Soland v. George Washington University ( 2013 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
RICHARD SOLAND,
Plaintiff, Civil Action No. 10-cv-2034 (RLW)
v.
THE GEORGE WASHINGTON
UNIVERSITY, et al.,
Defendants.
MEMORANDUM OPINION
Plaintiff Professor Richard Soland (“Soland”) brings this action against his former
employer The George Washington University (“GWU”) for alleged violations of the Employee
Retirement Income Security Act, 29 U.S.C. §§ 1001-1461, as well as a claim of common law
negligent misrepresentation. Soland claims that when he approached GWU about his plans to
retire, they failed to inform him of a more generous retirement plan than the one he was offered,
despite having the other plan under serious consideration at the time. He also claims GWU
improperly refused to allow him to join the other plan when they ultimately announced it despite
his being eligible to do so. Defendants GWU, The George Washington University School of
Engineering and Applied Science Voluntary Separation Incentive Plan, and Donald Lehman and
The George Washington University Office of the Executive Vice President for Academic Affairs
moved to dismiss Counts I and III of Soland’s complaint (Dkt. No. 14), and moved for summary
judgment on Count II (Dkt. No. 17). After careful consideration of the materials submitted by
both parties, for the reasons below the Court finds that Defendants’ Motion to Dismiss (Dkt. No.
14) is granted in part and denied in part, and Defendants’ Motion for Summary Judgment (Dkt.
No. 17) is granted.
1
I. Factual Background
Soland taught at The George Washington University’s School of Engineering and
Applied Science (“SEAS”) for over 30 years. (Dkt. No. 10 at ¶ 7). Around January 2008, he
told the head of his department he planned to retire “at or around the end of 2009[,] and inquired
as to whether a voluntary separation package would be available to him at or around the time of
his proposed retirement.” (Id. ¶ 14). After some discussion with staff of The George
Washington University (“GWU”), Soland received a memorandum dated January 31, 2008
outlining the terms of a separation agreement. (See Dkt. No. 14, Ex. 1). It stated that final
approval of the terms would need to come from Donald Lehman, the Executive Vice President
for Academic Affairs (“Lehman”). (Id.)
Lehman approved the January 31, 2008 memorandum on April 7, 2008, and wrote
Lehman on April 16, 2008 to confirm. (Id.). The letter from Lehman stated that Soland’s “full-
time active status will continue through the 2008 Fall semester,” he would “be granted
administrative leave” for 2009, and his retirement “will be effective as of the end of the 2009
Fall semester.” (Id.) A November 1, 2008 letter confirmed the amount of money Soland would
receive for 2009. (See Dkt. No. 10 at ¶ 17).
Around one year later, on October 23, 2009, Lehman announced a Voluntary Separation
Incentive Program (“VSIP”) “for all full-time regular active status faculty” in Soland’s
department. (Id. ¶ 18). GWU did not send notice of the VSIP to Soland. (Id.). After Soland
learned of the VSIP, he wrote to Lehman on December 2, 2009 and expressed interest in
participating in it. (Id. ¶ 22). Lehman told Soland he was not eligible because he was not “full-
time active status.” (Id.). Nonetheless, Soland sought to register for the program, and mailed in
certain paperwork associated with it. (Id. ¶ 23). On February 16, 2010, Lehman denied Soland’s
2
claim for benefits under the VSIP, which Soland appealed on April 14, 2010. (Id. ¶ 24).
Lehman rejected that appeal by letter on June 11, 2010. (Id. ¶ 25).
Soland filed his complaint in this Court on November 23, 2010, stating claims under
ERISA §§ 502(a)(3) & 502(A)(1)(B). (Dkt. No. 1). After Defendants answered and moved to
dismiss the claim filed under ERISA § 502(a)(3) (Dkt. Nos. 7 & 8), Soland filed an amended
complaint on March 8, 2011, adding an additional count of common law negligent
misrepresentation. (Dkt. No. 10).
II. Legal Standards
A. Motion To Dismiss
Defendants have moved to dismiss Counts I and III of Plaintiff’s complaint under Rule
12(b)(6). (Dkt. No. 14). “To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). In evaluating a Rule 12(b)(6) motion, the court construes the complaint liberally in the
Plaintiff’s favor and grants him all reasonable inferences. See Stokes v. Cross, 327 F.3d 1210,
1215 (D.C. Cir. 2003). Despite the positive inferences granted in considering a motion to
dismiss, a complaint must sufficiently “give the defendant fair notice of what the . . . claim is and
the grounds upon which it rests.” Twombly, 550 U.S. at 555 (internal citations omitted).
