Opinion
Civ. No. 97-5344(WGB)
March 28, 2001
Richard K. Coplon, HELLRING, LINDEMAN, GOLDSTEIN SIEGAL LP, Newark, N.J., Attorney for Plaintiff.
Richard S. Zackin, GIBBONS, DEL DEO, DOLAN, GRIFFINGER VECCHIONE, PC Newark, N.J., Attorney for Defendant.
OPINION
Plaintiff Joseph Chichelo has brought an action against his former employer, Defendant Hoffman-La Roche, Inc., alleging that prior to his retirement Roche wrongfully failed to advise him of its plans to implement a voluntary early retirement program, and in so failing breached its fiduciary duties to him in violation of the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq. ("ERISA").
This matter is before the Court on Defendant's motion for summary judgment, and Plaintiff's cross-motion for summary judgment pursuant to Fed.R.Civ.P. 56. For the following reasons, the Court grants Defendant's motion for summary judgment and denies Plaintiff's cross-motion for summary judgment .
I. BACKGROUND A. Procedural History
This action was commenced in the United States District Court for the Southern District of New York on June 18, 1997. It was transferred to the District of New Jersey on October 28, 1997. This Court has subject-matter jurisdiction pursuant to 29 U.S.C. § 1132 (f).
The Court denied a motion for summary judgment brought by Defendant without prejudice on October 6, 1999, and by the same Order compelled the Defendant to provide Plaintiff with additional discovery. Discovery has since been completed, and this matter is now fully pre-tried. Upon completion of discovery Defendant renewed its motion for summary judgment, and Plaintiff cross-moved for summary judgment.
B. Factual History
At the time of his retirement, Plaintiff had been employed by Defendant Hoffman-La Roche, Inc. ("Roche") for 27 years, and held the position of Director of Creative Services. (Chichelo Dep., at 6). On May 23, 1994 Plaintiff advised his immediate supervisor, Thomas Hoff ("Hoff"), via memo that he intended to voluntarily retire from Roche on June 10, 1994. (See memo attached to Final Pre-Trial Order as Plaintiff's Exh. 6). Plaintiff's last day of work was June 10, 1994, and his retirement became effective as of July 1, 1994. (Chichelo Dep., at 50, 68).
Contemporaneous with Plaintiff's deliberations on retirement, he became aware that Roche was in the process of acquiring Syntex Corporation. (Chichelo Dep., at 10-11). Plaintiff was not concerned about losing his job as a result of the acquisition, and if anything was concerned that he would be getting more work. Id., at 14-18. This concern, in conjunction with feelings that he and his department were not being treated fairly by Mr. Hoff, led Chichelo to decide that he would rather retire from Roche and pursue consulting work. Id.
Also contemporaneous with his deliberations on retirement, Plaintiff heard rumors that Roche was considering implementing a voluntary early retirement program ("VERP") in connection with the acquisition of Syntex. (Chichelo Dep., at 11-14). Prior to handing in his resignation, Plaintiff made repeated inquiries of Hoff, Karl Ratti ("Ratti"), and Alan Rubino ("Rubino") between January 26, 1994 and May 23, 1994 in an effort to determine whether a VERP might be offered in the near future. (Chichelo Decl., ¶ 11). At the time of Plaintiff's inquiries, Hoff was Vice President of Promotion for the Roche Labs Division, Ratti worked in Roche's Benefits Department, and Rubino was Roche's Director of Human Resources. (Chichelo Dep., at 6-9, 38-41).
In response to each of his inquiries, Plaintiff was told by the person of whom inquiry was made that they did not know of any such plans. Id., at 38-41. Chichelo did not seek information from any other person within the company about the possibility of whether Roche would be offering a VERP in connection with the Syntex acquisition. Id., at 65. Plaintiff's last inquiry into whether he might receive some additional compensation for his early retirement was made in his resignation letter, submitted on May 23, 1994. (Chichelo Decl., ¶ 12). That letter included the language, "If Roche should prefer to elect that I retire early, perhaps there could be some compensatory program." (Plaintiff's Exh. 6).
