Kurz v. Philadelphia Elec. Co.
| Decision Date | 20 July 1993 |
| Docket Number | No. 92-1685,92-1685 |
| Citation | 994 F.2d 136 |
| Parties | 16 Employee Benefits Cas. 2420 Donald R. KURZ; William W. Anderson; James W. Beck; William T. Bergen; Charles W. Bowden; William H. Brown; Richard Cahill; Armando L. Capoferri; Robert C. Demarco; James J. Dilolle, Sr.; Vincent J. Dimaggio; John J. Divalentino, Jr.; William E. Drumel; Victor J. Gibialante; Francis T. Golden; James J. Granger; Elmer D. Greim, Jr.; James H. Hair; John M. Hoopes; Benjamin J. Kilian; George C. Linthicum; Hubert A. McKown, Jr.; Henry P. McNamee; Oliver K. Messner; Robert E. Miller; John A. Morse; Samuel J. Mullen; John A. Munley; Stanley B. Myers; John J. Nusspickel; James W. Patterson; Alfred B. Schumann; Joseph C. Sharkey; William H. Smoyer; Woodrow E. Snyder; James D. Sutliff; Edward J. Vetner; Dominic C. Viglianese; G. Earle Watt; Frederick W. Winterling; John R. Young, Appellants, v. The PHILADELPHIA ELECTRIC COMPANY; Service Annuity Plan of Philadelphia Electric Company; Charles L. Fritz, J.L. Everett, III; John H. Austin, Jr., Appellees. |
| Court | U.S. Court of Appeals — Third Circuit |
Ronald L. Wolf (argued), Martina W. McLaughlin, Litvin, Blumberg, Matusow & Young, Philadelphia, PA, for appellants.
David H. Marion (argued), Elizabeth A. Read, Kimberly H. Humes, Montgomery, McCracken, Walker & Rhoads, Philadelphia, PA, for appellees.
Before: MANSMANN, SCIRICA and FEINBERG, * Circuit Judges.
Donald R. Kurz 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 Kurz alleged that the Company violated the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. The issues before us are similar to those raised in Fischer v. Philadelphia Elec. Co., 994 F.2d 130 (3d Cir.1993), which we also decide today. This appeal, like the appeal in Fischer, primarily requires us to decide whether summary judgment for PECo was proper on the record before us.
On behalf of its employees, PECo administers an employee pension benefit plan known as the Service Annuity Plan (the Plan), the same plan at issue in Fischer. To keep track of how the Plan compares to those of other utilities, PECo has from at least as early as 1977 participated in annual or bi-annual surveys of employee pension benefits offered by companies in the utility industry. These surveys were conducted by the Public Service Electric and Gas Company before 1986 and thereafter by PECo itself. At least once in the past, PECo amended the Plan to increase benefits after one such survey showed that PECo's benefits were comparatively low. The Pension Survey Report for the year 1986 would be issued sometime in 1987.
Throughout 1986 and into 1987, the Independent Group Association (IGA), a PECo employee organization, expressed concern to the Company about the Plan and pressed for improved benefits. In March 1987, Charles L. Fritz was Vice-President of Personnel and Industrial Relations and Chairman of the Service Annuity Board. Fritz responded to IGA's concerns and met with its Executive Committee to discuss the Company's wage and benefits package expected later in the year. In the course of that meeting, Fritz "remarked generally that the timing was right to make a significant change to the pension plan and that [the Company] had been looking at different ways of making a change to the pension [plan]." Discussions about proposed changes to the Plan continued at another meeting held the following month.
Meanwhile, as early as February 1987, the actuarial firm of Towers, Perrin, Forster & Crosby (TPF & C) had been put to work by PECo to evaluate a formula to change the Plan to enhance benefits. In March, TPF & C Vice-President Donald Fleischer held a meeting at PECo to discuss the alternative formulas to be considered, some of which TPF & C started "pricing" or "costing out." Officials from TPF & C and PECo held what was apparently a final meeting around May 20, at which time various alternatives were discussed. On May 22, TPF & C sent PECo Vice-President Fritz a letter summarizing the firm's comments, recommendations and conclusions.
On that same day, PECo issued its 1986 Pension Survey Report comparing PECo's benefits to those of other utility companies. According to one official in PECo's Personnel and Industrial Relations Department, the Report showed that PECo "was below the midpoint and significantly below the midpoint for all management cases." In other words, compared to other utility companies, the pension benefits offered by PECo "had become fairly non-competitive." The Report concluded that "the time for a pension change ... had arrived" and recommended adopting one of the proposals on which TPF & C had been working.
Based on this recommendation, Fritz requested and obtained permission from J.L. Everett, III, then PECo's Chief Executive Officer, and John H. Austin, Jr., then PECo's President and Chief Operating Officer, to recommend a change to the Board of Directors. Thereafter, a formal proposal to change the Plan was made to the Board and approved on June 22. The change was announced in the Company's official bulletin on July 2. The improvement to the Plan provided a substantial increase (approximately 17.6%) in the pension for those employees with over 40 years of service who retired at age 65.
In accordance with Company policy, all studies relating to the proposed change had been kept confidential, at least until the change was formally adopted. As in Fischer, this policy of confidentiality, which plaintiffs describe as a "conspiracy of silence," extended even to PECo's benefits counselors, whose job it was to provide prospective retirees with information about retirement benefits. Like the plaintiffs in Fischer, members of the plaintiff class here attended individual retirement interviews, the majority of which were conducted by Senior Benefits Counselor Jack McCartney. During these interviews, some class members asked the counselors whether or not any change to the Plan was being considered. The benefits counselors, however, knew nothing of the change until it was announced. Indeed, they had been instructed "to give employees the facts as of [the time of the interview], and ... not to speculate."
The plaintiffs in this case are former employees of PECo who retired between February 1 and June 1, 1987, and who were therefore ineligible to benefit from the change to the Plan. (Those employees who had scheduled retirement on July 1 were allowed to change their retirement date in order to take advantage of the change to the Plan, which became effective on August 1). As did the plaintiffs in Fischer, plaintiffs here allege 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)).
We held in Fischer that a plan administrator, in response to inquiries from plan participants, "may not make affirmative material misrepresentations ... about changes to an employee pension benefits plan." Fischer, 994 F.2d at 135. We held in addition that a company could not circumvent this obligation "by building a 'Chinese wall' around those employees on whom plan participants reasonably rely for important information and guidance about retirement." Id. at 135. It was thus...
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