Rashid v. First Energy Corp. Pension Plan , 183 F. App'x 257 ( 2006 )

Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit
6-8-2006
Rashid v. First Energy Corpp
Precedential or Non-Precedential: Non-Precedential
Docket No. 05-3054
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
__________
NO. 05-3054
__________
SYLVIA M. RASHID
Appellant
v.
FIRST ENERGY CORPORATION PENSION PLAN; RETIREMENT BOARD OF
FIRST ENERGY CORPORATION PENSION PLAN; TRUSTEES OF FIRST
ENERGY CORPORATION PENSION PLAN; FIRST ENERGY CORPORATION
__________
On Appeal from the United States District Court
for the Western District of Pennsylvania
D.C. Civil No. 01-cv-00001
(Honorable David S. Cercone)
__________
Submitted Under Third Circuit LAR 34.1(a)
on April 25, 2006
Before: SCIRICA, Chief Judge, NYGAARD, Circuit Judge,
and YOHN, District Judge*
(Filed: June 8, 2006)
__________
OPINION OF THE COURT
__________
__________________________________
* The Honorable William H. Yohn Jr., United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.
YOHN, District Judge.
The appellant, Sylvia Rashid, a former employee of the Pennsylvania Power
Company (“Penn Power”),1 brought this action under the Employee Retirement Income
Security Act (ERISA) of 1974, 29 U.S.C. §§ 1001-1461, asserting that the defendants
violated their fiduciary duties by representing in May or June 1999 that no early-
retirement incentive program would be offered in the near future and then offering such a
program in January 2000, after she had retired. The District Court determined that the
defendants were not “seriously considering” the incentive program at any time before
Rashid retired and entered summary judgment for the defendants. Because we conclude
that the District Court was correct in ruling that no reasonable jury could find that the
incentive program was under serious consideration in May or June 1999, we will affirm.
I.
Rashid was a participant in the FirstEnergy Pension Plan (the “Plan”). On May 10,
1999, Rashid turned fifty-five and became eligible for early retirement under the Plan. In
both May and June 1999, she asked her supervisor, Dan Vogler, whether the company
had plans to offer an early-retirement incentive program.2 Rashid stated that she would
postpone her retirement if such a program was on the horizon. At Rashid’s request,
1
Penn Power is a wholly-owned subsidiary of FirstEnergy.
2
The company had offered such a program in 1998.
2
Vogler relayed her question to Joseph Hrach, the President of Penn Power, who stated
that Penn Power would not offer an incentive program in the near future. Vogler apprised
Rashid of Hrach’s response,3 and Rashid elected to retire on July 1, 1999.
In 1999, Hrach directed three Penn Power employees to draft a business plan
outlining ways in which Penn Power could reduce its costs in 2000 (the “Business Plan”).
The employees worked through the summer and early fall of 1999, sometimes conferring
with Hrach, and on October 19, 1999, they presented the completed Business Plan to Earl
Carey, who was in charge of regional operations for FirstEnergy. This marked the first
time that the Business Plan was presented to a FirstEnergy representative. Among the
Business Plan’s various cost-cutting proposals was a workforce reduction. The Business
Plan suggested that the reduction could be accomplished through layoffs, attrition, or
voluntary retirement.
In December 1999, John Gill, Senior Vice President of Administrative Services of
FirstEnergy, directed Richard LaFleur, Director of Employee Benefits of FirstEnergy, to
create an early-retirement incentive program for eligible Penn Power and FirstEnergy
employees. LaFleur did so, and in January 2000 presented the incentive program to the
Compensation Committee of the FirstEnergy Board of Directors (the “Committee”) for
approval. The program was adopted by the Committee and then implemented by the
Retirement Board of the FirstEnergy Pension Plan. Soon thereafter, LaFleur and Gill sent
3
As this is an appeal from the grant of summary judgment, we have viewed the facts in
the light most favorable to the plaintiff.
3
a letter dated January 18, 2000 to eligible employees detailing the program.
Rashid then instituted an action in District Court, alleging that the defendants’
representation that no such program was forthcoming constituted a breach of their
fiduciary duties under 29 U.S.C. § 1104. On May 23, 2005, the District Court granted
summary judgment for the defendants. Rashid now appeals that decision.
II.
The District Court had jurisdiction under 29 U.S.C. § 1132(e)-(f), and we exercise
jurisdiction pursuant to 28 U.S.C. § 1291. Our review of a grant of summary judgment is
plenary and we will “affirm summary judgment if there is no genuine issue of material
fact and the moving party is entitled to judgment as a matter of law.” Mushalla v.
