La Fata v. Raytheon Co.

• Decision Date: 30 January 2004
• Docket Number: No. 01-CV-1220.,01-CV-1220.
• Citation: 302 F.Supp.2d 398
• Parties: Michael LA FATA, et al. Plaintiffs, v. RAYTHEON COMPANY, et al. Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

302 F.Supp.2d 398

Michael LA FATA, et al. Plaintiffs, v. RAYTHEON COMPANY, et al. Defendants.

No. 01-CV-1220.

United States District Court, E.D. Pennsylvania.

January 30, 2004.

COPYRIGHT MATERIAL OMITTED

Bryan R. Lentz, Bochetto & Lentz, David H. Weinstein, Edward F. Kalman, Kellie A. Allen, Paul J. Scarlato, Robert S. Kitchenoff, Weinstein, Kitchenoff, Scarlato & Goldman, Ltd., Philadelphia, PA, for Plaintiff.

Andrew W. Allison, James M. Wilson, Littler Mendelson Prof. Corp., Philadelphia, PA, Gregory C. Braden, H. Douglas Hinson, Michael G. Monnolly, Alston & Bird LLP, Atlanta, GA, Richard J. Antonelli, Littler Mendelson PC, Pittsburgh, PA, Steven K. Ludwig, Fox Rothschild O'Brien & Frankel, LLP, Philadelphia, PA, for Defendant.

MEMORANDUM AND ORDER

ANITA B. BRODY, District Judge.

Plaintiff Michael La Fata ("La Fata") is a former employee of Raytheon Engineers and Constructors, Inc. ("RE & C"). Prior to July 7, 2000, RE & C was a wholly-owned subsidiary of defendant Raytheon Engineers and Constructors International, Inc. ("RECI"). RECI is a wholly-owned subsidiary of defendant Raytheon, Inc. ("Raytheon"). La Fata originally filed a 17-count class action complaint against a number of defendants¹ for violations of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., federal securities laws, and state common law.² At this time, only two³ counts remain: Count I, a claim for benefits pursuant to § 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B),⁴ and Count II, a claim for benefits pursuant to § 510 of ERISA, 29 U.S.C. § 1140.⁵ Raytheon and RECI are the only remaining defendants.⁶ Before me are the cross-motions for summary judgment filed by the parties on the two remaining counts. This court has jurisdiction based on the existence of a federal question. For the following reasons, I grant defendants' motion for summary judgment on both Count I and Count II.

I. Facts Stated Most Favorably to Plaintiff

In March of 1993, La Fata began working for RE & C as an engineer. (First Am. Compl. ¶ 28.) RE & C and its owner, RECI,⁷ are Delaware corporations. (App. Supp. D's Mot. Summ. J. Ex. B.) La Fata was provided a number of benefits as an RE & C employee. Those benefits included: the option to participate in an RE & C-sponsored defined pension benefit plan, the option to participate in a Raytheon-sponsored savings and investment plan with an employee stock ownership component, the option to participate in the Raytheon Scholars Program, which provided cash awards to the children of Raytheon employees to be used for costs associated with undergraduate programs, access to medical, dental, and disability coverage, and a non-discretionary severance plan for involuntary termination of RE & C employment known as the RE & C Severance Pay Policy ("Severance Pay Policy"). (App. Supp. D's Mot. Summ. J. Ex. R.) Some of the constituent benefit programs enjoyed by La Fata are expressly incorporated into what is known as the Welfare Benefit Plan. The Welfare Benefit Plan operates as an umbrella plan for the other RE & C employee plans, supplying "certain uniform terms for the employee benefit plans." (App. Supp. D's Mot. Summ. J. Ex. C at § 2.1.) Each term of the Welfare Benefits Plan is considered to apply to all incorporated plans unless it "conflicts with, contradicts, or renders ambiguous" a term, provision, implication or statement in the incorporated plan. (Id. at § 1.5.) The rules of each incorporated plan regarding eligibility, enrollment, coverage, and termination of coverage of eligible employees are set forth in each incorporated plan's "Constituent Benefit Program Document." (Id. at § 3.2.) The Welfare Benefits Plan contains a termination provision. It provides:

In the event of any dissolution, merger, consolidation, or reorganization of the Employer in which the Employer is not the survivor, the [Welfare Benefits Plan] shall terminate with respect to the Employer and its Employees unless the Plan is continued by the successor to the Employer and such successor agrees to be bound by the terms and conditions of the Plan.

Id. at § 7.4.

The Severance Pay Policy is one of the constituent benefit programs explicitly incorporated into the Welfare Benefits Plan. (Id. at App. A.)⁸ The Severance Pay Policy is not a stand-alone policy. The Severance Pay Policy is section X of a larger employment policy, the RE & C Termination of Employment Policy ("Termination Policy").⁹

The Termination Policy sets out "fair and uniform standards for the termination of employees." (Decl. Supp. Pl.'s Opp'n Defs.' Mot. Summ. J. Ex. A.) In Section IV of the Termination Policy, several types of voluntary and involuntary terminations of employment are described. Of the four types of involuntary terminations defined, Section X, the Severance Pay Policy, specifies that severance pay will be authorized for those terminations of full-time employees classified as layoff,¹⁰ release,¹¹ or reorganization.¹² (Id.) Section IX of the Termination Policy states:

Any accrued vacation¹³ and severance pay, if applicable, will be included on the first paycheck following an employee's termination date.

