Hooven v. Exxon Mobil Corp. , 465 F.3d 566 ( 2006 )

Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit
10-20-2006
Hooven v. Exxon Mobil Corp
Precedential or Non-Precedential: Precedential
Docket No. 04-3773
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
Nos. 04-3773 and 05-1610
_____________
Case No: 04-3773
JOE A. HOOVEN; MICHAEL AVERSANO;
AINARS BLUSS; T. B. BOTTOLFSON; D. R. CLARIZIO;
STAN CONLEY; EDMUND E. DAVIS, SR.;
PAUL E. DOXEY; JACK F. DUNLEAVY;
CHRISTOPHER G. GIBSON; ROGER A. HENDLER;
J. K. HOOVEN; ROMULUS VANCE HOUCK, III;
TODD HOWARD; D. HRINAK; J. D. HUMPHREYS;
WILLIAM J. HELFRICH; H. J. KLEIN; A. R. KLINE;
R. J. KOPCHA; FRANKLIN W. LEE; R. E. LITTLE;
JOANNE LIMA; J. LUTZ; E. T. McMURPHY;
S. A. MENDOLIA; STEVE MERCURIO;
CLARK D. MILLER; MICHAEL L. MILLMAN;
G. A. MILNE; DANIEL G. MOORE; B. L. MORGAN;
P. M. POROHNAVI; PATRICIA V. ROSE;
JEAN VALENZA-RUBINO; SHELLY C. SHARER;
JAMES R. SLUSHER; M. W. STUMP; D. M. SULLIVAN;
LINDA N. SUTPHIN; DARREL R. TAYLOR;
THOMAS P. THOMPSON; JOHN TROY;
(continued)
DONALD A. TWELE; CARROLL S. WAGNER;
LAURA WAKS; JOE D. WOODWARD;
JOHN H. WOOLFOLK; E. CHRISTINE COPLEY;
E. JACKSON; L. YOUNG; SUZANNE MICHAUD
v.
EXXON MOBIL CORPORATION;
MOBIL CORPORATION EMPLOYEE SEVERANCE
PLAN,
Appellants
____________
Case No: 05-1610
JOE A. HOOVEN; MICHAEL AVERSANO;
AINARS BLUSS; T. B. BOTTOLFSON; D. R. CLARIZIO;
STAN CONLEY; EDMUND E. DAVIS, SR;
PAUL E. DOXEY; JACK F. DUNLEAVY; CHRISTOPHER
G. GIBSON; ROGER A. HENDLER; J. K. HOOVEN;
ROMULUS VANCE HOUCK, III; TODD HOWARD;
D. HRINAK; J. D. HUMPHREYS; H. J. KLEIN;
A. R. KLINE; R. J. KOPCHA; FRANKLIN W. LEE;
R. E. LITTLE; JOANNE LIMA; J. LUTZ;
E. T. McMURPHY; S. A. MENDOLIA;
(continued)
2
STEVE MERCURIO; CLARK D. MILLER;
MICHAEL L. MILLMAN; G. A. MILNE;
DANIEL G. MOORE; B. L. MORGAN;
P. M. POROHNAVI; PATRICIA V. ROSE;
JEAN VALENZA-RUBINO; SHELLY C. SHARER;
JAMES R. SLUSHER; M. W. STUMP;
D. M. SULLIVAN; LINDA N. SUTPHIN;
DARREL R. TAYLOR; THOMAS P. THOMPSON;
JOHN TROY; DONALD A. TWELE;
CARROLL S. WAGNER; LAURA WAKS;
JOE D. WOODWARD; JOHN H. WOOLFOLK;
E. CHRISTINE COPLEY; E. JACKSON; L. YOUNG;
SUZANNE MICHAUD; WILLIAM J. HELFRICH
v.
EXXON MOBIL CORPORATION;
MOBIL CORPORATION EMPLOYEE SEVERANCE
PLAN,
Appellants
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 00-cv-05071)
District Judge: Honorable Cynthia M. Rufe
__________
3
Argued July 10, 2006
Before: SLOVITER, McKEE AND RENDELL,
Circuit Judges
(Filed: October 20, 2006)
Mark S. Dichter [ARGUED]
Jeremy P. Blumenfeld
Morgan, Lewis & Bockius
1701 Market Street
Philadelphia, PA 19103
David M. Rivet
Exxon Mobil Corporation
800 Bell Street, Room 18060
Houston, TX 77002
Richard G. Rosenblatt
Morgan, Lewis & Bockius
502 Carnegie Center
Princeton, NJ 08540
Counsel for Appellants
Exxon Mobil Corporation;
Mobil Corporation Employee Severance Plan
4
John A. Guernsey [ARGUED]
Paul J. Greco
Colleen M. Johns
Frank M. Emmerich, Jr.
