Myla Nauman v. Abbott Laboratories , 669 F.3d 854 ( 2012 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 10-2272
M YLA N AUMAN, JANE R OLLER,
and M ICHAEL L OUGHERY,
Plaintiffs-Appellants,
v.
A BBOTT L ABORATORIES and H OSPIRA, INC.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 04 C 7199—Robert W. Gettleman, Judge.
A RGUED JUNE 6, 2011—D ECIDED F EBRUARY 3, 2012
Before K ANNE, E VANSΠ, and SYKES, Circuit Judges.
S YKES, Circuit Judge. Abbott Laboratories decided to
“spin” its Hospital Products Division (“HPD”), creating
a separate company called Hospira. Prior to the spin,
Œ
Circuit Judge Terence T. Evans died on August 10, 2011, and
did not participate in the decision of this case, which is being
resolved by a quorum of the panel under 28 U.S.C. § 46(d).
2 No. 10-2272
HPD employees had access to Abbott’s pension plan.
After the spin, however, HPD employees became em-
ployees of Hospira, which did not offer a pension plan
but instead offered an enhanced 401(k) plan with an
employer-matching provision. The terms of the spin
included reciprocal no-hire policies, meaning that for
two years post-spin, Abbott would not hire Hospira
employees or retirees, and Hospira would not hire
Abbott employees or retirees. Thus, when HPD em-
ployees ceased employment with Abbott and became
employees of Hospira, their nonvested pension rights
in the Abbott plan were eliminated. In addition,
retirement-eligible HPD employees were effectively
prevented from retiring from Abbott before the spin
to begin collecting an Abbott pension, then joining
Hospira.
The named plaintiffs here represent a certified class
of Abbott employees terminated (though reemployed
by Hospira) as a result of the spin. They alleged that
Abbott violated § 510 of the Employee Retirement
Income Security Act (“ERISA”) by using the spin and the
no-hire policy to get rid of unwanted pension liability.
They also claimed that Hospira used the no-hire policy
to deter HPD employees from exercising pension
benefits before the spin. Finally, they alleged that
Abbott breached its fiduciary duty by failing to
disclose prior to the spin that Hospira would not offer
pension benefits. After a nine-day bench trial, the dis-
trict court entered judgment for Abbott and Hospira
on all counts. The plaintiffs appealed.
No. 10-2272 3
We affirm. The § 510 claims failed because Abbott and
Hospira did not act with the requisite intent to interfere
with the plaintiffs’ pension benefits. The district judge
specifically found that employee benefits played no role
in the decision to spin HPD and implement the no-hire
policy, and these findings are not clearly erroneous. The
breach-of-fiduciary-duty claim failed because Abbott
had nothing to do with the Hospira benefits plan and
because Abbott reported truthfully to HPD employees
that their benefits might change after the spin. These
findings, too, are supported by the evidence.
I. Background
Abbott Laboratories is a major pharmaceuticals
company with headquarters in northern Illinois. Its
Hospital Products Division (“HPD”), while well estab-
lished and profitable, was resource intensive and had
a slow growth rate, whereas Abbott preferred high
growth. On the advice of several financial advisors,
Abbott determined that HPD and Abbott would be
worth more separate than together. So Abbott decided to
“spin” HPD, meaning that HPD would become its own
company, to be called Hospira, with each Abbott share-
holder receiving pro rata shares of the new company.
Abbott approved the spin in June 2003 and announced
it publicly two months later. The spin would take place
on April 30, 2004, and Hospira would be live the next
day. In the announcement Abbott stated that HPD em-
ployees would remain on Abbott’s various benefits
plans until the spin. After the spin the new Hospira
4 No. 10-2272
employees would continue to receive the same benefits
through a transitional plan set up by Abbott but managed
by Hospira until the end of 2004. At that point Hospira
employees would receive benefits through a not-yet-
created Hospira plan, which Hospira management
would design post-spin.
