John Depenbrock v. Cigna Corp.

PRECEDENTIAL
IN THE UNITED STATES COURT OF
APPEALS
FOR THE THIRD CIRCUIT
____________
No. 03-3575
____________
JOHN DEPENBROCK,
Appellant
v.
CIGNA CORP.; CIGNA PENSION PLAN
____________
Appeal from the United States District
Court
the Eastern District of Pennsylvania
D.C. No.: 01-cv-06161
District Judge: Honorable Robert F.
Kelly
____________
Argued: September 21, 2004
Before: McKEE, ROSENN and WEIS,
Circuit Judges
(Filed: November 10, 2004)
Stephen R. Bruce, Esq. (Argued)
805 15th Street, N.W.
Washington, DC 20005-2271
William M. O'Connell, III, Esq.
Barbin, Lauffer & O'Connell
608 Huntingdon Pike
Rockledge, PA 19046
Counsel for Appellant
Joseph J. Costello, Esq. (Argued)
Tamsin J. Newman
Morgan, Lewis & Bockius
1701 Market Street
Philadelphia, PA 19103
Counsel for Appellee
____________
OPINION OF THE COURT
____________
ROSENN, Circuit Judge.
This case is a by-product of
corporate America’s recent effort to curb
costs by, inter alia, scaling back the
benefits provided under pension plans.
John Depenbrock (“Depenbrock”) claims
that his employer, CIGNA Corporation
(“CIGNA”), violated the Employee
Retirement Income Secur it y A ct
(“ERISA”), 29 U.S.C. § 1001, et seq., by
denying him benefits without the required
notice and lawful amendment to the
pension plan. Depenbrock also alleges
that CIGNA violated ERISA by failing to
provide him an opportunity to review
pertinent documents relating to his denial-
of-benefits claim, and by breaching the
fiduciary duty owed as plan administrator.
The District Court granted
CIGNA’s motion for summary judgment
and denied Depenbrock’s cross motions.
We reverse the summary judgment in
favor of CIGNA and remand with
directions to enter summary judgment for
Depenbrock.
I.
In 1983, Depenbrock began

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working at CIGNA. At that time, CIGNA
provided its employees with a generous
traditional pension plan.1 On November 4,
1997, presumably to cut costs, CIGNA
proposed amendments to its plan that were
to become effective January 1, 1998.
According to the amendments, younger,
short-term employees w ere to be
transferred to a more modest “cash
balance” pension formula (“the New
Plan”),2 while long-term employees –
such as Depenbrock – would
“grandfather” in under the traditional plan
(“the Old Plan”) and receive higher
benefits.3 In addition, the proposed plan
amendment included a “Rehire Rule”
which stated that long-term employees
who left CIGNA and were re-employed
after December 31, 1997, would not
participate in the Old Plan upon return but
instead would be transferred immediately
into the New Plan. For reasons unknown,
CIGNA did not formally adopt the
amendment and “Rehire Rule” until
December 21, 1998, when CIGNA’s CEO
executed a written adoption in accordance
with the amendment procedure set forth in
the plan.
On January 2, 1998, Depenbrock
resigned from CIGNA to work for another
company. However, Depenbrock was
rehired at CIGNA on November 30, 1998.
Depenbrock claims that the pension rule in
effect when he was rehired provided that
he immediately resume participation under
the Old Plan. Depenbrock bases this
assertion on the fact that the proposed
amendment to CIGNA’s plan had not yet
been formally adopted when he was
rehired on November 30, 1998. Because
the formal adoption date came twenty-two
days after Depenbrock returned to work,
Depenbrock asserts that the amendment
does not apply to him. To hold otherwise,
Depenbrock argues, would amount to an
impermissible retroactive reduction of his
1A traditional pension plan is a defined
benefit plan that “pays an annuity based
on the retiree’s earnings history, usually
the most recent or highest paid years, and
the number of completed years of service
to the company.” Campbell v.
BankBoston, N.A., 327 F.3d 1, 4 (1st
Cir. 2003). The CIGNA pension plan
was determined by factoring in the
retiree’s credited years of service, 2% of
his 36-month average compensation at
the time of retirement, minus a Social
Security offset.
2“Cash balance” plans “guarantee an
employee a certain contribution level,
usually an annual percentage of salary,
plus a fixed percentage of interest.”
Campbell, 327 F.3d at 4. CIGNA’s
“cash balance” plan offered employees
an account balance to which was credited
an amount based on eligible earnings and
credited years of service, as well as an
annual declared interest rate.
3CIGNA refers to the Old Plan as
“Part A” and the New Plan as “Part B.”
We employ the terms “Old” and “New”
in order to orient the plans
chronologically.

