Hennessy v. Federal Deposit Insurance , 58 F.3d 908 ( 1995 )

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
6-29-1995
Hennessy v FDIC
Precedential or Non-Precedential:
Docket 94-1857
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 94-1857
JOHN T. HENNESSY; MICHAEL B. HIGH;
WILLIAM A. BRACKEN; LARRY GIBSON;
MARTHA C. HITCHCOCK; LAURENCE A. LISS;
KEN MANCINI; GEORGE S. RAPP;
ROBERTA GRIFFIN TORIAN; FRANK J. SORIERO
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER FOR MERITOR SAVINGS BANK
(D.C. Civil No. 93-cv-05589)
THOMAS CALLAHAN
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER FOR MERITOR SAVINGS BANK
(D.C. Civil No. 94-cv-01949)
John T. Hennessy, Roberta Griffin Torian,
Michael B. High, William Bracken, Laurence Liss,
Marty Hitchcock, George S. Rapp, Kenneth R. Mancini,
Lawrence J. Gibson, Frank J. Soriero and Thomas Callahan,
Appellants
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 93-cv-05589)
No. 94-1933
DAVID A. CAMPBELL, JR.; ROBERT F. HANNA;
LESLIE VOTH; HELEN T. DEMARCO, individually, and
ROBERT F. HANNA; HELEN T. DEMARCO, on behalf of
themselves and all others similarly situated,
(SEPARATION PLAN CLASS), and
DAVID A. CAMPBELL, JR.,
on behalf of himself and all others similarly
situated, (RETIREE HEALTH CLASS), and
DAVID A. CAMPBELL, JR.; ROBERT F. HANNA,
on behalf of themselves and all others
similarly situated, (LIFE INSURANCE CLASS)
v.
FEDERAL DEPOSIT INSURANCE CORPORATION
AS RECEIVER FOR MERITOR SAVINGS BANK
David A. Campbell, Jr., Robert F. Hanna,
Helen T. DeMarco and Leslie Voth,
Appellants
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 93-cv-03969)
No. 94-1934
JOSEPH A. ADOLF, LAURENCE J. ARNOLD,
CHRISTIAN F. AURIG, GEORGE W. BARBER,
LINDA C. BARCH, RICHARD F. BATE, OWEN J. BEHEN,
LAUREN BETHEA, ELIZABETH L. BLANKENHORN,
ANNE MARIE BOBACK, SUSAN M. BROWN,
JOHN J. BUCZEK, GEORGE S. BUNTING, MARY ANN C. BURCH,
EDITH BURKEITT, THOMAS P. CALLAHAN,
DAVID A. CAMPBELL, JR., KARLA J. CARNEY,
JOHN M. CASAMENTO, JR., WILLIAM J. CATHCART,
LISA CAVALLI, NANCY L. CEFFARATTI, JOSEPH D. CELLUCCI,
ESTHER CERBO, CAROLE A. CIRCUCCI, ANTHONY R. COOGAN,
LARRY A. COOK, SAMUEL J. COOK, WALLACE P. COONEY,
PAUL L. COPPOLA, LORENE C. COQUILLETTE,
BETTY R. CORLEY, HARRIET S. CORLEY, JOAN T. CORSON,
DAVID E. COVERDALE, MARY C. CRAIGE, LOIUS T. CULLEN,
JOHN F. CULP, EDWARD D. CUSTER, MICHAEL CZINCILA,
JOAN E. DEBES, IRENE V. DELIZZIO, GAIL L. DELVISCIO,
HAROLD L. DEMPSEY, HAROLD C. DENGEL,
DEBRA ANNE DENIGHT, BEATRICE L. DESHER,
JOSEPH H. DEVORE, JR., ANNA S. DIFELICE,
MARIO DIFELICE, MARY ANN DIGREGORIO,
LEONID A. DOBRININ, SARAH S. DOODY, JOSEPH M. DUFFY,
LEONARD T. EBERT, JOHN A. FATULA, CHARLES J. FERRIE,
GEORGE W. FETTERS, JR., LORE L. FISHER, JOHN P. FOGARTY,
CYNTHIA M. FORD, DORIS GAGLIARDI, BARBARA A. GIBSON,
FRANCES J. GILLEN, WILLIAM R. GOETTLE,
CHARLES W. GRAY, III, EUGENE A. HEIWIG,
WILLIAM H. HILLIARD, WILLIAM H.H. HSU,
STANLEY E. HUNT, CHARLES C. JONES,
THOMAS C. KEISER, KATHLEEN F. KELLY, LYNN M. KELLY,
ETHEL S. KEOWEN, JOHN ANDREW KINNERMAN,
PHILIP W. KLINGER, C. ANDREW KREPPS, JR.,
JOHN DAVID LAMBERT, MICHAEL G. LEWIS,
PATRICIA LEUTHY, SALVATORE LIZZIO, ALDO S. LOMBARDI,
ELISABETH W. LORD, KATHLEEN LYNCH, E. DAVID MACNALLY,
WILLIAM C. MACNEILL, JR., FRANK JOSEPH MARULLO,
EDWARD M. MASON, JR., THOMAS G. MARVEL,
RUTH A. MCALLISTER, JOSEPH F. MCCOLE,
CHRISTINE D. MCCORMICK, PHILIP J. MCCORMICK,
JANET B. MCCOURT, DAVID C. MELNICOFF, FREDA I. MILLAR,
ANTHONY M. MINGARINO, JOSEPH J. MOFFA,
LINDA LEE MONTANA, BARBARA L. MORGAN,
MARION D. MORGAN, LEONARD V. MORRIS,
DAVID D. MORRISON, MARY T. MURPHY, ANTHONY J. NOCELLA,
WILLIAM A. NORRIS, III, MARTHA K. NYLUND,
MARY E. ORR, JOHN T. OSMIAN, CHARLES E. PADGETT,
PATRICIA PAWLING, HOWARD F. PEARCE,
CATHERINE P. PICCONE, PETER P. PRYZBYLKOWSKI,
DARLENE E. PURUGGANAN, ELIZABETH L. RAFETTO,
EDWARD W. RAPP, LUBA K. REILLY, LOUISE M. REITANO,
ANTOINETTE D. RENDINO, MS. JAMIE RINDOCK,
JEAN DAVIS ROBINSON, RICHARD ROGERS, DIANE S. ROHR,
HERBERT A. ROTH, ANTHONY J. SANTILLI, JR.,
KATHLEEN M. SAWCHYNSKY, RUTH C. SCHMIDT,
MICHAEL F. SCUTTI, MARTIN SELGRATH, JOHN W. SEMPLE,
JOSEPH F. SLANE, ROBERT A. SMALLEY, ELIZABETH K. SONNEBORN,
FRED B. STAAS, WALTER R. STAPLES, ROBERT C. STEINMAN,
ARTHUR W. STETTLER, JEAN J. STUBBS, ANTHONY TABASCO,
ROBERT B. TAYLOR, ANNITA L. TEDESCO, KENNETH C. THOMAS,
PATRICIA E. THOMPSON, DIANNE T. TINDALL,
JAMES M. TOOLAN, MORRIS VARANO, STANLEY J. VERBEEK,
DONNA VOLZ, LESLIE C. VOTH, THERESA M. WEBB,
CYNTHIA WEST, ROBERT B. WHITELAW, ALTON T. WINNER, JR.,
ANNE M. WISE, VERDELLA WRIGHT, ANTHONY J. ZONGARO AND
LINA G. ZANONI,
Appellants
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER FOR MERITOR SAVINGS BANK
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 94-cv-01499)
Argued May 16, 1995
Before: COWEN, LEWIS and GARTH, Circuit Judges
(Filed June 29, l995 )
Alice W. Ballard (argued)
Samuel & Ballard
225 South 15th Street
Suite 1700
Philadelphia, PA 19102
COUNSEL FOR APPELLANTS
in No. 94-1857
Harry C. Barbin (argued)
Barbin, Lauffer & O'Connell
608 Huntingdon Pike
Rockledge, PA 19046
COUNSEL FOR APPELLANTS
in No. 94-1933
Harry C. Barbin (argued)
William M. O'Connell
Barbin, Lauffer & O'Connell
608 Huntingdon Pike
Rockledge, PA 19046
COUNSEL FOR APPELLANTS
in No. 94-1934
Jaclyn C. Taner (argued)
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429
COUNSEL FOR APPELLEE
Federal Deposit Insurance Corporation
as Receiver for Meritor Savings Bank
OPINION
COWEN, Circuit Judge:
Plaintiffs in these related cases, former employees and
managers of Meritor Savings Bank, appeal from three orders of the
district court that granted summary judgment in favor of the
