Frank C. SCHOONEJONGEN; Wesley L. Losson; John S. Dunning;
William Martone; William V. Hanzalek; Edward F. Ziek;
Melvin Deblock; Joseph Colquhoun; Joseph Majerscak;
Gerard Abbamont; and Olga Wolsey, on behalf of themselves
and all others similarly situated, Appellants,
v.
CURTISS-WRIGHT CORPORATION.
No. 97-5497.
United States Court of Appeals,
Third Circuit.
Argued March 17, 1998.
Decided April 29, 1998.
Nicholas F. Lewis (Argued), Everett E. Lewis, Shirely Fingerhood, Lewis, Greenwald, Clifton & Lewis, New York City, for Appellants.
Stephen F. Payerle (Argued) Laurence Reich, Carpenter, Bennett & Morrissey, Newark, NJ, for Appellee.
Before: SLOVITER, RENDELL and SEITZ, Circuit Judges.OPINION OF THE COURT
SEITZ, Circuit Judge.
The sole but important issue in this appeal, which stems from an action alleging a violation of section 402(b)(3) of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1102(b)(3) ("ERISA"), has already been framed for us by the Supreme Court in its mandate to our court on remand.1 In particular, we will address the question directly posed by the Supreme Court: "[W]hether Curtiss-Wright's valid amendment procedure--amendment 'by the company'--was complied with in this case." Curtiss-Wright Corp. v. Schoonejongen,
I. Factual Background
A. Procedural History
The lоng and contentious history of this case, which spans over fourteen years of litigation, is set forth in Schoonejongen v. Curtiss-Wright Corp.,
In 1984, the affected retirees instituted a class action in the district court, alleging that CW had wrongfully terminated their retirement health benefits and that they had a vested right to these benefits for life. After six years of litigation and a bench trial, the district court in 1990 dismissed most of the plaintiffs' claims, including one contention that CW had contractually bound itself to provide retirement health benefits for life. The district court found, however, that the revised SPD language concerning the termination of benefits constituted an "amendment" to the Plan and therefore fell within ERISA's section 402(b)(3), which requires that every employee benefit plan must "provide a procedure for amending such plan, and for identifying the persons who have authority to amend the plan." 29 U.S.C. § 1102(b)(3). The district court then held that, as an amendment, the relevant SPD language was not adopted under an amendment procedure as required by ERISA. Therefore, the district court concluded that the terminations of health benefits under the amended Plan were void ab initio and ordered CW to pay a significant amount in retroactive benefits.
On appeal to our court, CW argued that the revised SPD language was in fact adopted under an amendment procedure contained in a standard reservation clause which provided that "[t]he Company reserves the right at any time and from time to time to modify or amend, in whole or in part, any or all of the provisions of the Plan." CW contended that this procedure was valid under section 402(b)(3) becаuse it identified "the Company" with the authority to amend the retirement benefits plan. This court rejected that argument, reasoning that the purpose behind the section 402(b)(3) requirement was to "ensure that all interested parties will know how a plan may be altered and who may make such alternations. Only if they know this information will they be able to determine with certainty at any given time exactly what the plan provides." Schoonejongen v. Curtiss-Wright Corp.,
The Supreme Court granted CW's petition for certiorari and reversed in a unanimous opinion. The Court observed that the text of section 402(b)(3) contains only two requirements: "a 'procedure for amending [the] plan' and '[a procedure] for identifying the persons who have authority to amend the plan.' " Curtiss-Wright Corp. v. Schoonejongen,
The Court then remanded the case to our court to determine "whether Curtiss-Wright's valid amendment procedure--amendment 'by the Company'--was complied with in this case." Id. at 85,
On remand from the Supreme Court, both parties argued before us that it was possible to decide the case on the existing record. The panel, however, decided that a remand to the district court was appropriate because of a factual dispute--namely, whether anyone at CW possessed the actual or implied authority to amend the plan. See Schoonejongen v. Curtiss-Wright Corp., Nos 92-5695, 92-5710,
B. Facts Discovered on Remand
Renewed discovery by the parties in the district court revealed the following undisputed facts. CW is a Delaware corporation and has adopted by-laws applicable at all times here pertinent which gives the Chairman of the Board of Directors, as Chief Executive Officer ("CEO"), "general and active control of [the corporation's] business and affairs." App. at 441. They expressly include the authority to sign all contracts, obligations, and other instruments on behalf of the corporation. Id. The by-laws further designate the Presidеnt as the Chief Operating Officer and bestow "general and active control of [the corporation's] operations," including the authority to execute contracts, fix employee compensation other than primary officers, and "all other duties and powers usually appertaining to the office of president of a corporation," except as otherwise stated in the by-laws. Id. at 441-43. Finally, the by-laws provide that the Vice-Presidents "shall perform all such duties and exercise all such powers as may be provided by these by-laws or as may from time to time be determined by the Board of Directors, ... the Chairman, or the President." Id. at 443.
