PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

WILLIAM J. ELMORE, Individually;

WAYNE COMER, Individually and as

representatives of a class of

Plaintiffs similarly situated,

Plaintiffs-Appellants,

v.

CONE MILLS CORPORATION,

Defendant-Appellee, No. 95-2901

and

DEWEY L. TROGDON; LACY G.

BAYNES; PAUL W. STEPHANZ; CONE

MILLS ACQUISITION CORPORATION;

WACHOVIA BANK AND TRUST

COMPANY, N.A.,

Defendants.

Appeal from the United States District Court

for the District of South Carolina, at Greenville.

Joseph F. Anderson, Jr., District Judge.

(CA-88-3258-6-17)

Argued: October 31, 1996

Decided: August 20, 1999

Before WIDENER, Circuit Judge, HALL,* Senior Circuit Judge,

and THORNBURG, United States District Judge for the

Western District of North Carolina, sitting by designation.

_________________________________________________________________

*Senior Judge Hall heard oral argument in this case but died prior to

the time the decision was filed. The decision is filed by a quorum of the

panel. 28 U.S.C. § 46(d).
Affirmed by published per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: James Robinson Gilreath, Greenville, South Carolina, for

Appellants. John Robbins Wester, ROBINSON, BRADSHAW &

HINSON, P.A., Charlotte, North Carolina, for Appellee. ON BRIEF:

J. Kendall Few, Greenville, South Carolina; John P. Freeman, Columbia, South Carolina, for Appellants. David C. Wright, III, ROBINSON, BRADSHAW & HINSON, P.A., Charlotte, North Carolina;

Robert O. King, Kristopher K. Strasser, OGLETREE, DEAKINS,

NASH, SMOAK & STEWART, L.L.P., Greenville, South Carolina;

Robert J. Lawing, Jane C. Jackson, ROBINSON, MAREADY, LAWING & COMERFORD, Winston-Salem, North Carolina, for Appellee.

_________________________________________________________________

OPINION

PER CURIAM:

Plaintiffs William Elmore and Wayne Comer, individually and as

representatives of a class of employees of defendant Cone Mills,

appeal a decision of the district court in South Carolina entering judgment for the defendant and denying the plaintiffs' claims to a pension

surplus governed by ERISA under federal common law theories of

equitable estoppel, third-party beneficiary of a contract, and unjust

enrichment. At issue is a $14.2 million portion of the surplus of an

Employee Retirement Plan (ERP) which Cone Mills over-funded.

Plaintiffs claim officers of Cone Mills represented Cone Mills' management would contribute the whole surplus to a new Employee

Stock Ownership Plan (ESOP) if management succeeded in its leveraged buy-out of the company. Plaintiffs assert that Cone Mills only

contributed about $54.8 million by 1985, and that under the foregoing

theory they are entitled to recovery of the remainder of a $69 million

surplus.

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This is the third time this court has heard this case.1 As a divided

en banc court we vacated a panel decision and vacated an earlier district court decision in favor of the plaintiffs on their claim that Cone

Mills had breached its fiduciary duty in contravention of the

Employee Retirement Income Security Act (ERISA), 29 U.S.C.

§§ 1001-1461. Elmore v. Cone Mills Corp. , 23 F.3d 855 (4th Cir.

1994) (en banc). However, by an evenly divided court, we upheld the

district court's determination that plaintiffs might be able to establish

equitable estoppel, subject to proof of detrimental reliance. Elmore,

23 F.3d at 863. We did not reach the issue of breach of a third-party

beneficiary contract and we affirmed the district court's dismissal of

"all remaining ERISA and other claims." Elmore, 23 F.3d at 858, 863.

On remand the district court permitted the plaintiffs to amend their

complaint to add a claim for unjust enrichment, premised on a federal

common-law theory under ERISA. The district court held that the

plaintiffs' failure to establish either reasonable reliance or detrimental

reliance, prerequisites for specific performance under notions of equitable estoppel or third-party beneficiary, required denial of those theories of recovery. Subsequently, the district court heard the unjust

enrichment claim and denied recovery, finding that Cone Mills was

not unjustly enriched where the pension plan and ERISA entitled

Cone Mills to the surplus pension funds at issue.

