United States Court of Appeals
For the First Circuit
No. 01-1409
GILLES FILIATRAULT,
Plaintiff, Appellant,
v.
COMVERSE TECHNOLOGY, INC. AND BOSTON TECHNOLOGY, INC.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Morris E. Lasker, Senior U.S. District Judge]
Before
Selya, Circuit Judge,
Rosenn* and Cyr, Senior Circuit Judges.
Paul J. Murphy, with whom Menard, Murphy & Walsh LLP was on
brief, for appellant.
Christopher J. Perry, with whom Catherine M. Stockwell and
Hale and Dorr LLP were on brief, for appellees.
December 27, 2001
________________
*Of the Third Circuit, sitting by designation.
SELYA, Circuit Judge. Plaintiff-appellant Gilles
Filiatrault brought suit under the Employee Retirement Income
Security Act (ERISA), 29 U.S.C. §§ 1001-1461 (1994 & Supp. V
1999), and specifically, 29 U.S.C. § 1132(a)(1)(B) (authorizing
a private action by a participant in, or beneficiary of, an
ERISA-regulated plan "to recover benefits due . . . under the
terms of [the] plan"). The lower court found the plaintiff's
claims lacking in merit and entered summary judgment for the
defendants. We affirm.
I.
Background
In this suit, the plaintiff seeks to collect benefits
allegedly due under an employee severance benefit plan (the
Plan) maintained by his quondam employer, defendant-appellee
Boston Technology, Inc. (BTI). The relevant facts are largely
undisputed. We begin with a decurtate summary.
In 1997, the plaintiff was a mid-level manager,
employed by BTI and covered by the Plan. On August 20, 1997,
BTI agreed to merge at a future date (January 14, 1998) into
defendant-appellee Comverse Technology, Inc. (CTI) in a tax-
free, stock-for-stock transaction. BTI would then dissolve.
On October 24, 1997, BTI terminated the plaintiff's
employment, and the plaintiff responded by demanding payment of
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severance benefits under the Plan. Although the merger had not
been consummated when BTI terminated his employment, the
plaintiff claimed that a "change in control" nonetheless had
occurred upon the execution of the agreement to merge, thereby
triggering his entitlement to severance benefits. BTI refused
to honor the plaintiff's demand.
BTI merged into CTI on January 14, 1998. CTI
thereafter transferred certain of its assets, including all the
former assets of BTI, into a new operating unit, Comverse
Network Systems, Inc. (CNSI). CTI appears to have accomplished
this transfer by delivering a bill of sale to CNSI.
On June 12, 1998, the plaintiff filed suit against BTI
(as the Plan's sponsor) and CTI (as BTI's successor in interest)
in the federal district court. The defendants moved to dismiss
for failure to state an actionable claim. See Fed. R. Civ. P.
12(b)(6). When the district court converted this motion into a
motion for summary judgment, see Fed. R. Civ. P. 12(b), the
defendants filed a supporting affidavit subscribed to by
Adalbert K. Wnorowski (BTI's general counsel up to the time of
the merger and CNSI's general counsel thereafter). The
plaintiff filed an opposition to the motion and simultaneously
filed a motion to withhold decision pending additional
discovery. See Fed. R. Civ. P. 56(f).
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Following a hearing, the district court entered partial
summary judgment for the defendants and, at the same time,
granted the plaintiff's Rule 56(f) motion in part (allowing the
plaintiff to depose a representative of the defendants on the
issues that remained outstanding). On May 18, 2000, the
plaintiff deposed Wnorowski and thereafter filed a supplemental
opposition, a cross-motion for summary judgment, and a motion
for partial reconsideration of the district court's earlier
order. On September 14, 2000, the district court granted the
balance of the defendants' motion for summary judgment and
denied the plaintiff's cross-motions.1 This timely appeal
followed.
II.
Standard of Review
We review the district court's entry of summary
judgment de novo, taking the facts in the light most favorable
to the summary judgment loser (here, the plaintiff). Garside v.
Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir. 1990). Although some
incidental facts are controverted, those disputes are not
material. The essence of the controversy resides in the
pertinent documents, and neither the contents of those documents
1Final judgment did not enter until February 9, 2001, when
the district court dismissed a tagalong count. This count is
not in issue here, and we make no further reference to it.
