United States Court of Appeals
For the First Circuit
____________________
Nos. 00-2077, 00-2078
STANLEY A. RODOWICZ, MARGARET STEVENS, AND JAMES LEMON,
Plaintiffs, Appellees, Cross-Appellants,
v.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,
Defendant, Appellant, Cross-Appellee.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Michael A. Ponsor, U.S. District Judge]
____________________
Before
Lynch, Circuit Judge
Stahl, Senior Circuit Judge,
and Lipez, Circuit Judge.
____________________
Edward J. McDonough Jr. with whom Egan, Flanagan and Cohen, P.C.
was on brief for appellant.
John C. Sikorski with whom John E. Garber and Robinson Donovan
Madden & Barry, P.C. were on brief for appellees.
____________________
February 4, 2002
____________________
LYNCH, Circuit Judge. In October of 1992 Massachusetts
Mutual Insurance Company, seeking to improve its financial
stability, attempted to reduce its work force by offering a
Voluntary Termination Program ("VTP"). The program, open to all
employees, offered a generous severance package. Some who took
the program did so by retiring. Although the program did not
offer enhanced retirement benefits, it did, of course, through
the larger severance package, increase the benefits of retiring
by offering the VTP benefits in addition to regular retirement
benefits.
As is inevitable in such a situation, there were those
who had retired in the months before the VTP was announced, and
felt they should have received the severance package available
under the VTP. This suit involves three of those employees:
Stanley Rodowicz, Margaret Stevens, and James Lemon. Initially,
the suit involved nine retiring employees, but a prior opinion
of this court winnowed the viable claims down to these three.
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Rodowicz v. Mass. Mut. Life Ins. Co. (Rodowicz I), 192 F.3d 162,
modified, reh'g denied, 195 F.3d 65 (1st Cir. 1999).1
This court’s prior opinion reversed the entry of summary
judgment against these three employees and held their Massachusetts
state law misrepresentation claims actionable on the summary judgment
record. Id. at 192. It characterized Massachusetts law as being more
generous to employees under a non-ERISA plan than the parallel federal
law would be if the severance program was an ERISA plan (which the VTP
was not).2 Id. at 173-75. ERISA would require a plan to be under
"serious consideration" by senior management in order to have an
actionable claim for breach of the fiduciary duty to disclose that a
change in benefits might be forthcoming, Vartanian v. Monsanto Co.,
131 F.3d 264, 268 (1st Cir. 1997). In contrast, Massachusetts law
requires only a "false statement of material fact made to induce the
1 A more detailed description of the facts can be found
in the district court’s opinions. Rodowicz v. Mass. Mut. Life
Ins. Co., 3 F. Supp. 2d 1481 (D. Mass. 1998), aff'd in part,
rev'd in part, and remanded, 192 F.3d 162 (1st Cir. 1999);
Rodowicz v. Mass. Mut. Life Ins. Co., 857 F. Supp. 992 (D. Mass.
1994), vacated, 915 F. Supp. 486 (D. Mass. 1996).
2 In Rodowicz I, we affirmed the district court's grant
of summary judgment on plaintiffs' ERISA claims, holding that
the VTP was not an ERISA-covered plan because it did not "call
for ongoing, individualized determinations" and, in general,
"the extent and complexity of administrative obligations" were
not so extensive as to render it an ERISA plan. 192 F.3d at
172.
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plaintiff to act, together with reasonable reliance on the false
statement to the plaintiff's detriment" in order to show an actionable
misrepresentation. Rodowicz I , 192 F.3d at 171 (citing Zimmerman v.
Kent, 31 Mass. App. Ct. 72, 575 N.E.2d 70, 74 (1991)).
Rodowicz I also stated that it did not mean to suggest that
"plaintiffs will or should necessarily prevail." Id. at 178. The
summary judgment record, as understood by the Rodowicz I court,
permitted the jury, but did not require it, to reach the conclusion at
trial that the alleged misrepresentations were made "at a time when
several proposals urging such changes [in benefits were] on the table
but, as yet, senior management with the authority to implement a change
ha[d] not yet chosen a specific plan for implementation . . . . In
such a case, the existence of the proposals and the attendant
discussion might reasonably be expected to influence a decision with
respect to retirement." Id. at 174-75. If so, the statements would be
material, and plaintiffs could rest a misrepresentation claim on them,
assuming the other elements of misrepresentation were met. Id.
