Petition for Writ of Certiorari — Kelly v. Kentucky

J OCT 18 1994

No. 94-660

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1994

FREDERICK DEGROOTH, et al.,

Petitioners,

GENERAL DYNAMICS CORPORATION, et al.,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUPPLEMENTAL APPENDIX

TO PETITION FOR WRIT OF CERTIORARI

W. WILSON KEITHLINE

100 Constitution Plaza

Hartford, Connecticut 06103

(203) 278-3010

Of Counsel: oe

STUART RODNEY WOLK Attorney for Petitioners.

WOLK, NEUMAN & MAZIARZ

30 East 40th Street

New York, New York 10016

(212) 679-4658

October 18, 1994

Supreme Court, U,

LOIRE LEI SOLIS ENS NCTA

Washington, 0.C. « THIEL PRESS © (202) 328-3286

‘|

ris book

Spe x72,

(%)

TABLE OF CONTENTS

APPENDIX D — Judgment of United States District

Court, District of Connecticut, dated 11/18/93........--- la

APPENDIX E — Ruling on Defendants’ Motion To

Dismiss in United States District Court, District

of Connecticut, dated 11/16/93. ......-.--- eee eeres 3a

la

APPENDIX D

[Filed Nov. 19 1993]

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

CASE NO. 3:93CV00940 (JAC)

FREDERICK DEGROOTH, GEORGE GLENDENNING,

DONALD STOCKFORD, on Behalf of Themselves

and All Others Similarly Situated

V.

GENERAL DYNAMICS CORPORATION,

In Its Corporate and Fiduciary Capacity As

Administrator of the Executive and Professional Plan;

THE EXECUTIVE AND PROFESSIONAL PLAN

JUDGMENT

This cause having come on for consideration on

defendants’ motion to dismiss before the Honorable

Jose A. Cabranes, Chief United States District Judge,

and the issues having been duly considered including

applicable principles of law and on November 16, 1993,

a Ruling on Defendants’ Motion to Dismiss having been

filed granting the motion,

It is ORDERED, ADJUDGED and DECREED that

judgment be and is hereby entered in favor of the defend-

ants.

SPN oe ee PE | 8G ES Pe et ERE Os aya Ee ee Ree nr oaks Nk athe ice aS a

2a

Dated at New Haven, Connecticut, this 18th day of

November, 1993.

KEVIN F. ROWE “

CLERK, UNITED STATES DISTRICT COURT

BY [Illegible]

DEPUTY IN CHARGE

3a

APPENDIX E

[Filed Nov 16 1993] |

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

Civil No. 3:93-940 (JAC)

FREDERICK DEGROOTH, GEORGE GLENDENNING,

DONALD STOCKFORD, on Behalf of Themselves

and All Others Similarly Situated

V.

GENERAL DYNAMICS CORPORATION,

In Its Corporate and Fiduciary Capacity As

Administrator of the Executive and Professional Plan;

THE EXECUTIVE AND PROFESSIONAL PLAN

Appearances:

W. WILSON KEITHLINE

STUART R. WOLK

(Keithline & Dellamarggio,

Hartford, CT)

Counsel for Plaintiffs

ALEX V. BARBOUR

JOSEPH G. BISCEGLIA

CRAIG C. MARTIN

(Jenner & Block,

Chicago, IL)

Counsel for Defendants

ta

RULING ON DEFENDANTS’ MOTION TO DISMISS

JOSE A. CABRANES, Chief Judge:

This action arises out of a reduction in benefits pro-

vided to certain employees of defendant General

Dynamics Corporation under the Executive and Pro-

fessional Plan, an “employee welfare benefit plan”

governed by the Employee Retirement Income Security

Act (“ERISA’’), 29 U.S.C. §1001, et seg. Pending before

the court is the defendants’ Motion to Dismiss (filed

June 16, 1993). The motion was submitted for decision

after oral argument on November 15, 1993.

