Ackerman v. Warnaco, Inc.

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
5-15-1995
Ackerman v Warnaco Inc
Precedential or Non-Precedential:
Docket 94-3527
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 94-3527
VALERIE J. ACKERMAN, Chester O. Adams, Anne E. Alexander,
Barry M. Allmond, Helen L. Anders, Marlene Archey, Mary H. Auker,
Frances C. Balestino, Pauline Balestino, Thomas L. Ballos,
Barney W. Barndollar, Elaine Barnes, Bertha L. Barnhill,
James E. Becker, Linda Becker, Mark A. Becker, Katherine L. Bem,
William F. Black, Diane Blanchard, Timothy Bowser, Barbara
Brocious, Janette C. Buzzella, Daniel R. Campbell, Barbara C.
Carney, David Castle, Paul M. Clack, Ronald Clapper, Darlene R.
Clark, Joyce Ann Conrad, Karen Joy Consalvo, Evelyn Conte, Carol
J. Corbin, Anna M. Costlow, Helen Creamer, Amporn Y. Cuff,
Shirley Cunningham, Hilda D'Amata, Melissa K. Daugherty, Judith
G. Davis, Twila Davis, Mary Louise Dawson, Walter E. Dempsie,
Deborah L. Deyarmin, Gary L. Dick, Phyllis I. DiTosti,
Charlotte Dixon, Deborah G. Dugan, Thomas Edmiston, Gordon M.
Ellis, Helen Erickson, Helen F. Fanelli, Paul Ferguson, Renee
Figait, Elizabeth C. Fleck, Gary P. Frederick, Roberta J. Frew,
David G. Frey, Rupert Friedenberger, Shirley A. Fudalski,
Derwin D. Gilbert, Jr., Brenda Greenleaf, Ida Gristina,
Steve Gristina, Gilda M. Hammer, Patricia Hartzell, Barbara
D. Helsel, Leslie E. Hildebrand, Karen S. Holmberg, Anita F.
Hoover, Lucy Horton, Joan B. Ickes, Penelope Ickes, Shirley Ann
Ickes, Glenna D. James, Sue Ellen Jensen, Diane Kelley, Soonja
Kelly, Alice Lawrence, William H. Leedy, Dale E. Lenning,
Agnes E. Lidwell, William S. Luther, Virginia Lynam, Mary L.
Maidl, June Martino, Dawn M. Masic, Doris H. Massaro, Eugene A.
Massaro, Kathy L. Mast, John L. McClosky, James F. McDermitt,
Jr., Donald E. McMasters, Francis R. Mentzer, Howard S. Mentzer,
Terrance Mentzer, Donnis Miller, Richard Miller, Ruth A. Miller,
James W. Morning, Donald M. Myers, Shirley Louise Myers, Jack E.
Neely, Scott E. Neely, Denise K. Neil, Wesley C. Noye, II,
Shirley L. Nyiri, Sean M. O'Connor, Mark E. Oswald, Jane Ozio,
Elsie K. Parsons, Joan L. Patterson, Sheryl A. Patterson, Dansie
Pearson-Lightner, Shirley J. Pero, Walter M. Phillips,
Marjorie Grace Pierce, Diana M. Prosser, Eugene Quarry, Santina
Radazzo, Mark A. Reagan, Bonnie Jean Rhodes, Donna E. Rhodes,
Thomas Leo Rhodes, Jr., Gerald P. Richards, Harry W.
