Mauser v. Raytheon Co. Pension Plan for Salaried Employees ( 2001 )

United States Court of Appeals
For the First Circuit
No. 99-1895
99-1896
GARY B. MAUSER,
Plaintiff, Appellant/Cross-Appellee,
v.
RAYTHEON COMPANY PENSION PLAN FOR SALARIED EMPLOYEES;
RAYTHEON COMPANY,
Defendants, Appellees/Cross-Appellant.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William J. Young, U.S. District Judge]
[Hon. Reginald C. Lindsay, U.S. District Judge]
Before
Torruella, Chief Judge,
Wallace,* Senior Circuit Judge,
and Boudin, Circuit Judge.
Ralph Somma, with whom Frank & Brelow, P.C. was on brief,
for appellant.
Michael P. DeFanti, with whom Willard Krasnow, and
Hinckley, Allen and Snyder LLP were on brief, for appellees.
February 2, 2001
* Of the Ninth Circuit, sitting by designation.
WALLACE, Circuit Judge. Mauser appeals from the district
court’s summary judgment for Raytheon Company Pension Plan for
Salaried Employees and Raytheon Company (together, Raytheon) as to
his claims that (1) Raytheon arbitrarily and capriciously denied him
pension benefits; (2) Raytheon should be estopped from denying him
benefits; and (3) Raytheon violated its fiduciary obligations under
the Employee Retirement Income Security Act of 1974 (ERISA), 29
U.S.C. §§ 1001 et seq. Mauser also contests the remedy and
attorneys’ fees awarded by the district court after trial on his
fourth claim, which alleged that he detrimentally relied on a
misleading summary plan description. Finally, Mauser asserts that
the district court abused its discretion when, after trial, it did
not allow Mauser to amend his complaint in order to bring a claim for
statutory penalties under ERISA. In its cross-appeal, Raytheon
argues that the district court erred in denying Raytheon’s motion for
summary judgment as to Mauser’s claim of reliance on an inadequate
summary plan description and in holding against Raytheon on that
claim at trial. The district court had jurisdiction under 29 U.S.C.
§ 1132(e) and 28 U.S.C. § 1331. We have jurisdiction pursuant to 28
U.S.C. § 1291. We affirm in part and reverse in part.
I
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Mauser’s first stint of employment for Raytheon began in
September 1966 and ended on February 29, 1980. During this period,
Mauser became completely vested in Raytheon’s contributory defined
benefit plan, which, at that time, calculated benefits using a
participant’s career average salary. After Mauser left Raytheon in
1980, he received a letter explaining his pension benefit: at age 65,
he would receive $453.17 per month or, if he withdrew his
contributions, $243.09 per month. Mauser withdrew his contributions
by an application dated August 30, 1982.
Effective January 1, 1981, Raytheon made its plan non-
contributory and changed its benefits formula to one based on a
participant’s final average salary, thereby significantly increasing
retirement benefits for eligible employees. The plan was renamed
“Raytheon Company Pension Plan for Salaried Employees” (Plan). Under
the terms of the Plan, the new formula did not apply to Mauser
because he was not an active employee on December 31, 1980, and did
not fall within one of the exceptions.
During 1987, Mauser learned from current and former
Raytheon employees of the favorable change to Raytheon’s pension
benefit formula. With this information in mind, Mauser states that
he turned down a job at Westinghouse Company during February 1988,
and in April 1988 he applied to Raytheon. Upon his re-hire at
Raytheon, he received a copy of the current summary plan description
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(Plan Summary) which contained the following section:
If you leave Raytheon and later return
. . . .
[I]f you leave the company and are away longer than 12
months, you won’t receive credit for the time you were
away. Whether the service you had before you left will be
counted depends on whether or not you were vested when you
left, and on the length of time you were gone.
It will be counted when you have completed a year of
service after you return if any of the following applies:
1. You were vested when you left
2. Your time away is less than the service you had
before you left
3. You left after 1/1/85, and your time away is
less than five years.
The district court found that Mauser read this statement and believed
that his pre-1981 years of service would be taken into account when
his pension was calculated under the new, final average salary
formula.
Mauser asserts that in reliance on his reading of the Plan
Summary, he “rejected a more lucrative offer of employment with
Westinghouse Company, made improvements on his home, provided his
daughter a lavish wedding, did not make alternate or additional
retirement income plans, agreed his wife did not need to obtain
employment with a promise of future pension benefits, and remained in
the employ of Raytheon."