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rights.4
CIGNA counters that although the
amendment was not formally adopted until
December 21, 1998, the announcement of
the proposed changes on November 4,
1997, coupled with the CEO’s conduct
subsequent to the announcement, served to
implement and retroactively ratify the
amendment as of November 4, 1997. As
such, CIGNA asserts that the effective
date of the amendment was January 1,
1998 – the effective date specified in the
internal announcement of the amendment.
Because Depenbrock resigned from
CIGNA on January 2, 1998, one day after
the specified effective date of the “Rehire
Rule,” CIGNA contends the “Rehire Rule”
lawfully applies.
Depenbrock filed suit against
CIGNA in the Eastern District of
Pennsylvania on December 11, 2001, for
wrongful denial of ERISA benefits,
disclosure violations, and breach of
fiduciary duty. During discovery,
Depenbrock moved to compel the
production of fifty-two documents that
CIGNA claimed were protected by the
attorney-client privilege and/or “work
product” doctrine. The District Court
invited CIGNA to submit an ex parte
memorandum in support of its claims.
After conducting an in camera review, the
District Court denied Depenbrock’s
motion to compel without offering any
explanation for its finding. The District
Court held oral argument on cross motions
for summary judgment and on July 31,
2003, issued an opinion and order granting
s u m m a r y j u d g me n t to C IG N A .
Depenbrock timely appealed.
II.
This case having arisen under
ERISA, the District Court had subject
matter jurisdiction pursuant to 28 U.S.C. §
1331 and 29 U.S.C. § 1132. This Court
has appellate jurisdiction pursuant to 28
U.S.C. § 1291 over the final judgment of
the District Court. Berger v. Edgewater
Steel Co., 911 F.2d 911, 916 (3d Cir.
1990).
We review de novo the District
Court’s order granting CIGNA’s motion
for summary judgment. Bixler v. Cent. Pa.
Teamsters Health & Welfare Fund, 12
F.3d 1292, 1297 (3d Cir. 1993). Motions
for summary judgment must be granted if
there is no genuine issue as to any material
fact and the moving party is entitled to
judgment as a matter of law. Fed. R. Civ.
P. 56(c); Ryan by Capria-Ryan v. Fed.
Express Corp., 78 F.3d 123, 125 (3d Cir.
1996).
Depenbrock initially raised five
issues on appeal: 1) whether the “Rehire
Rule” was effective January 1, 1998; 2)
whether the plan amendment adopted
December 21, 1998, can be given
retroactive effect; 3) whether CIGNA
complied with ERISA’s notice and
disclosure requirements; 4) whether
Depenbrock’s failure-to-produce claim
against CIGNA fails as a matter of law;
4One of CIGNA’s actuaries estimated
that transferring Depenbrock from the
Old Plan to the New Plan will result in
his losing $800,000 in benefits, assuming
he continued to work for CIGNA until
age 55.

