Russell v. Harman International Industries, Inc.

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 24, 2014 Decided December 12, 2014
No. 13-7095
PATRICK RUSSELL, ON BEHALF OF HIMSELF
AND ALL OTHERS SIMILARLY SITUATED,
APPELLANT
v.
HARMAN INTERNATIONAL INDUSTRIES, INC., ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:07-cv-02212)
Thomas J. McKenna, pro hac vice, argued the cause for
the appellant. Toyja E. Kelley and John B. Isbister were with
him on brief.
Sara Pikofsky argued the cause for the appellees. Evan
Miller was with her on brief. Thomas F. Cullen, Jr. entered
an appearance.
Before: HENDERSON, ROGERS and GRIFFITH, Circuit
Judges.
Opinion for the Court filed by Circuit Judge HENDERSON.
2
KAREN LECRAFT HENDERSON, Circuit Judge: This appeal
involves the conversion process set forth in Rule 12(d) of the
Federal Rules of Civil Procedure. That rule provides:
If, on a motion under Rule 12(b)(6) or 12(c), matters
outside the pleadings are presented to and not
excluded by the court, the motion must be treated as
one for summary judgment under Rule 56. All
parties must be given a reasonable opportunity to
present all the material that is pertinent to the
motion.
FED. R. CIV. P. 12(d). Patrick Russell, the appellant,
complains that the district court converted the appellees’
motion to dismiss and granted them summary judgment
without giving him a “reasonable opportunity” to present
evidence. But we do not reach that issue because, assuming
arguendo that the district court violated Rule 12(d), the error
would be harmless in this case. For that reason, we affirm.
I. BACKGROUND
Patrick Russell is a former employee of Harman
International Industries, Inc. Russell participated in Harman’s
401(k) plan, which invests primarily in Harman common
stock. In April 2007, Harman issued a press release claiming
that two investment firms had agreed to acquire the company.
That deal ultimately fell through, triggering a corresponding
decline in the value of Harman’s stock. Russell alleges that
the deal failed because agents of Harman made false and
misleading statements to the investment firms. He contends
that these statements constituted a breach of fiduciary duty in
violation of the Employee Retirement Income Security Act
(ERISA). In December 2007, Russell filed a class-action
complaint against Harman and various individuals associated
with the company (collectively, Harman).
3
When he filed suit, Russell no longer worked for
Harman. Six months earlier, Russell had signed a severance
agreement that included the following release of liability:
Release of Known and Unknown Claims.
Employee . . . releases and forever discharges the
Company, its affiliates, and all of their agents . . . of
and from any Claim (as defined below) which have
[sic] arisen on or before the date that this Agreement
becomes effective. . . . The Claims released by this
agreement include, but are not limited to, Claims
arising out of, based upon, or relating to . . . the
Employee Retirement Income Security Act . . . .
Employee expressly acknowledges, agrees and
recites that: (i) this Agreement is written in a manner
he understands; . . . (iii) he has entered into and
executed this Agreement knowingly and voluntarily;
(v) [sic] he has read and understands this Agreement
in its entirety; and (vi) he has not been forced to sign
this Agreement by any employee or agent of the
Company.
Aug. 5, 2008 Mot. to Dismiss, Ex. 1 (emphasis added). In
return for his signature, Harman gave Russell severance
payments he was not otherwise entitled to receive. The
severance agreement advised Russell to consult a lawyer
before signing and gave him seven days to do so. Russell did
not avail himself of that opportunity.
Harman used the severance agreement’s release as the
basis for a motion to dismiss under Rule 12(b)(6). The
motion contended that Russell gave up his right to bring an
ERISA action. To support this defense, Harman attached the
severance agreement as an exhibit to the motion. After
4
holding the case under advisement for some time, the district
court ordered supplemental briefing and asked the parties to
address the meaning of the phrase (emphasized above) “any
Claim . . . arisen on or before the date that this Agreement
becomes effective.” The order did not expressly mention
Rule 12(d) or the possibility of converting Harman’s motion
to dismiss into one for summary judgment. Harman and
Russell promptly submitted their supplemental briefs.
Although the district court asked the parties to address only
one issue, Russell’s brief addressed many more. He argued
that (1) his claims did not “arise[]” under the terms of the
severance agreement, (2) he did not knowingly and
voluntarily waive his ERISA rights, (3) the severance
agreement could not waive the claims of other plan members
and (4) the severance agreement was void as against public
policy. See Feb. 28, 2013 P’s Opp. to D’s Supp. Memo. 2–7.
