Vartanian v. Monsanto Company

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 93-1611

LEO VARTANIAN,

Plaintiff-Appellant,

v.

MONSANTO COMPANY, ET AL.,

Defendants-Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Michael Ponsor, U.S. Magistrate Judge]

Before

Torruella, Circuit Judge,

Bownes, Senior Circuit Judge,

and Cyr, Circuit Judge.

John C. Sikorski, with whom Robinson Donovan Madden &

Madden, P.C., was on brief for appellant.

Richard J. Pautler, with whom Richard P. Sher, Peper,

Martin, Jensen, Maichel and Hetlage, Francis D. Dibble, Jr.,

Bulkley, Richardon and Gelinas, and John S. Morrison, were on

brief for appellees.

February 2, 1994

TORRUELLA, Circuit Judge. Appellant Leo Vartanian

("Vartanian") brought claims against his former employer,

Appellee Monsanto Chemical Company ("Monsanto"), under the

Employment Retirement Income Security Act ("ERISA"), 29 U.S.C.

1001 et seq., pursuant to Section 502(a) of ERISA, 29 U.S.C.

1132(a), as well as under common law,1 asserting that Monsanto

breached its fiduciary duty and engaged in unlawful

discrimination and misrepresentation. The district court

dismissed Vartanian's complaint for failure to state a claim

under Federal Rule of Civil Procedure 12(b)(6). Vartanian appeals

the district court's dismissal of his claims.

According to the facts alleged by Vartanian, Vartanian

worked for Monsanto for nearly 37 years. He was a participant in

the Monsanto Company Salaried Employees Pension Plan ("1986

Plan"). The 1986 Plan offered several options to retirees,

including the option to receive various types of periodic

payments (annuities) or to take all benefits in a lump sum. In

accordance with the requirements of the 1986 Plan, Vartanian

submitted a lump sum distribution request at least one year prior

to his anticipated early retirement date. Vartanian submitted

1 Vartanian's complaint alleges a claim for common law
misrepresentation, without specifying whether he means federal or
state common law. The district court in its opinion clearly
interpreted the claim to be a claim under state common law.
Rather than filing a motion to reconsider with the district court
and explaining to the district court that it had mistakenly
considered his claim to assert a state law claim rather than a
federal law claim, Vartanian appealed the district court's order
of dismissal. In the present case, we review the district
court's decision and find it unnecessary to recognize a federal
common law claim. See infra note 5 and accompanying text.

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this request in March, 1990 for an anticipated early retirement

date of May 1, 1991.

In February, 1991, Vartanian started to hear rumors

that Monsanto was going to offer a more favorable early

retirement package as a retirement incentive in the near future.

Monsanto had a history of using early retirement incentive

programs, having done so in 1981, 1985 and 1990. As rumors of

early retirement offerings persisted, sometime in February or

March, 1991, Vartanian asked his supervisor about the possibility

of an early retirement offering and requested that the supervisor

inquire about this possibility. Several weeks later, Vartanian's

supervisor responded that he could not confirm any rumors and

that there were "no plans" regarding the early retirement offer.

In April, 1991, Vartanian repeated the same inquiry to

his supervisor who again responded that there were no plans

regarding an early retirement arrangement. Vartanian also

questioned the Springfield Personnel Supervisor as to the

possibility of an early retirement incentive offering and was

told that there were no plans for any such offering. The

Springfield supervisor asked Vartanian if he would refrain from

retiring on May 1, 1991 if such a program were available.

Vartanian responded that he would want to study any new program

and certainly have the option of delaying the effective date of

his early retirement, depending on the option. Vartanian had in

fact postponed a previously elected early retirement so he could

work on certain projects for Monsanto. Vartanian retired as of

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May 1, 1991, and took a lump sum distribution of approximately

$509,000 under the 1986 Plan.

