USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 93-1611
LEO VARTANIAN,
Plaintiff-Appellant,
v.
MONSANTO COMPANY, ET AL.,
Defendants-Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Michael Ponsor, U.S. Magistrate Judge]
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Before
Torruella, Circuit Judge,
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Bownes, Senior Circuit Judge,
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and Cyr, Circuit Judge.
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John C. Sikorski, with whom Robinson Donovan Madden &
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Madden, P.C., was on brief for appellant.
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Richard J. Pautler, with whom Richard P. Sher, Peper,
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Martin, Jensen, Maichel and Hetlage, Francis D. Dibble, Jr.,
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Bulkley, Richardon and Gelinas, and John S. Morrison, were on
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brief for appellees.
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February 2, 1994
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TORRUELLA, Circuit Judge. Appellant Leo Vartanian
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("Vartanian") brought claims against his former employer,
Appellee Monsanto Chemical Company ("Monsanto"), under the
Employment Retirement Income Security Act ("ERISA"), 29 U.S.C.
1001 et seq., pursuant to Section 502(a) of ERISA, 29 U.S.C.
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1132(a), as well as under common law,1 asserting that Monsanto
breached its fiduciary duty and engaged in unlawful
discrimination and misrepresentation. The district court
dismissed Vartanian's complaint for failure to state a claim
under Federal Rule of Civil Procedure 12(b)(6). Vartanian appeals
the district court's dismissal of his claims.
According to the facts alleged by Vartanian, Vartanian
worked for Monsanto for nearly 37 years. He was a participant in
the Monsanto Company Salaried Employees Pension Plan ("1986
Plan"). The 1986 Plan offered several options to retirees,
including the option to receive various types of periodic
payments (annuities) or to take all benefits in a lump sum. In
accordance with the requirements of the 1986 Plan, Vartanian
submitted a lump sum distribution request at least one year prior
to his anticipated early retirement date. Vartanian submitted
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1 Vartanian's complaint alleges a claim for common law
misrepresentation, without specifying whether he means federal or
state common law. The district court in its opinion clearly
interpreted the claim to be a claim under state common law.
Rather than filing a motion to reconsider with the district court
and explaining to the district court that it had mistakenly
considered his claim to assert a state law claim rather than a
federal law claim, Vartanian appealed the district court's order
of dismissal. In the present case, we review the district
court's decision and find it unnecessary to recognize a federal
common law claim. See infra note 5 and accompanying text.
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this request in March, 1990 for an anticipated early retirement
date of May 1, 1991.
In February, 1991, Vartanian started to hear rumors
that Monsanto was going to offer a more favorable early
retirement package as a retirement incentive in the near future.
Monsanto had a history of using early retirement incentive
programs, having done so in 1981, 1985 and 1990. As rumors of
early retirement offerings persisted, sometime in February or
March, 1991, Vartanian asked his supervisor about the possibility
of an early retirement offering and requested that the supervisor
inquire about this possibility. Several weeks later, Vartanian's
supervisor responded that he could not confirm any rumors and
that there were "no plans" regarding the early retirement offer.
In April, 1991, Vartanian repeated the same inquiry to
his supervisor who again responded that there were no plans
regarding an early retirement arrangement. Vartanian also
questioned the Springfield Personnel Supervisor as to the
possibility of an early retirement incentive offering and was
told that there were no plans for any such offering. The
Springfield supervisor asked Vartanian if he would refrain from
retiring on May 1, 1991 if such a program were available.
Vartanian responded that he would want to study any new program
and certainly have the option of delaying the effective date of
his early retirement, depending on the option. Vartanian had in
fact postponed a previously elected early retirement so he could
work on certain projects for Monsanto. Vartanian retired as of
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May 1, 1991, and took a lump sum distribution of approximately
$509,000 under the 1986 Plan.
On or about June 28, 1991, Monsanto's Board of
Directors approved a restructuring plan which involved
consolidating manufacturing operations, closing plants,
reorganizing businesses and reducing the number of employees. As
of February, 1991, when Vartanian made specific inquiries about
early retirement incentive programs, Monsanto had, in fact,
already given serious consideration to staff reductions and
changes in the 1986 Pension Plan and was contemplating the
formation of the Monsanto Special Voluntary Retirement Plan
("1991 Plan").
