*1 United States Court of Appeals
For the First Circuit
No. 02-2618
FRED W. KOLLING, III,
Plaintiff, Appellant,
v.
AMERICAN POWER CONVERSION CORPORATION,
Defendant, Appellee. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Reginald C. Lindsay, U.S. District Judge]
Before
Lynch, Circuit Judge,
Arnold,* Senior Circuit Judge,
and Howard, Circuit Judge.
John J. McNaught, with whom McNaught, Cecere & McNaught, P.C. were on brief for appellant.
Adam P. Forman, with whom John T. McCarthy, Brian P. Pezza and Testa, Hurwitz & Thibeault, LLP were on brief for appellee. October 16, 2003
* of the Eighth Circuit, sitting by designation
HOWARD, Circuit Judge . Plaintiff-appellant Fred W. Kolling, III, challenges an adverse summary judgment ruling that American Power Conversion Corporation's ("APC") denial of his claim for employee benefits neither violated the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461, nor breached a contractual obligation owed to him by APC. We affirm.
I. Background
In November 1989, Kolling responded to APC's classified advertisement seeking candidates for the recently vacated Chief Financial Officer position ("CFO"). APC's Chief Executive Officer, Roger Dowdell, subsequently interviewed Kolling as part of APC's broader CFO search. Although Dowdell did not address the specific compensation and benefits package Kolling might receive as CFO, he did discuss the benefits generally available to APC employees, such as the salary range, an employee stock ownership plan ("ESOP", "the Plan"), incentive stock options ("ISOs"), a medical plan, and health insurance. At the close of the interview, Dowdell advised Kolling that he planned to continue his CFO search, but that APC had an immediate need for accounting services, which Kolling could provide on a consultancy basis for $50.00 an hour. At that time, Dowdell advised Kolling that the parties "could see how it goes and . . . take it from there."
On November 25, 1989, Kolling began working for APC at its headquarters in Peace Dale, Rhode Island. From the outset, *3 Kolling submitted weekly invoices in which he billed APC for "consulting services rendered." Kolling reported IRS form 1099 income, not IRS form W-2 wages, and was not on APC's payroll. After two months, Kolling agreed to have his compensation reduced to $35 dollars an hour. Dowdell explained that the cutback was consistent with the salary a CFO might receive. Meanwhile, APC conducted two additional searches for a CFO.
From 1989 to 1993, Kolling remained a consultant. During that time, he worked 40 to 80 hours a week for APC, performing general accounting functions such as SEC reporting and budget planning. [1] Kolling did not participate in APC's employee benefit or stock option plans but did obtain health insurance through APC on the condition that he, not APC, pay the premiums. Although Kolling persistently pressed the issue of his employment status, APC did not place him on its payroll until May 24, 1993, when he assumed the position of Director of Finance. [2] For purposes of vacation days and vesting under the ESOP, APC gave Kolling credit for his service as a consultant.
In July 1995, Kolling resigned from APC to accept another job. Four years later, in August 1999, Kolling submitted a claim for benefits seeking contributions under the ESOP for the three- *4 and-a-half years he had consulted. In October 1999, APC's Plan administrator wrote Kolling to advise him, inter alia, that he was not eligible to participate in the ESOP prior to May 1993.
In denying Kolling's claim, the administrator primarily relied on the fact that Kolling had not been an eligible APC employee when he had served as a consultant. The Plan defined eligible employees as "Employees of the Employer" including "leased employees," but did not further define who was an "Employee of the Employer." Consistent with APC's business practice, the administrator applied a "W-2 definition" to the term "employee." Under this definition, only individuals paid on an IRS form W-2 basis were eligible to receive ESOP contributions. Accordingly, the administrator denied Kolling's claim.
