Court Opinion

ID: 6930673
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:58:16.122964+00
Date Added: 2024-06-11T16:07:10.062332
License: Public Domain

MURNAGHAN, Circuit Judge,
concurring:
An evenly divided court has affirmed the district court on its finding that the plaintiffs’ right to have a transfer of the surplus of the 1983 ESOP depends on proof of reliance. The case has been remanded for decision on that point. We have also affirmed on all other points raised in the appeal concerning which the opinion of Judge Williams states the opinion of the court.
I agree with the opinion remanding for decision of the question of whether there was sufficient reliance by the plaintiffs. At the same time, I contend that there also is presented the corollary question of whether a contract might exist under which Cone Mills Corporation was required to adhere to the promise of the surplus under its December 15,1983 letter to salaried employees. It is to that question that the bulk of this concurrence is devoted.
Cone Mills, a large textile manufacturer, faced a hostile takeover bid announced on October 31,1983. A group of senior management employees decided to mount a leveraged buy-out (LBO). With the objective of encouraging Cone Mills employees to support a favorable vote by the shareholders at the LBO vote on March 26, 1984, the Cone Mill’s management corresponded with the company’s employees. Specifically, in an effort to achieve such an objective, Dewey Trogdon, the Cone Mills President, wrote a letter to salaried employees on December 15, 1983, in which he said:
Keep in mind that Cone Mills has very limited value to anyone unless they have the people_ Remember, outside investment organizations do not know how to run a textile and foam business. They need you!
By deposition in the ensuing litigation, Trogdon, speaking of the period while the LBO was generally known and the senior management’s contesting of the hostile takeover through the LBO was soon to be voted on testified:
It’s important all the time to cultivate the loyalty of the employees, and I would say it’s especially important at a time when they are distracted. A hostile takeover attempt is one of those.
*866In his letter of December 15, 1983, written in his “official capacity as chairman of the board,” Trogdon also said:
If the management and bank proposal to buy the Company is successful, there is an agreement among the 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.
The surplus to which Trogdon referred had been developed by pension plans for Cone Mills employees and, under the Cone Mills plans if the LBO were to be successful, which in time it was, would change title from those pension plans of Cone Mills to a 1983 ESOP pension plan to be created for the benefit of the employees. Unless and until the December 15, 1983 letter should become effective, the surplus to which Trogdon referred was the excess of the amount needed to purchase annuities and would be entitled to retention by Cone Mills.
At the time of the December 15, 1983 letter, Trogdon and other senior management personnel assumed that the surplus was over $50,000,00o.1 However, by the time the surplus was distributed on dates through December 23, 1985, it had grown to $69,000,-000.2 The LBO had, on March 26, 1984, achieved a favorable result3 so “the management and bank proposal to buy the company [was] successful.” Consequently, “all of the Cone employees” became entitled to the surplus which was “a substantial asset” theretofore not owned by the employees.
The most simple and straightforward meaning of “surplus” is what the word unambiguously signifies. A surplus could and almost surely would fluctuate in value (probably upward) over time. No time for calculation of value is specifically called for in the December 15, 1983 letter; consequently the surplus should be valued when it had a determined value, ie., when it was terminated and so for the first and only time became fixed.
But even if a precise value of $50,000,000 is accepted at some earlier date, the date of that valuation was the date of the December 15, 1983 letter or March 26, 1984 when the LBO was successful and created the occasion for contributing the surplus to the 1983 ESOP. Thereupon title to the surplus, as the December 15, 1983 letter stated unambiguously, would have passed to the 1983 ESOP. As title holder or owner, the 1983 ESOP was automatically the one to receive any increase in value accruing after the contribution. If the contribution took place on March 26, 1984 upon the successful election approving the LBO, perhaps the correct amount of the surplus’ value was $50,000,000, but that date would be substantially sooner than December 23, 1985 when the value of the surplus was finally fixed. The “surplus” referred to all of the surplus on the date of distribution.
So whichever valuation was intended in the December 15, 1983 letter, $50,000,000 calculated as of March 26, 1984 or $69,000,000 as of December 23, 1985, the result is the same since the 1983 ESOP was the owner entitled to all increase between the two dates. That conclusion is consistent with president Trog-don’s testimony that there was a “binding” obligation or “agreement.” 4
