Opposition Brief — Pacific Bell Telephone Co. v. Wayne

Supreme Court, U.S.

| 3) FILED

JUN 20 200!

No. 00-1680

sm CLERK

In The i

Supreme Court of the United States

¢

PACIFIC BELL TELEPHONE COMPANY, a California

corporation, and PACIFIC TELESIS GROUP,

a Nevada corporation,

Petitioners,

Vv.

NANCY WAYNE; MARY ANN ACALDO; BARBARA

GARVIN; KAREN KENDRICK; DORIS RYAN; and

CAROL JANE TIDWELL,

Respondents.

¢

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

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RESPONDENTS’ BRIEF IN OPPOSITION

4

Marc S. SCHECHTER A. KENDALL Woop

Counsel of Record Hincny, Witte, Woop,

Jutia A. NICKERSON ANDERSON & Hopces

BUTTERFIELD SCHECHTER LLP A Law CorPorRATION

525 B Street, Suite 1500 525 B Street, Suite 1500

San Diego, CA 92101 San Diego, CA 92101

(619) 544-1200 (619) 239-1901

Attorneys for Respondents

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

TABLE OF CONTENTS

Page

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A. The Climate Created by Pacific.............. 1

B. Respondents Were Offered an Early Retirement

NE Is 5.05 0055555 a nie vdacewednwae ian 2

C. An Enhanced ERB Plan Was Offered

Shortly After Respondents Accepted the ERI II

cg POP eer eer eee LTET OTE eT TCE rere ree 5

D. Pacific’s Negotiations With the Union Before

and After the ERI Ii Offer................... 6

E. The District Court’s Findings in its Memoran-

I AF I vidas s Snseeinses ead ks ceneus 9

PEE Rob nba ch Nese dealwes tucks acnenck is 10

I. THE WRIT SHOULD BE DENIED BECAUSE

THE SERIOUS CONSIDERATION DIS-

CLOSURE REQUIREMENT DOES NOT INTER-

FERE WITH COLLECTIVE BARGAINING..... 10

Il. THE NINTH CIRCUIT OPINION DOES NOT

CE Fy GREE GP GEE ce eG kh aeedivciakesice 16

III. THE ISSUE OF A CIRCUIT SPLIT IS NOT RIPE

FOR THIS COURT’S REVIEW BECAUSE THE

DUTY NOT TO ACTIVELY MISINFORM

EMPLOYEES, REGARDLESS OF SERIOUS

CONSIDERATION, DOES NOT CONTROL THE

CEs Or ERED CASE oo sc cc sic ccsccees 20

Bee An cee bak eo 065 04 Figacesae wees 24

ii

TABLE OF AUTHORITIES

FEDERAL CASES

Adamcyk v. Lever Brothers Co., 33 F.Supp.2d 679

(ese Me. | Err yr er Cer reme epee © |

Ballone v. Eastman Kodak Co., 109 F.3d 117 (2d Cir. -

SO Fa GR 56h es co Se a a een

Bins v. Exxon Co. U.S.A., 220 F.3d 1042 (9th Cir.

PEP ey rrr rey re rire. res 10, 13,

Drennan v. General Motors Corp., 977 F.2d 246 (6th

CO ROUES cvs is eae cadgo csc ceves cipal

Fischer v. Philadelphia Electric Co., 96 F.3d 1533 -_

(3d Cir. 1996), cert. denied, 520 U.S. 1116

fd A DR Siig eter itera PUR ni a1, 47,

Hockett v. Sun Co., 109 F.3d 1515 (10th Cir.

WOES sc Riweddssnadaweded ae 18, 22,

Kurtz v. Philadelphia Elec. Co., 96 F.3d 1544 (3d Cir.

Pac 5 £0 cee a eee

Muse v. IBM, 103 F.3d 490 (6th Cir. 1996), cert.

denied, 520 U.S. 1260 (1997) .....6.sccscass 2a, 22,

Vartanian v. Monsanto Co., 131 F.3d 264 (1st Cir.

gs Spee re Erm Peer om Ee rp snr atte ails 17,

Wayne v. Pacific Bell, 189 F.3d 982 (9th Cir.

Ws oni shies ikke 1: F2, 33, 77,

Wilson v. Southwestern Bell Tel. Co., 55 F.3d 399 (8th

Se | RPP tnree nine Poy teary pe mete 18, 22,

FEDERAL STATUTES :

BAS. ee Bt Pear Serta errs re yp GE

20

22

23

23

18

23

BRIEF IN OPPOSITION

Respondents Nancy Wayne; Mary Ann Acaldo; Bar-

bara Garvin; Karen Kendrick; Doris Ryan; and Carol Jane

Tidwell respectfully pray that the petition for writ of

certiorari sought in this matter be denied.