BACKGROUND

The following facts are not in dispute. Since 1960,

General Dynamics Corporation has offered and main-

tained the Executive and Professional Plan (the ‘“‘Plan’’)

for certain executive and professional employees, includ-

ing the plaintiffs, who are current employees of General

Dynamics at its Electric Boat Division in Groton, Con-

necticut. The plan provides life and medical insurance

benefits superior to those benefits available to other

employees.

On January 1, 1985, General Dynamics limited partici-

pation in the Plan to those employees who were eligible

for membership as of December 31, 1984. On June 24,

1992, General Dynamics reduced certain medical benefits

provided to those employees still covered by the Plan.

This reduction affected medical benefits provided between

the date an employee takes early retirement and the date

that the employee reaches the age of 65 years. The reduc-

tion in medical benefits did not apply to those employees

who had demonstrated an intent to take early retirement

prior to July 1, 1992 and did so prior to the end of 1992,

5a

and those who actually took early retirement prior to

July 1, 1992. On March 3, 1993, General Dynamics made

other modifications to the Plan.

On May 5, 1993, the plaintiffs filed this action alleging

that General Dynamics had granted them “grandfathered”

rights to benefits under the Plan as of December 31,

1984, and that General Dynamics violated these rights

under ERISA and state law by modifying the benefits

provided to the plaintiffs.

DISCUSSION

5

In deciding a motion to dismiss, the court must accept

as true all factual allegations in the complaint and draw

inferences from these allegations in the light most favor-

able to the plaintiffs. See Scheuer v. Rhodes, 416 USS.

232, 236 (1974). The complaint, or portions thereof,

will not be dismissed “unless it appears beyond doubt

that the plaintiff can prove no set of facts in support of

his claim which would entitle him to relief.” Conley v.

Gibson, 355 U.S. 41, 45-46 (1957).

In support of their motion to dismiss, the defendants

have attached a copy of the Summary Plan Description

(“SPD”) and the affidavit of Marie Anna Pardo, the

employee benefits supervisor at General Dynamics, to

their motion papers. The defendants urge the court to

consider these materials in deciding their motion to

dismiss. The plaintiffs respond that consideration of

these outside materials would convert the defendants’

motion into a motion for summary judgment. The

court disagrees.

6a

A district court has discretion to consider a document

outside of the pleadings on a motion to dismiss if “[{1]

there was undisputed notice to the plaintiffs of [the

dotument’s] contents and [2] [the document] was

integral to plaintiffs’ claim.” Cortec Industries, Inc. v.

Sum Holding L.P., 949 F.2d 42, 48 (2d Cir. 1991),

cert. denied, __. U.S. —— , 112 S.Ct. 1561 (1992);

Teagardener v. Republic-Frankln Inc. Pension Plan,

909 F.2d 947, 949-50 (6th Cir. 1987) (district court

properly considered pension plan document on a motion

to dismiss, even though the plaintiffs failed to attach such

document to the complaint), cert. denied, 498 U.S. 1027

(1991).

First, the plaintiffs in the instant case clearly had

notice of the contents of the SPD. At oral argument,

the plaintiffs conceded that they possessed the SPD

which the defendants attached to their motion. In addi-

tion, the plaintiffs demonstrated full knowledge of the

contents of the SPD, asserting that its contents had not

been amended since December 1981.

“eine

Second, the SPD is “integral” to the plaintiffs’ com-

plaint. The SPD is the primary vehicle for informing plan

participants and beneficiaries of their rights under an

ERISA plan.! See Moore v. Metropolitan Life Ins. Co.,

856 F.2d 488, 492 (2d Cir. 1988). When participants

file a lawsuit to determine the scope of those rights, the

SPD is surely integral to that determination, even if it is

not attached as an exhibit to the complaint.

1 Section 102(a) of ERISA requires that the plan adminis-

trator furnish plan participants and beneficiaries with a summary

plan description ‘‘written in a manner calculated to be understood

by the average plan participant, and shall be sufficiently accurate

and comprehensive to reasonably apprise such participants and

beneficiaries of their rights and obligations under the plan.” 29

U.S.C. §1022(a).