defendant, the Federal Deposit Insurance Corporation ("FDIC"), on
their claims to recover severance pay, medical benefits, and life
insurance benefits pursuant to the terms of their employee
welfare benefit plans. The issues raised in these appeals are
whether the district court erred in determining that: (1) the
FDIC's takeover and sale of Meritor was not a reorganization for
purposes of the plaintiffs' separation pay plan; (2) the
discharge of Meritor employees did not constitute "job
elimination" or "lack of work" triggering severance payments; (3)
the plaintiffs had no vested right to severance pay; (4) the FDIC
properly exercised its repudiation powers; (5) the plaintiffs did
not incur "actual direct compensatory damages" as provided in 12
U.S.C. § 1821(e)(3); (6) the FDIC properly terminated life and
health insurance benefits pursuant to the termination provisions
in these employee welfare benefit plans; (7) the FDIC was not
liable for a statutory penalty under 29 U.S.C. § 1132(c)(1) as a
result of its failure to respond in a timely manner to
plaintiffs' request for plan documents; and (8) the certification
of three plaintiff classes was inappropriate. Because we
conclude that the district court did not err in granting summary
judgment to the FDIC on plaintiffs' claims for separation pay,
health insurance benefits, and life insurance benefits, we will
affirm the orders of the district court. Further, because we
conclude that the district court did not abuse its discretion in
finding that the FDIC is not liable for the statutory penalty
prescribed by 29 U.S.C. § 1132(c), we will affirm the order of
the district court pertaining to this issue. Finally, because of
our conclusion on the merits, that the district court did not err
in granting summary judgment for the FDIC, we need not reach the
class certification issues.
I. FACTS & PROCEDURAL HISTORY
On December 11, 1992, the Secretary of Banking of the
Commonwealth of Pennsylvania issued an order declaring Meritor
Savings Bank ("Meritor") insolvent and directing that the bank be
closed. On the same day, the FDIC was appointed as receiver for
the insolvent bank. As receiver, the FDIC executed a Purchase
and Assumption Agreement with Mellon Bank ("Mellon") transferring
a portion of Meritor's assets and liabilities to Mellon. The
FDIC retained the liabilities not assumed by Mellon, along with
the unpurchased Meritor assets, which the FDIC proceeded to
liquidate for the benefit of Meritor's approved creditors.
The record demonstrates that until the Secretary of Banking
declared the bank insolvent, Meritor maintained a separation pay
plan ("SPP"), a retiree health insurance plan (the Meritor
Medical Plan 65 Special Option or "65 Special"), and a retiree
life insurance plan (the Meritor Group Life Insurance Plan or
"MGLIP").1 Under the SPP, eligible employees were entitled to
severance pay based on their years of service and salary, up to a
maximum benefit of twenty-six weeks. Benefits were payable for
involuntary termination due to "lack of work, job elimination,
reorganization or reduction-in-force." Campbell App. at 139a.
No benefits would be paid if separation resulted from sale or
disposition of a portion of Meritor's assets and the employee was
employed by the successor entity. Id.The SPP was "unfunded," meaning all benefits were paid from
the general assets of Meritor. Id. at 141a. Meritor retained
sole authority to determine whether a separation entitled an
employee to benefits. Id. Moreover, Meritor expressly reserved
the right to modify or discontinue the SPP in whole or in part at
any time. Id. at 137a.
Under the 65 Special, Meritor provided group health
insurance coverage for its retirees. Id. at 406a. The 65
Special was a self-insured plan that qualified as an employee
welfare benefit plan under the Employee Retirement Income
Security Act of 1974, as amended, 29 U.S.C. §§ 1001-14611
. The parties stipulated to the material facts in these cases.
Statement of Undisputed Facts, Hennessy App. at 187-95; Joint
Statement of Undisputed and Disputed Facts Regarding Motions for
Summary Judgment, Campbell App. at 403a-70a; Joint Statement and
Joint Supplemental Statement of Disputed and Undisputed Facts,
Adolph App. at 367a-437a.
("ERISA"). The MGLIP, also an employee welfare benefit plan
under ERISA, provided retirees with death benefit coverage equal
to the lesser of $50,000 or 25% of the amount of death benefit
coverage for which they were insured immediately prior to
retirement. Id. at 405a-06a.
Meritor explicitly reserved the right to terminate the 65
Special and the MGLIP at any time. The health plan provided:
Meritor intends the plan to be permanent, but since future
conditions affecting your employer cannot be anticipated or
foreseen, Meritor reserves the right to amend, modify or
terminate the plan at any time, which may result in the
termination or modification of your coverage. Expenses
incurred prior to the plan termination will be paid as
provided under the terms of the plan prior to its
termination.
Id. at 165a (emphasis omitted). The life insurance
plan provided:
Meritor reserves the right to terminate the group life
insurance policy for its employees and retirees at any time,
if Meritor determines that such termination is in its best
interests. If Meritor terminates its group life insurance
policy, employees and retirees who die after the effective
date of the termination . . . will not have any life
insurance.
Id. at 152a.
On the day the Secretary declared Meritor insolvent, a
meeting was held to discuss the status of Meritor's employees.
