Flick v. Borg-Warner Corp.

• Decision Date: 24 January 1990
• Docket Number: No. 89-5323,BORG-WARNER,89-5323
• Parties: Alan FLICK, Lester H. Bausman, Jr., Michael J. Houtz, Curvin T. Kraft, Kenneth J. Peifer, Norman Renier, Marilyn A. Sandell, James Spells, Jr., Thomas Harsch, Francis X. Weber, James Knaub, Kenneth Border, Jr., and Jeffrey L. Dressel, Appellants, v.CORPORATION, Appellee.
• Court: U.S. Court of Appeals — Third Circuit

Page 285

892 F.2d 285

Alan FLICK, Lester H. Bausman, Jr., Michael J. Houtz, Curvin T. Kraft, Kenneth J. Peifer, Norman Renier, Marilyn A Sandell, James Spells, Jr., Thomas Harsch, Francis X. Weber James Knaub, Kenneth Border, Jr., and Jeffrey L. Dressel, Appellants, v. BORG-WARNER CORPORATION, Appellee.

No. 89-5323.

United States Court of Appeals Third Circuit.

Argued Sept. 6, 1989.

Decided Dec. 19, 1989.

Rehearing and Rehearing In Banc Denied Jan. 24, 1990.

Gerald J. Williams (argued), Slap, Williams & Cuker, Philadelphia, Pa., for appellants.

Mark A. Casciari (argued), Seyfarth, Shaw, Fairweather & Geraldson, Chicago, Ill., for appellee.

Before BECKER, COWEN, and WEIS, Circuit Judges.

OPINION OF THE COURT

WEIS, Circuit Judge.

The district court ruled that the terms of a revised severance plan did not grant plaintiff employees benefits on the termination of their services. On appeal, plaintiffs for the first time assert that defendant could not revise its original plan because it had failed to prove the existence of a provision permitting amendments. Because plaintiffs did not raise this issue in the district court, we decline to consider it here. On those issues properly presented to us, we affirm the summary judgments for defendant.

Plaintiffs are former employees of the defendant's Transportation Services Division. Following the sale of the Division, plaintiffs brought this suit alleging violations of ERISA. After submissions on stipulated issues and facts, the district court entered summary judgment for defendant and denied the plaintiffs' motion for partial summary judgment. Plaintiffs appeal.

Beginning at the close of 1985, or early 1986, Transportation Services instituted a severance policy dubbed "Transitional Income Plan" (TIP), an employee welfare plan under ERISA, 29 U.S.C. § 1002(1), (3). The terms of the Plan did provide benefits for a number of weeks after defined cessations of employment but did not explicitly grant or deny benefits to a terminated employee who was offered a new position by a purchaser of the entire Division.

On May 8, 1987 defendant revised the Plan to provide for payment of benefits upon "[a] divesture, sale or transfer of all or a portion of Transportation Services wherein the employee is not offered employment with the purchaser." Defendant communicated this amendment to Division employees beginning on May 16 through a general letter, a series of meetings, and oral and written question and answer programs.

Defendant sold Transportation Services Division to the North American Van Lines (Van Lines) on July 31, 1987. Two weeks before completing the sale, Van Lines offered employment to most Transportation Services employees, including all plaintiffs. Some, but not all, of the plaintiffs accepted the offers. In some instances Van Lines offered wages lower than those previously paid by Transportation Services. All the plaintiffs' employment with Transportation Services ended on the date of the sale.

As provided by TIP, Division employees who were not offered employment by Van Lines received severance payments, and others whose employment with Van Lines was shorter than the number of weeks that TIP benefits could be paid were given benefits on a pro rata basis.

The parties submitted motions for summary judgment on stipulated issues and facts. The district court rejected the plaintiffs' contention that any re-employment offer must be "reasonable," and declined to graft that qualification onto TIP. The court also concluded that defendant had not violated any fiduciary duty in amending the original TIP and that the company had not treated similarly situated employees in a disparate fashion.

In their motion for partial summary judgment, plaintiffs asserted that defendant had violated the disclosure provision of ERISA. In letters dated December 7 and 14, 1987, plaintiffs asked defendant to produce a copy of TIP and an explanation for the denial of benefits. Defendant failed to respond until March 17, 1988.

The district court refused to assess civil penalties, reasoning that plaintiffs were not "participants" under ERISA, and consequently, were not entitled to invoke the penalty provision. In response to the plaintiffs' contention that some of them had been deprived of vacation pay, the court denied relief, emphasizing that Van Lines and defendant had paid plaintiffs the full amount of their claims.

On appeal plaintiffs contend that in revising TIP defendant breached its fiduciary duty to employees entitled to benefits under the original plan. Plaintiffs also argue that defendant cannot show a reservation of a right to modify the severance plan's terms. Plaintiffs further insist that the district court erroneously denied civil penalties for the defendant's failure to timely disclose information and improperly rejected claims for direct payment of vacation pay.