Kolling appealed, but the Plan administrator stood by his decision that, from 1989 to 1993, Kolling was ineligible for ESOP contributions because he was not paid on a W-2 basis. In due course, Kolling brought this action alleging common law breach of contract and intentional misrepresentation. He subsequently amended his complaint to allege a claim for benefits under ERISA, 29 U.S.C. § 1132(b). At the close of discovery, APC moved for summary judgment. The court granted the motion, reasoning that the Plan administrator had not acted arbitrarily and capriciously in denying Kolling ESOP benefits, and that the arrangement between Kolling and APC was too indefinite to constitute a formal *5 employment contract under Rhode Island law. Kolling appeals these rulings. [3]
II. Standard of Review
Because the Plan reserves interpretive discretion to its
administrator,
[4]
judicial review of the eligibility determination is
limited to ascertaining whether the administrator acted arbitrarily
and capriciously. See, e.g., Lopes v. Metro. Life Ins. Co., 332
F.3d 1, 4-5 (1st Cir. 2003); Liston v. UNUM Corp. Officer Severance
Plan,
III. Analysis
A. ERISA Claim
Kolling first argues that the Plan administrator acted unreasonably when he relied on a definition of employee which defined employee to include anyone who received an IRS form W-2 rather than anyone who met the common law definition of employee. In Kolling's view, APC's endorsement of the administrator's interpretation would lead to mischief because an employer could, with impunity, misclassify a worker for its own financial benefit. Kolling asserts that the facts presented to the administrator during the appeals process, and later to the district court, demonstrate that he was APC's employee even though he was not on its payroll. [6]
Relying on Renda v. Adam Meldrum & Anderson Co., 806 F.
Supp. 1071, 1081 (W.D.N.Y. 1992), Kolling claims that because he
qualified as a common law employee he was entitled to benefits
under the ESOP. We disagree. So long as a plan does not
discriminate based on age or length of service, nothing in ERISA
*7
requires a plan to extend benefits to every common law employee.
See Bauer v. Summit Bancorp, 325 F.3d 155, 164 n.19 (3d Cir.
2003)(rejecting Renda's logic); Abraham v. Exxon Corp., 85 F.3d
1126, 1130-31 (5th Cir. 1996)(same); see also, Hensley v. Northwest
Permanente P.C. Ret. Plan & Trust,
Kolling may have a plausible argument that he was a common law employee of APC, but it is the language of the Plan, not common law status, that controls. Where, as here, the Plan adopts a circular definition of employee -- "Employee of the Employer" -- the Plan administrator has the discretion reasonably to determine the meaning of that phrase. See Trombetta, 102 F.3d at 1439-40 ("The phrase 'employed by an Employer' as used in the plan contains a defined term, and [the administrator] is free to define the terms in its plan however it wishes.").
According to the administrator, APC intended that only
individuals who received W-2 forms and "leased employees"
participate in the ESOP.
[7]
The administrator permissibly looked to
APC's intention in defining the Plan's scope, see Hensley, 258
F.3d at 1002 (noting that it was reasonable for the plan
*8
administrator to adopt a definition of employee that carried out
the plan's objectives), and the evidence supports the
administrator's determination regarding APC's intention. APC has
consistently declined to extend ESOP benefits to other individuals
who did not receive W-2 forms and were not leased employees. See
Bauer,
Within limits, ERISA affords employers broad discretion
to limit participation in their employee benefit plans -- even
where such an exclusion affects common law employees. See, e.g.,
Wolf v. Coca-Cola Co.,
B. Breach of Contract Claim
Kolling's second contention is that statements made to him by APC representatives established an employment contract between the parties. Kolling claims that, as a result of this supposed employment agreement, APC owes him several forms of compensation that were available to APC employees. [9] The district court held that Kolling and APC had not entered into an employment agreement. While acknowledging that Kolling had entered into an agreement with APC to provide consulting services in November 1989, the court concluded that APC's representations to Kolling, beginning from his initial interview in November 1989 and continuing until he assumed the position of APC's Director of Finance in May 1993, were too indefinite to establish an employment contract. We agree with the court's analysis.
Because both parties assert that their contract dispute
is governed by Rhode Island law, we will apply that state's law in
analyzing Kolling's claim. See Merchs. Ins. Co. of N.H., Inc. v.
USF&G Co.,
314, 319 (1st Cir. 1936)). For an employment contract, "the
essential terms . . . include expressions of definiteness or
certainty as to the parties to be bound by the contract, the
compensation paid and the nature and extent of service to be
performed." Lopez v. Personnel Appeal Bd., No. 99-41551, 2002 WL
393847, at *6 (R.I. Super. Ct. Mar. 4, 2002)(internal quotations
omitted); see Ferrera v. Carpionato Corp.,
To support his claim, Kolling identifies several representations made by Dowdell, including statements that (1) Dowdell would make a decision on Kolling's employment status in a few more interviews; (2) he would discuss employment with Kolling "in a week or two"; (3) he would discuss permanent employment with Kolling "tomorrow, not right now"; and (4) he "would see how [the consulting work went] and at that point . . . [would] make it *11 permanent." To be sure, Dowdell's statements likely encouraged Kolling to believe that, at some future time, APC would offer him employment. However, whether taken individually or cumulatively, these statements are too indefinite to establish an employment contract under Rhode Island law.
