248 F.3d 131 (3rd Cir. 2001), 99-5791, Eichorn v. AT&T
|Citation:||248 F.3d 131|
|Party Name:||KURT H. EICHORN; WILLIAM J. HUCKINS; T. ROGER KIANG; EDWARD W. LANDIS; ORLANDO NAPOLIT ANO, individually and on behalf of all others similarly situated; GILBERT G. DALEY; SUSAN H. DIBONA; BETH KING; MICHAEL S. ORATOWSKI; THOMAS L. SALISBURY; LAWRENCE WALSH, individually and on behalf of all others similarly situated, Appellants Page 132 v. AT&T C|
|Case Date:||April 23, 2001|
|Court:||United States Courts of Appeals, Court of Appeals for the Third Circuit|
Argued December 12, 2000
Amended June 12, 2001.
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
NOEL C. CROWLEY, ESQUIRE (ARGUED), Crowley & Crowley, Morristown, New Jersey, Attorney for Appellants.
JONATHAN E. HILL, ESQUIRE (ARGUED), KATHY A. LAWLER, ESQUIRE, Pitney, Hardin, Kipp & Szuch, Morristown, New Jersey, JAMES E. TYRRELL, JR., ESQUIRE (ARGUED), SCOTT L. WEBER, ESQUIRE, Latham & Watkins, Newark, New Jersey, Attorneys for Appellees, AT&T Corp. and Lucent Technologies, Inc.
DAVID M. FABIAN, ESQUIRE (ARGUED), Traflet & Fabian, Morristown, New Jersey, Attorney for Appellee, Texas Pacific Group.
Before: SCIRICA and AMBRO, Circuit Judges, and POLLAK, District Judge.[*]
OPINION OF THE COURT
SCIRICA, Circuit Judge.
In this appeal from the grant of summary judgment we must decide whether defendants AT&T Corp., NCR Corp., Lucent Technologies, and Texas Pacific Group's agreement to restrict the hiring of certain employees upon Lucent's sale of Paradyne Corp. was a violation of § 1 of the Sherman Antitrust Act. We also must decide whether this no-hire agreement which effectively cancelled the plaintiff employees' AT&T pension bridging rights violated § 510 of the Employee Retirement Income Security Act. We hold the no-hire agreement was a valid covenant not to compete that was reasonable in scope and therefore not a violation of § 1 of the Sherman Act. But also we hold plaintiffs have presented sufficient prima facie evidence of AT&T and Lucent's specific intent to interfere with an ERISA funded employee pension fund to survive summary judgment on the ERISA § 510 claim.
In July 1995, AT&T, a long distance telephone and wireless services provider, decided to sell one of its affiliates, Paradyne Corp., a manufacturer of network access products for the telecommunications industry. Contemplating the sale, AT&T wanted to ensure that Paradyne remained a viable entity because AT&T and its other affiliates, including Lucent Technologies, purchased many of the network access products Paradyne manufactured. To make Paradyne more attractive to buyers as an ongoing business, AT&T adopted a human resource plan that placed restrictions on Paradyne employees' ability to transfer to other divisions of AT&T ("the Preliminary Net"). Specifically, the Preliminary Net precluded an employee who voluntarily left Paradyne from being hired by any other division of AT&T. The premise for the hiring bar was AT&T's belief that one of Paradyne's most marketable assets was its skilled employees. The retention of Paradyne's employees, therefore, was considered essential for the sale of Paradyne.
Shortly after adopting the Preliminary Net, AT&T consummated a business reorganization plan resulting in three independent companies: AT&T, Lucent Technologies, and NCR Corp. (the "trivestiture"). As part of the trivestiture, AT&T transferred ownership of Paradyne to Lucent. Consistent with the Preliminary Net, the Paradyne employees, now employed by Lucent, were precluded from seeking re-employment at any other AT&T division or affiliate after the trivestiture.
On July 31, 1996, Lucent sold Paradyne to Texas Pacific Group. Before closing, Lucent agreed, on behalf of itself and the other former AT&T affiliates, that it would not hire, rehire, retain, or solicit the services of any Paradyne employee or consultant
whose annual income exceeded $ 50,000. This "Pre-Closing Net" was consistent with the understanding that Texas Pacific Group's interest in purchasing Paradyne was based on its desire to acquire the technical skills of Paradyne's employees for a sufficient period of time to ensure a successful transition of ownership.