Rickabaugh, Gary Lee Roudabush, Mary F. Russo, Steven Sager,
Pamela M. Sarvis, Kenneth Showalter, Jr., Minnie Showalter,
Sandra L. Showalter, Susan K. Showalter, Mary J. Sill,
George Simpson, Barry L. Siters, Rose Marie Skipper,
E. Kirby Smeigh, Joann Smith, Robert W. Snowberger,
Theresa Snowberger, Joseph C. Snyder, Teresa Soldenwagner, John
Stevens, Dawn Sturgill, Carol Sumner, Kathleen A. Sweitzer,
Richard M. Sweitzer, Judith L. Swires, John L. Taylor, William
M. Taylor, Lester R. Thompson, Sharon Thompson, Mary Ann Trexler,
Steven J. Vasas, Dolores G. Verbonitz, Katherine Waite,
Barbara F. Walter, Robert E. Walter, Scott A. Walter, Michael
E. Weaver, Veda S. Wertz, Richard M. Weston, Kay Weyandt, Jay
Wible, Donald A. Wolfe, Janet R. Wolfe, Diane J. Woomer and
Margaret Yantim
Appellants
v.
WARNACO, INC.
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 93-cv-0-00101J)
Argued March 28, 1995
BEFORE: Mansmann, Cowen and Lewis
Circuit Judges
(Filed May 15, 1995)
James P. Hollihan (Argued)
Manion, McDonough & Lucas
600 Grant Street
Suite 882
Pittsburgh, PA 15219
Counsel for Appellants
George E. Preonas (Argued)
Seyfarth, Shaw, Fairweather & Geraldson
2029 Century Park East
Suite 3300
Los Angeles, CA 90067
Counsel for Appellee
OPINION
Cowen, Circuit Judge:
Plaintiffs, 169 former employees of defendant Warnaco, Inc.
("Warnaco"), appeal from an order of the district court that
granted summary judgment in favor of Warnaco and denied
plaintiffs' cross-motion for partial summary judgment as to
liability on plaintiffs' claims for termination benefits pursuant
to an employee benefit plan. Plaintiffs claim on appeal that the
district court erred by concluding that a complete rescission of
a welfare plan does not implicate the amendment procedures
required by section 402(b)(3) of the Employee Retirement Income
Security Act ("ERISA"), 29 U.S.C. § 1102(b)(3). Because we
conclude that a complete rescission of a benefit plan does
implicate the requirements of section 402(b)(3), we will reverse
the order of the district court and provide certain directions
upon remand.
Plaintiffs also assert on appeal that the district court
erred by: (1) failing to void a change to Warnaco's employee
benefits plan that eliminated the plan's termination allowance
policy where the plaintiffs did not receive adequate notice of
this change; and (2) concluding that no genuine issue of material
fact existed as to whether Warnaco intentionally misled the
plaintiffs by not timely disclosing the elimination of the
termination allowance policy. Subsequent to the district court's
decision in this matter, and while this appeal was pending, the
Supreme Court decided the case of Curtiss-Wright Corp. v.
Schoonejongen, U.S. , 115 S. Ct. 1223 (1995). In light of
the Supreme Court's decision in that case, and because we
conclude that there are genuine issues of material fact in
dispute, we will remand this matter to the district court for
further findings of fact.
I.
Plaintiffs worked in production positions at Warnaco's
Altoona, Pennsylvania plant, where Warnaco manufactured various
types of fashion apparel. In January of 1988, Warnaco published
an "Employee Handbook" (the "1988 Handbook") and distributed it
to all of its employees, including the plaintiffs. The 1988
Handbook described the company's termination allowance policy as
follows:
Warnaco hopes that economic circumstances never makes
[sic] it necessary to eliminate any jobs within the Company.
Should this unfortunate circumstance occur, however, you may
be eligible for a termination allowance. For example, you
may be eligible if Warnaco eliminated your job to achieve
long-term savings to the Company. A condition of
eligibility is that the employee sign an agreement to
release Warnaco from liability for employment-related
matters.
In some cases, loss of employment will not make you
eligible for a termination allowance. For example, you will
not be entitled to an allowance if termination of your
employment occurs as a result of death, retirement,
resignation, or discharge for misconduct or poor
performance. Entitlement to a termination allowance may
also be affected if you receive any other termination or
disability pay. Furthermore, you will not be entitled to a
termination allowance if, at or about the time of
termination of your employment with Warnaco Inc., you are
offered employment with Warnaco Inc. or any affiliate or
subsidiary of Warnaco Inc., or any purchaser of Warnaco
assets, at a salary not substantially less than your last
current salary at Warnaco Inc. You will also not be
entitled to a termination allowance if, prior to termination
of your employment, management has altered or rescinded this
termination allowance policy.