At trial after remand, a jury found for the plaintiffs and
awarded a total of $334,777.33. Both parties appeal. The plaintiffs
challenge the trial court’s ruling that they could not receive
emotional distress damages for a misrepresentation claim. The company
says that it was entitled to judgment as a matter of law because there
was no plan under consideration at the time of the purported
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misrepresentations, that there was instructional error, that certain
evidence was erroneously admitted, that plaintiffs surprised and
prejudiced the company by changing their testimony on when the supposed
misrepresentations were made, and that the three plaintiffs' claims
should have been severed.
We reach only MassMutual's arguments that it was entitled to
judgment as a matter of law, that there was instructional error, and
that it was prejudiced by surprise testimony. We vacate the judgment,
and we direct entry of judgment for MassMutual.
I.
For purposes of the sufficiency of the evidence challenge,
we present the facts most favorably to the verdict for plaintiffs. For
purpose of the evidentiary challenges, we also describe the facts as
the defendant alleged them.
In the early 1990s, the insurance industry was in some
turmoil. Several of MassMutual’s long-time competitors were forced to
close their doors. MassMutual itself was downgraded by two ratings
agencies, in July 1991 and again in the fall of 1991. On three
separate occasions between 1990 and April of 1992, MassMutual's Human
Resources division looked at potential ways to downsize staff, either
through reducing hiring or by implementing some sort of retirement
benefits enhancement package. These studies were all closed down
without any such plan being implemented or even referred to the Board
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of Directors for consideration. The evidence concerning these plans is
discussed in more depth below, in the section dealing with MassMutual's
sufficiency of the evidence claim.
The plaintiffs, for their part, were all considering
retirement in late spring and early summer of 1992. Plaintiff
Rodowicz, who had been an associate director in the investment
department, submitted a Notice of Retirement on July 24. He retired on
October 1 with over sixty unused vacation days, for which he was
compensated in the form of a lump sum payment. Rodowicz based his
claim of misrepresentation on a conversation that occurred, according
to his testimony, in late August or early September, 1992, after his
Notice of Retirement was given.3 He testified that he asked Laura
Cowles, a Human Resources employee, "if there was any truth to the
rumor [that there was a package coming]." He testified that "she said
no, that the Board of Directors had met and considered a retirement
package and decided that they would -- emphatically decided that there
would be no enhancement or improvement in any retirement package."
Cowles testified that, although she did not remember the specifics of
the conversation, she did not recall making that statement and she did
not believe she had said anything about the Board, nor would she have,
because she would not know what the Board had or had not approved.
3 Plaintiffs' theory was that they were free to rescind
their Notices of Retirement up to their last day at work.
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Plaintiff Lemon, who had been a senior systems analyst,
submitted his Notice of Retirement on May 22. He retired on October 1,
1992, the same date as Rodowicz, although Lemon took his accrued
vacation prior to retirement and therefore his last day worked was July
17. Lemon’s claim is based on a statement which he testified was made
at a MassMutual retirement seminar that occurred in March, April, or
perhaps May.4 He testified that someone else at the seminar asked "Is
there going to be any change in benefits?" He further testified "[t]he
answer was Mr. Wilson [a Human Resources employee] said there will be
no change in benefits. He did say there might be some change in the
group life medical, you know, benefits, but there would be no change in
benefits. . . . I understood that to be . . . when I terminated, there
would be no additional benefits -- or when I retired." Wilson had no
memory of Lemon or the question, but testified, "that’s not something
I would say. . . I probably wouldn’t know if there was something coming
until it happened pretty much . . . . I’d say, I don’t know."
Plaintiff Stevens, also a senior systems analyst at
MassMutual, submitted her Notice of Retirement on May 20. She retired
on September 1, a month before Rodowicz and Lemon, but her last day
4 In his deposition, Lemon said this seminar had taken
place in the summer of 1992. At trial, he changed his
testimony, stating that after having "sleepless nights and all
that sort of stuff" since the start of trial, he had concluded
that the seminar took place in March or April, or possibly May,
of 1992. MassMutual objected to this surprise testimony.
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worked was July 31. Stevens testified that she had repeated meetings
with retirement counselor Lois DeGray in 1991 and 1992, and that DeGray
had avoided answering questions about any future changes to benefits.
