Opinion ID: 512620
Heading Depth: 2
Heading Rank: 3

Heading: Common Factual Allegations

Text: 8 During the time period relevant to this appeal (October 1980 through July 1982), MBT was experiencing financial difficulties, and there was a growing realization at MBT that there existed an overabundance of management-level employees within the company. As a result, MBT officials began to consider options for reducing surplus management, ruling out, however, layoffs which were contrary to the company's basic philosophy. In response to the management surplus problem, MBT officially adopted MIPP on October 1, 1980, as a tool to downsize management. MIPP operated as an incentive package to encourage voluntary terminations or early retirement for individuals affected by what the company denoted as a resizing opportunity, thereby accelerating the attrition rate among management-level employees. 9 The availability of the first MIPP offering was from October 1, 1980, through December 1, 1980 (the first MIPP window period or offering). A second MIPP offering covering the period of June 1, 1982, through July 31, 1982 (the second MIPP window period), is what gives rise to the issues in controversy in the present cases. 10 MIPP operated as an unfunded welfare benefit plan, meaning that no trust corpus existed. See 29 U.S.C. Sec. 1002(1). As an employee welfare benefit plan, MIPP was subject to ERISA. See 29 U.S.C. Sec. 1101(a). Those persons found eligible for MIPP benefits generally could receive, in addition to any pension or other unrelated benefit, a separation pay allowance of 5 per cent annual salary plus 5 per cent for each completed year of net credited service in excess of one year of net credited service (with a maximum of 100 per cent of annual salary) to be paid over a one-year period beginning at retirement. MIPP also provided additional medical insurance coverage. The funds necessary to meet the costs of a MIPP extension were paid directly by MBT based on the actual cost of MIPP. 11 Both parties concede that MIPP was adopted as a force reduction tool and used by MBT to encourage voluntary terminations or early retirement. J.A. at 865. An offer of MIPP benefits could only occur when the fiduciary named for the MIPP program designated an employee or group of employees as affected by a resizing opportunity. J.A. at 32. The plan provided that [t]he Vice President-Personnel shall be the named fiduciary of the Plan. J.A. at 36. 1 Moreover, the plan states that the decision to implement the plan is to be made by the vice president-personnel. Id. At all relevant times, defendant Grady was the Vice President-Personnel at MBT and the admitted fiduciary under the MIPP plan. MBT, through its agent, Grady, is named as plan administrator. J.A. at 47. 12 The events giving rise to the present cases occurred between October 1, 1980, when MIPP was first implemented, and July 31, 1982, when it became apparent that the plaintiffs in the present cases would be ineligible for MIPP benefits because they retired after the close of the first MIPP window but before the opening of the second. The district court found that MIPP remained effective during the period from October 1, 1980, through July 31, 1982, since (although not always implemented) MIPP was always a viable work force reduction alternative available to the company. 13 MIPP could be used by MBT in various ways. For example, MIPP benefits might be offered to a specific individual to encourage that individual's retirement. MIPP also could be applied generally to management-level employees in a certain category. According to a news publication for management personnel at MBT (News for Management Bulletin or NMB 2 ): 14 MIPP was used in Michigan to correct a surplus situation that was not correctable simply by attrition or routine personnel handling. MIPP, under its guidelines, cannot be used to eliminate weak or unsatisfactory performers. 15   MIPP is used only when there is a surplus condition resulting from three specific situation [sic] (1) a general reduction of management jobs; (2) elimination of specific management jobs; (3) significant changes in specific management jobs; for example, skills and abilities. 16 J.A. at 867. 17 As stated earlier, the first general MIPP offering or window period was established from October 1, 1980, to December 1, 1980. Managers designated as eligible for MIPP benefits on the basis of their net credited service who retired during the window period could receive MIPP benefits. Of the managers offered MIPP, approximately one hundred voluntarily terminated their employment at MBT within the window period and were given MIPP benefits. J.A. at 52, 869. 18 Following this first general MIPP offering, there was, as might be expected, considerable interest among potentially affected managers, especially those considering retirement, about the possibility of future general MIPP offerings. As a result of this concern, and because it appeared to MBT officials that some MBT managers were delaying retirement decisions in the hopes of a future MIPP offering, MBT officials made several communications (alleged by plaintiffs to be misrepresentations) regarding the future possibility of a MIPP extension. Plaintiffs' contention in the present cases is that MBT intentionally misled plaintiffs by indicating that the late-1980 MIPP offering had been a one-time application, that MIPP benefits would not again be made available, and that managers considering retirement should not delay plans in anticipation of another MIPP offering. 