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WAY v. OHIO CASUALTY INSURANCE

December 16, 2005.

ANNE B. WAY, Plaintiff,
v.
OHIO CASUALTY INSURANCE COMPANY, Defendant.



The opinion of the court was delivered by: JEROME SIMANDLE, District Judge

OPINION

This matter comes before the Court upon Defendant Ohio Casualty Insurance Company's motion for summary judgment. Plaintiff seeks payment of severance pay benefits under Defendant's separation pay plan. Plaintiff alleges that Defendant's decision to deny benefits violates Section 1132(a) of the Employee Retirement Income Security Act and cannot withstand scrutiny because it was arbitrary and capricious. For the reasons discussed herein, Defendant's motion for summary judgment will be granted.

  I. BACKGROUND

  Plaintiff Anne B. Way filed an Amended Complaint in this Court on December 13, 2004.*fn1 Plaintiff claims that Defendant Ohio Casualty Insurance Company ("Defendant" or "Ohio Casualty") wrongfully refused to pay her severance pay benefits in accordance with Defendant's Separation Pay Plan (the "Plan") after her employment ended with the company on February 11, 2004. Plaintiff's Amended Complaint alleges that Defendant's denial of Plaintiff's severance pay benefits covered by the Plan constitutes an unlawful denial of benefits under 29 U.S.C. § 1132(a)(1)(B) of the Employee Retirement Income Security Act ("ERISA"). (Amend. Compl. ¶ 13.) In addition, the Amended Complaint claims that Plaintiff is entitled to reasonable attorney's fees and costs pursuant to 29 U.S.C. § 1132(g). (Amend. Compl. ¶ 14.)

  A. The Separation Pay Plan

  Defendant established and administers an ERISA benefits plan, titled "Separation Pay Plan," which provides employees nationwide, including Plaintiff, an opportunity to receive certain severance pay where eligible in accordance with its terms. (Affidavit of Elizabeth S. Aumann, ¶ 4; Separation Pay Plan of The Ohio Casualty Insurance Company, Aumann Aff., Ex. A.) The plan, which bears an effective date of April 6, 2000, is administered by Defendant's Welfare Plan Committee (the "Benefits Committee")*fn2 and grants the Benefits Committee full authority to interpret the Plan's terms and determine eligibility of Plan benefits. (Aumann Aff. ¶ 3-5; Separation Pay Plan, Aumann Aff., Ex. A.) Specifically, the Plan grants the Benefits Committee:
[F]ull authority to interpret the provisions and terms of [the Plan], including authority to determine the eligibility for separation pay . . . to take such other action as the [Benefits] Committee deems equitable under the circumstances in light of the policy.
(Separation Pay Plan p. 4; Aumann Aff., Ex. A.) The Plan is a so-called "unfunded" or "self-funded" plan, as funds paid out under the Plan come directly from Defendant's general treasury fund. (Statement of Edward Ellis, Esq., counsel for Defendant, made during oral argument on October 27, 2005). Such a plan is in contrast to a "funded" ERISA plan where funds to pay claims under the plan are paid out from a separate ERISA trust fund and the employer's funding of the trust fund is determined by an actuarial formula.
  The Plan provides, inter alia, that if an employee's permanent layoff is "due to [Defendant's] sale of all or a portion of its assets to another person or entity, the employee will not be eligible for separation pay benefits." (Separation Pay Plan, Aumann Aff., Ex. A.) (emphasis added) The Plan continues, however, to state:
This assumes the employee has the opportunity to accept employment with the purchaser at a location within fifty (50) miles of the employee's last worksite with [Defendant] in a job paying no less than eighty-five percent (85%) of the employee's base rate of pay at the time of purchase. . . .
(Id.) (emphasis added) This is the provision of the Plan implicated in Plaintiff's Amended Complaint.*fn3 (Amend. Compl. ¶ 9.)

