Flanigan, et al. v. General Electric Co.
| Decision Date | 01 August 2000 |
| Docket Number | Docket Nos. 00-7569 |
| Citation | 242 F.3d 78 |
| Parties | (2nd Cir. 2001) WILLIAM G. FLANIGAN, I/ & on behalf of all others similarly situated; ROGER L. PAPE, I/ & on behalf of all others similarly situated; DAVID J. OSTERHOUT, I/ & on behalf of all others similarly situated; MARVIN F. SEDLACEK, I/ & on behalf of all others similarly situated; ALAN R. SAYDAH, I/ & on behalf of all others similarly situated; JOSEPH E. LEONE, I/ & on behalf of all others similarly situated; STEPHEN LOUGHLIN, I/ & on behalf of all others similarly situated; DONALD R. BLOYER, I/ & on behalf of all others similarly situated; JOSEPH G. MCGUIRE, I/ & on behalf of all others similarly situated; MELVIN L. GILBERT, I/ & on behalf of all others similarly situated; BARBARA A. TOBLER, I/ & on behalf of all others similarly situated; JOSEPH M. BELMONT, I/ & on behalf of all others similarly situated; RICHARD R. DUCKO, I/ & on behalf of all others similarly situated; ANNA M. MARCO, I/ & on behalf of all others similarly situated; VERNON W. WAGNER, I/ & on behalf of all others similarly situated; CAROL A. MOODY, I/ & on behalf of all others similarly situated; MARK H. TRZYZEWSKI, I/ & on behalf of all others similarly situated; STEPHEN J. SMITH, I/ & on behalf of all others similarly situated; DAVID P. CRANSTON, I/ & on behalf of all others similarly situated, Plaintiffs-Appellants, v. GENERAL ELECTRIC CO.; DALE F. FREY; MICHAEL J. COSGROVE; JOHN H. MYERS; JOEL R. WILSON; ARTHUR S. BAHR; ALAN M. LEWIS; EUGENE K. BOLTON; DONALD W. TOREY; MARTIN MARIETTA CORPORATION; JOHN H. KNIES; LOCKHEED MARTIN CORP., Defendants-Appellees, LAUREEN WARRICK; KENNETH BRILLINGER; FREDERICK A. HOLMES; CHRISTINE GRUDZIEN; FRED M. SLOAN, Movants. (L), 00-7570(CON) |
| Court | U.S. Court of Appeals — Second Circuit |
ALAN M. SANDALS, Sandals, Langer & Taylor, LLP, Philadelphia, PA (Kay E. Sickles, of counsel, Joseph C. Kohn, Kohn, Swift & Graf, P.C., Philadelphia, PA, of counsel, J. Daniel Sagarin and Elias A. Alexiades, Hurwitz & Sagarin, P.C., Milford, CT, of counsel, David S. Preminger, Rosen, Preminger & Bloom, New York, N.Y., of counsel, Jules L. Smith, Blitman & King, Rochester, N.Y., of counsel, J. Dennis Faucher, Miller, Faucher Cafferty & Wexler, Philadelphia, PA, of counsel, Francis J. Robinson, Newtown Square, PA, of counsel, Ronald H. Surkin, Richard, Di Santi, Hamilton & Gallagher, P.C., Media, PA, of counsel), for Plaintiffs-Appellants.
PATRICK W. SHEA, Paul, Hastings, Janofsky & Walker LLP, Stamford, CT (Jennifer M. Bologna, Dale F. Frey, Michael J. Cosgrove, John H. Meyers, Joel R. Wilson, Arthur S. Bahr, Alan M. Lewis, Eugene K. Bolton, and Donald W. Torey, of counsel), for Defendants-Appellees General Electric Co., Dale F. Frey, Michael J. Cosgrove, John H. Myers, Joel R. Wilson, Arthur S. Bahr, Alan M. Lewis, Eugene K. Bolton and Donald W. Torey.
PAUL J. ONDRASIK, JR., Steptoe & Johnson LLP, Washington, D.C. (Morgan D. Hodgson, Sara E. Hauptfuehrer, of counsel), for Defendant-Appellee Lockheed Martin Corp.
Before: KEARSE, WINTER, AND McLAUGHLIN, Circuit Judges.
BACKGROUND
The demise of the Soviet Union in the early 1990's had a direct impact upon the defense industry in the United States. As the industry reshaped itself, the Martin Marietta Corporation (now Lockheed Martin or "Lockheed") acquired the General Electric Company's ("GE's") aerospace division in a bewilderingly complex transaction that closed in early April 1993 (the "deal"). In the deal, Lockheed agreed to hire all 37,000 GE aerospace employees, and to give them employee benefits that were "substantially similar to their GE benefits." To implement that promise, a portion of GE's pension assets was to be transferred (the "pension asset transfer") to Lockheed to fund the pension obligations Lockheed was to assume for those employees.
