BELOT, District Judge.
Plaintiffs/appellants appeal the dismissal of state law and ERISA claims by Judge Daniel B. Sparr of the United States District Court for the District of Colorado. The claims and allegations in these consolidated cases are similar to those made against defendants/appellees US WEST Management Pension Plan and John G. Shea in Averhart v. US WEST Management Pension Plan (No. 92-1317), Sandquist v. US WEST Management Pension Plan (No. 92-1321), and Sabell v. US WEST Management Pension Plan (No. 92-1375), three cases which were also decided by Judge Sparr. A separate panel of this court recently affirmed Judge Sparr's grant of summary judgment for the defendants in those cases. Averhart v. US WEST Management Pension Plan, 46 F.3d 1480 (10th Cir.1994), reh'g denied (10th Cir. Feb. 21, 1995).
Defendant Mountain States Telephone & Telegraph, Inc. ("Mountain Bell") is a former subsidiary of defendant US WEST Communications, Inc. ("US WEST"), a regional holding company formed after the court-ordered divestiture of AT & T. Plaintiffs were formerly employed as managers at Mountain Bell and participated in US WEST's Management Pension Plan.
In January 1987, US WEST sought to reduce its work force by offering its managers a severance pay plan called the "Enhanced Management Transition Program" or EMTP. EMTP was designed to encourage voluntary termination or early retirement and operated as an unfunded welfare benefit plan subject to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq. An Employee Benefits Committee ("EBC") was established to administer the program.
The EMTP offer consisted of two options: (1) immediate separation and one year's salary in severance pay; or (2) a three year leave of absence, with employee benefits, followed by separation and severance pay equal to fifty percent of one year's salary. On February 12, 1987, defendant A. Gary Ames, Mountain Bell's executive vice president, issued a "management bulletin" urging Mountain Bell managers to "consider our incentive offer carefully." Plaintiffs' App. at 9. Ames stated that Mountain Bell would be "lean, effective and market-driven" in the future and that anyone uncertain about being a part of that future should carefully consider accepting termination under EMTP. Id. Ames further stated that, in the future, "[i]f we have more employees than we need to staff the market units, and if normal attrition won't correct this force imbalance, we may offer incentives for people to leave voluntarily. But those payments will amount to no more than six months' salary." Id. Portions of Ames's comments were published in an article in the February 18, 1987 issue of the MB Times, an in-house newsletter distributed to Mountain Bell employees. Plaintiffs' App. at 11. Plaintiffs Maez, Maestas, and Spieker eventually decided to accept immediate separation from service under EMTP option (1). Plaintiff Cowdrey took a leave of absence under option (2).
In April 1989, US WEST implemented a voluntary severance program to reduce the number of director-level employees in the company. This program, called the Director's Program, offered certain director-level employees a choice of various severance pay options if they elected to retire or resign during 1989. This program was not available to managers like plaintiffs. Averhart v. US
On November 29, 1989, after plaintiffs had accepted termination under EMTP, the US WEST Board of Directors adopted a resolution authorizing the EBC to amend the Pension Plan, effective January 1, 1990, to provide certain special pension benefits to eligible employees who would elect between January 2 and January 31, 1990, to retire as of February 28, 1990. This amendment to the Pension Plan, known as the "5 + 5 amendment," provided for a "Minimum Benefit" of adding five years of age and five years of service to participants with five or more years of employment as of February 28, 1990 for purposes of calculating their pension benefits. Eligibility was generally limited to "active employee[s] on the payroll as of February 28, 1990, with five or more years of term of employment as of February 28, 1990." However, director-level employees who terminated during 1989 pursuant to the Director's Program also were permitted to take advantage of the 5 + 5 amendment. Averhart, 46 F.3d at 1483.
Although plaintiffs had already accepted termination under EMTP, they submitted claims for benefits under the 5 + 5 amendment. Their claims were denied. The Secretary of the EBC, defendant John G. Shea, determined that plaintiffs were ineligible for the benefits of the 5 + 5 amendment because they were not "active employees."
A somewhat detailed explanation of the tortured history of this case is necessary to place the issues in proper focus.
On April 9, 1990, plaintiffs filed a class action lawsuit against Mountain Bell in Colorado state court, specifically, the District Court for the City and County of Denver. Plaintiffs' App. at 1-8. Plaintiffs' complaint set forth state law claims of promissory estoppel predicated on allegations that plaintiffs were wrongfully induced to participate in EMTP and wrongfully denied 5 + 5 benefits. On May 3, Mountain Bell removed the state court action to federal court, asserting that plaintiffs' state law claims were preempted by the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq. Plaintiffs' App. at 12-15. The case was assigned to Judge Matsch of the United States District Court for the District of Colorado.
On May 21, 1990, Mountain Bell moved to dismiss the removed action on Rule 12(b)(6) grounds. Plaintiffs' App. at 28-31. Plaintiffs in turn moved to remand the action back to state court, contending that there was no ERISA preemption. Plaintiffs' App. at 32-35. Without undertaking to decide the preemption issues or the propriety of removal jurisdiction himself, Judge Matsch ordered that the case be remanded because the preemption issue was "not free from doubt" and needed to be addressed "as an affirmative defense to plaintiffs' complaint." Plaintiffs' App. at 78-79. Mountain Bell then petitioned this court for a writ of mandamus directing Judge Matsch to vacate his order of remand. Plaintiffs' App. at 81-103. This court dismissed Mountain Bell's petition on June 28, 1991, concluding that Judge Matsch's remand decision was not reviewable and that Judge Matsch had appropriately remanded the case pursuant to 28 U.S.C. § 1447(c): "If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." Plaintiffs' App. at 104-05.
