                                                                                                                           Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


6-8-2006

Rashid v. First Energy Corpp
Precedential or Non-Precedential: Non-Precedential

Docket No. 05-3054




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"Rashid v. First Energy Corpp" (2006). 2006 Decisions. Paper 933.
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                                                               NOT PRECEDENTIAL


                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                                 __________

                                     NO. 05-3054
                                     __________

                                SYLVIA M. RASHID
                                           Appellant
                                        v.

  FIRST ENERGY CORPORATION PENSION PLAN; RETIREMENT BOARD OF
    FIRST ENERGY CORPORATION PENSION PLAN; TRUSTEES OF FIRST
  ENERGY CORPORATION PENSION PLAN; FIRST ENERGY CORPORATION
                           __________

                    On Appeal from the United States District Court
                       for the Western District of Pennsylvania
                              D.C. Civil No. 01-cv-00001
                             (Honorable David S. Cercone)
                                     __________

                      Submitted Under Third Circuit LAR 34.1(a)
                                 on April 25, 2006

              Before: SCIRICA, Chief Judge, NYGAARD, Circuit Judge,
                            and YOHN, District Judge*

                                 (Filed: June 8, 2006)


                                     __________

                             OPINION OF THE COURT
                                   __________

__________________________________

    * The Honorable William H. Yohn Jr., United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.
YOHN, District Judge.

         The appellant, Sylvia Rashid, a former employee of the Pennsylvania Power

Company (“Penn Power”),1 brought this action under the Employee Retirement Income

Security Act (ERISA) of 1974, 29 U.S.C. §§ 1001-1461, asserting that the defendants

violated their fiduciary duties by representing in May or June 1999 that no early-

retirement incentive program would be offered in the near future and then offering such a

program in January 2000, after she had retired. The District Court determined that the

defendants were not “seriously considering” the incentive program at any time before

Rashid retired and entered summary judgment for the defendants. Because we conclude

that the District Court was correct in ruling that no reasonable jury could find that the

incentive program was under serious consideration in May or June 1999, we will affirm.

                                             I.

         Rashid was a participant in the FirstEnergy Pension Plan (the “Plan”). On May 10,

1999, Rashid turned fifty-five and became eligible for early retirement under the Plan. In

both May and June 1999, she asked her supervisor, Dan Vogler, whether the company

had plans to offer an early-retirement incentive program.2 Rashid stated that she would

postpone her retirement if such a program was on the horizon. At Rashid’s request,


1
    Penn Power is a wholly-owned subsidiary of FirstEnergy.
2
    The company had offered such a program in 1998.

                                              2
Vogler relayed her question to Joseph Hrach, the President of Penn Power, who stated

that Penn Power would not offer an incentive program in the near future. Vogler apprised

Rashid of Hrach’s response,3 and Rashid elected to retire on July 1, 1999.

       In 1999, Hrach directed three Penn Power employees to draft a business plan

outlining ways in which Penn Power could reduce its costs in 2000 (the “Business Plan”).

The employees worked through the summer and early fall of 1999, sometimes conferring

with Hrach, and on October 19, 1999, they presented the completed Business Plan to Earl

Carey, who was in charge of regional operations for FirstEnergy. This marked the first

time that the Business Plan was presented to a FirstEnergy representative. Among the

Business Plan’s various cost-cutting proposals was a workforce reduction. The Business

Plan suggested that the reduction could be accomplished through layoffs, attrition, or

voluntary retirement.

       In December 1999, John Gill, Senior Vice President of Administrative Services of

FirstEnergy, directed Richard LaFleur, Director of Employee Benefits of FirstEnergy, to

create an early-retirement incentive program for eligible Penn Power and FirstEnergy

employees. LaFleur did so, and in January 2000 presented the incentive program to the

Compensation Committee of the FirstEnergy Board of Directors (the “Committee”) for

approval. The program was adopted by the Committee and then implemented by the

Retirement Board of the FirstEnergy Pension Plan. Soon thereafter, LaFleur and Gill sent

3
 As this is an appeal from the grant of summary judgment, we have viewed the facts in
the light most favorable to the plaintiff.

                                             3
a letter dated January 18, 2000 to eligible employees detailing the program.

       Rashid then instituted an action in District Court, alleging that the defendants’

representation that no such program was forthcoming constituted a breach of their

fiduciary duties under 29 U.S.C. § 1104. On May 23, 2005, the District Court granted

summary judgment for the defendants. Rashid now appeals that decision.

                                             II.

       The District Court had jurisdiction under 29 U.S.C. § 1132(e)-(f), and we exercise

jurisdiction pursuant to 28 U.S.C. § 1291. Our review of a grant of summary judgment is

plenary and we will “affirm summary judgment if there is no genuine issue of material

fact and the moving party is entitled to judgment as a matter of law.” Mushalla v.

