Adams v. Lockheed Martin Energy Systems, Inc.

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 06a0599n.06
Filed: August 21, 2006
No. 04-6204
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
JOHN R. ADAMS, et al., )
)
Plaintiffs-Appellants, )
)
v. ) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR THE
LOCKHEED MARTIN ENERGY SYSTEMS, ) EASTERN DISTRICT OF TENNESSEE
INC., et al., )
)
Defendants-Appellees. )
Before: BATCHELDER, GIBBONS, and COOK, Circuit Judges.
COOK, Circuit Judge. Plaintiffs, former employees of Defendant Lockheed Martin Energy
Systems (LMES), appeal from the district court’s order denying their motion for partial summary
judgment and granting Defendant’s motion for summary judgment. We affirm.
I. Background
Plaintiffs, before March 1, 1999, worked in the Information Technology Service (ITS)
division at an LMES-operated nuclear facility. In 1998, LMES decided to “outsource” the ITS
division whereby Plaintiffs would continue to perform essentially the same work but the successful
bidder for the outsourcing contract would become their new employer.
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LMES informed Plaintiffs about the planned outsourcing and published an “Expression of
Interest” (EOI), setting forth “Participation Criteria” for companies interested in bidding for the
outsourcing contract. The EOI required the successful bidder to provide “market competitive”
benefits. After over 20 companies responded, LMES sent a request for proposal to the companies
that satisfied the participation criteria. Three companies submitted bids. LMES employed a
consulting firm to review and evaluate the compensation and benefits packages offered and
concluded that all three bidders’ packages were “market competitive.” Ultimately, LMES awarded
the contract to Science Applications International Corporation (SAIC).
LMES set March 1, 1999 as the target date for the outsourcing and told Plaintiffs that SAIC
had represented in its bid that it would accept “rollover transfers” of their 401(k) plan balances. But
in early February, SAIC realized that an IRS rule likely prohibited rollover transfers. LMES asked
SAIC to consider allowing Plaintiffs to use “trust-to-trust” transfers, but SAIC refused, citing the
increased administrative costs of such transfers, which it had not factored into its bid. The week
before the planned outsourcing, LMES notified Plaintiffs that they would not be permitted to
rollover their 401(k) balances and that when SAIC officially hired Plaintiffs, their 401(k) balances
would remain with LMES. Soon after, Plaintiffs filed suit.
The district court granted LMES’s motion for summary judgment on all claims. Plaintiffs
appeal the summary judgment award with respect to three of their ERISA-based claims.
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II. Discussion
We review a grant of summary judgment de novo, applying the frequently-cited Rule 56
standard. Int’l Union v. Cummins, Inc., 434 F.3d 478, 483 (6th Cir. 2006); Fed. R. Civ. P. 56(c).
Plaintiffs generally claim that LMES breached its fiduciary duty under ERISA “by failing
to properly investigate the matter and/or by lying and/or misleading” them about: 1) their ability
to roll-over their 401(k) balances after they were outsourced; and 2) the level of benefits they would
receive as SAIC employees. Plaintiffs also allege LMES breached its fiduciary duty by failing to
pay promised severance benefits.
A.
ERISA mandates that a “fiduciary . . . discharge his duties with respect to a plan solely in
the interest of the participants and beneficiaries,” 29 U.S.C. § 1104, and further provides that
a person is a fiduciary with respect to a plan to the extent (i) he exercises any
discretionary authority or discretionary control respecting management of such plan
or exercises any authority or control respecting management or disposition of its
assets, . . . or (iii) he has any discretionary authority or discretionary responsibility
in the administration of such plan.
29 U.S.C. § 1002(21)(A).1 LMES, as the administrator of its ERISA-governed plan, was a fiduciary.
But ERISA permits LMES to “wear two hats: one as a fiduciary in administering or managing the
1
ERISA defines a “person” to include a corporation. 29 U.S.C. § 1002(9).