  B. Plaintiff's Termination and Contact with Proformance

  Plaintiff was employed as an adjuster by Defendant in its Voorhees, New Jersey office. (Amend. Compl. ¶¶ 6-7.) Beginning in December of 2001, Defendant sold and transferred its private passenger automobile business to Proformance Insurance Company ("Proformance"). (Aumann Aff. ¶ 6.) Under the terms of the sale, Proformance (located in Freehold, New Jersey) was obligated to offer certain affected employees "employment on substantially equivalent terms of [their] employment" with Defendant. (Letter from Catherine Helen Dooley to Nancy Way, dated 2/11/04 (the "Release Memo"), Declaration of Jennifer T. Keegan, Ex. 1.) Plaintiff was one of the employees. (Id.) On February 11, 2004, Plaintiff and several other employees were asked to attend a meeting where they were notified that, as part of the sale and transfer of a business division to Proformance, they were being laid off. (Anne B. Way Depo. Tr. at 45-46, Keegan Decl., Ex. 3.)*fn4 Also at that meeting, Plaintiff was presented with the Release Memo which stated, among other things:
Following your release date . . . from [Ohio Casualty], a representative from [Proformance] will contact you regarding employment. [Proformance] is obligated to offer you employment on substantially equivalent terms of [your current] employment [with Ohio Casualty]. . . .
(Release Memo, Keegan Decl., Ex. 1.) Plaintiff signed the Release Memo under a paragraph titled "Acknowledgment and Agreement" which stated: I have read, understand and agree to the foregoing and state that I have had an opportunity to ask [Ohio Casualty] any questions I may have had pertaining to the transfer of my employment. I am not relying upon any representation by [Ohio Casualty] or otherwise that is contrary to or not otherwise expressed in this memorandum.

 (Id.)

  Two days after the meeting and her lay off notification, Plaintiff received a letter from Proformance stating that Proformance was contacting her to "determine [Plaintiff's] interest in employment" with Proformance in Freehold, New Jersey. (Letter from Cynthia Codella to Nancy Way*fn5 dated 2/13/2004, Keegan Decl., Ex. 2.) Enclosed with the letter was an application for employment. (Id.) The letter further stated that Proformance:
"request[s] that [Plaintiff] complete this application and return it. . . . The completion and return to us of this application will signal to [Proformance] your interest and is required before a bona fide offer of employment can be made."
(Id.) Plaintiff never completed or returned the application or contacted anyone at Proformance about employment. (Way Depo. Tr. at 55, Keegan Decl., Ex. 3.) C. Determination by Defendant's Benefits Committee that Plaintiff was not Eligible for Severance Pay Benefits

  Defendant's Benefits Committee considered Plaintiff's eligibility for separation pay under the Plan and concluded that Defendant was not obligated to provide Plaintiff with severance benefits. The Benefits Committee's rationale was that Plaintiff was given the opportunity to accept employment by Proformance at a location within fifty (50) miles of her last worksite and in a job paying at least eighty-five percent (85%) of her last rate of pay at Ohio Casualty — and therefore, she was excluded under the Plan. (Release Memo, Keegan Decl., Ex. 1.) Specifically, the Benefits Committee (1) determined that, by contacting Plaintiff about employment at Proformance, Plaintiff had been offered the "opportunity to accept employment" there, (Aumann Aff. ¶ 8), and (2) that Proformance's Freehold office was within 50 miles of Defendant's Voorhees office — interpreting the term a "location within fifty (50) miles" to mean 50 "straight-line" miles. (Aumann Aff. ¶ 9.)

  Plaintiff disagreed and on February 27, 2004, Plaintiff's counsel sent a letter to Defendant demanding payment of separation pay benefits under the Plan. (Letter from Alexander W. Ross, Jr. to Catherine Helen Dolley dated 2/27/04, Aumann Aff., Ex. B.) Plaintiff argued that she was eligible for separation pay under the Plan because (1) Plaintiff was not offered employment at Proformance (rather, Proformance's letters of February 13, 2004 was only an invitation to complete an application for employment) and (2) Proformance's Freehold offices were more than 50 miles from Plaintiff's previous job site (calculated by driving distance between the two offices, rather than the straight-line distance). (Ross Letter, Aumann Aff. ¶ 8-9, Ex. B.) These ...


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