
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________          No. 94-1786                     VICTOR E. CARLO, JR. AND KATHLEEN M. CARLO,                               Plaintiffs - Appellants,                                          v.                           REED ROLLED THREAD DIE COMPANY,                                Defendant - Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Nathaniel M. Gorton, U.S. District Judge]                                              ___________________                                 ____________________                                        Before                               Torruella, Chief Judge,                                          ___________                            Bownes, Senior Circuit Judge,                                    ____________________                               and Cyr, Circuit Judge.                                        _____________                                _____________________               John  W. Spillane, with whom  John J. Spillane  was on brief               _________________             ________________          for appellants.               Thomas  J.  Scannell,  with  whom Michael  P.  Angelini  and               ____________________              _____________________          Bowditch & Dewey were on brief for appellee.          ________________                                 ____________________                                    March 3, 1995                                 ____________________                    TORRUELLA,  Chief Judge.   This  appeal requires  us to                    TORRUELLA,  Chief Judge.                                ___________          decide  whether ERISA  preempts a  state law  claim of  negligent          misrepresentation against an  employer based upon the  employer's          representations  regarding  the  employee's prospective  benefits          under an early retirement program.  For the following reasons, we          find  that the  state law  claims are  preempted, and  affirm the          district court's ruling.                              I.  PROCEDURAL BACKGROUND                              I.  PROCEDURAL BACKGROUND                    The  plaintiffs-appellants, Victor  E.  Carlo, Jr.  and          Kathleen M.  Carlo (the "Carlos"), commenced  this action against          the defendant-appellee, Reed Rolled Thread Die Co., a Division of          Quamco, Inc.  ("Reed"), in Massachusetts state  court in December          1991.  In  their original complaint,  the Carlos alleged  various          state  law claims with  respect to Reed's  early retirement plan.          Reed  removed the case to federal district court in January 1992,          alleging  that  federal law  preempted  the Carlos'  claims.   On          Reed's  subsequent Motion  to Dismiss,  the district  court found          that all  of the  Carlos' state  law claims were  preempted by             514(a)  of  the  Employment   Retirement  Security  Act  of  1974          ("ERISA"), 29 U.S.C.   1001 et seq.,   1144(a).  Accordingly, the                                      _______          district court dismissed the Carlos' complaint under Federal Rule          of  Civil  Procedure 12(b)(6)  for failure  to  state a  cause of          action.   The Carlos subsequently  filed a Motion  to Amend their          Complaint. Concluding that  the Proposed Amended Complaint  still          failed  to  allege a  viable  federal claim,  the  district court          denied the Motion  to Amend and dismissed the  Carlos' complaint.                                         -2-                    On  March  2,  1994,  the  Carlos  filed  a  Motion  to          Reconsider, arguing that a recent decision from the Massachusetts          Supreme Judicial Court changed  the ERISA preemption analysis and          rendered  their  state law  claims  viable.   The  district court          denied  the  Motion  to  Reconsider, and  the  Carlos  filed this          appeal.   Reed filed a  Motion to Dismiss  the Appeal,  which was          denied by this Court on September 8, 1994.  We  hereby affirm the          underlying decision of the district court.                               II.  FACTUAL BACKGROUND                               II.  FACTUAL BACKGROUND                    The essential allegations of the  Carlos' complaint are          as follows:   Mr. Carlo  is a former  employee of  Reed and is  a          participant in the Quamco, Inc. Retirement Plan (the "Plan").  In          July 1988, Reed offered Mr. Carlo early retirement under an Early          Retirement Program  (the  "ERP").   Mr.  Carlo met  with  William          Baldino  ("Baldino"), Reed's  Personnel Manager,  to discuss  the          benefits  he  would receive  if he  elected the  early retirement          option.   Baldino  informed Mr.  Carlo  of his  expected  monthly          benefits, and  indicated that the  figures had been  certified by          Reed's  corporate program  administrator.   Mr. Carlo  elected to          accept the early  retirement offer, allegedly in  reliance on the          figures provided him by Baldino.                    