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plan for the benefit of participants and the other as employer in performing settlor functions such
as establishing, funding, amending, and terminating the trust.” Hunter v. Caliber Sys., 220 F.3d 702,
718 (6th Cir. 2000); see Varity Corp. v. Howe, 516 U.S. 489, 498 (1996). Because, “when company
representatives . . . are not acting in their capacity as a plan fiduciary, . . . they do not bear the legal
obligations that go along with fiduciary status,” Ames v. Am. Nat’l Can Co., 170 F.3d 751, 757 (7th
Cir. 1999), LMES must have been “wearing its fiduciary hat” for Plaintiffs to prevail on their breach
of fiduciary duty claim. See Pegram v. Herdrich, 530 U.S. 211, 226 (2000) (“[I]n every case
charging breach of ERISA fiduciary duty . . . the threshold question is . . . whether [a person
providing services under a plan] was acting as a fiduciary (that is, was performing a fiduciary
function) when taking the action subject to complaint.”). We find LEMS was not acting as a
fiduciary.
First, as the district court found, LMES’s decision to outsource the ITS division was a
business decision that did not trigger ERISA’s fiduciary standards. See Adams v. Avondale Indus.,
Inc., 905 F.2d 943, 947 (6th Cir. 1990) (“ERISA does not require that day-to-day corporate business
transactions, which may have a collateral effect on . . . employee benefits, be performed solely in
the interest of plan participants.” (quotation omitted)); Ames, 170 F.3d at 757 (holding that company
representatives act as employer, not fiduciary, when negotiating the sale of a division).
Plaintiffs nevertheless insist that LMES’s actions taken in the process of implementing this
business decision, i.e., failing to investigate and misleading them about their ability to rollover their
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401(k) balances and the nature of their future benefits, triggered ERISA’s fiduciary standards. See
Sengpiel v. B. F. Goodrich Co., 156 F.3d 660, 666 (6th Cir. 1998) (“[C]ertain actions taken in the
course of implementing a corporate business decision may be subject to ERISA’s fiduciary standards
even though the employer’s decision itself is not.”). Focusing on the specifically targeted actions
of LMES, we determine none to be a breach of fiduciary duty.
The Seventh Circuit’s reasoning in the comparable Ames case facilitates our review. There,
American National Can Co. (ANC), the plaintiffs’ former employer and plan administrator, made
the business decision to sell-off the plaintiffs’ division. Ames, 170 F.3d at 754. After the sale, the
plaintiffs, as former ANC employees and no longer participants in ANC’s benefits plan, became
participants in their new employer’s plan. Before the sale, ANC representatives “publicized the
impending benefits changes to [the plaintiffs] in a number of ways,” including telling them at an
informational meeting that the two benefit plans were “not identical . . . , but . . . very comparable.”
Id. When the plaintiffs later became dissatisfied with the level of benefits, they sued ANC for
breaching its fiduciary duty. The Seventh Circuit affirmed the district court’s granting of summary
judgment to ANC, finding no breach. The panel noted that (1) there was “not a shred of evidence”
that the new employer was unable to provide its own benefits and (2) the plaintiffs knew they would
not be able to continue receiving benefits under ANC’s plan after the sale. Id. at 758. The panel
therefore agreed with the district court about the absence of a fiduciary duty, opining that “[t]o the
extent [the plaintiffs] had specific questions about [benefits under the new plan],” they had to rely
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on literature or representatives from their new employer, and characterized ANC’s “very-
comparable” comment as nothing “more than a general opinion.” Id.
Similarly, when LMES informed Plaintiffs that they would be allowed to rollover their
401(k) balances, LMES was parroting what SAIC had represented to LMES in its bid: “SAIC’s
401(k) plan accepts rollovers from prior employer-sponsored qualified plans.” And when LMES
suggested that SAIC’s benefits package would be “market competitive,” it was offering its opinion,
gleaned from the consultants it hired to evaluate the bids. If Plaintiffs had questions regarding
SAIC’s benefits plan, SAIC documents and representative were available to provide them with
answers.
Plaintiffs try, but fail, to analogize themselves to the plaintiffs in Varity. In that case, Varity,
the plaintiffs’ employer and benefits-plan administrator, created a wholly-owned subsidiary,
planning to transfer several of its less-profitable divisions to the newly-formed subsidiary. Varity,
516 U.S. at 493. To entice employees to transfer to the subsidiary, Varity affirmatively misled them
about the likely effect on their benefits. Id. at 493-94. When, as Varity expected, the new company
failed, the transferred employees sued, alleging Varity breached its fiduciary duty under ERISA.
