Adcock v. Firestone Tire & Rubber Co.
| Decision Date | 06 August 1985 |
| Docket Number | No. 3-83-0037.,3-83-0037. |
| Parties | Ronald ADCOCK, et al. v. The FIRESTONE TIRE & RUBBER CO. |
| Court | U.S. District Court — Middle District of Tennessee |
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John L. Van Cleave, Robert E. Hoehn, Nashville, Tenn., for plaintiffs.
William N. Ozier, Nashville, Tenn., for defendant.
This Court must decide whether employees who have not lost a day of pay or any significant deviation in their job responsibilities are entitled to severence pay benefits when their former employer sells the employee's place of employment to a successor corporation who immediately steps in and continues plant operations without an interruption in production. The case is brought by former nonunion, salaried employees of the Firestone Tire & Rubber Company pursuant to federal question jurisdiction, 28 U.S.C. § 1331, asserting claims under the Employment Retirement Income Security Act ERISA, 29 U.S.C. § 1101, et seq. (1982), for the recovery of certain pension and severance pay benefits that allegedly were lost upon Firestone's sale of its Lavergne tire facility in 1982. The focus of this memorandum is limited solely to the issue of severance pay benefits.
In 1982, Firestone sold its Lavergne facility as an ongoing operation to the Bridgestone Tire Company. Prior to the sale, all the plaintiffs were employees of Firestone and, upon consummation of the divestiture, became employees of Bridgestone without losing a day of pay. During its operation of the Lavergne facility, Firestone maintained a severance pay plan for the benefit of its employees. Upon divestiture Firestone refused to pay such benefits, asserting that no contingency had occurred resulting in maturation of severance pay rights. Pending before the Court are cross motions for partial summary judgment on the severance pay issue. A hearing was held by the Court on Wednesday, April 10, 1985. The Court grants the motion for summary judgment of defendant Firestone and defines the rights and obligations of the parties.
At the time of divestiture, the plaintiffs were nonunion, salaried employees of Firestone. Firestone maintained a non-funded non-contributory severance pay benefit plan for its employees. The details of the plan are contained in two documents. The first document is the Salaried Employees Handbook, which was distributed to all employees. On page H-3, the handbook provides:
No other details as to rights or the operation of the severance pay plan are provided in the handbook. The plaintiffs assert that Firestone's sale of the facility to Bridgestone and their "transfer" of employment to Bridgestone constituted a "reduction in work force" thereby giving rise to a duty upon Firestone to pay severance benefits. Firestone denies a reduction in work force has occurred. Termination on account of a reduction in force is calculated at the rate of two weeks of pay per year of service with the corporation.
The second source of information on the severance pay plan is contained in the Firestone Salaried Personnel Manual. The Manual was maintained as a confidential document and was not distributed to employees. In contrast to the one paragraph description of severance pay rights contained in the employee handbook, the personnel manual contains approximately thirty pages of detailed information concerning the administration of the severance pay benefit plan.
At some point prior to the divesture of the Lavergne facility, but after specific requests for information by Firestone employees as to their right to severance pay in the event of Firestone's divesture of the Lavergne facility, Firestone amended the confidential personnel manual to provide:
Personnel Manual at Section 2.11.0(K) (revised November 1, 1982).
On Friday, January 10, 1983, Firestone sold its Lavergne facility to Bridgestone. The following Monday the employees reported to work as usual, but were now producing Bridgestone products as Bridgestone employees.
The former Firestone employees requested Firestone to provide severance pay in light of their termination of employment with the company. Firestone denied severance pay benefits to all employees, maintaining that no reduction of force occurred giving rise to a duty to pay such benefits. Plaintiffs subsequently brought suit in this Court claiming wrongful denial of their severance pay benefits in violation of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seq. and, also, Tennessee contract law.
Plaintiffs invoke federal question jurisdiction of this Court, 28 U.S.C. § 1331, raising claims under the Employee Retirement Income Security Act. ERISA provides a private right of action to any beneficiary to enforce the terms of either a pension or a welfare benefit plan. 29 U.S.C. § 1132(a)(3)(B)(ii). Noting that the provisions of Firestone's severance pay plan fall within ERISA's definition of an "employee welfare benefit plan," 29 U.S.C. § 1002(1); 29 U.S.C. § 186(c)(6); 29 C.F.R. § 2501.31,1 the Court determines that the plaintiffs claim that they were wrongfully denied severance pay benefits states a cause of action under ERISA sufficient to vest this Court with jurisdiction. 29 U.S.C. § 1132(e)(1).
Plaintiffs' pendent state law claims are dismissed for failure to state a claim on which relief can be granted. Fed.R.Civ.P. 12(b)(6). ERISA preempts state law provisions concerning employee benefit plans, federalizing the area of pension rights and related ancillary welfare benefits by establishing uniform standards of fiscal responsibility for the administration of such plans. H.R.Rep. No. 93-533, 93d Cong. 2d Sess., in 1974 U.S.Code Cong. & Admin. News 4639 at 4639-40 House Report; Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402 (1981); Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208, 1215 (8th Cir.1981), cert. denied, 454 U.S. 968, 102 S.Ct. 512, 70 L.Ed.2d 384 (1981); Scott v. Gulf Oil Corp. 754 F.2d 1499 (9th Cir. 1985).
A party moving for summary judgment bears the burden of demonstrating the non-existence of any genuine issue of fact material to a judgment in his favor. Adickes v. S.H. Kress & Company, 398 U.S. 144, 147, 90 S.Ct. 1598, 1603, 26 L.Ed.2d 142 (1970); United States v. Article of Device ... "Diapulse", 527 F.2d 1008, 1011 (6th Cir.1976). A party who demonstrates the absence of any material fact and that the applicable law warrants a judgment in his favor is entitled to an order of summary judgment as a matter of law.
In reviewing the materials submitted to the Court on the motion for summary judgment, the Court will evaluate the inferences that may be drawn from the underlying facts contained in the pleadings, affidavits, exhibits, and depositions, and will view those inferences in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); Bohn Aluminum & Brass Corporation v. Storm King Corp., 303 F.2d 425 (6th Cir. 1962). The Court adheres to these procedural standards in its review of the facts and the application of the appropriate law.
In defining the nature of the plaintiffs' rights under the Firestone severance pay plan, an initial distinction must be drawn between pension and welfare benefit plans. Pensions are a form of deferred compensation to which an individual employee accrues rights by providing a period of service to a particular employer. Pensions provide the employee a secured measure of income following his retirement from active employment, thereby assuring a source of economic resources during one's later years of life. Welfare benefits plans, on the other hand, are not necessarily intended as deferred income to assure economic stability during one's post-employment days. Rather, the plans often serve as a form of deferred, frequently contingent, benefit that is offered by virtue of one's affiliation as an employee of a certain employer.2
Despite the different purposes served by pension as compared to welfare benefit plans, ERISA mandates common reporting and disclosure requirements, 29 U.S.C. §§ 1021-31, and standards of fiduciary conduct, 29 U.S.C. §§ 1101-14, governing the employer's administration of the plans. However, unlike pension plans, welfare benefits plans are not subject to any ERISA minimum substantive content provisions. If an employer chooses to offer his employees the option of joining a pension plan, ERISA mandates specific standards concerning the vesting of benefits, and participation and funding obligations. In contrast, if an employer offers a welfare benefit plan, such as severance pay or health insurance, ERISA does not require the plan to guarantee vesting rights, nor does it prescribe the fiscal structure of assets that support the plan. An employee "accrues" a vested interest in a pension plan upon meeting eligibility requirements to participate in such a plan. However, because welfare benefit plans are not subject to the vesting...
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