In re Bidermann Industries USA, Inc.

• Decision Date: 02 November 1999
• Docket Number: Bankruptcy No. 95 B 43098(TLB),95 B 43099(TLB),95 B 43101(TLB) to 95 B 43114(TLB).
• Parties: In re BIDERMANN INDUSTRIES U.S.A., INC., f/k/a Blackstone, Inc., et al., Debtors.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

241 B.R. 76 (1999)

In re BIDERMANN INDUSTRIES U.S.A., INC., f/k/a Blackstone, Inc., et al., Debtors.

Bankruptcy Nos. 95 B 43098(TLB), 95 B 43099(TLB), 95 B 43101(TLB) to 95 B 43114(TLB).

United States Bankruptcy Court, S.D. New York.

November 2, 1999.

COPYRIGHT MATERIAL OMITTED

Tenzer Greenblatt LLP, Attn: Harris N. Cogan, New York City, for debtors in Possession.

Stevens & Lee, P.C., Attn: Robert Lapowsky, Wayne, Pennsylvania, for debtors in Possession.

Ravin, Greenberg & Marks, P.A., Attn: Allan M. Harris, Roseland, New Jersey, for Stay Bonus claimants.

DECISION AND ORDER GRANTING IN PART AND DENYING IN PART DEBTORS' MOTION FOR SUMMARY JUDGMENT

TINA L. BROZMAN, Chief Judge.

Introduction

Bidermann Industries U.S.A., Inc., Bidermann Industries Corp. and certain of their direct and indirect subsidiaries (collectively, "Bidermann" or "the Debtors") engaged in the design, manufacture, merchandising and distribution of men's and women's apparel products both domestically and abroad. Among their divisions was Ralph Lauren Womenswear ("RLW"), which, during the course of their chapter 11 cases, was sold to Polo Ralph Lauren Enterprises L.P. ("Polo"). Many of the employees from RLW were offered employment with Polo. In contemplation of the closing of the contract of sale, Bidermann obtained court approval for and implemented a stay bonus program potentially affecting 111 employees whose jobs with the Debtors would be terminated. The aim was to ensure a smooth transition by inducing employees to remain with Bidermann until a specified date.

Thirty-eight former Bidermann employees (collectively, the "Claimants") filed administrative expense claims seeking payment in the aggregate amounts of $527,112.93 under the enhanced retirement benefit program of Bidermann's Pension Plan and $223,909.54 under the stay bonus program. Following Bidermann's objection thereto, discovery ensued. At the conclusion of discovery, Bidermann filed a motion for summary judgment seeking expungement of the Claimants' claims.

Background

Prior to the commencement of its chapter 11 proceedings, and anticipating that the reorganization and downsizing of the company might involve the sale of one of its subsidiaries as well as layoffs of employees, Bidermann amended its Retirement Income Plan on July 6, 1995 to provide for an enhanced retirement program. See Affidavit of Steven J. Kaufman, sworn to on January 14, 1999, at ¶ 5, to be referred to as "Kaufman Aff. at ___." The amendment provided, in pertinent part, that a participant in the Bidermann Retirement Income Plan would be eligible for an enhanced retirement benefit if "the Termination of Employment is not the result of the sale of the stock or assets of an Employer or a division thereof if the purchaser offers continued employment to the Participant on substantially the same terms and conditions as in effect immediately prior to such sale."¹ See Bidermann's Summary Judgment Motion, Exhibit E. In a July 10, 1995 memorandum (the "July 10th Memorandum") distributed to its employees, Bidermann explained that:

to qualify for this special benefit, you must have worked at least 1000 consecutive hours as of July 1, 1995 and be a Plan Participant (i.e. have at least 1 year and 1 month service) on the date your employment was terminated. . . . If your employment is terminated for any other reason, including if you resign in anticipation of your job being eliminated, you will not be eligible for this benefit. Also if you work for a subsidiary which is sold and the purchaser offers continued employment, you will not be eligible for this benefit.

See Bidermann's Summary Judgment Motion, Exhibit F. In a July 17, 1995 memorandum (the "July 17th Memorandum") distributed to its employees at the Secaucus location, Bryan P. Marsal, President and Chief Executive Officer of Bidermann, stated that:

We do not expect massive layoffs as a result of this reorganization, and the Company is not going out of business. However, as part of our turnaround plan, we are moving to decentralize the management of the Company to improve productivity and reduce operating costs—which will result in the elimination of certain jobs. The positions that will be affected are located mainly at the Secaucus office and distribution center. Certain Secaucus employees will be offered positions at other locations, including the New York corporate office. Others will be asked to stay for a certain length of time to assist with the transition. Those who are not asked to remain will receive separate packages in accordance with company policy.

