Carlo v. Reed Rolled Thread Die Co.

• Decision Date: 08 December 1994
• Docket Number: No. 94-1786,94-1786
• Citation: 49 F.3d 790
• Parties: Pens. Plan Guide P 23907E Victor E. CARLO, Jr. and Kathleen M. Carlo, Plaintiffs-Appellants, v. REED ROLLED THREAD DIE COMPANY, Defendant-Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 790

49 F.3d 790

Pens. Plan Guide P 23907E

Victor E. CARLO, Jr. and Kathleen M. Carlo, Plaintiffs-Appellants, v. REED ROLLED THREAD DIE COMPANY, Defendant-Appellee.

No. 94-1786.

United States Court of Appeals First Circuit.

Heard Dec. 8, 1994.

Decided March 3, 1995.

John W. Spillane, with whom John J. Spillane was on brief, for appellants.

Thomas J. Scannell, with whom Michael P. Angelini and Bowditch & Dewey were on brief, for appellee.

Before TORRUELLA, Chief Judge, BOWNES, Senior Circuit Judge, and CYR, Circuit Judge.

TORRUELLA, Chief Judge.

This appeal requires us to decide whether ERISA preempts a state law claim of negligent misrepresentation against an employer based upon the employer's representations regarding the employee's prospective benefits under an early retirement program. For the following reasons, we find that the state law claims are preempted, and affirm the district court's ruling.

I. PROCEDURAL BACKGROUND

The plaintiffs-appellants, Victor E. Carlo, Jr. and Kathleen M. Carlo (the "Carlos"), commenced this action against the defendant-appellee, Reed Rolled Thread Die Co., a Division of Quamco, Inc. ("Reed"), in Massachusetts state court in December 1991. In their original complaint, the Carlos alleged various state law claims with respect to Reed's early retirement plan. Reed removed the case to federal district court in January 1992, alleging that federal law preempted the Carlos' claims. On Reed's subsequent Motion to Dismiss, the district court found that all of the Carlos' state law claims were preempted by Sec. 514(a) of the Employee Retirement Security Act of 1974 ("ERISA"), 29 U.S.C. Sec. 1001 et seq., Sec. 1144(a). Accordingly, the district court dismissed the Carlos' complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a cause of action. The Carlos subsequently filed a Motion to Amend their Complaint. Concluding that the Proposed Amended Complaint still failed to allege a viable federal claim, the district court denied the Motion to Amend and dismissed the Carlos' complaint. On March 2, 1994, the Carlos filed a Motion to Reconsider, arguing that a recent decision from the Massachusetts Supreme Judicial Court changed the ERISA preemption analysis and rendered their state law claims viable. The district court denied the Motion to Reconsider, and the Carlos filed this appeal. Reed filed a Motion to Dismiss the Appeal, which was denied by this Court on September 8, 1994. We hereby affirm the underlying decision of the district court.

II. FACTUAL BACKGROUND

The essential allegations of the Carlos' complaint are as follows: Mr. Carlo is a former employee of Reed and is a participant in the Quamco, Inc. Retirement Plan (the "Plan"). In July 1988, Reed offered Mr. Carlo early retirement under an Early Retirement Program (the "ERP"). Mr. Carlo met with William Baldino ("Baldino"), Reed's Personnel Manager, to discuss the benefits he would receive if he elected the early retirement option. Baldino informed Mr. Carlo of his expected monthly benefits, and indicated that the figures had been certified by Reed's corporate program administrator. Mr. Carlo elected to accept the early retirement offer, allegedly in reliance on the figures provided him by Baldino.

In December 1988, Reed notified Mr. Carlo of his actual benefits under the ERP. The actual monthly benefit was approximately twenty percent less than the benefit Carlo expected to receive based on Baldino's earlier representations. Reed claimed that it had made a calculation error when it determined the benefits represented to Mr. Carlo in July 1988. By letter dated December 30, 1988, Baldino apologized to Mr. Carlo for his error in calculating Mr. Carlo's pension benefits and offered Mr. Carlo the opportunity to continue working in the position he then held. Baldino's letter stated that the offer to continue working would remain open until January 10, 1989. If Mr. Carlo did not accept within this period, the letter continued, Reed would presume that Mr. Carlo was rejecting the employment offer and accepting the modified Early Retirement option. Carlo did not accept the offer before the January 10 deadline. Rather, he decided to take early retirement in April 1989, allegedly under protest.

On December 3, 1991, the Carlos brought this action in Massachusetts state court, alleging state law claims for, inter alia, breach of contract and negligent misrepresentation.

III. STANDARD OF REVIEW

The unusual procedural posture here requires a somewhat nuanced statement of the standard of review. The Carlos appeal the denial of their Motion to Reconsider the court's denial of their Motion to Amend the Complaint.

