Dister v. Continental Group, Inc.

• Decision Date: 03 October 1988
• Docket Number: No. 876,D,876
• Citation: 859 F.2d 1108
• Parties: , 10 Employee Benefits Ca 1169 Joseph E. DISTER, Plaintiff-Appellant, v. The CONTINENTAL GROUP, INC., Defendant-Appellee. ocket 87-7995.
• Court: U.S. Court of Appeals — Second Circuit

Page 1108

859 F.2d 1108

57 USLW 2242, 10 Employee Benefits Ca 1169

Joseph E. DISTER, Plaintiff-Appellant, v. The CONTINENTAL GROUP, INC., Defendant-Appellee.

No. 876, Docket 87-7995.

United States Court of Appeals Second Circuit.

Argued March 21, 1988.

Decided Oct. 3, 1988.

Joseph D. Garrison, New Haven, Conn. (Garrison, Kahn, Silbert & Arterton, New Haven, Conn., of counsel), for plaintiff-appellant.

William C. Bruce, New Haven, Conn., for defendant-appellee.

Before FEINBERG, Chief Judge, and CARDAMONE and PIERCE, Circuit Judges.

CARDAMONE, Circuit Judge:

Plaintiff Joseph E. Dister appeals from an October 30, 1987 judgment of the United States District Court for the District of Connecticut (Eginton, J.) granting the motion of the defendant The Continental Group, Inc. (Continental) for summary judgment and dismissing plaintiff's complaint. The district court held that Dister had failed to raise a genuine issue of fact as to whether Continental, by terminating him four months and seven days before he qualified for enhanced pension benefits, violated Sec. 510 of the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 895 (codified at 29 U.S.C. Sec. 1140 (1982)). This dashed plaintiff's apparent hope that had he but lingered a little longer as an employee and obtained the enhanced pension benefits, then the best was yet to come; his future would be secure.

This appeal requires us to decide for the first time what order and method of proof should be used where an employee sues his employer under Sec. 510 of ERISA for an alleged discriminatory discharge. We bear in mind that in cases claiming discrimination of this sort, crucial evidence of an employer's unlawful motive is nearly always in short supply.

FACTS

The now 51-year-old plaintiff began working at Continental in 1957 as a trainee. Twenty-five years later he had become Vice President/General Manager of Marketing and Product Development for the Continental Packaging Company (Continental Packaging), a division of Continental, with total annual compensation, including salary and an incentive bonus, of $117,500. In that position, Dister reported directly to the President of Continental Packaging, and his responsibilities focused on new product development in the packaging area.

After a corporate reorganization in 1982, plaintiff began reporting to John C. Ringgold, Continental Packaging's new Vice President/Administrative Officer. A year later his employer acquired a new President whose ideas concerning new product development differed from those of his predecessor. At this time Dister's role in the corporation began to change, and by late 1983 or early 1984 he had begun to worry whether his position was assured. Discussing his concerns with Ringgold and Richard D. Hofmann--an Executive Vice President to whom Ringgold reported--plaintiff was candidly told that his job might be eliminated. That prediction proved prophetic. In late 1983, Dister was given the option either of leaving the company and receiving an enhanced severance benefit package, or of remaining in the same position at the same salary, but without any staff. He chose the latter. Continental and Dister hold differing opinions regarding his duties in the position he retained. Plaintiff claims that they were the same; defendant contends that they gradually diminished.

Later in 1984, Continental was purchased in a leveraged buyout. Dister testified that throughout that year he often had little, if anything, to do, and that there were "days upon days where the only thing that there was to do was to read the Wall Street Journal and trade magazines." At his deposition, he acknowledged a change in Continental Packaging's business priorities resulting from $2 billion in debt assumed in the leveraged buyout. Because of limited company resources to market the new products it already had, development of more new product lines became unlikely. It also became clear that with insufficient capital for acquisitions--an area involving plaintiff--Continental would divest itself of some operating units. When the 1985 budget for Continental Packaging was being formulated, executives were told to cut costs and overhead. According to Hofmann, Ringgold recommended the elimination of Dister's job and Hofmann agreed. On October 11, 1984 Dister was informed that he was discharged as of January 1, 1985. Twelve other CPC employees received similar notices.

Plaintiff's basic pension rights had vested prior to his termination. But under Continental's enhanced benefit package, known as the "75/80 Plan," an employee retiring before age 65 who has served Continental for a minimum of 15 continuous years and whose age plus years of service equals at least 80 is entitled to an unreduced pension as well as insurance and medical benefits. This plan applies in cases where business conditions force a shut-down of the employee's workplace or in certain cases of layoff or disability. Pursuant to the leveraged buyout agreement, Dister qualified for a "Change in Control Severance Package" which, in part, awarded him credit for two additional years of service were he to be fired. Taking these two years into account, Dister as of his discharge date was four months and seven days short of qualifying for the 75/80 Plan.

