filed: June 29, 1995.
JOHN T. HENNESSY; MICHAEL B. HIGH; WILLIAM A. BRACKEN; LARRY GIBSON; MARTHA C. HITCHCOCK; LAURENCE A. LISS; KEN MANCINI; GEORGE S. RAPP; ROBERTA GRIFFIN TORIAN; FRANK J. SORIERO
FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR MERITOR SAVINGS BANK; THOMAS CALLAHAN V. FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR MERITOR SAVINGS BANK, JOHN T. HENNESSY, ROBERTA GRIFFIN TORIAN, MICHAEL B. HIGH, WILLIAM BRACKEN, LAURENCE LISS, MARTY HITCHCOCK, GEORGE S. RAPP, KENNETH R. MANCINI, LAWRENCE J. GIBSON, FRANK J. SORIERO AND THOMAS CALLAHAN, APPELLANTS; DAVID A. CAMPBELL, JR.; ROBERT F. HANNA; LESLIE VOTH; HELEN T. DEMARCO, INDIVIDUALLY, AND ROBERT F. HANNA; HELEN T. DEMARCO, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, (SEPARATION PLAN CLASS), AND DAVID A. CAMPBELL, JR., ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, (RETIREE HEALTH CLASS), AND DAVID A. CAMPBELL, JR.; ROBERT F. HANNA, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, (LIFE INSURANCE CLASS) V. FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR MERITOR SAVINGS BANK, DAVID A. CAMPBELL, JR., ROBERT F. HANNA, HELEN T. DEMARCO AND LESLIE VOTH, APPELLANTS; JOSEPH A. ADOLF, LAURENCE J. ARNOLD, CHRISTIAN F. AURIG, GEORGE W. BARBER, LINDA C. BARCH, RICHARD F. BATE, OWEN J. BEHEN, LAUREN BETHEA, ELIZABETH L. BLANKENHORN, ANNE MARIE BOBACK, SUSAN M. BROWN, JOHN J. BUCZEK, GEORGE S. BUNTING, MARY ANN C. BURCH, EDITH BURKEITT, THOMAS P. CALLAHAN, DAVID A. CAMPBELL, JR., KARLA J. CARNEY, JOHN M. CASAMENTO, JR., WILLIAM J. CATHCART, LISA CAVALLI, NANCY L. CEFFARATTI, JOSEPH D. CELLUCCI, ESTHER CERBO, CAROLE A. CIRCUCCI, ANTHONY R. COOGAN, LARRY A. COOK, SAMUEL J. COOK, WALLACE P. COONEY, PAUL L. COPPOLA, LORENE C. COQUILLETTE, BETTY R. CORLEY, HARRIET S. CORLEY, JOAN T. CORSON, DAVID E. COVERDALE, MARY C. CRAIGE, LOIUS T. CULLEN, JOHN F. CULP, EDWARD D. CUSTER, MICHAEL CZINCILA, JOAN E. DEBES, IRENE V. DELIZZIO, GAIL L. DELVISCIO, HAROLD L. DEMPSEY, HAROLD C. DENGEL, DEBRA ANNE DENIGHT, BEATRICE L. DESHER, JOSEPH H. DEVORE, JR., ANNA S. DIFELICE, MARIO DIFELICE, MARY ANN DIGREGORIO, LEONID A. DOBRININ, SARAH S. DOODY, JOSEPH M. DUFFY, LEONARD T. EBERT, JOHN A. FATULA, CHARLES J. FERRIE, GEORGE W. FETTERS, JR., LORE L. FISHER, JOHN P. FOGARTY, CYNTHIA M. FORD, DORIS GAGLIARDI, BARBARA A. GIBSON, FRANCES J. GILLEN, WILLIAM R. GOETTLE, CHARLES W. GRAY, III, EUGENE A. HEIWIG, WILLIAM H. HILLIARD, WILLIAM H.H. HSU, STANLEY E. HUNT, CHARLES C. JONES, THOMAS C. KEISER, KATHLEEN F. KELLY, LYNN M. KELLY, ETHEL S. KEOWEN, JOHN ANDREW KINNERMAN, PHILIP W. KLINGER, C. ANDREW KREPPS, JR., JOHN DAVID LAMBERT, MICHAEL G. LEWIS, PATRICIA LEUTHY, SALVATORE LIZZIO, ALDO S. LOMBARDI, ELISABETH W. LORD, KATHLEEN LYNCH, E. DAVID MACNALLY, WILLIAM C. MACNEILL, JR., FRANK JOSEPH MARULLO, EDWARD M. MASON, JR., THOMAS G. MARVEL, RUTH A. MCALLISTER, JOSEPH F. MCCOLE, CHRISTINE D. MCCORMICK, PHILIP J. MCCORMICK, JANET B. MCCOURT, DAVID C. MELNICOFF, FREDA I. MILLAR, ANTHONY M. MINGARINO, JOSEPH J. MOFFA, LINDA LEE MONTANA, BARBARA L. MORGAN, MARION D. MORGAN, LEONARD V. MORRIS, DAVID D. MORRISON, MARY T. MURPHY, ANTHONY J. NOCELLA, WILLIAM A. NORRIS, III, MARTHA K. NYLUND, MARY E. ORR, JOHN T. OSMIAN, CHARLES E. PADGETT, PATRICIA PAWLING, HOWARD F. PEARCE, CATHERINE P. PICCONE, PETER P. PRYZBYLKOWSKI, DARLENE E. PURUGGANAN, ELIZABETH L. RAFETTO, EDWARD W. RAPP, LUBA K. REILLY, LOUISE M. REITANO, ANTOINETTE D. RENDINO, MS. JAMIE RINDOCK, JEAN DAVIS ROBINSON, RICHARD ROGERS, DIANE S. ROHR, HERBERT A. ROTH, ANTHONY