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nor the facts necessary to put them into perspective are open to
serious question. The Plan comes within the purview of ERISA;
its relevant provisions are as stated herein; the plaintiff was
a Plan participant; the terms of the agreement to merge are free
from ambiguity; and the critical dates (e.g., when BTI dismissed
the plaintiff and when it consummated the merger) are
uncontroverted. Thus, so long as the lower court correctly
construed the Plan and the agreement to merge, grasped the
pertinent facts, and took them properly into account, summary
judgment was appropriate. We turn to that inquiry.
III.
Analysis
When BTI terminated the plaintiff's employment, the
Plan provided that employees who were dismissed without cause
within twelve months after a "change in control" would receive
certain described severance benefits. This is the focal point
of the instant litigation: the plaintiff maintains that he was
an employee of BTI at the time of a change in control and,
accordingly, that he had an entitlement to those benefits when
he thereafter was discharged without good cause. For summary
judgment purposes, the defendants concede that the plaintiff
can, at the least, make out a genuine issue of material fact as
to termination without cause. They maintain, however, that no
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change in control occurred until after the plaintiff's
termination, so that he had no entitlement to severance
benefits. Accordingly, this appeal hinges on the meaning of the
phrase "change in control."
A.
Relevant Plan Provisions
The provisions of an ERISA-regulated employee benefit
plan must be interpreted under principles of federal common law.
See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987); see
also Nash v. Trustees of Boston Univ., 946 F.2d 960, 964 (1st
Cir. 1991) (applying that tenet to a severance pay plan). We
think it obvious that federal common law embodies commonsense
principles of contract interpretation. Thus, straightforward
language in an ERISA-regulated plan should be accorded its
plain, ordinary, and natural meaning. Burnham v. Guardian Life
Ins. Co., 873 F.2d 486, 489 (1st Cir. 1989). It is against this
backdrop that we inquire into the contours of the phrase "change
in control."
The Plan itself contains the operative definition. It
enumerates five events that will suffice to trigger a change in
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control. Two of these are potentially relevant here (Events 2
and 5). Event 2 provides that a change in control shall be
deemed to have occurred upon the emergence of "an Acquiring
Person (as such term is defined in the Rights Agreement dated as
of May 9, 1991 between [BTI] and The First National Bank of
Boston)." Event 5 provides that a change in control shall be
deemed to have occurred if "the Company shall sell all or
substantially all of its assets to another person or entity in
one transaction or a series of related transactions." The
plaintiff argues that one or both of these events occurred prior
to the date of his discharge (October 24, 1997). We think not.
B.
Event 2
The plaintiff's argument that CTI became an "Acquiring
Person" immediately upon the signing of the agreement to merge
is insupportable. The Plan borrows the definition of acquiring
person used in the Rights Agreement between BTI and its
principal lender, originally entered into on May 9, 1991. That
pact defines an acquiring person as "any person who . . . shall
be the Beneficial Owner of 20% or more of the shares of Common
Stock then outstanding of [BTI]." In turn, it defines
beneficial owner as any person who owns or "has the right to
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acquire" securities.2 The plaintiff asserts that, upon executing
the agreement to merge, CTI "ha[d] the right to acquire" BTI's
stock (and, thus, became an acquiring person at that moment).
The flaw in this argument is that CTI did not obtain
an unconditional right to acquire BTI's stock merely by signing
the agreement to merge. There were numerous conditions
precedent to the merger,3 and a failure of any of these
conditions would have scuttled the merger. Consequently, CTI
did not have "the right to acquire" BTI's stock until these
2
The parties to the Rights Agreement amended these
definitions on August 20, 1997, to facilitate the proposed
merger. The defendants urge us to apply the new language (which
plainly excludes any possibility that CTI might have become an
acquiring person merely by agreeing to merge). The plaintiff
notes that the Plan itself was never amended and contends that
the language in effect when he first became a participant should
apply. We assume, for argument's sake, that the plaintiff is
correct.
The plaintiff also contends that the mere fact that CTI's
counsel saw fit to request amendment of this language buttresses
his construction of the operative terms. But lawyers frequently
see ghosts under every bed, and the fact that a party seeks a
protective amendment does not necessarily mean that the
unamended language is antithetic to his cause.
3
Article VI of the agreement to merge sets forth an array of
conditions precedent that had to be satisfied or waived in order
for the merger to go forward. These include (1) stockholder
approvals, (2) termination or expiration of the waiting period
under the Hart Scott Rodino Act, 15 U.S.C. §§ 1311-1314 (1994 &
Supp. V 1999), (3) effectiveness of the Form S-4 under the
Securities Act, see 17 C.F.R. § 230, (4) Nasdaq listing of CTI's
common stock, and (5) the receipt of opinion letters vouchsafing
that the merger would qualify as a "pooling of interests"
transaction.
