Bunnion v. Consolidated Rail Corp., Civ.A. 97-4877.

Decision Date23 March 1999
Docket NumberNo. Civ.A. 97-4877.,Civ.A. 97-4877.
Citation108 F.Supp.2d 403
PartiesJohn J. BUNNION, Jr., et al., individually and on behalf of all others similarly situated v. CONSOLIDATED RAIL CORP., et al.
CourtU.S. District Court — Eastern District of Pennsylvania

Stephen G. Console, Law Offices of Stephen G. Console, Philadelphia, PA, Debora A. O'Neill, The Mager Law Firm, P.C., Philadelphia, PA, Robert G. Eisler, Liebenberg & White, Jenkintown, PA, Joel C. Schochet, The Mager Law Firm, Philadelphia, PA, for plaintiffs.

Laurence Z. Shiekman, Pepper, Hamilton & Scheetz, Philadelphia, PA, Brian T. Ortelere, Pepper, Hamilton & Scheetz, Philadelphia, PA, Michael H. Rosenthal, Pepper Hamilton, L.L.P., Philadelphia PA, for Consolidated Rail Corporation, defendant.

Joseph J. Bellew, Cozen and O'Connor, Philadelphia, PA, for Mara J. Bellew, respondent.

Teresa F. McLaughlin, Pepper, Hamilton & Scheetz, Philadelphia, PA, Brian T. Ortelere, Pepper, Hamilton & Scheetz, Philadelphia, PA, Michael H. Rosenthal, Pepper Hamilton, L.L.P., Philadelphia, PA, for Administrative Committee of the Conrail Matched Savings Plan, Supplemental Pension Plan Administrative Committee, Flexible/Medical/Dental Dependent Plan, Life Insurance, Dismemberment and Long Term Disability and Retirees Life Insurance Plan, Severance Plan, Deborah A. Melnyk, Richard J. Davison, Peter F. Barr, Christian D. Hill, Marianne S. Gregory, Gerhard A. Thelen, John A. McKelvey, Richard D. Huffman, defendants.

Teresa F. McLaughlin, Brian T. Ortelere, Michael H. Rosenthal, Pepper Hamilton, L.L.P., Philadelphia, PA, for Dale A. Shaub, Fiduciaries and Administrators of the Foregoing Plans and Other Doe Fiduciaries, Supplemental Pension Plan of Consolidated Rail Corporation, defendants.

MEMORANDUM

BARTLE, District Judge.

This is a class action lawsuit under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq. The plaintiffs, former employees of the defendant, Consolidated Rail Corporation ("Conrail"), challenge the legality of certain actions Conrail took with respect to its employee pension plan, and more specifically with respect to its voluntary separation program, which the plaintiffs accepted in 1996.1 There are also age discrimination and pendant state law claims. Presently before the court are plaintiffs' motion for summary judgment as to Counts II and XIV, defendants' motions for summary judgment as to all Counts,2 and defendants' motion for additional discovery pursuant to Rule 56(f) of the Federal Rules of Civil Procedure.

After granting in part and denying in part successive motions to dismiss the complaint and amended complaint, we certified a plaintiff class of "all persons formerly employed by Conrail at any Conrail location who separated from Conrail as part of the March 1, 1996 Conrail Voluntary Separation Program" with respect to the ERISA claims in Counts I, II, III, and VI and the fraud claims in Count IV, the negligent misrepresentation claim in Count V, and the estoppel claim in Count XIV. Bunnion v. Consolidated Rail Corp., No. CIV. A. 97-4877, 1998 WL 372644 (E.D.Pa. May 14, 1998); see also Bunnion (E.D.Pa. May 18, 1998); Bunnion (E.D.Pa. March 23, 1998); Bunnion, 1998 WL 32715 (E.D.Pa. Jan. 6, 1998). We also certified one subclass of "those VSP participants who returned to work for Conrail in positions of employment which Conrail designated as non-employee status" with respect to the ERISA claims in Counts VIII, IX, and XIII, and another subclass of "those class members over 40 years of age who were returned to work into non-employee status" with respect to the age discrimination claim in Count VII. Bunnion, 1998 WL 372644 (E.D.Pa. May 14, 1998).

We may grant summary judgment only if there is no genuine issue of material fact and the moving party is entitled to summary judgment as a matter of law. See Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). We review all evidence and make all reasonable inferences from the evidence in the light most favorable to the non-movant. See Wicker v. Consolidated Rail Corp., 142 F.3d 690, 696 (3d Cir.), cert. denied, 525 U.S. 1012, 119 S.Ct. 530, 142 L.Ed.2d 440 (1998).3

I.

