Jerry Jessup v. Alcoa, Inc. ( 2007 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 06-1164
No. 06-2923
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Jerry Jessup, et al., *
*
Plaintiffs - Appellees, *
* Appeals from the United States
v. * District Court for the
* Eastern District of Arkansas.
Alcoa, Inc., et al. *
*
Defendants - Appellants. *
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Submitted: December 15, 2006
Filed: April 2, 2007
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Before LOKEN, Chief Judge, JOHN R. GIBSON and MURPHY, Circuit Judges.
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LOKEN, Chief Judge.
Alcoa, Inc., sold two facilities as going concerns to an unrelated purchaser that
continued to operate the facilities under the name Almatis Group. After the sale,
salaried employees who continued work without interruption as employees of the
purchaser applied to Alcoa for early retirement benefits under the “Rule of 65”
provisions of the Alcoa Retirement Plan I (the Plan). When their claims were denied
by the Alcoa Benefit Appeals Committee, they commenced this action against Alcoa
and the Plan for wrongful denial of benefits under the Employee Retirement Income
Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a). The district court granted
plaintiffs summary judgment on this claim and subsequently awarded them attorneys’
fees and costs as prevailing parties. Alcoa separately appeals both rulings. We review
the grant of summary judgment de novo, applying the same standard as the district
court. Stearns v. NCR Corp., 297 F.3d 706, 708 (8th Cir. 2002), cert. denied, 537
U.S. 1160 (2003). When an ERISA plan grants the administrator discretion to
construe the plan and to determine benefits eligibility, as in this case, both courts must
apply a deferential abuse-of-discretion standard in reviewing the plan administrator’s
decision. McKeehan v. Cigna Life Ins. Co., 344 F.3d 789, 792 (8th Cir. 2003).
Applying that standard here, we reverse.
Plaintiffs were not eligible for Rule of 65 benefits under the relevant provisions
of the lengthy Plan document. Article 7.2(b)(vi)(A) provided that employees who
meet certain age and tenure requirements (as plaintiffs did) became eligible for Rule
of 65 benefits if they were “absent due to a Permanent Separation from Employment
resulting from the permanent shutdown of . . . the plant . . . (as determined by Alcoa).”
Article 2 defined the term “Permanent Separation from Employment” as:
[T]he termination of the employment of an Eligible Employee . . .
through no fault of his or her own for lack of work for reasons associated
with the business . . . . In no event does a Permanent Separation from
Employment occur if the Eligible Employee is offered suitable
employment by the Company, a Subsidiary, or a successor employer.
In letters denying plaintiffs’ administrative appeals, the Alcoa Benefit Appeals
Committee explained that they were not eligible for Rule of 65 benefits because (i)
they were terminated due to the sale of the business, not “for lack of work,” and (ii)
they received suitable offers of employment from Almatis, a successor employer. If
the Plan language is controlling, this decision was clearly not an abuse of discretion.
However, the Plan’s summary plan description (SPD) employed different
language in summarizing eligibility for the Plan’s Rule of 65 benefits. After setting
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forth age and tenure requirements, the SPD recited that to qualify for rule of 65
benefits an employee must:
• be absent for one year due to layoff . . . or have been placed
on permanent layoff; and
• Alcoa and its subsidiaries fail to offer you suitable long-
term employment (as determined by Alcoa).
As a general rule, when the SPD conflicts with the plan it purports to summarize, the
SPD provision governs. See Koons v. Aventis Pharm., Inc., 367 F.3d 768, 775 (8th
Cir. 2004). Therefore, plaintiffs argue, they are eligible for Rule of 65 benefits
because they were permanently laid off when the facilities were sold and they were
not offered suitable long-term employment by Alcoa and its subsidiaries, as the SPD
provided. The district court agreed, concluding that the Plan and the SPD were in
conflict because the Plan provided that an employee was ineligible if he or she
received an offer of suitable employment “from the Company, a Subsidiary, or a
successor employer,” whereas the SPD exclusion was limited to offers from “Alcoa
and its subsidiaries.” Given this conflict, the court concluded, the denials of benefits
must be reversed because they were based upon “an additional qualification” (offers
of employment from Almatis, the successor) not disclosed in the SPD.
