723 F.2d 1148 (4th Cir. 1983), 83-1257, Livernois v. Warner-Lambert Co., Inc.

Docket Nº:83-1257 to 83-1267.
Citation:723 F.2d 1148
Party Name:Douglas J. LIVERNOIS, Appellee, v. WARNER-LAMBERT COMPANY, INC., a Corporation, Appellant. Ronald D. DUCHENE, Appellee, v. WARNER-LAMBERT COMPANY, INC., a corporation, Appellant. Ivan H. CHRISTOPHERSON, Appellee, v. WARNER-LAMBERT COMPANY, INC., a corporation, Appellant. Thomas H. GIVENS, Appellee, v. WARNER-LAMBERT COMPANY, INC., a corporation, Ap
Case Date:December 21, 1983
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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Page 1148

723 F.2d 1148 (4th Cir. 1983)

Douglas J. LIVERNOIS, Appellee,

v.

WARNER-LAMBERT COMPANY, INC., a Corporation, Appellant.

Ronald D. DUCHENE, Appellee,

v.

WARNER-LAMBERT COMPANY, INC., a corporation, Appellant.

Ivan H. CHRISTOPHERSON, Appellee,

v.

WARNER-LAMBERT COMPANY, INC., a corporation, Appellant.

Thomas H. GIVENS, Appellee,

v.

WARNER-LAMBERT COMPANY, INC., a corporation, Appellant.

Urban G. MITCHELL, Appellee,

v.

WARNER-LAMBERT COMPANY, INC., a corporation, Appellant.

Thomas J. McHUGH, Jr., Appellee,

v.

WARNER-LAMBERT COMPANY, INC., a corporation, Appellant.

A.R. TRAUTWEIN, Appellee,

v.

WARNER-LAMBERT COMPANY, INC., a corporation, Appellant.

John J. CAPUTO, Appellee,

v.

WARNER-LAMBERT COMPANY, INC., a corporation, Appellant.

Clayton E. ROBINSON, Jr., Appellee,

v.

WARNER-LAMBERT COMPANY, INC., a corporation, Appellant.

Virginia M. SEJMAN, Appellee,

v.

WARNER-LAMBERT COMPANY, INC., a corporation, Appellant.

Douglas A. DODDS, Appellee,

v.

WARNER-LAMBERT COMPANY, INC., a corporation, Appellant.

Nos. 83-1257 to 83-1267.

United States Court of Appeals, Fourth Circuit

December 21, 1983

Argued Nov. 1, 1983.

Page 1149

Stanley Godofsky, New York City (Rex W. Mixon, Jr., Rogers & Wells, New York City, O.W. Bannister, Jr., Hill, Wyatt & Bannister, Greenville, S.C., on brief), for appellant.

C. Rauch Wise, Greenwood, S.C. (Wise & Tunstall, Greenwood, S.C., on brief), for appellees.

Before RUSSELL, HALL and MURNAGHAN, Circuit Judges.

MURNAGHAN, Circuit Judge:

Cases sometimes amble down the judicial path which test the normal rules of adjudication. This is one.

Eleven plaintiffs in a diversity case disposed of by court trial have each won judgments against the defendant, Warner-Lambert Company, Inc. for severance pay (the individual recoveries ranging from a high of $58,625.98 to a low of $23,796.40) on the grounds that their jobs with Warner-Lambert at a facility in Greenwood, South Carolina had been terminated by the employer. Each of the plaintiffs has continued to work at the same facility, performing the same or similar tasks at comparable rates of compensation and other employee benefits. However, by reason of a sale, effective January 20, 1982, of Warner-Lambert's Medical Surgical Division as a going concern, the employer has changed to the purchaser of the business, Professional Medical Products, Inc.

Warner-Lambert, since 1957, had maintained a severance policy applicable to each of its employees meeting certain conditions as to length of service and age, if the employee were terminated by Warner-Lambert. The payment of severance benefits has not taken place under the severance policy in cases where an employee, himself or herself, caused termination of the employment relationship. The policy has provided that "an employee terminated by the Company, as a result of job elimination, work performance, or other reasons of Company convenience" would be entitled to severance pay. 1

Page 1150

On November 13, 1970, Warner-Lambert merged with Parke-Davis & Company, Inc. As part of the arrangements, Warner-Lambert, as the continuing corporation, was obligated to assure benefits given by Parke-Davis to its employees, and, in that connection, to compute the benefits on the basis of the original date of employment by Parke-Davis of the employee involved. Those benefits included rights under a Parke-Davis severance policy.