After Chichelo's retirement, a VERP was in fact announced by Roche on October 17, 1994. (Cert. Of Dr. William Hennrich, ¶ 12). The eventual decision to implement that VERP in connection with the Syntex acquisition was made by Patrick Zenner ("Zenner"), who was Roche's President and CEO. (Zenner Dep., at 3,88). The proposal Zenner approved was essentially the same as that reflected in an October 3, 1994 writing from Carol Brand ("Brand"), Director of Human Resources for the Research and Development Division of Roche, and David Alpert ("Alpert") of the Roche Legal Department, to Zenner. (Brand Cert., ¶ 7).
It is uncontested that Roche would periodically review its benefits programs as part of the company's monitoring of costs and personal management. (Hennrich Cert., ¶ 3). These reviews were conducted at the direction of Dr. William Hennrich, who at the time was Vice President and Treasurer of Roche. Id., at ¶¶ 2,3. Roche's outside actuary, William M. Mercer, Inc., often assisted in these efforts. Id. The matter now in dispute is at what point prior to the implementation of the VERP on October 17, 1994 Roche's periodic reviews became a specific proposal, that was being discussed for purposes of implementation, by senior management with the authority to implement it.
II. DISCUSSION A. Standard for Summary Judgment
The standard for granting summary judgment pursuant to Federal Rule of Civil Procedure 56 is a stringent one. Summary judgment is appropriate only if all the probative materials of the record "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Hersh v. Allen Prods. Co., 789 F.2d 230, 232 (3d Cir. 1986); Lang v. New York Life Ins. Co., 721 F.2d 118, 119 (3d Cir. 1983). The court must resolve all reasonable doubts in favor of the nonmoving party when determining whether any genuine issues of material fact exist. Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 n. 2 (3d Cir. 1983); Smith v. Pittsburgh Gage Supply Co., 464 F.2d 870, 874 (3d Cir. 1972). Significantly, "at the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
Under the standards announced by the Supreme Court's trilogy in Celotex Corp. v. Catrett, 477 U.S. 317 (1986), Anderson, 477 U.S. 242 (1986), andMatsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986), "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment." Anderson, 477 U.S. at 247-48 (emphasis in original). If the moving party has made a properly supported motion for summary judgment, then the nonmoving party must come forward with specific facts to show that there is a genuine issue of material fact for trial. Id. at 248. Thus, once the moving party has carried its burden of establishing the absence of genuine issues of material fact, the nonmoving party "may not rest upon mere allegations or denials" of its pleadings, but must produce sufficient evidence that will reasonably support a jury verdict in its favor, Id. at 249; J.E. Mamiye Sons, Inc. v. Fidelity Bank, 813 F.2d 610, 618 (3d Cir. 1987) (Becker, J., concurring), and not just "some metaphysical doubt as to material facts." Matsushita, 475 U.S. at 586.
Moreover, "there is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable or is not significantly probative summary judgment may be granted." Anderson, 477 U.S. at 249-50. "Consequently, the court must ask whether, on the summary judgment record, reasonable jurors could find facts that demonstrated, by a preponderance of the evidence, that the nonmoving party is entitled to a verdict." In re Paoli R.R. Yard PCB Litig., 916 F.2d 829, 860 (3d Cir. 1990).
B. ERISA's Fiduciary Duty of Loyalty
Both parties agree that the legal standard which this Court must apply was articulated by the Third Circuit Court of Appeals in the factually analogous case of Fischer et al. v. Philadelphia Electric Co., 96 F.3d 1533 (3d Cir. 1996), cert den., 117 S.Ct. 1247 ("Fischer II"). In Fischer II, the Third Circuit held that a company has a fiduciary duty as an ERISA plan administrator to provide truthful information in response to employee inquiries about possible changes to an employee pension benefits plan, once those changes are under "serious consideration." Id., at 1538. Chichelo alleges that a breach of this fiduciary duty occurred when he was not informed in response to his inquiries that a VERP was being seriously considered. In such circumstances, "where the misrepresentation in question is the statement that no change in benefits is under consideration, the only factor at issue is the degree of seriousness with which the change was in fact being considered." Id.
"The concept of `serious consideration' recognizes and moderates the tension between an employee's right to information and an employer's need to operate on a day-to-day basis." Fischer II, 96 F.3d at 1539. ERISA does not impose a duty of clairvoyance on fiduciaries, instead they need only answer the inquiries of employees truthfully. Id. This duty is tempered by the fact that a plan administrator is under no duty to disclose its internal deliberations. Id., citing Swinney v. General Motors Corp., 46 F.3d 512, 510 (6th Cir. 1995); Mullins v. Pfizer, Inc., 23 F.3d 663, 669 (2nd Cir. 1994); Drennan v. General Motors Corp., 977 F.2d 246, 251 (6th Cir. 1992); Barnes v. Lacy, 927 F.2d 539, 544 (11th Cir. 1991); Berlin v. Michigan Bell Tel. Co., 858 F.2d 1154, 1164 (6th Cir. 1988).
