Holmes v. Pension Plan of Bethlehem Steel Corp.

Opinions of the United

2000 Decisions States Court of Appeals

for the Third Circuit

5-23-2000

Holmes v. Pension Plan/ Bethlehem Steel

Precedential or Non-Precedential:

Docket 99-1619

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Filed May 23, 2000

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 99-1619 and 99-1620

ARNOLD HOLMES; LAWRENCE HOLLYFIELD, Fiduciary

to the Estate of Collins Hollyfield

v.

PENSION PLAN OF BETHLEHEM STEEL CORPORATION

AND SUBSIDIARY COMPANIES; EMPLOYEE BENEFITS

ADMINISTRATION COMMITTEE OF BETHLEHEM STEEL

CORPORATION; MICHAEL P. DOPERA;

JOHN/JANE DOES 1-10

Arnold Holmes and Lawrence Hollyfield, Fiduciary

to the Estates of original named plaintiff Collins

Hollyfield, individually and on behalf of all

members of the proposed class and subclasses,

Appellants at No. 99-1619

ARNOLD HOLMES; LAWRENCE HOLLYFIELD, Fiduciary of

the Estate of Collins Hollyfield

v.

PENSION PLAN OF BETHLEHEM STEEL CORPORATION

AND SUBSIDIARY COMPANIES; EMPLOYEE BENEFITS

ADMINISTRATION COMMITTEE OF BETHLEHEM STEEL

CORPORATION; MICHAEL P. DOPERA;

JOHN/JANE DOES 1-10

the Pension Plan of Bethlehem Steel Corporation and

Subsidiary Companies, the Employee Benefits

Administration Committee of Bethlehem Steel Corporation

and Michael P. Dopera,

Appellants at 99-1620

APPEAL FROM THE

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

(D.C. No. 98-cv-01241)

District Judge: Honorable Franklin S. Van Antwerpen

ARGUED April 11, 2000

BEFORE: NYGAARD, ALITO, and GIBSON,*

Circuit Judges.

(Filed May 23, 2000)

Alan M. Sandals, Esq. (argued)

Howard I. Langer, Esq.

Sandals, Langer & Taylor

1650 Market Street

One Liberty Place, 50th Floor

Philadelphia, PA 19103

Attorneys for Appellants

G. Stewart Webb, Jr., Esq. (argued)

Venable, Baetjer & Howard

2 Hopkins Plaza

1800 Mercantile Bank & Trust

Building

Baltimore, MD 21201

Attorney for Appellees

OPINION OF THE COURT

NYGAARD, Circuit Judge.

Appellants, Arnold Holmes and Lawrence Hollyfield,filed

a civil action against Appellees pursuant to SS 404 and

502(a) of the Employment Retirement Income Security Act.

_________________________________________________________________

* The Honorable John R. Gibson, United States Circuit Judge for the

Eighth Circuit Court of Appeals, sitting by designation.

2

29 U.S.C. SS 1104 & 1132(a). The District Court had

jurisdiction over the action pursuant to 29 U.S.C.

S 1132(e)(1). We have jurisdiction to review the District

Court's final order pursuant to 28 U.S.C. S 1291.

Appellants, plaintiffs below, successfully prosecuted their

claim to interest on pension benefits they received after a

decade and a half of delay. Nevertheless, Appellants

challenge two equitable limitations the District Court placed

on the interest it awarded. They also challenge the District

Court's refusal to certify two classes of plaintiffs they

proposed for class action purposes. Finally, they challenge

the District Court's ruling that a legal memorandum they

sought to discover was protected by the doctrine of work-

product immunity. We will affirm in part, and reverse in

part.

Appellees, defendants below, cross appeal, ostensibly

raising an issue as to whether the District Court erred by

concluding that Appellants were entitled to any interest at

all, regardless of the limitations it imposed. Rather than

directly challenging the District Court's decision, however,

they limit their argument to a critique of our decision,

which the District Court correctly found controlling, in

Fotta v. Trustees of the United Mine Workers of Am. Health

& Retirement Fund, 165 F.3d 209 (3d Cir. 1998) (holding

that ERISA permits actions to recover interest on wrongly

withheld benefits even where the benefits were paid before

litigation). We hold that the argument is not properly

presented in this appeal, and decline to entertain it.

I. Background Facts & Procedure

Appellants, as well as the members of the plaintiff classes

they seek to certify, are participants in, or beneficiaries of,

the Pension Plan of Bethlehem Steel Corporation and its

Subsidiary Companies (hereafter referred to as "the Plan").

Prior to a 1977 amendment, the Plan required that benefits

due under the Plan be offset (i.e., reduced) by the amount

of any pension benefits the relevant participant received

from any source other than the Plan itself. In July 1977,

the Plan was amended so that the offset requirement

applied only to non-plan pension benefits "attributable to

3

employment with an Employing Company." See Bethlehem

1977 Salaried Pension Plan S 3.8 (J.A. at 128-29). In other

words, after the 1977 amendment, non-Plan pension

benefits received from sources falling outside the definition

of an Employing Company are not deducted from benefits

received from the Plan itself.

The Plan defines an "Employing Company" to mean

Bethlehem Steel, any Bethlehem Subsidiary that has

adopted the Plan, and "any corporation which, prior to July

31, 1966, was merged into or consolidated with any such

subsidiary company or with" Bethlehem Steel. See

Bethlehem Steel 1977 Salaried Pension Plan at 2 (J.A. at

120). Additionally, the Plan provides that benefits received

from sources falling within the definition of an Employing

Company are offset only to the extent they were earned

during a period in which the participant was being

"credited with continuous service for the purpose of

calculating the amount of any regular pension under[the]

Plan." Id. at 19-20 (J.A. at 128-29).

