Kemmerer v. ICI Americas Inc. , 70 F.3d 281 ( 1995 )

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
11-17-1995
Kemmerer v ICI Americas Inc.
Precedential or Non-Precedential:
Docket 95-1071
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_________________
Nos. 95-1071 and 95-1098
_________________
JOHN L. KEMMERER; JAMES H. JORDAN,
Appellants in No. 95-1071
v.
ICI AMERICAS INC.
JOHN L. KEMMERER; JAMES H. JORDAN
v.
ICI AMERICAS INC.,
Appellant in No. 95-1098
_________________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 92-5986)
_______________
Argued October 11, 1995
BEFORE: GREENBERG, LEWIS, and ROSENN, Circuit Judges
(Filed: November 17, 1995)
______________
Theodore R. Mann (argued)
Carol J. Sulcoski
Sharon C. Weinman
Mann, Ungar & Spector, P.A.
1709 Spruce Street
Philadelphia, PA 19103
Attorneys for
John L. Kemmerer
and John H. Jordan
Michael L. Banks (argued)
1
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103
Attorneys for
ICI Americas Inc.
_______________________
OPINION OF THE COURT
_______________________
GREENBERG, Circuit Judge.
In this case, arising under the Employee Retirement
Income Security Act (ERISA), the district court held that the
defendant company breached the terms of the executive deferred
compensation plan that it offered to its highly compensated
employees. Yet it also held that the appellants -- participants
in that plan -- failed to prove they suffered any damages as a
result of the breach. We hold that the district court correctly
decided both issues and therefore we will affirm its judgments.
I. Introduction
Appellants John L. Kemmerer and James H. Jordan were
high level executives of the defendant, ICI Americas Inc.0 ICI
offered its employees the opportunity to participate in a number
of benefit plans. The dispute on appeal centers around its
executive deferred compensation plan (the DEC plan), which like
0
ICI Americas Inc. explains in its brief that it has changed its
name to Zeneca Inc. and that the company now known as ICI
Americas Inc. is an entirely different corporation which came
into existence as a result of a reorganization of the business
that began in late 1992. Nevertheless, as a matter of
convenience, we refer to the defendant as ICI.
2
all such plans is commonly referred to as a "top hat" plan.
Specifically, ICI encouraged its high level executives to
participate in the DEC plan, under which participants deferred
receipt of a percentage of their income, and thus initially
reduced their annual taxable income. Although the DEC plan was
unfunded, its participants were allowed to track or shadow
investment portfolios available to participants of an ICI
deferred contribution plan. ICI would credit the participants'
balances in the DEC plan as though the hypothetical investments
actually had been made. Appellants participated in the DEC plan.
An executive's account balance in the DEC plan became
payable after the executive left ICI's employ. The DEC plan
permitted participants to elect the method of payment by which
distributions would be made. In this regard, the plan was
amended on February 1, 1985, to state:
Amounts deferred under this agreement shall
be paid to Optionee commencing January 15 of
the year following the year of his separation
from service in five percentage installments
. . . unless, prior to separation from
service the Optionee files a written notice
with the Secretary of Company, ('Secretary')
requesting a different form of distribution.
Such notice shall be treated as an election
by the Optionee to receive payment by the
method requested. The method of distribution
requested shall be irrevocable after the
close of business on the date of Optionee's
separation from service.
Kemmerer v. ICI Americas, Inc., 842 F. Supp. 138, 139-40 (E.D.
Pa. 1994).0 Pursuant to this provision, "Jordan elected to have
0
We simplify our discussion of ICI's plans to encompass only what
is relevant on appeal. The district court's opinion discusses
3
his DEC benefits paid in specific annual amounts until the year
2007. Kemmerer elected to have his plan balance distributed in
fixed annual amounts until such time as his account balance would
be exhausted." Id. at 140. After Kemmerer and Jordan retired
(in 1986 and 1989 respectively), ICI began distributing their
benefits in accordance with their respective elections. In 1991,
however, ICI unilaterally decided to terminate the DEC plan. At
that point, rather than complying with its retired executives'
elections, ICI decided to distribute their accumulated account
balances in three annual installments, with 10% interest on the
unpaid balances, to be paid in January 1992, January 1993, and
January 1994. ICI advised appellants of this change by letters
dated November 29, 1991.