Eligible employees are entitled to receive a
termination allowance of one week pay for each completed
year of service, with a minimum of termination allowance of
two weeks.
App. 116a-17a (emphasis added).
In a memorandum dated December 26, 1990, Stanley
Silverstein, the Secretary and Assistant General Counsel of
Warnaco, stated that, "effective immediately, the Termination
Allowance Policy referred to in the Warnaco Employee Handbook,
has been rescinded. Employees separated from the employment of
Warnaco on and after December 19, 1990 will not be eligible for
any termination allowance." App. at 120a. This memorandum also
directed that meetings be scheduled to communicate this change to
all employees. Id.Plaintiffs contend that while one of Warnaco's vice
presidents met with employees at the Duncanville, Pennsylvania
warehouse and advised them of the rescission of the termination
allowance policy, no such meeting was ever held with employees at
the Altoona plant. Further, plaintiff Francis Mentzer avers that
Warnaco did not give written or oral notice that the termination
allowance policy was being rescinded until a meeting was held on
January 22, 1992 to discuss issues raised by the closing of the
Altoona plant. At that meeting, plaintiffs assert, employees
questioned Warnaco Vice President Richard Mitchell as to whether
they would be receiving the severance benefits provided for in
the 1988 Handbook, and he informed them that no such benefits
would be paid.
Warnaco claims, and plaintiffs do not dispute, that sometime
in 1991, it published an updated Employee Handbook (the "1991
Handbook") reflecting the elimination of the termination
allowance. Further, it is undisputed that Warnaco President and
Chief Executive Officer Linda Wachner, by letter dated January
16, 1991, advised employees about unfavorable economic times, and
stated, "it has been necessary for us to take certain measures
to protect the 11,800 members of our Warnaco family. While such
things as a salary freeze and changes in our severance policy are
difficult, they represent the kind and quality of tapestry that
we must weave to strengthen our company." App. at 155a (emphasis
added). Plaintiff Mentzer acknowledges receipt of this letter,
which he describes as "vague," and without reference to any
rescission of the termination allowance policy.
No reference is made in the 1991 Handbook, or elsewhere in
the record, to the procedure that was followed in eliminating the
termination allowance or the precise date such action was
accomplished. More important, while plaintiffs concede that
Warnaco began distributing the 1991 Handbook to new employees at
other locations in 1991, plaintiffs allege that no employees at
the Altoona plant ever received a copy of this updated handbook.
Warnaco failed to produce any evidence that it distributed the
1991 Handbook to employees at the Altoona plant.
Warnaco shut down its Altoona plant in early 1991, and
terminated the plaintiff employees at different times from
October 1991 through January 1992. In light of Warnaco's refusal
to pay severance benefits, the plaintiffs filed suit against
Warnaco in the United States District Court for the Western
District of Pennsylvania alleging violations of ERISA and seeking
the benefits due to them under the 1988 Handbook, interest, and
attorney's fees. Warnaco moved for summary judgment and
plaintiffs cross-moved for partial summary judgment as to the
issue of liability. The district court granted summary judgment
in favor of Warnaco and denied the plaintiffs' cross-motion.
This appeal followed.
Plaintiffs relied heavily on our decision in Schoonejongen
v. Curtiss-Wright Corporation, 18 F.3d 1034 (3d Cir. 1994),
rev'd, U.S. , 115 S. Ct. 1223 (1995) in presenting their
appeal. Following the Supreme Court's decision in that matter,
which reversed our prior panel decision, we ordered supplemental
briefing on the question of the effect of the Schoonejongen case
on the instant appeal. We recognize, of course, that the
district court did not have the benefit of the Supreme Court's
decision in Schoonejongen for purposes of its decision concerning
the granting of summary judgment.