Following remand to state court, plaintiffs moved for leave to file a "first amended complaint," and the state court granted the motion. Defendants' Supp.App. at 1-13; Plaintiffs' App. at 106-113. Mountain Bell moved to dismiss the "first amended complaint," asking the state court to decide the issue of ERISA preemption. Plaintiffs' App. at 114-17. On November 29, 1991, while defendants' motion to dismiss was still under advisement, plaintiffs filed a motion to further amend their first amended complaint. Plaintiffs' App. at 159-61. On the same day, plaintiffs also filed a second, entirely separate lawsuit in federal court against Mountain Bell, US WEST, US WEST Management Pension Plan and the other defendants listed in the caption above. Plaintiffs' App. at 175-84. As a preface to their complaint in this second lawsuit, plaintiffs stated:
Id. at 175. The federal case was assigned to Judge Sparr.
On December 26, 1991, the state court held that plaintiffs' state law claims were preempted by ERISA (Plaintiffs' App. at 185-87), and, on January 2, 1992, Mountain Bell filed another notice of removal to federal court (Plaintiffs' App. at 188-92). Upon removal, plaintiffs' initial lawsuit was also assigned to Judge Sparr.
Plaintiffs filed motions in both state and federal court requesting reconsideration of the state court's ERISA preemption decision. Plaintiffs' App. at 209-232. The state court found that the case had already been removed to federal court and that it would be inappropriate to entertain plaintiffs' motion to reconsider without a remand order from the federal court. Plaintiffs' App. at 283. Judge Sparr took the matter under advisement.
After removal, defendants requested that the two cases filed by plaintiffs — the first lawsuit initiated in state court (case number 92-S-0009) and the second lawsuit initiated in federal court (case number 91-S-2095) — be consolidated. Defendants' Supp.App. at 13-18. On February 6, 1992, Judge Sparr held a status conference regarding the two cases and ordered that the actions would be "consolidated subject to plaintiff filing [a] first amended complaint in 91-2095 and defendants answering." Plaintiffs' App. at 284-87. Judge Sparr also denied plaintiffs' motion to reconsider the state court's ERISA preemption decision. Id. at 287.
During the February 6 status conference, Judge Sparr also "disclosed [his] acquaintance w/ [defendant] Fred Cook & other [Mountain Bell] employees." Id. at 285. Judge Sparr indicated that he had been an employee of defendant Mountain Bell from 1955 through the early 1960s, prior to Mountain Bell's becoming a subsidiary of US WEST, and that, after becoming an attorney, he had served one year as part of Mountain Bell's in-house legal staff. Defendants' Supp.App. at 200-01. Judge Sparr stated that he was familiar with Fred Cook and his wife through business associations dating back twenty years and that he had a professional acquaintance with Mountain Bell's general counsel. See id. at 212.
On February 26, plaintiffs in the present case filed a motion to recuse based on Judge Sparr's revelations during the February 6 status conference. Plaintiffs' App. at 464-69. Judge Sparr made similar revelations to the plaintiffs in Averhart, Sandquist, and Sabell, but those plaintiffs did not request recusal. Defendants' Supp.App. at 207. Judge Sparr held a hearing on the recusal issue on March 17. Defendants' Supp.App. at 197-221; Plaintiffs' App. at 474. Counsel for plaintiffs in Averhart, Sandquist, and Sabell appeared and stated that "we do not see under the disclosures made ... any sort of an appearance of impartiality." Defendants' Supp. App. at 210. After "very carefully consider[ing]" plaintiffs' motion in the present case, Judge Sparr found "that there would not be sufficient indication here of any potential bias or prejudice to give a reasonable person a concern that this judge might be biased or prejudiced with respect to claims of any of the parties or counsel." Id. at 218, 220.
On March 24, 1992, plaintiffs filed their amended complaint in case number 91-S-2095 (Plaintiffs' App. at 308-22) and sought leave to file a "third amended complaint" in case number 92-S-0009 (Plaintiffs' App. at 294-307). On April 15, defendants filed a motion to dismiss, to strike, and for a more definite statement, arguing inter alia that plaintiffs had ignored Judge Sparr's consolidation order and submitted two new complaints in an attempt to recast the litigation as two expanded lawsuits. Plaintiffs' App. at 323-34. On May 21, Judge Sparr issued an order (1) officially granting defendants' motion to consolidate cases 91-S-2095 and 92-S-0009; (2) denying plaintiffs' motion to amend their complaint in 92-S-0009 because it sought "to relitigate claims already found to be preempted by ERISA"; (3) declaring
On September 4, 1992, plaintiffs moved for leave to file yet another amended complaint entitled "first amended complaint after consolidation" in Civil Action No. 91-S-2095 (Consolidated with 92-S-0009). Defendants' Supp.App. at 73-76; Plaintiffs' App. at 401-36. This proposed amended complaint set forth ten different claims for relief under ERISA.