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conditions were satisfied and the merger was consummated. See,
e.g., Riseman v. Orion Research, Inc., 749 F.2d 915, 919 (1st
Cir. 1984) (explaining that a "firm agreement" is not tantamount
to a purchase until the performance of a condition precedent).
The last of these conditions precedent was not fulfilled until
January 14, 1998 (the day that the parties consummated the
merger). Because CTI did not become an acquiring person until
that day, no change in control within the purview of Event 2
occurred during the currency of the plaintiff's employment.
C.
Event 5
That leaves Event 5: the "asset sale" provision. The
evidence establishes beyond hope of contradiction that the
CTI/BTI merger was a stock-for-stock transaction that did not
involve the sale simpliciter of BTI's assets. To be sure, CTI
adumbrated in an August 1997 press release that BTI's operations
would be combined post-merger with those of CTI's network
systems division. Then, after the merger had been consummated,
CTI transferred certain of its assets, which included the former
assets of BTI, to CNSI (a newly-created subsidiary that assumed,
inter alia, the functions of CTI's network systems division).
Moreover, CTI appears to have effectuated the transfer by bill
of sale. This latter transaction, the plaintiff asseverates,
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was tantamount to a sale of BTI's assets, triggering a change in
control because it was one of "a series of related
transactions." This asseveration is unpersuasive.
In the first place, there was no "sale." Moreover,
assuming arguendo that a sale occurred, it was not a sale by
BTI, but, rather, a sale by CTI of BTI's former assets. Indeed,
after the parties consummated the merger on January 14, 1998,
BTI ceased to exist (and, therefore, neither had assets to sell
nor the capacity to sell them).
In the second place, the only thing that actually
transpired before the plaintiff's dismissal was the execution of
the agreement to merge — and that agreement did not require a
transfer of BTI's assets by sale or otherwise. The reference in
the text of Event 5 to a "series of related transactions" does
not repair this hole in the plaintiff's case. Settled
principles of construction forbid the balkanization of
contractual language for interpretive purposes. See Smart v.
Gillette Co. Long-Term Disab. Plan, 70 F.3d 173, 179 (1st Cir.
1995). Here, the plaintiff's construction wrests the phrase
"series of related transactions" from its contextual moorings.
When that phrase is read — as it must be — as part of the
description of Event 5 as a whole, it plainly means that, for
a triggering event to occur, BTI must "sell all or substantially
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all of its assets" either "in one transaction or a series of
related transactions." Where, as here, BTI never essayed a sale
of its assets, and none was required by any agreement entered
into prior to the date of the plaintiff's dismissal, there was
no series of related transactions within the ambit of Event 5.
The plaintiff cites no authority that would give the quoted
language so broad a sweep, and we see no basis for interpreting
it in so expansive a manner.
In a last-ditch effort to salvage his Event 5 argument,
the plaintiff remarks that the district court granted summary
judgment as to Event 5 in its initial (March 1, 1999) order —
prior to the Wnorowski deposition. Building on this foundation,
the plaintiff complains in a desultory fashion about the timing.
We see no prejudice (and, therefore, no basis for any
complaint). The dispositive question is purely a matter of
interpreting unambiguous contract language. Extrinsic evidence
is generally inadmissible on such a question, see Smart, 70 F.3d
at 178; Boston Edison Co. v. FERC, 856 F2d 361, 367 (1st Cir.
1988), and the plaintiff has not indicated how access to
discovery might have put him in a more advantageous position.
D.
Opportunity for Discovery
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The final point raised on appeal concerns whether or
not the district court permitted the plaintiff an adequate
opportunity for discovery. The facts are as follows. On
February 1, 1999, the plaintiff filed both an opposition to the
defendants' motion for summary judgment and a Rule 56(f) motion
seeking additional discovery. In an affidavit accompanying the
later motion, counsel for the plaintiff complained generally
that he had been afforded an insufficient opportunity for
discovery, but he did not set forth what discovery he desired
(save for a Rule 30(b)(6) deposition).4 At the ensuing hearing
on the defendants' summary judgment motion, counsel explained
that the additional discovery would permit him to test the
veracity of the statements contained in the Wnorowski affidavit.
On March 1, 1999, the district court granted the
plaintiff's request for additional discovery, allowing him to
depose a representative of the defendants for up to three hours.
