Hennessy v. F.D.I.C.

Decision Date29 June 1995
Docket NumberNos. 94-1857,94-1933 and 94-1934,s. 94-1857
Citation58 F.3d 908
PartiesPens. Plan Guide P 23914I John T. HENNESSY; Michael B. High; William A. Bracken; Larry Gibson; Martha C. Hitchcock; Laurence A. Liss; Ken Mancini; George S. Rapp; Roberta Griffin Torian; Frank J. Soriero v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Meritor Savings Bank. Thomas CALLAHAN v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Meritor Savings Bank. Appeal of John T. HENNESSY, Roberta Griffin Torian, Michael B. High, William Bracken, Laurence Liss, Marty Hitchcock, George S. Rapp, Kenneth R. Mancini, Lawrence J. Gibson, Frank J. Soriero and Thomas Callahan, Appellants. David A. CAMPBELL, Jr.; Robert F. Hanna; Leslie Voth; Helen T. DeMarco, individually, and Robert F. Hanna; Helen T. Demarco, on behalf of themselves and all others similarly situated (Separation Plan Class), and David A. Campbell, Jr., on behalf of himself and all others similarly situated (Retiree Health Class), and David A. Campbell, Jr.; Robert F. Hanna, on behalf of themselves and all others similarly situated (Life Insurance Class) v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Meritor Savings Bank. Appeal of David A. CAMPBELL, Jr., Robert F. Hanna, Helen T. DeMarco and Leslie Voth, Appellants. Joseph A. ADOLF, Laurence J. Arnold, Christian F. Aurig, George W. Barber, Linda C. Barch, Richard F. Bate, Owen J. Behen, Lauren Bethea, Elizabeth L. Blankenhorn, Anne Marie Boback, Susan M. Brown, John J. Buczek, George S. Bunting, Mary Ann C. Burch, Edith Burkeitt, Thomas P. Callahan, David A. Campbell, Jr., Karla J. Carney, John M. Casamento, Jr., William J. Cathcart, Lisa Cavalli, Nancy L. Ceffaratti, Joseph D. Cellucci, Esther Cerbo, Carole A. Circucci, Anthony R. Coogan, Larry A. Cook, Samuel J. Cook, Wallace P. Cooney, Paul L. Coppola, Lorene C. Coquillette, Betty R. Corley, Harriet S. Corley, Joan T. Corson, David E. Coverdale, Mary C. Craige, Loius T. Cullen, John F. Culp, Edward D. Custer, Michael Czincila, Joan E. Debes, Irene V. Delizzio, Gail L. Delvisci
CourtU.S. Court of Appeals — Third Circuit

Alice W. Ballard (argued), Samuel & Ballard, Philadelphia, PA, for appellants in No. 94-1857.

Harry C. Barbin (argued), Barbin, Lauffer & O'Connell, Rockledge, PA, for appellants in No. 94-1933.

Harry C. Barbin (argued), William M. O'Connell, Barbin, Lauffer & O'Connell, Rockledge, PA, for appellants in No. 94-1934.

Jaclyn C. Taner (argued), F.D.I.C., Washington, DC, for appellee F.D.I.C. as Receiver for Meritor Sav. Bank.

Before: COWEN, LEWIS and GARTH, Circuit Judges.


COWEN, Circuit Judge:

Plaintiffs in these related cases, former employees and managers of Meritor Savings Bank, appeal from three orders of the district court that granted summary judgment in favor of the defendant, the Federal Deposit Insurance Corporation ("FDIC"), on their claims to recover severance pay, medical benefits, and life insurance benefits pursuant to the terms of their employee welfare benefit plans. The issues raised in these appeals are whether the district court erred in determining that: (1) the FDIC's takeover and sale of Meritor was not a reorganization for purposes of the plaintiffs' separation pay plan; (2) the discharge of Meritor employees did not constitute "job elimination" or "lack of work" triggering severance payments; (3) the plaintiffs had no vested right to severance pay; (4) the FDIC properly exercised its repudiation powers; (5) the plaintiffs did not incur "actual direct compensatory damages" as provided in 12 U.S.C. Sec. 1821(e)(3); (6) the FDIC properly terminated life and health insurance benefits pursuant to the termination provisions in these employee welfare benefit plans; (7) the FDIC was not liable for a statutory penalty under 29 U.S.C. Sec. 1132(c)(1) as a result of its failure to respond in a timely manner to plaintiffs' request for plan documents; and (8) the certification of three plaintiff classes was inappropriate. Because we conclude that the district court did not err in granting summary judgment to the FDIC on plaintiffs' claims for separation pay, health insurance benefits, and life insurance benefits, we will affirm the orders of the district court. Further, because we conclude that the district court did not abuse its discretion in finding that the FDIC is not liable for the statutory penalty prescribed by 29 U.S.C. Sec. 1132(c), we will affirm the order of the district court pertaining to this issue. Finally, because of our conclusion on the merits, that the district court did not err in granting summary judgment for the FDIC, we need not reach the class certification issues.


On December 11, 1992, the Secretary of Banking of the Commonwealth of Pennsylvania issued an order declaring Meritor Savings Bank ("Meritor") insolvent and directing that the bank be closed. On the same day, the FDIC was appointed as receiver for the insolvent bank. As receiver, the FDIC executed a Purchase and Assumption Agreement with Mellon Bank ("Mellon") transferring a portion of Meritor's assets and liabilities to Mellon. The FDIC retained the liabilities not assumed by Mellon, along with the unpurchased Meritor assets, which the FDIC proceeded to liquidate for the benefit of Meritor's approved creditors.

The record demonstrates that until the Secretary of Banking declared the bank insolvent, Meritor maintained a separation pay plan ("SPP"), a retiree health insurance plan (the Meritor Medical Plan 65 Special Option or "65 Special"), and a retiree life insurance plan (the Meritor Group Life Insurance Plan or "MGLIP"). 1 Under the SPP, eligible employees were entitled to severance pay based on their years of service and salary, up to a maximum benefit of twenty-six weeks. Benefits were payable for involuntary termination due to "lack of work, job elimination, reorganization or reduction-in-force." Campbell App. at 139a. No benefits would be paid if separation resulted from sale or disposition of a portion of Meritor's assets and the employee was employed by the successor entity. Id.

The SPP was "unfunded," meaning all benefits were paid from the general assets of Meritor. Id. at 141a. Meritor retained sole authority to determine whether a separation entitled an employee to benefits. Id. Moreover, Meritor expressly reserved the right to modify or discontinue the SPP in whole or in part at any time. Id. at 137a.

Under the 65 Special, Meritor provided group health insurance coverage for its retirees. Id. at 406a. The 65 Special was a self-insured plan that qualified as an employee welfare benefit plan under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Secs. 1001-1461 ("ERISA"). The MGLIP, also an employee welfare benefit plan under ERISA, provided retirees with death benefit coverage equal to the lesser of $50,000 or 25% of the amount of death benefit coverage for which they were insured immediately prior to retirement. Id. at 405a-06a.

Meritor explicitly reserved the right to terminate the 65 Special and the MGLIP at any time. The health plan provided:

Meritor intends the plan to be permanent, but since future conditions affecting your employer cannot be anticipated or foreseen, Meritor reserves the right to amend, modify or terminate the plan at any time, which may result in the termination or modification of your coverage. Expenses incurred prior to the plan termination will be paid as provided under the terms of the plan prior to its termination.

Id. at 165a (emphasis omitted). The life insurance plan provided:

Meritor reserves the right to terminate the group life...

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