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AMATUZIO v. GANDALF SYS. CORP.

February 4, 1998

Dolores Amatuzio, et al., Plaintiffs,
v.
Gandalf Systems Corporation, et al., Defendants. William Chambers, et al., Plaintiffs, v. Gandalf Systems Corporation, et al., Defendants.



The opinion of the court was delivered by: IRENAS

 IRENAS, District Judge:

 This matter comes before this Court on defendants Gandalf Systems Corp. and Gandalf Technologies, Inc.'s motion for summary judgment as to all claims in this action, and plaintiffs' cross-motion for summary judgment as to all claims. The disputes in this action arise out of a severance pay plan covered by the Employee Retirement and Income Security Act ("ERISA"), and defendants' obligation under the Worker Adjustment and Retraining Notification Act ("WARN"), to give affected employees notice of a mass layoff and/or plant closing. This Court has jurisdiction under 28 U.S.C. § 1331.

 For the reasons that follow, this Court will: (1) find that Class One and Class Two plaintiffs have standing under ERISA, but that Class One Subclass "A" plaintiffs lack standing; (2) deny both defendants' motion for summary judgment and plaintiffs' cross-motion for summary judgment as to plaintiffs' claim that they are entitled to vested benefits; (3) deny both defendants' motion for summary judgment and plaintiffs' cross-motion for summary judgment as to all plaintiffs' equitable estoppel claims; (4) grant defendants' motion for summary judgment as to plaintiffs' claims that the severance plan modification is void because plaintiffs were not timely noticed of the severance plan modification and were not timely given a summary plan benefits description, and deny plaintiffs' cross-motion for summary judgment as to these claims; (5) deny both defendants' motion for summary judgment and plaintiffs' cross-motion for summary judgment as to plaintiffs' claim that the severance plan modification was invalid because defendants did not follow the plan's amendment procedure; (6) deny defendants' motion for summary judgment as to Class Two plaintiffs' WARN claim, and grant plaintiffs' cross-motion for summary judgment as to Class Two plaintiffs' WARN claim; and, (7) deny both defendants' motion for summary judgment and plaintiffs' cross-motion for summary judgment as to Class Three plaintiffs' WARN claim.

 I. BACKGROUND

 A. Procedural History

 Plaintiffs Dolores Amatuzio et al. commenced this action by filing by the Complaint in Civil Action No. 95-4808 on September 19, 1995. On February 20, 1996, plaintiffs William F. Chambers et al. (Chambers) filed the Complaint in Civil Action No. 96-621. Chambers filed the Amended Complaint in No. 96-621 on April 25, 1996.

 By Order dated June 4, 1996, this Court ordered the consolidation for all purposes of Civil Action Nos. 95-4808 and 96-621 under the lead case number of 95-4808. By Consent Order Concerning Class Certification dated June 17, 1996, the Magistrate Judge certified the three classes of plaintiffs described below in Part I.B.. By Order dated October 18, 1996, the Magistrate Judge granted Chambers leave to file a second amended complaint. Chambers filed the Second Amended Complaint in No. 96-621 on October 21, 1996, carving out the subclass of plaintiffs as described below in Part I.B..

 On June 7, 1996, defendants Gandalf Systems Corp. and Gandalf Technologies, Inc. ("defendants") filed a motion to dismiss and to strike. By Order dated July 5, 1996, this Court denied the motion to dismiss the First Count of the Complaint in No. 95-4808 and the First Count of the Amended Complaint in No. 96-621. By the same Order this Court granted defendants' motion to dismiss those portions of the Second Count of the Complaint in No. 95-4808 and the Second Count of the Second Amended Complaint in No. 96-621 that were brought pursuant to the Employment Retirement Income Security Act § 510, 29 U.S.C.A. § 1140.

 Defendants filed the instant motion for summary judgment as to all remaining counts and claims in this consolidated action on October 24, 1997. On the same date plaintiffs filed the instant cross-motion for summary judgment as to all remaining counts and claims.

 B. Parties, Plaintiff Classes and Claims

 Defendant Gandalf Systems Corp. ("GSC") is a New Jersey-based company engaged in the design, marketing and sale of telecommunications products and services. Defendant Gandalf Technologies, Inc. ("GTI"), a Canadian corporation, is GSC's parent company. GSC was created in 1991 when Gandalf Data, Inc. ("GDI") merged with Infotron Systems Corporation ("Infotron"). At all times relevant to this action GSC was headquartered in a Cherry Hill, New Jersey, facility formerly occupied by Infotron. The majority of GSC's Cherry Hill employees were former Infotron employees who had remained with GSC following the 1991 Infotron/GDI merger.

