Crawford v. Lamantia

• Citation: 34 F.3d 28
• Decision Date: 08 April 1994
• Docket Number: No. 93-2241,93-2241
• Parties: Peter A. CRAWFORD, Plaintiff, Appellant, v. Charles R. LAMANTIA, et al., Defendants, Appellees. . Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 28

34 F.3d 28

Peter A. CRAWFORD, Plaintiff, Appellant, v. Charles R. LAMANTIA, et al., Defendants, Appellees.

No. 93-2241.

United States Court of Appeals, First Circuit.

Heard April 8, 1994.

Decided Sept. 14, 1994.

Alfred D. Ellis with whom Michelle L. Farmer and Cherwin & Glickman, Boston, MA, were on brief, for appellant.

Peter J. Macdonald with whom Jeffrey B. Rudman, Hale and Dorr, James J. Dillon, and Goodwin Procter & Hoar, Boston, MA, were on brief, for appellees.

Before BREYER, ^* Chief Judge, BOWNES, Senior Circuit Judge, and STAHL, Circuit Judge.

STAHL, Circuit Judge.

Plaintiff-appellant Peter Crawford filed a complaint charging defendants-appellees Paul Littlefield, Irving Plotkin and Harland Riker, Jr., individually and in their capacity

as trustees of the Arthur D. Little, Inc. Employee Stock Ownership Plan and Trust ("the Plan" or "the ESOP"), with a breach of their fiduciary duties as defined under the Employee Retirement Income Security Act ("ERISA"). Plaintiff now appeals the district court's grant of summary judgment in favor of defendants. After careful consideration of plaintiff's arguments, we affirm.

I. Factual and Procedural Background

Arthur D. Little, Inc. ("ADL") is a Cambridge-based international consulting firm. Plaintiff began working at ADL as a management consultant on June 7, 1981. In March 1988, ADL's Board of Director's voted to form an ESOP ¹ pursuant to 26 U.S.C. Sec. 4975(e)(7) of the Internal Revenue Code, and to propose a "going-private" transaction whereby ADL would 1) acquire all outstanding publicly held shares of ADL stock; 2) cancel all existing shares of ADL stock; 3) reissue "New Shares"; and 4) sell a portion of the New Shares to the ESOP with financing from ADL (which in turn received bank financing). Plaintiff objected to the transaction for a variety of reasons, and delivered to the Department of Labor a thirty-two page memorandum detailing his belief that, as part of the going-private transaction, the ESOP Trustees were intending to buy ADL common stock in excess of adequate consideration within the meaning of 29 U.S.C. Sec. 1002(18). Plaintiff urged the Department of Labor to seek an injunction enjoining ADL from consummating its plan. The Department of Labor declined plaintiff's invitation, and on June 14, 1988, the ADL disinterested shareholders approved the proposed transaction.

Thereafter, the ESOP Trustees negotiated a $32.8 million loan from ADL. The agreement provided that the to-be-purchased ADL stock would act as collateral for the loan, which was to be paid back to ADL over a seven-year period. The borrowed funds would then be used to purchase 546,520 New Shares of ADL common stock at $60 per share. At closing, the stock would immediately be deposited into a suspense account within the ESOP to be released over the next seven years, on a pro rata basis, to the individual accounts of qualified employee participants of the ESOP pursuant to the following arrangement. Each quarter, ADL agreed to make cash contributions to the ESOP in an amount sufficient to defray the principal and interest payments due ADL on the ESOP loan. The ESOP, in turn, agreed to return the contribution immediately to ADL in repayment of its note. Meanwhile, a proportionate number of the New Shares held in the suspense account as collateral would be freed and allocated by formula to the individual accounts of participating ADL employees. In effect, ADL was agreeing to repay the loan it was making to the ESOP to fund the purchase of the New Shares, with the employees ultimately reaping the benefits.

