Soland v. George Washington University ( 2014 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
RICHARD SOLAND,
Plaintiff,
v. Case No. 10-cv-02034 (CRC)
THE GEORGE WASHINGTON
UNIVERSITY, et al.,
Defendants.
MEMORANDUM OPINION
In this ERISA case, former George Washington University (“GW”) Professor Richard
Soland alleges that the university breached a fiduciary duty by failing to inform him of a
department-wide retirement plan that he claims was in the works while he was negotiating his
retirement. GW’s omission, Soland contends, caused him to agree to a less-beneficial retirement
package. GW disputes that the alternative plan was in development when the parties negotiated
Soland’s retirement and has moved for summary judgment. Because Soland has not offered
evidence establishing that GW made a misstatement or failed to disclose necessary information,
and because the plan was in too nascent a stage to constitute material information when Soland
sought to retire, the Court will grant GW’s motion.
I. Background
For nearly thirty years, Soland was a professor at GW’s School of Engineering and
Applied Science (“SEAS”). Am. Compl. ¶ 7. In 2005, he began considering retirement and
discussed it with the chair of his department, Dr. Thomas Mazzuchi. Pl.’s Opp. to Mot. for
Summ. J. Ex. 1, Deposition of Richard Soland (“Soland Dep.”) at 11:22–13:4. These
conversations led to his appointment as the special assistant to Timothy Tong, the SEAS Dean.
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Id. at 14:3–13. In November 2007, GW announced that Dean Tong would step down the next
year and be replaced by David Dolling. Am. Compl. ¶¶ 10, Soland reiterated his interest in
retiring to Mazzuchi. Id. at 14. Soland contends that Richard Cosentino, another employee of
SEAS, encouraged him to pursue retirement while he could leverage his relationship with Tong
before the dean left. Soland Dep. at 17:1–18:16. On January 31, 2008, Mazzuchi sent Soland an
individual separation agreement detailing the terms of Soland’s retirement from SEAS. Def.’s
Statement of Undisputed Material Facts in Supp. of Mot. for Summ. J. ¶ 9. Dr. Donald Lehman,
GW’s chief academic officer, approved Soland’s retirement agreement on April 7, 2008. Id. ¶
11. Under the agreement, Soland continued work through the end of the Fall 2008 semester,
took administrative leave with full pay for the 2009 calendar year, and then was awarded
emeritus status. Id. ¶¶ 14–16.
According to Soland, around the time of his departure, Lehman and Tong were
participating in what was called the “SEAS 2020 Commission,” a committee of professors and
administrators charged with developing “a set of concrete recommendations” to improve
academic performance and finances. Pl.’s Statement of Disputed Material Facts in Opp. to Mot.
for Summ. J. ¶¶ 16–18. The 2020 Commission issued an 85-page report in April 2008. The
report included a paragraph titled “Encourage research-inactive professors nearing retirement to
leave,” which recommended that “inactive professors should be entitled to retire early.” Pl.’s
Opp. to Mot. for Summ. J. Ex. 3, Deposition of Donald Lehman (“Lehman Dep.”) Ex 3. An
earlier draft of the report had suggested that faculty members who were not actively conducting
research should be encouraged to leave “with perhaps a buy-out plan.” Pl.’s Opp. to Mot. for
Summ. J. Ex. 4, Deposition of David Dolling (“Dolling Dep.”) Ex 3. Lehman testified in his
deposition that he may have heard about the 2020 Commission’s recommendations during
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committee meetings in late 2007. Lehman Dep. 30:14–31:13. Dolling also indicated in an email
that he had discussed how to pay for a voluntary separation plan with GW’s president during his
recruitment as SEAS dean. Dolling Dep. Ex. 1. In July 2008, after Soland’s retirement was
finalized, Lehman listed “develop[ing] a voluntary separation plan” as a goal in his yearly
performance evaluation. Id. Ex. 7.
On October 23, 2009, eighteen months after Soland’s separation agreement, Lehman
notified the faculty that SEAS would adopt a Voluntary Separation Incentive Plan (“VSIP”) for
full-time faculty employed more than 15 years. Am. Compl. ¶ 18. Soland wrote a letter to
Lehman in December 2009 claiming he was eligible for the VSIP. Id. ¶ 22. Lehman responded
that Soland did not qualify for the plan because Soland’s “full-time active status” with SEAS
ended at the conclusion of the Fall 2008 semester. Id. Undaunted, Soland applied for the VSIP,
but Lehman denied his request and his subsequent appeal. Id. ¶¶ 17, 23–25.