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In 1990, Mauser received a personal statement of benefits
from Raytheon; he realized that it did not include any credit for his
pre-1981 years of service. Mauser orally requested a corrected
statement, which he did not receive. However, Mauser did not make
clear to Raytheon his belief that his prior years of service would be
included in calculating his benefits. The benefits statements from
1991 through 1994 all failed to include credit for pre-1981 service,
and Mauser continued, unsuccessfully, to make verbal requests for a
corrected statement. Beginning in November of 1994, Mauser made a
more intense, written effort to ascertain the scope of his benefits.
Early in 1995 Raytheon informed Mauser that his pre-1981 years of
service would not be used in calculating his pension. Mauser then
hired an attorney and has consistently maintained that he is entitled
to a calculation of benefits under the new formula that takes into
account both his first and second periods of employment with
Raytheon.
Mauser brought four claims against Raytheon. First, he
alleged that Raytheon’s administration of benefits was arbitrary and
capricious because Raytheon had granted credit to one employee for
his pre-1981 years of service. (This claim also included
allegations, not raised on appeal, that Raytheon had arbitrarily and
capriciously misinterpreted the Plan.) Next, Mauser alleged that
Raytheon should be estopped from denying him credit for his pre-1981
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years of service because Raytheon had purposefully misrepresented its
position regarding break-in-service employees (estoppel claim). In
addition, Mauser’s complaint asserted that Raytheon’s actions
amounted to a breach of its fiduciary duty under ERISA (fiduciary
duty claim). These three claims — capricious denial, estoppel, and
fiduciary duty — were resolved in Raytheon’s favor on its motion for
summary judgment. See Mauser v. Raytheon Co. Pension Plan for
Salaried Employees, 31 F. Supp. 2d 168 (D. Mass. 1998).
A bench trial was held on Mauser’s final claim that
Raytheon’s Plan Summary violated ERISA’s disclosure requirements.
The district court concluded that the Plan Summary was inadequate and
that there was “some” “thin” reliance. It held that Mauser would be
allowed to redeposit his withdrawn contributions; however, the new
formula would not be applied to include the pre-1981 years of
service. Mauser requested attorneys’ fees in the amount of $156,201,
but the court, after taking into account various factors, awarded
only $35,000 in fees. After trial, Mauser asked the district court
to allow him to amend his complaint to include a claim for statutory
penalties against Raytheon for refusing to provide benefit
information in violation of 29 U.S.C. §1132(c). The district court
denied this request to amend.
II
At the heart of this appeal is Mauser’s claim that
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Raytheon is bound by the Plan Summary to credit his pre-1981 years of
service under its favorable, final average salary formula. One of
ERISA’s civil enforcement provisions provides that a participant may
bring an action “(A) to enjoin any act or practice which violates any
provision of this subchapter . . . or (B) to obtain other appropriate
equitable relief (i) to redress such violations or (ii) to enforce
any provisions of this subchapter or the terms of the plan.” 29
U.S.C. § 1132(a)(3). Mauser asserts that he is entitled to “other
appropriate equitable relief” because the Plan Summary violated
ERISA’s disclosure provision, which provides:
(a) A summary plan description of any employee benefit
plan shall be furnished to participants and beneficiaries
. . . . The summary plan description shall include the
information described in subsection (b) of this section,
shall be written in a manner calculated to be understood
by the average plan participant, and shall be sufficiently
accurate and comprehensive to reasonably apprise such
participants and beneficiaries of their rights and
obligations under the plan. . . .
(b) The summary plan description shall contain the
following information: . . . the plan's requirements
respecting eligibility for participation and benefits; . .
. circumstances which may result in disqualification,
ineligibility, or denial or loss of benefits . . . .
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29 U.S.C. § 1022; see Govoni v. Bricklayers, Masons and Plasterers
Int’l Union of Am., Local No. 5 Pension Fund, 732 F.2d 250, 252 (1st
Cir. 1984). We have recognized that a Plan Summary that violates
this provision will be binding on a plan administrator. However, we
have also held, drawing on common law principles of estoppel, that
such relief is only appropriate if the participant demonstrates
significant or reasonable reliance on the Plan Summary. Bachelder v.
Communications Satellite Corp., 837 F.2d 519, 523 (1st Cir. 1988).