Once the deal was closed, Lucent and Texas Pacific Group entered a post-closing agreement ("Post-Closing Net") in which Lucent warranted on behalf of itself and the other AT&T affiliates that for 245 days (8 months) following the sale and the expiration of the Pre-Closing Net, it would not seek to hire, solicit or rehire any Paradyne employee or consultant whose compensation exceeded $ 50,000. The eight month no-hire agreement had the practical effect of cancelling the Paradyne employees' accrued pension benefits under their former AT&T pension plans. Under the AT&T pension plan, employees were entitled to "bridging rights" which allowed them to retain their level of accrued pension benefits if they left AT&T and returned within six months. After six months, the bridging rights expired. Employees rehired after the six month period would need five years of employment to regain their previous pension levels. Because the Post-Closing Net barred Paradyne employees from returning to an AT&T affiliate for eight-months, these employees automatically lost the bridging rights they had acquired under their AT&T pensions.
Before the sale was consummated, Texas Pacific Group hired an outside consultant to determine the benefit package it could offer the Paradyne employees. Paradyne's Vice-President of Human Resources, Sherril Claus Melio, who had previously held the same position when Paradyne was owned by AT&T and Lucent, assisted the consultant in drafting various benefit plan proposals. The consultant concluded that in order to make Paradyne financially competitive, Texas Pacific Group could not offer the same pension package AT&T had previously offered its employees. Although Melio's exact role in Texas Pacific Group's decision is disputed, Texas Pacific Group ultimately decided not to offer a defined pension benefits program to its new employees.
The plaintiffs are former Paradyne employees who allege the Preliminary Net, as well as the Pre and Post-Closing Nets, collectively represent an unlawful group boycott in violation of § 1 of the Sherman Act. Additionally, they contend the defendants conspired to eliminate their pension benefits thereby engaging in an illegal price fixing scheme in violation of § 1 of the Sherman Act. Furthermore, they allege the no-hire agreement, which effectively cancelled Paradyne employees' bridging rights under their AT&T pensions, violated § 510 of the Employee Retirement Income Security Act.
In addressing these claims, the District Court held that plaintiffs failed to prove a violation of § 1 of the Sherman Act and failed to produce sufficient prima facie evidence of AT&T and Lucent's specific intent to interfere with an ERISA funded pension plan to support their § 510 claim. The court, therefore, granted defendants' motion for summary judgment. After the grant of summary judgment, plaintiffs filed a discovery motion in connection with an anticipated motion for class certification which the District Court denied. This appeal followed.
The District Court had jurisdiction under 15 U.S.C. § 26 and 29 U.S.C. § 1140 because plaintiffs' claims allege violations of § 1 of the Sherman Antitrust Act and
§ 510 of ERISA. We have jurisdiction under 28 U.S.C. § 1291. We exercise plenary review over the District Court's grant of summary judgment on plaintiffs' antitrust and ERISA claims. Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992), cert. denied, 507 U.S. 912, 122 L.Ed. 2d 659, 113 S.Ct. 1262 (1993). We exercise plenary review over the District Court's legal determinations concerning class certification and review its factual findings for abuse of discretion. Bogus v. Am. Speech & Hearing Ass'n, 582 F.2d 277, 289 (3d Cir. 1978).
Section 1 of the Sherman Act provides:
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal.
15 U.S.C. § 1 (1994).
Under § 1, unreasonable restraints on trade are prohibited because they inhibit competition within the market. Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 723, 99 L.Ed. 2d 808, 108 S.Ct. 1515 (1988); United States v. Brown Univ., 5 F.3d 658, 669 (3d Cir. 1993). In order to assert a cause of action under § 1, plaintiffs must prove they have suffered an antitrust injury that is causally related to the defendants' allegedly illegal anti-competitive activity. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 50 L.Ed. 2d 701, 97 S.Ct. 690 (1977). Once there is the finding of antitrust injury, courts examine the alleged illegal conduct under one of two distinct tests: per se violation or rule of reason. Under the per se test, "agreements whose nature and necessary effect are so plainly anti-competitive that no elaborate study of the industry is needed to establish their illegality" are found to be antitrust violations. Nat'l Soc'y of Prof. Eng'rs v. United States, 435 U.S. 679, 692, 55 L.Ed. 2d 637, 98 S.Ct. 1355 (1978). For those activities not within the per se invalidity category, courts employ the rule of reason test. Under this test, plaintiffs have the burden of establishing that, under all the circumstances, "the challenged acts are unreasonably restrictive of competitive conditions" in the relevant market. Standard Oil Co. of N.J. v. United States, 221 U.S. 1, 28, 55 L.Ed. 619, 31 S.Ct. 502 (1911). "An analysis of the reasonableness of particular...
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