Kolling v. American Power Conversion Corp.

347 F.3d 11, 20 I.E.R. Cas. (BNA) 823, 31 Employee Benefits Cas. (BNA) 1513, 56 Fed. R. Serv. 3d 1140, 2003 U.S. App. LEXIS 20983, 2003 WL 22350886
CourtCourt of Appeals for the First Circuit
DecidedOctober 16, 2003
DocketNo. 02-2618
StatusPublished
Cited by47 cases

This text of 347 F.3d 11 (Kolling v. American Power Conversion Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kolling v. American Power Conversion Corp., 347 F.3d 11, 20 I.E.R. Cas. (BNA) 823, 31 Employee Benefits Cas. (BNA) 1513, 56 Fed. R. Serv. 3d 1140, 2003 U.S. App. LEXIS 20983, 2003 WL 22350886 (1st Cir. 2003).

Opinion

HOWARD, Circuit Judge.

Plaintiff-appellant Fred W. Kolling, III, challenges an adverse summary judgment ruling that American Power Conversion Corporation’s (“APC”) denial of his claim for employee benefits neither violated the Employment Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1461, nor breached a contractual obligation owed to him by APC. We affirm.

I. Background

In November 1989, Kolling responded to APC’s classified advertisement seeking candidates for the recently vacated Chief Financial Officer position (“CFO”). APC’s Chief Executive Officer, Roger Dowdell, subsequently interviewed Kolling as part of APC’s broader CFO search. Although Dowdell did not address the specific compensation and benefits package Kolling might receive as CFO, he did discuss the benefits generally available to APC employees, such as the salary range, an employee stock ownership plan (“ESOP”, “the Plan”), incentive stock options (“ISOs”), a medical plan, and health insurance. At the close of the interview, Dowdell advised Kolling that he planned to continue his CFO search, but that APC had an immediate need for accounting services, which Kolling could provide on a consultancy basis for $50.00 an hour. At that time, Dow-dell advised Kolling that the parties “could see how it goes and ... take it from there.”

On November 25, 1989, Kolling began working for APC at its headquarters in Peace Dale, Rhode Island. From the outset, Kolling submitted weekly invoices in which he billed APC for “consulting services rendered.” Kolling reported IRS form 1099 income, not IRS form W-2 wages, and was not on APC’s payroll. After two months, Kolling agreed to have his compensation reduced to $35 dollars an hour. Dowdell explained that the cutback was consistent with the salary a CFO might receive. Meanwhile, APC conducted two additional searches for a CFO.

From 1989 to 1993, Kolling remained a consultant. During that time, he worked 40 to 80 hours a week for APC, performing general accounting functions such as SEC reporting and budget planning.1 Kolling did not participate in APC’s employee benefit or stock option plans but did obtain health insurance through APC on the condition that he, not APC, pay the premiums. Although Kolling persistently pressed the issue of his employment status, APC did not place him on its payroll until May 24, 1993, when he assumed the position of Director of Finance.2 For purposes of [13]*13vacation days and vesting under the ESOP, APC gave Rolling credit for his service as a consultant.

In July 1995, Rolling resigned from APC to accept another job. Four years later, in August 1999, Rolling submitted a claim for benefits seeking contributions under the ESOP for the three-and-a-half years he had consulted. In October 1999, APC’s Plan administrator wrote Rolling to advise him, inter alia, that he was not eligible to participate in the ESOP prior to May 1993.

In denying Rolling’s claim, the administrator primarily relied on the fact that Rolling had not been an eligible APC employee when he had served as a consultant. The Plan defined eligible employees as “Employees of the Employer” including “leased employees,” but did not further define who was an “Employee of the Employer.” Consistent with APC’s business practice, the administrator applied a “W-2 definition” to the term “employee.” Under this definition, only individuals paid on an IRS form W-2 basis were eligible to receive ESOP contributions. Accordingly, the administrator denied Rolling’s claim.

Rolling appealed, but the Plan administrator stood by his decision that, from 1989 to 1993, Rolling was ineligible for ESOP contributions because he was not paid on a W-2 basis. In due course, Rolling brought this action alleging common law breach of contract and intentional misrepresentation. He subsequently amended his complaint to allege a claim for benefits under ERISA, 29 U.S.C. § 1132(b). At the close of discovery, APC moved for summary judgment. The court granted the motion, reasoning that the Plan administrator had not acted arbitrarily and capriciously in denying Rolling ESOP benefits, and that the arrangement between Rolling and APC was too indefinite to constitute a formal employment contract under Rhode Island law. Rolling appeals these rulings.3

II. Standard of Review

Because the Plan reserves interpretive discretion to its administrator,4 judicial review of the eligibility determination is limited to ascertaining whether the administrator acted arbitrarily and capriciously. See, e.g., Lopes v. Metro. Life Ins. Co., 332 F.3d 1, 4-5 (1st Cir.2003); Liston v. Unum Corp. Officer Severance Plan, 330 F.3d 19, 24 (1st Cir.2003).5 We review de novo whether the district court correctly concluded that APC was entitled to summary judgment under the applicable standard of review. See Pari-Fasano, 230 F.3d at 418-19. We review the district court’s decision granting summary judgment on the breach of contract claim de novo. See Thomas v. Metro. Life Ins. Co., 40 F.3d 505, 508 (1st Cir.1994).

III. Analysis

A. ERISA Claim

Rolling first argues that the Plan administrator acted unreasonably when he [14]*14relied on a definition of employee which defined employee to include anyone who received an IRS form W-2 rather than anyone who met the common law definition of employee. In Rolling's view, APC’s endorsement of the administrator’s interpretation would lead to mischief because an employer could, with impunity, misclassify a worker for its own financial benefit. Rolling asserts that the facts presented to the administrator during the appeals process, and later to the district court, demonstrate that he was APC’s employee even though he was not on its payroll.6

Relying on Renda v. Adam Meldrum & Anderson Co., 806 F.Supp. 1071, 1081 (W.D.N.Y.1992), Rolling claims that because he qualified as a common law employee he was entitled to benefits under the ESOP. We disagree. So long as a plan does not discriminate based on age or length of service, nothing in ERISA requires a plan to extend benefits to every common law employee. See Bauer v. Summit Bancorp, 325 F.3d 155, 164 n. 19 (3d Cir.2003)(rejeeting Renda’s logic); Abraham v. Exxon Corp., 85 F.3d 1126, 1130-31 (5th Cir.1996)(same); see also, Hensley v. Northwest Permanente P.C. Ret. Plan & Trust, 258 F.3d 986, 1000-02 (9th Cir.2001) (ERISA plan is not required to cover all common law employees); Trombetta v. Cragin Fed. Bank for Sav. Employee Stock Ownership Plan, 102 F.3d 1435, 1439 (7th Cir.1996) (same).

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347 F.3d 11, 20 I.E.R. Cas. (BNA) 823, 31 Employee Benefits Cas. (BNA) 1513, 56 Fed. R. Serv. 3d 1140, 2003 U.S. App. LEXIS 20983, 2003 WL 22350886, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kolling-v-american-power-conversion-corp-ca1-2003.