Wulf v. Quantum Chemical Corp.
| Decision Date | 27 July 1994 |
| Docket Number | No. 93-3061,93-3061 |
| Citation | 26 F.3d 1368 |
| Parties | , 18 Employee Benefits Cas. 1449 Russell WULF and Ronald Rentschler, Plaintiffs-Appellants, v. QUANTUM CHEMICAL CORPORATION; Quantum Employee Stock Ownership Plan for Hourly Represented Employees, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
James B. Robinson (argued and briefed), Kircher, Robinson, Cook, Newman & Welch, Cincinnati, OH, for plaintiffs-appellants.
David T. Croall (briefed), James K.L. Lawrence, Frost & Jacobs, Cincinnati, OH, and Cynthia P. Purvis (briefed) and John W. Purcell (argued), Baker & Daniels, Indianapolis, IN, for defendants-appellees.
Before: KENNEDY and MILBURN, Circuit Judges; and LIVELY, Senior Circuit Judge.
KENNEDY, Circuit Judge (pp. 1378-1380), delivered a separate dissenting opinion.
This is an ERISA (Employee Retirement Income Security Act of 1974, 29 U.S.C. Sec. 1001 et seq.) case in which the district court granted summary judgment to the defendants upon concluding that the plaintiffs did not suffer a "termination of employment" when their employer sold the division where they worked. After a period of discovery, the parties filed cross-motions for summary judgment. The district court denied the plaintiffs' motion, granted that of the defendants, and dismissed the action.
The defendant Quantum Chemical Corporation sold its plant at St. Bernard, Ohio to Henkel Corporation on April 17, 1989, as part of the sale of its Emery Division. The plaintiffs were employed by Quantum at the St. Bernard plant at the time of the sale and were participants ("Members") in the Quantum Employee Stock Ownership Plan for Hourly Represented Employees (the Plan or ESOP). Section 7.01 of the Plan provides that "[u]pon a Member's termination of employment the Vested Portion of his Account shall be distributed as provided in this Article" (Article 7, "Distribution of Accounts"). Section 7.03 provides, as applicable here, for distribution of the vested portion to be made "as soon as administratively practicable following ... the Member's termination of employment." This section also provides that a terminated employee may elect "to have his distribution commence as of a Valuation Date coincident with or next following ... his termination of employment...." Although the Plan uses "termination of employment" throughout Article 7, that term is never defined.
The sales agreement required Henkel to offer employment to employees of the Emery Division. In addition, the sales agreement called for Henkel to cause either new or existing trusts funding employee benefit plans to accept transfers of assets and liabilities from all of Quantum's retirement plans, including the defendant Plan, attributable to employees accepting Henkel's offer of employment. After the sale, however, Henkel refused to accept the transfers of assets and liabilities of the Plan. Quantum subsequently amended Section 7.03 of the Plan on December 14, 1989, retroactively effective to April 15, 1989, to provide for the distribution of plan proceeds to plan participants in the event that Quantum, or a subsidiary of Quantum, sold substantially all of its assets and the plan participants continued employment with the purchaser.
The hourly employees at the St. Bernard plant were hired by Henkel and continued to perform the same duties at the same wages, in the same location and under the same supervisors. Quantum determined that no termination of employment occurred at the time of the sale and that the plaintiffs were entitled to distribution of their accounts in the Plan only by reason of the amendment.
Quantum elected to distribute the proceeds of the Plan in the latter part of 1989. In preparation for that distribution, application forms were distributed in October 1989 to Emery Division employees rehired by Henkel. These forms gave the plan participants a choice: to retain their accounts in the Plan or have their account balances distributed in lump sum payment of cash or stock. The named plaintiffs elected a lump sum payment of their accounts in cash. Quantum made the requested distributions in December 1989. The dispute that resulted in this law suit is over the date on which the accounts' balances were valued. Quantum valued the accounts for distribution purposes on October 31, 1989, more than six months after the sale. The value of the accounts on April 17, 1989, the date of sale, was substantially higher. In fact, if the distribution had been valued on the date of sale, the amount distributed would have been $573,477 more than Quantum actually distributed in December.