+

STATEMENT OF THE CASE

Respondents respectfully refer this Court to the

Ninth Circuit’s opinion, Wayne v. Pacific Bell, 189 F.3d 982,

984-988 (9th Cir. 1999); App. C To Pet. For Cert. 22a-28a,

for a complete statement of the relevant facts and pro-

cedural history. As explained herein, the petition fails to

advance any compelling reason for granting certiorari.

The Serious Consideration Disclosure Requirement does

not interfere with collective bargaining. The Ninth Circuit

did not create a circuit split by creating a rule against

actively misinforming and deceiving plan beneficiaries

about the availability of future retirement benefits to

induce them to retire earlier than they otherwise would.

Moreover, this case is not ripe for this Court’s review

because the rule forming the alleged, but disputed, circuit

split does not necessarily determine the outcome of this

case.

A. The Climate Created by Pacific

Starting in approximately December 1994, Pacific

employees, including Respondents, were given the

impression by Pacific that Pacific’s financial condition

had taken a turn for the worse. (District Court Clerk’s

Record number, hereafter referred to as “CR”, 54;

Excerpts of Record number, hereafter referred to as “ER”,

14A, p. 413; ER 14B, p. 420.) Pacific had been cutting back

and downsizing. Pacific had sent voice mails to the

employees notifying them who had been laid off, that the

company was doing poorly, that they needed to sell more

products, cut back on their use of office supplies, and to

try to save Pacific money. (CR 54; ER 14A, pp. 412 and

416; 14B, p. 420; 14C, p. 426; 14D, pp. 437-438; 14E, p. 440;

14F, pp. 451-452; 14G, p. 458; 14H, pp. 463-464; 141, p. 467;

14J, p. 476.)

Pacific held special meetings to let the employees

know that in the Respondents’ workgroup “head count

needed to go down by 19 people” and generally what a

sad state the company was in. (CR 54; ER 14C, pp.

424-425; ER 14K, pp. 479-480; 14L, p. 49; 14E, pp. 442-443;

14G, pp. 459-460.) The employees were also told that

Pacific would have to lose approximately 10,000

employees in five years, that this may be the first time in

the history of the company that the shareholders would

not receive dividends, and that Pacific projected a loss of

approximately 30 percent of its business customers when

competition became a reality. (CR 54; ER 14C, p. 426.)

B. Respondents Were Offered an Early Retirement

Incentive Plan

It was in this economic climate that, in May 1995, a

meeting was held for a group of Pacific Bell employees,

including Respondents. Respondents were told that an

early retirement package was going to be offered to them.

Shortly thereafter, Respondents and others were given an

information package and were officially offered the ERI

II. Respondents were told they had a window period of

between June 1, 1995, and June 30, 1995, to either accept

or reject the ERI II plan. If they accepted, they would

have to retire on the 15th day following June 30, 1995.

(CR 40; ER 7A, pp. 130-131.)

Between May and the end of June 1995, the eligible

employees, including Respondents, asked many ques-

tions of their managers and supervisors. They asked

whether other enhanced early retirement incentives,

specifically a cash incentive, would be offered in the

future or whether the ERI II would be further enhanced

by a cash payment. The eligible employees, including

Respondents, were told directly and indirectly by Pacific

supervisors and managers that it was unlikely that there

would be better offers and there would certainly be no

offers with a cash incentive. (CR 54; ER 14K, pp. 43-46;

14L, p. 490; 14A, pp. 414-415; 14B, pp. 420-422; 14I, pp.

471-473; 14D, p. 436; 14F, pp. 451 and 456; 14H, p. 465.)

Mike Lynch, a manager of the work group at Pacific

which included the Respondents, told one of the Respon-

dents, Mary Ann Acaldo, when she asked about possible

future enhanced early retirement benefits, “Mary Ann,

you're the smart one. All these other people are waiting

for a bonus or for extra money. There is never going to be

any money. This company can’t afford to pay any

money.” (CR 54; ER 14C, pp. 428-430; ER 14E, pp.

444-445.) Lynch admitted during his deposition that he

told employees he did not believe there would be a better

offer. (CR 54; ER 14M, pp. 492-493.) Acaldo testified that

she told the other eligible employees what Lynch had told

her. (CR 54; ER 14C, p. 431.)

4

Respondent Karen Kendrick did not want to retire

when the ERI II was offered so she asked her supervisor,

Gladys Sanchez, whether any better offers were going to

be made. Sanchez told Kendrick that she “shouldn't

count on it.” (CR 54; ER 14E, pp. 446; ER 14F, pp. 451.)