Soland then brought this suit against GW, the George Washington University School of
Engineering and Applied Science Voluntary Separation Incentive Plan, the George Washington
University Office of the Executive Vice President for Academic Affairs, and Lehman, alleging
breach of fiduciary duties under the Employee Retirement Income Security Act (“ERISA”), 29
U.S.C. § 1001 and common law negligent representation. He also claimed that he was owed
benefits under the new VSIP. Judge Wilkins, who previously oversaw this case, dismissed
Soland’s negligent representation claim and granted summary judgment in favor of GW on his
claim for benefits. After the close of discovery, GW moved for summary judgment on Soland’s
remaining claims, arguing that it was not in a fiduciary relationship with Soland when it
negotiated his retirement agreement and, even if it was, Soland had put forth no evidence to
demonstrate that GW misrepresented the existence of the VSIP. Def.’s Mot. for Summ. J. at 1.
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II. Standard of Review
Summary judgment is proper “if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.
R. Civ. P. 56(a). The party seeking summary judgment bears the burden to demonstrate “the
absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
To overcome a motion for summary judgment, the non-moving party must “designate specific
facts showing that there is a genuine issue for trial.” Id. at 324 (quotation omitted). A dispute is
genuine only if a reasonable fact-finder could find for the non-moving party; a fact is only
material if it is capable of affecting the outcome of the litigation. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986); Laningham v. Dep’t of the Navy, 813 F.2d 1236, 1241 (D.C. Cir.
1987). In assessing a party’s motion, the court must “view the facts and draw reasonable
inferences in the light most favorable to the party opposing the summary judgment motion.”
Scott v. Harris, 550 U.S. 372, 378 (2007) (quotation and brackets omitted).
III. Analysis
To prevail on his claim, Soland must ultimately prove (1) that GW and the other
defendants owed fiduciary duties to him under ERISA; (2) that they made a misstatement or
misleadingly omitted information—thereby triggering a duty of disclosure; and (3) that any
misstatement or omission was material to his decision to retire. See Eddy v. Colonial Life Ins.
Co., 919 F.2d 747, 750 (D.C. Cir. 1990). Because the Court finds that GW made no
misstatement or misleading omission and that the information allegedly withheld from Soland
during negotiations was not material, it need not decide whether GW had a fiduciary relationship
with Soland at the time of the negotiations.
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A. Misstatement and Disclosure
An ERISA fiduciary breaches its duty to act “solely in the interest of [plan] participants
and beneficiaries” by deceiving beneficiaries in order to save the employer money at the
beneficiaries’ expense. Mullins v.Pfizer, Inc., 147 F. Supp. at 107. Put another way, “[l]ying is
inconsistent with the duty of loyalty owed by all fiduciaries and codified in section 404(a)(1) of
ERISA[.]” Varity Corp. v. Howe, 516 U.S. 489, 506 (1996). ERISA does not impose a duty to
disclose future changes to plans prior to their formal adoption unless a beneficiary has made a
specific inquiry or the fiduciary has made a statement about future plans that would be
misleading absent further disclosure. See Bins v. Exxon Co. U.S.A., 220 F.3d 1042, 1045 (9th
Cir. 2000) (rejecting duty to “volunteer information [about retirement plan changes being
seriously considered]. . . in the absence of specific questions”); Chojnacki v. Georgia-Pac. Corp.,
108 F.3d 810, 817 (7th Cir. 1997) (“mere passive behavior” cannot give rise to a breach of
fiduciary duty claim under ERISA unless it is misleading); Pocchia v. NYNEX Corp., 81 F.3d
275, 278 (2d Cir. 1996) (“a fiduciary is not required to voluntarily disclose changes in a benefit
plan before they are adopted”). Thus, GW can only be liable if it made a misstatement or if a
specific inquiry by Soland triggered a duty to disclose information in order to avoid a misleading
omission.
Soland does not point to any explicit statement by GW that was false or misleading.
Neither does he claim that he specifically asked GW whether SEAS planned to offer a retirement
incentive plan. Instead, he argues that by signaling his interest in learning what retirement
options were available, he triggered a duty on the part of GW to disclose all pertinent retirement
options covered by ERISA, including any anticipated future plans. Opp. to Mot. for Summ. J. at
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11–12. He also argues that Cosentino’s advice that he retire while Tong was still the dean of
SEAS triggered a disclosure obligation. Id. at 11.
Soland argues that this disclosure obligation arises under Eddy v. Colonial Life Insurance
Co., 919 F.2d at 747. Unlike here, however, Eddy involved a misrepresentation by the employer.