At her husband’s urging, Stevens had finally asked DeGray "very
specifically . . . was there any reason for [her to] stay on over, you
know, any particular date that would be a benefit to [her], was there
any package maybe coming along. And [DeGray] told [her] 'no.'"
Stevens did not remember the exact date of the conversation, but
testified that it was before she sent a letter to her manager on May
22, as the conversation "was sort of the deciding factor."5 DeGray did
not recall Stevens ever asking her whether there would be any enhanced
benefits or severance, and denied ever telling her there would be no
changes.
On September 17, well after the alleged misrepresentations
claimed by the plaintiffs, Tom Wheeler, the CEO of MassMutual,
instructed John Pajak, the Executive Vice President for Operations and
Chief Operating Officer of MassMutual, to "dust off" the 1991 reduction
in force project6 and evaluate options for a possible plan. There is
5 This was a change from her pretrial deposition
testimony, in which she stated that the conversation had
occurred in mid-June of 1992. MassMutual objects to this
surprise testimony.
6 It is not clear what plan this refers to. CEO Wheeler
could not specifically recall the statement, nor could Pajak.
The statement came from a summary prepared by Susan Alfano of
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no evidence that any work was done on any form of an enhanced benefits
plan (retirement or severance) from the time the numbers were looked
at, and the idea abandoned, in late March or early April 1992 until
this request by Wheeler on September 17. Nor is there any evidence
that any ideas concerning such benefits were discussed by management
during that period. After the September 17 Wheeler request, Susan
Alfano, the Vice President for Human Resources, assembled a team and
worked virtually around the clock to prepare something. An employee
who worked on both the March analysis and the September project
testified that the two plans were "significantly different,"
particularly because the March analysis focused exclusively on
employees aged fifty or older. Pajak presented initial results to
Wheeler on September 25. Wheeler then presented the idea to a high-
level management group known as the "president’s cabinet" on September
30 and October 6. A proposal was then put before the Board of
Directors at the October 12 board meeting, and Wheeler was given the
authority to implement the plan at his discretion. Wheeler authorized
the Human Resources department. The only specific draft plan
prior to 1992 that was discussed in the trial testimony is the
1990 "Voluntary Incentive Program" (VIP) draft, which was not a
severance program, but an ERISA retirement benefit plan. The
evidence from 1991 was a memo from Susan Alfano to Pajak
regarding three possibilities for down-sizing, none of which
were severance options, and which Pajak referred to as not even
a "proposal."
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the plan on October 19 and it was announced to the company on October
23.
II.
The company appeals from the district court’s denial of its
motion for judgment as a matter of law, arguing, among other things,
that the evidence does not support the verdict and that the trial judge
erred in its jury instructions. The standard of review for a district
court's denial of a Rule 50 motion for judgment notwithstanding the
verdict is de novo. Walton v. Nalco Chem. Co., 272 F.3d 13, 23 (1st
Cir. 2001). Our review is weighted toward preservation of the jury
verdict; "[w]e must affirm unless the evidence was 'so strongly and
overwhelmingly' inconsistent with the verdicts that no reasonable jury
could have returned them." Id. at 23 (quoting Negron v. Caleb Brett
U.S.A., Inc., 212 F.3d 666, 668 (1st Cir. 2000) (quoting Coastal Fuels
of P.R., Inc. v. Caribbean Petroleum Corp., 79 F.3d 182, 188 (1st Cir.
1996))). "[T]he giving of [a jury] instruction is reversible error
only if it (1) was misleading, unduly complicating, or incorrect as a
matter of law, and (2) adversely affected the objecting party's
substantial rights." Faigin v. Kelly, 184 F.3d 67, 87 (1st Cir. 1999).
Plaintiffs pled in the alternative that the
misrepresentations were either negligent or intentional. Because the
degree of culpability a plaintiff must show to establish liability for
negligent misrepresentation is less than for intentional
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misrepresentation, we use the elements for negligent misrepresentation.
Cummings v. HPG Int'l Inc., 244 F.3d 16, 24-25 (1st Cir. 2001). Under
Massachusetts law,
To sustain a claim of misrepresentation, a plaintiff must
show a false statement of a material fact made to induce the
plaintiff to act, together with reliance on the false
statement by the plaintiff to the plaintiff's detriment. .
. . The speaker need not know "that the statement is false
if the truth is reasonably susceptible of actual knowledge,
or otherwise expressed, if, through a modicum of diligence,
accurate facts are available to the speaker."