At that meeting, Jack Goodner, the FDIC's closing manager, made a
brief presentation. When he finished his remarks, an employee
asked him whether severance benefits would be paid. Goodner
thought not, but was not sure. After looking towards two other
FDIC officials for guidance, Goodner responded "no." At the
close of business on December 11, 1992, the former Meritor
employees became employees of Keytech Resources, Inc., a firm
established to provide staffing for the former Meritor offices
purchased by Mellon. Mellon paid severance benefits to the
employees who were subsequently laid off based on their years of
service to Meritor, up to a maximum of four weeks salary.
On the Monday following the events of Friday, December 11,
1992, the former branches of Meritor opened for business as usual
under the name of Mellon-PSFS without interruption of business to
regular customers. The FDIC subsequently repudiated the SPP
pursuant to its powers under 12 U.S.C. § 1821(e). The FDIC did
not repudiate either the 65 Special or the MGLIP plans. Instead,
the FDIC sent letters to the former employees and retirees of
Meritor notifying them that their health and life insurance plans
were terminated effective December 31, 1992 pursuant to the terms
of each plan.2 Those letters advised the employees about the
availability of FDIC-sponsored continuing medical coverage, and
also provided specific instructions for filing claims for
benefits under the FDIC's statutory claims process, alerting the
employees and retirees to a March 19, 1993 bar date for filing
claims against the assets of the receivership.
A. The Hennessy Plaintiffs
2
. Consistent with the above facts, when we use the term
"repudiation," we are referring to the statutory power of a
receiver under 12 U.S.C. § 1821(e) to refuse to recognize a
contract. "Termination," by contrast, refers to the
discontinuing of a plan pursuant to the plan's own terms.
The Hennessy plaintiffs are former managers of Meritor.
They filed suit in the Eastern District of Pennsylvania alleging
the right to recover severance pay pursuant to the terms of the
SPP. In support of their claim, they rely on the above-stated
facts and the fact that, prior to the FDIC's takeover of Meritor,
each of them received a letter from Meritor's Chairman, Roger
Hillas, stating:
Meritor senior management is acutely aware that [it] is
essential to retain motivated employees such as you in key
positions.
As evidence of this awareness, Meritor is extending the
severance benefit provided to you under the Separation Pay
Program to a total of 52 weeks pay. This enhanced benefit
will be payable under the same terms and conditions as
provided for in the Separation Pay Program if you are
separated from employment by Meritor anytime on or before
December 31, 1992.
Letter from Hillas to John Hennessy (October 3, 1990); Hennessy
App. at 68. The Hennessy plaintiffs argued before the district
court that their severance rights under the SPP were activated
when "they were terminated as part of a reorganization."
Hennessy v. FDIC, 858 F. Supp. 483, 487 (E.D. Pa. 1994).
The district court rejected the Hennessy plaintiffs'
argument. The court explained that the FDIC sold Meritor to
Mellon and was in the process of liquidating the rest of
Meritor's assets. Id. The court reasoned that because the FDIC
was involved with the termination of Meritor, rather than the
continuation of its business, there was no reorganization. Id.In the alternative, the Hennessy plaintiffs argued before
the district court that given the FDIC's repudiation of the SPP,
the plaintiffs should be able to recover severance pay pursuant
to 12 U.S.C. § 1821(e)(3) which provides for compensation for
actual direct compensatory damages attributable to a repudiation.
Id. at 488-89. The district court disagreed. Relying on the
decision of the Court of Appeals for the First Circuit in Howell
v. FDIC, 986 F.2d 569 (1st Cir. 1993), the district court
determined that severance payments are not actual direct
compensatory damages under § 1821(e)(3). Id. at 489.
Accordingly, the district court granted summary judgment in favor
of the FDIC. Id. at 485. This appeal followed.
B. The Campbell Plaintiffs
The Campbell plaintiffs include: (1) David Campbell, Jr., an
employee who retired from Meritor effective December 1, 1987; (2)
Robert Hanna, Helen DeMarco, and Leslie Voth, employees who were
employed by Meritor on December 11, 1992; and (3) potential
plaintiff classes comprised of the above named plaintiffs and
those similarly situated. The Campbell plaintiffs filed claims
for benefits with the FDIC. The FDIC, however, rejected these
claims.
Subsequent to the FDIC's denial of their claims, the
Campbell plaintiffs filed suit in the United States District
Court for the Eastern District of Pennsylvania. In their
complaint, plaintiffs Hanna and DeMarco sought severance payment
pursuant to the SPP. Plaintiff Campbell sought a declaration
that he and other similarly situated persons are entitled to
health insurance coverage under the 65 Special. Campbell also
sought reimbursement with interest for health insurance premiums
paid since December 11, 1992. In addition to these claims,
plaintiffs Campbell and Hanna sought a declaration that they and
other similarly situated persons are entitled to life insurance
under the MGLIP. They also sought reimbursement with interest
for life insurance premiums paid since December 11, 1992.
Finally, plaintiffs Campbell, Hanna, Voth and DeMarco sought a
monetary penalty under ERISA for the FDIC's failure to provide in
a timely manner information requested by their counsel.3
The district court denied Hanna and DeMarco's claims for
severance pay under the SPP for the reasons set forth in its
decision in Hennessy. Campbell v. FDIC, No. CIV.A.93-3969, 1994
WL 475067, at *4 (E.D. Pa. Aug. 29, 1994). In addition, the
court found that it did not have jurisdiction to hear the claims
brought by Campbell or Voth because these claims were filed
prematurely.4 Id. Nevertheless, the court concluded that even
if it had jurisdiction to hear Campbell's claims for health and
life insurance benefits, these claims would fail because the FDIC
terminated both the 65 Special and the MGLIP pursuant to its
3
. Plaintiffs' counsel sent an ERISA document request to the
FDIC on March 16, 1993. The FDIC did not respond to the ERISA
document request until September 21, 1993, 189 days after the
initial request.
4
. The court concluded that Campbell's and Voth's claims were
premature because these plaintiffs did not wait the requisite 180
days after filing their claims with the FDIC before filing their
actions in district court. Campbell, 1994 WL 475067, at *4. The
court noted, however, that Campbell and Voth were added as
individual plaintiffs in the Adolph case by the filing of the
First Amended Complaint in that case and thus these plaintiffs
asserted a timely filing in Adolph. Id. at *7 n.7.
contractual rights. Id. Finally, the district court granted
summary judgment in favor of the FDIC on the plaintiffs' claims
for a statutory penalty because it concluded that: (1) the
statutory penalty should not apply to the FDIC, an agency of the
federal government; or (2) even if the statutory requirement does
apply to the FDIC, the court would exercise its discretion under
29 U.S.C. § 1132(c) and award no penalty in this case. Id. at
*7.
With respect to the potential class claims, the district
court denied plaintiffs' motion to certify a separation pay plan
class, a retiree health class, and a life insurance class.