Mr. T. Roland Berner, who died in the spring of 1990, long before remand to the district court, was CW's Chairman of the Board, CEO, and President. Mr. Charles Ehinger and Mr. Richard Sprigle, both now retired, were CW's twо Executive Vice Presidents. While the precise responsibilities of Mr. Ehinger and Mr. Sprigle are the subject of some disagreement between the parties to this action, although not between the two Vice Presidents themselves, it is not disputed that Mr. Ehinger generally handled corporate staff issues for all CW employees and Mr. Sprigle was essentially in charge of operations at the Wood Ridge facility in New Jersey. App. at 181, 247.
Discovery before the district court also yielded the following undisputed facts relating to the Plan's history. CW's post-retirement and health benefits plan was established, implemented, and administered without any formal board action other than a 1976 authorization of an undertaking to self-insure its health insurance plans and an adoption of a Trust Agreement in connection with that self-insurance. There is no written delegation of authority over Plan matters to any particular corporate officer, either by name or by title. On September 1, 1976, Mr. Ehinger executed a Plan Constitution as the general instrument governing welfare benefits, and thereby purported to create a CW retirement benefits Plan that complied with ERISA. The board took no part in this action, and its minutes are completely silent as to Plan matters until November 8, 1990, when it sought to retroactively ratify the 1983 SPD amendment at issue. In 1978 and 1981, Plan amendments providing for an adjustment of health benefits had been made by certain managers working under Mr. Ehinger's direction. App. at 337-39. Again, corporate records do not show formal involvement by either the board or Mr. Berner with respect to these amendments.
It is undisputed that Mr. Richard A. DuBois, the Corporate Manager for Benefits, and Mr. Aaron J. Carr, CW's labor counsel, initially drafted the 1983 SPD amendment providing for the termination of health benefits for a closed plant's retirees. Here the parties' accounts begin to diverge. CW contends, based on the deposition testimony of Mr. Ehinger and Mr. Sprigle, that Mr. Berner, the President, orally delegated the authority to deal with Plan matters to Mr. Ehinger. It further argues that Mr. Ehinger explicitly authorized Mr. DuBois and Mr. Carr to draft the necessary language in the SPD amendment which would provide for a termination of health benefits upon the closing of a CW plant. CW points to Mr. Ehinger's assertions in his deposition that he read the provision at issue and approved it pursuant to his authority over Plan administration. App. at 195-97. Plaintiffs, on the other hand, strenuously dispute in their briefs the testimony of Mr. Ehinger that he had intentionally amended the SPD based on an oral delegаtion of authority by Mr. Berner. Pointing to various alleged inconsistencies in Mr. Ehinger's deposition, plaintiffs emphasize that CW issued the SPD amendment without ever intending it to be a substantive change in policy.