Appellants Holmes and Hollyfield both worked for

Bethlehem Steel subsidiaries prior to their respective

retirements, and both participated in the Plan. After retiring

in 1977, Hollyfield applied for pension benefits from both

the Plan, and from the United Mine Workers of America

Retirement Fund. Unlike the Plan, the UMWA Fund is not

employer specific. Rather, it is a multi-employer plan

providing benefits to all workers represented by the UMWA.

Like the Plan, however, it is funded entirely by employer

contributions, including contributions from Bethlehem

Steel and its subsidiaries.

Following his retirement, the Plan awarded Hollyfield

$214.13 in monthly pension benefits, effective December 1,

1977. Nearly a year later, in November 1978, his

application for UMWA benefits was granted in the amount

of $250 per month, retroactive to September 1, 1977.

Thereafter, the Plan notified Hollyfield that his Plan benefits

would be reduced by the full amount of his UMWA benefits.

Thus, because his UMWA benefits were greater than this

Plan benefits, Hollyfield's Plan benefits were eliminated

altogether. Additionally, because his UMWA benefits award

was retroactive, the Plan also required Hollyfield to repay

4

all Plan benefits he had previously received. Hollyfield

complied, paying the Plan $2,449.56 in previously received

benefits. The Plan did not request, and Hollyfield did not

pay, interest on the repaid benefits.

Appellant Holmes retired in 1980 and, like Hollyfield,

applied for pension benefits from both the Plan and from

the UMWA Fund. The Plan awarded him a monthly benefit

of $1,224.36, effective February 1, 1981. In October 1981,

the UMWA Fund awarded Holmes a monthly benefit of

$290.00, retroactive to November 1980. As it did with

Hollyfield, the Plan determined that all of Holmes' UMWA

benefits should be offset against his Plan benefits. And,

again, it required Holmes to repay all offset amounts

already received. Thereafter, Holmes repaid the Plan

$2,825.00, reflecting principal only and no interest.

In 1994, Hollyfield's son contacted Plan administrators

regarding his father's Plan benefits. In a subsequent

investigation, the Plan determined that none of Hollyfield's

UMWA benefits were earned during a period in which he

was being credited with continuous service for purposes of

calculating his Plan benefits. In other words, the Plan

concluded that none of Hollyfield's UMWA pension should

have been offset against his Plan benefits during the 17-

year period since he had retired. Consequently, the Plan

paid Hollyfield a lump sum of $47,553 in past-due benefits.

That sum represented past-due principal only, and did not

include any interest payments for the period of delay.

A similar series of events in 1997 led to Holmes'

collection of $24,514 in past-due Plan benefits. In contrast

to Hollyfield's case, however, the Plan determined that

Holmes earned 65% of his UMWA benefits at the same time

he was being credited with continuous service for purposes

of calculating his benefits under the Plan. Therefore, his

lump-sum payment amounted to only 35% of the Plan

benefits that had been offset in the sixteen years since his

retirement, not the 100% that Hollyfield had recovered.

Shortly after Holmes received his past-due benefits, his

attorney placed a call to the Plan's offices. In a conversation

with an assistant to the Plan's administrator, the attorney

claimed that Holmes was entitled to interest on his past-

5

due benefits as well as the principal. In response, a Plan

attorney prepared a memorandum analyzing the legal

issues surrounding Holmes' interest claim. The

memorandum was circulated to other Plan attorneys, as

well as to its administrator. Thereafter, the administrator

informed Holmes' attorney that nothing in the Plan

provided for interest payments on delayed benefits, and

that the administrator had determined such a payment

would not be appropriate. See Letter from Dopera to

Thornton of 07/22/1997 (J.A. at 185). Holmes then

appealed the denial of his interest claim to the Plan's

Employee Benefits Administration Committee. The

Committee affirmed. See Letter from Dopera to Thornton of

10/10/1997 (J.A. at 191).

In March 1998, Holmes and Hollyfield filed a civil

complaint against the Plan and its administrators. In Count

One of the complaint, both Holmes and Hollyfield sought

interest on their delayed benefits, as well as disgorgement

of any additional profits the Plan may have earned on those

benefits during the period of delay. Holmes also challenged

the continuing 65% offset of his UMWA benefits against his

Plan benefits, arguing that the UMWA benefits were not

received from an "Employing Company." See App. at 20.

Count Two alleged violations of the fiduciary duty to

disclose accurate information. See id. at 21.

The complaint also sought certification of two proposed

classes of Plan participants and beneficiaries: (1) those

whose benefits had been, were or would one day be

erroneously offset; and (2) those who had received or one

day would receive past-due benefits but neither interest nor

disgorgement of unjust gains. On August 12, 1998, the

District Court denied the motion for class certification

without prejudice, granting Appellants leave to refile their

motion after additional discovery.

During the course of discovery, Appellants sought to

compel production of the legal memorandum prepared in

response to Plaintiff Holmes' initial claim to interest on his

delayed benefits. The defendants argued that the

memorandum was protected by both the attorney-client

privilege and the doctrine of work-product immunity. A

Magistrate Judge rejected the attorney-client privilege

6

claim, but concluded that the memorandum was protected

from discovery under the work-product immunity doctrine.