*867So, with respect to at least a valuation of $50,000,000 Trogdon believed the conveyance of “the surplus” was a binding obligation. Also, the successful senior management caused Cone Mills, through several contributions to the 1983 ESOP, to make contributions totalling $54,796,638. So Trogdon apparently accepted and performed the December 15, 1983 letter as a “binding obligation,” i.e., contract. The legal question of whether Cone Mills made a binding promise should properly be considered settled. In addition, the district judge has made a finding of fact as to the applicable value of the surplus which was not clearly erroneous, Elmore v. Cone Mills, No: 6:88-3258-17, order at 26-27 (D.S.C. Sept. 18, 1991) (Findings of Fact, Conclusions of Law, and Order), that the “surplus” in the December 15, 1983 letter was $69,000,000 when the surplus was terminated. That finding should be accepted.
If the Trogdon “binding obligation” is excused or ignored, there will still remain the simple basic question of whether contract law has indeed been satisfied. The Cone Mills’ December 15,1983 letter provided the promise, but what consideration then makes it binding?
The district judge left open for subsequent determination the question of reliance if the existence of a contract or its equivalent was established on an estoppel basis. While the district court spoke in terms of equitable estoppel, it is clear that what is at issue in the instant case is the making — and subsequent breaking — of a promise. Strictly speaking, then, the matter is one appropriately considered under the equitable doctrine of promissory estoppel.5 Promissory estop-*868pel, where reliance is shown, has the significance of consideration. See Allen M. Campbell Co., General Contractors, Inc. v. Virginia Metal Indus., Inc., 708 F.2d 930, 931 (4th Cir.1983) (“[P]romissory estoppel ... allows recovery even in the absence of consideration where reliance and change of position to the detriment of the promisee make it unconscionable not to enforce the promise.”); Restatement (Second) of Contracts § 90(1) (“A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action is binding if injustice can be avoided only by enforcement of the promise.”); 4 Richard A. Lord, Williston on Contracts § 8:5 (4th ed. 1992).
I have voted to affirm the district judge’s decision which took the estoppel approach. He concluded that recovery by the plaintiffs could be possible either under estoppel or third party beneficiary theories. In either case, reliance must be shown. I do not believe, however, that estoppel is the only route with which to find Cone Mills’ promise binding. The senior management group appears to have made the December 15,1983 promise hoping that the Cone Mills employees would support and vote for the LBO. It is evident that the employees did. Their doing so would create the contractual support for a unilateral contract. Restatement (Second) of Contracts § 30(1) (“An offer may invite or require acceptance to be made by an affirma-five answer in words, or by performing or refraining from performing a specified act _”); 1 Lord, Williston on Contracts § 1:17 (discussing the difference between unilateral and bilateral contracts) (emphasis added). The district judge, on remand, should be free to investigate that question.
The question also has arisen of what effect the presence of ERISA has, if any, on the instant case. However, the binding obligation, that is a contract, was entered and all conditions thereof met by the LBO’s adoption on March 26, 1984, well before adoption on April 2,1984 of the Plan incorporating the 1983 ESOP. Prior existence of the Plan when the contract was formed might have caused problems to arise. In Coleman v. Nationwide Life Ins. Co., 969 F.2d 54, 60 (4th Cir.), cert. denied, — U.S. -, 113 S.Ct. 1051, 122 L.Ed.2d 359 (1993), we held that estoppel principles cannot be used to effect a modification of an existing ERISA benefit plan. In such a case, adoption of an estoppel theory
would require this court to rewrite the contract of insurance. While a court should be hesitant to depart from the written terms of a contract under any circumstances, it is particularly inappropriate in a case involving ERISA, which .places great emphasis upon adherence to the written provisions in an employee benefit plan. Plaintiffs theories, though packaged in dif*869ferent wrappers, all would lead to the same result — the written plan would no longer be the benchmark in an action under ERISA.
Id. at 56. Similarly, in Singer v. Black & Decker Corp., 964 F.2d 1449, 1452 (4th Cir.1992), we held that “resort to federal common law generally is inappropriate when its application would conflict with the statutory provisions of ERISA, discourage employers from implementing plans governed by ERISA, or threaten to override the explicit terms of an established ERISA benefit plan.” This is so because
ERISA demands adherence to the written terms of an employee benefit plan.... Federal common law does not provide a backdoor through which these statutory requirements may be evaded, and attempts to import state common law principles such as equitable or promissory estoppel to alter and undermine written obligations have been consistently rebuffed by the courts.