A

Ni

y

7a

Because the plaintiffs were on notice of the contents

of the SPD and the SPD is integral to the plaintiffs’

claims, the court may consider it without converting the

defendants’ motion to dismiss into a motion for summary

judgment. However, the court may not consider the

affidavit of Marie Anna Pardo, except to the limited

extent it authenticates the SPD. See Swanson v. Local 13

Pension Plan, 779 F. Supp. 690, 695 (W.D.N.Y.) (district

court converted a motion to dismiss into a motion for

summary judgment because the parties submitted affi-

davits regarding communications between a plan adminis-

trator and the plaintiff), aff'd without opinion, 953 F.2d

636 (2d Cir. 1991).

Il.

In Count I of the complaint, the plaintiffs allege that

General Dynamics violated ERISA, 29 U.S.C. §1001 et

seq., by not continuing the benefits of the Plan as they

existed as of December 31, 1984. The defendants argue

that the plaintiffs have failed to allege any express con-

tract provision by which their rights in the Plan vested.

According to the defendants, the inter-office memoranda

on which the plaintiffs rely to establish their “grand-

fathered” status are insufficient because such informal

communications between an employer and plan bene-

ficiaries do not—and cannot—constitute amendments to

an ERISA plan. Furthermore, the defendants argue that

the SPD expressl, provides that General Dynamics may

amend the Plan.

The plaintiffs agree that informal communications

do not modify an ERISA plan, as long as plan documents

are kept up-to-date as required by §102 of ERISA, 29

U.S.C. § 1022. In the instant case, because the defendants

have not amended the SPD or issued a new one since

8a

December 1981, the plaintiffs argue that the court may

look at the inter-office memoranda to define the terms of

the Plan. Furthermore, the plaintiffs maintain that

General Dynamics should be estopped from denying the

effects of the inter-office memoranda since they failed to

properly amend the SPD. The court finds the plaintiffs’

arguments unpersuasive.

In Moore v. Metropolitan Life Ins. Co., 856 F.2d 488,

492 (2d Cir. 1988), our Court of Appeals held that

“absent a showing tantamount to proof of fraud, an

ERISA welfare plan is not subject to amendment as a

result of informal communication between an employer

and plan beneficiaries.’” The Moore court reasoned that:

Congress intended that plan documents and the

SPDs exclusively govern an employer’s obligations

under ERISA plans. This intention was based on a

sound rationale. Were all communications between

an employer and plan beneficiaries to be considered

along with the SPDs as establishing the terms of a

welfare plan, the plan documents and the SPDs

would establish merely a floor for an employer’s

future obligations. Predictability as to the extent of

future obligations would be lost, and, consequently,

substantial disincentives for even offering such

plans would be created.

Moore, 856 F.2d at 492.

Unfortunately for the plaintiffs in the instant case,

Moore bars their reliance on inter-office memoranda to

define the terms of the Plan. As Plaintiffs’ counsel con-

ceded at oral argument, no allegation of fraud has been

made here, nor does the record contain any evidence of

bad faith or intent to deceive on the part of General

Dynamics. Accordingly, under Moore, the plan docu-

ments and the SPD exclusively govern the terms of the

Plan..

9a

Constrained to the four comers of the SPD, the

plaintiffs have not established—and cannot establish—

that they are entitled to “grandfathered” benefits under

the Plan. The SPD contains no provision by which the

plaintiffs’ rights in the Plan vested as of December 31,

1984. Furthermore, the SPD does contain a provision

which expressly reserves to General Dynamics the right to

amend or terminate the benefits under the Plan. See

Summary Plan Description, attached as Exhibit A to the

Affidavit of Marie Anne Pardo (filed June 16, 1993), at

45. Accordingly, the continuation of the plaintiffs’

after December 31, 1984 was wholly at the discretion of

General Dynamics, and the reduction of those benefits

does not violate the plaintiffs’ rights under ERISA.

