USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 94-1786
VICTOR E. CARLO, JR. AND KATHLEEN M. CARLO,
Plaintiffs - Appellants,
v.
REED ROLLED THREAD DIE COMPANY,
Defendant - Appellee.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge] ___________________
____________________
Before
Torruella, Chief Judge, ___________
Bownes, Senior Circuit Judge, ____________________
and Cyr, Circuit Judge. _____________
_____________________
John W. Spillane, with whom John J. Spillane was on brief _________________ ________________
for appellants.
Thomas J. Scannell, with whom Michael P. Angelini and ____________________ _____________________
Bowditch & Dewey were on brief for appellee. ________________
____________________
March 3, 1995
____________________
TORRUELLA, Chief Judge. This appeal requires us to TORRUELLA, Chief Judge. ___________
decide whether ERISA preempts a state law claim of negligent
misrepresentation against an employer based upon the employer's
representations regarding the employee's prospective benefits
under an early retirement program. For the following reasons, we
find that the state law claims are preempted, and affirm the
district court's ruling.
I. PROCEDURAL BACKGROUND I. PROCEDURAL BACKGROUND
The plaintiffs-appellants, Victor E. Carlo, Jr. and
Kathleen M. Carlo (the "Carlos"), commenced this action against
the defendant-appellee, Reed Rolled Thread Die Co., a Division of
Quamco, Inc. ("Reed"), in Massachusetts state court in December
1991. In their original complaint, the Carlos alleged various
state law claims with respect to Reed's early retirement plan.
Reed removed the case to federal district court in January 1992,
alleging that federal law preempted the Carlos' claims. On
Reed's subsequent Motion to Dismiss, the district court found
that all of the Carlos' state law claims were preempted by
514(a) of the Employment Retirement Security Act of 1974
("ERISA"), 29 U.S.C. 1001 et seq., 1144(a). Accordingly, the _______
district court dismissed the Carlos' complaint under Federal Rule
of Civil Procedure 12(b)(6) for failure to state a cause of
action. The Carlos subsequently filed a Motion to Amend their
Complaint. Concluding that the Proposed Amended Complaint still
failed to allege a viable federal claim, the district court
denied the Motion to Amend and dismissed the Carlos' complaint.
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On March 2, 1994, the Carlos filed a Motion to
Reconsider, arguing that a recent decision from the Massachusetts
Supreme Judicial Court changed the ERISA preemption analysis and
rendered their state law claims viable. The district court
denied the Motion to Reconsider, and the Carlos filed this
appeal. Reed filed a Motion to Dismiss the Appeal, which was
denied by this Court on September 8, 1994. We hereby affirm the
underlying decision of the district court.
II. FACTUAL BACKGROUND II. FACTUAL BACKGROUND
The essential allegations of the Carlos' complaint are
as follows: Mr. Carlo is a former employee of Reed and is a
participant in the Quamco, Inc. Retirement Plan (the "Plan"). In
July 1988, Reed offered Mr. Carlo early retirement under an Early
Retirement Program (the "ERP"). Mr. Carlo met with William
Baldino ("Baldino"), Reed's Personnel Manager, to discuss the
benefits he would receive if he elected the early retirement
option. Baldino informed Mr. Carlo of his expected monthly
benefits, and indicated that the figures had been certified by
Reed's corporate program administrator. Mr. Carlo elected to
accept the early retirement offer, allegedly in reliance on the
figures provided him by Baldino.
In December 1988, Reed notified Mr. Carlo of his actual
benefits under the ERP. The actual monthly benefit was
approximately twenty percent less than the benefit Carlo expected
to receive based on Baldino's earlier representations. Reed
claimed that it had made a calculation error when it determined
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the benefits represented to Mr. Carlo in July 1988. By letter
dated December 30, 1988, Baldino apologized to Mr. Carlo for his
error in calculating Mr. Carlo's pension benefits and offered Mr.
Carlo the opportunity to continue working in the position he then
held. Baldino's letter stated that the offer to continue working
would remain open until January 10, 1989. If Mr. Carlo did not
accept within this period, the letter continued, Reed would
presume that Mr. Carlo was rejecting the employment offer and
accepting the modified Early Retirement option. Carlo did not
accept the offer before the January 10 deadline. Rather, he
decided to take early retirement in April 1989, allegedly under
protest.
