Bruch v. Firestone Tire & Rubber Co.

• Decision Date: 09 June 1986
• Docket Number: Civ. A. No. 82-3286.
• Citation: 640 F. Supp. 519
• Parties: Richard BRUCH, et al. v. FIRESTONE TIRE & RUBBER CO., et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

640 F. Supp. 519

Richard BRUCH, et al. v. FIRESTONE TIRE & RUBBER CO., et al.

Civ. A. No. 82-3286.

United States District Court, E.D. Pennsylvania.

June 9, 1986.

Paula R. Markowitz, Philadelphia, Pa., for plaintiffs.

Martin Wald, Philadelphia, Pa., for defendants.

MEMORANDUM AND ORDER

HUYETT, District Judge.

This ERISA class action arises out of the November 30, 1980 sale by Firestone Tire & Rubber Company ("Firestone") of five of its plants which, together, constituted its Plastics Division. All five plants were sold as ongoing operations to Occidental Petroleum, the Hooker Chemical Division. Of the seven original counts in the second amended complaint, five remain in this action. All five counts are the subject of the cross-motions for summary judgment which are presently pending before me. Before delving into a detailed analysis of the issues raised by each of plaintiffs' claims, I will outline briefly the facts underlying this action, the claims plaintiffs have raised, the procedural posture of the action, and the standard by which plaintiffs' claims must be evaluated.

The five plants which comprised Firestone's Plastics Divisions were located in Pottstown, Pennsylvania; West Caldwell, New Jersey; Perryville, Maryland; Salisbury, Maryland; and Baton Rouge, Louisiana and employed approximately 500 salaried employees. The six named plaintiffs are former, salaried, non-union employees who worked at the Pottstown, Pennsylvania plant. They represent four classes of salaried, non-union individuals who were employed in Firestone's Plastics Division on the date of the sale. Following the sale, plaintiffs and most of the other employees continued, without interruption, to perform their same jobs at the same rates of pay as employees of the new owner, Occidental.

Of the five remaining claims, four are being maintained on behalf of classes; one claim is being asserted by individual named plaintiffs. In count one, plaintiffs, representing a class of all salaried employees employed in the five plants on November 30, 1980 except those employees who retired at the time of the sale or who have been paid termination pay with regard to their employment with Firestone's Plastics Division, claim that they are entitled to termination pay on the grounds that they were terminated by Firestone at the time of the sale; the sale, plaintiffs allege, constituted a reduction in force under Firestone's termination pay policies thereby entitling them to the termination pay.

Count three states a claim for redress for the difference under Firestone's Retirement Plan for Salaried Employees ("Retirement Plan") between an early retirement benefit and a deferred vested retirement benefit. Plaintiffs bring this claim on behalf of a class of all salaried, non-union employees at the five plants who did not qualify, before the date of the sale, for normal or early retirement under the Firestone Retirement Plan. In count five, plaintiffs, on behalf of a class of all salaried, non-union employees at the five plants who had non-vested accrued benefits credited to their accounts under Firestone's Stock Purchase and Savings Plan ("Stock Plan"), seek the vesting of their unvested interests in Firestone's contributions to the Stock Plan.

In count six, plaintiffs represent a class of all salaried, non-union employees who were employed in the five plants on the date of the sale who had vacation time accrued on November 30, 1980 but had not yet taken it. Plaintiffs claim that they are entitled to the vesting of credit for purposes of the Retirement and Stock Plans for the accrued vacation time which was unused at the time of the sale. Finally, in count seven, several individual plaintiffs state a claim for breach of ERISA's reporting and disclosure requirements.

The Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., is a comprehensive statute designed to protect employees enrolled in pension and welfare benefit plans. ERISA provides a private right of action to any participant or beneficiary to enforce his or her rights under either a pension or a welfare benefit plan. 29 U.S.C. § 1132(a)(3)(B)(ii). Although pension and welfare benefit plans serve different purposes, ERISA subjects them to common reporting and disclosure requirements, 29 U.S.C. §§ 1021-31, and standards of fiduciary conduct, 29 U.S.C. §§ 1101-14. Welfare benefit plans, however, are not subject to ERISA's vesting provisions or minimum substantive provisions. Termination pay plans are now generally classified as "employee welfare benefit plans" within the meaning of 29 U.S.C. § 1002(1) and are, therefore, governed by ERISA.

