United States Court of Appeals
For the First Circuit
No. 05-1092
ANTHONY MADERA,
Plaintiff, Appellant,
v.
MARSH USA, INC. and
J&H MARSH & MCLENNAN, INC. SEVERANCE PAY PLAN,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Torruella, Circuit Judge,
Siler,* Senior Circuit Judge,
and Howard, Circuit Judge.
Joseph P. Musacchio, with whom Anthony Tarricone and Sarrouf,
Tarricone & Flemming, were on brief, for appellant.
Louis A. Rodriques, with whom Rheba Rutkowski and Bingham
McCutchen LLP, were on brief, for appellees.
October 18, 2005
*
Of the Sixth Circuit, sitting by designation.
TORRUELLA, Circuit Judge. Plaintiff-appellant Anthony
Madera here appeals the district court's grant of summary judgment
for defendant-appellee Marsh U.S.A., Inc. ("Marsh") and defendant-
appellee J&H Marsh & McLennan Severance Pay Plan ("Plan"), a
severance pay plan adopted and maintained by Marsh in accordance
with the provisions of the Employee Retirement Income Security Act
of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq. (2000). Madera, a
former senior vice president at Marsh, was fired "for cause" after
providing certain information about the company to a competitor in
violation of Marsh's written policies. Madera, however, contends
that this firing "for cause" was merely a pretext used to deprive
him of the severance pay he was due under the Plan. The district
court, finding that Madera failed to exhaust the administrative
remedies available to him prior to bringing this suit, granted
summary judgment in favor of the defendant-appellees. We affirm.
I.
For approximately fourteen years, Madera was an employee
of Sedgwick James ("Sedgwick"), a risk management and insurance
brokerage company. In 1998, Sedgwick was acquired by Marsh, the
United States operating subsidiary of Marsh Inc., a leading
provider of risk management and insurance brokerage services
worldwide. With the acquisition, Madera became a senior vice
president within Marsh's Brokerage Risk Control Group. In his new
role, Madera provided risk management consulting services to
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Marsh's clients in the New England region and oversaw the
evaluation and professional development of sixteen individuals
under his supervision.
In late 2000 and early 2001, Marsh began a series of
reorganizations and consolidations, motivated in part by the need
to eliminate redundant positions following acquisitions made in
1997 and 1998, including the Sedgwick acquisition. One of the
organizational changes made was to eliminate Madera's Brokerage
Risk Control Group. As a result, Madera was informed in mid-
February 2001 that he was being reappointed to a new position --
that of "Middle Market Sales Leader" for Marsh's consulting
practice in the New England region.
Madera, however, was not happy with the change. He felt
that Marsh's management did not provide him with a clear definition
of his new role and that the company was not making the best use of
his skills and experience. He informed Michael Golden, the head of
Marsh's New England operations and its Boston office, of his
unhappiness. After Golden reassured Madera about the strategic
importance of his new position and his critical role in Marsh's
operations, Madera agreed to do his best in his new job.
Shortly after this conversation, on or about March 9,
2001, Madera went on vacation. Before leaving, however, he sent
several e-mails to Keith Smaldon, the Boston office head of the
Hays Group ("Hays"), another risk management firm and a direct
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competitor of Marsh. Madera became acquainted with Smaldon when
both men were employees at Sedgwick. Smaldon, like Madera, became
a Marsh employee after the 1998 Sedgwick acquisition. Smaldon,
however, left Marsh shortly afterwards to join Hays. After this
move, Madera continued to have social contact with Smaldon. Madera
maintains, however, that he had no intention of seeking employment
with Hays and never raised the issue with Smaldon.
The e-mails sent by Madera contained important
information about Marsh's business. For example, a message
forwarded by Madera to Smaldon on March 1, 2001 contained various
"Market Alert Memos" sent by Marsh to all of its employees in the
United States. These memos discussed the lowering of ratings of
certain insurance companies and advised Marsh personnel that
clients insured by these companies should be notified of these
developments. On March 8, Madera forwarded an e-mail that he,
along with all other Marsh employees in Boston, received from
Golden. This message contained announcements of promotions and
reassignments within the Boston office. Madera explains that he
sent Smaldon this e-mail because Smaldon was friendly with people
receiving the promotions, some of whom were former Sedgwick
colleagues. On the same day, March 8, Madera also forwarded to
Smaldon an "Industry Practices Organizational Change" e-mail that
had been previously sent to all Marsh employees in the United
States (approximately 16,000 people) and that contained
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announcements of promotions and general goals. In total, Madera
forwarded seven Marsh e-mails to Smaldon.
