                                                                                                                           Opinions of the United
2001 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


4-23-2001

Eichorn v. AT&T Corp
Precedential or Non-Precedential:

Docket 99-5791




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Filed April 23, 2001

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 99-5791

KURT H. EICHORN;
WILLIAM J. HUCKINS; T. ROGER KIANG;
EDWARD W. LANDIS; ORLANDO NAPOLIT ANO,
individually and on behalf of all others similarly situated;
GILBERT G. DALEY; SUSAN H. DIBONA;
BETH KING; MICHAEL S. ORATOWSKI;
THOMAS L. SALISBURY; LAWRENCE W ALSH,
individually and on behalf of all others similarly situated,
       Appellants

v.

AT&T CORP; LUCENT TECHNOLOGIES, INC.;
TEXAS PACIFIC GROUP

On Appeal from the United States District Court
for the District of New Jersey
D.C. Civil Action Nos. 96-cv-03587 & 96-cv-04674
(Honorable Mary Little Cooper)

Argued December 12, 2000

Before: SCIRICA and AMBRO, Circuit Judges,
and POLLAK, District Judge*

(Filed: April 23, 2001)



_________________________________________________________________
* The Honorable Louis H. Pollak, United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.
NOEL C. CROWLEY, ESQUIRE
 (ARGUED)
Crowley & Crowley
10 Park Place
Morristown, New Jersey 07960

 Attorney for Appellants

JONATHAN E. HILL, ESQUIRE
 (ARGUED)
KATHY A. LAWLER, ESQUIRE
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, New Jersey 07962

JAMES E. TYRRELL, JR., ESQUIRE
 (ARGUED)
SCOTT L. WEBER, ESQUIRE
Latham & Watkins
One Newark Center, 16th Floor
P.O. Box 10174
Newark, New Jersey 07101

 Attorneys for Appellees,
AT&T Corp. and Lucent
Technologies, Inc.

DAVID M. FABIAN, ESQUIRE
 (ARGUED)
Traflet & Fabian
264 South Street
Morristown, New Jersey 07960

 Attorney for Appellee,
Texas Pacific Group

                           2
OPINION OF THE COURT

SCIRICA, Circuit Judge.

In this appeal from the grant of summary judgment we
must decide whether defendants AT&T Corp., NCR Corp.,
Lucent Technologies, and Texas Pacific Group's agreement
to restrict the hiring of certain employees upon Lucent's
sale of Paradyne Corp. was a violation of S 1 of the
Sherman Antitrust Act. We also must decide whether this
no-hire agreement which effectively cancelled the plaintiff
employees' AT&T pension bridging rights violated S 510 of
the Employee Retirement Income Security Act. W e hold the
no-hire agreement was a valid covenant not to compete that
was reasonable in scope and therefor e not a violation of S 1
of the Sherman Act. But also we hold plaintif fs have
presented sufficient prima facie evidence of AT&T and
Lucent's specific intent to interfer e with an ERISA funded
employee pension fund to survive summary judgment on
the ERISA S 510 claim.

I.

In July 1995, AT&T, a long distance telephone and
wireless services provider, decided to sell one of its
affiliates, Paradyne Corp., a manufacturer of network
access products for the telecommunications industry.
Contemplating the sale, AT&T wanted to ensur e that
Paradyne remained a viable entity because A T&T and its
other affiliates, including Lucent Technologies, purchased
many of the network access products Paradyne
manufactured. To make Paradyne mor e attractive to buyers
as an ongoing business, AT&T adopted a human r esource
plan that placed restrictions on Paradyne employees' ability
to transfer to other divisions of AT&T ("the Preliminary
Net"). Specifically, the Preliminary Net precluded an
employee who voluntarily left Paradyne from being hired by
any other division of AT&T. The pr emise for the hiring bar
was AT&T's belief that one of Paradyne's most marketable
assets was its skilled employees. The retention of

                               3
Paradyne's employees, therefore, was considered essential
for the sale of Paradyne.

Shortly after adopting the Preliminary Net, A T&T
consummated a business reorganization plan resulting in
three independent companies: AT&T, Lucent Technologies,
and NCR Corp. (the "trivestiture"). As part of the
trivestiture, AT&T transferred ownership of Paradyne to
Lucent. Consistent with the Preliminary Net, the Paradyne
employees, now employed by Lucent, were pr ecluded from
seeking re-employment at any other AT&T division or
affiliate after the trivestiture.

On July 31, 1996, Lucent sold Paradyne to Texas Pacific
Group. Before closing, Lucent agreed, on behalf of itself and
the other former AT&T affiliates, that it would not hire,
rehire, retain, or solicit the services of any Paradyne
employee or consultant whose annual income exceeded
$50,000. This "Pre-Closing Net" was consistent with the
understanding that Texas Pacific Group's interest in
purchasing Paradyne was based on its desir e to acquire the
technical skills of Paradyne's employees for a sufficient
period of time to ensure a successful transition of
ownership.

Once the deal was closed, Lucent and Texas Pacific
Group entered a post-closing agreement ("Post-Closing Net")
in which Lucent warranted on behalf of itself and the other
AT&T affiliates that for 245 days (8 months) following the
sale and the expiration of the Pre-Closing Net, it would not
seek to hire, solicit or rehire any Paradyne employee or
consultant whose compensation exceeded $50,000. The
eight month no-hire agreement had the practical effect of
cancelling the Paradyne employees' accrued pension
benefits under their former AT&T pension plans. Under the
AT&T pension plan, employees were entitled to "bridging
rights" which allowed them to retain their level of accrued
pension benefits if they left AT&T and r eturned within six
months. After six months, the bridging rights expir ed.
Employees rehired after the six month period would need
five years of employment to regain their pr evious pension
levels. Because the Post-Closing Net barred Paradyne
employees from returning to an A T&T affiliate for eight

                               4
months, these employees automatically lost the bridging
rights they had acquired under their AT&T pensions.

Before the sale was consummated, Texas Pacific Group
hired an outside consultant to determine the benefit
package it could offer the Paradyne employees. Paradyne's
Vice-President of Human Resources, Sherril Claus Melio,
who had previously held the same position when Paradyne
was owned by AT&T and Lucent, assisted the consultant in
drafting various benefit plan proposals. The consultant
concluded that in order to make Paradyne financially
competitive, Texas Pacific Group could not offer the same
pension package AT&T had previously of fered its
employees. Although Melio's exact role in T exas Pacific
Group's decision is disputed, Texas Pacific Group
ultimately decided not to offer a defined pension benefits
program to its new employees.

