Hall v. Simkins Industries, Inc.

• Decision Date: 22 July 1983
• Docket Number: Civ. A. C81-1868A.
• Citation: 584 F. Supp. 955
• Parties: Denzil I. HALL, James C. Hammond, Harold M. Johnson, Joseph H. McVoy, Dallas C. Smith and Phillip Vaughn, Plaintiffs, v. SIMKINS INDUSTRIES, INC., Defendant and Third-Party Plaintiff, v. ST. REGIS PAPER COMPANY, Third-Party Defendant.
• Court: U.S. District Court — Northern District of Georgia

584 F. Supp. 955

Denzil I. HALL, James C. Hammond, Harold M. Johnson, Joseph H. McVoy, Dallas C. Smith and Phillip Vaughn, Plaintiffs, v. SIMKINS INDUSTRIES, INC., Defendant and Third-Party Plaintiff, v. ST. REGIS PAPER COMPANY, Third-Party Defendant.

Civ. A. C81-1868A.

United States District Court, N.D. Georgia, Atlanta Division.

July 22, 1983.

H. Lowell Hopkins, Patrick J. McKenna, Atlanta, Ga., for plaintiffs.

Ann Miller, Philadelphia, Pa., James J. Thomas, Michael M. Ozburn, Darryll Love, Allen Willingham, Atlanta, Ga., for defendant.

ORDER OF COURT

HORACE T. WARD, District Judge.

This is an action by six (6) former employees of Simkins Industries, Inc. (hereinafter "Simkins") who claim that they are entitled to vacation pay and severance pay from Simkins as a result of Simkins' termination of their employment at various times between December 31, 1980 and January 23, 1981. The action was originally instituted in the Superior Court of Cobb County, Georgia, but was removed to the federal court by defendant Simkins based on diversity of citizenship. Simkins later filed a third-party complaint against St. Regis Paper Company (hereinafter "St. Regis") alleging that St. Regis is responsible to Simkins for any liability which Simkins may have to its employees for severance pay which "accrued" to its employees prior to November 5, 1979. The allegations in the third-party complaint are based on paragraph 8(I)(n) of the 1979 sales contract between Simkins and St. Regis in which St. Regis sold to Simkins its manufacturing operations at Marietta, Georgia, where the plaintiffs were employed. This clause in the sales contract and the third-party complaint are the basis for the cross motions for summary judgment filed by Simkins and St. Regis, which are currently before the court.

FINDINGS OF FACT

1.

Prior to November 5, 1979, the plaintiffs were employed by St. Regis at its folding carton plant located in Marietta, Georgia.

2.

On or about November 5, 1979, an Agreement of Sale was entered into between Simkins and St. Regis, under which and pursuant to which St. Regis sold to Simkins its folding carton plant located in Marietta, Georgia, along with other assets, operations and property.

3.

In connection with the sale of the folding carton plant by St. Regis to Simkins, Simkins hired and retained the plaintiffs as employees during the period from on or about November 5, 1979 until their employment with Simkins was terminated by Simkins.

4.

Plaintiffs claim that following the purchase of the folding carton plant, Simkins promised to continue all benefits formerly maintained by St. Regis, as though there had been no change in ownership or management, and therefore Simkins adopted St. Regis' policies with respect to vacation and severance benefits.

5.

Plaintiffs claim that they are entitled to vacation and severance benefits in accordance with Simkins' alleged promise to continue said benefit programs formerly maintained by St. Regis.

6.

Plaintiff Denzil I. Hall was employed by St. Regis at its plant in Marietta, Georgia from October 2, 1964 until November 5, 1979. On November 5, 1979 Simkins hired and retained the plaintiff as an employee until his position was eliminated. On January 23, 1981 Simkins terminated plaintiff's employment without offering him another job.

7.

Plaintiff James C. Hammond was employed by St. Regis at its plant in Marietta, Georgia, from April 1, 1977 until November 5, 1979. On November 5, 1979 Simkins hired and retained the plaintiff as an employee until his position was eliminated. On January 5, 1981 Simkins terminated plaintiff's employment without offering him another job.

8.

Plaintiff Harold M. Johnson was employed by St. Regis at its plant in Marietta, Georgia from September 1, 1968 until November 5, 1979. On November 5, 1979, Simkins hired and retained the plaintiff as an employee until his position was eliminated. On January 23, 1981 Simkins terminated plaintiff's employment without offering him another job.

9.

Plaintiff Joseph McVoy was employed by St. Regis at its plant in Marietta, Georgia from December 13, 1948 until November 5, 1979. On November 5, 1979 Simkins hired and retained the plaintiff as an employee until his position was eliminated. On December 31, 1980 Simkins terminated plaintiff's employment without offering him another job.

10.

