Opinion
CIVIL ACTION NO. 3-00-CV-0622-P
September 26, 2001
MEMORANDUM OPINION AND ORDER
Now before the Court are Defendants' Motion for Summary Judgment and Brief in Support, filed July 9, 2001, Plaintiffs' Response and Brief in Support, filed August 1, 2001, and Defendants' Reply, filed August 16, 2001. In addition, before the Court are Defendants' Objections to Plaintiffs' Summary Judgment Evidence, filed August 16, 2001, and Plaintiffs' Response, filed August 27, 2001. The Court takes into consideration Defendants' objections insofar as it has considered such evidence. Otherwise, Defendants' objections are moot. After considering the parties' evidence and arguments, and the applicable law, the Court GRANTS IN PART and DENIES IN PART Defendants' Motion for Summary Judgment.
I. BACKGROUND
Plaintiffs Veronica Chaplin, Thomas Hall, Frank Illing, Stephen Kendall, Gerhard Levering, Ralph Throneberry, and Stephen Buck filed their Original Complaint on March 21, 2000, alleging claims under both state and federal law for severance benefits they claim they were denied when they were terminated from their employment by NationsCredit Corporation. Plaintiffs argue that their claims for benefits were wrongly denied and that their appeal seeking such benefits was also wrongly denied.
Plaintiffs claim that they were eligible under an ERISA severance benefit plan promulgated by NationsCredit in 1995 (hereinafter "1995 Plan"). Pls.' Orig. Compl. ¶ 13. However, pursuant to a reorganization effort, each of the Plaintiffs signed a release in exchange for severance benefits determined by guidelines announced in January 1998 ("1998 guidelines"). Plaintiffs all signed individual releases some time between March and September of 1998. See Def. App. 049-052 (Chaplin release, June 1, 1998); Def. App. 066-070 (Hall release, April 29, 1998); Def. App. 087-091 (Kendall release, March 4, 1998); Def. App. 105-108 (Illing release, June 22, 1998); Def. App. 122-125 (Levering release, July 10, 1998); Def. App. 139-142 (Throneberry release, June 17, 1998); Def. App. 156-159 (Buck release, September 4, 1998). However, in January of 1999, all of the Plaintiffs but Buck submitted a claim for benefits under the 1995 Plan. Pls.' Orig. Compl. ¶ 14. Plaintiffs' claims were denied. Id. Plaintiffs thereafter appealed the denial, but the denial was affirmed. Id. at ¶ 15.
Plaintiff Hall also sent a letter, dated April 20, 1998, to NationsCredit's Plan Administrator contesting the use of the 1998 Guidelines rather than the 1995 Plan. See Def. App. 071-072. In addition, Hall submitted an "Amendment" signed April 29, 1998, claiming his intention to "reserve the right to demand my severance benefits be increased and retroactively calculated under this plan [1995 Plan] also." Def. App. 073.
Each Plaintiff signed a Letter of Agreement that set out the terms and amount of severance benefits they would each receive. In each letter, there was a separate section entitled "Release of Claims." Under this heading is the following paragraph:
In consideration of the promises and commitments made by NationsCredit Distribution Finance, Inc. and described herein, you hereby agree to release NCDF from any and all claims, suits, demands, or other causes of action of any kind (hereinafter collectively referred to as "claims") you might have against NCDF, its predecessors, successors, parent, subsidiaries, affiliates and any of their officers, directors, agents, employees or representatives (hereinafter collectively referred to as "NCDF") arising at any time in the unlimited past up to and including the date of your execution of this Letter of Agreement. This release includes any claims based in tort, contract or alleged violation of any federal, state or municipal statute, or ordinance. It includes, but is not limited to, all claims arising by reason of or in any way connected with your employment relationship with NCDF, or the subsequent termination thereof. Without waiving the generality of the foregoing, it is understood and agreed that this release of claims specifically includes an claims that you ever had or now have that could be asserted under the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. § 621 et seq.
Def. App. 051 (Chaplin Letter of Agreement). The following paragraph includes this language: "You understand that you have the right to consult an attorney of your choosing prior to signing this agreement and are encouraged to do so." Id. Within the same section, the agreement notes that each individual Plaintiff "acknowledge[d] that any payment(s) made to you under the terms of this agreement are in addition to anything you are already legally entitled to receive from NCDF." Id. The release section also noted that each Plaintiff would have forty-five (45) days to consider the agreement, and even after the agreement was signed, each Plaintiff would have seven (7) days to revoke the agreement. Id. Each Plaintiff signed a Release and has received severance benefits. See Def. App. 042 (Chaplin Admis. No. 18-19); Def. App. 058 (Hall Admis. No. 16-17); Def. App. 098 (Illing Admis. No. 18-19); Def. App. 080 (Kendall Admis. No. 17); Def. App. 115 (Levering Admis. No. 18-19); Def. App. 132 (Throneberry Admis. No. 18-19); Def. App. 149 (Buck Admis. No. 16-17).
