662 F.2d 1158 (5th Cir. 1981), 80-3537, Hicks v. Quaker Oats Co.

Docket Nº:80-3537.
Citation:662 F.2d 1158
Party Name:Morris A. HICKS, on behalf of himself and all others similarly situated, Plaintiff-Appellee, v. The QUAKER OATS COMPANY, Defendant-Appellant.
Case Date:December 07, 1981
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 1158

662 F.2d 1158 (5th Cir. 1981)

Morris A. HICKS, on behalf of himself and all others

similarly situated, Plaintiff-Appellee,


The QUAKER OATS COMPANY, Defendant-Appellant.

No. 80-3537.

Unit A [*]

United States Court of Appeals, Fifth Circuit

December 7, 1981

Page 1159

Glankler, Brown, Gilliland, Chase, Robinson & Raines, Lee J. Chase, III, John I. Houseal, Jr., Memphis, Tenn., Benjamin R. Slater, Jr., New Orleans, La., Theodore A. Woerthwein, Chicago, Ill., The Quaker Oats Co., for defendant-appellant.

Freeland & Gafford, T. H. Freeland, III, Oxford, Miss., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Mississippi.

Before CHARLES CLARK and RANDALL, Circuit Judges, and SHARP [**], District Judge.

RANDALL, Circuit Judge:

This case involves a suit by fourteen former employees of the defendant Quaker Oats Company for benefits under a special retirement program, and presents several difficult questions regarding the law of collateral estoppel. Essentially, the issues revolve around the propriety of the use of offensive collateral estoppel with respect to a prior unappealed and alternative ground of decision of a trial court. Because we think that the trial judge abused his discretion by applying offensive collateral estoppel in the circumstances of this case, we reverse and remand for further proceedings.

Factual Background

Prior to May 27, 1966, Defendant Quaker Oats Co. had a regular retirement plan for its participating employees, vesting after ten years of continuous service for the company. The retirement plan provided for optional early retirement benefits at a reduced amount beginning at age forty-five, or "full" retirement benefits at age sixty-five. Most, but not all, of the plaintiffs in this action had been continuously employed for ten years by Quaker and thus would have vested rights under the regular plan.

On May 27, 1966, Quaker issued a letter through its Feed Division Vice-President, H. W. Crutchfield, announcing terms for a special new retirement plan. The Crutchfield letter stated that the new program applied to "field sales personnel" who were defined as "field salesmen, field specialists, regional administrators, and regional and district managers." The letter read as follows:

I am most happy to bring you this announcement of a new special retirement feature that I believe will please you.

Our management has felt for sometime that the Quaker Retirement Plan does not realistically recognize the special problems that face field salesmen during the later years of their business careers. The physical and technical demands of present day feed marketing make it increasingly difficult for most to maintain the required fast pace until the age of 65 has been reached.

Therefore, July 1, 1966, we are making effective a new early retirement program for field sales personnel only. It will include field salesmen, field specialists,

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regional administrators, and regional and district managers. Important features of the new program, as it applies to eligible Feed Division employees, are outlined below.

They will be placed on an 'inactive status' on the first day of the month following their 60th birthday.

During the five-year period between age sixty (60) and age 65, they will receive annually in twelve equal monthly installments, one-half of their average total compensation for the previous five full calendar years. Total compensation will include bonus and commission, if any, in addition to regular salary.

They must return to active service if recalled, must remain available for special assignments, but may work at other employment if it is not, in the opinion of the Company, in competition with Quaker.

During the five-year period, they will retain their coverage as employees under the Group Life and Medical Care programs.

At the age of 65 years, they will retire under the Quaker Retirement Plan with a total retirement income equal to the amount they would have received had they remained in active employment based on the total income received in the last calendar year before their early retirement.

The new program will not be fully effective for the next two years, or until July 1, 1968. During this period, eligible employees who wish to participate in the new program may elect to do so whenever they wish. Others who have attained age 60 (but less than age 65) may continue in actual employment provided they are needed and are able to perform their normal tasks. On and after July 1, 1968, it is expected that the new program will be applied to all eligible employees.

