Makenta v. University of Pennsylvania

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
1-30-2004
Makenta v. Univ PA
Precedential or Non-Precedential: Non-Precedential
Docket No. 03-1354
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004
Recommended Citation
"Makenta v. Univ PA" (2004). 2004 Decisions. Paper 1057.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/1057
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2004 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 03-1354
BAH BAI MAKENTA,
Appellant
v.
UNIVERSITY OF PENNSYLVANIA
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
D.C. Civil No. 98-cv-03376
District Judge: The Honorable Ronald L. Buckwalter
Submitted Under Third Circuit LAR 34.1(a)
January 13, 2004
Before: BARRY, SMITH, and GREENBERG, Circuit Judges
(Opinion Filed: January 30, 2004)
OPINION
BARRY, Circuit Judge
Appellant Bah Bai J. Makenta, who was employed by appellee University of
Pennsylvania (“Penn” or “University”) and subsequently laid off, asks us to reverse the
District Court’s order granting Penn’s motion for summary judgment and dismissing his
action for intentional deprivation of his pension and welfare benefits, in violation of
ERISA Section 510, 29 U.S.C. § 1140 (“Section 510”). We will affirm.
I.
The parties are familiar with the facts of this case, and, thus, we will provide but a
brief summary of those facts at the outset, incorporating additional facts only as necessary
to our discussion of the issues.
Penn employed M akenta from 1967 to 1970, and again starting in 1988, in its
facilities management division, most recently as a construction coordinator. He was
among those Penn employees laid off in March 1998 when Penn outsourced its facilities
management operations.
In the spring of 1994, Penn hired Coopers and Lybrand (“Coopers”) to provide
advice on improving services and increasing cost efficiencies, culminating in Coopers’
December 1994 report. In January of 1995, University President Judith Rodin announced
that Penn was pursuing an “Agenda for Excellence”; specifically, Rodin explained that
The drive for better service and higher quality at the lowest possible cost
will increasingly dominate the higher education environment, just as it has
for business and government . . . Only by striving for fiscal, administrative
and academic excellence will Penn, and Penn’s people, achieve their full
potential in such a climate.
To realize these goals, Coopers recommended changes to the administration and
substance of Penn’s compensation and benefits packages, and high-ranking Penn officials
2
emphasized the importance of generally reducing administrative costs while improving
administrative services. In 1996, University Executive Vice President John A. Fry noted
the necessity of reducing the escalating costs of the benefits system while maintaining
total compensation at competitive levels. Fry also stated that Penn would use outsourcing
in certain areas.
Penn administrators, as part of their general concerns, were dissatisfied with the
performance of facilities management, which was unable to meet Rodin’s goals. In
particular, Fry, in his declaration filed in this litigation, stated that it “was viewed as not
appropriately managing the staffing and budgeting of construction projects,” and that
outsourcing would better serve Penn’s facilities management needs. Fry claimed that the
“paramount considerations animating the decision to outsource the Facilities Management
Division were the needs to: (1) improve the quality of facilities management services; and
(2) deliver services in more efficient and effective ways.” Fry also stated that “[b]enefits
cost savings were entirely irrelevant in determining whether to outsource the facilities
management functions to an outside entity and, in fact, no comparative benefits costs
savings studies were prepared.”
Penn entered into an agreement on October 1, 1997 with Trammell Crow Higher
Education Services, Inc., a subsidiary of Trammell Crow Corporate Services, Inc.
(together “Trammel Crow”), to outsource most of Penn’s facilities management
operations. Trammel Crow agreed to hire at least seventy percent of the terminated Penn
3
employees who applied, at salaries at least equal to those received from Penn, and with
Trammel Crow’s benefits. It also agreed to pay additional amounts to these employees to
offset any increased out-of-pocket costs attributable to differences between Penn’s and
Trammel Crow’s medical, dental, and vision benefits.1 On December 5, 1997, Penn
notified facilities management employees that their employment would be terminated as
of March 1, 1998 (later changed to March 31, 1998), and gave them several options: seek
another position at Penn, seek employment from Trammel Crow, or take a severance. On
April 1, 1998, 77 former Penn employees – eighty percent of those who applied – became
Trammel Crow employees. Five who applied were not hired, among them Makenta. As a
result, he claims to have lost protected life insurance, retirement, and tuition
reimbursement benefits.
