165 F.3d 1038 (6th Cir. 1999), 97-6091, McAuley v. International Business Machines Corp., Inc.

Docket Nº:97-6091.
Citation:165 F.3d 1038
Party Name:John A. McAULEY; Theodore A. Griggs; Franklyn R. Lefevre, Sr.; Gerald L. Greenlief, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. INTERNATIONAL BUSINESS MACHINES CORPORATION, INC., et al., Defendants-Appellees.
Case Date:January 22, 1999
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

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165 F.3d 1038 (6th Cir. 1999)

John A. McAULEY; Theodore A. Griggs; Franklyn R. Lefevre,

Sr.; Gerald L. Greenlief, on behalf of themselves

and all others similarly situated,





No. 97-6091.

United States Court of Appeals, Sixth Circuit

January 22, 1999

Argued Sept. 22, 1998.

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[Copyrighted Material Omitted]

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G. Kennedy Hall, Jr. (argued and briefed), Kenneth S. Handmaker (briefed), Nancy T. Schook (briefed), Middleton & Reutlinger, Louisville, KY, Ronald E. Meisburg (briefed), Heenan, Althen & Roles, Washington, DC, for Plaintiffs-Appellants.

Charles E. Shivel, Jr., Stoll, Keenon & Park, Lexington, KY, Michael S. Horne (argued and briefed), Rebecca S. Campbell (briefed), Covington & Burling, Washington, DC, for Defendants-Appellees.

Before: MERRITT, JONES, and SILER, Circuit Judges.


SILER, Circuit Judge.

Plaintiffs are a class of retired employees from defendant International Business Machines ("IBM") Corporation's Lexington, Kentucky plant who retired during a downsizing period under a retirement plan somewhat less favorable than one offered soon after their effective retirement dates. They claim that IBM intentionally withheld information regarding a pending change in retirement options which would have been more favorable for employees in their situation in violation of IBM's fiduciary duties under the Employee Retirement Income Security Act of 1974 ("ERISA") (codified at 29 U.S.C. § 1001, et seq.). More specifically, they complain that IBM used material misrepresentations and deliberate nondisclosure to fraudulently induce its retirement eligible employees to opt for a retirement date before December 31, 1990, rather than utilizing a leave of absence option to set a later retirement date, which would have made them eligible for an enhanced retirement plan offered in January 1991. The district court found that the employees retired before the date on which IBM had any duty to disclose the upcoming change in retirement plans and therefore granted summary judgment to IBM. Plaintiffs appeal the grant of summary judgment and the restriction of the class to former employees from the Lexington plant only, rather than similarly situated former employees nationwide. We REVERSE the grant of summary judgment as to a portion of the plaintiff class and AFFIRM the class certification.


In 1989 and 1990, IBM offered a series of early retirement incentive programs to its employees in order to reduce its workforce nationwide and at its Lexington plant in particular. The two programs relevant to this case are known as the Voluntary Transition Payment Program ("VTP") and the Lexington Transition Payment Program ("LTPP"). The VTP was initially offered to employees nationwide on December 5, 1989. Those electing to participate had to resign or retire by March 30, 1990 (Field Administration employees had a deadline of December 31, 1990.). On January 17, 1990, a variation of the VTP was offered which provided for up to five years of pre-retirement leave of absence ("VTP/LOA"). The VTP/LOA plan required that participants begin their leaves of absence no later than March 31, 1990. Upon their effective retirement date, participants would be entitled to receive benefits calculated in accordance with the IBM Retirement Plan as it existed on their retirement date. The LTPP was announced on August 1, 1990, and participants had to resign or retire by December 31, 1990. The LTPP also had a pre-retirement leave of absence feature which worked in the same way as the VTP/LOA. Plaintiffs retired either on or before December 31, 1990, and their retirement benefits are being calculated in accordance

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with the IBM Retirement Plan in existence on their retirement date.

On January 29, 1991, IBM announced a redesign of the Retirement Plan which eliminated certain early retirement penalties and provided greater retirement benefits for those employees retiring on or after January 31, 1991. A later enhancement to the Retirement Plan made the redesigned plan retroactive to all employees retiring during and after 1991. The basis of plaintiffs' complaint is that IBM and/or its representatives induced them to participate in one of the early retirement programs available during 1990 and to retire prior to December 31, 1990, rather than utilize the Leave of Absence ("LOA") option, although the company was already preparing to implement an enhanced retirement plan for which plaintiffs would have been eligible if their retirement date had been set later through the LOA. Plaintiffs base their claims on alleged misrepresentations, both oral (in communications between employees and their managers) and written (in Summary Plan Descriptions of the VTP and LTPP).

The primary representation which plaintiffs allege was materially misleading was the oft-repeated statement that deferring the employee's retirement date through the LOA option would not be financially advantageous in most cases. Plaintiffs maintain the falsity of those statements is established by an affidavit made on behalf of IBM (the Miskovitz Declaration) in this lawsuit in which IBM calculated that based upon each class plaintiff's personnel record and actuarial calculations, 30 of 76 VTP Plaintiffs (39%) and 70 of 505 LTPP Plaintiffs (14%) would not have benefitted from the enhanced pension plan had they retired on or after January 31, 1991, based upon a present value calculation. This, of course, means that 61% of the VTP Plaintiffs and 86% of the LTPP Plaintiffs would have benefitted. They claim that the inducement to retire during a period in which the enhanced plan was being prepared was in breach of IBM's fiduciary duties under ERISA. Plaintiffs allege that they would have set later retirement dates but for the fraudulent inducements to retire under the VTP or LTPP.

Plaintiffs seek payment of funds by IBM into the Retirement Plan to provide them with the greater benefits to which they could have become entitled under the 1991 change in the Retirement Plan but for their retirements on or before December 31, 1990. Plaintiffs also seek equitable relief necessary to allow them access to benefits under the revised plan.

The development of the change in the Retirement Plan announced on January 29, 1991 began in July 1989, when Walter Burdick, IBM's Senior Vice-President of Personnel, requested Don Edman, Director of Personnel Programs, to staff a study on a redesigned pension plan. Subsequently, in July 1989, Edman placed Barry Voichick, Program Manager of IBM's Benefits Planning, in charge of this project. Voichick recruited others within the IBM organization to...

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