Stanley A. Rodowicz v. Massachusetts Mutual Life Insurance Company, Stanley A. Rodowicz v. Massachusetts Mutual Life Insurance Company

Citation: 192 F.3d 162Docket: 98-1654

Court: Court of Appeals for the First Circuit; November 2, 1999; Federal Appellate Court

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Plaintiffs, retired employees of Massachusetts Mutual Life Insurance Company (MassMutual), filed suit alleging that the company failed to disclose a more favorable retirement option, thereby violating its fiduciary duties under the Employee Retirement Income Security Act (ERISA) and committing misrepresentation under Massachusetts law. The district court dismissed the ERISA claims, ruling that the severance package did not qualify as an "ERISA plan," and also granted summary judgment on the state law claims. Plaintiffs appealed the dismissal of their state law claims, while MassMutual cross-appealed regarding the ERISA ruling, arguing that if remanded, only the ERISA claims should proceed.

The Court of Appeals affirmed the dismissal of the ERISA claims and upheld the dismissal of most state law claims, albeit on different grounds than the district court. However, it reversed and remanded for trial the claims of three out of the eight plaintiffs. The background indicates that in 1990, MassMutual recognized a need for senior executives to retire more frequently to facilitate promotions, leading to the development of a Voluntary Incentive Program that was never implemented. Additionally, in 1991, MassMutual faced downgrades from ratings agencies concerned about its over-investment in real estate amidst economic downturns, prompting the company to consider cost-reduction measures, which initially did not include workforce reductions.

In February 1992, Thomas Wheeler, CEO of MassMutual, delivered an annual address to employees, asserting the company's strong financial status and commitment to ethical business practices, without mentioning any workforce reductions. In March 1992, COO John Pajak tasked his management team, including Senior VP Susan Alfano, with analyzing the costs and benefits of a potential workforce reduction. By September 1992, during a budget review meeting, Wheeler asked Pajak to explore options to reduce the company’s largest operating expense, wages and salaries, including revisiting a previously developed Voluntary Incentive Program (VIP).

On September 30, 1992, Pajak and Alfano presented a proposal for a two-step workforce reduction involving a voluntary termination program (VTP) followed by involuntary layoffs. They were instructed to flesh out this program. By mid-October, the terms of the VTP were drafted and approved by the Compensation Committee, with Wheeler adopting the plan on October 19, 1992. The VTP, announced on October 23, 1992, was available to approximately 4,000 full-time employees, offering severance based on years of service or salary brackets, with a deadline for participation set for December 1, 1992.

Eligibility for benefits under the VTP was restricted to employees who retired between October 23, 1992, and January 2, 1993. Plaintiffs, who retired between August 1, 1992, and October 1, 1992, contend they were misled by company personnel into retiring earlier, which deprived them of significantly higher retirement benefits available under the VTP. Specific allegations concerning these misrepresentations are detailed later in the document.

Plaintiff Stanley Rodowicz asserts that in late August or early September 1992, Laura Cowles from Corporate Human Resources informed him that the Board of Directors decided against changes to the retirement package. Barbara Binsky claims that in May 1992, Byron Mattson, a Second Vice President, assured her there would be no golden parachute or early retirement incentive, a sentiment echoed by retirement counselor Priscilla Dill. Anne Buck reports that in July 1992, Dill also indicated a lack of knowledge about any upcoming changes to retirement packages, while Michael Walker, Buck's former boss, suggested that no definite plans for enhanced benefits existed. Patricia Kennedy recalls a spring 1992 meeting where her boss, Linda Egan, stated there would be no severance or early retirement incentive programs. James Lemon attended a retirement meeting in summer 1992 where Jack Wilson confirmed no enhanced benefit package would be offered. Kenneth Cardwell previously informed Lemon in 1985 that his division would not receive a severance payment available to others. Margaret Stevens states that in April 1992, retirement counselor Pat Ogoley was unsure about early retirement incentives, and another counselor, Lois DeGray, later confirmed there would be no enhanced benefits. Sigmund Ziemba recounts a spring 1992 encounter with senior officer Robert Pouliot, who expressed uncertainty about any retirement package. Raymond Faniel, after 45 years with MassMutual, assumed he would be informed of benefit changes but found Dill unsure of any forthcoming changes in March 1992. Each plaintiff claims to have been misled by statements from Wheeler, reported in the February 12, 1992 MassMutual News, suggesting the company was financially stable with no changes expected.