Vartanian alleges that he was denied a reasonable
opportunity to make an informed decision about when to retire
because Monsanto failed to disclose its consideration of an
enhanced severance program. If Vartanian had received complete
and truthful information, he would have continued to work at
Monsanto until December 1, 1991 and, thus, would have been
eligible for full benefits under the 1991 Plan announced on June
28, 1991.
Vartanian exhausted all administrative procedures and
plan appeal procedures in his claim for benefits under the 1991
Plan. Monsanto denied Vartanian's claim because he had retired
on May 1, 1991 and, therefore, was not employed by Monsanto on
October 1, 1991, which was a requirement for eligibility to
participate in the 1991 Plan.
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In the court below, Vartanian alleged that Monsanto
breached its fiduciary duty in violation of 29 U.S.C. 1104(a)
by failing to disclose its intention to create a new, more
generous retirement package or the fact that the company was
giving "serious consideration" to such a plan. Vartanian claimed
that as a result of his reliance on Monsanto's misleading
statements to the effect that the company did not intend to
create a more generous retirement package, he missed the
opportunity to retire under the more advantageous provisions of
the new plan which went into effect shortly after his retirement.
Vartanian also alleged unlawful discrimination in violation of
Section 510 of ERISA, 29 U.S.C. 1140.
Under Section 502 of ERISA, 29 U.S.C. 1132(a), only a
"participant" or "beneficiary" may bring a private civil action.
Vartanian claims that he had standing to sue because he was a
"participant." The district court found, however, that Vartanian
was not a "participant" as defined by 29 U.S.C. 1002(7) of
ERISA and thus, did not have standing to sue under Section 502.
Because Section 502 is the sole civil enforcement provision of
ERISA, the district court dismissed both of Vartanian's ERISA
claims. The district court also dismissed Vartanian's common law
claims alleging misrepresentation. The court found that because
these are state law claims which "relate to" ERISA, they are
therefore preempted by Section 514(a) of ERISA, 29 U.S.C.
1144(a).
On appeal, Vartanian maintains that the district court
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erred in dismissing his claims. Vartanian argues that, at the
time Monsanto made the alleged misrepresentations, he was a
"participant" in an employee benefit plan (the 1986 Plan), that
Monsanto's breach of its fiduciary duty caused him to leave
shortly before the 1991 Plan was adopted. Furthermore, Vartanian
claims that but for Monsanto's misrepresentations, he would be a
"participant" in the 1991 Plan under 29 U.S.C. 1002(7) and, as
such, he has standing to assert claims for breach of fiduciary
duty, unlawful discrimination and misrepresentation under
ERISA.2 He argues that the ERISA definition of "participant"
refers to a person who is, or may become eligible for benefits
"from an employee benefits plan" and does not require that the
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person be eligible for benefits from two employee benefit plans.
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Thus, because he was a participant in the 1986 Plan, he claims
that, it was not necessary that he be a participant in the 1991
Plan in order to have standing under ERISA. In the alternative,
Vartanian argues that, even if he does not have standing to
assert claims under ERISA, this federal statute does not preempt
his state common law claims and this case should be remanded to
the district court for further proceedings to determine the
merits of his common law claims.
STANDARD OF REVIEW
STANDARD OF REVIEW
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We review the district court's decision to grant the
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2 Vartanian also points out that the 1991 Plan had two
components, enhancement of benefits under the 1986 Plan and a
separate cash payment. He suggests that he is a participant in
that portion of the 1991 Plan that consists of an enhancement of
benefits under the 1986 Plan.
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motion to dismiss Vartanian's claim under Federal Rule of Civil
Procedure 12(b)(6) de novo. Kale v. Combined Ins. Co. of
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America, 925 F.2d 1161, 1165 (1st Cir. 1991). We must accept the
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allegations of the complaint as true, and if, under any theory,
the allegations are sufficient to state a cause of action in
accordance with the law, we must deny the motion to dismiss.
Knight v. Mills, 836 F.2d 659 (1st Cir. 1987).
