Cobb-Alvarez v. Union Pacific Corp., 96 C 236.

• Decision Date: 21 March 1997
• Docket Number: No. 96 C 236.,96 C 236.
• Citation: 962 F.Supp. 1049
• Court: U.S. District Court — Northern District of Illinois
• Parties: Lynn COBB-ALVAREZ, Amy Long, Don Fredbeck, Bryan Madsen, Larry Meyne, Gary Turner, Jack Parker, Robert Meyer and Larry Whitney, Plaintiffs, v. UNION PACIFIC CORPORATION, Union Pacific Railroad Company and Chicago and North Western Railway Company, Defendants.

962 F.Supp. 1049

Lynn COBB-ALVAREZ, Amy Long, Don Fredbeck, Bryan Madsen, Larry Meyne, Gary Turner, Jack Parker, Robert Meyer and Larry Whitney, Plaintiffs, v. UNION PACIFIC CORPORATION, Union Pacific Railroad Company and Chicago and North Western Railway Company, Defendants.

No. 96 C 236.

United States District Court, N.D. Illinois, Eastern Division.

March 21, 1997.

Craig Edgar Anderson, Charles James Corrigan, Jacobson, Brandvik & Anderson, Chicago, IL, Joseph E. Tighe, Richard J Prendergast, Ltd., Chicago, IL, William J. Harte, William J. Harte, Ltd., Chicago, IL, for plaintiffs.

Raymond Hugo Groble, III, Robert Thomas Zielinski, Ginger G. Mayer, Ross & Hardies, P.C., Chicago, IL, for defendants.

MEMORANDUM OPINION AND ORDER

ANN CLAIRE WILLIAMS, District Judge.

Plaintiffs¹ seek to recover severance pay from their former employers, Union Pacific Railroad Company, Union Pacific Corporation, and Chicago and North Western Railway, ("Union Pacific" or "defendants").² The complaint alleges a breach of contract and a breach of the duty of good faith and fair dealing. Defendants move the court to grant their motion to dismiss the complaint, pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons set forth below, the court grants defendants' motion to dismiss.

Background

Plaintiffs are residents of either Illinois or North Carolina. Defendant Union Pacific Railroad Company is a Utah corporation, and has its principal place of business in Nebraska. Defendant Union Pacific Corporation is a Delaware corporation, and has its principal place of business in Pennsylvania. In March, 1995, Chicago and North Western Railway Company merged with Union Pacific Railroad Company, and the sole surviving corporation was Union Pacific. Accordingly, the court has jurisdiction pursuant to federal diversity jurisdiction. 28 U.S.C. § 1332.³

The following facts are taken from plaintiffs' complaint. Defendant Chicago and North Western Railway Company employed plaintiffs around March, 1995. (Compl. at ¶ 1.) Union Pacific Corporation, Union Pacific Railway Company, Chicago and North Western Railway Company entered into a merger agreement around March, 1995. (Id. at ¶ 2.) Due to the merger, Chicago and North Western Railway became a wholly-owned subsidiary of Union Pacific Corporation. Id. Under the terms of the merger agreement, nonunion employees, of Chicago and North Western Railway Company, below the level of Senior Vice-President, were invited to participate in a Voluntary Force Reduction Program ("VFRP" or "Program"), a resignation program with an enhanced severance package. (Id. at ¶ 3.)

Plaintiffs were eligible to participate in the Voluntary Force Reduction Program because they were non-union employees, under the level of Senior Vice-President. (Pls.' Ex. A.)⁴ The terms of the VFRP were explained to plaintiffs and other eligible employees in a letter from Union Pacific Railroad Company's Vice President of Human Resources, that referenced attached documents and schedules, ("VFRP letter"). Id. The first page of the VFRP letter was printed on Union Pacific Railroad Company letterhead and included the company's return address in Nebraska. Id. The VFRP letter outlined the schedule of severance payments participants in the Voluntary Force Reduction Program would receive. (Compl. at ¶ 6.) The VFRP letter instructed eligible employees, willing to terminate their employment for enhanced severance payments, to fill out an application to participate in the Voluntary Force Reduction Program as well as to sign a "General Release and Covenant Not to Sue." (Id. at ¶ 8.) According to the VFRP letter, the application and the release were due by June 15, 1995. Id.

Plaintiffs each executed a release and completed an application, and submitted both by the deadline. (Id. at ¶ 9.) The VFPR letter detailing the terms of the Voluntary Force Reduction Program stated: "[i]f you apply your application can be denied because of business necessity." (Pls.' Ex. A). Additionally, under a heading entitled `Approval,' the VFPR letter outlined: "[a]pplications to participate in the VFRP must have approval of the Vice President-Human Resources, Union Pacific Railroad.... Requests to participate in the VFRP will be granted or denied on the basis of business needs." Id. Agents of defendants represented to plaintiffs that their applications would be honored and they would be given the severance packages detailed in the VFRP letter, unless Union Pacific required their continued employment. (Compl. at ¶ 12.) Defendants' agents told plaintiffs that Union Pacific would not use the "business need" clause to opt out of terminating the plaintiffs' employment under the VFRP, unless particular employees were necessary to continue operating the defendants' railroad businesses. (Id. at ¶ 12.)

