Andes v. Ford Motor Co.

• Decision Date: 24 January 1996
• Docket Number: 94-7253,Nos. 94-7252,s. 94-7252
• Citation: 70 F.3d 1332
• Parties: , 64 USLW 2392, 19 Employee Benefits Cas. 2329, Pens. Plan Guide P 23916I Bruce S. ANDES, et al., Louis S. Aronica, et al., Appellants, v. FORD MOTOR COMPANY, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1332

70 F.3d 1332

315 U.S.App.D.C. 120, 64 USLW 2392,

19 Employee Benefits Cas. 2329,

Pens. Plan Guide P 23916I

Bruce S. ANDES, et al., Louis S. Aronica, et al., Appellants, v. FORD MOTOR COMPANY, Appellee.

Nos. 94-7252, 94-7253.

United States Court of Appeals District of Columbia Circuit.

Argued Oct. 31, 1995.

Decided Dec. 8, 1995.

Rehearing Denied Jan. 24, 1996.

Appeals from the United States District Court for the District of Columbia (92cv02294 & 93cv00540).

William A. Dobrovir, argued the cause, for appellants. Cornish F. Hitchcock entered an appearance.

Robert N. Eccles, argued the cause and filed the brief, for appellee. Michael J. O'Reilly entered an appearance.

Before: WALD, SILBERMAN, and WILLIAMS, Circuit Judges.

SILBERMAN, Circuit Judge:

Appellants challenge the district court's summary judgment determining that Ford Motor Company's decision to sell its Dealer Computer Services (DCS) subsidiary, and the resulting loss of benefits to the DCS employees, did not violate Sec. 204(g) or Sec. 510 of ERISA. Since no Ford benefit plan was amended as required by Sec. 204(g) and Ford did not "discharge, fine, suspend, expel, discipline, or discriminate" against a DCS employee within the meaning of Sec. 510, we affirm.

I.

The basic facts are undisputed. Appellants represent 60 former employees of DCS, a subsidiary of Ford Motor Company. DCS' primary function was providing Ford dealers with computer services. In 1990, Ford experienced sharply reduced profits and had losses exceeding $2.25 billion in 1991. In early 1990, Ford management set a 20% reduction in personnel costs by 1995 target for its North American Automotive Operations. In 1990, Ford had a committee evaluate the possibility of selling DCS. The committee recommended that DCS be sold, despite DCS' profitability every year from 1974 to 1990. The rationale given was that DCS was a "non-core" activity which would require the investment of Ford resources that could be spent more productively on other operations. At Ford's Board of Director's meeting in June of 1991, Ford's objectives were described as receiving a reasonable sale price, ensuring fair treatment for its dealers and employees, and retaining some influence over the future technological development of DCS. In its "Offering Memorandum" circulated to potential buyers, Ford expressed its intention that the acquiring company adopt "pay and benefits comparable in overall value to existing arrangements." Universal Computer Services' (UCS) offer was announced as the best bid on November 27, 1991, and the purchase agreement with UCS was consummated on January 31, 1992. After March 1991, DCS employees who requested to transfer out of DCS or participate in Ford's Voluntary Termination Plan, a program which offered certain incentives for Ford employees to resign, were refused permission. The DCS employees were given the option of either working for Ford Dealer Computer Services (FDCS), UCS' new name for DCS, at 100% of their Ford salaries, excluding benefits, or lose their jobs. UCS had indicated to Ford that it would be "weeding out personnel with less desirable skills" after a performance evaluation period of 12 to 18 months. When UCS started discharging FDCS employees, Ford rehired some of them. Indeed, 32 of the 60 employees represented by appellants now work at Ford.

As a result of the sale, the former DCS employees did not receive all of the benefits that they otherwise would have ultimately received as Ford employees. Particularly, Ford's General Retirement Plan (GRP) provides for early retirement benefits for an "active member" who either has 10 years of employment at Ford after 1950 and is at least 55 years old or has 30 years of employment at Ford after 1950. Accordingly, working at FDCS does not count toward the years-of-employment-eligibility requirement. Some of Ford's personnel people suggested permitting DCS employees who were close to vesting to "grow into" early retirement benefits despite this limitation. According to the deposition of Ford Vice President Mr. Hausman, Ford rejected this proposal because the GRP was a "very generous plan" to begin with, a "cutoff" point had to be established, and allowing a "grow in" in this sale would establish a precedent for future sales of portions of Ford Corporation. Ford also rejected a proposal that Ford retain approximately 40 people and lease them to UCS in order to protect them against being laid off by UCS. ¹

