Baker v. BASF Corporation ( 1996 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
BILLY R. BAKER; THEODORE W.
CAMDEN, JR.; ROBERT J. BUNTING;
ROAMIE WEST; JAMES R.
FREEMAN, JR.; CHARLES S. SMITH;
BILLY R. THOMAS; JUDY S. TATE;
ROBERT A. MCGINN; GORDON R.
FINCHAM,
No. 95-1353
Plaintiffs-Appellants,
v.
BASF CORPORATION; BASF
CORPORATION RETIREMENT PLAN OF
JANUARY 1, 1987,
Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of Virginia, at Newport News.
James E. Bradberry, Magistrate Judge.
(CA-94-40-4, CA-94-41-4, CA-94-42-4, CA-94-43-4, CA-94-44-4,
CA-94-45-4, CA-94-46-4, CA-94-47-4, CA-94-48-4, CA-94-49-4)
Argued: November 1, 1995
Decided: April 22, 1996
Before RUSSELL, WIDENER, and HALL, Circuit Judges.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: James Harrell Shoemaker, Jr., PATTEN, WORNOM &
WATKINS, Newport News, Virginia, for Appellants. James Patrick
McElligott, Jr., MCGUIRE, WOODS, BATTLE & BOOTHE, L.L.P.,
Richmond, Virginia, for Appellees. ON BRIEF: Joseph Henry
Latchum, Jr., PATTEN, WORNOM & WATKINS, Newport News,
Virginia, for Appellants. David F. Dabbs, MCGUIRE, WOODS,
BATTLE & BOOTHE, L.L.P., Richmond, Virginia, for Appellees.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Ten individuals ("the Appellants") filed substantially identical
complaints, which were consolidated, against BASF Corporation
("BASF") and the BASF Corporation Retirement Plan of January 1,
1987. Seeking relief under the Employee Retirement Income Security
Act of 1974 ("ERISA"), 29 U.S.C. § 1000 et seq., as amended by the
Retirement Equity Act of 1984 and the Tax Reform Act of 1986, the
Appellants alleged that they were entitled to severance pay from
BASF because their employment with BASF terminated when BASF
sold its Williamsburg, Virginia plant ("the Plant") to Mann Industries.
The district court entered summary judgment for BASF, finding that
the written terms of BASF's severance plan comported with ERISA
procedure.
Appealing the district court's grant of summary judgment, the
Appellants allege that BASF 1) failed to pay them severance pay to
which they were entitled under a written severance plan; and 2) vio-
lated ERISA's reporting and disclosure requirements by failing to
fully inform them of their severance benefits rights. We review de
novo the district court's grant of summary judgment regarding ERISA
claims under 29 U.S.C. §1132. See Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101, 115 (1989). Upon review, we affirm the district
court's order.
2
I.
Four and one-half years after either having been let go or by volun-
tarily resigning from Mann Industries, the Appellants sought sever-
ance benefits from BASF. The Appellants had been salaried, non-
union employees at BASF's Plant until November 17, 1989, when
BASF sold its acrylic fibers Plant to Mann Industries. Upon the
Plant's sale to Mann Industries, the Appellants' employment trans-
ferred from BASF to Mann Industries.1 The Appellants continued
working without interruption at the same pay received from BASF.
Each received in wages or salary, a sum greater than what each would
have received in severance had BASF, instead of selling, closed its
doors. Although Mann Industries offered no severance or retirement
plan, it did provide its employees with health benefits and a 401(k)
"matching" retirement plan.
The Appellants now contend that BASF management beguiled
them into accepting employment with Mann Industries by assuring
them they would be "taken care of" and that those accepting employ-
ment with Mann Industries would receive severance pay from BASF.
Notwithstanding their allegations, at the time of the sale, only those
salaried employees not offered jobs with Mann Industries and not
transferred internally to another BASF division received severance
pay from BASF. In sum, each salaried BASF employee continued
working for either Mann Industries or another BASF division or
received severance pay from BASF.
_________________________________________________________________
1 Three of the ten complainants worked at the Plant since its opening
in 1958 by Dow Chemical. The remaining seven worked for all subse-
quent owners aside from the original one. In 1966, the Plant was sold to
a joint venture Dow-Badische (owned in equal shares by Dow and Badis-
che Corporation). Dow-Badische sold the Plant outright to Badische in
1976. During a corporate reorganization in 1985, BASF acquired the
Plant from Badische. The appellants mischaracterize the '66 and '76
sales as "restructurings," when in fact they were outright sales--the
Plant's beneficial ownership affirmatively changed hands each time. Not
a single appellant received severance pay from the Plant's previous
owner when ownership transferred.
3
II.
A.
Despite the district court's finding that it was neither irrational nor
clearly erroneous under ERISA for BASF to have denied severance
to those salaried employees continuing employment with the purchas-
ing concern when the division in which they worked was sold, the
Appellants argue that genuine issues of material fact exist as to
whether the language of the May 1989 plan was ambiguous and
whether BASF arbitrarily and unreasonably interpreted the May 1989
plan in violation of ERISA. Upon examination of the severance poli-
cy's language, we affirm the decision of the district court.
