Fischer v. Philadelphia Elec. Co.
| Decision Date | 20 July 1993 |
| Docket Number | No. 92-1684,92-1684 |
| Citation | 994 F.2d 130 |
| Parties | 16 Employee Benefits Cas. 2413 Herbert L. FISCHER, Floyd L. Adams, James W. Alfreds, John I. Arena, Earl T. Atkinson, William Auve, Thomas F. Beck, William J. Bono, William A. Burwell, Jr., Joseph C. Calabrese, Peter Carfagno, John B. Creighton, Ralph J. DaFermo, Sr., Felix A. DeJoseph, Joseph A. DeVito, John T. Dougherty, John J. Dowling, Anthony Falasca, Eugene Fink, Rita J. Gesualdo, Joseph L. Giorgio, Edwin Haines, Joseph T. Haley, Daniel J. Hefferan, Leo M. Hill, Robert J. Hoopes, Donald J. Hoy, Michael Hrynko, Donald Hughes, Carl M. Hunsicker, Neal Ireland, Walter D. Kraus, Charles E. Lindemuth, Robert F. Mahoney, Anthony D. Marchesani, Robert P.F. McCarron, Robert McCormick, Frank L. Mercadante, John P. Monaghan, David Monzo, John K. Moore, Joseph P. Moran, Mildred Pearl Morgan, Ralph E. Moyer, Herbert E. Mueller, James J. Nugent, Thomas E. Oetzel, Frank W. Persichetti, Sr., Charles W. Plummer, Lewis Raibley, James J. Roddy, John J. Saunders, Louis F. Saunders, Nicholas J. Screnci, Joseph J. Semetti, John Steindl, William F. Thompson, Michael W. Trendler, Francis R. Tunney, Sr., Herbert R. Walters, Richard S. Wilson, John H. Zimmer and Gerald A. Zimmerman, Appellants, v. The PHILADELPHIA ELECTRIC COMPANY; Joseph F. Paquette, Jr.; Michael J. Crommie; Service Annuity Plan of Philadelphia Electric Company, Appellees. |
| Court | U.S. Court of Appeals — Third Circuit |
Ronald L. Wolf (argued) and Martina W. McLaughlin, Litvin, Blumberg, Matusow & Young, Philadelphia, PA, for appellants.
David H. Marion (argued), Elizabeth A. Read and Kimberly H. Humes, Montgomery, McCracken, Walker & Rhoads, Philadelphia, PA, for appellees.
Before: MANSMANN, SCIRICA and FEINBERG, * Circuit Judges.
Herbert L. Fischer appeals on behalf of a class of former employees of the Philadelphia Electric Company (PECo or the Company) from an order of the United States District Court for the Eastern District of Pennsylvania denying his motion for summary judgment and granting that of PECo. 1 Fischer alleged that the Company violated the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. This appeal primarily requires us to decide whether summary judgment for PECo was proper on the record before us.
Joseph F. Paquette, Jr. became PECo's Chief Executive Officer and Chairman of the Board in 1988. At that time, he was concerned that PECo's staffing levels, total wages and other costs were as high or higher than the average for the utility industry. In particular, PECo had a higher number of employees per customer than did its competitors. Apparently in response to these concerns, PECo requested a $549 million rate increase from the Public Utility Commission (PUC) in July 1989. PECo knew that the PUC would make its final decision on the rate increase in April 1990. In the meantime, the Company began to look for ways to reduce costs and hired an outside consultant, McKinsey & Company (McKinsey), to develop a long-range strategic plan for cost-reduction.
In October 1989, PECo learned that the PUC staff had recommended that PECo receive only $220 million of its requested increase. Despite this news, Paquette said in a speech in December 1989 on the that he was optimistic that PECo would get the entire increase it requested. In responding to a question after the speech as to whether an early retirement plan had been discussed as a cost-cutting option, Paquette answered that if the Company had to reduce the number of its employees, attrition would be the preferred means of doing so, possibly accelerated by an early retirement plan. Layoffs would be a last resort.
In March 1990, an administrative law judge issued an interim ruling on PECo's requested increase, recommending that the Company be granted only $117 million, 21% of its total request. In the month before that ruling, PECo had formed a Cost Management Team to identify ways to reduce the Company's costs. Kenneth Lefkowitz, Manager of PECo's Compensation and Benefits Division, began outlining options to reduce the work force and contacted the actuarial firm of Towers, Perrin, Forster & Crosby (TPF & C) for assistance. TPF & C later sent Lefkowitz a confidential memorandum outlining three different methods of reducing the number of PECo employees, including an early retirement plan. PECo had considered such a plan in 1988, but it was never put into effect. Early in April 1990, McKinsey presented PECo's Board of Directors and top management with its list of ways to reduce costs. An early retirement plan was one of them.