The plaintiffs now appeal, asserting that they established the reliance necessary for their theories of equitable estoppel and third-party

beneficiary. They claim that the district court's decision for the defendant on the issue of reliance is based on facts contrary to those found

in the initial trial and affirmed by this court en banc. Additionally,

they assert that reliance is not required for restitution under unjust

enrichment, and that the plaintiffs had a reasonable expectation that

the full pension reversion would be contributed to the surplus.

Our review is of these two issues, and we affirm the judgment of

the district court.

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1 For the purposes of this appeal we permitted the use of the 17-volume

Joint Appendix from the previous appeal. For completeness we note that

the vacated panel decision is reported as 6 F.3d 1028 (4th Cir. 1993).

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I.

The district court in its first opinion set forth the underlying events,

and we found the operative facts from that narrative in our en banc

opinion. Elmore, 23 F.3d at 855, 858-860. We confine our discussion

to the facts central to the issues before us, reliance and unjust enrichment.

In order to fend off a hostile takeover bid announced on October

31, 1983, a group of senior management employees at Cone Mills

organized a leveraged buy-out (LBO) of the company, which became

final on March 27, 1984. At that time Dewey Trogdon was Cone

Mills' Chairman of the Board and Chief Executive Officer. During

the months preceding the LBO Trogdon engaged in regular communication with the employees of Cone Mills to keep them apprised of the

situation and to obtain their support for the LBO. Through letters,

office memoranda and video presentations Trogdon addressed

employee concerns, in particular those regarding the effect of the

LBO on their pensions.

Our en banc opinion focused on the contents of six of these preLBO communications. They are summarized as follows.

A December 12, 1983 letter to all Cone Mills employees explained

that the LBO would include an Employee Stock Ownership Plan

(ESOP) which would not diminish their pensions. It provided that

"pension plans [would] be left in place with existing benefits guaranteed by the company" and that the combination of the new ESOP and

the ERP would ensure employees "receive no less than the full

amount" of their pre-LBO pension benefits. The letter further stated

that "[t]ogether, the ESOP and your pension plan are expected to provide greater financial security than your present retirement benefits."

(emphasis omitted). The letter "estimated" that the company could

contribute over $50 million in stock to the new ESOP, but Trogdon

made the express reservation that "[a]t this time I am not allowed to

legally guarantee that amount, nor will it be the same amount in

future years." A.J.A 3696.

A December 15, 1983 letter from Trogdon to salaried employees

further detailed the proposed LBO. The letter stated that the existing

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ERP contained a surplus because the company had contributed more

funds than were necessary to pay for the accrued benefits. It referred

to the fact that under the terms of the ERP Cone Mills was entitled

to reclaim this pension surplus. However, the letter provided:

[i]f the management and the bank proposal to buy the Company is successful, there is agreement among management

and the banks that we will contribute the surplus, or its

equivalent in Company stock to the ESOP. When the transaction is executed and the contribution is made you, I, and

all other Cone employees will "take title" to a substantial

asset in which we currently have no rights or ownership.

Trogdon qualified this statement with a disclaimer.

As we get more time, we will answer your questions and

publish information to the extent that it can be done on a

legal and factual basis. We are, however, giving you information based on our present plans which are subject to revision to meet changing situations.

A bulletin board notice followed the letters. It outlined how Cone

Mills' planned contributions to the ESOP would be 10% of salaries

paid in both 1983 and 1984, and 1% per annum thereafter. The notice

stressed the discretionary nature of any additional contributions.

A February 1984 video presentation referred to the expected contribution as "over $50 million."

The question-and-answer booklet which accompanied the video

similarly estimated that

if all goes according to plan, over $50 million of stock will

be contributed to the ESOP for the years 1983 and 1984.

After 1984 the company's contribution will be determined

by the board of Directors based on business conditions and

company profits.

Like all the prior communications the pamphlet contained a disclaimer, this time in bold-face type, stating that

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[t]he legal documents control, and if this material differs in

any way from the legal documents, the correct source of the

information is the legal documents.

A February 23, 1984 proxy statement provided to all salaried

employees as participants in the employee stock ownership plan

(PAYSOP) outlined that the mandatory ESOP obligation of Cone

Mills would follow the 10%/10%/1% formula.