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and 5) whether the “fiduciary exception”
to the attorney-client privilege compels
CIGNA to produce fifty-two ostensibly
privileged documents. Disposition of the
first two issues renders discussion of the
remaining issues unnecessary. We
therefore turn to the effective date of the
amendment and analyze whether the
amendment may be applied retroactively.
A. Effective Date of the Amendment
Before turning to the merits, we
first set forth some background on ERISA.
“Erisa does not create any substantive
entitlement to employer-provided . . .
welfare benefits. Employers or other plan
sponsors are generally free under ERISA,
for any reason at any time, to adopt,
modify, or terminate welfare plans.”
Curtiss-Wright Corp. v. Schoonejongen,
514 U.S. 73, 78 (1995); see Bellas v. CBS,
221 F.3d 517, 522 (3d Cir. 2000) (“ERISA
neither mandates the creation of pension
plans nor in general dictates the benefits a
plan must afford once created.”).
However, “ERISA requires that all
employee benefit plans be ‘established and
main tained pursuant to a written
instrument,’ 29 U.S.C. § 1102(a)(1) . . . .”
Ryan by Capria-Ryan, 78 F.3d at 126.
Thus, “[t]his section precludes oral or
informal amendments to employee benefit
plans.” Confer v. Custom Eng’g, 952 F.2d
41, 43 (3d Cir. 1991) (citing Hozier v.
Midwest Fasteners, Inc., 908 F.2d 1155,
1163 (3d Cir. 1990)). Although the
Supreme Court has established a de
minimus standard for compliance with
ERISA, see Curtiss-Wright, 514 U.S. 73,
the plan must identify the person who has
the authority to amend the plan, and
amendments must be conducted according
to formal procedures. 29 U.S.C. § 1102.5
“[W]hatever level of specificity a company
ultimately chooses, in an amendment
procedure or elsewhere, it is bound to that
level.” Curtiss-Wright, 514 U.S. at 85.
Thus, an amendment is ineffective if it is
incon sis tent with the gov ernin g
instruments. Delgasso v. Sprang & Co.,
769 F.2d 928, 935-36 (3d Cir. 1985); see
Confer, 952 F.2d at 43 (“Only a formal
written amendment, executed in
accordance with the Plan’s own procedure
for amendment, could change the Plan.”).
As a threshold matter, Depenbrock
5The pertinent provisions of 29 U.S.C.
§ 1102 provide:
(a) Named fiduciaries
(1) Every employee benefit
plan shall be established
and maintained pursuant to
a written instrument. . . .
* * *
(b) Requisite features of
plan: Every employee
benefit plan shall--
* * *
(3) provide a procedure for
amending such plan, and for
identifying the persons who
have authority to amend the
plan, and
(4) specify the basis on
which payments are made to
and from the plan.

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claims that CIGNA’s CEO lacked
authority to amend the plan. Alternatively,
Depenbrock contends that even if the CEO
was authorized to amend the plan, he
failed to comply with CIGNA’s own
written amendment procedures so that the
amendment was not effective until
December 21, 1998, the date when
CIGNA finally executed revised formal
plan documents in accordance with the
amendment procedure set forth in the plan.
Because the amendment’s effective date
came twenty-two days after Depenbrock
was rehired, Depenbrock contends the
adverse amendment does not apply to him.
CIGNA counters that its CEO was
duly authorized to amend the plan and he
did so pursuant to the doctrine of
ratification. According to CIGNA,
although the plan amendment was not
formally adopted until December 21, 1998,
the CEO’s approval on November 4, 1997,
of a summary of the proposed “cash
balance” pension formula and “Rehire
Rule,” coupled with his subsequent
conduct, effected a retroactive ratification
of the plan amendment to be effective
January 1, 1998. Accordingly, CIGNA
claims that the “Rehire Rule” was
effective as of the date specified for the
amendment – January 1, 1998 – and
applied to Depenbrock because he
resigned on January 2, 1998, one day after
the alleged effective date of the rule.
We first address the CEO’s
authority to amend. As a threshold
determination, we agree with the District
Court that the CEO was authorized to
amend the plan and adopt the “Rehire
Rule.” Section 16.1 of the CIGNA plan
specified three methods for amendment:
1) a resolution of the Board of Directors;
2) a resolution of the People’s Resources
Committee of the Board of Directors
(“PRC”); or 3) a written instrument
approved and executed by one or more
duly authorized officers of CIGNA. On
July 23, 1997, the PRC adopted a
resolution authorizing the CEO to:
adopt amendments to the
CIGNA Pension Plan . . . to
be effective January 1, 1998
(or a later date if deemed
appropriate by the CEO), as
necessary or appropriate to .
. . [c]hange the Plan’s
current “final average pay”
benefit accrual formula to a
“cash balance” formula for
all eligible participants
under the Plan except those
who (1) are currently
accruing benefits under the
form ula in effect o n
December 31, 1988, and (2)
whose combined age plus
years of credited service . . .
is 45 or more as of
December 31,
1997 . . . .
This resolution gave the CEO plenary
authority to amend the plan from a “final
average pay” to a “cash balance” formula.
The exception provided for long-term
employees does not insulate them from the
CEO’s decision-making authority so much
as clarify that long-term employees are not
subject to the plan changes. Accordingly,

