Saporito v. Combustion Engineering Inc.
| Decision Date | 29 April 1988 |
| Docket Number | No. 87-5144,87-5144 |
| Citation | 843 F.2d 666 |
| Parties | RICO Bus.Disp.Guide 6910, 9 Employee Benefits Ca 2623 Arsenio C. SAPORITO, Pasquale F. Ambrosio, Alfred Grant Baum, Frederick Betz, Rose Bochicchio, William Floyd Burroughs, Amerigo Burruano, Edwin B. Carlson, William F. Cheperak, George F. Crowley, Vernon D. Davis, John Francis DeMar, Fred Diamond, Norma Lee Dyer, Murray S. Gottlieb, Svante Humbla, Edward F. Jedziniak, Alda Yvonne Kyle, Charles Philip Marion, Louis Marshall, Richard Martone, Peter James Mikedes, Anthony J. Morrell, Per Olof Einer Reich, Robert Robie, Harold Rodriguez, Tim Shaunfield, Mary S. Siegel, Richard Iver Swartz, Morris Swerlin, Huan Yin Wang, Jess V. Ziccarello, Appellants, v. COMBUSTION ENGINEERING INC., Charles E. Hugel, Donald C. Taylor, Sveh A. Kreipke and C.L. Bekkedahl, Appellees. |
| Court | U.S. Court of Appeals — Third Circuit |
Judith P. Vladeck (argued), Vladeck, Waldman, Elias & Engelhard, P.C., New York City, Margaret L. Moses, Newark, N.J., for appellants.
Richard C. Mariani (argued), Apruzzese, McDermott, Mastro & Murphy, Springfield, N.J., for appellees.
Before BECKER, SCIRICA and ROSENN, Circuit Judges.
This is an appeal from the district court's dismissal of the complaint of thirty-two former employees of Combustion Engineering, Inc. ("C-E") which alleged that C-E and four of its officers (collectively "appellees"), induced appellants to retire under one retirement plan while at the same time concealing from them but disclosing to certain other employees the development of a second, more generous plan. The complaint claimed that appellees thereby breached fiduciary duties under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Secs. 1001-1461 (1982), and violated the civil provisions of the Racketeer Influenced and Corrupt Organizations Act ("civil RICO"), 18 U.S.C. Secs. 1961-1968 (1982). 1
The appeal presents two ERISA questions. The first question is whether appellants, having received all the benefits to which they were entitled under the first plan, were no longer "participants" in the plan as required for standing to sue for breach of fiduciary duty under ERISA Sec. 502(a), 29 U.S.C. 1132(a) (1982). We conclude that they were not and will therefore affirm the district court's dismissal of Count I. The second question is whether appellants, having retired under the first plan (not knowing about the second) nonetheless have standing to sue as potential participants in the second plan, and, whether appellees' actions constitute discrimination against appellants in violation of ERISA Sec. 510, 29 U.S.C. Sec. 1140, for the purpose of denying benefits to which they were or would have become entitled. We conclude that appellants have standing because their allegations, if proved, would demonstrate that appellants would have been participants in the second plan but for C-E's actions, which effectively tricked them into retirement under the first plan while secretly informing other employees of the second, more lucrative, plan. Because appellants should have an opportunity to flesh out their Sec. 510 claim, we will remand the case to the district court for further proceedings on that claim.
The appeal also presents several RICO questions. The first question is whether appellants have alleged fraud with particularity as required under Fed.R.Civ.P. 9(b), which is made applicable by the RICO jurisprudence. We conclude that the complaint failed to allege fraud with sufficient particularity, but that appellants should be allowed to amend the complaint. The second question is whether appellants have alleged a "pattern" of racketeering activity. Applying this court's recent decisions in Barticheck v. Fidelity Union Bank/First National State, 832 F.2d 36 (3d Cir.1987), and Marshall-Silver Construction Co. v. Mendel, 835 F.2d 63 (3d Cir.1987), we determine that appellants' allegations of multiple inducements to retire made to at least thirty-two individuals over an extended period of time met the pattern requirement. The third question is whether C-E can be both an enterprise and a person liable under civil RICO. Appellants pleaded that C-E was an "enterprise" under Sec. 1962. Under Sec. 1962(c) only "persons" may be held liable, and a corporation may not be both a person and an enterprise under Sec. 1962(c). The language of Sec. 1962(a) differs, however, and a corporation may be both an enterprise and a person under that subsection. Because of a lack of specificity in the complaint, we are unable to determine whether it alleged a violation of 18 U.S.C. Sec. 1962(c) or of Sec. 1962(a), and thus we are unable to determine whether the complaint against C-E must be dismissed. For all these reasons we will reverse and remand the district court's dismissal of Count III (the civil RICO count).
