Anstett v. Eagle-Pitcher Indus.

• Decision Date: 24 March 2000
• Docket Number: No. 98-3983,EAGLE-PICHER,98-3983
• Parties: (7th Cir. 2000) CAROL ANSTETT, KIMBERLY K. ARMSTRONG, WILLIAM A. BAUER, et al., Plaintiffs-Appellants, v.INDUSTRIES, INC., Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 501

203 F.3d 501 (7th Cir. 2000)

CAROL ANSTETT, KIMBERLY K. ARMSTRONG, WILLIAM A. BAUER, et al., Plaintiffs-Appellants, v. EAGLE-PICHER INDUSTRIES, INC., Defendant-Appellee.

No. 98-3983

In the United States Court of Appeals For the Seventh Circuit

Argued March 29, 1999

Decided February 8, 2000

Rehearing En Banc Denied

March 13, 2000

Rehearing Denied March 24, 2000.

Appeal from the United States District Court for the Northern District of Indiana, Fort Wayne Division. No. 97 C 458--William C. Lee, Chief Judge.

Before RIPPLE, ROVNER and EVANS, Circuit Judges.

ROVNER, Circuit Judge.

Eagle-Picher sold its Plastics Division to Cambridge Industries, Inc., which immediately re-employed nearly all of the Plastics Division personnel. Eagle-Picher's Divisional Separation Policy provided severance benefits to its employees under certain circumstances, and the Plastics Division employees believed that the sale triggered application of the policy to them. Eagle-Picher declined to grant the benefits and the employees sued. The district court granted summary judgment in favor of Eagle-Picher. We reverse and remand.

I.

The plaintiffs were all salaried, at-will employees of Eagle-Picher's Plastics Division. Eagle-Picher entered into an asset purchase agreement with Cambridge on July 9, 1997, and on July 10, 1997, all of the plaintiffs began working for Cambridge without any interruption in employment. One of the benefits offered by Eagle- Picher was a severance policy that provided in relevant part:

Salaried employees terminated other than for cause or voluntary separation, due to the exigencies of the business situation, will be entitled to the following benefits:

* One week's pay, for each year of service to the Plastics Division (final year to be prorated), with a minimum of two months pay (eight weeks) granted to the employee.

* Payment for both unused and accrued vacation.

* Group Medical and Life Insurance coverage of one week's coverage for each year of service, or until covered by another employer's program (minimum of eight weeks).

R. 41, Ex. C, p.20. The Plastics Division employee handbook also contained a statement regarding the purpose of the plan benefits:

It has always been the policy of Eagle-Picher Plastics Division to improve working conditions and promote the welfare of all employees. In line with this policy, the Company has established and maintains a number of benefit plans to meet the needs of its employees. The primary purpose of these plans is to afford a measure of security for all of us. Some allow us to lead fuller lives, through time off without loss of pay. Others provide for a reasonable amount of protection against unforeseen circumstances.

R. 41, Ex. C, p. 8.¹ Cambridge had no such separation policy, but did provide other comparable benefits to the Plastics Division employees affected by the sale.

After the sale, Eagle-Picher refused to pay out separation benefits, maintaining that the employees had not been terminated as required by the plan. The affected employees sued Eagle- Picher under ERISA, 29 U.S.C. sec. 1001 et seq., seeking approximately $1 million in separation benefits. Eagle-Picher contended that the policy was intended only to cover employees who suffered a loss of income, and was never intended to cover a corporate asset sale in which the employees were immediately re-hired by the purchaser. The district court agreed. Finding that the separation policy was unambiguous as a matter of law, the district court held that the policy was intended only to provide a degree of security to employees who became unemployed. The district court rejected the employees' argument that the policy language referred simply to termination as the triggering event, rather than unemployment. The court similarly rejected the employees' claim that the policy was intended to reward salaried employees rather than protect them from an unexpected period of unemployment. The court found that a more "sensible construction of the language of the policy leads to the conclusion that employees who continue employment with an asset purchaser, and suffer no loss of employment, [are] not entitled to receive separation benefits." Anstett v. Eagle-Picher Industries, Inc., No. 97cv458, slip op. at 8-9 (N.D. Ind. Oct. 16, 1998).

