Sejman v. Warner-Lambert Co., Inc., WARNER-LAMBERT

• Decision Date: 05 January 1990
• Docket Number: 88-2607,Nos. 88-2606,WARNER-LAMBERT,s. 88-2606
• Citation: 889 F.2d 1346
• Parties: , 11 Employee Benefits Ca 2262 Virginia M. SEJMAN; A.R. Trautwein; Thomas H. Givens; Thomas J. McHugh, Jr.; Glenda Idle; Roy G. Cook; Joseph D. Dubuque; C. Robert Reese; Joe L. Norman; Morris Leister; Mary J. Miller; Raymond G. Bernhardt; Lewis Lathren, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v.COMPANY, INC., a corporation, Defendant-Appellee. Thomas H. GIVENS; M.L. Brannon; John J. Caputo; C.E. Robinson, Jr., Plaintiffs-Appellants, v.COMPANY, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1346

889 F.2d 1346

58 USLW 2335, 11 Employee Benefits Ca 2262

Virginia M. SEJMAN; A.R. Trautwein; Thomas H. Givens;

Thomas J. McHugh, Jr.; Glenda Idle; Roy G. Cook; Joseph

D. Dubuque; C. Robert Reese; Joe L. Norman; Morris

Leister; Mary J. Miller; Raymond G. Bernhardt; Lewis

Lathren, on behalf of themselves and all others similarly

situated, Plaintiffs-Appellants, v. WARNER-LAMBERT COMPANY, INC., a corporation, Defendant-Appellee.

Thomas H. GIVENS; M.L. Brannon; John J. Caputo; C.E.

Robinson, Jr., Plaintiffs-Appellants, v. WARNER-LAMBERT COMPANY, INC., Defendant-Appellee.

Nos. 88-2606, 88-2607.

United States Court of Appeals Fourth Circuit.

Argued April 13, 1989.

Decided Nov. 24, 1989.

Rehearing and Rehearing En Banc Denied Jan. 5, 1990.

Clarence Rauch Wise (Wise & Tunstall, on brief), for plaintiffs-appellants.

Margaret Blair Soyster (Rogers & Wells, New York City, O.W. Bannister, Jr., Hill, Wyatt & Bannister, Greenville, S.C., on brief), for defendant-appellee.

Before ERVIN, Chief Judge, and HALL and WILKINSON, Circuit Judges.

WILKINSON, Circuit Judge:

These cases, consolidated on a prior appeal, arose from two suits brought against Warner-Lambert by former employees seeking severance pay from that company. We affirm the judgment of the district court that appellants have no entitlement to severance benefits under Warner-Lambert's severance policy. They must look instead to the severance policy of the company to whom their division was sold and for whom they continued to work.

I.

Appellants worked in the Medical-Surgical Division of Warner-Lambert. That division was sold by Warner-Lambert as a going concern on January 20, 1982 to Professional Medical Products, Inc. (PMP). Both groups of plaintiffs in these consolidated cases claimed entitlement to severance pay from Warner-Lambert under its 1981 severance policy. The severance policy provided in relevant part:

Purpose: To assure fair treatment to an employee terminated by the Company as a result of job elimination, work performance or other reasons of Company convenience except for violation of Company rules or regulations....

In Livernois v. Warner-Lambert, 723 F.2d 1148 (4th Cir.1983), this court found that although the sale of the division did not constitute "job elimination" under this severance policy, Warner-Lambert nonetheless bore a contractual obligation under state law toward its former employees, which would ripen upon termination. Id. at 1156.

Following the sale of their division, plaintiffs continued to work for PMP in the same job, at the same location, with the same seniority, at the same or higher salaries, and with fully comparable employee benefits. At the time of sale, Warner-Lambert sought assurances from PMP that all employees transferred from the Warner-Lambert payroll to the PMP payroll would become entitled to severance pay and other benefits from PMP on a basis comparable to existing policies. Benefit computations would be based upon the dates of an employee's original employment, either with Parke-Davis, with whom Warner-Lambert had merged in 1970, or with Warner-Lambert itself. Though the overall level of employee benefits remained comparable to that existing at the time of the sale of the division, PMP instituted various changes in its benefits package from time to time. One such change occurred in February 1985, when benefits under its severance policy were reduced.

Plaintiffs returned to federal court in mid-1985, claiming that they had now been "terminated" as required by the 1981 severance policy and that Warner-Lambert owed them severance pay under its terms. These plaintiffs were divided into two groups: the Sejman and Givens plaintiffs. The Sejman plaintiffs claimed job elimination as of February 1, 1985 based on the change in severance benefits. The Givens plaintiffs claimed job termination after they were terminated by PMP and failed to receive severance pay benefits equal to those they would have received under the 1981 Warner-Lambert policy.

As to the Givens plaintiffs, Caputo and Robinson were terminated by PMP on March 8, 1985 for unsatisfactory work. On April 19, 1985 Givens and Brannon were terminated by PMP due to job elimination. Givens and Brannon received $15,574 and $10,868 respectively in severance pay from PMP in accordance with the PMP severance pay policy. Caputo and Robinson received no explicit severance payment. However, in exchange for "any and all claims for relief or damages, arising out of ... (their) employment with Professional Medical Products, Inc.," they received payments of $30,000 and $25,000 respectively.