Conrad, O’Brien, Gellman & Rohn
1515 Market Street, 16th Floor
Philadelphia, PA 19102
Counsel for Appellees in No. 04-3773
Joe A. Hooven; Michael Aversano; Ainars Bluss;
T. B. Bottolfson; D. R. Clarizio; Stan Conley;
Edmund E. Davis, Sr.; Paul E. Doxey; Jack F. Dunleavy;
Christopher G. Gibson; Roger A. Hendler; J. K. Hooven;
Romulus Vance Houck, III; Todd Howard; D. Hrinak;
J. D. Humphreys; William J. Helfrich;H. J. Klein; A.
R. Kline; R. J. Kopcha; Franklin W. Lee; R. E. Little;
Joanne Lima; J. Lutz; E. T. McMurphy; S. A. Mendolia;
Steve Mercurio; Clark D. Miller; Michael L. Millman;
G. A. Milne; Daniel G. Moore; B. L. Morgan;
P.M.Porohnavi; Patricia V. Rose; Jean Valenza- Rubino;
Shelly C. Sharer; James R.Slusher; M. W. Stump;
D. M. Sullivan; Linda N. Sutphin; Darrel R. Taylor;
Thomas P. Thompson; John Troy; Donald A. Twele;
Carroll S. Wagner; Laura Waks; Joe D. Woodward;
John H. Woolfolk; E. Christine Copley; E. Jackson;
L.Young; Suzanne Michaud.
(continued)
5
- and -
Counsel for Appellees in No. 05-1610
Joe A. Hooven; Michael Aversano; Ainars Bluss;
T. B. Bottolfson; D. R. Clarizio; Stan Conley;
Edmund E. Davis, Sr; Paul E. Doxey; Jack F. Dunleary;
Christopher G. Gibson; Roger A. Hendler; J. K. Hooven;
Romulus Vance Houck, III; Todd Howard; D. Hrinak;
J. D. Humphreys; H. J. Klein; A. R.Kline; R. J. Kopcha;
Franklin W. Lee; R. E. Little; Joanne Lima; J. Lutz;
E. T. McMurphy; S. A. Mendolia; Steve Mercuric;
Clark D. Miller; Michael L. Millman; G. A. Milne;
Daniel G. Moore; B. L. Morgan; P. M. Porohnavi;
Patricia V. Rose; Jean Valenza-Rubino;
Shelly C. Sharer; James R. Slusher; M. W. Stump;
D. M. Sullivan; Linda N. Sutphin; Darrel R. Taylor;
Thomas P. Thompson; John Troy; Donald A. Twele;
Carroll S. Wagner; Laura Waks; Joe D. Woodward;
John H. Woolfolk; E. Christine Copley; E. Jackson;
L. Young; Suzanne Michaud; William J. Helfrich.
__________
OPINION OF THE COURT
__________
6
RENDELL, Circuit Judge.
This case arises out of a dispute over whether
employees divested in connection with the merger between
Mobil Corporation and Exxon Corporation are entitled to
severance benefits. In preparation for the merger, Mobil
implemented an Enhanced Change-in-Control Retention /
Severance Plan (the “CIC Plan”).
Plaintiffs Joe A. Hooven, et al., are former Mobil
Corporation employees whose employment with the merged
Exxon Mobil Corporation was terminated when the division
for which they worked was divested to Tosco Corporation.
Plaintiffs contend that they are entitled to benefits under the
terms of a summary plan description (the “Initial SPD”) that
Mobil distributed to employees following the announcement
of the merger. They sued Defendants Exxon Mobil
Corporation and the Mobil Corporation Employee Severance
Plan (together, “Exxon Mobil”) under the civil enforcement
provision of the Employee Retirement Income Security Act of
1974, 29 U.S.C. § 1132, asserting claims for breach of
fiduciary duty, equitable estoppel, procedural and reporting
violations and federal common law breach of contract.
After a bench trial, the District Court issued a
memorandum opinion and order granting judgment in favor of
Exxon Mobil on the fiduciary duty, equitable estoppel and
procedural and reporting claims. However, the District Court
7
agreed with Plaintiffs that the Initial SPD established a
unilateral contract that obligated Exxon Mobil to provide
them with severance benefits when it terminated their
employment following the merger. Accordingly, it entered
judgment in favor of Plaintiffs on the breach of contract claim
and ordered Exxon Mobil to provide Plaintiffs with severance
benefits under the terms of the Initial SPD. Exxon Mobil
appeals this portion of the District Court’s order.
We disagree with the District Court’s characterization
of the Initial SPD as a unilateral contract the terms of which
became fixed as the employees performed. As we will
explain, the starting point for Plaintiffs’ claim is ERISA, not
the common law of contracts. Under this framework,
Plaintiffs’ rights to benefits under the Initial SPD never
became due. Because the plan documents that were in effect
when Plaintiffs’ claim to benefits would have accrued clearly
establish that they are ineligible for severance, we will reverse
and remand with instructions for the District Court to enter
judgment for Exxon Mobil.1
1
Exxon Mobil also appeals the District Court’s February 14,
2005 order awarding Plaintiffs attorneys’ fees under the terms
of the CIC Plan. See Hooven v. Exxon Mobil Corp., No. Civ. A.
00-5071, 2005 WL 417416 (E.D. Pa. Feb. 14, 2005). Because
we reverse the District Court’s decision on the merits, we will
also vacate the attorneys’ fees order and need not address the
merits of the fee dispute.