On November 30, 1988, plaintiff was informed that due to budget cuts, he was to be terminated. ² Plaintiff negotiated an extension of salary and benefits until March 24, 1989, with an "unpaid leave of absence" to follow. On May 12, 1989, plaintiff filed his original complaint, pro se. ³ Plaintiff then resigned from ADL, effective May 18, 1989. Approximately one year later, on May 7,

                1990, plaintiff elected to receive his total vested distribution from the ESOP in the form of 47 shares of ADL common stock and a check in the amount of $51.49. 4  Plaintiff subsequently retained an attorney and, on June 10, 1993, filed a motion to amend his original complaint, together with an amended complaint seeking "recovery on behalf of the ESOP for breach of fiduciary duty for the Trustees' failure to act for the exclusive benefit of the participants and beneficiaries of the ESOP plan."   Plaintiff also sought class certification at this time.  The district court granted plaintiff's motion to amend on June 24, 1993.  The defendants then renewed their motion for summary judgment, including further argument directed at the amended complaint.  After accepting additional memoranda and hearing oral argument on defendants' motion, the district court granted summary judgment in favor of defendants, citing plaintiff's lack of standing
                

II. STANDARD OF REVIEW

As always, we review a district court's grant of summary judgment de novo and, like the district court, review the facts in a light most favorable to the non-moving party. See e.g., Woods v. Friction, 30 F.3d 255, 259 (1st Cir.1994). Our review is limited to the record as it stood before the district court at the time of its ruling. Voutour v. Vitale, 761 F.2d 812, 817 (1st Cir.1985), cert. denied, 474 U.S. 1100, 106 S.Ct. 879, 88 L.Ed.2d 916 (1986). Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A material fact is one which has the "potential to affect the outcome of the suit under the applicable law." Nereida-Gonzalez v. Tirado-Delgado, 990 F.2d 701, 703 (1st. Cir.1993). Thus, the nonmovant bears the burden of placing at least one material fact into dispute once the moving party offers evidence of the absence of a genuine issue. Darr v. Muratore, 8 F.3d 854, 859 (1st Cir.1993); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986) (Fed.R.Civ.P. 56(c) "mandates the entry of summary judgment, ... upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial."). In other words, neither "conclusory allegations, improbable inferences, and unsupported speculation," Medina-Munoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir.1990), nor "[b]rash conjecture coupled with earnest hope that something concrete will materialize, is [ ]sufficient to block summary judgment," Dow v. United Bhd. of Carpenters, 1 F.3d 56, 58 (1st Cir.1993).

III. DISCUSSION

On appeal, plaintiff makes essentially two arguments. First, plaintiff charges that the district court erred in ruling that plaintiff lacked standing to pursue his ERISA action because he was not a current employee throughout the litigation. Second, plaintiff contends that the court erred in concluding that he lacked standing because he had failed to present a colorable claim for benefits. We discuss each of these arguments below.

Plaintiff brought this action pursuant to 29 U.S.C. Sec. 1132(a)(2), which authorizes a "participant," "beneficiary" or "fiduciary" to bring a civil action for breach of any fiduciary duty proscribed by 29 U.S.C. Sec. 1109(a). Because plaintiff is neither a beneficiary nor a fiduciary, our central task is to determine whether plaintiff qualifies as a plan "participant" within the meaning of ERISA.

ERISA defines the term "participant" to include

any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit.

29 U.S.C. Sec. 1002(7) (emphasis supplied). In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117, 109 S.Ct. 948, 957-58, 103 L.Ed.2d 80 (1989), the Supreme Court interpreted this provision as providing for two distinct categories of ERISA participants: 1) "employees in, or reasonably expected to be in, currently covered employment;" or 2) former employees who have "a reasonable expectation of returning to covered employment" and/or a "colorable claim" to vested benefits. Id. at 117, 109 S.Ct. at 958 (internal quotations omitted).

Plaintiff maintains that he has standing under either prong. First, he argues that he was a current employee when he initiated this action and should remain a current employee throughout the litigation for purposes of standing despite his actual termination of employment. In the alternative, he asserts that he is a former employee with a colorable claim to vested benefits. We disagree with each of plaintiff's contentions.

With regard to plaintiff's argument that he should be considered an employee under Firestone's first prong, we note that the basis for " '[s]tanding, since it goes to the very power of the court to act, must exist at all stages of the proceeding, and not merely when the action is initiated or during an initial appeal.' " Sommers Drug Stores Co. Employee Profit Sharing v. Corrigan, 883 F.2d 345, 348 (5th Cir.1989) (emphasis supplied) (quoting Safir v. Dole, 718 F.2d 475, 481 (D.C.Cir.1983), cert. denied, 467 U.S. 1206, 104 S.Ct. 2389, 81 L.Ed.2d 347 (1984)). Therefore, although plaintiff may have had standing as a current employee when he brought this action, by the time he filed his amended complaint, he lost this standing on account of having terminated his employment with ADL and having collected all vested benefits then due him from the ESOP. ⁵ Accordingly, plaintiff cannot be considered a...