On or about June 28, 1991, Monsanto's Board of

Directors approved a restructuring plan which involved

consolidating manufacturing operations, closing plants,

reorganizing businesses and reducing the number of employees. As

of February, 1991, when Vartanian made specific inquiries about

early retirement incentive programs, Monsanto had, in fact,

already given serious consideration to staff reductions and

changes in the 1986 Pension Plan and was contemplating the

formation of the Monsanto Special Voluntary Retirement Plan

("1991 Plan").

Vartanian alleges that he was denied a reasonable

opportunity to make an informed decision about when to retire

because Monsanto failed to disclose its consideration of an

enhanced severance program. If Vartanian had received complete

and truthful information, he would have continued to work at

Monsanto until December 1, 1991 and, thus, would have been

eligible for full benefits under the 1991 Plan announced on June

28, 1991.

Vartanian exhausted all administrative procedures and

plan appeal procedures in his claim for benefits under the 1991

Plan. Monsanto denied Vartanian's claim because he had retired

on May 1, 1991 and, therefore, was not employed by Monsanto on

October 1, 1991, which was a requirement for eligibility to

participate in the 1991 Plan.

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In the court below, Vartanian alleged that Monsanto

breached its fiduciary duty in violation of 29 U.S.C. 1104(a)

by failing to disclose its intention to create a new, more

generous retirement package or the fact that the company was

giving "serious consideration" to such a 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.

Vartanian also alleged unlawful discrimination in violation of

Section 510 of ERISA, 29 U.S.C. 1140.

Under Section 502 of ERISA, 29 U.S.C. 1132(a), only a

"participant" or "beneficiary" may bring a private civil action.

Vartanian claims that he had standing to sue because he was a

"participant." The district court found, however, that Vartanian

was not a "participant" as defined by 29 U.S.C. 1002(7) of

ERISA and thus, did not have standing to sue under Section 502.

Because Section 502 is the sole civil enforcement provision of

ERISA, the district court dismissed both of Vartanian's ERISA

claims. The district court also dismissed Vartanian's common law

claims alleging misrepresentation. The court found that because

these are state law claims which "relate to" ERISA, they are

therefore preempted by Section 514(a) of ERISA, 29 U.S.C.

1144(a).

On appeal, Vartanian maintains that the district court

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erred in dismissing his claims. Vartanian argues that, at the

time Monsanto made the alleged misrepresentations, he was a

"participant" in an employee benefit plan (the 1986 Plan), that

Monsanto's breach of its fiduciary duty caused him to leave

shortly before the 1991 Plan was adopted. Furthermore, Vartanian

claims that but for Monsanto's misrepresentations, he would be a

"participant" in the 1991 Plan under 29 U.S.C. 1002(7) and, as

such, he has standing to assert claims for breach of fiduciary

duty, unlawful discrimination and misrepresentation under

ERISA.2 He argues that the ERISA definition of "participant"

refers to a person who is, or may become eligible for benefits

"from an employee benefits plan" and does not require that the

person be eligible for benefits from two employee benefit plans.

Thus, because he was a participant in the 1986 Plan, he claims

that, it was not necessary that he be a participant in the 1991

Plan in order to have standing under ERISA. In the alternative,

Vartanian argues that, even if he does not have standing to

assert claims under ERISA, this federal statute does not preempt

his state common law claims and this case should be remanded to

the district court for further proceedings to determine the

merits of his common law claims.

STANDARD OF REVIEW

We review the district court's decision to grant the

2 Vartanian also points out that the 1991 Plan had two
components, enhancement of benefits under the 1986 Plan and a
separate cash payment. He suggests that he is a participant in
that portion of the 1991 Plan that consists of an enhancement of
benefits under the 1986 Plan.

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motion to dismiss Vartanian's claim under Federal Rule of Civil

Procedure 12(b)(6) de novo. Kale v. Combined Ins. Co. of

America, 925 F.2d 1161, 1165 (1st Cir. 1991). We must accept the

allegations of the complaint as true, and if, under any theory,

the allegations are sufficient to state a cause of action in

accordance with the law, we must deny the motion to dismiss.

Knight v. Mills, 836 F.2d 659 (1st Cir. 1987).

