Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-04-01902/USCOURTS-ca8-04-01902-0/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 04-1902

___________

Dallas Deane Register; Toney P. *

Freeman; James H. Frerichs; Scott *

Patrick Henry; Emelia Kelley; Joseph *

C. Lewis; Don T. Lynch; David A. *

Shepherd, *

*

Plaintiffs - Appellants, *

* Appeal from the United States

v. * District Court for the 

* Western District of Missouri.

Honeywell Federal Manufacturing & *

Technologies, LLC, *

*

Defendant - Appellee. *

*

_________________ *

*

Gerald W. Lawson, *

*

Plaintiff - Appellant, *

*

v. *

*

Honeywell Federal Manufacturing & *

Technologies, LLC, *

*

Defendant - Appellee. *

___________

Submitted: January 14, 2005

Filed: February 17, 2005

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The Honorable Howard F. Sachs, United States District Judge for the Western

District of Missouri.

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___________

Before MURPHY, McMILLIAN, and BYE, Circuit Judges.

___________

MURPHY, Circuit Judge.

Former employees of Honeywell FM&T, LLC, including Dallas Deane

Register and Gerald W. Lawson, sued the company after their positions were

outsourced, alleging violations of the Employment Retirement Income Security Act

(ERISA), the Age Discrimination in Employment Act (ADEA), and Title VII. They

alleged in particular that Honeywell terminated their employment with the intent to

interfere with their pension benefits, in violation of § 510 of ERISA, 29 U.S.C.

§ 1140. The district court1

 granted summary judgment to Honeywell, and the former

employees appeal only the dismissal of their § 510 ERISA claims. We affirm.

Before the outsourcing, appellants had worked in the facilities and utilities

engineering groups at Honeywell's Kansas City manufacturing plant. As a

government contractor Honeywell manages and operates the Kansas City plant for the

Department of Energy (DOE), and Honeywell or one of its predecessors has operated

the plant since 1949. Honeywell's contract with DOE provides that the government

pays all management and operation costs at the plant, including employee

compensation and benefit costs, and Honeywell receives an incentive fee based on

performance and other awards.

The facilities engineering group at Honeywell was responsible for the design

and implementation of onsite construction projects, and the utilities engineering

group was responsible for maintaining onsite facilities such as heat, ventilation, air

conditioning, water, and electricity. Honeywell president Karen Clegg was

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dissatisfied with the senior management and the performance of the facilities and

utilities groups, and the company hired a consultant in 1995 to study its facilities

operations. That study concluded that the facilities engineering group was too large

and did not meet the standards of private industry. The study also found that a

significant contributor to the problems in the area was turnover at the senior

management level.

Since 1949 DOE had renewed contracts to operate the Kansas City plant

without competitive bidding, but in 1998 Honeywell received information that DOE

would likely open the contract to outside bidders. This information was later

confirmed, and Honeywell hired consultant Darrell Elliott to help develop a strategy

for its bid on the contract. Elliott assisted Honeywell in performing a self assessment

to determine its strong and weak areas. He recommended that the company address

any potential weaknesses and urged Honeywell to consider outsourcing some

functions to companies that were stronger in the weaker areas. The self assessment

identified security, the cafeteria, and facilities and utilities engineering as areas whose

outsourcing could strengthen Honeywell's contract proposal to DOE. Honeywell

states that Elliott's recommendation was consistent with the DOE policy described in

its 1994 report "Making Contracting Work Better and Cost Less." That report

encouraged contractors to consider whether subcontracting or outsourcing would be

cost effective.

David Douglass became vice president for operations at Honeywell in January

2000, with supervision over the facilities and utilities groups. He received feedback

from a local DOE officer that the facilities area had performed at a good level, but

that there was room for improvement. Another source of concern for Honeywell was

DOE's 1999 fiscal year report, which rated its facilities and utilities areas only as

"good" while other areas received a rating of "outstanding." Douglass succeeded in

getting Honeywell to seek a new director for the facilities and utilities functions in

early 2000, but it did not find any acceptable candidates. Honeywell states that it was

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about this time that Douglass proposed that it follow Elliott's recommendation that

facilities and engineering services be outsourced by subcontracting with a third party.

The facilities and utilities engineering groups were seen as potential areas for

outsourcing because they were not considered core competencies of Honeywell and

they were commonly outsourced in private industry. The proposal was put before a

focus group which concluded that DOE might prefer that Honeywell retain control

of the utilities group but that it might "be the wrong approach" to continue with the

facilities group in the same way.

