Biggers v. Wittek Industries, Inc.

• Citation: 4 F.3d 291
• Decision Date: 27 August 1993
• Docket Number: No. 92-2139,92-2139
• Parties: 17 Employee Benefits Ca 1556 Ronald J. BIGGERS; James E. Brandon; Linda M. Cornwell; James A. Dunn; Kenneth W. Elliott; Betty L. Griffin; Robert L. Jackson; Terry K. Jewell; Kenneth Jordan; Charles E. Lackey; Raymond W. Lamberth; John Edward Miller, Jr.; Robert A. Munse; Deborah W. Stanton; John H. Starnes; Gary Sweeney; Joanne M. Veillette; Jerry E. Wingate; Glenn Breitwieser, Plaintiffs-Appellees, v. WITTEK INDUSTRIES, INCORPORATED, Defendant-Appellant, and J.D. Industries, Incorporated; Chrysler Corporation; Carmen Viana; John W. Darrah, Defendants.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 291

4 F.3d 291

17 Employee Benefits Ca 1556

Ronald J. BIGGERS; James E. Brandon; Linda M. Cornwell James A. Dunn; Kenneth W. Elliott; Betty L. Griffin Robert L. Jackson; Terry K. Jewell; Kenneth Jordan Charles E. Lackey; Raymond W. Lamberth; John Edward Miller, Jr.; Robert A. Munse; Deborah W. Stanton; John H Starnes; Gary Sweeney; Joanne M. Veillette; Jerry E. Wingate; Glenn Breitwieser, Plaintiffs-Appellees, v. WITTEK INDUSTRIES, INCORPORATED, Defendant-Appellant, and J.D. Industries, Incorporated; Chrysler Corporation; Carmen Viana; John W. Darrah, Defendants.

No. 92-2139.

United States Court of Appeals, Fourth Circuit.

Argued May 5, 1993.

Decided Aug. 27, 1993.

George Clive Hook, II, George C. Hook, P.C., Chicago, IL, argued, for defendant-appellant.

Eric Robert Meierhoefer, Charlotte, NC, argued (Mark A. Michael, on brief), for plaintiffs-appellees.

Before ERVIN, Chief Judge, and NIEMEYER and WILLIAMS, Circuit Judges.

NIEMEYER, Circuit Judge:

Wittek Industries, Inc., a corporation engaged in the manufacture of automobile parts, closed its EC Manufacturing Division at Pineville, North Carolina, on February 15, 1991, and terminated the employment of those working at the plant. Applying a 1989 written policy which provided for a maximum of three weeks of severance pay, Wittek Industries paid each of the employees those benefits. Ronald J. Biggers and 17 other employees contended the 1989 policy had never been adopted, and they sued Wittek Industries under ERISA claiming entitlement to additional severance benefits under a more generous, preexisting 1987 policy. Following trial the court awarded the employees $112,526.37 in additional severance benefits under the 1987 policy.

In a separate action, consolidated with the first, Glenn Breitwieser, a vice president of manufacturing of Wittek Industries, who was also terminated in February 1991, likewise sued Wittek Industries for severance benefits under an alleged individual contractual arrangement. The court submitted his claim to a jury under Illinois common law and the jury awarded him $99,187.50.

On appeal of the judgment embodying both awards, Wittek Industries now contends that (1) the award to Biggers and the 17 other employees of benefits under the 1987 company policy was improper because that policy had been duly replaced by the 1989 policy; (2) Breitwieser's contract claim was preempted by ERISA and any ERISA claim that Breitwieser might have should have been decided by the court and not by the jury; (3) the contract under which Breitwieser sued was never established and in any event, as alleged, was unenforceable; and (4) the award to plaintiffs of attorney's fees was improper because Wittek Industries was never given the opportunity to respond to the motion for such fees.

For the reasons that follow, we affirm the judgment in favor of Biggers and the other 17 former employees of Wittek Industries; we vacate the judgment in favor of Breitwieser because his claim is preempted by ERISA and remand his claim for a new trial by the court; and we vacate the order awarding attorney's fees, remanding that issue for further proceedings.

I

The EC Manufacturing Division of Wittek Industries, Inc., operated a plant in Pineville, North Carolina, that was engaged in the manufacture of "door rods," part of the locking device found in automobile doors, which were sold principally to Chrysler Corporation. Because of financial difficulties, the plant was closed on February 15, 1991, and its assets were sold. As a result, the employment of those working at the plant was terminated. Ronald J. Biggers and 17 other employees filed suit against Wittek Industries under ERISA claiming severance benefits under a written company policy dated June 1, 1987. The policy provided for "a severance allowance of one (1) week of pay at the regular base rate for each full year of continuous uninterrupted service" up to a maximum of 20 weeks.