The District Court affirmed, concluding that the Magistrate

Judge's reasoning was neither clearly erroneous nor

contrary to law.

After answering Appellants' complaint, the defendants

moved for summary judgment on both of its counts. With

respect to Count One, the defendants argued that neither

ERISA nor the Plan required payment of interest"when

retroactively awarding benefits to a participant." See Def.'s

Motion for S.J. at 4 (J.A. at 49). The District Court agreed,

and granted summary judgment in favor of the defendants

on Count One's interest claims.

The court also ruled that Plaintiff Holmes had failed to

exhaust his administrative remedies with respect to his

continuing-offset claim. Consequently, the court dismissed

the claim without prejudice. Holmes subsequently

reasserted the claim in a separate law suit. See Holmes v.

Pension Plan of Bethlehem Steel and Subsidiary Cos. , No.

99-CV-2369 (E.D. Pa., filed May 7, 1999) (J.A. at 591). The

District Court also granted summary judgment for the

Defendants on Count Two's breach-of-fiduciary-duty

claims, ruling that they were barred by the statute of

limitations. Thereafter, the court entered final judgment

and closed the case.

On February 4, 1999, the District Court granted

Appellants' motion for reconsideration of their interest

claims based on our intervening decision in Fotta v.

Trustees of the United Mine Workers of Am. Health &

Retirement Fund, 165 F.3d 209 (3d Cir. 1998) (holding that

ERISA permits actions to recover interest on wrongly

withheld benefits even where the benefits were paid before

litigation). At the same time, the court also ruled that the

doctrine of laches would limit the period for which interest

could be recovered, and that Pennsylvania's general six-

year statute of limitations provided the appropriate

limitations period. See Mem. & Order of 02/04/1999 at 5-

7 (J.A. at 528-30).

In a subsequent Memorandum and Order, the District

Court ruled that Appellants were entitled to interest on

7

their delayed benefits. But, based on a balancing of the

equities, the court also ruled that such interest should be

calculated at the post-judgment interest rate specified in 28

U.S.C. S 1961. See Mem. & Order of 03/25/1999 at 3-9

(J.A. at 528-30). Thus, the court ordered the Plan to pay

Appellants Holmes and Hollyfield $1391.50 and $459.68

respectively as interest on their delayed benefits. On March

25, 1999, the court closed the case for a second time.

A few days earlier, Appellants had renewed their motion

for class certification, once more proposing two classes of

prospective plaintiffs. Consequently, on April 7, Appellants

moved the District Court to reconsider its order closing the

case, and to consider their renewed motion for class

certification. The District Court granted the motion to

reconsider, but ultimately denied certification of both

proposed classes. That denial was based on the court's

conclusion that the proposed class definitions were overly

broad, and that neither class satisfied the prerequisites for

certification. See Mem. & Order of 06/30/99 at 7-29 (J.A.

at 607-29). The court then closed the case for a third time,

and Appellants filed this appeal.

On appeal, Appellants argue that the District Court erred

by: (1) awarding interest at the statutory rate rather than

requiring the Plan to disgorge the actual profits it earned on

their delayed benefits; (2) concluding that the doctrine of

laches applied to limit the period for which they could

recover interest; (3) denying certification of their proposed

plaintiff classes; and (4) concluding that the legal

memorandum they sought to discover was entitled to work-

product immunity.

II. Discussion

A. Appellant's Interest Rate Claims

Though ultimately awarded interest on their delayed

pension benefits, Appellants argue that the District Court

erred by calculating the award based on the post-judgment

interest rate established at 28 U.S.C. S 1961. Relying on

our decision in Fotta, Appellants argue that they are

entitled to recover interest at the actual rate of return that

8

the Pension Plan earned during the period it wrongfully

delayed payment of their benefits. Our review of the District

Court's interpretation and application of Fotta is plenary.

See Holmes v. Millcreek Township Sch. Dist., 205 F.3d 583,

589 (3d Cir. 2000) (citing Louis W. Epstein Family

Partnership v. Kmart Corp., 13 F.3d 762, 765-66 (3d Cir.

1994)). We conclude, however, that it is Appellants, not the

District Court, who have misinterpreted Fotta .

In Fotta, we held that a beneficiary may bring an action

under ERISA against a pension plan "to recover interest on

benefits the plan paid after some delay, but without the

beneficiary having sued under ERISA" to recover the

benefits themselves. See id. at 210. In earlier decisions, we

had already recognized that prejudgment interest was

available where the beneficiary had brought suit under

ERISA to recover unpaid benefits. See Fotta , 165 F.3d at

212 (citing Schake v. Colt Indus. Operating Corp. Severance

Plan for Salaried Employees, 960 F.2d 1187, 1192 n.4 (3d

Cir. 1992); Anthuis v. Colt Indus. Operating Corp., 971 F.2d

999, 1010 (3d Cir. 1992)).

Those earlier decisions were based on recognition of the

fact that

"[t]o allow the Fund to retain the interest it earned on

funds wrongfully withheld would be to approve of

unjust enrichment. Further the relief granted would

fall short of making [the claimant] whole because he

has been denied the use of the money which was his."

Id. (quoting Short v. Central States, Southeast and

Southwest Areas Pension Fund, 729 F.2d 567, 576 (8th Cir.

1984)). Those principles applied, we held in Fotta, whether

the beneficiary ultimately recovered the wrongfully withheld

benefits through judicial action, or through non-judicial

means. See id.

