Filiatrault v. Comverse Technology

• Decision Date: 06 December 2001
• Docket Number: No. 01-1409,01-1409
• Citation: 275 F.3d 131
• Parties: (1st Cir. 2001) GILLES FILIATRAULT, Plaintiff, Appellant, v. COMVERSE TECHNOLOGY, INC. AND BOSTON TECHNOLOGY, INC., Defendants, Appellees. Heard
• Court: U.S. Court of Appeals — First Circuit

Page 131

275 F.3d 131 (1st Cir. 2001)

GILLES FILIATRAULT, Plaintiff, Appellant, v. COMVERSE TECHNOLOGY, INC. AND BOSTON TECHNOLOGY, INC., Defendants, Appellees.

No. 01-1409

United States Court of Appeals For the First Circuit

Heard Dec. 6, 2001

Decided December 27, 2001,

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. Hon. Morris E. Lasker, Senior U.S. District Judge

[Copyrighted Material Omitted] Paul J. Murphy, with whom Menard, Murphy & Walsh LLP was on brief, for appellant.

Christopher J. Perry, with whom Catherine M. Stockwell and Hale and Dorr LLP were on brief, for appellees.

Before Selya, Circuit Judge, Rosenn^* and Cyr, Senior Circuit Judges.

SELYA, Circuit Judge.

Plaintiff-appellant Gilles Filiatrault brought suit under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1461 (1994 & Supp. V 1999), and specifically, 29 U.S.C. § 1132(a)(1)(B) (authorizing a private action by a participant in, or beneficiary of, an ERISA-regulated plan "to recover benefits due . . . under the terms of [the] plan"). The lower court found the plaintiff's claims lacking in merit and entered summary judgment for the defendants. We affirm.

I. Background

In this suit, the plaintiff seeks to collect benefits allegedly due under an employee severance benefit plan (the Plan) maintained by his quondam employer, defendant-appellee Boston Technology, Inc. (BTI). The relevant facts are largely undisputed. We begin with a decurtate summary.

In 1997, the plaintiff was a mid-level manager, employed by BTI and covered by the Plan. On August 20, 1997, BTI agreed to merge at a future date (January 14, 1998) into defendant-appellee Comverse Technology, Inc. (CTI) in a tax-free, stock-for-stock transaction. BTI would then dissolve.

On October 24, 1997, BTI terminated the plaintiff's employment, and the plaintiff responded by demanding payment of severance benefits under the Plan. Although the merger had not been consummated when BTI terminated his employment, the plaintiff claimed that a "change in control" nonetheless had occurred upon the execution of the agreement to merge, thereby triggering his entitlement to severance benefits. BTI refused to honor the plaintiff's demand.

BTI merged into CTI on January 14, 1998. CTI thereafter transferred certain of its assets, including all the former assets of BTI, into a new operating unit, Comverse Network Systems, Inc. (CNSI). CTI appears to have accomplished this transfer by delivering a bill of sale to CNSI.

On June 12, 1998, the plaintiff filed suit against BTI (as the Plan's sponsor) and CTI (as BTI's successor in interest) in the federal district court. The defendants moved to dismiss for failure to state an actionable claim. See Fed. R. Civ. P. 12(b)(6). When the district court converted this motion into a motion for summary judgment, see Fed. R. Civ. P. 12(b), the defendants filed a supporting affidavit subscribed to by Adalbert K. Wnorowski (BTI's general counsel up to the time of the merger and CNSI's general counsel thereafter). The plaintiff filed an opposition to the motion and simultaneously filed a motion to withhold decision pending additional discovery. See Fed. R. Civ. P. 56(f).

Following a hearing, the district court entered partial summary judgment for the defendants and, at the same time, granted the plaintiff's Rule 56(f) motion in part (allowing the plaintiff to depose a representative of the defendants on the issues that remained outstanding). On May 18, 2000, the plaintiff deposed Wnorowski and thereafter filed a supplemental opposition, a cross-motion for summary judgment, and a motion for partial reconsideration of the district court's earlier order. On September 14, 2000, the district court granted the balance of the defendants' motion for summary judgment and denied the plaintiff's cross-motions.¹ This timely appeal followed.