On December 3, 1991, the Carlos brought this action in
Massachusetts state court, alleging state law claims for, inter _____
alia, breach of contract and negligent misrepresentation. ____
III. STANDARD OF REVIEW III. STANDARD OF REVIEW
The unusual procedural posture here requires a somewhat
nuanced statement of the standard of review. The Carlos appeal
the denial of their Motion to Reconsider the court's denial of
their Motion to Amend the Complaint.
With regard to motions to amend, we have stated that
"[w]hile motions to amend are liberally granted, see Johnston v. ___ ________
Holiday Inns, Inc., 595 F.2d 890, 896 (1st Cir. 1979), a court __________________
has the discretion to deny them if it believes that, as a matter
of law, amendment would be futile. See Jackson v. Salon, 614 ___ _______ _____
F.2d 15, 17 (1st Cir. 1980); Crews v. Memorex Corp., 588 F. Supp. _____ _____________
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27, 28 (D.Mass. 1984); 6 C. Wright & A. Miller, Federal Practice _________________
and Procedure: Civil 1487 at 432-33 (1971)(citing cases). We _____________________
will generally defer to a district court's decision to deny leave
to amend where the reason is 'apparent or declared.'" Demars v. ______
General Dynamics Corp., 779 F.2d 95, 99 (1st Cir. 1985)(quoting ______________________
Tiernan v. Blyth, Eastman, Dillon & Co., 719 F.2d 1, 4 (1st Cir. _______ _____________________________
1983)).
Here, the Carlos' Motion to Reconsider argued that
their state law claims were rendered viable by the Massachusetts
Supreme Judicial Court's decision in Pace v. Signal Technology ____ _________________
Corp., 628 N.E.2d 20, 22 (Mass. 1994). The district court denied _____
the Motion, finding that controlling First Circuit precedent
mandated preemption of the Carlos' claims. In other words, the
district court concluded that the Carlos' proposed amendment was
futile. This decision necessarily entailed an analysis of the
underlying preemption issue, a question of law. Therefore, we
review it here. That is, we will review whether ERISA preempts
the Carlos' state law claims for negligent misrepresentation.
IV. PREEMPTION IV. PREEMPTION
Section 514 of ERISA supersedes "any and all State laws
insofar as they may now or hereafter relate to any employee _________
benefit plan . . . ."1 29 U.S.C. 1144(a) (emphasis added).
"The term 'State Law' includes all laws, decisions, rules,
____________________
1 The parties do not dispute that the ERP constitutes a
qualified employee benefit plan for the purposes of ERISA
preemption.
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regulations, or other State action having the effect of law, of
any State." 29 U.S.C. 1144(c). The Supreme Court has
established that "a law 'relates to' an employee benefit plan . .
. if it has a connection with or reference to such a plan."
Ingersoll-Rand, Co. v. McClendon, 498 U.S. 133, 139 (1990) ____________________ _________
(quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 ____ _______________________
(1982)). "Under this 'broad common-sense meaning,' a state law
may 'relate to' a benefit plan, and thereby be pre-empted, even
if the law is not specifically designed to affect such plans, or
the effect is only indirect." Id. (quoting Pilot Life Ins. Co. ___ ____________________
v. Dedeaux, 481 U.S. 41, 47 (1987)). _______
In Ingersoll-Rand, the Supreme Court identified two ______________
tests for determining whether a state cause of action is
preempted because it "relates to" an ERISA plan. First, a law is
expressly preempted by ERISA where "the court's inquiry must be
directed to the plan." Ingersoll-Rand, 498 U.S. at 140. Second, ______________
even where there is no express preemption, a cause of action is
preempted if it conflicts directly with ERISA. Id. at 142. ___
Given these preemption principles, we must decide
whether the Carlos' claims relate to the ERP and are therefore
preempted. The Carlos' suit seeks damages for what can best be
described as negligent misrepresentation. They argue that their
claims for misrepresentation are so remotely related to the ERP
that, for the purposes of ERISA preemption, they do not relate to
it. They allege that they are not seeking coverage under the
ERP, but rather damages sustained as a result of Reed's alleged
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misrepresentation concerning the extent of Mr. Carlos' retirement
benefits under the ERP. They maintain, therefore, that the
court's inquiry will not necessarily be directed to the ERP.
