Chaplin v. Nationscredit Corp.

• Decision Date: 08 October 2002
• Docket Number: No. 01-11389.,01-11389.
• Citation: 307 F.3d 368
• Parties: Veronica CHAPLIN, Thomas Hall, Frank Illing, Stephen Kendall, Gerhard Levering, John David Throneberry, As an Independent Executor of the Estate of Ralph Throneberry, Substituted in Place and Stead of Ralph Throneberry, Deceased, and Stephen Buck, Plaintiffs-Appellants, v. NATIONSCREDIT CORPORATION and Bank of America, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 368

307 F.3d 368

Veronica CHAPLIN, Thomas Hall, Frank Illing, Stephen Kendall, Gerhard Levering, John David Throneberry, As an Independent Executor of the Estate of Ralph Throneberry, Substituted in Place and Stead of Ralph Throneberry, Deceased, and Stephen Buck, Plaintiffs-Appellants, v. NATIONSCREDIT CORPORATION and Bank of America, Defendants-Appellees.

No. 01-11389.

United States Court of Appeals, Fifth Circuit.

October 8, 2002.

David Stanley Jones (argued), Law Offices of David S. Jones, James M. Klancnik (argued), Law Offices of James M. Klancnik, Dallas, TX, for Plaintiffs-Appellants.

William C. Strock, Haynes & Boone, Dallas, TX, Helen Liu Thigpen, Haynes & Boone, Richardson, TX, for Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Texas.

Before SMITH and BENAVIDES, Circuit Judges, and FITZWATER,^* District Judge.

JERRY E. SMITH, Circuit Judge:

The plaintiffs appeal a summary judgment adverse to their claim for employee benefits. Finding no error, we affirm.

I.

Plaintiffs Veronica Chaplin, Thomas Hall, Frank Illing, Stephen Kendall, Gerhard Levering, Ralph Throneberry,¹ and Stephen Buck worked as executives or managers at NationsCredit Distribution Finance ("NCDF") until early 1998, when they lost their jobs because of a corporate reorganization. NationsCredit Corporation ("NationsCredit") and NCDF were subsidiaries of NationsBank Corporation; Bank of America is the successor to NationsBank Corporation.

NationsCredit established a severance pay plan in 1995 under the Employee Retirement Income Security Act of 1974 ("ERISA"), 11 U.S.C. § 1001 et seq. The plan granted severance benefits to "those full-time salaried employees in Salary Grades below Band C who are designated in writing by the Company's Director of Human Resources as eligible to participate in the Plan due to involuntary termination of his/her employment as a result of position elimination, position restructuring, lack of work, and/or the like." Plaintiffs and NationsCredit dispute whether plaintiffs were eligible employees under the Plan in early 1998 when they lost their jobs because of the reorganization.

Neither side disputes that plaintiffs earned salaries below Band C and were involuntarily terminated. They disagree only whether plaintiffs were "designated in writing by the Company's Director of Human Resources as eligible to participate in the Plan." Plaintiffs contend they were designated as eligible employees by a memorandum dated September 25, 1995, with an attached copy of the summary plan description, and by a memorandum dated February 29, 1996, with an attached copy of an amendment to the summary plan description. NationsCredit responds that these documents do not designate plaintiffs as eligible employees and, in any event, NationsCredit terminated the plan in 1997 before plaintiffs became eligible.

Although they claimed eligibility under the plan, each plaintiff signed a Letter of Agreement between March 1998 and September 1998 releasing NationsCredit from all potential claims in exchange for severance benefits under non-ERISA guidelines adopted in January 1998 during the reorganization. A section of the Letter of Agreement entitled "Release of Claims" included the following language:

[Y]ou hereby agree to release NCDF from any and all claims, suits, demands, or other causes of action of any kind ... arising at any time in the unlimited past up to and including the date of your execution of this Letter of Agreement. This release includes any claims based in tort, contract or alleged violation of any federal, state or municipal statute, or ordinance. It includes, but is not limited to, all claims arising by reason of or in any way connected with your employment relationship with NCDF....

...

... You also acknowledge that any payment(s) made to you under the terms of this agreement are in addition to anything you are already legally entitled to receive from NCDF.

The severance benefits plaintiffs received in exchange for signing the release were less than they would have received under the plan if the plan was active in early 1998 and if plaintiffs in fact were eligible for benefits under the plan.

II.