Campbell v. FDIC, No. 93-3969 (E.D. Pa. June 30, 1994) (order
denying class certification). The court determined that the
plaintiffs could not satisfy all four of the threshold
requirements of Rule 23(a) of the Federal Rules of Civil
Procedure for certifying a plaintiff class. Id. at 5, 7, 8. In
addition, the district court found that class certification under
Rule 23(b)(1) or Rule 23(b)(2) would be inappropriate. Id. at 9.
This appeal followed.
C. The Adolph Plaintiffs
The Adolph plaintiffs are a group of 161 former Meritor
employees and retirees.5 In their complaint, also filed in the
United States District Court for the Eastern District of
5
. On July 22, 1994 the district court entered an order granting
the plaintiffs' unopposed motion to amend the complaint in this
matter to add David Campbell and Leslie Voth as plaintiffs.
Pennsylvania, the employee plaintiffs challenged the repudiation
of the SPP by the FDIC. The retiree plaintiffs challenged the
termination of their medical benefits under the 65 Special. In
addition, both the employee and retiree plaintiffs challenged the
termination of the MGLIP. The FDIC and the Adolph plaintiffs
filed motions for summary judgment on July 26, 1994. The
district court granted summary judgment for the FDIC for the
reasons detailed in Hennessy and Campbell. Adolph v. FDIC, No.
94-1499 (E.D. Pa. Aug. 29, 1994) (order granting summary
judgment). This appeal followed.
II. JURISDICTION
These cases commenced under the Financial Institutions
Reform, Recovery and Relief Act of 1989 ("FIRREA") and ERISA.
The district court's jurisdiction was predicated upon 28 U.S.C. §
1331. We have jurisdiction over the instant appeals pursuant to
28 U.S.C. § 1291. We exercise plenary review over a grant of
summary judgment. Because the material facts in this matter are
not in dispute, we review only for errors of law. As to the
Campbell plaintiffs' argument that an ERISA penalty should be
assessed pursuant to 29 U.S.C. § 1132(c)(1), our review is for
abuse of discretion.
III. SEVERANCE PAY
A. Was there a Reorganization?
The Hennessy plaintiffs' first contention is that Meritor
was "reorganized," triggering a right to severance payments under
the terms of the SPP. According to these plaintiffs, Mellon Bank
acquired Meritor as a going concern following the FDIC's takeover
of Meritor. The Hennessy plaintiffs point out that Meritor's
offices opened for business as usual on the next business day
after the takeover under the trademark "Mellon-PSFS." They
assert that because Meritor continued as a going concern without
interruption of business, they have a right to severance payments
under the terms of the SPP.
We are unpersuaded by this argument. The written terms of
the SPP provide that:
If the Employee is involuntarily terminated for
organizational reasons associated with lack of work, job
elimination, reorganization, or reduction in force . . .
he/she will be eligible to receive bi-weekly separation
payments and benefit continuation as outlined in Section IV
of the Plan Document.
Meritor Separation Pay Program (effective November 1, 1989);
Campbell App. at 129a (emphasis added). The district court
determined that both the facts and the law in this case did not
support the conclusion that the Hennessy plaintiffs were
terminated as part of a reorganization. Hennessy, 858 F. Supp.
at 487. It reasoned that the FDIC's takeover and sale of a
bank's assets constituted a termination of the bank's business,
not a continuation of this business. Id. We agree with the
determination of the district court.
A receiver, unlike a conservator, does not have as its
purpose the preservation of an institution as a going concern.
Resolution Trust Corp. v. CedarMinn Bldg. Ltd. Partnership, 956
F.2d 1446, 1454 (8th Cir.), cert. denied, U.S. , 113 S.
Ct. 94 (1992). Receivers have the power to liquidate and wind up
the affairs of an institution. Id. (citing FDIC v. Grella, 553
F.2d 258, 261 (2d Cir. 1977)). As the Court of Appeals for the
Eighth Circuit has recognized, this distinction was emphasized in
the Conference Report accompanying FIRREA, which stated:
The title . . . distinguishes between the powers of a
conservator and receiver, making clear that a conservator
operates or disposes of an institution as a going concern
while a receiver has the power to liquidate and wind up the
affairs of an institution.
Id. (quoting H.R. Conf. Rep. No. 209, 101st Cong., 1st Sess. 398
(1989)).
The Secretary of Banking for the Commonwealth of
Pennsylvania closed Meritor Savings Bank. The FDIC was appointed
receiver and it sold some of Meritor's assets to Mellon. As part
of this transaction, Mellon agreed to assume some of Meritor's
liabilities. The FDIC proceeded to liquidate the remaining
assets of Meritor for the benefit of Meritor's creditors. These
actions are commensurate with the winding up of a failed bank's
affairs and the proper function of a receiver. To suggest that
these actions constituted a reorganization of Meritor is to turn
a blind eye to the dispositive facts. We therefore cannot
conclude that the district court erred in its determination that
Meritor did not undergo a reorganization that would trigger
plaintiffs' rights to severance pay.
B. "Job Elimination" or "Lack of Work"
Rather than arguing that Meritor was reorganized, the Adolph
and Campbell plaintiffs suggest that under the terms of the SPP,
"job elimination" or "lack of work" triggered the receiver's
obligation to pay severance benefits. According to these
plaintiffs, the district court failed to adequately consider this
argument when it simply relied on its discussion in Hennessy to
grant summary judgment in favor of the FDIC in the Campbell and
Adolph cases.6 The Adolph and Campbell plaintiffs assert that
because the FDIC, as receiver, stands in the shoes of Meritor, it
must provide separation benefits pursuant to the written terms of
the SPP.
This argument also misses the mark. As stated above, the
written terms of the SPP provide:
IF the Employee is involuntarily terminated for
organizational reasons associated with lack of work, job
elimination, reorganization, or reduction in force . . .
he/she will be eligible to receive bi-weekly separation
payments and benefit continuation as outlined in Section IV
of the Plan Document.
Meritor Separation Pay Program (effective November 1, 1989);
Campbell App. 129a (emphasis added). Job elimination, however,
is defined by the plan to be if "as a result of a reorganization,
changing business needs, or the sale, closure or relocation of an
office, a specific position is determined to be unnecessary to
the company for an indefinite period of time." Id. at 128a. The
Secretary of Banking's shutdown of Meritor and the appointment of
6
. The district court's discussion in Hennessy did not
specifically address this argument.
the FDIC as receiver was not "reorganization, changing business
needs, or the sale, closure or relocation of an office." It was
the shutdown of the entire bank. Further, no specific position
was "determined to be unnecessary to the company for an
indefinite period of time." Rather, Meritor ceased to exist, and
the employment of all employees (not specific positions) was
terminated permanently. We therefore cannot conclude that "job
elimination" triggered a right to severance pay.
Similarly, we cannot conclude that a "lack of work," as
defined by the plan, triggered the right to severance benefits.