Respondent Doris Ryan had been ill during the time the

ERI II was first offered in late May 1995. When she came

back to work, she was offered the ERI II. Babette Norris,

her supervisor, told her it would be best for Ryan if she

accepted the ERI II. (CR 54; ER 141, pp. 466-469; ER 14J, p.

477.) Considering what Norris and Acaldo and the others

told her when she returned to work. Ryan felt that she

better take the ERI II because if she did not, she “would

be gone with nothing.” (CR 54; ER 14I, p. 470.)

Lynch also told Rita Erickson, a facilities administra-

tor at Pacific and a coworker of Respondents, that “if you

are waiting for an offer with money, you are dreaming

because the company is broke.” Erickson. passed this

information on to others. (CR 54; ER 14A, p. 415.)

Respondent Nancy Wayne also asked her supervisor

when she was considering whether or not to accept the

offer how things looked in the company, the supervisor

said that it looked “gloomy.” (CR 54; ER 14A, pp.

416-417.)

Around the same time, Pacific circulated a newsletter

entitled “Briefings” which was published by the Califor-

nia Markets Transition Team. (CR 54; ER 14N, pp.

495-498.) The team is a multi-level, multi-function group

with representatives from each Pacific Bell business and

support unit. The team meets with the executive vice

president of Pacific Bell every six weeks. The Briefings

Ea a

newsletter was the means by which the company commu-

nicated the results of the meetings to its employees.

The Briefings issue that reported on the June 6, 1995,

meeting contained a section with questions by team mem-

bers and answers by the Pacific executive vice president.

One question asked was if an enhanced early retirement

incentive program with a cash incentive would be

offered. The executive vice president’s answer was that it

was “questionable” because of the declining surplus in

the pension plan fund. (CR 54; ER 14N, p. 496.)

The answer was interpreted by some of the eligible

employees to be a clear indication that the surplus pen-

sion funds were drying up so there would be no money

available to fund future offers with cash incentives. (CR

54; ER 14C, pp. 432-433; 14K, pp. 481-482; ER 14E, pp.

447-448.) In fact, Pacific had a projection by their own

actuary that by the year 2000, if there were no changes to

the retirement program, the pension fund would be over-

funded by approximately $1.6 billion. (CR 54; ER 140, pp.

512-513, 520.)

C. An Enhanced ERB Plan Was Offered Shortly After

Respondents Accepted the ERI II Plan

Respondents accepted the ERI II plan and took early

retirement. Their last day of employment was July 15,

1995. During the first week of August 1995, only three

weeks after Respondents retired, a new enhanced early

retirement incentive program (the “ERB”) was agreed

upon and made a part of the collective bargaining agree-

ment between the union and Pacific. The ERB was offered

to approximately 30 Pacific employees within a couple of

months. (CR 41; ER 8G, pp. 344-350; ER 8F, pp. 341-343.)

The benefits offered under the ERB contained an approxi-

mate increase of 13-14 percent in the pension benefits

offered and approximately 30 percent more in the form of

a cash bonus than the value of the benefits offered to the

Respondents under the ERI II Plan. The ERB program

would have entitled the Respondents, collectively, to

approximately $386,000 more than they received under

the ERI II plan. Individually, each Respondent would

have been entitled to $99,241.38 (Wayne); $89,919.44

(Acaldo); $41,843.25 (Garvin); $71,334.94 (Kendrick);

$26,962.74 (Ryan); and $57,077.85 (Tidwell) more than

they received under the ERI II plan. (CR 53; ER 13, pp.

407-408; CR 54; ER 14T, pp. 614-654.)

D. Pacific’s Negotiations With the Union Before and

After the ERI II Offer

Michael A. Rodriguez was the vice president of

Pacific Telesis and the chief negotiator for Pacific during

the bargaining sessions with the union regarding the 1995

labor contract which included the adoption of the ERB.

He had the authority from Pacific to enter into binding

agreements with the union, including an agreement pro-

viding for retirement benefits. (CR 54; ER 14P, pp.

574-575.)

Pacific and the union’s records of their negotiations

reveal that an enhanced early retirement benefit package

containing a cash incentive was formally presented to

Pacific by the union and discussion of the package was

placed on the agenda for the June 15, 1995, bargaining

session. (CR 54; ER 14Q, pp. 584-597.) This was before

Le ee Se

Respondents had accepted the ERI II and during the time

they asked Pacific supervisors and managers whether a

retirement package with a cash incentive was going to be

offered. |

Pacific admits that negotiations relating to an

enhanced early retirement program were commenced on

June 13, 1995. The union had its proposal on the table

which contained a cash incentive and Pacific, having

anticipated the issue, had already prepared a counter-

proposal and had drafted a proposed Memorandum of

Agreement which contained a cash incentive. (CR 54; ER

14Q, pp. 584-597.)

