Garavuso v. SHOE CORPORATIONS OF AMERICA IND., C-2-86-1164.

• Citation: 709 F. Supp. 1423
• Decision Date: 22 March 1989
• Docket Number: No. C-2-86-1164.,C-2-86-1164.
• Parties: James A. GARAVUSO, Plaintiff, v. SHOE CORPORATIONS OF AMERICA INDUSTRIES, INC., Defendant.
• Court: U.S. District Court — Southern District of Ohio

709 F. Supp. 1423

James A. GARAVUSO, Plaintiff, v. SHOE CORPORATIONS OF AMERICA INDUSTRIES, INC., Defendant.

No. C-2-86-1164.

United States District Court, S.D. Ohio, E.D.

March 22, 1989.

Fred J. Milligan, Jr., Westerville, Ohio, for plaintiff.

Emily J. Lewis, Porter, Wright, Morris & Arthur, Columbus, Ohio, for defendant.

MEMORANDUM AND ORDER

GRAHAM, District Judge.

This action was originally filed in the Court of Common Pleas of Franklin County, Ohio on August 29, 1986. A petition for removal of the action to this court was filed by defendant on September 29, 1986 on the basis of federal question jurisdiction.

The complaint of plaintiff, James A. Garavuso, as amended, alleges five claims against the defendant, Shoe Corporations of America Industries, Inc. ("SCOA"), plaintiff's former employer. Count 1 of the complaint alleges breach of contract based upon SCOA's decision not to pay plaintiff severance benefits under SCOA's severance pay plan. Count 2 advances the same claim under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. Count 3 of the complaint seeks a declaratory judgment to the effect that if plaintiff is not immediately eligible for severance payments, he would nonetheless be entitled to benefits if he is laid off in the future by his current employer, Morse Shoe Company. Count 4 asserts a common law claim for interference with an employment relationship. Count 5 asserts a claim under ERISA for interference with protected rights under 29 U.S.C. § 1140.

This matter is now before the court on defendant's motion for summary judgment. The procedure for granting summary judgment is found in Fed.R.Civ.P. 56(c), which provides:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

The evidence must be viewed in light favorable to the nonmoving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Summary judgment will not lie if the dispute about a material fact is genuine, "that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). However, summary judgment is appropriate if the opposing party fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).

Defendant contends that the claim for breach of contract advanced in Count 1 is preempted by ERISA. Plaintiff does not disagree with this argument. The preemption provision in 29 U.S.C. § 1144(a) is broadly construed to encompass any law which "relates to", that is, has a connection with or reference to, an employee benefit plan. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2899-2900, 77 L.Ed.2d 490 (1983). The SCOA severance pay plan is an employee welfare benefit plan as defined in 29 U.S.C. § 1002(1). The Sixth Circuit held in Blakeman v. Mead Containers, 779 F.2d 1146 (6th Cir. 1985) that a state law cause of action for breach of contract in regard to a severance pay plan was preempted by ERISA. This court finds as a matter of law that plaintiff's breach of contract claim advanced in Count 1 is preempted by ERISA.

Defendant next seeks summary judgment on Count 2 of the complaint in which plaintiff seeks to recover benefits under ERISA pursuant to 29 U.S.C. § 1132(a)(1)(B). The first issue presented is which standard of review should be applied to defendant's decision to deny benefits under the SCOA severance pay plan. The parties have been given the opportunity to brief this issue. However, upon review of the relevant authorities, the court has concluded that it is prepared to decide the issue without further briefing. The standard traditionally applied has been whether the denial of benefits was arbitrary and capricious, in bad faith, or otherwise contrary to law. Adcock v. Firestone Tire & Rubber Co., 822 F.2d 623 (6th Cir. 1987); Daniel v. Eaton Corp., 839 F.2d 263, 267 (6th Cir.1988). However, the Supreme Court recently rejected the use of the arbitrary and capricious standard under some circumstances. See Firestone Tire & Rubber Co. v. Bruch, ___ U.S. ___, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). In Bruch, ___ U.S. at ___, 109 S.Ct. at 956-957, the Supreme Court held that a denial of benefits challenged under 29 U.S.C. § 1132(a)(1)(B) must be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe plan terms. Firestone's decisions under its termination pay plan were held to be subject to de novo review.

