Rodowicz v. Massachusetts Mut. Life Ins. Co.

• Decision Date: 04 February 2002
• Docket Number: No. 00-2078.,No. 00-2077.,00-2077.,00-2078.
• Citation: 279 F.3d 36
• Parties: Stanley A. RODOWICZ, Margaret Stevens, and James Lemon, Plaintiffs, Appellees, Cross-Appellants, v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, Defendant, Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — First Circuit

279 F.3d 36

Stanley A. RODOWICZ, Margaret Stevens, and James Lemon, Plaintiffs, Appellees, Cross-Appellants, v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, Defendant, Appellant, Cross-Appellee.

No. 00-2077.

No. 00-2078.

United States Court of Appeals, First Circuit.

Heard October 4, 2001.

Decided February 4, 2002.

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Edward J. McDonough Jr. with whom Egan, Flanagan and Cohen, P.C. was on brief for appellant.

John C. Sikorski with whom John E. Garber and Robinson Donovan Madden & Barry, P.C. were on brief for appellees.

Before LYNCH, Circuit Judge, STAHL, Senior Circuit Judge, and LIPEZ, Circuit Judge.

LYNCH, Circuit Judge.

In October of 1992 Massachusetts Mutual Insurance Company, seeking to improve its financial stability, attempted to reduce its work force by offering a Voluntary Termination Program ("VTP"). The program, open to all employees, offered a generous severance package. Some who took the program did so by retiring. Although the program did not offer enhanced retirement benefits, it did, of course, through the larger severance package, increase the benefits of retiring by offering the VTP benefits in addition to regular retirement benefits.

As is inevitable in such a situation, there were those who had retired in the months before the VTP was announced, and felt they should have received the severance package available under the VTP. This suit involves three of those employees: Stanley Rodowicz, Margaret Stevens, and James Lemon. Initially, the suit involved nine retiring employees, but a prior opinion of this court winnowed the viable claims down to these three. Rodowicz v. Mass. Mut. Life Ins. Co. (Rodowicz I), 192 F.3d 162, modified, reh'g denied, 195 F.3d 65 (1st Cir.1999).¹

This court's prior opinion reversed the entry of summary judgment against these three employees and held their Massachusetts state law misrepresentation claims actionable on the summary judgment record. Id. at 192. It characterized Massachusetts law as being more generous to employees under a non-ERISA plan than the parallel federal law would be if the severance program was an ERISA plan (which the VTP was not).² Id. at 173-75. ERISA would require a plan to be under "serious consideration" by senior management in order to have an actionable claim for breach of the fiduciary duty to disclose that a change in benefits might be forthcoming, Vartanian v. Monsanto Co., 131 F.3d 264, 268 (1st Cir.1997). In contrast, Massachusetts law requires only a "false statement of material fact made to induce the plaintiff to act, together with reasonable reliance on the false statement to the plaintiff's detriment" in order to show an actionable misrepresentation. Rodowicz I, 192 F.3d at 171 (citing Zimmerman v. Kent, 31 Mass.App.Ct. 72, 575 N.E.2d 70, 74 (1991)).

Rodowicz I also stated that it did not mean to suggest that "plaintiffs will or should necessarily prevail." Id. at 178. The summary judgment record, as understood by the Rodowicz I court, permitted the jury, but did not require it, to reach the conclusion at trial that the alleged misrepresentations were made "at a time when several proposals urging such changes [in benefits were] on the table but, as yet, senior management with the authority to implement a change ha[d] not yet chosen a specific plan for implementation.... In such a case, the existence of the proposals and the attendant discussion might reasonably be expected to influence a decision with respect to retirement." Id. at 174-75. If so, the statements would be material, and plaintiffs could rest a misrepresentation claim on them, assuming the other elements of misrepresentation were met. Id.

At trial after remand, a jury found for the plaintiffs and awarded a total of $334,777.33. Both parties appeal. The plaintiffs challenge the trial court's ruling that they could not receive emotional distress damages for a misrepresentation claim. The company says that it was entitled to judgment as a matter of law because there was no plan under consideration at the time of the purported misrepresentations, that there was instructional error, that certain evidence was erroneously admitted, that plaintiffs surprised and prejudiced the company by changing their testimony on when the supposed misrepresentations were made, and that the three plaintiffs' claims should have been severed.