Plaintiffs' applications were rejected by Union Pacific, and instead plaintiffs were offered continued employment in new jobs that did not match their skills, experience, and training. (Id. at ¶ 18). Plaintiffs were all subsequently terminated without the severance packages detailed in the VFRP after they rejected the jobs offered. (Id. at ¶ 19.) Plaintiffs claim that they are entitled to receive the severance packages, as well as other termination benefits, detailed in the Voluntary Force Reduction Program. (Id. at ¶¶ 20-21.) Plaintiffs allege a breach of contract and a breach of the duty of good faith and fair dealing. (Id. at ¶ 17.)

Analysis

A. Standard of Review

Union Pacific moves the court to dismiss plaintiffs' complaint for failure to state a claim upon which relief can be granted, pursuant to Fed. R. Civ. P 12(b)(6). A motion to dismiss tests the sufficiency of the complaint, not the merits of the suit. Demitropoulos v. Bank One Milwaukee, N.A., 915 F.Supp. 1399, 1406 (N.D.Ill.1996) (citing Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.1990)). Therefore, the court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in favor of the plaintiff. Zinermon v. Burch, 494 U.S. 113, 118, 110 S.Ct. 975, 979, 108 L.Ed.2d 100 (1990); Colfax Corp. v. Illinois State Toll Highway Auth., 79 F.3d 631, 632 (7th Cir. 1996) (citation omitted). The court will dismiss a claim only if "it appears beyond doubt that [the plaintiff] can prove no set of facts in support of his claim which would entitle him to relief." Colfax, 79 F.3d at 632 (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)).

B. Choice of Law

The parties do not dispute that Illinois law controls this diversity suit.⁵ If neither party raises the issue of a conflict of law, the court may apply the law of the state in which it is situated. See GATX Leasing Corp. v. Nat'l Union Fire Ins. Co., 64 F.3d 1112, 1115 n. 6 (7th Cir.1995) (citing Employers Ins. v. Bodi-Wachs Aviation Ins. Agency, Inc., 39 F.3d 138, 141 n. 2 (7th Cir.1994)). If the parties did dispute the appropriate choice-of-law, this federal court, due to its diversity jurisdiction, would look to the forum state's choice-of-law rules in order to decide which state's substantive law will be employed to rule on the motion to dismiss. Hystro Products, Inc. v. MNP Corp., 18 F.3d 1384, 1387 (7th Cir.1994) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941)).

In contract actions, Illinois courts apply the "most significant contacts" test, as outlined in Restatement (Second) of Conflicts § 188 (1971). CSX Transp., Inc. v. Chicago and North Western Transp. Co., 62 F.3d 185, 188-89 (7th Cir.1995). The factors considered under the "most significant contacts" test include "the place of contracting, negotiation, performance, location of the subject matter of the contract, and the domicil[e], residen[ce], place of incorporation and business of the parties." Wildey v. Springs, 47 F.3d 1475, 1481-83 (7th Cir.1995) (quoting Palmer v. Beverly Enter., 823 F.2d 1105, 1109-1110 (7th Cir.1987)).

In this case, the parties were located in different states and communications were sent in writing by mail. The alleged offer, the Voluntary Force Reduction Program letter, included no choice-of-law provision. The only relevant state referred to in the VFPR letter was Nebraska.⁶ Plaintiffs received the alleged offer while domiciled, residing, and/or working in either North Carolina or Illinois. Plaintiffs completed applications and executed legal releases in acceptance and consideration of the alleged offer. Therefore, the court finds that these actions took place in plaintiffs' domiciles, namely, either North Carolina or Illinois. Plaintiffs were employed by Chicago and North Western Railroad, a company that did significant business in Illinois until it was acquired in the merger by Union Pacific Railroad Company.⁷ Union Pacific Railroad Company is a Utah corporation, but has its principle place of business in Nebraska. Finally, Union Pacific's agents made parol statements explaining the Program to eligible employees in attendance at a meeting in Chicago, Illinois. Based on these facts, this court finds that substantive Illinois law governs this contract dispute under the "most significant contacts" test.

C. Offer or Invitation to Make an Offer

The issue before the court is whether the letter from Union Pacific detailing the enhanced severance plan was an offer to the corporation's eligible employees, or whether it was merely an invitation to make an offer. Plaintiffs claim a valid contract exists because they accepted Union Pacific's offer, as outlined in the VFRP letter, for severance pay, and in exchange they volunteered to leave their jobs and released Union Pacific from any liability. Defendants deny that a contract exists, arguing that the letter that plaintiffs construe as an offer was merely an invitation to make an offer. Plaintiffs seek damages for both breach of contract and breach of the duty of good faith and fair dealing.

Under Illinois law,...