Although the complaint does not require detailed factual allegations, it must provide “more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Id.B. Summary Judgment
Defendants have moved for summary judgment with respect to Count II of Plaintiff’s
complaint. (Dkt. No. 17). Summary judgment is appropriate when the moving party
3
demonstrates that there is no genuine issue as to any material fact and that the moving party is
entitled to judgment as a matter of law. See Moore v. Hartman, 571 F.3d 62, 66 (D.C. Cir. 2009)
(citing FED. R. CIV. P. 56(c) and Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986)). A
genuine issue of material fact exists if the evidence “is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson, 477 U.S. at 248. “The mere existence of a scintilla
of evidence in support of the plaintiff's position will be insufficient; there must be evidence on
which the jury could reasonably find for the plaintiff.” Id. at 252.
III. Analysis
A. Soland’s Count I Claim For Breach Of Fiduciary Duty
1. Taking Soland’s Allegations As True, Defendants Engaged In Fiduciary
Action And Should Have Disclosed The VSIP
To state a claim under ERISA § 502(a)(3), Plaintiff must demonstrate Defendants acted
in a fiduciary capacity. The ERISA statute states that “a person is a fiduciary with respect to a
plan to the extent he exercises any discretionary authority or discretionary control respecting
management of such plan . . . or he has any discretionary authority or discretionary responsibility
in the administration of such plan.” 29 U.S.C. § 1002(21)(A). The Supreme Court has
recognized that breach of fiduciary duty under ERISA can be an actionable claim. Varity Corp.
v. Howe, 516 U.S. 489 (1996).
The motion papers clarify that Soland does not claim a fiduciary duty owed to him from
discussions about his severance package. “[E]mployee benefits, such as severance pay, set forth
in individually negotiated employment contracts, do not give rise to a ‘plan’ under ERISA.”
Johnson v. TCOM Sys., Inc., Civ. A. No. 89-0311 (RCL), 1989 WL 517870, at *2 (D.D.C.
1989). Soland and the Defendants agree that Soland’s separation agreement is not an ERISA
4
plan, and therefore discussions related to it do not constitute fiduciary acts. (See Dkt. No. 15, at
9 n.1).
The issue is whether Defendants’ comments (or lack thereof) regarding the VSIP
constitute fiduciary action. Soland claims that because Defendants “sponsored and/or
administered ERISA-covered retirement and benefit plans to which [he] was a participant,” they
owed him a fiduciary duty to disclose information regarding the VSIP when he inquired about
his retirement in 2008 and during his ongoing negotiations that year. (Dkt. No. 10, at ¶ 28).
However Defendants claim Soland’s participation in other ERISA plans “is of no moment.”
(Dkt. No. 14, at 9). They claim “[t]here is no all-encompassing fiduciary duty . . . simply
because Dr. Soland participated in other GW plans covered under ERISA.” (Dkt. No. 16, at 4).
Central to whether Defendants breached a fiduciary duty to Soland is whether the VSIP
was under serious consideration at the time of the parties’ ongoing discussions in 2008. The
Third Circuit essentially first devised the serious consideration test. See Fischer v. Phila.
Electric Co., 96 F.3d 1533 (3d Cir. 1996). “Serious consideration of a change in plan benefits
exists when (1) a specific proposal (2) is being discussed for purposes of implementation (3) by
senior management with the authority to implement the change.” Id. at 1539. Several Circuit
Courts have adopted the serious consideration test as formulated by Fischer, or modified it
slightly. See, e.g., Mathews v. Chevron Corp., 362 F.3d 1172, 1180-82 (9th Cir. 2004);
McAuley v. IBM Corp., 165 F.3d 1038, 1043 (6th Cir. 1999); Vartanian v. Monsanto Co., 131
F.3d 264, 272 (1st Cir. 1997). In the Second and Fifth Circuits the test is a materiality test,
which is assessed through factors that include the serious consideration doctrine’s factors but
enhanced with others. The materiality test is designed to avoid employers keeping information
from employees before the three elements of the serious consideration test are met but after such
5
information would become materially relevant to an employee’s decision to retire. See, e.g.,
Ballone v. Eastman Kodak Co., 109 F.3d 117 (2d Cir. 1997); Martinez v. Schlumberger, Ltd.,
338 F.3d 407, 428 (5th Cir. 2003) (“[L]ack of serious consideration does not equate to a free
zone for lying.”). The D.C. Circuit has not yet expressed a preference for the serious
consideration test or materiality test in the ERISA context. In part because the factual record is
largely undeveloped, and thus the extent of any alleged misrepresentation remains unclear, this
Court does not need to resolve the issue at this stage of the proceedings.
