Bins v. Exxon Co.

• Decision Date: 13 April 1999
• Docket Number: No. 98-55662,98-55662
• Parties: (9th Cir. 1999) ERNEST S. BINS, Plaintiff-Appellant, v. EXXON COMPANY U.S.A., a division of Exxon Corp., Defendant-Appellee
• Court: U.S. Court of Appeals — Ninth Circuit

Page 929

189 F.3d 929 (9th Cir. 1999)

ERNEST S. BINS, Plaintiff-Appellant, v. EXXON COMPANY U.S.A., a division of Exxon Corp., Defendant-Appellee.

No. 98-55662

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted April 13, 1999--Pasadena, California

Decided August 30, 1999

[Copyrighted Material Omitted] Thomas G. Moukawsher, Moukawsher & Walsh, Groton, Connecticut, for the plaintiff-appellant.

James Severson, Heather C. Beatty, Allyson W. Sonsenshine, McCutchen, Doyle, Brown & Enersen, Los Angeles, California, and David M. Rivet, Exxon Company, U.S.A., Houston, Texas, for the defendant-appellee.

Appeal from the United States District Court for the Central District of California; Harry L. Hupp, District Judge, Presiding. D.C. No. CV-97-01654-HLH.

Before: Dorothy W. Nelson, Ferdinand F. Fernandez, and William A. Fletcher, Circuit Judges.

Opinion by Judge William A. Fletcher; Partial Concurrence and Partial Dissent by Judge Fernandez

W. FLETCHER, Circuit Judge:

Appellant Ernest Bins worked for Exxon, U.S.A. ("EUSA"), a division of Exxon Corporation ("Exxon"), for fifteen years. In the months before he retired, Bins unsuccessfully attempted to confirm rumors that EUSA was considering offering eligible employees a lump-sum retirement incentive under an existing employee benefit plan covered by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. S 1001, et seq. Two weeks after Bins retired, EUSA announced precisely the sort of retirement incentive about which Bins had inquired. We must decide whether EUSA, as an ERISA fiduciary, had a duty to tell Bins that it was seriously considering a proposal to offer eligible employees such an incentive. We conclude that once EUSA began serious consideration of a proposal to offer more advantageous severance benefits, information about that proposal was material to the retirement decisions of employees, like Bins, who would be eligible for such benefits if the proposal were approved. We further conclude that EUSA had an affirmative duty to disclose information about the proposal to Bins as soon as EUSA knew or should have known that such information was material to his decision about when to retire.

I

Ernest Bins worked for EUSA as a Senior Mechanical Technician on an offshore oil drilling rig. He became eligible for retirement in the summer of 1995 and decided to retire effective January 1, 1996. In the fall of 1995, Bins began hearing rumors that, in addition to regular retirement benefits, EUSA would offer a lump-sum retirement incentive under its Special Program of Severance Allowances ("SPOSA"). The SPOSA is an ERISA benefit plan established by Exxon that permits it to pay special severance benefits to employees if and when it decides to offer special inducements to retire as a means of reducing its workforce.

Anxious to confirm rumors of an impending SPOSA offering, Bins asked everyone available to him who might have been able to provide information about such an offering. He asked his supervisors, Mechanical Foreman Kelly Pease and Field Superintendent Jerry Odom, who told him that, although they knew nothing about a SPOSA offering, they had heard the same rumors. Bins also asked his assigned benefits counselor, Becky Pilgrim, and a human resources advisor, Ray Julson. According to Bins, these were the people to whom he had been instructed to direct his benefits questions. They both told him they knew nothing about a SPOSA offering.

Bins decided to postpone his retirement to February 1, 1996, in part because of rumors about the new SPOSA offering and in part because he wanted to avoid a penalty for early withdrawal from his Thrift Account. In November, 1995, Bins attended a retirement seminar conducted by Lea Connor, an Exxon attorney. At the seminar, Connor answered another prospective retiree's question by stating that she had no knowledge of a new SPOSA offering. At Bins' retirement party on his last day of work, December 27, 1995, Bins asked his supervisor's supervisor, Dave Lucas, whether EUSA was going to offer SPOSA benefits. Lucas replied that he had no knowledge of such an offering.

From December 27, 1995 until his retirement on February 1, 1996, Bins used accrued vacation time to supplement his scheduled off-duty days and did not return to work. Bins could have changed his retirement date at any time prior to February 1, 1996. After December 27, however, he did not ask again about the possibility of a SPOSA offering, and no one told him about the likelihood of a change in benefits.

