Simmons v. Diamond Shamrock Corp.

• Citation: 844 F.2d 517
• Decision Date: 09 June 1988
• Docket Number: No. 87-1460,87-1460
• Parties: , 9 Employee Benefits Ca 1969 Clyde SIMMONS and Lloyd Cole, Appellants, v. DIAMOND SHAMROCK CORPORATION, a/k/a Diamond Shamrock Chemicals Company, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

Page 517

844 F.2d 517

56 USLW 2663, 9 Employee Benefits Ca 1969

Clyde SIMMONS and Lloyd Cole, Appellants, v. DIAMOND SHAMROCK CORPORATION, a/k/a Diamond Shamrock Chemicals Company, Appellee.

No. 87-1460.

United States Court of Appeals Eighth Circuit.

Submitted Jan. 12, 1988.

Decided April 12, 1988.

Rehearing and Rehearing En Banc Denied June 9, 1988.

David O. Danis, St. Louis, Mo., for appellants.

Brett A. Ringle, Stanley Weiner, John J. Marek, II, David H. Pace, Jones, Day, Reavis & Pogue, Dallas, Tex., Bradley S. Hiles and Richard J. Pautler, Peper, Martin, Jensen, Maichel and Hetlage, St. Louis, Mo., for appellee.

Before JOHN R. GIBSON, Circuit Judge, BRIGHT, Senior Circuit Judge, and Magill, Circuit Judge.

BRIGHT, Senior Circuit Judge.

Plaintiffs, former employees of the Vitex American Division (Vitex) of Diamond Shamrock Chemicals Company (Diamond Shamrock) brought this class action to recover separation pay allegedly due upon Diamond Shamrock's sale of Vitex to Mallinckrodt, Inc. (Mallinckrodt) (plaintiffs will hereinafter be referred to as Employees). The district court below, 658 F.Supp. 1053, granted Diamond Shamrock's summary judgment motion finding: (1) that the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Sec. 1001 et seq. (1982 & Supp. III 1985), governs the separation pay policy at issue; (2) that a prior state court judgment awarding two former Diamond Shamrock employees separation pay on state contractual grounds did not control this action; and (3) that Diamond Shamrock's interpretation of its separation pay plan was not arbitrary, capricious, or an abuse of discretion. For the reasons stated below, we affirm.

I. BACKGROUND

On February 21, 1981, Diamond Shamrock sold its Vitex division as a going concern to Mallinckrodt. On that date, plaintiff employees Lloyd Cole and Clyde Simmons ceased their employ with Diamond Shamrock and resumed work the next day as Mallinckrodt employees. The duties Cole and Simmons assumed at Mallinckrodt were identical to those they performed at Diamond Shamrock, and Mallinckrodt provided the same or greater rate of compensation.

Diamond Shamrock set forth its corporate personnel policies in a Personnel Policies and Procedures Manual which it maintained at each of its facilities, including the Vitex division. ¹ Diamond Shamrock employees knew the Manual existed and had access to it. The separation pay policy contained in the Manual provided for payment of separation pay to those Diamond Shamrock employees who are separated from employment "due to lack of necessary competence" or "because of a permanent layoff due to lack of work." ² The policy nowhere addresses a separation from work caused by the sale of a business division.

In October 1980, shortly before the sale of Vitex, Diamond Shamrock adopted a special policy for employees affected by divestiture (Divestiture Policy). The Divestiture Policy explicitly exempted from benefits those employees who, upon the sale of the division in which they worked, were offered a job with the purchasing company. ³

Diamond Shamrock did not pay separation pay to those workers who ceased working for Diamond Shamrock on February 27, 1981 and immediately became Mallinckrodt employees. The company did, however, pay separation pay to those salaried employees who were not offered continued employment by Mallinckrodt and for whom other jobs with Diamond Shamrock were not available.

Two former Vitex division workers, not parties to this action, brought suit in Missouri state court asserting entitlement to separation pay following the sale of Vitex to Mallinckrodt. The Missouri Court of Appeals, viewing the policy as a binding contract between Diamond Shamrock and its employees, found in favor of those employees based on state law contract doctrines. Gerson v. Diamond Shamrock Corp., 710 S.W.2d 368 (Mo.Ct.App.1986).

Plaintiffs Simmons and Cole initially filed this class action suit in the circuit court for St. Louis County, Missouri, basing their claim for separation pay on Missouri common law. Diamond Shamrock removed the case to the United States District Court for the Eastern District of Missouri on the grounds that the separation pay policy was an "employee welfare benefit plan" governed by ERISA, 29 U.S.C. Sec. 1002(1). The district court agreed and thus considered Employees' state law claims as claims for separation benefits under ERISA pursuant to 29 U.S.C. Sec. 1132.

Diamond Shamrock then filed a motion for summary judgment on the ground that its decision not to pay Employees separation pay was not arbitrary or capricious. Employees similarly moved for summary judgment, arguing that the Gerson decision had res judicata effect in this case. The district court denied Employees' and granted Diamond Shamrock's summary judgment motion. The district court found the Gerson decision inapplicable to the case at bar. It further held that Diamond Shamrock's interpretation of its separation pay policy was not arbitrary, capricious or an abuse of discretion. This timely appeal followed.