 Plaintiffs are former employees of GSC who worked in Cherry Hill and who ceased to be employed by GSC at various times between January 14, 1994, and August 31, 1994. Plaintiffs are divided into three classes and one subclass. Eight named plaintiffs ("the individual plaintiffs") -- also members of Class One and Class Two -- bring individual claims. Class One plaintiffs are former GSC employees who received notice from GSC on February 22, 1994, that they would be laid off on or after April 25, 1994, and WARN *fn1" notice of a plant closing scheduled to take place on or after April 25, 1994. Class One Subclass "A" ("Subclass 'A'") plaintiffs are seventeen former GSC employees who resigned between January and July of 1994. Class Two plaintiffs are former GSC employees who were laid off on or about February 22, 1994, and who were not given WARN notice. Class Three consists of former GSC employees who were laid off on or about January 14, 1994, and who were not given WARN notice.

 Class Two and Class Three plaintiffs also allege that defendants violated the Worker Adjustment and Retraining Notification Act, 29 U.S.C.A. §§ 2101-2107 ("WARN"), by terminating their employment without providing sixty-days' notice.

 C. Factual History

 In or around 1984, Infotron developed a personnel policy and procedures manual entitled "Personnel Guidelines for the Manager" ("the Manual"). The Manual was kept in Infotron's Human Resources Department and was distributed to Infotron management employees for reference in handling day to day employee issues and questions. The introduction to the Manual states in pertinent part:

 
This manual is designed to be an overall guide for supervisory personnel in their day-to-day administration. Additions, revisions and deletions will be issued from time to time. . . . Provisions of these guidelines are not to be considered policies binding on Infotron. They may be changed at any time as management deems appropriate. They are not intended to and do not constitute expressed or implied contractual obligations to anyone.

 Section 2, Guideline 2-5 of the Manual -- entitled "Termination" -- sets forth in desultory fashion a policy on resignation, discharge and severance pay. The Manual provides in pertinent part:

 
1.3.1 Voluntary Resignation
 
Voluntary resignation is initiated by the employee. Employees other than managers and directors are expected to give at least two weeks' notice of resignation; . . . . Severance pay is not given in cases of voluntary resignation.
 
1.3.2 Involuntary Resignation
 
. . . if the resignation is requested by the company for other than misconduct or cause:
 
-- non-exempt = one week's pay for each full year of employment
 
-- exempt = two weeks' pay for each full year of employment
 
-- officers = three weeks' pay for each full year of employment . . .
 
1.3.3 Discharge
 
Discharge is initiated by the Company. . . .
 
1.3.4 Severance Allowance
 
The purpose of severance allowance is to provide an employee with income during a period of financial adjustment precipitated by the Company's termination of his/her employment.
 
Under no circumstances will severance allowance be paid in cases of discharge for misconduct (i.e., insubordination, embezzlement, misappropriation of funds, misrepresentation, etc.).

 It is undisputed that rank and file employees were generally familiar with the Manual plan, though they were not given copies of the Manual. How they came to be familiar with the Manual plan, whether they knew it was housed in written form in the Manual or elsewhere, and to what extent, if at all, they understood the Plan's details and were aware of the Manual's contractual disclaimer and reservation of rights clause, are all much foggier matters. The evidence suggests some employees may have known of the Manual plan qua Manual plan, while other employees' acquaintance with the Manual plan seems to have been formed exclusively through their observations of how laid off employees were treated (in layoffs prior to and after the 1991 merger), their discussions with co-workers, and their informal and formal meetings with managerial/supervisory personnel. Whether all of GSC's managerial personnel were familiar with the Manual's contractual disclaimer and reservation of rights clause also is unclear.

 During the late Spring and Summer of 1991, when the Infotron/GDI merger was in the works, Infotron and GTI officers conducted informational meetings with Infotron employees in Cherry Hill. Des Cunningham, then Chairman of the Board of GTI, stated at one such meeting that the merger would not result in either company's severance pay policy being changed, at least not for the worse. *fn2"

 Subsequent to the merger, in August, 1991, and continuing through 1993, GSC conducted a number of layoffs. Affected employees apparently received severance pay pursuant to the Manual plan. Remaining employees became increasingly anxious about layoffs and about whether GSC would continue to provide the severance pay previously laid-off employees had received. They were told in the aftermath of layoffs -- particularly in mid-January of 1994 -- that severance benefits were the same and/or that severance benefits were not going to change and/or that there were no plans to change severance benefits. *fn3"

 GSC was expecting weak third quarter financial results in late 1993, and, as early as December, 1993, defendants' objective was to develop a restructuring plan which would entail layoffs. On January 6, 1994, GTI Director of Human Resources Jeffrey Singer ("Singer") and GTI President and Chief Executive Officer Brian Hedges ("Hedges") traveled to Cherry Hill to prepare a layoff plan. At a January 7, 1994, meeting, GSC Director of Human Resources Vincent Messina ("Messina") showed the Manual containing the Manual plan to Singer and Hedges after having been asked either whether there was such a plan or whether he had a copy of Infotron's plan that he could show to them. (Messina Dep. at 118, 122). Hedges then spoke to the issue of severance pay, saying that "it was too rich" and expressing "surprise." (Id. at 123). Singer told Messina that he first was made aware of the Manual plan in a January, 1994, meeting. (Id. at 117). Singer turned a copy of the Manual over to GSC's legal counsel in late January, 1994, for review and for advice regarding the law governing severance plans. Singer knew at this time that workforce reductions and layoffs above and beyond those taking place in January, 1994, would be necessary. (Singer Dep. at 78).