On October 16, 1992, after ICI made one payment on the
new distribution schedule, appellants filed this action in the
district court contending that, by terminating the DEC plan after
their rights in it had vested, ICI breached its contractual
obligations and thereby violated ERISA. They requested monetary
damages for the benefits lost as a consequence of ICI's breach of
the plan. In this litigation, they contend that the early
termination of the plan had adverse tax consequences to them and
required them to incur fees for financial management they
otherwise would not have incurred. They do not contend, however,
that ICI did not pay them the full amount of their account
balances. Consequently, they are in the position, unusual if not
the various plans in greater detail. See Kemmerer, 842 F. Supp.
at 139-40.
4
unprecedented for plaintiffs, of suing for damages because they
were paid money owed to them. Eventually appellants and ICI
filed cross-motions for summary judgment on liability, and ICI
filed a motion for summary judgment on damages. In an opinion
filed on January 4, 1994, reported at 842 F. Supp. 138, the
district court granted appellants' motion for summary judgment on
liability, and denied ICI's motions on both liability and
damages. The court entered an order on January 5, 1994, in
accordance with its opinion.
The district court held a nonjury damages trial in
October 1994. In an unreported memorandum opinion filed on
December 22, 1994, the court rejected appellants' argument that
ICI had the burden of proof and held that appellants had failed
to prove that they suffered damages as a result of ICI's conduct.
Accordingly, it entered a judgment in favor of ICI on December
23, 1994. On January 19, 1995, the parties stipulated, and the
court ordered, that all claims except those for attorneys' fees
and costs had been resolved. The court stayed proceedings as to
those items pending the completion of this appeal. Both parties
then filed appeals, appellants from the order of December 23,
1994, and ICI from the order of January 5, 1994.
Arguably, we should dismiss ICI's appeal, as ICI could
challenge the district court's finding of liability in this court
as an alternative ground for us to affirm. See Armotek Indus.,
Inc. v. Employers Ins. of Wausau, 952 F.2d 756, 759 n.3 (3d Cir.
1991). But we will not do so because appellants have filed a fee
petition which, as we have indicated, the district court has
5
stayed pending disposition of this appeal. Thus, even though we
affirm on the damages issue, ICI may be aggrieved by the judgment
on liability, because the district court may conclude that, on
the basis of that judgment alone, it can award the appellants
counsel fees.0 Of course, we express no opinion on this point.
However, in view of ICI's success at trial on the damages issue,
its appeal from the denial of its motion for summary judgment on
damages is moot and we will not consider it. See McDaniels v.
Flick, 59 F.3d 446, 448 n.1 (3d Cir. 1995). We have jurisdiction
over appellants' appeal pursuant to 28 U.S.C. § 1291. The
district court exercised diversity of citizenship and federal
question jurisdiction under 28 U.S.C. § 1332(a) and 29 U.S.C.
§1132(e).
II. Discussion
A. Liability
We first consider whether the district court erred in
concluding that ICI breached the terms of the DEC plan. We
exercise plenary review on this issue as the district court
granted the appellants' motion for summary judgment. See
0
In theory, we could conclude that until such time as the
district court enters an award of fees against ICI, if it does
so, ICI has not been aggrieved by the liability judgment and that
we therefore should dismiss its appeal. However, we will not
take that approach, as the liability issue has been briefed fully
and, in any event, we can consider ICI's challenge on that issue
as an alternative basis to affirm. Furthermore, we think that
resolution of the liability issue at this time may aid in
concluding this case. Of course, there is no doubt but that we
have the power to consider the issue. See United States v. Tabor
Court Realty Corp., 943 F.2d 335, 342-44 (3d Cir. 1991), cert.
denied, 502 U.S. 1093, 112 S.Ct. 1167 (1992).