PREEMPTION

We first examine the district court's finding that

Vartanian's state law claims are preempted by Section 514(a) of

ERISA, 29 U.S.C. 1144(a).

Section 514 of ERISA supersedes "any and all State laws

insofar as they may now or hereafter relate to any employee

benefit plan . . . ." 29 U.S.C. 1144(a) (emphasis added). 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).

In Ingersoll-Rand, Co., the Supreme Court identified

two tests for determining whether a cause of action "relates to"

and is thus, preempted by ERISA. First, a law is expressly

preempted by ERISA where a plaintiff, in order to prevail, must

plead, and the court must find, that an ERISA plan exists. Id.

at 140. The cause of action "relates to" an ERISA plan in this

context because the court's inquiry must be directed to the plan.

Id. Second, even where there is no express preemption, a cause

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of action is preempted if it conflicts directly with an ERISA

cause of action. Id. at 142.

In the present case, the existence of the 1991 Plan is

inseparably connected to any determination of liability under

state common law of misrepresentation. There is simply no cause

of action if there is no plan. See id. at 140. The alleged

misrepresentations by Monsanto relate to the existence of the

1991 Plan and in order to prevail under a state common law claim

for misrepresentation, Vartanian would undoubtedly have to plead,

and the Court would have to find, that the 1991 Plan exists. See

id. at 140. Thus, under the first test set forth in Ingersoll-

Rand, Co., Vartanian's claims "relate to" an ERISA plan and are

expressly preempted by ERISA. See Smith v. Durham-Bush, Inc.,

959 F.2d 6, 11-12 (2d Cir. 1992); see also Sanson v. General

Motors Corp., 966 F.2d 618, 621 (11th Cir. 1992), cert. denied,

113 S. Ct. 1578 (1993).

Therefore, we affirm the portion of the district

court's opinion holding that Vartanian's state common law claims

of negligent misrepresentation are preempted by ERISA.

ERISA CLAIMS

Next, we examine the district court's finding that

Vartanian did not have standing to pursue a civil claim under

ERISA.

Section 502, the civil enforcement provision of ERISA,

provides that a "civil action may be brought by a participant or

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beneficiary3 to recover benefits due him under the terms of his

plan, to enforce his rights under the terms of the plan, or to

clarify his rights to future benefits under the terms of the

plan." 29 U.S.C. 1132(a)(1)(B). ERISA defines the term

"participant" as:

any employee or former employee of an
employer, or any member or former member
of an employee organization, who is or
may become eligible to receive a benefit
of any type from an employee benefit plan
which covers employees of such employer
or members of such organization, or whose
beneficiaries may be eligible to receive
such benefit.

29 U.S.C. 1002(7).

In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101

(1989), the Supreme Court discussed the meaning of the term

"participant":

the term "participant" is naturally read
to mean either "employees in, or
reasonably expected to be in, currently
covered employment," Saladino v.

I.L.G.W.U. National Retirement Fund, 754

F.2d 473, 476 (CA2 1985), or former
employees who "have . . . a reasonable
expectation of returning to covered
employment" or who have "a colorable
claim" to vested benefits, Kuntz v.

Reese, 785 F.2d 1410, 1411 (CA9) (per

curiam), cert. denied, 479 U.S. 916

(1986). In order to establish that he or
she "may become eligible" for benefits, a
claimant must have a colorable claim that
(1) he or she will prevail in a suit for
benefits, or that (2) eligibility
requirements will be fulfilled in the
future. "This view attributes
conventional meanings to the statutory
language since all employees in covered

3 Appellant does not claim to be a beneficiary.

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employment and former employees with a
colorable claim to vested benefits 'may
become eligible.' A former employee who
has neither a reasonable expectation of
returning to covered employment nor a
colorable claim to vested benefits,
however, simply does not fit within the
[phrase] 'may become eligible.'" Saladino

v. I.L.G.W.U. National Retirement Fund,

supra, at 476.

Firestone, 489 U.S. at 117-18.

