Russell v. Harman International Industries, Inc.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 24, 2014 Decided December 12, 2014

No. 13-7095

PATRICK RUSSELL, ON BEHALF OF HIMSELF

AND ALL OTHERS SIMILARLY SITUATED,

APPELLANT

v.

HARMAN INTERNATIONAL INDUSTRIES, INC., ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:07-cv-02212)

Thomas J. McKenna, pro hac vice, argued the cause for

the appellant. Toyja E. Kelley and John B. Isbister were with

him on brief.

Sara Pikofsky argued the cause for the appellees. Evan

Miller was with her on brief. Thomas F. Cullen, Jr. entered

an appearance.

Before: HENDERSON, ROGERS and GRIFFITH, Circuit

Judges.

Opinion for the Court filed by Circuit Judge HENDERSON.

2

KAREN LECRAFT HENDERSON, Circuit Judge: This appeal

involves the conversion process set forth in Rule 12(d) of the

Federal Rules of Civil Procedure. That rule provides:

If, on a motion under Rule 12(b)(6) or 12(c), matters

outside the pleadings are presented to and not

excluded by the court, the motion must be treated as

one for summary judgment under Rule 56. All

parties must be given a reasonable opportunity to

present all the material that is pertinent to the

motion.

FED. R. CIV. P. 12(d). Patrick Russell, the appellant,

complains that the district court converted the appellees’

motion to dismiss and granted them summary judgment

without giving him a “reasonable opportunity” to present

evidence. But we do not reach that issue because, assuming

arguendo that the district court violated Rule 12(d), the error

would be harmless in this case. For that reason, we affirm.

I. BACKGROUND

Patrick Russell is a former employee of Harman

International Industries, Inc. Russell participated in Harman’s

401(k) plan, which invests primarily in Harman common

stock. In April 2007, Harman issued a press release claiming

that two investment firms had agreed to acquire the company.

That deal ultimately fell through, triggering a corresponding

decline in the value of Harman’s stock. Russell alleges that

the deal failed because agents of Harman made false and

misleading statements to the investment firms. He contends

that these statements constituted a breach of fiduciary duty in

violation of the Employee Retirement Income Security Act

(ERISA). In December 2007, Russell filed a class-action

complaint against Harman and various individuals associated

with the company (collectively, Harman).

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When he filed suit, Russell no longer worked for

Harman. Six months earlier, Russell had signed a severance

agreement that included the following release of liability:

Release of Known and Unknown Claims.

Employee . . . releases and forever discharges the

Company, its affiliates, and all of their agents . . . of

and from any Claim (as defined below) which have

[sic] arisen on or before the date that this Agreement

becomes effective. . . . The Claims released by this

agreement include, but are not limited to, Claims

arising out of, based upon, or relating to . . . the

Employee Retirement Income Security Act . . . .

Employee expressly acknowledges, agrees and

recites that: (i) this Agreement is written in a manner

he understands; . . . (iii) he has entered into and

executed this Agreement knowingly and voluntarily;

(v) [sic] he has read and understands this Agreement

in its entirety; and (vi) he has not been forced to sign

this Agreement by any employee or agent of the

Company.

Aug. 5, 2008 Mot. to Dismiss, Ex. 1 (emphasis added). In

return for his signature, Harman gave Russell severance

payments he was not otherwise entitled to receive. The

severance agreement advised Russell to consult a lawyer

before signing and gave him seven days to do so. Russell did

not avail himself of that opportunity.

Harman used the severance agreement’s release as the

basis for a motion to dismiss under Rule 12(b)(6). The

motion contended that Russell gave up his right to bring an

ERISA action. To support this defense, Harman attached the

severance agreement as an exhibit to the motion. After

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holding the case under advisement for some time, the district

court ordered supplemental briefing and asked the parties to

address the meaning of the phrase (emphasized above) “any

Claim . . . arisen on or before the date that this Agreement

becomes effective.” The order did not expressly mention

Rule 12(d) or the possibility of converting Harman’s motion

to dismiss into one for summary judgment. Harman and

Russell promptly submitted their supplemental briefs.

Although the district court asked the parties to address only

one issue, Russell’s brief addressed many more. He argued

that (1) his claims did not “arise[]” under the terms of the

severance agreement, (2) he did not knowingly and

voluntarily waive his ERISA rights, (3) the severance

agreement could not waive the claims of other plan members

and (4) the severance agreement was void as against public

policy. See Feb. 28, 2013 P’s Opp. to D’s Supp. Memo. 2–7.