In March 2000 Honeywell entered into discussions with three firms about

outsourcing, and it then executed a memorandum of understanding with the

engineering company Burns & McDonnell. That memorandum stated that DOE was

expected to issue a formal request for proposal for the Kansas City plant, that each

party would use best efforts to negotiate an agreement under which Burns &

McDonnell would serve as a subcontractor for facilities and utilities engineering

services, and that this would be incorporated into Honeywell's proposal. When DOE

issued a formal request for proposal in April, Honeywell and Burns & McDonnell

agreed to prepare one for submission. Honeywell informed its employees in May that

it intended to propose outsourcing the facilities and utilities engineering groups and

the cafeteria operations in its bid for the DOE contract.

At least five other companies notified DOE that they planned to submit a

proposal, and representatives of other potential bidders toured the Honeywell Kansas

City plant in May. Honeywell submitted its proposal to DOE on July 14 and learned

in October that it had been chosen; none of the other potential bidders actually

submitted a proposal. Although DOE identified the outsourcing of the facilities and

utilities functions as a weakness in Honeywell's overall proposal, it ultimately

approved the subcontract with Burns & McDonnell.

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Honeywell established eleven positions that would remain in the company to

oversee and coordinate the facilities and utilities functions, and it indicated that all

employees in the facilities and utilities groups could apply for them. Although the

positions were filled from those groups, the five appellants who applied were not

selected. Several facilities and utilities engineering employees asked to be transferred

to other positions within Honeywell to avoid being outsourced to Burns &

McDonnell, but Douglass announced that no other employees from the affected

groups would be able to remain at Honeywell because the company wanted to ensure

continuity of operations after work was transferred to Burns & McDonnell.

According to Honeywell some internal debate followed, and it was decided that the

employees who were to be outsourced would be allowed to apply for internal

openings if an employee's skills were not necessary for the success of the outsourced

operation. Honeywell states that as a result of this screening process, at least fifteen

employees applied for internal openings and two were allowed to transfer within the

company. 

Appellants assert that permission to apply for internal transfers was given on

an ad hoc basis without informing all of the employees that the initial transfer ban had

been lifted, but Register and Lawson were cleared to apply for internal openings.

Register applied for an internal position of industrial engineer, but that position was

given to another employee before the hiring manager received Register's application.

Both Register and Lawson expressed interest in applying for another engineering

position and were cleared to apply, but they were later informed that the position was

not going to be filled because the needs of the department had been reevaluated.

Appellants point out, however, that Honeywell had said in a corporate newsletter that

it anticipated filling many positions with outside talent because a number of its

associates were becoming eligible for retirement.

In its April 2000 request for proposal, DOE had notified potential bidders that

one of its goals was to maintain the value of employee benefit packages while at the

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same time limiting its long term liability, and Honeywell agreed in its contract that

it would submit a plan for achieving this goal. Appellants assert that Honeywell

knew about DOE's desire to limit long term liability before the company made the

decision to outsource their jobs to Burns & McDonnell. They claim that Honeywell

recognized in February 2000 that a portable pension plan would be needed to ease the

transition and to retain talent after the outsourcing. They were nevertheless not

offered such a plan even though by the time of outsourcing in January 2001, one had

been in place for months at other business units of the company. Honeywell disputes

the accuracy of that claim. It says it had considered a portable pension plan for new

and existing employees during 2000, but the idea was put on hold because of the

potential acquisition of the company by General Electric.

Honeywell submitted a plan to DOE on October 31, 2001 in accordance with

the contract provision requiring limitation of its long term liability. Honeywell's plan

included a portable pension plan for new hires and an option for existing employees

to leave their old pension plan and join a new one. This new plan provided earlier

vesting of benefits than Honeywell's existing plan, but featured substantially lower

retirement benefits for long term employees. It also eliminated the retirement medical

coverage that had been available under the previous plan, fees for health insurance

were increased, and long term disability and survivor benefits were eliminated. The

portable pension plan was put in place for new hires at Honeywell in March 2001,

and it became available to all Honeywell employees in 2002. Appellants ceased to

be Honeywell employees in January 2001, and they were never offered a portable

pension plan.

Effective January 2, 2001, the facilities and utilities engineering functions were

outsourced to Facilities and Engineering Services (FES), a subsidiary of Burns &

McDonnell created for this purpose. Honeywell terminated the nine employees

involved in this case and 46 others in the facilities and utilities groups, and all were

offered employment at FES. Appellants accepted the offer, and Burns & McDonnell

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placed one of its managers in charge of the outsourced FES operation and added

others. The outsourced employees remained at the same desks in the Honeywell

facility and performed the same functions as they had when they worked for

Honeywell.

