Adam v. Joy Mfg. Co., Civ. No. 84-736-D.

• Decision Date: 23 January 1987
• Docket Number: Civ. No. 84-736-D.
• Citation: 651 F. Supp. 1301
• Parties: Alvin C. ADAM, et al v. JOY MANUFACTURING COMPANY.
• Court: U.S. District Court — District of New Hampshire

651 F. Supp. 1301

Alvin C. ADAM, et al v. JOY MANUFACTURING COMPANY.

Civ. No. 84-736-D.

United States District Court, D. New Hampshire.

January 23, 1987.

Warren H. Pyle, Boston, Mass., Russell F. Hilliard, Concord, N.H., Angoff, Goldman, Manning, Pyle, Wanger & Hiatt, PC. by Warren H. Pyle, Boston, Mass., Upton, Sanders & Smith by Russell F. Hilliard, Concord, N.H., for plaintiffs.

Gallagher, Callahan & Gartrell by Steven J. McAuliffe, Concord, N.H., for defendant.

OPINION

DEVINE, Chief Judge.

Plaintiffs Alvin C. Adams and seventy-seven other former employees of defendant Joy Manufacturing Company ("Joy") bring this action, claiming that Joy's refusal to give them severance pay benefits following their employment termination violates the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461.¹ Currently before the Court are defendant's motion for summary judgment pursuant to Rule 56(c), Fed.R.Civ.P., plaintiffs' objection thereto, and plaintiffs' cross-motion for partial summary judgment. For the reasons set forth below, both motions are denied.

Factual Background²

Plaintiffs are former salaried nonunion employees of Joy at its Claremont, New Hampshire, facility ("the facility"). In November 1983, Joy executed an agreement for sale of the facility to Sullivan Machinery Company ("Sullivan"), purchase and sale of which was consummated in March 1984. Plaintiffs were offered and accepted continuing employment with Sullivan and in the process lost no work time; however, the salaries at Sullivan were lower than the salaries plaintiffs had received at Joy.

Joy had maintained a severance pay policy for nonunion employees dating back to at least December 14, 1971, which essentially provided that employees terminated through no fault of their own would receive severance pay of one week's salary for each full year of service. Written severance policy standards were contained in Joy's Manual of Corporate Policy ("the Manual"), a loose-leaf ring binder subject to periodic revision which contained policies on a number of subjects. Copies of the Manual were not automatically distributed to nonunion employees, and an issue of fact exists as to whether employees were provided Summary Plan Descriptions of the benefit plan as required under ERISA, 29 U.S.C. § 1022(a)(1). Manual revisions were neither circulated to those without Manuals nor publicized in any manner such as posting the revised pages or notices thereof in prominent locations in the plant; however, Manuals were accessible for viewing upon request, and approximately twenty supervisory employees at the Claremont facility had copies.

The stated purpose of the severance pay, as explained in a Manual revision page dated June 30, 1977, was "to provide certain terminated employees, in consideration of their length of service, with a form of post-employment income continuance for a limited period, during which the employee may concentrate on seeking other employment." Defendant's Motion, Exhibit A, § B(5). Thus, employees discharged for cause (e.g., for violation of rules or for malfeasance) were ineligible to receive severance pay. Id. at Exhibit A, ¶ B(6). Similarly, an earlier revision page provided that employees who accepted a pension upon voluntary or involuntary retirement or employees "transferred from one unit of Joy Manufacturing Company, a subsidiary, or associated company to another unit, subsidiary or associated company," were ineligible for severance benefits. Id. at Exhibit A, ¶ C(3) (revision page dated October 16, 1972).

Consistent with the policy's stated purpose and existing provisions, Joy revised the Manual on October 17, 1980, effective that date, to deny severance pay to nonunion employees whose jobs were eliminated through the sale of a company operation and whose employment was continued without interruption by the buyer. This revision ("Revision I") provided:

Sale of a Segment of the Business—Employees who are terminated by the Company in connection with the sale of a segment of Joy Manufacturing Company, a subsidiary, or affiliated Company and who are offered continuing employment by the Purchaser shall not be eligible to receive any benefits under the terms of this policy.

Id. at Exhibit C, ¶ F(2).