II.
The district court exercised jurisdiction in this matter
pursuant to 29 U.S.C. § 1132(e)(1) and 28 U.S.C. § 1331. We have
jurisdiction over this appeal pursuant to 28 U.S.C. § 1291.
III.
The plaintiffs' first claim is that the district court erred
by concluding that a complete rescission of a welfare plan does
not implicate the amendment procedures required by section
402(b)(3) of ERISA. Plaintiffs assert that it is illogical to
suggest that while changes to a benefit plan which reduce
benefits must follow the procedure outlined in section 402(b)(3),
changes that totally eliminate plan benefits do not require such
a procedure. Further, plaintiffs assert that the district court
misinterpreted dicta in Schoonejongen, 18 F.3d at 1040, in
reaching its erroneous conclusion.
We exercise plenary review over the district court's rulings
concerning statutory construction. United States v. Barel, 939
F.2d 26, 31 (3d Cir. 1991). Section 402(b)(3) of ERISA states
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).
Concededly, nothing in the language of this ERISA section
indicates that an employee benefit plan must provide a procedure
for terminating the plan. Nevertheless, as the district court
recognized, it is anomalous to suggest that ERISA offers
employees protection from mere changes in employee benefit plans,
but does not afford protection against wholesale elimination of
benefits. Ackerman v. Warnaco, No. 93-101J, slip. op. at 9 (W.D.
Pa. August 8, 1994). Further, the view that termination is
categorically different from an amendment for purposes of
402(b)(3) is at odds with the tenor of a previous decision of our
court where we stated that, "ERISA generally allows employers to
amend or terminate welfare benefit plans at will so long as the
procedure followed is consistent with the plan and the Act."
Deibler v. United Food & Commercial Workers' Local Union 23, 973
F.2d 206, 210 (3d Cir. 1992) (emphasis added). Accordingly, we
agree with the plaintiffs that the requirements of section
402(b)(3) apply to plan terminations as well as plan amendments.1
Warnaco asserts, and the district court agreed, that
language in our previous decision in Schoonejongen supports the
view that a complete rescission of an employee benefit plan does
not implicate the requirements of section 402(b)(3). Warnaco and
the district court point to a passage in that decision where we
stated:
1
. We are aware that the Court of Appeals for the Eleventh
Circuit has taken a different view in a recent decision. See
Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan Benefits
Committee, 40 F.3d 1202, 1210 (11th Cir. 1994). In that case,
the court determined that the purpose of preventing unanticipated
amendments from defeating employees' expectations of benefits are
not achieved by applying section 402 to plan terminations. Id.The court reasoned that the notice and procedural requirements
specifically tailored for terminations under 29 U.S.C. § 1341 are
sufficient to keep employees apprised of their benefits under the
plan and to promote certainty with regard to plan terminations.
Id.We are unpersuaded by this analysis. We believe that an
unanticipated termination of an employee benefit plan can have an
even more devastating effect in defeating employees expectations
of benefits than an unanticipated amendment. In addition, we
fail to see how 29 U.S.C. § 1341 ensures that employees will be
apprised of a termination of their severance benefits.
Alternatively, [the employer] suggests that we should
sustain the November 1983 announcement as a termination of
its entire welfare benefit plan and the institution of a new
plan without benefits for the retirees of the Wood-Ridge
plant. It points out that it reserved the right to
terminate its plan as well as amend it and that §
402(b)(3)'s requirement of a plan provision specifying a
process for amendments does not apply to plan terminations.
Because [the employer] could have terminated its entire plan
without implicating § 402(b)(3) and could then have
instituted a new plan without benefits for the Wood-Ridge
retirees, [the employer] insists that it should be held to
have accomplished the same result in "one step rather than
two." We are unpersuaded.
