Madera v. Marsh USA, Inc.

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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