The plaintiffs are former Paradyne employees who allege
the Preliminary Net, as well as the Pre and Post-Closing
Nets, collectively represent an unlawful group boycott in
violation of S 1 of the Sherman Act. Additionally, they
contend the defendants conspired to eliminate their
pension benefits thereby engaging in an illegal price fixing
scheme in violation of S 1 of the Sher man Act. Furthermore,
they allege the no-hire agreement, which effectively
cancelled Paradyne employees' bridging rights under their
AT&T pensions, violated S 510 of the Employee Retirement
Income Security Act.

In addressing these claims, the District Court held that
plaintiffs failed to prove a violation ofS 1 of the Sherman
Act and failed to produce sufficient prima facie evidence of
AT&T and Lucent's specific intent to inter fere with an
ERISA funded pension plan to support their S 510 claim.
The court, therefore, granted defendants' motion for
summary judgment. After the grant of summary judgment,
plaintiffs filed a discovery motion in connection with an
anticipated motion for class certification which the District
Court denied. This appeal followed.

II.

The District Court had jurisdiction under 15 U.S.C.S 26
and 29 U.S.C. S 1140 because plaintiffs' claims allege

                                5
violations of S 1 of the Sherman Antitrust Act and S 510 of
ERISA. We have jurisdiction under 28 U.S.C.S 1291. We
exercise plenary review over the District Court's grant of
summary judgment on plaintiffs' antitrust and ERISA
claims. Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974
F.2d 1358, 1363 (3d Cir. 1992), cert. denied, 507 U.S. 912
(1993). We exercise plenary review over the District Court's
legal determinations concerning class certification and
review its factual findings for abuse of discretion. Bogus v.
Am. Speech & Hearing Ass'n, 582 F.2d 277, 289 (3d Cir.
1978).

III.

Section 1 of the Sherman Act provides:

       Every contract, combination in the form of trust or
       otherwise, or conspiracy, in restraint of trade or
       commerce among the several states, or with for eign
       nations, is hereby declared to be illegal.

15 U.S.C. S 1 (1994).

Under S 1, unreasonable restraints on trade are
prohibited because they inhibit competition within the
market. Bus. Elecs. Corp. v. Sharp Elecs. Corp. , 485 U.S.
717, 723 (1988); United States v. Brown Univ., 5 F.3d 658,
669 (3d Cir. 1993). In order to assert a cause of action
under S 1, plaintiffs must prove they have suffered an
antitrust injury that is causally related to the defendants'
allegedly illegal anti-competitive activity. Brunswick Corp. v.
Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). Once
there is the finding of antitrust injury, courts examine the
alleged illegal conduct under one of two distinct tests: per
se violation or rule of reason. Under the per se test,
"agreements whose nature and necessary effect are so
plainly anti-competitive that no elaborate study of the
industry is needed to establish their illegality" are found to
be antitrust violations. Nat'l Soc'y of Pr of. Eng'rs v. United
States, 435 U.S. 679, 692 (1978). For those activities not
within the per se invalidity category, courts employ the rule
of reason test. Under this test, plaintif fs have the burden of
establishing that, under all the circumstances,"the
challenged acts are unreasonably r estrictive of competitive

                               6
conditions" in the relevant market. Standard Oil Co. of N.J.
v. United States, 221 U.S. 1, 28 (1911). "An analysis of the
reasonableness of particular restraints includes the
consideration of the facts peculiar to the business in which
the restraint is applied, the nature of the restraint and its
effects, and the history of the restraint and the reasons for
its adoption." United States v. Topco Assocs., Inc., 405 U.S.
596, 607 (1972).

A.

We hold the AT&T Preliminary Net was not a violation of
S 1 of the Sherman Act. The District Court found that "as
of . . . the date that the Preliminary Net was put into effect
. . . , Lucent was a wholly-owned subsidiary of A T&T, and
accordingly, the two companies were a singular entity that
could not conspire to violate the Antitrust laws." Eichorn v.
AT&T Corp., CA No. 96-3587, slip op. at *17 (D.N.J.
September 10, 1999). In Copperweld Corp. v. Independence
Tube Corp., 467 U.S. 752 (1984), the Supr eme Court held
the coordinated acts of a parent and its wholly owned
subsidiary cannot themselves give rise to S 1 antitrust
violations. The Court reasoned, "[a] par ent and its wholly
owned subsidiary have a complete unity of inter est. Their
objectives are common, not disparate; their general
corporate actions are guided or determined not by two
separate corporate consciousnesses, but one." Id. at 771.
Because the Preliminary Net was an inter nal restriction
between a single corporation, AT&T, and its wholly owned
subsidiaries, Lucent and NCR, and not an agr eement
between separate corporate identities, it was not a violation
of S 1 of the Sherman Act. Id. at 769 ("An internal
agreement to implement a single unitary fir m's policies does
not raise the antitrust dangers that S 1 was designed to
police."). Although plaintiffs assert A T&T and Lucent were
not motivated by a single "corporate consciousness"
because they were in the process of becoming separate
entities, we believe that during the effective time period of
the AT&T Preliminary Net, AT&T and Lucent retained a
unified corporate interest for the purpose of antitrust
analysis. It was not until AT&T divested all of its stock in
Lucent and after the lapse of the Preliminary Net that the
two companies became completely separate entities.

                               7
As Supreme Court and our precedent make clear, only
anti-competitive actions between competitors give rise to
Sherman Act liability. Copperweld, 467 U.S. at 771; Siegel
Transfer, Inc. v. Carrier Exp., Inc. , 54 F.3d 1125, 1132 (3d
Cir. 1995) ("The operations of a corporate enterprise
organized into divisions must be judged as the conduct of
a single actor."); Weiss v. Y ork Hosp., 745 F.2d 786, 813 (3d
Cir. 1984), cert. denied, 470 U.S. 1060 (1985). As a single
entity in a parent subsidiary relationship, the defendants in
this case were incapable of conspiring to violate the
antitrust laws through the Preliminary Net agreement.
Siegel, 54 F.3d at 1132.