Schoonejongen, 18 F.3d at 1040-41 (emphasis added). According to
Warnaco and the district court, this passage indicates that a
complete rescission of a welfare benefit plan does not implicate
the requirements of section 402(b)(3).
We are unpersuaded by such reasoning. As a preliminary
matter, our decision in Schoonejongen has been reversed by the
United States Supreme Court, albeit not on the precise issue
discussed in this passage. Schoonejongen, U.S. at , 115
S. Ct. at 1231 (reversing the prior decision of our Court). More
important, however, in this passage we were merely describing an
argument of the employer. We were not setting forth a rule of
law or even providing persuasive dicta. Because it is improper
to give precedential weight to a mere characterization of a
party's argument, we find that Warnaco's argument lacks merit.
Accordingly, we will reverse the order of the district court
granting summary judgment in favor of Warnaco and remand for
further proceedings consistent with this opinion.
On remand the district court must determine whether Warnaco
complied with section 402(b)(3). We pause briefly to provide
certain directions. The plaintiffs assert that Warnaco failed to
comply with section 402(b)(3) because it failed to identify
specifically the entity with the authority to alter plan
benefits. Warnaco counters that it expressly reserved the right
of "the management" to alter or rescind the termination allowance
policy, and that "the management" is sufficiently specific to
comply with section 402(b)(3).
In our previous decision in Schoonejongen, we determined
that designating "the Company" as the entity with authority to
amend a benefits plan was not sufficiently specific to comply
with section 402(b)(3). Schoonejongen, 18 F.3d at 1039. The
Supreme Court granted certiorari on this precise issue, however,
and determined that designating "the Company" as the entity with
authority to alter the plan satisfied the requirements of section
402(b)(3). Schoonejongen, U.S. at , 115 S. Ct. at 1228-
29. The Court reasoned that designating "the Company" is
sufficiently specific because principles of corporate law provide
a ready-made set of rules for determining who has authority to
make decisions on behalf of the company. Id. at , 115 S. Ct.
at 1229. The Court also explained that the literal terms of
section 402(b)(3) are ultimately indifferent to the level of
detail in the identification procedure. Id. Although it is a
close question, in light of the Supreme Court's decision, we
conclude that designating "the management" as the entity with
authority to alter the plan satisfies the requirements of section
402(b)(3).2 Accordingly, on remand the issue to be determined is
whether Warnaco's valid amendment procedure was complied with in
this case. The answer will depend on a fact-intensive inquiry
into whether Warnaco's management actually approved the new plan
provision rescinding the termination allowance policy.
IV.
Plaintiffs next argue that even if the rescission to the
termination allowance policy was properly adopted, the district
court erred by failing to void this rescission where the
plaintiffs' did not receive adequate notice of the change.
Plaintiffs assert that each affected employee is entitled to
written notice of such rescission. According to plaintiffs, the
1991 Handbook evidencing the deletion of the termination
allowance policy was not distributed at the Altoona plant at
which they worked, and meetings were not held at the Altoona
plant to advise the employees of this change.
Warnaco counters that ERISA does not require written notice
to each affected employee. Warnaco argues that meetings were
held for most of Warnaco's 11,800 employees, and that one such
meeting was conducted at the nearby Duncanville plant. Warnaco
also argues that the employees at the Altoona plant received a
letter from Linda Wachner, Warnaco's CEO, explaining that the
2
. The question is close because although designating "the
management" as the body with authority to alter a plan in one
sense is more specific than designating "the Company," companies
act through well-recognized chains of corporate governance. Who
has authority to act on behalf of "the management" is less clear.
company was experiencing economic difficulties and referencing
changes in the severance policy. Finally, Warnaco asserts that
whether or not plaintiffs received notice of the termination
allowance, their claim for benefits is barred because a
procedural defect like defective notice does not give rise to a
substantive remedy under ERISA.