A March 15 memorandum, less than two weeks before the LBO

vote, cautioned that the company was not making any guarantees as

to its contributions to the ESOP after 1985, other than the minimum

required by the plan. Trogdon wrote "I do not believe it is prudent,

presently, to guarantee ESOP contributions above the 1% minimum

for years 1985 and forward. . . ." A.J.A at 4034.

The salaried employees who received these communications

owned a total of 1.3% of Cone Mill's common stock. The plaintiffs

assert that as a result of these communications the salaried employees

voted for the LBO, which was overwhelmingly adopted on March 26,

1984.

On April 2, 1984 the 1983 ESOP documents were executed. They

obligated the company to contribute cash, stock, or other property

equivalent in value to ten percent of each participating employee's

compensation in 1983 and 1984. Thereafter, according to the

10%/10%/1% formula, the documents required a contribution of one

percent of each covered employee's compensation. As the en banc

opinion noted, the documents "did not refer to the pension surplus but

did provide for discretionary contributions." Elmore, 23 F.3d at 860.

Cone Mills received the pension surplus between May, 1985 and

December, 1985. During that time the surplus had increased to

approximately $69 million.2 It is undisputed that from the date of the

_________________________________________________________________

2 The increase over the estimated $50 million resulted

[b]ecause the [pension] reversion created taxable income, [therefore] Cone Mills deferred receipt until 1985 so that it could

reclaim 1981 taxes paid in excess of $17 million. This inten-

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LBO until September 1985 Cone Mills contributed stock to the ESOP

worth $54,796,638. Cone Mills' payments into the ESOP did not

coincide with the receipt by Cone Mills of the pension reversion and

exceeded the roughly $30 million dollars that the 10%/10%/1% formula of the ESOP documents required over the first two years.

On these facts an evenly divided en banc court affirmed that the

plaintiffs could recover "based on the incorporation of equitable

estoppel principles into the federal common law of ERISA", provided

that on remand the plaintiffs could establish the final element, reliance.

On remand the district court in its order of April 19, 1996 granted

summary judgment in favor of the defendant on the equitable estoppel

and third-party beneficiary claims. Based on its review of the law of

detrimental reliance and the evidence of the first trial the court found

that there was no genuine dispute of material fact as to the issue of

reliance. It further found that the record "disclosed that none of the

Plaintiffs can demonstrate that he or she expected to receive contribution of more of the surplus than Cone Mills actually contributed."

II. Detrimental Reliance

The Supreme Court has held that "[an] essential element of any

estoppel is detrimental reliance on the adverse party's misrepresentations." Lyng v. Payne, 476 U.S. 926, 935 (1986). Similarly, this circuit has long held that detrimental reliance on a misrepresentation is

a prerequisite for restitution under a theory of equitable estoppel. See

Service & Training, Inc. v. Data General Corp., 963 F.2d 680, 690

(4th Cir. 1992). The reliance must take the form of a definite and

identifiable action. Specifically, "[a]n estoppel arises when `one person makes a definite misrepresentation of fact to another person having reason to believe that the other will rely upon it and the other in

_________________________________________________________________

tional delay in receiving the pension reversion surplus increased

its value from the original estimate of $50 million to the $69 million [Cone Mills] received by December of 1985.

Elmore, 23 F.3d at 860, n.4.

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reasonable reliance does an act . . . .'" Sheppard & Enoch Pratt Hospital, Inc. v. Travelers Ins. Co., 32 F.3d 120, 127 (4th Cir. 1994)

(quoting Heckler v. Community Health Servs. of Crawford, 467 U.S.

51, 59 (1984)).

Central to the district court's finding of an absence of reliance was

that all the parties to the litigation believed that the surplus referred

to in the communications had a value of roughly $50 million. The

court agreed with, and expressly relied upon, the concurring opinion

of Judge Wilkins in our en banc decision in which Judges Niemeyer

and Williams joined:

The record is unassailable that Cone Mills and the Plaintiffs

acted at all times with the mutual understanding that the surplus amounted to approximately $50 million. Because in the

only information available to the Plaintiffs it was estimated

that the amount of the surplus was approximately $50 million, Plaintiffs could not have relied upon receipt of a substantially greater amount.

