Local Union No. 1992 v. The Okonite Co.

• Decision Date: 19 May 1999
• Docket Number: No. 98-6194,98-6194
• Citation: 189 F.3d 339
• Parties: (3rd Cir. 1999) LOCAL UNION NO. 1992, OF THE INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS v. THE OKONITE COMPANY, APPELLANT Argued:
• Court: U.S. Court of Appeals — Third Circuit

Page 339

189 F.3d 339 (3rd Cir. 1999)

LOCAL UNION NO. 1992, OF THE INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS v. THE OKONITE COMPANY, APPELLANT

No. 98-6194

U.S. Court of Appeals, Third Circuit

Argued: May 19, 1999

Decided August 17, 1999

On Appeal from the United States District Court for the District of New Jersey (D.C. Civil No. 97-cv-02041) District Judge: Honorable Alfred J. Lechner, Jr.

Richard J. DeLello, Esq. (argued) Grotta, Glassman & Hoffman 75 Livingston Avenue Roseland, NJ 07068 Counsel for Appellant

Paul A. Montalbano, Esq. Ronnie Gardstein, Esq. (argued) Schneider Goldberger Cohen Finn Solomon Leder & Montalbano 1700 Galloping Hill Road Kenilworth, NJ 07033 Counsel for Appellee

Before: Becker, Rendell, and Rosenn, Circuit Judges

Rendell, Circuit Judge

OPINION OF THE COURT

Appellant The Okonite Company ("Okonite") appeals from the order of the District Court granting summary judgment in favor of appellee Local 1992 of the International Brotherhood of Electrical Workers ("Local 1992") on appellee's claim that appellant violated the Worker Adjustment and Retraining Notification Act ("WARN Act"), 29 U.S.C. §§ 2101-09, by failing to give its employees sufficient advance notice of a plant closing. The District Court held that any waiver of these claims in exchange for severance benefits was invalid for lack of consideration, because appellee union members had been entitled to such benefits without executing the waiver, under the unambiguous terms of their severance agreement. We find that the District Court erred in holding that the severance agreement was unambiguous, and will reverse and remand for further proceedings consistent with this opinion.

I.

Appellant Okonite is a manufacturer and seller of high voltage wire and cable. In January 1995, Okonite employed 209 employees at its North Brunswick, New Jersey facility, 160 of whom were represented by appellee Local 1992. As demand for its product decreased, Okonite was forced to lay off a substantial number of employees between January 1995 and May 1996. Okonite's economic problems persisted, and in June 1996, it decided it could no longer continue production at the North Brunswick facility.

Okonite announced its intention to close the North Brunswick facility on July 8, 1996, and twenty-one employees were laid off effective that date. Over the next nine months, the remaining employees were laid off, ¹ and the plant was closed on March 31, 1997.

The employees' entitlement to benefits after the plant was closed was governed by the severance agreement contained in the collective bargaining agreement between Local 1992 and Okonite. All but one of the employees elected severance payments; he was laid off with a right of recall or transfer to another Okonite facility through May 17, 2001. The vast majority of those who elected severance pay had fifteen or more years of service with Okonite, and therefore received between thirteen and seventy-eight weeks of severance pay. Employees who chose to receive severance benefits were required to execute a severance computation form that provided:

"I understand that by accepting severance pay I will be deemed to have waived all my rights as an employee, excluding only those rights or benefits to which I may have become entitled to under any Pension, Welfare or other benefit program established by the Company which I may have been eligible to participate in."

On July 11, 1996, Local 1992 filed a grievance against Okonite, alleging that Okonite had violated the collective bargaining agreement by terminating employees without prior notice. Okonite denied the grievance and Local 1992 filed the instant suit in the District Court, alleging that Okonite had violated the WARN Act by failing to provide sixty days advance notice to employees laid off when the plant closed on July 8, 1996, and by failing to provide sixty days advance notice to employees laid off during "mass layoffs" between January 1, 1995 and July 8, 1996. The District Court granted Okonite's motion to dismiss the latter allegation, finding that, during the relevant time period, there had not been any "mass layoffs" that required advance notice. This determination has not been challenged on appeal.