The plaintiffs filed a lawsuit in federal court under ERISA, alleging breach of fiduciary duty and improper plan administration, along with a common law claim for misrepresentation. On July 27, 1994, the district court partially denied the defendants’ motion to dismiss the ERISA claims but granted the motion regarding the misrepresentation claims, ruling they were preempted by ERISA.

In 1995, the court clarified the criteria for employee benefits to be considered a "plan" under ERISA in Belanger v. Wyman-Gordon Co. Following this, a district court determined that the MassMutual Voluntary Termination Plan (VTP) was not an ERISA "plan," leading to the dismissal of plaintiffs' ERISA-based claims. This ruling left plaintiffs without viable claims since their state law claims were previously dismissed due to ERISA preemption. To address this unfairness, the district court reinstated the plaintiffs' common law misrepresentation claims and allowed amendments to include additional claims for breach of the covenant of good faith and fair dealing, as well as promissory and equitable estoppel, retaining jurisdiction over these claims.

On April 24, 1998, the district court granted summary judgment in favor of defendants on all common law claims, relying on Vartanian v. Monsanto Company, which established that an employer's fiduciary duty under ERISA to disclose changes in retirement benefits arises when changes are given "serious consideration." The court concluded that the plaintiffs could not show the VTP was under serious consideration by MassMutual until September 1992, by which time six plaintiffs had already retired and the remaining two had not inquired about changes. On appeal, plaintiffs argue the district court erred in granting summary judgment on their common law claims, while MassMutual contends the court wrongly ruled the VTP was not an ERISA "plan" and seeks to limit any potential claims to ERISA-based ones if the summary judgment is reversed.

The district court dismissed the plaintiffs' claims under the Employee Retirement Income Security Act (ERISA), determining that the MassMutual Voluntary Trust Plan (VTP) did not qualify as an "employee benefit plan" under ERISA guidelines. The court made this ruling based on documents including the plan document and an affidavit from Susan Alfano, treating the issue similarly to a summary judgment motion. The review of this ruling is conducted de novo, akin to standards outlined in Federal Rule of Civil Procedure (Fed. R. Civ. P.) 56.

To determine the VTP's classification under ERISA, the court referenced the Supreme Court's decision in Fort Halifax Packing Co. v. Coyne, which indicated that a plan must necessitate an ongoing administrative program to fulfill employer obligations. The Court ruled that a one-time severance payment required by a Maine statute did not constitute a plan, as it did not involve ongoing administration or obligations.

ERISA was enacted to protect employees from inconsistent benefit regulations and to ensure the long-term financial integrity of benefit funds. The Court in Fort Halifax highlighted that a single event-triggered payment does not engage these concerns, unlike ongoing benefits that could lead to regulatory complexity and potential abuse. Subsequent case law reinforces that a plan's existence depends on the nature and extent of an employer's benefit obligations, particularly whether there is an expressed intention by the employer to provide benefits on a regular and long-term basis. Benefits that do not exceed the obligations identified in Fort Halifax will not qualify as ERISA plans.

In Belanger, the court determined that a series of early retirement offers, which provided a one-time severance bonus based on tenure, did not qualify as an ERISA "plan," aligning with the exclusion noted in Fort Halifax. Conversely, in Simas v. Quaker Fabric Corp., the court found that the Massachusetts "tin parachute" statute constituted an ERISA plan due to its requirement for ongoing administrative decisions based on individual employee terminations within specific timeframes, involving eligibility determinations for unemployment compensation.

Applying these precedents, the district court concluded that the MassMutual Voluntary Transition Program (VTP) resembled the severance packages in Belanger. It noted that the one-time bonus offered during a two-month window required minimal administrative effort and did not entail a long-term financial commitment from the company. Although the VTP excluded "involuntarily terminated" employees, the court viewed this exclusion as differing from the "for cause" assessments in Simas, since the VTP allowed the administrator broad discretion to exclude employees without necessitating a detailed inquiry into the reasons for termination. Additionally, the VTP did not impose prolonged administrative responsibilities as seen in Simas, and the decision to defer election dates for some employees merely postponed payment without creating ongoing obligations for the company.

The district court's conclusion that the MassMutual Voluntary Termination Program (VTP) did not qualify as an ERISA "plan" is upheld, distinguishing it from more complex plans that involve significant individualized determinations as noted in previous cases like Simas and Belanger. The VTP allowed for certain exclusions and deferrals but lacked the ongoing, individualized decision-making necessary to be classified as an ERISA plan. The court emphasized that minimal discretion in determining eligibility and payment amounts did not elevate the VTP to an ERISA plan, as it did not impose substantial administrative responsibilities on the employer, aligning with the Fort Halifax standard.