Counsel appeared before Judge Sparr on September 9 to argue defendants' April 15 motion to dismiss, but Judge Sparr was forced to focus instead on plaintiffs' newly proposed amended complaint. Plaintiffs' App. at 365-87. After considerable discussion, Judge Sparr granted plaintiffs' leave to file their "first amended complaint after consolidation" and directed counsel to proceed with the case based on the claims articulated therein. Id. at 384.
On September 17, 1992, Judge Sparr granted a motion for summary judgment for defendants US WEST Management Pension Plan and John G. Shea in Averhart and Sandquist. Among other things, Judge Sparr held that ERISA preempted the plaintiffs' state law claims of promissory estoppel. Plaintiffs' App. at 388-400; Sandquist, CIV.A. Nos. 91-S-0028, 91-S-0727, 1992 WL 469739 at
On October 2, 1992, defendants in the present case filed a motion to dismiss the "first amended complaint after consolidation" in Civil Action No. 91-S-2095 (Consolidated with 92-S-0009).
In this appeal, plaintiffs challenge Judge Abram's recommendation and Judge Sparr's order regarding dismissal. Plaintiffs also challenge Judge Sparr's denial of their recusal request. Finally, plaintiffs challenge the Colorado state court's December 1991 ruling that plaintiffs' state law claims are preempted by ERISA as well as Judge Sparr's denial of their motion to reconsider that order and to amend their complaint in case number 92-S-0009. See Plaintiffs' Notice of Appeal.
Appellate Jurisdiction Issues
Defendants contend that this court does not have jurisdiction to review the state court's ERISA preemption decision which led to the removal of this case to federal court.
First, as a general rule, the prejudgment findings of a state court made prior to removal are merged into the final judgment and may be reviewed on appeal irrespective of whether the federal district court reexamined the decision after removal. Resolution Trust Corp. v. Nernberg, 3 F.3d 62, 67-68 (3d Cir.1993); Reilly v. Waukesha County, Wisconsin, 993 F.2d 1284, 1287 (7th Cir.1993).
Second, the state court was not the only court to make rulings concerning the preemption and removal issues. Judge Sparr reexamined the issues in denying plaintiffs' motion to reconsider. Plaintiffs' App. at 287. The ERISA preemption matter also arose in connection with plaintiffs' motion to amend their complaint and defendants' motion to dismiss.
Third, the federal district court's subject matter jurisdiction over plaintiffs' original action, and hence our jurisdiction, depended upon whether there was preemption under ERISA. As previously noted in connection with this case, 28 U.S.C. § 1447(c) provides that "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." (emphasis added). Federal Rule of Civil Procedure 12(h)(3) further directs that "[w]henever it appears ... that the court lacks jurisdiction of the subject matter, the court shall dismiss the action." (emphasis added). The ERISA preemption matter is clearly, therefore, a matter with which we should be concerned.
Finally, this court recently reversed the denial of a motion to remand because the denial was predicated on an erroneous ERISA preemption finding in Joos v. Intermountain Health Care, Inc., 25 F.3d 915, 917 (10th Cir.1994). Although the ERISA preemption issue in that case was decided solely by the federal district court, this case should not be treated differently simply because the federal district court relied on the findings of the state court.
Having concluded that we have reviewing authority, we now turn to the question of whether the lower courts' ERISA preemption findings should be overturned. Congress "expressly included a broadly worded pre-emption provision" in ERISA. Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 138, 111 S.Ct. 478, 482, 112 L.Ed.2d 474 (1990). Section 514(a) of ERISA, 29 U.S.C.
The state court found that plaintiffs' claims "relate to" an ERISA plan within the meaning of 29 U.S.C. § 1144(a), rendering them preempted. Plaintiffs' App. at 187. The court relied substantially on similarities it perceived between the present case and Lee v. E.I. DuPont de Nemours and Co., 894 F.2d 755 (5th Cir.1990), in which state law claims of fraud and misrepresentation were also found to be preempted under 29 U.S.C. § 1144(a). Id. at 756. Having reviewed Lee, this court finds that it does indeed support the state court's holding that plaintiffs' state law claims are preempted.
In recommending dismissal of plaintiffs' final amended complaint, Magistrate Judge Abram found that plaintiffs' claims "relate to an employee benefit plan and are preempted by ERISA." Plaintiffs' App. at 455. Judge Abram cited Judge Sparr's ERISA preemption findings in Sandquist/Averhart and Sabell. Id. On October 28, 1994, a separate panel of this court affirmed those findings. In Averhart v. US WEST Management Pension Plan, 46 F.3d at 1484-86, this court held that ERISA preempts state law promissory estoppel claims virtually identical to the promissory estoppel claims made by plaintiffs in the present case.
We likewise hold in the present case that plaintiffs' state law claims are preempted by ERISA and affirm the removal of plaintiffs' first action to federal court and the denial of plaintiffs' motion to amend their complaint.