Absent an employee inquiry, an ERISA fiduciary has no duty to volunteer information about any plan changes prior to their final adoption. Bins v. Exxon Company U.S.A., 220 F.3d 1042, 1045 (9th Cir. 2000) (en banc). Further, an employer/fiduciary need not follow up with an employee who has previously made a request for information if at some point after that inquiry proposed plan changes reach the serious consideration stage, unless the employer has agreed to do so. Id.
An employee's inquiry regarding potential plan changes need not be directed only to those with actual knowledge of a potential change; if an inquiry is made after a potential change reaches the serious consideration stage, "it would not be a defense that supervisors [of whom inquiry was made] were unaware of the status and thus responded ignorantly but truthfully to the employee's inquiry." Bins, 220 F.3d at 1049 n. 6.
Additionally, even if a potential plan change has not reached the "serious consideration" stage, an employer may not induce its employees to retire by actively misinforming them about the availability of (or lack of) potential improved retirement benefits. Wayne v. Pacific Bell, 238 F.3d 1048 (9th Cir. 1999) (as amended, Feb. 8, 2001, 2001 WL 102314).
"A person actively misinforms by saying that something is true when it is not true. But the person also misinforms by saying that something is true when the person does not know whether it is true or not." Wayne, 238 F.3d at 1055. Plaintiff argues that the Wayne decision precludes summary judgment for the Defendants, as the question of what conduct is sufficient to constitute active misinformation is a question for the jury.
Chichelo does not claim he was ever told that a VERP was not under consideration. It is undisputed that Chichelo was told by the people of whom he inquired only that they had no knowledge about any potential VERP. Chichelo has not adduced any evidence that these responses were somehow untruthful, or that the individuals of whom he inquired knew of a VERP's consideration when they told him they had no information. In fact, Chichelo explicitly stated at his deposition that he now believes Mr. Hoff was truthful when he told him he didn't know of a proposed VERP. (Chichelo Dep., 40:12-16).
Accordingly, the Court concludes that there is no factual basis for a trier-of-fact to reasonably conclude that Plaintiff was somehow actively misinformed, as defined by the Wayne decision. Therefore, as a matter of law, liability in this case could not have attached prior to Roche's "serious consideration" of a proposed VERP.
C. The "Serious Consideration" Standard
"Serious Consideration" of a change in ERISA plan benefits sufficient to create a fiduciary duty compelling disclosure to employees who inquire occurs when 1) a specific proposal 2) is being discussed for purposes of implementation 3) by senior management with the authority to implement the change. Fischer II, 96 F.3d at 1539. The formulation is fact-specific, and turns on the interaction of all three factors. Id. The factors do not constitute a bright-line rule, but do limit "serious consideration" to the later stages of corporate decision-making. Id., at 1540.
The first factor, that a specific proposal exist, is designed to distinguish serious consideration from the requisite antecedent steps of gathering information, developing strategies, and analyzing options.Fischer II, 96 F.3d at 1539-40. While a specific proposal can contain alternatives and may differ from the plan that is eventually implemented, it must be "sufficiently concrete to support consideration by senior management for the purpose of implementation." Id., at 1540.
The second factor, that the specific proposal be discussed for purposes of implementation, similarly distinguishes serious consideration from the preceding data gathering and strategic planning that, while necessary for the formulation of planned changes, do not generate a fiduciary duty.Fischer II, 96 F.3d at 1540. The purpose is to protect the ability of senior management to take an early role in the process of developing changes, without triggering a duty of disclosure. Id. Participation which does not trigger a duty can include ordering an analysis of benefits or commissioning a comparative study without seriously considering implementing a change in benefits. Id. "Consideration becomes serious when the subject turns to the practicalities of implementation." Id.
The third factor, that a specific proposal be discussed by senior management with the authority to implement it, is designed to ensure that a court's analysis of serious consideration focuses on the proper actors within the corporate hierarchy. Fischer II, 96 F.3d at 1540. Until senior managers who have the authority to implement the proposed changes address the issue, any specific plan changes have yet to be "seriously considered." Id.
