                                                                                                                           Opinions of the United
2000 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


5-31-2000

Lettrich v. JCPenny
Precedential or Non-Precedential:

Docket 99-3034




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Recommended Citation
"Lettrich v. JCPenny" (2000). 2000 Decisions. Paper 113.
http://digitalcommons.law.villanova.edu/thirdcircuit_2000/113


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Filed May 31, 2000

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 99-3034

JOSEPH LETTRICH,
and all others similarly situated,
       Appellant

v.

J. C. PENNEY COMPANY, INC.

On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 98-cv-00137)
District Judge: Hon. Donald J. Lee

Argued: October 18, 1999

Before: SLOVITER, MANSMANN, and ROTH,
Circuit Judges

(Filed: May 31, 2000)

       Daniel W. Ernsberger (Argued)
       Behrend & Ernsberger
       Pittsburgh, PA 15219

        Attorney for Appellant
       John B. Rizo, Sr. (Argued)
       J. C. Penney Company, Inc.
       Legal Department
       Plano, TX 75024

        Attorney for Appellee

OPINION OF THE COURT

SLOVITER, Circuit Judge.

At issue on this appeal is the requirement under the
Employee Retirement Income Security Act of 1974 (ERISA),
29 U.S.C. SS 1001-1461, that an employer notify
participants of a material change in a welfare plan. Plaintiff
Joseph Lettrich contends that he left his position as a
pharmacist with J.C. Penney Company, Inc. in 1997 under
the belief that he was entitled to the severance benefits
established in 1988 by J.C. Penney for qualified employees.
J.C. Penney denied his request for benefits on the ground
that the company had rescinded the separation pay
program in 1993. Lettrich sued J.C. Penney under ERISA
claiming that the cancellation was void for lack of effective
notice of that material change in the program. He also
contends that he is entitled to the benefits under an
equitable estoppel theory. The District Court granted
summary judgment in favor of J.C. Penney. Lettrichfiled a
timely appeal.

I.

A.

The following facts are not in dispute. In 1988, J.C.
Penney adopted a Separation Allowance Program (herein
the "separation pay program" or the "program") for its
profit-sharing employees in an effort to alleviate growing
employee concerns over job security and the possibility of
lost welfare benefits. These employee concerns emanated
from the company's announced relocation of its home office
from New York to Texas and from the vigorous acquisition

                                2
activity that was occurring at that time in the retail
merchandise industry. The program addressed these
concerns by providing a lump-sum severance payment if an
eligible employee was terminated within two years of a
change of control. "Change of control" was defined to
include a merger or consolidation. The size of the severance
payment was to be based on the employee's length of
service. The program also provided that the medical and
dental coverage, term life insurance, stock options and a
relocation allowance would be extended.

The program specified that it would continue for a term
of five years, and would automatically renew for another
five-year term unless the Board of Directors canceled the
program sixty days before the termination date.

After J.C. Penney established the separation pay
program, the company circulated news of this program to
eligible employees along with a descriptive brochure that
included the following:

       The Separation Allowance Program provides for both
       separation pay and benefits if you lose your job within
       a certain period after a change of control of the
       Company. It is designed for your peace of mind. It
       is a tangible form of reassurance of JCPenney's
       commitment to you.

       Take some time to understand what the program offers
       and share it with your family. Then, file it away with
       your other important papers. This program should
       remove any distracting concerns you may have about
       the future. And with this protection in place -- you can
       move forward and continue making the most of the
       present.

App. at 30.

Employees were notified that the Board of Directors could
abolish the separation pay program in five years but that if
no steps were taken to do so, the program would renew
automatically for another five-year term. J.C. Penney
requested all company managers to hold special meetings
to communicate the new separation pay program personally
to all eligible employees in their unit. For that purpose, the

                               3
company provided a video message discussing the reasons
for the new program, copies of the descriptive brochure, a
scripted discussion guide, and a list of potential questions
and answers.