Id. The Supreme Court agreed, holding that “[c]onveying information about the likely future of plan
benefits, thereby permitting beneficiaries to make an informed choice about continued participation,
would seem to be an exercise of a power ‘appropriate’ to carrying out an important plan purpose,”
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id. at 502 (emphasis added), and thus was “an act of plan administration”—that is, a fiduciary act.
Id. at 505.
Unlike in Varity, the information conveyed by LMES to Plaintiffs did not concern a plan
administered by LMES, and nothing suggests that LMES affirmatively or intentionally misled its
employees. Plaintiffs did not have a choice “about continued participation” in LMES’s plan—as
in Ames, the business decision to outsource Plaintiffs foreclosed that option. And also as in Ames,
Plaintiffs were appropriately informed of this fact. LMES’s actions, as distinguished from Varity’s,
did not constitute “discretionary acts of plan management or administration, or . . . acts designed to
carry out the very purposes of the plan.” Sengpiel, 156 F.3d at 666.
Even if LMES’s actions did trigger ERISA’s fiduciary standards, we would nevertheless
affirm because Plaintiffs have not pointed to any evidence to suggest that LMES’s alleged breach
caused them any harm. Plaintiffs generally assert in their brief that “[they] reasonably relied upon
the information provided to them . . . to their detriment” because the “misinformation” “prevented
[them] from making an informed decisions [with regard to retirement and future employment],” and
because they were “forced to forego [sic] other job opportunities.” But Plaintiffs suffer from a
paucity of supporting evidence, neglecting to target any specific facts demonstrating such harm.
Instead they offer general allegations and cite to entire depositions rather than specific supporting
testimony of a deponent. Summary judgment practice requires more. See Lujan v. Nat’l Wildlife
Fed’n, 497 U.S. 871, 888 (1990) (“Rule 56(e) provides that judgment ‘shall be entered’ against the
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nonmoving party unless affidavits or other evidence ‘set forth specific facts showing that there is
a genuine issue for trial.’ The object of this provision is not to replace conclusory allegations of the
complaint or answer with conclusory allegations of an affidavit.”); Wardle v. Lexington-Fayette
Urban County Gov’t, 45 Fed. Appx. 505, 509 (6th Cir. 2002) (“[A] district court is not required to
search the record to determine whether genuine issues of material fact exist when the non-moving
party has failed to point them out.” (citing Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479-80
(6th Cir. 1989))).
B.
Plaintiffs also allege LMES breached its duty by failing to honor its “unequivocal
commitment” to provide them severance benefits as required by LMES’s 1989 severance plan. The
commitment was not so “unequivocal” however. In 1989, LMES adopted a “layoff allowance”
policy, providing that “[e]mployees who are laid off on account of lack of work (reduction in force)
will be paid a layoff allowance.” (Emphasis added.) Almost a decade later, LMES amended, and
then entirely replaced, the policy. Plaintiffs argue that because these amendments were “prepared
solely for the purpose of excluding severance benefits to [them],” and because “terminating
[Plaintiffs] would have triggered the payment of severance benefits under the plan in existence
[before the amendments],” LMES is now obligated to provide them benefits.
The district court found that though “the language of the [original policy] embodie[d] an
enforceable obligation to pay eligible employees severance benefits,” Plaintiffs were not eligible
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because the phrase “lack of work” did not encompass outsourced employees. See Cassidy v. Akzo
Nobel Salt, 308 F.3d 613, 618 (6th Cir. 2002) (noting that the plain meaning of the phrase “lack of
work” does not encompass a situation where plaintiffs are presently doing the same or substantially
similar work as they did for their former employer before an asset sale). In their brief, Plaintiffs
never challenge this aspect of the district court’s holding. Accordingly, we affirm the summary
judgment on this claim. And because we agree with the district court that Plaintiffs were not eligible
for severance pay under the 1989 plan, we do not pass on the correctness of the district court’s other
legal conclusions with respect to this issue—namely, that the 1989 policy created an enforceable
contractual obligation governed by state law and was not a welfare plan governed by ERISA.
III. Conclusion
For these reasons we affirm the district court.
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