We next turn to plaintiffs' claim that the Pre and Post-
Closing Nets, collectively referred to as the no-hire
agreement, represent an illegal gr oup boycott and a
horizontal price fixing conspiracy under S 1 of the Sherman
Act. Plaintiffs allege Lucent, AT&T and T exas Pacific Group
horizontally competed for the plaintiff employees' technical
skills and services. As competitors, they ar gue, the
defendants conspired to suspend competition for plaintiffs'
technical services with the purpose and the ef fect of locking
them out of the labor market. See Anderson v. Shipowners
Ass'n of the Pac. Coast, 272 U.S. 359 (1926) (agreement
between most shipowners on Pacific coast to deny
employment to any seaman who did not register with
association was violation of S 1 of Sher man Act); Law v.
Nat'l Collegiate Athletic Assoc., 134 F.3d 1010 (10th Cir.)
(NCAA rule limiting salary of basketball coaches was per se
violation of S 1 of Sherman Act), cert. denied, 525 U.S. 822
(1998). By locking them out and effectively cancelling their
entitlement to AT&T pension rights, plaintif fs argue the
defendants conspired to fix the cost of labor in the market.
In support, plaintiffs cite several Supr eme Court cases that
hold horizontal group boycotts and price fixing conspiracies
are per se violations of the Sherman Antitrust Act. See FTC
v. Super. Ct. Trial Lawyers Assoc., 493 U.S. 411, 422
(1990); Arizona v. Maricopa County Med. Soc'y , 457 U.S.
332, 344-45 (1982); Broad. Music, Inc. v. Columbia Broad.
Sys., Inc., 441 U.S. 1, 7-8 (1979).

But the facts here are substantially dif ferent from the
classic per se horizontal price fixing and gr oup boycott

                               8
conspiracies the Court has generally found to be per se
antitrust violations. Broad. Music, Inc. , 441 U.S. at 8 ("Easy
labels [like price fixing] do not always supply ready
answers."). Because of the fact specific inquiry required to
assess antitrust liability under the Sherman Act, we will
address each prong of the S 1 analysis.

B.

Private plaintiffs pursuing claims under S 1 of the
Sherman Act have standing when they suf fer an antitrust
injury that is causally related to the defendants' allegedly
illegal anti-competitive activity. Brunswick, 429 U.S. at 489.
The Supreme Court has described antitrust injury as injury
of

       the type the antitrust laws were intended to pr event
       and that flows from that which makes defendants' acts
       unlawful. The injury should reflect the anti-competitive
       effect either of the violation or of anti-competitive acts
       made possible by the violation. It should, in short, be
       the type of loss that the claimed violations . . . would
       be likely to cause.

Id. (internal quotes omitted).

It is well established that an antitrust injury r eflects an
activity's anti-competitive effect on the competitive market.
Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328,
344 (1990) ("The antitrust injury requir ement . . . ensures
that a plaintiff can recover only if the loss stems from a
competition-reducing aspect or ef fect of the defendant's
behavior.") (emphasis in original). W e have consistently held
an individual plaintiff personally aggrieved by an alleged
anti-competitive agreement has not suffer ed an antitrust
injury unless the activity has a wider impact on the
competitive market. See, e.g., City of Pittsburgh v. West
Penn Power Comp., 147 F.3d 256, 266-67 (3d Cir. 1998)
(holding action that did not lessen competition in a
"marketplace" was not antitrust injury); Barton & Pittinos,
Inc. v. SmithKline Beecham Corp., 118 F.3d 178, 182 (3d
Cir. 1997) (the determination of whether a party has
suffered an antitrust injury "depends on how the market is
defined"); Brader v. Allegheny Gen. Hosp. , 64 F.3d 869 (3d

                                 9
Cir. 1995). While a plaintiff may have individually suffered
an injury as a result of defendants' actions, the antitrust
laws were designed to protect market-wide anticompetitive
activities. Atlantic Richfield, 495 U.S. at 338 (quoting Brown
Shoe Co. v. United States, 370 U.S. 294, 320 (1902) ("The
antitrust laws were enacted for the protection of
competition, not competitors.") (emphasis in original)); see
also Les Shockley Racing, Inc. v. Nat'l Hot Rod Ass'n., 884
F.2d 504, 508 (9th Cir. 1989) (holding plaintiffs must "plead
and prove a reduction of competition in the market in
general and not mere injury to their own positions as
competitors").

In dismissing plaintiffs' antitrust claims the District
Court stated,

       Plaintiffs apparently argue that the injury to
       competition is that they are prevented fr om providing
       their services to AT&T, Lucent or its affiliates. Put
       simply, the antitrust laws are not concer ned with
       injury to competitors (here the plaintif fs), but with
       injury to competition. That these plaintiffs are
       prevented from working at AT&T , Lucent or their
       affiliates for the limited time period during which the
       pre-closing and post-closing nets were in effect is not
       an injury to competition. In our view, plaintif fs'
       allegations of economic injury to themselves
       misperceive the nature of the injury which is required
       to be established in order to sustain a claim under
       Section 1 of the Sherman Act.

Eichorn, CA No. 96-3587, slip op. at *20-21 (internal
citations omitted).

While employees who are precluded fr om selling their
labor have not necessarily suffered an antitrust injury,
"employees may challenge antitrust violations that are
premised on restraining the employment market." Phillip
Areeda & Herbert Hovenkamp, Antitrust Law P 377a (rev.
ed. 1995) (footnotes omitted); see also Brian R. Henry,
`Sorry, We Can't Hire You . . . We Promised Not To': The
Antitrust Implications of Entering Into No-Hir e Agreements,
11-Fall Antitrust 39 (1996) ("Most courts considering the
issue have held that employees suffer `injury' recognized by

                               10
the antitrust laws when their employment opportunities are
restricted by a no-hire agreement between potential
employers, and thus have standing to sue the entity
imposing such a provision."). As a leading treatise on
antitrust states:

       Antitrust law addresses employer conspiracies
       controlling employment terms precisely because they
       tamper with the employment market and thereby
       impair the opportunities of those who sell their services
       there. Just as antitrust law seeks to pr eserve the free
       market opportunities of buyers and sellers of goods, so
       also it seeks to do the same for buyers and sellers of
       employment services. It would be perverse indeed to
       hold that the very object of the law's solicitude and the
       persons most directly concerned--per haps the only
       persons concerned--could not challenge the r estraint.

       *   *   *

       An employee overcomes the primary hurdle to standing
       when he shows that the alleged violation restrains
       competition in the labor market. Of course, he must
       still show injury-in-fact that was proximately caused
       by the violation and, in damage cases, that can be
       quantified without undue speculation.

Areeda & Hovenkamp, supra, at P 377c (footnotes omitted).

In Anderson, the Supreme Court held that a seaman, on
behalf of himself and other members of the seamen's union,
could sue an association of most of the shipowners in the
region when the shipowners' association adopted unduly
strict regulations governing employment. 272 U.S. at 359.
The Court found the shipowners' agreement violated the
antitrust laws because the regulations pr evented the "free
exercise of the rights" of the seamen to engage in trade and
commerce. Id. at 363 (quoting United States v. Colgate &
Co., 250 U.S. 300, 307 (1919)). Because unr egistered
seamen were precluded from working on any association
ship, which constituted the majority of the ships in the
region, they suffered an injury pr otected under the
antitrust laws.