The district court’s Order did not address a distinct issue argued by the parties
in the district court and on appeal. Alcoa argues, as the Benefits Appeal Committee
letters explained, that plaintiffs did not suffer a “permanent layoff” within the meaning
of the SPD provision because, although they ceased working for Alcoa, their facility
was sold as a going concern and they continued working for the purchaser without
interruption or a substantial change in the terms of their employ. Plaintiffs argue they
were nonetheless permanently laid off, citing only a dictionary definition of the word
“layoff.” Alcoa, on the other hand, relies on numerous ERISA and federal labor law
decisions. Though the specific plan language at issue varied, the decisions were
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uniform in concluding that, when a facility is sold or its right to conduct contract
operations is assigned to a new owner, employees who continue to work for the new
owner under substantially the same terms and conditions are not entitled to early
retirement or severance benefits.1 Retired Supreme Court Justice Byron R. White
sitting by designation in the Tenth Circuit explained the common-sense rationale for
these consistent decisions in Headrick, 24 F.3d at 1276:
After all, when an employee retains his job despite a transfer, he has not
suffered for “lack of work.” Moreover, inhering in the term “laid off” is
the understanding the affected employee no longer holds the same job he
did prior to being “laid off” . . . . The difficulty of squaring appellants’
claim to being “laid off for lack of work” with the ordinary meaning of
the phrase is illustrated by the trouble we have in imagining any Rocky
Flats employee describing himself to family, friends, or, say, the local
welfare office . . . as having just been “laid off for lack of work” after
[the successor] had provided him with the very same job and benefits he
enjoyed with Rockwell the day before.
1
See Brandis v. Kaiser Alum. & Chem. Corp., 47 F.3d 947, 949 (8th Cir. 1995)
(“permanent shutdown of the plant”); Headrick v. Rockwell Int’l Corp., 24 F.3d 1272,
1276 (10th Cir. 1994) (“laid off for lack of work”); Schroeder v. Phillips Pet. Co., 17
F.3d 1147, 1148 (8th Cir. 1994) (same); Blank v. Bethlehem Steel Corp., 926 F.2d
1090, 1092-4 (11th Cir. 1991) (“layoff . . . as a result of a permanent shutdown”), cert.
denied, 502 U.S. 938 (1991); Rowe v. Allied Chem. Hourly Employees’ Pension Plan,
915 F.2d 266, 268-69 (6th Cir. 1990) (“layoff”); Lakey v. Remington Arms Co., 874
F.2d 541, 545 (8th Cir. 1989) (“termination . . . caused by lack of work”); Acton v.
Tosco Corp., 815 F.2d 1161, 1162 (8th Cir. 1986) (“layoffs”); Anderson v. Ideal Basic
Indus., 804 F.2d 950, 953 (6th Cir. 1986) (“termination of employment resulting from
a permanent shutdown of a plant”). Plaintiffs urge us to ignore the earlier cases
because they applied an arbitrary and capricious standard of review that gave way to
the abuse of discretion standard after the Supreme Court’s decision in Firestone Tire
& Rubber Co. v. Bruch, 489 U.S. 101 (1989). However, substantively “this is a
distinction without a difference.” Cox v. Mid-America Dairymen, Inc., 965 F.2d 569,
572 n.3 (8th Cir. 1992).
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Viewed from the perspective of these prior decisions, the SPD’s summary of
the eligibility criteria for Rule of 65 benefits did not conflict with the Plan. The SPD
explained that Rule of 65 benefits were limited to employees “placed on permanent
layoff.” Prior cases established the relevant context -- employees are not “placed on
permanent layoff” when, as in this case, a facility is sold and they are offered
comparable, uninterrupted employment by the new owner. In other words, by limiting
eligibility to “permanent layoff” situations, the SPD incorporated the substance of the
Plan’s more explicit reference to offers of suitable employment by a successor. This
interpretation does not render meaningless the SPD’s additional eligibility
requirement that “Alcoa and its subsidiaries” failed to offer suitable long-term
employment. That requirement covers a different situation -- when a facility is sold,
employees are not employed by the purchaser, and Alcoa then terminates the retained
employees without offering suitable alternative employment.
In conclusion, though the Plan and the SPD used different language in defining
eligibility for Rule of 65 benefits, the Alcoa Benefit Appeals Committee did not abuse
its discretion in concluding that plaintiffs were not eligible under either definition.
Therefore, the decisions of the Plan administrator must be affirmed. Turning to the
second appeal, plaintiffs concede that the district court’s award of attorneys’ fees and
costs must be overturned if they are not prevailing parties.
Accordingly, we reverse that portion of the district court’s judgment that
overturned Alcoa’s denial of Rule of 65 benefits and the district court’s orders dated
July 10 and July 13, 2006, awarding plaintiffs attorneys’ fees and costs.
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