The plaintiffs filed this ERISA action under 29 U.S.C. Sec. 1132(a)(1)(B), which provides that a civil action may be brought by participants in a plan governed by ERISA "to recover benefits due [them] under the terms of the plan." The district court eventually certified the case as a class action on behalf of "those persons employed by Quantum Chemical Corporation at its Saint Bernard plant who were participants in its hourly employee ESOP plan immediately prior to April 17, 1989."
In their complaint, which named Quantum and the Plan as defendants, the plaintiffs alleged that the vested portions of their accounts should have been valued and distributed to them in April 1989. This claim was based on the contention that the sale of the Emery Division to Henkel resulted in a termination of their employment on April 17, 1989.
The defendants admitted that the plaintiffs were participants in the Plan until the date when their accounts were distributed to them, and that the plan was subject to ERISA. They denied that the plaintiffs' employment was terminated as of April 17, 1989, and denied any wrongdoing in valuing the plaintiffs' accounts for distribution as of October 31, 1989.
As exhibits to their motion for summary judgment the plaintiffs filed copies of two communications from Quantum. Exhibit A was an undated letter on Quantum stationery addressed to "Dear Quantum Employee." The letter appears to have been sent to the employees in January 1988, as it referred to Quantum's 1987 earnings. The letter announced the company's decision to form the ESOP and stated that Quantum was contributing a profit sharing bonus in the form of Quantum stock to an account "in your name." The letter explained that the stock bonus awards depended on Quantum's success and were granted as an incentive for employees to continue efforts in the future that contributed to that success. Referring to distribution, the letter stated, "You receive the value of your account when you leave Quantum, if you have two years of service at that time."
Exhibit B, dated April 29, 1988, was a newsletter titled "Profit Sharing Stock Bonus Plan." It referred to the earlier announcement of creation of the ESOP and again described the Plan as "an incentive to continue the hard work and enthusiasm that have brought us this success." The document described in some detail how the bonus plan worked, how values of contributions were computed and the relationship between market value of Quantum stock, which funds the ESOP, and individual employee's accounts. In two places this communication used the same "when you leave Quantum" language found in the earlier letter. The plaintiffs argued at the summary judgment hearing that statements in the newsletter clearly advised that membership in the Plan depended on being employed by Quantum.
The plaintiffs also filed an affidavit in which they alleged that Quantum's personnel officer Richard Neff had told Emery Division employees prior to the sale to Henkel that their ESOP shares would be valued and distributed as of the last day of the month of the sale.
In support of their motion for summary judgment the defendants relied on the Plan itself, as amended, and documents exchanged between Quantum and Henkel in connection with the sale of the Emery Division. The defendants argued that the plaintiffs and similarly situated employees did not experience a termination of employment upon the sale of the Emery Division. This being so, the defendants continued, the Plan contained no authorization for distribution to the plaintiffs of the value of their ESOP accounts based upon sale of a division until Quantum amended the Plan to provide specifically for such a distribution.
Quantum asserted that the brief descriptions of the Plan and of participants' rights contained in the exhibits did not define or enlarge the rights of participants or the obligations of Quantum or the Plan administrator, a committee of three persons not affiliated with Quantum. They took the same position with respect to Neff's alleged statements, which he denied making when he gave his deposition. Quantum argued that it acted within its discretion in choosing the October 31, 1989, valuation date and that the plaintiffs and their class had no claim for damages based on the decline in value of Quantum stock between April and October.
In its order granting the defendants' motion for summary judgment, the district court agreed that the Plan did not require the defendants to distribute funds or value the plaintiffs' accounts as of the date of the sale to Henkel. The court stated that the transfer of a subsidiary or division in which employees retain the same job responsibilities and work for the same wages under the same supervisors does not effect a termination of employment. In order for the transfer to Henkel's payroll to qualify as a termination, the court stated, the employees would be required immediately after the sale either to assume new responsibilities with the new employer or actually to sever that employment relationship.
The district court...
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