These e-mail messages may very well have disappeared into
the electronic ether if not for a telephone conversation shortly
afterwards between Smaldon and Christopher Scontras, the head of
Marsh's Portland office and a member of Golden's senior staff.
During the course of this conversation, Smaldon mentioned certain
organizational and personnel changes in Marsh's New England
operations, information which had been communicated only internally
at Marsh. In fact, Scontras believed that the information conveyed
by Smaldon was known only by a "small" or "restricted" management
group in the Boston office.
On March 12, Scontras attended a regularly scheduled
meeting with several members of Marsh's management team, and there
he informed Golden about his conversation with Smaldon. Golden,
troubled by the fact that Smaldon had this information, ordered a
search of Marsh's e-mail system to determine whether a Marsh
employee had been passing company information to anyone at Hays.
Within twenty-four hours, Marsh's Information Technology Department
determined that Madera had forwarded seven e-mails to Smaldon.
Golden was provided with copies of each of the e-mail messages that
Madera had forwarded.
Upon reviewing the contents of these messages, Golden
became concerned. Nearly all of the messages contained information
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that Marsh intended for internal distribution only; that, in
effect, Madera had provided a competitor with access to internal,
proprietary information. Golden's concern only increased with the
knowledge that it was Smaldon who had access to this sensitive
information. Smaldon now worked for Hays -- at that time, a start-
up operation in the Boston area. Hays was doing everything in its
power to increase its size and grow its market share in the risk
management business. The information conveyed in the e-mails would
give Hays a real competitive advantage, especially in the areas of
new employee recruitment, product marketing, and client
development. And as a former Marsh manager, Smaldon would be
particularly well positioned to make use of and understand the
information in the messages conveyed by Madera.
Based on this review of the e-mails, Golden concluded
that Madera had breached his duty of loyalty to Marsh and that he
was no longer trustworthy. He believed that the number of e-mails
sent indicated that the disclosures to Smaldon were not a mistake
and that no reasonable manager could have believed that such a
disclosure of company information to a competitor was appropriate.
After consulting with his human resource managers and a Marsh in-
house attorney, Golden decided to fire Madera.
Upon his return from vacation on March 19, Madera was
called to a meeting with Golden, where he was informed that he had
been identified as the source of the e-mails to Smaldon and that
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his employment with Marsh was to be terminated "for cause" because
his conduct constituted "willful misconduct" within the meaning of
the Plan, for failing to comply with company guidelines concerning
conflicts of interest and the use and disclosure of confidential or
proprietary information as set forth in Marsh's Employee Handbook
("Handbook"). Madera's response was that he did not think the
information he had forwarded to Smaldon was sensitive; that he had
simply "made a mistake"; and that he "did something stupid."
When these arguments proved unavailing and Madera
realized that Golden's decision would not be reversed, he inquired
about severance pay. He was informed that he was not eligible to
receive it. The Plan did make provision for severance payments to
eligible employees whose employment was terminated by Marsh.
However, the Plan also stated explicitly that "[a]n individual is
not eligible for benefits under [the] Plan if . . . his/her
termination is for cause." The determination of what constituted
"cause" was left to the Plan Administrator or his or her delegate;
in this case, that delegate was Marsh's Human Resources Department.
The Plan also stated that
[t]he Company . . . shall have the
discretionary authority and responsibility to
determine eligibility for benefits and the
amount of such benefits, and to construe the
terms of the Plan. The determinations and
constructions of the Company . . . will be
final, binding, and conclusive as to all
parties, unless found by a court of competent
jurisdiction to be arbitrary and capricious.
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Officials at Marsh, pursuant to this authority, confirmed Golden's
initial statement that Madera's firing was one "for cause."
Madera, however, believed that the "for cause"
explanation was merely a pretext. He believed that Marsh was
looking for a reason to discharge him "for cause" for the purpose
of denying him severance benefits. He thought that the true
reasons for his discharge were Marsh's decision to eliminate his
supervisory position under a restructuring, his expressed
displeasure with his undefined diminished status at the company,
and Marsh's assumption that he was seeking employment from Smaldon
at Hays.