Id. at 1453-54 (Wilkinson, J., concurring).
I have no quarrel with any of these prior decisions in their proper context. However, here the Plan was created subsequent to the contract, so no such Plan existed when the contract came into existence. Hence, no comparison of the two was possible.6 The contract when made could not threaten the integrity of the written plan. Moreover, the contract in no way departed from Cone Mills’ intention to create a binding obligation. Only the determination of the date as of which the surplus should be valued was in issue. I have attempted to demonstrate that the result is that same whichever date is used to value the surplus: $69,000,000 less $54,796,638. We have recently recognized that, in enacting ERISA, Congress “intended that the courts would develop a federal common law of rights and obligations under ERISA-regulated plans.” Id. at 1452 (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)) (quotations and internal citations omitted); see also Holland v. Burlington Indus. Inc., 772 F.2d 1140, 1147 n. 5 (4th Cir.1985) (Congress intended for courts to borrow from state law when appropriate in fashioning federal common law to govern ERISA), aff'd sub nom. Brooks v. Burlington Indus. Inc., 477 U.S. 901, 106 S.Ct. 3267, 91 L.Ed.2d 559 and cert. denied sub nom. Slack v. Burlington Indus. Inc., 477 U.S. 903, 106 S.Ct. 3271, 91 L.Ed.2d 562 (1986). In Singer, we acknowledged the difficulty courts may encounter in delineating the situations where federal common law would be a “desirable companion to ERISA,” from those where it would unduly expand rights and remedies established by the statutory scheme. But we also admonished the district court for “paintfing] with too broad a brush in stating categorically that courts should not look to state common-law causes of action that have been preempted by ERISA in fashioning federal common law.” Singer, 964 F.2d at 1452. Indeed, the Singer court defended the use by a federal court of common law doctrines “to assist in shaping the federal common law of ERISA,” by noting that use of common law doctrines “to further[] the goals of ERISA” would advance, not frustrate, the intention of Congress that ERISA subject plans and plan sponsors to a uniform body of benefits law. Id. at 1452-53. I would submit that the instant case cries out for the application of federal common law, precisely in order to effectuate ERISA’s promise, namely to protect the expectations of those who are beneficiaries of the Plan.7
*870Moreover, an extension of the primacy of the Plan, when it is later adopted, to a preexisting contract would render the contract, the “binding obligation,” changeable, i.e., nonbinding. I see no evidence that Congress intended, with the enactment of ERISA, to make any contract always unenforceable, that is always capable of being changed or made unenforceable by one of the parties. In the instant case, that party is the employer, the one who would adopt not only the Plan but also any amendment thereto. ERISA should not be understood as rendering illusory all such commitments made by employers. See 1 Lord, Williston on Contracts § 1:2 (“[A]n apparent promise which makes performance optional with the promi-sor ... is in fact no promise- Such an expression is often called an illusory promise.”) While an employee endorsed post-Plan amendment could well represent a provision actually inconsistent with the prior intent of the maker of the Plan, as in Coleman or Singer, here, on the contrary, the December 15, 1983 letter written by Cone Mills’ president and ratified by the entire Board of Directors on May 15, 1984 contained the promise upon which the plaintiffs relied. It clearly represented the employer’s view. Moreover, since the Plan contains both a provision for mandatory and a provision for discretionary contributions to the ESOP, nothing in the Plan is inconsistent with the intent expressed by the employer in making its promise.
In summary, the overall objective of ERISA is to insure fair treatment of employees, see, e.g., Donovan v. Dillingham, 688 F.2d 1367, 1372 (11th Cir.1982); Coleman, 969 F.2d at 60; Cleary v. Graphic Communications Int’l Union, 841 F.2d 444, 447 n. 5 (1st. Cir.1988); Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 157, 105 S.Ct. 3085, 3098, 87 L.Ed.2d 96 (1985) (Brennan, J., concurring), and, to achieve that result, the employees should be accorded what they were promised, namely, the surplus determined when it terminated on December 23, 1985, i.e., $69,000,000 — $54,796,638, that is $14,203,362. Whether the date of termination or the date of the earlier transfer of title to the surplus was meant, the result is the same.
Nothing in the ERISA law should permit a result whereby one party can unilaterally change a Plan later adopted and thereby impair an already existing contract. Allowing an employer to invalidate a binding contract made while the 1983 ESOP Plan was in gestation would permit one party to alter a contract unilaterally, against the other contracting party’s will, to change “Yes” to “No.”
Judge K.K. HALL, Judge MICHAEL, Judges, and Senior Judge SPROUSE have authorized me to say that they concur in my concurring opinion.