While Anderson was decided many years befor e the

                                11
Supreme Court detailed the antitrust injury r equirement in
Brunswick,1 several courts since Brunswick have found that
no-hire agreements which preclude employees from seeking
employment from a third party employer can give rise to
antitrust injury. In Cesnick v. Chrysler Corp. , 490 F. Supp.
859 (M.D.Tenn. 1980), plaintiffs who wer e precluded from
seeking re-employment at Chrysler when their division was
sold to a third party suffered an antitrust injury. The Court
reasoned that it "must conclude that the market for
employee skills is a market subject to the pr ovisions of the
Sherman Act." Id. at 864.

More recently in Roman v. Cessna Air craft Co., 55 F.3d
542 (10th Cir. 1995), the Court of Appeals for the Tenth
Circuit held that a plaintiff precluded from seeking
employment as an airplane engineer with the Cessna
Aircraft Company because of an agreement between Cessna
and the Boeing Company not to hire each other's engineers
suffered an antitrust injury. The Court r easoned that
plaintiff

       alleged that competition in the market for his services
       as an employee had been directly impeded by
       defendants' agreement not to compete for each other's
       employees. He further alleges that he was injur ed by
_________________________________________________________________

1. Several other courts prior to Brunswick held that employees barred
from seeking employment from a thir d party employer because of a no-
hire agreement have standing to litigate aS 1 claim. See, e.g., Radovich
v. Nat'l Football League, 352 U.S. 445 (1957) (coach precluded from
working in National Football League because of agr eement among all of
the teams in the league had standing); Quinonez v. Nat'l Assoc. of Secs.
Dealers, Inc., 540 F.2d 824 (5th Cir. 1976) (plaintiff who was fired by
securities dealer and was unable to find employment with another
securities dealer because of agreement among dealer firms not to hire an
employee who was discharged by another fir m suffered sufficient injury
to proceed with antitrust claim); Tugboat, Inc. v. Mobile Towing Co., 534
F.2d 1172, 1176 (5th Cir.) ("Ther e can be little doubt that an employee
who is deprived of a work opportunity has been injur ed . . . because the
selling of one's labor is a commercial interest."), reh'g denied, 540 F.2d
1085 (5th Cir. 1976); Nichols v. Spencer Int'l Press, Inc., 371 F.2d 332
(7th Cir. 1967) (plaintiff prohibited from seeking employment at
competing employer because of agreement between employers in
industry not to hire each other's employees suf fered injury sufficient to
bring antitrust claim).

                               12
       that agreement because it prevented him fr om selling
       his services to the highest bidder . . . . W e believe this
       is sufficient to allege antitrust standing.

Id. at 545; see also Law, 134 F .3d 1010 (coach whose
opportunities in employment market were impair ed by
agreement among members of NCAA to limit the maximum
compensation paid to coaches suffered antitrust injury).

In a similar manner, plaintiffs her e allege they have been
precluded from selling their services to three companies
within the industry, NCR, AT&T and Lucent, and that the
no-hire agreement interfered with their ability to attain
pension benefits. Because the no-hire agr eement directly
impeded plaintiffs' ability to sell their labor to at least three
companies within the competitive market and ef fectively
cancelled their AT&T pension benefits, we believe they have
standing to litigate their S 1 claims. Roman, 55 F.3d at 545.
To the extent the District Court held that plaintiffs did not
suffer an antitrust injury and lacked standing to litigate
their S1 claims, it was in error.

C.

Plaintiffs contend on appeal that the no-hir e agreement
was a group boycott and a horizontal pricefixing
conspiracy. See Klor's v. Broadway-Hale Stores, Inc., 359
U.S. 207, 211 (1959). As direct competitors for their labor,
plaintiffs argue, the defendants enter ed the no-hire
agreement as part of a concerted effort to lock them out of
employment and decrease labor costs by eliminating
pension benefits. See Nat'l Soc'y of Pr of. Eng'rs, 435 U.S. at
692 (quoting United States v. Container Corp. of Am., 393
U.S. 333 (1969) ("[A]n agreement that`interfere[s] with the
setting of price by free market forces' is illegal on its face.")).
Plaintiffs maintain that group boycotts and horizontal price
fixing schemes between competitors are per se violations of
the antitrust laws because these agreements ar e manifestly
uncompetitive and are "naked restraints of trade . . . [that
have] no purpose except stifling of competition." White
Motor Co. v. United States, 372 U.S. 253, 263 (1963); see
also N. Pac. Ry. Co. v. United States, 356 U.S. 1, 19-20
(1958). In support, they cite NCAA v. Bd. of Regents of the

                               13
Univ. of Okla., 468 U.S. 85, 100 (1984), wher e the Supreme
Court stated,

       Horizontal price fixing . . . [is] or dinarily condemned as
       a matter of law under an `illegal per se' appr oach
       because the probability that these practices ar e anti-
       competitive is so high . . . . In such circumstances a
       restraint is presumed unreasonable without inquiry
       into the particular market context in which it is found.

While plaintiffs contend the no-hire agr eement was per se
illegal because it was a horizontal group boycott and a price
fixing conspiracy, we can find no support within the
relevant case law for this label. Br oad. Music, Inc., 441 U.S.
at 8 ("Easy labels do not always supply r eady answers.").
The per se illegality rule applies only in those cases where
the business practice in question is one, which on its face,
has "no purpose except stifling of competition." White Motor
Co., 372 U.S. at 263; see also N.W. Wholesale Stationers,
Inc. v. Pac. Stationery & Printing Co., 472 U.S. 284, 289-90
(1985) (per se rule confined to limited types of anti-
competitive practices); Larry Muko Inc. v. S.W . Pa. Bldg. and
Const. Trades Council, 670 F.2d 421, 429 (3d. Cir.)
("Generally the application of the per se rule has been
limited to those `classic' boycotts in which a gr oup of
business competitors seek to benefit economically by
excluding other competitors from the marketplace."), cert.
denied, 459 U.S. 916 (1982). The Supreme Court has been
cautious in extending the per se approach to claims that
fall outside certain previously enumerated categories of
liability. See, e.g., Bd. of Regents of the Univ. of Okla., 468
U.S. at 100 n.21 ("Judicial inexperience with a particular
arrangement counsels against extending the r each of the
per se rules."); Broad. Music, Inc. , 441 U.S. at 20 n.33 ("The
per se rule is not employed until after considerable
experience with the type of challenged restraint."); Maricopa
County Med. Soc'y, 457 U.S. at 344 ("Experience with a
particular kind of restraint enables the Court to predict
with confidence that the rule of reason will condemn it.").
Because of the fact specific inquiry involved in antitrust
analysis, the Supreme Court has recognized that claims not
within established categories of antitrust liability are more
appropriately analyzed under the rule of r eason where

                               14
courts can balance the effect of the alleged anti-competitive
activity against its competitive purposes within the relevant
product and geographic markets.