D. Chichelo's Claim
It is uncontested that, having heard rumors of a VERP stemming from the Roche/Syntex merger, Chichelo made numerous inquiries both of his superiors and individuals responsible for human resources in an effort to determine whether a VERP would be implemented. (Chichelo Decl., ¶¶ 11-12). Chichelo's resignation letter to his supervisor Hoff, submitted May 23, 1994, contained the statement that "[i]f Roche should prefer to elect that I retire early, perhaps there could be some compensatory program." Id.
Taken in a light most favorable to Plaintiff, Chichelo's resignation letter to Hoff could be construed as a final inquiry into whether a VERP was being seriously considered. It is immaterial that Hoff may not have had knowledge that a VERP was being seriously considered when he received the letter, as a supervisor's ignorance is no excuse if a change is under serious consideration by those with the authority to implement it. See Bins, 220 F.3d at 1049 n. 6. Since Chichelo made no further inquires after the submission of his resignation letter, the critical date for the Court's "serious consideration" inquiry can be no later than May 23, 1994. See Fischer II, 96 F.3d at 1538; Bins, 220 F.3d at 1045. For purposes of Defendant's summary judgment motion, if no reasonable jury could find that Roche had a VERP under "serious consideration" pursuant to the Fischer II test on or before May 23, 1994, summary judgment must be awarded to the Defendant.
Defendants do not deny that the October 3, 1994 memorandum from Alpert and Brand to Zenner demonstrates that as of October 3rd, 1994 a specific proposal for a VERP existed, and that it was discussed for purposes of implementation by senior management with the authority to implement the change. (Plaintiff's Exh. 31). This memo addressed both the VERP plans of eight other pharmaceutical companies, and considerations for the implementation of a similar plan at Roche. Id. According to Defendants, it was on this date that a specific proposal for a VERP was transmitted to senior management for the first time. (Brand Cert., ¶ 9; Hennrich Cert., ¶ 11).
Plaintiff contends that a VERP was under serious consideration prior to October 3, 1994. In support, Chichelo points to, among other things, a July 21, 1994 memorandum from Harold F. Boardman, Vice President and General Counsel of Roche, to Zenner regarding the Roche/Syntex Integration plan. (Plaintiff's Exh. 20, "Boardman Memo"). Taken in a light most favorable to the Plaintiff, the Court concludes that a reasonable jury might find the Boardman Memo sufficient to satisfy theFischer II test. In his memorandum, Boardman recommends that, "if Roche employees are to be terminated in the integration process, we implement an enhanced severance program which approaches, if not mirrors, the Syntex program." (Boardman Memo, p. 4). The memo continues, "I believe we should seriously consider implementing an Early Retirement Program for the Roche organization." Id. While the details on the proposed plan are sparse, a reasonable jury could conclude based on that language that on July 21, 1994 a specific proposal existed, and that it was being discussed for implementation by those senior managers with the authority to implement it.
Senior management is free to start the process of exploration and evaluation of changes to a plan without triggering a duty of disclosure; liability does not necessarily attach at the earliest example of affirmative action taken by management to implement a plan. Fischer II, 96 F.3d at 1542. Similarly, general discussions of early retirement options by senior management, and the development of a specific plan on the instructions of senior management for their future approval, fail to rise to the level of serious consideration. Id.
Even with all doubts resolved in Plaintiff's favor, none of the other facts before the Court constitute even colorable evidence that anything more than "gathering information, developing strategies, and analyzing options" took place on or prior to May 23, 1994. See Fischer II, 96 F.3d at 1539-40. Additionally, facts exist in the record that are not easily reconciled with the existence of "serious consideration" on or prior to the critical date of May 23, 1994.
Plaintiff has stated that a "trier-of-fact could find that the concept of VERP was directed and considered by `senior management' long before October 3, 1994." (Plaintiff's Suppl. Opp. Brief, p. 4) (emphasis added). From the record the Court agrees, but this is not sufficient to establish liability. Fatal to Plaintiff's case there is no evidence either on or prior to May 23, 1994 that a specific proposal existed or was discussed for purposes of implementation.
Chichelo points to a study by William H. Mercer, Inc. in July of 1993 as evidence that Roche had begun accumulating data on the implementation of a VERP months before his retirement. (Plaintiff's Exh. 3). While this is true, it sheds no light on when this data was assembled into a specific proposal, let alone when that specific proposal was first considered for purposes of implementation.