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PREEMPTION
PREEMPTION
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We first examine the district court's finding that
Vartanian's state law claims are preempted by Section 514(a) of
ERISA, 29 U.S.C. 1144(a).
Section 514 of ERISA supersedes "any and all State laws
insofar as they may now or hereafter relate to any employee
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benefit plan . . . ." 29 U.S.C. 1144(a) (emphasis added). The
Supreme Court has established that "a law 'relates to' an
employee benefit plan . . . if it has a connection with or
reference to such a plan." Ingersoll-Rand, Co. v. McClendon, 498
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U.S. 133, 139 (1990).
In Ingersoll-Rand, Co., the Supreme Court identified
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two tests for determining whether a cause of action "relates to"
and is thus, preempted by ERISA. First, a law is expressly
preempted by ERISA where a plaintiff, in order to prevail, must
plead, and the court must find, that an ERISA plan exists. Id.
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at 140. The cause of action "relates to" an ERISA plan in this
context because the court's inquiry must be directed to the plan.
Id. Second, even where there is no express preemption, a cause
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of action is preempted if it conflicts directly with an ERISA
cause of action. Id. at 142.
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In the present case, the existence of the 1991 Plan is
inseparably connected to any determination of liability under
state common law of misrepresentation. There is simply no cause
of action if there is no plan. See id. at 140. The alleged
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misrepresentations by Monsanto relate to the existence of the
1991 Plan and in order to prevail under a state common law claim
for misrepresentation, Vartanian would undoubtedly have to plead,
and the Court would have to find, that the 1991 Plan exists. See
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id. at 140. Thus, under the first test set forth in Ingersoll-
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Rand, Co., Vartanian's claims "relate to" an ERISA plan and are
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expressly preempted by ERISA. See Smith v. Durham-Bush, Inc.,
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959 F.2d 6, 11-12 (2d Cir. 1992); see also Sanson v. General
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Motors Corp., 966 F.2d 618, 621 (11th Cir. 1992), cert. denied,
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113 S. Ct. 1578 (1993).
Therefore, we affirm the portion of the district
court's opinion holding that Vartanian's state common law claims
of negligent misrepresentation are preempted by ERISA.
ERISA CLAIMS
ERISA CLAIMS
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Next, we examine the district court's finding that
Vartanian did not have standing to pursue a civil claim under
ERISA.
Section 502, the civil enforcement provision of ERISA,
provides that a "civil action may be brought by a participant or
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beneficiary3 to recover benefits due him under the terms of his
plan, to enforce his rights under the terms of the plan, or to
clarify his rights to future benefits under the terms of the
plan." 29 U.S.C. 1132(a)(1)(B). ERISA defines the term
"participant" as:
any employee or former employee of an
employer, or any member or former member
of an employee organization, who is or
may become eligible to receive a benefit
of any type from an employee benefit plan
which covers employees of such employer
or members of such organization, or whose
beneficiaries may be eligible to receive
such benefit.
29 U.S.C. 1002(7).
In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101
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(1989), the Supreme Court discussed the meaning of the term
"participant":
the term "participant" is naturally read
to mean either "employees in, or
reasonably expected to be in, currently
covered employment," Saladino v.
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I.L.G.W.U. National Retirement Fund, 754
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F.2d 473, 476 (CA2 1985), or former
employees who "have . . . a reasonable
expectation of returning to covered
employment" or who have "a colorable
claim" to vested benefits, Kuntz v.
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Reese, 785 F.2d 1410, 1411 (CA9) (per
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curiam), cert. denied, 479 U.S. 916
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(1986). In order to establish that he or
she "may become eligible" for benefits, a
claimant must have a colorable claim that
(1) he or she will prevail in a suit for
benefits, or that (2) eligibility
requirements will be fulfilled in the
future. "This view attributes
conventional meanings to the statutory
language since all employees in covered
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3 Appellant does not claim to be a beneficiary.
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employment and former employees with a
colorable claim to vested benefits 'may
become eligible.' A former employee who
has neither a reasonable expectation of
returning to covered employment nor a
colorable claim to vested benefits,
however, simply does not fit within the
[phrase] 'may become eligible.'" Saladino
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v. I.L.G.W.U. National Retirement Fund,
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supra, at 476.