Plaintiff Dallas C. Smith was employed by St. Regis at its plant in Marietta, Georgia from March 1, 1969 until November 5, 1979. On November 5, 1979 Simkins hired and retained the plaintiff as an employee until his position was eliminated. On January 23, 1981 Simkins terminated plaintiff's employment without offering him another job.

11.

Plaintiff Phillip Vaughn was employed by St. Regis at its plant in Marietta, Georgia from November 25, 1950 until November 5, 1979. On November 5, 1979, Simkins hired and retained the plaintiff as an employee until his position was eliminated. On January 23, 1981 Simkins terminated plaintiff's employment without offering him another job.

12.

Plaintiffs have computed their damages based on St. Regis' policies regarding vacation and severance benefits which Simkins allegedly adopted and which benefit programs Simkins allegedly promised to continue.

CONCLUSIONS OF LAW

The issue presented to the court is whether St. Regis, the third-party defendant, must indemnify Simkins, the defendant and third-party plaintiff, for any liability which Simkins may have to the plaintiffs for severance pay which "accrued" to the plaintiffs prior to November 5, 1979.¹

Simkins relies on paragraph 8(I)(n) of the Sales Agreement between itself and St. Regis, dated November 5, 1979, in support of its third-party complaint and its motion for summary judgment. Paragraph 8(I)(n) provides: "Seller agrees that termination or transfer of employment of its employees including the responsibility for the payment of severance benefits, if any, in accordance with Seller's severance policy will be the sole responsibility of Seller." Simkins contends that based on this clause St. Regis is partially responsible for the payment of severance benefits to the plaintiffs, specifically, for the payment of any severance benefits which "accrued" to the plaintiffs in connection with their employment with St. Regis prior to November 5, 1979.

Simkins further argues that in addition to assuming sole responsibility for payment of severance benefits accrued to its employees prior to the sale date, St. Regis made certain representations with respect to its obligation to Simkins. Simkins refers to paragraphs 12(b) and (c) of the Sales Agreement which state in pertinent part:

12. Indemnities-Assumption of Liabilities

(b) With the exception of the assignment of the leases attached hereto as Exhibits B-1 and F; and the subleases attached hereto as Exhibits B-2 and C and the contracts, licenses, commitments and purchase orders for the sale of products to customers on hand at each of the Operations or orders for materials and supplies outstanding at each of the Operations or other agreements as listed in Exhibit F hereto, Buyer does not assume any other contracts, liabilities or obligations of Seller. Seller agrees to indemnify and hold Buyer harmless from and against all obligations, liabilities, claims, costs and expenses (including reasonable attorneys' fees) incurred in the period prior to the Closing Date with respect to any of the leases, licenses, contracts, commitments, or other agreements as listed on Exhibit F hereto and purchase orders assumed by Buyer pursuant to this subsection (b) of Section 12. Buyer agrees to indemnify and hold Seller harmless from and against all obligations, liabilities and claims incurred in the period after the Closing Date with respect to any of the leases, licenses, contracts, commitments and purchase orders assumed by Seller pursuant to this subsection (b) of Section 12;

(c) Seller agrees to indemnify, hold harmless and defend Buyer against any and all claims, costs and expenses (including reasonable attorneys' fees), if any should result, made against Buyer insofar as such claims arise out of or are based upon Seller's conduct of the Operations prior to the Closing Date.

Based on these two paragraphs, Simkins contends that St. Regis warranted that it would indemnify Simkins for any claims which might subsequently be asserted against Simkins.²

St. Regis, on the other hand, disputes Simkins' interpretation of paragraph 8(I)(n) of the sales contract and in support of its motion for summary judgment argues that paragraph 8(I)(n) must be read in conjunction with several other paragraphs in order to properly interpret that paragraph. St. Regis directs the court to paragraphs 8(I)(m), 8(II)(e), and 12(d).

Paragraph 8(I)(m) provides:

(m) Seller agrees that with respect to each salaried and hourly-paid employee whose employment with Seller is terminated as a result of the transaction contemplated herein that it will take all steps and execute all documents as are necessary or appropriate to provide, and will in fact provide, for the pension benefits for such employees in accordance with the terms of its present pension and retirement plans, and as may be required by the Employee Retirement Income Security Act, the Internal Revenue Service and the Secretary of Labor;

Paragraph 8(II)(e) states:

Buyer will advise Seller in writing, no later than the date of this Agreement of all personnel employed in connection with the operation of the Assets not to be employed by it;

and Paragraph 12(d) states:

(d) Buyer agrees to indemnify, hold harmless and defend Seller against any and all claims, cost and expenses (including reasonable attorneys' fees), if any should result, made against Seller insofar as such claims arise out of or are based upon Buyer's conduct of the Operations after the Closing Date.

Based on a reading of these three clauses in conjunction with paragraph 8(I)(n), St. Regis argues that...