8
I.
A. The CIC Plan and SPD
Exxon and Mobil began merger discussions in June of
1998. In September 1998, in anticipation of a possible merger
with Exxon, Mobil’s Board of Directors revoked the
company’s existing severance plan and implemented the CIC
Plan. The CIC Plan provided that employees in salary groups
19 and below, together classified as “Tier 4” employees, were
not eligible for severance benefits if their business unit or
activity was divested after the merger and they were offered
comparable employment by the acquiring entity. Plaintiffs
were all Tier 4 employees. Hooven v. Exxon Mobil Corp.,
No. 00-CV-5071, 2004 WL 724496, at *2 (E.D. Pa. Mar. 31,
2004).
After the Boards of Directors of Exxon and Mobil
formally approved the merger, Mobil prepared and mailed the
Initial SPD to its employees. The Initial SPD did not allude
to the specific non-eligibility of divested employees, or even
mention divestiture.2 The District Court found that the Initial
SPD “failed to advise Plaintiffs that they would be ineligible
2
The parties argue as to how to characterize this mistake–as
a mere “omission,” or as a “misrepresentation” that conflicts
with the language of the CIC Plan. We need not resolve this
disagreement in light of our reasoning along different lines.
9
for severance in the event of a divestiture.” Id. at *8.
However, the Initial SPD cautioned that it was merely “a
summary of the Plan and does not replace the official Plan
documents, which govern in all cases.” Id. at *21. See also
Id. (“If the Plan description in this handbook does not agree
with the Plan text, the Plan text will govern.”). It also stated
that, although Mobil reserved the right to “modify, suspend,
or terminate benefits at any time for any reason,” the CIC
Plan “may not be terminated or modified while a change of
control is pending, or within: [s]ix months following a
potential change in control, or [t]wo years following a change
in control.” Id. at *9.
B. The Merger and Divestiture
On November 30, 1999, the Federal Trade
Commission approved the Mobil / Exxon merger, subject to
divestitures of various Mobil assets and other conditions.
Exxon Mobil was created on December 1, 1999. Also on
December 1, 1999, Mobil agreed to sell its Mid-Atlantic
Marketing division, in which Plaintiffs worked, to Tosco
Corporation. Tosco agreed to offer jobs with comparable or
improved salaries and benefits to all of Mobil’s Mid-Atlantic
Marketing employees. Id. at *11.
Mobil announced the divestiture of its Mid-Atlantic
Marketing division on December 2, 1999. At an employee
meeting that day, Mobil management discussed the divestiture
10
and explained that all affected employees would be offered
employment with Tosco. At the same time, management
advised Tier 4 employees that they would not be entitled to
severance benefits because they had been divested and would
receive comparable employment offers. In subsequent
meetings, Plaintiffs expressed surprise that they would not be
offered severance benefits and complained that Mobil had
changed the terms of the CIC Plan. Mobil management
responded by distributing copies of relevant questions and
answers from Mobil’s internal website and the divestiture
provision of the actual CIC Plan, which clearly established
Plaintiffs’ non-eligibility. Id. at *12.
In February of 2000, Mobil distributed a notice of
errata in the SPD, which acknowledged that the Initial SPD
had omitted the divestiture provision and clarified the
conditions for eligibility for benefits under the CIC Plan, as
follows:
The following text was omitted from the Mobil
Corporation Employee Severance plan Summary
for U.S. employees in salary groups 19 and
below, distributed to all employees in those salary
groups in August, 1999. Please keep this with
your Summary for future reference.
11
This bullet belongs on page 5 and
should be included as an additional
reason one is not eligible to
participate in the CIC
retention/severance package:
• you are no longer employed by
the Company or an Affiliate
due to a divestiture of any
facility or sale or outsourcing
of any business and are offered
comparable employment by the
purchaser or successor of such
facility or business, regardless
of whether you accept or reject
the employment.
Id.
Plaintiffs’ employment with Mobil was officially
terminated between March and May of 2000. The District
Court found that each Plaintiff was offered employment with
Tosco on terms comparable to his or her employment with
Mobil. After the divestiture, Plaintiffs received the same
salaries and benefits, and generally reported to the same
supervisors, as they had before the divestiture. According to
the District Court,
12
No Plaintiff who accepted a position with Tosco
missed any work between the date he or she left
Mobil and the date he or she began working for
Tosco. Moreover, there was no break in any
Plaintiffs’ [sic] health care coverage from the date
he or she left Mobil until he or she started at
Tosco.
Id. at *13 (citations omitted).
C. The District Court’s Opinion
In their complaint, Plaintiffs had asserted ERISA
claims for breach of fiduciary duty, equitable estoppel and
procedural and reporting violations, as well as a “federal
common law breach of contract” claim, as bases for the
recovery of severance benefits.3 The District Court conducted
an eight-day bench trial. Thereafter, the District Court issued
3
Plaintiffs’ counsel explained at oral argument that Plaintiffs
did not assert a claim for recovery of benefits under section
502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B), because
they thought that any such claim had to be maintained under the
terms of the CIC Plan itself, which clearly ruled out severance
for Tier 4 employees. Their complaint was filed before our
opinion in Burstein v. Retirement Account Plan for Employees
of Allegheny Health Education & Research Foundation, 334
F.3d 365 (3d Cir. 2003), allowed plaintiffs to state a section
502(a)(1)(B) claim based on the terms of an SPD.