Standard of Review for Rule 12(b)(6) Dismissals
Judge Sparr ordered that plaintiffs' action be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6) because of deficiencies in their final amended complaint. "[T]he sufficiency of a complaint is a question of law which we review de novo." Ayala v. Joy Mfg. Co., 877 F.2d 846, 847 (10th Cir. 1989) (quoting Morgan v. City of Rawlins, 792 F.2d 975, 978 (10th Cir.1986)). "We will uphold a dismissal [under Federal Rule of Civil Procedure 12(b)(6)] only when it appears that the plaintiff can prove no set of facts in support of the claims that would entitle the plaintiff to relief." Jacobs, Visconsi & Jacobs, Co. v. City of Lawrence, 927 F.2d 1111, 1115 (10th Cir.1991). In performing our review, we accept all well-pleaded allegations as true and construe them in the light most favorable to plaintiffs. Williams v. Meese, 926 F.2d 994, 997 (10th Cir.1991) (citation omitted). We note that "`[t]he Federal Rules of Civil Procedure erect a powerful presumption against rejecting pleadings for failure to state a claim.'" Morgan, 792 F.2d at 978 (quoting Auster Oil & Gas Inc. v. Stream, 764 F.2d 381 (5th Cir.1985)).
We proceed to review each of plaintiffs' claims for relief in the order that seems most sensible to us.
1. Inadequate remedy under ERISA
In recommending that plaintiffs' tenth claim for relief be dismissed, Judge Abram found that plaintiffs' pursuit of relief "under any other law" was simply another attempt
We agree with the rationales set forth by Judges Abram and Sparr and affirm the dismissal of plaintiffs' tenth claim for relief "under any other law."
2. Breach of fiduciary duties
Plaintiffs allege that defendants US WEST, Cook, Greenhalgh, Ames, EMTP, the EMTP Review Committee, and Mountain Bell breached fiduciary duties and duties of loyalty with respect to EMTP, and that US WEST, the EBC, and Shea breached fiduciary duties or duties of loyalty with respect to the Pension Plan. Plaintiffs' App. at 424-27, ¶¶ 45-48. As support for these claims, plaintiffs rely on several paragraphs of allegations in the body of their complaint. Id. The most significant of these is paragraph 16, in which plaintiffs specifically mention defendants' fiduciary duties and duties of loyalty. Id. at 408-09, ¶ 16. Plaintiffs allege that the following acts by defendants induced plaintiffs to accept EMTP:
Id. Plaintiffs assert that by making such misrepresentations and omissions of material facts defendants violated the fiduciary standards in 29 U.S.C. § 1104(a)(1)(A) and (B).
Judge Abram recommended that plaintiffs' breach of fiduciary duties claims be dismissed, and Judge Sparr agreed. Judge Abram found that plaintiffs failed to properly allege that defendants were fiduciaries and failed to allege conduct that amounted to a breach of fiduciary duty. Plaintiffs' App. at 441-48.
a. Identification of fiduciaries
29 U.S.C. § 1002(21)(A) provides in pertinent part:
ERISA contemplates the existence of both named and unnamed fiduciaries. A "named fiduciary" is "a fiduciary who is named in the plan instrument, or who ... is identified as a fiduciary (A) by a person who is an employer or employee organization with respect to the plan or (B) by such an employer and such an employee organization acting jointly." 29 U.S.C. § 1102(a)(2).
Plaintiffs' allegations with respect to the identification of the defendants as fiduciaries are found at paragraphs 34 through 40 of the complaint. Plaintiffs' App. at 416-18, ¶¶ 34-40. Plaintiffs allege that Greenhalgh and Cook were "named fiduciaries" and that Greenhalgh, Cook, and Ames were all three "fiduciaries" because they "exercised discretionary authority or control with respect to the management of EMTP." Id. at ¶¶ 35(b) & (c), and 40. Plaintiffs also allege that the EMTP Plan Review Committee and all its members were both "named fiduciaries" and "fiduciaries." Id. at ¶ 36. We must accept these allegations as true and construe them in the light most favorable to plaintiffs. So doing, we find plaintiffs' allegations of defendants' fiduciary status sufficient.
b. Conduct amounting to breach of fiduciary duty
Judge Abram analyzed each of the paragraphs of allegations in plaintiffs' complaint and concluded that none of the allegations stated a claim for breach of fiduciary duties under 29 U.S.C. § 1132(a)(1)(A) and (B). Judge Abram paid close attention to the allegations of misrepresentations and failures to disclose in paragraph 16 of plaintiffs' complaint, set forth above. Plaintiffs' App. at 443-47. In considering those allegations, Judge Abram examined a number of cases, including Berlin v. Michigan Bell Telephone Co., 858 F.2d 1154 (6th Cir.1988), plaintiffs' primary case authority in support of their breach of fiduciary duties claims. Plaintiffs' App. at 445.
The factual scenario and breach of fiduciary duties claims in Berlin are remarkably similar to those in the present case. The plaintiffs were managers at Michigan Bell, another former AT & T subsidiary which was seeking to reduce its number of management-level employees. 858 F.2d at 1156-57. Like Mountain Bell, Michigan Bell developed a severance incentive package designed to encourage voluntary termination or early retirement. Id. at 1157. This package was called the Management Income Protection Plan or "MIPP" and, like EMTP, operated as an unfunded employee welfare benefit plan subject to ERISA. Id. MIPP could be offered to a specific individual or offered generally to a certain category of management-level employees, depending upon where the need for downsizing arose. Id.
Michigan Bell made its first general MIPP offering from October 1, 1980 to December 1, 1980. Id. at 1158. Following this offering, there was considerable interest among managers
The district court granted summary judgment in favor of defendants on the breach of fiduciary duties claim. The court found that the decision to offer MIPP benefits a second time was a business decision (i.e., a decision made by Michigan Bell and its Vice President while wearing the businessman's hat, not the fiduciary's hat) and, therefore, that communications or representations relating to that decision were nonfiduciary. Id. at 1162.