Elmore, 23 F.3d at 872 (Wilkins, J. concurring). Thus because the

plaintiffs were only aware of estimates approximating the surplus at

about $50 million ("approximately $50 million", "over $50 million",

"$50 million or more"), the district court found the plaintiffs were

precluded from claiming they reasonably expected more. Indeed, the

district court found as a matter of fact that there was no causal relation between the communications regarding the retirement benefits

and the buy-out - "Whatever action they [the plaintiffs] took in regard

to the LBO was not directly connected with the surplus." Rather, it

is apparent, as Judge Wilkins' concurrence reasoned, and the district

court found, the expectation concerned the amount of money paid to

the ESOP. Significantly, we note that the complaint, in its last

amended form, sues for $14.2 million, which is the difference

between the $54+ million paid to the ESOP Fund by Cone Mills

under the 10/10/1 formula and $69 million, the value of the stock in

the ERP Fund, created by Cone Mills' overpayment because of the

$17 million reclaim of 1981 taxes to the United States. The tax advantage taken by Cone Mills is the root of this law suit.

An additional reason supporting our decision is that the overpayment in the ERP Fund being the property of Cone Mills, we know of

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no reason that Cone Mills should not have taken advantage of the tax

treatment. Since Cone Mills' payments into the ESOP Fund have

exceeded anything promised, even the plaintiffs have tacitly acknowledged by their claim for damages of only $14.2 million that they are

not entitled both to all the ERP overpayment and to the 10%/10%/1%

payments. As the district court found, " . . . by the date Cone Mills'

plan tax return was due for plan year 1985, Cone had committed an

amount which exceeded the surplus funds returned to the company in

1985."

We find the district court's determinations of fact as to the respective states of mind of the parties are not clearly erroneous, and we

affirm its finding of an absence of detrimental reliance by the plaintiffs.

The plaintiffs' contention that the district court contradicted its earlier fact finding by adopting Judge Wilkins' summary of the situation

is not well taken. Judge Wilkins expressly based his synopsis above

on the district court's observation in the first trial that "`I think everybody thought [the surplus] was $50 million.'" Elmore, 23 F.3d at 872.

In this same vein, the plaintiffs, in their briefs and at oral argument

seek to buttress their argument of reliance with the claim that the district court initially found Cone Mills had promised the plaintiffs the

entire surplus, regardless of the amount. The en banc court, the plaintiffs assert, affirmed this finding. Their argument is that the affirmance precluded the district court on remand from finding, as it did,

that all the parties believed the surplus was $50 million and that therefore plaintiffs could not have relied on receiving more.

We are not convinced that these earlier findings of fact preclude or

render clearly erroneous the district court's subsequent findings of

fact. Consistent throughout is the fact that all the parties believed the

surplus was approximately $50 million, regardless of whether Cone

Mills represented it would contribute the surplus in its entirety. This

does not contradict the court's finding on remand that the plaintiffs

did not rely on receiving more if they had not even an inkling that the

surplus would in fact be a greater sum.

We also note that the district court, in both its April 19 order granting the summary judgment on the reliance issue and its final Septem-

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ber 25 order denying the unjust enrichment claim, rejected several of

the plaintiffs' theories regarding how they had relied to their detriment. We mention one of them.

The court rejected the plaintiffs' assertion that they relied to their

detriment by voting for the LBO and by supporting management in

its effort to persuade banks to participate in the LBO as lenders and

equity owners. The court noted that the plaintiffs did not suffer any

detriment either by voting for the LBO or by supporting the management.

The surplus funds in the existing pension account did not

belong to the plaintiffs. If the Plaintiffs somehow marshalled their votes and those of others to defeat the LBO, or

if the Plaintiffs had expressed their dissatisfaction with the

LBO to the extent the banks declined to participate, the

Plaintiffs may well have succeeded in killing the LBO, but

they still would not have gained title to the surplus funds in

the existing pension account.

In short, even if the plaintiffs could show they relied on the representations, they had nothing to lose.

Upon review of the record and the materials of the parties we are

convinced that these rulings by the district court on the plaintiffs'

alternative theories are consistent with our law on estoppel and detrimental reliance, as set forth by Service & Training, Inc., 963 F.2d at

680, and Sheppard & Enoch Pratt Hospital, Inc. , 32 F.3d at 120.