Lack of work is defined by the plan to be if "as a result of a
decrease in volume of work to be done, a position is temporarily
not needed." Id. at 128a (emphasis added). The facts of this
case do not support the view that a position was "temporarily not
needed." The Secretary of Banking closed the entire bank and
declared Meritor insolvent. We therefore fail to see how the
Campbell and Adolph plaintiffs have demonstrated a "lack of work"
as the plan defines that phrase. Accordingly, we are unpersuaded
that the district court erred in failing to find this argument a
sufficient basis upon which to ground a claim for severance
benefits.7
7
. The Hennessy plaintiffs did not rely on "job elimination" or
"lack of work" as a basis for recovery in their briefs before
this Court. At oral argument, however, counsel for the Hennessy
plaintiffs stated that she believed that "job elimination" or
"lack of work" would be an alternative grounds of recovery for
her clients. Further, she stated that the plan document
containing the definitions of "job elimination" and "lack of
work" received by the Campbell and Adolph plaintiffs was not
received by the Hennessy plaintiffs.
C. Did plaintiffs' right to severance pay vest?
Using slightly different approaches, the Hennessy
plaintiffs, and the Campbell and Adolph plaintiffs, next argue
that their rights to severance pay were "fixed and unconditional"
when the receiver was appointed. Based on certain language in
the Court of Appeals for the First Circuit's opinion in Kennedy
v. Boston-Continental National Bank, 84 F.2d 592 (1st Cir. 1936),
the Hennessy plaintiffs argue that their rights to severance
benefits vested on the day that Meritor closed its doors and went
into receivership. The Campbell and Adolph plaintiffs, by
contrast, assert that the Meritor employees had fixed,
enforceable contract rights to severance pay throughout the term
of their employment as the result of their total compensation
package. According to the Campbell and Adolph plaintiffs, the
only contingent aspect of their right to severance pay was the
amount of the benefits to be paid, an amount that was tied to
each employee's salary and years of service. These plaintiffs
cite Citizens State Bank of Lometa v. FDIC., 946 F.2d 408, 415
(5th Cir. 1991), and that case's analysis of a standby letter of
credit, to support their argument.
(..continued)
While the Hennessy plaintiffs' argument along these lines
raises certain questions about which plan documents are
applicable to them, we need not decide these questions because of
our determination, see infra part III.D., that the FDIC
repudiated the SPP.
We find these arguments unconvincing. The rights and
liabilities of a bank and the bank's debtors and creditors are
fixed as of the date of the declaration of a bank's insolvency.
American Nat'l Bank of Jacksonville v. FDIC, 710 F.2d 1528, 1540
(11th Cir. 1983) (citing First Empire Bank v. FDIC, 572 F.2d
1361, 1367-68 (9th Cir.), cert. denied, 439 U.S. 919, 99 S. Ct.
293 (1978); FDIC v. Grella, 553 F.2d 258, 262 (2d Cir. 1977);
Kennedy, 84 F.2d at 597). To establish a claim against an
insolvent bank in receivership, the liability of the bank must
have accrued and become unconditionally fixed on or before the
time it is declared insolvent. Kennedy, 84 F.2d at 597(citations omitted). As the Court of Appeals for the First
Circuit has stated:
The amount of a claim may be later established, but it
must be the amount due and owing at the time of the
declaration of insolvency . . . . If nothing is due at
the time of insolvency, the claim should not be allowed
. . . .
Id.; see also Dababneh v. FDIC, 971 F.2d 428, 434 (10th Cir.
1992) (courts analyze "provability" of claims and creditors
possess "provable" claims only if claims are "in existence before
insolvency") (quoting FDIC v. Liberty Nat'l Bank, 806 F.2d 961,
965 (10th Cir. 1986)).
The language that the Hennessy plaintiffs cite in Kennedy is
not to the contrary. To support their argument, the Hennessy
plaintiffs point to language in Kennedy that states:
Had the lease contained a covenant that insolvency shall be
breach of the lease and thereupon, without any further
action by the lessor, the lease shall terminate and the
lessor shall be entitled forthwith to damages measured as
provided in the covenant of the lease for liquidated
damages, then, on the declaration of insolvency, no doubt a
claim would arise and be matured by the agreement for
liquidated damages . . . so that the claim would be provable
in bankruptcy.
Kennedy, 84 F.2d at 597 (citations omitted). Aside from the fact
that the Hennessy plaintiffs' position ignores the holding of
Kennedy -- that the claim for failure to rent in that case was
too contingent and uncertain to support liability -- these
plaintiffs have made no showing that insolvency itself triggered
their rights under the SPP. The terms of the SPP do not provide
that a declaration of insolvency triggers payment of severance
benefits. Accordingly, their right to severance benefits was
still contingent at the time of the appointment of the receiver.
The Campbell and Adolph plaintiffs' right to severance pay
was likewise contingent, and their reliance on Citizens State
Bank of Lometa is unavailing. In Lometa, the Court of Appeals
for the Fifth Circuit held that claims that "originated" from
standby letters of credit issued before the bank became insolvent
passed the "provability test" even though the triggering event
obligating the bank to pay did not occur until after the bank
became insolvent. Lometa, 946 F.2d at 415. The court in Lometa,
however, explained that standby letters of credit are not
contingent liabilities; they are loans. Id. at 414. Therefore,
such letters are not directly comparable to a severance pay plan
under which no vested benefits accrue until a contingency is
fulfilled. Accordingly, we remain unconvinced that the
plaintiffs had a vested right to benefits prior to, or at the
time of, the appointment of the receiver.
D. Repudiation
Having determined that there was no event that triggered the
payment of severance benefits, it would ordinarily be unnecessary
to dispose of the other issues raised by the parties regarding
their entitlement to severance pay, i.e., repudiation and whether
the failure to pay severance benefits constituted actual direct
compensatory damages under FIRREA. However, the parties have
forcefully argued their positions regarding the various
"triggering" provisions, and have at least implied that they are
susceptible to more than one reasonable interpretation. We would
normally commit the task of construing ambiguous contract terms
to the fact finder after extrinsic evidence has been adduced. We
do not do so here because even if we were to assume a triggering
event had occurred, we would nonetheless affirm the district
court's grant of summary judgment in favor of the FDIC because
the FDIC repudiated the SPP pursuant to its statutory authority
under 12 U.S.C. § 1821. See PACC v. Rizzo, 502 F.2d 306, 308 n.1
(3d Cir. 1974), cert. denied, 419 U.S. 1108, 95 S. Ct. 780 (1975)
(we can affirm the district court on any ground).
