849 F.2d 1039 (7th Cir. 1988), 87-1866, Young v. Standard Oil (Indiana)

Docket Nº:87-1866.
Citation:849 F.2d 1039
Party Name:9 Employee Benefits Ca 2544 Philip A. YOUNG, Max Gossard, Robert L. Broeker, Mark Bokelman, James Rohlf, Oliver E. Moldestad, Larry Godejahn, Emery Pistulka, and Arthur Reinsma, Plaintiffs-Appellants, v. STANDARD OIL (INDIANA) and Amoco Oil Company, Defendants-Appellees.
Case Date:June 23, 1988
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 1039

849 F.2d 1039 (7th Cir. 1988)

9 Employee Benefits Ca 2544

Philip A. YOUNG, Max Gossard, Robert L. Broeker, Mark

Bokelman, James Rohlf, Oliver E. Moldestad, Larry

Godejahn, Emery Pistulka, and Arthur

Reinsma, Plaintiffs-Appellants,


STANDARD OIL (INDIANA) and Amoco Oil Company, Defendants-Appellees.

No. 87-1866.

United States Court of Appeals, Seventh Circuit

June 23, 1988

Argued Dec. 8, 1987.

Page 1040

Lynne H. Lawyer, Decker & Lawyer, Anderson, Ind., for plaintiffs-appellants.

Stanley C. Fickle, Barnes & Thornburg, Indianapolis, Ind., for defendants-appellees.

Before BAUER, Chief Judge, COFFEY, and KANNE, Circuit Judges.

KANNE, Circuit Judge.

In this action, governed by the Employee Retirement Income Security Act (ERISA), the district court granted defendants' motion for summary judgment finding that there was no factual dispute that plaintiffs' severance benefits claims were properly denied, 660 F.Supp. 587 (1987). Plaintiffs challenged both the terms of the severance plan, which they contended was developed secretly, and the employer's decision to deny them benefits. Because we believe the record supports the district court's determination that there was no dispute about plaintiffs' eligibility for benefits and because we find the employer did not owe a fiduciary duty to the employees in developing the severance plan, we affirm.


Plaintiffs are former employees of defendant, Amoco Oil Company, a subsidiary of defendant, Standard Oil of Indiana, (collectively "Amoco"). Plaintiffs were employed in Amoco's Fertilizer and Pesticides Division ("F & P Division"), which manufactured and distributed agricultural fertilizers and crop protection materials. The division had 350 retail outlets, organized regionally into three divisions. Each retail outlet was managed by a crop guide manager and in some instances, by another employee called a "helper" or "secondman." Plaintiffs were all employed as crop guide managers with the exception of plaintiff Bokelman who was employed as a helper.

In late 1981, Amoco received a recommendation from its financial consultant to divest itself of the F & P Division. Amoco began searching for a buyer, but when no offers had been received by June, 1982, it was decided that the F & P division would be divested in any manner possible, including by sale of the division on a facility-by-facility basis or by cessation of operations.

At the time Amoco first considered divesting itself of the F & P Division, the 1981 Severance Allowance Policy of Standard Oil Company and Participating Companies (which included Amoco) was in effect. That policy provided that Amoco management could elect to "apply [the severance policy] to a particular employee-reduction

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situation." Management was free however, to exclude categories of employees from participation under the plan. In addition, the severance policy also contained an exclusion which read as follows:

3. Even though the Policy may be in effect for a particular employee reduction situation, an employee will not qualify for a severance allowance under the following circumstances:

g. Sale of facilities when the new owner offers to the employee comparable employment as determined by the Company.

In June, 1982, Amoco management sought permission to include all F & P Division employees under the terms of the 1981 Severance Policy in the event a sale of the F & P Division was consummated. Management approval for this request was granted on July 13, 1982. Thus, under the terms of the 1981 policy, all employees of the F & P Division, who were offered a comparable position by the Division's buyer, were not entitled to severance benefits.

Shortly thereafter, it became evident that a sale of the F & P Division in its entirety was not possible and a suggestion was made to sell the division piecemeal. At the same time, in light of the high costs associated with applying the 1981 severance policy to the sale of the F & P division, 1 Amoco management suggested that a different severance policy be created for the F & P Division. In a memorandum to Standard, Amoco's president wrote:

[I]t is unlikely that potential buyers would provide wages or the level of benefits comparable to those presently offered by Amoco Oil. Under these conditions, all present [F & P] employees would probably qualify for severance benefits, regardless of employment opportunities with the new owners. Such payments would amount to approximately $6,200,000.