Makenta filed this action on July 1, 1998, alleging that Penn terminated his
employment in an effort to intentionally interfere with his receipt of protected pension
and welfare benefits in violation of Section 510.2 Penn, in its answer to the complaint,
stated that its decision to outsource was intended to “effectuate legitimate and
fundamental business objectives,” and that it went to “extraordinary lengths to protect the
1
Makenta claims that Trammel Crow’s life insurance and health benefits were
substantially lower than those offered by Penn, and that Trammel Crow did not offer
tuition reimbursement benefits at all.
2
Makenta filed this action both on his own behalf and as a representative of a putative
class of former employees. In its September 25, 2001 order, the District Court held that
Makenta was an inadequate class representative. Makenta’s interlocutory appeal of the
denial of class certification was dismissed as untimely.
4
affected workers” by negotiating comparable salary and benefits for those employees who
were employed by Trammel Crow.
In June of 2002, Penn moved for summary judgment and on January 8, 2003, the
District Court granted Penn’s motion. The Court concluded that Makenta was unable to
establish a prima facie case that Penn discharged him with the specific intent to interfere
with his right to obtain benefits protected under ERISA, and that there was no evidence
that Penn’s legitimate nondiscriminatory reason for outsourcing was a pretext. Makenta
now appeals.3
The District Court had jurisdiction under 28 U.S.C. § 1331. We have jurisdiction
under 28 U.S.C. § 1291.
II. DISCUSSION
A court may grant summary judgment if there is no genuine issue as to any
material fact and the moving party is entitled to judgment as a matter of law. F ED. R. C IV.
P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The court must view all
evidence, and draw all inferences therefrom, in the light most favorable to the non-
moving party, here Makenta. See, e.g., Williams v. Morton, 343 F.3d 212, 216 (3d Cir.
2003). Our review of the District Court’s grant of summary judgment is plenary. See,
3
The District Court denied Penn’s motion for summary judgment with respect to its
counterclaim asserting the validity of a general release by Makenta of Penn and denied
Makenta’s motion under F ED.R.C IV.P. 56(f). The parties subsequently agreed to dismiss
Penn’s counterclaim and Penn agreed to provide the discovery Makenta requested in his
56(f) motion. Thus, we need not reach those issues.
5
e.g., Sutton v. Rasheed, 323 F.3d 236, 248 (3d Cir. 2003).
Makenta challenges the District Court’s conclusion that no genuine question of
material fact exists with respect to whether Penn violated Section 510, which makes it
unlawful for “any person to discharge ... a participant or beneficiary for exercising any
right to which he is entitled under the provisions of an employee benefit plan ... or for the
purpose of interfering with the attainment of any right to which such participant may
become entitled under the plan ....” 29 U.S.C. § 1140. The legal standard in Section 510
cases is, as we recently explained, “very clear”:
To recover, a plaintiff must demonstrate that the defendant had the
“‘specific intent’” to violate § 510. [DeWitt v. Penn-Del Directory Corp.,
106 F.3d 514, 522 (3d Cir. 1997) (quoting Haberen v. Kaupp Vascular
Surgeons Ltd., 24 F.3d 1491, 1501 (3d Cir. 1994))]. This requires the
plaintiff to show that “the employer made a conscious decision to interfere
with the employee’s attainment of pension eligibility or additional benefits.”
Id. at 523 (citing Gavalik v. Continental Can Co., 812 F.2d 834, 860 (3d
Cir. 1987)). The plaintiff may use both direct and circumstantial evidence
to establish specific intent, but when the plaintiff offers no direct evidence
that a violation of [Section] 510 has occurred, the court applies a shifting
burden analysis, similar to that applied in Title VII employment
discrimination claims. See Gavalik, 812 F.2d at 851-53 (applying the
McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 36
L.Ed.2d 668 (1973), shifting burdens mechanism). In this burden-shifting
analysis, the plaintiff must first establish a prima facie case by showing “(1)
prohibited employer conduct (2) taken for the purpose of interfering (3)
with the attainment of any right to which the employee may become
entitled.” [Gavalik, 812 F.2d] at 852, [McDonnell Douglas,] 93 S.Ct. 1817.
If the plaintiff is successful in demonstrating her prima facie case, the
burden then shifts to the defendant-employer, who must articulate a
legitimate, nondiscriminatory reason for the prohibited conduct. If the
employer carries its burden, the plaintiff then must persuade the court by a
preponderance of the evidence that the employer’s legitimate reason is
pretextual. See Texas Dep’t of Community Affairs v. Burdine, 450 U.S.
6248, 252-53, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981).
