Richards v. General Motors Corp.

• Decision Date: 05 April 1993
• Docket Number: No. 92-1500,92-1500
• Parties: 126 Lab.Cas. P 57,479, 16 Employee Benefits Cas. 1977 Robert RICHARDS, Plaintiff-Appellant, v. GENERAL MOTORS CORPORATION; General Motors Savings-Stock Purchase Program for Salaried Employees in the United States, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1227

991 F.2d 1227

126 Lab.Cas. P 57,479, 16 Employee Benefits

Cas. 1977

Robert RICHARDS, Plaintiff-Appellant, v. GENERAL MOTORS CORPORATION; General Motors Savings-Stock Purchase Program for Salaried Employees in the United States, Defendants-Appellees.

No. 92-1500.

United States Court of Appeals Sixth Circuit.

Argued Dec. 10, 1992.

Decided April 5, 1993.

Michael J. Forster (argued and briefed), Saginaw, MI, for plaintiff-appellant.

Francis S. Jaworski, Stuart R. Cohen (argued and briefed), General Motors Corp., Detroit, MI, for defendants-appellees.

Before: MERRITT, Chief Judge, and MARTIN and MILBURN, Circuit Judges.

MERRITT, Chief Judge.

For three years, plaintiff back-dated quarterly stock transfers and purchases under GM's employee savings plan because the local plan administrator told him to do so. This procedure potentially would allow plaintiff to gain windfall profits by purchasing stock as of an earlier date after it had risen in value. For this conduct, GM discharged him and other employees who had followed the same practices, as well as the local plan administrator who authorized the back-dating.

Plaintiff sued General Motors and its employee savings plan for wrongful discharge and intentional infliction of emotional distress under Michigan law. These claims were dismissed following defendants' motion for summary judgment. Plaintiff was given leave to file an amended complaint stating two additional claims under the federal Employee Retirement Income Security Act ("ERISA"), codified at 29 U.S.C. § 1001 et seq.: (1) that defendants breached their fiduciary duties to the plan and to him as a participant in violation of 29 U.S.C. § 1132(a); and (2) that defendants discharged him for exercising or to prevent exercise of ERISA rights in violation of 29 U.S.C. § 1140. The district court then dismissed Counts I and II of the amended complaint. ¹ Plaintiff appeals the dispositive rulings on both complaints. The most difficult issue on appeal is whether under agency principles of "apparent authority" GM's local plan administrator had the authority to bind GM, her principal, to this unusual construction of the ERISA plan. For the reasons stated below, we affirm the district court's rulings regarding plaintiff's state law claims and reverse the dismissal of the ERISA claims, remanding for further proceedings.

I.

Plaintiff was hired by GM in 1966, and was employed full-time until his termination in 1990. His position at that time was Suggestions Coordinator at GM's Chevrolet-Pontiac Canada plant in Bay City, Michigan. As part of its various employee benefit plans covered by ERISA, GM offered a Savings-Stock Purchase Plan ("savings plan"), under which plaintiff could direct GM to withhold up to fifteen percent of his salary to purchase GM stock and other investments under any of several different options. These assets would be held in his employee account until his retirement, and GM provided matching contributions on a percentage basis.

Up to four times annually, employees were permitted to transfer existing funds between the various stock-based investments, to change the percentage of their salaries withheld for purchases, and to change the formula under which the withheld funds were divided to purchase the various stock-based investments. In the Bay City plant, these actions were effected by submitting written "applications for transfer" to the local Plan Administrator, Kay Kraeger. Under the written terms of the savings plan, a purchase of new stock (or a transfer among existing stock holdings) became "effective on the fifteenth or last day of the month next following or coincident with the date on which written application is received by the corporation for a transfer of assets." By the express terms of the plan, purchases or transfers therefore could not become effective until they were "received." The term "received" was not defined, nor were any specific procedures outlined for submitting the written applications.

Plaintiff elected to participate in the savings plan. He asserts that Kraeger made three representations: (1) local administrators had an extended period of time following the fifteenth and last days of the month to enter transfer and purchase instructions into the company-wide savings plan computer system; (2) this "grace period" or "input period" was initially open ended, but was later shortened to 45 days and then to 28 days; and (3) the transfers would be approved by GM as long as the forms were delivered to her within this period. The record does not show whether Kraeger in fact so advised plaintiff and, if so, on what she based her construction of the ERISA plan. Neither does the record show the scope of a local plan administrator's authority to construe the plan or facts relevant to her apparent authority so to interpret the plan and so to advise plaintiff and other employees.