It is not enough to show a “mere expectation” that certain benefits
will materialize; action must have been taken in reliance on
reasonable expectations formed after reading the Plan Summary. See
id. at 523 n. 6.
Raytheon asserts both that the Plan Summary did not
violate ERISA’s disclosure provision and that Mauser has failed to
show significant or reasonable reliance on the Plan Summary.
A.
In its cross-appeal, Raytheon argues that the district
court erred in denying its motion for summary judgment as to Mauser’s
claim of reliance on an alleged inadequate Plan Summary. Raytheon
contends that Mauser failed to show any acts taken in reasonable
reliance on the Plan Summary because he stipulated that he had “no
memory one way or the other whether he read the [Plan Summary] at the
time of being rehired” by Raytheon. This stipulation was entered
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into the day before the district court denied summary judgment.
While we agree that Mauser could not demonstrate the requisite level
of reliance if he did not read the Plan Summary at the time of his
re-hire, we are bound by the principle that “[o]rdinarily, the denial
of summary judgment is not appealable. Acevedo-Garcia v. Vera-
Monroig, 204 F.3d 1, 7 (1st Cir. 2000). “An order denying summary
judgment typically does not merge into the final judgment and
therefore is not an independently appealable event if the case
thereafter proceeds to trial.” Iacobucci v. Boulter, 193 F.3d 14, 22
(1st Cir. 1999); see also Lama v. Borras, 16 F.3d 473, 476 n. 5 (1st
Cir. 1994). Thus, to be preserved for review, a denial of summary
judgment must be perfected by making a motion for judgment as a
matter of law at the close of the evidence. Eastern Mountain
Platform Tennis, Inc. v. Sherwin-Williams Co., Inc., 40 F.3d 492, 497
(1st Cir. 1994). Here, because no such motion was made, we may not
address the merits of this claim.
B.
Raytheon also argues that the district court erred in
entering judgment in favor of Mauser. The district court’s factual
findings are reviewed for clear error. Roman v. Maietta Const.,
Inc., 147 F.3d 71, 74 (1st Cir. 1998). We review de novo the
district court’s determination as to the governing legal rules and
its application of those rules to the facts. Id.; Reich v. John
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Alden Life Ins. Co., 126 F.3d 1, 6 (1st Cir. 1997).
The district court found that Mauser demonstrated
sufficient reliance to merit a remedy, even though it characterized
the reliance as being “thin.” In reviewing the record of the bench
trial, we observe that the court only made two findings in support of
its ultimate conclusion. First, the district court found that Mauser
did read the Plan Summary upon his re-hire and believed that his pre-
1981 years of service would be counted under the new formula.
Second, the court found that Mauser heard “through the grapevine from
present and former Raytheon employees” about Raytheon’s improved
pension benefit plan and that “one of the reasons he did not go with
Westinghouse, who had offered him a slightly better plan, was that he
hoped . . . and expected that his pension plan from Raytheon would be
sweeter than that he would get from Westinghouse for whom he had no
prior period of employment.”
We need not address whether the district court's findings
of fact were clearly erroneous in light of Mauser's stipulation.
Rather, we hold that the district court incorrectly applied the law
to the facts found in reaching its conclusion. There is no evidence
that Mauser significantly or reasonably relied on the Plan Summary.
First, even if Mauser did actually read the Plan Summary at the time
of his re-hire, the mere forming of an expectation as to benefits is
not enough. There must be some measurable prejudice to Mauser.
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Bachelder, 837 F.2d at 523 & n.6. Likewise, Mauser’s decision not to
take the more lucrative job with Westinghouse cannot constitute
reliance on the Plan Summary because the trial court found that he
rejected this job opportunity on the basis of rumors he had heard
from former and current Raytheon employees. In fact, the district
record reveals that Mauser rejected the job offer at Westinghouse
before he had even applied to Raytheon.
As to the other acts — improvements to his home, lavish
wedding for his daughter, failure to make alternate retirement plans,
his wife’s employment decisions—offered by Mauser to show reliance,
the district court stated, “While I believe Mr. Mauser’s testimony
about his financial affairs, the paying for his child’s wedding, I do
not find that they constitute any detrimental reliance here. . .
There appears to have been no detailed financial planning done until
he had the advice of counsel.” The court’s finding that Mauser did
not act until after he was advised by an attorney of his legal
options is not clearly erroneous on the record before us. We also
point out that as early as 1990, Mauser became aware, after receiving
his annual statement of benefits, that he might not be receiving
credit under the new formula for his pre-1981 years of service. Any
reliance after that point would have been unreasonable.