The Sixth Circuit reversed the district court, finding as follows:
Id. at 1163-64. The Sixth Circuit emphasized that it was not holding that the defendants (or any fiduciary) had an affirmative duty "to say anything at all or to communicate with potential plan participants about the future availability of MIPP." Id. at 1164. The court simply held that "if the plan administrator and/or plan fiduciary does communicate with potential plan participants after serious consideration has been given concerning a future implementation or offering under the plan, then any material misrepresentations may constitute a breach of their fiduciary duties." Id.; see Drennan v. General Motors Corp., 977 F.2d 246, 250-52 (6th Cir.1992), cert. denied, ___ U.S. ___, 113 S.Ct. 2416, 124 L.Ed.2d 639 (1993) ("As observed by the Berlin court, the duty to avoid material misrepresentations does not require the employer to predict an ultimate decision to offer a plan so long as it fairly discloses the progress of its serious considerations to make a plan available to affected employees.").
Judge Abram distinguished Berlin from the present case, finding that "[t]here are no allegations that US West was giving serious consideration to a modification of the EMTP at the time of their retirement in 1987" and, therefore, that "[e]ven under the Berlin decision, the plaintiffs have not stated a claim." Plaintiffs' App. at 447. Judge Abram apparently overlooked paragraph 16(f) and (g) of the complaint wherein plaintiffs specifically alleged "[t]hat the Defendants had given serious consideration of future better force reduction offers" and "falsely or recklessly represented that no better early separation incentive offer would follow EMTP." Plaintiffs' App. at 409 (emphasis added). As with all motions to dismiss, Judge Abram was required to accept these allegations as true and to construe them in the light most favorable to plaintiffs. See Williams, 926 F.2d at 997 (citation omitted). It appears that he did not. Judge Sparr's short dismissal order fails to mention this apparent error in Judge Abram's analysis.
The Sixth Circuit is not the only circuit court that has concluded that ERISA prohibits material misrepresentations by fiduciaries. Many other circuits have followed the Sixth Circuit's lead and held that ERISA imposes a duty on plan fiduciaries not to affirmatively mislead plan participants. Howe v. Varity Corp., 36 F.3d 746, 753-54 (8th Cir.1994); Mullins v. Pfizer, Inc., 23 F.3d 663, 668-69 (2d Cir.1994); Vartanian v. Monsanto Co., 14 F.3d 697, 702 (1st Cir. 1994); Fischer v. Philadelphia Elec. Co., 994 F.2d 130, 133-35 (3d Cir.), cert. denied, ___ U.S. ___, 114 S.Ct. 622, 126 L.Ed.2d 586 (1993); Anweiler v. American Elec. Power Serv. Corp., 3 F.3d 986, 991 (7th Cir.1993); Barnes v. Lacy, 927 F.2d 539, 543-44 (11th Cir.), cert. denied, 502 U.S. 938, 112 S.Ct. 372, 116 L.Ed.2d 324 (1991); Eddy v. Colonial
Accepting as true and construing in plaintiffs' favor plaintiffs' allegations of affirmative misrepresentations with respect to future force reduction offers, we find those allegations sufficient to state a claim for breach of fiduciary duties under Berlin. We accordingly reverse Judge Sparr's order of dismissal of plaintiffs' second and third claims for relief insofar as they purport to assert breach of fiduciary duties claims predicated on the allegations of material misrepresentations in paragraph 16 of the complaint. However, to the extent that plaintiffs seek to base a cause of action for breach of fiduciary duties on some other type of allegation or theory (e.g., failures to disclose, arbitrary and capricious denial of 5 + 5 benefits, discrimination between plaintiffs and other Pension Plan participants, or adding an "active employee" eligibility requirement to EMTP without Board approval), the dismissal of plaintiffs' second and third claims for relief is affirmed. See our discussion of such claims infra and this court's decision in Averhart, 46 F.3d at 1487-90.
3. Interference with plaintiffs' attainment of pension rights
Plaintiffs allege that defendants "discharged (constructively terminated) or discriminated
a. Constructive discharge
Plaintiffs allege that defendants "constructively terminated" them by directing a campaign of misrepresentations calculated to coerce acceptance of EMTP, including representations that EMTP would be better than any future force reduction offer and that future changes in company operations could result in lack of promotions, demotions, paycuts, transfers and even termination. Plaintiffs' App. at 405-09, ¶¶ 11-12 and 16-17. Plaintiffs contend that these allegations are sufficient to support a claim of constructive discharge in violation of 29 U.S.C. § 1140.
Judge Abram addressed plaintiffs' constructive discharge claim in discussing plaintiffs' second and fifth claims for relief. Judge Abram recommended that the claim be dismissed, finding as follows:
Plaintiffs' App. at 442, 450.
Judge Abram essentially found that the conduct alleged by plaintiffs was simply insufficient to support a claim under section 510 of ERISA. Judge Abram's analysis suggests that anything short of firing an employee, threatening to fire him, or harassing him until he's forced to quit or otherwise cease employment cannot constitute a constructive discharge. We think this too narrowly construes the concept of constructive discharge.