Following completion of discovery, Warner-Lambert moved for summary judgment on the grounds that plaintiffs' common law breach of contract claims had been pre-empted by ERISA, 29 U.S.C. Secs. 1001, et seq., and that Warner-Lambert's denial of severance benefits was neither arbitrary nor capricious and thus could not support a claim under that statute. The district court, however, held that this court's earlier decision in Livernois precluded preemption of plaintiffs' claims by ERISA. This court reversed, holding that plaintiffs' state law claims were indeed preempted by ERISA and remanded for a determination of whether "Warner-Lambert's present refusal to pay benefits [was] arbitrary or capricious" under that statute. Sejman v. Warner-Lambert Co., 845 F.2d 66, 70 (4th Cir.1988). That determination was to be informed by "the totality of the circumstances, including the nature of the original contractual relationship between appellant and appellees." Id. at 70.

On remand, the district court granted defendant's motion for summary judgment, finding that Warner-Lambert's denial of severance benefits was not arbitrary and capricious. While the Supreme Court's decision in Firestone Tire & Rubber Co. v. Bruch, --- U.S. ----, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), requires that a review of the plan administrator's actions be de novo, ¹ we think it clear that Warner-Lambert's action was justifiable under the de novo standard. Much of the reasoning of the district court stands independently of the standard of review, and we affirm its well-considered decision.

II.

Appellants argue that Warner-Lambert had a continuing obligation to pay them severance benefits under the 1981 severance policy and that they merely awaited "termination" before becoming eligible to collect under that policy. We hold, however, that once PMP took over management of the Medical-Services division, its severance policy, not that of Warner-Lambert, was controlling. We reject plaintiffs' contention that they retained either a continuing right to severance payments under the 1981 policy or that they were wrongly denied such payments at the time of divestiture.

This circuit has squarely held that "[t]he accrued benefits secured by ERISA do not encompass unfunded, contingent early retirement benefits or severance payments. The Act was not designed to prohibit modifications of these ancillary benefits." Sutton v. Weirton Division of National Steel Corp., 724 F.2d 406, 410 (4th Cir.1983) (citing H.R.Conf.R. No. 1280, 93d Cong., 2d Sess. 273, reprinted in 1974 U.S.Code Cong. & Admin.News 4639, 5038, 5054; H.R.Rep. No. 807, 93d Cong., 2d Sess. 60-61, reprinted in 1974 U.S.Code Cong. & Admin.News 4639, 4670, 4726). See also Viggiano v. Shenango China Div. of Anchor Hocking Corp., 750 F.2d 276, 279-280 (3d Cir.1984). "Congress expressly exempted employee welfare benefit plans from stringent vesting, participation, and funding requirements. Congress recognized the differences between welfare benefit plans and pension plans, and we discern no basis for finding mandatory vesting in ERISA of retiree welfare benefits." In re White Farm Equipment Co., 788 F.2d 1186, 1193 (6th Cir.1986). Because, under ERISA, severance benefits are contingent and unaccrued, an employer may unilaterally amend or eliminate the provisions of a severance plan, which is usually funded solely by the employer in any event. Young v. Standard Oil (Indiana), 849 F.2d 1039, 1045 (7th Cir.1988).

Nothing in ERISA thus required Warner-Lambert to pay plaintiffs at 1981 benefit levels or to provide continuing coverage for them under its severance policy. Plaintiffs' interest in the severance plan did not vest simply because they once were covered by it. In August 1982, Warner-Lambert amended its policy on severance pay to make even more explicit that severance benefits would not be available to an employee who had the opportunity to continue work with a company that acquired a Warner-Lambert division. This Warner-Lambert had a right to do. While the employer acts as a fiduciary in administering plan assets, it violates no fiduciary duty in amending a plan involving non-vested interests. Young, 849 F.2d at 1045. Business decisions, including corporate actions by plan administrators reducing the amount of unaccrued benefits, have routinely been held to be non-fiduciary. Berlin v. Michigan Bell Telephone Co., 858 F.2d 1154, 1163 (6th Cir.1988); West v. Greyhound Corp., 813 F.2d 951, 955-56 (9th Cir.1987). ERISA "does not impress a trust" upon any employer's corporate treasury for the payment of contingent benefits, Sutton, 724 F.2d at 411, and plaintiffs are foreclosed from claiming such a trust at Warner-Lambert.

The divestiture of the Medical-Surgical Division, with the subsequent change in plan administrators, did not change plaintiffs' position with regard to severance payments. Cf. Mead Corporation v. B.E. Tilley, --- U.S. ----, 109 S.Ct. 2156, 104 L.Ed.2d 796 (1989) (29 U.S.C. Sec. 4044(a)(6) of ERISA does not create benefit entitlements to unaccrued early retirement benefits in event of voluntary plan termination by an employer after sale of subsidiary). As Warner-Lambert could have changed its severance pay policy in 1985 had it been appellants' employer at the time, so too could PMP reduce severance pay benefits. Indeed, plaintiffs must look...