The District Court also found that appellee had not waived its first claim, in spite of the waiver language in the severance computation form. The Court determined that the employees had not received any enhanced benefit in exchange for agreeing to waive their rights, because, under the unambiguous terms of the severance agreement, the employees were already entitled to the severance benefits they received in exchange for signing the severance computation form. The Court noted:

"By signing the Severance Form, the Bargaining Unit Employees received nothing other than that to which they were already entitled. Accordingly, valid consideration does not exist to support the release language of the Severance Form."

The District Court then granted summary judgment in favor of appellee on this claim, finding that the employees who had been laid off beginning July 8, 1996 and ending September 6, 1996 had not received the requisite WARN notice, and were therefore entitled to sue for damages. The Court also denied appellee's request for prejudgment interest, and granted its request for attorney's fees. Appellant filed the instant appeal. We exercise our appellate jurisdiction pursuant to 28 U.S.C. § 1291. The District Court had jurisdiction based on 28 U.S.C. § 1331 and 29 U.S.C. § 2104(a)(5).

II.

The District Court's summary judgment ruling was based on its determination that the terms of the severance agreement were unambiguous, and entitled appellee union members to severance benefits prior to signing the waiver form, thereby rendering such waiver invalid for lack of consideration. The question of whether contract terms are clear or ambiguous is a legal one subject to plenary review. See Pennbarr Corp. v. Insurance Co. of N. Am., 976 F.2d 145, 149 (3d Cir. 1992). We will affirm a grant of summary judgment on an issue of contract interpretation only if we conclude that the contractual language is subject to only one reasonable interpretation. See Tamarind Resort Assocs. v. Government of the Virgin Islands, 138 F.3d 107, 110-11 (3d Cir. 1998); Sumitomo Mach. Corp. of Am., Inc. v. Allied Signal, Inc., 81 F.3d 328, 332 (3d Cir. 1996); Pennbarr Corp., 976 F.2d at 149.

We turn first to the language of the severance agreement in order to determine if the District Court properly held that it was unambiguous. The portions most relevant to our analysis are paragraphs two, three, and four:

"2. Employees will be eligible for severance pay as herein provided if they are involuntarily terminated as the result of a permanent transfer of machinery, equipment, or operations to other plants of the company, due to the permanent cessation of such work at the North Brunswick Plant or in the event of a total plant shutdown."

"3. An employee involuntarily terminated and eligible for severance pay in accordance with the foregoing shall, within the time limits herein established, elect one of the following options:"

"a) Layoff with such recall rights as he may be entitled to under the collective bargaining agreement then in existence between the parties." "b) Severance pay in accordance with the foregoing, in which case such employee will be deemed to have waived all of his rights as an employee, excluding any rights or benefits to which he may have become entitled under any Pension, Welfare, or other benefit program established by the Company in which he may have been eligible to participate. In the event such employee is rehired at a later date by the Company, he shall be rehired as a new employee."

"c) The time, measured from the date of termination of employment, within which an employee may make such election shall be as follows:"

                Completion of Full Years of Work Time Within to Make Election
                5 One (1) Month
                10 Two (2) Months
                15 Three (3) Months
                20 Four (4) Months
                

"Any employee failing to notify the Company of his election within the time limits established herein shall be deemed to have elected in favor of the first option referred to above -- layoff with retention of recall rights."

"4. In the event of a total plant shutdown, employees who are laid off at the time of such shutdown, or who have as of the date of such shutdown been laid off within six (6) months prior to the date of the announcement of a total plant shutdown, and who retain recall rights under the collective bargaining agreement shall be deemed to have been involuntarily terminated as the result of such plant shutdown and shall be entitled to severance pay."

App. 102-03. The District Court examined these provisions and concluded that, under the plain meaning of the agreement, employees who were involuntarily terminated as a result of a total plant shutdown were automatically entitled to severance pay under paragraph four, and were not required to proceed under paragraph three, which would have required them to elect either severance pay or recall rights, and waive their rights as employees if they chose severance pay. In interpreting these provisions, the District Court noted that the severance agreement did not explicitly provide that paragraph three did not apply to total plant shutdowns, and when read in isolation, paragraph three could be read as applying to both partial and total plant closings. Nonetheless, the Court concluded, when paragraph three was read in conjunction with paragraph four, which was explicitly limited to total plant shutdowns, it was clear that paragraph three applied only if there was a partial plant closing, and not if there was a total plant shutdown.

The District Court also concluded that the language in paragraph four that employees "shall be entitled" to severance pay indicated that employees' eligibility for severance pay after a total plant shutdown...