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Roganti v. Metropolitan Life Ins. Co.

United States Court of Appeals, Second Circuit

May 14, 2015

RONALD A. ROGANTI, Plaintiff-Appellee-Cross-Appellant, -
v.
- METROPOLITAN LIFE INSURANCE COMPANY, METROPOLITAN LIFE RETIREMENT PLAN FOR UNITED STATES EMPLOYEES, SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES OF METROPOLITAN LIFE AND PARTICIPATING AFFILIATES, THE METLIFE AUXILIARY PENSION PLAN, THE METROPOLITAN LIFE SUPPLEMENTAL AUXILIARY SAVINGS AND INVESTMENT PLAN, Defendants-Appellants-Cross-Appellees

Argued November 21, 2014.

Page 202

Appeal from a November 22, 2013 judgment of the United States District Court for the Southern District of New York (Engelmayer, J.) in favor of plaintiff Ronald Roganti (" Roganti" ) on his claim for pension benefits under the Employee Retirement Income Security Act of 1974 (" ERISA" ) against defendants the Metropolitan Life Insurance Company (" MetLife" ) and four MetLife-administered retirement plans in which Roganti is a participant. On appeal, defendants argue (1) that the district court erred in denying their motion to dismiss Roganti's ERISA claim on res judicata and collateral estoppel grounds, and (2) that the district court erred in concluding that their denial of Roganti's benefits claim was arbitrary and capricious. We agree with defendants' second argument, so we reverse. In light of this disposition, we affirm the district court's denial of Roganti's request for attorney's fees, from which Roganti has cross-appealed.

DAVID G. GABOR, The Wagner Law Group, Boston, MA, for Plaintiff-Appellee-Cross-Appellant.

MICHAEL H. BERNSTEIN (John T. Seybert, on the brief), Sedgwick LLP, New York, NY, for Defendants-Appellants-Cross-Appellees.

Before: JACOBS, RAGGI, and LIVINGSTON, Circuit Judges.

OPINION

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Debra Ann Livingston, Circuit Judge :

Plaintiff-appellee-cross-appellant Ronald Roganti (" Roganti" ) was a successful executive with defendant-appellant-cross-appellee Metropolitan Life Insurance Company (" MetLife" [1]) until 2005, when he resigned in the face of pay reductions that he claims were levied in retaliation for his opposition to unethical business practices. Roganti

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brought arbitration proceedings against MetLife before the Financial Industry Regulatory Authority (" FINRA" ), seeking, among other things, wages that he would have been paid but for the retaliatory pay reductions, as well as compensation for the decreased value of his pension, which was tied to his wages. The FINRA panel awarded Roganti approximately $2.49 million in " compensatory damages," but its award did not clarify what that sum was compensation for. Roganti then filed a benefits claim with MetLife, arguing that the award represented back pay and that his pension benefits should be adjusted upward as if he had earned the money while he was still employed. MetLife denied the claim because the FINRA award did not say that it was, in fact, back pay. Roganti brought this lawsuit.

The Employee Retirement Income Security Act of 1974 (" ERISA" ), 29 U.S.C. § 1001 et seq., creates a private right of action to enforce the terms of a benefit plan. 29 U.S.C. § 1132(a)(1)(B). Roganti's pension plans vest interpretive discretion in the plan administrator, which means that the plan administrator's benefits decision is conclusive unless it is " arbitrary and capricious." Pagan v. NYNEX Pension Plan, 52 F.3d 438, 441 (2d Cir. 1995). After a summary bench trial on stipulated facts, the district court (Engelmayer, J. ) determined that MetLife's denial of Roganti's claim was arbitrary and capricious because it was clear from the arbitral record that the award did represent back pay. We reverse. For the reasons stated below, we conclude that MetLife's denial of Roganti's claim was not arbitrary and capricious, and that MetLife is therefore entitled to judgment in its favor as to Roganti's benefits claim. In light of this decision, we affirm the district court's denial of Roganti's request for attorney's fees, from which Roganti has cross-appealed.