DiFederico v. Rolm Co., 201 F.3d 200, 204-05 (3d Cir. 2000). Applying this burden
shifting analysis, the District Court concluded that Makenta had not established a prima
facie case. We agree.
First, by his own admission (at his deposition), Makenta presented no direct
evidence that Penn specifically intended to interfere with his attainment of protected
benefits:
Q: [A]s we sit here today, other than the fact that you were losing your
job and that would cost you your benefits, do you have any evidence
available to you suggesting that [Penn’s] actions were taken to
interfere with your benefits? A conversation you overheard? A
document?
A: I have no evidence.
***
Q: [D]o you have any evidence, sir, that [your boss’s] actions were
taken with a specific intent to interfere with your benefits?
A: No, I don’t have any evidence.
Our review of the record also discloses no direct evidence that Penn had the required
specific intent.
Because, however, there is rarely “smoking gun” evidence of specific intent, we
have held that specific intent can be shown by circumstantial evidence. See Eichorn v.
AT&T Corp., 248 F.3d 131, 150 (3d Cir.), cert. denied, 534 U.S. 1014 (2001) (quoting
DeWitt, 106 F.3d at 523 (quoting Gavalik, 812 F.2d at 851)); Hendricks v. Edgewater
7
Steel Co., 898 F.2d 385, 389 (3d Cir. 1990) (citing Gavalik, 812 F.2d at 852).
Economic benefits enjoyed by defendants when pension benefits are cancelled can
be circumstantial evidence of specific intent, particularly when other circumstances make
that cancellation suspicious. See Eichorn, 248 F.3d at 149-50 (where plaintiff’s employer
was purchased by another company, and entered into an eight month re-employment no-
hire agreement that extended just beyond the vesting period for plaintiff’s pension
benefits, plaintiff presented sufficient circumstantial evidence of intent to interfere with
his benefits to survive summary judgment).
Nevertheless, “‘[w]here the only evidence that an employer specifically intended
to violate ERISA is the employee’s lost opportunity to accrue additional benefits, the
employee has not put forth evidence sufficient to separate that intent from the myriad of
other possible reasons for which an employer might have discharged him.’” Turner v.
Schering-Plough Corp., 901 F.2d 335, 348 (3d Cir. 1990) (quoting with approval Clark v.
Resistoflex Co., 854 F.2d 762, 771 (5th Cir. 1988)) (emphasis added). Thus, “[p]roof of
incidental loss of benefits as a result of a termination will not constitute a violation of
section 510,” DeWitt, 106 F.3d at 522 (citing Gavalik, 812 F.2d at 853), and vague
allegations of malicious termination, unsupported by any facts, are insufficient to support
a claim for violation of Section 510. See Romero v. SmithKline Beecham, 309 F.3d 113,
119 (3d Cir. 2002); see also Inter-Modal Rail Employees Assoc. v. Atchison, Topeka &
Santa Fe Railway Co., 520 U.S. 510, 516 (1997) (when an employer acts without the
8
purpose of interfering with employees’ attainment of protected rights under a plan, “as
could be the case when making fundamental business decisions, such actions are not
barred by § 510”).
The circumstantial evidence here is too general and too far removed from the
decision to terminate Makenta to carry the day. President Rodin’s “Agenda for
Excellence” made clear her intention to generally improve services at Penn while
lowering costs. Coopers was called upon to help design and implement Rodin’s plan
three years before the Trammel Crow agreement and emphasized cost efficiencies
primarily in the administration, not the substance, of Penn’s benefits program.4
Other circumstantial evidence is equally general and far removed from the decision
to outsource. A 1995 “Strategic Plan” for implementing the Agenda for Excellence,
published two years before the Trammel Crow outsourcing agreement, called for Penn to
“[s]treamline, improve, and reduce the costs of [its] benefit system while maintaining
total compensation at levels consistent with those of peer institutions.” Following
publication of this plan, Fry stated in September 1995 that Penn would “‘focus on
delivering significant cost reductions and service improvements’” in the targeted
administrative areas. In February 1996, Fry stated that Penn wanted to “reduce the cost of
4
The one exception was Penn’s tuition reimbursement program, which Coopers found
to be “more generous” than those provided by peer institutions. That benefit, however, is
not protected under ERISA, see 29 C.F.R. § 2510.3-1(k), and therefore its reduction or
elimination cannot be the basis for a Section 510 claim.