With regard to motions to amend, we have stated that "[w]hile motions to amend are liberally granted, see Johnston v. Holiday Inns, Inc., 595 F.2d 890, 896 (1st Cir.1979), a court has the discretion to deny them if it believes that, as a matter of law, amendment would be futile. See Jackson v. Salon, 614 F.2d 15, 17 (1st Cir.1980); Crews v. Memorex Corp., 588 F.Supp. 27, 28 (D.Mass.1984); 6 C. Wright & A. Miller, Federal Practice and Procedure: Civil Sec. 1487 at 432-33 (1971) (citing cases). We will generally defer to a district court's decision to deny leave to amend where the reason is 'apparent or declared.' " Demars v. General Dynamics Corp., 779 F.2d 95, 99 (1st Cir.1985) (quoting Tiernan v. Blyth, Eastman, Dillon & Co., 719 F.2d 1, 4 (1st Cir.1983)).

Here, the Carlos' Motion to Reconsider argued that their state law claims were rendered viable by the Massachusetts Supreme Judicial Court's decision in Pace v. Signal Technology Corp., 417 Mass. 154, 628 N.E.2d 20, 22 (1994). The district court denied the Motion, finding that controlling First Circuit precedent mandated preemption of the Carlos' claims. In other words, the district court concluded that the Carlos' proposed amendment was futile. This decision necessarily entailed an analysis of the underlying preemption issue, a question of law. Therefore, we review it here. That is, we will review whether ERISA preempts the Carlos' state law claims for negligent misrepresentation.

IV. PREEMPTION

Section 514 of ERISA supersedes "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...." ¹ 29 U.S.C. Sec. 1144(a) (emphasis added). "The term 'State Law' includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State." 29 U.S.C. Sec. 1144(c)(1). The Supreme Court has established that "a law 'relates to' an employee benefit plan ... if it has a connection with or reference to such a plan." Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 483, 112 L.Ed.2d 474 (1990) (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983)). "Under this 'broad common-sense meaning,' a state law may 'relate to' a benefit plan, and thereby be pre-empted, even if the law is not specifically designed to affect such plans, or the effect is only indirect." Id. (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47, 107 S.Ct. 1549, 1553, 95 L.Ed.2d 39 (1987)).

In Ingersoll-Rand, the Supreme Court identified two tests for determining whether a state cause of action is preempted because it "relates to" an ERISA plan. First, a law is expressly preempted by ERISA where "the court's inquiry must be directed to the plan." Ingersoll-Rand, 498 U.S. at 140, 111 S.Ct. at 483. Second, even where there is no express preemption, a cause of action is preempted if it conflicts directly with ERISA. Id. at 142, 111 S.Ct. at 484.

Given these preemption principles, we must decide whether the Carlos' claims relate to the ERP and are therefore preempted. The Carlos' suit seeks damages for what can best be described as negligent misrepresentation. They argue that their claims for misrepresentation are so remotely related to the ERP that, for the purposes of ERISA preemption, they do not relate to it. They allege that they are not seeking coverage under the ERP, but rather damages sustained as a result of Reed's alleged misrepresentation concerning the extent of Mr. Carlos' retirement benefits under the ERP. They maintain, therefore, that the court's inquiry will not necessarily be directed to the ERP. They also emphasize that because they are suing Reed, and not the Plan Trustee, any damages will not effect the fiscal integrity of the ERP.

Courts have struggled over whether ERISA preempts claims of misrepresentation regarding the scope or existence of benefits, and " 'there is ample, well reasoned authority which would support either position.' " Pace, 628 N.E.2d at 22 (quoting Cutler v. Phillips Petroleum Co., 71 Wash.App. 511, 859 P.2d 1251, 1254 (1993)). Courts finding that misrepresentation claims are not preempted have reasoned that the mere fortuity that the misrepresentation involved pension benefits is insufficient to cause the "axe of federal preemption to fall." Greenblatt v. Budd Co., 666 F.Supp. 735, 742 (E.D.Pa.1987); see also Pace, 628 N.E.2d at 22 (holding that where the "resolution of state law claims will neither 'determine whether any benefits are paid' nor 'directly affect the administration of benefits under the plan,' the claims do not 'relate to' ERISA and accordingly are not preempted") ² (citation omitted). That is, they have concluded that the misrepresentation claims should not be preempted because, "simply put, the premise underlying [the cause of] action [is] that the plaintiff was deceived by the verbal statements made and the actions taken by his employer. That the subject of the deception concerned pension benefits is only incidental and not essential to the plaintiff's cause of action. Like promises for a raise in salary, a promotion, or the use of tickets to a baseball game, plaintiff's employer's promise to provide the plaintiff with certain benefits ..., upon which plaintiff could reasonably rely,...