The district court rendered its decision in May 2013. For
the first time, the district court expressly invoked Rule 12(d)
and converted Harman’s motion to dismiss into one for
summary judgment. In its decision, the district court
determined, among other things, that Russell had knowingly
and voluntarily waived his ERISA rights by signing the
severance agreement. The district court relied on the
following factors:
the Agreement states clearly the consideration
Russell received for entering into the Agreement,
highlights the rights that Russell released, uses clear
and precise language to describe the scope of that
release, provides that Russell had time to consider
the Agreement, and counsels him to consult an
attorney.
5
Russell v. Harman Int’l Indus., Inc., 945 F. Supp. 2d 68, 76
(D.D.C. 2013). The district court then entered summary
judgment for Harman.
Russell timely appealed. Our jurisdiction arises under 28
U.S.C. § 1291.
II. DISCUSSION
Russell properly raises one argument on appeal. 1 He
contends that the district court violated Rule 12(d) by entering
summary judgment without giving him a “reasonable
opportunity” to present evidence. But we do not decide
whether the district court violated Rule 12(d) because,
assuming it did, the error would be harmless. See 28 U.S.C. §
2111.
A district court’s failure to comply with the procedural
safeguards of Rule 12(d) does not constitute reversible error if
it did not prejudice the parties. See Holy Land Found. for
Relief & Dev. v. Ashcroft, 333 F.3d 156, 165 (D.C. Cir. 2003);
Hollis v. Dep’t of Army, 856 F.2d 1541, 1544 (D.C. Cir.
1988). Here, Russell suffered no prejudice because, even had
he obtained his now-desired discovery, he could not
demonstrate a “genuine issue of material fact” sufficient to
prevail at summary judgment. See Colbert v. Potter, 471 F.3d
158, 168 (D.C. Cir. 2006); Holy Land, 333 F.3d at 165;
Hollis, 856 F.2d at 1544 n.34.
1
Russell also attempts to argue—for the first time in his reply
brief—that the severance agreement covers only Harman itself, not the
individual defendants. We decline to consider this argument because
Russell forfeited it. See Am. Wildlands v. Kempthorne, 530 F.3d 991,
1001 (D.C. Cir. 2008) (arguments raised for first time in reply brief are
forfeited).
6
Russell complains that the district court did not afford
him discovery on whether he knowingly and voluntarily
consented to the severance agreement. We generally require
waivers of liability to be “knowing and voluntary” in the
context of Title VII. See United States v. Trucking Emp’rs,
Inc., 561 F.2d 313, 318 (D.C. Cir. 1977) (citing Alexander v.
Gardner-Denver Co., 415 U.S. 36, 52 n.15 (1974)). Most of
our sister circuits have extended the knowing-and-voluntary
requirement to the ERISA context as well. See, e.g., Smart v.
Gillette Co. Long-Term Disability Plan, 70 F.3d 173, 181 (1st
Cir. 1995); Laniok v. Advisory Comm. of Brainerd Mfg. Co.
Pension Plan, 935 F.2d 1360, 1367 (2d Cir. 1991); Jakimas v.
Hoffmann–La Roche, Inc., 485 F.3d 770, 781 (3d Cir. 2007);
Chaplin v. NationsCredit Corp., 307 F.3d 368, 373 n.6 (5th
Cir. 2002); Howell v. Motorola, Inc., 633 F.3d 552, 559 (7th
Cir. 2011); Leavitt v. Nw. Bell Tel. Co., 921 F.2d 160, 162
(8th Cir. 1990); Vizcaino v. Microsoft Corp., 120 F.3d 1006,
1012 (9th Cir. 1997); Wright v. Sw. Bell Tel. Co., 925 F.2d
1288, 1293 (10th Cir. 1991). Our precedent is unclear.
Compare Trucking Emp’rs, 561 F.2d at 318 (Title VII
waivers must be knowing and voluntary), and Brown v.
Brody, 199 F.3d 446, 456 n.10 (D.C. Cir. 1999) (Title VII
jurisprudence is instructive in interpreting ERISA), with
Makins v. Dist. of Columbia, 277 F.3d 544, 547 (D.C. Cir.
