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Shook v. Avaya Inc.

November 2, 2010


On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. No. 2-07-cv-01123) District Judge: Honorable David Stewart Cercone.

The opinion of the court was delivered by: Fisher, Circuit Judge


Argued September 15, 2010

Before: SCIRICA, RENDELL and FISHER, Circuit Judges.


Richard and Karen Shook, husband and wife, filed suit against Avaya, Inc., Richard‟s former employer, alleging a violation of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1104 and 1132. The Shooks contended that Avaya breached its fiduciary duty owed to them as participant and beneficiary under the Avaya Pension Plan through a series of misleading letters regarding Richard‟s pension benefits. Based on Avaya‟s representation of the length of Richard‟s service, the Shooks alleged that Richard calculated his expected pension benefit and the couple decided that Karen should retire from her job at a different company. The District Court granted Avaya‟s Motion for Summary Judgment, finding that Avaya did not make a material misrepresentation. For the reasons stated herein, we will affirm the decision of the District Court on partly different grounds. Specifically, we hold that the Shooks‟ decision that Karen should retire is insufficient detrimental reliance to establish a claim for breach of fiduciary duty under ERISA.


Richard Shook was employed by Avaya and its predecessor companies, including Western Electric and Octel Communications Corporation. Lucent Technologies purchased Octel in 1997. At that point, Avaya was a telecommunications unit of Lucent. Lucent and Octel subsequently entered into a Memorandum of Understanding that addressed the integration of the two companies and the effect of prior service in determining pension benefits. Pursuant to this agreement, Octel service prior to September 1, 1998 "shall count toward eligibility under the Pension Plan," but that "[f]or pension calculation purposes, a . . . pension service date shall be no earlier than September 1, 1998." (App. at 421.) On October 1, 2000, Avaya became an independent company. As a result, Avaya assumed control of the Lucent Pension Plan, of which Richard was a participant. Although Richard did not designate Karen as a beneficiary, the Avaya Pension Plan provides that pension benefits are paid to a lawful spouse if the participant and spouse are married when pension payments begin. (Id. at 327.)

The Avaya Pension Plan states that the Recognition of Prior Service ("RPS") date is the employee‟s starting date and includes prior service with predecessor companies. For purposes of pension calculations, an employee‟s monthly benefit is calculated by multiplying the applicable pension range by the employee‟s net credited service. (Id. at 314.) Net credited service ("NCS") is defined as the "continuous number of years, months and days you have worked for a participating company or any other controlled group company, beginning with your most recent date of hire and ending with your retirement or other termination of employment." (Id.)

On October 18, 1999, the Lucent Technologies Pension Service Center sent Richard a letter stating that because "Octel is not a participant in the Lucent Technologies, Inc. Management Pension Plan (LTMPP), your Octel service will not be included in your Net Credited Service date. Accordingly, your Net Credited Service date will be 9/1/98." (Id. at 367.)

In response to Avaya‟s correspondence, Richard filed a grievance with Avaya in February 2000 contending that his RPS date was calculated improperly and that the mistake detrimentally affected his eligibility for benefits. Subsequently, on April 7, 2000, the Lucent Technologies Pension Service Center sent Richard a follow up letter regarding his RPS date. The letter noted that there was confusion regarding when prior service would be recognized for purposes of vacation and benefits. As such, the letter clarified that Richard‟s RPS date was October 30, 1980 and his NCS date was December 19, 1988. The letter further explained that "your NCS date will remain the same until you complete three years of continuous employment with Lucent from the Acquisition Date. At that time, your NCS date will be adjusted to reflect your previous employment with Lucent." (Id. at 372.) The letter concluded that Richard‟s "supervisor will need the above-referenced information to determine [] eligibility for vacation and benefits under the Lucent Technologies Inc. Sickness and Accident Disability Benefit Plan." (Id.)

Richard then received another letter from the Lucent Pension Service Center on November 21, 2000 stating that his NCS date "has been established and updated in the Payroll and Personnel Systems." (Id. at 373.) The letter provided that Richard‟s "Adjusted NCS Date" was October 30, 1980. Like the April 7, 2000 letter, this letter provided that Richard‟s supervisor would need the document for purposes of disability and vacation benefits.

The Shooks contend that, based on the November 2000 letter, Richard calculated his expected monthly pension using the October 30, 1980 NCS date. Richard believed that he had twenty-three years of service that would be credited towards his pension. As a result, he thought he would be able to retire in 2005 with twenty-five years of service and receive a full pension. Richard was a member of the Communication Workers of America and spoke to his union representative regarding possible layoffs at the company. He also talked to co-workers about his estimates. Richard did not, however, confirm this calculation with anyone at Avaya. In late 2003, the Shooks alleged that they jointly made the decision that Karen would retire from her job at Verizon, based on their current combined income, the likelihood of layoffs at Avaya, and Richard‟s expected pension benefit.

After Karen retired, Richard learned he was going to be laid off and requested a pension calculation from Avaya. On December 14, 2004, Richard received a Pension Plan Worksheet calculating Richard‟s monthly benefit to be $1,469.25 based on twenty-four years and four months of service. On December 27, 2004, Avaya sent Richard a new Pension Plan Worksheet correcting its prior calculation and stating that his monthly benefit would be $880.54 based on fourteen years and seven months of service. Richard admits that he took no action based on these calculations during this thirteen day period. Richard ...

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