The plaintiff proceeded to depose the defendants' designated
4
When a corporation is deposed, the corporation, in response
to a deposition notice, is obliged to "designate one or more
officers, directors, or managing agents, or other persons who
consent to testify on its behalf . . . ." Fed. R. Civ. P.
30(b)(6). Under this protocol, "[t]he person[] so designated
shall testify as to [all] matters known or reasonably available
to the organization." Id. In this case, the plaintiff asked
for leave to invoke this rule and tendered a draft of a subpoena
duces tecum that he proposed to serve in connection with such a
deposition.
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representative, Wnorowski, for approximately ninety minutes. He
then renewed his request for further discovery, but was
inexplicit about what additional discovery he wished to pursue
or why he wanted to pursue it. The district court denied the
renewed request.
We need not tarry. The management of pretrial
discovery lies primarily within the sound discretion of the
district court. See Faigin v. Kelly, 184 F.3d 67, 84 (1st Cir.
1999). This court "will intervene in such matters only upon a
clear showing of manifest injustice, that is, where the lower
court's discovery order was plainly wrong and resulted in
substantial prejudice to the aggrieved party." Mack v. Great
Atl. & Pac. Tea Co., 871 F.2d 179, 186 (1st Cir. 1989). This is
a high hurdle, and the plaintiff cannot clear it here.
Among other things, a party who seeks to invoke the
prophylaxis of Rule 56(f) must articulate some plausible basis
to support a belief that discoverable material exists which, if
available, would suffice to raise a trialworthy issue.
Paterson-Leitch Co. v. Mass. Mun. Wholesale Elec. Co., 840 F.2d
985, 988 (1st Cir. 1988). At the time that the plaintiff
renewed his discovery request, he already had copies of his own
employment agreement, the agreement to merge, the Rights
Agreement, the amendment to the Rights Agreement, the Plan, the
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press release announcing the execution of the agreement to
merge, and the pertinent minutes of BTI's board of directors.
He also had the benefit of the Rule 30(b)(6) deposition. Apart
from these items the plaintiff has not identified a single piece
of discovery that would assist him in prosecuting his claims.
That omission is not surprising. The resolution of
this paper-intensive case is dependent on the documents, and the
documents are unambiguous insofar as they pertain to the issues
presented. It is surpassingly difficult to imagine what
additional evidence might bear on the issues that the plaintiff
presses or what other testimony he might need to respond to the
defendants' motion for summary judgment. Because the plaintiff
cannot demonstrate that the trial court's management of the
discovery process was unfairly prejudicial, his Rule 56(f) claim
cannot succeed.
At the risk of carting coal to Newcastle, we mention
a further ground that supports this holding. After taking the
Rule 30(b)(6) deposition, the plaintiff filed a cross-motion for
summary judgment along with his motion to reopen discovery. The
filing of the former motion constituted an acknowledgment by the
plaintiff that he had sufficient knowledge of the situation,
then and there, to justify asking the court to enter summary
judgment in his favor. As we have said before, the making of
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such a motion almost invariably indicates that the moving party
was not prejudiced by a lack of discovery. See, e.g.,
Rodriguez-Cuervos v. Wal-Mart Stores, Inc., 181 F.3d 15, 23 (1st
Cir. 1999) ("Ordinarily, a party may not attempt to meet a
summary judgment challenge head-on but fall back on Rule 56(f)
if its first effort is unsuccessful.") (citation and internal
quotation marks omitted); C.B. Trucking, Inc. v. Waste Mgmt.,
Inc., 137 F.3d 41, 44 (1st Cir. 1998) (similar); Ayala-Gerena v.
Bristol Myers-Squibb Co., 95 F.3d 86, 92 (1st Cir. 1996)
(similar).
IV.
Conclusion
We need go no further. When the words of a severance
pay plan are plain, we will refrain from attempting to tease out
of the text far-fetched nuances of meaning. Cf. Taylor v. Aetna
Cas. & Sur. Co., 867 F.2d 705, 706 (1st Cir. 1989) (per curiam)
(admonishing that courts should "abjure unnecessary mental
gymnastics which give the terms of [a document] a forced or
distorted construction") (citation and internal quotation marks
omitted). That rule applies here — and the fact that the
severance pay plan is regulated under ERISA does not diminish
its cogency. In the last analysis, courts have no warrant to
redraft employee benefit plans in an effort either to work rough
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justice or to palliate the seemingly harsh effects of considered
language in particular cases. Giving the relevant provisions of
the Plan their plain, ordinary, and natural meaning, the
district court's summary judgment order is fully supportable.
Affirmed.
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