Harms v. Cavenham Forest Industries, Inc.

• Decision Date: 04 March 1993
• Docket Number: No. 92-3321,92-3321
• Citation: 984 F.2d 686
• Parties: Pens. Plan Guide P 23884Y Jan C. HARMS, et al., Plaintiffs-Appellees-CrossAppellants, v. CAVENHAM FOREST INDUSTRIES, INC., et al., Defendants-Appellants-Cross Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 686

984 F.2d 686

Pens. Plan Guide P 23884Y

Jan C. HARMS, et al., Plaintiffs-Appellees-CrossAppellants, v. CAVENHAM FOREST INDUSTRIES, INC., et al.,

Defendants-Appellants-Cross Appellees.

No. 92-3321.

United States Court of Appeals, Fifth Circuit.

March 4, 1993.

As Amended on Denial of Rehearing

April 7, 1993.

Richard F. Knight, Richard A. Richardson, Talley, Anthony, Hughes & Knight, Bogalusa, LA, for all Cavenham defendants-appellants, cross appellees.

Howard Shapiro, McCalla, Thompson, Pyburn & Ridley, New Orleans, LA, for Crown/James River defendants-appellants, cross appellees.

Norman A. Mott, III, Littler, Mendelson, Fastiff & Tichy, New Orleans, LA, for plaintiffs-appellees, cross appellants.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before REAVLEY, SMITH, and DeMOSS, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

In this case presenting claims under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq. (1985), defendants appeal the district court's grant of summary judgment in favor of the plaintiff employees' entitlement to certain severance and pension benefits. The employees cross-appeal, asserting as error the summary judgment against them on their claims to severance benefits as to one of the named defendants and the dismissal of their state law claims as preempted by ERISA, and seeking an award of their costs and attorney's fees incurred in pursuing this appeal. Although we agree with the district court's ultimate disposition of the case, our reasoning is different.

I.

Plaintiffs Jan C. Harms, Robert E. Heinz, Sue C. Magee, Timothy H. Rush In July 1985, the anticipated change of control took place, and CZ's various operations were split up, sold off, or taken over by other companies. CZ's Timber and Wood Products operation was acquired by CFI, which extended employment to the beneficiaries on May 5, 1986. By an Employee Benefits Agreement ("EBA") dated March 28, 1986, CZ previously had relinquished, and CFI had assumed, liability for benefits relating to CZ personnel who were shortly to be transferred to CFI. On May 6, 1986, immediately after the sale of the business to CFI and the transfer to it of CZ's former employees, CZ amended its Retirement Plan to eliminate Supplement C.

                James T. Quitta, and Eddie Welch (the "beneficiaries") are former employees of Crown Zellerbach ("CZ") and Cavenham Forest Industries, Inc.  ("CFI").  Attempting to fend off a hostile takeover bid, CZ developed for its employees--who controlled the largest bloc of outstanding CZ stock--an enhanced severance of employment program known as the CZ Change of Control/Restructuring Severance Program, which is an addition to the CZ Salaried Employees Involuntary Separation Salary Continuation Plan ("Continuation Plan") and constitutes part III of that plan.    Also at this time, CZ added benefits to its separate Retirement Plan by means of a document entitled "Supplement C."   The effective date of both additions was April 1, 1985;  the beneficiaries were employed by CZ as of that date.   Employees became eligible for these additional benefits only in the event of a "change in control" of CZ
                

Within one year's time, each of the beneficiaries was involuntarily separated from CFI and received benefits pursuant to the CFI severance plan. Collectively, the beneficiaries already have received a total of $334,457.75 from CFI in lump-sum payments equivalent to the Paid Terminal Leave owed to them under the original CZ Involuntary Separation Program. The parties agree that the beneficiaries also are entitled to vested and accrued retirement benefits under the CFI Retirement Plan, to which, according to CZ and CFI, CZ's pension obligations were transferred.

Our dispute centers on the beneficiaries' contention that benefits are also owing to them under the CZ Severance Program and Supplement C and that these claims were wrongly denied. On October 26, 1988, the district court granted CFI's motion for partial summary judgment, concluding that the enhanced severance and Supplement C benefits properly were classified as employee welfare benefits, not pension benefits, and therefore were not subject to ERISA's vesting, accrual, and nonforfeitability provisions. As such, CFI's modification of its employee severance plan to exclude both these benefits did not violate ERISA.