None of Dowdell's representations bound APC to employ
Kolling. The statements merely pushed the time of decision on
Kolling's employment prospects to some future date. See Smith v.
Boyd,
C. Common Law Employee Claim
Kolling asserts a final theory for relief. He claims that regardless whether APC's representations established an employment contract, his actual relationship with APC qualified him as a common law employee, which entitled him to employee benefits. The district court declined to consider this claim and so do we.
In his initial complaint, Kolling pled this "common law
employee claim." However, this claim is conspicuously absent from
Kolling's amended complaint. Kolling's breach of contract claim in
the amended complaint is premised solely upon APC violating its
"continuous representations" of employment. Kolling's amended
complaint completely supersedes his original complaint, and thus
the original complaint no longer performs any function in the case.
See Lopez-Carrasquillo v. Rubianes, 230 F.3d 409, 412 (1st Cir.
2000); 6 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane,
Federal Practice & Procedure § 1476 (2d ed. 1990) ("Once an amended
pleading is interposed, the original pleading no longer performs
any function in the case."). By omitting "the common law employee
claim" from the amended complaint, Kolling abandoned it. See
Cicchetti v. Lucey, 514 F.2d 362, 365 n.5 (1st Cir. 1975); see
also, Carver v. Condie,
Kolling seeks to avoid this waiver problem by arguing that he included "the common law employee claim" in his amended complaint by referencing facts and attaching documents, which suggest his common law employee status. Nowhere in Kolling's amended complaint did he clearly explain that these facts were intended to comprise a theory of recovery separate from the specified counts. While Kolling could have raised an additional claim by reference, see Fed. R. Civ. P. 10(c), he was required to plead the claim with sufficient specificity that APC could have recognized that an additional claim had been asserted against it. See 5 Wright & Miller, Federal Practice & Procedure § 1326 ("references to prior allegations must be direct and explicit in order to enable the responding party to ascertain the nature and extent of the incorporation"). Kolling did not do so.
Affirmed.
Notes
[1] Kolling's yearly consulting fees were $94,360, $119,245, and $120,540 in 1990, 1991 and 1992, respectively.
[2] Kolling received APC's full complement of benefits when APC placed him on its payroll.
[3] The district court also granted summary judgment on Kolling's intentional misrepresentation claim. Kolling does not pursue that claim on appeal.
[4] The relevant provision of the Plan states that the Plan administrator shall determine any questions arising in the administration, interpretation and application of the Plan,. . . and the decision of the Administrator shall be conclusive and binding on all persons.
[5] Kolling contends that our review should be less deferential
because the Plan administrator allegedly labored under a conflict
of interest. Circuit precedent precludes this argument. See , e.g.,
Lopes,
[6] Kolling also argues that the district court erroneously
ignored the report and deposition testimony of his expert, Helen
Marmoll. According to Kolling, Marmoll's testimony casts doubt on
APC's classification of Kolling as an independent contractor. But
this evidence was not before the Plan administrator at the time of
his decision. Except for certain sorts of claims, such as a claim
of corruption (not presented here), there is a strong presumption
that judicial review is limited to the evidentiary record presented
to the administrator. See Liston,
[7] A leased employee is an individual who performed services for APC as a result of a contract between APC and a third party.
[8] Kolling makes a blanket allegation that the Plan administrator did not consider the information he presented as part of his administrative appeal. In the letter denying Kolling's appeal, however, the administrator stated that he had considered Kolling's submissions as well as his testimony during the hearing. Kolling presents us with no basis to question this statement.
[9] Kolling claims entitlement to incentive stock options, FICA contributions, bonuses, vacation pay, educational pay, and sick pay.
[10] We note that this is not a case in which the district court
dismissed, as a matter of law, Kolling's "common law employee
claim" from the original complaint, which would have made the
waiver issue much more difficult. Compare Marx v. Loral Corp., 87
F.3d 1049, 1055 (9th Cir. 1996) (holding that party waived right to
appeal where district court dismissed claim from original complaint
and party failed to re-plead dismissed claim in amended complaint)
with Davis v. TXO Prod. Corp.,