Jim L. WOOLSEY, Plaintiff-Appellant,
v.
MARION LABORATORIES, INC.; Marion Laboratories, Inc.,
Profit Sharing Plan, Defendants-Appellees.
No. 90-6011.
United States Court of Appeals,
Tenth Circuit.
June 4, 1991.
Steven M. Angel, Oklahoma City, Okl., for plaintiff-appellant.
Keith M. Pyburn, Jr. of McCalla, Thompson, Pyburn & Ridley, New Orleans, La., (Howard Shapiro and Heather G. Magier of McCalla, Thompson, Pyburn & Ridley, New Orleans, La., and Page Dobson of Holloway, Dobson, Hudson and Bachman, Oklahoma City, Okl., with him on the briefs), for defendants-appellees.
Before McKAY, ANDERSON, Circuit Judges, and BROWN,* District Judge.
STEPHEN H. ANDERSON, Circuit Judge.
Jim L. Woolsey brought this action in district court against Marion Laboratories, Inc. ("Marion") and the Marion Laboratories, Inc. Profit Sharing Plan (the "Plan"), (collectively referred to as "defendants"), claiming that the form in which the Plan distributed his vested benefits violated 29 U.S.C. Secs. 1132 and 1140, part of the Employee Retirement Income Security Act ("ERISA"). On appeal, Woolsey, first, seeks reversal of the district court order granting summary judgment to the defendants and, second, claims that the district court erred in denying his motion to amend. We affirm.
BACKGROUND
Mr. Woolsey worked for Marion for over seventeen years until he resigned on November 11, 1985. Throughout Woolsey's employ, Marion maintained the Plan, subject to the provisions of ERISA, to pay benefits to eligible employees upon retirement, death, disability, or other separation from service. The Plan is funded with annual contributions from Marion, with all such monies, once contributed, belonging irrevocably to the Plan. The Plan Administrators, appointed by the Marion Board of Directors, also serve as officers of Marion. When Woolsey resigned, he was 100% vested in the Plan and was entitled to $234,631.82 in benefits.
In a letter dated November 27, 1985, Marion asked Woolsey whether he preferred to receive the portion of his vested benefit allocated to the Marion Fund (a particular fund invested primarily in Marion stock) in cash, stock, a combination of the two or periodic cash installment payments. Woolsey requested 50% of his benefit to be paid in cash and the remaining 50% in Marion stock. After a claims review meeting on February 24, 1986, the Administrators exercised the discretion reserved to them under Section 7.1 of the Plan and denied Woolsey's request. They then informed Woolsey of their decision and tendered checks to him for the full amount of his vested benefit. A short time later, a stock split occurred, significantly increasing the value of Marion stock.
Woolsey returned the checks to Marion and requested that Marion issue a check for half of the amount due from the Marion Fund ($109,856.65) and requested a review of the Administrators' decision regarding the form of the other half of his benefit payment. Marion complied and issued the check, noting that Woolsey's request had been denied because of the "special circumstances surrounding [his] termination." R. Doc. 41, Exh. B-6. Subsequently Marion advised Woolsey that a hearing would be held on December 15, 1986.
At the December hearing, the Administrators heard from Charlie Dalton, counsel for Marion, and two employees of Marion--Norm Craig, a regional manager, and Steve Krohne, manager of personnel support services. They presented the following evidence: In July, Woolsey had been informed by Myrna West, his new district manager, that she did not care how he had sold pharmaceuticals in the past, but she wanted to run a "clean ship" from then on. Woolsey allegedly told her that she would not discover any unethical activities as she reviewed the books. In early September, West told Craig that she had discovered that Woolsey had been selling pharmaceuticals outside his designated area for some time. Craig and Krohne flew down to Oklahoma to talk with Woolsey and get more information about what may have happened. Craig stated that he did not intend to "nail" Woolsey and, indeed, had a great deal of respect for Woolsey who had become a member of the Marion "M Club," "the most coveted [salesmanship] organization in th[e] company." R. Doc. 41, Exh. G at 22. Woolsey allegedly admitted to Craig that, after he had spoken with West, he had breached Marion policy and procedure by working outside the boundaries of his territory, essentially stealing sales from his coworkers, and adding samples and stock pharmaceuticals to regular orders in order to "sweeten the pot" and encourage pharmacists to place larger orders. Woolsey also allegedly admitted that he had falsely reported lost pharmacy orders to obtain the replacement drugs and to give large amounts of credit to his customers. Craig and Krohne stayed in Oklahoma for three days, talking with West, Woolsey and several other employees. They then returned to Kansas and reported their findings to the senior management at Marion. The Marion officials requested Woolsey to come to Kansas, presumably for further investigation and discussion. Woolsey then resigned and refused to go to Kansas.