2002) (declining to apply knowing-and-voluntary requirement
to Title VII waiver in settlement agreement). We see no
reason to take a position in this case because the parties agree
that the knowing-and-voluntary standard applies. We will
therefore assume, arguendo, that an employee must
knowingly and voluntarily consent to a waiver of ERISA
liability.
Our sister circuits rely on a non-exhaustive list of factors
to determine whether, under the totality of the circumstances,
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an ERISA waiver is knowing and voluntary. The following
list from the Second Circuit is representative:
1) the plaintiff’s education and business experience,
2) the amount of time the plaintiff had possession of
or access to the agreement before signing it, 3) the
role of plaintiff in deciding the terms of the
agreement, 4) the clarity of the agreement, 5)
whether the plaintiff was represented by or consulted
with an attorney, as well as whether an employer
encouraged the employee to consult an attorney and
whether the employee had a fair opportunity to do so
and 6) whether the consideration given in exchange
for the waiver exceeds employee benefits to which
the employee was already entitled by contract or law.
Laniok, 935 F.2d at 1368 (brackets omitted).
Russell contends that he needed discovery on each and
every one of these factors. But at least two of the factors—
Factors 4 and 6—are apparent from the face of the severance
agreement. Granted, the remaining factors ordinarily require
the district court to evaluate not only characteristics unique to
the employee but also the circumstances surrounding his
assent to the waiver. But here, those factors are all matters
within Russell’s own knowledge. Russell knows his
education and business experience, the role he played in
deciding the terms of the agreement and whether he consulted
counsel. If Harman had pressured or coerced Russell into
signing the release, Russell would undoubtedly be aware of it.
Despite the length of this litigation, Russell has never
proffered any evidence to undermine the knowing-and-
voluntary nature of his consent or identified a plausible line of
8
inquiry for discovery that might lead to evidence creating a
disputed issue of material fact. 2
Accordingly, Russell was not prejudiced by his lack of
discovery. Russell’s failure to suggest any reason why his
consent to the severance agreement was unknowing or
involuntary convinces us that discovery would be futile. We
decline to remand a case when discovery would amount to
“nothing more than a fishing expedition” because the
appellant is “unable to offer anything but rank speculation.”
Bastin v. Fed. Nat’l Mortg. Ass’n, 104 F.3d 1392, 1396 (D.C.
Cir. 1997). Thus, the district court’s violation of Rule 12(d),
assuming it occurred, would be harmless error. See Colbert,
471 F.3d at 168–69; Holy Land, 333 F.3d at 165–66.
Of course, our harmless-error analysis is confined to the
unique circumstances of this case. It bears repeating:
We do not propose that in every case in which a
district court improperly goes beyond the pleadings
2
In his reply brief, Russell makes two challenges to the severance
agreement—both of which border on the conspiratorial. First, Russell
complains that the Harman agent who signed the severance agreement
signed her name with one pen but dated her signature with another pen.
Putting aside an obvious, innocent explanation for this discrepancy—that
the first pen ran out of ink—the sufficiency of Harman’s consent to the
severance agreement says nothing about the sufficiency of Russell’s
consent. Only the latter matters under the knowing-and-voluntary
standard.
Second, Russell notes that he signed the severance agreement the
same day he received it, even though Harman gave him seven days to
consider it. Russell appears to be suggesting that Harman pressured him
into signing the severance agreement before he could fully examine it.
Yet, if such pressure occurred, Russell would know about it. His failure to
come forward with any evidence of such pressure further convinces us that
Russell is merely grasping at straws.
9
in granting a motion to dismiss without affording the
protections contemplated in Rule 12[(d)], a losing
party will lose once more on appeal because of its
inability to show what it would have produced had it
been given the opportunity. In a general case,
perhaps the opportunity for discovery might have
produced precisely that which was lacking.
Holy Land, 333 F.3d at 166. This case is not a “general case,”
however, because Russell neither proffered evidence nor
identified a plausible line of inquiry regarding the matters on
which he says discovery is needed. Stated differently, Russell
“had every opportunity and incentive to produce the evidence
sufficient to rebut the ample evidence supporting the [district
court’s] conclusion.” Id. Because Russell has failed to show
prejudice resulting from his lack of discovery, we conclude
that the district court’s assumed error was harmless.
For the foregoing reasons, we affirm the district court’s
grant of summary judgment.
So ordered.