Paragraph C(2) of this same revision page reiterated past policy, i.e., that severance pay was limited to instances of involuntary or undeserved unemployment. "Only employees who are terminated as a result of dismissal without prejudice or a permanent reduction in force, will be paid a severance allowance...." Id. at Exhibit C, ¶ C(2). However, it is unclear whether ¶ C(2) was revised as of October 17, 1980, or whether ¶ C(2) remained intact from some prior revision.³

At some point prior to the late spring or early summer of 1983, Joy management decided to sell off various unprofitable company operations, the Claremont facility included. This decision was approved by the Joy Board of Directors on July 19, 1983. Beginning in the spring and continuing throughout the summer and fall, James Chokey, general counsel for Joy and the project manager responsible for disposition of the company division which included the Claremont facility, began entertaining purchase inquiries.

On August 12, 1983, during the period in which Chokey was negotiating with potential purchasers of the facility, Revision I of the severance pay policy was amended. The amended provision ("Revision II"), effective July 29, 1983, provided:

Sale of a Unit or Subsidiary—Employees, who are terminated by the Company in connection with the sale of all or part of a unit or subsidiary of the Company and who are offered continuing employment at the same base salary by the purchaser, will not be eligible to receive any benefits under the terms of this policy.

Id. at Exhibit D, ¶ A(4) (emphasis added). Excerpts from deposition testimony of the persons responsible for amending the Manual reveal that the phrase "at the same base salary" was included in earlier draft versions of the policy which had been circulated to various members of Joy management for discussion purposes, but testimony is unclear and contradictory as to whether the phrase was included in the final version of Revision II deliberately or inadvertently.

In late August or early September 1983 (the exact date is uncertain) Joy began negotiating with Donald Hoodes, president of Sullivan and a former Joy executive, for the sale of the facility. These negotiations and the prospect of an impending sale of the facility were reported in area newspapers on October 5th and 6th. Understandably, the publicity and resultant uncertainty about future viability of jobs at the facility led to general anxiety at the plant.

On October 13, 1983, in response to the growing unrest, and in order to forestall wholesale desertion by employees, Joy posted a notice on bulletin boards in the facility. This notice stated in pertinent part:

TO ALL EMPLOYEES:

CLAREMONT MANUFACTURING PLANT

If the present negotiations for the purchase of the Claremont facility are consummated there will be a public announcement at least two weeks prior to the date the sale becomes final. During this period of at last two weeks all employees will, if they so desire, be able to exercise their options as presently defined by Joy Manufacturing Company's Corporate Policy....

Id. at Exhibit H (emphasis added). Regarding severance pay and "options as presently defined," on October 13 (the date of the notice) the three options for nonunion employees were enumerated in the Manual as follows: (1) the employee could voluntarily quit, in which case he or she would be ineligible for severance pay; (2) the employee could, if eligible, voluntarily resign and apply for a pension, in which case he or she would be ineligible for severance pay; or (3) the employee could remain with Joy until the date of the termination, in which case he or she would be eligible for severance pay unless offered continuing employment at the same base salary by the successor company. See id. at Exhibit D, ¶¶ A(3), D(2). Evidence indicates that posting of the notice alleviated the atmosphere of anxiety and unrest then prevailing in the plant. Plaintiffs' Cross-Motion, Brunelle Affidavit at 7.

In mid-October a handshake agreement was reached by which Hoodes was to purchase the facility. Sometime thereafter Hoodes and his representatives met with union officers, following which, on October 23, 1983, the union local met and, based on Hoodes' purchase of the facility being contingent on their so doing, voted to accept a thirty percent pay reduction. An agreement was signed to this effect the following day, October 24, 1983.

Three days later, on October 27, 1983, Joy amended Revision II, allegedly in response to management's discovery that the phrase "at the same base salary" had been included inadvertently. The new provision ("Revision III") deleted that phrase, as follows:

Sale of a Unit or Subsidiary—Employees, who are terminated by the Company in connection with the sale of all or part of a unit or subsidiary of the Company and who are offered continuing employment by the purchaser, will not be eligible to receive any benefits under the terms of this policy.

Id. at Exhibit J, ¶ A(3). Revision pages were sent to Manual holders with a cover letter indicating that the phrase "at the same base salary" had been deleted and that the change was retroactive to July 29, 1983. The Court has not seen evidence to indicate that Revision III or notice thereof was circulated to those without Manuals or posted prominently within the plant.

On November 11, in response to deteriorating employee relations stemming from the twin specters of lowered wages after sale of the facility was finalized and loss of severance pay benefits based on the October 27 retroactive revision of the severance pay policy, Joy held a meeting of its employees and announced that, in this one instance, Joy would...