* * *

Amoco recommends that a special severance ... policy be adopted for the [F & P] divestiture....

1. Any ... Amoco employee who is offered a position with a new owner will forfeit severance consideration, regardless of salary, benefits or position.

2. Severance payments will be given to current employees who are not offered employment with the new owner, and to employees when facilities are not sold and operations are discontinued.

The amended severance policy, as outlined in the president's memorandum, was approved on August 6, 1982, but was effective as of August 1, 1982.

On August 3, 1982, Amoco sent a letter to the F & P employees announcing its plans to sell the division. The letter made a perfunctory reference to the employees' severance benefits rights, 2 but did not mention that those rights had been made a part of a new policy. Thus, the employees were not made aware that they were now ineligible for benefits if they received any offer of employment from a potential purchaser rather than an offer of comparable employment, as previously set forth in the 1981 severance policy. Nor did a later press release or a "Question & Answer" brochure make this change clear.

Amoco began selling segments of the F & P Division to various buyers. On April 29, 1983, the Scoular Company offered to purchase the remaining segments. In its offer, Scoular stated:

Most of the retail outlets will be offered for sale to the present Amoco plant managers [crop guide managers] at 82.5% of net book value. The retail outlets will be leased back under long term agreements. 3

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3] Most of Amoco's employees, including the owner-manager [sic] of the leased retail outlets, will be offered comparable jobs.

On June 20, 1983, Standard prepared a letter announcing F & P's sale to Scoular and the effective date of the sale. According to the letter, the closing date of the sale was August 31, 1983. Thus, on September 1, 1983, F & P employees could consider themselves terminated by Amoco and employed by Scoular. The letter stated "the termination date will be used as the effective date of employment for those employees who are offered and subsequently accept employment with the Scoular company."

As part of the agreement between Amoco and Scoular for the sale and purchase of F & P's assets, Scoular agreed to make offers of employment to those F & P employees listed on an attachment to the purchase agreement. Cropmate, the division created by Scoular to replace F & P, began reviewing crop guide managers and secondmen, presumably to compile the list of the employees it intended to retain. It was agreed that the list would be compiled by July 20, 1983.

In July, 1983, plaintiffs were invited to meet with Cropmate to discuss their employment. According to plaintiffs' version of the events, no offers of employment were made at the July meeting. Cropmate's formal presentation centered solely on the leaseback arrangement discussed in Scoular's April 29, 1983 letter. Plaintiffs allege that they were told if they did not enter into a leaseback arrangement with Cropmate, their jobs could not be guaranteed. At the conclusion of the meeting, virtually all the crop guide managers refused to sign a leaseback arrangement. When plaintiffs asked questions about severance, they allege they were simply told they did not qualify.

Defendants admit that "there are disputed factual issues regarding what was said at [that] meeting about employment with Cropmate and Cropmate's proposal that crop guide managers purchase from and lease back to Cropmate their retail outlets...." Nevertheless, defendants maintain plaintiffs were offered employment and were told that if they accepted employment with Cropmate, they would no longer be eligible for Amoco severance benefits. Defendants admit they did not provide copies of the new severance policy or explain severance benefit claim procedures to plaintiffs. They claim however, that all employees were informed where to write or call for information. Amoco points out that all nine plaintiffs were placed on Cropmate's July employment list.

Shortly before August 31, 1983, the closing date of the sale, plaintiffs contend they were told to continue operating their facilities (apparently regardless of whether they entered into a leaseback arrangement). On September 1, 1983, eight of the nine plaintiffs began working for Cropmate. Only plaintiff Moldestad refused to work for Cropmate.

As of 1984, six of the nine plaintiffs remained in Cropmate's employ. Of those six, three purchased their retail outlets and leased them back to Cropmate. Plaintiff Young continued to work for Cropmate only until September 16, 1983. Plaintiff Broeker quit Cropmate in January, 1984, when Cropmate allegedly found a crop guide manager willing to buy his facility.

Plaintiffs Gossard, Young, and Bokelman sought severance benefits under the F & P plan in late August, 1983. At that time, Amoco called Cropmate and verified that those plaintiffs as well as the other six were employed by Cropmate. 4 Assured by Cropmate that all but plaintiff Moldestad were working for Cropmate, the administrator of Amoco's severance plan denied Gossard's, Young's and Bokelman's claims for benefits. Plaintiffs Godejahn,...

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