Despite these beliefs, Madera made no attempt to appeal
the company's decision to fire him "for cause." The Plan provides
specific procedures whereby an employee can appeal certain
employment and benefit decisions. For example, an employee who
disagrees with the determination of his or her benefits is required
to submit to the Plan Administrator a written statement describing
the basis of his or her claim for benefits within sixty days of
receipt of the initial notification of that determination. The
Plan further provides that any employee who fails to receive such
notification "but believes that he/she is entitled to benefits
under the Plan may, within 60 days of such employee's Termination
Date, submit a written statement to the Plan Administrator
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describing the basis of his/her claim for benefits and requesting
any forms required in connection with payment of such benefits."
Rather than pursue any of these administrative remedies,
Madera filed suit in the district court on June 18, 2003, alleging
that Marsh's decision to terminate him and subsequent failure to
grant him severance pay (i) was made in bad faith and in violation
of the implied covenant of good faith and fair dealing; (ii)
constituted age discrimination in violation of Mass. Gen. Laws ch.
151B; (iii) violated the Massachusetts Wage Statute, Mass. Gen.
Laws ch. 149, § 148; and (iv) violated ERISA, 29 U.S.C. § 1001, et
seq. (2000). Marsh moved for summary judgment on all of Madera's
claims. In opposing this motion, Madera conceded that ERISA
preempted his common law claims and waived all claims but the ERISA
claim. Madera then moved for partial summary judgment, stating
that the facts and the law he relied upon in opposing Marsh's
summary judgment motion supported the entry of partial summary
judgment in his favor "on the issues of the confidentiality of the
subject e-mails and on the exhaustion of administrative remedies."
On December 15, 2004, the district court, after granting
Marsh's motion for summary judgment and denying Madera's motion for
partial summary judgment, dismissed Madera's ERISA claim on the
sole ground that he failed to exhaust his administrative remedies.
We now affirm.
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II.
We begin by stating the proper standard of review. The
district court's grant of summary judgment is reviewed de novo,
with all inferences resolved in favor of the non-moving party.
Noviello v. City of Boston, 398 F.3d 76, 84 (1st Cir. 2005).
Summary judgment is appropriate only if there is no genuine dispute
as to material facts and the moving party is entitled to judgment
as a matter of law. Fenton v. John Hancock Mut. Life Ins. Co., 400
F.3d 83, 87 (1st Cir. 2005); Rodríguez-Abreu v. Chase Manhatttan
Bank, N.A., 986 F.2d 580, 583 (1st Cir. 1993).
ERISA is a comprehensive federal statute that governs the
rights and responsibilities of parties in relation to employee
pension, welfare, and benefit plans. Under the terms of the
statute, an employer is not permitted to discipline or discharge a
person for the purpose of interfering with the attainment of any
right or benefit to which the person may become entitled. 29
U.S.C. § 1140 (2000).1 This prohibition includes characterizing an
employee's termination as one "for cause" for the purpose of
unlawfully denying that employee severance benefits. See Koons v.
Aventis Pharm., Inc., 367 F.3d 768 (8th Cir. 2004). Madera filed
1
Section 1140 provides in pertinent part: "It shall be unlawful
for any person to discharge, fine, suspend, expel, discipline, or
discriminate against a participant or beneficiary for exercising
any right to which he is entitled under the provisions of an
employee benefit plan . . ., or for the purpose of interfering with
the attainment of any right to which such participant may become
entitled under the plan . . .." 29 U.S.C. § 1140 (2000).
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suit under 29 U.S.C. § 1132(a)(1)(B) (2000), claiming that Marsh
violated ERISA by wrongfully characterizing his termination as one
"for cause" for the purpose of unlawfully denying him severance
benefits.2
Before a plaintiff asserts an ERISA claim, however, he
first must exhaust his administrative remedies. Terry v. Bayer
Corp., 145 F.3d 28, 40 (1st Cir. 1998). The employer's provision
of such administrative remedies is mandated by ERISA. ERISA
requires employee benefit plans to provide any participant whose
claim for benefits is denied with an opportunity for review by the
fiduciary denying the claim. 29 U.S.C. § 1133(2) (2000). Here,
"[i]t is undisputed that [Marsh] provided the required review
procedure." Drinkwater v. Metropolitan Life Ins. Co., 846 F.2d
821, 826 (1st Cir. 1988). The Plan's review procedure was outlined
in the Handbook, and Madera had adequate opportunity to read and
understand the relevant provisions.