BACKGROUND

According to his complaint in this action, Roganti began working for MetLife as an account representative in 1971. Over the course of the next three decades, he was promoted multiple times, becoming a Vice President and the Managing Director of a New York business unit called R. Roganti & Associates, as well as the Executive Director of Agencies at another MetLife business unit known as the Tower Agency Group. Roganti's compensation rose significantly over the course of his career, and particularly between 1994, when he earned $351,000, and 2001, when he earned a high of $2.007 million.

Roganti alleges that beginning in 1999 and continuing until his retirement in 2005, his relationship with MetLife deteriorated as a result of his objections regarding unlawful, inappropriate, and unethical conduct at the company. Among various allegations, Roganti claims that a subordinate of his, Dorian Hansen, came under fire in 1999 for opposing fraudulent business practices employed by some MetLife insurance salespeople. As part of a campaign against Hansen's efforts to end these practices, Roganti was allegedly told to fire her; when he refused, the Tower Agency Group was dissolved, affecting Roganti's compensation. Roganti alleges that he thereafter continued to oppose illegal and unethical conduct, and that MetLife further reduced his compensation in retaliation. As a result, Roganti filed a retaliation complaint with the Occupational Safety and Health Administration (" OSHA" ) in 2003, under the Sarbanes--Oxley Act of 2002 (" SOX" ), Pub. L. No. 107-204, 116 Stat. 745 (codified in relevant part at 18 U.S.C. § 1514A). The complaint was dismissed, however, when OSHA's preliminary investigation did not

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validate Roganti's claims. A second complaint, filed in January 2004 and alleging further acts of retaliation, was dismissed in November of that year.

In July 2004, while the second OSHA complaint was still pending (and some eight months before he retired), Roganti commenced FINRA arbitration proceedings against MetLife. In the arbitration, Roganti advanced three theories of recovery in addition to his claim that MetLife had violated SOX by retaliating against him for opposing its business practices and for filing a SOX complaint: (1) breach of contract, for the alleged breach of MetLife's commitment to make certain payments to him for overseeing the Tower Agency Group; (2) quantum meruit, to recover the reasonable value of services Roganti had provided, but for which he had been underpaid; and (3) ERISA violations, on the theory that MetLife had violated the statute by reducing Roganti's compensation for the purpose of diminishing his pension benefits. Roganti's statement of claim contained two separate paragraphs describing his request for relief. The first requested " back pay, liquidated damages, compensatory and punitive damages, attorneys fees and an accounting." J.A. 45. The second--in the statement of claim's " Wherefore" clause--sought an accounting of R. Roganti & Associates' revenues and expenses; " appropriate back pay, front pay and reimbursement for lost benefits" ; liquidated damages; punitive damages; and attorney's fees and costs. J.A. 60-61.

The arbitration did not conclude until 2010, after a seventeen-day hearing. Roganti's counsel made clear throughout the proceedings that Roganti was focused on recovering two categories of damages: damages for " lost comp[ensation]" and " damages for the collateral effect [on] his pension benefits which are directly tied to his comp[ensation]." J.A. 2881; see also, e.g., J.A. 2891 (stating that Roganti " seeks nothing more than the compensation and pension benefits that he worked for and earned" (emphasis added)). Roganti is entitled to pension benefits by virtue of his participation in four MetLife retirement plans (the " Plans" ) and, as previously noted, he claimed before the arbitral panel that MetLife had reduced his compensation for the specific purpose of limiting the growth of his sizable pension.[2] In his summation to the FINRA panel, Roganti's counsel explained how these two damages components should be calculated based on the evidence presented during the arbitral hearing.