Although Fotta makes clear that interest on delayed

ERISA benefits is an equitable remedy left to the discretion

of the trial court, id. at 213-15, we also held that "interest

is presumptively appropriate." Id. at 214. We did not,

however, offer extensive guidance for deciding what rate of

interest is appropriate in a given case. Recognizing the need

to fill this gap, as well as its discretion in doing so, the

9

District Court in this case turned to Fotta's two primary

justifications for interest awards: (1) ensuring full

compensation to the plaintiff; and (2) preventing unjust

enrichment. See Mem. of 03/25/1999 at 5, (J.A. at 571)

(citing Fotta, 165 F.3d at 213). In considering these two

justifications, the District Court concluded that Fotta did

not qualify one as more important than the other, and that

each could result in a different interest rate. See id.

Focusing solely on compensating the plaintiff, the court

concluded that it would be inappropriate to award interest

at a rate higher than the essentially zero-risk yield on

Treasury Bills provided for in 28 U.S.C. S 1961. See id. at

6. In the court's view, it would be "highly speculative" to

simply assume that Appellants would have invested their

benefits in higher-risk, higher-yield securities, and that to

so assume would be to reward them for risks they did not

take. See id. On the other hand, if the only objective were

to prevent unjust enrichment, disgorgement of the

defendant's actual profits would be the appropriate

measure of interest to be awarded. See id. Ultimately, the

District Court concluded that the best way to resolve this

apparent conflict was to resort to equitable principles. See

id. at 7.

Balancing the equities, the District Court concluded that

requiring the Plan to disgorge its profits "would be

essentially punitive in nature," and that punitive measures

were inappropriate where the delayed payment of benefits

was inadvertent rather than intentional. See id. The court

further concluded that "the fact that the Appellants have

been paid amounts on all of the years, rather [than] the

amount they are legally entitled to is further evidence of

good faith." Id. at 7-8.2 Therefore, the court ruled,

restitution was the most equitable measure of interest due,

and restitution would be achieved by awarding interest at

the Treasury Bill yield rate as calculated according to the

analogous provisions in 28 U.S.C. S 1961. Performing the

_________________________________________________________________

2. The court had previously concluded that had Appellants been forced

to sue for recovery of their past-due benefits, the statute of limitations

would have barred them from recovering benefits due more than six

years prior to the filing of their suit.

10

necessary calculations, the District Court then awarded

Appellants interest at the rate of 5.01%. See id. at 575-78.

Appellants argue that they are entitled to recover the

much higher rate of interest that the Plan actually earned

while their benefits were withheld, approximately 12%, and

allege several flaws in the District Court's analysis. First,

they argue that the District Court erred by concluding that

requiring the Plan to disgorge all profits earned by delaying

payment of their benefits would be "punitive in nature." See

Appellants' App. at 26. "As a matter of logic," they argue,

"when a defendant is stripped of a benefit it had no right to

retain, it is not being `punished.' " Id. Although we can find

flaws in Appellants' own analysis, we ultimately conclude

that whether disgorgement is deemed punitive or otherwise,

the District Court did not abuse its discretion by declining

to adopt it as a remedy in this case.

As an initial matter, we note that any return the Plan

realized in excess of the risk-free yield on Treasury Bills

during the relevant period would be the result of the Plan's

investment expertise and labor, as well as additional risk

that the Plan, not Appellants, bore. Had the Plan's

investments yielded a lower rate of return than Treasury

Bills, or even a loss, it would have been the Plan rather

than Appellants that would have been required to bear the

resulting loss.

Indeed, as Appellants concede, in such circumstances

they would have sought, and likely would have recovered,

interest based on the Treasury Bill yield or some other

"minimal standard rate." Appellant's Br. at 29 n.2.

Consequently, requiring the Plan to disgorge profits earned

as a result of risks irreversibly borne and labor otherwise

uncompensated could be viewed as punitive. Alternatively,

awarding interest at a rate higher than the statutory rate

might be viewed as punitive merely because it would be

higher than necessary to compensate Appellants. See Ford

v. Uniroyal Pension Plan, 154 F.3d 613, 619 (6th Cir. 1998)

(concluding that awarding interest at a rate that would

overcompensate the plaintiff would be punitive and would

contravene "ERISA's remedial goal of simply placing the

plaintiff in the position he or she would have occupied but

for the defendant's wrongdoing.").

11

In any event, what matters is not how the District Court

characterized disgorgement, but whether its balancing of

the equities amounted to an abuse of discretion. Wefind no

such abuse in the District Court's conclusion that the Plan

had acted in good faith, and that Appellants would be fully

compensated by interest paid at the statutory post-

judgment rate.

Appellants next argue that deeming disgorgement of

profits as punitive defies the law as well as logic. The

District Court's approach, they argue, contravenes Fotta's

"paramount goal" of deterring ERISA violations by denying

wrongdoers the profits of their misconduct. See Appellant's

Br. at 26. Again, however, the argument misconstrues our

decision in Fotta. Deterrence was not the paramount goal in

Fotta, but only one of the decision's two primary goals--

providing restitution and preventing unjust enrichment "at

beneficiaries' expense." Fotta, 165 F.3d at 214 (emphasis

added). Interest earned in excess of what Appellants

themselves would have earned is not earned at their

expense.

Appellants next argue that the District Court

"impermissibly imposed a requirement of " culpability on

the Defendants' part not found in Fotta. See Appellants' Br.

at 27. But the mere fact that Fotta did not impose a

requirement of culpability does not mean that the District

Court, in its discretionary application of equitable

principles, could not do so.

