Bellino v. Schlumberger Technologies, Inc.

• Decision Date: 04 June 1991
• Docket Number: No. 91-1144,91-1144
• Citation: 944 F.2d 26
• Parties: , 14 Employee Benefits Cas. 1564 James BELLINO, et al., Plaintiffs, Appellees, v. SCHLUMBERGER TECHNOLOGIES, INC., Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 26

944 F.2d 26

60 USLW 2284, 14 Employee Benefits Cas. 1564

James BELLINO, et al., Plaintiffs, Appellees, v. SCHLUMBERGER TECHNOLOGIES, INC., Defendant, Appellant.

No. 91-1144.

United States Court of Appeals, First Circuit.

Heard June 4, 1991.

Decided Sept. 11, 1991.

Rehearing and Rehearing En Banc

Denied Nov. 20, 1991.

W. Irl Reasoner with whom Jean M. Frazier, Baker & Hostetler, Columbus, Ohio, Joseph J. Hahn, and Bernstein, Shur, Sawyer & Nelson, Portland, Me., were on brief for defendant, appellant.

Francis M. Jackson Portland, Me., for plaintiffs, appellees.

Before BOWNES, Senior Circuit Judge, and SKINNER, ^* and STAHL, ^** District Judges.

STAHL, District Judge.

Plaintiffs-appellees, former employees of defendant-appellant Schlumberger Technologies, Inc. ("Schlumberger"), sued to recover severance benefits from Schlumberger pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq. Schlumberger appeals from an order of the district court granting appellees' motion for summary judgment on their ERISA claim and denying Schlumberger's motion for summary judgment on the same claim. 753 F.Supp. 394.

1. Facts

The undisputed facts are as follows. In 1989, appellees were employed by defendant Schlumberger as maintenance workers at a National Semiconductor Corporation ("NSC") facility in South Portland, Maine. At that time, NSC was purchasing maintenance services and maintenance related equipment from Schlumberger pursuant to a series of contracts and purchase orders. ¹

Early in 1989, NSC decided that it would be economically advantageous to employ its own maintenance staff to perform the work being done by Schlumberger and notified Schlumberger in writing on June 5, 1989, that it was canceling the maintenance contract. Unable to persuade NSC to change its position on cancellation, Schlumberger subsequently entered into negotiations with NSC. The negotiations culminated in an agreement, under the terms of which Schlumberger was to "transition" to NSC much of the maintenance work it had handled under the earlier contract. Additionally, appellees were to be "transferred" from Schlumberger to NSC; Schlumberger agreed to aid NSC in hiring appellees and was to receive in return $5,000 for each appellee who accepted an offer from and commenced employment with NSC. The contract contemplated that nine of the appellees would end their employment with Schlumberger on September 4, 1989, and begin employment with NSC on September 5, 1989. The other two appellees were to end their employment with Schlumberger on December 31, 1989, and to commence employment with NSC on January 1, 1990.

On July 31, 1989, Schlumberger's personnel manager, Gerard Yanoshak, met with appellees and informed them of the new contract with NSC. He further informed appellees that they would receive offers from NSC to perform substantially the same job that they had performed for Schlumberger. Appellees also were told that if they chose to reject NSC's offer, they would be treated as having resigned from Schlumberger. Finally, Yanoshak informed appellees that, whether or not they accepted NSC's job offers, they would not be eligible to receive severance benefits from Schlumberger. Yanoshak explained to appellees that Schlumberger's policy was to deny severance benefits to departing employees who are offered comparable jobs at comparable pay. That policy, however, did not appear explicitly in Schlumberger's written ERISA plan.

On August 18, 1989, appellees accepted the employment offers extended by NSC. Nine appellees commenced employment with NSC on September 5, 1989. The other two commenced employment in January 1990. Appellees performed the same jobs for NSC that they had performed for Schlumberger at the same facility, received a higher wage from NSC, and did not miss a day's work as a result of their "transfer." ²

Appellees initiated the instant action in the United States District Court for the District of Maine seeking severance pay from Schlumberger pursuant to Schlumberger's ERISA plan ("the Plan"). Applying a de novo standard of review, the district court determined that Schlumberger's unwritten policy of denying severance to departing employees who receive offers for comparable jobs was contrary to the plain language of the Plan. The court also determined that Schlumberger's oral representation to appellees of its unwritten policy was not a valid amendment to the Plan. The court concluded that Schlumberger terminated appellees because of "lack of work," and thus was required to grant them severance benefits pursuant to the terms of the Plan. Consequently, the court granted appellees partial summary judgment (on liability) with respect to their ERISA claim and denied Schlumberger's motion for summary judgment on the same claim. We affirm the decision of the district court.