After presentation of this information, Woolsey and his attorney were allowed to enter the room and submit any information or arguments for reversal of the Administrators' prior decision regarding the form of payments to Woolsey. Woolsey's counsel argued that the acts taken by the Administrators were not in the best interests of the beneficiaries, that they had acted improperly because of an alleged conflict of interest and that any discipline for Woolsey's alleged misconduct should have been part of his termination proceedings, not part of his benefit payment proceedings. He also argued that Woolsey had been deprived of a property right in his vested benefits and that an employee's conduct should serve as the basis for the Plan's vesting requirements, not for determining the form of vested payments.
The Administrators subsequently informed Woolsey that they affirmed their prior decision that "special circumstances" existed justifying the denial of the stock distribution. Such circumstances included, but were not limited to, a number of Woolsey's abuses of company policy: pursuing and obtaining orders for Marion products outside his assigned territory; supplying customers with sample and stock pharmaceuticals to persuade them to increase or place an order with himself; writing unauthorized credits to pharmacies for "lost" product; and, obtaining additional product to "buy orders" from customers. In addition, they noted that Woolsey had been advised that he must discontinue such practices by his superior and had not. They stated:
The Administrators believe that if they were to reward associates leaving under less than admirable conditions by granting them Marion stock, the stock price would likely decrease to the detriment of the remaining participants in the Plan, which would have not only an adverse monetary affect on the overall value of the Plan, but an adverse affect on associate morale as well.
R. Doc. 41, Exh. B-10 at 2.
The defendants admit that this is the first time that the Administrators have ever denied an otherwise eligible associate's request for payment of half of his benefits in stock.
Woolsey filed his complaint on April 18, 1988 alleging that he had been denied his vested benefit rights in violation of 29 U.S.C. Sec. 1132 and that the Plan had discriminated against him in violation of 29 U.S.C. Sec. 1140. On March 31, 1989, the defendants filed a motion to dismiss, or in the alternative, for summary judgment. Both parties extensively briefed that motion. On September 16, 1989, nearly 17 months after the filing of the complaint, Woolsey filed a motion for leave to file an amended complaint adding new parties and another cause of action against the defendants for having failed to provide him with requested information regarding the denial of benefits and the appeal of that denial as required under ERISA. The district court denied that motion on October 13, 1989 because it would necessitate additional delay and expense to the parties and because "[n]o evidence is available now which Woolsey was not aware of or could have been aware of when the case was filed." R.Vol. I, Tab 64.
On December 11, 1989, after oral argument on the issue, the district court held that there was no evidence indicating that Marion and the Plan acted arbitrarily or capriciously in determining the form of benefit payments to Woolsey or that they had discriminated against him in order to prevent him from exercising his pension rights. R.Tab 68. Finding no genuine issue of material fact supporting Woolsey's claims, the district court granted defendants' motion for summary judgment.
Woolsey now appeals both of the district court's holdings and reurges his arguments on appeal.
SUMMARY JUDGMENT
Woolsey contends that the district court erred in granting the defendants' motion for summary judgment and argues that there are substantial factual disputes which should be litigated at trial. We disagree.
On appeal from a summary judgment order, we apply the same standard employed by the district court in reviewing the Administrators' decision. Applied Genetics Int'l, Inc. v. First Affiliated Secur., Inc.,
Denial of Benefit Payment in Stock: Sec. 1132
Woolsey first challenges the trial court's grant of summary judgment regarding the Administrators' alleged violation of 29 U.S.C. Sec. 1132 in denying Woolsey's request for payment in Marion stock. The decisions of the administrators of a pension plan will be upheld unless they are arbitrary and capricious, not supported by substantial evidence or erroneous on a question of law. Pratt v. Petroleum Prod. Management, Inc. Employee Sav. Plan & Trust,
The Plan before us expressly provides that, upon termination of employment, the full amount of an employee's pension benefits
shall be distributed to the Member as the Plan Administrator, in his sole discretion, after consulting with the Member, shall determine and direct, either:
(a) As a lump sum payment in cash or in kind, or part in cash and part in kind.