The Hennessy, Campbell, and Adolph plaintiffs all allege
that following the FDIC's appointment as receiver, the FDIC did
not properly repudiate the SPP pursuant to the statutory
requirements found at 12 U.S.C. § 1821(e)(1). According to the
plaintiffs, 12 U.S.C. § 1821(e)(1) requires the FDIC to make
formal findings that the terms of the SPP were "burdensome" and
that repudiation is necessary in order to "promote the orderly
administration of the institution's affairs." The plaintiffs
argue that the FDIC made no such formal findings in this case and
therefore any repudiation of the SPP was ineffective. Further,
the Hennessy plaintiffs argue that the FDIC improperly relied on
an undisclosed policy of denying all claims for severance
benefits in repudiating the SPP.8
8
. In addition to this procedural argument, the Hennessy
plaintiffs suggest that the FDIC's repudiation power is limited
to executory contracts. These plaintiffs cite LaMagna v. FDIC,
828 F. Supp. 1 (D.D.C. 1993) in support of their position.
In LaMagna, the district court determined that an employment
agreement which provided for severance pay was nonexecutory once
the employee had rendered his services by working for one year.
Id. at 2-3. The court concluded that such nonexecutory contracts
may not be repudiated by the FDIC pursuant to FIRREA. Id.We are unpersuaded by the district court's reasoning in
LaMagna. The district court's conclusory holding that § 1821(e)
does not permit the receiver to repudiate a "nonexecutory"
contract lacks support in both the statutory language and the
case law. As many courts have noted, the statute explicitly
provides that a conservator or receiver "may disaffirm any
contract or lease," not just executory contracts. E.g.,
Employees' Retirement System of Alabama v. Resolution Trust
Corp., 840 F. Supp. 972, 984 (S.D.N.Y. 1993) (quoting §
1821(e)(1)(A)) (emphasis in original). This provision is in
sharp contrast to the Bankruptcy Code which specifically refers
only to the trustee's power to reject executory contracts. See
Morton v. Arlington Heights Fed. Sav. & Loan Ass'n, 836 F. Supp.
477, 481-82 (N.D. Ill. 1993); Employees' Retirement System of
Alabama, 840 F. Supp. at 984 (noting marked contrast with the
Bankruptcy Code which gives a trustee in bankruptcy the power to
"assume or reject any executory contract." (quoting 11 U.S.C. §
365(a))). Because Congress provided no such limitation here, we
are unable to conclude that the FDIC's power of repudiation is
limited only to executory contracts.
The provisions governing a receiver's authority to repudiate
contracts can be found at 12 U.S.C. § 1821(e). Section 1821(e)
states, in pertinent part:
(1) Authority to repudiate contracts
In addition to any other rights a conservator or
receiver may have, the conservator or receiver for any
insured depository institution may disaffirm or repudiate
any contract or lease--
(A) to which the institution is a party;
(B) the performance of which the conservator or
receiver, in the conservator's or receiver's
discretion, determines to be burdensome; and
(C) the disaffirmance or repudiation of which the
conservator or receiver determines, in the
conservator's or receiver's discretion, will promote
the orderly administration of the institution's
affairs.
12 U.S.C. § 1821(e)(1) (Supp. V 1993). Section 1821(e) does not
set forth a specific procedure for a receiver to follow in
repudiating a contract. Indeed, section 1821(e) leaves the
decision as to whether repudiation is "burdensome" and "necessary
to promote the orderly administration of the institution" to the
receiver's discretion so long as repudiation is accomplished
within "a reasonable period" following the receiver's
appointment. 12 U.S.C. § 1821(e)(2).
Courts have refused to read into this statutory language any
requirement for formal findings in support of a decision to
repudiate. In addressing this precise issue in a case involving
a receiver's obligation to pay rent, the Court of Appeals for the
Second Circuit recently stated:
First, there is no requirement that the conservator or
receiver make a formal finding that a lease or contract is
burdensome. Second, it can hardly be said that it was not
reasonable for the [receiver] to find that it would be
burdensome for it to assume a $7 million obligation to pay
rent on premises for which it no longer had use, at a time
when the real estate market was declining. Third, whether
the lease is burdensome is to be decided at the discretion
of the conservator or receiver. 12 U.S.C. § 1821(e)(1)(B).
1185 Avenue of the Americas Assocs. v. Resolution Trust Corp., 22
F.3d 494, 498 (2d Cir. 1994). The court went on to uphold the
district court's grant of summary judgment in favor of a receiver
that claimed that it had repudiated a lease. Id.; see also
Morton, 836 F. Supp. at 485 ("The statute does not require that
the receiver give reasons for repudiating a contract . . . . ");
Jenkins-Petre Partnership One v. Resolution Trust Corp., No.
Civ.A.91-A-637, 1991 WL 160317, at *5 (D. Col. Aug. 13, 1991)
("The FIRREA statute does not provide that the [receiver] explain
its actions or that a court may review the basis for that
decision.").
We see no reason to depart from this line of cases. The
claimants have failed to demonstrate that the SPP, which provided
no benefit to the receivership, but which called for millions of
dollars in payments, should not be considered "burdensome." In
addition, we conclude that there is no basis in the statute or in
the case law for requiring the FDIC, which has discretion in
making the decision concerning whether to repudiate, to produce
written findings.
Nor do we find merit in the Hennessy plaintiffs' argument
that the FDIC's repudiation is invalid because it was carried out
pursuant to an undisclosed policy. We fail to comprehend how a
consistent denial of the same type of claim constitutes an abuse
of the FDIC's discretion. If anything, such a longstanding
policy demonstrates a conscious decision to promote uniform
treatment of similar claims. Accordingly, we cannot conclude
that the district court erred in determining that the FDIC's
repudiation was not procedurally defective.
E. Actual Direct Compensatory Damages
The three sets of plaintiffs next argue that even if the
FDIC did properly repudiate the SPP, they are entitled to
severance benefits as actual direct compensatory damages under 12
U.S.C. § 1821(e)(3). The plaintiffs assert that severance pay in
the context of at will employment represents additional
compensation for entering into such a relationship and is
therefore a compensable loss if not paid. The plaintiffs rely on
the decision of the Court of Appeals for the District of Columbia
Circuit in Office and Professional Employees Int'l Union, Local 2
v. FDIC, as Receiver of Nat'l Bank of Washington ("NBW"), 27 F.3d
598 (D.C. Cir. 1994), to support their position.
While the question is close, we remain unconvinced by the
plaintiffs' argument. FIRREA provides, in pertinent part, that:
the liability of the conservator or receiver for the
disaffirmance or repudiation of any contract pursuant to
paragraph (1) shall be--
(i) limited to actual direct compensatory damages; and
(ii) determined as of--
(I) the date of the appointment of the conservator
or receiver; . . . .
12 U.S.C. § 1821(e)(3)(A) (Supp. V 1993). The statute states,
however, that the term "actual direct compensatory damages" does
not include:
(i) punitive or exemplary damages;
(ii) damages for lost profits or opportunity; or
(iii) damages for pain and suffering.
12 U.S.C. § 1821(e)(3)(B) (Supp. V 1993) (emphasis added). The
courts are split over the proper interpretation of these
provisions. The Court of Appeals for the First Circuit has
determined that the phrase "actual direct compensatory damages,"
does not include severance payments stipulated in advance.