The court agreed with Eagle-Picher's characterization of the policy as intending to assist employees during a period of unemployment. As evidence of this intent, the court noted that the policy provided health and life insurance benefits, but only until the employee was re- employed. Further evidence of this intent was the provision of greater benefits to those employees terminated due to the exigencies of the business situation or for cause than to those employees separated from employment voluntarily. In the former situations, the court agreed, the employee was likely to experience a period of unemployment, while in the latter situation, employees were likely to have new jobs lined up, or were simply retiring. Accordingly, the court found that the policy unambiguously applied only when the employees in question were actually unemployed, and not when their employment was transferred to another company as the result of an asset sale. The employees appeal from the district court's grant of summary judgment in favor of Eagle-Picher.

II.

We review the district court's grant of summary judgment de novo. Green v. Shalala, 51 F.3d 96, 99 (7th Cir. 1995); Hickey v. A.E. Staley Mfg., 995 F.2d 1385, 1388 (7th Cir. 1993). The parties agree that the plan in dispute is an employee welfare benefit plan governed by ERISA. See 9 U.S.C. sec. 1001, et seq. We review the denial of benefits de novo unless the plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan. Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 112 (1989); Hickey, 995 F.2d at 1388-89. Eagle- Picher's plan gave no discretionary authority to the plan administrator, and we thus review the company's interpretation of the plan de novo.

The claim for separation benefits is really a claim to enforce a contract. See Hickey, 995 F.2d at 1389. When there are no genuine issues of material fact, contract interpretation is particularly well-suited for summary judgment. Id. We first must decide whether the contract is ambiguous as a matter of law. If so, we may consider undisputed extrinsic evidence to resolve the ambiguity. Id. An ambiguous term is one which is subject to reasonable alternative interpretations. The district court found that the contract was unambiguous as a matter of law, and we agree. We do not agree, however, with the court's reading of the relevant terms.

We begin by looking at the relevant language in the plan: "Salaried employees terminated other than for cause or voluntary separation, due to the exigencies of the business situation, will be entitled to [separation] benefits." R. 41, Ex. C, p. 20. Eagle-Picher did not consider the employees terminated because they were immediately re-employed by Cambridge. Eagle- Picher asks us to read into the policy a requirement that the affected employees must suffer a period of unemployment in order to recover separation benefits. In support of this interpretation, Eagle-Picher points to two other policy provisions. First, Eagle-Picher cites the purpose statement in the employee handbook, which provides that the "primary purpose of these plans is to afford a measure of security for all of us. Some allow us to lead fuller lives, through time off without loss of pay. Others provide for a reasonable amount of protection against unforeseen circumstances." R. 41, Ex. C, p. 8. Implicit in this statement, according to Eagle- Picher, is an intent to protect employees who suffer a period of unemployment. In this view, guarding against the insecurity caused by and the unforeseen circumstances of unemployment is the purpose of the policy. Second, Eagle-Picher points to policy provisions granting separation benefits to employees terminated for cause, but granting no separation benefits to employees who leave the company voluntarily. At oral argument, Eagle-Picher claimed that this policy "sets up the expectation that you must lose your job to get benefits. And that's why these appellants are not entitled to any." Eagle-Picher posits that separation benefits could not have been intended as a reward to employees if those terminated for cause received the benefits, and yet employees who served the company faithfully until retirement were entitled to nothing.

In making these arguments, Eagle-Picher tacitly admits that nothing in the express language of the plan requires anything other than termination in order to trigger eligibility for separation benefits. Eagle-Picher disputes whether the employees were terminated because they were immediately re-employed and suffered no real interruption in employment. Although the plaintiffs were re-employed after the sale, they were employed by Cambridge and had, in fact been terminated from Eagle-Picher's employ. Eagle- Picher treated the plaintiffs as terminated for every purpose other than the determination of eligibility for separation benefits. For example, Eagle-Picher sent the employees the required COBRA notification, explaining how to continue their health insurance coverage after the qualifying event of "termination of service." R. 41, Ex. D. In the case of persons eligible for certain pension benefits, Eagle-Picher sent notices to those employees describing the deferred vested benefits to which the employees were entitled as a result of their termination from service on the date of the sale of the division. R.41, Exs. F and Q. In internal and external correspondence, Eagle-Picher referred to the employees as terminated or "termed" as of the date of the sale. R. 41, Exs. H and K. Only in determining eligibility for separation benefits was...