6
Petruzzi's IGA Supermarket, Inc. v. Darling-Delaware Co., 998
F.2d 1224, 1230 (3d Cir.), cert. denied, 114 S.Ct. 554 (1993).
With the passage of ERISA, Congress set out to "assure
the equitable character of employee benefit plans and their
financial soundness." Moench v. Robertson, 62 F.2d, 553, 560 (3d
Cir. 1995) (citing Central States, Southeast and Southwest Areas
Pension Fund v. Central Transp., Inc., 472 U.S. 559, 570, 105
S.Ct. 2833, 2840 (1985)) (internal quotations and alterations
omitted). ERISA broadly defines the terms "employee pension
benefit plan" and "pension plan" to include any plan established
or maintained by an employer that, by its express terms:
results in a deferral of income by employees
for periods extending to the termination of
covered employment or beyond, regardless of
the method of calculating the contributions
made to the plan, the method of calculating
the benefits under the plan or the method of
distributing benefits from the plan.
29 U.S.C. § 1002(2)(A)(ii). Thus, top hat plans clearly are
subject to ERISA. Nonetheless, not every type of pension plan is
subject to all of ERISA's stringent requirements. Congress
imposed strict regulations over plans whose participants and
beneficiaries it most desired to protect -- employer-funded plans
designed to secure employees' financial security upon retirement.
ERISA imposes upon the trustees and sponsors of such plans strict
fiduciary duties and standards of care and further provides for
detailed disclosure and vesting requirements. Top hat plans,
however, which benefit only highly compensated executives, and
largely exist as devices to defer taxes, do not require such
7
scrutiny and are exempted from much of ERISA's regulatory scheme.
See Barrowclough v. Kidder, Peabody & Co., 752 F.2d 923, 930 n.7
(3d Cir. 1985).0 In particular, top hat plans are not subject to
certain vesting, participation, and fiduciary requirements. Id.
at 930-31. But despite the exemption of top hat plans from many
of ERISA's regulations, ERISA's enforcement provision clearly
permits participants in top hat plans, as well as other covered
plans, to bring civil actions "to enforce the substantive
provisions of the Act or to recover benefits due or otherwise
enforce the terms of the plan." Id. at 935; see 29 U.S.C.
§1132(1)(B) ("A civil action may be brought by a participant or
beneficiary to recover benefits due to him under the terms of his
plan, to enforce his rights under the terms of the plan, or to
clarify his rights to future benefits under the terms of the
plan.").
Contrary to ICI's intimations, then, Congress' decision
to exempt top hat plans from certain fiduciary standards does not
mean that courts may not review their trustees' and sponsors'
actions. Rather, the exemption means only that they are not held
to the strict fiduciary standards of loyalty and care otherwise
applicable to ERISA fiduciaries.
In holding that ICI breached the terms of the plan, the
district court appropriately applied contract principles. As we
0
We overruled Barrowclough insofar as it held that arbitration of
statutory ERISA claims is precluded in Pritzker v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 7 F.3d 1110 (3d Cir. 1993), but
Barrowclough remains good law on the points for which we cite it
here.
8
pointed out in Barrowclough, "this court has repeatedly
considered claims for benefits by participants . . . that are
based on the terms of or rights under a plan" even though such
claims are based not on fiduciary duties but on "breach[es] of
contract of an employee benefit plan." Id. at 935-36. Thus, in
such instances, breach of contract principles, applied as a
matter of federal common law, govern disputes arising out of the
plan documents. In determining how to apply these principles,
the district court followed the analysis in Carr v. First
Nationwide Bank, 816 F. Supp. 1476 (N.D. Cal. 1993), which held
that top hat plans should be interpreted in keeping with the
principles that govern unilateral contracts.
Applying those principles to ICI's DEC plan, the
district court noted that the plan provides that "amounts
deferred . . . shall be paid . . . in five percentage
installments unless . . . the Optionee files a written notice
with the Secretary of Company . . . , requesting a different form
of distribution." Kemmerer, 842 F. Supp. at 145. Therefore, the
court reasoned, when appellants complied with all the
prerequisites to vesting they accepted the ICI's offer. The plan
terms then required ICI to fulfill its end of the bargain by
making payments consistent with appellants' respective elections.