The release language is identical in the Letters of Agreement for the other Plaintiffs based in Dallas. See Def. App. 107 (Illing); Def. App. 124 (Levering); Def. App. 141 (Throneberry); Def. App. 157-58 (Buck). The paragraph is substantively identical in Hall and Kendall's Letters of Agreement, although it refers to "NCCC" (NationsCredit Commercial Corporation) and NationsBank instead of NCDF. Def. App. 068-069 (Hall Letter of Agreement); Def. App. 089-090 (Kendall Letter of Agreement).
Defendants now seek summary judgment. Defendants essentially assert three defenses: (1) Plaintiffs were ineligible under the 1995 Plan because they were never "designated in writing," (2) Plaintiffs' releases were valid and bar the instant suit, and (3) the denial of Plaintiffs' appeal for benefits was neither arbitrary nor capricious.
II. SUMMARY JUDGMENT
A. Standard of Review
Summary judgment shall be rendered when the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). All evidence and the reasonable inferences to be drawn therefrom must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). The moving party bears the burden of informing the district court of the basis for its belief that there is an absence of a genuine issue for trial, and of identifying those portions of the record that demonstrate such an absence. Celotex, 477 U.S. at 323.
Once the moving party has made an initial showing, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The party defending against the motion for summary judgment cannot defeat the motion unless he provides specific facts that show the case presents a genuine issue of material fact, such that a reasonable jury might return a verdict in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Mere assertions of a factual dispute unsupported by probative evidence will not prevent summary judgment. Id. at 248-50; Abbot v. Equity Group, Inc., 2 F.3d 613, 619 (5th Cir. 1993). In other words, conclusory statements, speculation and unsubstantiated assertions will not suffice to defeat a motion for summary judgment. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1429 (5th Cir. 1996) (en banc). If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to is case, and on which he bears the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.
Finally, the Court has no duty to search the record for triable issues. Guarino v. Brookfield Township Trustees, 980 F.2d 399, 403 (6th Cir. 1992). The Court need only rely on the portions of submitted documents to which the nonmoving party directs. Id.
B. Defendants' Grounds for Summary Judgment
Defendants make three arguments in support of their Motion for Summary Judgment. Defendants argue that Plaintiffs were ineligible under the 1995 Plan, which, if true, would prevent Plaintiffs from obtaining any benefits pursuant to the 1995 Plan. Additionally, Defendants claim that even if Plaintiffs were eligible under the 1995 Plan, Plaintiffs are barred from bringing the instant suit because they each signed a release when they received benefits as designated by the 1998 Guidelines. Finally, Defendants argue that even if Plaintiffs were eligible under the 1995 Plan, the denial of benefits in January of 1999 was not "arbitrary and capricious."
1. Plaintiffs' Eligibility Under the 1995 Plan
The Court must determine whether, as a matter of law, Plaintiffs were not eligible employees under the terms of the 1995 Plan. The language of the 1995 Plan defines "eligible employees" as "those full-time salaried employees in Salary Grades below Band C who are designated in writing by the Company's Director of Human Resources as eligible to participate in the Plan due to the involuntary termination of his/her employment as a result of position elimination, position restructuring, lack of work and/or the like." Pls.' Orig. Compl. Ex. A, p. 1.
Plaintiffs maintain that on two occasions each Plaintiff received a written memorandum addressed to "Eligible NationsCredit Associates." A memorandum dated September 25, 1995 was received by each Plaintiff and included an attached copy of the Summary Plan Description. See Pls.' Orig. Compl. Ex. B; Pls.' Orig. Compl. ¶ 13. Additionally, each Plaintiff received a memorandum dated February 29, 1996 addressed to "Eligible NationsCredit Associates" which included an attached amendment to the Summary Plan Description. See Pls.' Orig. Compl. Ex. C; Pls.' Orig. Compl. ¶ 13.