The district court rendered its decision in May 2013. For

the first time, the district court expressly invoked Rule 12(d)

and converted Harman’s motion to dismiss into one for

summary judgment. In its decision, the district court

determined, among other things, that Russell had knowingly

and voluntarily waived his ERISA rights by signing the

severance agreement. The district court relied on the

following factors:

the Agreement states clearly the consideration

Russell received for entering into the Agreement,

highlights the rights that Russell released, uses clear

and precise language to describe the scope of that

release, provides that Russell had time to consider

the Agreement, and counsels him to consult an

attorney.

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Russell v. Harman Int’l Indus., Inc., 945 F. Supp. 2d 68, 76

(D.D.C. 2013). The district court then entered summary

judgment for Harman.

Russell timely appealed. Our jurisdiction arises under 28

U.S.C. § 1291.

II. DISCUSSION

Russell properly raises one argument on appeal. 1 He

contends that the district court violated Rule 12(d) by entering

summary judgment without giving him a “reasonable

opportunity” to present evidence. But we do not decide

whether the district court violated Rule 12(d) because,

assuming it did, the error would be harmless. See 28 U.S.C. §

2111.

A district court’s failure to comply with the procedural

safeguards of Rule 12(d) does not constitute reversible error if

it did not prejudice the parties. See Holy Land Found. for

Relief & Dev. v. Ashcroft, 333 F.3d 156, 165 (D.C. Cir. 2003);

Hollis v. Dep’t of Army, 856 F.2d 1541, 1544 (D.C. Cir.

1988). Here, Russell suffered no prejudice because, even had

he obtained his now-desired discovery, he could not

demonstrate a “genuine issue of material fact” sufficient to

prevail at summary judgment. See Colbert v. Potter, 471 F.3d

158, 168 (D.C. Cir. 2006); Holy Land, 333 F.3d at 165;

Hollis, 856 F.2d at 1544 n.34.

1

Russell also attempts to argue—for the first time in his reply

brief—that the severance agreement covers only Harman itself, not the

individual defendants. We decline to consider this argument because

Russell forfeited it. See Am. Wildlands v. Kempthorne, 530 F.3d 991,

1001 (D.C. Cir. 2008) (arguments raised for first time in reply brief are

forfeited).

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Russell complains that the district court did not afford

him discovery on whether he knowingly and voluntarily

consented to the severance agreement. We generally require

waivers of liability to be “knowing and voluntary” in the

context of Title VII. See United States v. Trucking Emp’rs,

Inc., 561 F.2d 313, 318 (D.C. Cir. 1977) (citing Alexander v.

Gardner-Denver Co., 415 U.S. 36, 52 n.15 (1974)). Most of

our sister circuits have extended the knowing-and-voluntary

requirement to the ERISA context as well. See, e.g., Smart v.

Gillette Co. Long-Term Disability Plan, 70 F.3d 173, 181 (1st

Cir. 1995); Laniok v. Advisory Comm. of Brainerd Mfg. Co.

Pension Plan, 935 F.2d 1360, 1367 (2d Cir. 1991); Jakimas v.

Hoffmann–La Roche, Inc., 485 F.3d 770, 781 (3d Cir. 2007);

Chaplin v. NationsCredit Corp., 307 F.3d 368, 373 n.6 (5th

Cir. 2002); Howell v. Motorola, Inc., 633 F.3d 552, 559 (7th

Cir. 2011); Leavitt v. Nw. Bell Tel. Co., 921 F.2d 160, 162

(8th Cir. 1990); Vizcaino v. Microsoft Corp., 120 F.3d 1006,

1012 (9th Cir. 1997); Wright v. Sw. Bell Tel. Co., 925 F.2d

1288, 1293 (10th Cir. 1991). Our precedent is unclear.

Compare Trucking Emp’rs, 561 F.2d at 318 (Title VII

waivers must be knowing and voluntary), and Brown v.

Brody, 199 F.3d 446, 456 n.10 (D.C. Cir. 1999) (Title VII

jurisprudence is instructive in interpreting ERISA), with

Makins v. Dist. of Columbia, 277 F.3d 544, 547 (D.C. Cir.