Five years later, on November 11, 1992, the J.C. Penney
Board of Directors terminated the separation pay program.
The company's notification to participants of this change in
benefits came by way of inclusion in its 1993 notice of
shareholders meeting and proxy statement (hereafter
"Notice of Meeting") of a section titled Separation Allowance
Program. This notification was placed in the middle (after
page 30) of the sixty-two page Notice of Meeting. It read as
follows:

       Separation Allowance Program. In March, 1988, the
       Board of Directors adopted a Separation Allowance
       Program ("Separation Program") for profit-sharing
       management associates, including executive officers;
       adopted a Pension Plan amendment designed to protect
       the surplus assets in that plan for all employees ("Plan
       Amendment"); and, in 1989, 1990, and 1991, granted
       contingent stock options to participants in the
       Company's Equity Plan ("Contingent Stock Options"),
       which would become exercisable in the event of a
       "change of control" regarding the Company and an
       option holder's employment termination within two
       years thereafter. These actions were taken to address
       employee concerns regarding job and benefits security
       in light of the Company's announced relocation of its
       Home Office from New York to Texas, and in light of
       the active acquisition activity which was occurring at
       that time in the retail merchandise industry. The
       Separation Program was effective for five years and
       provided for automatic renewal for subsequent five-
       year periods, unless terminated by the Board.

       Due to the changed circumstances that have
       occurred since the 1988 implementation of these three
       programs, including the completion of the Company's
       successful relocation, the Board determined in
       November, 1992, that: (1) the Separation Program not
       be renewed for an additional five-year period; (2) the
       Plan Amendment be retained; and (3) the Company

                               4
       request holders of Contingent Stock Options to
       surrender them in exchange for, on a pre-split basis,
       one normal stock option for each ten Contingent Stock
       Options so surrendered (See "Option/SAR Grants in
       Last Fiscal Year" table on page 22.)

       As a result of these actions by the Board of Directors,
       the Separation Program terminated on March 14, 1993.
       . . .

App. at 77.

The page facing this notification contained the
announcement of a new 1993 Equity Plan that would
replace the separation pay program. The Equity Plan
required shareholder approval to become effective. Unlike
the separation pay program which had applied to a large
group of "profit sharing associates," store managers,
assistant managers and certain eligible associates, the
Equity Plan was to apply to no more than 2,000 employees.

The Assistant Manager of Chemical Bank, the transfer
agent for J.C. Penney, testified that the bank mailed a copy
of the Notice of Meeting to each plan participant. All
employees entitled to benefits under the separation pay
program were shareholders. Lettrich does not contest that
the Notice of Meeting was sent to all affected employees,
including himself, and that it contained the information
required by ERISA and the plan. Specifically, in the notice
J.C. Penney stated that due to, inter alia, the completion of
the Company's successful relocation, the Board determined
in November 1992 not to renew the separation pay program
and that "the Separation Program terminated on March 14,
1993." Id.

The notification included in the Notice of Meeting
constituted the only notification to the employees/
participants of the termination of the separation pay
program. Nothing on the cover of the Notice of Meeting
called attention to the inclusion of the notification
announcing the program's termination or to the page on
which it was placed. J.C. Penney had previously distributed
Benefit Information Flyers to all employees to notify them of
changes in medical and dental benefits, but it did not use
that procedure on this occasion. Nor did it send the

                               5
notification of the termination of the program to Robert
Perrin, the Vice President of Human Resources within Thrift
Drug, who had responsibility for promoting and
implementing the separation pay program. It happened that
Perrin, who maintained his own internal follow-up system,
inquired about the status of the program. In response, J.C.
Penney informed Perrin of the program's termination. There
is no allegation that J.C. Penney prohibited or in any way
discouraged Perrin from spreading word of the program's
termination. He testified at his deposition that he did not
do so on his own because he knew such notices require
legal approval and he expected J.C. Penney to send out
notice in an information flyer. When employees called
Perrin regarding the separation pay program, he informed
them that J.C. Penney had terminated that program.

B.