Acknowledging this judicial hesitance to extend the per
se rule to new categories of antitrust claims, we note there
are no Supreme Court cases nor any federal cases that
have applied the per se rule in similar factual
circumstances. The only two federal cases that have
analyzed similar group boycott and price fixing claims have
held that no-hire agreements executed upon the sale of a
corporation are analyzed under the rule of r eason. Coleman
v. Gen. Elec. Co., 643 F. Supp. 1229, 1243 (E.D. Tenn.
1986), aff 'd, 822 F.2d 59 (6th Cir. 1987); Cesnick, 490 F.
Supp. at 866-67. In Coleman, the 3M Corporation sold its
ceramics division to General Electric. 643 F . Supp. at 1243.
After closing, 3M and General Electric enter ed an
agreement in which 3M warranted that it would not rehire
any employee who voluntarily accepted a job with General
Electric. Several ceramic division employees br ought suit
alleging a group boycott that was per se invalid under S 1
of the Sherman Act. Disagreeing, the court reasoned that
"courts have refused to apply the `gr oup boycott'
designation where the effect is not to drive out competition
but to achieve some other goal, whether or not the goal
withstands the rule of reason analysis." Id. (citing Smith v.
Pro Football, Inc., 593 F.2d 1173, 1177-78 (D.C. Cir. 1979)).
Because the agreement only precluded the plaintiffs from
selling their services to one corporation, the court held it
only had a "de minimus impact on the employment market
in general," and the per se rule was "wholly inapplicable."
Id.

Similarly in Cesnick, former employees of Chrysler's Non-
Automotive Air Conditioning Division sued underS 1 when
Chrysler sold the division to the Fedders Corporation and
agreed not to rehire its employees. 490 F. Supp. at 866.
Although plaintiffs characterized the agr eement as a group
boycott and a per se violation of S 1, the court stated, "[i]n
the absence of any Supreme Court cases based on facts
similar to those of this case, this Court will not accept the
proposition that any conduct that can be characterized as
a group boycott is a per se violation." Id. The court
reasoned the Chrysler-Fedders'

                               15
       agreement was designed to increase the likelihood that
       Fedders would enjoy the services of the experienced
       AirTemp employees, an obviously sound business
       purpose. To the extent that the agreement effectively
       restrained competition between Chrysler and Fedders
       for employee services, a competition whose existence is
       entirely conjectural, that effect was incidental as well
       as de minimus.

Id. at 866-67.

Cognizant that there are no Supreme Court cases holding
no-hire agreements entered upon the legitimate sale of a
business to a third party are per se antitrust violations,2
and recognizing that the only two federal courts that have
addressed the issue have declined to apply the per se rule,
we hold the no-hire agreement here is more appropriately
analyzed under the rule of reason. As several courts have
recognized, the per se rules of illegality ar e the exception to
antitrust analysis and are only employed in certain
recognized categories. DeLong Equip. Co. v. Washington
Mills Abrasive Co., 887 F.2d 1499, 1506 (11th Cir. 1989),
cert. denied, 494 U.S. 1081 (1990).

The District Court properly characterized the no-hire
agreement as a common law covenant not to compete. As
we discuss, courts have uniformly found that covenants not
to compete should be examined under the rule of r eason.
See, e.g., McDonald v. Johnson & Johnson, 722 F.2d 1370
(11th Cir.), cert. denied, 469 U.S. 870 (1984); Consultants &
Designers, Inc., v. Butler Serv. Group, Inc. , 720 F.2d 1553
(11th Cir. 1983); Aydin Corp. v. Loral Corp., 718 F.2d 897
(9th Cir. 1983); Lektro-Vend Corp. v. Vendo Co., 660 F.2d
255 (7th Cir. 1981), cert. denied, 455 U.S. 921 (1982).
Therefore, we will analyze plaintif fs' claims under the rule
of reason so we can examine the effect of the defendants'
agreement within the wider context of its competitive
_________________________________________________________________

2. Similarly, we can find no cases in which a no-hire agreement entered
into upon the sale of a business to a third party that resulted in the
loss
of employee benefits was found to be a horizontal price fixing conspiracy.
See Broad. Music, Inc., 441 U.S. at 9-10 (quoting Topco Assocs., Inc., 405
U.S. at 607-08 ("It is only after considerable experience with certain
business relationships that courts classify them as per se violations.")).

                               16
purposes and its impact on the relevant pr oduct and
geographic markets.

D.

Under the rule of reason, we look at the totality of the
circumstances surrounding an alleged anti-competitive
activity, including facts peculiar to the relevant business, to
determine the "nature or purpose" of the allegedly illegal
restraint. Topco Assocs., Inc., 405 U.S. at 607. "The finder
of fact must decide whether the questioned practice
imposes an unreasonable restraint on competition, taking
into account a variety of factors, including specific
information about the relevant business, its condition
before and after the restraint was imposed and the
restraint's history, nature and ef fect." State Oil Co. v. Khan,
522 U.S. 3, 10 (1997) (citing Maricopa, 457 U.S. at 342). In
applying this test, we examine the competitive significance
of the alleged restraint to determine whether it has an anti-
competitive effect on the market and is an unr easonable
restraint on trade. Tunis Bros. Co. v. Ford Motor Co., 952
F.2d 715, 722 (3d Cir. 1991), cert. denied, 505 U.S. 1221
(1992). In this regard, covenants not to compete executed
upon the sale of a business to a third party ar e generally
not recognized as antitrust violations. See Bus. Elecs. Corp.,
485 U.S. at 730 n.4 ("The classic ancillary r estraint is an
agreement by the seller of a business not to compete within
the market."); Nat'l Soc'y of Prof 'l Eng'rs, 435 U.S. at 689;
Lektro-Vend Corp., 660 F.2d at 265 ("The recognized
benefits of reasonably enforced noncompetition covenants
are now beyond question."). As early as 1899, courts have
recognized that covenants not to compete ar e not violations
of S 1 of the Sherman Act because,

       It [i]s of importance, as an incentive to industry and
       honest dealing in trade, that, after a man ha[s] built up
       a business with extensive good will, he should be able
       to sell his business and good will to the best
       advantage, and he could not do so unless he could
       bind himself by an enforceable contract not to engage
       in the same business in such a way as to prevent
       injury to that which he was about to sell.