13
a memorandum opinion granting relief based on a breach of
contract, but denying Plaintiffs’ ERISA claims.
Specifically, the District Court determined that
Plaintiffs’ breach of fiduciary duty claim failed because there
was no evidence that Plaintiffs had detrimentally relied on the
Initial SPD. Id. at *16. Detrimental reliance on a material
misrepresentation made by the defendant is a necessary
element of an ERISA breach of fiduciary duty claim. See
Daniels v. Thomas & Betts Corp., 263 F.3d 66, 73 (3d Cir.
2001). However, the District Court concluded that Plaintiffs
continued to work for Mobil after the merger was announced
“for the opportunity to work for Exxon Mobil–not to collect
enhanced severance benefits.” Hooven, 2004 WL 724496, at
*13. Moreover,
[n]o Plaintiff proved that he or she did anything
in reliance upon the understanding that he or she
would receive enhanced severance benefits in
the event of a divestiture. No Plaintiff turned
down any specific job offer in reliance on the
belief that he or she would receive severance
benefits in the event of a divestiture.
Id.
14
Plaintiffs’ equitable estoppel and reporting and
disclosure violation claims failed for the additional reason that
Plaintiffs had failed to establish “extraordinary
circumstances,”4 which “generally involve acts of bad faith on
the part of the employer, attempts to actively conceal a
significant change in the plan, or commission of fraud.”
Jordan v. Fed. Express Corp., 116 F.3d 1005, 1011 (3d Cir.
1997). The District Court concluded that Mobil’s failure to
include the divestiture provision in the SPD amounted to
“inartful drafting, not fraud or active concealment.” Hooven,
2004 WL 724496, at *17. The District Court noted that
Plaintiffs had not asserted a claim for recovery of benefits
under ERISA section 502(a)(1)(B) (see supra n.3), but ruled
that Plaintiffs were entitled to severance benefits on their
“federal common law breach of contract” theory. The District
Court first held that the CIC Plan was an offer of a unilateral
contract that Plaintiffs then accepted by continuing to work
for Mobil and, later, Exxon Mobil. Id. at *18. As such, the
terms of the plan or offer, as communicated to Plaintiffs
4
See Ackerman v. Warnaco, Inc., 55 F.3d 117, 124 (3d Cir.
1995) (noting that, “under ordinary circumstances,” ERISA
reporting and disclosure violations do not give rise to
substantive remedies); Curcio v. John Hancock Mut. Life Ins.
Co., 33 F.3d 226, 235 (3d Cir. 1994) (to sustain an equitable
estoppel claim under ERISA, a plaintiff must establish “(1) a
material representation, (2) reasonable and detrimental reliance
upon the representation, and (3) extraordinary circumstances”).
15
through the Initial SPD, became fixed as Plaintiffs performed.
Id. (quoting Kemmerer v. ICI Americas Inc., 70 F.3d 281, 287
(3d Cir. 1995); citing Amatuzio v. Gandalf Sys. Corp., 994 F.
Supp. 253, 267 (D.N.J. 1998)). Next, the District Court
determined that the terms of the Initial SPD differed from the
terms of the CIC Plan, and that, under our decision in
Burstein v. Retirement Account Plan for Employees of
Allegheny Health Education & Research Foundation, 334
F.3d 365 (3d Cir. 2003), the terms of the SPD would control,
Hooven, 2004 WL 724496, at *18-19.
Thus, the District Court reasoned, when Plaintiffs
learned, on December 2, 1999, that their division would be
divested, their rights to severance as set forth in the Initial
SPD had accrued. “In these circumstances,” it concluded, “by
virtue of Plaintiffs’ performance on the unilateral contract, the
Court must enforce Defendants’ corresponding obligation.”
Id. at *22.
The District Court’s March 31 memorandum opinion
and order became final on September 2, 2004, when the
District Court denied Exxon Mobil’s motion to amend the
findings of fact and conclusions of law and to alter or amend
the judgment. Exxon Mobil appealed the March 31 and
September 2 orders. Although Plaintiffs originally cross-
appealed the District Court’s order as to the fiduciary duty,
equitable estoppel and ERISA reporting and disclosure
claims, we dismissed the cross-appeal pursuant to a joint
16
stipulation of the parties on January 14, 2005, in accordance
with Fed. R. App. P. 42(b). Thus, we limit our review to the
portion of the District Court’s opinion and order entering
judgment in favor of Plaintiffs on the “breach of contract”
claim and ordering Exxon Mobil to pay Plaintiffs severance
benefits under the terms of the Initial SPD.
II.
The District Court exercised federal question
jurisdiction, pursuant to 28 U.S.C. § 1331, over Plaintiffs’
ERISA and “federal common law” claims. Our jurisdiction
over this appeal from the District Court’s final judgment
arises under 28 U.S.C. § 1291.