III. Unjust Enrichment

On April 19, 1995 the district court allowed plaintiffs to amend

their complaint to allege a claim for unjust enrichment. The district

court denied the defendant's motion to dismiss the claim and "ordered

the parties to appear . . . for the purpose of presenting whatever evidence or argument either side wished to submit." Neither party submitted additional evidence, relying instead on the existing record. The

court then heard argument of the parties on the issue of unjust enrichment and directed the parties to file proposed findings of fact and conclusions of law.

 10
The court considered the testimony and the credibility of the witnesses. It reviewed the briefs and exhibits, and based on the applicable law made its September 25, 1995 Finding of Facts and

Conclusions of Law in which it denied plaintiffs' claim that Cone

Mills had been unjustly enriched by not contributing the $14.2 million

remainder of the pension surplus to the ESOP.

We agree with the district court that Provident Life & Acc. Ins. Co.

v. Waller, 906 F.2d 985 (4th Cir.), cert. denied, 498 U.S. 982 (1990),

plainly requires the dismissal of the unjust enrichment claim.

Waller involved a claim by an insurance company for the return of

medical expenses advanced to a defendant injured in an auto accident.

After receiving the advance the defendant also recovered damages

from a third party exceeding the amount of the advance. A clause in

the plan provided that where the insured was injured through no fault

of her own the insurer would advance her medical expenses, which

she would have to repay in full. Because the plaintiff insurer had not

required the insuree to sign the repayment provision the district court

ruled that such noncompliance with the terms of the plan barred

recovery by the plaintiff under the terms of the plan. Waller, 906 F.2d

at 986-87.

However, we reversed and permitted recovery under a federal common law theory of unjust enrichment in part because the facts there

"fit the archetypal unjust enrichment scenario." Waller, 906 F.2d at

993. More importantly though, "the plan contract in the present

[Waller] case provided for repayment of the advanced monies" and

thus "the creation of a common law remedy here would further the

contract between the parties and effectuate the clear intent of [the

plan]." Waller, 906 F.2d at 993 (emphasis in original).

Although the plaintiffs continue in their appeal to rely on Waller

which did permit an unjust enrichment claim in an ERISA action, we

unambiguously reaffirmed in Waller the general rule that federal

courts "must proceed cautiously in creating additional rights under the

rubric of federal common law" and do not "possess carte blanche

authority to `use state common law to re-write a federal statute.'"

Waller, 906 F.2d at 992. The use of a federal common law theory

claim of unjust enrichment in Waller was clearly the exception and

 11
not the rule for ERISA cases. See Waller, 906 F.2d at 992 (citing

Cummings By Techmeier v. Briggs & Stratton, 797 F.2d 383, 390 (7th

Cir.), cert. denied, 479 U.S. 1008 (1986), and Van Orman v. American Ins. Co., 680 F.2d 301, 312 (3d Cir. 1982), as examples that circuits generally "decline to impose a federal common law of unjust

enrichment.").

We agree with the district court that where the original plan entitled Cone Mills to the surplus, the facts in the instant case are closer

to Cummings By Techmeier, 797 F.2d 383 at 390 (plan explicitly

authorized the enrichment), and Van Orman, 680 F.2d at 312 (plan

silent as to surplus). There is no express right in ERISA for unjust

enrichment and the plaintiffs here have not established "a particularly

strong affirmative indication that such a common law right would

effectuate a statutory policy" of ERISA on the facts of the case.

Waller, 906 F.2d at 993 (internal quotes omitted). Accordingly we

affirm the district court's ruling that the plaintiffs' attempt to obtain

funds outside of the plan documents on a federal common law theory

of unjust enrichment must fail.

Finally, we would agree in the alternative with the district court

that even if recovery under a theory of unjust enrichment were permissible here, plaintiffs are unable to make a satisfactory showing of

the well-established elements of that cause of action. Quoting a sister

circuit, the district court aptly noted that Cone Mills cannot be

unjustly enriched where it put the surplus into the plan and where the

plan specifically entitled Cone Mills to recover those funds at the termination of the plan. Craig v. Bemus, 517 F.2d 677, 684 (5th Cir.

