397 F.3d 1130 (8th Cir. 2005), 04-1902, Dallas Deane Register v. Honeywell Federal Manufacturing & Technologies, LLC.

Docket Nº:04-1902
Citation:397 F.3d 1130
Party Name:Dallas Deane Register v. Honeywell Federal Manufacturing & Technologies, LLC.
Case Date:February 17, 2005
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

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397 F.3d 1130 (8th Cir. 2005)

DALLAS DEANE REGISTER; Toney P. Freeman; James H. Frerichs; Scott Patrick Henry; Emelia Kelley; Joseph C. Lewis; Don T. Lynch; David A. Shepherd, Plaintiffs--Appellants,



Gerald W. LAWSON, Plaintiff--Appellant,


Honeywell Federal Manufacturing & Technologies, LLC, Defendant--Appellee.

No. 04-1902.

United States Court of Appeals, Eighth Circuit.

February 17, 2005

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[Copyrighted Material Omitted]

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Counsel who presented argument on behalf of the appellant was Mark A. Buchanan of Kansas City, MO.

Counsel who presented argument on behalf of the appellee was Daniel B. Boatright of Kansas City, MO.

Before MURPHY, McMILLIAN, and BYE, Circuit Judges.

MURPHY, Circuit Judge.

Former employees of Honeywell FM & T, LLC, including Dallas Deane Register and Gerald W. Lawson, sued the company after their positions were outsourced, alleging violations of the Employment Retirement Income Security Act (ERISA), the Age Discrimination in Employment Act (ADEA), and Title VII. They alleged in particular that Honeywell terminated their employment with the intent to interfere with their pension benefits, in violation of § 510 of ERISA, 29 U.S.C. § 1140. The district court1 granted summary judgment to Honeywell, and the former employees appeal only the dismissal of their § 510 ERISA claims. We affirm.

Before the outsourcing, appellants had worked in the facilities and utilities engineering groups at Honeywell's Kansas City manufacturing plant. As a government contractor Honeywell manages and operates the Kansas City plant for the Department of Energy (DOE), and Honeywell or one of its predecessors has operated the plant since 1949. Honeywell's contract with DOE provides that the government pays all management and operation costs at the plant, including employee compensation and benefit costs, and Honeywell receives an incentive fee based on performance and other awards.

The facilities engineering group at Honeywell was responsible for the design and implementation of onsite construction projects, and the utilities engineering group was responsible for maintaining onsite facilities such as heat, ventilation, air conditioning, water, and electricity. Honeywell president Karen Clegg was dissatisfied with the senior management and the performance of the facilities and utilities groups, and the company hired a consultant in 1995 to study its facilities operations. That study concluded that the facilities engineering group was too large and did not meet the standards of private industry. The study also found

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that a significant contributor to the problems in the area was turnover at the senior management level.

Since 1949 DOE had renewed contracts to operate the Kansas City plant without competitive bidding, but in 1998 Honeywell received information that DOE would likely open the contract to outside bidders. This information was later confirmed, and Honeywell hired consultant Darrell Elliott to help develop a strategy for its bid on the contract. Elliott assisted Honeywell in performing a self assessment to determine its strong and weak areas. He recommended that the company address any potential weaknesses and urged Honeywell to consider outsourcing some functions to companies that were stronger in the weaker areas. The self assessment identified security, the cafeteria, and facilities and utilities engineering as areas whose outsourcing could strengthen Honeywell's contract proposal to DOE. Honeywell states that Elliott's recommendation was consistent with the DOE policy described in its 1994 report "Making Contracting Work Better and Cost Less." That report encouraged contractors to consider whether subcontracting or outsourcing would be cost effective.