Employee eligibility for ERISA benefits is governed primarily by
the plan's language. Lockhart v. United Mine Workers of America
1974 Pension Trust, 5 F.3d 74, 78 (4th Cir. 1993). To prevail, there-
fore, the Appellants must demonstrate that despite the beneficial
change in ownership and their continued employment with the ongo-
ing concern, they were eligible for severance pay under the May 1989
plan in existence during the Plant's sale. The Appellants maintain that
both the district court and BASF misinterpreted the May 1989 plan's
language by finding them ineligible for severance benefits. The May
1989 plan contains the following provision defining severance eligi-
bility:
Employees who have completed at least one year of contin-
uous service, but who have been terminated for reasons such
as declining business, elimination of position, or discontinu-
ance of operations, where the continuance of employment
ceases permanently will be eligible for the provisions out-
lined in this policy.
Under the plan's plain language, an employee cannot collect sever-
ance unless his employment "ceases permanently." The Appellants'
employment did not cease, but continued with the purchasing concern
without interruption or hardship and at the same rate of pay.
The Appellants insist, however, that the May 1989 plan's language
is ambiguous and that the district court should have considered extrin-
4
sic evidence to illuminate the intent of the severance eligibility provi-
sion. The Appellants rely on Fuller v. FMC Corp. , 4 F.3d 255 (4th
Cir. 1993), cert. denied, 114 S. Ct. 1062 (1994), in support of their
proposition. In Fuller, FMC Corp.'s severance plan provided sever-
ance to terminated employees, who were parenthetically defined as
those employees "laid off due to the closing of a plant or location."
Id. at 259. Because we found the concept of"plant closing" to be
ambiguous, we looked to extrinsic evidence of past practice to illumi-
nate whether the sale of a plant constituted a plant closing. And upon
reviewing every previous FMC plant sale it became apparent that
FMC had never paid employee benefits to employees offered continu-
ing employment with a purchaser. Accordingly, we held that the sale
of the plant did not constitute a plant closing and to label the appel-
lants "terminated employees" would unjustly award them severance
to which they were not entitled. See Hickey v. Digital Equipment
Corp., 43 F.3d 941, 947-48 (4th Cir. 1995).
In the instant case, we need not examine extrinsic evidence of past
practice because the plan's severance eligibility provision is unambig-
uous. The clear and unambiguous severance plan language controls.
See Gillis v. Hoechst Celanese Corp., 4 F.3d 1137, 1142 (3rd Cir.
1993), cert. denied, 114 S. Ct. 1369 (1994). The May 1989 plan
clearly precludes severance unless "the continuance of employment
cease[d] permanently." Here, the Appellants' employment never
ceased, nor was it interrupted for a day or even a pay period.
Once employees of the selling company became employees of the
purchasing concern, the selling company was no longer obligated to
provide them severance with respect to subsequent layoffs. Hickey, 43
F.3d at 947; see Holland v. Burlington Industries, Inc., 772 F.2d 1140(4th Cir. 1985) (holding no job termination under a severance policy
where the plaintiffs continued employment with the purchaser of a
plant), aff'd mem., 477 U.S. 903 (1986); Sejman v. Warner-Lambert
Co. Inc., 889 F.2d 1346 (4th Cir. 1989) (holding that when purchaser
later laid off plaintiffs and plaintiffs sought severance from former
employer/seller, denial of severance was justified because termination
of plaintiffs was done by the purchaser not by the original employer),
cert. denied, 498 U.S. 810 (1990). We affirm, therefore, the district
court's finding that BASF's decision denying severance pay to sala-
ried employees offered continuing employment in the purchasing
5
company when the division in which they worked was sold was nei-
ther an irrational nor clearly erroneous decision under ERISA.2
B.
The Appellants alternatively argue, in the event that we found the
language of the May 1989 plan unambiguous, that BASF should be
fined for violating ERISA's reporting and disclosure requirements by
intentionally and secretly withholding details of the May 1989 sever-
ance plan. 29 U.S.C. § 1132. Their grievance arises from BASF's
1988 modification of the pre-existing severance policy, known as the
Badische policy.3 The Appellants contend that 29 U.S.C.
§ 1024(b)(1)(A) entitled them to view the May 1989 plan within 90
days after they became beneficiaries under that plan--essentially 90
days after the May 1989 plan's effective date.