As of June 15, 1995, there is no question that Pacific

was seriously considering an early retirement benefit

package which would be enhanced by a cash incentive.

(CR 54; ER 14P, pp. 577-578; ER 14Q, pp. 584-597.) The

union had already offered its proposal which included a

cash incentive component. Pacific made its counter-

proposal on June 16, 1995, which included a cash incen-

tive and an increase in the pension band. (CR 54; ER 14P,

pp. 579-580; ER 14R, pp. 598-604.) The only proposals

under consideration were more favorable than the ERI II

offered to the Respondents.

The issue to be resolved through collective bargain-

ing was not whether there would be an enhanced early

retirement plan, but merely how much the pension band

would be increased and how much of a cash incentive

would be offered. On or about the same day, a proposed

Memorandum of Agreement which incorporated an

increase in the pension band and a cash incentive was

presented by Pacific to the union. (CR 54; ER 14P, pp.

580-581; ER 14R, pp. 598-604.)

In late 1994 or early 1995, Pacific Bell representatives,

including its Director of Labor Relations, Robert Kelly,

had submitted a series of projections and proposals that

included a pension annuity component to a steering com-

mittee which included Rodriguez. Each of the proposals

contained a cash incentive as part of the proposed early

retirement benefits, i.e, money would be paid to an

employee as an annuity or the employee could cash out

all or part of the annuity. (CR 54; ER 140, pp. 507-511 and

520.)

In June 1995, Kelly gave the steering committee a

proposal which included a 4 plus 4, a 20 percent

increased severance payment and a pension band

increase. (CR 54; ER 140, pp. 514-515, and 572.) Kelly

admitted that, as of June 1995, the pension fund was well

above the full funding limit. (CR 54; ER 140, pp. 516-517.)

Considering the history of proposals and projections

performed by Pacific, both well before and during the

1995 bargaining sessions, the company knew a cash

incentive was going to be a component in any future

early retirement benefit acceptable by the union. Yet its

management represented to its employees that no cash

incentive would be given in the next package if there was

one. The eligible employees were told they had better

“take what they could get” while they could. (CR 54; ER

14A, pp. 411-418; ER 14M, pp. 491-494; 14C, pp. 423-434;

14E, pp. 439-449; 14F, pp. 450-456; 141, pp. 451-452.)

— >

E. The District Court’s Findings in its Memorandum of

Decision

The district court made certain findings of fact in its

Memorandum of Decision. Specifically, the district court

made the following findings of fact:

* Respondents asked their immediate supervisors if

there might be other financial incentives offered in the

future (CR 59; ER 18, p. 693);

* Respondents were told that there would be no

better offers and there would definitely be no offers with a

cash bonus (CR 59; ER 18, p. 693);

* Pacific advertised that its financial health was poor,

that downsizing was inevitable, and that the surplus in the

pension plan was drying up (CR 59; ER 18, p. 693);

* On June 15 and 16, 1995, the union and Pacific

traded proposals for an early retirement incentive pro-

gram, both of which included a cash incentive (CR 59; ER

18, p. 693);

* The ERI II required the employees to make their

election between June 1 and June 30, 1995. (CR 59; ER 18,

pp. 692.)

The district court’s findings of fact, and the failure by

Pacific to provide the district court with any evidence to

demonstrate how and why a truthful and forthright

response to Respondents’ inquiries would have interfered

with the collective bargaining sessions, leads to the conclu-

sion that the district court should not have granted sum-

mary judgment.

10

ARGUMENT

I.

THE WRIT SHOULD BE DENIED

BECAUSE THE SERIOUS CONSIDERATION

DISCLOSURE REQUIREMENT DOES NOT

INTERFERE WITH COLLECTIVE BARGAINING

Pacific’s first argument is that the application of the

Serious Consideration Disclosure Requirement interferes

with the collective bargaining process. Essentially, Pacific

would like this Court to create a rule whereby all

employers are required to abide by the Serious Consider-

ation Disclosure Requirement, except those employers

who have union employees and therefore use the collec-

tive bargaining process to negotiate the ERISA benefit

plan terms. There is no compelling reason why the poli-

cies of the NLRA should trump ERISA’s policies in order

to carve out an exception to the Serious Consideration

Disclosure Requirement for employers employing union

employees.

A. The Ninth Circuit’s Holding That the Serious Con-

sideration Disclosure Requirement Applies in Col-

lective Bargaining Situations Is Consistent with

Other Circuits

Bins v. Exxon Co. U.S.A., 220 F.3d 1042, 1045 (9th Cir.