Zimmerman v. Kent, 31 Mass. App. Ct. 72, 575 N.E.2d 70, 74 (1991)
(quoting Acushnet Fed. Credit Union v. Roderick, 26 Mass. App. Ct. 604,
530 N.E.2d 1243, 1244 (1988)).7 As we have noted previously, "in
7 An alternate phrasing of the elements of
misrepresentation, and a more thorough discussion of its
nuances, can be found in the Restatement (Second) of Torts,
which Massachusetts has adopted. See Cummings, 244 F.3d at 24.
As set forth in Restatement §552(1), the plaintiff must prove
that the defendant:
(1) in the course of its business, (2) supplied false
information for the guidance of others (3) in their
business transactions, (4) causing and resulting in
pecuniary loss to those others (5) by their justifiable
reliance upon the information, and (6) that it failed to
exercise reasonable care or competence in obtaining or
communicating the information. Fox v. F & J Gattozzi
Corp., 41 Mass. App. Ct. 581, 672 N.E.2d 547, 551 (1996)
(citing Restatement (Second) of Torts § 552(1) (1977)); see
also Massachusetts School of Law at Andover, Inc. v.
American Bar Ass'n, 142 F.3d 26, 41 (1st Cir. 1998).
Cummings, 244 F.3d at 24.
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general, Massachusetts courts treat negligent misrepresentation claims
more as negligence actions than deceit actions, focusing on the degree
of care exercised by the speaker in making the statement." Cummings,
244 F.3d at 25.
A. Sufficiency of Evidence
The company says it was entitled to judgment because the
plaintiffs failed to introduce any evidence to show that, at the time
the alleged disclosures were made, the VTP severance plan was "on the
table," or that any proposals were in existence, or that there were any
"attendant discussions" by the employee’s senior management about
either the VTP or any other plan.
The company argues that the Human Resources personnel said
to have made the statements "could not have discovered, or disclosed,
any facts about the severance option which later would become the VTP
in October of 1992, because the evidence was uncontroverted that the
discussions which led to the VTP severance option did not begin until
September 17, 1992, and that the VTP was not recommended to senior
management until September 30, 1992, after the communications with each
of the three employees."
Using the terminology of Rodowicz I , 192 F.3d at 174-78, the
company at times characterizes this argument as one going to the
materiality of the statements. However, in light of the evidence at
trial, we think it is better thought of as going to another element of
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the misrepresentation claim -- whether the statements were in fact
false at the time they were made. Under Rodowicz I, we assume the
speakers are the company, speaking through its authorized Human
Resources representatives. Id. at 177.8
At trial, plaintiff Stevens testified that DeGray made the
statement at issue here in mid-May, before Stevens submitted her
retirement notice. Plaintiff Lemon testified that Wilson made his
statement sometime between March and May, before Lemon submitted his
retirement notice on May 22. Rodowicz testified that Cowles made her
statement about the Board of Directors in late August or early
September, after he had submitted his July 24, 1992 retirement notice
to the company.
The evidence as to the company’s discussions of alterations
in its benefits plans was as follows. In 1990, MassMutual's Human
Resources division had worked up a possible ERISA early retirement plan
which was targeted at senior employees and would have provided enhanced
pension and retirement benefits. This plan was referred to as the
Voluntary Incentive Program or "VIP" plan. The VIP proposal was
abandoned without ever being implemented or even referred to the Board
8 In Rodowicz I, we dismissed the claims of four
plaintiffs based on the fact that the alleged misrepresentations
were made by MassMutual employees who did not have authority to
speak on behalf of the company with regard to retirement
benefits, and also excluded statements made to plaintiff Lemon
by such an individual. 192 F.3d at 177 & n.12.
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of Directors for consideration. John Pajak, the Executive Vice
President for Operations and Chief Operating Officer, testified that
the VIP proposal was "aborted in midstream," although the documents
were kept for future use.
In April 1991, MassMutual did alter the retirement benefits
to decrease the age at which one could retire with full retirement
benefits from 65 to 62. This was done as the result of an annual
internal competitiveness survey, in order to keep current with the
benefits offered by MassMutual’s competitors. The Board of Directors
voted on this change and approved it at the Board's April 1991 meeting.
This was the only potential change to the retirement system or
severance benefits considered by the Board until it ultimately approved
the VTP in the fall of 1992.
