# Opposition Brief — Pacific Bell Telephone Co. v. Wayne

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_1774%3A3

## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2001
- **Citation:** 534 U.S. 814

## Text

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

¢

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
BAnee GP PAPER REMI «6 60650 oc cxenaccacececen ii
SAA WRMreE GE BE CASE. oc sccccsicsencssesess 3
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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_1774%3A3. Public record. Not legal advice.