They also emphasize that because they are suing Reed, and not the
Plan Trustee, any damages will not effect the fiscal integrity of
the ERP.
Courts have struggled over whether ERISA preempts
claims of misrepresentation regarding the scope or existence of
benefits, and "'there is ample, well reasoned authority which
would support either position.'" Pace, 628 N.E.2d at 22 (quoting ____
Cutler v. Phillips Petroleum Co., 859 P.2d 1251, 1254 (Wash. Ct. ______ ______________________
App. 1993)). Courts finding that misrepresentation claims are
not preempted have reasoned that the mere fortuity that the
misrepresentation involved pension benefits is insufficient to
cause the "axe of federal preemption to fall." Greenblatt v. __________
Budd Co., 666 F. Supp. 735, 742 (E.D. Pa. 1987); see also Pace, _________ ________ ____
628 N.E.2d at 22 (holding that where the "resolution of state law
claims will neither 'determine whether any benefits are paid' nor
'directly affect the administration of benefits under the plan,'
the claims do not 'relate to' ERISA and accordingly are not
preempted")2 (citation omitted). That is, they have concluded
that the misrepresentation claims should not be preempted
because, "simply put, the premise underlying [the cause of]
action [is] that the plaintiff was deceived by the verbal
____________________
2 Of course, Pace, as a state court decision, is not controlling ____
precedent on this issue.
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statements made and the actions taken by his employer. That the
subject of the deception concerned pension benefits is only
incidental and not essential to the plaintiff's cause of action.
Like promises for a raise in salary, a promotion, or the use of
tickets to a baseball game, plaintiff's employer's promise to
provide the plaintiff with certain benefits . . ., upon which
plaintiff could reasonably rely, is the essence of the
[misrepresentation] alleged." Greenblatt, 666 F. Supp. at 742. __________
The courts finding against preemption have been
troubled by the fact that ERISA preemption in these benefit
misrepresentation suits often leaves plaintiffs remediless. See, ___
e.g., Pace, 628 N.E.2d at 24 ("That a statute whose clear purpose ____ ____
was to benefit employees has become widely used as a shield to
protect employers from any deceptive and wrongful acts they may
have committed against their employees is an irony we find
unacceptable . . . ."); Greenblatt, 666 F. Supp. at 742 (noting __________
that because the plaintiff would likely be without a remedy under
ERISA, "it would defy logic to presume that Congress intended to
preempt the common law action of fraud in a situation of this
type.").
Despite these cogent arguments against preemption in
misrepresentation claims, we nevertheless find that ERISA
preempts the Carlos' claims because they "relate to" an employee
benefit plan. ERISA's "deliberately expansive" preemption
language was "designed to 'establish pension plan regulation as
exclusively a federal concern.'" Pilot Life Ins. Co. v. Dedeaux, ___________________ _______
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481 U.S. at 46 (quoting Alessi v. Raybestos-Manhattan, Inc., 451 ______ _________________________
U.S. 504, 523 (1981)). As Senator Harrison Williams stated:
It should be stressed that with the
narrow exceptions specified in the bill,
the substantive and enforcement
provisions of the conference substitute
are intended to preempt the field for
Federal regulations, thus eliminating the
threat of conflicting or inconsistent
State and local regulation of employee
benefit plans. This principle is
intended to apply in its broadest sense
to all actions of State or local
governments, or any instrumentality
thereof, which have the force or effect
of law.
120 Cong. Rec. 29933 (1974).
With this sweeping principle in mind, we find that the
Carlos' claims are preempted because they have "a connection with
or reference to" Reed's ERP. If the Carlos were successful in
their suit, the damages would consist in part of the extra
pension benefits which Reed allegedly promised him.3 To compute
these damages would require the court to refer to the ERP as well
____________________
3 The Carlos argue that their claims do not relate to the ERP
because they are seeking damages for a tort committed by
Mr. Carlo's employer within the course of his employ. Their tort
action, they maintain, is distinct from a contractual claim for
the promised benefits, which they concede would be preempted. We
find this distinction to be meaningless here. As the Fifth
Circuit noted, "ERISA's preemption of state law claims 'depends
on the conduct to which such law is applied, not on the form or
label of the law.'" Cefalu v. B.F. Goodrich Co., 871 F.2d 1290, ______ _________________
1294 (5th Cir. 1989); see also Pohl v. National Benefits _________ ____ __________________
Consultants, Inc., 956 F.2d 126, 128 (7th Cir. 1992) (The court _________________
noted that although the plaintiffs were not seeking to enlarge
their coverage as such, any money they obtained from their suit
would be functionally a benefit to which the terms of the plan
did not entitle them. "This type of end run is regularly
rebuffed.").