As to the first component of damages-- i.e., for lost compensation (or what Roganti's attorney referred to as " back pay" )--Roganti retired in 2005, when he was 55 years and six months old, but he testified that he would have continued working at MetLife until age 62 had his compensation not been reduced. Roganti's counsel therefore argued that the panel should determine what Roganti would have earned not only in the years 2003 to 2005 had the company not reduced his compensation,

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but also (because he would not have retired) what he would have earned through September 2010.[3]

The evidence showed that Roganti's pay rose significantly from 1994 through 2001, and then decreased markedly: he earned $1.168 million in 1998, $1.24 million in 1999, $1.406 million in 2000, and $2.007 million in 2001, before his compensation declined to $1.506 million in 2002, $475,000 in 2003, $383,000 in 2004, and $67,000 for the first quarter of 2005, after which he retired.[4] Based on these sums, Roganti's counsel proposed three scenarios for determining Roganti's lost compensation. The first assumed that Roganti's compensation would have increased four percent annually from an estimate of his expected 2002 earnings contained in MetLife's pension files, yielding total lost compensation--Roganti's " but for" earnings from 2003 to 2010 minus the sum of his actual earnings from 2003 to 2005 and the actual pension payments that he had received thereafter--of $14.768 million. The second scenario assumed that Roganti's compensation would have remained flat at $1.506 million ( i.e., what he actually received in 2002), yielding a lower total lost compensation figure of $7.350 million. The third scenario effectively split the difference between the first two, yielding total lost compensation of roughly $11 million.

With respect to the second component of damages-- i.e., for pension benefits to which Roganti would have been entitled but for the retaliatory decrease in his compensation (or what Roganti's attorney sometimes called " front pay" )--the panel heard extensive testimony regarding how Roganti's benefits were calculated under the Plans. As Michael Bailey, an Assistant Vice-President and Corporate Actuarial at MetLife, explained (in testimony that was generally consistent with testimony from both Roganti and Robert Benmosche, MetLife's CEO), Roganti's retirement benefits were primarily a function of two variables: his pre-retirement compensation and his retirement age. Had Roganti retired at age 62, he would have been entitled to an annual benefit based on his five highest-earning years within his last fifteen years of employment at MetLife. However, this annual benefit was subject to an " early retirement discount" of four percent per year: retiring at 61 would mean receiving 96 percent of the annual benefit, retiring at 60 would mean receiving 92 percent of that benefit, retiring at 59 would mean receiving 88 percent, and so on. J.A. 2894.

Based on an assumption that Roganti's remaining life expectancy in 2010 was roughly twenty years, Roganti's counsel advanced a proposal, during his summation, as to how the arbitral panel ought to use the foregoing evidence to award Roganti damages for his decreased pension benefits. Based on MetLife's own projections of Roganti's pension had he not retired in 2005 (which assumed four percent annual growth from his actual 2002 compensation), Roganti would have been entitled to about $120,000 a month in pension benefits, or about $830,000 more per year than he had been receiving. Aggregated over twenty years, that difference would amount to lost benefits of about $17 million.

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Alternatively, Roganti's counsel estimated that by virtue of Roganti's early retirement alone, even with no increase in compensation above what he had actually earned during his five highest-earning years, he had suffered a loss of about $3.42 million in benefits as a result of the early retirement discount.

Roganti's counsel acknowledged, however, that the calculation of a pension award involves some measure of speculation. Most notably, if Roganti's compensation during any year between 2002 and his retirement would, but for MetLife's unlawful pay reductions, have been higher than the compensation he earned during one of his prior five highest-earning years, that higher figure would properly replace the lower one for calculating his pension. Thus, as an alternative, Roganti's counsel suggested that the panel could avoid calculating Roganti's pension by simply deciding what Roganti would have earned while still employed through age 62 ( i.e., by choosing a back pay award), and then instructing MetLife to determine Roganti's entitlement to pension benefits based on that increase in compensation. As he put it:

But once again, I don't want to be unduly speculative. So to the extent this panel has concerns about awarding front pay in specific amounts, I submit that an award should be rendered which says assume Ron had earned such and such through the date of his retirement at 62 and, MetLife, give him ...

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