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Firestone, 489 U.S. at 117-18.
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Since Vartanian did not allege that he has an
expectation of returning to covered employment, the district
court, relying on Firestone, focused its inquiry on whether
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Vartanian had a colorable claim to vested benefits. Finding that
Vartanian had no such claim, the district court held that
Vartanian did not have standing to pursue a claim under ERISA.
We disagree with the district court's interpretation of the
standing requirements under ERISA.
The Supreme Court's discussion in Firestone of the
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ERISA term "participant" was developed outside of the "standing"
context and therefore, does not mandate a finding that Vartanian
has no standing to assert his claims. See Christopher v. Mobil
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Oil Corp., 950 F.2d 1209, 1221 (5th Cir. 1992), cert. denied, 113
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S. Ct. 68 (1992) ("Firestone . . . [cannot] be read to reduce the
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standing question to a straightforward formula applicable in all
cases.").
The Sixth Circuit recently addressed the issue of who
is a "participant," for purposes of standing:
In determining who is a "participant,"
for purposes of standing, the definition
found in 29 U.S.C. 1002(7) must be read
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in the context of traditional concepts of
standing, not in the context of
adjudicating the ultimate issue of the
merits of plaintiffs' claim . . . . The
doctrine of standing is concerned with
whether a person is the proper party to
request adjudication of a particular
issue, whether a person has alleged such
a personal stake in the outcome of the
justiciable controversy that he should be
entitled to obtain its judicial
resolution. Standing focuses on a
person's effort to get his complaint
before a court and not on the issue he
wishes to have adjudicated.
* * *
[The ultimate question is whether the
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plaintiff is] within the zone of
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interests ERISA was intended to protect.
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Astor v. International Business Machines Corp., 7 F.3d 533, 538-
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39 (6th Cir. 1993), (quoting Hughes v. General Motors Corp., 852
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F.2d 568 (6th Cir. 1988) (unpublished) (citations omitted)); see
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also Data Processing Service v. Camp, 397 U.S. 150, 153 (1970).
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The legislative history of ERISA indicates that
Congress intended the federal courts to construe the Act's
jurisdictional requirements broadly in order to facilitate
enforcement of its remedial provisions:
The enforcement provisions have been
designed specifically to provide both the
Secretary [of Labor] and participants and
beneficiaries with broad remedies for
redressing or preventing violations of
the [Act]. . . . The intent of the
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Committee is to provide the full range of
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legal and equitable remedies available in
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both state and federal courts and to
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remove jurisdictional and procedural
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obstacles which in the past appear to
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have hampered effective enforcement of
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fiduciary responsibilities under state
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law or recovery of benefits due to
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participants.
S. Rep. No. 127, 93d Cong., 2d Sess., 3 (1974), reprinted in 1974
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U.S.C.C.A.N. 4639, 4871 (emphasis added).
To hold that Vartanian's state common law claims for
breach of fiduciary duty are preempted by ERISA, and that he has
no standing to assert his claims under ERISA, would clearly
frustrate Congress's intention to remove jurisdictional and
procedural obstacles to such claims.
At the time of the alleged misrepresentations,
Vartanian was a "participant" in the 1986 Plan, and as such, the
administrators of the plan had a fiduciary duty not to mislead
Vartanian as to the prospective adoption of a plan under serious
consideration. See Berlin v. Mich. Bell Tel. Co., 858 F.2d 1154,
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1163-64 (6th Cir. 1988). Vartanian's claims thus fall squarely
within the "zone of interests" ERISA was designed to protect.
See Astor, 7 F.3d at 538-39 (former employees who are within the
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zone of interests ERISA was intended to protect held to be
"participants" for purposes of standing).
We recognize that the 1991 Plan had not yet been made
available to Vartanian at the time of Monsanto's alleged
misrepresentations nor at the time of Vartanian's retirement and
thus, Vartanian could not technically be a "participant" in the
1991 Plan. We believe, however, that given the broadly inclusive
scope of the ERISA statute, and its preclusion of all other
judicial recourse, it would be entirely consistent with the ERISA
statute for this court to decline to bar Vartanian, for lack of
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"standing", from showing that, "but for" Monsanto's wrongful
conduct, he would be a "participant" in the 1991 Plan. Cf.