In their final argument on this issue, Appellants contend

that although this court "has not yet ruled on the

appropriate measure of prejudgment interest under ERISA,"

it "has made clear that selection of an appropriate rate of

prejudgment interest must be made in light of the goals of

the statute involved." Id. at 31. They then argue, implicitly

rather than expressly, that only disgorgement can

effectuate ERISA's goals.

As an initial matter, the cases cited by Appellants in

support of this argument did not hold that a statutorily-

established rate of interest was per se inadequate, as

Appellants imply. Rather they merely upheld the relevant

decision maker's discretion to award interest at a higher

12

rate according to equitable principles. See Peterson v.

Crown Financial Corp., 661 F.2d 287, 292-93 (3d Cir. 1981)

(holding that where a "claim sounds in restitution, it calls

for the exercise of the court's broader equitable powers,"

leaving the trial judge with the discretion to award interest

above the statutory rate); North Cambria Fuel Co., Inc. v.

NLRB, 645 F.2d 177, 181 (3d Cir. 1981), cert. denied, 454

U.S. 1123 (1981) (holding that the NLRB's "broad discretion

in fashioning remedies . . . extends to the imposition of an

interest rate.").

Additionally, ERISA's goals do not mandate total

disgorgement. As we recently noted, "ERISA does no more

than protect the benefits which are due to an employee

under a plan." Bennett v. Conrail Matched Savings Plan,

168 F.3d 671, 677 (3d Cir. 1999). As the United States

Court of Appeals for the Sixth Circuit has recognized, the

purpose of granting equitable relief under ERISA is simply

to place "the plaintiff in the position he or she would have

occupied but for the defendant's wrongdoing." Ford, 154

F.3d at 619.

Awarding Appellants in this case interest at a higher rate

then they would have earned had they invested their

benefits on their own behalf would go beyond making them

whole. Therefore, ERISA's goals can be achieved by

awarding interest below the rate actually earned by the

Plan. Thus, Appellants' own argument on this point weighs

in favor of affirming the District Court's decision to award

interest at the statutory rate. Accordingly, we will affirm.

B. Laches

Though the District Court awarded Appellants interest on

their delayed pension benefits, it also ruled that the

doctrine of laches limited the period for which interest

could be recovered. According to the court, "under

Pennsylvania law, in the absence of fraud or concealment,

laches generally follows the statute of limitations." Mem. &

Order of 02/04/1999 at 5 (J.A. at 528) (citing United

National Ins. Co. v. J.H. France Refractories Co. , 668 A.2d

120 (Pa. 1995)). Concluding that there was no fraud or

concealment in this case, the District Court determined

13

that Pennsylvania's general six-year statute of limitations

was the most appropriate limitations period, and restricted

the period for which Appellants could recover interest

accordingly. See id. at 7. On appeal, Appellants do not

challenge the District Court's findings regarding the

absence of fraud or concealment. Rather, they argue that

the District Court misinterpreted United National Ins. Co.,

and erred in its application of the laches doctrine. We

agree.

As an equitable doctrine, the decision to apply laches is

left to the sound discretion of the District Court. See Gruca

v. U.S. Steel Corp., 495 F.2d 1252, 1258 (3d Cir. 1974).

Consequently, appellate review of a lower court's

application of the doctrine is limited to a review for abuse

of discretion. See id. Nevertheless, in the exercise of its

discretion, the District Court must correctly apply the

governing law. In this case, the District Court did not make

the necessary findings and we must remand.

In United National Ins. Co., the Pennsylvania Supreme

Court did, as the District Court correctly noted, iterate that

" `[i]n the absence of fraud or concealment, it is that general

rule that laches follows the statute of limitations.' " 668

A.2d at 124 (quoting Silver v. Korr, 139 A.2d 552, 555 (Pa.

1958)), and (citing Philadelphia v. Louis Lab., Inc., 189 A.2d

891, 893 (1963)). But the court's opinion did not discuss,

much less define, the doctrine of laches itself.

Under Pennsylvania law, the doctrine of laches has two

elements: (1) inexcusable delay; and (2) prejudice. See, e.g.,

Jacobs v. Halloran, 710 A.2d 1098, 1102 (Pa. 1998)

("Laches arises when a defendant's position or rights are so

prejudiced by length of time and inexcusable delay, plus

attendant facts and circumstances, that it would be an

injustice to permit presently the assertion of a claim

against him.") (emphasis in the original); DiLucia v.

Clemens, 541 A.2d 765 (Pa. Super 1988) ("In order to

prevail on his assertion of the equitable defense of laches,

[the defendant] must establish both undue delay from [the

plaintiff 's] failure to exercise due diligence and prejudice

resulting from the delay."). See also Burke v. Gateway, 441

F.2d 946, 949 (3d Cir. 1971) (noting that before a district

court can apply the doctrine of laches, it mustfind

14

"inexcusable delay in light of the equities of the case and

prejudice to the defendant."). The District Court applied the

doctrine of laches, but did not determine that its two

required elements were satisfied. Accordingly, we will

reverse the District Court on the issue of laches, and

remand for a proper application of the doctrine.

C. Class Certification

After the District Court denied Appellants' initial motion

for class certification without prejudice, the parties

undertook discovery on the issue of whether class

certification would be proper. Thereafter, Appellants

renewed their motion, seeking certification of the following

two classes of plaintiffs:

Class One [Offset Claims]:

All persons who retired on or after July 31, 1977 and

their beneficiaries who are or were entitled to pension

benefits under the Pension Plan of Bethlehem Steel

Corporation and Subsidiary Companies but whose

benefits were denied or reduced due to their receipt of

benefits from another pension plan or fund that were

attributable to employment with a former employer

that was not an "Employing Company" within the

meaning of the Plan.