Madera, however, "failed to utilize the review procedure
provided by [Marsh], saving his complaints for the litigation
process rather than the review procedure." Drinkwater, 846 F.2d at
825. He made no effort to avail himself of the Plan's appeal
provisions. He neither filed a claim for severance benefits under
2
29 U.S.C § 1132(a)(1)(B) is the cause of action under ERISA
enabling plan participants and other beneficiaries "to recover
benefits due to him under the terms of his plan." 29 U.S.C § 1132
(a)(1)(B) (2000).
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the Plan nor appealed Marsh's decision to deny him severance
benefits under the Plan.
In his brief, Madera claims that he had a good reason for
his failure to follow Marsh's established dispute resolution
procedures. He writes, "It was absolutely crystal clear that,
under Marsh's Severance Plan, an employee terminated 'for cause' is
not eligible for severance. Thus, if Madera's termination remained
as one 'for cause,' he absolutely had no right to severance pay.
On this point, there was nothing for Madera to challenge or Marsh
to administratively review." Appellant Br. 17. But as appellee
correctly points out, "there simply is no basis to conclude from an
initial determination that a termination is 'for cause' that it
would be futile for the employee to challenge that determination."
Appellee Br. 21. The claims procedure set up by Marsh is precisely
the sort of procedure appropriate to review the use of the "for
cause" label in Madera's termination.
Failing to actually exhaust his administrative remedies
as required, Madera makes several different arguments claiming that
he is exempt from the exhaustion requirement. First, he argues
that his failure to exhaust his administrative remedies is excused
in this instance because Marsh did not provide him with written
notice of the denial of severance benefits. Citing 29 U.S.C.
§ 1133(1) and 29 C.F.R. § 2560.503-1(g), as well as several
district court opinions, DePina v. General Dynamics Corp., 674 F.
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Supp. 46 (D. Mass. 1987), and McLean Hosp. Corp. v. Lasher, 819 F.
Supp. 110 (D. Mass. 1993), that interpret that statute and
regulation, Madera claims that failure of an employer to provide
written notice to an employee setting forth the specific reasons
for the denial of a benefit and notifying the employee of the
review process relieves the employee from the obligation to exhaust
administrative remedies. Even if we were bound by these district
court decisions, such a rule would apply only where an employee has
made a claim for benefits. See 29 U.S.C. § 1133(1) and 29 C.F.R.
§ 2560.503(g). Here, Madera did not do so. Although he did
inquire informally as to whether he would be eligible for severance
benefits, he never filed any sort of formal claim. Since he never
made a claim, there was nothing for Marsh to deny in writing, and
the statute and regulation do not apply.
Second, Madera raises the issue of futility. Futility is
an exception to ERISA's exhaustion requirement. See Drinkwater,
846 F.2d at 826. An employee is not required to exhaust his
administrative remedies in those instances where it would be futile
for him to do so. Madera claims that in this instance, it would
have been futile to have to first bring an administrative claim
before the very employer responsible for the wrongdoing. He argues
that it would have been pointless to require him to seek an
administrative review from Marsh asking it to review its own
unlawful conduct in attaching a phony and pretextual reason to his
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discharge. As he writes in his brief, "[i]t simply made no sense
to require Madera to ask Marsh, the very entity that Madera accused
of acting with an improper and selfish motive, to admit its own
violation of ERISA." Appellant Br. 17. Since it is futile to
expect the employer to attach a bad motive to its conduct, he
claims, direct judicial resolution of his statutory rights is
appropriate (i.e., no administrative remedies should be required).
In Drinkwater, we confronted a similar argument. The
plaintiff in that case, Richard Drinkwater, made "the accusation
. . . that the review procedure provided by [the defendant
insurance company] was a meaningless exercise, requiring [the
insurance company] to adjudicate 'the legal consequences of its own
fraud and breach of contract,' and that there was 'not the
slightest possibility that the plan administrator could be
objective, unbiased and act in the best interest of the
beneficiary' in reviewing Drinkwater's claim." Drinkwater, 846
F.2d at 825-26. We noted, however, that such a blanket assertion,
unsupported by any facts, is insufficient to call the futility
exception into play. We did not allow Drinkwater to use this
exception because "Drinkwater produced no evidence to show . . .
that resort to this [administrative] review would have been
futile." Id. at 826.
Here, our response is the same. As we have already
suggested, there is no proof that it would have been futile for
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Madera to exhaust his administrative remedies. Madera, attempting
to demonstrate futility, points to the timing of the action (the
decision to terminate him was made while he was on vacation) and
notes the "vigorous and unbending" position taken by Marsh in
defending this claim. Appellant Br. 24. These circumstances,
however, are immaterial to the issue at hand and hardly demonstrate
that it would have been pointless for Madera to pursue the Plan's
procedures for making a claim for severance benefits or for
appealing the decision to deny him benefits. Even assuming the
"totality of the circumstances" approach advocated by the
appellant, we fail to see how such circumstances would make it
futile for Madera to pursue his administrative remedies.