On appeal from a judgment entered after a non-jury
trial, we review findings of fact for clear error, Fed. R. Civ. P.
52(a), and conclusions of law de novo, Henglein v. Colt
Indus. Operating Corp., 260 F.3d 201, 208 (3d Cir. 2001).
Because the primary issue on appeal is the District Court’s
analysis of the legal effect of the SPD and Initial CIC Plan,
we will review its conclusions de novo.
III.
It is one thing to acknowledge that contract principles
apply in ERISA cases. Clearly, they do. Generally, “breach
of contract principles, applied as a matter of federal law,
17
govern” claims for benefits due under an ERISA plan.
Kemmerer v. ICI Americas Inc., 70 F.3d 281, 287 (3d Cir.
1995). However, it is quite another to say that an employee’s
severance benefit can be grounded in, and enforceable based
on, a unilateral contract outside of ERISA’s remedial scheme.
Although this approach is intuitively appealing, and
seemingly appropriate in this complex area, we conclude that
it is inconsistent with the basic framework of ERISA and,
therefore, cannot be.
The District Court, addressing this issue of first
impression, conducted a thoughtful analysis and proposed a
reasonable solution. However, upon further review, we
disagree with two aspects of its reasoning:
First, its determination that Plaintiffs’ rights
arose by virtue of a unilateral contract whereby their
rights to severance somehow became fixed before
Plaintiffs’ employment was terminated, and
Second, its conclusion that, based upon
Burstein, the Initial SPD governed Plaintiffs’ rights in
this factual setting.
18
We begin with a fundamental premise: every claim for
relief involving an ERISA plan must be analyzed within the
framework of ERISA. The District Court found, and the
parties agree, that the CIC Plan is an “employee welfare
benefit plan” covered by ERISA. Hooven, 2004 WL 724996,
at *17 (citing 29 U.S.C. § 1002(1)). ERISA is a
“comprehensive statute for the regulation of employee benefit
plans,” Aetna Health Inc. v. Davila, 542 U.S. 200, 208
(2004); it is intended “to occupy fully the field of employee
benefit plans,” Reichelt v. Emhart Corp., 921 F.2d 425, 431
(2d Cir. 1990).5
The District Court found that Plaintiffs’ claim was not
based on ERISA, but nevertheless allowed it as arising out of
5
It is true that “Congress has authorized the federal courts to
create federal common law” under ERISA. Plucinski v. I.A.M.
Nat’l Pension Fund, 875 F.2d 1052, 1056 (3d Cir. 1989) (citing
Van Orman v. Am. Ins. Co., 680 F.2d 301, 311 (3d Cir. 1982)).
However, federal courts may not “lightly create additional rights
under the rubric of federal common law”; we may exercise our
common law authority to fashion new ERISA causes of action
only where we deem it “‘necessary to fill in interstitially or
otherwise effectuate the statutory pattern enacted in the large by
Congress.’” Van Orman, 680 F.2d at 312 (quoting United States
v. Little Lake Misere Land Co., 412 U.S. 580, 593 (1973)). This
is certainly not the case here. There is absolutely no need in this
case to create new remedies, either to fill in “gaps” left by the
statute or to “effectuate” congressional intent.
19
a unilateral contract, whereby Mobil’s obligation became
fixed when Plaintiffs accepted the CIC Plan by continuing to
work for Mobil up until and after the merger. Unfortunately
for Plaintiffs, this contract-based construct just does not fit
within the ERISA structure. ERISA requires “that any
contractually accrued rights be discernible from the written
terms of the formal ERISA plan documents themselves.”
Carr v. First Nationwide Bank, 816 F. Supp. 1476, 1490
(N.D. Cal. 1993). Although we occasionally employ
unilateral contract concepts in ERISA cases, we do so only
where “the asserted unilateral contract is based on the explicit
promises in the ERISA plan documents themselves.” Id. at
1490-91. Unilateral contract principles may not operate to
create extra-ERISA causes of action for plan benefits.
Our observation in this regard is consistent with the
case law on this issue. In Reichelt v. Emhart Corporation,
plaintiffs argued that their employer’s informal “prior
practice” of paying severance to any employee who was
involuntarily terminated created a unilateral contract that the
employer could not amend or terminate by adopting formal
severance plans. 921 F.2d at 431-32. The Second Circuit
Court of Appeals disagreed, concluding that plan documents,
not “prior practice,” governed the plaintiffs’ rights to
severance, see id. at 430-31, and that “ERISA preempts civil
actions against employers for severance pay predicated on
20
common-law contract principles,” id. at 431 (citing Gilbert v.
Burlington Indus., Inc., 765 F.2d 320, 328 (2d Cir. 1985)).6
Other courts of appeals have similarly “refused to
allow ERISA plaintiffs to use unilateral contract rules” as a
basis to recover benefits promised in an employee welfare
benefit plan where “the particular ERISA plan documents in
question did not provide a basis for . . . vesting or accrual of
the claimed benefits.” Carr, 816 F. Supp. at 1489-90. See
Alday v. Container Corp. of Am., 906 F.2d 660, 665-66 (11th
Cir. 1990) (rejecting plaintiff’s claim that benefit plan created
unilateral contract because plan documents unambiguously
provided that employer could terminate or modify the plan);
Musto v. Am. Gen. Corp., 861 F.2d 897, 906-07 (6th Cir.
