Televantos v. Lyondell Chemical Co. ( 2002 )

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
3-8-2002
Televantos v. Lyondell Chem Co
Precedential or Non-Precedential:
Docket 1-2476
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"Televantos v. Lyondell Chem Co" (2002). 2002 Decisions. Paper 162.
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
No. 01-2476
YIANNAKIS JOHN TELEVANTOS,
Appellant
v.
LYONDELL CHEMICAL COMPANY;
LYONDELL CHEMICAL WORLDWIDE, INC.
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No.99-cv-05966)
District Judge: Hon. James T. Giles
Submitted Under Third Circuit LAR 34.1(a)
February 7, 2002
Before: SLOVITER, AMBRO, Circuit Judges, and SHADUR, District Judge
(Filed March 8, 2002 )
OPINION OF THE COURT
SLOVITER, Circuit Judge.
I.
Appellant, Yiannakis John Televantos, brought suit in the United
States District
Court for the Eastern District of Pennsylvania against his former
employer, Lyondell
Chemical Company ("Lyondell"), seeking benefits payable under a Change of
Control
Plan (the "Plan") applicable when an employee resigns within two years of
a change of
control due to the occurrence of a relocation of the employee's principal
place of work.
Televantos was employed by ARCO Chemical Company ("ARCO") in Newtown
Square,
Pennsylvania as Vice President for the Research and Development Business
Urethanes.
In anticipation of a possible takeover, ARCO developed and adopted a
Change of Control
Plan in April 1998. The Plan is an employee benefit plan governed by the
requirements
and provisions of the Employee Retirement Income Security Act ("ERISA") of
1974, 29
U.S.C. 1001 et. seq. (2001).
The Plan provides, inter alia, payment of severance benefits to
qualifying
participants for the purpose of enabling the company to "be able to retain
the services of
its executives and personnel in the event of a Change of Control of the
Company, during
the pendency of a possible Change of Control, and following a Change of
Control, to
ensure their continued dedication and efforts in any such event without
undue concern for
their personal financial and employment security." App. at 389.
Article V, Paragraph 5.1(a) provides for benefits if, within two
years of a change
of control, the participant's employment "terminates for any reason . . .
other than . . . (D)
a termination, voluntary resignation or retirement by the Participant
without Good
Reason." App. at 397. "Good Reason" is defined in Article II, Paragraph
2.11 as "the
occurrence after a Change of Control of any of the following events or
conditions,"
including "the relocation of the Participant's principal place of work,
but only if the
'moving expenses' incurred in connection with such relocation would be
deductible under
Section 217 of the Internal Revenue Code of 1986, as amended." App. at
394. The
referenced section of the tax code provides that moving expenses "paid or
incurred . . . in
connection with the commencement of work . . . at a new principal place of
work" are
deductible if, inter alia, they involve a move of greater than fifty
miles. I.R.C.
217(a),(c) (2001).
At the time the Plan was distributed to employees, ARCO also
distributed a
Summary of the Change of Control Plan (the "Summary"). The Summary
explicitly
states that it is not meant to replace the official Plan documents, which
govern in the
event of any inconsistency with the Summary. The Summary states that, as
"an
additional measure of protection for employees," an employee "may elect to
leave the
Company and still be entitled to receive" Plan benefits. App. at 413. In
describing
circumstances under which this could happen, the Summary states that an
individual in
Televantos' employment level "may elect to terminate employment upon
request or
requirement . . . to relocate to a new work location." App. at 413.
In July 1998, Lyondell acquired all of the stock of ARCO through a
cash tender
offer and as a result acquired control of ARCO. This stock acquisition
constituted a
"change of control" under the Plan. On March 30, 1999, Lyondell sent
Televantos a letter
offering him employment at the same position he held with ARCO, and had
held since the
change in control, and stating that on or about February 1, 2000, his
position "will be
located" in Houston. Similar letters were sent to a number of employees.
The letter
further stated that "[i]f you decline this offer, you will be eligible for
the Change of
Control package. However, in order to receive this payment, you must
complete all
transitional assignments. This date is determined by management at the
sole discretion of
management." App. at 385. The letter asked Televantos to respond by
April 30, 1999 as
to whether he would accept or decline this offer.