. A December 12, 1983 letter from Trogdon spoke of a surplus of "over $50 million.” A company video presentation also indicated that the amount was "over” $50 million. Finally, Cone Mills' proxy statement indicated that the surplus was "approximately $50 million."

. The amount came principally from interest earnings on the annuities, and also to an unspecified extent from tax savings achieved as a result of deferring distribution of the surplus.

. The right reserved in the December 15, 1983 letter to change did not arise prior to March 26, 1984 since governmental approval did occur and the management’s bid for the company was successful. In other words, every condition specified by the Trogdon letter was met.

.Specifically, Trogdon testified that the "take title” representation was a "promise,” a "com-mittment],” and a "binding obligation.” He testified, however, that the promise was capped at $50 million, an interpretation not only contradicted by the language of his December 15, 1983 letter, but also by the repeated observations that the surplus was worth “over $50 million," not capped at $50 million. In any event, the value of the promise of the surplus when made did not *867ascertain the worth of the surplus on termination.

. Judge Niemeyer is of the view that the district court's labeling of the estoppel at issue as "equitable” rather than “promissory” should preclude our passing judgment on the latter. Such a view, it seems to me, exalts form over substance.
First, it is abundantly clear that the district court understood that the gravamen of the plaintiffs’ complaint was a broken promise:
The issue of whether the plaintiffs ... reasonably relied upon any of the alleged promises of the defendants has been a much-discussed, topic during the three-year history of this litigation.
J.A. at 356 (District Court's "Findings of Fact, Conclusions of Law, and Order”) (emphasis added).
In a final pre-trial conference held on January 17, 1991, the court raised the reliance issue once again. After a thorough discussion of the issue, it was agreed that the trial would proceed without testimony concerning reliance. The plaintiffs would be allowed to attempt to convince the court that they should recover under theories not requiring reliance, and the defendants would be allowed to attempt to demonstrate that no person could reasonably have relied upon the alleged promises.
Id. (emphasis added).
In summary, the promise to contribute "the” pension reversion was clear and unqualified. Unlike the promises of post-LBO benefits, which were generally couched in terms of expectations or predictions, or which were effectively disclaimed, the pension reversion promise was just that — a promise.... This unqualified promise gives rise to liability to the plaintiff class for breach of fiduciary duty, and possibly under contract law principles, as discussed in the conclusions of law.
Id. at 358 (emphasis added).
Admittedly, as Judge Niemeyer indicates, the district court labelled its discussion "equitable estoppel.” Given its discussion of why it reserved the finding of reliance, it is clear that the district court’s concern was actually with promissory estoppel. See J.A. at 378 (Findings of Fact, Conclusions of Law, and Order) ("In the case before this court, Cone made authorized promises which, if kept, would yield substantial additional benefits to the Cone salaried employees. Cone ... has attempted to hide behind plan documents which they claim permit them to renege on its promises. Simply stated, the doctrine of estoppel does not allow such behavior.") (emphasis added). As shown in the body of this concurrence, it is technically promissory estop-pel that does "not allow [the] behavior” that so offended the district court.