By Memorandum and Order dated December 16, 1991, the district court again granted partial summary judgment, this time in favor of the beneficiaries, holding that they were entitled to both Paid Terminal Leave under the CZ Involuntary Separation Plan and Supplement C benefits under the CZ Retirement Plan. The court's ruling was leavened, however, by its grant of partial summary judgment to CFI, to the effect that the beneficiaries could not collect the full amount of benefits owing under both the CZ and the CFI plans. While CZ legitimately could transfer its severance obligation to CFI, so long as it did not cancel or modify benefits, the court apparently reasoned, the beneficiaries were not entitled to a double-recovery windfall by way of collecting severance payments from both plans for their combined term of service with CZ/CFI.

II.

On appeal of a district court's grant of summary judgment, we review de novo the court's application of the law to the evidence adduced before it. Samaad v. City of Dallas, 940 F.2d 925, 937 (5th Cir.1991). In cases involving the interpretation of an ERISA-covered plan, we likewise construe the terms of the plan de novo, "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956, 103 L.Ed.2d 80 (1989). The parties agree that the instant plans contain no language according any such authority to the plan fiduciaries.

Accordingly, we must look to the plan language as a guide to our de novo interpretation, buttressed only by admissible evidence as to the settlor's intent where the plan terms are ambiguous. Id. at 112, 109 S.Ct. at 954 (quoting RESTATEMENT (SECOND) OF TRUSTS § 4 cmt. d (1959)). We must defer, however, to the plan fiduciary's factual determinations made in the course of determining benefits eligibility, unless

those determinations reflect an abuse of discretion. Pierre v. Connecticut Gen. Life Ins. Co., 932 F.2d 1552, 1562 (5th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 453, 116 L.Ed.2d 470 (1991).

III.

The first issue we address concerns the district court's 1991 order granting partial summary judgment in favor of the beneficiaries on their Supplement C claim. CFI disputes the order, contending that the beneficiaries are not eligible to receive Supplement C benefits.

To be eligible for Paid Terminal Leave, an employee first had to meet the eligibility requirements set out in section III.A. of the CZ Salary Continuation Plan. See Intro. to Summary Plan Description. It is undisputed that sections III.A.5, III.B.4, and IV.D. of that plan apply to the beneficiaries, and CFI argues that the interpretation of these provisions governs the beneficiaries' eligibility for Supplement C benefits as well. The relevant paragraphs of the Plan's section III provide that

[a]ll active salaried employees of Crown Zellerbach and its U.S. subsidiaries as of April 1, 1985 who are Involuntarily Separated from Crown Zellerbach are eligible for Paid Terminal Leave under the Change of Control/Restructuring Program except:

....

5. Employees who, in connection with the sale of an operation, are offered employment with a successor employer which acquires an operation, shall not receive benefits except in the event that such employees are Involuntarily Separated by the successor employer within two years from the Change of Control or within one year from the sale or other disposition of the subsidiary or division, whichever period ends first, in which case the employee will be entitled to the Salary Continuation provided in this Section III.

....

B.

....

4. A lump sum payment equivalent to Paid Terminal Leave provided above will be paid to an eligible employee who, after a Change of Control, accepts employment with a successor employer in connection with the sale of an operation and is Involuntarily Separated by the successor employer within two years of the Change of Control or within one year from the sale of the operation, whichever first occurs.

Salary Continuation Plan at 5, 7. ¹

Pursuant to the above provisions, the beneficiaries received a lump sum payment equivalent to, and in lieu of, Paid Terminal Leave from the CFI Severance Program. CFI contends, however, that the excerpted provisions of the Severance Program unambiguously exclude Supplement C benefits from the range of benefits available to former CZ employees in the position of the beneficiaries. CFI points to the language in Supplement C, stating its purpose "to provide special benefits in lieu of Early Retirement Benefits and Vested Benefits to eligible Participants who are involuntarily separated under the Severance Program." Retirement Plan at C-1 (Supplement C). These special benefits set forth in Supplement C, CFI argues, are logically entailed by section III.A.5's reference to "benefits" that employees similarly situated to the beneficiaries "shall not receive"--the sole exception being the lump sum Salary Continuation benefit specified in section III.B.4. Accordingly, CFI urges, the beneficiaries are entitled to the lump sum payment but are precluded from receiving Supplement C benefits.

Our review of the various plan documents refutes CFI's interpretation. Supplement C was adopted as an amendment to the CZ Retirement Plan, not the Salary Continuation Plan. In addition to being appended physically to the Retirement Plan, Supplement C's purpose is to provide special benefits in lieu of certain...