The outsourced employees had been participants in Honeywell's pension plan

which was a defined benefit plan. That plan provided for normal retirement at age

65 and early retirement at age 55 or when the sum of the participant's age and years

of service equaled 80 (80 point retirement). A plan participant who worked at

Honeywell for more than five years but did not qualify for either normal or early

retirement would receive a vested benefit which was significantly lower than one

received upon retirement. After the outsourcing decision was made, Honeywell

amended its pension plan to allow affected employees who were approaching a

retirement milestone to receive an unpaid "bridge" leave of absence so they could

reach the milestone. This bridge leave was available to employees who were either

within twenty four months of reaching age 55, thirty six months of reaching age 65,

or 80 point retirement. The bridge leave allowed ten outsourced employees to attain

full retirement benefits, and twenty six of the fifty five outsourced employees are or

will be eligible for at least early retirement benefits. Although appellant Lawson was

three weeks short of age 53 at the time of the outsourcing, Honeywell allowed him

to use accrued paid leave to remain on its payroll until his fifty third birthday so he

too could take advantage of the bridge leave opportunity.

In preparation for the outsourcing, Honeywell worked with Burns &

McDonnell to design a compensation and benefit package for the outsourced

employees at its FES subsidiary. The FES salary for each of the nine appellants at

FES was equal to or greater than the salary received at Honeywell, and FES

employees were eligible for bonuses that were not available at Honeywell. The

outsourced employees at FES came under a Burns & McDonnell benefit package

which did not include a defined benefit plan like Honeywell's pension plan, but Burns

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& McDonnell created two additional defined contribution plans for the FES

employees. Honeywell commissioned a study of its benefit package compared to the

one at FES. The first study indicated that the value of the FES package would be

approximately 90% of Honeywell's. Burns & McDonnell enhanced the FES benefit

package in response, with the result that the FES package was valued at 95% of

Honeywell's, or 105% if possible bonuses were considered.

Appellants claim they lost their right to future benefit accruals and their

retirement medical benefits as a result of their outsourcing, and they allege that both

DOE and Honeywell benefitted financially from the change. They point to DOE's

Annual Report on Contractor Work Force Restructuring for fiscal year 2001, which

stated that 71 employees were outsourced from the Kansas City Honeywell plant, that

the workforce restructuring cost $9,502, and that the estimated savings to the

government in salary and benefits from the 71 outsourced positions was $5.7 million.

Appellants claim that Honeywell shares in any savings the government experiences

from reducing costs, including employee benefits. Honeywell disputes this

contention, stating that the pension plan is funded by DOE and that any cost savings

accrue only to it. Moreover, Honeywell's pension plan was fully funded in 2000 and

actuarial projections indicated that no contributions would be needed for the next

fifteen years. Honeywell also asserts that any financial benefit DOE may have

received from the outsourcing is offset by its additional expenses for funding the

defined contribution plans and bonuses for the outsourced employees.

After the employees were transferred out of Honeywell, Register filed a

complaint in district court. It alleged as amended that Honeywell had discriminated

against him on the basis of his age, in violation of the ADEA and Title VII, and

terminated him in order to interfere with his pension rights, in violation of § 510 of

ERISA, 29 U.S.C. § 1140. Lawson filed a separate action, alleging identical

violations of the ADEA and Title VII, and ERISA. Register later successfully moved

to amend his complaint to add a claim that Honeywell violated 29 U.S.C.

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§ 1132(a)(1)(B) of ERISA, by failing to pay severance benefits, and to add seven

other plaintiffs on the two ERISA claims. The court granted a joint motion to

consolidate the Register and Lawson cases, and Honeywell moved for summary

judgment.

The district court granted Honeywell's motion on July 31, 2003, dismissing all

of the claims against the company. Appellants moved for reconsideration on their

claim under § 510 of ERISA, but the court denied the motion and judgment was

entered against them. Their appeal from the judgment is founded only on the

dismissal of their § 510 ERISA claim alleging interference with their pension rights.

They contend that the district court erred by considering the affidavit testimony of

Honeywell consultant Darrell Elliott and by concluding that one of Honeywell's

reasons for the outsourcing was not pretextual. Honeywell responds that the decision

to outsource was an exercise of legitimate business judgment and that the district

court correctly dismissed the claims.

We review the district court's grant of summary judgment de novo. Woodland

v. Joseph T. Ryerson & Son, Inc., 302 F.3d 839, 841 (8th Cir. 2002). Summary

judgment is appropriate when the evidence, viewed in the light most favorable to the

nonmoving party, presents no genuine issue of material fact and the moving party is

entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Matsushita Elec. Indus.

Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). The nonmoving party must

do more than rely on allegations or denials in the pleadings, and the court should

grant summary judgment if any essential element of the prima facie case is not

supported by specific facts sufficient to raise a genuine issue for trial. Celotex Corp.

v. Catrett, 477 U.S. 317, 324 (1986).

Section 510 of ERISA makes it unlawful for an employer to discharge a

participant in an employee benefit plan "for the purpose of interfering with the

attainment of any right to which such participant may become entitled under the

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plan." 29 U.S.C. § 1140. To prevail under § 510 appellants must show that

Honeywell had a specific intent to interfere with their pension benefits, but that may

be shown by circumstantial evidence. Regel v. K-Mart Corp., 190 F.3d 876, 881 (8th

Cir. 1999).

In overruling the appellants' objection to Darrell Elliott's affidavit, the district

court observed that it had not been offered as an expert opinion to show that

Honeywell's decision to outsource was a prudent one, but rather as evidence of its

motive for outsourcing. Appellants claim that the district court erred by considering

the affidavit because it lacked foundation and was in reality an unreliable expert

opinion. They assert that the affidavit contained no facts to support Elliott's opinion

that outsourcing would strengthen Honeywell's bid for the DOE contract and that it

was inadmissible under Federal Rule of Evidence 602 because it was opinion

testimony based on specialized knowledge, training, and experience gained as a

consultant, citing United States v. Peoples, 250 F.3d 630, 640-42 (8th Cir. 2001).

Honeywell responds that Elliott was a fact witness, not an expert witness, and that his

testimony regarding the advice he gave Honeywell was relevant to show its reasons

for outsourcing.

We conclude that Elliott's testimony was relevant to Honeywell's motive. His

affidavit outlined the self assessment process he suggested to Honeywell and the

advice he gave it to consider subcontracting in order to improve its bid to DOE. As

the district court noted, his testimony was relevant in determining whether

Honeywell's decision to outsource was motivated by an intent to interfere with

pension benefits. See, e.g., Koons v. Aventis Pharms., Inc., 367 F.3d 768, 778 n.6

(8th Cir. 2004) (relevant issue in § 510 case was not whether employee violated

company policy, but whether employer honestly believed he had). This case is

different from Peoples, on which appellants rely. The trial court in Peoples erred by

admitting as lay testimony the opinion of an FBI agent explaining the meaning of

language used in intercepted conversations in which she had not participated. In

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contrast, Elliott testified as a fact witness about his personal experiences while

working with Honeywell and about the advice he had given the company. We

conclude that appellants have shown no reason why Elliott's affidavit should not

properly be considered and that the district court did not abuse its discretion in

admitting it.

Claims brought under § 510 are analyzed under the McDonnell Douglas burden

shifting framework. Eckelkamp v. Beste, 315 F.3d 863, 871 (8th Cir. 2002); see

Griffith v. City of Des Moines, 387 F.3d 733, 736-37 (8th Cir. 2004). If plaintiffs

show a prima facie case of a violation of § 510, the burden shifts to the defendant to

articulate a legitimate, nondiscriminatory reason for the outsourcing. If the defendant

does so, the burden shifts back to the plaintiffs to prove that the defendant's proffered

reason was pretextual. Eckelkamp, 315 F.3d at 871.

Appellants argue that the district court correctly held that they established a

prima facie case of interference under § 510 but contend that it should have also held

that both of Honeywell's stated reasons for the outsourcing were pretextual. They

assert that Honeywell's failure to provide them with a portable pension plan, even

though it recognized the need for such a plan, and provided the option of such a plan

to other business units prior to the outsourcing, shows that it had financial incentive

to interfere with their pensions. They also point out that Honeywell's contract with

DOE entitled it to share in cost savings and that Honeywell could benefit in the

competitive bidding process by showing that it was saving the government millions

of dollars in employee benefits by outsourcing the groups.

Honeywell responds that appellants neither made a prima facie case nor

showed that its legitimate business decisions were pretextual. Honeywell had no

financial incentive to interfere with their pension benefits it says, since DOE funded

all of the company's pension benefit expenses and any savings to DOE would not be

shared with it. The company also asserts that the decision to outsource was motivated

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2

We note that subsequent to Andes, the Supreme Court decided Inter-Modal

Rail Employees. Ass'n v. Atchison, Topeka & Santa Fe Ry., 520 U.S. 510 (1997), in

which it concluded that employees whose jobs were subcontracted could bring a

claim under § 510 for interference with their welfare benefits.