                               17
United States v. Addyston Pipe & Steel, 85 F . 271, 280 (6th
Cir. 1898), modified, 175 U.S. 211 (1899).

In this vein, courts have characterized covenants not to
compete executed upon the legitimate transfer of ownership
of a business as ancillary restraints on trade. Id.; see also
Bus. Elecs. Corp., 485 U.S. at 730 n.4; United States v.
Empire Gas Corp., 537 F.2d 296, 307 (8th Cir. 1976)
("Covenants not to compete executed in conjunction with
the purchase of a business allow the pur chaser to obtain
the value of the good will for which he has paid."), cert.
denied, 429 U.S. 1122 (1977). So long as these covenants
are reasonable in scope, there is no antitrust violation
under the rule of reason. See, e.g., Syntex Labs., Inc., v.
Norwich Pharmacal Co., 315 F. Supp. 45, 56 (S.D.N.Y.
1970) ("[I]t is hornbook law that a covenant not to compete
ancillary to the sale of a business (or part of a business),
when reasonably limited to time and territory, does not fall
within the prohibitions of the Sherman Act."), aff 'd, 437
F.2d 566 (2d Cir. 1971).

The District Court found,

       In our view, the pre-closing and post-closing nets at
       issue here are a subset of common law covenants not
       to compete. Moreover, it is clear that the no-hire
       agreements imposed restrictions which wer e "ancillary
       to legitimate transactions," and thus properly
       considered an ancillary restraint.

Eichorn, CA No. 96-3587, slip op. at *23 (internal citation
omitted).

We agree that the no-hire agr eement was not an
unreasonable restraint of trade underS 1 of the Sherman
Act. Frackowiak v. Farmers Ins. Co., Inc. , 411 F. Supp.
1309, 1318 (D.Kan. 1976) ("Numerous Courts have
recognized the general rule that agreements not to compete,
entered into in conjunction with the ter mination of
employment or sale of a business, do no offend the federal
antitrust provisions if they are r easonable in duration and
geographical limitation."). The primary purpose of the no-
hire agreement was to ensure that T exas Pacific Group, as
the purchaser of Paradyne, could retain the skilled services
of Paradyne's employees. Although the no-hir e agreement

                               18
precluded the employees from seeking employment at an
AT&T affiliate for 245 days, the primary purpose of the
agreement was not anti-competitive. Contrary to plaintiffs'
assertions, we can find no evidence to support their claim
that the no-hire agreement was executed for the improper
purpose of restraining trade and the cost of labor in the
telecommunications industry. The primary purpose of the
no-hire agreement was to ensure the successful sale of
Paradyne to Texas Pacific Group which r equired workforce
continuity.3 Any restraint on plaintiffs' ability to seek
employment at AT&T and any effect on their pension
bridging rights was incidental to the effective sale of
Paradyne.

Because the no-hire agreement was a legitimate ancillary
restraint on trade, we must determine whether the eight
month restriction from employment at an A T&T affiliate
was reasonable or whether it went further than necessary
to ensure the successful transition of ownership. Cesnick,
490 F. Supp. at 868 (quoting Syntex Labs. , 315 F. Supp. at
56) ("The question in every case [involving a covenant not to
compete ancillary to the sale of a business] is whether the
restraint is reasonably calculated to pr otect the legitimate
interests of the purchaser in what he has purchased, or
whether it goes so far beyond what is necessary as to
provide a basis for the inference that its real purpose is the
fostering of monopoly.").

We do not think the eight month restriction on re-
employment at an AT&T affiliate was unr easonably broad.
It is reasonable to believe Texas Pacific Group would
require the technical skills of these employees for at least
this eight month period, if not longer, to ensure a
successful transition of ownership from Lucent.
_________________________________________________________________

3. Plaintiffs contend the true motive of the no-hire agreement was not
work force continuity but eliminating pension benefits to reduce Texas
Pacific Group's costs. They argue that if work force continuity were
really
the motive, Texas Pacific Group could have offered enhanced benefits
packages to entice the work force to remain with Paradyne rather then
simply agreeing to cancel their AT&T pension benefits. But the existence
of alternative means to achieve a legitimate business goal does not in
itself mean the defendants' chosen course of action was uncompetitive
and improper.

                               19
Furthermore, the no-hire agr eement only precluded the
plaintiffs from working at Lucent or an A T&T affiliate. The
employees were free to leave Texas Pacific Group and seek
employment elsewhere within the telecommunications
industry. Significantly, there is no evidence in the record to
support plaintiffs' claim that AT&T was the only employer
in the market to whom they could sell their services. As the
District Court found, there are over twenty other
telecommunications firms that compete for plaintiffs'
technical services. Furthermore, the market for plaintiffs
with more generalized educational and work backgrounds
includes "a vast number of jobs" nationwide. Eichorn, CA
No. 96-3587, slip op. at *27-28 n.17.

Therefore, we hold the no-hire agr eement was not an
unreasonable restraint on trade. As an ancillary covenant
not to compete, the no-hire agreement was reasonable in its
restrictions on the plaintiffs' ability to seek employment
elsewhere. Nat'l Soc'y of Prof 'l Eng'rs, 435 U.S. at 689.
While the no-hire agreement essentially barred the
plaintiffs' ability to retain their desirable AT&T pension
benefits, S 1 of the Sherman Antitrust Act is not the
appropriate vehicle here for redr ess. In formulating their
claim in antitrust parlance, plaintiffs have argued their
inability to work at their former jobs was a manifestly
uncompetitive restraint on trade within the r elevant
market. We disagree. In order to advance their antitrust
claim, plaintiffs are forced to define narrowly the relevant
market affected by the defendants' activity as,

       potential employers within a 35 mile radius of
       Holmdel/Middletown with the capacity and capability
       of employing or utilizing large numbers of persons with
       specialized experience in high speed data
       communications equipment of the sort Paradyne
       develops and makes . . . who can provide continuity of
       the pension benefits which have accrued to [plaintiffs]
       under the AT&T and/or Lucent pension plans.

Eichorn, CA No. 96-3587, slip op. at *29-30 n.18.