In this case, plaintiffs claim that defendants fraudulently induced or tricked them into quitting by deceiving them into thinking that EMTP was the best offer that would be made and that if they didn't accept EMTP, they would risk being demoted, transferred, or terminated. Plaintiffs' App. at 406, 409, ¶¶ 11(b) and 16(g). At what point, if any, does such trickery, if proved, amount to a constructive discharge? As of yet, this court
The three cases relied upon by Judge Abram in discussing plaintiffs' constructive discharge claim, Berger, Lojek, and Adams, were decided on motions for summary judgment, not motions to dismiss, and did not involve the sort of "trickery" alleged to have occurred in the present case. Adams, 936 F.2d at 370 (affirming summary judgment on ERISA § 510 discrimination claim where plaintiffs alleged employer had discriminated between salary and hourly employees with respect to allowing early retirement); Berger, 911 F.2d at 922-23 (affirming summary judgment on plaintiff's claim that employer constructively discharged him by simply informing him of a proposed Pension Plan amendment that would eliminate his special benefits); Lojek, 716 F.2d at 680-83 (affirming summary judgment on plaintiffs' claim that his former law firm constructively discharged him by changing its stock purchase and redemption agreements); see also Gray v. York Newspapers, Inc., 957 F.2d 1070, 1080-83 (3d Cir.1992) (affirming summary judgment because evidence was insufficient to support plaintiff's alleged belief that if she refused early retirement, she would be harassed and forced out of her job).
In Devine v. Combustion Engineering, Inc., 760 F.Supp. 989 (D.Conn.1991), the plaintiffs claimed that their former employer had violated ERISA § 510 by "tricking them `into leaving their employment early in order to save money.'" Id. at 993 (quoting the plaintiffs' complaint). The plaintiffs alleged that their employer had offered them a retirement incentive program including free lifetime medical and dental benefits and then, when plaintiffs accepted, broke their promise to provide such benefits. Id. at 990-91. With regard to the plaintiffs' claim under section 510 of ERISA, the court found: "Assuming plaintiffs' allegations to be true for purposes of the motion to dismiss, I believe that they have stated a cause of action for which relief may be granted. They are certainly entitled to offer evidence to support this claim." Id. at 993.
We believe that plaintiffs are equally entitled to develop and offer evidence of constructive discharge under ERISA § 510 in the present case. The alternative is to hold that an employer who (as alleged in this case) intentionally lies to his employees about the costs and benefits of accepting an early retirement offer in order to induce them to take the offer and prevent them from attaining additional pension rights does not violate ERISA § 510. That seems incongruous with both the letter and the spirit of section 510.
We must accept as true and construe in plaintiffs' favor plaintiffs' allegations that defendants purposely deceived them. If proven, such deception could be found to vitiate the voluntariness of plaintiffs' decision to accept termination under EMTP and could support an inference of constructive discharge. See Christopher v. Mobil Oil Corp., 950 F.2d 1209, 1223 (5th Cir.) (holding that alleged deceptive conduct by Mobil might be found to vitiate the voluntariness of plaintiffs' decision to retire), cert. denied, ___ U.S. ___, 113 S.Ct. 68, 121 L.Ed.2d 35 (1992); Henn v. National Geographic Soc., 819 F.2d 824, 828-29 (7th Cir.), (holding that "voluntariness" question in constructive discharge case depends in part on whether plaintiff's choice was "free from fraud or other misconduct"), cert. denied, 484 U.S. 964, 108 S.Ct. 454,
We emphasize that we make no evaluation of the factual or legal sufficiency of any evidence that plaintiffs may seek to present in the district court, such as the aforementioned management bulletin and the article in the MB Times. We simply hold that plaintiffs have stated a claim for constructive discharge by alleging that defendants purposely deceived them into accepting EMTP in order to prevent them from attaining greater pension rights. Whether plaintiffs can actually find and present evidence to this effect sufficient to establish a "prima facie case" under ERISA § 510 is another matter altogether. See Gavalik v. Continental Can Co., 812 F.2d 834, 852 (3d Cir.) (holding that in order to establish a "prima facie case" under section 510 of ERISA, a plaintiff must show "(1) prohibited employer conduct (2) taken for the purpose of interfering (3) with the attainment of any right to which the employee may become entitled") cert. denied, 484 U.S. 979, 108 S.Ct. 495, 98 L.Ed.2d 492 (1987).
As support for their discrimination claim under ERISA § 510, plaintiffs allege that defendants discriminated between managers and directors at Mountain Bell by making the "active employee" eligibility requirement to the 5 + 5 amendment applicable only to managers. Plaintiffs' App. at 409-12, ¶¶ 18-21. Plaintiffs contend that this "discrimination" violates ERISA § 510.
Judge Abram addressed plaintiffs' discrimination claim in discussing plaintiffs' second and third claims for relief. He found that the allegations of discrimination did not set forth a claim cognizable under 29 U.S.C. § 1140. Plaintiffs' App. at 442, 448. Judge Abram cited Judge Sparr's decision in Sabell, 1992 WL 469776 at *7, finding that "there were legitimate reasons for the Defendant to differentiate between the Directors' Program group and the Plaintiffs [managers] for purposes of eligibility for 5 + 5 benefits." This court has since affirmed that decision, noting that "`ERISA does not mandate that employers provide any particular benefits, and does not itself proscribe discrimination in the provision of employee benefits.'" Averhart, 46 F.3d at 1488 (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91, 103 S.Ct. 2890, 2897, 77 L.Ed.2d 490 (1983) and citing Owens v. Storehouse, Inc., 984 F.2d 394, 398 (11th Cir.1993) and McGann v. H & H Music Co., 946 F.2d 401, 408 (5th Cir.1991), cert. denied sub nom., Greenberg v. H & H Music Co., ___ U.S. ___, 113 S.Ct. 482, 121 L.Ed.2d 387 (1992)).