19 The communications involved in the present cases began during the time the first general MIPP offering was in effect. On November 3, 1980, a News for Management Bulletin was circulated among management which quoted defendant Grady as having made the following statement: 20 All the managers who are going to be offered MIPP have now been given the opportunity to accept it.... In this phase of the company's downsizing, no additional offers of MIPP will be made. 21 I can't say that MIPP won't be offered again at some time in the future when circumstances require it. But for now, we have taken care of the [management] surplus problem that existed and we won't be making any additional offers of MIPP. 22 I'm sure the general awareness that MIPP was being offered even on a very limited basis may have caused some managers to delay their plans to retire. If any of them are still waiting in anticipation of receiving such an offer, there's no reason for them to delay any longer.... 23 J.A. at 865-66. 24 On November 14, 1980, another NMB was circulated which quoted defendant Grady as seeing no future use of MIPP on a general basis. J.A. at 868. The flyer continued: 25 [H]e [i.e. Grady] believes there could be infrequent and very specific uses, for example an office closing or an operation dramatically reduced by new technology. The Michigan experience indicates that MIPP gave the company a new way to deal effectively--and humanely--with management surplus. 26 Id. 27 Another NMB flyer, dated March 26, 1981, also touched upon the possibility of future MIPP offerings. This bulletin again reiterated the company's position that employees considering retirement should not delay decisions based upon the possibility of a second MIPP offering: 28 At MBT, as stated last November by Personnel Vice President Dan Grady, for the foreseeable future, general use of MIPP in Michigan is at an end. 29 Any use of the plan in the foreseeable future is likely to be quite rare and on a very limited basis, said Dick Christie, assistant vice president-human resources development. 30 J.A. at 869. After circulation of the March 26, 1981, NMB flyer, subsequent NMBs never mentioned the MIPP plan until the second general MIPP offering was announced in June 1982. J.A. at 199-200. 31 In addition to NMBs, throughout the relevant time period involved in these cases, a number of officers and high-level managers at MBT, including Grady, spoke to different groups regarding personnel matters, including retirement, and made various statements about the possibility of future MIPP offerings. 3 These managers stated that questions regarding MIPP invariably arose during personnel sessions with managers. 32 As indicated, Grady regularly spoke to managers about personnel matters. Grady testified that he was often asked at these sessions about the likelihood of a general MIPP offering. J.A. at 897. Grady testified that he typically responded to these questions by saying: 33 That we had applied MIPP in 1980 based on the surplus at that time, and we considered using the macromeasures for the corporation, that at that time we did not have a condition beyond which attrition would manage and we didn't anticipate because of that applying [MIPP] in a general way. 34 J.A. at 898. Martha Thornton, an MBT employee, testified at her deposition that she had witnessed Grady field questions concerning MIPP on various occasions, and that Grady consistently responded with [c]omments to the extent that there were no current plans to offer MIPP. J.A. at 932. 35 Roy Leet, a district manager in MBT's Benefits Office, also spoke to a significant number of MBT managers about personnel matters. Leet gave a number of retirement seminars between October 1981 and May 1982, at which he discussed various aspects of retirement. Leet testified that although his expertise involved traditional retirement benefits, he was nonetheless asked at most, if not all, of his seminars about the likelihood of a second MIPP offering. Leet stated that his stock answer to these questions was that MBT had no plans for a MIPP ... J.A. at 928. However, Leet stated that he also cautioned employees that if they became aware of facts which would warrant a MIPP offering (such as substantial management surplus combined with financial shortcomings), they should make their own determination about whether MIPP would be offered or not. J.A. at 928. 36 William Schlageter, Vice President of Transition and Support Services at MBT, also spoke to various managers about MIPP and was regularly asked about the possibility of a general MIPP offering. He testified that on advice from Grady, he responded to these questions that a general MIPP application was unlikely and that those who were ready to retire should go ahead and retire. J.A. at 907. Schlageter stated that the tenor of his responses to questions about MIPP did not change until the decision to offer MIPP again in June 1982. Roman Grucz, an MBT employee, indicated that he was present at a May 18, 1982, meeting in which Schlageter answered a question about MBT by stating that there would be no MIPP benefits available in the future. J.A. at 169. 37 As stated earlier, the second general MIPP offering was extended to certain managers retiring between June 1, 1982, and July 31, 1982. It is undisputed that the actual decision to offer MIPP a second time was made at a June 11, 1982, MBT executive group meeting. J.A. at 939. Furthermore, it is undisputed that prior to the formal decision to extend a second MIPP offering, MBT was consistently concerned about management surplus. Defendants concede that during the relevant period (October 1980 through June 11, 1982), high-level MBT officials periodically discussed a MIPP implementation as a mode for addressing the surplus problem. Since MIPP was a relatively costly alternative for reducing surplus, its use was consistently rejected by MBT officials. The parties further agree that no quantifiable implementation criteria existed for MIPP. MIPP was an option to be used in the company officials' discretion, but there was no requirement that it be used if specified conditions were found to exist. 