The district court based its decision on Warnaco's final
contention, that even if the plaintiffs did not receive notice,
this procedural defect does not give rise to a substantive
remedy. Relying on Hozier v. Midwest Fasteners, Inc., 908 F.2d
1155, 1170 (3d Cir. 1990) and Berger v. Edgewater Steel Co., 911
F.2d 911, 921 (3d Cir. 1990), cert. denied, 499 U.S. 920, 111 S.
Ct. 1310 (1991), the court determined that the caselaw of this
circuit teaches that substantive remedies are generally not
available for such violations. Ackerman, No. 93-101J, slip. at
10. The court explained that while monetary relief is sometimes
available in "exceptional cases" or if "extraordinary
circumstances" are present, there was insufficient evidence of
such circumstances in this case to warrant relief. Id. at 10-11.
In Schoonejongen, the Supreme Court described a number of
ERISA's core requirements and goals. U.S. at , 115 S. Ct.
at 1230-31. As the Court recognized in that case, ERISA requires
that "`[e]very employee benefit plan shall be established and
maintained pursuant to a written instrument.'" Id. at 1230(quoting 29 U.S.C. § 1102(a)(1)). Further, as the Court
explained, a written instrument is required to enable employees
to determine exactly what his or her rights are under the plan.
Id. (citing H.R. Conf. Rep. No. 1280, 93rd Cong., 2d Sess. 297
(1974), reprinted in 1974 U.S.C.C.A.N. 4639, 5077-78). Finally,
as the Court noted, ERISA gives effect to the written plan scheme
through a comprehensive set of reporting and disclosure
requirements embodied in 29 U.S.C. §§ 1021-31. Id. Certain of
these reporting and disclosure requirements are at issue in this
case.
ERISA requires that if there is a modification or change in
a summary plan description,3 a summary of this modification or
change must be furnished to each plan participant not later than
210 days after the end of the plan year in which the change is
adopted. 29 U.S.C. § 1024(b)(1) (1988). In addition, and
"[m]ore important," ERISA requires that every plan administrator
make available for inspection in the administrator's "`principal
office' and other designated locations," a set of currently
operative governing plan documents, which "necessarily includes
any new, bona fide amendments." Schoonejongen, U.S. at ,
115 S. Ct. at 1231 (citing 29 U.S.C. § 1024(b)(2)).4
3
. A summary plan description contains information including the
plan's requirements for eligibility for participation and
benefits. 29 U.S.C. § 1022(b).
4
. Section 1024(b)(2) provides:
The administrator shall make copies of the plan description
and the latest annual report and the bargaining agreement,
trust agreement, contract, or other instruments under which
the plan was established or is operated available for
examination by any plan participant or beneficiary in the
principal office of the administrator and in such other
places as may be necessary to make available all pertinent
information to all participants (including such places as
the Secretary may prescribe by regulations).
Warnaco acknowledges that not all of its employees received
notice of the rescission of the termination allowance policy
within 210 days of the end of the plan year in which the change
was adopted.5 Warnaco, however, suggests that a copy of the
amended handbook with the rescission of the termination allowance
policy was on file in the principal office of the plan
administrator. Unfortunately, Warnaco cannot point to convincing
record support for its claim that the 1991 Handbook was on file
in the plan administrator's principal office, and the plaintiffs
assert that this is a disputed issue of material fact.6
(..continued)
29 U.S.C. § 1024(b)(2) (1988).
5
. Once again, Warnaco argues that a termination of benefits is
different from an amendment and is therefore not covered by the
language of 29 U.S.C. § 1024(b)(1) which speaks of a plan
"modification" or "change." We find this argument unpersuasive
for the same reasons we found Warnaco's argument concerning
section 402(b)(3) unpersuasive -- we do not believe Congress
intended to protect employees from undisclosed plan amendments,
but leave them defenseless with respect to a plan termination, a
change with potentially more dramatic effects. We take no
position, however, on whether the 210 day notice period
sufficiently protects employees' rights. Indeed, at least one
court has determined that 210 days after the end of the plan year
in which the change has been adopted is too long a period for
employees to wait to be notified of changes in their rights, and
that "prompt" notice will be required. See Rucker v. Pacific FM,
Inc., 806 F. Supp. 1453, 1459 (N.D. Cal. 1992).
