Nichol v. Pullman Standard, Inc.

• Decision Date: 06 November 1989
• Docket Number: Nos. 88-2555,88-2653 and 88-3055,s. 88-2555
• Citation: 889 F.2d 115
• Parties: , 11 Employee Benefits Ca 2134 Ira W. NICHOL, Plaintiff-Appellant, Cross-Appellee, v. PULLMAN STANDARD, INC., a Delaware corporation, et al., Defendants-Appellees, Cross-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 115

889 F.2d 115

58 USLW 2309, 11 Employee Benefits Ca 2134

Ira W. NICHOL, Plaintiff-Appellant, Cross-Appellee, v. PULLMAN STANDARD, INC., a Delaware corporation, et al.,

Defendants-Appellees, Cross-Appellants.

Nos. 88-2555, 88-2653 and 88-3055.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 8, 1989.

Decided Nov. 6, 1989.

Joseph S. Reid, Highland, Ind., Joel Sprayregen, Clifford Yuknis, Shefsky, Saitlin & Froelich, Chicago, Ill., Mark E. Schmidtke, John E. Hughes, Hoeppner, Wagner & Evans, Valparaiso, Ind., for plaintiff-appellant, cross-appellee.

William J. Marshall, Wilmette, Ill., Charles Kelso, Robert C. Christenson, Roger K. Quillen, Fisher & Phillips, Atlanta, Ga., for defendants-appellees.

Before CUMMINGS and POSNER, Circuit Judges, and GORDON, Senior District Judge. ^*

CUMMINGS, Circuit Judge.

In 1983, Ira W. Nichol signed severance agreements in which he relinquished his rights to long-term disability benefits under his company's disability plans.

In 1985, Nichol commenced an action under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Secs. 1001-1461, seeking to avoid the terms of the severance agreements and to renew his eligibility for disability benefits. A bench trial was held on June 1 and 2, 1988. At the close of Nichol's evidence the defendants, Pullman Standard, Inc. ¹ and the former and present administrators of Pullman's disability plans (hereafter collectively, "Pullman") moved for an involuntary dismissal of the action under Federal Rule of Civil Procedure 41(b). The district court granted this motion but denied Pullman's request for costs and attorneys' fees. Both parties appeal. We affirm.

I. FACTS AND PROCEDURAL HISTORY

Nichol was employed by Pullman Standard, Inc. on August 27, 1979, as Director of Engineering. He was later promoted to Vice President-Engineering. On February 27, 1982, six days after his fifty-ninth birthday, Nichol suffered a heart attack and was hospitalized. As a participant in Pullman's short-term and long-term disability plans, Nichol was entitled to seven weeks of salary continuation at full pay plus six additional weeks at half pay before becoming eligible for long-term disability benefits. Once eligible for long-term disability, Nichol would have been entitled to monthly payments equal to fifty percent of his monthly base salary until the end of his disability or until he reached age sixty-five, whichever occurred first. In addition, Pullman's long-term disability plan provided for a continuation of medical, dental, and vision insurance coverage.

Five weeks into his recuperation, on April 2, 1982, Nichol was visited at his home by Jack Kruizenga, President and Chief Executive Officer of Pullman. Kruizenga proposed that Nichol continue at full salary until he reached age sixty. He also suggested that the company would work on agreements to cover the period between Nichol's sixtieth birthday and his sixty-second birthday, when Nichol would become eligible for early retirement.

In early February 1983, Nichol wrote to Kruizenga asking to return to work. ² In response, Nichol received a telephone call from John Rozner, Head of Personnel, informing him that agreements such as Kruizenga had proposed in April of 1982 were being prepared. Nichol received these agreements in due course. He consulted with his attorney, proposed various changes, some of which were incorporated, and eventually signed the agreements on March 24, 1983. The agreements provided that Nichol would be retained by Pullman in the capacity of an independent consultant until he reached age sixty-two. The agreements further provided that Nichol would be compensated at a rate equal to one half of his previous annual salary. Finally, the agreements provided that Nichol would continue to be covered by Pullman's medical, dental, vision, and life insurance programs and that he would continue to accrue pension credit until he reached early retirement. In return for this compensation package, Nichol agreed to relinquish any other benefits to which he may have been entitled. ³

From the time of his heart attack through February 21, 1983 (his sixtieth birthday), Nichol received his full salary. Thereafter, until his sixty-second birthday on February 21, 1985, Nichol received half pay. Shortly after his sixty-second birthday, Nichol was placed on early retirement. As a result of early retirement, his dental and vision care insurance coverage were terminated and his life and medical insurance coverage were shifted to the Pullman early retirement plan. Under that plan, Pullman replaced Nichol's $140,000 life insurance coverage with a total of $35,000 of coverage which was later reduced to $31,500 and then to $28,000. All of these transactions were in strict compliance with the terms of the severance agreements and the Pullman early retirement plan.

