Sandstrom, Kenneth v. Cultor Food Science ( 2000 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 99-2331
Kenneth Sandstrom,
Plaintiff-Appellant,
v.
Cultor Food Science, Incorporated,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern
Division.
No. 97 C 8216--James F. Holderman, Judge.
Argued April 25, 2000--Decided May 25, 2000
Before Posner, Chief Judge, and Easterbrook
and Evans, Circuit Judges.
Easterbrook, Circuit Judge. American
Xyrofin, a manufacturer of food
additives, was sold, merged, and
reorganized early in 1996, with
predictable consequences for some of its
executives. Cultor U.S. Inc. acquired
Xyrofin in January 1996 and renamed the
new subsidiary Cultor Food Science (cfs).
Soon Cultor Limited (the parent of Cultor
U.S.) bought another food additives group
from Pfizer, Inc., and merged this
business into cfs. As part of the
acquisition, Cultor promised Pfizer that
it would give Pfizer employees who joined
cfs but later lost their jobs benefits
tracking those of the severance-payment
plan that Pfizer maintained under the
Employee Retirement Income Security Act
(erisa). When in March 1996 cfs ended the
employment of Violeta Velasco, who came
from Xyrofin (which lacked a severance-
benefit plan), it offered her a severance
package: six weeks’ pay, plus one
additional week’s pay for each year she
had been employed by Xyrofin, both
doubled if she signed a release of any
legal claims against cfs. Toward the end
of March cfs decided that the services of
Kenneth Sandstrom, Velasco’s supervisor,
also were no longer necessary. Sandstrom,
unlike Velasco, was not offered a
severance package. He filed this suit
under sec.502(a) (1)(B) of erisa, 29
U.S.C. sec.1132(a)(1)(B), contending that
the offer to Velasco demonstrated that cfs
had an "informal plan for severance
benefits" that applied to him too. The
district court disagreed and granted
summary judgment for cfs. 1999 U.S. Dist.
Lexis 6525 (N.D. Ill. Apr. 26, 1999).
Briefs filed in this court dwell on two
questions: whether Sandstrom has produced
evidence from which a reasonable trier of
fact could conclude that cfs "intended" to
establish an "informal" (which is to say,
unwritten) severance-benefit plan and, if
so, whether the terms of that plan are
sufficiently definite to support a
remedy. They debate, for example, whether
Barton Finegan, the vice president of
human resources who approved the offer to
Velasco, had authority to establish a
plan on behalf of cfs. They also explore
whether the Velasco offer sets out the
terms of the plan or whether, instead,
these terms may be found elsewhere--
perhaps in a check sent to Velasco (which
gave her one week’s pay in addition to
what the offer promised) or perhaps in
the (written) plan for employees cfs
inherited from Pfizer. This plan had a
13-week base plus triple the week’s-pay-
per-prior-year if the employee signed a
release. Nor can the parties agree on
whether the "informal plan" afforded
benefits in lieu of notice (so that an
employee who remained on the payroll
after notice of termination would have
severance benefits reduced by the number
of weeks of employment yet to go) or was
on top of whatever wages the employee
earned. If cfs created a plan by making an
offer to Velasco, did it amend or abolish
the plan by not making a similar offer to
Sandstrom? These are enigmas, which
exemplify a deeper problem that the
parties have not mentioned: does erisa
contemplate unwritten plans? None of
these uncertainties would exist if the
plan were on paper.
Several of our cases say that it is
possible to have an unwritten pension or
welfare-benefit plan under erisa, if the
plan is "a ’reality,’ which requires . .
. that the court be able to determine
’whether from the surrounding
circumstances a reasonable person could
ascertain the intended benefits,
beneficiaries, source of financing, and
procedures for receiving benefits.’"
James v. National Business Systems, Inc.,
924 F.2d 718, 720 (7th Cir. 1991),
quoting from Donovan v. Dillingham, 688
F.2d 1367, 1373 (11th Cir. 1982) (en
banc). See also Diak v. Dwyer, Costello &
Knox, P.C., 33 F.3d 809, 811-12 (7th Cir.
1994); Ed Miniat, Inc. v. Globe Life
Insurance Group, Inc., 805 F.2d 732, 738-
39 (7th Cir. 1986). It is not clear that
the approach taken in Dillingham is
compatible with more recent decisions of
the Supreme Court, which emphasize
different considerations when asking
whether an informal policy or arrangement
is a "plan." See Massachusetts v. Morash,
490 U.S. 107 (1989); Fort Halifax Packing
Co. v. Coyne, 482 U.S. 1 (1987). Both
Morash and Ft. Halifax evince reluctance
to find that regular and predictable
awards of severance or vacation payments
establish a "plan," given the frequency
with which these benefits are the subject
of bilateral negotiations between
employers and departing employees. But we
need not pursue this subject, because cfs
had an express plan, which did not cover
Sandstrom.
Written plans may be altered only in
writing. Statements by plan
administrators, side agreements and
understandings, or even special offers
made to many of a firm’s employees, do
not change the contents of the plan
applicable to other employees. See, e.g.,
Central States Pension Fund v. Gerber
Truck Service, Inc., 870 F.2d 1148 (7th
Cir. 1989) (en banc); Frahm v. Equitable
Life Assurance Society, 137 F.3d 955, 960
(7th Cir. 1998); Central States Pension
Fund v. Joe McClelland, Inc., 23 F.3d
1256 (7th Cir. 1994). Likewise,
statements or conduct by bureaucrats
implementing a plan do not estop the
employer to enforce the plan’s written
terms, and although we have not barred
the door we have made it clear that only
extreme circumstances (not yet seen)
justify estoppel. See, e.g., Shields v.
Teamsters Pension Plan, 188 F.3d 895 (7th
Cir. 1999); Plumb v. Fluid Pump Service,
Inc., 124 F.3d 849, 856 (7th Cir. 1997);
Schoonmaker v. Employee Savings Plan of
Amoco Corp., 987 F.2d 410 (7th Cir.
1993).
These decisions are fatal to Sandstrom’s
position, for his claim must be that cfs
amended its formal plan (the one
applicable only to former Pfizer
employees) by making the offer to
Velasco. Yet that is not the means erisa
contemplates for plan amendments. See
Curtiss-Wright Corp. v. Schoonejongen,
514 U.S. 73 (1995). Sandstrom evidently
believes that erisa forbids bilateral
deals between an employer and individual
employees, so that the offer to Velasco
must be a manifestation of a generally
applicable "plan." Our opinion in Frahm
rejects that position, holding that
bilateral arrangements are compatible
with erisa and do not modify the plan
applicable to other employees who did not
receive the offers or estop the employer
to enforce the plan’s written terms. 137
F.3d at 957-58. See also McNab v. General
Motors Corp., 162 F.3d 959 (7th Cir.
1998). Accord, Sprague v. General Motors
Corp., 133 F.3d 388, 403 (6th Cir. 1998)
(en banc). Sandstrom was not entitled to
severance benefits under the terms of the
Pfizer acquisition, so the judgment of
the district court is
affirmed.