Therefore, we reverse the trial court’s decision to
provide a remedy to Mauser based on his assertions that he relied on
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an inadequate Plan Summary. Because we hold that the record at trial
fails to demonstrate significant or reasonable reliance, we need not
address Raytheon’s arguments regarding the adequacy of the Plan
Summary. As Mauser did not prevail, we vacate the award of
attorneys' fees.
III
Mauser appeals from the district court’s summary judgment
in favor of Raytheon as to his capricious denial, estoppel, and
fiduciary duty claims. We review a summary judgment de novo,
“construing the record in the light most favorable to the nonmovant
and resolving all reasonable inferences in that party's favor.”
Landrau-Romero v. Banco Popular De Puerto Rico, 212 F.3d 607, 611
(1st Cir. 2000). Summary judgment is appropriate if “the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that 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).
A.
Mauser alleges that Raytheon administered its Plan
arbitrarily and capriciously when it refused to credit his pre-1981
years of service under the final average salary formula. See
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 114-15 (1989)
(holding that where the plan administrator has discretionary
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authority to determine eligibility for benefits, the administrator’s
decision not to award benefits will be reversed only if it is
“arbitrary and capricious”). In support of his claim, Mauser points
to the fact that Raytheon credited the pre-1981 years of service of
Lawrence Lavallee, an employee who, like Mauser, left Raytheon before
it implemented the new benefits formula and later returned after a
lengthy break in service. However, the undisputed evidence before
the district court showed (1) that Lavallee was paid with respect to
the pre-1981 years of service out of company assets and not Plan
assets, (2) that Lavallee said he had expressly negotiated for this
favorable treatment as a condition of his re-employment with
Raytheon, and (3) that it was only after Lavallee made this claim
known to Raytheon that he received credit for the pre-1981 years of
service.
Mauser asserts that “a material question of fact exists
whether Lavallee had such an agreement or was simply provided a
generous interpretation of the plan based upon his long standing
relationship with someone very high in the Raytheon hierarchy.”
However, resolving whether there was an actual agreement between
Lavallee and Raytheon or whether Lavallee’s assertions simply fell on
friendly ears is not material to Mauser’s claim that Raytheon
administered its plan arbitrarily and capriciously. See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over
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facts that might affect the outcome of the suit under the governing
law will properly preclude the entry of summary judgment.”). In
order to prevail, Mauser must demonstrate, at a minimum, that
Raytheon treated him differently from similarly situated employees.
Mauser and Lavallee are not similarly situated because Mauser, unlike
Lavallee, has never asserted he had an express agreement with
Raytheon regarding the pre-1981 years of service. In fact, Mauser
acknowledged at his deposition that he never even inquired about the
applicability of the new formula to his pre-1981 years of service
when he first returned to Raytheon. It is irrelevant that, as Mauser
asserts, there may not have been any actual agreement between
Lavallee and Raytheon; the critical fact is that Lavallee asserted
that such an agreement existed. Raytheon’s response to that
contention was not unreasonable. Therefore, we hold that district
court properly granted Raytheon’s motion of summary judgment on this
issue. See Mauser, 31 F. Supp. 2d at 171-72.
B.
Mauser also argues that Raytheon should be equitably
estopped from denying him credit for pre-1981 years of service under
the new formula. On appeal, Mauser has grounded this assertion
entirely in the alleged inadequacies of the Plan Summary. An
equitable estoppel claim contains two elements. First, Raytheon must
have made “definite misrepresentations of fact” to Mauser with reason
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to believe that Mauser would rely on it. Law v. Ernst & Young, 956
F.2d 365, 368 (1st Cir. 1992) (citation and quotation omitted).
Second, Mauser must “rely reasonably on the misrepresentation to his
detriment.” Id. The district court found that Mauser had failed to
establish that Raytheon made “definite misrepresentations” to Mauser.
Mauser, 31 F. Supp. 2d at 174.