For the same reasons noted in Averhart, we affirm the dismissal of plaintiffs' cause of action for discrimination under ERISA § 510, 29 U.S.C. § 1140, in the present case.
4. Void and/or arbitrary and capricious denial of 5 + 5 benefits to those who had accepted early retirement under EMTP option 2
As discussed supra, plaintiff Cowdrey accepted termination under EMTP option 2. Under option 2, Cowdrey was to take a three year leave of absence, get credit for three more years of service, and receive one-half of his annual salary as severance pay at the end of those three years. During the three year leave of absence, Cowdrey was to continue to receive employee benefits and participate in the US WEST Employee Stock Ownership Plan.
Plaintiff Cowdrey alleges that the EBC's decision to deny 5 + 5 benefits to EMTP option 2 retirees is void because "the EBC has not acted in accordance with § 11 of the Pension Plan." Id. at ¶ 64(a). This court considered the same claim in reviewing Sabell and affirmed summary judgment, stating as follows:
Averhart, 46 F.3d at 1489. Given this finding in Sabell and the fact that plaintiffs in the present case also concede that the EBC had Board approval to adopt the 5 + 5 amendment, we must affirm the dismissal of plaintiff Cowdrey's claim that the "active employee" eligibility requirement is void.
Cowdrey also alleges that the EBC's denial of 5 + 5 benefits is arbitrary and capricious because it "impair[ed] the rights of participants granted under the initial 5 + 5 Amendment" and "violated the ERISA provisions as set forth in the Second, Third, Fourth and Fifth Claims for Relief." Plaintiffs' App. at 432, ¶ 64(b) and (c). The "arbitrary and capricious" standard is applicable whenever an administrator or fiduciary has been given "discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989); see, e.g., Rademacher v. Colorado Ass'n of Soil Conservation Districts Medical Benefit Plan, 11 F.3d 1567, 1569 (10th Cir.1993); Sandoval v. Aetna Life and Casualty Ins. Co., 967 F.2d 377, 379-80 (10th Cir.1992). "An administrator's action is arbitrary and capricious if it is based on a `lack of substantial evidence, mistake of law, bad faith, [or] conflict of interest.'" Counts v. Kissack Water and Oil Serv., Inc., 986 F.2d 1322, 1324 (10th Cir. 1993) (quoting Winchester v. Prudential Life Ins. Co., 975 F.2d 1479, 1483 (10th Cir.1992)).
Here, there is no allegation that the denial was based on a lack of substantial evidence, mistake of law, bad faith, and/or conflict of interest, or anything arguably akin to the above. The denial was simply based on the "active employee on the payroll" eligibility requirement. Accordingly, we affirm the dismissal of the eighth claim for relief. See Sandquist/Averhart, 1992 WL 469739 at *3-4 (granting summary judgment for defendants on "arbitrary and capricious" issue); Sabell, 1992 WL 469776 at *3-7 (same); Averhart, 46 F.3d at 1486-89 (affirming summary judgment on "arbitrary and capricious" issues in Sandquist, Averhart, and Sabell).
5. Using Pension Plan assets to benefit plan sponsor
Judge Abram recommended dismissal of plaintiffs' fourth claim for relief, and Judge Sparr agreed. Judge Abram found that the plaintiffs had merely made a "conclusory allegation" and had failed to set forth any facts or law that supported their section 403(c) claim. Plaintiffs' App. at 448-49. Judge Abram also relied on Holliday v. Xerox Corp., 732 F.2d 548, 551 (6th Cir.), cert. denied, 469 U.S. 917, 105 S.Ct. 294, 83 L.Ed.2d 229 (1984), in which the Sixth Circuit stated:
We agree with Judge Abram's analysis and affirm the dismissal of plaintiffs' fourth claim for relief. The anti-inurement or "exclusive benefit" policy of section 403(c) of ERISA is intended to "protect participants' expected payments" by preventing employers from diverting funds to themselves. Outzen v. FDIC ex rel. State Examiner of Banks, 948 F.2d 1184, 1188 (10th Cir.1991). An alleged violation of section 403(c) might, for example, involve a reversion of surplus assets to an employer at a plan's termination pursuant to a plan provision. See, e.g., Borst v. Chevron Corp., 36 F.3d 1308, 1320-21 (5th Cir.1994); Holland v. Valhi Inc., 22 F.3d 968 (10th Cir.1994); Outzen, 948 F.2d at 1185-88.
In the present case, no such reversion, diversion, or any other sort of payment of surplus assets to Mountain Bell or US WEST is alleged. Plaintiffs simply claim that defendants should have used the surplus plan assets to benefit plaintiffs instead of using them to fund a second early retirement offer which furthered defendants' desired reductions in force. It is undisputed that the surplus funds which plaintiffs wish had passed to them under EMTP remained with the Pension Plan and were still held in trust for participants in the plan and their beneficiaries. There is no allegation that the assets were used in any way other than to pay benefits to participants and beneficiaries and to pay reasonable administrative expenses. Hence, there are no allegations which would support the return of any assets to the Pension Plan under section 403(c) of ERISA. See Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan Benefits Committee, 953 F.2d 587, 592 n. 6 (11th Cir.1992) ("The exclusive benefit rule can only be violated if there has been a removal of plan assets for the benefit of the plan sponsor or anyone other than the plan participants.") (citing Holliday, 732 F.2d at 551-52).