Shortly before closing, plaintiffs (who were then employees of GE and unhappy with the deal) instituted this action, seeking a preliminary injunction to prevent the pension asset transfer. The transfer, however, proceeded when the United States District Court for the District of Connecticut (Arterton, J.) refused to block it.
While moving for the injunction, the plaintiffs also requested relief that would preserve their "right" to remain participants in the GE pension plan (the "GE plan"), and alleged: (1) that GE and Lockheed had violated a fiduciary duty to give them full information about their pension benefit rights; (2) that GE's investment of pension funds in 90-day United States T-Bills was imprudent; and (3) violations of the Employee Retirement Income Security Act ("ERISA").
In September 1996 ("Flanigan I"), the district court dismissed the plaintiffs' claims that: (1) they had a "right" to remain in the GE plan; and (2) GE had violated ERISA. In ruling on both GE's and Lockheed's -- Lockheed had been named as a "knowing participant" in the alleged violations -- motions to dismiss, the court found that the plaintiffs had no unconditional right to remain participants in the GE plan after they were no longer GE employees. The court also held that neither the pension asset transfer itself nor the amount of the transfer violated ERISA. The district court, however, refused to dismiss plaintiffs' attack on GE's T-Bill investment (the "investment claim"), or their claim that defendants had failed to provide sufficient information concerning their pension rights (the "communications claim"). The district court then requested an amended complaint.
Plaintiffs complied with the court's request, and a month later, filed an amended complaint reasserting the investment claim and formally adding Lockheed as a defendant in the action. Plaintiffs also reasserted the communications claim, and added two new claims against Lockheed: (1) that at some unspecified time after closing, the new Lockheed pension plan (the "Lockheed plan") experienced a partial termination, thereby entitling plaintiffs to a vesting of accrued benefits and an allocation of surplus assets (the "partial termination claim"); and (2) that Lockheed had impermissibly reduced accrued benefits by permitting two special benefit features carried over from the GE plan - the Special Early Retirement Option ("SERO") and the Plant Closing Pension Option ("PCPO") - to expire.
After another round of motions in September 1997 ("Flanigan II"), the court rejected plaintiffs' claim that benefits had been impermissibly reduced when Lockheed eliminated the SERO and PCPO options. However, the court let stand the investment claim, the communications claim and the partial termination claim. A year later, the court conditionally certified two sub classes of plaintiffs to pursue these remaining claims.
Sub class One included all former GE employees who had retired or resigned from GE between the announcement of the deal and its closing. They challenged the nature and timing of the information provided by GE and Lockheed regarding the benefits that Lockheed was to offer transferring employees after the closing (the communications claim).
Sub class Two comprised former GE employees who had actually transferred and had gone to work at Lockheed. They challenged the procedure by which GE and Lockheed arranged the transfer of an initial $1 billion in pension assets from one plan to another (the investment claim). Sub class Two also made a claim against just Lockheed, alleging that the sequence of consolidation and downsizing moves after the sale constituted a partial plan termination under ERISA ().
Following extensive discovery, defendants moved for summary judgment. It was granted by the district court. See Flanigan v. Gen. Elec. Co., 93 F. Supp. 2d 236 (D. Conn. 2000) ("Flanigan III"). In its decision, the court first addressed the investment claim, and concluded that no fiduciary breach had occurred as a result of the GE plan's $1 billion T-Bill investment. Specifically, it held that in the transaction both Lockheed and GE were acting as settlors, and not fiduciaries, and that even if GE could be considered a fiduciary, it had fulfilled its duties as such.
The district court next addressed the communications claim, and concluded that: (1) Lockheed had no fiduciary duties of communication to Sub-class One plaintiffs because ERISA does not cover prospective employees; (2) GE breached no disclosure duties because it did not know the final details of the new Lockheed plan; and (3) in any event, the plaintiffs had enough information to make informed decisions about their employment. Finally, the district court addressed the partial termination claim and found that plaintiffs had failed to exhaust their internal remedies.
Plaintiffs now appeal on a host of issues, claiming that the district court erred in both of its earlier dismissals (Flanigan I & II), as well as in granting summary judgment to defendants (Flanigan III). More particularly, plaintiffs claim that: (1) they had the right to stay in the GE plan rather than join the Lockheed plan; (2) the defendants violated ERISA's fiduciary duty rules, ERISA's rules prohibiting certain transactions, and its rules barring unlawful inurement when GE "converted" pension assets during the pension asset transfer; (3) they suffered from an illegal cutback of their SERO and PCPO benefits; (4) there are triable issues as to whether defendants failed to comply with their fiduciary duties to provide complete and accurate benefits information on a timely basis; (5) there are triable issues as to whether defendants violated their fiduciary duties by engaging in the T-Bill investment; and (6) there are triable issues as to whether a partial termination...
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