In December 1988, Reed notified Mr. Carlo of his actual          benefits  under  the  ERP.    The  actual   monthly  benefit  was          approximately twenty percent less than the benefit Carlo expected          to  receive based  on  Baldino's earlier  representations.   Reed          claimed that it had  made a calculation error when  it determined                                         -3-          the benefits represented to  Mr. Carlo in  July 1988.  By  letter          dated  December 30, 1988, Baldino apologized to Mr. Carlo for his          error in calculating Mr. Carlo's pension benefits and offered Mr.          Carlo the opportunity to continue working in the position he then          held.  Baldino's letter stated that the offer to continue working          would remain open  until January 10, 1989.  If  Mr. Carlo did not          accept  within  this period,  the  letter  continued, Reed  would          presume that  Mr. Carlo  was rejecting the  employment offer  and          accepting the  modified Early Retirement  option.  Carlo  did not          accept  the offer  before the  January 10  deadline.   Rather, he          decided to take  early retirement in April  1989, allegedly under          protest.                    On December 3,  1991, the Carlos brought this action in          Massachusetts state  court, alleging state law  claims for, inter                                                                      _____          alia, breach of contract and negligent misrepresentation.          ____                               III.  STANDARD OF REVIEW                               III.  STANDARD OF REVIEW                    The unusual procedural posture here requires a somewhat          nuanced statement of the  standard of review.  The  Carlos appeal          the  denial of their Motion  to Reconsider the  court's denial of          their Motion to Amend the Complaint.                      With regard  to motions to  amend, we have  stated that          "[w]hile motions to  amend are liberally granted, see Johnston v.                                                            ___ ________          Holiday Inns, Inc., 595  F.2d 890, 896  (1st Cir. 1979), a  court          __________________          has the discretion to deny them  if it believes that, as a matter          of  law, amendment would  be futile.   See Jackson  v. Salon, 614                                                 ___ _______     _____          F.2d 15, 17 (1st Cir. 1980); Crews v. Memorex Corp., 588 F. Supp.                                       _____    _____________                                         -4-          27, 28 (D.Mass. 1984); 6 C. Wright & A. Miller, Federal  Practice                                                          _________________          and Procedure:  Civil    1487 at 432-33 (1971)(citing cases).  We          _____________________          will generally defer to a district court's decision to deny leave          to  amend where the reason is 'apparent or declared.'"  Demars v.                                                                  ______          General Dynamics Corp., 779 F.2d  95, 99 (1st Cir.  1985)(quoting          ______________________          Tiernan v. Blyth, Eastman, Dillon &  Co., 719 F.2d 1, 4 (1st Cir.          _______    _____________________________          1983)).                      Here,  the Carlos'  Motion  to  Reconsider argued  that          their state law claims were  rendered viable by the Massachusetts          Supreme Judicial  Court's decision  in Pace v.  Signal Technology                                                 ____     _________________          Corp., 628 N.E.2d 20, 22 (Mass. 1994).  The district court denied          _____          the  Motion, finding  that  controlling First  Circuit  precedent          mandated preemption of the  Carlos' claims.  In other  words, the          district court concluded that  the Carlos' proposed amendment was          futile.   This decision necessarily  entailed an analysis  of the          underlying preemption issue,  a question of  law.  Therefore,  we          review  it here.  That is,  we will review whether ERISA preempts          the  Carlos' state law claims for negligent misrepresentation.                                      IV.  PREEMPTION                                   IV.  PREEMPTION                    Section 514 of ERISA supersedes "any and all State laws          insofar  as  they may  now or  hereafter  relate to  any employee                                                    _________          benefit  plan . .  . ."1   29 U.S.C.    1144(a) (emphasis added).          "The  term  'State  Law'  includes all  laws,  decisions,  rules,                                        ____________________          1   The  parties  do  not  dispute that  the  ERP  constitutes  a          qualified  employee  benefit  plan  for  the  purposes  of  ERISA          preemption.                                         -5-          regulations, or other State  action having the effect of  law, of          any State."    29  U.S.C.     1144(c).   