Damaging to his case, additional facts relied on by Chichelo support the conclusion that such accumulation of data continued for weeks, if not months, after his retirement. For example, on May 26, 1994 Zenner made inquires of the Chief Executive Officers of Marion Merrill-Dow and Bristol-Myers Squibb regarding how they handled mergers in their companies. (Plaintiff's Exh. 8). While Plaintiff relies on this as evidence that a VERP was being "seriously considered" at the highest levels of Roche in May of 1994, in this regard Plaintiff misapprehends the guidance of the Third Circuit in Fischer II, which stated that serious consideration can only begin after information is gathered and options developed. 96 F.3d at 1542. It would be an impossibly favorable inference to consider this conduct by Zenner to be anything but information gathering, which does not rise to the level of Fischer II liability.
The Court finds it likely that Zenner did take steps to develop a voluntary reduction in force shortly after or simultaneous with the Syntex Merger Agreement on May 1, 1994, but a first step in that development necessarily would have been the actual formulation of a specific proposal for senior management to consider.
That such a plan was formulated during the Spring and Summer of 1994 is in keeping with the testimony of Carol Brand, who stated that at some point in the "late Spring of 1994, after [Roche] had announced its plans to acquire Syntex Corporation. . . Zenner. . .asked me to serve on a special task force to coordinate the integration of the Roche and Syntex work forces." (Brand Cert., ¶ 2). Brand claims to have operated under the assumption that any reductions would be accomplished via an involuntary reduction-in-force, but that she was later asked to prepare a proposal that contained voluntary components as well. Id., at ¶ 4. While Plaintiff attacks Brand's credibility, other documentary evidence strongly supports the conclusion that data gathering and plan formulation, as opposed to implementation, continued through the summer of 1994.
While Plaintiff points to a June 23, 1994 retainer of McKinsey Company, Inc. "to redesign. . .Roche's organizational structure and processes" as evidence that McKinsey devoted itself to the questions of timing, implementation, and communications related to effectuating a VERP, (Plaintiff's Suppl. Opp. Brief, p. 9, quoting Plaintiff's Exh. 10), omitted from this quote is the retainer's damaging language that "The overall objective is to collect data. . .to allow redesign of Roche's organizational structure and processes. . ." Id. (emphasis added). That a contract for study in an area related to implementation of a VERP was entered into on June 23, 1994 (one month after Plaintiff's last inquiry) deeply undercuts Plaintiff's proposition that a specific proposal sufficient to satisfy Fischer II was created prior to his final inquiry.
Similarly, by Plaintiff's own admission in June/July of 1994 Roche sent surveys to its direct competitors, inquiring whether they had implemented VERPs, and what methods they had used. (Plaintiff's Exhs. 14-19, 21, 38, 41-43, 45). The collection of data on options for what type of VERP to implement in June and July tends to refute a specific proposal's existence prior to May 23, 1994. Even more damaging is the fact that the October 3, 1994 proposal that was eventually considered and implemented largely incorporated the results of the June/July survey. (Plaintiff's Exh. 31).
If the totality of the evidence is reconciled in favor of the Plaintiff, a reasonable trier-of-fact can not escape the conclusion that a VERP was being investigated and formulated contemporaneous with Chichelo's inquiries prior to his retirement. Unfortunately, as a matter of law Plaintiff has not presented any evidence, circumstantial or otherwise, which demonstrates that on or prior to May 23, 1994 a specific plan existed, or that Roche's conduct rose to the level of "serious consideration" necessary to create the breach of an ERISA fiduciary duty as articulated in Fischer II.
Chichelo has provided the Court with nothing more than his assertions that a specific proposal for a VERP must have existed, and that it must have been discussed for purposes of implementation by senior management with the authority to implement it. To survive a motion for summary judgment, the non-moving party may not rest on mere assertions, but instead must produce sufficient evidence that will reasonably support a jury verdict in its favor. Anderson v. Liberty Lobby, 477 U.S. at 249. Since Chichelo has failed to meet this burden, the Court must grant summary judgment in favor of the Defendants.
III. CONCLUSION
For the foregoing reasons, Defendant's motion for summary judgment is granted. For the same reasons, Plaintiff's cross-motion for summary judgment is denied.
An appropriate order follows.