Id.

In about September 1999, executives and directors of Raytheon, RECI, RE & C, and Morrison Knudsen Corporation ("MK") commenced discussions in the hope of selling its RE & C stock to MK. (Decl. Pl.'s Mot. Summ. J. Ex. 5, 8, 9.) At that time, RE & C had eight operating divisions. (Id. Ex. 27.) Also at that time, MK performed some due diligence on RE & C. (Id. Ex. 8.) MK is an Ohio corporation. (Id. Ex. 21.) The initial proposal between Raytheon and MK was structured as an asset sale. (Id. Ex. 5.) Likewise, the Term Sheet outlining the proposed acquisition of RE & C by MK structured the transaction as an asset purchase. (Id. Ex. 31.) An early draft of the agreement of sale was entitled a "Stock and Asset Purchase Agreement." (Decl. Supp. Pl.'s Opp'n Defs.' Mot. Summ. J. Ex. G.) Members of Raytheon's Human Resources Leadership Team discussed structuring the sale as a stock sale as opposed to an asset sale because they believed that a stock sale would not trigger the obligations of the RE & C Severance Pay Policy. (Decl. Pl.'s Mot. Summ. J. Ex. 7.) In November or December of 1999, Raytheon proposed structuring the sale as a sale of stock. (Id. Ex. 5.)

On February 11, 2000, Shay Assad, Executive Vice-President of Raytheon and Chairman and Chief Executive Officer of RE & C, sent a letter to all RE & C employees pledging that an employee benefit program involving RE & C's performance sharing plan would continue in 2000, and expressed hope "to put extra money in everyone's pocket this time next year." Assad's letter made no mention of a potential sale. (App. Supp. D's Mot. Summ. J. Ex. Q.) Also in February 2000, La Fata's employment title became that of construction or project manager for RE & C's PECO Contractor and Project Manager Group. (Id. Ex. F.)

Sometime in mid-April of 2000, Raytheon, RECI, and MK signed an agreement for the sale of the stock of RE & C to MK. (Decl. Pl.'s Mot. Summ. J. Ex. 5.) Section 9.1(a) of the Stock Purchase Agreement (the "Agreement") provides that:

At the Closing, the Buyer will or will cause an RECI Company to offer employment to those individuals listed on Schedule 9.1, each an employee of one or another of the Sellers primarily engaged in providing services with respect to the Purchased Business. The offer for each such individual shall be for the same base pay as such individual receives as of the Closing Date and with benefits satisfying the Buyer's obligations under Section 9.2. The employment with the Buyer (or an RECI Company) of all such employees accepting such offers will be deemed to have commenced immediately after 11:59 p.m., Boston local time, on the Closing Date.

Parties' Joint Summ. J. Ex. 1.

Section 9.1(c) provides:

The Sellers shall remain responsible for any severance benefits, termination indemnity payments, or similar payments, if owed to any individual made an offer of employment as provided in paragraph (a) above who does not accept such offer.

Parties' Joint Summ. J. Ex. 1.

Section 9.3(d) provides:

The Sellers shall be responsible for amounts payable and any other obligations under the Retention Agreements not specifically addressed in this Section 9.3, when and if such obligations become due, and for severance, change of control or similar amounts payable to any Assumed Employees and arising solely from the consummation of the transactions contemplated by this Agreement.

Parties' Joint Summ. J. Ex. 1.

Section 16.4 provides:

The validity and construction of the agreement shall be governed by the internal laws (and not choice-of-law rules which would require the application of the laws of another jurisdiction) of the state of New York.

Parties' Joint Summ. J. Ex. 1.

Section 16.9 provides:

Except as otherwise expressly provided herein, nothing herein expressed or implied is intended or shall be construed to confer upon or to give any person, firm or corporation, except the Sellers and the Buyer and as provided in Article 13 with respect to the Buyer Indemnified Parties and the Seller Indemnified Parties, any rights or remedies under or by reason of this Agreement.

Parties' Joint Summ. J. Ex. 1.

The Stock Purchase Agreement did not require MK to provide or maintain benefits for RE & C employees at an aggregate level comparable to those provided by RE & C. (Decl. Pl.'s Mot. Summ. J. Ex. 9.)

By at least May 2000, RE & C employees were informed of the changes that would result from the closing of the sale through meetings, "MK-RE & C Integration Q & A Sheet" releases ("Q & A Sheet"), and other information posted on a transitional website. (Id. Ex. 14.) An undated document entitled MK & RE & C Weekly Connection stated that the "transition team is developing answers to any questions you might have regarding timelines, benefits, and the reorganization." (Id. Ex. 28.)...