In the summer of 1991, as troubles mounted in the New England
insurance industry and a rating downgrade seemed imminent, Pajak asked
Alfano, then Vice President for Human Resources, to look into
possibilities for a reduction in force. Alfano compiled a memo for
Pajak listing three options -- one involving enhanced retirement
benefits (which, like the 1990 VIP proposal, would have fallen under
ERISA), and two involving reduced hiring through eliminating all open
exempt positions or selected exempt positions. Later in 1991, on her
own initiative, Alfano retained outside consultants to look into the
mechanics of doing an involuntary layoff. This study took place over
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a few months time, ending sometime in the fall of 1991. No such
layoffs were ever done, and Pajak had no memory of even being told
about this consultancy. Alfano testified that the purpose of it was
merely to educate the Human Resources management about the options,
"[b]ecause there was always the possibility" the company would have to
resort to layoffs.
In March of 1992, Pajak asked Alfano to crunch the numbers
again on possibilities for an early or enhanced retirement benefits
package. Alfano testified that the focus of this project, like the
1990 VIP project, was "exclusively on people retirement eligible." The
options being considered included "an enhancement to age, an
enhancement to years of service, and/or a severance component" for
retirement-eligible workers. The effort was apparently an attempt to
evaluate the feasibility of what would have been an ERISA-covered plan.
The options being worked up were not single payment general severance
plans, as the VTP eventually would be. This project was terminated in
March or early April because Alfano concluded that it would cause
excessive attrition in experienced and necessary positions.
Consequently, the results were never presented to the Board or even
compiled into a written report. Thus, as of early April 1992, the
company had considered but rejected ideas of offering enhanced
retirement benefits.
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On the evidence at trial, at the time of Rodowicz’s question
about whether there was any truth to the rumor that a package was
coming, the answer "no" was an accurate reflection of the company’s
position at that time. In discussing retirement with her retirement
counselor, Stevens asked whether there was any package coming along.
At that time, the company had no intent to offer any package.
Therefore, this case is factually distinguishable from cases in which
a company is in the process of considering a plan and either violates
a duty to disclose or misrepresents the state of things. Because no
benefits plans were being considered or discussed at the time the
questions were posed, the statements were literally true when made.
Thus, the plaintiffs failed to present sufficient evidence to meet a
basic element of negligent misrepresentation, that there be "false
information for the guidance of others." Cummings, 244 F.3d at 24.9
The statement that Lemon heard at the retirement seminar is
a bit more problematic, due to the muddled time frame offered by Lemon
for the statement. He testified that he attended the seminar in
"March, April, or perhaps May." This was a change from his deposition
testimony, when he testified that the seminar took place in the summer
9 We note, but do not decide, the question of whether a
statement about retirement benefits, answered in the negative,
may be deemed untrue in the context of a company counseling
employees about retirement, by the development of a plan
offering enhanced severance benefits to all employees.
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of 1992. If the testimony as to March were credited, there is some
chance that he heard the statement that there would be no package at
the same time that Alfano and her team were analyzing the viability of
a package in March of 1992. However, we are doubtful that this is
sufficient evidence of misrepresentation -- because the ambiguity of
his testimony failed to carry his burden, because MassMutual's duty to
disclose consideration of an ERISA-covered plan was limited by the
Vartanian "serious consideration" test, and because any March statement
would not be false because the March analysis never developed into a
plan. If the issue turned on his ambiguous testimony that the
statement was made in March, then that testimony, coming by surprise,
should not have been admitted as evidence and its admission was
reversible error.10 Lemon offered no substantial justification for his
last-minute change of testimony in this case. The trial judge
requested that the parties verify the accuracy of their discovery
evidence prior to trial, and Lemon should have realized the problem, at
10 Under Federal Rule of Civil Procedure 26(e)(2), a party is
required to "seasonably" amend a prior discovery response if the party
learns that the response is in some respect incorrect. See Klonoski
v. Mahlab, 156 F.3d 255, 268 (1st Cir. 1998) (noting that the rule
"imposes a broad requirement on parties to update their earlier
disclosures and discovery responses"). Rule 37(c)(1) imposes sanctions
for failure to comply, stating that "[a] party that without substantial
justification fails to . . . amend a prior response to discovery as
required by Rule 26(e)(2), is not, unless such failure is harmless,
permitted to use [such] evidence at trial." See Samos Imex Corp. v.
