192 F.3d 162 (1st Cir. 1999), 98-1654, Rodowicz v. MA Mutual Life Ins.

Docket Nº:98-1654, 98-1690.
Citation:192 F.3d 162
Party Name:STANLEY A. RODOWICZ, ET AL., Plaintiffs, Appellants, v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, ET AL., Defendants, Appellees. STANLEY A. RODOWICZ, ET AL., Plaintiffs, Appellees, v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, ET AL., Defendants, Appellants.
Case Date:September 15, 1999
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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192 F.3d 162 (1st Cir. 1999)

STANLEY A. RODOWICZ, ET AL., Plaintiffs, Appellants,



STANLEY A. RODOWICZ, ET AL., Plaintiffs, Appellees,



No. 98-1654, 98-1690.

United States Court of Appeals, First Circuit

September 15, 1999

Heard Feb. 5, 1999.

As Amended on Denial of Rehearing En Banc Nov. 3, 1999[*]


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John C. Sikorski with whom Keith A. Minoff and Robinson, Donovan, Madden & Barry, P.C. were on brief for plaintiffs.

David G. Cohen with whom Charles S. Cohen and Egan, Flanagan and Cohen, P.C. were on brief for defendants.

Before Boudin, Circuit Judge, Aldrich and Campbell, Senior Circuit Judges.

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CAMPBELL, Senior Circuit Judge.

Plaintiffs each retired from defendant Massachusetts Mutual Life Insurance Company ("MassMutual" or "the Company") under terms that were less favorable than those in a special offer made to employees soon after. They filed suit against MassMutual and the Massachusetts Mutual Voluntary Termination Program ("VTP")1, alleging that by failing to reveal that a more favorable retirement option was forthcoming, MassMutual violated its fiduciary duties under the Employee Retirement Income Security Act of 1974 ("ERISA") (codified at 29 U.S.C. §§ 1001 et seq.). Plaintiffs also alleged misrepresentation under Massachusetts common law. The district court dismissed plaintiffs' ERISA claims on the ground that the severance package offered by the Company did not constitute a "plan" for purposes of ERISA.2 Exercising supplemental jurisdiction, the court also granted summary judgment dismissing the state law misrepresentation claims as well as later-added estoppel claims. Plaintiffs appeal from the grant of summary judgment on their state law claims. MassMutual cross-appeals from the district court's ruling that the severance package is not a "plan" governed by ERISA. The Company contends that should the case be remanded to the district court, only plaintiffs' ERISA claims will survive.

For the reasons that follow, we affirm the district court's dismissal of plaintiffs' ERISA claims. We also affirm, although on grounds somewhat different from those stated by the district court, the dismissal of most of plaintiffs' state law claims, but reverse and remand for trial the claims of three of the eight plaintiffs.


This case has followed a torturous path. The underlying facts and procedural history are set forth in two opinions below. See Rodowicz v. Massachusetts Mutual Life Ins. Co., 857 F.Supp. 992 (D. Mass. 1994); Rodowicz v. Massachusetts Mutual Life Ins. Co., 3 F. Supp.2d 1481 (D. Mass. 1998). We summarize the facts pertinent to the issues raised in the parties' appeals.

In 1990, MassMutual began to be concerned that senior executives were not leaving the company in sufficient numbers to make room for the promotion of other executives. To address this problem, employees drafted a 1990 Voluntary Incentive Program ("VIP"), which was intended to induce more senior executives to retire. The VIP was never adopted. However, the VIP documents were saved by the Company for possible use at a later date.

During the summer of 1991, for the first time in MassMutual's history, two ratings agencies lowered their ratings of MassMutual products. The agencies were especially concerned that MassMutual was over-invested in real estate, creating the danger that losses in that sector could impact negatively upon the Company's value. The agencies' downrating occurred at a time when both the national economy and the insurance industry were experiencing economic troubles.

MassMutual thereupon began to consider what measures it could take to lower costs. As employee salaries comprised the largest single category of cost, at the end of 1991 senior executives at MassMutual looked into reducing staffing levels. After consideration, however, the Company decided against workforce reduction at the time.