Howell v. FDIC, 986 F.2d 569, 573 (1st Cir. 1993). According to
that court, such payments are "at best an estimate of likely harm
made at a time when only prediction is possible" and are
analogous to "liquidated damages." Id. That court reasoned that
because those employees entitled to severance pay "may, or may
not, have suffered injury," depending on the employment options
they had in the past and the options available now, and because
"[c]onceivably," such employees could have suffered "no damage at
all," severance payments of this type do not fit within the
language of the statute. Id.; see also Resolution Trust Corp. v.
Management, Inc., 25 F.3d 627, 632 (8th Cir. 1994) ("Neither
severance fees nor future lost profits are compensable under
FIRREA."); Westport Bank & Trust Co. v. Geraghty, 865 F. Supp.
83, 86 (D. Conn. 1994) ("Courts have found that damages resulting
from the repudiation of a severance package are not ``actual
direct compensatory damages' within the meaning of § 1821 because
they are analogous to liquidated damages."); Aguilar v. FDIC, No.
92-4286 (RR), slip op. at 15-16 (E.D.N.Y. Oct. 4, 1993) (noting
that courts have been unwilling to permit plaintiffs to recover
amounts more akin to liquidated than compensatory damages);
Lanigan v. Resolution Trust Corp., No. 91-7216, slip op. at 5-7
(N.D. Ill. March 30, 1993) (relying on the reasoning in Howell).
As the plaintiffs point out, however, the Court of Appeals
for the District of Columbia Circuit has taken a different view.
In NBW, a case involving a collective bargaining agreement
between the National Bank of Washington and its employees, the
court of appeals determined that in the context of an at will
employment relationship, severance payments are "properly
characterized as consideration for entering into (or continuing
under) the employment contract and therefore are compensable as
actual damages under FIRREA." NBW, 27 F.3d at 604. Rejecting
the "liquidated damages" analogy used by the Court of Appeals for
the First Circuit, the court determined that the FDIC was liable
for severance payments. Id. at 604-05.
In addition to being confronted with division amongst the
courts, we must contend with competing policy considerations. On
the one hand, we have the concern raised in Howell that in
drafting FIRREA, "Congress, faced with mountainous bank
failures," was "determined to pare back damage claims founded on
repudiated contracts." Howell, 986 F.2d at 572. On the other
hand, we must address the point raised in NBW that the question
is not whether Congress meant to scale back damage claims, but
"which damage claims, however few, are preserved." NBW, 27 F.3d
at 604. Moreover, we are cognizant of the fact that disallowance
of promised severance pay may chill a troubled bank's ability to
effectively retain able employees. See Howell, 986 F.2d at 573.
We share the view of the Court of Appeals for the First
Circuit that these payments are analogous to "liquidated
damages." We therefore agree with the position of the district
court in this case that these damages are not compensable as
"actual direct compensatory damages" under 12 U.S.C. § 1821.9Accordingly, we will affirm the order of the district court
granting summary judgment to the FDIC on the issue of separation
pay.
IV. TERMINATION OF HEALTH AND LIFE INSURANCE BENEFITS
The Campbell and Adolph plaintiffs next allege that the
district court erred in granting summary judgment against them on
their claims for health and life insurance benefits pursuant to
the 65 Special and the MGLIP.10 According to these plaintiffs,
9
. In reaching this decision, we are not unmindful of the
Hennessy plaintiffs' argument that under the terms of this
severance pay plan, benefits are actually accelerated if the
discharged employee finds other employment. Hennessy App. at 106
("If you are otherwise qualified for separation payments and then
become employed during the benefit payment period . . . [y]ou
will then receive a single-sum cash payment equal to the
remaining separation pay to which you would have been entitled
had you remained unemployed."). Nevertheless, we believe that
the function of these provisions is to articulate the timing of
the payment of benefits rather than to relate the purpose behind
the SPP.
10
. The Hennessy plaintiffs take no part in this argument.
the district court erred in determining that the provisions of §
402(b)(3) of ERISA, 29 U.S.C. § 1102(b)(3), requiring that every
employee benefit plan provide a "procedure for amending such
plan," apply only to plan amendments and not to plan
terminations. These plaintiffs argue that because the FDIC did
not follow the proper "procedure" in terminating their life and
health insurance benefits, the FDIC should be responsible for
these benefits until such time as the FDIC complies with ERISA.
They suggest that a remand is appropriate to decide this
question.
Relying on our previous decision in Schoonejongen v.
Curtiss-Wright Corp., 18 F.3d 1034 (3d Cir. 1994), the district
court held that when a party seeks to terminate an ERISA plan,
there is no requirement that the ERISA plan have a termination
procedure. Campbell, 1994 WL 475067, at *5. Subsequent to the
district court's opinion in this matter, however, the Supreme
Court reversed our panel's decision in Schoonejongen. Curtiss-
Wright Corp v. Schoonejongen, U.S. , 115 S. Ct. 1223(1995). Following that reversal, we decided the case of Ackerman
v. Warnaco, Inc., No. 94-3527, 1995 WL 289682 (3d Cir. May 15,
1995). In that case, we explicitly held that § 402(b)(3) of
ERISA applies to plan terminations as well as plan amendments.
Ackerman, 1995 WL 289682, at *3. Accordingly, we conclude that
the district court erred in holding to the contrary.
Nevertheless, we cannot agree that a remand is appropriate
or that the district court erred in granting summary judgment for
the FDIC. Section 402(b)(3) of ERISA requires that every
employee benefit plan shall "provide a procedure for amending
such plan, and for identifying the persons who have authority to
amend the plan." 29 U.S.C. § 1102(b)(3) (1988). The summary
plan booklet for the 65 Special states that:
Meritor intends the plan to be permanent, but since future
conditions affecting your employment cannot be anticipated
or foreseen, Meritor reserves the right to amend, modify or
terminate the plan at any time, which may result in the
termination or modification of your coverage.
Campbell App. at 165a. Similarly, the summary plan booklet for
the MGLIP states:
Meritor reserves the right to terminate the group life
insurance policy for its employees and retirees at any time,
if Meritor determines that such termination is in its best
interests. If Meritor terminates its group life insurance
policy, employees and retirees who die after the effective
date of the termination (other than those who are totally
disabled and insured under the provision of "Continuation of
Life Insurance During Disability") will not have any life
insurance.
Campbell App. at 152a. While section 402(b)(3) of ERISA requires
that every employee benefit plan have a procedure for amending or
terminating the plan, the Supreme Court has determined that
language such as that stated above reserving the right of "the
Company" to modify or amend a plan satisfies the requirements of
section 402(b)(3). Curtiss-Wright, U.S. at , 115 S. Ct.
at 1228-29 ("Curtiss-Wright is correct, we think, that this
states an amendment procedure and one that, like the
identification procedure, is more substantial than might first
appear."). The Court explained that "the literal terms of §
402(b)(3) are ultimately indifferent to the level of detail in an
amendment procedure, or in an identification procedure for that
matter." Id. at , 115 S. Ct. at 1229. Further, the Court
explained that "principles of corporate law provide a ready-made
set of rules for determining, in whatever context, who has
authority to make decisions on behalf of the company." Id.Because the 65 Special and the MGLIP reserve to Meritor (the
Company) the right to terminate these plans, we find no violation
of the terms of section 402(b)(3).