Nichol filed his original complaint on March 22, 1985. A second amended complaint, filed on June 23, 1986, included the ERISA claim as well as a pendent state law claim asserting fraud and willful misconduct. The district court dismissed the state law claim as preempted by ERISA, but denied Pullman's motion for summary judgment on the ERISA claim. Following the presentation of Nichol's evidence at trial, District Judge Marshall granted Pullman's Rule 41(b) motion, ⁴ stating that Nichol had, "knowingly and intentionally and voluntarily waived [long-term disability benefits]."

II. STANDARD OF REVIEW

"In granting a Rule 41(b) motion, a district court's factual findings are made pursuant to Rule 52(a), and may not be set aside unless clearly erroneous." Furth v. Inc. Publishing Co., 823 F.2d 1178, 1179 (7th Cir.1987). However, determining that a plaintiff has no right to relief is separate from determining that the district court's fact findings are clearly erroneous. Id. (citing 5 J. Moore, J. Lucas, and J. Wicker, Moore's Federal Practice, p 41.13, at 41- 166 to 41-167 (2d ed. 1986)). Therefore, we must determine as a matter of law whether the facts as established by the district court demonstrate that Nichol is entitled to long-term disability benefits.

III. THE SEVERANCE AGREEMENTS

As Judge Marshall noted in his memorandum opinion, Nichol does not dispute that the agreements, if effective, preclude his recovery of any long-term disability benefits. Instead, Nichol argues that the agreements are invalid. Specifically, Nichol appears to be arguing that the agreements themselves constitute a denial of his long-term disability benefits in violation of the provisions of Section 404 of ERISA, 29 U.S.C. Sec. 1104. Those provisions require plan fiduciaries to discharge their duties "solely in the interest of the participants and beneficiaries," and "in accordance with the documents and instruments governing the plan." Nichol relies on language in the Pullman benefit plans requiring an "attending physician's statement" ⁵ to argue that Pullman officials should not have relied on Nichol's own statements about his health, but rather were under a duty to investigate his state of health independently before encouraging him to sign the severance agreements.

The gist of Pullman's argument is that the duties imposed by Pullman's benefit plan are not applicable to Nichol's decision to sign the proposed severance agreements, and that the agreements, once signed, released Pullman from all plan-mandated duties it may have owed to Nichol.

Nichol argues that Wolfe v. J.C. Penney Co., Inc., 710 F.2d 388 (7th Cir.1983), and Central States Pension Fund v. Central Transport, Inc., 698 F.2d 802 (6th Cir.1983), reversed on other grounds, 472 U.S. 559, 105 S.Ct. 2833, 86 L.Ed.2d 447, support the proposition that Pullman had an affirmative duty to investigate Nichol's eligibility for long-term disability benefits. Neither Wolfe nor Central States recognized a statutory duty. Rather, in each case the court looked to the terms of the company plan to supply the duty. Consequently, Pullman argues that at most these cases would require compliance with a plan-mandated duty, and that once Nichol waived his rights under the plan, no such duty existed.

We need not decide the merits of this difference in approach, because even adopting Nichol's view, we agree with Judge Marshall's finding that Nichol failed to adduce sufficient evidence to withstand a Rule 41(b) motion to dismiss.

The obligations of plan fiduciaries are indeed exacting. The Supreme Court has recently held that a plan participant who challenges a denial of benefits resulting from a fiduciary's plan interpretation is entitled to a de novo review of that denial. Firestone Tire & Rubber Co. v. Bruch, --- U.S. ----, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). Furthermore, the Court held that de novo review is appropriate "regardless of whether the administrator or fiduciary is operating under a possible or actual conflict of interest." Id. 109 S.Ct. at 956.

Firestone does nothing to buttress Nichol's case. Firestone requires de novo review of plan interpretations that result in the denial of benefits. It is doubtful whether Kruizenga's proposal to supplant the terms of Pullman's benefit plans with an alternative severance arrangement fashioned specifically for Nichol can be considered a plan interpretation within the Firestone case. Even if the proposed severance agreement did involve a plan interpretation, the record does not indicate that Judge Marshall erroneously applied an arbitrary and capricious standard rather than a de novo standard in arriving at his decision that Nichol knowingly waived his long-term disability benefits.

Finally, it is evident that Nichol does not consistently seek strict enforcement of the plan provisions. He does not object to being kept on full salary for an entire year following his heart attack even though he was entitled to only seven weeks at full salary under the company disability plans. In effect Nichol seems to be arguing that he can freely...