Following the dismissal of ERISA-based claims, the district court also dismissed the plaintiffs' state common law claims, which was reviewed de novo. Summary judgment was deemed appropriate, as there was no genuine issue of material fact. For the misrepresentation claims under Massachusetts law, the court found that the plaintiffs failed to prove any false statement of material fact made by the defendant that induced detrimental reliance. The court noted that the evidence did not support the plaintiffs' position sufficiently to warrant a jury trial.

The district court granted summary judgment, emphasizing that there was no evidence supporting the plaintiff's claim that a specific benefits package was under "serious consideration" before late September 1992. This "serious consideration" standard, derived from Vartanian v. Monsanto Co., establishes that an employer breaches its fiduciary duty under ERISA if it misrepresents the status of benefit changes that are genuinely under discussion by senior management. The court determined that the necessary criteria for "serious consideration" were not met until at least September 30, 1992, after most plaintiffs had retired and the remaining two employees had not inquired about an enhanced retirement package after September 17, 1992, negating their misrepresentation claims.

The plaintiffs contended that the district court erred by applying ERISA standards instead of Massachusetts common law, arguing that state law would reveal triable issues of fact. The appellate court agreed that Massachusetts common law should guide the claims but found it was incorrect to grant summary judgment against three plaintiffs while affirming the decision for others. The "serious consideration" test, developed in federal ERISA litigation, outlines that only benefit changes that reach a level of serious consideration and are material to an employee's decision must be disclosed. Employers can confidentially evaluate options and are only obligated to disclose plans when a specific proposal is under discussion with senior management involved.

The district court initially ruled that the MassMutual VTP did not qualify as an ERISA "plan," but applied the Vartanian "serious consideration" test, finding no significant difference between Massachusetts and federal standards for "materiality." Both legal frameworks define materiality as the importance a reasonable person would attach to undisclosed facts when making decisions about a transaction. However, the "serious consideration" test, developed by federal courts specifically for ERISA fiduciary duty cases, imposes stricter proof requirements on plaintiffs compared to the common law materiality standard. Under Massachusetts law, a misstatement is deemed material if it is likely to lead a reasonable employee to retire. In contrast, the "serious consideration" test requires plaintiffs to prove it is substantially likely that the employee would not have retired had the misrepresentation not occurred.

Additionally, to meet the "serious consideration" standard, a plaintiff must show that the misrepresentation pertains to a specific benefits change actively under discussion by senior management with implementation authority. This contrasts with common law principles, where a trial court may remove a misrepresentation case from the jury only if the misrepresented fact is so trivial that no reasonable person would find it influential. The document posits that a reasonable employee could still find significant misstatements influential, even if they do not meet the strict "serious consideration" criteria. For instance, a claim that no benefit changes are being considered, when proposals for such changes exist, could reasonably influence an employee's retirement decision.

The district court erred by applying the "serious consideration" test to the plaintiffs' state law claims, as this test has not yet been recognized by the Massachusetts Supreme Judicial Court. Instead, the standard for "materiality" should follow Massachusetts case law and the Restatement (Second) of Torts. For the plaintiffs to succeed in their misrepresentation claims against MassMutual, they must show that the company made false statements of material fact intended to induce their retirement decisions and that they reasonably relied on these statements to their detriment. Statements must be factual, not mere opinions or estimates. The court found that many of the statements plaintiffs relied upon could not be characterized as factual, as they were opinion-based or cautionary and did not assert definitive facts. Consequently, the misrepresentation claims related to statements made to specific plaintiffs (Binsky, Buck, Stevens, Ziemba, and Faniel) were dismissed as they failed to meet the factual statement requirement. Similar reasoning applied to statements made by President Wheeler in a company newsletter, which were deemed general commentary on the company's performance rather than actionable representations regarding retirement benefits.

Statements in the Company newsletter did not constitute representations or material misrepresentations regarding retirement benefits, leading to the dismissal of claims based on that content. Plaintiffs also claimed misrepresentations made by individual employees concerning retirement benefits; however, for an employer to be liable for an employee's tortious acts, those acts must occur within the scope of employment. The court referenced Massachusetts case law, indicating that an employee's conduct falls within the scope of employment if it pertains to their job duties. 