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by a desire to improve performance and retain the DOE contract. To support its

argument that the outsourcing was a legitimate and nondiscriminatory business

decision, Honeywell points to evidence about concerns it had with senior

management in the facilities and utilities engineering groups, Elliott's advice that it

outsource functions that were not core competencies, and DOE's general receptivity

to outsourcing. It also argues that appellants have not shown any ERISA related

characteristics suggesting that their groups were singled out for adverse treatment,

citing Andes v. Ford Motor Co., 70 F.3d 1332, 1338 (D.C. Cir. 1995), for this

argument.2

The district court concluded that the first reason advanced by Honeywell, to

improve performance in the facilities and utilities engineering groups, was pretextual

but that the second, to make its bid to DOE more competitive, was not. Appellants

contend that the court's conclusion regarding the first reason was correct because after

the outsourcing the same employees performed the same jobs. They also point to the

deposition of the president of Honeywell, where she said not only that she had been

dissatisfied with the senior management in those groups, but also with the employees.

They argue that the second reason was also pretextual and point to a Honeywell

planning document showing that DOE was satisfied with the former facilities and

utilities engineering groups and that it preferred to keep the utilities function under

its own control. Appellants also note that DOE never recommended that Honeywell

outsource the groups and that Honeywell was aware of DOE's desire to reduce long

term liabilities for employee benefits before it proposed outsourcing. They cite

Eichorn v. AT&T Corp., 248 F.3d 131, 149 (3d Cir. 2001) cert. denied, 534 U.S.

1014 (2001), and Turner v. Schering-Plough Corp., 901 F.2d 335, 348 (3d Cir. 1990),

for the proposition that monetary savings to an employer resulting from termination

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of employees may be viewed as a motivating factor sufficient to satisfy the intent

element of § 510. As additional evidence that Honeywell's real intent was to interfere

with their pension benefits, they point to the lack of documentation regarding Elliott's

consultation, deposition testimony of Clegg and Douglass which scarcely mentions

Elliott's recommendation, the failure to provide a portable pension plan, and the

blocking of internal job transfers.

Appellants also argue that the two reasons Honeywell offered for the

outsourcing were closely intertwined and that the pretextual nature of the first reason

was so obvious that it casts doubt on the second reason. Summary judgment was

therefore inappropriate they say, citing Wolf v. Buss Am. Inc., 77 F.3d 914, 920 (7th

Cir. 1996) (employee must raise an issue of fact regarding each reason offered by the

employer unless the reasons are intertwined or one is "fishy and suspicious"). They

argue that the proferred reasons are intertwined because Honeywell asserts that the

outsourcing would make its bid to DOE more competitive by increasing performance

in one of its weaker areas.

Although appellants established a prima facie case, Honeywell articulated

legitimate, nondiscriminatory reasons for its outsourcing, particularly in respect to its

desire to maintain its contract with DOE. Honeywell also presented evidence that it

was unhappy with senior management in the facilities and utilities engineering

groups, that it had unsuccessfully attempted to hire a new director for these groups,

and that it believed placing these groups under the management of Burns &

McDonnell would improve performance. Once outsourced, changes were indeed

made to the management of the groups. They were placed under the direction of a

manager from Burns & McDonnell and additional managers from Burns &

McDonnell were brought in to work at FES. Honeywell also presented evidence that

it was advised by a consultant that outsourcing the groups would increase its chances

of retaining the DOE contract. The fact that DOE did not recommend this approach,

and ultimately questioned it, is not evidence that Honeywell was motivated by a

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desire to interfere with the employees' pension rights. The issue is what the employer

honestly believed, not whether it was right. Koons v. Aventis Pharms., Inc., 367 F.3d

768, 778 n.6 (8th Cir. 2004). The evidence also shows that Honeywell was

considering outsourcing the groups before it received the April 2000 memo from

DOE, stating that the government wanted to limit its long term liability regarding

employee benefits.

We conclude that appellants did not meet their burden to show that

Honeywell's proffered reasons were pretextual. They argue that Honeywell's

restrictions on internal transfers were evidence of pretext, but Honeywell produced

evidence that the restrictions were put in place to ensure continuity of operations at

FES and that it amended its pension plan to allow twenty six of the fifty five

outsourced employees to reach a retirement milestone. The company also worked

with Burns & McDonnell to create a benefit package for the outsourced employees

at FES that included higher salaries, the opportunity to earn bonuses, and two defined

contribution plans funded by DOE. After an initial study showed the package was

only 90% of Honeywell's, it was enhanced to make it comparable or even better than

Honeywell's if bonuses were included in the calculation. Appellants did not succeed

in undermining the evidence that Honeywell had legitimate business reasons for the

outsourcing or demonstrate that these were not its real reasons.

We conclude in sum that Honeywell was entitled to summary judgment on

appellants' § 510 claims, and we affirm the judgment of the district court.

______________________________

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