6
. Counsel for Warnaco states, in a supplemental brief filed
with this Court, that his law firm has spoken with Denise Kelly,
the personnel manager for the Knitwear Division of Warnaco, and
she has confirmed that copies of the 1991 Handbook were on file
in the Duncanville personnel office and available for review by
all Altoona and Duncanville employees. As a preliminary matter,
since Ms. Kelly's statements on this point are not part of the
record before us, we cannot consider them. Even more
fundamental, however, the district court made no findings
We have repeatedly held that under ordinary circumstances
defects in fulfilling the reporting and disclosure requirements
of ERISA do not give rise to a substantive remedy other than that
provided for in section 502(a)(1)(A) of that Act.7 See Hozier,
908 F.2d at 1169-70 (declining to find an implied remedy for a
violation of ERISA's reporting and disclosure requirements);
Berger, 911 F.2d at 921 ("[T]his Circuit has apparently rejected
the reasoning that substantive remedies, such as the severance
pay the Employees seek on appeal, are available for violations of
ERISA's procedural requirements."); see also Gridley v. Cleveland
Pneumatic Co., 924 F.2d 1310, 1319 (3d Cir.) (declining to find a
basis for equitable relief absent "extraordinary circumstances"),
cert. denied, 501 U.S. 1232, 111 S. Ct. 2856 (1991). Thus, even
if as the result of Warnaco's negligence a copy of the 1991
Handbook was not available for plaintiffs' review in the
principal office of the plan administrator, and the employees did
not receive written notice of the termination of their severance
benefits within 210 days of the end of the plan year in which
this change was adopted, we are unable to conclude that ERISA
(..continued)
concerning whether Duncanville, or any other location, was the
principal office of the plan administrator.
7
. Section 502(a)(1)(A) of ERISA codified at 29 U.S.C. §
1132(a)(1)(A) states that any administrator who fails to provide
information required to be disclosed under ERISA within 30 days
after a request for such information is made may in the court's
discretion be personally liable for an amount of up to $100 per
day from the date of such failure or refusal to provide the
information, and may be liable for such other relief as the court
deems appropriate. 29 U.S.C. § 1132(a)(1)(A) (referencing §
1132(c).
provides the remedy that plaintiffs seek. Plaintiffs are limited
to their statutory remedies under such facts.
V.
The plaintiffs' final contention is that the district court
erred in determining that no genuine issue of material fact
existed as to whether Warnaco intentionally misled the plaintiffs
by not timely disclosing the elimination of the termination
allowance policy. According to the plaintiffs, even though
substantive remedies are generally not available for an
employer's violation of ERISA's reporting and disclosure
violations, the remedy of striking a plan amendment is available
where an employer is guilty of bad faith or active concealment
with respect to a substantive plan change. The plaintiffs point
to the fact that meetings that were scheduled to inform the
plaintiffs of the change in policy were never held, the fact that
the 1991 Handbook was never distributed to the Altoona employees,
and the fact that a letter of January 16, 1991 from Warnaco's CEO
spoke of "changes" in (rather than the elimination of) the
severance plan, to support their view that Warnaco was actively
concealing the elimination of the severance policy in order to
induce workers to stay at their jobs.
As we discussed above, substantive remedies are generally
not available for violations of ERISA's reporting and disclosure
requirements. See Hozier, 908 F.2d at 1169-70; Berger, 911 F.2d
at 921. We have, however, recognized the possibility of a remedy
where the plaintiff can demonstrate the presence of
"extraordinary circumstances." See Gridley, 924 F.2d at 1319.