Nextel Comms. Inc., 194 F.3d 301, 305 (1st Cir. 1999) ("[E]xclusion of
evidence is a standard sanction for a violation of the duty of
disclosure under Rule 26(a).")
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the latest, when his coplaintiff Stevens changed her testimony, two
days prior to his testifying. MassMutual had no opportunity to
investigate or introduce evidence concerning which retirement seminar
Lemon attended and it made a timely objection to the introduction of
this evidence at trial.
Plaintiffs are not assisted by characterizing the statements
as oriented to the future and proven untrue by future events. In order
for a representation about a future occurrence to be actionable
negligent misrepresentation, there must be evidence that the statement
was false at the time made, and that the defendant could have learned
of the falsity with reasonable care. A simple change of mind by a
defendant does not render an earlier statement false. McEvoy Travel
Bureau, Inc. v. Norton Co., 408 Mass. 704, 563 N.E.2d 188, 192 & n.4
(1990). Without evidence of the contrary intent, the statement is not
considered false at the time it is made. Id.
Plaintiffs argue that the jury could have inferred that
defendants had a contrary intent, rendering the statements false when
made. However, under Massachusetts law, a jury cannot infer contrary
intent at the time of the representation from the mere fact that the
company took contrary action at a later date. Zhang v. Mass. Inst. of
Tech., 46 Mass. App. Ct. 597, 708 N.E.2d 128, 134-35 (1999); see also
Carroll v. Barberry Homes, Inc., No. 976418, 1999 WL 1204020, at *4
(Mass. Super. Ct. Oct. 22, 1999) (order on motion for summary judgment)
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(fact that defendant followed a different course months later does not
support a finding of earlier intent to misrepresent); Connolly v.
Rochester Shoe Tree Co., Inc., No. 935190H, 1994 WL 879515 (Mass.
Super. Ct. Nov. 8, 1994) (where change of circumstance led defendant to
abandon alleged promise, no basis to infer intent to misrepresent). In
order to show that the representations about whether MassMutual would
offer a package were false, the plaintiffs needed to offer evidence
that, at the time of the representations, MassMutual had some present
intention to offer such a package in the future. Using the
Massachusetts law standard for determining the falsity of an assertion
concerning a future event, we hold that none of the statements that
there would be no package was false at the time it was made.
The record contains no evidence that in the period from March
or early April until mid-September there were any "proposals urging
such changes [in benefits] on the table," to use the language of
Rodowicz I.11 192 F.3d at 174. The VTP was not even a glimmer in
11 The closest case we have found is McCall v. Burlington
N. Santa Fe Co., 237 F.3d 506 (5th Cir. 2000), cert. denied, 122
S. Ct. 57 (2001), and it is in accord. The company in the
McCall case offered a separation pay plan in 1991. Id. at 509.
The plan description stated that the company had not determined
whether there would be additional voluntary severance plans;
however, management had decided that if there were any
additional plans, "the benefits would not be as good as those
contained in this plan." Id. at 510. In 1995, the company
offered another voluntary severance plan which had better
benefits than those in the 1991 plan. Id. Plaintiffs, who had
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management’s eye until September 17, when the CEO ordered Pajak to
develop a proposal for a reduction in force. Indeed, Pajak, the Chief
Operating Officer, testified that "there was nothing on my agenda that
indicated in June of '92 that there was going to be any changes
whatsoever, packages or anything." Similarly, Cowles’s undisputed
testimony is that she had no information about the VTP in the spring
and summer of 1992 and Dawn Scaporatti, a financial consultant at
MassMutual who worked on both the March analysis and then on developing
the VTP program, testified that she did not work on any such project in
the months between March and September. Moreover, following the
September 17 directive, Alfano and her team had to work virtually
around the clock in order to have something ready to present first to
Wheeler on September 25, and then to the Board on October 12; they did
not simply pull out an older plan for presentation to the Board. In
addition to this uncontroverted evidence that no one at MassMutual was
developing a plan from April to September, there was no evidence to
support the plaintiffs' suggestion that, throughout this period,
management considered a plan of some sort to be inevitable (and
taken the 1991 severance plan, sued. While the 1991 plan was an
ERISA plan, the court's holding was on a non-ERISA point. The
court held that the action for breach of fiduciary duty based on
a material misrepresentation failed because the statement was
true at the time it was made. Id. at 511.