Arsenio C. Saporito and the thirty-one other plaintiff-appellants are all former employees of C-E who receive monthly pension benefits under C-E's corporate-wide salaried pension plan, entitled the C-E Retirement Plan for Salaried Employees ("the Corporate Plan"), and who in February 1985, took early retirement pursuant to C-E's Voluntary Early Separation Plan ("VESP"). Because the complaint was dismissed on the pleadings, we will treat the allegations in the complaint as true. See Labov v. Lalley, 809 F.2d 220, 221-22 (3d Cir.1987); Wisniewski v. Johns-Manville Corp., 759 F.2d 271, 273 (3d Cir.1985).
C-E first notified its employees of VESP on or about February 4, 1985. Employees had until February 15, 1985 to join the plan, which entailed retiring by February 28, 1985. The VESP plan was offered to employees of the C-E Engineering and Construction Group working in New Jersey, Oklahoma, and Texas. Under VESP, the employees received, in addition to pension and other benefits to which they were already entitled under the Corporate Plan, a special lump-sum separation payment. 2 According to appellants, they accepted the terms of VESP because C-E and its officers threatened or implied that appellants would be laid off if they did not accept the plan. The parties agree that C-E did subsequently lay off some employees. All of the appellants accepted VESP, retired effective February 28, 1985, and received the benefit payments to which they were entitled under the plan.
Appellants allege that at the same time C-E was encouraging appellants to join the VESP, C-E was actively planning to promulgate another early retirement plan, the Voluntary Separation Incentive Plan ("VSIP"), to be offered to certain employees after the expiration of the VESP election period. C-E unveiled VSIP and offered it to C-E employees on May 20, 1985. VSIP provided for significantly greater benefits than the earlier VESP, including unreduced early retirement benefits, surviving spouse benefits, supplemental pension benefits, and free medical and dental benefits. 3
Appellants also allege that during the election period for VESP, C-E "and/or persons acting under [its] direction or control" informed certain employees other than the appellants that the more valuable VSIP would be offered shortly after the expiration of VESP. J.A. at 45. According to appellants, they were not informed about VSIP, but would have been eligible and eager to participate had they been given the opportunity. After learning of VSIP, appellants requested to participate in the plan, but C-E denied these requests.
Appellants subsequently filed a three count complaint, asserting two ERISA claims and one civil RICO claim. Count I alleged that appellants were participants in the VESP plan; that C-E and the individual defendants are administrators and fiduciaries of VESP under ERISA; and that C-E and the individual defendants breached their fiduciary duty to appellants by: (1) withholding information about the development of the VSIP plan, which "was material and necessary to [appellants] in determining whether or not to participate in VESP"; and (2) divulging such information to other C-E employees. J.A. at 49.
In Count II appellants alleged that they were participants in VSIP because "but for" C-E's misrepresentations, appellants would have refused the VESP offer and would have elected to join VSIP. Although Count II did not specify which ERISA section was thereby violated, appellants argued before the district court and argue here that C-E's actions violated ERISA Sec. 510, 29 U.S.C. 1140, which prevents employers from interfering with rights to which employees may become entitled under ERISA. In effect, appellants alleged that C-E's actions interfered with their opportunity to participate in the VSIP plan. Appellants claimed damages for Counts I and II equal to the difference in the value between the benefits of the two plans, plus punitive damages, interest, attorneys' fees, and costs.
Finally, Count III alleged that the individual defendants used the mails and telephone to prevent the appellants from participating in VSIP, which constituted acts of mail and wire fraud amounting to a pattern of racketeering activity under 18 U.S.C. Sec. 1961(5). Count III further alleged that such racketeering activity on the part of the individual defendants violated 18 U.S.C. Sec. 1962, which prohibits conducting or participating in the affairs of an enterprise (C-E) through racketeering activity. Appellants also alleged that the enterprise itself violated Sec. 1962 by engaging in a pattern of racketeering activity. Appellants sought treble damages, costs and attorneys fees from the individual appellees and C-E itself in the civil RICO count.
C-E and the individual defendants moved to dismiss all counts pursuant to Fed.R.Civ.P. 12(b)(6). The district court granted the motion as to the civil RICO count (Count III), but at first rejected C-E's motion to dismiss the ERISA...
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