1975) ("enrichment [is] not unjust where it is allowed by the express

terms of the Plan").

IV. Varity Corporation v. Howe

In their briefs and at oral argument plaintiffs relied on the recent

decision of Varity Corporation v. Howe, 516 U.S. 489 (1996),

announced after the district court issued its opinion in the instant case.

In Varity the plaintiffs were employees of Massey-Ferguson, Inc., a

wholly-owned subsidiary of Varity Corporation. As such the plaintiffs

were participants in Massey Ferguson's self-funded welfare benefit

plan, which fell within the scope of ERISA. Varity, 516 U.S. 492. To

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Varity's consternation certain divisions of Massey-Ferguson were losing large amounts of money. As a result, Varity faced the prospect of

having to honor out of the pockets of Massey-Ferguson's profitable

divisions the obligations of those failing divisions arising from the

commitments of Massey-Ferguson's benefit plan commitment to pay

medical and other nonpension benefits to employees. Varity, 516 U.S.

at 493. The Court found that rather than face the repercussions of terminating those benefits, Varity reorganized according to what it misleadingly gave the optimistic label "Project Sunshine," pursuant to

which it put all its "money-losing eggs in one financially rickety basket" named Massey-Combines. Varity, 516 U.S. at 493. Varity then

persuaded its employees through literature and videos to switch over

to the new benefits plan. While guaranteeing the same benefits, the

new plan had as its underpinning only the dubious financial resources

of the doomed divisions. The new Massey Combines lost $88 million

in its first year and finished its second in receivership, thereby denying the employees their nonpension benefits.

The employees sued under ERISA seeking the benefits they would

have received under the previous Massey-Ferguson plan. The Court

found that Varity and Massey-Ferguson in their capacity as ERISA

fiduciaries through deliberate deception had harmed the plan's beneficiaries, thereby violating the corporations' duties as plan fiduciaries

under ERISA § 404. Varity, 516 U.S. at 506. Where there was a

breach by the fiduciaries, the Court found that ERISA § 502(a)(3)

permits lawsuits for equitable relief. Varity , 516 U.S. at 507-15.

Varity is consistent with our decision. Plaintiffs claim that after

Varity ERISA § 502(a)(3) "provides a right of recovery on behalf of

plan beneficiaries seeking appropriate equitable relief (unjust enrichment) due to an employer's having enriched itself by misleading

employees." Varity, unlike here, involved the violation of a specific

ERISA provision (ERISA § 404), and based on that allowed recovery

as equitable relief under ERISA § 502(a)(3) where otherwise there

would not have been a remedy. Varity, 516 U.S. at 507-15. In the

instant case we found en banc that Cone Mills as the manager of the

ERISA protected plan did not breach its fiduciary duties to the

employee plaintiffs. Elmore, 23 F.3d at 863. Significantly, ERISA

§ 502(a)(3) does not authorize a general form of "appropriate relief",

but instead more narrowly circumscribes the availability of the rem-

 13
edy to situations involving the violation of an ERISA provision or the

enforcement of the terms of an ERISA protected plan. Mertens v.

Hewitt Associates, 508 U.S. 248, 253 (1993). The Court has noted

that ERISA § 502(a)(3)

does not, after all, authorize "appropriate relief" at large, but

only "appropriate relief" for the purpose of"redress[ing any]

violations or . . . enforc[ing] any provisions" of ERISA or

an ERISA plan.

Mertens, 508 U.S. at 253 (emphasis in original). Thus the absence

here of a violation of the plan administrator's fiduciary duty puts this

case on a different legal and factual footing than Varity.

Further, we find the claim in Varity to be rooted in a wholly distinct factual scenario. In Varity the Court found that Varity had

engaged in "deception" by "knowingly and significantly . . . deceiving

a plan's beneficiary in order to save the employer money at the beneficiaries expense". Varity, 516 U.S. at 506. Again in contrast, in the

present appeal the district court dismissed the fraud claim, and it is

not disputed that Cone Mills exceeded its contribution commitment

under the ESOP formula of 10%/10%/1%.

The judgment of the district court is accordingly

AFFIRMED.

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