1988) (holding that plan documents that made “perfectly clear
that no immutable insurance benefits can be said to vest upon
retirement” defeated plaintiffs’ unilateral contract claims);
Moore v. Metro. Life Ins. Co., 856 F.2d 488, 491-92 (2d Cir.
1988) (stating that plaintiffs’ theory that various
“representations” of the employer and “actions of the
employees in accepting those representations by remaining
with the Company” gave rise to an extra-ERISA “contract”
6
The Reichelt court noted, further, that the plaintiffs’
argument was incompatible with ERISA’s substantive
provisions, which allow employers flexibility in structuring,
amending and terminating severance and other employee
welfare benefit plans. 921 F.2d at 432.
21
“would undermine ERISA’s framework,” as “plan documents
and the SPDs exclusively govern an employer’s obligations
under ERISA plans”).
Apparently recognizing that they cannot maintain a
common law claim outside of ERISA, Plaintiffs contend on
appeal that their right to relief arises out of ERISA section
502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). They assert, further,
that “whatever title [they] may have affixed to their claim to
enforce the conflicting terms of the [Initial] SPD” in their
complaint, we must construe it to include a claim under
ERISA section 502(a)(1)(B) in accordance with the liberal
pleading standards of the Federal Rules of Civil Procedure.
See Appellees’ Br. 53-56 (citing Fed. R. Civ. P. 8(a)). We
need not address this issue, or decide whether Plaintiffs’
repeated “disavowals” of reliance on section 502(a)(1)(B), see
Hooven, 2004 WL 724496, at *22, preclude them from taking
a different position here, as we conclude that, even under
section 502(a)(1)(B), Plaintiffs are not entitled to relief.
A plaintiff seeking to recover under section
502(a)(1)(B) must demonstrate that the benefits are actually
“due”; that is, he or she must have a right to benefits that is
legally enforceable against the plan. See 29 U.S.C.
§ 1132(a)(1)(B) (“A civil action may be brought – (1) by a
participant or beneficiary – . . . (B) to recover benefits due to
him under the terms of his plan.” (emphasis added)). Benefits
must have “vested” in order to be legally “due.”
22
ERISA exempts severance and other welfare benefit
plans from its vesting requirements, see 29 U.S.C. § 1051(1),
so that benefits offered under such plans are typically
“unaccrued and nonvested,” Reichelt, 921 F.2d at 430. As a
result, “[e]mployers or other plan sponsors are generally free
under ERISA, for any reason and at any time, to adopt,
modify or terminate welfare plans.” Curtis-Wright Corp. v.
Schoonejongen, 514 U.S. 73, 78 (1995). However, an
employer may offer accrued or vested severance benefits, or
cede its freedom to amend or cancel a welfare benefit plan,
through the terms of the plan itself. See Inter-Modal Rail
Employees Ass’n v. Atchison, Topeka & Santa Fe Ry. Co.,
520 U.S. 510, 515 (1997); Hansen v. White Motor Corp. (In
re White Farm Equip. Co.), 788 F.2d 1186, 1193 (“[T]he
parties may themselves set out by agreement or by private
design, as set out in plan documents, whether . . . welfare
benefits vest, or whether they may be terminated.”). Where
the plan provides that an employee is irrevocably entitled to a
certain benefit, and where all of the conditions precedent to
the employee’s receipt of that benefit have been satisfied,
“that benefit is said to have accrued (or ‘vested’ or ‘ripened’)
and cannot be taken away by plan amendment or
termination.” ABA Section of Labor & Employment Law,
Employee Benefits Law 1052 (2d ed. 2000). At that point, but
not before, the employee’s rights to benefits become
enforceable through a typical ERISA section 502(a)(1)(B)
action.
23
The District Court’s analysis is incompatible with this
statutory scheme. Relying on another district court decision
that held that an employee’s “rights to receive severance pay .
. . vest as she works,” Amatuzio v. Gandalf Sys. Corp., 994 F.
Supp. 253, 267 (D.N.J. 1998), the District Court concluded
that Plaintiffs’ rights to benefits became fixed when they
accepted Mobil’s “offer” by staying in their jobs. See
Hooven, 2004 WL 724496, at *18. However, treating
Mobil’s adoption of the CIC Plan as the juncture at which a
purported offer of severance was made, and Plaintiffs’
“acceptance” through continued employment as the point at
which their right to benefits became fixed, undercuts the very
concept of “vesting” that is crucial to a claim under ERISA.
Whether and how a severance plan provides an employee
with enforceable benefits must be determined on a case-by-
case basis, according to the terms of the plan itself–not
through the automatic application of “unilateral contract
principles.” See Carr, 816 F. Supp. at 1490. Plaintiffs’ rights
to severance were not fixed as a result of Plaintiffs’
“performance,” but, rather, at such time as all the conditions
to their entitlement, as specified in the CIC Plan documents,
had occurred.