Defendant disputes the plaintiffs' claim of entitlement to benefits under the original TIP and also challenges assertions that plaintiffs were unaware of TIP's terms before the letter of December 1987.

At oral argument, this Court questioned counsel about whether the terms of the original TIP permitted defendants unilaterally to revise the eligibility requirements. The parties submitted additional briefing to the Court on this issue and we will address it first, focusing on whether plaintiffs raised the point in the district court.

We have stated on numerous occasions that in the absence of special circumstances, such as a change in the law, we will not consider on appeal an issue that the parties failed to present to the district court. See Halderman v. Pennhurst State School & Hosp., 673 F.2d 628, 639 (3d Cir.1982) (in banc) (citing Singleton v. Wulff, 428 U.S. 106, 120, 96 S.Ct. 2868, 2877, 49 L.Ed.2d 826 (1976)), cert. denied, 465 U.S. 1038, 104 S.Ct. 1315, 79 L.Ed.2d 712 (1984); East Coast Tender Serv., Inc. v. Robert F. Winzinger, Inc., 759 F.2d 280, 284 (3d Cir.1985). No special circumstances have been presented here.

Our review of the district court record shows that plaintiffs failed to raise the issue, and as a result, the district judge did not address it. As noted earlier, the parties submitted their motions on stipulated facts and issues and agreed that the precise points in dispute were:

"A. Whether the defendant breached the terms and conditions of TIP, in violation of ERISA, by not making TIP payments to the plaintiffs.

B. Whether defendant's failure to respond to plaintiffs' attorney's December 7, 1987 letter within the thirty day period noted in ERISA § 502(c)(1), 29 U.S.C. § 1132(c)(1), entitles plaintiffs to any relief under that section.

C. Whether defendant is legally required to pay [vacation pay]...."

In their brief in the district court opposing the defendant's motion for a summary judgment, plaintiffs called the judge's attention to their contentions that the "original TIP" was never provided to them, the written "revision" was not supplied until legal action was instituted, and defendant had made TIP payments in a manner inconsistent with the "revision." Plaintiffs' Response To Defendant's Motion For Summary Judgment at 2. In the single reference to alteration of the original TIP, the plaintiffs' district court brief reads:

"Defendant argues that it had the absolute right to alter its severance plan so as to deny benefits to terminated employees who were 'offered' employment by the purchaser, regardless of the reasonableness of the 'offer.' (the majority of the plaintiffs in the case at bar rejected offers from the purchaser, and the parties agreed that these offers would have entailed reductions in compensation). Even if this were so, it is undisputed that defendants did not apply the 'revised plan' in this manner." Id. at 3.

The brief then discusses payments made to named employees and continues,

"[t]he Court of Appeals in Bruch, supra, made it clear that employee benefit plans are not to be treated as 'gratuities.' Rather, they are subject to analysis according to contract principles. Id. at 136-141. [citing Bruch v. Firestone Tire and Rubber, 828 F.2d 134 (3d Cir.1987) ]. In the case at bar, it is clear that plaintiffs are entitled to establish at a plenary trial the proper interpretation of TIP, and whether defendant breached its fiduciary duty under ERISA by refusing to pay benefits to some employees while paying them to others in the same situation." Plaintiffs' Response at 4.

The brief further commented that the written "revision" was not supplied until after the sale and the original plan, never filed or disclosed, was "lost." Id. at 4-5.

Nowhere in their brief do plaintiffs contend, as they now do on appeal, that defendant must show it had reserved the right to change the terms of the original TIP. Nor does any reference appear either in the plaintiffs' brief in support of their motion for partial summary judgment, or indeed, in the complaint itself. Nor does the brief cite any case holding that an employer may not unilaterally change the conditions of a severance plan.

In its memorandum opinion, the district court concluded that an employer does not owe its employees a fiduciary duty when it amends or abolishes a severance benefit plan, citing Young v. Standard Oil (Indiana), 849 F.2d 1039, 1045 (7th Cir.), cert. denied, 485 U.S. 1022, 109 S.Ct. 529, 102 L.Ed.2d 561 (1988). We reached an analogous result in a case where the employer refused to permit early retirement, although a plan existed to provide such benefits when it was in the best interest of the company to do so. See Hlinka v. Bethlehem Steel Co., 863 F.2d 279 (3d Cir.1988). See also Trenton v. Scott Paper Co., 832 F.2d 806 (3d Cir.1987), cert. denied, 485 U.S. 1022, 108 S.Ct. 1576, 99 L.Ed.2d 891 (1988).

What plaintiffs are urging on this appeal, however, is not merely a breach of fiduciary duty by the employer acting in its own interest in interpreting a contract, but rather a breach of...