Assuming the VSIP was under serious consideration during the negotiations of Soland’s
separation agreement, Defendants owed him a fiduciary duty to disclose it. At this stage of the
proceedings, Soland’s allegations must be presumed true, see Holistic Candlers & Consumers
Ass’n v. Food & Drug Administration, 664 F.3d 940, 943 (D.C. Cir. 2012), and the Court
assumes Soland has alleged his facts in good faith. See FED. R. CIV. P. 11(b). Defendants claim
that the VSIP “was established eighteen months later” than Soland’s first communications about
his retirement, and that Soland “never explains how Defendants could be liable for failing to
disclose something that did not exist.” (Dkt. No. 16, at 5-6). But this mischaracterizes what
Soland alleges. He alleges that “Defendants had the 2009 Separation Program under serious
consideration at the time Plaintiff made his inquiries.” (Dkt. No. 10, at ¶ 32). And he alleges
that “as of the time of Plaintiff’s discussions and inquiries as to the existence of a voluntary
separation program in early to mid-2008 . . . GW was giving serious consideration to (and likely
had already adopted and begun to implement) the 2009 Separation Program.” (Id. ¶ 31). This is
not the time for resolving this factual dispute, as Soland’s allegations that the VSIP was under
serious consideration in 2008 are given credence at this stage.
6
Several courts have found a duty to disclose information regarding a new plan under
serious consideration, or information regarding amendments to an existing plan, if a preexisting
ERISA fiduciary relationship exists between the parties. In Mullins v. Pfizer, Inc., 147 F. Supp.
2d 95 (D. Conn. 2001), for example, the court rejected an employer’s argument that because a
new plan was at issue the employer did not owe any fiduciary duty regarding the new plan until
it was formally adopted. Similarly, in Adamczyk v. Lever Bros. Co., a Division of Conopco,
991 F. Supp. 931, 940 (N.D. Ill. 1997), the court held that although “[a]n employer is not
required to be perfectly prescient as to all future changes in employee benefits,” “where an
employer is seriously considering the implementation of a new plan, he or she has a fiduciary
duty not to make misrepresentations.” See also Flanagan v. Allstate Ins. Co., 213 F. Supp. 2d
862 (N.D. Ill. 2001). Defendants fail to distinguish these cases largely because they rely on their
argument that the VSIP was not under serious consideration in 2008, which as discussed above
this Court cannot accept at this stage.
2. Soland’s Claims In Counts I And II Are Not Duplicative
Defendants also move to dismiss Count I because they claim it is “duplicative” of and
“identical” to Count II. (Dkt. No. 14, at 12-13). They cite cases supporting the proposition that
“a plan participant cannot proceed with a breach of fiduciary claim under Section 502(a)(3) when
relief is available under other remedial sections of ERISA.” Kifafi v. Hilton Hotels Ret. Plan,
616 F. Supp. 2d 7, 39 (D.D.C. 2009). They also state that Soland’s reference to Count I being
brought under an estoppel theory “should be dismissed for the same reasons.” (See Dkt. No. 14,
at 13-14).
Soland’s theories in Counts I and II are not identical. As discussed further below, in
Count II, he challenges the denial of benefits based on Defendants’ interpretation of the VSIP’s
7
language. However in Count I, he alleges that Defendants failed to provide him with accurate
information regarding the existence of the VSIP and its potential availability to him. These are
two different theories based on different actions by Defendants. “Where plaintiffs are not merely
repackaging a benefits claims [sic], it is entirely appropriate to bring simultaneous § 502(a)(3)
and § 502(a)(1)(B) claims to address two separate and distinct injuries that are based in whole or
in part on different facts.” England v. Marriott Int’l, Inc., 764 F. Supp. 2d 761, 779 (D. Md.
2011) (citing Gore v. El Paso Energy Corp. Long Term Disability Plan, 477 F.3d 833, 839-40
(6th Cir. 2007)) (internal quotations omitted). Such is the case here, and thus this Court finds
that Count I is not duplicative of Count II. 1
3. Soland Is Entitled To Discovery On The Issue Of When The VSIP Was
Under Serious Consideration
If the VSIP was under serious consideration in 2008 when Soland approached Defendants
and negotiated his severance package, it is possible he can state a claim for breach of fiduciary
duty. However if the VSIP was not under serious consideration at that time, this claim will
likely fail. Because Soland has alleged the former in his complaint, he is entitled to discovery
with respect to this issue.