We believe this narrow market definition is inappropriate.
As we recently stated, "[t]he outer boundaries of a product
market are determined by the reasonable interchangeability

                               20
of use or the cross-elasticity of demand between the
product itself and substitutes for it." Queen City Pizza, Inc.,
v. Domino's Pizza, Inc., 124 F.3d 430, 436 (3d Cir.) (quoting
Brown Shoe Co., 370 U.S. at 325), r eh'g denied, 129 F.3d
724 (1997), cert. denied, 523 U.S. 1059 (1998). "The test for
a relevant market is not commodities [in this case technical
jobs] reasonably interchangeable by a particular plaintiff,
but `commodities [technical employees] r easonably
interchangeable by consumers [technology companies] for
the same purposes.' " Id. at 438 (quoting United States v.
E.I. DuPont Nemours and Co., 351 U.S. 377, 395 (1956)).
Additionally, we have said "the relevant geographic market
is the area in which a potential buyer may rationally look
for the goods or services he or she seeks." Pa. Dental Assn.
v. Med. Serv. Assn. of Pa., 745 F.2d 248, 260 (3d Cir. 1984),
cert. denied, 471 U.S. 1016 (1985); see also Brokerage
Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494, 515
(3d Cir. 1998). This geographic market must"conform to
commercial reality." Acme Mkts., Inc. v. Wharton Hardware
& Supply Corp., 890 F. Supp. 1230, 1239 (D.N.J. 1995)
(citing Brown Shoe Co., 370 U.S. at 336).

By defining the market so narrowly that it only includes
the defendants, plaintiffs' proffer ed geographic and product
markets are unrealistic.4 The market for the plaintiffs' labor
is much broader. We agree with the District Court that the
relevant market is not limited to AT&T and its affiliates but
rather includes all those technology companies and
network services providers who actively compete for
employees with the skills and training possessed by
plaintiffs.5
_________________________________________________________________

4. Plaintiffs argue they are under no obligation to define the relevant
product and geographic markets because the defendants' conduct per se
violated the antitrust laws. See Jefferson Parish Hosp. Dist. No. 2 v.
Hyde, 466 U.S. 2, 15 (1984). Because we find this case is governed
under the rule of reason, plaintiffs necessarily have the affirmative
burden of proving the relevant pr oduct and geographic markets affected
by the defendants' alleged uncompetitive activity. Ideal Dairy Farms Inc.
v. John LaBatt, Ltd., 90 F.3d 737, 743 (3d Cir. 1996) (holding plaintiffs
must present evidence from which rational person could conclude the
relevant markets are actually what plaintiffs allege them to be).
5. As previously noted, the District Court found there are over twenty
companies that compete for employees with plaintif fs' technical skills.
Additionally there are a "vast number of jobs" nationwide for plaintiffs
with more generalized work and educational experience. Eichorn, CA No.
96-3587, slip op. at *27-28 n.17.

                               21
Because market realities reflect that the no-hire
agreement did not have a significant anti-competitive effect
on the plaintiffs' ability to seek employment within this
broader telecommunications market nor that itfixed the
cost of labor in the industry, we conclude it was not an
antitrust violation under the rule of reason. 6 The antitrust
laws were not designed to protect every uncompetitive
activity, but rather only those activities that have anti-
competitive effects on the market as a whole. Broad. Music,
Inc., 441 U.S. at 23 ("Not all arrangements among actual or
potential competitors that have an impact on price are per
se violations of the Sherman Act or even unr easonable
restraints."). While plaintiffs' loss of their pension benefits
gives us pause, we believe they can seek redr ess through
other statutes more adequately suited to their injury than
S 1 of the Sherman Antitrust Act.7 Chambless v. Masters,
_________________________________________________________________

6. Plaintiffs also attempt to characterize defendants' activity as an
illegal
exercise of relational market power. See Sullivan & Grimes, The Law of
Antitrust: An Integrated Handbook S 2.4e2iv (2000); Warren S. Grimes,
Market Definition in Antitrust Claims: Relational Market Power and the
Franchisor's Conflict of Interest, 67 Antitrust L.J. 243 (1999). They
contend AT&T offered a unique pension benefits program that essentially
locked the plaintiffs into working for them. See Eastman Kodak Co. v.
Image Technical Services, 504 U.S. 451 (1992). Claiming that AT&T was
the only telecommunications company within the industry that offered
such an extensive benefits program, plaintif fs maintain they were
prevented from seeking employment at any other company, since to do
so would result in the loss of valuable pension benefits. According to
this
argument, the no-hire agreement that precluded plaintiffs from working
at an AT&T affiliate prevented them fr om working at the only company
within the industry where they could receive these unique benefits. See,
e.g., Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585
(1985); FTC v. Texaco, Inc., 393 U.S. 223 (1968). Central to plaintiffs'
argument is the contention that the AT&T pension benefits are unique
in the industry. We see no evidence for this in the record. Therefore, we
need not address whether to extend the r elational market power analysis
to the facts of this case.

7. Although the no-hire agreement ef fectively cancelled the plaintiffs'
AT&T benefits, these plaintiffs were free to seek employment elsewhere
in the industry where pension benefits may have been available. But
even though defendants' activity was not a pricefixing conspiracy under
the Sherman Act, it may give rise to liability under S 510 of ERISA where
a different analysis is involved.

                               22
Mates & Pilots Pension Plan, 772 F.2d 1032, 1042 (2d Cir.
1985) ("To the extent that the . . . [plaintiff 's antitrust
claim] is based on diminished retirement benefits, it is
essentially an ERISA matter."), cert. denied, 475 U.S. 1012
(1986).

IV.

We now turn to whether the no-hir e agreement, which
effectively cancelled plaintiffs' A T&T pension bridging
rights, violated S 510 of ERISA. Section 510 of ERISA
provides:

       It shall be unlawful for any person to dischar ge, fine,
       suspend, expel, discipline or discriminate against a
       participant or beneficiary for exercising any right to
       which he is entitled under the provisions of the
       employee benefit plan . . . for the purpose of interfering
       with the attainment of any right to which such
       participant may become entitled under the plan.

29 U.S.C. S 1140 (1994).

Congress enacted S 510 "primarily to prevent
unscrupulous employers from discharging or harassing
their employees in order to keep them fr om obtaining
vested pension benefits." DeWitt v. Penn-Del Directory Corp.,
106 F.3d 514, 522 (3d Cir. 1997). W e have held an
employer violates S 510 when it acts with the specific intent
to interfere with an employee's right to benefits. DiFederico
v. Rolm Co., 201 F.3d 200, 204-05 (3d Cir . 2000). To prove
a prima facie case under S 510 a plaintif f must show (1)
that an employer took specific actions (2) for the purpose of
interfering (3) with an employee's attainment of pension
benefit rights. Gavalik v. Cont'l Can Co., 812 F.2d 834, 852
(3d. Cir.), cert. denied, 484 U.S. 979 (1987). We held in
DiFederico that once a plaintiff makes a prima facie
showing, the employer has the burden of articulating a
legitimate non-discriminatory reason for his conduct. Then,
the burden shifts back to the plaintiff to show that the
employer's rationale was not pre-textual and that the
cancellation of benefits was the "deter minative influence"
on the employer's actions. DiFederico, 201 F .3d at 205.

