308 F.3d 613 (6th Cir. 2002), 01-1580, Cassidy v. Akzo Nobel Salt, Inc.

Docket Nº:01-1580.
Citation:308 F.3d 613
Party Name:Louise CASSIDY, et al., Plaintiffs-Appellants, v. AKZO NOBEL SALT, INC., Defendant-Appellee.
Case Date:October 21, 2002
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 613

308 F.3d 613 (6th Cir. 2002)

Louise CASSIDY, et al., Plaintiffs-Appellants,


AKZO NOBEL SALT, INC., Defendant-Appellee.

No. 01-1580.

United States Court of Appeals, Sixth Circuit.

October 21, 2002

Argued: Sept. 19, 2002.Page 614

Steven Z. Cohen (briefed), Joshua A. Lerner (argued), Cohen, Lerner & Rabinovitz, Royal Oak, MI, for Plaintiffs-Appellants.

Timothy H. Howlett (argued and briefed), D. Lee Khachaturian (briefed), Dickinson, Wright, PLLC, Detroit, MI, for Defendants-Appellees.

Before KENNEDY and MOORE, Circuit Judges; DOWD, District Judge.[*]


KENNEDY, Circuit Judge.

Plaintiffs-appellants Louise Cassidy, et al, appeal the district court's summary judgment for defendant, Akzo Nobel Salt, Inc., ("ANSI"), on plaintiffs' claim that they are contractually entitled to benefits under ANSI's severance pay plan. Jurisdiction is based on diversity of citizenship.

ANSI's termination plan states that regular full time employees who are "released" will receive severance pay. The policy defines "release" as follows:

Release is a permanent separation initiated by the company due to lack of work, an economic reduction in the work force, the employee's inability to perform satisfactorily the duties of the position, incompatibility, etc. Lack of work

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may occur as the result of reorganization, job abolishment, etc.

In April of 1997, ANSI sold its assets to Cargill, Inc., with a promise that Cargill would employ substantially all the employees of ANSI. Plaintiffs are all ANSI employees who accepted offers for substantially similar positions with Cargill. All continue to work for Cargill. They allege that under the terms of ANSI's severance plan, their transfer from employment with ANSI to Cargill was a "release" entitling them to severance benefits from ANSI. They claim breach of contract for ANSI's failure to make those payments.

The district court granted ANSI's motion for summary judgment, holding that the plain and unambiguous language of the plan did not entitle plaintiffs to severance benefits because their transfer of employment to Cargill was not due to "lack of work" or an "economic reduction in the workforce" as specifically required by the terms of the plan.1

Plaintiffs raise two issues on appeal: (1) whether the severance plan is a welfare benefit plan under the Employment Retirement Income Security Act, 29 U.S.C. § 1001 et seq., triggering federal common law rather than state contract law principles; (2) whether there is a genuine issue of material fact as to the proper interpretation of the contract.


The district court did not decide whether or not the severance plan is a employee welfare benefit plan under ERISA, reasoning that "general rules" of contract interpretation apply regardless. This is an imprecise statement. When interpreting ERISA plans, federal courts apply "general rules" of contract law as part of the federal common law. See, e.g., Hunter v. Caliber System, Inc., 220 F.3d 702, 712 (6th Cir. 2000); Perez v. Aetna Life Ins. Co., 150 F.3d 550, 556 (6th Cir. 1998). The federal common law may draw upon state law principles, but state law is not controlling authority. Interpreting a non-ERISA contract claim requires federal courts to look only to state law principles, and has nothing to do with federal common law. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Because the fundamental legal framework differs for ERISA and non-ERISA plans, the question of whether the ANSI severance pay benefit is part of an ERISA plan should be decided.

ERISA defines an "employee welfare benefit plan" as "any plan . . . established or maintained by an employer . . . for the purpose of providing for its participants . . . (A) benefits in the event of . . . unemployment . . . or (B) any benefit described in section 186(c) of this title." 29 U.S.C. § 1002(1).

Severance plans are included in the definition of 29 U.S.C. § 1002(1)(B). Shahid v. Ford Motor Co., 76 F.3d 1404, 1409 (6th Cir. 1996). Section 302(c) of the Labor-Management Relations Act ("LMRA"), 29 U.S.C. § 186(c), refers to severance benefits, and § 1002(1)(B) incorporates that reference into ERISA's definition of "employee welfare benefit plan." Additionally, the Supreme Court has specifically noted that "plans to pay employees severance benefits, which are payable only upon termination of employment, are employee welfare benefit plans." Massachusetts v. Morash, 490 U.S. 107, 116, 109 S.Ct. 1668, 104 L.Ed.2d 98 (1989).

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Nonetheless, this circuit has held that not all severance...

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