On May 7, 1999, Televantos returned the letter stating that he would
decline the
offer to relocate in his position to Houston. Soon thereafter, he
accepted an offer of
employment with Foamex, a local company and customer of Lyondell, with
whom
Televantos had been in employment negotiations since prior to his receipt
of the March
30 letter. His employment agreement with Foamex was dated May 21, 1999
but included
a provision stating that his employment would not begin until he had
completed his
"transitional work assignments" with Lyondell. App. at 423. However, the
Agreement
also bound Televantos to "devote his entire working time" to Foamex
beginning on May
21, 1999. On May 21, 1999, Televantos met with his supervisor at Lyondell
and
informed him that he had accepted a position with Foamex, would complete
all
transitional assignments with Lyondell, and wanted to receive the Plan
benefits. In the
next two weeks, Lyondell informed Televantos that his last day of work
would be June
11, 1999. Continued employment with Lyondell and the completion of
transitional
assignments was deemed impossible because Foamex's position as a customer
of
Lyondell created a conflict of interest.
When Televantos inquired about the amount of his Plan benefits, he
was informed
by Lyondell's Vice President of Human Resources that he would not be
receiving any
benefits under Article V. Televantos brought this lawsuit against
Lyondell seeking these
benefits under the Plan. The District Court conducted a bench trial and
found in favor of
Lyondell, concluding that the Plan's definition of "Good Reason" was not
ambiguous and
required the "actual occurrence of the relocation of the participant's
principal place of
work." App. at 5-7.
II.
A. Jurisdiction and Standard of Review
The District Court had jurisdiction pursuant to 28 U.S.C. 1331
because the
complaint sought benefits under 29 U.S.C. 1132(a)(1)(B). This court has
jurisdiction
over the final decision of the District Court pursuant to 28 U.S.C.
1291. Televantos
filed a timely appeal.
Traditional rules of contract construction govern our review of an
employment
benefit plan under ERISA. See Int'l Union v. Skinner Engine Co., 188 F.3d
130, 138 (3d
Cir. 1999). The determination of whether a provision of a contract is
clear or ambiguous
is a question of law subject to plenary review by this court. See Bill
Gray Enters., Inc.
Employee Health and Welfare Plan v. Gourley, 248 F.3d 206, 218 (3d Cir.
2001);
Williams v. Metzler, 132 F.3d 937, 946 (3d Cir. 1997).
B. Contract Ambiguity
Televantos argues that the District Court erred in finding the
relevant terms of the
Plan unambiguous. He argues that the Plan's definition of "Good Reason"
was
ambiguous and he posits an interpretation of that term that would entitle
him to benefits.
In order to evaluate his claim, we must first examine the terms of the
document to
determine if the relevant provisions are clear or ambiguous. Employee
benefits plans
governed by ERISA are subject to the same principles as contracts in
general. See In re
Unisys Corp. Long-Term Disability Plan ERISA Litig., 97 F.3d 710, 715 (3d
Cir. 1996).
"A [contract] term is ambiguous if it is susceptible to reasonable
alternative
interpretations." Sanford Inv. Co. v. Ahlstrom Mach. Holdings, Inc., 198
F.3d 415, 421
(3d Cir. 1999). To determine whether a clause is ambiguous, "courts must
first look to
the plain language of [the] document." Bill Gray, 248 F.3d at 218. While
the strongest
evidence of whether a contract is unambiguous are the words of the
agreement, we may
consider additional sources if necessary to determine if the words of the
contract were
given their common meaning. These additional sources include "'the
contract language,
the meanings suggested by counsel, and the extrinsic evidence offered in
support of each
interpretation. Extrinsic evidence may include the structure of the
contract, the
bargaining history, and the conduct of the parties that reflects their
understanding of the
contract's meaning.'" Bethlehem Steel Corp. v. United States, 270 F.3d
135, 139 (3d Cir.
2001) (quoting Teamsters Indus. Employees Welfare Fund v. Rolls-Royce
Motor Cars,
Inc., 989 F.2d 132, 135 (3d Cir. 1993)). Once a contract's terms are
found unambiguous,
we may no longer consider extrinsic evidence in order to interpret those
terms. Bill Gray,
248 F.3d at 218.
The relevant language in this case is the language of the Plan quoted
above
defining what constitutes "Good Reason." The District Court concluded
that this
language was not ambiguous and held that "relocation . . . means what it
says, there must
be relocation - - there must be an occurrence of the relocation." App. at
6. In other
words, the Plan requires the employee to remain with the company until his
or her place
of work actually moves to a new location. The District Court concluded
that "[g]iven the
words occurrence in conjunction with relocation of the principal place of
work, and
moving expenses incurred, past tense, then it follows that there must have
been - - there
would have to be an actual occurrence of the relocation of the
participant's principal place
of work." App. at 7.
