Petrella v. NL Industries, Inc.

Decision Date20 January 1982
Docket NumberCiv. A. No. 80-2746.
Citation529 F. Supp. 1357
PartiesDominic J. PETRELLA, et al., Plaintiffs, v. NL INDUSTRIES, INC., and Employee Benefit and Retirement Plan of NL Industries, Inc., Defendants.
CourtU.S. District Court — District of New Jersey

COPYRIGHT MATERIAL OMITTED

Young, Tarshis & Dimiero by Alfred D. Dimiero, Montclair, N.J., for plaintiffs.

Patterson, Belknap, Webb & Tyler by Frederick T. Davis, New York City, and Malcolm L. Sutherland, Gary M. Nath, Hightstown, N.J. by Ellen Martin, New York City, for defendants.

OPINION

HAROLD A. ACKERMAN, District Judge.

I. INTRODUCTION

This is a suit to recover pension and employee welfare benefits brought pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. The fourteen plaintiffs are all former salaried employees of the Dutch Boy Paint Division ("Dutch Boy") of NL Industries ("NL") not covered by a collective bargaining agreement.1 They allege that as a result of the sale of Dutch Boy to ELT, Inc. ("ELT") in December 1976, NL terminated their employment and wrongfully deprived them of certain employee benefits in violation of the provisions of ERISA. Both NL and the Employee Benefit and Retirement Plan of NL Industries, Inc. are named defendants. The case is presently before me on the defendants' motion for summary judgment pursuant to Fed.R.Civ.P. 56(c) on all counts of the complaint.

Under Rule 56(c), summary judgment may be granted only if there is no dispute as to a material fact and the moving party is entitled to judgment as a matter of law. In considering such a motion, I must view the evidence in a light most favorable to the party opposing the motion, drawing every reasonable inference in his or her favor. Small v. Seldows Stationery, 617 F.2d 992, 994 (3d Cir. 1980).

With that standard in mind, I have considered the pleadings, affidavits and answers to interrogatories submitted by both sides and have concluded that the defendants are entitled to partial summary judgment. The complaint, which is set out in eight counts, can be summarized briefly as follows:

First Count: Claim for separation pay from NL
Second Count: Claim for vacation pay in lieu of vacation time
Third Count: Claim for ancillary pension benefits including early retirement benefits, Health and Life Insurance Continuation benefits, and a Level Income Option
Fourth Count: Claim for "Rule of 80" supplemental payments Fifth Count: Claim that NL failed to prepare or inadequately prepared benefit plan descriptions
Sixth Count: Claim for benefits under the 1976 NL Employee Stock Ownership Plan ("ESOP")
Seventh Count: Claim for immediate vesting in employee benefit plans on account of an alleged partial termination of the plans
Eighth Count: Claim of discriminatory crediting of periods of service.

For reasons detailed below, I have decided to grant summary judgment to the defendants on the Third, Fourth, Sixth, Seventh and Eighth Counts. Because there are material issues of fact in dispute, I have denied the defendants' motion on the First Count, except as to certain retired plaintiffs, the Second Count, and the Fifth Count.

II. FACTS

The affidavits and other documentary evidence, viewed most favorably to the plaintiffs, reveal the following facts:

On December 28, 1976, NL sold Dutch Boy to ELT as a going concern. The transfer of Dutch Boy took about three months to complete after this date. In order to encourage the Dutch Boy employees to stay on in their positions, NL arranged for guaranteed employment with ELT at the same salary and seniority in lieu of severance benefits and vacation pay accrued in 1976.

All Dutch Boy employees who were at least 55 years of age or would reach age 55 within three months of the sale date were offered early retirement at reduced benefits pursuant to § 4.3(b) of the NL Industries, Inc. Retirement Plan for Salaried Employees in the United States Not Covered by a Collective Bargaining Agreement, Amended January 1, 1974 ("1974 Plan") (App. I, § 3).2 Section 4.3(b) of the 1974 Plan provided for early retirement to employees within 10 years preceding age 65 "at the convenience of the company". This early retirement option (hereafter referred to as Age 55 Retirement) was offered to all Dutch Boy employees meeting the age requirement at the time of the divestiture regardless of their length of service with NL.

Those early retirees whose age and length of service equalled 80 at the time of the retirement were given monetary supplements known as "Rule of 80" benefits. All of the age 55 retirees were entitled to continuation of Health and Life Insurance coverage under the express terms of those plans.

The Dutch Boy employees who were under 55 years of age at the time of the sale were terminated from NL employment. Owing to inadequate length of service, some of the terminated employees were not vested in their accrued benefits, and thus stood to lose all of their accrued pension benefits. To avoid this harsh result, NL agreed to credit these employees with future service at ELT for vesting purposes only.

Sometime in 1977, the NL pension plan was amended to comply with the requirements of ERISA. I will refer to this version as the "1976 Plan" because, although it was not adopted until August 29, 1977, it was made applicable retroactively to January 1, 1976. One change in the pension plan, significant to this case, involved Age 55 Retirement. Under the 1976 Plan, the discretion of the company to grant such retirement was sharply curtailed and limited to recommending retirement when a "Participant is unable to perform his duties with the degree of efficiency necessary to meet the work standards of the Employer, whether due to poor health or some other condition beyond his control." 1976 Plan § 5.3(b) (App. I, § 1). The company's recommendation then has to be reviewed by the Pension and Employee Benefits Committee.