2000) held that “when a plan participant inquires about

potential plan changes, an employer-fiduciary has a duty

to provide complete and truthful information about any

such changes then under serious consideration.” This

rule has become commonly known as and is referred to

CaO OOOO TOOT

moet er eat

11

herein as the “Serious Consideration Disclosure Require-

ment.” The Ninth Circuit stated in its original opinion in

this case that “[p]roviding employees with information

relevant to their decisions about pension benefits does

not interfere with bargaining unless the employer

attempts to use those communications to undermine a

union's position in bargaining.” Wayne I, 189 F.3d at 989,

App. C To Pet. For Cert. 32a.

The Ninth Circuit stated in Wayne II that “[a]n

employer attempting to undermine a union’s power to

bargain on behalf of its members is a far cry from com-

municating as a fiduciary about serious consideration of a

proposal to change employee benefits under an ERISA

plan. App. A To Pet. For Cert. 12a. As well, the Ninth

Circuit stated such a stance is consistent with the Third

Circuit’s decision in Fischer v. Philadelphia Electric Co., 96

F.3d 1533, 1539 (3d Cir. 1996), cert. denied, 520 U.S. 1116

(1997), in which the court stated:

An ERISA fiduciary is under no obligation to

offer precise predictions about future changes to

its plan. Rather, its obligation is to answer par-

ticipants’ questions forthrightly, a duty that

does not require the fiduciary to disclose its

internal deliberations nor interfere with the sub-

stantive aspects of the collective bargaining

process (emphasis added).

The Ninth Circuit’s opinion adopting the Serious

Consideration Disclosure Requirement in a collective bar-

gaining situation is also in line with the Sixth Circuit’s

decision in Drennan v. General Motors Corp., 977 F.2d 246,

251 (6th Cir. 1992), where the court stated:

12

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 con-

siderations to make a plan available to affected

employees. ... A fiduciary has a duty not only

to inform a beneficiary of new and relevant

information as it arises, but also to advise him of

circumstances that threaten interests relevant to

the relationship. A fiduciary must give complete

and accurate information in response to partici-

pants’ questions, a duty that does not require

the fiduciary to disclose its internal delibera-

tions nor interfere with the substantive aspects

of the bargaining process. (Emphasis added;

internal quotations and cites omitted).

The Ninth Circuit’s holding that the Serious Consid-

eration Disclosure Requirement applies in collective bar-

gaining situations is also consistent with a district court

opinion in the Seventh Circuit, Adamcyk v. Lever Brothers

Co., 33 F.Supp.2d 679, 687 (N.D. Ill. 1998), where the court

stated that:

Contrary to defendant’s contention, informing

employees that the employer is seriously con-

sidering a severance package that will first need

to be the subject of collective bargaining does

not constitute an unfair labor practice.

The Adamcyk opinion holds that “[t]he NLRA does not

preclude application of the serious consideration stan-

dard.” Adamcyk, 33 F.Supp.2d at 687.

13

B. The Record on Appeal Contains No Facts Demon-

strating How Disclosure of Seriously Considered

Plan Changes Would Compromise the Collective

Bargaining Process _

Pacific did not provide the district court with any

facts to demonstrate how disclosure to its employees of

the likelihood there would be a future early retirement

benefit package would compromise the company or inter-

fere with the union’s role as employees’ exclusive bar-

gaining agent. (CR 38-42; ER 4-9, pp. 49-380.) Further, no

evidence was provided to the district court that Pacific

brought its dilemma, if indeed there was one, to the

attention of the union representatives and sought the

union’s consent to disclose the likelihood of an enhanced

early retirement benefit to its inquiring employees. Id.

Simply put, it is pure speculation that, by disclosing the

likelihood of a future early retirement benefit package to

a small group of employees to whom the information

would be material, would interfere with Pacific’s ability

to participate effectively in the bargaining sessions.

C. Application of the Serious Consideration Dis-

closure Requirement in Collective Bargaining Situ-

ations Does Not Hurt Plan Participants

The carefully structured Serious Consideration Dis-

closure Requirement fashioned by the Ninth Circuit in

Bins v. Exxon Co. U.S.A., 220 F.3d 1042 (9th Cir. 2000) (en

banc) and delineated again by the Ninth Circuit in this

case does not undermine the collective bargaining

process because it does not require disclosure of the

details of the union and/or employer proposals under

14

consideration. Pacific could have informed the benefici-

aries who so inquired by merely telling them that an

enhanced early retirement benefit was under consider-

ation. Then, it would have been up to the employees to

decide whether to base their decision on the “bird in the

hand” (ERI II) or on the prospect that there is a “bird in

the bush” worth waiting for (probable enhanced ERB). If

the negotiations broke down and the ERI II remained in

place, or no ERB was agreed upon, then the employer-

fiduciary would have had no ERISA liability because it

met its Serious Consideration Disclosure Requirement.

