Degnan v. Publicker Industries ( 1996 )

UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
No. 95-2244
WILLIAM DEGNAN, JR.,
Plaintiff, Appellant,
v.
PUBLICKER INDUSTRIES, INC., ET. AL.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Mark L. Wolf, U.S. District Judge]
Before
Selya and Cyr, Circuit Judges,
and Gertner,* District Judge.
Sydelle Pittas for appellant.
Thomas E. Shirley, with whom Liam T. O'Connell and Choate,
Hall & Stewart were on brief, for appellees.
May 1, 1996
*Of the District of Massachusetts, sitting by designation.
SELYA, Circuit Judge. William Degnan, Jr., the former
SELYA, Circuit Judge.
president of Fenwal Electronics, Inc., a wholly owned subsidiary
of Publicker Industries, Inc., initiated this misrepresentation
action in a Massachusetts state court against Fenwal and
Publicker on November 14, 1994. He framed his complaint
exclusively in terms of state law, alleging in substance that the
defendants induced him to take early retirement at age fifty-five
by promising to revise a corporate retirement plan so as to make
him eligible for full retirement benefits at that age; and that,
after he retired (giving up lucrative employment opportunities
elsewhere), the defendants paid him the agreed amount for only
eighteen months before they breached their promise (claiming that
he did not qualify for full benefits under the amended plan).
The defendants removed the case to the federal district court and
sought dismissal on preemption grounds.
On September 8, 1995, the district court found that the
Employee Retirement Income Security Act of 1974 (ERISA), 29
U.S.C. 1001 et seq., and in particular, ERISA's broad-gauged
preemption clause, 29 U.S.C. 1144(a) (1994), preempted Degnan's
common law misrepresentation claims against the defendants. Upon
reviewing the matter de novo, see Correa-Martinez v. Arrillaga-
Belendez, 903 F.2d 49, 52 (1st Cir. 1990), we agree that the
common law claims were preempted and that the complaint as framed
courted dismissal. See Fed. R. Civ. P. 12(b)(6) (authorizing
dismissal for the pleader's failure to state an actionable
claim).
2
We need not dwell upon the rationale for finding
preemption. Suffice it to say that, in its order of dismissal,
the district court characterized the instant case as "analogous"
in all material respects to a case previously decided by this
court, namely, Carlo v. Reed Rolled Thread Die Co., 49 F.3d 790,
793-95 (1st Cir. 1995) (ruling that ERISA preempted a state-law
misrepresentation claim). We readily agree that Carlo controls
here, and add only that in his appellate briefs Degnan has failed
to advance any plausible basis for distinguishing this case from
Carlo.
Under ordinary circumstances, this would be the end of
the matter. Where, as here, the plaintiff chooses not to ask the
trial court for permission to amend but stands upon his complaint
in the face of an order dismissing it, and thereafter loses the
ensuing appeal, he is not entitled to a second bite of the
banana. See, e.g., Royal Business Group, Inc. v. Realist, Inc.,
933 F.2d 1056, 1066 (1st Cir. 1991) (explaining that when a party
elects to appeal rather than attempt to amend a complaint, it ill
behooves that party to suggest at a later date that it could have
satisfied the district court's concerns by amending the
complaint); James v. Watt, 716 F.2d 71, 78 (1st Cir. 1983)
(admonishing that courts should not routinely allow plaintiffs to
"pursue a case to judgment and then, if they lose, to reopen the
case by amending their complaint to take account of the court's
decision"), cert. denied, 467 U.S. 1209 (1984).
The rule, however, is not inflexible. We have
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recognized that, even if the pleader has elected to dig in his
heels, appealing from a judgment of dismissal rather than
endeavoring to reframe his complaint, "an appellate court has the
power, in the interest of justice, to grant leave to amend if the
circumstances warrant." Rivera-Gomez v. de Castro, 843 F.2d 631,
636 (1st Cir. 1988). This approach finds ample support in other
appellate authority, see, e.g., Bryan v. Austin, 354 U.S. 933,
933 (1957) (per curiam); Whitelock v. Leatherman, 460 F.2d 507,
515 (10th Cir. 1972); Moviecolor Ltd. v. Eastman Kodak Co., 288
F.2d 80, 88 (2d Cir.), cert. denied, 368 U.S. 821 (1961), among
the commentators, see, e.g., 3 J. Moore, Moore's Federal Practice
15.11 at 15-109 (1983), in the Code, see, e.g., 28 U.S.C.
2106 (1994) ("[A] court of appellate jurisdiction may . . .
direct the entry of such appropriate judgment . . . as may be
just under the circumstances."), and in the spirit that pervades
the Civil Rules, see, e.g., Fed. R. Civ. P. 15(a) (counseling
that leave to amend "shall be freely given when justice so
requires").
This is a suitable instance in which to invoke the
exception to the general rule. The appeal is in a highly
idiosyncratic posture. On March 19, 1996, after the parties had
briefed this appeal but two weeks before oral argument, the
Supreme Court issued its opinion in Varity Corp. v. Howe, 116 S.
Ct. 1065 (1996). Varity shed new light on the Court's earlier
holding in Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S.