(b) In annual installments over a period of years....
(c) Any combination of the foregoing.
R. Doc. 41, Exh. A, Sec. 7.1 at 30 (emphasis added). Furthermore, the Plan grants the Administrator "full and complete authority, responsibility, and control over the management, administration and operation of the Plan, including, but not limited to, the authority to ... [m]ake appropriate determinations ... of the distributions due Members under the Plan [and a]uthorize and direct payment of benefits." Id. Sec. 13.3 at 50; see Pratt v. Petroleum Prod. Management, Inc. Employee Sav. Plan & Trust,
Woolsey contends that he has been denied his vested pension benefits because the Plan denied his request for partial payment in stock. However, "ERISA does not mandate any specific mode of payment for retirement benefits." Oster v. Barco of Cal. Employees' Retirement Plan,
The Plan does not guarantee payment of benefits in the method preferred by eligible participants. Instead, it expressly grants the Administrators sole discretion in determining the form of payment. Thus, despite Woolsey's valiant attempts to convince us otherwise, he did not have a right to payment in stock and the Administrators' decision to pay the entire vested amount in a lump sum did not deprive him of a vested benefit.
Even so, we must now determine if the Administrators' reasons for denying Woolsey's request were so insufficient or unreasonable as to be arbitrary and capricious. Oster v. Barco of Cal. Employees' Retirement Plan,
Woolsey asserts several bases for his contention that the Administrators acted arbitrarily and capriciously. We deal with each in turn. First, he contends that ERISA prohibits the denial of benefits because of alleged wrongdoing during employment. In support of his argument, Woolsey cites to McLaughlin v. Lindemann,
Here, as discussed above, the Administrators have not used Woolsey's alleged misconduct in order to avoid paying him his rightful benefits. They have considered evidence of Woolsey's actions only in determining the form of those benefits. Other courts have held that fiduciaries exercising discretion as to the form of pension benefits may properly consider acts of the claimant which adversely affect the employer or which violate company policy. In Severs v. Allied Const. Services, Inc.,
obligation to the remaining participants not to reward [a] former employee whose conduct may impair the Profit Sharing Plan's funding and valuation by reducing the amount of profits generated by Allied's business [and on the claimant's] failure to present facts which show extraordinary need or hardship that would justify a different determination under the circumstances....
Severs v. Allied Const. Services, Inc.,
Furthermore, ERISA requires that the Plan be administered with an eye solely to the best interests of all the beneficiaries. "[T]o award those departing employees with a financial windfall would in fact have preferred them at the expense of the entire trust." Morse v. Stanley,
Second, Woolsey argues that the Administrators acted arbitrarily in failing to comply with the 1982 Guidelines adopted by the Plan to assist them in exercising their judgment in authorizing stock payments. Woolsey contends that those Guidelines establish the exclusive set of factors that the Administrators may consider and asserts that the Guidelines require the Administrators to pay all "long-term associates" in stock, if requested. The Guidelines state, in part:
[The Administrators'] objective is to make sure that long-term associates currently terminating, as well as those terminating in the future will have available to them an adequate number of Marion shares should they request a stock distribution from their Marion Fund assets.... In the absence of special circumstances, the Plan Administrators will probably allow Plan Participants to have up to 50% of their Marion Fund assets distributed to them in Marion shares if they are early or normal retirees, disabled associates or deceased associates, or if they have become fully vested or have ten or more years of service.... Notwithstanding the foregoing guidelines, the Administrators, in all cases, will reserve discretion in determining which Participants may receive stock distributions and the amount thereof, taking into account the unique needs of any terminating Participant, the number of shares in the Marion Fund and other investments and cash or cash equivalents in the Marion Fund.