There are no facts in this regard from which to infer that

either the employer’s or the union’s bargaining position

would have been undermined by such a simple dis-

closure to the appellants before June 30, 1995.

Pacific argues in its petition that the Serious Consid-

eration Disclosure Requirement “will more likely confuse,

rather than educate, employees whose benefits are being

negotiated through the collective bargaining process.”

App. To Pet. For Cert. 23. This argument seems to indi-

cate-that Pacific has learned nothing from this experience.

Pacific knew at the time that the Respondents were con-

sidering early retirement that it was likely an enhanced

early retirement benefit, in some form, would soon be

available to them. Both Pacific and the union had pro- ‘

posed retirement programs that were more favorable to

employees than the existing program, and disclosing the j

likelihood of improved retirement benefits to potentially

affected employees would not have interfered with nego-

tiations and would have helped potentially affected

employees make informed decisions.

’

ee |

15

Pacific shouldn’t influence the employees’ decision

by withholding this information. The rule fashioned by

the Ninth Circuit assures that the decision by the plan

participant who asks will be an informed one. But it also

protects the fiduciary from liability if the fiduciary could

not have reasonably known that information was material

to a particular plan participant.

D. Application of the Serious Consideration Dis-

closure Requirement in the Context of Collective

Bargaining Does Not Undermine ERISA Policy.

ERISA imposes a duty on all plan fiduciaries to act in

the best interest of plan participants. (ERISA § 404; 29

U.S.C. § 1104.) ERISA, a statute enacted after the National

Labor Relations Act, does not legislate that the

employer's fiduciary obligation as a plan administrator is

suspended during a collective bargaining process.

Collective bargaining often goes on for a sustained

period before an agreement is reached. As the Ninth

Circuit has pointed out, to rule that an employer’s fiduci-

ary duties are suspended during collective bargaining

would produce perverse incentives, such as tempting the

employer to extend the bargaining period solely in order

to avoid its fiduciary obligations. Wayne I, 189 F.3d at 989;

App. C To Pet. For Cert. 32a; Adamcyk, 33 FSupp.2d at

687.

16

E. The Serious Consideration Disclosure Requirement

Can Be Met in the Context of Collective Bargaining

Pacific argues that, since serious consideration does

not begin in the context of collective bargaining until a

proposal has been accepted by the union, disclosure can

not be met in the context of collective bargaining. The

Ninth Circuit does not agree since it found in this case

that serious consideration began, at the latest, as soon as

Pacific tendered a proposal to the union during collective

bargaining. Specifically, the Ninth Circuit stated, “It is

unclear on this record precisely when serious consider-

ation began, but it is at least clear that it had already

occurred when Pacific presented in proposed ERB to the

Union during collective bargaining on June 19, 1995.”

App. A To Pet. For Cert. 10a. Accordingly, the Serious

_ Consideration Disclosure Requirement can work in the

context of collective bargaining since serious conSider-

ation begins, not when a proposal has been accepted by a

union, but rather when such proposal is offered to a

union by an employer.

II.

THE NINTH CIRCUIT OPINION

DOES NOT CREATE A CIRCUIT SPLIT

Pacific’s second argument is that the rule of law set

by the Ninth Circuit in this case conflicts with the rule of

law in other circuits. Respondents disagree with such

interpretation. The Ninth Circuit is in agreement with the

First, Third, Sixth, Eighth, and Tenth Circuits that as soon

as an employer-fiduciary gives “serious consideration” to

a proposal to change retirement benefits, it has a duty to

Cr ae

17

disclose information about the proposal to plan partici-

pants and beneficiaries who have so inquired.

In addition, the Ninth Circuit held in Wayne that an

employer-fiduciary may not “actively misinform” its plan

beneficiaries about the availability of future retirement

benefits to induce them to retire earlier than they other-

wise would. App. A To Pet. For Cert. 3a. Essentially, the

Ninth Circuit found that being deceitful and actively

misinforming can be material enough to equate to a

breach of fiduciary duty. In so doing, did the Ninth

Circuit create a circuit split? In order to answer this

question, we must look at the facts of each case.

In Wayne, the employer actually provided misleading

information to those who asked. However, no facts exist

in the cases presented to the First, Third, Sixth, Eighth,

and Tenth Circuits whereby the employer actively misin-

formed. Accordingly, the First, Third, Sixth, Eighth, and

Tenth Circuits did not rule that actively misinforming can

not be material enough to equate to a breach of fiduciary

duty. Rather, those circuits were not even presented with

such an issue.

In Vartanian v. Monsanto Co., 131 F.3d 264, 267 (1st

Cir. 1997), upon inquiry by a plan participant, the person-

nel representatives stated “they had been unable to con-

_ firm the rumors, and did not personally believe that any

early retirement package was in the works.” The plan

participant did not dispute the truthfulness of those state-

ments. Thus, the employer did not actively misinform.