Giving the contract terms their common and accepted meanings, the
words of the
provision support the District Court's conclusion that the provision is
unambiguous:
"Good reason" means the "occurrence" of "the relocation of the
Participant's principal
place of work." App. at 394. The latter part of the provision is also
unambiguous, stating
that the relocation serves as Good Reason "only if the 'moving expenses'
incurred in
connection with such relocation would be deductible" under the provision
of the tax code
defining "moving expenses." App. at 394. The clear import of this
segment of the
provision is to convey that the relocation contemplated must be, inter
alia, to a location in
excess of fifty miles away, and that relocations to areas closer do not
qualify as Good
Reason to resign and receive benefits.
The District Court seemed to place some emphasis on the fact that the
word
"incurred" was in the past tense, and Televantos argues that the District
Court erroneously
interpreted the provision to require that the employee must have
physically moved and
incurred expenses in order to receive the benefits under the Plan. If the
District Court
read the Plan to have required an actual move by an employee before
severance payments
would be due, then that reading would be erroneous, as Televantos argues.
But contracts
must not be read in a light that leads to an unreasonable outcome. See
Bohler-Uddeholm
America Inc. v. Ellwood Group, Inc., 247 F.3d 79, 96 (3d Cir. 2001).
Although the word
"incurred" is in the subjunctive rather than in the past tense, that is
not really the issue.
What controls instead are the facts that the required "relocation" refers
to an actual
change in the principal place of work something that had not taken place
before
Televantos left his employment and that the provision about moving
expenses refers to
those that would be incurred in connection with "such relocation." Thus,
the Plan does
not require that the employee himself have entered into a physical move,
but rather that
the employee's principal place of work must have moved. Therefore, reading
the District
Court's opinion in its entirety, we read it as holding that employees are
eligible for
benefits when their principal place of work makes the actual transition
from one location
to another location at least fifty miles away.
Under our plenary review, this court can look to extrinsic evidence
to determine if
the words of the contract are ambiguous. Televantos would have us look to
the Summary
of the Plan created by ARCO and distributed to ARCO employees, which
states in part:
To provide an additional measure of protection for employees . .
. under
certain specified circumstances, an individual may elect to leave the
Company and still be entitled to receive the change-of-control
allowances
under the Plan. In general accord with industry practices, these
circumstances are somewhat different for specified levels of employee
. . .
for [individuals in Televantos' employment level] . . . an individual
in these
grade levels may elect to terminate employment upon request or
requirement to . . . relocate to a new work location.
App. at 413 (emphasis added).
Televantos would have us hold that the March letter notifying him
that his position
would relocate to Houston in February 2000 was a "request or requirement"
to relocate,
triggering his eligibility for benefits according to the Summary. We
agree with the
District Court's conclusion that the Summary does not render the Plan's
terms
ambiguous. While the Summary is written in terms of "request" or
"requirement" to
relocate as opposed to the "occurrence" of relocation, the terms of the
Summary still
comport with the terms of the Plan. Like the Plan, the Summary refers to
"a new work
location" something that did not exist at the time of the request, but
was instead an
aspect of Lyondell's future planning.
Accordingly, the more reasonable reading of the Plan is that it
requires employees
to remain with the company until the time their principal place of work
relocates because
such a policy (1) provides the company with the security of a stable work
force during a
time of transition and (2) rewards those employees with generous
compensation to
provide them with security after their place of work relocates and they
choose not to
follow. In fact, Televantos' place of work never did move to Texas
because of a
subsequent sale of the relevant work place to a local company.
As the District Court noted, "Dr. Televantos chose not to take the
risk associated
with staying with Lyondell." App. at 10. By choosing to leave when his
"status, title or
responsibilities were not changed and [his] position was not relocated in
fact," Televantos
became ineligible for Plan benefits. App. at 9. We agree.
III.
For the reasons stated above, we will affirm the decision of the
District Court.
___________________
TO THE CLERK:
Please file
the foregoing opinion.
/s/
Dolores K. Sloviter
Circuit Judge