II. DISCUSSION

A. Standard of Review

Summary judgment is proper if there is no genuine issue of material fact and the moving party should prevail as a matter of law. Fed.R.Civ.P. 56(c). In reviewing a motion for summary judgment, we give the party opposing summary judgment "the benefit of all favorable factual inferences * * *." Holloway v. Lockhart, 813 F.2d 874, 878 (8th Cir.1987).

B. The Gerson Decision

Employees argue first that, pursuant to the doctrines of res judicata and collateral estoppel, the Missouri state court's ruling in Gerson requires a judgment in their favor. We disagree.

28 U.S.C. Sec. 1738 (1982) requires a federal court to give the same preclusive effect to a prior state court judgment as would the courts of the state from which the judgment emerged. See Kremer v. Chemical Constr. Co., 456 U.S. 461, 466, 102 S.Ct. 1883, 1889, 72 L.Ed.2d 262 (1982); Harrison v. Springdale Water & Sewer Comm'n, 780 F.2d 1422, 1431 (8th Cir.1986). Thus, we apply Missouri law in determining whether the Gerson decision precludes relitigation of Diamond Shamrock's obligations under the separation pay policy.

Under Missouri law, collateral estoppel applies only where the issue decided in the prior adjudication is identical to the issue presented in the present action. Hudson v. Carr, 668 S.W.2d 68, 70 (Mo.1984). "Collateral estoppel forecloses a party from litigating only those exact issues unambiguously decided in the earlier case." Owens v. Government Employees Ins. Co., 643 S.W.2d 308, 310 (Mo.Ct.App.1982) (emphasis added) (quoting Salsberry v. Archibald Plumbing and Heating Co., 587 S.W.2d 907, 915 (Mo.Ct.App.1979)).

The Gerson court stated that "the seminal issue for decision" concerned "the meaning of the personnel policy," which the court interpreted in accord with Missouri contract law principles. Gerson, 710 S.W.2d at 369. The issue before the federal district court, on the other hand, was whether Diamond Shamrock's interpretation of its severance pay policy violated ERISA.

Collateral estoppel is further inapplicable where the party seeking its application bears a more difficult burden of proof than he/she bore in an earlier action. See Shaffer v. Terrydale Management Corp., 648 S.W.2d 595, 608 (Mo.Ct.App.1983). The Gerson court construed the terms of the separation pay plan against the drafter, Diamond Shamrock, holding Diamond Shamrock to a fairly high standard regarding its obligations to its employees. See Gerson, 710 S.W.2d at 369. The district court, on the other hand, viewed Diamond Shamrock's actions through the considerably more deferential lens mandated by ERISA. The dissimilarity of the issues presented and standards employed by the federal district and Missouri courts defeat plaintiffs' assertion that collateral estoppel applies in this case.

Employees' invocation of res judicata is similarly without merit. Under principles of res judicata, a final judgment on the merits in a prior suit bars a later suit involving the same parties or their privies based on the same cause of action. Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 973, 59 L.Ed.2d 210 (1979); Mid-Continent Broadcasting Co. v. Dresser Indus., Inc., 669 F.2d 564, 566 (8th Cir.1982). In Missouri, res judicata requires "(1) identity of the thing sued for; (2) identity of the cause of action; (3) identity of the persons and parties to the action; and (4) identity of the quality of the person for or against whom the claim is made." Prentzler v. Schneider, 411 S.W.2d 135, 138 (Mo.1966). The employees in the instant case were neither parties in the Gerson case, nor in privity with the Gerson plaintiffs. Thus, the district court correctly afforded the Gerson decision no preclusive effect.

The Gerson decision cannot bind this court for a third related reason. Diamond Shamrock's separation pay plan is governed by ERISA, ⁴ which preempts Employees' state court claims. See Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 2389, 85 L.Ed.2d 728 (1985) ("the preemption provision was intended to displace all state laws that fall within its sphere, even including state laws that are consistent with ERISA's substantive requirements"); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96, 103 S.Ct. 2890, 2899, 77 L.Ed.2d 490 (1983) (ERISA preempts state laws which have connection with or reference to an ERISA employee benefit plan); Holland v. Burlington Indus., Inc., 772 F.2d 1140, 1146 (4th Cir.1985), aff'd sub nom. Brooks v. Burlington Indus., Inc., 477 U.S. 901, 106 S.Ct. 3267, 91 L.Ed.2d 559 (1986); Pabst Brewing Co. v. Anger, 610 F.Supp. 214, 216 (D.Minn.1985), aff'd, 784 F.2d 338 (8th Cir.1986). ERISA's preemptive effect extends to state decisional law, as well as to state statutes and regulations. Jung v. FMC Corp., 755 F.2d 708, 714 (9th Cir.1985). Thus, the Gerson decision becomes irrelevant to the action...