Class Two [Interest Claims]:

All persons, including beneficiaries, who are or were

entitled to pension benefits under the Pension Plan of

Bethlehem Steel Corporation and Subsidiary

Companies whose benefits were delayed, reduced or

denied by the Plan for more than 90 days and who

have received or will receive a retroactive payment by

the Plan of such withheld pension benefits.

Mem. & Order of 06/30/99 at 4 (J.A. at 604) (citing Pls.'

Renewed Motion at 1).

In a 29-page Memorandum and Order, the District Court

denied certification of both proposed classes,finding them

deficient in several respects. On appeal, Appellants argue

that the District Court's certification analysis contains

15

numerous errors. They also claim that the "principle basis

for denying class certification was the fact that after the

renewed class motion was filed, but before the class ruling,

the court elected to grant final relief to the two named

Appellants and their claims were no longer actively

pending." Appellants' Br. at 39-40 (citing Mem. & Order of

06/30/1999 at 8-10 (J.A. at 608-10)). That claim grossly

mischaracterizes the District Court's decision.

1. Requirements for Class Actions

Under the Federal Rules of Civil Procedure, a civil suit

may proceed as a class action only if it satisfies four

prerequisites. Accordingly,

[o]ne or more members of a class may sue or be sued

as representative parties on behalf of all only if:

(1) the class is so numerous that joinder of all

members is impracticable;

(2) there are questions of law or fact common to t he

class;

(3) the claims or defenses of the representative p arties

are typical of the claims or defenses of the class; and

(4) the representative parties will fairly and ade quately

protect the interests of the class.

Fed. R. Civ. P. 23(a).

In addition to the requirements expressly enumerated in

Rule 23, class actions are also subject to more generally

applicable rules such as those governing standing and

mootness. For instance, a plaintiff who lacks the

personalized, redressable injury required for standing to

assert claims on his own behalf would also lack standing to

assert similar claims on behalf of a class. See Davis v.

Thornburgh, 903 F.2d 212, 222 (3d Cir. 1990). Additionally,

even a plaintiff with standing is generally disqualified from

representing a class if his individual claim becomes moot

before the proposed class is certified. See Rosetti v. Shalala,

12 F.3d 1216, 1225 (3d Cir. 1993); Lusardi v. Xerox Corp.,

975 F.2d 964, 974 (3d Cir. 1992) (citations omitted). Not

16

surprisingly, however, there are exceptions to this general

rule. One such exception is at issue in this case.

So long as a class representative has a live claim at the

time he moves for class certification, neither a pending

motion nor a certified class action need be dismissed if his

individual claim subsequently becomes moot. See id. at

1228. If, on the other hand, the putative class

representative's individual claim becomes moot before he

moves for class certification, then any subsequent motion

must be denied and the entire action dismissed. See

Lusardi, 975 F.2d at 978.

2. Standard of Review

We review a decision to certify, or to deny certification of,

a class action for abuse of discretion. See In re Prudential

Ins. Co. Am. Sales Litig., 148 F.3d 283, 299 (3d Cir. 1998)

(citing In re General Motors Corp. Pick-Up Truck Fuel Tank

Products Liab. Litig., 55 F.3d 768, 782 (3d Cir. 1995));

Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912, 923 (3d

Cir. 1992). We may find an abuse of discretion"where the

`district court's decision rests upon a clearly erroneous

finding of fact, an errant conclusion of law or an improper

application of law to fact.' " Id. (quoting In re General Motors

Corp., 55 F.3d. at 783) (additional quotation marks and

citations omitted).

3. Class One (Offset Claims)

The District Court identified multiple, alternative grounds

for denying certification of the Class One "offset" claims.

First, it concluded that the proposed class had been defined

too broadly to permit certification. Stated differently, the

District Court concluded that Appellants sought to assert

claims on behalf of the proposed class that they had not,

and could not, assert on their own behalf. Consequently,

they were not qualified to represent the proposed class.

Second, the court concluded that even if the proposed class

were properly defined, it failed to satisfy three of Rule

23(a)'s four prerequisites for certification. Appellants raise

separate challenges to each of these conclusions.

17

The District Court based its conclusion that proposed

Class One was overbroad on several factors. First, the court

noted that after it had dismissed Plaintiff Holmes'

"continuing-offset claim" without prejudice, he had

reasserted that claim in a separate lawsuit. Consequently,

there was no live continuing-offset claim pending before the

court for which a class could be certified. See Mem. &

Order of 06/30/99 at 8 (J.A. 608). The court then noted

that both Appellants had settled their "mistaken-offset

claims" through administrative means before filing their

complaint seeking interest on those claims. Consequently,

they lacked live claims at the time they filed their motion

for class certification, requiring that it be denied. See id. at

8-10.

On appeal, Appellants argue that under the law of this

Circuit, the fact that their mistaken-offset claims had

become moot did not disqualify them from representing the

proposed class, and thus did not mandate denial of

certification. Again, they miscomprehend the relevant law.

The status of their own claims would be irrelevant only if

those claims were live at the time they moved for class

certification. Their claims, however, were moot before they

even filed their complaint. Consequently, they are

disqualified from representing the proposed class and the

District Court did not err by denying certification. See

Lusardi v. Xerox Corp., 975 F.2d 964, 978 (3d Cir. 1992).