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Christopher, 950 F.2d at 1221.
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In reaching our conclusion, we rely on the fact that
Vartanian did not know Monsanto had made misrepresentations to
him and therefore, he could not have alleged a breach of
fiduciary duty by Monsanto until after he had received payment
under the 1986 Plan. To hold otherwise would imply that when an
employer breaches its fiduciary duty to an employee under ERISA,
the employee would have standing to sue only if the employee
finds out all of the facts constituting the breach prior to his
receipt of retirement benefits. Such a holding would enable an
employer to defeat the employee's right to sue for a breach of
fiduciary duty by keeping his breach a well guarded secret until
the employee receives his benefits or, by distributing a lump sum
and terminating benefits before the employee can file suit. The
employee would have no standing to state a claim under ERISA,
even where the employer's breach of fiduciary duty takes the form
of misrepresentations that induced the employee to retire and
receive the payment of benefits. Congress did not intend such
unjust and arbitrary results.4
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4 We are aware of decisions of other courts that are frequently
cited for the proposition that the term "participant" excludes
plaintiffs who have already received all of their vested benefits
in the form of a lump sum payment under a benefit plan. E.g.,
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Kuntz v. Reese, 785 F.2d 1410 (9th Cir. 1986), cert. denied, 479
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U.S. 916 (1986); Yancy v. American Petrofina, Inc., 768 F.2d 707
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(5th Cir. 1985); Raymond v. Mobil Oil Corp., 983 F.2d 1528 (10th
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Cir. 1993), cert. denied, 114 S. Ct. 81 (1993); and Berger v.
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Edgewater Steel Co., 911 F.2d 911, 921 (3d Cir. 1990), cert.
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Our conclusion is consistent with the Fifth Circuit's
decision in Christopher, in which the court indicated that
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it would seem . . . logical to say that
but for the employer's conduct alleged to
be in violation of ERISA, the employee
would be a current employee with a
reasonable expectation of receiving
benefits, and the employer should not be
able through its own malfeasance to
defeat the employee's standing.
Christopher, 950 F.2d at 1221. Contra Raymond, 983 F.2d at 1536.
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We hold that where an employee alleges a decision to
retire based on alleged misrepresentations by his employer
amounting to a breach of fiduciary duty, and the true facts, are
not available to the employee until after the employee has
received all his vested benefits under a plan; and further, where
the employee shows that in the absence of the employer's breach
of fiduciary duty he would have been entitled to greater benefits
than those which he received, then his receipt of payment cannot
be used to deprive him of "participant" status and hence,
standing to sue under ERISA. Thus, Vartanian has standing to
assert his claims under ERISA even though he has already received
his benefits under the 1986 Plan.
FEDERAL COMMON LAW
FEDERAL COMMON LAW
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On appeal, Vartanian requests that this court recognize
a federal common law claim for misrepresentation.
Although this court has noted that Congress has
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denied, 499 U.S. 920 (1991). These cases hold that such
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plaintiffs lack standing to sue under ERISA because they cannot
establish that they were former employees with a colorable claim
to vested benefits.
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contemplated that the federal courts "in the interests of
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justice, would engage in interstitial lawmaking in ERISA cases in
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much the same way as the courts fashioned a federal common law of
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labor relations under section 301 of [the Labor Management
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Relations Act][,]" Nash v. Trustees of Boston Univ., 946 F.2d
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960, 965 (1st Cir. 1991) (citations omitted), we deny
Vartanian's request because it is not necessary that we reach
this issue given the present ruling.
Because we have held that Vartanian has standing to
pursue his claims under ERISA, we find that justice does not
require that we recognize a federal common law claim of negligent
misrepresentation.5
We affirm that portion of the district court's order
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dismissing Vartanian's state claims for common law negligent
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misrepresentation. We reverse the portion of the order
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dismissing Vartanian's claims under ERISA and remand this case to
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the district court for decision on the merits of Vartanian's
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ERISA claims.
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5 We express no view on whether, under different circumstances,
such a federal common law claim should be recognized.
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