C. The District Court's Disposition on Remand
Based on the record developed on remand, the district court considered the motions for summary judgment submitted by the plaintiffs and by CW. In initially addressing the issue of authority, the court found, relying on its earlier opinion, that CW intended to amend the Plan in 1983 and did not, as plaintiffs argued, merely seek to clarify existing coverage.4 Second, the district court identified Mr. Berner as one who possessed the express authority to amend the SPD in 1983 based on its reading of the corporate by-laws. The court further observed that the corporation vested Mr. Ehinger with an implied authority to undertake such action because he had originally executed the Plаn Constitution with the board's knowledge. Notably, however, the district court refused to find that Mr. Berner orally delegated authority to Mr. Ehinger, despite Mr. Ehinger's deposition to that effect, because there were "issues of credibility" which the court considered inappropriate for resolution at the summary judgment stage. Nevertheless, having concluded that Mr. Ehinger possessed the necessary authority to amend the SPD in 1983 based on the board's silence, the district court held that a genuine issue of material fact existed as to whether Mr. Ehinger actually approved the revised SPD provisions under his authority. Here, the court once again observed that the only support for Mr. Ehinger's actual approval was his own testimony at deposition, which it also concluded would not constitute an appropriate basis for summary judgmеnt because issues of credibility remained.
Because the district court did not find that anyone at CW with authority to amend the Plan actually approved the SPD amendment, it addressed whether the doctrine of ratification provided an appropriate alternative basis to hold the 1983 Plan amendment as a valid corporate act. Here, the district court concluded that the 1983 letter bearing Mr. Sprigle's name and on CW letter head served to ratify the revised SPD. Reasoning that Mr. Sprigle possessed the authority to act on behalf of the Wood Ridge facility, the letter to that plant's retirees advising them of the health benefits termination could be considered an authorized act on behalf of CW. Thus, the district court concluded that even if Mr. Carr and Mr. DuBois had revised the SPD without authority from Mr. Ehinger, Mr. Sprigle's subsequent actions сonstituted a valid corporate act ratifying the Plan amendment.
Plaintiffs now appeal the district court's grant of summary judgment in favor of CW. Our standard of review is plenary. Hozier v. Midwest Fasteners, Inc.,
II. Authority
As we have noted, the district court refused to find, at the summary judgment stage, that any corporate officer with the appropriate authority actually authorized the 1983 SPD amendment, despite CW's argument to the contrary. CW renews that same contention before us, which the plaintiffs again oppose.
In considering the issue of a valid amendment procedure under ERISA section 402(b)(3)--amendment by "the Company"--the Supreme Court held that principles of corporate law provide a ready-made set of rules for identifying the natural persons authorized to make decisions on behalf of a company. Curtiss-Wright,
A. Who Possessed the Authority to Amend the Plan?
1. The Board's Authority to Amend the Plan and Delegate Plan Matters
Because it is tacitly conceded that the board possessed the authority to amend the Plan, see 8 Del.Code Ann. § 141(a), but never actually undertook such an amendment, we pause to address the plaintiffs' argument that only the board of directors had authority to adopt amendments to the Plan in this case. The answer must be that unless otherwise provided by the certificate of corporation and subject to the limitations set forth in 8 Del.Code Ann. § 141(c), the board may freely delegate the authority to manage the business and affairs of the corporation. See 1 R. Franklin Balotti & Jesse A. Finkelstein, The Delaware Law of Corporations & Business Organizations § 4.17, at 32 (collecting cases). Indeed, the ability to delegate is the еssence of corporate management, as the law does not expect the board to fully immerse itself in the daily complexities of corporate operation. See Grimes v. Donald,
Nor do we agree with the plaintiffs' assertion that the delegation of Plan matters, including its amendment, to a corporate officer or agent would necessarily constitute an abdication of managerial duties. The business decision of appointing a corporate officer to manage retirement health benefits for the corporation does not have the effect of "removing from directors in a very substantial way their duty to use their own best judgment on management matters." Abercrombie v. Davies,
2. Mr. Berner's Authority to Amend the Plan Pursuant to
Board Delegation
Beyond the board of directors, the corporation may validly act through its directors and officers as authorized corporate agents. In general, an officer's powers stem from the organic law of the corporation, or a board delegation of authority which may be express or implied. 2 William M. Fletcher, Fletcher Cyclopedia of the Law of Private Corporations § 434, at 339 (perm.rev. ed.1992). Express authority to act on behalf of the corporation is usually manifested through a statute, the certificate of corporation, the by-laws, or a board or shareholder action. Id. § 434, at 339-40; Petition of Mulco Prods.,