This conclusion is not altered by the fact that General

Dynamics has not amended the SPD since December

1981. Even assuming General Dynamics violated an

obligation to update the SPD, the plaintiffs have not

offered any authority for their assertion that an SPD

does not govern the rights of the parties if it is not in

perfect procedural compliance with ERISA regulations.

Indeed, the opposite appears to be true; in Moore, the

Court of Appeals enforced the terms of an SPD that was

not formally amended for seven years, despite ““numerous

changes in its medical plans.” Moore, 856 F.2d at 490.

Furthermore, if accepted, the plaintiffs’ argument

could lead to the precise result cautioned against in

Moore—that is, disputes over the meaning and effect of

informal communications between employers and plan

beneficiaries every time a plan administrator failed to

comply with one of the technical reporting requirements

of ERISA. Accordingly, the court finds that General

Dynamics’ failure to amend the SPD does not undermine

the validity or binding effect of the document. What can

10a

be said, at most, is that General Dynamics’ failure to

amend the SPD should have put the plaintiffs on notice

that, sadly, the promises allegedly made to them in the

inter-office memoranda apparently were not worth the

paper on which they were printed.

For the foregoing reasons, Count I of the complaint

must be dismissed.

Ill.

In Count II of the complaint, the plaintiffs allege that

General Dynamics violated §510 of ERISA, by arbitrarily

allowing some Plan members, but not others, to retire

by December 31, 1992 and thereby retain enhanced

benefits.* The defendants argue that Count II should be

dismissed because, even if apportioning benefits among

employees is indeed arbitrary, such a practice does not

constitute adverse employment action, as required by

§510. The court agrees.

Section 510 “targets discriminatory conduct designed

to interfere with the exercise or attainment of vested or

other rights under [a] plan or ERISA.” Owens v. Store-

hourse, Inc., 984 F.2d 394, 399 (11th Cir. 1993) (cita-

tions omitted). To state a claim under §510, a plaintiff

must allege that adverse employment action was taken

against him in retaliation for asserting his rights under

ERISA or for the purpose of interfering with the attain-

ment of those rights. See Rath v. Selection Research,

Inc., 978 F.2d 1087, 1089 (8th Cir. 1992) (to prove a

2 Section 510 provides in pertinent part: “It shall be unlawful

for any person to discharge, fine, suspend, expel, discipline, or dis-

criminate against a participant or beneficiary for exercising any

right to which he is entitled . . . or for the purpose of interfering

with the attainment of any right to which such participant may

become entitled. . . .”” 29 U.S.C. §1140.

Sd 2 WR AE TR Ba i 5 Pe ee Ie, aN PP MRE eet Ee! Sy Te ee

Dts ese) ee ee AR SOREL NL Ry CPAP IE ne oy wa leas 9 * - acd

AE fl ee, A ee ee a Me Ee eM a eR ee eS pe ee ee

inaiciiill Pp eee Oe Se rs we ee ne

lla

§510 violation, plaintiff must show that adverse employ-

ment action was taken against him); Deeming v. Amen-

can Standard, Inc., 905 F.2d 1124, 1127 (7th Cir. 1990)

(“[a] fundamental prerequisite to a §510 action is an

allegation that the employer-employee relationship, and

not merely the pension plan, was changed in some dis-

criminatory or wrongful way”); Swanson v. Local 13

Pension Plan, 779 F. Supp. at 702-03 (Section 510 “‘only

reaches conduct which fundamentally changes the

employer-employee relationship’’).

A reduction of benefits, in and of itself, is not adverse

employment action for purposes of §510. See Berger v.

Edgewater Steel Co., 911 F.2d 911, 922-23 (3d Cir.

1990) (informing employees of proposed retirement plan

amendments did not constitute a violation of §510),

cert. denied, 499 U.S. 920 (1991); Owens v. Storehouse,

Inc., 984 F.2d at 399 (reduction of medical benefits did

not violate §510). Furthermore, allocating benefits

among employees, or allowing some employees to retire

during a grace period and thereby retain discontinued

benefits, does not constitute adverse employment action.