2. Discussion

As Schlumberger appeals from an order on summary judgment, our review is circumscribed by Fed.R.Civ.P. 56.

[W]e must, after perusing the record and all reasonable inference extractable therefrom in the aspect most generous to appellant, be 'fully satisfied that there is no genuine dispute as to any relevant fact issue and that the appellee is, as a matter of law, due the relief which the district court awarded.'

Burnham v. Guardian Life Ins. Co. of America, 873 F.2d 486, 488 (1st Cir.1989).

Before discussing the merits of Schlumberger's appeal, we first determine the appropriate standard of review. Federal courts review ERISA claims de novo, "unless the benefit 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, 115, 109 S.Ct. 948, 956, 103 L.Ed.2d 80 (1989). Schlumberger argues that the arbitrary and capricious standard of review, rather than the de novo standard, is appropriate in this action, but points to no language in the Plan giving it the "discretionary authority" required for that standard. Therefore, we review de novo Schlumberger's decision to deny appellees severance benefits.

We begin our discussion with an overview of the Plan. It is not disputed that the Plan is an "employee welfare benefit plan" under § 1002(1) of ERISA. See Massachusetts v. Morash, 490 U.S. 107, 116, 109 S.Ct. 1668, 1673-74, 104 L.Ed.2d 98 (1989). As such, it is exempted from the stringent vesting, participation, and funding requirements of ERISA "pension" benefit plans. See, e.g., Reichelt v. Emhart Corp., 921 F.2d 425, 429 (2d Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 2854, 115 L.Ed.2d 1022 (1991); Sejman v. Warner-Lambert Co., Inc., 889 F.2d 1346, 1348 (4th Cir.1989), cert. denied, --- U.S. ----, 111 S.Ct. 43, 112 L.Ed.2d 19 (1990). However, ERISA does subject welfare benefit plans to certain disclosure and fiduciary requirements. See Reichelt, supra. For example, such plans must be "maintained pursuant to a written instrument" that provides "for one or more named fiduciaries" who have "authority to control and manage the operation and administration of the plan." ³ 29 U.S.C. § 1102(a)(1). In exercising that authority, the fiduciary must act "in accordance with the documents and instruments governing the plan." ⁴ 29 U.S.C. 1104(a)(1)(D).

The benefit provisions of an ERISA-regulated plan are interpreted under principles of federal substantive law. See Bruch, supra, 489 U.S. at 110, 109 S.Ct. at 953; Burnham, supra at 489 ("benefit provisions of an ERISA-regulated group life insurance policy must be interpreted under principles of federal substantive law"). "[T]he 'federal common law of rights and obligations,' while still in formation, must embody common-sense canons of contract interpretation." Burnham, supra. Accordingly, we confine our construction of the Plan terms to the intent of the parties; where a disputed term is unambiguous, we presume its natural meaning to be conclusive evidence of such intent. See id. at 489-90. ⁵

The terms of the Plan are found in Schlumberger's Employee Handbook and in its Personnel Administration Procedures Manual. The Employee Handbook provides in pertinent part:

Termination

Employment may be terminated for any number of reasons at any time, including retirement, resignation, discharge, or layoff....

Layoff

From time to time, Schlumberger may need to terminate an employee for lack of work, poor business conditions, or change in business focus. Should such termination become necessary, Schlumberger will provide all affected employees with salary and benefits continuation for a specified period of time.

The Personnel Manual elaborates further on these terms. It makes plain that "terminations" are either "voluntary" or "involuntary." Additionally, it states that "[t]here are two types of involuntary termination: Reduction in Force [and] Firing." Employees terminated due to a "Reduction in Force" are entitled to severance benefits:

Reduction in Force

From time to time, Schlumberger may need to terminate an employee for lack of work, poor business conditions, or change in business focus. Should such terminations become necessary, Schlumberger will provide employees with salary and benefits continuation for a specified period of time.

Employees who are laid-off are eligible for severance pay according to the enclosed schedule. The amount of severance pay is determined by the number of years of service with Schlumberger .....

When it becomes necessary, due to business conditions, to have a reduction in the workforce (layoff), the affected employees will be eligible for severance pay according to the schedule that appears below.

We agree with the finding of the district court that the above Plan language is clear and unambiguous as applied to the facts of this case and that it entitles appellees to severance benefits. As an initial matter, there can be no dispute that appellees were "terminated" within the plain meaning of...