While Ford realized significant pension savings--an estimated $18.8 million--by selling DCS, Ford notes that DCS employees were, on average, younger and had fewer years of Ford service, factors that are correlated with benefit costs. Ford provided a "Welcome Aboard" cash bonus to the transferred DCS employees, which Ford anticipated would cost $1.75 million, and one month's free coverage under Ford's welfare benefit plans. Unlike previous sales, Ford rejected a proposal to transfer GRP assets to a separate retirement plan for the FDCS employees. While UCS indicated that it would not establish such a benefits plan because of administrative and legal complications, it did agree to replicate Ford's severance benefits for one year and to provide a periodic cash bonus for each employee equal to a portion--allocated by reference to various factors--of the total value of projected Ford benefits that DCS employees lost. UCS also agreed to allow Ford to have some continuing influence on FDCS' prices and technological development. Ford urged its dealers to stay with FDCS, telling them the change would be "transparent" with Ford Motor Credit continuing to finance FDCS' sales. Appellants characterize the sale merely as an "outsourcing" in which Ford continued to "control FDCS' performance of its functions," even though UCS paid $103 million ($53 million of which was financed by a Ford loan) for DCS.

The district court rejected appellants' arguments that these facts establish that Ford ran afoul of the Sec. 204(g) prohibition on decreasing accrued benefits through an amendment of an employee pension plan and their Sec. 510 claim that the former DCS employees were discharged by Ford with the purpose of interfering with the attainment of their pension rights. Appellants contend that the "district court erred by weighing the evidence and inferences itself and resolving the [Sec. 510] intent issue against appellants." Appellants' challenge is not to the facts summarized above (which stem from pleadings, documents and depositions), but rather to the appropriate inferences to be drawn from these facts, particularly as to Ford's purpose. Appellants, of course, are correct that these inferences should be drawn in their favor.

II.

Appellants, even with the benefit of all disputed inferences, seek to stretch the words "amendment of the plan" as used in Sec. 204(g). That section provides:

(1) The accrued benefit of a participant under a plan may not be decreased by an amendment of the plan, other than an amendment described in section 1082(c)(8) of this title.

(2) For purposes of paragraph (1), a plan amendment which has the effect of--

(A) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in regulations)

. . . . .

with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits.

29 U.S.C. Sec. 1054(g) (1985) (emphasis added).

It is argued that since the DCS employees, because of the sale and their termination as Ford employees, could no longer receive credit toward early retirement benefits under the Ford plan, even though their "post-sale service [is] identical to their pre-sale service," the plan was "constructively amended." Appellants rely for support on a Third Circuit case, Gillis v. Hoechst-Celanese Corp., 4 F.3d 1137 (3d Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 1369, 128 L.Ed.2d 46 (1994). There, the court indicated that a sale of a corporate subsidiary, which resulted in cutting off the right of employees hired by the purchaser to accrue early retirement benefits under the seller's (their old employer's) plan, was a "constructive amendment" of the plan. In Gillis, however, the seller transferred all of the plan's liabilities and assets to the purchaser and the primary dispute involved the question of whether sufficient assets were transferred. Although the language in Gillis is broad enough to support appellants' position, only recently the Third Circuit in Dade v. North American Philips Corp., 68 F.3d 1558 (1995), rejected a claim similar to appellants', limiting Gillis to a situation where there is a plan spin-off to the acquiring company. Where an employer merely sells a separate business unit, the Dade court held there is no plan amendment. Id. at 1560.

In any event, appellants' argument is foreclosed in this circuit by Stewart v. National Shopmen Pension Fund, 730 F.2d 1552 (D.C.Cir.), cert. denied, 469 U.S. 834, 105 S.Ct. 127, 83 L.Ed.2d 68 (1984). Stewart involved a multi-employer plan where one employer stopped making contributions to the plan, leaving it underfunded as to that employer's employees. The trustees of the multi-employer plan, pursuant to authority granted them by the terms of the plan, decided to reduce the accrued benefits to those employees. We concluded that this reduction did not violate Sec. 203's minimum vesting requirements because the trustees' actions were exempted under Sec. 203(a)(3)(E). ² In rejecting the argument that the trustees' actions violated Sec. 204(g), we determined that there was no amendment to the plan. We explained that the "word 'amendment' is used as a word of limitation. Congress did not state that any change would trigger [Sec. 204(g) ]; it stated that any change by amendment would do so.... In its present form, Sec. 204(g) is specifically limited to actual amendments ..." Id. at 1561, 1563 (emphasis in original). Appellants' efforts to distinguish Stewart are quite...