2002) (declining to apply knowing-and-voluntary requirement

to Title VII waiver in settlement agreement). We see no

reason to take a position in this case because the parties agree

that the knowing-and-voluntary standard applies. We will

therefore assume, arguendo, that an employee must

knowingly and voluntarily consent to a waiver of ERISA

liability.

Our sister circuits rely on a non-exhaustive list of factors

to determine whether, under the totality of the circumstances,

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an ERISA waiver is knowing and voluntary. The following

list from the Second Circuit is representative:

1) the plaintiff’s education and business experience,

2) the amount of time the plaintiff had possession of

or access to the agreement before signing it, 3) the

role of plaintiff in deciding the terms of the

agreement, 4) the clarity of the agreement, 5)

whether the plaintiff was represented by or consulted

with an attorney, as well as whether an employer

encouraged the employee to consult an attorney and

whether the employee had a fair opportunity to do so

and 6) whether the consideration given in exchange

for the waiver exceeds employee benefits to which

the employee was already entitled by contract or law.

Laniok, 935 F.2d at 1368 (brackets omitted).

Russell contends that he needed discovery on each and

every one of these factors. But at least two of the factors—

Factors 4 and 6—are apparent from the face of the severance

agreement. Granted, the remaining factors ordinarily require

the district court to evaluate not only characteristics unique to

the employee but also the circumstances surrounding his

assent to the waiver. But here, those factors are all matters

within Russell’s own knowledge. Russell knows his

education and business experience, the role he played in

deciding the terms of the agreement and whether he consulted

counsel. If Harman had pressured or coerced Russell into

signing the release, Russell would undoubtedly be aware of it.

Despite the length of this litigation, Russell has never

proffered any evidence to undermine the knowing-and-

voluntary nature of his consent or identified a plausible line of

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inquiry for discovery that might lead to evidence creating a

disputed issue of material fact. 2

Accordingly, Russell was not prejudiced by his lack of

discovery. Russell’s failure to suggest any reason why his

consent to the severance agreement was unknowing or

involuntary convinces us that discovery would be futile. We

decline to remand a case when discovery would amount to

“nothing more than a fishing expedition” because the

appellant is “unable to offer anything but rank speculation.”

Bastin v. Fed. Nat’l Mortg. Ass’n, 104 F.3d 1392, 1396 (D.C.

Cir. 1997). Thus, the district court’s violation of Rule 12(d),

assuming it occurred, would be harmless error. See Colbert,

471 F.3d at 168–69; Holy Land, 333 F.3d at 165–66.

Of course, our harmless-error analysis is confined to the

unique circumstances of this case. It bears repeating:

We do not propose that in every case in which a

district court improperly goes beyond the pleadings

2

In his reply brief, Russell makes two challenges to the severance

agreement—both of which border on the conspiratorial. First, Russell

complains that the Harman agent who signed the severance agreement

signed her name with one pen but dated her signature with another pen.

Putting aside an obvious, innocent explanation for this discrepancy—that

the first pen ran out of ink—the sufficiency of Harman’s consent to the

severance agreement says nothing about the sufficiency of Russell’s

consent. Only the latter matters under the knowing-and-voluntary

standard.

Second, Russell notes that he signed the severance agreement the

same day he received it, even though Harman gave him seven days to

consider it. Russell appears to be suggesting that Harman pressured him

into signing the severance agreement before he could fully examine it.

Yet, if such pressure occurred, Russell would know about it. His failure to

come forward with any evidence of such pressure further convinces us that

Russell is merely grasping at straws.

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in granting a motion to dismiss without affording the

protections contemplated in Rule 12[(d)], a losing

party will lose once more on appeal because of its

inability to show what it would have produced had it

been given the opportunity. In a general case,

perhaps the opportunity for discovery might have

produced precisely that which was lacking.

Holy Land, 333 F.3d at 166. This case is not a “general case,”

however, because Russell neither proffered evidence nor

identified a plausible line of inquiry regarding the matters on

which he says discovery is needed. Stated differently, Russell

“had every opportunity and incentive to produce the evidence

sufficient to rebut the ample evidence supporting the [district

court’s] conclusion.” Id. Because Russell has failed to show

prejudice resulting from his lack of discovery, we conclude

that the district court’s assumed error was harmless.

For the foregoing reasons, we affirm the district court’s

grant of summary judgment.

So ordered.