B. In Count II, Soland Fails To Demonstrate That The Plan Administrator’s
Decision Was Unreasonable Or An Abuse Of Discretion
1. ERISA Standard Of Review For Denial Of Benefits
Denial of benefits by an ERISA plan administrator is considered under the deferential
“abuse of discretion” or “arbitrary and capricious” standard of review. Firestone Tire & Rubber
Co. v. Bruch, 489 U.S. 101, 115 (1989). The Court of Appeals for this Circuit “has defined the
Firestone deferential standard as one of ‘reasonableness.’” Wagener v. SBC Pension Benefit
1
With respect to estoppel, after the parties fully briefed the motion to dismiss, the Supreme
Court decided Cigna Corp. v. Amara, which suggests that estoppel is appropriate equitable relief
under § 502(a)(3). 131 S. Ct. 1866, 1878-81 (2011).
8
Plan–Non Bargained Program, 407 F.3d 395, 402 (D.C. Cir. 2005) (quoting Block v. Pitney
Bowes, Inc., 952 F.2d 1450, 1452 (D.C. Cir. 1992)). Review of the administrator’s decision is
based only “on the evidence presented to the plan administrators, not on a record later made in
another forum.” Pitney Bowes, 952 F.2d at 1455.
2. The Decision Of The Plan Administrator Is Both Reasonable And Entitled
To Deference
The plan announced by GWU in October 2009 listed three conditions that must be
satisfied in order to participate. First, one “[m]ust be a full-time regular active faculty member in
SEAS” hired prior to August 1994. (Dkt. No. 17, at AR004). Second, the material “provided by
the University” needed to be executed by January 29, 2010. (Id.) And third, faculty “[m]ust
remain employed through his or her ‘Resignation Date,’ as defined in the Agreement.” (Id.)
Soland does not satisfy any of the three criteria. 2
Defendants’ interpretation that Soland failed to meet the definition of “full-time regular
active faculty member” is entitled to deference. According to the separation agreement reached
between Soland and GWU, he would continue to work full time, but only during 2008. (Id. at
AR012). By describing Soland’s status as full time only through 2008, the agreement clearly
contemplates a change in that status after 2008. While Soland is correct that the October 2009
Plan does not specifically define “full-time regular active faculty member,” this misses the point.
(See Dkt. No. 20, at 11). Defendants interpreted the term as involving attendance at faculty
meetings, participation in committees, conducting research, and other duties. (Dkt. No. 17, at
AR037). This Court owes deference to that interpretation unless it is an abuse of discretion or
arbitrary and capricious, which does not appear to be the case. Because the separation agreement
2
Neither party addresses point number two, although the Court notes that Defendants
never “provided” the material to Soland. Instead, he obtained the material on his own.
9
defined Soland as working full time only through 2008, for Defendants to determine that he was
not working full time in 2009 does not appear at all to be unreasonable.
Soland admits that he did not remain employed through any “Resignation Date” provided
in the October 2009 plan. (Dkt. No. 20, at 12). He attempts to excuse this in part by claiming
that the October 2009 plan “does not contain an express provision stating that an employee must
retire on one of the referenced dates to receive benefits under the VSIP or that the VSIP is only
intended to apply to employees who retire on one of the referenced dates.” (Id. at 13.) But the
record indicates otherwise. “Resignation Date” is defined as the date checked among the three
listed: May 31, 2010; December 31, 2010; or May 31, 2011. (Dkt. No. 17, at AR017). When
Soland sent in the materials he obtained, he left the choice among these three dates blank. (Id. at
AR026). He did so because he was “terminated with [his] official retirement on December 31,
2009.” (Id. at AR012). In addition, the October 2009 plan requires an employee to “remain
employed” through their 2010 or 2011 Resignation Date, which of course Soland did not do as
he retired at the end of 2009. (Id. at AR004). Facts are stubborn things, and Soland’s effort here
to wish them away fails.
The plan announced in October 2009 included criteria that needed to be met, and the
record indicates that Soland did not satisfy them. Defendants’ decision to deny Soland’s request
to participate in the plan is imminently reasonable, and especially so under the deferential
standard applicable here. Accordingly, this Court will grant Defendants’ motion for summary
judgment with respect to Soland’s second Count.
C. Soland’s Claim For Common Law Negligent Misrepresentation In Count III Is
Preempted
ERISA contains a broad preemption provision to provide a uniform framework for
employee benefit plans. The statute states it “shall supersede any and all State laws insofar as
10
they may now or hereafter relate to any employee benefit plan . . . .” 29 U.S.C. § 1144(a). 3
State laws do not have to be specifically designed to affect employee benefit plans to be
preempted. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47-48 (1987). “ERISA includes
expansive pre-emption provisions . . . which are intended to ensure that employee benefit plan
regulation would be exclusively a federal concern.” Aetna Health Inc. v. Davila, 542 U.S. 200,
208 (2004) (citation and quotations omitted).