In Fischer, 96 F.3d at 1537-38, the employer simply

informed the participants who so inquired that no change

in benefits was under consideration. The Third Circuit

18

found that the employer “responded truthfully to

employee questions.” Id. at 1541. No active misinforma-

tion was given to the participants with an intention to

induce them to retire earlier than they actually would.

In Muse v. IBM, 103 F.3d 490, 495 (6th Cir. 1996), cert.

denied, 520 U.S. 1240 (1997), the “record [did] not contain

sufficient evidence to establish that IBM knowingly

deceived plaintiffs about the possibility of an enhanced

plan.” Moreover, the Sixth Circuit found that IBM had not

“engaged in a targeted plan to deceive the plaintiffs and

thus reduce their benefits.” Id. at 495.

In Wilson v. Southwestern Bell Tel. Co., 55 F.3d 399, 406

(8th Cir. 1995), the plaintiffs alleged that the employer not

only breached their fiduciary duty because it failed to

disclose after serious consideration, but also that the

employer actively misinformed its plan participants with

an intent to deceive. The Eighth Circuit found that the

employees “did not meet their burden of showing mis-

representation, either intentional or negligent.” Id.

In Hockett v. Sun Co., 109 F.3d 1515, 1519 (10th Cir.

1997), there was no inducement by the employer to retire

early, as the plaintiff in that case resigned prior to asking

if he would be offered a better retirement package.

Accordingly, there could be no active misinformation or

deception to induce him to retire earlier than he other-

wise would.

The facts in Wayne are different than the other Cir-

cuits since Pacific did actively misinform in order to

induce earlier retirement. The Ninth Circuit specifically

found that a reasonable fact finder could conclude that:

19

There is evidence in the record that Pacific affir-

matively represented to its employees that no

offer of an improved benefits package would be

offered when, in fact, Pacific knew that it would

propose such a package to the Union and that

there was at least a reasonable probability that

some version of the package would ultimately

be incorporated into the collective bargaining

agreement. App. A to Pet. For Cert. 14a.

In so finding, the Ninth Circuit held that actively

misinforming can be material enough to equate to a

breach of fiduciary duty. The Ninth Circuit relied upon

the Second Circuit in Ballone v. Eastman Kodak Co., 109

F.3d 117 (2d Cir. 1997), the only other serious consider-

ation case where the employer did actively misinform

and deceive plan participants to retire earlier than they

otherwise would. In Ballone, the employer “made false

assurances that future enhancements have been ruled

out.” Ballone, 109 F.3d at 124.

Upon a thorough inspection of the facts, it becomes

clear that the Ninth and Second Circuits did not expand

the Serious Consideration Disclosure Requirement set

forth in the First, Third, Sixth, Eighth, and Tenth Circuits.

Rather, the cases presented to the Ninth and Second

Circuits contained facts whereby the employer was pro-

viding enough misleading information in order to equate

to a breach of fiduciary duty — facts which did not exist in

the cases presented to the other circuits.

20

Ill.

THE ISSUE OF A CIRCUIT SPLIT IS NOT RIPE

FOR THIS COURT’S REVIEW BECAUSE THE DUTY |

NOT TO ACTIVELY MISINFORM EMPLOYEES,

REGARDLESS OF SERIOUS CONSIDERATION, DOES |

NOT CONTROL THE OUTCOME OF THIS CASE

Even if the Ninth Circuit did expand the Serious

Consideration Disclosure Requirement and thus created a

circuit split, this case is not ripe for this Court’s review

because the rule against actively misinforming does not

control the outcome of this case.

‘

A. We Don’t Know When Serious Consideration Of

The Enhanced Plan Began.

Depending upon the factual finding still to be made

by the district court on remand, it is possible for the

Respondents to prevail based upon the Serious Consider-

ation Disclosure Requirement as established in any of the

Circuits. Serious consideration may have begun prior to

the time Respondents made their affirmative inquiries to

Pacific. The record is unclear as to this issue. This was a

reason why the Ninth Circuit remanded the case for

further proceedings. Specifically, the Ninth Circuit stated,

To determine when the Bins duty to disclose

arose, the district court must determine, irre-

spective of the pendency of collective bargain-

ing, the date on which Pacific began ‘serious

consideration’ of improved retirement benefits.

App. A to Pet. for Cert. 14a.

If the district court does find that serious consideration of

the ERB did begin prior to the time Respondents were

ii

21

informed no enhanced plan would be offered, Respon-

dents would prevail on the Serious Consideration Dis-

closure Requirement alone. Thus, whether or not Pacific

actively misinformed may not be necessary to a resolu-

tion of this matter in favor of Respondents. Since the rule

forming the alleged, yet disputed, circuit split would not

necessarily determine the outcome of this case, the issue

of a circuit split is not ripe for this Court’s review.