See Owens, 984 F.2d at 400 (Section 510 does not

forbid discrimination in the apportionment of benefits

within a plan); Tusting v. Bay View Federal Savings &

Loan Ass’n, 789 F. Supp. 1034, 1043 (N.D. Cal. 1992)

(Section 510 not violated where an employee allows

some employees to retire during a grace period and

thereby continue to receive discontinued benefits). While

such practices may indeed by arbitrary, they are not

actionable under §510, in the absence of further allega-

tions of an employer’s specific intent to discriminate

against individual employees. See Owens, 984 F.2d at

400.

12a

In the instant case, the plaintiffs merely allege that

General Dynamics violated §510 by arbitrarily denying

benefits to some employees while affording those bene-

fits to others. Because it is settled that apportioning

benefits, even if accomplished arbitrarily, is not adverse

employment action for purposes of §510, this allegation

is insufficient to state a claim under §510. Accordingly,

Count II must be dismissed.

IV.

In Count III of the complaint, the plaintiffs allege that

General Dynamics created a contract with them by repre-

senting that they were “grandfathered,” and subse- |

quently breached that contract by modifying the bene-

fits provided under it. In Count IV of the complaint, the

plaintiffs allege that General Dynamics violated the Con-

necticut Unfair Trade Practices Act, C.G.S. §41-110b

(“CUTPA”’), by arbitrarily allowing some Plan members

but not others to retire by December 31, 1992 and

thereby retain enhanced benefits. The defendants con-

tend that these claims should be dismissed because

§514(a) of ERISA preempts any and all state law claims

that ‘“‘related to” any employee benefit plan. The court

agrees.

Section §514(a) of ERISA provides that ERISA “shall

supersede any and all State laws insofar as they may now

or hereafter relate to any employee benefit plan. . . .”

29 U.S.C. §1144(a) (emphasis added). A district court

must construe the phrase “relate to” in its “‘normal

sense’’—that is, a state law claim is preempted by ERISA

“if it has a connection with or relevance to such a plan.”

Shaw v. Delta Air Lines, 463 U.S. 85, 97 (1983); District

of Columbia v. Gr. Wash. Bd. of Trade, _ U.S. ___ ,

113 S.Ct. 580, 583 (1992); Smith v. Dunham-Bush, Inc.,

13a

959 F.2d 6, 10 (2d Cir. 1992) (ERISA preempts a breach

of contract claim where that claim deals “expressly and

exclusively” with benefits under the plan); Altieri v.

Cigna Dental Health, Inc., 753 F. Supp. 61, 64 (D. Conn.

1990) (ERISA preempts a CUTPA claim where that claim

arises out of action taken in connection with the plan);

Cote v. Durham Life Insurance Co., 754 F. Supp. 18, 22

(D. Conn. 1991) (same).

In the instant case, both Count III (breach of contract)

and Count IV(CUTPA) clearly ‘relate to” the Plan. These

counts arise out of the same course of conduct cn which

the plaintiffs base their ERISA claims. Indeed, the allega-

tions in Count III and Count IV make explicit reference

to the Plan and are worded almost identically to their

ERISA counterparts contained in Counts I and II, respec-

tively. Furthermore, the relief which the plaintiffs seek in

Counts III and IV depends upon an interpretation of the

Plan. Under these circumstances, it is clear that the plain-

tiffs’ state law claims “relate to” the Plan. Accordingly,

Counts III and IV must be dismissed.

CONCLUSION

Based on the full record and for the reasons stated

above, the defendants’ Motion to Dismiss (filed June 16,

1993) (Doc #13) is GRANTED. Judgment shall enter for

the defendants.

It is so ordered.

Dated at New Haven, Connecticut, this 16th day of

November, 1993.

/s/ José A. Cabranes

José A. Cabranes

Chief Judge