Hainline v. General Motors Corporation

• Decision Date: 30 June 1971
• Docket Number: No. 20690.,20690.
• Parties: Joe R. HAINLINE, Plaintiff-Appellant, v. GENERAL MOTORS CORPORATION, a Delaware Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

444 F.2d 1250 (1971)

Joe R. HAINLINE, Plaintiff-Appellant, v. GENERAL MOTORS CORPORATION, a Delaware Corporation, Defendant-Appellee.

No. 20690.

United States Court of Appeals, Sixth Circuit.

June 30, 1971.

Joseph Levin, Detroit, Mich. (Dice, Sweeney & Sullivan, Detroit, Mich., on the brief), for appellant.

Donald K. Barnes, Detroit, Mich., Joseph G. Wackerman, Detroit, Mich. on the brief, for appellee; Ross L. Malone, Gen. Counsel, Detroit, Mich., of counsel.

Before PHILLIPS, Chief Judge, and EDWARDS and MILLER, Circuit Judges.

WILLIAM E. MILLER, Circuit Judge.

This is an action to recover installments of General Motors stock and cash awarded to appellant as bonuses during his employment by the Fisher Body Division of General Motors Corporation pursuant to the General Motors Bonus Plan. After extensive depositions and affidavits were filed, appellee moved for summary judgment, which was granted by the district court. This appeal followed.

At issue is appellant's right to receive portions of bonus awards made in previous years of his employment but yet undistributed as of the date of his resignation effective September 30, 1968. Appellant's position below was that the Bonus Plan constituted a contract between him and the appellee vesting in him a right to receive undistributed portions of bonuses already awarded if his termination of employment was involuntary so long as he was not dismissed for cause.

Appellant resigned because the delicate health of his young daughter necessitated that the family relocate in a warmer climate. He maintains that resignations for such reasons of health have not in the past caused the Committee to deny payment of accumulated bonus awards. The appellee's Bonus and Salary Committee, charged with the administration of the Plan, decided that appellant was not entitled to receive any further disbursements of accumulated bonus cash or stock, a decision that precipitated the present litigation. The parties and the court below apparently assumed that the Committee had decided that the appellant's resignation was "voluntary" so as to cause the loss of any right to receive further disbursements of previously awarded bonuses. The district court's view was that the Plan provided for continuing receipt of bonus payments by resigning employees who rendered "continuing service to the corporation," but that there was no right to receive such amounts as appellant claimed since appellant was not in position to render such continuing service and since the Plan vested discretion to decide such claims in the Bonus Committee. Since in the court's view appellant was as a matter of law not entitled to relief, the motion for summary judgment was granted.

On appeal, appellant contends that the lower court's interpretation of the contract is erroneous and that under the proper view there exists a genuine issue of material fact making summary judgment an inappropriate disposition of the case. We are in agreement with this view.

There are two sections of the Plan dealing with the manner of payment of bonuses, sections 6 and 8. With respect to the general method of payment of bonuses that have been awarded, section 6 of the Plan provides in pertinent part:

Upon final determination of bonus awards by the Committee, each award of $1,000 or less (cash or stock of equivalent award value) made prior to January 1, 1968 and each award of $2,000 or less made after December 31, 1967 shall be paid at the time of the award. Each award of more than $1,000 made prior to January 1, 1968 shall be paid in annual instalments of 20% or $1,000, whichever is greater, and each award of more than $2,000 made after December 31, 1967 shall be paid in annual instalments of 20% or $2,000 whichever is greater, the first such instalment at the time of award, and the remaining instalments in January of each succeeding year (until the full amount of the award is paid) if earned out by the beneficiary by continuing service to the Corporation, at the rate of 1/12th of the amount of the first instalment for each complete month of service beginning with January of the year of the determination. * * *

The district court apparently based its ruling, at least in part, on this section, for it held that any right to "earn out" unearned bonus awards was conditioned upon "continuing service to the Corporation." Since appellant had resigned, it was reasoned he could not have earned his awards by such continuing service. Appellant urges that the district court erred in relying on section 6, arguing that section 8, which does not contain the condition of "continuing service," is controlling. He argues that section 8 governs the payment of bonuses to beneficiaries who are resigning under certain circumstances, including his own resignation for reasons of health of a member of his family. It appears to us that the district court may have concluded either that section 6 governed entirely, or that "earned out" as used in section 8 must be read as conditioned by the requirement of "continuing service" in section 6. We are unable to agree with either supposition.