9
center and school administration by $50 million over the next 5 years,” and specified that
“[t]he need is to reduce costs of the benefits system while maintaining total compensation
at competitive levels ... Penn needs to drive down Employee Benefits (EB) rate from 33%
into the 20’s.” He stated that “[p]roblems in benefits are escalating costs (a 27.4%
increase over 3 years, to a total of $131 million); too many options, which increases costs
but diminishes the management of benefits; and a ‘richness in plans that has no clear
market linkage’ – with tuition reimbursement and retirement plans as examples.” Despite
Makenta’s arguments to the contrary, the plan and Fry’s statements, made long before the
Trammel Crow contract was signed, do not show that Makenta was fired to avoid paying
his benefits. Instead, they demonstrate Penn’s legitimate business goal to reduce the
overall costs of administering the benefits program while bringing benefits generally
within the range of market competitiveness.5
When outsourcing came up in June 1996, Fry stated that it would be “used
selectively, and only in those areas where it can demonstrably improve services and
reduce costs while at the same time serving the specific needs of the University
community.” Fry’s declaration in this litigation demonstrates that Penn’s motivation for
5
Comments by the Faculty Senate Executive Committee do not suggest otherwise. The
Committee found that “Penn’s 30.1% employee benefits rate may be among the highest at
comparable institutions,” and that “[t]he administration’s objective is not to reduce
benefits but in the face of declining University resources additional cost sharing by
faculty and staff may be necessary.” These observations correspond to the overarching
goal espoused by the administration, and are, in any event, not linked in any way to the
decision in 1997 to outsource facilities management or fire Makenta.
10
outsourcing facilities management was to improve quality and deliver services more
efficiently and effectively, not benefits cost savings. Indeed, Makenta knew about Penn’s
dissatisfaction with facilities management: he explained in his deposition that it was
known that the administration thought supervisors were overpaid, that the department was
top heavy, and that management failed to upgrade the department. And when the
outsourcing occurred, Penn went to great lengths to ensure that – tuition reimbursement
aside – Trammel Crow compensated former Penn employees with equal benefits, even
through salary top-offs to make up for benefit deficiencies. Makenta offers nothing but
speculation and conclusory allegations to rebut the unambiguous record.
Finally, Makenta’s emphasis on the alleged savings Penn enjoyed because it fired
him does not help his case. Makenta’s identification of over $6 million in benefits
savings in 1996 has no bearing on whether Penn saved money by firing him in 1998.6 A
May 2001 Agenda for Excellence update is more likely (if only because of its date) to
reflect the financial impact of the Trammell Crow outsourcing, but even it is too general
to support an allegation that Penn had the specific intent to interfere with Makenta’s
receipt of benefits.
In sum, there is little if anything to suggest that Penn fired Makenta with the
6
And as Penn also notes, this purported savings is not found in the record. The
$6,719,602 figure Makenta recites in his brief appears to be the total amount budgeted in
1996 for benefits, and not the amount (if any) saved in 1996 by reducing or eliminating
benefits.
11
specific intent to reduce or eliminate his benefits. Even if Makenta had made out a prima
facie case of a Section 510 violation, however, Penn articulated a legitimate, non-
discriminatory reason for acting as it did,7 and Makenta did not show that that stated
reason was pretextual and that Penn’s real reason was unlawful. 8
The order of the District Court dated January 8, 2003 will be affirmed.
TO THE CLERK OF THE COURT:
Kindly file the foregoing Opinion.
/s/ Maryanne Trump Barry
Circuit Judge
7
Cutting costs, even if that alone were a motivating factor here, can be a legitimate
reason for its decision to eliminate certain benefits. See Berger v. Edgewater Steel Co.,
911 F.2d 911, 923, n.17 (3d Cir. 1990) (dicta).
8
While Makenta need not prove that the “the sole reason” for his termination was to
interfere with his rights, once Penn articulated and presented evidence of a legitimate,
nondiscriminatory reason for its action, Makenta must meet his “ultimate burden of
persuasion” by proving that Penn discriminated against him. DiFederico, 201 F.3d at 206
(citing Miller v. CIGNA Corp., 47 F.3d 586, 597 (3d Cir. 1995)). To satisfy this burden
in a circumstantial evidence case, Makenta must prove that “the legitimate reason
proffered by the defendant was pretext for the real discriminatory reason ... either directly
by persuading the court that the discriminatory reason more likely motivated the employer
or indirectly by showing that the employer’s proffered explanation is unworthy of
credence.” DiFederico, 201 F.3d at 206 (citing Burdine, 450 U.S. at 256).
12