 On January 13, 1994, at a meeting of the GTI Board of Directors ("the Board"), Hedges directed GTI management to evaluate options for stemming the decline in revenue and profits, and to present their recommendations at the February 10, 1994, Board meeting. The Board understood as of the January 13, 1994, meeting that restructuring measures stronger than the planned January 14, 1997 layoffs would be required. On January 24 and 25, 1994, at meetings of the GTI Operations Committee, GTI and GSC managers were made aware of poor third-quarter results for both GTI and GSC. (Plaintiffs' Exh. 67 at 1). Defendants claim, although the evidence on this point is vague, that these third-quarter results were considerably worse than had been anticipated. Hedges requested that the Operations Committee prepare an acceptable business case scenario for presentation at the scheduled February 10, 1994 Board meeting; he stressed the importance of downsizing without causing further revenue erosion. (Id. at 3).

 Some time between January 21, 1994, and January 25, 1994, defendants formed an intent to modify the Manual plan. (Singer Dep. at 73, 75). The actual decision to modify the Manual plan was made by Hedges. (Id. at 75). Prior to February 8, 1994, Singer prepared materials concerning possible changes in severance benefits for presentation to the operating committee. (Id. at 135-38). On February 8, 1994, GSC issued a memorandum and attachment to all GSC employees concerning their benefits. This release consisted of a reissuance of an existing list of benefits -- which list did not include any mention of severance pay -- with a statement that GSC could amend, modify or terminate any benefits -- whether listed or not listed -- at any time, within the discretion of the President and CEO (then Frank Jerd). (Plaintiffs' Exh. 34). Between February 16 and 21, Singer was provided with a plan for the February 22, 1994, layoffs so that he could run a cost analysis. (Singer Dep. at 168). On February 17, 1994, GSC announced the modified severance plan pursuant to which laid off employees would receive one week's pay for each full year of employment to a maximum of six weeks or $ 10,000, whichever was less. (Plaintiffs' Exh. 47).

 According to defendants, on January 14, 1994, GSC laid off thirty-eight full-time employees from the engineering and manufacturing groups at Cherry Hill, converted two of those employees -- Michael Boyle and Patrick Countey -- to contractor status, and laid off one part-time temporary employee -- Amy Sinka. (Aff. of Procida at P 5 & Exh. B). Plaintiffs contend that on January 14, 1997, or shortly thereafter, GSC laid off forty full-time employees, plus two part-time temporary employees -- John Hembrough ("Hembrough") and Amy Sinka. (See Plaintiffs' Statement of Facts at P 39). It is undisputed that these employees received severance pay pursuant to the Manual plan terms.

 According to defendants, on or about February 22, 1994, twenty-two employees were laid off immediately from the Cherry Hill facility. Hembrough and Jerd were terminated on February 4, 1994, and February 24, 1994, respectively. Part-time employee Christine Gorenstein was terminated on February 18, 1994. (Aff. of Procida at P 7 & Exh. B). Plaintiffs contend that twenty-four full-time employees and one part-time employee were laid off on or after February 22, 1994. (See Plaintiffs' Statement of Facts at P 50).

 On February 18, 1994, sixty-two employees were given letters providing notice of future layoffs at various dates on or after April 25, 1994. These employees also received notice of an anticipated plant closing to take place on or after April 25, 1994. On March 2, 1994, six employees received notices of layoff on May 2, 1994. Employees Patricia O'Hara and Michael Dombrosky were laid off without notice on March 7, 1994, and March 31, 1994, respectively. GSC terminated Denise Fidura and Stephen Egerton without notice on July 12, 1994, and July 18, 1994, respectively. Sandra LeFevre was laid off by GSC on June 3, 1994. All employees laid off after February 17, 1994, received severance pay pursuant to the modified plan. *fn4"

 Between January 1, 1994, and August 31, 1994, thirty-eight GSC employees -- including the seventeen Subclass "A" plaintiffs -- at Cherry Hill resigned their employment at GSC. Only three of the Subclass "A" plaintiffs had received layoff notices prior to tendering their resignations. All Subclass "A" plaintiffs had engaged in job searches and obtained job offers from new ...


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