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as the misrepresentations allegedly made by Reed. Thus, part of
the damages to which the Carlos claim entitlement ultimately
depends on an analysis of the ERP. To disregard this as a
measurement of their damages would force the court to speculate
on the amount of damages. Consequently, because the "court's
inquiry must be directed to the plan," the Carlos' claims are
preempted under the first test set forth in Ingersoll-Rand. 498 ______________
U.S. at 140.
Our ruling here is in accord with our previous decision
in Vartanian v. Monsanto, Co., 14 F.3d 697, 700 (1st Cir. 1994). _________ _____________
In Vartanian, the plaintiff accepted an early retirement package _________
based on the employer's assurances that it was not contemplating
the creation of an enhanced severance program. In fact, when
Vartanian made these specific inquiries about early retirement
programs, Monsanto had already given serious consideration to
reducing its staff and was contemplating the formation of a
special early retirement plan. Vartanian claimed that as a
result of his reliance on Monsanto's misleading statements to the
effect that the company did not intend to create a more generous
retirement package, he missed the opportunity to retire under the
more advantageous provisions of the new plan, which went into
effect shortly after his retirement. We found that Vartanian's
claims were preempted because "the existence of the 1991 Plan is
inseparably connected to any determination of liability under
state common law misrepresentation." Id. As we then noted, ___
"[t]here simply is no cause of action if there is no plan." Id. ___
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Therefore, Vartanian's misrepresentation claim related to an
ERISA plan because it was inseparably connected to it.4
Similarly, the Carlos' claims are inseparably connected
to the ERP. The Carlos and Vartanian both sought damages for an
employer's alleged misrepresentation concerning the scope or
existence of early retirement benefits. The damages claimed in
both instances were dependent, at least in part, on analysis of a
qualified ERISA plan. Moreover, the misrepresentations
themselves concerned, ultimately, the amount of benefits the
plaintiffs would be entitled to upon retirement.5
____________________
4 A number of other circuits have also considered claims similar
to those alleged by the Carlos and found them preempted. See, ___
e.g., Pohl, 956 F.2d 126 (preempting a negligent ____ ____
misrepresentation claim based on the defendant's assurances that
it would cover the plaintiff's medical expenses); Cefalu, 871 ______
F.2d 1290 (preempting a misrepresentation claim based on the
employer's assurance that the plaintiff's retirement benefits
would be equivalent under two different employment options);
Anderson v. John Morrell & Co., 830 F.2d 872 (8th Cir. 1987) ________ ____________________
(preempting plaintiff's contract claim based on his employer's
promise that his fringe benefits as a member of management would
be equivalent to those he would have received had he remained a
member of a union); Straub v. Western Union Telegraph Co., 851 ______ ____________________________
F.2d 1262 (10th Cir. 1988) (preempting plaintiff's
misrepresentation claim based on assurances that his pension
benefits would be increased if he accepted a transfer to a
subsidiary company owned by his employer).
5 One notable difference distinguishes Vartanian from the _________
Carlos' case. In Vartanian, the plaintiff allegedly had taken _________
early retirement because of a misrepresentation about future
retirement benefits. We found that, in these circumstances, the
plaintiff had a cause of action under ERISA because the employer
had breached a fiduciary duty to a plan participant. Although
the issue was not raised on appeal, the difference here is that
after Mr. Carlo's employer realized that he had made a mistake
regarding Mr. Carlo's retirement benefits, he offered Mr. Carlo
an opportunity to continue working so that his retirement
benefits would not be adversely affected. Therefore, the Carlos
were never deprived of a benefit to which they were entitled
under ERISA.
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In sum, we find that the ERISA's express language,
jurisprudence, and legislative history all mandate a finding that
ERISA preempts the Carlos' state law claims.
We have considered the other issues raised by the
Carlos and find them meritless.
Affirmed. ________
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