Plaintiffs argue that each Plaintiff meets the eligibility requirements. Plaintiffs claim, and Defendants do not dispute, that each Plaintiff was a "full-time salaried employees in Salary Grades below Band C." See Def. App. 165 (Chaplin Interrog. No. 10); Def. App. 171-72 (Hall Interrog. No. 8); Def. App. 179 (Kendall Interrog. No. 11); Def. App. 185-86 (Levering Interrog. No. 10-11); Def. App. 201 (Throneberry Interrog. No. 10); Def. App. 217 (Illing Interrog. No. 11). Nor is it in dispute that Plaintiffs left their employment at NationsCredit due to "an involuntary termination of his/her employment as a result of position elimination, position restructuring, lack of work and/or the like." See Defs.' Brief, at 2; Pls.' Resp. at 4.
Plaintiff Buck does not recall if he was an employee below Band C. See Def App. 209 (Buck Interrog. No. 10).
However, the parties do dispute whether Plaintiffs were "designated in writing" pursuant to the 1995 Plan. Plaintiffs claim that the two memoranda constituted "designation in writing" of Plaintiffs as eligible employees under the 1995 Plan. Defendants contend that the memoranda themselves do not so designate Plaintiffs. The Court finds that the memoranda that Plaintiffs rely upon do not show that Plaintiffs were eligible employees designated in writing at the time of their termination. The memoranda simply show that Plaintiffs were eligible based upon their salary grade at the time that the memoranda were received. However, it appears as though Plaintiffs did satisfy the eligibility requirements of the 1995 Plan and that Plaintiffs should have been designated in writing at the time that they were terminated. The Court therefore finds that there is an issue of fact as to whether or not Plaintiffs were eligible employees within the meaning of the 1995 Plan.
Defendants further argue that regardless of each Plaintiff's eligibility under the 1995 Plan, they cannot receive benefits because the 1995 Plan was terminated prior to their potential eligibility. However, this argument does not appear to be supported by the evidence. Defendants argue that NationsCredit was planning on terminating the 1995 Plan, and point to an internal memorandum supporting that contention. See Def. App. 283 (January 20, 1998 memo from Floyd Robinson approving adoption of the 1998 Guidelines). Defendants also point to a Form 5500 filed on October 8, 1998 which purports to show that the 1995 Plan had been terminated. See Def. App. 260-65. Finally, Defendants submit a document signed on February 23, 1999 which terminated the 1995 Plan effective June 1, 1997. However, there was no indication beyond an internal memorandum that the 1995 Plan was to be terminated until October 1998, after each of the Plaintiffs had agreed to accepting severance benefits under the 1998 Guidelines.
Defendants assert that although Plaintiffs were never informed, the retroactive termination should still be considered valid and thus demonstrate that Plaintiffs were not eligible under the 1995 Plan. Defendants argue that Plaintiffs were not "participants" as defined in the ERISA statute. However, Plaintiffs do meet the definition of participants; that is,
The term "participant" means any employee or former employee of an employer, or any member of former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive such benefit.29 U.S.C. § 1002(7) (emphasis added). Because Plaintiffs were participants in the 1995 ERISA plan, they were also statutorily entitled to notice when the Plan was modified. See 29 U.S.C. § 1022(a), 1024(b)(1). Defendants failed to make this information available to any of the Plaintiffs, even when some of the Plaintiffs specifically asked Defendants about whether the 1995 Plan had been modified. See Pls.' App. 004 (Chaplin e-mail); Pls.' Orig. Compl. Ex. E (Hall letter).
Plaintiffs have made a showing that a material issue of fact exists as to the question of Plaintiffs' eligibility for the 1995 Plan. Therefore, summary judgment cannot be granted on this ground.
2. Validity and Scope of Plaintiffs' Releases
Defendants also argue that Plaintiffs cannot bring the instant suit because Plaintiffs are barred by the releases they signed when they received severance benefits under the 1998 Guidelines. The Fifth Circuit has held that "[p]ublic policy favors voluntary settlement of claims and enforcement of releases, but a release of an employment or employment discrimination claim is valid only if it is knowing and voluntary." Williams v. Phillips Petroleum Co., 23 F.3d 930, 935 (5th Cir. 1994) (citation and internal quotations omitted). After the moving party has established that "his opponent signed a release that addresses the claims at issue, received adequate consideration, and breached the release, the opponent has the burden of demonstrating that the release was invalid because of fraud, duress, material mistake, or some other defense." Id.
A release can be invalidated if there is proof of "fraud, duress, material mistake, or some other defense." Uherek v. Houston Light and Power Co., 997 F. Supp. 789, 792 (S.D. Tex. 1998). Plaintiffs argue that the Letters of Agreement were presented to them in a "take it or leave it" fashion, and argue that they were under economic duress to sign the releases.