R. Doc. 41, Exh. B-7. Nothing in the Guidelines indicates that it is an exclusive list of factors for determining the manner of payment of benefits or that all "long-term associates" will automatically receive stock if they request such payment. Nor is the consideration of performance or misconduct during employment specifically excluded. Instead, the Guidelines expressly leave the ultimate payment decision in the Administrators' sole discretion and even suggest that other unlisted "special circumstances" may exist justifying the denial of a request for stock payment.
Third, Woolsey contends that the Administrators acted arbitrarily and capriciously because they acted under a conflict of interest. He alleges that the Administrators, all stockholders and participants in the Plan, operated as agents of Marion in order to punish him for his conduct during his employment rather than acting solely in the interest of the beneficiaries. He also claims that they knew a stock split was imminent and purposely denied him the benefit of the increased stock value to enhance their own position. He asserts that, under Firestone Tire & Rubber Co. v. Bruch,
Bruch acknowledged that if an administrator or fiduciary operates under a conflict of interest, that conflict is a relevant factor in determining whether the administrator abused his discretion. Firestone Tire & Rubber Co. v. Bruch,
In addition, Woolsey fails to argue that a real conflict exists. Woolsey suggests only that Marion obtained some type of psychic benefit from punishing him for his misconduct. He does not contend, nor does the record support, a finding that Marion financially benefited in any way from the Administrators' choice of distribution. Rather, while Marion makes contributions to the Plan's fund, the Plan has a nonreversion clause stating that "the Company shall not have any right, title, or interest in the contributions made by it under the Plan and no part of the Trust Fund shall revert to it or for its benefit." R. Doc. 41, Exh. A, Sec. 12.2 at 47. Thus, Marion incurs no direct expense as a result of favorable benefit payments to beneficiaries nor benefits from denials of payment. Instead, the retention of stock by the Plan solely enhances the viability of the Plan's fund and the denial of Woolsey's claim benefits only future beneficiaries, not Marion. See De Nobel v. Vitro Corp.,
That the Administrators themselves may incidentally benefit by the retention of stock in the Marion Fund as future beneficiaries of the Plan similarly suggests no presumptive conflict of interest. Donovan v. Bierwirth,
Fourth, Woolsey contends that since the defendants had granted all prior claimants' requests for payment of pension benefits in Marion stock, they have acted arbitrarily and capriciously in denying his request. In determining whether the administrators acted arbitrarily and capriciously in denying a claimant's request for payment of his benefits in a lump sum, the Second Circuit stated that:
Whether the [Administrators] had in the past granted acceleration to employees who requested it does not mean that they had donned a discretionary strait-jacket which held them bound to grant acceleration in all cases as a matter of course. On the contrary, the Plan gave them broad discretion to evaluate requests for accelerated distribution on a case by case basis.
Morse v. Stanley,
Woolsey also argues that the decision of the Administrators should be overturned because it was not based on substantial evidence. He apparently argues that the evidence was insufficient because he was unable to refute or challenge Craig and Krohne's allegations of misconduct because he was not present during their presentation and because he did not know why his request had been denied prior to the hearing.1
In determining whether the decision was supported by substantial evidence, we consider only the facts before the Administrators at the time of their decision. Perry v. Simplicity Engineering,
Woolsey finally argues that the defendants violated the requirements of 29 U.S.C. Sec. 1133 in failing to provide him with adequate notice and specific explanation for the denial of his request and claims that his hearing was unfair, unduly delayed and denied him fundamental due process. However, ERISA and the Plan only require such notice and review in cases where a plan participant is denied his benefit. The denial of requests for certain forms of benefits, rather than for the benefit itself, do not require notice or review under Sec. 1133. Pompano v. Michael Schiavone & Sons, Inc.,
In sum, Woolsey was entitled to the full value of his benefits. That is all ERISA protects. That is all the Plan grants him. Woolsey complains now because the stock he desired has substantially increased in value. However, he has no legitimate expectation in anything more than the value of his vested benefit at the time of valuation and has no right, statutory or contractual, to a windfall resulting from the subsequent increased value of the Marion stock. Woolsey has been tendered the full amount of his vested benefit and is entitled to no more.