The  Supreme  Court  has          established that "a law 'relates to' an employee benefit plan . .          .  if it  has a  connection with  or reference  to such  a plan."          Ingersoll-Rand,  Co.  v.  McClendon,  498 U.S.  133,  139  (1990)          ____________________      _________          (quoting  Shaw v.  Delta  Air Lines,  Inc.,  463 U.S.  85,  96-97                    ____     _______________________          (1982)).  "Under this  'broad common-sense meaning,' a  state law          may 'relate to' a  benefit plan, and thereby be  pre-empted, even          if the law is not specifically designed to affect such  plans, or          the effect is only indirect."   Id. (quoting Pilot Life Ins.  Co.                                          ___          ____________________          v. Dedeaux, 481 U.S. 41, 47 (1987)).             _______                    In  Ingersoll-Rand, the  Supreme  Court identified  two                        ______________          tests  for  determining  whether  a  state  cause  of  action  is          preempted because it "relates to" an ERISA plan.  First, a law is          expressly preempted by ERISA  where "the court's inquiry must  be          directed to the plan."  Ingersoll-Rand, 498 U.S. at 140.  Second,                                  ______________          even  where there is no express  preemption, a cause of action is          preempted if it conflicts directly with ERISA.  Id. at 142.                                                          ___                    Given  these  preemption  principles,  we  must  decide          whether  the Carlos' claims relate  to the ERP  and are therefore          preempted.  The Carlos' suit seeks  damages for what can best  be          described as negligent misrepresentation.   They argue that their          claims for misrepresentation are so  remotely related to the  ERP          that, for the purposes of ERISA preemption, they do not relate to          it.   They allege  that they are  not seeking  coverage under the          ERP, but rather damages  sustained as a result of  Reed's alleged                                         -6-          misrepresentation concerning the extent of Mr. Carlos' retirement          benefits  under the  ERP.   They  maintain,  therefore, that  the          court's  inquiry will  not  necessarily be  directed to  the ERP.          They also emphasize that because they are suing Reed, and not the          Plan Trustee, any damages will not effect the fiscal integrity of          the ERP.                    Courts  have  struggled  over  whether  ERISA  preempts          claims of  misrepresentation regarding the scope  or existence of          benefits,  and "'there  is ample,  well reasoned  authority which          would support either position.'"  Pace, 628 N.E.2d at 22 (quoting                                            ____          Cutler  v. Phillips Petroleum Co., 859 P.2d 1251, 1254 (Wash. Ct.          ______     ______________________          App. 1993)).   Courts  finding that misrepresentation  claims are          not  preempted  have reasoned  that  the mere  fortuity  that the          misrepresentation  involved pension  benefits is  insufficient to          cause the "axe  of federal  preemption to fall."   Greenblatt  v.                                                             __________          Budd  Co., 666 F. Supp. 735, 742  (E.D. Pa. 1987); see also Pace,          _________                                          ________ ____          628 N.E.2d at 22 (holding that where the "resolution of state law          claims will neither 'determine whether any benefits are paid' nor          'directly affect the administration  of benefits under the plan,'          the  claims  do not  'relate to'  ERISA  and accordingly  are not          preempted")2 (citation  omitted).   That is, they  have concluded          that  the  misrepresentation  claims   should  not  be  preempted          because,  "simply  put, the  premise  underlying  [the cause  of]          action  [is] that  the  plaintiff  was  deceived  by  the  verbal                                        ____________________          2  Of course, Pace, as a state court decision, is not controlling                        ____          precedent on this issue.                                         -7-          statements made and the actions taken by his employer.  That  the          subject  of  the deception  concerned  pension  benefits is  only          incidental and not essential to the plaintiff's cause  of action.          Like  promises for a raise in salary,  a promotion, or the use of          tickets  to a  baseball game,  plaintiff's employer's  promise to          provide the plaintiff  with certain  benefits . .  ., upon  which          plaintiff  could   reasonably  rely,   is  the  essence   of  the          [misrepresentation] alleged."  Greenblatt, 666 F. Supp. at 742.                                         __________                    The  courts   finding  against  preemption   have  been          troubled  by  the fact  that  ERISA preemption  in  these benefit          misrepresentation suits often leaves plaintiffs remediless.  