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certainly no evidence that management considered a non-ERISA plan to be
inevitable).
This leaves only the portion of the statement that Rodowicz
claims Laura Cowles made to him in late August or early September, that
the Board of Directors had considered a retirement enhancement package
and rejected it. Any statement that the Board had considered and
rejected a package, if made, was false. The only change to the
retirement benefits program that the Board had considered was the
change of retirement age to 62, which the Board approved in 1991. The
Board had not been presented with any reduction in force options,
because the MassMutual top management had rejected such an option. In
fact, Pajak was rather emphatic in his trial testimony about his
disfavor for retirement enhancement packages.Nonetheless, Rodowicz
did not present his case as relying on any distinction between the
Board and upper management and testified that "if [Cowles] told me that
there was a package, I would've withdrawn my notice of retirement." At
the time of Rodowicz's question, Cowles could not have truthfully
stated that there would be a package or that a package was being
considered. A statement that senior management had considered and
emphatically rejected a retirement buy-out package would have been
entirely accurate. Such a statement could be considered an even
stronger representation that nothing was forthcoming, because no plan
could even be put before the Board unless senior management approved
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it. The distinction between the Board's rejection and senior
management's rejection is therefore not material. It was simply
Rodowicz's ill fortune that within weeks of his retirement, management
made a different decision as to whether to consider offering any extra
severance benefits.
B. Jury Instructions
Given this lack of evidence, how then to explain the jury
verdict? We think it arose from the peculiar litigation history of
this case and from a theory advanced by plaintiffs which has no support
in the law, but which appears, in combination with Rodowicz I , to have
influenced the jury instructions and led to error.
Over MassMutual's objection, the court admitted evidence of
the company’s consideration and rejection in 1990 and 1991 of possible
early retirement and reduction in force programs. The evidence was
admitted as background useful to the jury. MassMutual’s appellate
argument that the evidence was inadmissible is of no present concern to
us; we are, however, concerned by how plaintiffs’ counsel used that
evidence.
The plaintiffs advanced a theory, over objection, that the
misrepresentation claim could be proven because the VTP was simply the
culmination of a process that began in 1990 and continued through the
consideration of the various other plans and options that MassMutual
had considered and rejected. The theory was that the company
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considered a reduction in force more than a year earlier in 1991, and
perhaps even earlier, and so the VTP could be seen as the ultimate
solution to the financial problem that the company confronted in 1991
and continued to confront in 1992. The plaintiffs argued that these
draft plans evinced a trend which the jury could infer would lead
inevitably to the company's adoption of an enhanced benefits package.
And so, the plaintiffs argued, the Human Resources representatives
were obligated either to respond "no comment" or to acknowledge that
there might well be a package offered in the future. The district
court aptly described this as the "this was all one process" theory.
That the jury proved receptive to the argument is, we think,
shown primarily12 by its question submitted to the trial judge after
deliberations had begun:
12 The jury also later asked:
Was the defendant legally required to disclose to the
plaintiffs they were discussing options for a
reduction in force?
The court answered there was no affirmative obligation, but that
if MassMutual were asked, it would have some duty to disclose.
This exchange is significant in two ways. Since the
evidence showed there were no such "discussions" at the time of
the alleged misrepresentations, the jury could only have been
referring to the 1990, 1991, and 1992 discussions. This again
evidences adoption of plaintiffs' "all one process" argument.
Secondly, as to the discussions of ERISA plans, ERISA law
precludes those discussions as being a basis for disclosure
liability, unless the plan is under "serious consideration," see
Vartanian, 131 F.3d 267.
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Is the "misrepresentation of the fact" Related to (one)
knowledge of the development of any plan, or, (two) the
final plan, "the voluntary termination plan?"
The district court, over MassMutual’s objection, replied:
the misrepresentation of fact could possibly relate to both
the voluntary termination plan and any other plan so long as
the misrepresentation satisfies the five criteri[a].
The district court understandably felt that Rodowicz I compelled this
instruction.13 In the abstract, such an instruction would not
necessarily be incorrect: if there were evidence of some form of other
plan in formation during the period from April to early September 1992
13 We think the confusion stems from the mistaken
impression that the summary judgment record and the trial record
were the same. The denial of summary judgment in Rodowicz I was
premised on a "fact" that was reported in the district court
opinion and was apparently undisputed at the summary judgment
phase -- that "Alfano . . . perform[ed] a thorough analysis of
the possible costs and benefits of a reduction in force in the
months between March and September 1992." Rodowicz, 3 F. Supp.