Critical to the success of the spin was retaining the
roughly 15,000 HPD employees at Hospira. As a result
and consistent with external advice, Abbott: (1) prohibited
HPD employees tapped for Hospira from transferring
within Abbott; (2) announced that for two years after
the spin, Abbott would not hire anyone who left
Hospira; and (3) announced that for two years after the
spin, Hospira would not hire anyone who left Abbott.
The question then arose whether an exception would be
made for retirement-eligible HPD employees. Specif-
ically, could these employees retire from Abbott, begin
receiving their pensions, and then join Hospira? Ulti-
mately, Abbott announced pre-spin that this would not
be possible. This decision was made for several reasons.
First, Abbott’s tax advisors believed it would violate
tax law and therefore cause the relevant benefits plans
to lose their tax-deferred status. Another reason had to
do with productivity: Some employees receiving both a
pension and a salary for the same job might not work
as hard.
Even more critical to the success of the spin was re-
taining certain HPD executives at Hospira. Retention
bonuses are common in these circumstances. Abbott’s
benefits plan offered a valuable retiree medical program,
No. 10-2272 5
providing medical benefits to vested employees even
after leaving Abbott. Pre-spin, it was unknown whether
Hospira would offer a similar benefit, which was unset-
tling to five key HPD executives who were not yet
vested in the plan. To allay their concerns and provide
a retention incentive, Abbott simply gave the executives
retention bonuses in an amount equal to their expected
future medical claims.
After the spin Hospira approved a benefits plan that
did not offer pension or retiree medical benefits. Instead,
the Hospira plan offered an enhanced 401(k) plan with
generous employer-matching provisions.
HPD-turned-Hospira employees Myla Nauman,
Jane Roller, and Michael Loughery filed this lawsuit on
behalf of themselves and a proposed class of employees
whose employment at Abbott was terminated as a conse-
quence of the spin. They alleged four counts: (I) Abbott
carried out the spin transaction to interfere with the
benefits of HPD employees in violation of § 510 of
ERISA; (II) Abbott designed the no-hire policy to inter-
fere with the benefits of HPD employees in violation
of § 510 of ERISA; (III) Hospira designed the no-hire
policy to interfere with the benefits of HPD-turned-
Hospira employees in violation of § 510 of ERISA; and
(IV) Abbott and Hospira breached fiduciary duties under
ERISA by failing to disclose material information about
the Hospira benefits plan. The district court certified a
6 No. 10-2272
class,1 dismissed Count IV against Hospira because the
alleged fiduciary breach occurred prior to its existence,
and denied the parties’ cross-motions for summary judg-
ment. After a bench trial, the court found for the defen-
dants on all claims, entering comprehensive findings of
fact and conclusions of law, which we will discuss in
more detail below.
II. Discussion
The plaintiffs appeal from a judgment entered after a
bench trial; we review factual findings for clear error
and legal conclusions de novo. Kelley v. Chi. Park Dist., 635
F.3d 290, 295 (7th Cir. 2011). A factual finding is clearly
erroneous “only if we are firmly convinced after we
review all of the evidence that a mistake has been
made.” United States v. Hill, 645 F.3d 900, 907 (7th Cir.
2011).
A. ERISA § 510
Section 510 of ERISA, titled “Interference with protected
rights,” states in relevant part:
1
The class for Counts I, II, and IV was defined as “[a]ll employ-
ees of Abbott who were participants in the Abbott Benefit
Plans whose employment with Abbott was terminated . . . as a
result of the spin-off.” For Count III a subclass was certified
and defined as class members “who were eligible for retire-
ment under the Abbott Benefit Plans on the date of their
terminations.” Only Loughery represents the subclass.
No. 10-2272 7
It shall be unlawful for any person to discharge, fine,
suspend, expel, discipline, or discriminate against a
participant or beneficiary for exercising any right to
which he is entitled under the provisions of an em-
ployee benefit plan . . . or for the purpose of interfering
with the attainment of any right to which such partici-
pant may become entitled under the plan . . . .