District or Regional Sales Managers will attempt to answer any question you may have, and I will be pleased to have your comments.

On July 1, 1968, R. E. Hilgenfeld, General Sales Manager of Quaker's Agricultural Products Feed Division, wrote a memorandum stating that the inactive service program became fully effective as of that date:

There has been some question on the status of field sales personnel under this new program due to our policy of going on inactive service with the Company as of the first of the month following their sixtieth birth date. This inactive service program becomes fully effective on July 1, 1968.

At that point any field sales personnel who turned sixty would be required to participate in the inactive status program. On May 27, 1966, plaintiffs' ages ranged from forty-nine to fifty-five years so that all were under sixty years of age on July 1, 1968, when the inactive service program became mandatory.

All of the plaintiffs were in Quaker's employ and still under sixty years of age when, on February 14, 1969, Quaker sold its Agricultural Products Division to Allied Mills, Inc. On the day of the sale, T. B. Bartel, Quaker's Vice President for Employee Relations, issued a statement to the affected employees, including plaintiffs, explaining that their "employment status will be with Allied Mills instead of Quaker Oats Company." Bartel's letter set forth a list of Quaker benefits which would survive the sale to Allied, but did not mention the inactive status program.

All of the plaintiffs were offered employment by Allied, and all accepted. They went to work for Allied and continued in their same positions for various lengths of time. All but two of the plaintiffs eventually elected to take early retirement at age fifty-five or later under Quaker's regular retirement plan. (The record is silent as to the other two.)

In response to several inquiries by former employees about benefits under the inactive status plan, Quaker announced, after some delay, that the plan's benefits did not survive the sale. Each plaintiff, since turning 60, has been available for special assignment by Quaker, and other than in Allied's

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service, has not engaged in employment in competition with Quaker. Quaker has not requested the plaintiffs to perform any services for it nor has it acknowledged any obligation to plaintiffs under the inactive status program.

However, during the interim between the Crutchfield letter and the sale to Allied, five field sales employees who attained sixty years of age before the sale were voluntarily paid benefits under the inactive status plan. A sixth field salesman, W. B. Workman, though not yet sixty at the time of the sale, was held entitled in judicial proceedings to benefits payable under that program. Because of the importance of Workman's suit to the case before us, a short description of that litigation is in order.

The Workman Litigation

On August 3, 1973, W. B. Workman, a former Quaker District Sales Representative, sued Quaker and Allied to recover benefits under Quaker's inactive service program. The case was heard in the Northern District of Mississippi by the same federal district judge who heard the case presently on appeal before this Court. Workman had the unfortunate distinction of being exactly six months away from age sixty at the time of the sale to Allied. He went to work for Allied until September 1, 1971, at which point he turned sixty-two and was required by Allied to take retirement. At that point Workman also took early retirement under Quaker's regular retirement plan. Workman sued Quaker and Allied, claiming that the Crutchfield letter was a contractual promise of future employment under the inactive service plan. The trial court found for Workman against Quaker, but dismissed the suit against Allied. It is the reasoning of the court's opinion, however, which is of special importance to the present case:

On the undisputed facts shown by this record, the Court holds that Quaker, by the Crutchfield letter, made an irrevocable promise to Workman for service and benefits in the manner set forth in that communication. The essence of the proposal was that if Workman wished to continue in Quaker's employ he would be required to take inactive status at age 60 at a reduced level of compensation, that is, one-half of regular pay, but in consideration for which he would not be required to work except upon special call of Quaker, doing any special assignments, and that he was free to enter other employment which was non-competitive with Quaker....

The trial court held that the proposal was "clear, and unambiguous, and definite." Quaker had argued that the term "eligible" in the Crutchfield letter meant that the inactive status benefits were conditional upon reaching the age of sixty. The court rejected this argument, holding that "eligible" only referred to those employees who fell into certain specified job categories; i. e., "field sales personnel" as defined in the Crutchfield memo:

In the opinion of this Court, the words used in describing the covered employees can reasonably mean only...

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