In addition to concluding that Appellants lacked the live

claims required for class certification, the District Court

also concluded that certification of proposed Class One

should be denied on several alternative grounds. For

instance, the court concluded that the proposed class was

"so highly diverse and so difficult to identify that [it] is not

adequately defined or ascertainable." Mem. & Order of

06/30/1999 at 12 (J.A. 612) (listing six areas that would

require detailed inquiry). In addition, the court concluded

that even if the proposed class had been properly defined,

it did not satisfy Rule 23(a)'s commonality, typicality, and

adequacy-of-representation requirements. See id. at 17-19,

23, 25; see also Fed. R. Civ. P. 23(a)(2)-(4).

On appeal, Appellants raise separate challenges to each

of these alternative bases for denying certification. Here we

18

need not decide whether the District Court erred, because

the fact that Appellants lacked live claims at the time they

moved for certification bars certification of proposed Class

One in any event. Consequently, there is no need to

consider the validity of Appellants' additional challenges,

and denial of certification of Class One will be affirmed.

4. Class Two (Interest Claims)

As it did with respect to proposed Class One, the District

Court identified several alternative grounds for denying

certification of proposed Class Two. First, the District Court

concluded that Class Two was defined too broadly"because

it includes every plan participant, past or future, who has

received or will be receiving a delayed payment of benefits."

Mem. & Order of 06/30/1999 at 13 (J.A. 613) (citation

omitted). The court had "particular misgivings with respect

to the `future' members of the class because of the

infeasibility of auditing the Plan in order to determine

whether each participant may or may not have some

present or future claim regarding delayed benefits." Id.

(citation omitted). The court further concluded that the

proposed class was "ill-defined" because it included

individuals who had received or may one day receive

delayed benefits for any reason. In contrast, Appellants'

claims focused on "incorrect offsets since the Plan's

amendment in 1977." Id. at 13-14.

Appellants argue that the District Court incorrectly

concluded that proposed Class Two was overbroad. See

Appellants' Br. at 43-45. They do not, however, expressly

claim that the conclusion was "clearly erroneous" as

required for reversal on appeal. Nor, in fact, are the District

Court's conclusions clearly erroneous.

Appellants first argue that "[a]lthough the court believed

that determining interest for the members of Class Two

would require individualized determinations, this is not

correct." Id. at 44 (internal citation omitted). Yet Appellants

fail to explain why such a belief is incorrect. Based on their

subsequent arguments, Appellants appear to believe that

the interest entitlement of every class member can be

calculated using a single, objective formula, and that the

19

parties, not the court, would be responsible for performing

the requisite calculations. See id. Such a belief ignores

Fotta's clear holding that interest on delayed ERISA benefits

is an equitable remedy dependent upon the individual facts

of each claim. Thus, there is no single, objective formula for

calculating each class member's interest entitlement.

Moreover, it is the province of the court, not the parties, to

balance the equities in each claim. Therefore, the District

Court's conclusion that individualized determinations

would be required is not clearly erroneous.

Appellants next argue that even if individualized

determinations are required, that fact alone is not a "legally

valid ground to deny class certification." Id. at 44. But the

cases on which Appellants rely do not support their

argument. For instance, in Bogosian v. Gulf Oil Corp., we

held that:

it has been commonly recognized that the necessity for

calculation of damages on an individual basis should

not preclude class determination when the common

issues which determine liability predominate. E.g.,

Philadelphia Electric Co. v. Anaconda American Brass,

Co., 43 F.R.D. 452, 457 (E.D. Pa. 196 8); Dolgow v.

Anderson, 43 F.R.D. 472, 490-91 (E.D.N.Y. 1968 ). If

for any reason the district court were to conclude that

there would be problems involved in proving damages

which would outweigh the advantages of class

certification, it should give appropriate consideration to

certification of a class limited to the determination of

liability. See Rule 23(c)(4)(A).

561 F.2d 434, 456 (3d Cir. 1977) (emphasis added). As

already noted, the issue of liability itself requires an

individualized inquiry into the equities of each claim. Thus,

the District Court did not err by concluding that proposed

Class Two was overly broad and we will affirm denial of

certification.

D. Work-Product Immunity

Before seeking relief in the District Court, Appellant

Holmes pursued his interest claim through administrative

channels. His original claim to interest prompted a Plan

20

attorney to prepare a legal memorandum analyzing the

merits of the claim. Once judicial action had been initiated,

Appellants moved to compel production of that

memorandum during discovery. A Magistrate Judge denied

the motion, concluding that the memorandum was

protected from discovery by the doctrine of work-product

immunity. See Mem. of 01/08/1999 at 5-6 (J.A. at 514-15).

Appellants then appealed to the District Court, which

affirmed. In the final issue raised in their appeal,

Appellants argue that the Magistrate Judge erred by

denying their production request, and that the District

Court erred by affirming the Magistrate Judge's order.

We review discovery orders for abuse of discretion. See

Massachusetts School of Law at Andover, Inc. v. American

Bar Ass'n, 107 F.3d 1026, 1032 (3d Cir. 1997) (citing

Wisniewski v. Johns-Manville Corp., 812 F.2d 81, 90 (3d

Cir. 1987); Marroquin-Manriquez v. INS, 699 F.2d 129, 134

(3d Cir. 1983)). We agree that the Magistrate Judge erred,

and that the District Court thus erred by affirming denial

of Appellants' motion to compel discovery.

The doctrine of work-product immunity " `shelters the

mental processes of the attorney, providing a privileged

area within which he can analyze and prepare his client's

case.' " In re Grand Jury (Impounded), 138 F.3d 978, 981

(3d Cir. 1998) (quoting United States v. Nobles , 422 U.S.

225, 238 (1975)). A party claiming work-product immunity

bears the burden of showing that the materials in question

"were prepared in `the course of preparation for possible

litigation.' " Haines v. Liggett Group, Inc., 975 F.2d 81, 94

(quoting Hickman v. Taylor, 329 U.S. 495, 505 (1947);

Conoco, Inc. v. United States Dept. of Justice, 687 F.2d 724,

730 (3d Cir. 1982). Work product prepared in the ordinary

course of business is not immune from discovery. If the

party asserting the privilege bears its burden of proof, the

party seeking production may obtain discovery "only upon

a showing that the party. . . has substantial need of the

materials in the preparation of the party's case and that the

party is unable without undue hardship to obtain the

substantial equivalent of the materials by other means."

Fed. R. Civ. 26(b)(3).

21

In concluding that the memorandum at issue in this case

was protected by work-product immunity, the Magistrate

Judge noted that the Plan's attorney had prepared it

shortly after Plaintiff Holmes' attorney placed a telephone

call to a subordinate of the Plan's administrator. In that

telephone conversation, Holmes' attorney claimed that

Holmes was entitled to interest on his delayed benefits and

further asserted that failure to pay interest violated ERISA.

See Mem. of 01/08/1999 at 2 (J.A. 511). Thereafter, the

Plan's attorney prepared a memorandum analyzing the

merits of Holmes' interest claim.

Based on this factual background, the Magistrate Judge

concluded that "it is apparent the [memorandum] was

prepared in anticipation of possible future litigation. In

addition, it is reasonable to conclude that the document

would not have been prepared but for the prospect of

litigation." Id. at 6. The District Court determined that the

Magistrate Judge's reasoning was "not clearly erroneous or

contrary to law," and entered an order affirming denial of

Appellants' request for production. See Dist. Ct. Order of

02/03/1999 at 1-2 n.1 (J.A. 522-23).

The Magistrate Judge's conclusions may be reasonable,

but they are based on nothing more than assumptions.

There is nothing in the record indicating that the

Defendants have carried their burden of showing that the

memorandum was, in fact, prepared in anticipation of

possible litigation. Indeed, the Defendants appear to have

claimed nothing more than that "the memorandum was

written in connection with the claim by Plaintiff Holmes . . .

and . . . is, therefore, privileged and immune from discovery

under . . . the work product doctrine." Def.s' Answers to

Pl.s' Second Set of Interrogs. at 14 (J.A. 517). The mere fact

that the memorandum was prepared "in connection with"

Plaintiff Holmes' administrative claim to interest on his

delayed benefits hardly establishes that it was prepared in

anticipation of litigation. The Magistrate Judge abused his

discretion in assuming otherwise. Therefore, we will reverse

the order denying Appellants' request for production.

E. The Cross Appeal

Raising a single issue in their cross appeal, the Cross-

Appellants (defendants below) suggest that our decision in

Fotta is:

22

unclear to the extent it does not address situations in

which a participant brings a claim for interest, but the

plan at issue expressly disallows such payment, or the

plan administrator, who has discretionary authority,

has construed the plan to mean that such payment is

not allowed.

Cross-Appellants' Br. at 37. They therefore invite us to

modify Fotta "to hold that under appropriate

circumstances, plan provisions will be given effect and

deference paid to plan administrators' decisions to deny

interest on delayed benefits and overpayments." Id. at 37-

38.

We decline the invitation for three reasons. First, the

Cross-Appellees did not raise this issue below, and have

thus waived it on appeal. See Pritzker v. Merrill Lynch,

Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1115 (3d Cir.

1993). Second, the Bethlehem Steel Plan at issue does not

contain a provision preventing the payment of interest on

delayed benefits. Consequently, the Cross-Appellees'

arguments on this point are entirely hypothetical, lacking

the concrete, particularized facts necessary to support a

sound judicial decision. Third, only an en banc court can

overturn Fotta's holding that interest on delayed payment of

plan benefits is an implied term of the plan contract. See

Fotta, 165 F.3d at 213-14; see also United States Court of

Appeals for the Third Circuit, Internal Operating Procedure

9.1 (Policy of Avoiding Intra-circuit Conflict of Precedent).

Therefore, we decline to entertain the arguments presented

in the cross appeal.

III. Conclusion

The District Court correctly concluded that interest

awards on delayed employment benefits are an equitable

remedy left to its discretion. The court did not abuse that

discretion by awarding Appellants interest at the post-

judgment statutory rate, and we affirm the award. Nor did

the District Court abuse its discretion in refusing to certify

the two classes of plaintiffs proposed in Appellants'

complaint and subsequent motion for certification.

Accordingly, we also affirm the District Court's denial of

class certification.

23

The District Court did err in two respects, however. First,

the court erred by applying the doctrine of laches without

first determining that its two required elements were

satisfied. Consequently, we reverse on this issue and

remand the case for further findings of fact. Additionally,

the court erred by concluding that the legal memorandum

Appellants sought to discover was entitled to work-product

immunity. The memorandum may well be entitled to

immunity, but, on this record, the Defendants have not

carried their burden of showing that it is. Therefore, we

reverse the District Court's ruling on work-product

immunity and remand for further findings.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

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