38 Considering, however, the traditional ban against management layoffs at MBT, combined with the natural reluctance to extend MIPP benefits except as a last resort, MBT officials had at their disposal only a limited number of options for reducing management surplus. MBT officials were also finding that one problem in normal management attrition through retirement was a direct result of the first general MIPP offering in 1980. Employees considering voluntary termination after the first offering seemingly withheld or delayed termination decisions in the hopes that MIPP would be implemented again. This problem was discussed by MBT officials, and the decision was reached that the problem should be dealt with merely by informing employees that no definite plans to extend MIPP existed and, therefore, that employees considering retirement should not delay their decisions. Schlageter testified that after consultation with Grady, a decision was reached by them that managers could be encouraged to retire by indicating to them that there were no current plans for a second MIPP offering. J.A. at 913-14. 39 The parties also agree that it is difficult to determine when MBT concluded that only a second MIPP offering would adequately alleviate the management surplus problem. However, the record discloses that management surplus was discussed throughout the relevant period and that methods were discussed for work force reduction. MIPP was discussed in a number of meetings by MBT officials, and consideration of MIPP by high-level managers commenced as early as March 1982. Written cost-effectiveness studies were also undertaken, one of which was prepared on May 6, 1982, and another was prepared on May 20, 1982. 40 On June 1, 1982, a meeting was held at MBT to further design and discuss a MIPP offering. Although Grady briefly attended, the major participants at this meeting were high-level MBT managers, and a recommendation was made that MIPP should be offered again. Grady then secured the approval of MBT's chief operating officer and president before presenting a recommendation to MBT's executive group that MIPP should be offered. As stated, the recommendation was subsequently approved at a meeting on June 11, 1982. 41 Prior to the formal decision to extend the second MIPP offering, there was concern among high-level MBT management that some managers who had retired prior to the second MIPP offering (but after the first) would feel that they had been unfairly denied MIPP benefits. Accordingly, some officials suggested that the second offer be made retroactive to the first broad MIPP offering. However, it was determined that the MIPP offering should only be made effective for those retiring on or after June 1, 1982, and that any fairness concerns had been adequately addressed in MBT's communications about MIPP. 42 The pivotal allegation made by the plaintiffs in the present cases is that defendants, when making statements during the period from December 1, 1980, to June 1, 1982, either knowingly or negligently made material misrepresentations regarding the future availability of MIPP benefits with the intent to induce plaintiffs to act upon the alleged misrepresentations by voluntarily retiring at MBT and that in doing so, defendants breached their ERISA-imposed fiduciary duties. 4 The district court, however, held that no fiduciary responsibilities applied to defendants' conduct prior to the decision to offer MIPP benefits for a second period of time. 43 The district court noted that [b]efore the court can determine whether a fiduciary violated his duties, the court must determine if he was acting as a fiduciary when he engaged in the disputed conduct. Ogden, 657 F.Supp. at 333. The district court stated that named ERISA welfare plan fiduciaries may also serve as corporate officers, thus wearing two hats. Id. (citing 29 U.S.C. Sec. 1108(c)(3) (ERISA does not prohibit an individual from serving as a fiduciary in addition to being an officer, employee, agent, or other representative of a party in interest.)). Moreover, the district court held that where a corporate officer or an employer functions in dual roles, ERISA fiduciary duties apply only to those functions which are fiduciary in nature. When an employer or officer is conducting business not regulated by ERISA, no fiduciary duties apply. Id. (citing Amato v. Western Union Int'l Inc., 773 F.2d 1402, 1426-27 (2d Cir.), cert. dismissed, 474 U.S. 1113, 106 S.Ct. 1167, 89 L.Ed.2d 288 (1986)). 44 The district court then considered the nature of the June, 1982 decision by the defendants to offer MIPP benefits. Id. at 334. If the decision to offer MIPP was a business decision, the district court explained, no ERISA fiduciary duties applied. In analyzing this issue, the district court adopted as a test whether a neutral third party could have made the decision to offer MIPP benefits. Concluding that a neutral third party could not have made such a decision, the court held that the decision to offer MIPP was a business decision not undertaken in a fiduciary capacity. Id. at 335. 45 Plaintiffs, however, have consistently conceded that the decision to offer MIPP was a nonfiduciary business decision. Rather, plaintiffs argue that a distinction should be drawn between the actual corporate decision to offer benefits and communications made by fiduciaries to potential plan participants about the likelihood of a second implementation or offering of an existing welfare plan. The district court rejected this assertion, finding that [i]t would be illogical to hold that even though the ultimate decision to offer MIPP was a business decision, that representations about that eventuality were made in a fiduciary capacity. Id. Given its conclusion that defendants had no duties under ERISA, the district court never reached the issue of whether any misrepresentations actually occurred in the present case. 5