David Douglass became vice president for operations at Honeywell in January 2000, with supervision over the facilities and utilities groups. He received feedback from a local DOE officer that the facilities area had performed at a good level, but that there was room for improvement. Another source of concern for Honeywell was DOE's 1999 fiscal year report, which rated its facilities and utilities areas only as "good" while other areas received a rating of "outstanding." Douglass succeeded in getting Honeywell to seek a new director for the facilities and utilities functions in early 2000, but it did not find any acceptable candidates. Honeywell states that it was about this time that Douglass proposed that it follow Elliott's recommendation that facilities and engineering services be outsourced by subcontracting with a third party. The facilities and utilities engineering groups were seen as potential areas for outsourcing because they were not considered core competencies of Honeywell and they were commonly outsourced in private industry. The proposal was put before a focus group which concluded that DOE might prefer that Honeywell retain control of the utilities group but that it might "be the wrong approach" to continue with the facilities group in the same way.

In March 2000 Honeywell entered into discussions with three firms about outsourcing, and it then executed a memorandum of understanding with the engineering company Burns & McDonnell. That memorandum stated that DOE was expected to issue a formal request for proposal for the Kansas City plant, that each party would use best efforts to negotiate an agreement under which Burns & McDonnell would serve as a subcontractor for facilities and utilities engineering services, and that this would be incorporated into Honeywell's proposal. When DOE issued a formal request for proposal in April, Honeywell and Burns & McDonnell agreed to prepare one for submission. Honeywell informed its employees in May that it intended to propose outsourcing the facilities and utilities engineering groups and the cafeteria operations in its bid for the DOE contract.

At least five other companies notified DOE that they planned to submit a proposal, and representatives of other potential bidders toured the Honeywell Kansas City plant in May. Honeywell submitted its proposal to DOE on July 14 and learned in October that it had been chosen; none of the other potential bidders actually submitted a proposal. Although DOE identified

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the outsourcing of the facilities and utilities functions as a weakness in Honeywell's overall proposal, it ultimately approved the subcontract with Burns & McDonnell.

Honeywell established eleven positions that would remain in the company to oversee and coordinate the facilities and utilities functions, and it indicated that all employees in the facilities and utilities groups could apply for them. Although the positions were filled from those groups, the five appellants who applied were not selected. Several facilities and utilities engineering employees asked to be transferred to other positions within Honeywell to avoid being outsourced to Burns & McDonnell, but Douglass announced that no other employees from the affected groups would be able to remain at Honeywell because the company wanted to ensure continuity of operations after work was transferred to Burns & McDonnell. According to Honeywell some internal debate followed, and it was decided that the employees who were to be outsourced would be allowed to apply for internal openings if an employee's skills were not necessary for the success of the outsourced operation. Honeywell states that as a result of this screening process, at least fifteen employees applied for internal openings and two were allowed to transfer within the company.

Appellants assert that permission to apply for internal transfers was given on an ad hoc basis without informing all of the employees that the initial transfer ban had been lifted, but Register and Lawson were cleared to apply for internal openings. Register applied for an internal position of industrial engineer, but that position was given to another employee before the hiring manager received Register's application. Both Register and Lawson expressed interest in applying for another engineering position and were cleared to apply, but they were later informed that the position was not going to be filled because the needs of the department had been reevaluated. Appellants point out, however, that Honeywell had said in a corporate newsletter that it anticipated filling many positions with outside talent because a number of its associates were becoming eligible for retirement.

In its April 2000 request for proposal, DOE had notified potential bidders that one of its goals was to maintain the value of employee benefit packages while at the same time limiting its long term liability, and Honeywell agreed in its contract that it would submit a plan for achieving this goal. Appellants assert that Honeywell knew about DOE's desire to limit long term liability before the company made the decision to outsource their jobs to Burns & McDonnell. They claim that Honeywell recognized in February 2000 that a portable pension plan would be needed to ease the transition and to retain talent after the outsourcing. They were nevertheless not offered such a plan even though by the time of outsourcing in January 2001, one had been in place for months at other business units of the company. Honeywell disputes the accuracy of that claim. It says it had considered a portable pension plan for new and existing employees during 2000, but the idea was put on hold because of the potential acquisition of the company by General Electric.

Honeywell submitted a plan to DOE on October 31, 2001 in accordance with the contract provision requiring limitation of its long term liability. Honeywell's plan included a portable pension plan for new hires and an option for existing employees to leave their old pension plan and join a new one....

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