The PUC issued its final order on April 19, 1990, granting PECo less than 50% of its total request. PECo responded swiftly to this decision. On that same day, Paquette wrote a letter to all employees, including those who had already announced their decision to retire, reporting the PUC's action and its financial impact on the Company. Even though no proposal had as yet been made to PECo's Board of Directors, Paquette indicated in his letter that he was going to "recommend that our Board approve an early retirement program." Paquette soon did so, and the plan, which was formally approved by the Board of Directors on May 25, provided certain options that benefitted those employees who elected to retire between July 15 and September 15, 1990.
While all this was going on, some of PECo's employees were thinking about retiring. It was PECo's practice to have prospective retirees notify the Company a few months before they wished to retire so that a retirement interview could be held. The purpose of the interview was to provide the employee with information about retirement, including pension amount and options for life insurance. During the period of time relevant here, the majority of these interviews were conducted by Senior Benefits Counselor Jack McCartney, although two other counselors would fill in on an "as-needed" basis. All of these employees were under the supervision of Michael J. Crommie, the Director of the Benefits Division of PECo's Human Resources Department.
Six months before the early retirement plan was announced, rumors about it had already begun to circulate among PECo's employees. Prompted by these rumors, some prospective retirees asked the benefits counselors about the possibility that such a plan would be adopted. Until April 19, 1990, the date on which Paquette announced he would recommend a plan to the Board, the counselors answered that no plan was being considered, or that they had no knowledge of any plan. As far as the benefits counselors knew, they were telling the truth since the Company had not kept them abreast of any discussions taking place among senior management. Moreover, Director Crommie had instructed his counselors that if interviewees asked any questions, they were to be told "exactly what the plan called for at that time."
The plaintiffs in this case are PECo employees who retired on January 1, 1990, February 1, 1990, March 1, 1990 and April 1, 1990 and were therefore ineligible to obtain the benefits provided by the early retirement plan, but otherwise would have been eligible. Plaintiffs alleged that PECo breached its fiduciary duties under § 404 of ERISA; that PECo is estopped from denying the class members increased pension benefits; and that PECo engaged in discriminatory conduct in violation of § 510 of ERISA. After the class was certified, the parties cross-moved for summary judgment. The district court granted PECo's motion and denied plaintiffs' motion.
This appeal followed.
Our review of an order granting summary judgment is plenary. "[S]ummary judgment will not lie if the dispute about a material fact is 'genuine,' that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). "However, when the record is such that it would not support a rational finding that an essential element of the nonmoving party's claim or defense exists, summary judgment must be entered for the moving party." Turner v. Schering-Plough Corp., 901 F.2d 335, 341 (3d Cir.1990) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986)).
ERISA allows employers "to wear 'two hats,' " Amato v. Western Union Int'l, Inc., 773 F.2d 1402, 1416 (2d Cir.1985), cert. dismissed, 474 U.S. 1113, 106 S.Ct. 1167, 89 L.Ed.2d 288 (1986), and PECo did so. It was both an employer and a plan administrator. As an employer, neither PECo nor its business decision to offer an early retirement program were subject to ERISA's fiduciary duties. See, e.g., Payonk v. HMW Indus., Inc., 883 F.2d 221, 225 (3d Cir.1989). As a plan administrator under ERISA, however, PECo was a fiduciary and was required, among other things, "to discharge [its] duties 'solely in the interests of the participants and beneficiaries.' " Donovan v. Bierwirth, 680 F.2d 263, 271 (2d Cir.) (quoting 29 U.S.C. § 1104(a)(1)), cert. denied, 459 U.S. 1069, 103 S.Ct. 488, 74 L.Ed.2d 631 (1982).
Plaintiffs concede that PECo had the right as an employer to make the business decision of how much and when to enhance pension benefits, but argue that PECo also had an obligation under ERISA to tell the truth about such decisions when asked by plan participants. For this proposition, plaintiffs rely principally on Berlin v. Michigan Bell Tel. Co., 858 F.2d 1154 (6th Cir.1988), which, they assert, this court embraced in Payonk v. HMW Indus., Inc., 883 F.2d 221 (3d Cir.1989). According to plaintiffs, PECo breached its obligation through a "conspiracy of silence among senior management aimed at keeping confidential the considerable efforts being taken to implement an early...
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