Allen v. Adage, Inc.

• Decision Date: 17 June 1992
• Docket Number: No. 91-2206,91-2206
• Parties: , 15 Employee Benefits Cas. 2225 Richard G. ALLEN, et al., Plaintiffs, Appellants, v. ADAGE, INC., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 695

967 F.2d 695

61 USLW 2048, 15 Employee Benefits Cas. 2225

Richard G. ALLEN, et al., Plaintiffs, Appellants, v. ADAGE, INC., Defendant, Appellee.

No. 91-2206.

United States Court of Appeals First Circuit.

Argued April 10, 1992.

Decided June 17, 1992.

Ruth A. Bourquin, with whom Warren H. Pyle and Angoff, Goldman, Manning, Pyle, Wanger & Hiatt, P.C., Boston, Mass., were on brief, for plaintiffs, appellants.

John F. Welsh, with whom Jason Berger, Kerry M. Richard, and Testa, Hurwitz & Thibeault, Boston, Mass., were on brief, for defendant, appellee.

Before SELYA, Circuit Judge, CAMPBELL, Senior Circuit Judge, and KEETON, ^* District Judge.

SELYA, Circuit Judge.

The fifty-four plaintiffs in this case sought payment of benefits under a severance pay plan (Plan) maintained by their quondam employer, Adage, Inc. Their claims were preferred pursuant to the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461 (1988), and specifically, ERISA § 1132(a)(1)(B). The district court granted summary judgment in favor of the defendant. We affirm.

I. BACKGROUND

At the times material hereto, Adage manufactured, sold, and serviced high performance graphics and CAD/CAM products. Its field service unit employed approximately one hundred twenty persons at more than thirty locations in the United States and Canada. In 1988, as part of an effort to alter the focus of its business, Adage opened negotiations with National Computer Systems (NCS) for the sale of the field service unit.

Eventually, an agreement was reached. The principals agreed that, as a condition precedent to any sale, no fewer than eighty-five percent of Adage's field service employees would have to accept continuing employment with NCS. A series of meetings ensued. At those meetings, NCS extended individualized employment offers to every field service employee. The workers were given a very short time within which to respond to the offers. All the plaintiffs, and virtually all the affected members of the work force, agreed to join NCS. ¹ On August 12, 1988, the sale was consummated.

The parties agree that, without exception, the former Adage employees were paid at least as much by NCS as they were earning before the sale. They were given full credit for years in service in NCS's calculation of vacation time. Waiting periods with respect to health insurance and dental coverage were waived. Other incidents of employment were roughly comparable. ²

II. THE PLAINTIFFS' SUIT

The plaintiffs, none of whom experienced any period of unemployment during the transition, sought to collect benefits under Part B of the Plan, which read in its entirety:

In the event that an involuntary termination is caused by reduction-in-force the following guidelines have been established to provide consistency in severance provided to employees.

                                 NON"EXEMPT
                Years of Continuous Service  Severance Salary
                6 mon.--3 years                  2 weeks
                4"5 years                        3 weeks
                5k years                         4 weeks
                

EXEMPT

All exempt employees will be entitled to a minimum of four weeks salary plus one week salary for each full year of continuous service.

This provision for "consistency in severance" was the only provision in the Plan relevant to the dispute over severance benefits in this case.

After the pleadings were closed and discovery was completed, the district court granted Adage's motion for summary judgment under Fed.R.Civ.P. 56(c). The court assumed arguendo that the plaintiffs had been subjected to "an involuntary termination" of their employment with Adage, and focused on what caused the termination. The court concluded that the phrase "reduction-in-force" as used in the Plan was intended "to connote a situation of unexpected loss of employment" as opposed to a transfer from one payroll to another. Because the plaintiffs' separation from Adage's service was not "caused by reduction-in-force," no severance pay was due.

The district court subsequently refused to alter or amend its judgment in light of our opinion in Bellino v. Schlumberger Technologies, Inc., 944 F.2d 26 (1st Cir.1991). This appeal followed.

III. THE LEGAL LANDSCAPE

At the threshold, we consider both the criteria governing the district court's adjudication of this case and the standard of appellate review.

A.

Except in those cases where a different level of scrutiny is indicated in the benefit plan itself, the district court considers a denial-of-benefits challenge afresh, without deferring to the employer's interpretation of the plan. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956, 103 L.Ed.2d 80 (1989); Bellino, 944 F.2d at 29; see also 29 U.S.C. § 1132(a)(1)(B). Here, nothing in the Plan indicates that another approach is to be used. Hence, the lower court appropriately afforded de novo review.