Summary judgment may be granted only when it has been established that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Small v. Seldows, 617 F.2d 992 (3d Cir.1980). The court does not decide issues of fact, but merely determines if there is an issue of fact to be tried. Ettinger v. Johnson, 556 F.2d 692 (3d Cir.1977). The facts must be viewed in the light most favorable to the non-moving party, and any reasonable doubt as to the existence of a genuine issue of fact is to be resolved against the moving party. Continental Ins. Co. v. Bodie, 682 F.2d 436 (3d Cir.1982).

Firestone was the administrator of the three plans involved in the claims raised by plaintiffs, and as such, is a fiduciary under ERISA. In reviewing a decision by the administrator of a pension or welfare benefit plan, I am limited to determining whether the administrator's actions were arbitrary and capricious. Unless the decision was arbitrary and capricious, the administrator satisfied its fiduciary obligations under 29 U.S.C. § 1104.¹See Northeast Dep't. ILGWU Health and Welfare Fund v. Teamsters Local No. 229 Welfare Fund, 764 F.2d 147, 163 (3d Cir. 1985); Wolf v. National Shopmen Pension Fund, 728 F.2d 182, 187 (3d Cir.1984).

Count One—Termination Pay

In count one, plaintiffs seek the recovery of severance or termination pay benefits to which they claim they were entitled upon the sale of the Plastics Division. Upon divestiture of the five plants, Firestone refused to pay severance benefits, asserting that no event had occurred which gave rise to a right to such benefits.

At the time of the sale, Firestone maintained a non-funded, non-contributory severance pay benefit plan for its employees. The terms of the plan were set forth in two personnel documents. First, the Salaried Employees Handbook, which was in effect in 1980 and which was given to each employee, provided in pertinent part:

If your service is discontinued prior to the time you are eligible for pension benefits, you will be given termination pay if released because of a reduction in work force or if you become physically or mentally unable to perform your job.

The amount of termination pay you will receive will depend on your period of credited company service.

Plaintiffs contend that the sale constituted a reduction in force. The Handbook, however, does not provide any definition of "reduction in force."

Firestone's termination pay policies were set forth in greater detail in the Manual which was a confidential company document not generally circulated to employees, but which was, according to defendants, available for an employee to review upon request. A reduction in force (RIF) is defined generally in the Manual as "termination by the Company, without prejudice to the employee." Section 1.5.4. Section 2.11.3 further states:

Despite the objectives of Firestone to provide stable employment, continued earnings and benefit coverages to its employees, there may be economic conditions that develop which make it necessary for the Company to temporarily or permanently terminate the employment of some of its work force.

In the event such release must be made, the following reduction in force policies have been established with the goal of minimizing the economic and mental stress of terminated employees during the period of time between release from Firestone and securing other employment ...

Plaintiffs contend that defendants may not properly rely on the provisions of the Manual because the language in section 2.11.3 which defendants cite in their motion for summary judgment was added to the Manual only one month before the November 30, 1980 sale. Plaintiffs also argue that this Manual was not made available to the employees. I note that plaintiffs, in their second amended complaint, specifically relied on provisions in the Manual to support their claim for termination benefits; it would be rather anomalous to permit plaintiffs to rely on a document while prohibiting defendants from using it to support their defense. Nevertheless, at oral argument, defense counsel stated that defendants did not consider reliance on the Manual essential to their position. Because I find sufficient grounds for rejecting plaintiffs' termination pay claim without reference to the Manual, I need not decide whether reliance on the Manual is appropriate.

There is no dispute that Firestone's termination pay plan was an "employee welfare benefit plan" and as such is subject to the fiduciary and reporting and disclosure requirements of ERISA. See 29 C.F.R. § 2510.3-1(3). Employee welfare benefit plans, however, are not subject to the vesting and minimum substantive content provisions of ERISA. The issue that arises, therefore, is whether, in the absence of a statutory guarantee or right in an employer's termination pay plan, an employer, who has offered such a plan, may later terminate the plan without incurring liability for the previously promised benefits. Plaintiffs contend that the employer may not; employees acquire a contractual interest in welfare benefit plans enforceable under federal common law.

The court in Adcock v. The Firestone Tire & Rubber Co., 616 F.Supp. 409, 414-419 (1985), facing precisely the same claim raised by ...