Lettrich was first employed by Thrift Drug as a
pharmacist in 1975. Thrift Drug was then a division of J.C.
Penney although it was subsequently spun-off as a
subsidiary. In 1996, J.C. Penney acquired Eckerd Drug Co.
and began integrating the pharmacist services offered by
Eckerd with those already provided by J.C. Penney through
its subsidiary, Thrift Drug. The Thrift Drug store where
Lettrich worked was closed and reopened under the name
Eckerd. On March 8, 1997, Lettrich was advised that he
could retain his job as an employee of Eckerd if he
relinquished his position as store manager and accepted a
cut in pay. Lettrich briefly accepted this offer only to resign
several months later. At that time, Lettrich, who regarded
the combination with Eckerd as a change of control,
requested the severance pay to which he believed he was
entitled under the separation pay program. J.C. Penney
denied his request on the ground that it had discontinued
that program four years earlier. Lettrich contends that he
was unaware of the termination of the program because
J.C. Penney concealed the notification in the Notice of
Meeting and failed to alert employees that the Notice of
Meeting contained important information regarding welfare
benefits.

                               6
Lettrich filed suit in the United States District Court for
the Western District of Pennsylvania against J.C. Penney on
behalf of himself and others similarly situated pursuant to
S 502(a)(1)(B) of ERISA. See 29 U.S.C.S 1132(a)(1)(B). He
contends that J.C. Penney's languid attempt to notify
participants of the termination of the separation pay
program failed to satisfy ERISA's notice and disclosure
requirements set forth in 29 U.S.C. S 1024(b)(1)(B) and 24
C.F.R. 2520.104-1(b)(1). In his complaint, Lettrich claims
that J.C. Penney actively concealed the program's
termination from a majority of the program's participants
by placing the notification in a shareholders' Notice of
Meeting where few, if any, employees would notice it, failing
to use the effective and customary internal procedure for
notification of benefit changes, and providing actual notice
of the program's termination to only a select group of
officers.

The case was referred to a Magistrate Judge for pretrial
proceedings. Thereafter, J.C. Penney moved for summary
judgment. The Magistrate Judge accepted Lettrich's
position that he resigned from J.C. Penney believing he
would receive severance pay under the separation pay
program. She further stated, "[i]t is not surprising that
[Lettrich] was not aware of the termination of the
separation allowance program since the notice of
termination was `buried' in the notice of the annual
meeting." Amended Report and Recommendation, Doc. # 23
(Nov. 24, 1998) at 10 (hereafter "Report and
Recommendation").1 The court agreed with Lettrich that he
did not receive the notification required by the regulation
promulgated pursuant to ERISA. Nevertheless, relying on
our decision in Ackerman v. Warnaco, Inc., 55 F.3d 117 (3d
Cir. 1995), she recommended that J.C. Penney's motion for
summary judgment be granted, stating: "defects in notice
do not entitle an employee to receive the benefits unless the
employee can show extraordinary circumstances such as
bad faith by his employer or active concealment of a change
_________________________________________________________________

1. The original Magistrate Judge's Report and Recommendation, dated
October 15, 1998, was amended following Lettrich's objections to
acknowledge that he was a participant covered under the plan, not
merely a beneficiary.

                               7
in the benefits plan." Id. The Magistrate Judge concluded
that Lettrich had provided no such evidence and
recommended granting summary judgment for the

defendant. The District Court adopted the recommendation
and granted J.C. Penney's motion for summary judgment.
At the same time, the court denied Lettrich's motion to
maintain the action as a class action as moot. Lettrich
timely filed this appeal.

II.

We have jurisdiction over this appeal pursuant to 28
U.S.C. S 1291. We engage in plenary review of a District
Court's grant of summary judgment and consider the facts
in the light most favorable to Lettrich. See, e.g., Seitzinger
v. Reading Hosp. & Med. Ctr., 165 F.3d 236, 238 (3d Cir.
1999). To prevail, J.C. Penney must show that there is no
genuine issue as to any material fact and that J.C. Penney
is entitled to a judgment as a matter of law. See Fed. R.
Civ. P. 56(c); Anderson v. Liberty Lobby, Inc. , 477 U.S. 242,
247 (1986).

III.

ERISA recognizes two types of employee benefit plans,
pension plans and welfare benefits plans, and has different
requirements for each. Unlike the rules governing pension
plans, see 29 U.S.C. SS 1051-1061, there is no automatic
vesting requirement for welfare benefits. The parties agree
that J.C. Penney's Separation Allowance Program was a
welfare benefits plan. As the Supreme Court made clear,
"ERISA does not create any substantive entitlement to
employer-provided health benefits or any other kind of
welfare benefits," and employers are "generally free . . . , for
any reason at any time, to adopt, modify, or terminate
welfare plans." Curtiss-Wright Corp. v. Schoonejongen, 514
U.S. 73, 78 (1995).

This does not mean that welfare benefits plans are not
subject to any regulations at all. ERISA requires, inter alia,
that any change or modification to a welfare plan must be
in writing. See 29 U.S.C. S 1102(a)(1); Hozier v. Midwest
Fasteners, Inc., 908 F.2d 1155, 1162-64 (3d Cir. 1990)

                               8
(holding that failure to follow this procedural requirement
negates the effectiveness of the attempted modification). In
addition, ERISA requires that plan administrators furnish
participants with a summary of any material modifications
written in a manner calculated to be understood by the
average participant. See 29 U.S.C. S 1022(a). ERISA also
requires that a welfare benefits plan must include an
amendment procedure. See 29 U.S.C. S 1102(b)(3). In
Curtiss Wright, the Supreme Court held that the employer
must follow the amendment procedure set out in the plan,
and it remanded for a determination whether there was
compliance with that amendment procedure. 514 U.S. at
85.

In Ackerman v. Warnaco, Inc., 55 F.3d 117 (3d Cir. 1995),
decided a few months after the Supreme Court's decision in
Curtiss-Wright, this court rejected the employer's contention
that the amendment procedures of ERISA are inapplicable
to the complete rescission of a benefit plan. We stated that
"the requirements of section 402(b)(3) apply to plan
terminations as well as plan amendments," reasoning that
"it is anomalous to suggest that ERISA offers employees
protection from mere changes in employee benefit plans,
but does not afford protection against wholesale elimination
of benefits." Id. at 121; see also Deibler v. United Food &
Commercial Workers' Local Union 23, 973 F.2d 206, 210 (3d
Cir. 1992).

The J.C. Penney plan required a vote by its Board of
Directors sixty days prior to March 14, 1993 for the
termination of the welfare plan to be effective. The vote
taken November 11, 1992 satisfied this procedural
requirement, and Lettrich does not contend otherwise. Nor
does he contend that the notice failed to satisfy the ERISA
requirement that any material modification be written in a
manner calculated to be understood by the average
participant. See 29 U.S.C. S 1022(a). Instead, the thrust of
Lettrich's complaint is that J.C. Penney failed to give the
plan participants the notice that was required.

Under ERISA's notice and disclosure requirements, the
administrator of an employee benefit plan (here J.C.
Penney) must furnish participants and beneficiaries with a
readily understandable summary of any "material

                                9
modifications" in accordance with the notice and disclosure
requirements contained in S 1024(b)(1). See 29 U.S.C.
S 1022. The requirements set forth in S 1024(b)(1) call for "a
summary description of such modification or change. . .
[to] be furnished not later than 210 days after the end of
the plan year in which the change is adopted to each
participant, and to each beneficiary who is receiving
benefits under the plan." 29 U.S.C. S 1024(b)(1).

The notice requirements were further amplified by a
regulation promulgated by the Secretary of Labor pursuant
to authority provided by the statute. That regulation
provides that a plan administrator must notify participants
and beneficiaries of material reductions in covered services
or benefits by using measures reasonably calculated to
ensure actual receipt of the material by the plan
participants. See 29 C.F.R. 2520.104b-1(b)(1). Lettrich's
argument thus is that the placement of the notification of
the termination of the separation pay program in the
annual shareholders' Notice of Meeting was not reasonably
calculated to ensure actual receipt of the notification of
termination.