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we conclude that the CEO had authority to
adopt the “Rehire Rule” amendment.
However, the CEO did not exercise
his authority to amend the plan until
December 21, 1998, the date the written
amendment was executed and formally
adopted. ERISA specifies that a valid
amendment can only be made in the
manner specified in the plan document.
Cu rtiss-W right, 514 U.S. at 85.
Regardless of the method specified for
amendment, however, an indispensable
requirement under ERISA for effective
plan amendment is that the amendment be
in writing. See Hozier, 908 F.2d at 1163
(citing Nachwalter v. Christie, 805 F.2d
956. 960 (11th Cir.1986) (“ERISA
precludes oral modifications of employee
benefit plans.”)); Pizlo v. Bethlehem Steel
Corp., 884 F.2d 116, 120 (4th Cir.1989)
(stating that “informal” or “unauthorized”
modification of pension plans is
“impermissible” under ERISA); Degan v.
Ford Motor Co., 869 F.2d 889, 895 (5th
Cir.1989) (“ERISA mandates that [a] plan
itself and any changes made to it [are] to
be in writing.”); Musto v. Am. Gen. Corp.,
861 F.2d 897, 910 (6th Cir.1988) (“[A]
written employee benefit plan may not be
modified or superceded b y oral
undertakings on the part of the
employer.”), cert. denied, 490 U.S. 1020
(1989); Moore v. Metro. Life Ins. Co., 856
F.2d 488, 492 (2d Cir.1988) (“[A]n ERISA
welfare plan is not subject to amendment
as a result of informal communications
between the employer and pla n
beneficiaries.”). The CEO did not sign a
written instrument amending the plan until
December 21, 1998, more than three
weeks after Depenbrock had been rehired.
Thus, December 21, 1998, is the effective
date of the amendment. However, this
does not resolve the issue, for we must
consider whether the doctrine of
r a t i f i c a t i o n , u rg e d b y C I G N A ,
retroactively rendered the amendment and
“Rehire Rule” effective as of January 1,
1998.
B. Retroactive Ratification
The doctrine of ratification provides
that an improperly authorized amendment
may be ratified ex post by subsequent acts.
See Curtiss-Wright, 514 U.S. at 85.
M oreover, a validly accomplished
ratification ordinarily must be given
retroactive effect, rendering the ratified
action valid as of the original decision
date. Schoonejongen v. Curtiss-Wright,
Nos. 92-5695 & 92-5710, slip op. at 3 (3d
Cir. Aug. 30, 1995). However, ratification
is prohibited where the amendment
retroactively reduces the intervening rights
of third parties, such as plan participants.
See Curtiss-Wright v. Schoonejongen, 143
F.3d 120, 124-25 (3d Cir. 1998) (on
remand) (rejecting ex post ratifications that
defeat intervening rights); Confer, 952
F.2d at 43 (holding that an amendment
limiting eligibility can operate only
prospectively); 2A W illiam Fletcher,
Fletcher Cyclopedia of the Law of Private
Corporations § 782, at 647-48 (perm. ed.
rev. vol. 1992) (“Ratification cannot relate
back so as to defeat intervening rights of
strangers to the transaction.”).
In the instant case, the District
Court concluded that the December 21,
1998, date of formal adoption is not fatal
to the adoption of the amendment to the