The CIC Plan and Initial SPD clearly provide that,
even after a change in control, a Tier 4 employee is not
entitled to severance benefits until (1) his employment is
terminated within two years of the change in control, (2) he
continues to work for the Company until “released” and (3) he
24
signs a separation agreement. It is only after all of these
requirements are met, i.e., his employment is terminated, he
has satisfied his obligation to continue working for the
company and he signs a separation agreement, that we can say
that a Mobil employee’s right to the benefits would have
accrued and become fixed and enforceable.
The District Court found that “Plaintiffs’ Mobil
employment was terminated between March and May 2000,”
Hooven, 2004 WL 724496, at *13, and that all Plaintiffs
continued their employment with Mobil up until that date, see
id. (“No Plaintiff who accepted a position with Tosco missed
any work between the date he or she left Mobil and the date
he or she began working for Tosco.”). Although the District
Court did not enter any findings as to whether or when
Plaintiffs signed separation agreements, we conclude from
these other findings that Plaintiffs’ rights to severance would
have accrued, at the earliest, in March of 2000.
This brings us to the question of whether Plaintiffs are
entitled to severance benefits at all. As noted above, the
language of the CIC Plan clearly excludes Plaintiffs from the
class of employees entitled to receive severance:
An Eligible Employee will not be considered to
have incurred a Severance . . . (ii) in case of a Tier
4 employee, by reason of the divestiture of a
facility, sale of a business or business unit, or the
25
outsourcing of a business activity with which the
Eligible Employee is affiliated if the Eligible
Employee is offered comparable employment by
the entity which acquires such facility, business or
business unit or which succeeds to such
outsourced business activity.
Hooven, 2004 WL 724496, at *2 (emphasis omitted).
The District Court acknowledged that, “[u]nder the
terms of the CIC Plan, . . . Tier 4 employees continued to be
ineligible for severance benefits in the event of a divestiture,”
id., but held that Plaintiffs were nonetheless entitled to
severance benefits because the Initial SPD conflicted with the
CIC Plan and led Plaintiffs to “reasonably expect that Mobil
intended to offer severance benefits” in the event of a
divestiture, id. at *19. This conflicting language, it held,
“‘superseded and modified’” the Plan. Id. (citation omitted).
The District Court looked to the terms of the Initial
SPD believing that certain language we employed in Burstein
v. Retirement Account Plan for Employees of Allegheny
Health Education & Research Foundation, 334 F.3d 365 (3d
Cir. 2003), required it to do so. However, Burstein presented
a very different set of facts.
26
The Burstein plaintiffs were former employees of
Allegheny Health Education and Research Foundation
(“AHERF”) and participants in its Retirement Account Plan,
an ERISA defined benefit pension plan that was terminated
after AHERF filed for bankruptcy. The plaintiffs sought
benefits under the plan based upon a summary plan
description and a plan brochure. Although the AHERF plan
itself generally provided that a participant’s interest did not
vest until he had completed five years of service with
AHERF, the SPD clearly and unequivocally stated that a plan
participant’s interest in his account vested upon the plan’s
termination:
If the Plan is terminated, you will
automatically become vested in your
account, regardless of how many years of
service you have earned. No more annual
retirement credits will be made to your
account, but you will continue to receive
interest credits until payments from your
account begin.
Id. at 375.
The language of the plan, however, described the
impact of a plan termination differently, imposing “a
significant qualification,” id., on a participant’s vesting rights,
and essentially contradicting the SPD:
27
Upon the termination or partial termination of the
Plan, the right of all affected participants to
benefits accrued to the date of such termination or
partial termination shall become nonforfeitable .
. . to the extent funded as of such date.
Id. at 376 (emphasis in original). Contrary to the
“impression” given by the plan brochure and SPD, the plan
was funded only at the minimum level prescribed by ERISA,
which did not require AHERF to fund accounts for
participants who had not yet met the five-year service
requirement. Id.
We ruled that the Burstein plaintiffs had stated a
section 502(a)(1)(B) claim for benefits due under the plan,
and that, under the given facts, the language of the SPD
would govern. Noting that Congress intended the SPD to be
“the primary document on which plan participants must rely,”
and that ERISA specifically requires employers to make the
SPD “transparent, accurate, and comprehensive,” we stated
that, “where a summary plan description conflicts with the
plan language, it is the summary plan description that will
control.” Id. at 379 (citing 29 U.S.C. § 1022(a)). We then
observed that claims under section 502(a)(1)(B) for benefits
due under a plan are “contractual in nature.” Under these
circumstances, we held, “[i]f an SPD conflicts with a plan
document, then a court should read the terms of the ‘contract’
28
to include the terms of a plan document, as superseded and
modified by conflicting language in the SPD.” Id. at 381.