Since Vartanian did not allege that he has an

expectation of returning to covered employment, the district

court, relying on Firestone, focused its inquiry on whether

Vartanian had a colorable claim to vested benefits. Finding that

Vartanian had no such claim, the district court held that

Vartanian did not have standing to pursue a claim under ERISA.

We disagree with the district court's interpretation of the

standing requirements under ERISA.

The Supreme Court's discussion in Firestone of the

ERISA term "participant" was developed outside of the "standing"

context and therefore, does not mandate a finding that Vartanian

has no standing to assert his claims. See Christopher v. Mobil

Oil Corp., 950 F.2d 1209, 1221 (5th Cir. 1992), cert. denied, 113

S. Ct. 68 (1992) ("Firestone . . . [cannot] be read to reduce the

standing question to a straightforward formula applicable in all

cases.").

The Sixth Circuit recently addressed the issue of who

is a "participant," for purposes of standing:

In determining who is a "participant,"
for purposes of standing, the definition
found in 29 U.S.C. 1002(7) must be read

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in the context of traditional concepts of
standing, not in the context of
adjudicating the ultimate issue of the
merits of plaintiffs' claim . . . . The
doctrine of standing is concerned with
whether a person is the proper party to
request adjudication of a particular
issue, whether a person has alleged such
a personal stake in the outcome of the
justiciable controversy that he should be
entitled to obtain its judicial
resolution. Standing focuses on a
person's effort to get his complaint
before a court and not on the issue he
wishes to have adjudicated.

* * *

[The ultimate question is whether the

plaintiff is] within the zone of

interests ERISA was intended to protect.

Astor v. International Business Machines Corp., 7 F.3d 533, 538-

39 (6th Cir. 1993), (quoting Hughes v. General Motors Corp., 852

F.2d 568 (6th Cir. 1988) (unpublished) (citations omitted)); see

also Data Processing Service v. Camp, 397 U.S. 150, 153 (1970).

The legislative history of ERISA indicates that

Congress intended the federal courts to construe the Act's

jurisdictional requirements broadly in order to facilitate

enforcement of its remedial provisions:

The enforcement provisions have been
designed specifically to provide both the
Secretary [of Labor] and participants and
beneficiaries with broad remedies for
redressing or preventing violations of
the [Act]. . . . The intent of the

Committee is to provide the full range of

legal and equitable remedies available in

both state and federal courts and to

remove jurisdictional and procedural

obstacles which in the past appear to

have hampered effective enforcement of

fiduciary responsibilities under state

law or recovery of benefits due to

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participants.

S. Rep. No. 127, 93d Cong., 2d Sess., 3 (1974), reprinted in 1974

U.S.C.C.A.N. 4639, 4871 (emphasis added).

To hold that Vartanian's state common law claims for

breach of fiduciary duty are preempted by ERISA, and that he has

no standing to assert his claims under ERISA, would clearly

frustrate Congress's intention to remove jurisdictional and

procedural obstacles to such claims.

At the time of the alleged misrepresentations,

Vartanian was a "participant" in the 1986 Plan, and as such, the

administrators of the plan had a fiduciary duty not to mislead

Vartanian as to the prospective adoption of a plan under serious

consideration. See Berlin v. Mich. Bell Tel. Co., 858 F.2d 1154,

1163-64 (6th Cir. 1988). Vartanian's claims thus fall squarely

within the "zone of interests" ERISA was designed to protect.

See Astor, 7 F.3d at 538-39 (former employees who are within the

zone of interests ERISA was intended to protect held to be

"participants" for purposes of standing).

We recognize that the 1991 Plan had not yet been made

available to Vartanian at the time of Monsanto's alleged

misrepresentations nor at the time of Vartanian's retirement and

thus, Vartanian could not technically be a "participant" in the

1991 Plan. We believe, however, that given the broadly inclusive

scope of the ERISA statute, and its preclusion of all other

judicial recourse, it would be entirely consistent with the ERISA

statute for this court to decline to bar Vartanian, for lack of

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"standing", from showing that, "but for" Monsanto's wrongful

conduct, he would be a "participant" in the 1991 Plan. Cf.