To hold MassMutual liable, plaintiffs must show that the employees had actual or apparent authority to make statements about retirement benefits. The record indicates that the retirement counselors and Human Resources personnel had such authority, but the employees—Byron Mattson, Michael Walker, Linda Egan, Kenneth Cardwell, and Robert Pouliot—did not possess actual authority, nor was there evidence of them having apparent authority to comment on retirement benefits. In fact, employees were instructed to consult retirement counselors for such inquiries. No actions by the Company indicated that these individuals had the authority to speak on its behalf, rendering their statements non-actionable.

Additionally, summary judgment on the equitable estoppel claims was upheld. Plaintiffs must establish reliance on a misrepresentation of material facts to succeed under this theory, as defined by Massachusetts law.

Many of the representations cited by the plaintiffs were deemed mere opinions rather than definitive factual claims, and some were made by employees lacking authority to bind the Company regarding employee benefits. As a result, the district court appropriately granted summary judgment for most equitable estoppel claims. However, three plaintiffs—Rodowicz, Lemon, and Stevens—have viable misrepresentation and estoppel claims under Massachusetts law. Rodowicz claims he was informed by Laura Cowles, an employee in Corporate Human Resources, that the Board of Directors decided against changes to the retirement package, a statement which could be interpreted as a factual assertion rather than mere opinion. A jury could find Cowles had the authority to speak on this matter and that Rodowicz reasonably relied on her statement. Similarly, Lemon and Stevens received statements from employees that there would be no enhanced benefit packages, which could also be seen as binding representations. All three plaintiffs are permitted to present their claims to a jury. However, it is noted that the outcome is uncertain and dependent on trial evidence. The court affirms in part and reverses in part the district court's summary judgment in favor of MassMutual.

The district court's dismissal of the plaintiffs' ERISA claims is affirmed, alongside the summary judgment in favor of MassMutual concerning the Massachusetts common law claims of plaintiffs Binsky, Buck, Kennedy, Ziemba, and Faniel. However, the summary judgment regarding the state law claims of plaintiffs Rodowicz, Lemon, and Stevens is reversed, necessitating remand for further proceedings. Each party bears its own costs. Notably, Judge Bailey Aldrich did not participate in the vote. It is clarified that the Variable Termination Plan (VTP) is not classified as a "benefit plan" under ERISA, thus rendering it an improper defendant. The court also emphasizes that while ERISA governs "any plan, fund or program" providing employee benefits, the district court acted within its discretion to retain jurisdiction over the state law claims, given the lengthy proceedings and the completeness of the summary judgment record, in line with established legal precedent. The opinion highlights that simply requiring a "for-cause" determination does not automatically categorize a severance program as an ERISA plan. Additionally, while there was an agreement on the definition of "material" under both federal and Massachusetts law, plaintiffs maintained that the "serious consideration" test was not applicable to their state claims. The court noted that it can affirm a correct result on any sufficient grounds evidenced in the record. The document also references statements made by various plaintiffs regarding the uncertainty of enhanced retirement benefits, indicating that these opinions may not be actionable under certain exceptions.

Statements of opinion can be actionable if a defendant misrepresents their current intent to undertake a future act or if there is a disparity in knowledge regarding a future event that is fully controlled by the declarant. However, neither of these exceptions applies in this case. The defendants did not misrepresent any present intent, and while some declarants may have been perceived as having greater knowledge concerning changes in benefits, there was no evidence indicating that such changes were entirely within their control. Even if the statements were interpreted as factual, there is no proof that they were false at the time they were made. The district court concluded that the undisputed facts showed no false representations were made. 

Furthermore, while Mattson and Pouliot were senior officers, they lacked responsibilities related to Human Resources or employee benefits. With over two hundred senior and executive officers in the Company, it would be unreasonable to assume employees believed all of them had authority to discuss retirement benefits. Employees were aware that retirement counselors were the appropriate contacts for inquiries about benefits. 

Additionally, the plaintiffs included claims of equitable estoppel, promissory estoppel, and breach of the covenant of good faith and fair dealing in their Third Amended Complaint, which the court evaluated for summary judgment. The district court dismissed the estoppel claims based on the "serious consideration" test, and on appeal, the plaintiffs only contested the dismissal of their equitable estoppel claims, waiving challenges to the other claims. Finally, it was noted that Rodowicz had accumulated sixty days of excess vacation, which could have allowed him to extend his retirement and qualify for the Voluntary Transition Program (VTP).