Notwithstanding this release, plaintiffs submitted claims for severance benefits under the plan to NationsCredit in January 1999.² NationsCredit denied the claims in March 1999, because plaintiffs had released it from all liability. Plaintiffs then appealed the denial to the plan administrator in April 1999. The administrator denied the appeal in September 1999. Plaintiffs then filed the instant action, making claims under ERISA and state law for wrongful denial of severance benefits offered in the plan and wrongful denial of their appeal to the administrator.³

NationsCredit moved for summary judgment on all of plaintiffs' claims, which the district court ultimately granted, but only after a motion to reconsider and a second memorandum opinion. In the first opinion, the court denied summary judgment on the ERISA claims and granted summary judgment on the state law claims.

First, the court found a genuine issue of material fact regarding plaintiffs' eligibility for the plan when they were terminated. Second, the court held that the releases did not bar suit because the releases were limited to "anything [plaintiffs] are already legally entitled to receive from NCDF," which could include severance benefits offered in the plan if plaintiffs proved at trial that they were in fact eligible employees when they were terminated. Third, the court found a genuine issue of material fact as to whether the plan administrator had denied plaintiffs' appeal for benefits in an arbitrary and capricious manner, because the court already had concluded that plaintiffs might have been eligible for benefits under the plan and that the releases did not bar the suit. Finally, the court held that ERISA's preemption clause, 29 U.S.C. § 1144(a), preempted plaintiffs' state law claims, and accordingly it granted summary judgment to NationsCredit on these claims.⁴

After a motion to reconsider, however, the court granted in whole NationsCredit's motion for summary judgment in a second opinion. The court did not disturb its earlier finding that plaintiffs "were potentially entitled to receive benefits under the 1995 plan." The court concluded, however, that it had committed a clear error of law by holding that the releases would not bar plaintiffs' suit because plaintiffs and NationsCredit disputed plaintiffs' eligibility for the plan. Thus, even if plaintiffs had sued and ultimately prevailed on their underlying claim of eligibility for the plan, plaintiffs were not "already legally entitled to" severance benefits under the plan.

The district court therefore granted summary judgment to NationsCredit because the releases barred plaintiffs' suit. For the same reason, the court also concluded that the plan administrator could not have acted in an arbitrary and capricious manner, and therefore it granted summary judgment to NationsCredit on this claim as well. The court did not disturb its earlier holding that ERISA preempted plaintiffs' state law claims. Plaintiffs appeal the summary judgment on their claims for wrongful denial of benefits and wrongful denial of their appeal by the plan administrator.

III.

We review a summary judgment de novo and apply the same standards as did the district court. TIG Ins. Co. v. Sedgwick James, 276 F.3d 754, 759 (5th Cir.2002). Summary judgment is appropriate only if "the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any," when viewed in the light most favorable to the non-moving party, "show that there is no genuine issue as to any material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute about a material fact is "genuine" if the evidence would permit a reasonable jury to return a verdict for the non-moving party. Id. at 248, 106 S.Ct. 2505.

The court must draw all reasonable inferences in favor of the non-moving party. Id. at 255, 106 S.Ct. 2505. To obtain summary judgment, "if the movant bears the burden of proof on an issue ... because... as a defendant he is asserting an affirmative defense, he must establish beyond peradventure all of the essential elements of the ... defense to warrant judgment in his favor." Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir.1986).

IV.

NationsCredit bears the burden to prove that the releases bar plaintiffs' suit; it must establish that plaintiffs "signed a release that addresses the claims at issue, received adequate consideration, and breached the release." Williams v. Phillips Petroleum Co., 23 F.3d 930, 935 (5th Cir.1994). Neither side disputes that plaintiffs signed the releases or that, if the releases cover plaintiffs' claims for ERISA benefits and they received adequate consideration, they breached the release by suing. The parties disagree on, first, whether the releases cover plaintiffs' claims for ERISA benefits and, second, whether plaintiffs received adequate consideration for the releases. We agree with the district court that the releases cover plaintiffs' ERISA claims and that the plaintiffs received adequate consideration.

A.

The parties disagree whether the language of the releases covers a claim for ERISA benefits. Plaintiffs contend that for a release to cover an ERISA claim, it must specifically mention ERISA. NationsCredit argues that a release need not specifically mention ERISA for its broad language to cover an ERISA claim.

We agree with NationsCredit that the language in the release sweeps widely enough to cover plaintiffs' ERISA claim. Federal common law controls the interpretation of a release of federal claims. Fulgence v. J. Ray McDermott & Co., 662 F.2d 1207, 1209 (5th Cir.1981). The terms of the releases unambiguously reveal an intent to cover...