Such circumstances include situations where the employer has
acted in bad faith, or has actively concealed a change in the
benefit plan, and the covered employees have been substantively
harmed by virtue of the employer's actions. See Berger, 911 F.2d
at 920-21; Blau v. Del Monte Corp., 748 F.2d 1348, 1353-54 (9th
Cir. 1984), cert. denied, 474 U.S. 865, 106 S. Ct. 183 (1985).
Further, we have acknowledged that reporting and disclosure
violations can "wreak especially substantial harm" in the context
of a dispute over the validity of a plan alteration. Hozier, 908
F.2d at 1168-69 n.15. The district court concluded that the
record contains "no evidence of the narrow `extraordinary
circumstances,' which must be present for substantive relief to
be available." Ackerman, 93-101J, slip op. at 11. We disagree.
At oral argument, Warnaco described its failure to
distribute the 1991 Handbook to affected employees at the Altoona
plant, its failure to hold scheduled meetings with Altoona
employees, and its issuance of a letter concerning "changes" in
the severance policy, as mere bureaucratic "bungling." While we
do not rule out the possibility that administrative error
accounted for Warnaco's omissions, we conclude that a reasonable
fact finder could infer from these facts and from the plaintiffs'
evidence regarding the employment climate at the Altoona plant
that Warnaco actively concealed the change to its severance
policy in order to prevent employees at the Altoona plant from
leaving. Under such circumstances, we conclude that it would be
inappropriate to deprive the plaintiffs of the remedy of voiding
Warnaco's rescission of the termination allowance policy.8
Accordingly, we will reverse the district court's grant of
summary judgment in favor of Warnaco, and remand for further
findings on this disputed factual issue.9
CONCLUSION
8
. We find support for the remedy of voiding a rescission of an
employee benefits plan in a portion of our previous decision in
Schoonejongen that was not expressly reversed on appeal to the
Supreme Court. In that case, we explained that where we are
asked to void a plan amendment we are in a situation "[u]nlike
the situation in Hozier where the plaintiffs sought benefits not
provided for in the plan." Schoonejongen, 18 F.3d at 1040.
Further, in Hozier, we implicitly recognized the possibility of
striking down a plan amendment where there has been a reporting
and disclosure violation concerning the amendment. Hozier, 908
F.2d at 1168-69 n.15. We conclude that such a remedy is
appropriate in situations of active concealment.
We point out that an inference of bad faith or active
concealment does not arise simply from a failure to comply with
ERISA's reporting or disclosure requirements. It is the peculiar
combination of Warnaco's alleged deficiencies in this case that
raises a material issue of fact necessitating a remand.
9
. Warnaco also asserts that our decision in Hamilton v. Air
Jamaica, Ltd., 945 F.2d 74 (3d Cir. 1991), cert. denied, 503 U.S.
938, 112 S. Ct. 1479 (1992), precludes recovery for a violation
of a notice requirement, even in situations of active
concealment, where an employee handbook contains an express
reservation clause. According to Warnaco, where a plan document
expressly reserves the right to alter or eliminate benefits, no
additional notice to the beneficiaries is required to eliminate
benefits.
As a preliminary matter, we note that in Air Jamaica, the
employee handbook at issue expressly reserved the right to alter
or eliminate benefits "without notice," id. at 76, a provision
not contained in the description of Warnaco's termination
allowance policy. More fundamentally, however, we refuse to read
Air Jamaica so broadly. We did not intend in Air Jamaica to
allow employers to absolve themselves of good faith compliance
with their ERISA reporting and disclosure requirements simply by
placing a reservation clause in their employee handbooks.
Because we find that a complete rescission of a benefit plan
does implicate the requirements of section 402(b)(3) of ERISA, we
will reverse the order of the district court. Upon remand the
district court must determine whether Warnaco complied with its
otherwise valid procedure for altering plan benefits. With
respect to Warnaco's alleged reporting and disclosure violations,
we will reverse and remand this case for a determination as to
whether Warnaco acted in bad faith, or actively concealed the
rescission of the termination allowance policy.