Because it is plain that the district court merely mislabelled the branch of estoppel it considered, there is no valid reason to prohibit this Court or the district court itself from investigating promissory estoppel as a means of recovery. A review of opinions from this court and others suggests that the confusion here exhibited is by no means rare. Indeed, the first case on which Judge Niemeyer relies to argue that promissory estoppel is unavailable in the ERISA context was itself a case considering an equitable estoppel claim. See Miller v. Coastal Corp., 978 F.2d 622 (10th Cir.), cert. denied,-U.S.-, 113 S.Ct. 1586, 123 L.Ed.2d 152 (1993). There, plaintiff “argue[d] that ... defendants are equitably es-topped from now denying the[] benefits.” Id. at 624 (emphasis added). In rejecting the plaintiff’s equitable estoppel claim as preempted by ERISA, the Tenth Circuit quoted its earlier precedent to the effect that "we will not import *868notions of promissory estoppel into ERISA.” Id. at 625 (citation omitted). Just as the district court here conflated notions of promissory and equitable estoppel, so did the Miller court. See also Geva v. Leo Burnett Co., 931 F.2d 1220, 1223 n. 3 (7th Cir.1991) ("As we have earlier noted, Illinois at one time maintained a distinction between promissory and equitable estoppel, but those doctrines seem to overlap in great part today.”); Schalk v. Teledyne Inc., 1993 WL 432404, *4, 1993 U.S. Dist. LEXIS 10885, *14 (W.D.Mich. July 8, 1993) (“[Tjhe court notes that although the plaintiffs here have pleaded a promissory estoppel claim, they proceed on the theory of equitable estoppel.... The two theories are distinct and the elements are not interchangeable. Nevertheless, the defendants have long been aware that plaintiffs have relied upon the principles of equitable estoppel to support their claim.”) Indeed, the Fourth Circuit itself is not free of the doctrinal confusion, as is demonstrated by an opinion that I and Judge Niemeyer joined just two years ago. See Lawrence v. Mars, Inc., 955 F.2d 902, 907 (4th Cir.) (doctrine of "equitable estoppel” does not apply because “promise " not definite enough) (emphasis added), cert, denied, — U.S.-, 113 S.Ct. 76, 121 L.Ed.2d 40 (1992).
In the present case it is clear that the district court made a finding that a promise existed, and reserved the question of whether there was reasonable and detrimental reliance. While I do not celebrate the confusion engendered by the several equitable doctrines that make up the catch-all of "estoppel,” it seems to me that we should recognize that courts often conflate the doctrines. We should not, through an overly formalistic application of language, deny the plaintiffs the right to demonstrate reliance in accord with the agreement reached by the district court, the plaintiffs, and the defendants. Regardless of whether Cone Mills actually made a misrepresentation on December 15, 1983, when it gave the employees its promise, the employees subsequently suffered the effect of a misrepresentation.

. In addition, since the Cone Mills employees seek to increase the contributions to the fund, there is no concern as in our earlier cases, that the actuarial integrity of the plan is threatened with respect to some employees for the benefit of others.

. I want to underscore that in no way do I mean to reject the guidance of Coleman, Singer, or any other of our earlier cases. The Coleman rule is a sound one. Estoppel should not be employed to give force to unauthorized, oral promises that contradict the written terms of an established plan. As indicated above, however, I believe that where no plan exists, when an authorized promise is unambiguously made and relied upon, and the promise pertains to an area to which the contemplated Plan would relate, equitable relief is appropriate.
I must disagree with the suggestion advanced ■ by Judge Niemeyer in his dissent that courts have treated promissory estoppel differently from equitable estoppel with respect to ERISA preemption. Two of the three cases relied upon by Judge Niemeyer actually indicate the reverse. *870See Miller v. Coastal Corp., supra note 5 (applying Tenth Circuit’s preemption rule with respect to promissory estoppel to a claim based on equitable estoppel); Williams v. Bridgestone/Firestone, Inc., 954 F.2d 1070, 1072-73 (5th Cir.1992) (treating all estoppel-based federal common law claims alike). But see Alday v. Container Corp. of America, 906 F.2d 660, 666 (11th Cir.), (arguably holding that only equitable estoppel can be employed in ERISA context, and only when terms of plan are ambiguous), cert. denied, 498 U.S. 1026, 111 S.Ct. 675, 112 L.Ed.2d 668 (1991).
Those courts that have precluded the use of either promissory or equitable estoppel have done so in the name of the integrity of the written plan and the actuarial significance of modification of the plan. As argued throughout this concurrence, these concerns are simply in-apposite here.