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“Rehire Rule” as of January 1, 1998.
According to the District Court, the CEO
“manifested his intent” to amend the
“Rehire Rule,” effective January 1, 1998,
by his approval of a summary of the
proposed amendment on November 4,
1997. Furthermore, the CEO’s actions
subsequent to his approval ostensibly
“constituted a ratification of the
amendment both express and implied.”
The District Court cites as proof the
following subsequent conduct: the CEO’s
failure to voice opposition to the “Rehire
Rule” described in the “Signature Benefits
Retirement Kit” distributed to participants
in December, 1997; the CEO’s failure to
object to the “Rehire Rule” described in
the Summary Plan Description that was
generated for the New Plan in October,
1998; and the CEO’s express execution of
the formal amendment to the plan on
December 21, 1998.
Unfortunately for CIGNA, the
District Court’s reliance on the doctrine of
ratification is misplaced because
ratification would effect a retroactive
reduction of Depenbrock’s accrued
benefits under the Old Plan. Given that
the amendment was not formally adopted
until December 21, 1998, Depenbrock
acquired rights in the interval before
affirmance – namely, the right to receive
benefits under the Old Plan – and retained
his right to accrued benefits, instead of
having to settle for the more modest
benefits provided under the New Plan.
Because ratification of the amendment as
of November 4, 1997, would unlawfully
deprive Depenbrock of intervening
substantial bene fits, ratification is
ineffective.
CIGNA argues nonetheless that the
amendment did not reduce Depenbrock’s
then-accrued benefits under the plan
because Depenbrock worked for only a
short period in 1998 before the amendment
became effective on December 21, 1998.
Because Depenbrock worked only a
fraction of the year, CIGNA contends he
did not amass the 1,000 work hours
needed to accrue a year of service credit
under the Old Plan. Because Depenbrock
allegedly accrued no service credit under
the Old Plan, retroactive application of the
“cash balance” formula to his service
following his rehire did not reduce any
accrued benefit. As such, CIGNA claims
there is nothing unlawful in subjecting
Depenbrock to the “Rehire Rule.”
Even if we were somehow to
conclude that excluding Depenbrock from
the Old Plan was not a retroactive
reduction of benefits, CIGNA’s argument
fails because it wrongly assumes that
CIGNA could transfer Depenbrock out of
the Old Plan and into the New Plan
without effectuating another formal plan
amendment. CIGNA contends that even if
the amended plan were not properly
adopted until December 21, 1998, CIGNA
could leave Depenbrock in the Old Plan
for twenty-two days, and then transfer him
to the New Plan on December 21, 1998,
the effective date of the amendment.
However, CIGNA overlooks that it would
have no authority upon which to transfer
Depenbrock without effectuating another
formal plan amendment, which it did not
do.
Moreover, CIGNA’s assertion that

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the ame ndm ent did n ot reduce
Depenbrock’s accrued benefits is premised
on an unsubstantiated interpretation of
ERISA’s “Anti-cutback” rule, 29 U.S.C. §
1054(g).6 The “Anti-cutback” rule
prohibits a plan amendm ent from
decreasing a participant's “accrued
benefits.” Id.; see, e.g., Cent. Laborers’
Pension Fund v. Heinz, 214 S. Ct. 2230,
2237 (2004); Bellas, 221 F.3d at 522 (“[A]
plan amendment that retroactively reduced
benefits promised to plaintiffs for almost
seven years was precisely the sort of
inequity Congress designed ERISA to
prevent.”). ERISA defines “accrued
benefit” as an individual's right to a
retirement benefit “determined under the
plan . . . expressed in the form of an annual
benefit commencing at normal retirement
age.” 29 U.S.C. § 1002(23); see Berger,
911 F.2d at 917. CIGNA construes
“accrued benefit” narrowly to mean purely
a dollar amount of benefits. According to
this interpretation, retroactive amendments
to a plan are permissible so long as the
dollar amount of accrued benefits is not
reduced. CIGNA claims – which
Depenbrock disputes – that transferring
Depenbrock to the New Plan does not
reduce his dollar amount of benefits
because the benefits he earned under the
Old Plan were converted into an opening
account balance in the New Plan.7
Regardless of the merits of
Depenbrock’s challenge to CIGNA’s
assertion, CIGNA’s argument fails
because it is predicated upon a proposed
treasury regulation that is not yet the law.
See Prop. Treas. Reg. § 1.411(d)-3(a)(4),
Example 2, 69 Fed. Reg. 13769 (M ar. 24,
2004) (proposing to reinterpret the “Anti-
cutback” rule so as to limit the protection
of accrued benefits to purely a dollar
amount). Although the Treasury
Department retains interpretive jurisdiction
over the “Anti-cutback” rule, see 43 Fed.
Reg. 47713 (Oct. 17, 1978), “a proposed
regulation does not represent an agency's
considered interpretation of its statute . . .
.” Commodity Futures Trading Comm’n
629 U.S.C. § 1054(g) provides in
relevant part:
(1) The accrued benefit of a participant
under a plan may not be decreased by an
amendment of the plan . . . .
(2) For purposes of paragraph (1),
a plan amendment which has the effect
of--
(A) eliminating or reducing an early
retirement benefit or a retirement-type
subsidy (as defined in regulations), or
(B) eliminating an optional form of
benefit, with respect to benefits
attributable to service before the
amendment shall be treated as reducing
accrued benefits. . . .
7Depenbrock maintains that CIGNA
credits the initial “cash balance”
accounts of rehired employees like him
with less than the full value of their
previously earned annuities. As a result,
he claims employees start with lower
benefits for purposes of the “cash
balance” formula than they had before
and it takes years for rehired employees
to catch-up with where they began.