2d at 1485 (emphasis added). That fact was accepted as true for
summary judgment purposes by the Rodowicz I court, 192 F.3d at
167. The "fact" was apparently proposed by plaintiff and
apparently, although wrongly, not disputed by MassMutual before
the trial court at the summary judgment stage. Nor did
MassMutual dispute this "fact" before this court in Rodowicz I.
From small acorns of error, gnarled trees do grow. On this key
point, the summary judgment record and the trial record diverge.
There was no evidence introduced at trial that any such work was
done between early April and September 17. Nor was there any
evidence that would support an inference, asserted by the
plaintiffs before the Rodowicz I court, that CEO Wheeler had an
on-going intention to implement a reduction in force program and
was using an on-going, if staccato, planning process to move
toward that goal.
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that rendered the statements misrepresentations, even if the plan were
not the VTP plan, then the jury could consider it. But there was no
evidence presented that any plan -- or even any plans for a plan --
existed or was being discussed at all during the relevant time period.
There was only the plaintiffs' "this was all one process theory," which
is based on the flawed premise that a proto-plan, once considered by a
company, can go into deep stasis, and any plan that eventually emerges
is inevitably its progeny. To the extent the jury instruction
countenanced that theory, it was in error.
The "all one process" theory is not only factually
unsupported, but also legally untenable here. It was not countenanced
by Rodowicz I. A company may consider and reject a series of benefits
plans over years. In fact, there was evidence presented at trial that,
prior to Alfano taking over the Human Resources division, management
had considered possible "window" plans in 1975, 1980, 1981, 1983, 1985,
1987, and 1989, none of which were ever implemented. The mere fact
that a company had considered offering a package, or had evaluated the
possibilities for one, does not permit an inference that a company is
misrepresenting when it accurately represents that, at a given time, it
has rejected a particular benefits option or that it then has no intent
to offer enhanced benefits. Under plaintiffs' theory, MassMutual would
be liable for misrepresentation for accurately representing that it had
rejected enhanced benefits packages and had no present plans to offer
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any, simply because it had considered plans in the past and might well
consider them in the future. To uphold this theory would create a
nightmarish scenario for both companies and employees. Under such a
legal regime, a company would have a disincentive to adopt a plan once
it had rejected past options, or even to consider adopting plans that
it might eventually reject, for fear of future liability. Such a
regime would lead to the demise of voluntary termination benefit or
enhanced retirement benefit packages and so work to the detriment of
employees.
Secondly, under Rodowicz I and at least until the state
courts define the law,14 Massachusetts employers face different
obligations as to disclosures and representations made, depending on
whether the plan being considered is an ERISA plan or not. The prior
proposals on which plaintiffs' "this is all one process" theory rests
include ERISA plan proposals. It passes irony to use the fact that a
14 Massachusetts may, as it has done in the areas of
defamation and privacy, recognize a privilege to protect forms
of corporate communication needed to run a business. See Bratt
v. Int'l Bus. Mach. Corp., 392 Mass. 508, 467 N.E.2d 126, 131,
134-36 (1984). As numerous courts have recognized in the
context of ERISA plans, it makes little sense to impose a duty
on companies to disclose the most preliminary of investigations
into possible enhanced benefits programs, many of which die
quickly on the vine. See, e.g., Vartanian, 131 F.3d at 269-70;
Hockett v. Sun Co., Inc., 109 F.3d 1515, 1522 (10th Cir. 1997);
Fischer v. Philadelphia Elec. Co., 96 F.3d 1533, 1538-39 (3d
Cir. 1996).
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company considered an ERISA plan proposal, which would preempt
application of a state law standard of disclosure, as a platform for
liability in these circumstances.
There is simply no evidence in the trial testimony that
MassMutual had any intention, as of the date the statements were made,
of proposing or implementing an enhanced benefits package of any sort.
Because the evidence was insufficient and there was instructional error
as well, we need not reach MassMutual’s other issues. Likewise,
because the plaintiffs’ cross-appeal goes only to damages, it too need
not be addressed.
The verdict is vacated and the case remanded with
instructions that judgment be entered for the defendant. No costs are
awarded.
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