Wittek Industries refused to pay the benefits provided under the 1987 policy, contending that that policy had been replaced by a new written policy dated June 1, 1989. The company claimed that it had properly paid the employees under the 1989 policy, which provided severance benefits of one week's pay for one to three years' service; two weeks' pay for three to five years' service; and a maximum of three weeks' pay for service of five years and more. The employees contended that they had neither heard of nor seen the 1989 policy and they maintained that it was never put into effect. The issue of whether the employees were entitled to the more generous amounts provided by the 1987 policy was tried to the district court without a jury.

At trial Ray Keegan, Wittek Industries' director of human resources, testified that when Carmen Viana became president of Wittek Industries, she was "flabbergasted" at the generosity of the severance and other employee benefits then provided for in the company's written policies. She instructed Keegan to redraft the policies, which he did in early 1989. Keegan's assistant, Marge Husch, testified that she typed the new policies and put them, unsigned, into a locked file cabinet. She also testified that Keegan had her make a copy of the policies to give to Viana to look at, approve, and sign. To Husch's knowledge, as of March 19, 1991, more than a month after the plant in Pineville had been closed, none of the new policies that she typed had been approved and signed by Viana. Indeed, Keegan often complained to Husch that he was unable to get Viana to sign any of the new policies.

Shortly before the closing of the Pineville plant, James Dunn, human resource manager in Pineville, and his assistant started computing the employees' severance benefits using the 1987 policy. These calculations were approved by Glenn Breitwieser, vice president for manufacturing, and forwarded to Keegan in Illinois. On February 14, 1991, Keegan called Breitwieser and told him that the benefits had been calculated under the wrong plan. In the conference call that followed, Breitwieser, Dunn, and Biggers all disputed the existence of a 1989 policy. Nevertheless all benefits were recomputed under the 1989 policy as communicated during the conference call.

In addition to closing the Pineville plant, Wittek Industries was reorganizing in Illinois, laying off employees, and moving its offices from LaGrange Park, Illinois, to Galesburg, Illinois. In January 1991, Husch, who was still in LaGrange Park, began calculating severance benefits for the Illinois employees using the 1987 policy. Keegan, who had already moved to Galesburg, directed her to use the 1989 policy and mailed her a copy of the policy signed by Viana, which Husch received on February 18, 1991, after the Pineville plant had closed. She then sent it by fax to Pineville on February 21, 1991. Husch testified that the signed copy of the policy that she received had been retyped by someone else with a different typewriter and that, although the text was the same, it had been assigned a number different from that placed on the severance policy that she had typed in 1989. While Wittek Industries provided no explanation for the retyped copy, Keegan testified that the 1989 policy had been adopted when originally typed and that copies of the policy had been forwarded to Viana's secretary to be sent to Wittek Industries' various plants.

The district court rejected Keegan's testimony as incredible and found that "there is no credible evidence that Wittek Industries adopted written changes to its 1987 severance pay policy prior to the closing of the [Pineville] plant." The court therefore found that the 1987 plan applied at the time the employees were laid off, and awarded benefits as provided by it.

On appeal Wittek Industries contends that the district court was clearly erroneous in finding that the policy in effect at the time the employees were terminated was the 1987 policy, and further that any lack of notice to the employees about the new policy is irrelevant as notice is not a condition to the policy's effectiveness. It argues,

the only notice requirement even arguably applicable would be pursuant to ERISA Sec. 104(b)(1) [29 U.S.C. Sec. 1024(b)(1) ] which provides that modifications or amendments to employee welfare benefit plans may be distributed to plan beneficiaries as much as 210 days after the plan year in which the change is adopted.

Our review of the record confirms that the district court's factual findings are clearly supported by substantial evidence. The district court was confronted with two opposing positions, each supported by testimony. The court credited the testimony supporting one of these positions and found facts consistent with this decision. Accordingly, we conclude that the findings are not clearly erroneous. The contention remains, however, that Wittek Industries may nevertheless rely on a duly adopted plan sent to its employees even after its termination of their employment.

A plan established by an employer providing for severance pay benefits is an employee welfare benefit plan covered by ERISA. However, because a welfare benefit plan is not subject to ERISA's vesting provisions, an employer is free to amend the terms of the plan or terminate it entirely. See Sejman v. Warner-Lambert Co., 889 F.2d 1346, 1348-49 (4th Cir.1989), cert. denied, 498 U.S. 810, 111 S.Ct. 43, 112 L.Ed.2d 19 (1990). Wittek Industries was thus under no obligation to continue the 1987 policy and could amend it based on Viana's determination that its benefits were too generous given the financial condition of the company. Id. at 1349. Every employee benefit plan covered by ERISA, however, must be established pursuant to a written instrument, with procedures outlined for amending the plan and identifying those with authority to make amendments. See 29 U.S.C. Sec. 1102(a)(1), (b)(3). A written plan is critical to ERISA's goal that employees be informed about...