II. Standard of Review

We review the district court's entry of summary judgment de novo, taking the facts in the light most favorable to the summary judgment loser (here, the plaintiff). Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir. 1990). Although some incidental facts are controverted, those disputes are not material. The essence of the controversy resides in the pertinent documents, and neither the contents of those documents nor the facts necessary to put them into perspective are open to serious question. The Plan comes within the purview of ERISA; its relevant provisions are as stated herein; the plaintiff was a Plan participant; the terms of the agreement to merge are free from ambiguity; and the critical dates (e.g., when BTI dismissed the plaintiff and when it consummated the merger) are uncontroverted. Thus, so long as the lower court correctly construed the Plan and the agreement to merge, grasped the pertinent facts, and took them properly into account, summary judgment was appropriate. We turn to that inquiry.

III. Analysis

When BTI terminated the plaintiff's employment, the Plan provided that employees who were dismissed without cause within twelve months after a "change in control" would receive certain described severance benefits. This is the focal point of the instant litigation: the plaintiff maintains that he was an employee of BTI at the time of a change in control and, accordingly, that he had an entitlement to those benefits when he thereafter was discharged without good cause. For summary judgment purposes, the defendants concede that the plaintiff can, at the least, make out a genuine issue of material fact as to termination without cause. They maintain, however, that no change in control occurred until after the plaintiff's termination, so that he had no entitlement to severance benefits. Accordingly, this appeal hinges on the meaning of the phrase "change in control."

A. Relevant Plan Provisions

The provisions of an ERISA-regulated employee benefit plan must be interpreted under principles of federal common law. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987); see also Nash v. Trustees of Boston Univ., 946 F.2d 960, 964 (1st Cir. 1991) (applying that tenet to a severance pay plan). We think it obvious that federal common law embodies commonsense principles of contract interpretation. Thus, straightforward language in an ERISA-regulated plan should be accorded its plain, ordinary, and natural meaning. Burnham v. Guardian Life Ins. Co., 873 F.2d 486, 489 (1st Cir. 1989). It is against this backdrop that we inquire into the contours of the phrase "change in control."

The Plan itself contains the operative definition. It enumerates five events that will suffice to trigger a change in control. Two of these are potentially relevant here (Events 2 and 5). Event 2 provides that a change in control shall be deemed to have occurred upon the emergence of "an Acquiring Person (as such term is defined in the Rights Agreement dated as of May 9, 1991 between [BTI] and The First National Bank of Boston)." Event 5 provides that a change in control shall be deemed to have occurred if "the Company shall sell all or substantially all of its assets to another person or entity in one transaction or a series of related transactions." The plaintiff argues that one or both of these events occurred prior to the date of his discharge (October 24, 1997). We think not.

B. Event 2

The plaintiff's argument that CTI became an "Acquiring Person" immediately upon the signing of the agreement to merge is insupportable. The Plan borrows the definition of acquiring person used in the Rights Agreement between BTI and its principal lender, originally entered into on May 9, 1991. That pact defines an acquiring person as "any person who . . . shall be the Beneficial Owner of 20% or more of the shares of Common Stock then outstanding of [BTI]." In turn, it defines beneficial owner as any person who owns or "has the right to acquire" securities.² The plaintiff asserts that, upon executing the agreement to merge, CTI "ha[d] the right to acquire" BTI's stock (and, thus, became an acquiring person at that moment).

The flaw in this argument is that CTI did not obtain an unconditional right to acquire BTI's stock merely by signing the agreement to merge. There were numerous conditions precedent to the merger,³ and a failure of any of these conditions would have scuttled the merger. Consequently, CTI did not have "the right to acquire" BTI's stock until these conditions were satisfied and the merger was consummated. See, e.g., Riseman v. Orion Research, Inc., 749 F.2d 915, 919 (1st Cir. 1984) (explaining that a "firm agreement" is not tantamount to a purchase until the performance of a condition precedent). The last of these conditions precedent was not fulfilled until January 14, 1998 (the day that the parties consummated the merger). Because CTI did not become an acquiring person until that day, no change in control within the purview of Event 2 occurred during the currency of the plaintiff's employment.

C. Event 5

That leaves Event 5: the "asset sale" provision. The evidence establishes beyond hope of contradiction that the CTI/BTI merger was a stock-for-stock transaction that did not involve the sale simpliciter of BTI's assets. To be sure, CTI adumbrated in an August 1997 press release that BTI's operations would be combined post-merger with those of CTI's network systems division. Then, after the merger had been consummated, CTI transferred certain of its assets, which included the former assets of BTI, to CNSI (a newly-created subsidiary that assumed, inter alia, the functions of CTI's network systems division). Moreover, CTI appears to have effectuated the transfer by bill of sale. This latter transaction, the plaintiff asseverates, was tantamount to a sale of BTI's assets, triggering a change in control because it was one of "a series of related transactions." This asseveration is unpersuasive.

In the first place, there was no "sale." Moreover,...