The SCOA severance pay plan resembles the Firestone plan at issue in Bruch in many respects. Defendant, through its personnel officers, served as administrator of the SCOA severance pay plan, which was unfunded. SCOA, like Firestone, made any decisions regarding eligibility for severance pay. While the SCOA plan does specifically vest discretion in the president of the Retail Footwear Division to grant "other" allowances based on the individual circumstances of an involuntary termination, the plan contains no language, insofar as the benefits expressly itemized in the plan are concerned, granting SCOA the power to construe uncertain terms or providing that eligibility determinations are to be regarded with deference. The Supreme Court, in construing the similar Firestone plan, noted that the mere fact that the company, as administrator, exercised discretion and control over the payment of benefits was not sufficient to permit review under the arbitrary and capricious standard. See Bruch, ___ U.S. at ___, 109 S.Ct. at 954-956. The court concludes that SCOA's decision to deny severance benefits to plaintiff is subject to de novo review, including an examination of plan terms in light of all the circumstances and any evidence of the intent of the parties.

The evidence submitted by way of depositions, affidavits and documents reveals that plaintiff was employed by the Retail Footwear Division of SCOA on February 14, 1977 as manager of SCOA's distribution center in Columbus, Ohio. SCOA's Retail Footwear Division operated several company-owned shoe stores, and held leases to shoe departments in other department stores, including Hills Department Stores, Higbee's and Lazarus. When the position of manager of the distribution center was eliminated in August of 1985, plaintiff accepted the job of manager of purchasing.

In December of 1985, SCOA Industries was purchased by the Hills Stores Company in a leveraged buyout. SCOA, which was previously a publicly held corporation, became a privately held corporation as a result of the buyout. Incident to the purchase, the decision was made to dissolve SCOA's Retail Footwear Division, and to lay off the fifty to sixty employees at the distribution center and the approximately three hundred employees at the corporate offices.

The Morse Shoe Company assumed SCOA's leases of approximately one hundred and thirty shoe departments in Hills Department Stores. Morse Shoe made offers of employment to a majority of the employees in those departments, and a majority of those offered employment accepted. Morse also made employment offers to some employees at the corporate headquarters and distribution center. SCOA's leases in two hundred out of approximately two hundred and seventy-four Gallenkamp, By-Way and Shoe Salon shoe stores were assumed by the Volume Shoe Corporation. Tishkoff Enterprises, Inc. assumed SCOA's leases in the shoe departments in a number of other department stores and made offers of employment to approximately seventy employees at the Retail Footwear Division's corporate offices.

Decisions concerning the payment of severance benefits were usually made by Joseph O'Riordan, the former vice president of administration at SCOA. When SCOA was purchased by Hills Store Company, Larry Miller, vice president of personnel at Hills, was assigned to oversee the termination of employees and operations, and to assure a smooth transition between SCOA's management of the various shoe departments and the take-over of those departments by the acquiring companies. Mr. Miller was responsible for making sure that severance payments were made in conformance with SCOA's policy. However, Mr. O'Riordan continued to have some input into the eligibility determinations.

Plaintiff was originally scheduled to be laid off on March 21, 1986. Mr. O'Riordan had learned prior to that date that Morse Shoe had expressed some interest in plaintiff as a possible candidate for a position at Morse Shoe. When Morse Shoe had not made an offer to plaintiff by March 21, Mr. Miller made the decision to delay plaintiff's layoff and to keep him on the payroll pending receipt of Morse Shoe's decision whether or not to make plaintiff an offer. The deposition testimony of Mr. Miller and Mr. O'Riordan indicates that the layoff was delayed due to Mr. O'Riordan's concern about plaintiff being unemployed and the fact that it is often more difficult to find a job if one is unemployed. Mr. O'Riordan expressed his hope that he could use his influence to obtain an offer for plaintiff, and he arranged an interview for plaintiff with Charles Messina, president of Morse Shoe. Mr. Miller instructed Mr. O'Riordan to keep plaintiff on the payroll pending the decision of Morse Shoe. Plaintiff objected to the delay and indicated he wanted his severance benefits. Mr. O'Riordan told him that he had not heard from Morse Shoe regarding a job offer and that it would be in...