ERISA preempts Soland’s common law negligent misrepresentation claim. A state law
relates to an employee benefit plan “if it has a connection with or reference to such a plan.”
Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97 (1983) (footnote omitted). Soland’s claim in
Count III depends on the existence of the VSIP, and alludes to it several times. For example, he
claims that “Defendants’ negligent misrepresentations” occurred because of a failure to disclose
“a voluntary separation package.” (See Dkt. No. 10, at ¶¶ 45, 50). In similar contexts other
courts have noted that such a claim should be rejected as preempted by ERISA. In Olivo v.
Elky, 646 F. Supp. 2d 95 (D.D.C. 2009), current and former employees of the National Museum
of Women in the Arts claimed a failure to notify them regarding eligibility in an ERISA plan
constituted common law negligence. The court held that their negligence claim related to the
plan and was therefore preempted “because the duty that plaintiffs allege has been breached—the
duty to notify—exists because of the Plan.” Id. at 100 (citations omitted); see also Krooth &
Altman v. N. Am. Life Assurance Co., 134 F. Supp. 2d 96, 101-02 (D.D.C. 2001) (coming to the
same conclusion even though “these claims may rest upon actions that allegedly occurred before
the [policy] was entered”). Because Soland’s negligent misrepresentation claim relates to and is
linked with the VSIP, it is preempted by ERISA.
3
Soland misquotes the ERISA statute by replacing the word “shall” with the word
“should.” (Dkt. No. 15, at 22).
11
Soland states that Count III is brought “[a]s an alternative claim to his claim in Count I.”
(Dkt. No. 15, at 22; see also Dkt. No. 10, at ¶ 44). What Soland seeks to do in Count III has
been explicitly rejected by courts in the past, and there is no reason to go against this precedent.
Under ERISA, “a plaintiff’s common law claim is preempted where she advances it ‘as an
alternative basis for recovering [benefits] under the . . . Plan.’” Olivo, 646 F. Supp. 2d at 100(quoting Coleman v. Pension Benefit Guar. Corp., 196 F.R.D. 193, 197 (D.D.C. 2000);
alterations in Olivo). Because here too Soland attempts to bring a common law claim as an
alternative to his claim for benefits in Count I, the effort will be rejected.
The only case cited by Soland to the contrary is an unpublished 1992 case that members
of this court have consistently declined to follow with respect to ERISA preemption since that
time. See Johnson v. Antioch Univ., Civil Action No. 91-133-LFO, 1992 U.S. Dist. LEXIS 4931(D.D.C. April 15, 1992). At issue in Johnson was an employee who relied on a promise that she
would be covered under a new long-term disability plan when she was “encouraged by her
employer to resign for health reasons.” Id. at *3. Johnson is factually far afield from what is at
issue in this case, in part because GWU did not encourage Soland to retire, and also because the
issue of health care coverage is not present. But more importantly, the reasoning in Johnson—as
Plaintiff himself notes (see Dkt. No. 15, at 23 n.5)—has been repeatedly criticized since. See,
e.g., Olivo, 646 F. Supp. 2d at 101 (“Further, this Court has declined to follow the Johnson test
in recent cases involving ERISA.”); Krooth & Altman, 134 F. Supp. 2d at 101-02; Hurley v. Life
Ins. Co. of N. Am., Civil Action No. 04-0252 (CKK), 2005 U.S. Dist. LEXIS 43038, at *41
(D.D.C. July 7, 2005) (calling Johnson “questionable”). As have several others, this Court
declines to follow Johnson.
12
Defendants offer additional support for the dismissal of Count III, including an alleged
failure by Soland to adequately plead his claim under Federal Rules of Civil Procedure 8(a) and
9(b). But because this Court finds the claim for common law negligent misrepresentation is
preempted by ERISA, there is no need to consider these other arguments. As a result, this Court
will grant Defendants’ Rule 12(b)(6) motion with respect to Count III.
CONCLUSION
For the foregoing reasons, Defendants’ Motion to Dismiss (Dkt. No. 14) is GRANTED
IN PART and DENIED IN PART, and Defendants’ Motion for Summary Judgment (Dkt. No.
17) is GRANTED. An Order accompanies this Memorandum.
Digitally signed by Judge Robert L.
Wilkins
DN: cn=Judge Robert L. Wilkins,
o=U.S. District Court, ou=Chambers
of Honorable Robert L. Wilkins,
email=RW@dc.uscourt.gov, c=US
Date: January 7, 2013 Date: 2013.01.07 17:29:07 -05'00'
ROBERT L. WILKINS
United States District Judge
13