Meanwhile, in the fall of 1995, EUSA initiated an Organization Effectiveness Study ("OES") Team to increase efficiency in the Production Department where Bins was employed. In December 1995 and January 1996, the OES Team submitted proposals to EUSA's senior management to reorganize the Production Department (creating a 200-person labor surplus) and to offer increased benefits under the SPOSA to induce early retirement of excess workers. EUSA Vice-President J.H. Peery reviewed both proposals on November 29, 1995. As manager of the affected department, Mr. Peery was authorized to implement the SPOSA offering after obtaining approval from Exxon. EUSA Senior VicePresident M.E. Foster reviewed the two proposals on December 1, 1995. EUSA President Ansel Condray first reviewed the proposals on December 15, 1995.

The record before us does not reveal when EUSA forwarded the proposals to Exxon, but we know that on January 11, 1996, Exxon Senior Vice-President Harry Longwell favorably reviewed the reorganization proposal. We also know that EUSA President Ansel Condray conducted a final review of both proposals on January 24, 1996. On January 26, 1996, Exxon Senior Vice-President Robert Wilhelm wrote a brief letter formally approving the proposed reorganization. On January 30, 1996, EUSA Human Resources Manager M.A. Beg requested approval to implement the proposed SPOSA from Exxon Vice-President of Human Resources, D.S. Sanders. Sanders approved the SPOSA offering on February 2, 1996, and Beg received the approval on February 5, 1996.

On January 24, 1996, while Exxon was reviewing the reorganization proposal, EUSA Human Resources Operations Manager, Butch Snow, sent members of the EUSA Human Resources Department a confidential memorandum entitled "How to Respond to Questions Regarding SPOSA" and an attachment entitled "How Questions Regarding SPOSA Should Be Addressed/Legal Guidance/Organization Effectiveness Study Implementation." The memorandum and attachment provided a list of "acceptable responses" to questions from employees and their supervisors about the possibility of a new SPOSA offering.

Human resources personnel were instructed to say in response to employee inquiries: "The study is still under review. I don't know of a SPOSA having been approved." The Snow memorandum explained that if a supervisor asked whether he or she could discuss the possibility of SPOSA benefits with an employee who intended to retire as of February 1, human resources personnel should tell the supervisor not to initiate any SPOSA-related discussion with employees. Even if a supervisor knew the SPOSA offering had received final approval, supervisors were supposed to respond to questions by saying "[a]n announcement is scheduled for (insert portion of the month)." The memorandum explained that to prevent supervisors from learning about SPOSA approval "it is expected that any knowledge of SPOSA approval, if such approval is ever given, will be tightly held." It instructed human resources personnel that they should use the list of "acceptable responses" both to determine appropriate responses to questions and to advise local site managers and "natural leadership team members" about how to respond to SPOSA inquiries.

On February 13, 1996, less than two weeks after Bins retired, EUSA publicly announced the reorganization plan and the availability of SPOSA benefits. Bins filed suit, contending EUSA had breached its duties as an ERISA fiduciary. Relying on Fischer v. Philadelphia Elec. Co., 96 F.3d 1533, 1539-41 (3d Cir. 1996) ("Fischer II"), Bins argued that once EUSA began "seriously considering" a proposal to offer enhanced benefits under the ERISA severance plan, it had not only a duty to respond accurately and straightforwardly to Bins' questions, but also an affirmative duty to provide information even in the absence of specific questions.

EUSA moved for summary judgment. The district court applied Fischer II, but concluded that EUSA was not "seriously considering" a proposal to offer SPOSA benefits as of December 27, 1995, the last time Bins asked EUSA officials about the possibility of a SPOSA offering. The district court held that EUSA was seriously considering a proposal to offer SPOSA benefits before Bins retired, but concluded that because Bins had not specifically renewed his inquiry about SPOSA benefits, EUSA had no affirmative duty to disclose that it was considering such a proposal. Finding no breach of fiduciary duty under ERISA, the district court granted summary judgment for EUSA. We have jurisdiction under 28 U.S.C. S 1291. We review de novo a decision granting summary judgment, see Williams v. Caterpillar, Inc. , 944 F.2d 658, 661 (9th Cir. 1991), and we reverse.

II

Congress enacted ERISA to protect participants and beneficiaries of employee benefit plans by creating a statutory system that would encourage employers to offer benefit plans, establish "standards of conduct, responsibility, and obligation for fiduciaries," and provide plan participants and beneficiaries with "appropriate remedies . . . and ready access to the Federal courts." See Varity Corp. v. Howe, 516 U.S. 489, 497, 513 (1996) (quoting ERISA S 2(b), 29 U.S.C.S 1001(b)). In enacting ERISA, Congress painted with a broad brush, expecting the federal courts to develop a "federal common law of rights and obligations" interpreting ERISA's fiduciary standards. Id. at...