Christopher, 950 F.2d at 1221.

In reaching our conclusion, we rely on the fact that

Vartanian did not know Monsanto had made misrepresentations to

him and therefore, he could not have alleged a breach of

fiduciary duty by Monsanto until after he had received payment

under the 1986 Plan. To hold otherwise would imply that when an

employer breaches its fiduciary duty to an employee under ERISA,

the employee would have standing to sue only if the employee

finds out all of the facts constituting the breach prior to his

receipt of retirement benefits. Such a holding would enable an

employer to defeat the employee's right to sue for a breach of

fiduciary duty by keeping his breach a well guarded secret until

the employee receives his benefits or, by distributing a lump sum

and terminating benefits before the employee can file suit. The

employee would have no standing to state a claim under ERISA,

even where the employer's breach of fiduciary duty takes the form

of misrepresentations that induced the employee to retire and

receive the payment of benefits. Congress did not intend such

unjust and arbitrary results.4

4 We are aware of decisions of other courts that are frequently
cited for the proposition that the term "participant" excludes
plaintiffs who have already received all of their vested benefits
in the form of a lump sum payment under a benefit plan. E.g.,

Kuntz v. Reese, 785 F.2d 1410 (9th Cir. 1986), cert. denied, 479

U.S. 916 (1986); Yancy v. American Petrofina, Inc., 768 F.2d 707

(5th Cir. 1985); Raymond v. Mobil Oil Corp., 983 F.2d 1528 (10th

Cir. 1993), cert. denied, 114 S. Ct. 81 (1993); and Berger v.

Edgewater Steel Co., 911 F.2d 911, 921 (3d Cir. 1990), cert.

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Our conclusion is consistent with the Fifth Circuit's

decision in Christopher, in which the court indicated that

it would seem . . . logical to say that
but for the employer's conduct alleged to
be in violation of ERISA, the employee
would be a current employee with a
reasonable expectation of receiving
benefits, and the employer should not be
able through its own malfeasance to
defeat the employee's standing.

Christopher, 950 F.2d at 1221. Contra Raymond, 983 F.2d at 1536.

We hold that where an employee alleges a decision to

retire based on alleged misrepresentations by his employer

amounting to a breach of fiduciary duty, and the true facts, are

not available to the employee until after the employee has

received all his vested benefits under a plan; and further, where

the employee shows that in the absence of the employer's breach

of fiduciary duty he would have been entitled to greater benefits

than those which he received, then his receipt of payment cannot

be used to deprive him of "participant" status and hence,

standing to sue under ERISA. Thus, Vartanian has standing to

assert his claims under ERISA even though he has already received

his benefits under the 1986 Plan.

FEDERAL COMMON LAW

On appeal, Vartanian requests that this court recognize

a federal common law claim for misrepresentation.

Although this court has noted that Congress has

denied, 499 U.S. 920 (1991). These cases hold that such

plaintiffs lack standing to sue under ERISA because they cannot
establish that they were former employees with a colorable claim
to vested benefits.

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contemplated that the federal courts "in the interests of

justice, would engage in interstitial lawmaking in ERISA cases in

much the same way as the courts fashioned a federal common law of

labor relations under section 301 of [the Labor Management

Relations Act][,]" Nash v. Trustees of Boston Univ., 946 F.2d

960, 965 (1st Cir. 1991) (citations omitted), we deny

Vartanian's request because it is not necessary that we reach

this issue given the present ruling.

Because we have held that Vartanian has standing to

pursue his claims under ERISA, we find that justice does not

require that we recognize a federal common law claim of negligent

misrepresentation.5

We affirm that portion of the district court's order

dismissing Vartanian's state claims for common law negligent

misrepresentation. We reverse the portion of the order

dismissing Vartanian's claims under ERISA and remand this case to

the district court for decision on the merits of Vartanian's

ERISA claims.

5 We express no view on whether, under different circumstances,
such a federal common law claim should be recognized.

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