134 (1985), and indicated that, in certain circumstances, an
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individual plan participant or beneficiary may be able to obtain
equitable relief under the ERISA statute itself for harm caused
by an employer's breach of its fiduciary obligations. See
Varity, 116 S. Ct. at 1075-79; see also 29 U.S.C. 1132(a)
(1994) (enumerating equitable remedies under ERISA). Because we
deemed Varity to have possible applicability here, we immediately
called the opinion to the parties' attention and directed them to
be prepared to discuss it. We heard oral argument on April 2,
1996. We then ordered the parties to file supplemental briefs
addressing the potential applicability (if any) of Varity to
Degnan's situation.1
We have examined the record in this case in light of
Varity and of the parties' supplemental briefs. We see both
procedural and substantive problems. The procedural problem
stems from the fact that Degnan framed his suit as a common law
cause of action for misrepresentation rather than as a statutory
ERISA-based claim for breach of a fiduciary duty. The district
court treated the claim as asserted and, under our Carlo
precedent, correctly found the pleaded cause of action to be
preempted. The plaintiff neither asked the court to consider the
possibility of a statutorily based claim nor sought leave to file
an amended complaint. As we have said, these failings would be
fatal in the typical case. See, e.g., Royal Business Group, 933
F.2d at 1066.
1Simultaneous with the filing of his supplemental brief, the
appellant also moved to enlarge the record on appeal. In view of
our disposition today, the motion is moot.
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This case, however, is atypical. When Degnan eschewed
amendment in the district court, Varity had not yet been decided
and the state of the law was in flux. We think it is appropriate
for an appellate court to consider granting the type of
extraordinary relief that the plaintiff requests here
permitting an amendment even after affirmance of an order of
dismissal when an important new decision intervenes. See
Dartmouth Review v. Dartmouth College, 889 F.2d 13, 23 (1st Cir.
1989) (suggesting that such an amendment should be allowed if
"some new concept has surfaced, making workable an action
previously in the doldrums"); Pross v. Katz, 784 F.2d 455, 460
(2d Cir. 1986) (similar). That scenario, broadly speaking,
appears to exist here.
We find added impetus for applying the exception
because of the nature of the case. ERISA is a remedial statute
designed to fashion anodynes that protect the interests of plan
participants and beneficiaries. See 29 U.S.C. 1001(b)
(articulating policy "to protect . . . the interests of
participants in employee benefit plans and their beneficiaries .
. . by providing for appropriate remedies, sanctions, and ready
access to the Federal courts"); see also Varity, 116 S. Ct. at
1078; Johnson v. Watts Regulator Co., 63 F.3d 1129, 1132 (1st
Cir. 1995). Courts should not hasten to employ technical rules
of pleading and practice to defeat that goal. In this respect,
Fitzgerald v. Codex Corp., 882 F.2d 586 (1st Cir. 1989), is
instructive. There the state law remedies that the plaintiff
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sought were held to have been entirely displaced by ERISA. See
id. at 588. Although the plaintiff had not attempted to state a
federal claim in the district court, we nonetheless proceeded to
inquire whether his complaint could be read to contain a federal
claim upon which relief might be granted. See id. at 589.
Answering that question in the affirmative, we reversed the order
of dismissal. See id.The short of it is that in Fitzgerald, as in Rivera-
Gomez, we departed from our usual praxis to avoid injustice. We
believe that, given the purport and timing of the Court's opinion
in Varity, the same result should obtain here. The procedural
barrier to permitting an amendment is, therefore, superable.
The substantive problem is whether or not the plaintiff
can state a claim under Varity.2 At this juncture, we simply
cannot tell. Because the plaintiff has not yet tried to plead a
Varity claim, we do not know how well the shoe fits, or if it
fits at all. Rather than guessing at what facts the plaintiff
conceivably could allege in an amended complaint, we think that
the course of prudence is to give the plaintiff an opportunity to
supplement his factual allegations with whatever additional
averments he believes would buttress Varity-type claims, and,
once an amended complaint is filed, to permit the district court
to address the substantive problem, i.e., the sufficiency of the
2We note that the substantive and procedural problems
interlock because leave to file an amended complaint should not
be granted if it is clear that the amendment would be in vain.
See Foman v. Davis, 371 U.S. 178, 182 (1962); Correa-Martinez,
903 F.2d at 59.
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amended complaint, in the first instance.
We need go no further. We remand with directions to
grant the plaintiff permission to file an amended complaint
limited to whatever Varity-type claims he may envision under
ERISA. From that point forward, the district court can proceed
in the ordinary course. For our part, we take no view of whether
the plaintiff's case fits the Varity mold from the perspective of
either pleadings or proof.
We affirm the dismissal of the complaint insofar as it
We affirm the dismissal of the complaint insofar as it
purports to state claims based on the common law or on state law,
purports to state claims based on the common law or on state law,
and we remand the case to the district court with an express
and we remand the case to the district court with an express
direction that it permit the plaintiff to file an amended
direction that it permit the plaintiff to file an amended
complaint limited to his claim(s) under ERISA. The parties shall
complaint limited to his claim(s) under ERISA. The parties shall
bear their own costs.
bear their own costs.
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