It is, however, still an open question in this circuit
whether an equitable estoppel claim is permitted under ERISA. City
of Hope Nat’l Med. Ctr. v. Healthplus, Inc., 156 F.3d 223, 230 n.9
(1st Cir. 1998); Ernst & Young, 956 F.2d at 370 n.9. ERISA’s
expansive preemption provision provides that it “shall supersede any
and all State laws insofar as they may now or hereafter relate to any
employee benefit plan.” 29 U.S.C. § 1144(a). The Supreme Court has
directed that federal courts may engage in interstitial rule-making
when it is in the interests of justice. See Bruch, 489 U.S. at 110;
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987); Kwatcher v.
Mass. Serv. Employees Pension Fund, 879 F.2d 957, 966 (1st Cir.
1989). However, we must exercise caution in creating new common law
rules for pension plans; we should only act when there is, in fact, a
gap in the structure of ERISA or in the existing federal common law
relating to ERISA. See Andersen v. Chrysler Corp., 99 F.3d 846, 856
(7th Cir. 1996).
Mauser’s equitable estoppel claim is virtually
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indistinguishable from his claim, discussed in part II of this
opinion, that the Plan Summary violates ERISA’s disclosure
provisions. Because we have already established an avenue for relief
for reliance on an inadequate Plan Summary, we hold there is not a
more general equitable estoppel claim based solely on an inadequate
Plan Summary. We leave for an appropriate case whether there may
exist an equitable estoppel claim in cases where misrepresentations
exist apart from the Plan Summary. Therefore, we affirm the district
court’s summary judgment, albeit for different reasons.
C.
Like Mauser’s equitable estoppel claim, his breach of
fiduciary duty claim rests solely on the alleged inadequacies of the
Plan Summary. The Supreme Court in Varity Corp. v. Howe, 516 U.S.
489 (1996), recognized that ERISA authorizes individual lawsuits for
breach of fiduciary duty. Id. at 507-515. However, “where Congress
elsewhere provided adequate relief for a beneficiary’s injury, there
will likely be no need for further equitable relief, in which case
such relief normally would not be appropriate.” Id. at 515
(quotation omitted). The Supreme Court has thus limited the
applicability of an individual claim for breach of fiduciary duty to
those participants who are unable to avail themselves of other
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remedies. See Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d
609, 615 (6th Cir. 1998). As discussed in part II, we have an
established remedy for significant or reasonable reliance on a
statutorily inadequate Plan Summary. We therefore do not recognize a
duplicative claim for breach of fiduciary duty based wholly on an
inadequate Plan Summary. See Rhorer v. Raytheon Engineers &
Constructors, Inc., 181 F.3d 634, 639 (5th Cir. 1999). Although our
remedy for violations of ERISA’s disclosure provisions does not
depend exclusively on congressionally-crafted language (because we
draw on the common law of estoppel for guidance as to when relief is
appropriate), our decision is true to the general principle
reiterated in Varity and in Bruch that we should avoid creating
duplicative remedies for violations of ERISA’s provisions.
IV
After trial, Mauser asked the district court to add a
claim for statutory penalties under 29 U.S.C. § 1132(c), which allows
courts to impose a $100-per-day fine for delay in providing requested
benefits information. “The decision whether to allow amendment is
within the discretion of the trial judge and will be reversed only
where that discretion has been abused.” Keeler v. Hewitt, 697 F.2d
8, 14 (1st Cir. 1982).
The district court denied Mauser’s motion, stating
Although Mauser might have had a very strong case for the
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imposition of fines had he included the section 1132(c)
claim in his complaint, he cannot fairly attempt to add it
now. First Circuit precedent permits a cause of action to
arise pursuant to Fed. R. Civ. P. 15(b) “if, during the
trial, a party acquiesces in the introduction of evidence
which is relevant only to that issue.” Rodriguez v. Doral
Mortgage Corp., 57 F.3d 1168, 1172 (1st Cir. 1995)
(quoting DCPB, Inc. v. City of Lebanon, 957 F.2d 913, 917
(1st Cir. 1992)). Without doubt, Mauser’s introduction of
Raytheon’s failure to supply pension benefit calculations
until 1995 was relevant to whether Mauser relied on the
Summary’s description of determining benefits for break-
in-service employees. Since reliance is a key element of
ERISA disclosure violations, see Bachelder, 837 F.2d at
522-23, Raytheon could not have been expected to know that
“a new issue was infiltrating the case,” DCPB, 957 F.2d at
917.
We adopt the district court’s reasoning and hold that there was no
abuse of discretion in denying Mauser’s post-trial motion to amend
his complaint.
AFFIRMED IN PART AND REVERSED IN PART
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