In examining benefit denials under ERISA plans, and in interpreting such plans, a court should employ both trust and contract principles. See Bruch, 489 U.S. at 110-12, 109 S.Ct. at 954-55; Burnham v. Guardian Life Ins. Co., 873 F.2d 486, 489 (1st Cir.1989). Withal, the court should keep in mind that severance pay plans are employee welfare benefit plans, and thus, are not vested. See, e.g., Adams v. Avondale Indus., Inc., 905 F.2d 943, 947 (6th Cir.) (citing cases), cert. denied, --- U.S. ----, 111 S.Ct. 517, 112 L.Ed.2d 529 (1990). Therefore, resolution of questions concerning employer obligations under such plans must be tailored to avoid undermining Congress's "considered decision that welfare benefit plans not be subject to a vesting requirement." Id.

The question of whether a contract term is ambiguous is one of law for the judge. See, e.g., ITT Corp. v. LTX Corp., 926 F.2d 1258, 1261 (1st Cir.1991); In re Navigation Technology Corp., 880 F.2d 1491, 1495 (1st Cir.1989). While "an argument between parties about the meaning of a contract is typically an argument about a 'material fact,' " Boston Five Cents Sav. Bank v. Secretary of Dept. of HUD, 768 F.2d 5, 8 (1st Cir.1985), summary judgment is not necessarily foreclosed. "Even if there is ambiguity in the language ... the evidence presented about the parties' intended meaning may be so one-sided that no reasonable person could decide the contrary." Id.; see also American First Inv. Corp. v. Goland, 925 F.2d 1518, 1522 (D.C.Cir.1991) ("summary judgment may be appropriate in a contract case even if the contract is ambiguous so long as there is no evidence that would support a conflicting interpretation of the agreement"). ³ A good illustration of the rule is contained in Foster Medical Corp. Employees' Pension Plan v. Healthco, Inc., 753 F.2d 194 (1st Cir.1985). There, the plaintiff alleged that the defendants had failed to abide by certain provisions of an agreement for the transfer of designated assets and liabilities. We found the challenged provisions to be ambiguous, but noted that defendants had adduced evidence probative of the parties' intent while plaintiffs, for their part, had "offered no substantive evidence to challenge [this proof]." Id. at 198. We concluded that, in such circumstances, plaintiffs had "failed to establish the existence of a genuine issue of material fact" concerning the meaning of the agreement. Id. Accordingly, we upheld a summary judgment in the defendants' favor, notwithstanding the ambiguity. Id. at 198-99.

Here, Adage proffered evidence in connection with its Rule 56 motion to the effect that several reductions in force were conducted in the period 1987-1989, resulting in various awards of severance benefits pursuant to the Plan. The affected employees were not notified of their impending termination until their last day of work. They were then furnished with layoff notices and personnel documents advising that "[i]f you choose to collect unemployment during such severance time, your severance checks will stop immediately. You have the right to file for unemployment at any time while unemployed." The appellants neither challenged this description of Adage's past praxis nor submitted evidence of any divergent practices. Because there was no dispute concerning the underlying facts, insofar as those facts were material, summary judgment might appropriately lie. See Franklin v. Pitney Bowes, Inc., 919 F.2d 45, 47-48 (6th Cir.1990) (noting that summary judgment was appropriate where defendants had proffered evidence supporting their interpretation of a plan, including past practice under that plan, and plaintiffs had offered no contradictory evidence); Burger King Corp. v. Horn & Hardart Co., 893 F.2d 525, 528 (2d Cir.1990) (disposition by summary judgment is proper if the evidence of intent submitted by one party "does not conflict with [the other party's] evidence"); Burnham, 873 F.2d at 488 (determining that where the only "authentic controversy presented on appeal concerns the parties' divergent interpretations of ... established facts," summary judgment was appropriate); Chambers v. Prudential Ins. Co., 776 F.Supp. 1166, 1168, 1172 (S.D.Miss.1991); cf. Adcock v. Firestone Tire & Rubber Co., 822 F.2d 623, 626-28 (6th Cir.1987) (same; using pre-Bruch test). ⁴

B.

We subject the district court's grant of summary judgment to plenary review, taking the record in the light most congenial to the nonmovants and indulging all reasonable inferences in their favor. Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir.1990). This standard applies unreservedly in the ERISA context. See, e.g., Bellino, 944 F.2d at 29; Harper v. R.H. Macy & Co., 920 F.2d 544, 545 (8th Cir.1990). To affirm a grant of summary judgment, we must be satisfied that there is no genuine dispute concerning a material fact and that the movant is entitled to judgment as a matter of law. Burnham, 873 F.2d at 488.

This protocol, while generous to summary judgment opponents, does not free them from all obligations. When nonmovants bear the burden of proof on...