The Appellants cite only one case, Blau v. Del Monte Corp., 748
F.2d 1348 (9th Cir. 1984), cert. denied, 474 U.S. 865 (1985), in sup-
port of their proposition that BASF intentionally and secretly with-
held details of the May 1989 severance plan. Blau, however, is readily
distinguishable from the case at hand. In Blau , the management com-
pletely concealed the benefits policy. The employer neither published
the policy nor informed the plaintiffs of its existence, contents, or
terms and such intentional deceitfulness caused plaintiffs to suffer
substantial and irreparable harm. Id. at 1351. In contrast, BASF did
_________________________________________________________________
2 The district court held, in the alternative, that the Appellants' allega-
tion that BASF informed them either directly or indirectly that they
would receive severance pay constituted an oral modification to the sev-
erance contract; acknowledging that, under Virginia law, such contract
modifications are governed by a three-year statute of limitations, the dis-
trict court barred the Appellants' action against BASF. The Appellants
now argue, however, that the extrinsic evidence was not submitted to
suggest that oral modifications to the severance plan existed, but to prove
that questions of material fact existed evidencing BASF's intent regard-
ing their severance benefits. We need not address this issue because we
affirm on different grounds.
3 The Appellants contend that BASF surreptitiously revised its 1983
severance plan--the "Badische policy--"into the "May 1989" plan,
before Mann Industries purchased the Plant.
6
not withhold the May 1989 plan from Plant employees as contended.
At informal information gatherings, BASF told employees of the exis-
tence of the May 1989 severance plan, explained the schedule of ben-
efits available under the policy, and explained the circumstances
under which benefits would or would not be provided. Thus said, we
turn to a discussion of ERISA's reporting and disclosure require-
ments.
An employer may not arbitrarily deprive its employees of critical
information regarding their benefit and retirement plans. See 29
U.S.C. § 1132(c) (imposition of civil penalties upon employers refus-
ing to furnish information to employees who have requested informa-
tion). Sections 1022(a)(1)4 and 1024(b) provide guidelines as to when
and how often an employer must disseminate benefits information to
its employees. Section 1024(b)(1)(A) states:
(b) Publication of summary plan description and annual
report to participants and beneficiaries of plan.
Publication of the summary plan descriptions and
annual reports shall be made to participants and benefi-
ciaries of the particular plan as follows:
(1) The administrator shall furnish to each
participant, and each beneficiary receiving
_________________________________________________________________
4 Section 1022(a)(1) reads:
(a)(1) A summary plan description of any employee benefit
plan shall be furnished to participants as provided in section
1024(b) of this title. The summary plan description shall include
the information described in subsection (b) of this section, shall
be written in a manner calculated to be understood by the aver-
age plan participant, and shall be sufficiently accurate and com-
prehensive to reasonably apprise such participants and
beneficiaries of their rights and obligations under the plan. A
summary of any material modification in the terms of the plan
and any change in the information required under subsection (b)
of this section shall be written in a manner calculated to be
understood by the average plan participant and shall be furnished
in accordance with section 1024(b)(1) of this title.
7
benefits under the plan, a copy of the sum-
mary, plan description, and all modifica-
tions and changes referred to in section
1022(a)(1) of this title--
(A) within 90 days after he becomes a par-
ticipant, or (in the case of a beneficiary)
within 90 days after he first receives
benefits, . . . .
29 U.S.C. § 1024(b)(1)(A). The 90-day window requires the
employer to furnish plans to new participants within the first 90 days
after they become a participant.
The Appellants argue that BASF violated § 1024(b)(1)(A) by not
permitting them to view the benefits plan within 90 days of its effec-
tive date. The Appellants, however, were preexisting participants in
a preexisting plan--the Badische policy. In their failure to read
§ 1024(b)(1) in its entirety, the Appellants missed the last sentence of
§ 1024(b)(1), which states:
If there is a modification or change described in section
1022(a)(1) of this title, a summary description of such modi-
fication or change shall be furnished not later than 210 days
after the end of the plan year in which the change is adopted
to each participant, and to each beneficiary who is receiving
benefits under the plan.
29 U.S.C. § 1024(b)(1). Thus, once a benefits plan undergoes modifi-
cation or change, the employer has 210 days after the end of the plan
year to notify each participant and beneficiary of the modifications
and changes.
BASF's May 1989 Plan, was not a new plan, but a revision of a
pre-existing benefits policy. Pursuant to § 1024(b)(1), BASF had 210
days from the plan's year end to furnish the Appellants, with any
modifications or adopted changes. The plan year did not end until
December 31, 1989.5 Accordingly, BASF had until at least July 1990
_________________________________________________________________
5 Absent evidence of how BASF calculates its taxable year, we calcu-
late the plan year as the calendar year. See 52 Fed. Reg. 22716 (June 15,
1987) (to be codified at 26 C.F.R. Part 1).
8
to disseminate plan modifications and changes to employee beneficia-
ries and participants. By July 1990, the Appellants were employees
of Mann Industries. Because the Appellants were no longer BASF
employees, they were no longer qualified participants in the severance
plan. Thus, the district court did not err in finding that BASF did not
violate ERISA procedure.
III.
For the foregoing reasons, the district court's order granting BASF
summary judgment is
AFFIRMED.
9