The Magistrate Judge did not disagree with Lettrich's
complaint about the inadequacy of the notice. She
recognized that "the notice of termination was`buried' in
the notice of the annual meeting" and concluded that
Lettrich "did not receive the notice required by 29 C.F.R.
S 2520.104b-1(b)(1)." Report and Recommendation at 10.
We agree that there is at least a factual issue concerning
whether the notice requirement was met in this case. The
issue of notice is not merely whether the document was
mailed and received. We construe the regulation which
focuses on the need to take measures reasonably calculated
to ensure actual receipt of the material to contemplate that
in some situations mailing may not be enough if it is not
reasonably calculated to alert the recipients of the
significance of the mailing. We do not decide whether that
is the case here, but we believe a fact finder could conclude
that a 2 or 3 paragraph notice of termination of a welfare
benefit which, in the Magistrate Judge's words, was
"buried" in the middle of a 61-page notice of a shareholders
meeting with nothing in the exterior to call it to the

                               10
attention of the participants does not satisfy the
requirement.

The Magistrate Judge recommended dismissal or
summary judgment for J.C. Penney based on her
interpretation of our opinion in Ackerman, and the District
Court adopted the recommendation. The facts in Ackerman
are somewhat comparable to those here. There, as here, the
employer terminated a severance program. There, as here,
the plaintiffs argued that they had not received adequate
notice of the deletion of the termination allowance policy.
Although notice of the termination of the program was
included in the company's 1991 handbook, neither the
handbook nor any other notice of the termination of the
policy was distributed to the employees at the Altoona
plant, nor were there any meetings held at the plant to
advise the employees of the change. The district court in
Ackerman, similar to the ruling of the Magistrate Judge
here, entered summary judgment for the employer after
emphasizing that a procedural defect in notice does not give
rise to a substantive remedy and finding no extraordinary
circumstances to warrant deviating from the general rule.
On appeal, we acknowledged the validity of this general
rule, but stated that nonetheless there are situations,
usually presenting extraordinary circumstances, where the
remedy of striking a plan amendment may be available.
Ackerman, 55 F.3d at 125 n.8. The two such situations
delineated in Ackerman were "where the employer has acted
in bad faith, or has actively concealed a change in a benefit
plan, and the covered employees have been substantially
harmed by virtue of the employer's actions." Id. at 125.

In reversing the grant of summary judgment in
Ackerman, we focused on the active concealment exception.
We noted (1) the complete failure to provide the handbook
to the Altoona employees; (2) the failure to hold scheduled
meetings with Altoona employees; (3) the issuance of a
potentially misleading letter to the employees concerning
"changes" to the severance program rather than the
termination of the program; and (4) the hostile employment
climate at the Altoona plant. Id. at 125. We concluded that
a reasonable factfinder could infer that the employer
actively concealed the change in the severance policy in

                               11
order to prevent employees at the Altoona plant from
leaving, and remanded for further findings.

In this case, the Magistrate Judge, construing our
opinion in Ackerman to limit the circumstances for ordering
rescission to employer bad faith or active concealment of
the notice of termination, concluded that Lettrich produced
no such evidence. The Magistrate Judge distinguished
Ackerman on the ground that Ackerman presented
"suspicious circumstances" which the employer tried to
explain as bureaucratic bungling and that the employer
admitted that not all of the employees had received notice
of the rescission of the policy within the required 210 days
of the end of the plan year in which the change was
adopted. Report and Recommendation at 8. The Magistrate
Judge concluded that the J.C. Penney situation was
different because "Plaintiff did receive the notice although it
was buried in the Notice of 1993 Annual Meeting of
Stockholders and Proxy Statement."