J. SANTILLI, JR., KATHLEEN M. SAWCHYNSKY, RUTH C. SCHMIDT, MICHAEL F. SCUTTI, MARTIN SELGRATH, JOHN W. SEMPLE, JOSEPH F. SLANE, ROBERT A. SMALLEY, ELIZABETH K. SONNEBORN, FRED B. STAAS, WALTER R. STAPLES, ROBERT C. STEINMAN, ARTHUR W. STETTLER, JEAN J. STUBBS, ANTHONY TABASCO, ROBERT B. TAYLOR, ANNITA L. TEDESCO, KENNETH C. THOMAS, PATRICIA E. THOMPSON, DIANNE T. TINDALL, JAMES M. TOOLAN, MORRIS VARANO, STANLEY J. VERBEEK, DONNA VOLZ, LESLIE C. VOTH, THERESA M. WEBB, CYNTHIA WEST, ROBERT B. WHITELAW, ALTON T. WINNER, JR., ANNE M. WISE, VERDELLA WRIGHT, ANTHONY J. ZONGARO AND LINA G. ZANONI, APPELLANTS V. FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR MERITOR SAVINGS BANK
On Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Civil No. 93-cv-05589), (D.C. Civil No. 94-cv-01949), (D.C. No. 93-cv-03969), (D.C. No. 94-cv-01499).
Before: Cowen, Lewis and Garth, Circuit Judges.
Plaintiffs in these related cases, former employees and managers of Meritor Savings Bank, appeal from three orders of the district court that granted summary judgment in favor of the defendant, the Federal Deposit Insurance Corporation ("FDIC"), on their claims to recover severance pay, medical benefits, and life insurance benefits pursuant to the terms of their employee welfare benefit plans. The issues raised in these appeals are whether the district court erred in determining that: (1) the FDIC's takeover and sale of Meritor was not a reorganization for purposes of the plaintiffs' separation pay plan; (2) the discharge of Meritor employees did not constitute "job elimination" or "lack of work" triggering severance payments; (3) the plaintiffs had no vested right to severance pay; (4) the FDIC properly exercised its repudiation powers; (5) the plaintiffs did not incur "actual direct compensatory damages" as provided in 12 U.S.C. § 1821(e)(3); (6) the FDIC properly terminated life and health insurance benefits pursuant to the termination provisions in these employee welfare benefit plans; (7) the FDIC was not liable for a statutory penalty under 29 U.S.C. § 1132(c)(1) as a result of its failure to respond in a timely manner to plaintiffs' request for plan documents; and (8) the certification of three plaintiff classes was inappropriate. Because we conclude that the district court did not err in granting summary judgment to the FDIC on plaintiffs' claims for separation pay, health insurance benefits, and life insurance benefits, we will affirm the orders of the district court. Further, because we conclude that the district court did not abuse its discretion in finding that the FDIC is not liable for the statutory penalty prescribed by 29 U.S.C. § 1132(c), we will affirm the order of the district court pertaining to this issue. Finally, because of our Conclusion on the merits, that the district court did not err in granting summary judgment for the FDIC, we need not reach the class certification issues.
I. FACTS & PROCEDURAL HISTORY
On December 11, 1992, the Secretary of Banking of the Commonwealth of Pennsylvania issued an order declaring Meritor Savings Bank ("Meritor") insolvent and directing that the bank be closed. On the same day, the FDIC was appointed as receiver for the insolvent bank. As receiver, the FDIC executed a Purchase and Assumption Agreement with Mellon Bank ("Mellon") transferring a portion of Meritor's assets and liabilities to Mellon. The FDIC retained the liabilities not assumed by Mellon, along with the unpurchased Meritor assets, which the FDIC proceeded to liquidate for the benefit of Meritor's approved creditors.