The question therefore becomes what "procedure" the FDIC
must follow when it is appointed receiver for Meritor and it
terminates an employee welfare benefit plan pursuant to such a
reservation clause. Certainly, under such circumstances, it
would make little sense to require the FDIC to follow Meritor's
procedure for terminating these plans (i.e., calling a meeting of
the Board of Directors of Meritor or taking other corporate
action). While the appropriate analog within the FDIC to
Meritor's Board of Directors is not immediately apparent, it is
clear that an official receiver has great discretion in taking
action that would previously have been handled through the normal
methods of corporate governance. Thus, the receiver alone may
act in ways that might otherwise require Board action. The
record reflects, and the plaintiffs concede, that on December 11,
1992, "the FDIC" sent the Campbell and Adolph plaintiffs mailings
notifying them of the termination of the 65 Special and the
MGLIP. Joint Statement of Undisputed And Disputed Facts
Regarding Motions for Summary Judgment, Campbell App. at 416a-
17a; Joint Statement of Undisputed and Disputed Facts Regarding
Motions for Summary Judgment, Adolph App. at 368a (incorporating
statement of undisputed facts in Campbell case by reference).
Since the plaintiffs acknowledged that they received notice of
the plan terminations from "the FDIC," we decline to require
further investigation into the methods by which the FDIC makes
its decisions. Accordingly, we will uphold the district court's
grant of summary judgment for the FDIC on plaintiffs' claims for
health and life insurance benefits.
V. STATUTORY PENALTY UNDER 29 U.S.C. § 1132(c)(1)
The Campbell plaintiffs next allege that the district court
erred in determining that the FDIC was not liable for the penalty
found at 29 U.S.C. § 1132(c)(1) for failure to respond in a
timely manner to a request for plan documents. According to
these plaintiffs, their counsel sent an ERISA document request to
the FDIC as administrator of the Meritor Pension Plan and the
Meritor Savings Bank Savings Plan on March 16, 1993. The FDIC
did not respond until September 21, 1993, 189 days after the
initial request. Because ERISA provides that the plan
administrator must mail requested material within 30 days of such
a request, the Campbell plaintiffs assert that they are entitled
to the requisite statutory penalty of up to $100.00 a day for
each day the plan administrator failed to comply.
We cannot agree. ERISA provides that an administrator who
fails or refuses to mail requested documents within 30 days after
such request:
may in the court's discretion be personally liable to such
participant or beneficiary in the amount of up to $100 a day
from the date of such failure or refusal, and the court may
in its discretion order such other relief as it deems
proper.
29 U.S.C. § 1132(c)(1)(B) (Supp. V 1993) (emphasis added). The
district court in this case made two alternative findings.
First, it determined that while by its terms ERISA's requirements
and penalties apply to all administrators, "the requirement
should not apply to the FDIC since it is an agency of the federal
government." Campbell, 1994 WL 475067, at *7. Second, it
determined that even if the statutory penalty for failure to
provide requested information in a timely manner is applicable to
the FDIC, "the court shall exercise its discretion under 29
U.S.C. § 1132(c)(1) and award no penalty in this case." Id. The
court explained that any penalty applied "would be an
unjustifiable windfall to the plaintiffs and would hinder the
FDIC in achieving its public mission -- the orderly wrapping up
of Meritor's affairs." Id.As the district court noted, the issue of whether the
penalty provision of § 1132(c)(1) applies to the FDIC when it
acts as receiver for a failed financial institution is one of
first impression. Id. at *6. We agree that nothing on the face
of § 1132(c) exempts the FDIC from the requirement of furnishing
requested documents in a timely manner. We therefore see no
reason to adopt a rule categorically excluding the FDIC from this
important ERISA obligation. The reasoning of the district court,
that the requirement should not apply to the FDIC since it is an
agency of the federal government, is unconvincing. Employees'
need for access to significant information about plan coverage
does not diminish because the entity currently in charge of the
plan is an agency of the federal government.11
Concerning the district court's alternative holding,
however, we have previously determined that whether a district
court awards a plaintiff monetary damages under 29 U.S.C. §
1132(c)(1) is a matter of discretion. Gillis v. Hoechst Celanese
Corp., 4 F.3d 1137, 1148 (3d Cir. 1993), cert. denied, U.S.
, 114 S. Ct. 1369 (1994). Since the district court did determine
that any penalty in this case would be an "unjustifiable
windfall" and "would hinder" the FDIC in "the orderly wrapping up
of Meritor's affairs," we cannot conclude that the district court
abused its discretion in declining to award a statutory penalty.
Accordingly, we will affirm the order of the district court
denying the Campbell plaintiffs a § 1132(c)(1) penalty award.
VI. CLASS ACTION ISSUES
The Campbell plaintiffs also raise a number of issues
concerning the district court's decision to deny certification of
three plaintiff classes. The district court determined that the
plaintiffs failed to establish the threshold requirements under
11
. The FDIC suggests that 12 U.S.C. § 1825(b)(3), a FIRREA
provision, creates an exemption from the ERISA penalty
requirement. That provision states that the FDIC, when acting as
receiver, "shall not be liable for any amounts in the nature of
penalties or fines." 12 U.S.C. § 1825(b)(3). Read as a whole,
however, § 1825 appears to concern exemptions from taxes. We
therefore find this argument unconvincing.
Rule 23(a) of the Federal Rules of Civil Procedure. Campbell,
No. 93-3969, at 5, 7, 9 (E.D. Pa. June 30, 1994) (order denying
class certification). In addition, the district court found that
class certification under Rule 23(b)(1) or Rule 23(b)(2) would be
inappropriate. Id. at 9. Because of our decision on the merits
of the Campbell plaintiffs' claims, that these claims cannot
survive summary judgment, we need not address the propriety of
the district court's decision to deny class certification. We
therefore take no position with respect to these issues.
VII. CONCLUSION
The district court did not err in granting summary judgment
to the FDIC on the plaintiffs' claims for separation pay, health
insurance benefits, and life insurance benefits. We will
therefore affirm the orders of the district court. Further,
because the district court did not abuse its discretion in
declining to find the FDIC liable for the statutory penalty
prescribed by 29 U.S.C. § 1132(c)(1), we will affirm the order of
the district court pertaining to this issue. Finally, because of
our conclusion on the merits of the Campbell plaintiffs' claims,
that the district court did not err in granting summary judgment
for the FDIC, we do not reach the class certification issues.
Each party to bear its own costs.