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v. Schor, 478 U.S. 833, 845 (1986); see,
e.g., Ca. Rural Legal Assistance, Inc. v.
Legal Servs. Corp., 917 F.2d 1171, 1173
n.5 (9th Cir. 1990) (“We decline to take
cognizance of the proposed regulation
however, because ‘a proposed regulation
does not represent an agency's considered
interpretation of its statute . . . .’”) (quoting
Schor, 478 U.S. at 845).
Until the proposed treasury
regulation becomes law, the current
regulations govern.8 The current
regulations, 26 C.F.R. § 1.411(d)-3(b),9
prohibit plan amendments that “directly or
indirectly” affect accrued benefits. “Plan
provisions indirectly affecting accrued
benefits include, for example, provisions
relating to years of service and breaks in
service for determining benefit accrual . .
. .” Id. Because CIGNA’s amendment
adopts the “Rehire Rule” that “directly or
indirectly” affects the calculation of
benefits, the amendment as applied to
Depenbrock is prohibited.
Even if Depenbrock had been
notified of the proposed “Rehire Rule” by
the “Signature Retirement Benefits Kit” –
as CIGNA urges – such notice was
insufficient to have implemented the
amendment because ERISA provides that
amendments to a plan may only occur if
made in writing. See supra Part II.A. The
written amendment, as previously stated,
was not executed until December 21,
1998. Thus, December 21, 1998, is the
effective date of the amendment.
Depenbrock’s participation in the
8We note that as of June 28, 2004, the
proposed treasury regulation redefining
“Protected Benefits” – Section 411(d)(6)
(BIN 1545-BC26) – has progressed to
the “Final Rule Stage.” See 69 Fed. Reg.
37976. However, it is still not the law.
926 C.F.R. § 1.411(d)-3(b) provides in
relevant part:
Under section 411(d)(6) a plan is
not a qualified plan (and a trust
forming a part of such plan is not a
qualified trust) if a plan amendment
decreases the accrued benefit of
any plan participant, unless the plan
a m e n d m e n t s a t i s f i e s t h e
requirements of section 412(c)(8)
(relating to certain retroactive
amendments) and the regulations
thereunder. For purposes of
determining whether or not any
participant's accrued benefit is
decreased, all the provisions of a
plan affecting directly or indirectly
the computation of accrued benefits
which are amended with the same
adoption and effective dates shall
be treated as one plan amendment.
Plan provisions indirectly affecting
accrued benefits include, for
example, provisions relating to
years of service and breaks in
service for determining benefit
accrual, and to actuarial factors for
determining optional or early
retirement benefits.

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Old Plan should h av e re su m ed
immediately upon his return to work on
November 30, 1998. And his participation
should have continued until either his
employment ended or the terms of
participation in the Old Plan were altered
by a prospective amendment executed in
accordance with CIGNA’s specified
procedures.
Having determined that the
amendment adversely affects Depenbrock,
we do not reach the question of CIGNA’s
compliance with ERISA’s notice and
disclosure requirements, the validity of
Depenbrock’s failure-to-produce claim
against CIGNA, or the correctness of the
District Court’s finding of attorney-client
privilege.
IV.
Accordingly, for the reasons set
forth above, the summary judgment in
favor of CIGNA Corporation will be
reversed and the case remanded to the
District Court with direction to enter
summary judgment in favor of John
Depenbrock. Costs taxed against CIGNA.

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