans” to that list. Nor would the court expand ERISA to include an employer’s claims for breach of fiduciary duty against a plan administrator under a multiple-employer plan. Finally, because GSMT raised on appeal—but did not plead—the argument that its changes under the plan did not comply with a Tennessee notice statute, the Sixth Circuit rejected GSMT’s late argument.
This case reiterates the broad powers of ERISA, both to preempt state law and to limit federal common law. Even where the Supreme Court has expressly allowed the creation of federal common law, courts are reluctant to recognize it, especially in a statutory scheme as comprehensive as ERISA. It also demonstrates that, unless Congress amends ERISA to allow claims like GSMT’s in the multiple-employer plan context, member employers in such large plans must enter them alert to their limited remedies.