Burstein must be understood in context. There, we
construed an SPD that was in effect when the plaintiffs’
benefits actually vested, i.e., when the AHERF plan
terminated. Based on the terms of the SPD, all of the
conditions precedent to their receipt of such benefits had been
satisfied. As discussed above, once a benefit accrues, “the
employer is contractually and statutorily obligated to provide
that benefit and may not retrospectively amend the plan to
divest the plan participant of a payment that he was already
entitled to receive.” Algie v. RCA Global Commc’ns, Inc.,
891 F. Supp. 875, 884 (S.D.N.Y. 1994).
Until the vesting or accrual date, however, the
summary plan description is just that–a summary of the plan’s
terms. Although it is the “primary document on which plan
participants must rely,” Burstein, 334 F.3d at 379, it is not the
Plan, and thus not the authoritative source of plan terms. This
is particularly true where, as here, the SPD contains specific
language stating that “the official Plan documents . . . govern
in all cases.” For this reason, we read Burstein’s holding as
limited to its facts: where an SPD in effect when the plaintiffs’
benefits vest (under the terms of the plan or the SPD, if it
differs from the plan in this respect) clearly contradicts the
plan, the terms of the SPD can be held to control for purposes
29
of a claim for plan benefits pursuant to ERISA
section 502(a)(1)(B).
Here, even assuming that the Initial SPD did contradict
the CIC Plan as of December 1999, that would be irrelevant
because Plaintiffs’ right to severance benefits did not accrue
while the Initial SPD was in effect. In February 2000, before
Plaintiffs’ employment terminated and their rights vested,
Exxon Mobil recognized the conflict between the CIC Plan
and the Initial SPD, and distributed an errata notice,
effectively amending the Initial SPD7 to make it specific and
7
We reject the District Court’s view that the provision of the
SPD and CIC Plan prohibiting Mobil from amending or
terminating the Plan somehow also prohibited Exxon Mobil
from correcting the SPD to conform to the terms of the Plan.
See Hooven, 2004 WL 724496, at * 22. In fact, we note that an
agreement not to amend an SPD, of the sort that the District
Court found here, would likely violate ERISA; the statute’s SPD
provisions implicitly require employers and plan administrators
to correct misleading or incomplete SPDs:
The provision of ERISA which requires the
publication and distribution of an “accurate”
summary plan description, 29 U.S.C.
§ 1022(a)(1), when taken in conjunction with the
fiduciary duties of the employer, 29 U.S.C.
§ 1104(a), imposes . . . [a] “duty to correct” an
employer if and when the employer knows or
should know that a statement in a Summary Plan
30
consistent with the Plan provision stating that divested Tier 4
employees offered comparable employment with the acquirer
were ineligible for severance. The District Court found that
the errata notice “clearly and accurately referred to the
divestiture provision” of the CIC Plan. Hooven, 2004 WL
724496, at *12. It thus cured any defect in the August 1999
SPD. By the time that Plaintiffs would have become entitled
to benefits under section 502(a)(1)(B), the SPD and CIC Plan
were consistent; both made clear that employees in Plaintiffs’
position were not entitled to benefits. Accordingly, Plaintiffs’
rights to severance never arose.
IV.
We note in closing that Plaintiffs protested at oral
argument that holding that they were not entitled to benefits
on a unilateral contract theory would leave them without a
remedy for Mobil’s material omission in the Initial SPD. A
remedy for this omission is essential, they urged, to give
Description has become misleading to potential
participants.
McAuley v. Int’l Bus. Machs. Corp., 165 F.3d 1038, 1046 (6th
Cir. 1999). Moreover, while we made a leap in Burstein to
conclude that, under those unique facts, the SPD terms
superseded the terms of the plan, we cannot accept the premise
advanced here, that Mobil’s agreement not to change the Plan
somehow also limits its ability to correct an incorrect SPD.
31
effect to “Congress’s desire that the SPD be transparent,
accurate and comprehensive.” Burstein, 334 F.3d at 378-79
(citing 29 U.S.C. § 1022(a)-(b)).
We find Plaintiffs’ concerns to be misplaced here.
Contrary to their assertion, employees injured by a mistake in
a summary plan description have “a panoply of remedial
devices at [their] disposal.” Mass. Mut. Life Ins. Co. v.
Russell, 473 U.S. 134, 146 (1985). Section
502(a)(1)(B) provides a cause of action for benefits accrued
under an ERISA plan or SPD. See supra Part III; Burstein,
334 F.3d at 379. Moreover, any plaintiff who has relied on an
inaccurate or misleading term of an SPD to his or her
detriment can recover on a claim for breach of fiduciary duty,
see Burstein, 334 F.3d at 387, or, in “extraordinary
circumstances,” an equitable estoppel claim, see Curcio, 33
F.3d at 235, under ERISA section 502(a)(3)(B), 29 U.S.C.
§ 1132(a)(3)(B).
In this case, Plaintiffs were unable to maintain a breach
of fiduciary duty claim or a claim based on the equities
because the District Court held that they never relied on the
Initial SPD. By the time that benefits due under the Initial
SPD would have accrued, the error was corrected and
Plaintiffs were well aware that they were not entitled to them.
Under these facts, we will not bootstrap the error in the Initial
SPD, which the District Court characterized as one of
32
“inartful drafting,” and on which Plaintiffs did not rely, into a
cause of action for benefits due under the CIC Plan.
V.
We will accordingly REVERSE the judgment of the
District Court and REMAND with instructions to enter
judgment in favor of Exxon Mobil.
_____________________
33