The record demonstrates that until the Secretary of Banking declared the bank insolvent, Meritor maintained a separation pay plan ("SPP"), a retiree health insurance plan (the Meritor Medical Plan 65 Special Option or "65 Special"), and a retiree life insurance plan (the Meritor Group Life Insurance Plan or "MGLIP").*fn1 Under the SPP, eligible employees were entitled to severance pay based on their years of service and salary, up to a maximum benefit of twenty-six weeks. Benefits were payable for involuntary termination due to "lack of work, job elimination, reorganization or reduction-in-force." Campbell App. at 139a. No benefits would be paid if separation resulted from sale or Disposition of a portion of Meritor's assets and the employee was employed by the successor entity. Id.
The SPP was "unfunded," meaning all benefits were paid from the general assets of Meritor. Id. at 141a. Meritor retained sole authority to determine whether a separation entitled an employee to benefits. Id. Moreover, Meritor expressly reserved the right to modify or discontinue the SPP in whole or in part at any time. Id. at 137a.
Under the 65 Special, Meritor provided group health insurance coverage for its retirees. Id. at 406a. The 65 Special was a self-insured plan that qualified as an employee welfare benefit plan under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001-1461 ("ERISA"). The MGLIP, also an employee welfare benefit plan under ERISA, provided retirees with death benefit coverage equal to the lesser of $50,000 or 25% of the amount of death benefit coverage for which they were insured immediately prior to retirement. Id. at 405a-06a.
Meritor explicitly reserved the right to terminate the 65 Special and the MGLIP at any time. The health plan provided:
Meritor intends the plan to be permanent, but since future conditions affecting your employer cannot be anticipated or foreseen, Meritor reserves the right to amend, modify or terminate the plan at any time, which may result in the termination or modification of your coverage. Expenses incurred prior to the plan termination will be paid as provided under the terms of the plan prior to its termination.
Id. at 165a (emphasis omitted). The life insurance plan provided:
Meritor reserves the right to terminate the group life insurance policy for its employees and retirees at any time, if Meritor determines that such termination is in its best interests. If Meritor terminates its group life insurance policy, employees and retirees who die after the effective date of the termination . . . will not have any life insurance.
On the day the Secretary declared Meritor insolvent, a meeting was held to discuss the status of Meritor's employees. At that meeting, Jack Goodner, the FDIC's closing manager, made a brief presentation. When he finished his remarks, an employee asked him whether severance benefits would be paid. Goodner thought not, but was not sure. After looking towards two other FDIC officials for guidance, Goodner responded "no." At the close of business on December 11, 1992, the former Meritor employees became employees of Keytech Resources, Inc., a firm established to provide staffing for the former Meritor offices purchased by Mellon. Mellon paid severance benefits to the employees who were subsequently laid off based on their years of service to Meritor, up to a maximum of four weeks salary.
On the Monday following the events of Friday, December 11, 1992, the former branches of Meritor opened for business as usual under the name of Mellon-PSFS without interruption of business to regular customers. The FDIC subsequently repudiated the SPP pursuant to its powers under 12 U.S.C. § 1821(e). The FDIC did not repudiate either the 65 Special or the MGLIP plans. Instead, the FDIC sent letters to the former employees and retirees of Meritor notifying them that their health and life insurance plans were terminated effective December 31, 1992 pursuant to the terms of each plan.*fn2 Those letters advised the employees about the availability of FDIC-sponsored continuing medical coverage, and also provided specific instructions for filing claims for benefits under the FDIC's statutory claims process, alerting the employees and retirees to a March 19, 1993 bar date for filing claims against the assets of the receivership.
A. The Hennessy Plaintiffs
The Hennessy plaintiffs are former managers of Meritor. They filed suit in the Eastern District of Pennsylvania alleging the right to recover severance pay pursuant to the terms of the SPP. In support of their claim, they rely on the above-stated facts and the fact that, prior to the FDIC's takeover of Meritor, each of them received a letter from Meritor's Chairman, Roger Hillas, stating:
Meritor senior management is acutely aware that [it] is essential to retain motivated employees such as you in key positions.
As evidence of this awareness, Meritor is extending the severance benefit provided to you under the Separation Pay Program to a total of 52 weeks pay. This enhanced benefit will be payable under the same terms and conditions as provided for in the Separation Pay Program if you are separated from employment by Meritor anytime on or before December 31, 1992.
Letter from Hillas to John Hennessy (October 3, 1990); Hennessy App. at 68. The Hennessy plaintiffs argued before the district court that their severance rights under the SPP were activated when "they were terminated as part of a reorganization." Hennessey v. FDIC, 858 F. Supp. 483, 487 (E.D. Pa. 1994).