We agree. "A pension plan is a unilateral contract
which creates a vested right in those employees who accept the
offer it contains by continuing in employment for the requisite
number of years." Pratt v. Petroleum Prod. Management Employee
Sav. Plan, 920 F.2d 651, 661 (10th Cir. 1990) (internal quotation
9
marks omitted); Carr, 816 F. Supp. at 1488 ("[P]ension benefit
plans are unilateral contracts which employees accept by
appropriate performance."). Thus, the plan constitutes an offer
that the employee, by participating in the plan, electing a
distributive scheme, and serving the employer for the requisite
number of years, accepts by performance. Under unilateral
contract principles, once the employee performs, the offer
becomes irrevocable, the contract is completed, and the employer
is required to comply with its side of the bargain. Accordingly,
when a participant leaves the employ of the company, the trustee
is "required to determine benefits in accordance with the plan
then in effect." Pratt, 920 F.2d at 661. As a corollary,
"[s]ubsequent unilateral adoption of an amendment which is then
used to defeat or diminish the [employee's] fully vested rights
under the governing plan document is . . . ineffective." Id.Therefore, the district court correctly concluded that after the
appellants' rights had vested when they completed performance,
ICI could not terminate the plan in the absence of a specific
provision in the plan authorizing it to do so.
ICI seeks to avoid this result by arguing that the plan
terms do not impede its ability to terminate the plan.
Specifically, ICI objects to what it perceives to be the district
court's overbroad holding -- that in order to retain the power to
terminate a top hat plan a company explicitly must reserve the
right to do so in the plan documents. In the first place, ICI's
argument is simply wrong after Barrowclough because it has no
basis in contract law. In addition, we find ICI's argument more
10
than minimally unfair. As the Carr court recognized, even when a
plan reserves to the sponsor an explicit right to terminate the
plan, acceptance by performance closes that door under unilateral
contract principles (unless an explicit right to terminate or
amend after the participants' performance is reserved). "Any
other interpretation . . . would make the Plan's several specific
and mandatory provisions ineffective, rendering the promises
embodied therein completely illusory." Carr, 816 F. Supp. at
1494. Thus, there is no presumption that an employer may
terminate a top hat plan. Rather, the plan should be interpreted
under principles of contract law. Consequently, a court must
determine whether an employer has a right to terminate a plan by
construing the terms of the plan itself.
ICI also contends that our result is incongruous
because in its view we accord participants in unfunded plans more
protection than participants in funded plans. Although the cases
applying unilateral contract principles generally involve funded
rather than unfunded plans, we agree with the Carr court that the
cases' "holdings . . . did not rely on ERISA's provisions," id.
at 1488, but rather on principles of contract law. Id., see also
Pratt, 920 F.2d at 658. Indeed, any other result would
eviscerate our holding in Barrowclough that participants in
unfunded deferred compensation plans may sue to enforce the terms
of the plan under contract principles.
In this regard, ICI's reliance on Hozier v. Midwest
Fasteners, Inc., 908 F.2d 1155 (3d Cir. 1990), is misplaced. In
that case, we pointed out that "virtually every circuit has
11
rejected the proposition that ERISA's fiduciary duties attach to
an employer's decision whether or not to amend an employee
benefit plan." Id. at 1161. Of course, that only means that
ERISA's fiduciary duties themselves do not per se "prohibit a
company from eliminating previously offered benefits." (Phillips
v. Amoco Oil Co., 799 F.2d 1464, 1471 (11th Cir. 1986), cert.
denied, 481 U.S. 1016, 107 S.Ct. 1893 (1987). As one court has
explained, "when an employer decides to establish, amend, or
terminate a benefits plan, as opposed to managing any assets of
the plan and administering the plan in accordance with its terms,
its actions are not to be judged by fiduciary standards." Musto
v. American Gen. Corp., 861 F.2d 897, 912 (6th Cir. 1988), cert.
denied, 490 U.S. 1020, 109 S.Ct. 1745 (1989); see also Carr, 816
F. Supp. at 1489 ("[T]he rule that [funded] welfare benefit plans
are freely amendable means that the amendment or termination of
such plans is not governed by the fiduciary duty provisions of
ERISA.").