Pursuant to these principles of corporate law, the undisputed facts show that Mr. Berner, the CEO and President of CW possessed the express authority to amend the Plan without the board's prior aрproval. The corporate by-laws, adopted by the board, affirmatively bestow on the CEO the authority to take "general and active control of [the corporation's] business and affairs," which specifically includes the power to fix employee compensation. App. at 441-43. Delaware courts have held that attendant to this unqualified grant of authority, the president as general manager commands the power to "do anything the corporation could do in the general scope and operation of its business." Phoenix Finance Corp. v. Iowa-Wisconsin Bridge Co.,
We once again pause to address plaintiffs' arguments against finding express authority vested in Mr. Berner pursuant to an express delegation by the board. Plaintiffs assert that although Mr. Berner expressly commands the authority to "fix employee compensation," the termination of medical benefits would be an "extraordinary" exercise of authority that would require explicit board approval. Plaintiffs do not point to any record support for this contention other than the allegation that it would be "outside the ordinary course of business" for the CEO to undertake such an action. This argument is unavailing particularly in view of the board mandate allowing the CEO to fix employee compensation and the complete absence of any suggestion that the board intended Plan amendments to be subject to its prior approval. In fact, the board adopted the by-laws well before the Plan's creation and acted in a manner perfectly consistent with the assumption that the Plan was valid. If the board had considered the Plan's creation as a reasonable act without its prior authorization, then surely the board would not have considered the Plan's amendment to be so "extraordinary" that it was outside Mr. Berner's authority.
3. Mr. Berner's Delegation Under His Authority
As the record demonstrates, however, Mr. Berner did not amend the Plan, which leaves us with the necessity to decide whether another corporate officer or agent possessed the requisite amendatory authority. It is, of course, firmly established that an officer broadly charged with managing the affairs of a corporation impliedly possesses the authority to appoint subordinate agents under his control to act on behalf of the corporation. See 2 Fletcher, supra, § 503, at 598. Delaware is no stranger to this rule. See 8 Del.Code § 122(5); 1 Balotti & Finkelstein, supra, § 4.17. Nevertheless, the power of delegation is not without limits, and the language of case law generally focuses on whether the delegated authority involves "ministerial" functions or acts that require "the еxercise of discretion" by the subagent. See 2 Fletcher, supra, § 503, at 598. As the very term "management" connotes, however, corporate officers and subordinate agents must be afforded some level of discretion when faced with the demands of supervising a modern corporation. Thus, given the "necessities of the case and usage," corporate law recognizes that many "discretionary" acts will be carried out by officers and other subordinates. 1 Balotti & Finkelstein, supra, § 4.17, at 35 (citing 2 Fletcher, supra, § 495, at 580); see also Kelly v. Bell,
These principles of сorporate law, when applied to the record before us, lead us to conclude that Mr. Berner properly delegated to Mr. Ehinger, one of CW's Executive Vice Presidents, the authority to amend the Plan. It is not disputed that CW is a large, complex corporation with operations well beyond its facilities in New Jersey. While plaintiffs assert that the power to amend the Plan was outside Mr. Berner's authority to delegate because it was not "routine," we do not find this to be the case. To be sure, the Plan's amendment required some level of discretion on Mr. Ehinger's part, but this would not defeat a proper delegation by Mr. Berner in view of his authority. The bylaws specifically vest Mr. Ehinger, as Executive Vice President, with the authority to "perform all such duties and exercise all such powers as may be provided by ... the Presidеnt." App. at 443. Certainly, such a duty would include significant changes to the Plan's retirement health benefits and there is no indication on the record that the board limited the Vice President's authority to "routine" matters that would not include significant Plan amendments. Moreover, the prior course of dealings between Mr. Berner, Mr. Ehinger, and the board--none of which are disputed by the plaintiffs--all show that Mr. Berner and the board were well aware that Mr. Ehinger established and administered the current Plan. In light of these undisputed facts, we conclude that the validity of the Plan's amendment did not depend upon the prior express approval of Mr. Berner in his capacity as CW's President and CEO.