B. We Know That There Was Serious Consideration To

Offer An Enhanced Package Prior To The Time

Respondents Actually Retired.

Pacific began serious consideration of the ERB at the

latest on June 19, 1995. The Ninth Circuit’s opinion states,

“It is unclear on this record precisely when serious con-

sideration began, but it is at least clear that it had already

occurred when Pacific presented its proposed ERB to the

Union during collective bargaining on June 19, 1995.”

App. A To Pet. For Cert. 10a. The window period to elect

the ERI II lasted through June 30, 1995. Thus, there was a

period of at least 11 days during which time Pacific had

serious consideration of the ERB proposal, yet failed to

disclose such information to the Respondents. During

these 11 days, Pacific knew Respondents were relying

upon their communications of 13 days earlier that a better

early retirement offer would not be made in the future.

The record is unclear if Respondents made repeated

inquiries after June 19, 1995. Accordingly, the outcome of

this case does not rely upon the Ninth Circuit’s rule

against actively misinforming. Rather, there was serious

22

consideration to offer an enhanced early retirement pack-

age prior to the time Respondents accepted the less gen-

erous early retirement plan.

These facts are in direct contrast to the facts in each

related case in the various circuits. In Vartanian, 131 F.3d

264; Fischer, 96 F.3d 1533; Kurtz v. Philadelphia Elec. Co., 96

F.3d 1544 (3d Cir. 1996); Muse, 103 F.3d 490; Wilson, 55

F.3d 399; and Hockett, 109 F.3d 1515, employees failed to

show that the employer seriously considered a plan to

offer enhanced early retirement benefits before such

employees accepted the less generous early retirement

plan. In each of these cases, serious consideration began

after the employees had already accepted a different

package and after they had in fact retired.

In Vartanian, 131 F.3d at 266, the First Circuit held

that there was no breach of fiduciary duty because “no

enhanced severance package that would have affected

Vartanian was under ‘serious consideration’ at the time

he retired.” Vartanian retired on May 1, 1991. Id. Serious

consideration of the enhanced severance package began

on May 29, 1991. Id. at 272.

In Fischer, 96 F.3d at 1541, serious consideration of

the enhanced plan began on April 7, 1990. All of the

members of the plaintiff class retired before April 7, 1990.

Id. at 1543. The Third Circuit entered judgment for defen-

dants on plaintiffs’ breach of fiduciary duty claim. Id.

In Kurtz, 96 F.3d at 1550, May 28, 1987, marked the

beginning of serious consideration of an enhanced plan.

Judgment was entered for the defendants on the claims of

all employees who asked about a benefits change and

retired before May 28, 1987. Id.

23

Likewise, in Muse, 103 F.3d at 491, plaintiffs retired

prior to March 31, 1990. Serious consideration of IBM’s

increased early retirement program did not occur until

after such date. Again, the employer did not seriously

consider the plan prior to plaintiffs’ retirement. The Sixth

Circuit held no breach of fiduciary duty.

In Wilson, 55 F.3d at 404, plaintiffs all terminated

employment on or before December 31, 1990. The Eighth

Circuit found that “[a]lthough there may be some ques-

tion as to when in 1991 the [increased retirement plan]

was first seriously considered, there is no dispute that

this consideration occurred in 1991.” Once again, another

case where plaintiffs lost because they all retired prior to

serious consideration.

Finally, in Hockett, 109 F.3d at 1519, plaintiff retired

effective as of July 1, 1991. Sun Company did not “seri-

ously consider a future ERISA offering until sometime

after July 1, 1991.” Id. at 1524. Accordingly the Tenth

Circuit found no breach of fiduciary duty.

The Respondents may prevail simply on the Serious

Consideration Disclosure Requirement and need not rely

on the rule stating that fiduciaries have a duty not to

actively misinform. Since the rule forming the alleged,

yet disputed, circuit split would not necessarily deter-

mine the outcome of this case, if the Court were to grant

certiorari based on such a split, it would be doing so only

to make a policy decision.

24

IV.

CONCLUSION

For all of the above stated reasons, the petition for

writ of certiorari should be denied.

Respectfully submitted,

Marc S. SCHECHTER A. KENDALL Woop

Counsel of Record Hincny, Witte, Woop,

Jutia A. NICKERSON ANDERSON & HODGES

BUTTERFIELD SCHECHTER LLP A Law Corporation

525 B Street, Suite 1500 525 B Street, Suite 1500

San Diego, CA 92101 San Diego, CA 92101

(619) 544-1200 (619) 239-1901