In determining whether these defenses are available, the Court looks at several factors, including: "(1) the plaintiff's education and business experience; (2) the amount of time the plaintiff had possession of or access to the agreement before signing it; (3) the role of the plaintiff in deciding the terms of the agreement; (5) whether the plaintiff was represented by counsel or consulted with an attorney); and (6) whether consideration given in exchange for the waiver exceeds employee benefits to which the employee was already entitled by contract or law." Id. ( citing O'Hare v. Global Natural Resources, Inc., 898 F.2d 1015, 1017 (5th Cir. 1990).
These factors are considered to determine if there has been duress, but the threshold for such a finding is high. The Fifth Circuit has held that to find duress as an affirmative defense to a contract, plaintiff must show that there is "a threat to do some act which the party threatening has no legal right to do," there must be "some illegal exaction or some fraud or deception," and "the restraint must be imminent and such as to destroy free agency without present means of protection." Lee v. Hunt, 631 F.2d 1171, 1178 (5th Cir. 1980). Plaintiffs have failed to indicate any facts beyond conclusory allegations that individual Plaintiffs felt under duress. However, Defendants were not under any obligation to provide severance benefits to Plaintiffs. The claim that an individual had to sign a release in order to receive severance benefits does not rise to the level of duress required to undermine the validity of the releases. Each Plaintiff received consideration in the form of severance benefits received.
Several of the Plaintiffs have stated that they were "under duress" when considering whether to sign the Letters of Agreement. See Pl. App. 001-002 (Chaplin Aff. ¶ 6); Pl. App. 006 (Hall Aff. ¶ 6); Pl. App. 010 (Illing Aff. ¶ 6); Pl. App. 012-013 (Throneberry Aff. ¶ 6). However, this evidence is inadmissible because these statements are simply legal conclusions. See Salas v. Carpenter, 980 F.2d 299, 304-05 (5th Cir. 1992). Plaintiffs fail to allege any additional facts to support a finding that Plaintiffs were indeed under duress which would invalidate the releases.
Plaintiffs also argue that the releases are invalid because they fail to comply with the waiver requirements set out by statute pursuant to the Older Workers Benefit Protection Act. See 29 U.S.C. § 626(f). This statutory scheme sets out in detail the requirements for a waiver of claims under the Age Discrimination in Employment Act (ADEA). Plaintiffs do point out what would be defects in the release if the release was governed in any way by the ADEA. However, failure to comply with the waiver requirements is irrelevant to the instant case because Plaintiffs have not brought any claims under the ADEA. Plaintiffs seek relief pursuant to ERISA and state law. Plaintiffs point to the recent Supreme Court case of Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998) for the contention that failure to comply with the OWBPA invalidates the release as to all claims.
However, neither the Supreme Court nor the Fifth Circuit has ever held that failure to comply with OWBPA bars anything but ADEA claims. See id at 427-28 (reserving the question of whether an invalid waiver barred non-ADEA claims). The Oubre decision has been read by some courts as applying very specifically to the OWBPA and relying entirely on the statutory mandates of the OWBPA. See Halvorson v. Boy Scouts of America, 215 F.3d 1326 (6th Cir. 2000) (unpublished opinion) (finding a waiver releasing an ERISA claim that was invalid as a waiver to an ADEA claim) Aikins v. Tosco Refining Co., Inc., 1999 WL 179686, *5, No. C-98-00755-CRB (N.D. Cal. March 26, 1999) (" Oubre was based on the clear statutory commands of a [sic] the [OWBPA], and that Act's requirements for waivers of ADEA claims. . . . The decision does not purport to decide how general contract principles would apply to non-ADEA claims.").
Plaintiffs allege that "by the time Plaintiffs learned of Defendants non-compliance with the basic minimum requirements of the OWBPA, charge filing time limits had all passed." Pls.' Resp. and Brief, at 15. However, this statement is not an ADEA claim, and no ADEA claims were made in Plaintiff's Original Complaint or subsequently. Thus, although their OWBPA argument might be persuasive in the context of an ADEA claim, failure to comply with the statutory waiver requirements does not invalidate Plaintiffs' releases as to the ERISA and state law claims.
However, even though Plaintiffs may have signed valid releases, the releases themselves specifically included language that the release was limited. The release stated: "You also acknowledge that any payment(s) made to you under the terms of this agreement are in addition to anything you are already legally entitled to receive from NCDF." Def. App. 051 (emphasis added). If Plaintiffs are eligible employees under the 1995 Plan, the signed releases would not bar any litigation regarding their entitlement under the 1995 Plan. Thus, even if the release is valid, it is not a release to the claim now before the Court, the claim that Plaintiffs were wrongfully denied severance benefits pursuant to the 1995 Plan. For this reason, Defendants are not entitled to summary judgment dismissing Plaintiffs' claims. In addition, because the release was limited, Defendants are not entitled to summary judgment on their counterclaim for breach of contract. Defendants' motion for summary judgment on their counterclaim is therefore DENIED.