The following facts are undisputed. Conrail maintained a benefit plan for its employees known as the Matched Savings Plan/Employee Stock Ownership Plan ("MSP/ESOP"). The MSP/ESOP was comprised of both an Employee Stock Ownership Plan ("ESOP") and a "cash or deferred arrangement within the meaning of Code section 401(k)." Conrail Matched Savings Plan, Introduction. We previously described this plan in our decision in Bennett v. Conrail Matched Sav. Plan Admin. Comm., Nos. CIV. A. 97-4535, 97-5017, 97-5345, 1997 WL 700538 (E.D.Pa. Oct. 30, 1997), aff'd, 168 F.3d 671 (3d Cir. 1999). The plan is governed by ERISA, 29 U.S.C. §§ 1001 et seq., and is a "defined contribution plan," also known as an "individual account plan." 29 U.S.C. § 1002(34). Such a pension plan "provides for an individual account for each participant and for benefits based solely upon the amount contributed to the participant's account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant's account." Id. Under the terms of Conrail's MSP/ESOP, upon termination of employment or retirement, disability, death, or certain financial hardships, an individual was entitled to distributions of up to the total amount which had been allocated to his or her individual account.

The balance in each individual's MSP/ESOP account included the amount the individual contributed from his or her own earnings plus matching contributions of up to 100% of the individual's annual contribution.4 The source of the matching funds was a combination of direct contributions from Conrail and its "participating affiliates" and stock released from the MSP/ESOP "Unallocated Stock Account." Conrail Matched Savings Plan, §§ 4.1, 4.4. The MSP/ESOP could borrow money in order to purchase certain Conrail securities. The stock acquired with the borrowed funds was kept in the Unallocated Stock Account, which was separate from the individual participants' accounts. Each year, a portion of the stock in this account was to be released for allocation to participants' accounts. See id. at § 7.2. Any remainder built up in the Unallocated Stock Account.

In the mid-1990's, Conrail management began to do annual studies to compare the company, its functions, and its level of efficiency to other railroads throughout the nation. These studies also explored whether Conrail should change any of its operations. As a result, Conrail decided it needed to reduce its expenses by $30-60 million dollars. On February 21, 1996, the President and CEO of Conrail, David LeVan, wrote to the company's employees, "Conrail is announcing early retirement and voluntary separation programs that we hope will reduce our non-agreement workforce by 900 employees by 1998.... [W]e are seeking first to reduce our nonagreement workforce though voluntary programs that provide a transition into retirement or another career." An e-mail entitled "Conrail Newswire, Special Edition" disseminated later that same day told employees, "If the 900-position goal is not achieved through the voluntary programs, Conrail expects to achieve the additional reductions through non-voluntary separation programs."

In early March, 1996, Conrail distributed written materials to eligible employees to explain the voluntary separation program ("VSP"). Included was a March 1 letter from the Assistant Vice President of Compensation and Benefits, which stated, "As Dave LeVan told all of us in his announcement on February 21st, Conrail intends to reduce its non-agreement workforce by approximately 900 people over the next couple of years." The letter announced that the process Conrail would use to reach the 900-person reduction goal was comprised of four components. The first two, which Conrail would offer concurrently, were the VSP and the Voluntary Retirement Program. The other two components, to be offered concurrently and "as deemed necessary by management after completion of the voluntary offerings," were an "Involuntary Staff Rationalization," and a "Workforce Redeployment Program." While these components were not explained in detail in the record, they involved mandatory terminations and reassignments.

The VSP was generally open to all nonunion employees who had completed fifteen or more years of Conrail service. It provided for a separation payment of at least two years' salary,5 an expense allowance of $5,000, and in some instances a relocation allowance. Eligible employees interested in participating in the VSP were required to submit an application, including a signed "general release." The deadline for doing so was April 23, 1996. The VSP plan description materials provided that an employee could unilaterally revoke his or her application during the seven days after it was submitted. While Conrail reserved the right to accept or reject each application, it had to notify by April 29, 1996 all employees whose applications had been rejected. Conrail also reserved the right to delay an accepted applicant's termination date until, at the latest, April 30, 1997. Unless they received a directive from Conrail about a delayed termination date, accepted applicants were terminated effective April 30, 1996. After acceptance into the VSP but before the employee's termination date, the employee could rescind participation in the VSP, but only if it was agreeable to Conrail.

Conrail held informational meetings to explain the VSP program to eligible employees. At these meetings, attendees were given the opportunity to ask questions. Conrail also made use of a "SepINFO bulletin board," an e-mail distribution system, to disseminate information about the VSP and to allow...

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