The back-dating practice would, in theory, allow plaintiff to make a windfall profit on securities by directing Kraeger to purchase securities for his account which had risen in value between the fifteenth or last day of the month and the date on which he actually delivered his instructions to her. Defendants could not state with certainty either in their brief or at oral argument whether and to what extent such windfall profits ever actually occurred, and the record is silent on this question as well. Plaintiff submitted his forms following Kraeger's suggested procedure, turning in transfer applications dated earlier than the dates on which he actually submitted them. Each of his transactions were approved and implemented for about three years. GM then discharged Kraeger, plaintiff, and several other employees, and plaintiff commenced the actions culminating in this appeal.

II.

Defendants filed a motion pursuant to Fed.R.Civ.Proc. 12(b)(6) to dismiss plaintiff's ERISA claims. As permitted under the Rule, the district court held that to the extent matters outside the pleadings were considered, the motion was to be treated as one for summary judgment. We review a district court's grant of summary judgment de novo. Brooks v. American Broadcasting Cos., 932 F.2d 495, 500 (6th Cir.1991). We must view the facts in a light most favorable to the plaintiff. Boyd v. Ford Motor Co., 948 F.2d 283, 285 (6th Cir.1991). All we have in the record to support the summary judgment on plaintiff's ERISA claims is the district court's conclusion that plaintiff's actions "cannot be thought right or honest," so no relief is due. Discovery was never completed. Plaintiff served interrogatories on the issues of Kraeger's authority to construe the plan and GM's procedure for accepting and approving the transfer applications from employees. The district court did not rule on plaintiff's motion to compel when defendant objected to these questions. Plaintiff alleges facts that, with further discovery, may vindicate his claim. These "genuine issues of material fact" render summary judgment improper at this time.

In Count I of his amended complaint, plaintiff claims that defendants breached their fiduciary duties under ERISA to properly administer the savings plan by (1) discharging him and (2) "reconciling" his account by rescinding his back-dated investment elections and the corresponding contributions by GM. The relevant provisions of ERISA are 29 U.S.C. §§ 1132, 1104, and 1109. Section 1132 provides for civil causes of action to enforce the statutory scheme. ² Section 1104 defines the standard of care for a fiduciary under the Act. ³ Section 1109 sets out the extent of a fiduciary's liability in the event of a breach of this duty of care. ⁴

The district court considered the various theories under which plaintiff might recover pursuant to § 1132, and rejected them all. Guided by the Supreme Court in Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134, 142, 105 S.Ct. 3085, 3090, 87 L.Ed.2d 96 (1985), the district court held that § 1132(a)(2) (which refers to § 1109) provides for relief only to a plan, not to participants or beneficiaries. We agree. In Russell, the Supreme Court held that plan administrators cannot be held liable for extracontractual punitive or compensatory damages resulting from a breach of fiduciary duty under § 1109. Since any loss to plaintiff in the unwinding of his transactions would automatically produce a net gain to the savings plan, he may not challenge GM's actions under this subsection.

The district court further held that § 1132(a)(3) requires breach of a contractual fiduciary obligation before relief may be granted. The majority of courts have extended the Supreme Court's holding in Russell to prohibit extracontractual damages based on any fiduciary provisions of ERISA. See, e.g., Harsch v. Eisenberg, 956 F.2d 651, 656 (7th Cir.) (reversing an award of compensatory damages), cert. denied, Bihler v. Eisenberg, --- U.S. ----, 113 S.Ct. 61, 121 L.Ed.2d 29 (1992); Sokol v. Bernstein, 803 F.2d 532, 537-38 (9th Cir.1986) (holding damages unavailable for emotional distress). Plaintiff argues that this case should be governed by our decision in Warren v. Society National Bank, 905 F.2d 975 (6th Cir.1990), in which we found a narrow exception to this rule. We approved Warren's ERISA claim against the defendant bank because it had violated an express contractual agreement with him, subjecting him to tax liability. We agree with the district court that a breach of a contractual duty is required for liability to attach under § 1132(a)(3). We cannot agree, however, that no such breach was possible as a matter of law based on the facts before the court.

It is true defendants had no express contractual obligation to make plaintiff's back-dated transfer applications effective as of the dates he requested. Page 14 of the savings plan prospectus provides: "A transfer of assets is effective on the fifteenth or last day of the month next following or coincident with the date on which...