Section 6 provides for the general case of awards and payments of bonuses to employees who render continuing service by remaining in the employment of General Motors. The only contingency causing a loss of the right to receive the awards under the provisions of section 6 arises in the case of a beneficiary who has "acted or conducted himself in a manner inimical or in any way contrary to the best interests of the Corporation. * * *" This contingency is also one ground under section 8 for denying or cancelling a determination to allow a resigning employee to retain the right to "earn out unearned bonus awards" regardless of whether the conduct occurred before or after such termination. The condition of "continuing service" in section 6 thus appears to do nothing more than to define the general case of a beneficiary who retains the right to receive his awards as long as he is employed by GM.

Section 8 provides for the disposition of accrued bonus awards not yet paid to employees who leave the corporation under certain circumstances. It is appropriate that the language of "continuing service" conditioning "earned out" in section 6 should not appear in section 8, for the section clearly anticipates payments of accrued awards to individuals no longer in position to render continuing services as salaried employees. We agree that section 8 is the crucial provision in the present controversy. See O'Madigan v. General Motors Corp., 202 F.Supp. 190, 192 (E.D.Mo.1961), aff'd per curiam, 312 F.2d 250 (8th Cir. 1963). We also construe the term "earned out" as used in section 8 to mean "to receive" without reference to any requirement of "continued service," as that term is used in section 6.

The first paragraph of section 8 clearly provides for a right of ex-employees to receive undistributed bonuses: "A beneficiary whose employment terminates by dismissal for cause or who voluntarily terminates his employment shall * * * lose any right to earn out his unearned bonus awards. A beneficiary whose employment terminates for any reason other than death or as set forth in the preceding sentence shall * * * retain the right to earn out unearned bonus awards." (Emphasis added) To paraphrase, an employee who quits voluntarily loses his right to receive undistributed portions of previously awarded bonuses, while an employee terminating his employment other than voluntarily but who is not dismissed for cause retains the right to receive unpaid portions of the bonus awards.

Each of these provisions is qualified by the following language: "unless otherwise determined in connection with the termination of his employment." This language, we think, means that in either eventuality an opposite decision could be made with respect to unreceived portions of bonuses. Thus a beneficiary who was discharged for cause or who voluntarily resigned could nevertheless be permitted to receive his unpaid bonuses, and a beneficiary who quit other than voluntarily but was not dismissed for cause could be denied the right to such payments. In either case the second paragraph of section 8 conditions the right to receive such payments on the beneficiary's refraining from competition or other conduct inimical to the best interests of the corporations. The third paragraph of section 8 vests in the Committee "absolute discretion" to make such determinations as are provided for in section 8.¹

Bonus and profit-sharing plans are a common device for rewarding incentive and industry, retaining competent executives, and paying additional compensation in a manner having favorable tax consequences. Under the General Motors Plan bonus awards are made for both past services and anticipated continued employment. Thus, as long as a beneficiary of a bonus remains employed, he has a vested right to receive bonuses awarded to him, subject to the payment schedule established in section 6. Section 8 provides, however, for the continued payment of undistributed bonus amounts even after termination of employment in certain cases. A voluntarily resigning employee, unless otherwise determined, loses the right to earn out; an involuntarily resigning employee, unless otherwise determined, retains this right. In such cases, the Plan does not contemplate future services as consideration for such payments, except insofar as a former employee may not enter into competition or engage in conduct inimical to the corporation. See O'Madigan v. General Motors Corp., 202 F. Supp. 190 (E.D.Mo.1961), aff'd per curiam, 312 F.2d 250 (8th Cir. 1963). Noncompetition may be said to be the consideration for payments of previously awarded bonuses in such cases. Thus, to the extent that an employee not discharged for cause has an accrued balance of undistributed bonuses, he has contractual rights therein, subject to the determination of the Committee as to the...