We find that there is no material fact in dispute as to whether the defendants acted arbitrarily and capriciously in denying Woolsey's payment request and that, as a matter of law, the defendants should prevail.
Discrimination: Sec. 1140
Woolsey argues that, in denying him his preferred form of payments, the defendants discriminated against him in violation of 29 U.S.C. Sec. 1140 and that the district court erred in granting summary judgment on this issue. He alleges that the defendants refused to grant his payment request, although granted to every other participant who had requested such payment, in order to "punish" him for his alleged wrongdoing during his employ. He suggests, without support, that Sec. 1140 should be read broadly to reach conduct "where the employer interferes with a participant's election of a benefit." Appellant's Brief at 27 (emphasis added). We disagree.
Section 1140 states, in relevant part, that:
It shall be unlawful ... to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary ... for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan [or this Act].
Woolsey has presented no actionable claim under this section. First, as discussed above, he has not been deprived of a vested right. West v. Greyhound Corp.,
designed to protect the employment relationship against actions designed to interfere with, or discriminate against, the attainment of a pension right.... Simply put, [Sec. 1140] was designed to protect the employment relationship which gives rise to an individual's pension rights. West v. Butler,
Deeming v. American Standard, Inc.,
Since Woolsey has failed to state any facts that would support a Sec. 1140 claim, the district court order of summary judgment was correct.
DENIAL OF MOTION TO AMEND COMPLAINT
Woolsey contends that the district court erred in denying his motion to amend his original complaint pursuant to Federal Rule of Civil Procedure 15(a). We disagree.
The decision to grant leave to amend a complaint, after the permissive period, is within the trial court's discretion, Fed.R.Civ.P. 15(a), and will not be disturbed absent an abuse of that discretion. Las Vegas Ice and Cold Storage Co. v. Far West Bank,
Woolsey argues that "motions [to amend] are to be denied only when the delay in seeking amendment is motivated by bad faith or is prejudicial to defendants." Appellant's Brief at 18. Thus, he contends that since the defendants have not been prejudiced, the court's denial constituted error. While prejudice may be one ground justifying a denial of leave to amend, such a showing is not necessary. Indeed, "[u]ntimeliness alone may be a sufficient basis for denial of leave to amend.... [P]rejudice to the opposing party need not also be shown." Las Vegas Ice and Cold Storage Co. v. Far West Bank,
Woolsey filed his motion to amend nearly 17 months after the filing of the original complaint. Because the motion was untimely, the court acted within its discretion in denying the motion. In addition, Woolsey offered no explanation for the delay, another factor supporting a denial of leave to amend. Las Vegas Ice and Cold Storage Co. v. Far West Bank,
Furthermore, the court specifically noted that no new evidence that was unavailable at the original filing had come to Woolsey's attention. "Where the party seeking amendment knows or should have known of the facts upon which the proposed amendment is based but fails to include them in the original complaint, the motion to amend is subject to denial." Las Vegas Ice and Cold Storage Co. v. Far West Bank,
Given the untimely filing of the motion and the lack of new information justifying the delay in adding a new claim, we find that the district court acted within its discretion in denying Woolsey's motion to amend.
In accordance with the foregoing, we AFFIRM.
Notes
Hon. Wesley E. Brown, United States District Judge for the District of Kansas, sitting by designation
These complaints fall flat in light of Woolsey's counsel's references at the hearing to Woolsey's conduct during employment and his arguments that any misconduct by his client should be reviewed solely in termination proceedings or as conditions to vesting of retirement benefits, not in determining the form of such benefits. Indeed, his counsel stated, "The conclusion that I have to make on what information has been furnished me both by letter and directly is that this is some sort of punishment for a purported job misbehavior." R. Doc. 41, Exh. G at 56. In addition, the Administrators had previously informed Woolsey that they had denied his request "after serious consideration of the special circumstances surrounding [his] termination." R. Doc. 41, Exh. B-6. Having such notice, we can only conclude that Woolsey and his attorney knew of the specific reasons for the denial of his request or at least had the opportunity at the hearing to question the Administrators about those reasons. They failed to do so and cannot now claim that they were unable to challenge any erroneous beliefs the Administrators may have held regarding Woolsey's employment