Teamsters Local No. 863 Pension Fund, 300 F.3d 391, 395 (3d Cir. 2002) (internal

quotation marks omitted).

                                            III.

       In the exercise of its duties under ERISA, a plan administrator may not make

“affirmative material misrepresentations to plan participants about changes to an

employee pension benefits plan.” Fischer v. Philadelphia Elec. Co., 994 F.2d 130, 135

(3d Cir. 1993). “A plan administrator makes a material misrepresentation when it

responds to employee inquiries by representing it is not considering a change to its

pension plan, if it is in fact giving ‘serious consideration’ to a change.” Mushalla, 300

F.3d at 396 (3d Cir. 2002). “Serious consideration of a change in plan benefits exists

when (1) a specific proposal (2) is being discussed for purposes of implementation (3) by


                                             4
senior management with the authority to implement the change.” Fischer v. Philadelphia

Elec. Co., 96 F.3d 1533, 1539 (3d Cir. 1996) (hereinafter Fischer II). “[T]his formulation

does not turn on any single factor.” Id.

       We have explained that “[t]he first element, a specific proposal, distinguishes

serious consideration from the antecedent steps of gathering information, developing

strategies, and analyzing options.” Id. at 1539-40. The proposal must be “‘sufficiently

concrete to support consideration by senior management for the purpose of

implementation.’” Id. at 1540. Here, in the best-case scenario for Rashid,4 the first time

that a specific proposal concerning an early retirement incentive program arose was

during the October 19, 1999 presentation of the proposed Business Plan for 2000 to

FirstEnergy’s Earl Carey, over three months after Rashid retired. Rashid has presented

no evidence that a specific proposal existed prior to that date; up to that point, the Penn

Power employees were engaged in the “antecedent steps” described in Fischer II. Thus,

“[b]ecause a specific proposal did not emerge until [October 19, 1999], serious

consideration could not have commenced before this date.” Kurz v. Philadelphia Elec.

Co., 96 F.3d 1544, 1549 (3d Cir. 1996).

       “Under the second and third factors, we look to whether the specific proposal was


4
 Due to the wide scope of the Business Plan -- which, in addition to its recommendation
of a workforce reduction, included recommendations concerning facilities consolidation,
productivity improvements, functional consolidation, and validation and trucking -- a
strong argument could be made that the Business Plan was too broad and abstract to
create a specific proposal about an incentive program.

                                              5
being considered for implementation by senior management.” Id. at 1550. There is

nothing in the record that shows when, if ever, the Business Plan was approved for

implementation or explains the process necessary to effectuate that approval or

implementation. However, in order to implement the specific change at issue here -- the

creation of a new early-retirement incentive program -- the change had to be incorporated

into the FirstEnergy Pension Plan. In order to change the Pension Plan, the corporate

structure of FirstEnergy required that the change be approved first by Gill of FirstEnergy,

then by FirstEnergy’s president, and then by the Compensation Committee of the

FirstEnergy Board of Directors. Thus, after the Penn Power employees presented the

Business Plan (with its proposed incentive program) to Carey on October 19, 1999, a

change to the Pension Plan required at least two additional levels of authorization from

FirstEnergy officers before it could be proposed to the Committee.5 While the record

does not detail the specific steps that occurred with reference to the Business Plan and the

Pension Plan between October 19, 1999, when a FirstEnergy representative first saw the

Business Plan, and December 1999, when Gill directed LaFleur to create an incentive

program, it was within that time period that the incentive program was first considered for

implementation by senior management.

       Although we have insufficient information to determine the specific date that the

defendants first gave serious consideration to the incentive program, that date

5
 To reiterate, it was the separate incentive program subsequently created by LaFleur, not
the Business Plan, that the Committee ultimately adopted.

                                             6
indisputably occurred months after Rashid retired, let alone inquired about the program.

Thus, we agree with the District Court that there is no evidence from which a reasonable

jury could find that the defendants breached their fiduciary duties to Rashid.

Accordingly, we will affirm.6




6
 Rashid also presents the deposition testimony of Josephine Mangiarelli, in which
Mangiarelli stated that sometime in 1999 her husband’s brother talked to Roger Houk, a
former employee of Penn Power, and Houk said that he had heard that an incentive
program was imminent. Rashid argues that this demonstrates that some individuals
received notice of the incentive program before it was formally announced. However, the
statement allegedly made by a company representative informing Houk of the program is
hearsay, and neither Mangiarelli nor Rashid has identified the person who made the
statement. “Thus, the hearsay statement by this unknown individual is not capable of
being admissible at trial, and [can] not be considered on a motion for summary
judgment.” Philbin v. Trans Union Corp., 101 F.3d 957, 961 n.1 (3d Cir. 1996) (internal
citation and quotation marks omitted).

                                             7