In February 1992, Thomas Wheeler, MassMutual's Chief Executive Officer, delivered an annual "state of the company" speech to all employees. The February

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14, 1992 issue of the company newsletter, the MassMutual News, summarized Wheeler's remarks.3 Wheeler stated, in essence, that MassMutual was in good financial condition. He stated that while the ratings downgrade had "hurt our pride," there "would be no change in how we do business." Wheeler went on to state: "We are a company with integrity. We handle our business ethically and are better than our competitors." During the speech, Wheeler made no reference to any reduction in the Company's workforce.

In March 1992, John Pajak, MassMutual's Chief Operating Officer, assigned to senior members of his management team the task of determining the costs and savings from a workforce reduction. In connection with this assignment, Susan Alfano, Senior Vice President in Charge of Human Resources, gathered data from the Company's outside employee benefits consultant. Between March and September, 1992, Alfano thoroughly analyzed the costs and benefits of a reduction in force.

On September 17, 1992, Wheeler, Pajak, and other senior MassMutual executives met for the purpose of reviewing the Company's five-year budget. During the meeting, Wheeler and Pajak discussed MassMutual's wages and salaries paid, which, as said, were the Company's largest operating expense. Wheeler asked Pajak to develop some options for reducing this expense. Specifically, Wheeler instructed Pajak to "dust off" the VIP that had been developed in 1991.

On September 30, 1992, Pajak and Alfano made a presentation to the President's Cabinet, a formal MassMutual governing body that consisted of senior executives who reported directly to Wheeler. Pajak and Alfano recommended that the Company consider the possibility of a two-step reduction in force, in which a voluntary termination program ("VTP") would be followed by involuntary layoffs, to be completed by early 1993. Immediately following this presentation, Pajak and Alfano were instructed to develop the details of such a program for further consideration.

In early October, 1992, senior MassMutual employees began developing the specifics of a workforce reduction program. By October 12, 1992, the terms of the VTP were drafted, and the Compensation Committee of MassMutual's Board of Directors for the first time authorized Wheeler to adopt the plan at his discretion. On October 19, 1992, Wheeler decided to adopt the VTP. The Company announced the adoption of the plan on October 23, 1992. The terms of the VTP were not finally settled and the plan documents were not signed until mid-November, 1992.

The VTP was open to most full-time MassMutual employees, about 4,000 in number. The plan provided for a one-time, lump sum severance bonus equal to: (1) three weeks of salary for every year of service, up to a maximum of 78 weeks, or (2) one week of salary for each full $5,000 of compensation, and a proportionate amount for an increment less than $5,000, up to a maximum of 52 weeks. The Company set December 1, 1992 as the deadline for eligible employees to elect to participate in the VTP. At its discretion, however, the Company could defer an employee's election date beyond the December 1 deadline, but in no case past June 30, 1993. The VTP included a mechanism whereby employees to whom the Company denied benefits could appeal from the denial.

Only employees who retired on or after October 23, 1992 and before January 2, 1993 were eligible to receive benefits under the VTP. Each of the named plaintiffs retired from MassMutual between August 1, 1992 and October 1, 1992. All of the plaintiffs would have received substantially higher retirement benefits if they had waited to retire until after October 23, 1992.

Plaintiffs each claim to have decided to retire after being lulled by misrepresentations

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made by Company personnel to the effect that no change in retirement benefits was planned. The specific allegations are set forth below.

Plaintiff Stanley Rodowicz claims that in late August or early September 1992, Laura Cowles, an employee in Corporate Human Resources, told him that the Board of Directors had decided that there would be no change in the retirement package. Plaintiff Barbara Binsky alleges that in or around May 1992, she asked Byron Mattson, a Second Vice President, whether there was going to be any golden parachute or early retirement incentive. He answered "absolutely not, there will be no golden handshake." Later, Binsky asked a similar question of Priscilla Dill, a retirement counselor, who replied: "I really don't think there will be anything."

Plaintiff Anne Buck alleges that in July 1992, she was told by Dill that "I am not aware of anything coming down the road," or, as far as Dill knew at that point in time there was nothing going on with retirement packages. Sometime before May 1992, Michael Walker, Buck's former boss, allegedly told her that "anything can happen, but we have no definite plans [to adopt any enhanced benefits]."

Plaintiff Patricia Kennedy claims that in the spring of 1992, she was present when her boss, Linda Egan, told people at a department meeting that there would not be any severance program or early retirement incentive program. Plaintiff James Lemon claims that in the summer of 1992, he attended a retirement meeting at which Jack Wilson, a supervisor in Human Resources, announced that there would be no enhanced benefit...

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