                               23
The crucial threshold issue in this case is whether
defendants AT&T and Lucent8 had the specific intent to
interfere with the Paradyne employees' pension benefit
rights or whether the cancellation of the bridging rights was
merely an incidental by-product of the sale of Paradyne.
DeWitt, 106 F.3d at 523 ("[E]mployee must show that the
employer made a conscious decision to interfer e with the
employee's attainment of pension eligibility or additional
benefits."). Plaintiffs allege the no-hir e agreement and its
eight month restriction on re-employment was enacted for
"the direct and immediate objective and with the singular
purpose of eliminating the Paradyne pensions." In support
of their claim, plaintiffs argue the eight month restriction
on re-employment is suspiciously close to the six month
vesting period of the AT&T pension plan and that this
temporal proximity provides circumstantial evidence that
the cancellation of the benefits was a motivating factor in
the timing of the no-hire agreement. Additionally, they
point to the role of Paradyne's Vice-Pr esident of Human
Resources in proposing Texas Pacific Group's ultimate
pension package for the Paradyne employees. Plaintif fs also
cite a confidential memorandum between Larry Knoch and
Linda Roussau of Lucent Technologies, which acknowledges
the eight month restriction in the no-hir e agreement had
the practical effect of cancelling the Paradyne employees'
pension rights. Finally, plaintiffs point to the economic
benefits that both Lucent and AT&T received from the no-
hire agreement, specifically that neither defendant was
required to pay for pension benefits, as evidence of specific
intent to interfere with an ERISA pension plan in violation
of S 510. Turner v. Schering-Plough Corp., 901 F.2d 335, 348
(3d. Cir. 1990) (savings to an employer that result from
employees' termination might be viewed as a motivating
factor sufficient to satisfy the intent element ofS 510
liability).
_________________________________________________________________

8. In their complaint plaintiffs did not allege that Texas Pacific Group
violated S 510 of ERISA. App. at 92a, 157a ("Plaintiffs demand judgment
. . . declaring the refusal of AT&T and Lucent to employ members of the
Class until after the expiration of their pension bridging rights to be in
violation of ERISA section 510, 29 U.S.C. S 1140.").

                               24
Although the District Court found this evidence
insufficient to support a finding of specific intent to
interfere with the plaintiffs' benefit plans,9 Eichorn, CA No.
96-3587, slip op. at *9-12, we believe at this stage of the
proceedings plaintiffs have presented sufficient
circumstantial evidence of intent to inter fere with their
pension rights to create a genuine issue of material fact.10
Turner, 901 F.2d at 347 ("Employee may show [a violation
of S 510] . . . by circumstantial evidence."). As we held in
DeWitt, "[i]n most cases, . . .`smoking gun' evidence of
specific intent to discriminate does not exist. As a result,
the evidentiary burden in these cases may also be satisfied
by the introduction of circumstantial evidence." 106 F.3d at
523 (quoting Gavalik, 812 F.2d at 851). Of course we
express no opinion whether plaintiffs will prevail at trial
under the preponderance of evidence standar d for S 510
claims. DiFederico, 201 F.3d at 205 ("[If] employer carries
its burden, the plaintiff then must persuade the court by a
preponderance of the evidence that the employer's
_________________________________________________________________

9. In its initial order granting summary judgment on the antitrust
claims, the District Court found plaintiffs pr oduced enough evidence to
survive a motion for summary judgment on the ERISA claim. Upon
reconsideration, the District Court reversed its position stating it
improperly relied on circumstantial evidence that the defendants
experienced an overall economic gain from the no-hire agreement and
sale of Paradyne. In re-examining the r elevant case law, the court said
the proper inquiry should focus on the r eduction in actual benefit
expenses caused by the termination of employees, rather than a broader
assessment of the overall financial impact of ter mination on the
employer's business. See Clark v. Coates & Clark , 990 F.2d 1217, 1224
(11th Cir. 1993) ("[M]easures designed to reduce costs in general that
also result in an incidental reduction in benefits expenses do not suggest
discriminatory intent."). We agree with the Eleventh Circuit. But we hold
that plaintiffs have produced sufficient evidence that both AT&T and
Lucent received a direct and substantialfinancial gain from the
cancellation of pension benefits, namely they wer e relieved from paying
large sums for the pension benefits of the several Paradyne employees
affected by the agreement.

10. We believe a genuine issue of material fact exists only with the Pre
and Post-Closing Nets' effect on the Paradyne employees' pension rights.
Because the Preliminary Net did not prohibit plaintiffs from receiving
their pension benefits as employees of Lucent T echnologies, it did not
violate S 510 of ERISA.

                               25
legitimate reason is pre-textual."). Because plaintiffs have
submitted sufficient prima facie evidence to withstand
defendant's motion for summary judgment, we will r everse
and remand for further proceedings.

V.

Plaintiffs contend the District Court err ed when it denied
their motion for additional discovery for a contemplated
motion for class certification on their ERISAS 510 claim. In
denying plaintiffs' motion the District Court stated, "[W]e do
not find that . . . Third Circuit[ ] . . . [precedent] requires
this Court to keep this matter open so that plaintif fs may
engage in discovery and motion practice on the issue of
class certification when the underlying claims have been
dismissed with prejudice." Eichor n, CA No. 96-3887, slip
op. at *18. Because we hold plaintiffs have submitted
sufficient prima facie evidence to support their ERISA S 510
claim, we believe they may be entitled to additional
discovery to pursue a possible motion for class certification.
Accordingly, we direct the District Court on remand to
address plaintiffs' motion for additional discovery and any
future motion for class certification under the requirements
of Fed. R. Civ. P. 23(c).

VI.

For these reasons, we will affirm the District Court's
dismissal of plaintiffs' antitrust claims. W e will reverse the
grant of summary judgment on plaintiffs' ERISAS 510
claims. We will also reverse the Court's order denying
plaintiffs' motion for additional discovery for an anticipated
class certification motion and, on remand, direct the
District Court to address this issue in accor dance with the
requirements of Fed. R. Civ. P. 23(c).

A True Copy:
Teste:

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

                               26