But these cases do not say anything about the
application of unilateral contract principles to an employer's
actions in terminating a plan. The fact that fiduciary standards
are inapplicable "does not give employers carte blanche to amend
welfare benefit plans where the plans themselves may be
interpreted to provide that benefits are contractually vested or
accrued." Carr, 816 F. Supp. at 1489. And, as we discussed
above, those principles clearly apply after performance is
complete and the participant's rights have vested. Moreover,
nothing in ERISA prohibits the parties from contracting to limit
12
the employer's right to amend or terminate a plan. Indeed, the
point of our holding in Barrowclough was to ensure that
participants in ERISA plans have an ERISA-based right to sue
under contract principles to enforce the terms of the plan. As
the district court reasoned, Congress exempted top hat plans from
ERISA's vesting requirements in large part because it recognized
that high level executives retain sufficient bargaining power to
negotiate particular terms and rights under the plan and
therefore do not need ERISA's substantive rights and protections.
Kemmerer v. ICI, 842 F. Supp. at 144. This being so, "'it would
be absurd to deny such individuals the ability to enforce the
terms of their plans in contract. . . . [I]t would be difficult
to imagine what Top Hat participants would have the power to
obtain through negotiation or otherwise -- apparently not much
more than illusory promises.'" Id. (quoting Carr, 816 F. Supp.
at 1492).
In this regard, ICI concedes that a plan provision that
the plan's terms cannot be revoked is controlling. See br. at 23
("Ordinarily, plan sponsors have unfettered discretion to
terminate pension plans, unless the plan documents provide to the
contrary."). This is just such a case. In determining the
actual terms of the plan, "ERISA plans, like contracts, are to be
construed as a whole." Alexander v. Primerica Holdings, Inc.,
967 F.2d 90, 93 (3d Cir. 1992). If the plan document is
unambiguous, it can be construed as a matter of law.
The February 1, 1985 amendment to the plan, which we
quote above, in no uncertain terms provides that a participant's
13
election of a particular method of payment is binding and
irrevocable, and that it shall be complied with. To conclude in
the face of such language that ICI had unfettered discretion to
disregard a participant's election would violate the plain
meaning rule of contract interpretation. See Duquesne Light Co.
v. Westinghouse Elec. Corp., 66 F.3d 604, 613-16 (3d Cir. 1995)
(discussing Pennsylvania common law rules of contract
interpretation). ICI contends that the language is at the very
least ambiguous, and it points to extrinsic evidence tending to
show that "the purpose of the amendment was to avoid the
constructive receipt [tax] problem." Reply br. at 4.0
Furthermore, ICI contends that it terminated the plan because of
its desire to protect the participants' unfunded balances and
because of its concern that the tax deferral aspects of the plan
might not survive the scrutiny of the Internal Revenue Service.
Yet these circumstances in no way can alter the contractual
principles that lead to our conclusion that the terms of the plan
bound ICI so that, in the absence of appellants' consent, ICI
could not change its method of payment. The district court,
therefore, correctly held that ICI violated the terms of the
plan.
B. Damages
0
Constructive receipt in this context refers to a situation in
which participants exercise such a degree of control over plan
assets so as to be deemed to have received the deferred income.
In such cases, the income deferred could be considered taxable
immediately.
14
After granting summary judgment to the appellants on
liability, the district court found that appellants had failed to
prove that ICI's termination of the plan damaged them. Appellants
characterized their claim for damages as falling under 29 U.S.C.
§ 1132(a)(1)(B), which permits plan participants to sue to
recover benefits due them under the plan, and 29 U.S.C.
§1132(a)(3), which permits a participant to bring a civil action
"to obtain . . . appropriate equitable relief . . . to enforce
any provisions of this subchapter or the terms of the plan."