3. Plaintiffs' Appeal for Benefits
Finally, Defendants argue that they are entitled to summary judgment because Plaintiffs' appeal of their denial of benefits was not arbitrary and capricious. The 1995 Plan gives the Plan Administrator discretion to determine eligibility and benefits under the Plan. "The Plan Administrator [designated as the Company's Director of Human Resources] shall have the discretionary authority to determine eligibility for Plan benefits and to construe the terms of the plan." Def. App. 020 (Summary Plan Description, at 4).
If the administrator of an ERISA plan has discretionary authority to determine eligibility for benefits or to interpret plan terms, the reviewing court applies the arbitrary and capricious standard of review to a claim for denial of benefits. Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). The arbitrary and capricious standard is also referred to as "abuse of discretion standard." Wildbur v. ARCO Chemical Co., 974 F.2d 631, 635, n. 7 (5th Cir. 1992). "When reviewing for arbitrary and capricious actions resulting in an abuse of discretion, we affirm an administrator's decision if it is supported by substantial evidence. A decision is arbitrary only if made without a rational connection between the known facts and the decision or between the found facts and the evidence." Meditrust Financial Services Corp. v. Sterling Chemicals, Inc., 168 F.3d 211, 215 (5th Cir. 1999) (internal quotes and citations omitted). Because the 1995 Plan specifically vested discretionary authority in the Plan Administrator, the arbitrary and capricious standard is the correct standard to review Plaintiffs' denial of benefits.
Each Plaintiff but Buck filed a claim for benefits with Defendants on January 13, 1999. See Def. App. 279 (letter from Plaintiffs' attorneys to NationsCredit Corporation's Director of Human Resources). Plaintiffs' request was denied on March 9, 1999. See Def. App. 277 (letter from Maureen Hall to Plaintiffs' counsel). Plaintiffs appealed the denial by letter of their counsel on April 2, 1999. See Def. App. 273-74. This appeal was also denied on September 15, 1999. See Def. App. 266-67 (letter from Ann West to Plaintiffs' counsel); Def. App. 269-72 (Summary of Appeal).
The Plan Administrator denied Plaintiffs' appeal because Plaintiffs received severance pay under the 1998 Guidelines, and because Plaintiffs executed releases of their claims. See Def. App. 266. The Plan Administrator also concluded that Plaintiffs were not eligible employees under the terms of the 1995 Plan. See Def. App. 267.
Because the Court has concluded that there is a question of fact as to whether Plaintiffs were eligible employees, and because the Court has found that the signed releases may not have released Plaintiffs' claims in the instant suit, an additional material issue of fact remains, that is, whether the Plan Administrator acted in an arbitrary and capricious manner. Thus, Defendants are not entitled to summary judgment based on the Administrator's denial of benefits to Plaintiffs. Therefore, Defendants' Motion for Summary Judgment is DENIED as to Plaintiffs' ERISA claim for benefits under the 1995 Plan.
III. ERISA PREEMPTION
Finally, the Court considers Defendants' argument that Plaintiffs' state claims should be dismissed because they are preempted by ERISA. Plaintiffs bring several state causes of action, including Fraudulent Inducement, Unilateral Contract, Unjust Enrichment, Detrimental Reliance, Breach of Fiduciary Duty, Equitable Estoppel, Mental Anguish, and Intentional and Grossly Negligent Infliction of Emotional Distress. Pls.' Orig. Compl. ¶¶ 22-50.
The 1995 Plan at issue in this suit was specifically designated as an ERISA plan, Def. App. 017 (Summary Plan Description, at 1), and Plaintiffs admit that the Plan is an ERISA plan. Pls.' Orig. Compl. ¶ 5. ERISA by its terms provides that its provisions "shall supersede any and all [s]tate laws insofar as they may now or hereafter relate to any employee benefit plan. . . ." 29 U.S.C. § 1144(a).
The Court finds that Plaintiffs' state law claims are preempted because the 1995 Plan is an ERISA plan and ERISA's preemption provisions apply. Thus, the Court GRANTS Defendants' Motion for Summary Judgment for Plaintiffs' state law claims.
Conclusion
For the foregoing reasons, Defendants' Motion for Summary Judgment is GRANTED IN PART and DENIED IN PART.
SO ORDERED.