Plaintiff told Continental that of the 13 terminated employees he was the closest to vesting into the 75/80 Plan, and requested that his employment continue in some capacity so that his benefits could vest. Continental refused. Had Dister qualified for the 75/80 Plan, he would have received $6,821.37 per month immediately upon discharge. Under present benefits, he is entitled to receive $6,511.64 per month upon reaching age 55. Plaintiff estimates that had he qualified for the 75/80 Plan, he would have received an additional $550,000.

Plaintiff's last day of work at Continental Packaging was December 31, 1984. On January 2, 1985 he filed this action in the District of Connecticut alleging that Continental purposefully interfered with his right to retirement benefits in violation of Sec. 510 of ERISA. After extensive discovery, the district court found that the allocation of burdens and order of presentation of proof employed in discrimination suits brought under Title VII of the Civil Rights Act of 1964, 42 U.S.C. Secs. 2000e-2000e-17 (1982), and under the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. Secs. 621-634 (1982), applies in cases of alleged discriminatory discharge under ERISA. It determined that Dister had established a prima facie case of wrongful treatment under ERISA. But Judge Eginton went on to hold that plaintiff had not presented sufficient evidence to create a genuine issue of fact as to whether Continental's asserted nondiscriminatory reason for terminating him was pretextual. Accordingly, he granted Continental's motion for summary judgment and dismissed Dister's complaint. Although we affirm, our reasons for reaching this result are slightly different from those relied upon by the district court.

DISCUSSION

I Proving an ERISA Sec. 510 Case

A. The Substantive Law

This action was brought pursuant to Sec. 510 of ERISA, which provides in part: "It shall be unlawful for any person to discharge, fine, suspend, expel, discipline or discriminate against a participant or beneficiary ... for the purpose of interfering with the attainment of any right to which such participant may become entitled under [an employee benefit plan]...." 29 U.S.C. Sec. 1140 (1982). Section 510 was designed primarily to prevent "unscrupulous employers from discharging or harassing their employees in order to keep them from obtaining vested pension rights." West v. Butler, 621 F.2d 240, 245 (6th Cir.1980). An essential element of plaintiff's proof under the statute is to show that an employer was at least in part motivated by the specific intent to engage in activity prohibited by Sec. 510. Gavalik v. Continental Can Co., 812 F.2d 834, 851 (3d Cir.), cert. denied, --- U.S. ----, 108 S.Ct. 495, 98 L.Ed.2d 492 (1987); Titsch v. Reliance Group, Inc., 548 F.Supp. 983, 985 (S.D.N.Y.1982), aff'd mem., 742 F.2d 1441 (2d Cir.1983).

On the other hand, "[n]o ERISA cause of action lies where the loss of pension benefits was a mere consequence of, but not a motivating factor behind, a termination of employment." Titsch, 548 F.Supp. at 985; see Gavalik, 812 F.2d at 851 ("Proof of incidental loss of benefits as a result of termination will not constitute a violation of Sec. 510."); Corum v. Farm Credit Servs., 628 F.Supp. 707, 718 (D.Minn.1986) (plaintiff must show more than "lost opportunity to accrue additional benefits" to sustain a Sec. 510 claim); Baker v. Kaiser Aluminum & Chem. Corp., 608 F.Supp. 1315, 1319 (N.D.Calif.1984) ("The only evidence offered by plaintiff is that if he had not been terminated, he would have been able to accrue additional benefits."). ERISA does not guarantee every employee a job until he or she has fully vested into a company's benefit plan. Plaintiff is required to prove more than the single fact that his termination precluded him from vesting into the 75/80 Plan; he must demonstrate Continental's unlawful purpose in firing him.

B. Burdens and Order of Proof Under McDonnell Douglas

Because the existence of a specific intent to interfere with an employee's benefit rights is critical in Sec. 510 cases--yet is seldom the subject of direct proof--the district court allocated the burdens of production and order of proof in a manner similar to the approach used in Title VII and ADEA cases, where direct evidence of discriminatory intent is also scarce or nonexistent.

The Supreme Court first set forth its three-step analytical framework for indirect proof of intent in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802-05, 93 S.Ct. 1817, 1824-26, 36 L.Ed.2d 668 (1973) (Title VII), and has since summarized the procedure

First, the plaintiff has the burden of proving by...