The district court rejected the Hennessy plaintiffs' argument. The court explained that the FDIC sold Meritor to Mellon and was in the process of liquidating the rest of Meritor's assets. Id. The court reasoned that because the FDIC was involved with the termination of Meritor, rather than the continuation of its business, there was no reorganization. Id. In the alternative, the Hennessey plaintiffs argued before the district court that given the FDIC's repudiation of the SPP, the plaintiffs should be able to recover severance pay pursuant to 12 U.S.C. § 1821(e)(3) which provides for compensation for actual direct compensatory damages attributable to a repudiation. Id. at 488-89. The district court disagreed. Relying on the decision of the Court of Appeals for the First Circuit in Howell v. FDIC, 986 F.2d 569 (1st Cir. 1993), the district court determined that severance payments are not actual direct compensatory damages under § 1821(e)(3). 858 F. Supp. at 489. Accordingly, the district court granted summary judgment in favor of the FDIC. Id. at 485. This appeal followed.
B. The Campbell Plaintiffs
The Campbell plaintiffs include: (1) David Campbell, Jr., an employee who retired from Meritor effective December 1, 1987; (2) Robert Hanna, Helen DeMarco, and Leslie Voth, employees who were employed by Meritor on December 11, 1992; and (3) potential plaintiff classes comprised of the above named plaintiffs and those similarly situated. The Campbell plaintiffs filed claims for benefits with the FDIC. The FDIC, however, rejected these claims.
Subsequent to the FDIC's denial of their claims, the Campbell plaintiffs filed suit in the United States District Court for the Eastern District of Pennsylvania. In their complaint, plaintiffs Hanna and DeMarco sought severance payment pursuant to the SPP. Plaintiff Campbell sought a declaration that he and other similarly situated persons are entitled to health insurance coverage under the 65 Special. Campbell also sought reimbursement with interest for health insurance premiums paid since December 11, 1992. In addition to these claims, plaintiffs Campbell and Hanna sought a declaration that they and other similarly situated persons are entitled to life insurance under the MGLIP. They also sought reimbursement with interest for life insurance premiums paid since December 11, 1992. Finally, plaintiffs Campbell, Hanna, Voth and DeMarco sought a monetary penalty under ERISA for the FDIC's failure to provide in a timely manner information requested by their counsel.*fn3
The district court denied Hanna and DeMarco's claims for severance pay under the SPP for the reasons set forth in its decision in Hennessey. Campbell v. FDIC, No. CIV.A.93-3969, 1994 WL 475067, at * 4 (E.D. Pa. Aug. 29, 1994). In addition, the court found that it did not have jurisdiction to hear the claims brought by Campbell or Voth because these claims were filed prematurely.*fn4 Id. Nevertheless, the court concluded that even if it had jurisdiction to hear Campbell's claims for health and life insurance benefits, these claims would fail because the FDIC terminated both the 65 Special and the MGLIP pursuant to its contractual rights. Id. Finally, the district court granted summary judgment in favor of the FDIC on the plaintiffs' claims for a statutory penalty because it concluded that: (1) the statutory penalty should not apply to the FDIC, an agency of the federal government; or (2) even if the statutory requirement does apply to the FDIC, the court would exercise its discretion under 29 U.S.C. § 1132(c) and award no penalty in this case. Id. at * 7.
With respect to the potential class claims, the district court denied plaintiffs' motion to certify a separation pay plan class, a retiree health class, and a life insurance class. Campbell v. FDIC, No. 93-3969 (E.D. Pa. June 30, 1994) (order denying class certification). The court determined that the plaintiffs could not satisfy all four of the threshold requirements of Rule 23(a) of the Federal Rules of Civil Procedure for certifying a plaintiff class. Id. at 5, 7, 8. In addition, the district court found that class certification under Rule 23(b)(1) or Rule 23(b)(2) would be inappropriate. Id. at 9. This appeal followed.
The Adolph plaintiffs are a group of 161 former Meritor employees and retirees.*fn5 In their complaint, also filed in the United States District Court for the Eastern District of Pennsylvania, the employee plaintiffs challenged the repudiation of the SPP by the FDIC. The retiree plaintiffs challenged the termination of their medical benefits under the 65 Special. In addition, both the employee and retiree plaintiffs challenged the termination of the MGLIP. The FDIC and the Adolph plaintiffs filed motions for summary judgment on July 26, 1994. The district court granted summary judgment for the FDIC for the reasons detailed in Hennessey and Campbell. Adolph v. FDIC, No. 94-1499 (E.D. Pa. Aug. 29, 1994) (order granting summary judgment). This appeal followed.
These cases commenced under the Financial Institutions Reform, Recovery and Relief Act of 1989 ("FIRREA") and ERISA. The district court's jurisdiction was predicated upon 28 U.S.C. § 1331. We have jurisdiction over the instant appeals pursuant to 28 U.S.C. § 1291. We exercise plenary review over a grant of summary judgment. Because the material facts in this matter are not in dispute, we review only for errors of law. As to the Campbell plaintiffs' argument ...
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