The district court refused to find such a delegation of authority to Mr. Ehinger in fact at the summary judgment stage. It did so because, in its view, "issues of credibility" remain as to Mr. Ehinger's deрosition testimony that he had received an oral authorization by Mr. Berner to manage employee benefits. We therefore face the inescapable issue of deciding whether there is a "genuine issue of material fact" surrounding the delegation of amendatory authority from Mr. Berner to Mr. Ehinger. Fed.R.Civ.P. 56(c). A fact is "material" if, under the substantive law of the case, it is outcome determinative. See Anderson v. Liberty Lobby, Inc.,
Notwithstanding this well settled law, federal courts have found difficulty in applying the summary judgment standard when faced with certain questions of credibility. See 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2726, at 115 (2d ed.1983). It is by now axiomatic that "a nonmoving party ... cannot defeat summary judgment simply by asserting that a jury might disbelieve an opponent's affidavit to that effect." Williams v. Borough of West Chester,
The record here is replete with evidence showing that Mr. Berner had in fact orally delegated the authority to amend and administer the Plan to Mr. Ehinger, even apart from Mr. Ehinger's own testimony to that effect. Mr. Sprigle, CW's other Executive Vice President, testified under oath that based on his experience in the corporation Mr. Berner had divided responsibilities among Vice Presidents and that Mr. Ehinger was delegated matters relating to human resources and plan administration. App. at 249. Similarly, Mr. Carr, the corporation's labor counsel, submitted an affidavit showing that he always understood Mr. Ehinger to command operating authority with respect to Plan amendments, based on a delegation from Mr. Berner. App. at 420. Moreover, it is undisputed that both the human resources department and welfare benefits group reported directly to Mr. Ehinger and not to Mr. Berner. App. at 109-10. It is also not disputed that Mr. Ehinger had previously amended the Plan and reported to Mr. Berner about Plan administration. App. at 207.
Against all these affidavits, deposition testimony, and undisputed facts, the plaintiffs, who would bear the burden of proof on this issue at trial,5 have not set forth even the slightest quantum of evidence or reasonable factual inference to support a jury finding that Mr. Ehinger had no authority to amend Plan benefits. Nor does the record reflect any reasonable inference, whether through circumstantial evidence or otherwise, that Mr. Ehinger did not act under Mr. Berner's oral delegation of authority. While the plaintiffs аrgue that the absence of a written delegation creates an inference against authority, corporate law clearly allows for oral delegations of authority, see 2 Fletcher, supra, § 444, at 398 (citing Hessler, Inc. v. Farrell,
B. Did the Persons with the Necessary Authority Actually
Approve the Amended Plan?
Having identified the persons with thе necessary authority to amend CW's retirement benefits Plan, we must decide whether a person so situated actually exercised that authority in 1983. The record, as described above, shows that the analysis must focus on the authority delegated to Mr. Ehinger in his capacity as the corporation's Executive Vice President. We now turn to that record.
It is not disputed that Mr. DuBois, the Corporate Manager for Benefits, and Mr. Carr, CW's labor counsel, initially drafted the 1983 SPD amendment at issue providing for the termination of health benefits for a closed plant's retirees. As the parties agree, it is quite clear that if Mr. DuBois and Mr. Carr acted without the specific authorization of Mr. Ehinger, then the SPD amendment, without more, cannot be considered a valid corporate act on any delegation theory. The question then is primarily faсtual in nature--did Mr. Ehinger actually authorize the amendment to the Plan in 1983 terminating benefits? Once again, the district court denied summary judgment to CW on this question because, in its view, "the only evidence in the record on this issue is the deposition testimony of Ehinger [and] questions of credibility remain."
We reiterate at the outset that the burden of showing the unauthorized nature of the SPD amendment falls squarely on the plaintiffs. See Hozier v. Midwest Fasteners, Inc.,
Against this evidence, plaintiffs point to only two relevant instances in the record which they claim would allow a reasonable jury to conclude in their favor and therefore render the issue genuine. First, plaintiffs again emphasize that there is no documentation--whether a memorandum, resolution, or otherwise--reflecting Mr. Ehinger's actual exercise of authority. As we have stated before, however, the law recognizes an oral delegation or exercise of authority, which may be proved by parol evidence. See, e.g., 2 Fletcher, supra, § 444, at 398 (citing Hеssler, Inc. v. Farrell,
Plaintiffs also point to Mr. Ehinger's deposition testimony in 1986 where he stated:
It had been the policy of the Curtiss-Wright Corporation, which was put in practice in closing the East Paterson facility in 1971 ... [and] the Marquette facility, that post-retirement insurance would terminate at thе closing of the facility.