By the time this lawsuit was filed on August 22, 1980, all of the plaintiffs were vested in their accrued pension benefits as defined by ERISA, 29 U.S.C. § 1002(23)(A), and they will all be eligible to receive their accrued pension benefits at age 65. In addition, those plaintiffs with 20 years of service will be eligible to receive actuarially reduced benefits at age 60. See 1976 Plan, § 6.4 (App. I, § 1). However, as a result of the Dutch Boy divestiture and consequent termination from NL employment, the plaintiffs, under age 55 at the time of the divestiture, lost their Health and Life Insurance coverage and certain other ancillary benefits reserved to employees retiring from active employment with NL. The plaintiffs are challenging the loss of these benefits as well as the denial of severance and vacation pay. The basis of their challenge is ERISA.

III. ANALYSIS

ERISA, the Employee Retirement Income Security Act of 1974, is a comprehensive remedial statute designed to cure widespread weaknesses perceived in the private pension system. To strengthen the pension system, ERISA established minimum vesting, funding, fiduciary, and disclosure requirements which every plan must meet in order to qualify for tax benefits. It also delineated a specific uniform standard of conduct for fiduciaries, including a list of proscriptions which represent the most serious types of fiduciary misconduct. See generally Introductory Remarks of Senator Harrison A. Williams to S.4 reprinted in Senate Subcommittee on Labor, 94th Cong., 2d Sess., Legislative History of the Employee Retirement Income Security Act of 1974, (Comm. Print 1976).

Employee welfare benefit plans, such as health insurance plans, are also covered by ERISA. 29 U.S.C. § 1002(1). Although there are no minimum requirements as to the form and content of such plans, they are governed by the disclosure and fiduciary conduct provisions. ERISA also gives participants and beneficiaries of welfare benefit and pension plans the right to sue for the benefits under the plans in federal court.

A. SEVERANCE PAY

In their First Count the plaintiffs seek severance pay. They claim that when NL sold Dutch Boy to ELT, they were terminated as NL employees and therefore were entitled to a severance allowance under NL's severance plan. They argue that NL's severance plan is an "employee welfare benefit plan" within the meaning of 29 U.S.C. § 1002(1) and that NL's denial of severance pay violated the provisions of ERISA. If the severance plan is a "welfare benefit plan", then it is subject to the ERISA standards of fiduciary conduct. In addition, this court would have jurisdiction over the claim. NL contends that the so-called "severance plan" is not governed by ERISA and in any event, is couched in such discretionary language that it does not create any entitlement in the plaintiffs.

ERISA broadly defines "employee welfare benefit plan" to include:

"Any plan, fund, or program which was ... established or maintained by an employer ... to the extent that such plan was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) ... unemployment, or vacation benefits, ... or (B) any benefit described in section 186(c) of this title (other than pensions on retirement or death, and insurance to provide such pensions)."

29 U.S.C. § 1002(1).

Subsection (A) refers to "unemployment" benefits. Severance pay, which in general is intended to tide an employee over while seeking a new job, certainly could be considered an "unemployment" benefit. In addition, § 186(c),3 cited in subsection (B), explicitly mentions "severance benefits". According to Department of Labor regulations, the effect of citing to § 186(c) is "to include within the definition of `welfare plan' those plans that provide holiday and severance benefits, and benefits which are similar ..." 29 C.F.R. § 2501.3-1.

It appears, therefore, that under subsection (A) or (B) of § 1002(1), Congress intended the term "welfare...

To continue reading

Request your trial
37 cases
  • McLendon v. Continental Group, Inc.
    • United States
    • U.S. District Court — District of New Jersey
    • January 22, 1985
    ...F.Supp. 340, 341 (E.D.Mo.1982) (health insurance plan an employee benefit plan within the meaning of ERISA); Petrella v. NL Industries, Inc., 529 F.Supp. 1357, 1361-62 (D.N. J.1982) (severance pay plan a welfare plan for ERISA purposes). See generally Donovan v. Dillingham, 688 F.2d 1367, 1......
  • Sutton v. Weirton Steel Div. of Nat. Steel Corp.
    • United States
    • U.S. District Court — Northern District of West Virginia
    • July 8, 1983
    ...in 1974 U.S.Code, Cong. & Ad.News 4639, 4670, 4726. Am. Jur.2d Pension Reform Act § 73 (1975). See generally, Petrella v. NL Industries, 529 F.Supp. 1357, 1365-1366 (D.N.J.1982). These are ancillary benefits which may be amended or deleted without violating ERISA. Id. An examination of the ......
  • Barry v. Dymo Graphic Systems, Inc.
    • United States
    • United States State Supreme Judicial Court of Massachusetts
    • May 20, 1985
    ...Steel Corp., 724 F.2d 406 (4th Cir.1983), cert. denied, 467 U.S. 1205, 104 S.Ct. 2387, 81 L.Ed.2d 345 (1984); Petrella v. NL Indus., Inc., 529 F.Supp. 1357, 1362 (D.N.J.1982); Calhoun v. Falstaff Brewing Corp., 478 F.Supp. 357, 359 (E.D.Mo.1979). That DGS may have failed to meet ERISA's rep......
  • Lynch v. JP Stevens & Co., Inc.
    • United States
    • U.S. District Court — District of New Jersey
    • February 14, 1991
    ...& Employers Pension Fund, 763 F.2d 574, 577 (3d Cir. 1985) (early retirement benefits are not accrued benefits); Petrella v. NL Industries, Inc., 529 F.Supp. 1357 (D.N.J.1982) (early retirement benefits were not accrued or vested benefits and were not protected by ERISA against In the insta......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT