Blakeman v. Mead Containers

• Decision Date: 26 December 1985
• Docket Number: No. 85-5001,85-5001
• Citation: 779 F.2d 1146
• Parties: , 7 Employee Benefits Ca 1036 David E. BLAKEMAN and Harold D. Keeble, Plaintiffs-Appellants, v. MEAD CONTAINERS, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1146

779 F.2d 1146

54 USLW 2456, 7 Employee Benefits Ca 1036

David E. BLAKEMAN and Harold D. Keeble, Plaintiffs-Appellants, v. MEAD CONTAINERS, Defendant-Appellee.

No. 85-5001.

United States Court of Appeals Sixth Circuit.

Argued Nov. 7, 1985.

Decided Dec. 26, 1985.

Robert H. Jones argued, Louisville, Ky., for plaintiffs-appellants.

Robert J. Brown argued, Smith & Schnacke, Dayton, Ohio, for defendant-appellee.

Before MERRITT and CONTIE, Circuit Judges; and CELEBREZZE, Senior Circuit Judge.

CONTIE, Circuit Judge.

Plaintiffs, a group of defendant's former employees, appeal from an order of the district court granting summary judgment in favor of defendant Mead Containers on plaintiffs' complaint pursuant to 29 U.S.C. Sec. 1132 et seq. and state law. For the reasons that follow, we affirm.

I.

On August 17, 1983, plaintiffs David E. Blakeman and Harold D. Keeble filed a complaint "on behalf of all other persons similarly situated who were former salaried employees of the Defendant Corporation, not covered by a collective bargaining agreement" pursuant to 29 U.S.C. Sec. 1132 and state law. Plaintiffs alleged that on May 8, 1970, Mead established an Employee Welfare Benefit Plan known as the "Severance Allowance Guide For Salaried Employees." The complaint alleged that "[p]ursuant to said severance plan, as amended in 1977, the Defendant agreed to provide one weeks pay for each full year of Company service ... with a minimum of (2) weeks pay and a maximum of (12) weeks pay for all salaried employees who are or were involuntarily terminated in the interest of the Company." Plaintiffs were terminated on July 25, 1983 due to the closing of Mead's Louisville, Kentucky facility. Plaintiffs alleged that Mead's refusal to grant them severance pay was arbitrary, capricious, and illegal, in violation of 26 U.S.C. Secs. 401, 411, 501, and 29 U.S.C. Sec. 1002. Further, plaintiffs alleged that in 1977 Mead reduced benefits under the plan and failed to inform plaintiffs of such change. Plaintiffs also alleged breach of contract and the right to recover under the theory of quantum meruit. Plaintiffs alleged that Mead had a written vacation pay plan for all salaried employees which provided benefits to employees who were employed by the defendant on December 31 of each year. Plaintiffs alleged that Mead's sale of the division prevented them from being Mead employees on December 31, and that Mead refused to pay vacation benefits, in violation of the vacation pay plan. Plaintiffs sought to maintain a class action pursuant to Fed.R.Civ.P. 23(b)(1), (2), and sought severance pay, vacation pay, a declaration that the 1977 amendments to the plan were void, punitive damages, pre-judgment interest, the penalty provided by 29 U.S.C. Sec. 1132(c), attorney fees and costs.

Mead's answers to interrogatories indicate that Mead sold the Louisville Division on July 25, 1983, the Toledo Division on July 18, 1983, and the Cincinnati Division on July 11, 1983. The interrogatories further indicated that the alleged severance pay plan had never been adopted by corporate resolution. "Mead Containers has never adopted a severance pay plan. In 1970, Mead Containers approved a discretionary severance pay guideline for use by the Division.... This guideline was revised in 1977. No formal corporate resolution occurred with respect to either guideline."

The severance plan adopted April 17, 1970 provided that "[t]he purpose of the severance allowance guide line is to provide consistency but, at the same time, permitting exceptions appropriate to individual situations." Further, while "[a]n employee who is discharged for cause (e.g. dishonesty, willful neglect of duty, etc.) or who voluntarily resigns is not eligible for a severance allowance," "[a]n employee who is involuntarily terminated in the interest of the Division (e.g. plant closing, curtailment, inability to perform satisfactorily, etc.) will be eligible for a severance allowance." The guidelines provided for both a basic allowance and a contingency allowance, and provided that "[t]he employee should be given the option of receiving the basic severance allowance in a lump sum or of remaining on the payroll for the prescribed period of time." If an employee elected to remain on the payroll and secured "a job before his basic allowance is exhausted, he will be paid any balance remaining in a lump sum." "If an employee who has elected to be continued on the payroll has been unable to find a job by the time his basic allowance has been exhausted, he will be paid a Contingency Allowance of one-half ( 1/2) pay for the period of time corresponding to his age and service as shown in the guide line schedule." The guidelines provided that "[m]anagers are encouraged to consider each case in the light of its own circumstances and to make severance recommendations accordingly." Respecting vacations, the plan provided that "[v]acations for salaried employees vest on December 31 for the following year. Therefore, payment for vacation not taken is separate and distinct from the severance allowance." The amendments in 1977 reduced the amount of basic allowance and disposed of the contingency allowance.

On May 9, 1984, Mead moved for summary judgment, and, on September 18, 1984, the district court granted the motion. The district court found that the severance pay guidelines were never distributed or adopted by corporate resolution, and that Mead had paid severance pay to its employees at facilities that were closed and not at those that were sold. The court found that the denial of vacation and severance pay was not arbitrary and capricious in light of the fact that the guidelines were never published to the employees and were not adopted pursuant to a collective bargaining agreement. The court held that

[t]he 1977 guidelines as well as the 1970 guidelines may be reasonably interpreted as not providing severance pay to employees who continued to work at their same salary but for a different employer following the sale of the plant.... [T]he guidelines do not specifically refer to what would happen in the event of a sale of a plant by the defendant, and then employment of the plant's employees by the new purchaser. However, it is obvious that the guidelines were meant to give severance pay benefits to employees who, through no fault of their own, lost their jobs, i.e., were involuntarily terminated.

The court dismissed the claim for damages due to Mead's failure to disclose the plan, on the ground that there had been no written request for disclosure. The court found the state law claims to be preempted by 29 U.S.C. Sec. 1144. ¹ On appeal, plaintiffs apparently pursue both ERISA and state law claims.

II.

Plaintiffs bring this action for denial of benefits pursuant to 29 U.S.C. Sec. 1132(a)(1)(B) which provides:

A civil action may be brought ... by a participant or beneficiary ... to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan....

There seems little doubt that plaintiffs are both "participants" and "beneficiaries," 29 U.S.C. Sec. 1002(7), (8), that the employer, Mead, is the plan "administrator," 29 U.S.C. Sec. 1002(16), and that the severance pay and vacation provisions are "employee welfare benefit plans" as defined in 29 U.S.C. Sec. 1002(1). ² Jung v. FMC Corp., 755 F.2d 708, 710 (9th Cir.1985); Blau v. Del Monte Corp., 748 F.2d 1348, 1352 (9th Cir.1984); Scott v. Gulf Oil Corp., 754 F.2d 1499, 1503 (9th Cir.1985); Sly v. P.R. Mallory & Co., 712 F.2d 1209, 1211 (7th Cir.1983); Pinto v. Zenith Radio Corp., 480 F.Supp. 361, 363 (N.D.Ill.1979), aff'd, 618 F.2d 110 (7th Cir.1980); Petrella v. N L Industries, Inc., 529 F.Supp. 1357, 1362 (D.N.J.1982); Calhoun v. Falstaff Brewing Corp., 478 F.Supp. 357, 359 (E.D.Mo.1979). It is further clear, and the parties agree, that we review the decision of the administrator to deny benefits only to determine whether such decision was arbitrary, capricious, in bad faith, erroneous as a matter of law, or unsupported by substantial evidence. Jung, 755 F.2d at 711; Anderson v. Ciba-Geigy Corp., 759 F.2d 1518, 1521 (11th Cir.1985); Sly, 712 F.2d at 1211; Moore v. Reynolds Metals Co. Retirement Program, 740 F.2d 454, 457 (6th Cir.1984), cert. denied, --- U.S. ----, 105 S.Ct. 786, 83 L.Ed.2d 780 (1985); Van Gunten v. Central States, 672 F.2d 586, 587 (6th Cir.1982); Ponce v. Construction Laborers Pension Trust for Southern California, 628 F.2d 537, 542 (9th Cir.1980); Petrella, 529 F.Supp. at 1366. "Generally speaking, trustees [administrators] are knowledgeable of the details of a trust fund (both its purpose and its operation), and thus they are in a position to make prudent judgments concerning participant eligibility. Courts are extremely reluctant to substitute their judgment for the judgments of the trustees, and will do so only if the actions of the trustees are not grounded on any reasonable basis." Ponce, 628 F.2d at 542. However, the administrator "has no discretion to secrete the plan, to flout the reporting, disclosure and fiduciary obligations imposed by ERISA, or to deny benefits in contravention of the plan's plain terms." Blau, 748 F.2d at 1353. Further, "imposition of a standard that is not contained in the terms of a plan amounts to an arbitrary and capricious decision." Id. at 1354.

Judgment was granted in favor of defendant Mead on a summary judgment motion. "[O]n a motion for summary judgment the movant has the burden of showing conclusively that there exists no genuine issue as to a material fact and the evidence together with all inferences to be drawn therefrom must be read in the light most favorable to the party opposing the motion." Smith v. Hudson, 600 F.2d 60, 63 (6th Cir.), cert. dismissed, 444 U.S. 986, 100 S.Ct. 495, 62 L.Ed.2d 415 (1979). Accordingly, we examine the distinctive characteristics...