BP Retirees Win Long-Fought ERISA Lawsuit -- Sort of

August 7, 2024, 9:30AM. By Anne Wallace

Oil workers were lied to when BP took over Sohio retirement plan

Houston, TXOn March 28, Judge George C. Hanks of the Southern District of Texas held that more than 7,000 North Slope Alaskan pipeline retirees who had participated in the BP America Retirement Plan (BP plan) were entitled to equitable relief under Section 502(a)(3) of ERISA. Guenther v. BP Retirement Accumulation Plan, a long-running ERISA lawsuit, alleges that BP "committed fraud or similarly inequitable conduct" in how it announced a pension formula change more than 30 years ago.

They were lied to

In 1987, the North American subsidiary of British Petroleum (BP) acquired Standard Oil of Ohio (Sohio) and merged its retirement plan into the BP plan. This new combined BP plan had three important guarantees for former Sohio workers:

• it calculated benefits under a final average pay formula – which takes into account a worker’s pay over his or her work history;
• it had an early retirement option; and
• at a worker’s retirement, BP was required to purchase an annuity that paid a specific sum, regardless of interest rate changes -- which provided an additional safety net for the Sohio retirees.

In 1989, however, BP changed this benefit formula while insisting to workers that it would provide benefits as good as or better than the old formula. This was not true because:

• going forward, workers had no early retirement option; and
• workers, rather than BP, would bear the financial risk of interest rate fluctuations.

The CEO nonetheless sent a memo praising the new formula as less complicated. It assured workers that BP was still responsible for funding the plan and bearing any investment risk. The company falsely told plan participants that the switch was "not a cost-cutting exercise" to reduce suspicion that benefits might be lower under the converted plan.

In fact, the oil giant knew that some workers would receive fewer benefits under this 1989 revision, but explicitly represented that their new benefits would be comparable to what they would have received under the 1987 plan.

The court specifically ruled that BP had violated ERISA in five ways when it:

• promoted only the positive aspects of the plan change to employees for the purpose of keeping them from quitting;
• made promises to employees about comparative plan performance without warning employees about circumstances that would cause the promise to fail;
• failed to share with employees that BP realized benefits from the conversion other than immediate cost savings;
• did not explain to employees that the converted plan introduced risk to the employees they had not previously borne; and
• did not disclose that it had removed the early retirement benefit, and what that meant to employees as they reached age 55.

In other words, BP lied.

Section 502 of ERISA

Ordinarily, when a plan sponsor, like BP, fails to live up to its obligations under ERISA, the Department of Labor steps up to pursue legal action. ERISA Section 502, however, permits an individual who has been harmed by the plan sponsor’s actions to bring a civil lawsuit. Judge Hanks found that the plaintiffs had, in fact, been harmed by BP’s deception and asked them what kind of relief they wanted. It is a sad fact, however, that some have died since the lawsuit was filed – 2016, when they filed their ERISA lawsuit, was a long time ago.

When the court determined that the remaining plaintiffs had been injured by BP’s deception, it asked them to brief what kind of equitable remedy they wanted. An equitable remedy does not necessarily mean money.

Half a loaf, perhaps?

As a general rule, equitable relief  is “a court-granted remedy that requires a party to act or refrain from performing a particular act in cases where legal remedies are not considered to provide sufficient restitution.” It is a “go and sin no more” kind of remedy directed at a defendant, rather than money damages awarded to a plaintiff or group of plaintiffs.

At an earlier phase in the litigation, when former Sohio employees first began to question whether their benefits under the 1989 amendment of the 1987 plan were really going to be as good as promised, BP referred the complaint to an independent ombudsman. This was a voluntary move, not as the result of a court order. The ombudsman ultimately recommended that BP pay additional benefits to legacy Sohio employees, in recognition of the fact that a change in interest rate would decrease the retirement benefits of some of them.

BP never implemented this recommendation. Some commenters speculate that the company never intended to. Meanwhile, the years rolled past, and the group of affected participants continued to dwindle.

Today, it looks like the remedy in Guenther may amount to little more than an earnest promise on the part of BP to stop deceiving employees. The outcome in this ERISA lawsuit is a win for the oil workers but an admittedly somewhat unsatisfying one. Perhaps those who remain can take some satisfaction in the fact that current and future plan participants may be better protected than they were.