The plaintiff in Eddy inquired about whether he could continue his health insurance when his
employer switched plans. The employer responded “no” because, literally speaking, the
employer could not have “continued” his plan; he would have had to “convert” his existing plan
into a new plan. Id. The D.C. Circuit concluded that after the plaintiff told his employer that his
coverage was ending and asked about potential options for maintaining coverage, the employer
“bore a fiduciary duty to convey correct and complete information material to [the plaintiff’s]
circumstance.” Id. at 751. The facts here are different. Soland merely expressed general interest
in retiring; he did not inquire about whether new retirement plan options might arise in the
future. The Court declines to extend Eddy’s holding that employers have a duty not to mislead
employees once an inquiry about the availability of future benefits is made by instead imposing a
general duty to disclose plan changes prior to formal adoption.
Cosentino’s statement to Soland likewise did not trigger a duty to disclose because, even
if attributable to GW, it was not a misstatement and did not misconstrue Soland’s retirement
options. According to Soland, Cosentino suggested that Soland might be able to secure a buy-
out agreement before Dean Tong retired because of their amicable relationship. Soland Dep. at
18:11–16. There is nothing false or misleading about this statement, which appears to be no
more than a shared thought between colleagues. By contrast, in Mathews v. Chevron Corp., 362
F.3d 1172 (9th Cir. 2004)—which Soland attempts to analogize to this case—a plant supervisor
repeatedly told his employees that there would not be layoffs and an accompanying severance
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plan while, at the very same time, the supervisor was being pressured by management to adopt
just such a plan, which he eventually did. Id. at 1178–79. Unlike Cosentino’s advice, the
supervisor in Mathews knew that his statements were false and those statements directly
implicated future benefits. Here, Soland offers no evidence that Cosentino’s statement was an
intentional or reckless act designed to persuade Soland to retire, and there is no indication from
the record that Cosentino knew of a plan to implement a SEAS-wide retirement incentive offer in
the future. 1 Because Soland does not point to any affirmative misstatement by GW, and did not
specifically inquire about future retirement plan options, and because Cosentino’s general advice
was not misleading, no disclosure duty arose.
B. Materiality
The Court next considers whether GW was obligated to disclose the existence of the
VSIP plan when Soland negotiated his retirement. The parties propose alternative tests for
determining whether such an obligation existed, each of which has been adopted by some of the
circuits. The D.C. Circuit appears not to have spoken on the matter. GW argues that the
appropriate inquiry is whether the VSIP was under “serious consideration” when Soland
negotiated his retirement. Soland contends that the test is whether a reasonable person would
have found the withheld information material in deciding whether to retire. Under either
proposed test, there is no evidence from which a reasonable jury could conclude that GW
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Lehman states that Cosentino had attended some of the meetings of the 2020 Commission,
Lehman Dep. at 25:7–14, but this does not demonstrate that Cosentino knew of the
recommendation that “professors should be entitled to retire early,” which was not published
until well after Cosentino made the alleged statement to Soland. And it certainly does not
demonstrate that Cosentino knew that the school planned on creating the VSIP, as the statement
in the 2020 Commission report was a single-line recommendation without any detail or
indication of future plans. As discussed further below, this lone reference is insufficient to
establish the existence of a plan for a future buy-out.
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breached a duty of disclosure because the VSIP was in too nascent a stage when Soland
negotiated his retirement.
i. Serious Consideration Test
The serious consideration test, which was first developed by the Third Circuit, establishes
that a plan must be disclosed upon inquiry if “(1) a specific proposal (2) is being discussed for
purposes of implementation (3) by senior management with the authority to implement the
change.” Fischer v. Phila. Elec. Co., 96 F.3d 1533, 1539 (3d Cir. 1996). A majority of the
circuits that have addressed this issue have adopted some form of this test. See Mathews, 362
F.3d at 1180–82; Beach v. Commonwealth Edison Co., 382 F.3d 656, 661 (7th Cir. 2004);
McAuley v. IBM Corp., 165 F.3d 1038, 1043 (6th Cir. 1999); Hockett v. Sun Co., 109 F.3d
1515, 1523 (10th Cir. 1997); Vartanian v. Monsanto Co., 131 F.3d 264, 272 (1st Cir. 1997). If
all three prongs of the serious consideration test are met, “details of the amendment become
material; until then there is only speculation.” Beach, 382 F.3d at 659.