I expected my personnel to reflect such policy in such documents. I did not myself read the individual policies or question them where does it say what in it.
App. at 136 (emphasis added by plaintiffs). Plaintiffs argue that Mr. Ehinger's admission of not having read the individual benefits policies supports their contention that he did not specifically authorize the Plan amendment in 1983. We believe plaintiffs' conclusion is a non sequitur. Simply because Mr. Ehinger did not read the individual retirement health benefits policies does not mean that he did not authorize the change in the language of the amendment. In fact, Mr. Ehinger specifically states that he "expected [his] personnel to reflect such[a] policy in [the] documents," which at least raises an inference that he authorized any changes in the Plan that would cоnform to his expectations. Id. We therefore do not find this deposition testimony to create a genuine issue of material fact in the plaintiffs' favor.
Beyond these two arguments, which lack merit, plaintiffs do not identify any other instance in the record developed on remand that would render the question of Mr. Ehinger's exercise of authority a "genuine" dispute. This is not a case where a material issue of fact "cannot be resolved without observation of the demeanor of witnesses in order to evaluate their credibility." Advisory Committee Notes to Fed. R. Civ. P. 56(e). The record points in but one direction and, as a result, summary judgment for CW was proper.
III. Ratification
In view of our conclusions, we need not address the district court's reliance on the doctrine of ratification and its application to this case.'
IV. Conclusion
For the afоrementioned reasons, the judgment of the district court in Curtiss-Wright's favor will be affirmed.
Notes
The district court asserted subject matter jurisdiction pursuant to the civil enforcement provisions in ERISA, 29 U.S.C. § 1132. Jurisdiction of this court arises out of 28 U.S.C. § 1291 to review the district court's final order granting summary judgment
This addition to the SPD, found under the heading "Termination of Health Care Benefits," reads: "Coverage under this Plan will cease for retirees and their dependents upon the termination of business operations of the facility from which they retired." App. at 334
The Supreme Court cited Judge Roth's concurring reasoning on this point. See Curtiss-Wright,
Plaintiffs on appeal continue to press their argument that CW never intended to "amend" the Plan, but only sought to include this language as a "clarification" of existing coverage. We agree with the district court and find this issue settled by its initial finding, after a bench triаl, that "the language ... providing for a termination of benefits in the event of a plant closing constituted an amendment of the plan, not a clarification of existing terms...." App. at 34
As CW correctly points out, because plaintiffs seek affirmative relief in this action, they must establish the invalidity of the amendment in 1983 under both ERISA law, see Hozier,
We recognize that in certain situations discovery for a nonmoving party may be particularly difficult where the party seeking summary judgment has exclusive possession of all the material facts, thereby diminishing the nonmovant's ability to show a genuine issue. See, e.g., 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2740, at 536-37 (2d ed.1983); 6 James W. Moore, Moore's Federal Practice § 56.24, at 796 (2d ed.1996). The plaintiffs have never contended, however, that they faced such a problem during any discovery phase of litigation. Cf. Fed.R.Civ.P. 56(f) (allowing a district court to, among other things, "refuse application for judgment" if it appears "from the affidavits of a party opposing the motion that the party cannot for reasons stated present by affidavit facts essential to justify the party's opposition"). Indeed, we note that the plaintiffs exercised their right to cross-examine most material witnesses during their depositions. Consequently, the defendant was entitled to summary judgment in its favor notwithstanding the "desire ... for an opportunity to cross examine the [defendant's] witnesses in the hope of turning up something ..., at least in the absence of a showing, such as is contemplated by Rule 56(f), that all of the facts were necessarily within the exclusive knowledge of the plaintiffs and not accessible to the defendants." United States ex rel. Kolton v. Halpern,