See,                                                                       ___          e.g., Pace, 628 N.E.2d at 24 ("That a statute whose clear purpose          ____  ____          was to benefit employees  has become widely used  as a shield  to          protect employers from any deceptive  and wrongful acts they  may          have  committed  against  their employees  is  an  irony  we find          unacceptable . .  . ."); Greenblatt, 666 F. Supp.  at 742 (noting                                   __________          that because the plaintiff would likely be without a remedy under          ERISA,  "it would defy logic to presume that Congress intended to          preempt the  common law action  of fraud  in a situation  of this          type.").                    Despite  these cogent  arguments against  preemption in          misrepresentation  claims,  we   nevertheless  find  that   ERISA          preempts the Carlos' claims because they "relate  to" an employee          benefit  plan.     ERISA's  "deliberately  expansive"  preemption          language was  "designed to 'establish pension  plan regulation as          exclusively a federal concern.'"  Pilot Life Ins. Co. v. Dedeaux,                                            ___________________    _______                                         -8-          481 U.S. at 46 (quoting Alessi v. Raybestos-Manhattan, Inc.,  451                                  ______    _________________________          U.S. 504, 523 (1981)).  As Senator Harrison Williams stated:                      It  should  be  stressed  that  with  the                      narrow exceptions specified in  the bill,                      the    substantive    and     enforcement                      provisions  of the  conference substitute                      are intended  to  preempt the  field  for                      Federal regulations, thus eliminating the                      threat  of  conflicting  or  inconsistent                      State  and  local regulation  of employee                      benefit   plans.     This   principle  is                      intended to  apply in its  broadest sense                      to   all  actions   of  State   or  local                      governments,   or   any   instrumentality                      thereof, which  have the force  or effect                      of law.          120 Cong. Rec. 29933 (1974).                    With this sweeping principle in mind,  we find that the          Carlos' claims are preempted because they have "a connection with          or reference  to" Reed's ERP.   If the Carlos were  successful in          their  suit, the  damages  would consist  in  part of  the  extra          pension benefits which Reed allegedly  promised him.3  To compute          these damages would require the court to refer to the ERP as well                                        ____________________          3   The Carlos argue that  their claims do not  relate to the ERP          because  they  are  seeking  damages  for  a  tort  committed  by          Mr. Carlo's employer within the course of his employ.  Their tort          action, they maintain,  is distinct from a  contractual claim for          the promised benefits, which they concede would be preempted.  We          find  this  distinction to  be meaningless  here.   As  the Fifth          Circuit noted,  "ERISA's preemption of state  law claims 'depends          on the conduct to  which such law is applied, not  on the form or          label of the law.'"  Cefalu  v. B.F. Goodrich Co., 871 F.2d 1290,                               ______     _________________          1294  (5th  Cir.  1989);  see  also  Pohl  v.  National  Benefits                                    _________  ____      __________________          Consultants, Inc., 956 F.2d  126, 128 (7th Cir. 1992)  (The court          _________________          noted that  although the plaintiffs  were not seeking  to enlarge          their coverage as such,  any money they obtained from  their suit          would  be functionally a  benefit to which the  terms of the plan          did  not  entitle them.    "This type  of  end  run is  regularly          rebuffed.").                                         -9-          as  the misrepresentations allegedly made by Reed.  Thus, part of          the  damages to  which  the Carlos  claim entitlement  ultimately          depends  on an  analysis of  the  ERP.   To disregard  this as  a          measurement  of their damages would  force the court to speculate          on  the amount of  damages.   Consequently, because  the "court's          inquiry must be  directed to  the plan," the  Carlos' claims  are          preempted  under the first test set forth in Ingersoll-Rand.  498                                                       ______________          U.S. at 140.                    Our ruling here is in accord with our previous decision          in Vartanian v.  Monsanto, Co., 14 F.3d 697, 700 (1st Cir. 1994).             _________     _____________          In Vartanian, the plaintiff  accepted an early retirement package             _________          based on the employer's assurances that it was  not contemplating          the creation of  an enhanced  severance program.   In fact,  when          Vartanian made  these specific  inquiries about early  retirement          programs,  Monsanto had  already given  serious consideration  to          reducing  its  staff and  was  contemplating the  formation  of a          special early  retirement  plan.   Vartanian  claimed that  as  a          result of his reliance on Monsanto's misleading statements to the          effect that the company did not  intend to create a more generous          retirement package, he missed the opportunity to retire under the          more advantageous  provisions of the  new plan,  which went  into          effect  shortly after his retirement.   We found that Vartanian's          claims  were preempted because "the existence of the 1991 Plan is          inseparably  connected  to any  determination of  liability under          state  common law  misrepresentation."   Id.   As we  then noted,                                                   ___          "[t]here simply is no cause of action  if there is no plan."  Id.                                                                        ___                                         -10-          Therefore,  Vartanian's misrepresentation  claim  related  to  an          ERISA plan because it was inseparably connected to it.4                    Similarly, the Carlos' claims are inseparably connected          to the ERP.  The Carlos and Vartanian both sought  damages for an          employer's  alleged  misrepresentation  concerning  the  scope or          existence of early retirement  benefits.  The damages claimed  in          both instances were dependent, at least in part, on analysis of a          qualified  ERISA   plan.     Moreover,   the   misrepresentations          themselves  concerned, ultimately,  the  amount  of benefits  the          plaintiffs would be entitled to upon retirement.5                                        ____________________          4  A number of other circuits have also considered claims similar          to those alleged by  the Carlos and  found them preempted.   See,                                                                       ___          e.g.,   Pohl,    956   F.2d    126   (preempting    a   negligent          ____    ____          misrepresentation  claim based on the defendant's assurances that          it  would cover  the plaintiff's  medical expenses);  Cefalu, 871                                                                ______          F.2d  1290 (preempting  a  misrepresentation claim  based on  the          employer's  assurance  that the  plaintiff's  retirement benefits          would  be equivalent  under  two  different employment  options);          Anderson  v. John  Morrell &  Co., 830  F.2d 872 (8th  Cir. 1987)          ________     ____________________          (preempting plaintiff's  contract claim  based on  his employer's          promise  that his fringe benefits as a member of management would          be  equivalent to those he would  have received had he remained a          member  of a union); Straub  v. Western Union  Telegraph Co., 851                               ______     ____________________________          F.2d    1262   (10th    Cir.   1988)    (preempting   plaintiff's          misrepresentation  claim based  on  assurances  that his  pension          benefits  would be  increased  if he  accepted  a transfer  to  a          subsidiary company owned by his employer).          5    One  notable  difference distinguishes  Vartanian  from  the                                                       _________          Carlos' case.   In Vartanian,  the plaintiff allegedly  had taken                             _________          early retirement  because  of a  misrepresentation  about  future          retirement benefits.   We found that, in these circumstances, the          plaintiff  had a cause of action under ERISA because the employer          had  breached a fiduciary duty  to a plan  participant.  Although          the issue was not raised  on appeal, the difference here  is that          after  Mr. Carlo's employer realized  that he had  made a mistake          regarding Mr.  Carlo's retirement benefits, he  offered Mr. Carlo          an  opportunity  to  continue  working  so  that  his  retirement          benefits would not be adversely affected.  Therefore,  the Carlos          were  never deprived  of a  benefit to  which they  were entitled          under ERISA.                                         -11-                    In  sum, we  find  that the  ERISA's express  language,          jurisprudence, and legislative history all mandate a finding that          ERISA preempts the Carlos' state law claims.                    We  have  considered the  other  issues  raised by  the          Carlos and find them meritless.                    Affirmed.                    ________                                         -12-