6. Partial termination of Pension Plan
Judge Abram recommended that plaintiffs' seventh claim for relief be dismissed, and Judge Sparr agreed. Judge Abram based his recommendation on Sage v. Automation,
As discussed supra in connection with the claims for constructive discharge under section 510 of ERISA, plaintiffs have alleged that their decision to accept termination under EMTP was fraudulently induced and therefore not voluntary. Given this allegation, neither Sage nor Anderson would appear to be applicable. The court must accordingly reverse the dismissal of plaintiffs' partial termination claim.
7. Civil penalties for failure to supply requested information
Plaintiffs alleged that they "requested certain information" from "the Defendant administrators," but "the Defendant administrators" failed or refused to comply with that request. Plaintiffs' App. at 432-33, ¶¶ 65-67. Plaintiffs did not specify what the "certain information" was nor identify the particular "Defendant administrators" to whom their requests were addressed.
Judge Abram, noting that "thousands of documents ha[d] been produced" and that the assessment of civil penalties under section 1132(c) was "for the court's discretion," recommended dismissal of plaintiffs' ninth claim for relief because it simply "fail[ed] to state a claim." Plaintiffs' App. at 453. Judge Abram found that plaintiffs had not alleged what documents were requested, what documents were received, and how plaintiffs had been harmed. Judge Sparr agreed with Judge Abram's findings. We too agree with Judge Abram's analysis and affirm the dismissal of plaintiffs' ninth claim for relief.
8. Other "claims for relief"
Plaintiffs' remaining claims, the
The standards for recusal are well established. 28 U.S.C. § 455(a) provides that a judge "shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned." Subsection (b)(1) further provides for mandatory recusal where the judge "has personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts." The basic test is whether a reasonable person armed with the relevant facts would harbor doubts about the judge's impartiality United States v. Cooley, 1 F.3d 985, 993 (10th Cir.1993); United States v. Burger, 964 F.2d 1065, 1070 (10th Cir.1992); Hinman v. Rogers, 831 F.2d 937, 939 (10th Cir.1987). "There is as much obligation for a judge not to recuse when there is no occasion for him to do so as there is for him to do so when there is." Hinman, 831 F.2d at 939. We review a recusal decision on an abuse of discretion standard. Willner v. University of Kansas, 848 F.2d 1020, 1023 (10th Cir. 1988), cert. denied, 488 U.S. 1011, 109 S.Ct. 797, 102 L.Ed.2d 788 (1989).
Plaintiffs assert that Judge Sparr should have recused himself for the following reasons: (1) he had formerly worked for and represented Mountain Bell; (2) he had special knowledge of the internal workings of Mountain Bell; and (3) he knew Fred Cook and was acquainted with other individuals at US WEST. Defendants counter that (1) Judge Sparr terminated his employment with Mountain Bell more than twenty years ago and has not seen Mr. Cook and other witnesses or family members since then, and (2) in any event, mere familiarity is not enough to mandate a recusal.
We find that Judge Sparr's denial of plaintiffs' motion to recuse was not an abuse of discretion. A reasonable person would not harbor doubts about Judge Sparr's impartiality in the present case. Counsel in Averhart, Sandquist, and Sabell perceived no "appearance of impartiality," (Defendants' Supp.App. at 210), and doubts were not raised simply because Judge Sparr worked for or even represented Mountain Bell some twenty to thirty years ago and may have socialized with fellow Mountain Bell employees. See United States v. Lovaglia, 954 F.2d 811, 815-17 (2d Cir.1992) (affirming denial of recusal where judge's business or social relationship ceased seven or eight years prior to proceedings); Sierra Club v. Simkins Indus., Inc., 847 F.2d 1109, 1116-18 (4th Cir.1988) (affirming denial of recusal where judge had been member of Sierra Club fourteen years ago), cert. denied, 491 U.S. 904, 109 S.Ct. 3185, 105 L.Ed.2d 694 (1989). Moreover, there is nothing in the record to suggest that Judge Sparr was biased in favor of defendants. Judge Sparr appears to have been more than fair in his treatment of plaintiffs, giving them numerous opportunities to replead their case.
Accordingly, the judgment of the United States District Court for the District of Colorado is AFFIRMED IN PART AND REVERSED IN PART. The case is remanded to the district court for proceedings consistent with this opinion.
Id. at 1156.
Because we hold that plaintiffs failed to state a claim for failure to disclose, we need not decide whether a duty to disclose exists.
We decline to decide whether the individual relief sought in paragraphs 25 and 26 may be available. Should that issue arise in the district court, we direct the court's attention to the following cases: Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985); Howe v. Varity Corp., 36 F.3d 746 (8th Cir.1994); and Anweiler v. American Elec. Power Serv. Corp., 3 F.3d 986 (7th Cir. 1993).
Custer v. Pan American Life Ins. Co., 12 F.3d 410, 421 (4th Cir.1993).
In the present case, plaintiffs are still receiving benefits and therefore have standing.