The first element, a specific proposal, distinguishes serious consideration from “the
antecedent steps of gathering information, developing strategies, and analyzing options.” Fisher,
96 F.3d at 1539–40. The evidence Soland puts forth falls short of establishing that GW engaged
in anything more than these types of preliminary activities. In 2007, a draft version of a portion
of the 2020 Commission’s report recommended that older SEAS professors should be
encouraged to retire “with perhaps a buy-out.” Dolling Dep. Ex 3. The final version excluded
this phrase and simply recommended that inactive professors should be entitled to retire early.
Lehman Dep. Ex. 3. This recommendation is so lacking in detail and analysis that it barely
qualifies as “gathering information, developing strategies, and analyzing options,” let alone
constitutes a specific proposal. See Fisher, 96 F.3d at 1542 (finding that “a general discussion of
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early retirement options” was not a specific proposal, while “a document outlin[ing] various
early retirement alternatives” was sufficiently specific). Dolling’s statement in an email that he
had discussed whether SEAS or GW would pay for an incentive plan prior to his appointment as
dean likewise falls short of a specific proposal. It merely shows that the SEAS administration
was, at most, “developing strategies and analyzing options.” See id. (“Senior management is
free to start the process of exploration and evaluation without immediately triggering a duty of
disclosure.”).
The second element of the serious consideration test—whether a specific proposal is
being discussed for the purpose of implementation—“turns to the practicalities of
implementation.” Peterson v. Am. Tel. & Tel. Co., 127 Fed. App’x 67, 72 (3d Cir. 2005) (citing
Fisher, 96 F.3d at 1540). Again, Soland’s evidence does not suggest that SEAS was working
towards implementing a specific proposal when he was negotiating his individual separation
agreement. The 2020 Commission report does not include any substantive discussion of the
details or practicalities of a potential plan, such as what incentives to offer, how much to pay,
and which professors should be eligible. It contains only a single-paragraph, general
recommendation that senior staff should be “entitled to retire.” See, e.g., Vartanian v. Monsanto
Co., 956 F. Supp. 61, 66 (D. Mass. 1997), aff’d, 131 F.3d 264 (discussions for the purpose of
implementation begin only “when authorized senior management were first taking a hard look at
different forms of the potential new plan”). Such a general, undeveloped recommendation does
not rise to a specific proposal.
ii. Materiality Test
Two circuits have declined to adopt the Fisher bright-line test and instead ask “whether
there is a substantial likelihood that a reasonable person in the plaintiffs’ position would have
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considered the information an employer-administrator allegedly misrepresented important
information in making a decision to retire.” Martinez v. Schlumberger, Ltd., 338 F.3d 407, 428
(5th Cir. 2003); accord Ballone v. Eastman Kodak Co., 109 F.3d 117, 124 (2d Cir. 1997). This
rule applies only to misrepresentations; it does not create a general obligation to disclose future
potential plan changes. Martinez, 338 F.3d at 429; Pocchia, 81 F.3d at 278–79.
These circuits apply several factors in determining whether there has been a material
misstatement. One prominent factor relevant to materiality is the serious consideration test as
outlined above: “the more seriously a plan is being considered, the more likely a representation
about the plan is material.” Martinez, 338 F.3d at 428; accord Ballone, 109 F.3d at 123. As
discussed above, the VSIP was not under serious consideration when Soland was negotiating his
retirement. This factor weighs heavily against a finding of materiality because, even if GW was
under a duty to disclose expected future ERISA plans, Soland proffered no evidence
demonstrating that a plan existed at the time he negotiated his retirement.
Other factors considered under the materiality test include “how significantly the
statement misrepresents the present status of internal deliberations regarding future plan
changes[;] . . . the special relationship of trust and confidence between the plan fiduciary and
beneficiary[;] . . . whether the employee was aware of other information or statements from the
company tending to minimize the importance of the misrepresentation or should have been so
aware[;] . . . and the specificity of the assurance[.]” Ballone, 109 F.3d at 125; accord Martinez,
338 F.3d at 428. The first and last factors weigh heavily against Soland because, as explained
above, GW did not make any statement that misrepresented whether it intended to offer a
retirement incentive plan. Neither side has provided significant evidence showing a special
relationship between the parties, so this factor is neutral. Because each factor weighs in favor of
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finding there was no material misstatement by GW or is neutral, summary judgment in favor of
GW is appropriate under the materiality test as well.
IV. Conclusion
For the reasons stated above, the Court will grant Defendants’ motion for summary
judgment. The Court will issue an order consistent with this memorandum opinion.
CHRISTOPHER R. COOPER
United States District Judge
Date: July 25, 2014
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