See Opposition of Stay Bonus Claimants, Exhibit M. Two memoranda by authorized personnel of Bidermann, each dated August 4, 1995, were addressed to specific employees. One memorandum advised of the closing of the Secaucus facility and the anticipated layoffs of most employees by year end.² The second memorandum informed the named employee that his or her position was eliminated "as certain responsibilities performed by the Corporate staff are transferred to the operating divisions" and that "out of recognition of your contributions to the Company, and in order to make this transition as smooth as possible for the affected employees, Bidermann is applying for approval with the Bankruptcy Court to implement a Stay Bonus program." See Opposition of Stay Bonus Claimants, Exhibit I.

Later that same month, Bidermann entered into the agreement with Polo for the purchase of RLW. See Opposition of Stay Bonus Claimants, Exhibit N; Transcript of Deposition Testimony of Steven J. Kaufman, at page 28, to be referred to as "Kaufman at ___." Two months after the commencement of their bankruptcy cases, the Debtors requested Bankruptcy Court authorization to implement a Stay Bonus program and to make payments to certain employees under the program (the "Stay Bonus Motion"). The motion did not pertain to enhanced retirement benefits. In paragraphs 17 and 18 of the Stay Bonus Motion, the Debtors stated that:

Shortly prior to and continuing since the inception of these cases, the Debtors have undertaken long-range efforts to reduce unnecessary costs and to streamline operations. As part of this process, the Debtors, among other things, have determined to eliminate, commencing on August 30, 1995 and continuing through March 30, 1996, at least one-hundred and eleven (111) of those positions (possibly more) now held by the corporate staff at the Secaucus and New York locations. Regrettably, a necessary by-product of the Debtors\' streamlining and cost-cutting efforts at the Locations is the unfortunate loss of jobs by loyal employees. In full recognition of the dedication and contribution of these employees over the years, and in order to make this consolidation and transition effort run as smooth as possible, the Debtors have decided to implement a stay bonus program for the benefit of those 111 employees whose positions have been or will be eliminated.

However, in paragraph 19 of the Stay Bonus Motion, the Debtors stipulated that

as a pre-condition to receiving benefits under this program, such employee must continue in the employ of the company up through their actual date of termination, and must sign a general waiver and release agreement. In the event any employee voluntarily resigns prior to their actual date of termination, such employee will be deemed to forfeit, and will forfeit, all payments contemplated to be made under the Stay Bonus Program.

Attached to the Stay Bonus Motion was a list of 111 employees whose positions, according to the Debtors, had been or were to be eliminated. Many of the Claimants appeared on this list. See Opposition of Stay Bonus Claimants, Exhibit E. An order authorizing the Debtors to implement the stay bonus program and deeming payments to be made thereunder as administrative priority expenses under section 503(b) of the Bankruptcy Code was signed on September 18, 1995.

In a memorandum dated October 11, 1995 (the "October 11th Memorandum"), which Bidermann had individually addressed to certain employees who had not yet received notification of whether Polo would offer them employment, the employees, including many of the Claimants, were advised that:

the Polo organization is still deciding what functions they need to establish and you may be offered employment with Polo within the next few weeks. If you are not offered a position with Polo, we regret to inform you that your position with Bidermann will be eliminated, effective December 15, 1995. Out of recognition of your contributions to the Company, and in order to make this transition as smooth as possible for the affected employees, Bidermann has received approval from the Bankruptcy Court to implement a Stay Bonus program. Under this program, you would receive . . . a total payment which includes a stay bonus . . . plus an Enhanced Retirement Program separation benefit. According to the terms of these programs, you must continue to work until the above date in order to receive the Stay Bonus and the Enhanced Retirement separation benefit.

See Bidermann's Summary Judgment Motion, Exhibit G; Opposition of Stay Bonus Claimants, Exhibit G.

Two weeks later, Bidermann, in connection with the sale of RLW, and needing to assure the continued smooth operation of RLW's Secaucus warehouse facility with experienced personnel, executed a services agreement with Polo by which Bidermann's employees would continue to provide such services at a cost to be borne by Polo. See Opposition of Stay Bonus Claimants, Exhibit D. In the midst of the Secaucus facility closing, the streamlining of the Debtors' operations, the uncertainty of employees receiving an offer of employment with Polo, and the different times at which many of them did, it is undisputed that several Claimants had discussed with certain supervisory corporate personnel of Bidermann their eligibility for a stay bonus and an enhanced retirement benefit.

The Claimants

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