Wallace v. Firestone Tire & Rubber Co.

• Decision Date: 21 August 1989
• Docket Number: No. 87-2013,87-2013
• Citation: 882 F.2d 1327
• Parties: 11 Employee Benefits Ca 1694 James B. WALLACE, Mary Bailey, Bert O. Lambert, Patricia McGuffin, Deborah B. Reynolds, J.R. Hudman, Judy C. Hudman, Delwyn Wiley, Bill Mack, L. Kay Baker, Wanda Walker, Jimmy Cheatham, Troy C. Lebo, Bobby R. Bailey, Jr., Charles L. Holt, Ray Anthony Colvin, Charles E. Baker, Dennis Minor, Travis M. Blackwell, Jr., Leonard McKinney, Peggy J. Arrington, Willie M. Smelser, Jerry A. Griep, William Rowe, Yacub R. Akkub, Phillip Webb, Andy L. Hickey, Robert C. Bullock, Charles Hall, James E. Gardner, W.L. Ramsey, James C. Almand, Charles R. Hamm, Carl E. Johnson, Kenneth R. Flan, Vernon Wayne Evans, Don E. Orren, Max D. Gunnels, Gary D. Oswalt, Quentin L. Anderson, J.H. Hayes, Barbara Grafton, W.C. Cotton, Loretta A. Edwards, Susan Nygaard Keith, Mary F. Reeves and Cal D. Shepherd, Appellants, v. The FIRESTONE TIRE & RUBBER COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1327

882 F.2d 1327

11 Employee Benefits Ca 1694

James B. WALLACE, Mary Bailey, Bert O. Lambert, Patricia McGuffin, Deborah B. Reynolds, J.R. Hudman, Judy C. Hudman Delwyn Wiley, Bill Mack, L. Kay Baker, Wanda Walker, Jimmy Cheatham, Troy C. Lebo, Bobby R. Bailey, Jr., Charles L Holt, Ray Anthony Colvin, Charles E. Baker, Dennis Minor Travis M. Blackwell, Jr., Leonard McKinney, Peggy J Arrington, Willie M. Smelser, Jerry A. Griep, William Rowe, Yacub R. Akkub, Phillip Webb, Andy L. Hickey, Robert C. Bullock, Charles Hall, James E. Gardner, W.L. Ramsey, James C. Almand, Charles R. Hamm, Carl E. Johnson, Kenneth R. Flan, Vernon Wayne Evans, Don E. Orren, Max D. Gunnels, Gary D. Oswalt, Quentin L. Anderson, J.H. Hayes, Barbara Grafton, W.C. Cotton, Loretta A. Edwards, Susan Nygaard Keith, Mary F. Reeves and Cal D. Shepherd, Appellants, v. The FIRESTONE TIRE & RUBBER COMPANY, Appellee.

No. 87-2013.

United States Court of Appeals, Eighth Circuit.

Submitted June 12, 1989.

Decided Aug. 21, 1989.

Joseph Hickey, El Dorado, Ark., for appellants.

Martin Wald, Philadelphia, Pa., for appellee.

Before BEAM, Circuit Judge, HEANEY, Senior Circuit Judge, and HANSON ^*, Senior District Judge.

HANSON, Senior District Judge.

This case involves a claim for termination benefits by a class of former employees of appellee Firestone Tire and Rubber Company (Firestone). The District Court below, the Honorable Oren Harris, granted summary judgment to appellee. The court first found that the claims were governed by the Employee Retirement Income Security Act of 1974 (ERISA). It then held that Firestone's conclusion that termination benefits were not awardable was not arbitrary and capricious, the standard of review previously mandated by this court in ERISA cases. We affirm the portion of the district court's opinion holding that all of the claims are governed by ERISA, but reverse the grant of summary judgment and remand the case to the court for review under the de novo standard enunciated in Firestone Tire and Rubber Co. v. Bruch, --- U.S. ----, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). In fairness to the district court we note that the de novo standard of Bruch was announced after Judge Harris issued his ruling in this case.

FACTS

In early 1983 Firestone sold, as a going concern, a plant it operated in Magnolia, Arkansas, to American Fuel Cell and Coated Fabrics Company (Amfuel). All but

three of Firestone's employees received jobs with Amfuel when it took over the plant. The rehired employees' responsibilities were the same with Amfuel as they had been with Firestone, and the employees did not suffer any period of unemployment as a result of the sale. These employees brought a class action against Firestone when it failed to pay them termination benefits. Termination pay was paid to the employees not employed by Amfuel.

DISCUSSION

Two issues are presented to this court on appeal--whether the claims at issue are governed by ERISA, and if so, whether the court below properly reviewed these claims. We find that the answers to both questions are clearly dictated by Bruch.

Appellants contended below that the claims were not covered by ERISA arguing that "ERISA was never intended to apply to an unfunded severance or termination pay plan such as that adopted by Firestone." Appellants' brief at 8. This argument cannot be squared with Bruch as the termination pay plan at issue in that case was unfunded and the Supreme Court unhesitatingly applied ERISA. See Id., 109 S.Ct. at 951. Indeed, the Court specifically rejected the argument that the proper level of review depended on whether the plan was funded. Id. at 956. ¹ Thus, as it is clear that ERISA does cover the claims before us we turn to the issue of the proper level of review.

Appellants argue that the proper standard of review for examining Firestone's decision not to pay them termination benefits was de novo, rather than the arbitrary and capricious standard used by the district court. Accordingly, they argue, the case must be remanded to the District Court for review under the proper standard. In Bruch the Supreme Court held that a denial of benefits challenged under ERISA "is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Id. at 956. In other words, unless the plan language specifies otherwise, courts should construe any disputed language "without deferring to either party's interpretation." See Id. at 955. If a plan does "not give the employer or administrator discretionary or final authority to construe uncertain terms," a reviewing court should review the employee's claims as it would "any other contract claim". See Id.

Appellee responds that the arbitrary and capricious standard was proper because the plan gives it discretion in interpreting plan language and in determining eligibility for benefits. In support of this it cites a provision from the employee handbook which states that "Company benefits provided during your period of employment may be changed by the Company without notice. If you have any questions or need additional clarification on benefits, please consult your personnel representative." Firestone also notes that its Director of Compensation submitted an affidavit stating that he was responsible for "interpreting Firestone's salaried employee policies set forth in its Salaried Personnel Manual." Appellee's supplemental brief at 6.

These items are insufficient under Bruch to grant additional discretion to the plan administrator to interpret the terms of the plan. The Director's statement is irrelevant as the issue is whether the terms of the plan give Firestone added discretion, not whether Firestone acts as if it has such discretion. Indeed, the thrust of appellants' claim is that Firestone is exercising discretion it does not have. The provision providing that Firestone may change benefits without notice is also irrelevant as there is no contention that Firestone changed appellants' benefit policy. Thus, because the right to change or amend a policy is separate and distinct from the right to have discretionary authority to determine eligibility under a policy, the provision does not overcome the de novo review requirements of Bruch. Finally, the manual's suggestion that employees with questions should consult their personnel representative is just that, a suggestion. It has no effect on the amount of discretion Firestone has in determining eligibility. Therefore, based on the record before us, we find that this dispute must be resolved by a de novo review of "the terms of the plan and other manifestations of the parties' intent." Bruch, 109 S.Ct. at 955.

Appellee argues that an affirmance of the district court is proper even if that court erred in not reviewing the claims de novo on the grounds that the record allows us to make such a review in its favor. We decline to take this route for several reasons.

First, the termination pay...