Teamsters Local No. 863 Pension Fund, 300 F.3d 391, 395 (3d Cir. 2002) (internal
quotation marks omitted).
III.
In the exercise of its duties under ERISA, a plan administrator may not make
“affirmative material misrepresentations to plan participants about changes to an
employee pension benefits plan.” Fischer v. Philadelphia Elec. Co., 994 F.2d 130, 135
(3d Cir. 1993). “A plan administrator makes a material misrepresentation when it
responds to employee inquiries by representing it is not considering a change to its
pension plan, if it is in fact giving ‘serious consideration’ to a change.” Mushalla, 300
F.3d at 396 (3d Cir. 2002). “Serious consideration of a change in plan benefits exists
when (1) a specific proposal (2) is being discussed for purposes of implementation (3) by
4
senior management with the authority to implement the change.” Fischer v. Philadelphia
Elec. Co., 96 F.3d 1533, 1539 (3d Cir. 1996) (hereinafter Fischer II). “[T]his formulation
does not turn on any single factor.” Id.
We have explained that “[t]he first element, a specific proposal, distinguishes
serious consideration from the antecedent steps of gathering information, developing
strategies, and analyzing options.” Id. at 1539-40. The proposal must be “‘sufficiently
concrete to support consideration by senior management for the purpose of
implementation.’” Id. at 1540. Here, in the best-case scenario for Rashid,4 the first time
that a specific proposal concerning an early retirement incentive program arose was
during the October 19, 1999 presentation of the proposed Business Plan for 2000 to
FirstEnergy’s Earl Carey, over three months after Rashid retired. Rashid has presented
no evidence that a specific proposal existed prior to that date; up to that point, the Penn
Power employees were engaged in the “antecedent steps” described in Fischer II. Thus,
“[b]ecause a specific proposal did not emerge until [October 19, 1999], serious
consideration could not have commenced before this date.” Kurz v. Philadelphia Elec.
Co., 96 F.3d 1544, 1549 (3d Cir. 1996).
“Under the second and third factors, we look to whether the specific proposal was
4
Due to the wide scope of the Business Plan -- which, in addition to its recommendation
of a workforce reduction, included recommendations concerning facilities consolidation,
productivity improvements, functional consolidation, and validation and trucking -- a
strong argument could be made that the Business Plan was too broad and abstract to
create a specific proposal about an incentive program.
5
being considered for implementation by senior management.” Id. at 1550. There is
nothing in the record that shows when, if ever, the Business Plan was approved for
implementation or explains the process necessary to effectuate that approval or
implementation. However, in order to implement the specific change at issue here -- the
creation of a new early-retirement incentive program -- the change had to be incorporated
into the FirstEnergy Pension Plan. In order to change the Pension Plan, the corporate
structure of FirstEnergy required that the change be approved first by Gill of FirstEnergy,
then by FirstEnergy’s president, and then by the Compensation Committee of the
FirstEnergy Board of Directors. Thus, after the Penn Power employees presented the
Business Plan (with its proposed incentive program) to Carey on October 19, 1999, a
change to the Pension Plan required at least two additional levels of authorization from
FirstEnergy officers before it could be proposed to the Committee.5 While the record
does not detail the specific steps that occurred with reference to the Business Plan and the
Pension Plan between October 19, 1999, when a FirstEnergy representative first saw the
Business Plan, and December 1999, when Gill directed LaFleur to create an incentive
program, it was within that time period that the incentive program was first considered for
implementation by senior management.
Although we have insufficient information to determine the specific date that the
defendants first gave serious consideration to the incentive program, that date
5
To reiterate, it was the separate incentive program subsequently created by LaFleur, not
the Business Plan, that the Committee ultimately adopted.
6
indisputably occurred months after Rashid retired, let alone inquired about the program.
Thus, we agree with the District Court that there is no evidence from which a reasonable
jury could find that the defendants breached their fiduciary duties to Rashid.
Accordingly, we will affirm.6
6
Rashid also presents the deposition testimony of Josephine Mangiarelli, in which
Mangiarelli stated that sometime in 1999 her husband’s brother talked to Roger Houk, a
former employee of Penn Power, and Houk said that he had heard that an incentive
program was imminent. Rashid argues that this demonstrates that some individuals
received notice of the incentive program before it was formally announced. However, the
statement allegedly made by a company representative informing Houk of the program is
hearsay, and neither Mangiarelli nor Rashid has identified the person who made the
statement. “Thus, the hearsay statement by this unknown individual is not capable of
being admissible at trial, and [can] not be considered on a motion for summary
judgment.” Philbin v. Trans Union Corp., 101 F.3d 957, 961 n.1 (3d Cir. 1996) (internal
citation and quotation marks omitted).
7