We reach only MassMutual's arguments that it was entitled to judgment as a matter of law, that there was instructional error, and that it was prejudiced by surprise testimony. We vacate the judgment, and we direct entry of judgment for MassMutual.

I.

For purposes of the sufficiency of the evidence challenge, we present the facts most favorably to the verdict for plaintiffs. For purpose of the evidentiary challenges, we also describe the facts as the defendant alleged them.

In the early 1990s, the insurance industry was in some turmoil. Several of MassMutual's long-time competitors were forced to close their doors. MassMutual itself was downgraded by two ratings agencies, in July 1991 and again in the fall of 1991. On three separate occasions between 1990 and April of 1992, MassMutual's Human Resources division looked at potential ways to downsize staff, either through reducing hiring or by implementing some sort of retirement benefits enhancement package. These studies were all closed down without any such plan being implemented or even referred to the Board of Directors for consideration. The evidence concerning these plans is discussed in more depth below, in the section dealing with MassMutual's sufficiency of the evidence claim.

The plaintiffs, for their part, were all considering retirement in late spring and early summer of 1992. Plaintiff Rodowicz, who had been an associate director in the investment department, submitted a Notice of Retirement on July 24. He retired on October 1 with over sixty unused vacation days, for which he was compensated in the form of a lump sum payment. Rodowicz based his claim of misrepresentation on a conversation that occurred, according to his testimony, in late August or early September, 1992, after his Notice of Retirement was given.³ He testified that he asked Laura Cowles, a Human Resources employee, "if there was any truth to the rumor [that there was a package coming]." He testified that "she said no, that the Board of Directors had met and considered a retirement package and decided that they would — emphatically decided that there would be no enhancement or improvement in any retirement package." Cowles testified that, although she did not remember the specifics of the conversation, she did not recall making that statement and she did not believe she had said anything about the Board, nor would she have, because she would not know what the Board had or had not approved.

Plaintiff Lemon, who had been a senior systems analyst, submitted his Notice of Retirement on May 22. He retired on October 1, 1992, the same date as Rodowicz, although Lemon took his accrued vacation prior to retirement and therefore his last day worked was July 17. Lemon's claim is based on a statement which he testified was made at a MassMutual retirement seminar that occurred in March, April, or perhaps May.⁴ He testified that someone else at the seminar asked "Is there going to be any change in benefits?" He further testified "[t]he answer was Mr. Wilson [a Human Resources employee] said there will be no change in benefits. He did say there might be some change in the group life medical, you know, benefits, but there would be no change in benefits.... I understood that to be ... when I terminated, there would be no additional benefits — or when I retired." Wilson had no memory of Lemon or the question, but testified, "that's not something I would say... I probably wouldn't know if there was something coming until it happened pretty much.... I'd say, I don't know."

Plaintiff Stevens, also a senior systems analyst at MassMutual, submitted her Notice of Retirement on May 20. She retired on September 1, a month before Rodowicz and Lemon, but her last day worked was July 31. Stevens testified that she had repeated meetings with retirement counselor Lois DeGray in 1991 and 1992, and that DeGray had avoided answering questions about any future changes to benefits. At her husband's urging, Stevens had finally asked DeGray "very specifically... was there any reason for [her to] stay on over, you know, any particular date that would be a benefit to [her], was there any package maybe coming along. And [DeGray] told [her] `no.'" Stevens did not remember the exact date of the conversation, but testified that it was before she sent a letter to her manager on May 22, as the conversation "was sort of the deciding factor."⁵ DeGray did not recall Stevens ever asking her whether there would be any enhanced benefits or severance, and denied ever telling her there would be no changes.

On September 17, well after the alleged misrepresentations claimed by the plaintiffs, Tom Wheeler, the CEO of MassMutual, instructed John Pajak, the Executive Vice President for Operations and Chief Operating Officer of MassMutual, to "dust off" the 1991 reduction in force project⁶ and evaluate options for a possible plan. There is no evidence that any work was done on any form of an enhanced benefits plan (retirement or severance) from the time the numbers were looked at, and the idea abandoned, in late March or early April 1992 until this request by Wheeler on September 17. Nor is there any evidence that any ideas concerning such benefits were discussed by management during that period. After the September 17 Wheeler request, Susan Alfano, the Vice President for Human Resources, assembled a team and worked virtually around the clock to prepare something. An employee who worked on both the March analysis and the September project testified that the two plans were "significantly different," particularly because the March...