29 U.S.C. § 1140. This provision prohibits retaliation for
the exercise of plan benefits and interference with the
attainment of those benefits. But plaintiffs claiming a
violation of § 510 “must establish more than a loss of
benefits; they must demonstrate that their employers
[acted] with the specific intent of preventing or re-
taliating for the use of benefits.” Lindemann v. Mobil Oil
Corp., 141 F.3d 290, 295 (7th Cir. 1998). In other words,
employers must have been motivated by “a desire to
frustrate attainment or enjoyment of benefit rights.” Isbell
v. Allstate Ins. Co., 418 F.3d 788, 796 (7th Cir. 2005) (quota-
tion marks omitted).2
2
The plaintiffs challenge the district court’s conclusion, based
on Gross v. FBL Financial Services, Inc., 557 U.S. 167 (2009), that
§ 510 requires but-for causation. Gross interpreted the Age
Discrimination in Employment Act, but we have applied its
reasoning in other contexts. See, e.g., Serafinn v. Local 722,
597 F.3d 908, 915 (7th Cir. 2010) (Labor Management Reporting
and Disclosure Act); Serwatka v. Rockwell Automation, Inc., 591
F.3d 957, 961-62 (7th Cir. 2010) (Americans with Disabilities
Act); Fairley v. Andrews, 578 F.3d 518, 525-26 (7th Cir. 2009)
(§ 1983 First Amendment). In Fairley we said that “unless
(continued...)
8 No. 10-2272
The plaintiffs’ theory is that Abbott wanted to rid
itself of some of its pension liability so it spun HPD,
knowing that Hospira would not provide a similar
plan. On this view the Abbott no-hire policy ensured
that HPD employees could not simply return to Abbott
and retain their pension rights. But after a lengthy
bench trial, the district judge found that “employee
benefits simply had no part of [the decision to spin
HPD].” The plaintiffs have not directly challenged that
finding on appeal, and in any case, it was not clear error.
The judge supported this general finding with many
specific findings relating to witness testimony and docu-
mentary evidence. For example, the judge found that
“[e]very witness who testified at trial stated that the
spin decision had nothing to do with employee bene-
fits,” and that “[t]he HPD spin rationale was repeatedly
documented and employee benefits was never once
mentioned as a factor in the spin decision.”
(...continued)
a statute . . . provides otherwise, demonstrating but-for causa-
tion is part of the plaintiff’s burden in all suits under
federal law.” 578 F.3d at 525-26. The issue “turns on the lan-
guage of the statute and the presence or absence of text akin
to that of Title VII which authorizes mixed-motive claims.”
Serwatka, 591 F.3d at 961. Section 510 does not explicitly permit
such claims, so on the strength of this caselaw, but-for causa-
tion is probably required. We need not decide the issue, how-
ever, because the district judge as the trier of fact specifically
found that a desire to frustrate benefits played no role in the
defendants’ actions, and that finding is not clearly erroneous.
No. 10-2272 9
The plaintiffs also argued that the Hospira no-hire
policy was designed to interfere with employee benefits.
Specifically, the plaintiffs alleged that the policy was
intended to deter retirement-eligible HPD employees
from retiring from Abbott to start the flow of pension
benefits because if they did, they could not subsequently
join Hospira. But the district judge found that “[t]he no-
hire policy was not ‘motivated by an intention to inter-
fere with any of the employees[’] benefits.’ ” Again, the
plaintiffs have not directly challenged that finding on
appeal, and again, it was not clear error. The judge
found that the no-hire policy was created to promote
stability and productivity at both companies post-spin;
these findings are well supported by the evidence.
On appeal the plaintiffs change course and argue that
the companies discriminated against Abbott retirees by
colluding to preclude their employment at Hospira. As
we have explained, under the no-hire policy, Hospira
would refuse to hire Abbott retirees. The companies
adopted the policy because (among other reasons) they
thought that allowing employees to collect a retirement
pension from Abbott and a full salary from Hospira for
the very same job could lead to productivity problems.
The plaintiffs assert that these facts suggest discrimina-
tion based on an invidious stereotype that retirees are lazy.
This new theory sounds like a claim of discriminatory
failure to hire, which is unusual in the § 510 context.