It appears that the Magistrate Judge construed the
concept of active concealment too narrowly. J.C. Penney's
actions here are similar to those of Warnaco, the employer
in Ackerman. Like Warnaco, it held no meeting for the
employees to advise them of the change in policy. Like
Warnaco, it sent no letter (other than the Notice of Meeting)
to each employee. Like Warnaco, J.C. Penney, at least at
the inception, was desirous of keeping its employee staff
intact. In Ackerman, we stated: "While we do not rule out
the possibility that administrative error accounted for
Warnaco's omissions, we conclude that a reasonable fact
finder could infer from these facts and from the plaintiffs'
evidence regarding the employment climate at the Altoona
plant that Warnaco actively concealed the change to its
severance policy in order to prevent employees at the
Altoona plant from leaving." 55 F.3d at 125.

Ackerman is not the only case where we raised the
possibility of voiding a rescission of an employees' benefits
plan for inadequate notice. In Ackerman, we noted that in
Schoonejongen v. Curtiss-Wright Corp., 18 F.3d 1034, 1040
(3d Cir. 1993), reversed on other grounds, 514 U.S. 73
(1995) (in a portion of the opinion that had not been
expressly reversed by the Supreme Court), we distinguished

                               12
between cases where the court is asked to void a plan
amendment and cases where plaintiffs seek benefits that
were not provided in the plan. Ackerman, 55 F.3d at 125
n.8. We also noted in Ackerman that in our prior opinion in
Hozier v. Midwest Fasteners, Inc., 908 F.3d 1155 (3d Cir.
1990), we "implicitly recognized the possibility of striking
down a plan amendment where there has been a reporting
and disclosure violation concerning the amendment." Id.
(citing Hozier, 908 F.3d at 1168-69 n.15).

In other circuits as well, the courts have suggested that
notwithstanding the general rule that plan amendments are
valid in spite of inadequate notice, participants may recover
the benefits under the plan before the amendment if they
can demonstrate cognizable prejudice from the company's
failure to fully comply with ERISA's disclosure
requirements, see Veilleux v. Atochem North Am., Inc., 929
F.2d 74, 76 (2d Cir. 1991) (per curiam), make a showing of
"bad faith, active concealment, or detrimental reliance," see
Murphy v. Keystone Steel & Wire Co., 61 F.3d 560, 569 (7th
Cir. 1995), or "show active concealment of the amendment
. . . or some significant reliance upon, or possible prejudice
flowing from the lack of notice," see Godwin v. Sun Life
Assur. Co. of Canada, 980 F.2d 323, 328 (5th Cir. 1992)
(internal quotations omitted). Although the circumstances
in those cases did not persuade those courts to disregard
the plan amendment, this court's holding in Ackerman
establishes that if a plan administrator actively conceals a
material change in welfare benefits from an employee, and
the employee relies to his or her detriment on that omission
by the administrator, we will invalidate the change as to
that employee. Ackerman, 55 F.3d at 125. Our holding
there is consistent with Congress's intent that the ERISA
notice and disclosure provisions guarantee that"the
individual participant knows exactly where he [or she]
stands with respect to the plan." H.R. Rep. No. 93-533, p.
11 (1973), reprinted in 1974 U.S.C.C.A.N. 4639, 4649; see
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117
(1989).

We do not suggest that the circumstances of this case
compel a finding of active concealment sufficient to void the
termination of the separation pay program as to Lettrich.

                               13
Nor do we imply that an inference of bad faith or active
concealment may arise simply from a failure to comply with
ERISA's reporting and disclosure requirements. However, in
light of the similarity in the circumstances here and in
Ackerman, Lettrich's case should not have been dismissed
on summary judgment.2

We conclude that Lettrich presented sufficient evidence of
active concealment to survive summary judgment. When
considered in a light most favorable to Lettrich, the
placement of the termination notice without providing any
warning to participants that significant information
regarding welfare benefits was enclosed deep within --
combined with J.C. Penney's failure to use its established
and effective internal procedure for notifying employees of
important changes in benefits -- could support a
reasonable inference by a factfinder that J.C. Penney
intended to conceal the program's termination from affected
employees. As it is currently uncontested that Lettrich
resigned from his position at Thrift Drug in reliance on the
separation pay program, summary judgment for J.C.
Penney was inappropriate.

