Opinion
Civ. File No. 02-333 (PAM/RLE)
December 26, 2002
MEMORANDUM AND ORDER FOR JUDGMENT
This matter was tried to the Court during the week of November 4, 2002. Plaintiff claims that he suffered extensive financial loss as a result of Defendants' interpretation of his severance benefits policy. For the reasons that follow, the Court determines that Plaintiff is not entitled to benefits under the disputed pension program. Accordingly, the Court rules in favor of Defendants in part and in favor of Plaintiff in part.
BACKGROUND
Defendants E.F. Johnson Company and Transcrypt International, Inc. ("E.F. Johnson") hired Petersen as Director of Information Systems on May 22, 2000. In response to an economic downturn, E.F. Johnson laid off some of its work force, including Petersen on March 9, 2001. E.F. Johnson permanently terminated the employment of a second group of employees on that same date, but claims that it anticipated rehiring some or all of the laid-off employees from the first group.
The Court recognizes that using the term "layoff" risks mischaracterizing the employment actions of E.F. Johnson. Because the nature of those actions and the meanings of the terms "layoff," "temporary layoff," "permanent layoff," and "termination without cause" form the very subject of this litigation, the Court does not mean to stake a position simply in its preference for one term over another. While the Court does not employ the terms interchangeably, the Court also does not give them any force beyond their broadest connotations.
At the time of the layoff, Petersen was subject to the terms of The Directors Incentive Compensation Program ("the Program"). E.F. Johnson adopted a new severance package in April 2001, one month after it laid off Petersen. Six months later, on September 9, 2001, E.F. Johnson automatically terminated Petersen's employment, along with the other employees it had placed on temporary layoff status. However, when E.F. Johnson finally terminated Petersen, it claims only the new severance plan covered his discharge, not the old, superseded Program. E.F. Johnson offered to pay Petersen benefits under the new plan, but Petersen refused. Petersen argues that his right to severance benefits vested upon his layoff in March 2001, under the Program, not the new plan.
The Program stipulates that employees participating in the Program "will be provided with one month salary severance benefit, for each full year of service with a minimum of three months and a maximum of six months, for termination without cause or termination without cause as a result of a change of control." (Deft. Ex. 3 at 4.) The Program does not define the phrase "termination without cause." Previously, the Court held that: (1) E.F. Johnson laid off Petersen on March 9, 2001, and did not permanently terminate his employment until six months later; (2) the Program contained ambiguous language as a matter of law; and (3) the record contains evidence that creates an issue of material fact on the meaning of the Program's ambiguous terms. The parties proceeded to trial on the third issue. Thus, at trial, Petersen had the burden to prove beyond a preponderance of the evidence that the Program language included his employment status.
DISCUSSION A. Intent of the Parties
To resolve ambiguities in ERISA plans, courts look outside the four corners of the plan. Stearns v. NCR Corp., 297 F.3d 706, 710, 712 (8th Cir. 2002) (noting that "basic principles of contract interpretation are often relevant in construing an ERISA plan," and if a provision is ambiguous, the court may look at extrinsic evidence to determine the parties' intent); Farley v. Benefit Trust Life Ins. Co., 979 F.2d 653, 657 (8th Cir. 1992). At trial, both sides presented evidence about the meaning of the term "termination" in the Program's provisions. Petersen argues that the Court should resolve the Program's ambiguity by turning to the definition of "layoff" in an employee handbook given to Petersen when he began employment at E.F. Johnson. This definition makes no distinction between the terms "layoff" and "discharge" or "termination." This evidence, Petersen argues, shows his belief that the Program covered layoffs as well as terminations. In response, E.F. Johnson introduced evidence to show that it not only intended to rehire Petersen, were the economy to improve, but also that it communicated this to him. Therefore, E.F. Johnson reasons that neither party intended the language in the Program to include employees who were only temporarily on leave, subject to the performance of the economy.
The Court agrees with E.F. Johnson. On the day that Petersen was laid off, conversations that he had with his immediate supervisor, Mr. Safavi, and with the Vice President of Human Resources, Nancy Morrison, indicate that Petersen knew that his layoff did not sever the employment relationship between himself and E.F. Johnson. Instead, Ms. Morrison made it clear to him that he was subject to recall and that he retained his accrued vacation time and seniority. On one hand, Petersen testified to the uniqueness of his situation, stating that no other executive faced a temporary layoff, as he did. He also submitted evidence, in the form of internet news articles, suggesting that E.F. Johnson intended the layoffs to be permanent and did not intend to rehire any of the employees that it placed on temporary layoff status. On the other hand, however, during cross-examination Petersen admitted that even at the time of his layoff, he knew that a difference existed between layoff and termination. He also knew that his status was not terminated, but instead laid off. Petersen did not demonstrate that the parties intended the language in the Program to cover his employment status. Therefore, he failed to carry his burden of proof in this case.
B. Eligibility for Coverage under the New Plan
On April 2, 2001, E.F. Johnson adopted a new severance package, the "Transcrypt Directors Severance Plan" (the "Plan"), which superseded the previous Program. At the time E.F. Johnson eventually terminated Petersen's employment, he was eligible for benefits under the Plan. Even though Petersen undisputedly qualified for severance benefits under the new Plan, E.F. Johnson required that he waive any rights to the old Program. Because Petersen refused to waive these benefits, E.F. Johnson argues that he is ineligible to collect proceeds now. E.F. Johnson's requirement that Petersen sign a release form, waiving his rights to the old Program forced Petersen into a Hobson's choice: either accept the drastically reduced severance package in the new Plan or pursue this legal action in a good faith attempt to enforce his perceived entitlements under the old Program and risk losing his severance benefits altogether. Whether or not a calculated move by E.F. Johnson, the risk of losing his severance rights under both plans might have coerced a less resolute plaintiff into acquiescence. To find, as E.F. Johnson now requests, that Petersen intentionally waived coverage under the new Plan through pursuing a claim under the superseded Program offends the Court's sense of equity and undermines the interests of justice. Therefore, Petersen remains eligible for severance benefits under the new Plan.
CONCLUSION
Plaintiff failed to prove that the parties intended the language in the Program to cover his employment status. Plaintiff remains eligible for severance benefits under the new Plan, however. Accordingly, IT IS HEREBY ORDERED that:
1. Judgment be entered in favor of Defendant concerning the meaning of the superseded Program's language; and
2. Judgment be entered in favor of Plaintiff concerning his eligibility under the new Plan.
LET JUDGMENT BE ENTERED ACCORDINGLY.