Because of Federal Trade Commission efforts to thwart the merger between Warner-Lambert and Parke-Davis, or, more precisely, to force its unraveling, Parke-Davis was operated as a separate and distinct Medical-Surgical Division. In the end, in October 1976, the FTC approved the merger, and, thereupon, Warner-Lambert extended to the employees of the Medical-Surgical Division the benefits of its severance policy. Each of the eleven plaintiffs had become, as of no later than January 1, 1969, a regular salaried employee of Parke-Davis. Benefits, under the Warner-Lambert severance policy, were to be calculated on the basis of their respective starting dates of employment with Parke-Davis regardless of whether, in any case, such starting date antedated the November 13, 1970 merger of Parke-Davis into Warner-Lambert, or, a fortiori, the October 1976 approval thereof by the FTC.

In or about 1980, Warner-Lambert began efforts to divest itself of its Medical-Surgical Division. On April 15, 1981, the divestiture plan was accorded wide publicity through issuance by Warner-Lambert of a press release. To three employees, Douglas J. Livernois, Douglas A. Dodds and John J. Caputo, all plaintiffs here, it offered individual employment continuation agreements to induce their remaining as employees of the Medical-Surgical Division while a search for a purchaser proceeded. The three substantially identical agreements, all dated as of May 8, 1981, called for Warner-Lambert to use reasonable efforts to insure continued employment of the three employees by the purchaser of the Medical-Surgical Division. In the event the efforts of Warner-Lambert to secure continued employment for any of the three employees were unsuccessful, the three agreements recognized that the severance policy would operate and result in cash payment to those of the three employees not offered by the purchaser continued employment at current salary plus the bonus for 1980.

As things in fact developed, the package of current salary plus 1980 bonus was made available to each of the three by the purchaser who was ultimately located. As a consequence, provisions in the May 8, 1981 agreements came into effect providing that, in the event of termination of employment of any of the three within one year from the date of divestiture of the Medical-Surgical Division, Warner-Lambert would pay the equivalent of severance pay earned at Warner-Lambert (or Parke-Davis) less the severance pay, if any, paid by the purchaser. 2

The purchaser was Professional Medical Products, Inc., an entity independent and distinct from Warner-Lambert, formed on December 29, 1981. It acquired, effective January 20, 1982, the Warner-Lambert Medical-Surgical Division. The other eight plaintiffs had entered no contracts, like or unlike those between Livernois, Dodds and Caputo and Warner-Lambert. However, each of the eight enjoyed continued employment by PMP at current salary, plus 1980 bonus.

Page 1151

Warner-Lambert and PMP contracted that the other benefits, e.g., retirement plan entitlements for the employees in general and the eight and the three who are plaintiffs here in particular, would be comparable 3 to those enjoyed by them as Warner-Lambert employees prior to January 21, 1982. 4 That agreement explicitly applied only to Warner-Lambert and PMP, expressly denying third-party beneficiary status for anyone, including employees.

Warner-Lambert, by the agreement with PMP, obtained assurances that all employees transferred from the Warner-Lambert payroll to the PMP payroll as a consequence of the acquisition would become entitled to severance pay and other benefits on a comparable basis, with computations based on dates of original employment calculated by counting for such purposes service for Parke-Davis or Warner-Lambert. 5

By letter of November 10, 1981, counsel for seven of the plaintiffs had notified Warner-Lambert of their anticipated claim to severance pay on the grounds that "the divestiture of the Medical Surgical Division [would be] for reason of Company convenience." While the subject of divestiture was in the air, no agreement had, as yet, been entered, and, although Warner-Lambert, in a letter of November 25, 1981, made clear its disagreement with the interpretation advanced on the employees' behalf, it also indicated a belief that the claim was premature.

Another letter, also dated November 10, 1981, and from the same source, expressed the position taken by the three employees who had signed the May 8, 1981 agreements. The letter did not contain an explicit claim, upon divestiture, for severance pay; nevertheless it indicated that they were concerned about their situations, and the possibility that claims by them for severance pay would eventuate should have been evident to Warner-Lambert.

The indicated disagreement was not subsequently cleared up, however, and the parties, unwilling or unable to work out a reasonable and equitable solution, have turned to what is all too often the solution of first resort, the Courts, rather than making a very determined effort to find through negotiation a fair and equitable solution along the lines which Warner-Lambert followed obviously with equity and fairness in mind, though its approach may not by any means have been perfect in that respect, or lacking in self-interest.

There is no dearth of cases dealing with similar situations arising upon spin-offs of going businesses and continued operation by the purchaser with employees formerly engaged by the concern which has divested itself of the business. We have not been referred to, nor have we located any South Carolina authority of particular pertinence. However, the question being, in each case, one of contract interpretation, and the variation of language spelling out the particular circumstances in which a right to severance pay will arise approaching the infinite,

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the cases provide at most very general guidance. In the end, each decision is essentially sui generis. That being so, we proceed, as we are satisfied that a South Carolina court would, to consideration of the contract question uniquely presented to ascertain the meaning of the parties. To the extent that a case might be helpful for that purpose...

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