Regardless, this case is an improper vehicle for such a
claim because the named plaintiffs did not retire from
Abbott and were in fact hired by Hospira. So the argu-
10 No. 10-2272
ment must be that the companies used the threat of dis-
crimination—as embodied in Hospira’s no-hire policy—
o deter HPD employees from retiring. But this leads us
back to the district judge’s finding that the no-hire
policy was not motivated by an intent to interfere with
employee benefits. In short, however the argument is
framed, the fundamental problem is that § 510 requires
a specific intent, proof of which is lacking here. See
Isbell, 418 F.3d at 796; Lindemann, 141 F.3d at 295.
B. Breach of Fiduciary Duty
“A claim for breach of fiduciary duty under ERISA
is only valid against a ‘fiduciary.’ ” Baker v. Kingsley, 387
F.3d 649, 660 (7th Cir. 2004). A “fiduciary” is “a person
who exercises authority or discretion over the admin-
istration of a plan, but only when performing those func-
tions.” Beach v. Commonwealth Edison Co., 382 F.3d 656,
658 (7th Cir. 2004) (citing 29 U.S.C. § 1002(21)(A)); see also
Pegram v. Herdrich, 530 U.S. 211, 226 (2000) (“In every
case charging breach of ERISA fiduciary duty, . . . the
threshold question is . . . whether [the defendant] was
acting as a fiduciary (that is, was performing a fiduciary
function) when taking the action subject to complaint.”).
Thus, fiduciary duties are “plan-specific.” Beach, 382
F.3d at 658.
The plaintiffs alleged that prior to the spin, Abbott
helped create the Hospira benefits plan and thus had a
fiduciary duty to disclose the Hospira plan’s details to
employees. They claimed that instead of disclosing what
No. 10-2272 11
it knew, Abbott misled employees into believing that
the Hospira plan would be similar to the Abbott plan.
The district judge made several factual findings that
defeated this claim. Specifically, the judge found that pre-
spin, Abbott consistently told employees that Hospira
would set up its own employee-benefits plan and that
its benefits could be entirely different from Abbott’s. The
judge also found that consistent with these representa-
tions, Hospira indeed made its own decisions regarding
employee benefits after the spin. Accordingly, the
judge concluded that Abbott owed no duty to the plain-
tiffs with respect to the Hospira plan. Even assuming
otherwise, the judge found that Abbott committed
no breach because its communications were entirely
truthful.
The plaintiffs dispute that Hospira made its own deci-
sions about benefits after the spin. This argument is
based on an inference they invite us to draw from
Abbot’s decision to offer executive retention bonuses. As
we have noted, several key HPD executives were paid
retention bonuses in an amount equal to the value of
Abbott’s retiree medical program, a benefit that Hospira
ultimately did not offer. The plaintiffs argue that this
evidence suggests that Abbott knew the details of the
Hospira plan before the spin took place.
But the district judge made specific findings rejecting
this exact argument. The judge found that at the time of
the bonus decisions, Hospira’s benefits plan had not yet
been created, so it was unknown whether Hospira
would offer retiree medical benefits. This was a concern
12 No. 10-2272
to the executives who were not yet vested in the retiree
medical program. Abbott’s decision to offer executive
retention bonuses was a response to this uncertainty.
That is, to offset the fears of key executives and provide
an incentive for them to remain, Abbott simply gave
retention bonuses equal to the benefits’ future value. The
judge’s findings on this point are supported by the testi-
mony of Abbott executives and are not clearly erroneous.
Because the plan was created by Hospira after the spin
and without input from Abbott, the conclusion that
Abbott had no fiduciary duty with respect to the plan
naturally follows. See 29 U.S.C. § 1002(21)(A); Beach,
382 F.3d at 658.
Assuming the existence of a fiduciary duty, the judge
also found that Abbott committed no breach because
it did not materially misrepresent anything about the not-
yet-developed Hospira plan. Abbott told employees
that Hospira would create its own benefits plan after
the spin and that the Hospira plan could be entirely
different from the Abbott plan. Those statements were
entirely true; nothing in the record suggests otherwise.
A FFIRMED.
2-3-12