In addressing the parties' summary judgment motions,
the district court rejected ICI's argument that the damages
appellants sought constituted unrecoverable extracontractual
damages. Kemmerer v. ICI, 842 F. Supp. at 146. ICI contends
that the district court erred in that determination. The
question ICI raises is difficult, requiring a close examination
of precisely what damages appellants seek. In Massachusetts Mut.
Life Ins. Co. v. Russell, 473 U.S. 134, 144, 105 S.Ct. 3085, 3091
(1985), the Court noted that "the statutory provision explicitly
authorizing a beneficiary to bring an action to enforce his
rights under the plan -- § [1132(a)(1)(B)] says nothing about the
recovery of extracontractual damages." And in Mertens v. Hewitt
Assocs., 113 S.Ct. 2071-72, 2068 (1993), the Court held that the
provision for equitable relief in section 1132(a)(3) does not
allow the recovery of monetary damages. In In re Unisys Corp.,
57 F.3d 1255, 1267-68 (3d Cir. 1995), we held that an individual
participant may sue on his or her own behalf to recover equitable
relief under section 1132(a)(3), and characterized reimbursements
15
of back benefits as "remedies which are restitutionary in nature
and thus equitable." Id. at 1269 (citing Curcio v. John Hancock
Mut. Life Ins. Co., 33 F.3d 226, 238-39 (3d Cir. 1994)).
We are inclined to agree with ICI that appellants'
claims are for extracontractual damages for purposes of section
1132(a)(1)(B) and monetary damages for purposes of section
1132(a)(3) and thus are not cognizable claims under ERISA. After
all, the possibly adverse tax ramifications of the plan
termination and the financial management fees which appellants
may incur are possible consequences of the breach. On the other
hand, the plan required ICI to pay money, and by its payment of
their account balances to the appellants, ICI satisfied that
obligation, though it did so prematurely. Further, it is
difficult for us to see how such damages can be regarded as
claims for equitable relief under section 1132(a)(3). But be
that as it may, we decline to resolve such intricate issues of
ERISA law because appellants failed at trial to prove they were
damaged at all.0
In the first instance, we reject appellants' argument
that the district court improperly placed the burden of proof on
them. They rely on the proposition that when the existence of
damage is clear, damages should not be denied simply because it
is difficult to quantify the amount of loss. As a corollary,
appellants argue that after they have proved they have been
damaged, the district court cannot rely on burden of proof
0
Appellants concede that they can advance damage claims only
under ERISA.
16
principles to reject their damages claims outright. For this
proposition they rely on Anderson v. Mt. Clemens Pottery Co., 328
U.S. 680, 66 S.Ct. 1187 (1946). But in that Fair Labor Standards
Act case, the Court assumed that "the employee has proved that he
has performed work and has not been paid in accordance with the
statute." Id. at 688, 66 S.Ct. at 1193. As the Court noted,
"[t]he damage is therefore certain. The uncertainty lies only in
the amount of damages arising from the statutory violation by the
employer." Id. Here, the opposite is true -- the very existence
of damages is in dispute. ICI presented persuasive evidence that
appellants had not suffered any damages. When the very issue of
damages is the subject of a good faith dispute, the principle
that "'it would be a perversion of fundamental principles of
justice to deny all relief to the injured person, and thereby
relieve the wrongdoer from making any amend for his acts'" simply
does not apply. Id. (quoting Story Parchment Co. v. Paterson
Parchment Co., 282 U.S. 555, 563, 51 S.Ct. 248, 250 (1931)).
Nor are we moved by appellants' contention that the
burden should shift simply because this is an ERISA case. To be
sure, courts have, in certain ERISA cases, placed the burden of
proof on the trustee of the plan. But those cases involved
first, the trustee's breach of fiduciary duty, and second, a
definite loss. For instance, in Martin v. Feilen, 965 F.2d 660(8th Cir. 1992), cert. denied, 113 S.Ct. 979 (1993), the court
held that "once the ERISA plaintiff has proved a breach of
fiduciary duty and a prima facie case of loss to the plan or ill-
gotten profit to the fiduciary, the burden of persuasion shifts
17
to the fiduciary to prove that the loss was not caused by, or his
profit was not attributable to, the breach of duty." Id. at 671.