IV.

We will accordingly reverse the grant of summary
judgment for J.C. Penney and remand this case to the
District Court for further proceedings in accord with this
opinion.

_________________________________________________________________

2. It appears that Lettrich also contends that he is entitled to receive
the
separation pay benefits under the theory of equitable estoppel. See, e.g.,
International Union, United Auto., AeroSpace & Agric. Implement Workers
of Am. v. Skinner Engine Co., 188 F.3d 130, 152 (3d Cir. 1999); Kurz v.
Philadelphia Elec. Co., 96 F.3d 1544, 1553-1554 (3d Cir. 1996). Given
our disposition of this case, we need not consider that argument here.
We do not preclude Lettrich from raising that argument on remand, at
which point the court would need to decide whether equitable estoppel
offers an independent basis for Lettrich's claim to benefits.

                                14
ROTH, Circuit Judge, Dissenting:

Unlike the majority, I do not find a similarity between the
circumstances here and those in Ackerman v. Warnaco,
Inc., 55 F.3d 117 (3d Cir. 1995), sufficient to prevent the
award of summary judgment to J.C. Penney Co. For that
reason, I respectfully dissent.

As the majority discusses, the statute, 29 U.S.C.
S 1102(a)(1), requires that any change or modification to a
welfare plan be in writing and that the plan administrators
furnish participants with a summary of any material
modifications, written in a manner calculated to be
understood by the average participant. However, as we
recognized in Ackerman, defects in fulfilling ERISA's
reporting and disclosure requirements do not "under
ordinary circumstances" give rise to a substantive remedy.
Id. at 124. We will allow the remedy of recission of an
amendment to a plan only under the extraordinary
circumstances "where the employer has acted in bad faith,
or has actively concealed a change in the benefit plan, and
the covered employees have been substantively harmed by
virtue of the employer's actions." Id. at 125.

In Ackerman, the plaintiffs were production workers in an
apparel factory. Unlike other plants operated by Warnaco,
no meeting was ever held at plaintiffs' plant to inform them
of the elimination of the termination allowance and no
employees at their plant ever received a copy of the updated
plan handbook. We remanded the case so that the District
Court could determine whether under such circumstances
Warnaco could have acted in bad faith or actively concealed
the rescission of the allowance.

In the present case, on the other hand, all participants in
the Separation Allowance Program were profit sharing,
management level employees and all were shareholders of
the company. When J.C. Penney terminated the plan,
notice of the termination was included in Notice of Meeting
of the next shareholders meeting. Program participants,
being shareholders, had an interest in the notice of the
shareholders' meeting. A Notice of Meeting is a type of
communication which will be understood by management
level, shareholder employees. Whether the notice of

                               15
termination, entitled Separation Allowance Program,
appeared on page 1 or page 30 or page 62 of the Notice of
Meeting, it was directed at employees who were experienced
in business affairs and interested in what would transpire
at the shareholders meeting.

I would conclude that this type of notice to this level of
participants satisfies the statutory notice requirements. The
majority, however, not only concludes that it does not
satisfy the notice requirements, the majority has even
greater problems with the notice, concluding that it could
support a reasonable inference that J.C. Penney intended
to conceal the program's termination from affected
employees. If the affected employees had been production
workers in an apparel factory, perhaps. However, they were
not. They were management level, profit-sharing
shareholders in the company.

Moreover, the Vice President of Human Resources, who
was responsible to promote and implement the program,
knew of its termination. He informed any participants, who
asked him about its status, that it had been terminated.

For all the above reasons, I cannot conceive how this type
of notice can constitute bad faith or active concealment on
the part of J.C. Penney. In view of the circumstances of this
case, which I do not find to be extraordinary ones, I would
affirm the judgment of the District Court in favor of J.C.
Penney.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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