Third, Madera argues that his claim is not a contractual
claim. This court has previously held that exhaustion of
administrative remedies is a prerequisite to suit in contract-based
claims. See Morais v. Central Bev. Corp. Union Employees'
Supplemental Retirement Plan, 167 F.3d 709, 712 n.4 (1st Cir.
1999); Drinkwater, 846 F.2d at 825-26. Madera, however, argues
that his claim is not "contractual," but rather "statutory" since
it stems from ERISA – in particular, from the prohibition against
terminating an employee "for cause" for the wrongful purpose of
denying severance pay in violation of 29 U.S.C. § 1140 -- and as
such, better suited for adjudication by the courts without
requiring an exhaustion of administrative remedies. We disagree.
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A claim for the wrongful denial of benefits, such as the one here,
is not to be treated as a "statutory" claim, but rather as a
"contractual" one. We have explicitly recognized that the argument
that a "claim for past due benefits is based not on the contract
but on the violation of . . . statutory rights under ERISA and is
thus not subject to the exhaustion requirement . . . is a simple
contract claim artfully dressed in statutory clothing. If we were
to allow claimants to play this characterization game, then the
exhaustion requirement would be rendered meaningless." Drinkwater,
846 F.2d at 826.
Finally, even if Madera's ERISA claim was not barred for
his failure to exhaust administrative remedies, his claim fails
because the record demonstrates that Marsh's decision to terminate
Madera "for cause" was not arbitrary and capricious and was
reasonable in light of Madera's actions and the language of the
Plan. A denial of benefits challenged under 29 U.S.C. § 1132(a)
(1)(B) is to be reviewed under a de novo standard "unless the
benefit plan gives the administrator or fiduciary discretionary
authority to determine eligibility for benefits or to construe the
terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
101, 115 (1989); Orndorf v. Paul Revere Life Ins. Co., 404 F.3d
510, 516 n.7 (1st Cir. 2005). Where the administrator or fiduciary
does have such discretionary authority, a decision by that
administrator or fiduciary concerning eligibility under a benefit
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plan is subject to "a deferential arbitrary and capricious standard
of judicial review." Brigham v. Sun Life of Canada, 317 F.3d 72,
81 (1st Cir. 2003) (citing Terry, 145 F.3d at 37). A plan
administrator's decision must be upheld if there is any reasonable
basis for it. Terry, 145 F.3d at 40. Here, since Marsh's Plan
grants discretion to the Plan's Administrator to determine
eligibility for severance benefits under the Plan and to construe
the Plan's provisions, the decision to terminate Madera "for cause"
is to be properly examined under the arbitrary and capricious test.
Our examination of the record reveals that Marsh properly
exercised its discretion in determining that Madera's conduct
constituted a breach of his duty of loyalty. Madera was terminated
only after the company learned that he had forwarded internal e-
mails containing what Marsh believed to be confidential and/or
proprietary information to a direct competitor of Marsh.
Madera argues that nothing in the e-mails was
particularly sensitive or confidential and that all the information
was publicly available or routinely disclosed by Marsh. Even a
cursory analysis of the e-mail messages, however, shows a level of
detail and specificity not provided in Marsh's public
pronouncements, such as its press releases. For example, the e-
mails contained, among other things, detailed information
concerning personnel and organizational changes; information
concerning the Boston office's consulting goals for 2001; and
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Marsh's templates for communicating with its clients concerning
ratings changes for various insurance companies. Moreover, as
already mentioned, Madera forwarded these e-mails to a former Marsh
employee working for a competitor who was uniquely qualified to
make use of such information.
These facts enabled Marsh to come to the conclusion that
Madera had engaged in a breach of trust, which the company
reasonably construed as "willful misconduct" within the meaning of
the Plan (and, thus, constituted "cause" rendering him ineligible
for severance). Such a decision was rational and reasonably based,
and therefore, we cannot conclude that Marsh acted in an arbitrary
or capricious manner in denying severance benefits to Madera.
For the reasons expressed herein, the decision of the
district court granting summary judgment on behalf of Marsh and
dismissing Madera's motion for partial summary judgment is
Affirmed.
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