Neither of the prerequisites to burden-shifting is present here.
Turning to the evidence of damages, we are troubled by
the fact that appellants, though claiming they were aggrieved by
the plan termination, failed to request equitable relief
requiring ICI to comply with the plan terms. Even though ICI
advised them in November 1991 that it was changing the
distribution schedule, they brought this action almost one year
later, and only after ICI made one payment to them, and they
filed a motion for summary judgment only after ICI made two of
the accelerated payments. Yet section 1132(a)(3) explicitly
authorizes participants to bring civil actions "to enjoin any act
. . . which violates . . . the terms of the plan" and "to obtain
. . . equitable relief . . . to enforce . . . the terms of the
plan." Surely, if appellants really felt that ICI had injured
them, they could have rejected the accelerated payments and
sought injunctive relief enforcing the terms of the plan. Given
the circumstances, it seems obvious that appellants sought to
play a no-lose game -- trying to capitalize on the freed-up funds
but claiming damages based on utterly speculative projections as
to the financial consequences had the plan not been terminated.
Indeed, appellants' projections of damages at the trial
were so speculative as to be unascertainable. First, they
contended that they suffered tax-related losses because they were
forced immediately to pay taxes on the accelerated payments to
them and thereby forgo the benefits of tax deferral. Standing
18
alone there would be force to this argument because ordinarily
from a taxpayer's viewpoint it is advantageous to defer the
payment of taxes. Yet the existence of such damages depends in
part on what the tax rate will be at any given time and thus is
speculative. And, as ICI properly points out, by virtue of the
plan termination the appellants' account balances were taxed at a
much lower rate than would have been the case had payments been
made several years later. Furthermore the tax consequences of
the accelerated payments were simply part of a larger picture
including investment rates of return which the district court
concluded did not establish that appellants had suffered or would
suffer any financial loss as a result of the acceleration of
payments.
Second, the appellants contended that they incurred
management fees and transactions costs as a result of the breach.
But ICI presented evidence that appellants "can replicate the
investment options under [the] DEC without incurring material
transaction costs." Op. at 6. The district court credited this
testimony and concluded that "I cannot find . . . that it is more
likely true than not that plaintiffs will now incur either
material transactions costs or management fees." Op. at 6-7. The
district court's finding is certainly supported by the record.
Most significantly, appellants' expert did not take
into account the risk involved in keeping money in an unfunded
plan. The district court pointed out that "[a]ny evaluation of
one's interest in an unfunded plan must . . . give some
consideration to the fact that there is a risk to the participant
19
that there will be no funds and the value of his interest in the
plan should be adjusted to reflect that risk." Op. at 6. The
failure to take the risk into account not only called all of
appellants' projections into question, but is itself a reason for
denying damages because a conclusion that they were damaged would
rest on insupportable speculation.0 In light of all of these
factors, we cannot say that the district court's conclusion that
appellants failed to prove that they were damaged was clearly
erroneous. Oberti v. Board of Educ., 995 F.2d 1204, 1220 (3d
Cir. 1993).0 Thus, we cannot find that they were entitled to
relief in this case.0
Conclusion
For the reasons detailed above, we will affirm the
district court's judgment of December 23, 1994, in favor of ICI
and its order of January 5, 1994, granting appellants summary
judgment on liability, and we will dismiss as moot ICI's appeal
from the order of January 5, 1994, to the extent that the order
denied ICI summary judgment on damages.
0
Thus, we reject appellants' argument that the district court
failed to make adequate findings.
0
The conclusion we expressed above that ICI's concern about the
security of the participants' accounts in the DEC plan did not
justify its termination of the plan, does not mean that the
security factor cannot be considered in a damages calculation.
0
We realize that in some situations a wronged plaintiff may
recover nominal damages without proof of actual injury. See
e.g., Carey v. Piphus, 435 U.S. 247, 266, 98 S.Ct. 1042, 1054
(1978). We see no reason, however, to apply that principle here
as we do not regard the right which appellants seek to vindicate
as worthy of such special protection.
20